CORP-PRT.R&D ACQUIRATEC, INC. DEVELOPATEC, INC. Research and Development, License, And Supply Agreement This Research and Development, License, and Supply Agreement (this "Agreement") is made as of this _________ day of ___________ by and between Developatec, Inc. ("Developatec"), a _________ corporation, and Acquiratec, Inc., a _________ corporation. WHEREAS, Acquiratec is in the business of manufacturing and supplying widget devices for use in the widgetmental industry; WHEREAS, Acquiratec has an interest in supporting development of widget devices employing newtech for use in the widgetmental industry; WHEREAS, Developatec has been conducting extensive research and development for an extended period of time in the field of widget devices employing newtech for a variety of purposes, including devices intended for use in the widgetmental industry; and WHEREAS, Acquiratec and Developatec desire to cooperate in the research and development of widget devices employing newtech for use in the widgetmental industry; and, if such devices appear to be appropriate for commercialization, to provide for their commercialization; and, if such devices are commercialized, to provide for the supplying to Acquiratec, by Developatec, of target device assemblies embodying the results of such research and development for use in such devices marketed by Acquiratec; NOW, THEREFORE, in consideration of the mutual promises contained herein, the parties agree as follows: 1.0 Field of Research and Development; Definitions 1.1 The field of research and development that is the subject of this Agreement is newtech systems for the performance of newtech functions for use in the widgetmental industry, at ninety-nine percent servicability rates within a detectable range of one normal unit per minute to ten normal units per minute at generation pressures up to but not exceeding 100 psig for application in limited applications and at unlimited pressures in unlimited applications. Such a device is referred to herein as a "Developatec Widget Device" or "Target Device." Devices for different purposes and devices delivering more than ten normal units per minute are not within the field of research and development that is the subject of this Agreement and are not within the scope of any license that is granted by or pursuant to this Agreement. 1.1.1 Developatec agrees to negotiate in good faith with Acquiratec for an expansion of the rights granted hereunder with respect to the field of research and development and the license that is granted by or pursuant to this Agreement as they relate to ranges of normal units excluded above, and Acquiratec agrees that Developatec shall have no obligation to negotiate or to license or in any way grant rights to Acquiratec, other than those specifically provided for below in this Agreement, which would in any way be in conflict with other contractual obligations which Developatec has as of the date of this agreement or as of the date of any such negotiations with Acquiratec or which would in any way be in conflict with any other enterprise or negotiations presently in progress or contemplated by Developatec. 1.2 The scope and nature of the research and development to be conducted under this Agreement is set forth with particularity in Developatec Proposal No. 88002 AJ, dated January 18, 1994, a copy of which is attached hereto as Appendix A and incorporated herein by this reference. Reference herein to "Phase I" is reference to the tasks identified in Appendix A as Tasks 1 through 6, and reference to "Phase II" is reference to the task identified in Appendix A as Task 7, with all subtasks included. 1.3.1 The term "Solid Widgetlyte Technology" or "SWL Technology" means all know-how, discoveries, inventions, conceptions, information, and observations known to Developatec and relating to or useful to the development, manufacture, operation, maintenance, or improvement of widget devices employing solid widgetlytes, including, without limitation, all matters disclosed in U.S. Letters Patent No. 4,XXX,XXX. SWL Technology shall include, but not be limited to, information about widgetrode application techniques, widgetlyte compositions, widgetlyte processing and firming techniques, widgetrode physical specifications, widgetrode connectors, quality control and inspection techniques for all components, including continuity and porosity tests for widgetrodes and interface examinations. 1.3.2 The term "Target Technology" means all SWL Technology relating to or useful to the development, manufacture, operation, maintenance or improvement of Target Devices. 1.3.3 Technology has been classified herein into the set called "SWL Technology" and the subset of SWL Technology called "Target Technology" in recognition that Developatec may obtain SWL Technology that has no relation to the development, manufacture, operation, maintenance, or improvement of Target Devices, while some Target Technology may be useful in relation to widget devices that are not Target Devices. 1.3.4 The term "Existing Target Technology" means Target Technology known to Developatec at the date hereof, and the term "New Target Technology" means Target Technology obtained by Developatec after the date hereof. The term "Unavailable SWL Technology" means SWL Technology which Developatec acquires from third persons or develops in the course of research and development funded by third persons, and not with any funding by Acquiratec, under condition that such SWL Technology not be disclosed to Acquiratec. 2.0 Disclosure and Protection of Target Technology. 2.1 During the term hereof, and subject to the provisions hereof, Developatec shall disclose to Acquiratec all Target Technology, other than Unavailable SWL Technology; provided, however, that Developatec shall have no obligation to disclose New Target Technology obtained more than six months after the completion of Phase III. Such disclosure shall be in form and content best suited to enabling Acquiratec to understand and exploit the Target Technology under this Agreement; provided, however, that Developatec shall have no obligation to restate any Target Technology from then existing expressions solely for the purpose of such disclosure. The disclosure of Existing CODDPC Technology shall be made promptly following the execution and delivery of this Agreement. The disclosure of New Technology shall occur as the New CODDPC Technology is obtained, pursuant to monthly reports of Developatec's research and development activity made under Appendix A and otherwise as Acquiratec requests. Developatec represents that, at the date hereof, none of the SWL Technology is Unavailable SWL Technology. 2.2.1 Developatec shall use its best efforts to avoid arrangements causing Target Technology to be Unavailable SWL Technology, it being recognized (i) that Target Technology obtained by Developatec in the course of its performance under this Agreement is available for its use and disclosure by it to third persons as SWL Technology, subject to the limitations contained herein, and (ii) that Developatec and Acquiratec may both benefit through the availability and use of Target Technology, both in connection with Target Devices subject to this Agreement (which will benefit both Developatec and Acquiratec) and in connection with other newtech devices using solid widgetlytes (which will benefit Developatec), so that it will be advantageous to both parties that use of Target Technology not be unduly restricted. 2.2.2 Developatec shall not, during the term of this Agreement, enter into arrangements or agreements with any third person for, or permitting, the development or use of, SWL Technology by any third person in connection with Target Devices, it being the intent of this Agreement that Acquiratec have exclusive rights (as stated in Section 6.0) with respect to Target Devices. 2.3 Acquiratec shall maintain all Target Technology confidential and shall not, without Developatec's consent, disclose it to any other person, including any other ceramic company, other than (i) to any person licensed by Acquiratec to manufacture or to maintain Target Devices for supply to Acquiratec, as contemplated in Section 6.0, (ii) to its own employees having a need to know, and (iii) to independent contractors who are informed of the confidential nature thereof. Any authorized disclosure by Acquiratec shall be limited to a "need to know" basis as reasonably determined by Acquiratec. Acquiratec may also disclose Target Technology for such purposes as product liability evaluation, insurance, and defense, Federal Food and Drug Administration approvals, and the like; provided, however, that such disclosure shall be limited in each case to that reasonably determined by Acquiratec to be necessarily disclosed in order to satisfy the particular purposes of the disclosure. To the extent practicable, Acquiratec shall notify Developatec in advance of each disclosure, indicating with reasonable specificity what is to be disclosed and to whom. 2.3.1 Notwithstanding the foregoing restrictions on disclosure, (i) Acquiratec shall not be prohibited from marketing, selling, or otherwise transferring to third persons any Target Device that has been commercialized (as defined in Section 5.3) merely because such transfer may result in a disclosure of Target Technology inherently embodied in the Target Device; and (ii) in the process of determining to commercialize, or in commercializing, a Target Device, Acquiratec shall not be prohibited from otherwise appropriately showing or providing the Target Device to third persons merely because such showing or providing may result in a disclosure of Target Technology inherently embodied in the Target Device. 2.3.2 Notwithstanding the foregoing restrictions on disclosure, Acquiratec may disclose, and shall not be under any restriction or obligation to Developatec with respect to, any Target Technology that (i) was known to Acquiratec prior to the execution and delivery of this Agreement, (ii) is in the public domain, (iii) comes into the public domain without the fault of Acquiratec, or (iv) is disclosed to Acquiratec by third persons reasonably believed by Acquiratec, at the time of Acquiratec's disclosure, to be in rightful possession of such Target Technology and to be under no duty directly or indirectly owed to Developatec. It is understood that some Target Technology may at least, in part, consist of a synthesis of information that is in the public domain. It is therefore understood that the relief from confidentiality provided by this Section 2.3.2 does not apply to such synthesis of otherwise public domain information, unless it can be shown that such synthesis is itself in the public domain. 2.4 Developatec shall maintain all Target Technology confidential and shall not disclose it to any other person, other than (i) to the extent such disclosure may be inherent by embodiment in devices produced by Developatec; (ii) to any person licensed by Developatec pursuant to Section 7.2; Section (iii) to any person to the extent necessary to enable such person to practice SWL Technology in the development, manufacture, operation, maintenance, or improvement of devices other than Target Devices; or (iv) to any person who is funding or may fund SWL Technology development at Developatec; provided, however, that such person agrees for the benefit of Developatec and Acquiratec, not to disclose such Target Technology to third persons except as such disclosure may be inherent by embodiment in devices. Any authorized disclosure by Developatec shall be limited to a "need to know" basis as reasonably determined by Developatec. 2.4.1 Notwithstanding the foregoing restrictions on disclosure, Developatec may disclose, and may permit any other person to disclose, and shall not be under any restriction or of obligation to Acquiratec with respect to any Target Technology that (i) is in the public domain or (ii) comes into the public domain without the fault of Developatec or of any person to which Developatec has made disclosure. 2.5 Each party shall take appropriate action to impose upon persons to whom it discloses Target Technology duties of confidentiality, running for the benefit of the other party, that will provide for the confidentiality contemplated in this Agreement. 2.6 Each party agrees to maintain confidential all other business, technological, and other information that is disclosed to it, directly or indirectly, by the other party under this agreement, excepting information (i) that was known to the party prior to disclosure by the other party; (ii) that is in the public domain; (iii) that comes into the public domain without the fault of the party; or (iv) that is disclosed to the party by third persons reasonably believed by the party, at the time of the party's disclosure, to be in rightful possession of such information and to be under no duty directly or indirectly owed to the other party. 3.0 Phase I Performance 3.1 Developatec agrees to perform and complete Phase I and to use its best efforts to accomplish the goals, objectives, and schedule for Phase I set forth in Appendix A and to obtain success as defined in Section 3.3. Developatec shall make no substantial deviation from Tasks 1 through 6 comprising Phase I, as set forth in Appendix A, without the prior written approval of Acquiratec, which approval shall not be unreasonably withheld. Developatec will identify and describe all deviations, whether or not substantial, from Tasks 1 through 6 as so set forth, in the monthly reports it provides to Acquiratec pursuant to Appendix A. 3.2 The parties have agreed upon a budget (the "Phase I Budget") for Phase I, a copy of which is attached hereto as Appendix B and incorporated herein by this reference. Developatec shall make no substantial deviation from the Phase I Budget without the prior written approval of Acquiratec, which approval shall not be unreasonably withheld. Developatec will identify and describe all deviations, whether or not substantial, from the Phase I Budget, and Developatec will provide a statement of the status of actual expenditures in relation to the Phase I Budget, in the monthly reports it provides to Acquiratec pursuant to Appendix A. 3.3 Phase I will be deemed to be successfully completed if, upon completion of Task 6, a Target Device has been developed meeting the following standards and specifications: (i)capacity to deliver at least two normal unites per minute at ninety-nine percent purity and suitable for Widget Industry Class C classification; (ii) weight not exceeding twenty- five pounds; (iii) the flat plate assemblies will have a three-year life, determined as less than 33% deterioration in one year and assuming linearity of the curve. Acquiratec will also determine thermal cycles as a measurement of life, against which the life of the flat plate assemblies shall be tested; (iv) sound level of less than 30 Db(A), pursuant to test methods reasonably determined by Developatec; (v)power consumption not exceeding 300 watts at two normal units per minute flow rate and less than 450 watts at three normal units per minute flow rate (if a flow rate of three normal units per minute is attained); (vi) low impedance bipolar design using a four-stack of stabilized solid widgetlyte; (vii) air discharge at temperatures not exceeding thirty degrees Fahrenheit above ambient temperature; this will be measured in TBD BTU; (viii) oxygen discharge at temperatures not exceeding two degrees Fahrenheit above ambient temperature; (ix) external surface temperatures not exceeding 120 degrees Fahrenheit; and (x)full passage of tests referred to in "Test Protocol Plan," Subtask 2.3 set forth in Appendix A. 4.0 Funding of Phase I 4.1 Acquiratec commits to pay to Developatec, as funding for Phase I and subject to the conditions expressed below, the sum of $237,000, payable as follows: (i)$25,000 paid with the execution and delivery of this Agreement, to enable purchase of equipment, materials and the like in accordance with the Budget; (ii) Four installments of $25,000 each, one such installment being payable upon successful demonstration of each of the first three units referred to on page 1-C of Appendix A (a successful demonstration of a unit shall be a demonstration to Acquiratec's reasonable satisfaction that the unit has been developed meeting the standards and specifications therefor provided in or pursuant to Appendix A) and the fourth installment being payable upon a successful completion of Phase I within the meaning provided in Section 3.3. (iii) Fourteen installments of $8,000 each, one such installment being payable on the first day of each calendar month commencing with the first calendar month following the execution and delivery of this Agreement. 4.2 Notwithstanding the provisions of Section 4.1, in the event the parties determine, at any time during Phase I, that the goods and objectives of Phase I are unfeasible, then they may terminate this Agreement pursuant to Section 11.0, and Acquiratec shall thereupon have no further obligation under Section 4.1 with respect to payments not then due and payable. 5.0 Phase II and Phase III Procedures, Options, Performance, Funding, and Commercialization of Target Devices. 5.1 The parties acknowledge that, while the tasks comprising Phase II can be generally described at the time this Agreement is entered into, as has been done in the description of Task 7 set forth in Appendix A, the propriety of proceeding with Phase II cannot be determined until completion of Phase I. Accordingly, the parties have set forth in this Section 5.0 procedures regarding to decisions to proceed with Phase II, funding, and related matters. 5.2 Each party shall have six months following the successful completion of Phase I (or such longer period as is provided in the sixth sentence of this Section 5.2) in which to elect to proceed with Phase II. Either party may provide the other with notice of the date it deems Phase I to have been successfully completed, provided that such date is not more than thirty days prior to the date such notice is given, and such date shall be the date of completion of Phase I for purposes of this Section 5.2, unless the other party objects thereto by a notice of objection given within thirty days after the giving of the notice specifying the completion date. If the parties cannot then agree upon a successful completion date, the matter may be submitted to arbitration. If a party desires to proceed with Phase II, it shall elect to do so by giving notice of the election to the other party. The other party shall have until the later of the expiration of six months after the successful completion of Phase I or thirty days after the giving of the first party's notice of election in which to elect to proceed by giving notice of such election to the first party. If a party does not give a notice of election to proceed as provided for in this Section 5.2, it shall be deemed not to have elected to proceed. 5.3.1 If both parties elect to proceed with Phase II, then (i)the parties shall agree upon a budget for Phase II (the "Phase II Budget"), which shall provide for the funding of Phase II, by Acquiratec in an amount up to $500,000 or so much thereof as may be reasonably spent upon Phase II (herein referred to as "Acquiratec's Phase II Commitment"). The provisions of the second sentence of Section 3.2 shall apply with respect to the Phase II Budget as they apply to the Phase I Budget; and (ii) Developatec shall proceed to perform and shall complete Phase II and shall use its best efforts to accomplish the goals and objectives of Phase II, on the schedule set forth in Appendix A, as such goals, objectives, and schedule may be modified by agreement of the parties. The provisions of the second sentence of Section 3.1 shall apply with respect to deviations from Task 7 as they apply to deviations from Tasks 1 through 6; and (iii) Acquiratec shall be entitled to disclosure of all Target Technology obtained following the completion of Phase I, whether obtained with funding provided by Acquiratec or provided by Developatec or a third party in excess of the amounts provided by Acquiratec; and (iv) Acquiratec shall be entitled, but not obligated, to undertake to perform some or all of Phase II, in lieu of performance by Developatec; provided, that Acquiratec shall use its best efforts to accomplish such of the goals and objectives of Phase II as it undertakes, on the schedule set forth in Appendix A, as such goals, objectives, and schedule may be modified by the agreement of the parties; and provided, further, that Acquiratec shall be given credit, toward Acquiratec's Phase II Commitment, of the amounts it expends in such undertaking, in accordance with the Phase II Budget, as such expenditures are determined in accordance with Acquiratec's standard project cost accounting procedures; and (v)Acquiratec shall be entitled, but not obligated, to provide funding for Phase II in excess of Acquiratec's Phase II Commitment, to the extent reasonably necessary to accomplish the goals and objectives of Phase II, on the schedule set forth in Appendix A, as such goals, objectives, and schedule may be modified by agreement of the parties; and Acquiratec shall be given credit for such excess funding against its purchases of Target Device Assemblies from Developatec under this Agreement by reducing the price payable for each Target Device Assembly purchased from Developatec by twenty percent until the sum of such reductions equals the amount of such excess funding. 5.3.2 The provisions of Sections 2.3, 2.4, 2.5 and 2.6 shall continue in effect notwithstanding any election made under this Section 5.0. 5.4 The intention of the parties with respect to Phase III is to develop one or more Target Devices sufficiently that they can be marketed to the public. A Target Device that has been developed sufficiently to be marketed to the public is referred to herein as "commercialized" and the process of marketing the Device is referred to herein as "commericialization," which process may include preparatory matters such as finalizing the development of the Device, acquiring distributors and a marketing system, financing, and other matters preparatory to marketing as well as the actual sale, rental, or other marketing of the Device. 5.4.1 Acquiratec may determine, at any time prior to expiration of Phase III pursuant to Section 5.5, that a Target Device can be or has been commercialized, and, upon such determination and upon notice thereof to Developatec, Acquiratec may proceed with the marketing of the commercialized Target Device. 5.4.3 If Acquiratec does not determine to commercialize a Target Device pursuant to Section 5.4.1, then, upon expiration of Phase III, (i)Developatec shall have no further obligation to disclose Target Technology to Acquiratec; and (ii) Acquiratec shall forfeit all rights with respect to Target Technology and Target Devices provided under this Agreement; but (iii) Acquiratec shall be paid a royalty by Developatec equal to two percent of the gross revenues of Developatec or its licensees from products utilizing any aspect of Target Technology obtained during, and as a result of, Phase I, Phase II, or Phase III; provided, however, that such royalty shall terminate upon payment of an aggregate amount thereof equal to the aggregate amount paid by Acquiratec to Developatec plus the aggregate amount credited to Acquiratec, pursuant to Section 5.3.1(iv), to fund Phase I, Phase II, and Phase III. 5.5 The parties elect to proceed with Phase III and agree that the tasks comprising Phase III shall be as set forth in Exhibit I to the Phase III Agreement (hereinafter referred to as "Exhibit I"). Phase III shall be deemed to commence with the effective date of the Phase III Agreement and to end on July 1, 1994; provided, however, that Phase III shall be deemed to expire with the termination of this Agreement pursuant to Section 11.1 if not otherwise expiring prior to termination of this Agreement. 5.5.1 There is no Section 5.5.1 of this Agreement, and the section number is reserved. 5.5.2 The parties shall agree upon a budget for Phase III (the "Phase III Budget"), which shall reflect the funding of Phase III by Acquiratec as provided in this Section 5.5.2. Acquiratec shall pay to Developatec, as funding for Phase III, payments of $50,000 per calendar month commencing October 1994 and continuing twenty-one months to and including June 1996. Acquiratec's obligation to make such payments is referred to herein as the "Phase III Commitment." The provisions of the second sentence of Section 3.2 shall apply with respect to the Phase III Budget as they apply to the Phase I Budget. In the event Acquiratec terminates this Agreement prior to payment of the Phase III Commitment in full, Acquiratec shall be obligated to pay to Developatec, within fifteen days following such termination and in addition to all payments accrued but unpaid upon the Phase III Commitment, an amount equal to the difference obtained by subtracting (i) the total of payments accrued upon the Phase III Commitment from and including October 1994 to and including the month in which the termination is effective from (ii) the product of $42,000 multiplied by the number of whole months from and including June 1994 to and including the month in which the termination is effective. For example, if the termination is effective on April 15, 1995, Acquiratec shall be obligated to pay pursuant to the preceding sentence, in addition to all payments accrued but unpaid upon the Phase III Commitment to and including April 1995, the difference obtained by subtracting (i) the total of the payments accrued upon the Phase III Commitment to and including April 1995 (seven months times $50,000 per month, or $350,000) from (ii) the product of $42,000 per month times the eleven months from and including June 1994 to and including April 1995 ($462,000), the difference being $112,000. 5.5.3 Developatec shall proceed to perform and shall complete Phase III and shall use its best efforts to accomplish the goals and objectives of Phase III, on the schedule set forth in Exhibit I, as such goals, objectives, and schedule may be modified by the written agreement of both parties. Acquiratec shall use its best efforts to accomplish such of the tasks of Phase III that are specifically allocated to Acquiratec in Exhibit I. 5.5.4 Acquiratec shall continue to be entitled to disclosure of all Target Technology, whether obtained with funding provided by Acquiratec or provided by Developatec or a third party in excess of the amounts provided by Acquiratec. 5.5.5 Acquiratec shall be entitled, but not obligated, to provide funding for Phase III in excess of Acquiratec's Phase III Commitment, to the extent reasonably necessary to accomplish the goals and objectives of Phase III, on the schedule set forth in Exhibit I, as such goals, objectives, and schedule may be modified by the written agreement of both parties; and Acquiratec shall be given credit for such excess funding against its purchases of Target Device Assemblies from Developatec under this Agreement by reducing the price payable for each Target Device Assembly purchased from Developatec by twenty percent until the sum of such reductions equals the amount of such excess funding. 6.0 License for Target Devices; Provision for Nonexclusivity. 6.1 In the event Acquiratec determines to commercialize one or more Target Devices as provided in this Agreement and promptly commences, in good faith, to commercialize such Device or Devices, it shall have, and Developatec hereby grants to it, an exclusive, irrevocable license (the "License") to use all Target Technology in the development, manufacture, operation, maintenance, and improvement of, and to sell, lease, and otherwise dispose of, any and all Target Devices; provided, however, that the License shall entitle Acquiratec to manufacture Target Device Assemblies (as defined in Section 7.1) only upon the conditions expressed in Section 7.0. Notwithstanding the exclusivity of the License, the License shall be royalty- free except as provided in Section 7.1.4. Developatec shall retain the right to manufacture Target Device Assemblies for sale to Acquiratec under this Agreement. When used in this Agreement, the term "Manufacture" includes (i) assembly from components and (ii) acquisition from third persons who manufacture or assemble from components, and the term "maintain" includes repair. 6.1.1 The License shall be worldwide except that it shall not include the right to operate or maintain or to sell, lease, or otherwise dispose of any Target Device (except operation and maintenance that is incidental to the development, manufacture, and improvement of Target Devices and disposition that is incidental to such development, manufacture, or improvement and that is not, directly or indirectly, to or for an end user) in any of the following countries: Norway, Sweden, Finland, Ireland, Great Britain, Belgium, The Netherlands, Luxembourg, Denmark, France, Monaco, Germany, Poland, Switzerland, Austria, Hungary, Czechoslovakia, Yugoslavia, Bulgaria, Albania, Rumania, Italy, The Vatican, Greece, Portugal, and Spain. 6.1.2. If, however, Developatec desires to grant a license with respect to any Target Device to any third person (whether or not then identified) with respect to the countries that are enumerated in Section 6.1.1, or any part thereof, Developatec shall first offer a license to Acquiratec on such terms and conditions as it would accept from a third person and shall grant such license to Acquiratec instead of to a third person (provided that Developatec may also grant a license on the same terms and conditions to a third person if the license granted to Acquiratec pursuant to the foregoing provisions is not exclusive as to Acquiratec) if Acquiratec accepts the license on such terms and conditions within thirty days after the license is offered to it by Developatec. Within such thirty day period, Acquiratec may, in good faith, propose amendments to the terms and conditions of the license offered to it by Developatec, and Developatec shall consider such amendments in good faith and accept or reject them within fifteen days after they are proposed to it by Acquiratec. If the parties do not reach agreement with respect to the license to Acquiratec within such thirty day period, or within that period extended by fifteen days as a result of Acquiratec's proposal of amendments, then Developatec may offer the license to any third person or persons, on terms and conditions no more advantageous in any material respect to the third person or persons than those offered by Developatec to Acquiratec; provided that, in determining whether the terms and conditions of the license offered to any third person are more advantageous in any material respect than those offered to Acquiratec, due consideration shall be given to the respective parties' business capacities and other circumstances that might justify variations in the terms and conditions of the license for reasons other than advantage to the third person or persons. If Developatec has not granted such a license to a third person within one year following its offer of the license to Acquiratec, it shall again be subject to the terms of this Section 6.1.2. 6.1.3 The License includes the right to sublicense third persons to use Target Technology to manufacture in accordance with the provisions of Section 7 or to maintain Target Devices for Acquiratec and to operate Target Devices; provided, however, that any such sublicense providing manufacturing or maintenance rights shall contain a provision whereby the sublicensee (a) covenants that it shall use the Target Technology provided to it under such sublicense for no purpose other than (A) to manufacture Target Devices for Acquiratec or other marketeers licensed by Developatec or Acquiratec, or by both Developatec and Acquiratec or (B) to maintain Target Devices manufactured by Acquiratec or other marketeers licensed by Developatec or Acquiratec, or by both Developatec and Acquiratec, and (b) agrees that Developatec shall be a third party beneficiary of such covenant. 6.2 Developatec has agreed to grant the License according to the terms and conditions set forth herein on the assumption that Acquiratec will offer to purchase, pursuant to Section 7.0, certain minimum numbers of Target Device Assemblies (as defined in Section 7.1). Accordingly, the parties agree to the provision for the possibility of nonexclusivity provided below in this Section 6.2. 6.2.1 Acquiratec shall offer to purchase Target Device Assemblies from Developatec, or from third party suppliers pursuant to Section 7.1.2 or Section 7.1.3, in the quantities set forth below for the respective twelve-month periods following the first commercialization of any Target Device or, in the alternative, in the quantities set forth below cumulatively from the date of such first commercialization to the end of the respective twelve-month period: Number Period Number of Units from of Units Ordered First Ordered Cumulati in vely Commerci Period to End alizatio of n 1,500 Period 5,000 0 to 12 7,500 1,500 months 10,000 6,500 13 to 24 14,000 months 24,000 25 to 36 months 37 to 48 months 6.2.2 Acquiratec shall offer to purchase at least 10,000 Target Device Assemblies for Target Devices, from Developatec or from third party suppliers pursuant to Section 7.1.2 or Section 7.1.3, in each twelve-month period commencing with the twelve-month period beginning on the fourth anniversary of the first commercialization of any Target Device, without credit for units offered to be purchased in prior periods. 6.2.3 Subject to the agreement of the parties from time to time, Developatec shall be permitted to deliver units, purchased by Acquiratec pursuant to offers made under the foregoing provisions, in delivery lots of relatively uniform quantities over the appropriate periods. 6.2.4 In the event Acquiratec fails to comply with the provisions of Section 6.2.1 or Section 6.2.2, Developatec's sole remedy shall be to declare, upon thirty days' prior notice to Acquiratec, that the License shall be nonexclusive thereafter. 7.0 Supply of Target Device Assemblies. 7.1 Subject to the provisions of this Section 7.0, Acquiratec agrees to purchase its requirements of widgetlyte, widgetrodes, headers, and electrical leads for Target Devices (herein referred to as Target Device Assemblies) only from Developatec, and Developatec agrees to supply Acquiratec's requirements of Target Device Assemblies in assembled form. 7.1.1 Acquiratec and Developatec agree that the price for Target Device Assemblies purchased by Acquiratec from Developatec during the first twelve months following commercialization of a Target Device shall be as specified below: (i)The price shall be 2.4 multiplied by the sum of the "Direct Labor Cost" and the "Direct Materials Cost," as those terms are defined below. (ii) The "Direct Labor Cost" shall include only wages actually paid to Developatec employees for time that such employees are physically engaged in the actual process of producing Target Device Assemblies sold to Acquiratec and shall specifically exclude wages paid for time involved in support activities such as supervision, clean-up, and production accounting, and other non-production activities. (iii) The "Direct Materials Cost" shall include only the actual cost to Developatec for material that becomes a physical part of Target Device Assemblies sold to Acquiratec. 7.1.2 The prices for Target Device Assemblies purchased by Acquiratec from Developatec after the first twelve months following commercialization of a Target Device shall be determined by the parties by agreement from time to time, both parties recognizing that the prices should be such as will provide fair profit to each party. However, in the event Acquiratec and Developatec do not agree upon the prices for Target Device Assemblies, including volume discounts and the like, at any time after the first twelve months following such commercialization, then Acquiratec may manufacture Target Device Assemblies; provided, however, that, if the cost of such Target Device Assemblies to Acquiratec, as determined by Acquiratec's standard cost accounting procedures if Acquiratec does not acquire the Target Device Assemblies from a third party supplier or as determined by the amounts actually paid by Acquiratec to the supplier if Acquiratec acquires the Target Device Assemblies from a third party supplier, are in excess of the price offered by Developatec, after taking into account volume discounts and the like, then Developatec shall be entitled to demand that Acquiratec purchase its Target Device Assembly requirements from Developatec and not from the third party supplier. Developatec shall have until thirty days following notice of the cost of the Target Device Assemblies to Acquiratec in which to make such demand. 7.1.3 In the event (i) Developatec is unable to supply all of Acquiratec's requirements for Target Device Assemblies; or (ii) Acquiratec's volume of Target Devices marketed increases to an amount which exceeds 20,000 units per year and, in Acquiratec's reasonable judgment, justifies a second- source supplier of Target Device Assemblies, or (iii) Acquiratec reasonably determines that marketing of Target Devices in foreign countries requires a foreign source of supply of Target Device Assemblies, then Acquiratec may manufacture (including in foreign countries) Target Device Assemblies. Acquiratec shall take reasonable precautions against misappropriation of the Target Technology by foreign sources. 7.1.4 In the event Acquiratec manufactures Target Device Assemblies pursuant to Section 7.1.2 or 7.1.3, it shall do so for no purpose other than to supply its needs or the needs of its sublicensees, and it shall pay to Developatec a royalty of eight percent of Acquiratec's cost for the Target Device Assemblies, as such cost is determined pursuant to Section 7.1.2. Such royalty shall be payable monthly upon Target Devices actually sold, less those returned, by Acquiratec during the preceding calendar month. 7.2 Developatec shall be permitted to license the Target Technology to persons acting as subcontractors to Developatec for the supply of Acquiratec's requirements of Target Device Assemblies under this Agreement; provided that Acquiratec has approved such subcontractors, which approval shall not be unreasonably withheld. 7.3 The provisions of this Section 7.3 shall govern the purchase and sale of Target Device Assemblies under this Agreement. 7.3.1 In determining quantities, Acquiratec shall not be required to have any requirements of Target Device Assemblies, and Developatec shall not be required to supply, during any one twelve-month period, more than the number of Target Device Assemblies determined for such twelve-month period under Section 7.3.3. 7.3.2 Within a reasonable time after commercialization of a Target Device, Acquiratec shall notify Developatec of Acquiratec's good faith estimate of its requirements of Target Device Assemblies for such Target Device within a twelve- month period selected by Acquiratec and including the date such notice is given. Not less than ninety days before the end of that twelve-month period, and thereafter not less than ninety days before the end of each succeeding twelve-month period, Acquiratec shall notify Developatec of Acquiratec's good faith estimate of its requirements for such Target Device Assemblies in the next succeeding twelve-month period. The parties may, by mutual agreement, amend such estimates. 7.3.3 Developatec shall have no obligation to agree to provide Acquiratec with any such Target Device Assemblies during the first twelve-month period referred to in Section 7.3.2, but Developatec shall, within sixty days after Acquiratec first notifies Developatec of its estimated requirements, notify Acquiratec of the portion, if any, of such estimated requirements that Developatec agrees to supply to Acquiratec, and Developatec shall thereupon be obligated to supply such portion to Acquiratec. Developatec shall be obligated to supply to Acquiratec, in each succeeding twelve- month period, the lesser of (i) Acquiratec's estimated requirements for such twelve-month period or (ii) 150 percent of the number of Target Device Assemblies supplied (or agreed to be supplied, whichever is greater) by Developatec in the prior twelve-month period; provided, however, that, if Developatec chooses to limit its obligation to the amount determined by clause (ii) of this sentence it shall so notify Acquiratec within sixty days after Acquiratec notifies Developatec of its estimated requirements for the succeeding twelve-month period. 7.3.4 Acquiratec may obtain such of its requirements of Target Device Assemblies as Developatec is not obligated to supply to it, pursuant to the preceding provisions, from such suppliers as Acquiratec may determine, and nothing in Section 7.1.2 or 7.1.3 shall be deemed to limit such right. Acquiratec shall have no obligation to Developatec if Acquiratec's actual requirements for a twelve-month period are more or less than its good faith estimate. 7.3.5 From time to time during or prior to each twelve-month period, Acquiratec shall give Developatec written orders for specific quantities, if any, of Target Device Assemblies which Acquiratec desires to purchase during such twelve-month period. Each such order shall specify requested delivery dates and shall be given not less than 45 days before the first of such delivery dates. Developatec shall deliver each of the ordered quantities not sooner than 30 days before, nor later than 15 days after, the requested delivery dates. In placing orders and requesting delivery dates, Acquiratec shall use reasonable efforts to spread the quantities to be delivered over the twelve-month period the aggregate quantity of such Target Device Assemblies ordered by Acquiratec may exceed the amount Developatec agreed to supply in the twelve- month period, but Developatec shall have no obligation to supply more than it so agreed. 7.3.6 Target Device Assemblies sold by Developatec to Acquiratec hereunder shall be delivered FOB carrier's vehicle, Salt Lake City, Utah, and shipped freight collect to any destination specified in Acquiratec's order, or, if no destination is specified, to the address provided for under Section 12.2 for notice to Acquiratec. Developatec shall cause all shipments to comply with all applicable laws, rules, and regulations. Acquiratec may specify at any reasonable time the carrier or method of transportation, or both, but, in the absence of such specification, Developatec may ship Target Device Assemblies by any carrier and method as is commercially reasonable. 7.3.7 Target Device Assemblies supplied by Developatec to Acquiratec hereunder shall conform to all reasonable specifications established by Acquiratec and shall, in any event, meet the ninety- nine percent servicability standard of purity set forth in Section 1.1. Acquiratec shall establish such specifications, by notice to Developatec, at or before the time it gives notice of its estimated requirements for the twelve-month period pursuant to Section 7.3.3, and such specifications may not be amended for Target Device Assemblies ordered from Developatec for delivery in that twelve-month period without Developatec's consent. Except for the express warranty by Developatec of such conformity to such specifications, THERE ARE NO WARRANTIES, EXPRESS OR IMPLIED, MADE BY Developatec WITH RESPECT TO THE CONDITION OR PERFORMANCE OF Target Device ASSEMBLIES SUPPLIED BY IT UNDER THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR A PARTICULAR PURPOSE. In the event Acquiratec deems it necessary or appropriate to change specifications after it has given notice of its estimated requirements for a twelve-month period, it shall advise Developatec of the changes and give Developatec a reasonable opportunity to determine whether to deliver Target Device Assemblies conforming to such specifications. If Developatec does not determine to deliver such Target Device Assemblies, Acquiratec may proceed to manufacture such Target Device Assemblies as under clause (i) of Section 7.1.2. 7.3.8 Acquiratec shall not be deemed to have accepted any Target Device Assembly until the same has been fitted and installed in a Target Device and tested for conformity pursuant to test procedures established by Acquiratec from time to time; provided, however, that Acquiratec shall be deemed to have accepted any Target Device Assembly not rejected by it within six months of its receipt by Acquiratec. Developatec shall repair or replace nonconforming Target Device Assemblies as requested by Acquiratec. 8.0 Invention and Patent Rights. 8.1 When used in this Agreement, "Novel Development" means any trade secret, discovery, new conception, new information, or new observation; provided, however, that the term shall not include matter in the public domain. 8.2 When used in this Agreement, "Patent" means (i) any United States Letters Patent disclosing and claiming a Novel Development, including a reissue patent, a patent issuing from a continuation application, divisional application, or continuation-in-part application, and (ii) any foreign patent, including a patent of addition, disclosing and claiming a Novel Development. 8.3 Developatec shall retain and own all Novel Developments made, and Patent rights acquired, by it or any of its employees during the course of its performance under this Agreement, subject, however, to the rights of Acquiratec under this Agreement. Developatec agrees to maintain, during the term of this Agreement, agreements binding its employees and consultants engaged in the field of research and development that is the subject of this Agreement to assign to it ownership of all Novel Developments and Patent rights. 8.4 Acquiratec shall retain and own all Novel Developments made, and Patent rights acquired, by it or any of its employees during the course of its performance under this Agreement. 8.5 Nothing in this Section 8.0 shall preclude either party from acquiring rights in a Novel Development from third parties or, if the New Development was not previously disclosed to it by the other party, from independent discovery, conception, or observation. 8.6 Each party shall use its own discretion in maintaining any of its Novel Development as a trade secret or incorporating the Novel Development in Patent applications filed to protect it; provided, however, that Developatec shall maintain the confidentiality of all Novel Developments constituting Target Technology for which Patents are not issued, as required by the provisions of Section 2.4. The decision to file Patent application on a Novel Development shall reside solely with the party owning the Novel Development; provided, however, that Developatec shall give due consideration to filing Patent applications on all Novel Developments that are readily revealed by inspection or reverse engineering of a Target Device. 8.7 Each party shall retain all publication rights and copyright concerning its Novel Developments, but no Target Technology shall be published or otherwise disclosed except in compliance with the provisions of Sections 2.3 and 2.4. 9.0 Patent Warranty; Infringement Indemnity; Infringement Action. 9.1 Developatec warrants and represents to Acquiratec that, to the best of Developatec's knowledge (including, without limitation, the knowledge of Dr. Ashok Joshi), none of the Existing Target Technology infringes upon the Patent or other proprietary rights of any third person. Developatec agrees that it will not permit New Target Technology to include any matter that infringes upon any Patent or other proprietary rights of any third person. 9.2 Developatec agrees to indemnify and hold Acquiratec and its sublicensees and customers under the License harmless from and against all liability and expenses, including attorneys' fees, incurred by Acquiratec or any sublicensee as a result of any infringement, or alleged infringement, by any Target Technology or any Target Device Assembly or Target Device supplied by Developatec to Acquiratec, of any Patent or other proprietary right of any third person, such indemnification being subject, however, to the provisions of this Section 9.2. 9.2.1 Developatec shall not be obligated under this Section 9.2 with respect to any claim of infringement unless Acquiratec shall have given Developatec notice of such claim promptly upon receipt thereof by Acquiratec or unless a sublicensee or customer shall have given Developatec notice of such claim upon receipt thereof by the sublicensee or customer. 9.2.2 Developatec shall not be obligated under this Section 9.2 unless Acquiratec or its sublicensees or customers, as the case may be, offer to Developatec full control of the defense of any claim of infringement noticed to Developatec under Section 9.2.1; provided, however, that Acquiratec and its sublicensees and customers shall be permitted to observe and participate in any such defense. 9.2.3 In responding to any claim of infringement, Developatec shall have the right and power to: (i)cease to supply any allegedly infringing Target Device Assembly under this Agreement; (ii) alter the structure and operation of any allegedly infringing Target Device Assembly to avoid the alleged infringement, provided that the Target Device Assembly, as so altered, meets all applicable standards and specifications; or (iii) obtain a license under the allegedly infringement patent or other proprietary right, all costs of which shall be borne by Developatec. 9.2.4 Acquiratec shall have no obligation to purchase Target Device Assemblies from Developatec under this Agreement in the event: (i) it is enjoined or otherwise prohibited from utilizing Target Technology embodied in such Target Device Assemblies or from making such purchases or from selling, leasing, or otherwise distributing Target Devices utilizing such Target Device Assemblies; or (ii) it does not receive reasonable assurances from Developatec of Developatec's ability and intention to indemnify Acquiratec fully with respect to such allegedly infringing Target Device Assemblies. 9.3 In the event of any infringement of a Patent relating to any Target Device or of any rights in any Target Technology or in the event of any application being made for revocation of any Patent covering Target Technology, Developatec may take all actions and prosecute proceedings that it may deem necessary or appropriate to restrain such infringement or defend such revocation, at its cost; provided, however, that if Developatec does not commence an action or proceeding to restrain such infringement or defend such revocation within thirty days after notice to it of the infringement or the revocation application or if, after commencing such action or proceeding, Developatec does not diligently pursue the same, then Acquiratec may take all actions and prosecute all proceedings that it may deem necessary or appropriate to restrain such infringement or defend such revocation, at its own cost. Acquiratec will be entitled, in such a case, to act in Developatec's name, and Developatec will render all assistance that Acquiratec may reasonably request for that purpose. Each party shall promptly notify the other of any such infringement or application for revocation coming to its notice. 10.0 Assignment and Inurement. 10.1 This Agreement shall be binding upon the parties and their successors and assigns and shall inure to the benefit of the parties and their successors and permitted assigns. 10.2 This Agreement, and the rights and duties of the parties hereunder, may not be assigned by either party without the written consent of the other; provided, however, that Developatec may assign this Agreement and its rights hereunder and may delegate its duties hereunder to a subsidiary meeting the qualifications set forth in Section 10.2.1. In the event of such assignment and delegation by Developatec, Developatec shall remain fully liable to Acquiratec hereunder for any breach hereof by the assignee. 10.2.1 A subsidiary qualified to be an assignee and delegee hereof shall be one which is formed for the purpose of exploiting SWL Technology, which employs persons theretofore employed by Developatec and cognizant of SWL Technology and, in particular, Target Technology, sufficient to enable the assignee and delegee to perform, fully and timely, all of the assigned and delegated obligations of Developatec under this Agreement, which has access to all SWL Technology then possessed by Developatec with the right to use the same for purposes of performing all such obligations, and which (i) is wholly-owned by Developatec; or (ii) is wholly-owned by Developatec and one or more shareholders, employees, or consultants of Developatec, with or without one or more accredited investors (within the meaning of Regulation D promulgated by the Securities and Exchange Commission) based in Utah; or (iii) is wholly-owned by Developatec and one or more of the persons listed in clause (ii) of this section and Acquiratec and non-Utah- based accredited investors acceptable to Acquiratec. 11.0 Termination and Bankruptcy. 11.1 The term of this Agreement shall commence on the date hereof and shall continue until the first to occur of: (i) the agreement of Acquiratec and Developatec to terminate this Agreement; (ii) termination by Acquiratec upon the failure of Developatec to remedy any material breach by Developatec in the performance of its obligations under this Agreement within thirty days after notice of such breach is given; provided, however, that, in the event Acquiratec claims that delay by Developatec in the performance of any goal or objective set forth in Exhibit I constitutes a material breach of Developatec's obligations under this Agreement, Acquiratec will be required to show that such delay was a material breach without regard to the time established for the performance of the goal or objective in Exhibit I, it being understood that the time established for the performance of the goal or objective in Exhibit I is not of the essence; or (iii) termination by Developatec upon the failure of Acquiratec to remedy any material breach of its obligations under this Agreement within thirty days after notice of such breach is given. 11.2 In the event either party (herein referred to as the "petitioning party") files a petition in bankruptcy or is the subject of an involuntary petition in bankruptcy that is not dismissed within ninety days after its filing, then -- (i) If the petition is filed by or against Acquiratec, and the petition is filed before the completion of Phase III, Developatec may elect to treat the filing of the petition as a determination by Acquiratec not to commercialize a Target Device pursuant to Section 5.4.1, and the provisions of Section 5.4.3 shall apply accordingly; and (ii) If the petition is filed by or against Developatec, and the petition is filed within the first twelve months following commercialization of a Target Device, Acquiratec may elect to apply the provisions of Section 7.1, including those of Section 7.1.2 et seq., as if Section 7.1.1 were inoperative with respect to units to be ordered after the filing of the petition; and (iii) In lieu of making the election provided for in clause (i) or (ii) of this Section 11.2, as the case may be, the party other than the petitioning party may terminate this Agreement immediately upon notice given to the petitioning at any time after the ninetieth day after the filing of the petition. 11.3 In the event this Agreement is terminated by Acquiratec pursuant to clause (ii) of Section 11.1 or clause (iii) of Section 11.2, Acquiratec shall continue to enjoy the rights and benefits of the License in perpetuity, and Acquiratec and Developatec shall continue to be subject to the provisions of Sections 2.3, 2.4, 2.5, and 2.6, notwithstanding such termination. 11.4 In the event this Agreement is terminated by Developatec pursuant to clause (iii) of Section 11.1 or clause (iii) of Section 11.2, Acquiratec shall continue to be subject to the provisions of Sections 2.3, 2.5, and 2.6, and Developatec shall continue to be subject to Sections 2.5 and 2.6, notwithstanding such termination. 11.5 In the event Developatec files a petition in bankruptcy or is the subject of an involuntary petition in bankruptcy and, in the course of proceedings, this Agreement is rejected as executory, then the provisions of 11 United States Code Section 365(n), or successor legislation, shall apply to this Agreement. 12.0 Miscellaneous. 12.1 Each party hereto shall act only in its respective legal capacity as an arm's-length independent contractor. Nothing herein shall be construed to create an agency, partnership, joint venture, or employment relationship between the parties. Neither party has or acquires, under or pursuant to this Agreement, any authority or power to act for or on behalf of the other party or to bind the other party in any way whatsoever, and neither party shall claim or attempt to exercise any such authority or power. 12.2 All notices required or permitted to be given under or this Agreement shall be in writing and shall be effective when delivered to the party to which they are addressed or when deposited in the United States mails, postage prepaid, addressed if to Acquiratec, to Acquiratec Equipment, Inc. Attention: if to Developatec, to Developatec, Inc. Attention: or to such other address as may be designated by notice. Any such mailing shall be presumed to be made on the date of its registration or certification, if any. 12.3 This Agreement is the complete and exclusive statement of the agreement between the parties and supersedes all other agreements, oral or written, between them relating to the subject matter of this Agreement. 12.4 All questions arising in connection with this Agreement and the parties' performances hereunder shall be governed by and construed according to the laws of the State of Utah without giving effect to the conflict of law provisions thereof. 12.5 From time to time after the date hereof, upon reasonable notice and without further consideration, each party shall execute, acknowledge, and deliver all such other documents and instruments and shall take all such other action as may be necessary or appropriate in the reasonable discretion of other party, to carry out the intents and purposes of this Agreement, and consummate the transactions contemplated hereby. 12.6 All disputes arising under this Agreement shall be settled by arbitration in accordance with the Rules of Commercial Arbitration of the American Arbitration Association then in effect, and judgment upon the award rendered may be entered in a any court having jurisdiction. The arbitrator or arbitrators shall not have the power to amend this Agreement in any respect. 12.7 Acquiratec shall have access to Developatec's facilities at any time for the purpose of inspecting components and Developatec's performance hereunder, but only to the extent consistent with the provisions hereof. In addition, Developatec shall make its employees and consultants available upon reasonable notice during normal business hours to discuss all relevant matters with Acquiratec. Each party shall have access to the other party's books and records to the extent necessary or appropriate to ensure compliance with this Agreement, but all information obtained pursuant to such access, unless otherwise in or coming into the public domain through no fault of the party gaining access, shall be maintained confidential and used only for the purpose expressed above. 12.8 Compliance with the provisions of this Agreement may be waived only by a written instrument specifically referring to this Agreement executed by the party waiving compliance. The failure of either party to enforce at any time, or for any period of time, any provision of this Agreement shall not be construed as a waiver of any provision or the right of either party to enforce each and every provision of this Agreement. 12.9 This Agreement may not be changed, altered or amended except in a writing which specifically references this Agreement signed by duly authorized representatives of the parties. IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as the date first set forth above. [Signatures]