License And Development Agreement

LICENSE AND DEVELOPMENT AGREEMENT







THIS AGREEMENT, made and entered into this 18th day of December 1991 (the "Effective Date") by and between Harry R. McKinley, an individual citizen of the Commonwealth of Massachusetts (hereinafter referred to as "McKinley") and McKinley Optics, Inc., a corporation duly organized and existing under the laws of the Commonwealth of Massachusetts and having its principal office at 161 College Highway, Southampton, Massachusetts 01703 (hereinafter referred to as "MOI", and sometimes together with McKinley, as "Licensor"), and American Surgical Technologies Corporation, a corporation duly organized under the laws of the State of Delaware and having its principal office at One McKinley Square, Boston, Massachusetts 02109 (hereinafter referred to as "Licensee").







W I T N E S S E T H:



WHEREAS, Licensor is the owner of certain Technology (as defined below) relating to a stereoscopic objective lens for use in stereoscopic endoscopes and has the right to grant licenses thereunder;



WHEREAS, Licensor desires to have the Technology utilized by Licensee in certain medical device products as hereinafter defined and is willing to grant a license thereunder;



WHEREAS, Licensee has represented to Licensor, to induce Licensor to enter into this Agreement, that the Licensee shall commit itself to a diligent program of developing the Technology for commercial exploitation;



WHEREAS, Licensor is in the business of, and has expertise relative to conducting research into, designing, developing, engineering and manufacturing lenses for endoscopes and endoscopic video systems;



WHEREAS, Licensee desires to retain MOI and McKinley to conduct research into, design, develop and engineer lenses for endoscopes and endoscopic video systems utilizing the Technology; and



WHEREAS, in order to induce Licensor to enter into this Agreement, in addition to the consideration set forth in this Agreement, Licensor has previously issued to McKinley * * * shares of Licensee's Common Stock.



* * * Confidential Treatment Requested





NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the parties agree as follows:





ARTICLE 1 -- DEFINITIONS



For the purposes of this Agreement, the following words and phrases shall have the following meanings:



1.1 "Licensee" shall mean American Surgical Technologies Corporation and any subsidiary of American Surgical Technologies Corporation.





1.2 "Subsidiary" shall mean any corporation, division, company or other entity more than fifty percent (50%) of whose voting stock is owned or controlled directly or indirectly by American Surgical Technologies Corporation.



1.3 "Technology" shall mean certain existing Patent Rights (as defined below), Licensed Processes (as defined below), Know How, copyrights, trade secrets, inventions and other intellectual property or proprietary rights, as more fully described in Appendix A attached hereto and made a part hereof. As Used herein, the term "Know-How" means all unpatented scientific, engineering, or other know-how schematic designs, computer programs, code, software, firmware, technical data or information, all methods, processes and procedures, all products, formulations and kits and all instruments and apparatus materially related to the Licensed Products.



1.4 "Patent Rights" shall mean only those United States patent applications filed which are set forth in Appendix A or corresponding foreign patent applications to be filed (hereinafter referred to as the "Patent Rights Patent Application(s)"), and the United States patents and foreign patents issuing therefrom (hereinafter referred to as "Patent Rights Patent(s)") and any continuations, continuations-in part, divisions, reissues or extensions of any of the foregoing.



1.5 "Licensed Products" shall mean any endoscope which (a) is designed, marketed or sold for medical purposes AND (b) incorporates a stereo objective lens for use in endoscopes of any length, diameter or configuration, as disclosed in the patent application filed April 16, 1991 by McKinley (a copy of which is attached hereto).



1.6 "Licensed Process(es)" shall mean a process(es) for making any item relating to the above Technology which (a) is covered in whole or in part by a pending claim contained in a Patent Rights Patent Application, (b) is covered in whole or in part by a valid and unexpired claim contained in a Patent Rights Patent, or (c) otherwise materially incorporates any of the Technology.



1.7 "Marketing Period" shall mean any twelve (12) month period commencing on the second or any subsequent anniversary of the date of initial marketing release by Licensee of a Licensed Product.





1.8 "Net Sales" shall be determined based on Licensee's invoiced prices for the Licensed Product(s) produced hereunder less the sum of the following:



(a) Discounts allowed in amounts customary in the trade;



(b) Sales, excise, turnover, value added and/or use taxes or tariff duties directly imposed and with reference to particular sales;



(c) Outbound transportation prepaid or allowed; and;



(d) Amounts allowed or credited on returns;



provided however, that no deductions shall be made for commissions paid to individuals whether they be with independent sales agencies or regularly employed by Licensee and on its payroll, or for cost of collections. In the event that Licensed Product(s) are sold as part of a larger endoscopic video system and the invoice for such system does not set forth a separate price for the Licensed Product(s), then, for purposes of determining Net Sales as set forth above, the deemed invoiced price for the Licensed Product(s) in the system shall be determined by multiplying (i) the total invoiced price for the system by (ii) a fraction, the numerator of which is the Licensee's then-current list price for the Licensed Product which is part of the system (or which is the total of the Licensee's then-current list prices for all Licensed Product(s) sold as part of the system, if the system includes more than one Licensed Product) and the denominator of which is the total of the Licensee's then- current list prices for all components of the system (including the Licensed Product(s) in the system).





ARTICLE 2 -- GRANT; OWNERSHIP OF MODIFICATIONS

AND DEVELOPMENTS



2.1 Licensor, jointly and severally, hereby grants to Licensee a perpetual, exclusive worldwide license to make, have made, modify, use, lease, markets sell and otherwise distribute the Licensed Product(s) and any other medical products embodying the Technology, and to practice the Licensed Process(es) in the medical field, anywhere in the world, subject to the terms and conditions (including, under certain circumstances termination of exclusivity or termination of the license) hereinafter set forth.



2.2 Licensor, jointly and severally hereby also grants to Licensee a perpetual, exclusive, worldwide license and the right to develop, make, use, sell and distribute improvements, modifications and derivative works based on the Licensed Products, the Licensed Processes or the Technology. Licensor claims no ownership interest in any portion of an improvement, modification or derivative work which is not part of the Licensed Products, Licensed Processes or the Technology.



2.3 In the event that Licensor or (in the case of MOI) its officers or employees invents, controls, or becomes aware of any improvement to the Licensed Products, Licensed Processes or Technology, it or he, as the case may be, shall forthwith communicate full details thereof in its or his, as the case may be, possession to Licensee, such improvements





shall be deemed improvements, modifications or derivative works developed by the Licensee as provided under section 2.2 above.



2.4 The license granted hereunder shall cease to be exclusive and shall become nonexclusive upon default (continuing beyond the applicable grace period) in payment by Licensee of the license exclusivity maintenance royalty as hereinafter provided. Upon the termination of said exclusivity, notwithstanding any financial obligations which Licensee shall owe to Licensor and which Licensee shall nevertheless satisfy according to the terms of this Agreement, any nonexclusive license shall extend to the full end of the term or terms for which royalties are payable pursuant to Section 3.1(c)(ii) below, unless this Agreement is sooner terminated as hereinafter provided in Sections 7.2 and 7.3 below.



2.5 Licensee shall have the right to sublicense any of the rights, privileges and license granted hereunder only during the exclusive period of this Agreement. The termination or expiration of this Agreement shall not terminate or affect sublicenses previously granted by Licensee in accordance with this Agreement.



2.6 Licensee agrees that any sublicenses granted by it shall have privity of contract between Licensor and sublicensee such that the obligations of this Agreement shall be binding upon the sublicensee as if it were in the place of Licensee. Licensee further agrees to attach copies of this Agreement (from which the royalty provisions may be deleted) to all sublicense agreements.



2.7 Licensee agrees to forward to Licensor a copy of any and all fully executed sublicense agreements, and further agrees to forward to Licensor promptly after the end of each calendar quarter during which any sublicense is in effect a copy of such reports received by Licensee from its sublicensees during the preceding calendar quarter under the sublicenses as shall be pertinent to a royalty accounting under said sublicense agreements.



ARTICLE 3 -- ROYALTIES



3.1 For the rights, privileges and license granted hereunder and for the services to be performed by Licensor hereunder, Licensee shall pay royalties to Licensor (in the manner hereinafter provided) to the end of the term of this Agreement unless it shall be terminated as hereinafter provided:



(a) A license issue royalty of * * *, which said

license issue royalty shall be deemed earned and due immediately

upon the execution of this Agreement;



(b) A license exclusivity maintenance royalty of * * *

* * * per Marketing Period during the first * * *

Marketing Periods, which amount shall increase by the amount of

* * * per Marketing Period during each

subsequent Marketing Period until such time as the license

exclusivity maintenance royalty equals * * * , and

thereafter at a rate of * * * per Marketing

Period, which said license exclusivity maintenance royalty shall





* * * Confidential Treatment





Requested payable in monthly installments, in arrears, and

shall be credited in full against the royalties on sales due

for each Marketing Period pursuant to Section 3.1(c)(ii);



(c) Royalties on sales in an amount equal to:



(i) * * * upon sale of the 25th 3-D Video System (as such

term is defined in the description of Technology set forth

in Appendix A attached hereto) incorporating a Licensed

Product, and an additional * * * upon sale of each of the

* * * and *** such 3-D Video Systems incorporating a

Licensed Product;



(ii) thereafter, through the date on which the Patent Rights

Patent(s) expire (or, if no Patent Right Patents issue

within three years of the date of this Agreement, through

the fifteenth anniversary of the date of this Agreement),

* * * first * * * of Net Sales, * * * of the next

* * * of Net Sales, and * * * of all

subsequent Net Sales.



(d) From and after the date on which the Patent Rights Patent(s)

expire (or, if no Patent Right Patents issue within * * * years

of the date of this Agreement, from and after the * * *

anniversary of the date of this Agreement), the obligation of

Licensee to pay a license exclusivity maintenance royalty or any

royalties on sales hereunder shall terminate and the license

granted herein shall become perpetual, exclusive and royalty-



3.2 All royalties payable to Licensor under Section 3.1 above shall be considered earned by Licensor * * * by Licensee of payment for the license, use or sale of Licensed Products, and shall be payable * * * as set forth in Article 4 of this Agreement, except for license exclusivity maintenance royalties which shall be payable * * * immediately at the * * * in the manner as provided above.



3.3 All payments that are not paid for whatever reason when they become due shall be subject to the addition of interest at a floating rate per annum equal to the prime rate as published from time to time in the WALL STREET JOURNAL, calculated from said due date to the date a negotiable payment check is mailed by certified mail to Licensor for all monies due and owed to Licensor. Furthermore, Licensor shall not be obligated to give notice for interest to begin to accrue.



3.4 No multiple royalties shall be payable because the Licensed Product(s) or Licensed Process(es) are or shall be covered by more than one patent application or patent licensed under this Agreement, nor shall royalties be adjusted upon the granting of any patent or the finding of invalidity of any patent or portion thereof governed by this Agreement.





* * * Confidential Treatment Requested





3.5 Royalty payments shall be paid in United States dollars in Boston, Massachusetts, or at such other place as Licensor may reasonably designate consistent with the laws and regulations controlling in any foreign country. If any currency conversion shall be required in connection with the payment of royalties hereunder, such conversion shall be made by using the exchange rate prevailing at a first-class foreign exchange bank on the last business day of the calendar quarterly reporting period to which such royalty payments relate.



ARTICLE 4 -- REPORTS AND RECORDS



4.1 Licensee shall keep full, true and accurate books of account containing all particulars that may be necessary for the purposes of showing the amount payabl ...