Cooperative Research & Development Agreement

EXHIBIT 10.22


COOPERATIVE RESEARCH AND DEVELOPMENT AGREEMENT


97-CRDA-0106


RAPISCAN SECURITY PRODUCTS, INC.


AND


THE FEDERAL AVIATION ADMINISTRATION
WILLIAM J. HUGHES TECHNICAL CENTER


This Cooperative Research and Development Agreement (CRDA), dated ______________________ is entered into by and between Rapiscan Security Products, Inc. [RAPISCAN], and the United States of America, as represented by the Federal Aviation Administration William J. Hughes Technical Center [FAA Technical Center], located at the Atlantic City International Airport, New Jersey.


A. BACKGROUND
-------------


The development of effective enhanced automated baggage screening systems is a continuing effort at the Federal Aviation Administration (FAA) Technical Center. The Aviation Security Research & Development Division has been examining the potential of several technologies and is particularly interested in further development of the X-ray measurement and analysis techniques currently under development by Rapiscan. The Rapiscan technology is unique and proprietary in its particular scanning approach as well as in its image processing ability to sort out the signatures of numerous objects within a typical piece of luggage and then to identify to an operator whether a particular object constitutes a threat (explosive). The technology has been developed to the point where it is approaching the capability to meet the detection and throughput requirements for enhanced automated inspection of luggage at an airport.


B. OBJECTIVE AND PLAN
---------------------


The intent of this CRDA is to assist Rapiscan to optimize its prototype enhanced automated X-ray baggage screening system for use at airports.


C. AGREEMENT
------------


The Federal Technology Transfer Act of 1986, as amended, 15 U.S.C. 371Oa, et
-- seq. permits the Director of the FAA Technical Center to enter into Cooperative - ---- Research and Development Agreements consistent with that Act, associated Executive Orders, and agency policies.


ARTICLE 1. Definitions
-----------


As used in this AGREEMENT, the following terms shall have the following meanings:


1.0 The term "AGREEMENT" means this Cooperative Research and Development Agreement, or"CRDA".


1.1 The term "Cooperative Research and Development Program" means the research and development work as defined in the Obligation of the Parties (OP) in Article 2, paragraph 2.1.


1.2 The term "effective date" means the date on which the Director of the FAA Technical Center signs the AGREEMENT.


1.3 The term "made" in relation to any invention means the conception or first actual reduction to practice of such invention.


1.4 The term "invention" means any invention or discovery (including software- related invention) which is or may be patentable or otherwise protected under Title 35 of the United States Code or any novel variety of plant which is or may be protectable under the Plant Variety Protection Act (7 U.S.C. 7321 et seq.).


1.5 The term "proprietary information" means information which could provide a competitive advantage to the party possessing such information and which either embodies trade secrets developed at private expense and outside of any Government contract or is confidential technical, business, or financial information provided that such information:


a) is not generally known, or is not available from other sources without
obligations concerning its confidentiality;
b) has not been made available by the owners to others without obligations
concerning its confidentiality; or,
c) is not already available to the public without obligations concerning
its confidentiality.


1.6 "Subject invention" means any invention conceived or first actually reduced to practice in the performance of work under this AGREEMENT (as described in Section 2.0 of the Obligations of the Parties attached hereto as Appendix A), but shall not include any invention conceived and first actually reduced to practice prior to the date hereof.


1.7 The term "created" in relation to any copyrightable software work means when the work is fixed in any tangible medium of expression for the first time, as provided for at 17 U.S.C. 101.


2


ARTICLE 2. Cooperative Research and Development Program
--------------------------------------------


2.1 Obligation of the Parties. The cooperative research and development
------------------------- program performed under this AGREEMENT shall be performed in accordance with the Obligations of the Parties [OP], attached as Appendix A. The utilization of the FAA Technical Center's personnel, resources, facilities, equipment, skills, know-how, computer software and information will be consistent with its own policies, missions, and requirements. It is understood that the nature of this cooperative research is such that completion within the period of performance specified, or within the limits of financial support allocated, cannot be guaranteed. Accordingly, it is agreed that all cooperative research is to be performed on a best efforts basis. Any modifications of the OP shall be by mutual agreement between the parties and shall be incorporated into this AGREEMENT by a formally executed written amendment.


2.2 Review of Work. Periodic conferences may be held, when deemed necessary by
-------------- both parties, between personnel of the FAA Technical Center and RAPISCAN for the purpose of reviewing the progress of work defined in the OP of paragraph 2.1.


2.3 Principal Investigator. The Aviation Security Research & Development
---------------------- Division agrees to assign a substantial portion of the work to be performed pursuant to the OP to the Aviation Security Research & Development Division, AAR-500, AAR-520. The work will be performed under the supervision of Roy Mason who, as Principal Investigator, has the responsibility for the scientific and technical conduct of this project.


2.4 Scope Change. If at any time the Principal Investigator determines that
------------ the research data dictates a substantial change in the direction of the work, the FAA Technical Center shall promptly notify RAPISCAN and the parties shall make a good faith effort to agree on any necessary change to the OP. Any substantial change in the direction of work will be formalized by a mutual agreement and a change to the OP that specifies the new work to be performed, in each case signed by the FAA and by the chairman or president of RAPISCAN.


ARTICLE 3. Reports
-------


The FAA Technical Center shall prepare quarterly and final reports. These reports shall follow the guidelines in Appendix B. The final report shall be prepared within three (3) months after completing the work called for in the OP. Copies of all reports shall be forwarded to AAR-201. Any other reports as called for in the OP shall be in a format agreed upon by RAPISCAN and the PI and shall be forwarded to RAPISCAN and AAR-201.


ARTICLE 4. Financial Obligation
--------------------


The performance of research by the FAA Technical Center under this AGREEMENT is not conditioned on any advance payment of funds by RAPISCAN.


3


ARTICLE 5. Term
----


The term of this AGREEMENT is for a period of 36 months, commencing on the effective date of this AGREEMENT, unless otherwise modified pursuant to Article 13.


ARTICLE 6. Title to Property
-----------------


6.1 Capital Equipment. All capital equipment developed, acquired, and funded
----------------- under this AGREEMENT by the FAA Technical Center shall be the property of the FAA Technical Center, except that title to items of capital equipment provided to the FAA Technical Center by RAPISCAN or acquired by the FAA Technical Center with funds supplied by RAPISCAN (including without limitation, x-ray machines and related equipment) shall remain or vest in RAPISCAN.


6.2 Software. Title to software developed by RAPISCAN exclusively at private
-------- expense shall remain in RAPISCAN. Except to the extent that such software may be patentable, the Government acquires no rights to software developed by RAPISCAN in the course of participating in this AGREEMENT. Rights acquired in patentable software are set out in Article 9.


ARTICLE 7. Publicity, Use of Name, and Endorsement
---------------------------------------


7.1 Use of Technical Center Name Prohibited. RAPISCAN shall not use the name
--------------------------------------- of the FAA Technical Center on any product or service which is directly or indirectly related to either this AGREEMENT or any patent license or assignment Agreement which implements this AGREEMENT without the prior approval of the FAA Technical Center.


7.2 No Endorsement by FAA. By entering into this AGREEMENT, the FAA Technical
--------------------- Center does not directly or indirectly endorse any product or service provided, or to be provided, by RAPISCAN, its successors, assignees, or licensees. RAPISCAN shall not in any way imply that this AGREEMENT is an endorsement by the FAA Technical Center of any such product or service.


7.3 Publicity. Notwithstanding Articles 7.1 and 7.2 of this AGREEMENT,
--------- RAPISCAN may publicly disclose the existence of this AGREEMENT, a general discussion of the services to be performed by the FAA Technical Center hereunder and such other information as it determines reasonably necessary for compliance with applicable securities laws or listing agreements affecting its parent corporation.


ARTICLE 8. Publication
-----------


The FAA Technical Center and RAPISCAN agree to confer and consult with each other prior to publication or other public disclosure of the results of work under this AGREEMENT to ensure that no proprietary information or military critical technology is released. Furthermore, prior to submitting a manuscript for publication or before any other public disclosure, each party will offer the other party ample opportunity to review such


4


proposed publication or disclosure, to submit objections, and to file patent applications in a timely manner.


Notwithstanding the foregoing, RAPISCAN may make such public disclosures as it determines reasonably necessary to satisfy applicable securities laws or listing agreements affecting its parent corporation without first submitting such public disclosure to the FAA Technical Center; provided, however, that a copy of such disclosure shall thereafter be provided to the FAA Technical Center.


ARTICLE 9. Patents
-------


9.1 Reporting of Inventions. The FAA Technical Center shall promptly report to
----------------------- RAPISCAN each subject invention reported to the FAA Technical Center by its employees. RAPISCAN shall promptly disclose to the FAA Technical Center each subject invention reported to RAPISCAN by any of its employees. Each party shall provide the other party with copies of the patent applications it files on any subject invention along with the power to inspect and make copies of all documents retained in the official patent application files by the applicable patent office, except as may be prohibited by 35 U.S.C. 181, relating to inventions affecting the national security.


9.2 Inventions Made Solely by Employees of RAPISCAN. The FAA Technical Center,
------------------------------------------------ on behalf of the U.S. Government, waives any ownership rights the U.S. Government may have in subject inventions made solely by RAPISCAN employees and agrees that RAPISCAN shall have the option to retain title to any such employee subject invention. RAPISCAN shall notify the FAA Technical Center promptly upon making this election and agrees to file timely patent applications on such subject invention at its own expense in such countries which RAPISCAN, in its own discretion, deems expedient. Nothing in this AGREEMENT shall be interpreted to require RAPISCAN to continue the prosecution of such patents, nor to maintain them in force. Should RAPISCAN choose to abandon an application once filed or decide not to pay any maintenance fee when due, RAPISCAN shall immediately grant title to such application or patent to the Government of the United States.


9.3 Inventions Made Solely by Government Employees and Joint Inventions. The
------------------------------------------------------------------- FAA Technical Center, on behalf of the U.S. Government, shall have the initial option to retain title to each subject invention made solely by its employees and in each subject invention made jointly by RAPISCAN and Government employees. In the event that the FAA Technical Center informs RAPISCAN that it elects to retain title to such joint subject invention, RAPISCAN agrees to assign to the Government whatever right, title and interest RAPISCAN has in and to such joint subject invention.


5


9.4 Grant of Non-Exclusive License in U.S. Government Inventions.
-------------------------------------------------------------


The FAA Technical Center, on behalf of the U.S. Government, agrees to grant to RAPISCAN, for reasonable compensation not to exceed /*/ (as defined in Appendix C), a nonexclusive license in any invention made under this AGREEMENT, in whole or in part, by a Government employee.


9.5 Exclusive License in U.S. Government Invention in Specific Field of Use.
------------------------------------------------------------------------


The FAA Technical Center, on behalf of the U.S. Government, agrees to grant to RAPISCAN, for reasonable compensation, not to exceed /*/ (as defined in Appendix C), exclusive license in any invention made under this AGREEMENT, in whole or in part, by a Government employee in the following specific field of use:


Automated Detection of Explosives in Baggage


9.6 Filing of Patent Application. The party having the right to retain title
---------------------------- and file patent applications on a specific subject invention may elect not to file patent applications thereon provided it so advises the other party within sixty (60) days from the date it discloses the subject invention to the other party. Thereafter, the other party may elect to file patent applications on such subject invention and the party initially reporting such subject invention agrees to assign its right, title and interest in such subject invention to the other party and cooperate with such party in the preparation and filing of patent applications thereon. The assignment of the entire right, title, and interest to the other party pursuant to this paragraph shall be subject to the retention by the party assigning title of a non-exclusive, irrevocable, paid-up license to practice, or have practiced on its behalf, the subject invention throughout the world. In the event neither of the parties to this AGREEMENT elect to file a patent application on a subject invention, either or both (if a joint invention) may, at their sole discretion and subject to reasonable conditions, release the right to file to the inventor(s) with a license in each party of the same scope as set forth in the immediately preceding sentence.


9.7 Patent Expenses. The expenses attendant to the filing of patent
---------------- applications as specified in 9.6 above, and all maintenance fees, shall be borne by the party filing the patent application. Any party having an obligation to pay a maintenance fee who decides not to pay such maintenance fee, shall so notify the other party of that decision in sufficient time to permit the other party to act to preserve its interest in the patent.


9.8 Prior Patents of RAPISCAN. RESERVED
-------------------------


- ---------------------------- /*/ Symbol indicates that material has been omitted pursuant to a request for confidential treatment and such material has been filed separately with the Securities and Exchange Commission.


6


9.9 Retention of Government Rights in Inventions Made Under this AGREEMENT.
-----------------------------------------------------------------------


9.9.1 Government License. RAPISCAN agrees to grant to the U.S. Government
------------------ a nonexclusive, nontransferable, irrevocable, paid-up license to practice or have practiced throughout the world by or on behalf of the Government each invention made in whole or in part by its employees under this AGREEMENT. This license shall be evidenced by a confirmatory license agreement prepared by RAPISCAN in a form satisfactory to the FAA Technical Center.


9.9.2 March-in Rights. In the event the FAA Technical Center assigns
--------------- title or grants an exclusive license to a subject invention made in whole or in part by a Government employee, the Government shall retain the right:


a) to require RAPISCAN to grant to a responsible applicant a nonexclusive, partially exclusive, or exclusive license to use the invention in the applicant's licensed field of use, on terms that are reasonable under the circumstances; or
b) if RAPISCAN fails to grant such a license, to grant the license itself. See 15 U.S.C. 3710a(b)(1)(B).


9.9.3 Government Exercise of March-in Rights. The Government may exercise
-------------------------------------- its rights under Article 9.9.2 only in exceptional circumstances and only if the Government determines that


a) the action is necessary to meet health or safety needs that are not reasonably satisfied by the RAPISCAN;
b) the action is necessary to meet require ...