Research, Development And License Agreement

RESEARCH, DEVELOPMENT AND LICENSE AGREEMENT


This RESEARCH, DEVELOPMENT AND LICENSE AGREEMENT (the "Agreement") is made and entered into effective as of the12th day of November, 1996 (the "Effective Date"), by and between INVISION TECHNOLOGIES, INC., a corporation duly organized and existing under the laws of the State of Delaware, and having its principal place of business located at 3420 E. Third Avenue, Foster City, California 94494 ("InVision"), and EG&G ASTROPHYSICS, a corporation duly organized and existing under the laws of the State of California and having its principal place of business located at 4031 Via Oro Avenue, Long Beach, California 90801 ("Astrophysics"). Each of InVision and Astrophysics shall from time to time herein be referred to as a "Party" and together as the "Parties."


WHEREAS, InVision has developed and commercialized an FAA-certified explosive detection system (the "Pre-Existing InVision System") using a combination of computerized tomography and x-ray technologies for the purpose of inspecting checked luggage on commercial airline flights;


WHEREAS, Astrophysics has developed and commercialized a broad range of x-ray based inspection systems, with a current stand-alone dual energy model referred to as the "Z-Scan;"


WHEREAS, EG&G, Astrophysics and InVision have signed a non-binding Letter of Intent dated October 14, 1996 (the "LOI"), regarding a collaborative work effort they intend will lead to the commercialization of a high- performance, FAA-certifiable, explosive detection system or systems referred to as the "EDS" that will be initially based upon a combination of the Pre-Existing InVision System and the Z-Scan, and ultimately upon a combination of InVision's CTX 5000 and the Z-Scan, and which EDS the parties believe will provide enhanced total capability for reliable detection of explosives at higher rates of through-put than are currently available.


WHEREAS, the LOI calls for the concurrent negotiation of (i) this Agreement under which the parties will conduct work in a research and development phase to scale up and complete the development of an EDS using certain technology owned or controlled by InVision, certain Z-Scan technology owned or controlled by Astrophysics, and certain technology that may result from the collaborative work effort under the Agreement, (ii) a manufacturing and supply agreement (the "M&S Agreement") to govern the manufacturing and supply of EDS Products or components developed under the Development Program and pursuant to which it is intended that Astrophysics will manufacture the Z-Scan component of any EDS Product, and InVision will manufacture the CTX 5000 component of any EDS Product, as more fully described


in Section 2.5.4 below , (iii) a marketing and distribution agreement (the "Distribution Agreement") to govern the terms under which EDS Products (as such term is defined below) will be marketed and distributed by InVision on behalf of the Parties, using any existing Astrophysics' sales and marketing infrastructure in addition to InVision's, and (iv) a maintenance and support agreement (the "Maintenance Agreement") to govern the maintenance and support of EDS developed under the Agreement and manufactured, and sold or licensed under the M&S Agreement.


WHEREAS, the Parties and EG&G, INC., a corporation duly organized and existing under the laws of the Commonwealth of Massachusetts and having its principal place of business located at 45 William Street, Wellesley, Massachusetts 02181 ("EG&G"), have agreed that, pursuant to a Common Stock Purchase Agreement between EG&G and InVision of even date herewith, upon the effective date of which EG&G International, Ltd., a wholly-owned subsidiary of EG&G organized under the laws of the Cayman Islands and having its principal place of business located care of Maples and Calder, Ugland House, South Church Street, Grand Cayman, Cayman Islands, British West Indies ("EG&G International") will invest Two Million Dollars ($2,000,000) in InVision in exchange for shares of unregistered common stock of InVision (the "Shares") at a price per Share equal to the final trading price per share of the Company's publicly traded Common Stock on the day immediately prior to the effective date of such Common Stock Purchase Agreement as quoted in the Wall Street Journal, less a per Share amount equal to ten percent (10%) of such price; and


WHEREAS, the Shares will be issued and sold to EG&G International pursuant to the terms of a Common Stock Purchase Agreement in substantially the form attached hereto as Exhibit E (the "Stock Purchase Agreement").


NOW, THEREFORE, in consideration of the above premises and mutual covenants hereinafter contained, and for other good and valuable consideration the receipt of which is hereby acknowledged, InVision and Astrophysics hereby agree as follows:


1. DEFINITIONS.


1.1 "Astrophysics Licensees" means those third parties with whom Astrophysics has or will have a cross license of its own patents on a broad basis without the identification of individual patents as of the date of this Agreement.


1.2 "Astrophysics Firmware" means any and all Firmware licensed to or developed for or by Astrophysics and embedded in the Z-Scan, including but not limited to any and all improvements, modifications and variations.


1.3 "Astrophysics Patent Rights" means any and all Patent Rights owned, controlled, possessed or filed by Astrophysics as of the date hereof in connection with the


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Z-Scan, or which are owned, controlled, possessed or filed by Astrophysics upon improvements to the EDS Technology or Astrophysics Technology pursuant to Section 9.4 hereof.


1.4 "Astrophysics Software" means any and all software licensed to or developed for or by Astrophysics and is used solely to operate or embedded in the Z-scan as of the Effective Date.


1.5 "Astrophysics Technology" means any and all Technology owned or controlled by Astrophysics.


1.6 "Confidential Information" means any confidential or proprietary information, source code, software tools, designs, schematics, plans or any other information relating to any research project, work in process, future development, scientific, engineering, manufacturing, marketing or business plan or financial or personnel matter relating to either party, its present or future products, sales, suppliers, customers, employees, investors or business, identified by the disclosing Party as Confidential Information, whether in oral, written, graphic or electronic form. Without limiting the foregoing, all InVision Technology and all Astrophysics Technology shall be deemed the Confidential Information of their respective owner.


1.7 "CTX 5000" means a complete baggage screening device consistent with the InVision CTX 5000 Specifications attached hereto as Exhibit A (the "CTX 5000 Specifications"), but shall not include the component known as InVision's pre- scanner (the "InVision Pre-Scanner Device").


1.8 "CTX 5000 Technology" means those portions of the InVision Technology relating solely to the CTX 5000.


1.9 "Development Program" means the activities to be performed by InVision and Astrophysics both jointly and separately that are intended to produce EDS Products, equipment, processes, interfaces or connection protocols between the CTX 5000 and the Z-Scan and to result in a commercially viable EDS. The Development Program shall be executed in two or more phases, the first phase thereof ("Phase One") to encompass the development of an EDS utilizing a combination and integration of the Z-Scan and the InVision Pre-Existing System, and the second phase thereof ("Phase Two") to encompass the development of an EDS utilizing a combination and integration of the Z-Scan with and into the CTX 5000 as such EDS are described in Exhibit B, a draft of which is attached hereto (the "EDS Specifications"). In each phase, the parties intend that Astrophysics shall manufacture the Z-Scan component of the EDS and InVision shall manufacture the CTX 5000 component of the EDS, along with a specialized active luggage positioner of the CTX 5000 as described in Exhibit B hereto


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1.10 "EDS" means the explosive detection system or systems to be jointly developed hereunder by InVision and Astrophysics as described above, initially based upon the integration of the InVision Pre-Existing System and the Z-Scan, and later upon the full integration of the Z-Scan and the CTX 5000.


1.11 "EDS Product" means any product incorporating EDS Technology, and any new versions, replacement or substitute products created or developed under this Agreement, as from time to time amended.


1.12 "EDS Technology" means any and all Technology arising out of the research and development efforts hereunder, including but not limited to any and all related inventions, improvements, variations or modifications thereof or thereon which are used in any EDS prototype, and any inventions, improvements, variations or modifications on or to the EDS Technology or derivative works thereof.


1.13 "Firmware" means any and all machine readable programs which are hardwired into non-volatile integrated circuits contained in a Party's Technology.


1.14 "InVision Firmware" means any and all Firmware licensed to or developed for or by InVision and embedded in the CTX 5000 or the InVision Pre- Existing System.


1.15 "InVision Licensees" means those third parties with whom InVision has or will have a cross license of its own patents on a broad basis without the identification of individual patents as of the date of this Agreement.


1.16 "InVision Patent Rights" means any and all Patent Rights owned, controlled, possessed or filed by InVision as of the date hereof in connection with the CTX 5000 and/or the InVision Pre-Existing System, or which are owned, controlled, possessed or filed by InVision upon improvements to the InVision Technology or the EDS Technology pursuant to Section 9.4 hereof.


1.17 "InVision Pre-Scanner Technology" means those portions of the InVision Technology relating solely to the InVision Pre-Scanner.


1.18 "InVision Software" means any and all Software licensed to or developed by or for InVision and is used solely to operate or embedded in the CTX 5000 or the InVision Pre-Scanner as of the Effective Date.


1.19 "InVision Technology" means any and all Technology owned or controlled by InVision.


1.20 "Know-How" means all designs, drawings, prints, performance specifications, engineering data, sources of supply information, techniques, inventions,


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practices, methods, knowledge, skill, experience, test data and cost, sales and manufacturing data of any sort or description and (i) in the case of InVision relating to the CTX 5000 and/or to InVision's Pre-Scanner and (ii) in the case of Astrophysics to the Z-Scan, which is owned or controlled by such Party and which such Party discloses to the other Party under this Agreement. A Party's Know-How only includes that Know-How of third parties (i) to which such Party has an unrestricted right to use and disclose, and (ii) which is necessary to enable the Parties hereunder to modify, manufacture, assemble, test or use the Z-Scan, the CTX 5000, the InVision Pre-Scanner and/or an EDS.


1.21 "Oversight Board" means a group comprised of two individuals designated by InVision and one individual from each of EG&G and Astrophysics to represent it with respect to issues arising out of this Agreement, the M&S Agreements, the Distribution Agreement and/or the Maintenance Agreement. Initially, the members of the Oversight Board shall be David Pillor, Dr. Sergio Magistri, Tom Schorling and Angelo Castellana.


1.22 "Patent Rights" means any and all United States and foreign patent rights, including patents of importation, improvement patents, patents and certificates of addition, and utility models, as well as divisions, reissues, continuations, renewals, and extensions of any of the foregoing, and applications therefor and any patents issuing thereon and such further patent rights relating thereto.


1.23 "Software" means any and all human readable source code together with the applicable programmers' notes, and the machine executable version of the source code.


1.24 "Specifications" means the overall performance specifications to which a particular product performs or will perform.


1.25 "Technology" means Firmware, Know-How, Software and Patent Rights, together.


1.26 "Z-Scan Technology" means Astrophysics Technology relating solely to the Z-Scan.


2. DEVELOPMENT RESPONSIBILITIES.


2.1 SCOPE OF DESIGN AND DEVELOPMENT. The parties will cooperate and use their commercially reasonable efforts to develop under the Development Program, one or more commercial EDS Products, along with commercial scale equipment and processes for such EDS Product(s), all at a development cost not to exceed Two Million Dollars ($2,000,000) in the aggregate (the "Development Costs"), unless the Parties otherwise agree as set forth below. In the event that the Development Costs exceed $2,000,000, then the parties shall each bear their own costs for any excess unless they agree otherwise


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in writing. InVision and Astrophysics agree to cooperate to design and develop an EDS in accordance with the EDS Specifications in the attached Exhibit B, pursuant to the development schedule set forth in the attached Exhibit C (the "Development Schedule"). The EDS Specifications will be finalized as provided under Paragraph 2.3.3 below, and the Development Schedule will be finalized as provided under Section 2.5.2 below, subject thereafter to such modification as InVision and Astrophysics shall agree upon from time to time, if any. The Development Costs will be shared equally by the Parties, as described more fully under Section 4.4 below.


2.2 TECHNICAL ASSISTANCE.


2.2.1 Each of InVision and Astrophysics shall designate a project manager (each a "Project Manager"). The Project Managers shall be responsible for communicating on a regular basis regarding the progress of the Development Program and/or perceived problems the Parties are encountering or may expect to encounter during the Development Program and testing phase.


2.2.2 Subject to the licenses granted under Section 7 below, InVision will provide to Astrophysics for Astrophysics' use solely in developing and producing an EDS consistent with the EDS Specifications, those portions of InVision's Technology (exclusive of any proprietary InVision source code) as it exists on the Effective Date that InVision in its sole discretion believes are necessary for Astrophysics to develop and produce an EDS, along with any improvements to the InVision Technology occurring after such date which InVision also believes to be necessary to enable Astrophysics to meet its obligations hereunder.


2.2.3 Astrophysics will communicate to the InVision Project Manager its progress in developing the EDS not less frequently than once per month, and shall document such communications in a written report on a quarterly basis. In addition, each Party shall communicate promptly to the other Party's Project Manager any material improvements or modifications of or additions to the EDS Technology, and/or the other Party's Technology and/or, in the event that such improvements, variations, modifications, or additions arise out of a Party's efforts in connection with its obligations hereunder and relate to any of the EDS Technology, Astrophysics Technology or InVision Technology and including in any case any improvements to such technology, if, as and when such additions arise. Each Party shall document such communications as to material additions in writing on a monthly basis.


2.2.4 Each Party shall allocate its staff and designate its resources, financial or otherwise, as it deems reasonable and necessary in its sole discretion in order to meet its obligations hereunder, taking into account its other obligations and commitments.


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2.2.5 Subject to the restrictions of Section 5.3 hereof, InVision will continue to manufacture or have manufactured and to sell or distribute the CTX 5000 and the InVision Pre-Scanner and Astrophysics will continue to manufacture, sell and distribute the Z-Scan.


2.3 INVISION'S DEVELOPMENT RESPONSIBILITIES. Subject to the terms of this Agreement and the licenses granted hereunder, InVision shall:


2.3.1 Provide Astrophysics access at InVision's facilities located in Foster City, California to one InVision Pre-Existing System during InVision's regular business hours as needed by Astrophysics for the purposes of this Agreement, and shall make available, on an as-needed basis during regular business hours, and to the extent commercially reasonable, qualified personnel to consult with Astrophysics in response to Astrophysics' reasonable requests arising in connection with the design and development hereunder of EDS prototypes and the related manufacturing processes. In addition, in the event that InVision refuses a request for consultation or access for any reason, then Astrophysics may appeal such refusal to the Oversight Board for their consideration and resolution.


2.3.2 Provide access to such other InVision Technology (exclusive of any InVision proprietary source code) and such technical expertise and personnel of InVision's during regular business hours as are reasonably necessary, solely for the purposes of this Agreement and only to the extent InVision determines that such access and allocation of resources is commercially reasonable.


2.3.3 Provide for comment by Astrophysics proposed and detailed EDS Specifications, a draft copy of which are attached hereto as Exhibit B. The EDS Specifications will be analyzed, modified and amended by the Parties from time to time during the term of this Agreement; provided, however, that InVision shall use its commercially reasonable efforts, and Astrophysics shall use its commercially reasonable efforts to cooperate with and support InVision's efforts, to finalize the EDS Specifications within six (6) months from the Effective Date or at such later date as the parties shall agree in writing.


2.3.4 Provide to Astrophysics proposed specifications for an acceptance test procedure for each EDS prototype developed pursuant hereto (the "Acceptance Test"), a copy of which upon finalization by the parties will be attached hereto as Exhibit D ("Testing System Specifications").


2.3.5 Cooperate with Astrophysics to design, to develop and to produce an acceptance protocol for EDS Product(s), including any EDS prototypes, delivered or to be delivered hereunder to InVision.


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2.4 ASTROPHYSICS' DEVELOPMENT RESPONSIBILITIES. Subject to the terms of this Agreement and the licenses granted hereunder, Astrophysics shall use its commercially reasonable efforts to:


2.4.1 Design, develop and plan the equipment ("EDS Equipment") and staffing requirements necessary to develop and manufacture one or more EDS prototypes meeting the EDS Specifications (each a "Prototype"), subject to the review and approval of InVision. The Parties acknowledge and agree that the staff and EDS Equipment to be selected and manufactured may also provide the capacity to replace certain production requirements of each of InVision and Astrophysics, and agree to cooperate in good faith to fairly allocate between them such extra capacity to the extent it is available.


2.4.2 Subject to the review and approval of InVision, evaluate and hire the staff, and make, manufacture or otherwise procure the EDS Equipment required by the Development Program within the times set forth in the Development Schedule at prices to be negotiated in good faith and agreed upon by InVision and Astrophysics.


2.4.3 Design and develop commercially viable EDS Equipment and manufacturing processes necessary to produce an EDS Prototype and commercially viable EDS for each of Phases One and Two, respectively, in accordance with the EDS Specifications and the Development Schedule.


2.4.4 Provide in cooperation with InVision an EDS prototype that is in substantial conformance with the EDS Specifications and can be evaluated and tested in accordance with the Acceptance Test as defined in Section 2.3.4 above, within the time provided in the Development Schedule for InVision's use in testing and evaluating the EDS Product(s).


2.4.5 Undertake and continue product development efforts to improve and optimize EDS performance, yield and productivity throughout the term of this Agreement and as further specified in the M&S Agreement and in any Maintenance Agreements.


2.4.6 Develop, revise, produce and update as needed a well-ordered and user friendly manual containing, among other things, drawings relative to EDS Product installation, other applicable outline drawings and illustrations, schematic diagrams of circuits critical to any EDS Product, a listing of field replacement parts, and all instructions necessary for the installation, operation, maintenance and repair of the EDS Product(s).


2.4.7 Produce for delivery and acceptance by InVision pursuant to the Acceptance Test described in Section 2.3.4 above a pilot production run of one unit of the EDS Product for each of Phases One and Two.


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2.5 SHARED DEVELOPMENT RESPONSIBILITIES. Subject to the terms of this Agreement and the licenses granted hereunder, InVision and Astrophysics together shall:


2.5.1 Jointly apply for and use their best efforts to obtain Federal government funding, as it may come availa ...