# RESEARCH
AND DEVELOPMENT AGREEMENT

This
agreement made this day of 20, by and between University  of
Miami, Department of Electrical Engineering (University) and Watermark  Technologies,
Inc, a wholly owned subsidiary of UTEK, a Florida Corporation,  whose principal place of
business is at 202 South Wheeler Street, Plant City,  Florida 33566 (Company) to conduct
research and development activities described  in Exhibit A, attached hereto and made a
part hereof.

| | 1.
PRINCIPAL INVESTIGATOR(S)
| | ----------------------------

The
Principal Investigator(s) for the University shall be: Dr. Michael  Scordilis.

The
Principal Investigator(s) for the Company shall be: ______________

| | 2.
AMOUNT OF GRANT
| | ------------------

The
amount  of the grant for the conduct of this study is $240,000, where such amount shall
be paid in three phases and where Phase III shall be contingent upon the success  of
Phases I and II. This amount will be paid by the Company to the University as  described
in Exhibit B (Payment Schedule) attached hereto and made a part  hereof.

| | Payment
shall be mailed to:
| | ---------------------------

| |  |  | University of Miami
Sponsored Programs
P.O. Box 025405
Miami, Florida  33102-5405
| |  |  | ---------------------------------------------------------------------------------

The
check should indicate the University account number. A copy of the payment
transmittal shall be sent to the Principal Investigator.

It
is expected that grant funds will be expended in general accordance with the  budget
attached as Exhibit C (Budget). Actual expenditures may vary at the  discretion of the
University.

| | 3.
TERM OF AGREEMENT
| | --------------------

Performance
of this Agreement shall begin on  and shall not extend beyond the  estimated
completion date of, unless further extended by an amendment of  this Agreement,
which shall be in writing and signed by all parties to this  Agreement. Either the
Company or University may terminate this Agreement upon  sixty (60) days written notice
for any reason.

---

In
the event of termination, University shall refund to Company funds received in  excess of
all University expenditures incurred or non-cancelable commitments  made prior to the
effective date of cancellation. Company shall reimburse  University for all University
expenditures incurred and non-cancelable  commitments (including post doctoral associate
positions included in the project  description) made prior to the effective date of
cancellation in excess of funds  received.

| | 4.
PUBLICATION RIGHTS
| | ---------------------

The
University shall have publication privileges in reference to the subject study.  Company
shall have the right to review and approve such publication with respect  to disclosure
of confidential material prior to submission for publication. Such  approval will not be
unreasonably withheld, and will be provided within thirty  (30) calendar days from the
date of submission to the Company. In the event  Company does not respond to the
submission within such time, approval will be  deemed to have been given. University and
Principal Investigator agree to delay  submission for publication for up to ninety (90)
days to permit Company to take  adequate steps to secure patent protection for any
patentable subject matter  referred to herein.

| | 5.
INVENTIONS
| | -------------

a.
The term Invention and Discovery means any invention, discovery,
improvement, development, know-how, knowledge, trade secret, or data conceived  and
reduced to practice by either party or both parties in the performance of  research under
this Agreement, whether or not patented or patentable.

b.
OWNERSHIP OF INVENTIONS AND DISCOVERIES:  Inventions and Discoveries  conceived and
reduced to practice under This Agreement shall be owned by University.  Such  Invention
or Discovery shall be incorporated into, made a part of and governed by the License
Agreement executed concurrently with This Agreement

Notwithstanding
any provision to the contrary in the Agreement, the University shall retain the  right to
practice any invention or discovery developed hereunder for its own  use.

| | 6.
WARRANTIES
| | -------------

UNIVERSITY
MAKES NO WARRANTIES, EXPRESS OR IMPLIED AND HEREBY DISCLAIMS ALL SUCH  WARRANTIES, AS TO
ANY MATTER WHATSOEVER INCLUDING, WITHOUT LIMITATION, THE  CONDITION OF THE RESEARCH OR
ANY INVENTION(S) OR PRODUCT(S), WHETHER TANGIBLE OR  INTANGIBLE, CONCEIVED, DISCOVERED,
OR DEVELOPED UNDER THIS AGREEMENT; OR THE  OWNERSHIP, MERCHANTABILITY, OR FITNESS FOR A
PARTICULAR PURPOSE OF THE RESEARCH  OR ANY SUCH INVENTION OR PRODUCT. UNIVERSITY SHALL
NOT BE LIABLE FOR ANY DIRECT,  CONSEQUENTIAL, OR OTHER DAMAGES SUFFERED BY ANY LICENSEE
OR ANY THIRD PARTIES  RESULTING FROM THE USE OF THE RESEARCH OR ANY SUCH INVENTION OR
PRODUCT.

2

---

The
provisions of this paragraph shall continue beyond the termination of this  Agreement.

| | 7.
INDEMNIFICATION
| | ------------------

Company
agrees to release, indemnify and hold harmless the Principal Investigator,  University,
its Trustees, officers, faculty, employees and students (University)  against any and all
losses, expenses, claims, damages, actions, lawsuits and  judgments thereon (including
attorney fees through the appellate levels), which  may be brought against the
University, arising out of or reasonably attributable  to 1) the activities to be carried
out in this research and development study,  2) any negligent act or omission of Company,
its agents or employees or any  product or equipment supplied by Company, or 3) the use,
possession or operation  by the Company or any third party of any Invention or Discovery
developed under  this Agreement.

Company,
its agents and employees agree to release, hold harmless and indemnify the  University
from and against any and all loss, claims, or damages, including  bodily injury or death
or property damage, and including attorney fees, suffered  by Company, and its agents and
employees while on the University premises,  provided that such loss, claim or damage
does not arise out of University  negligence.

Except
as otherwise provided in this Agreement, University agrees to release, indemnify  and
hold harmless Company, its officers, directors and employees for any and all  losses,
expenses, claims, damages, actions, lawsuits and judgments therein  (including attorney
fees through the appellate levels) which may be brought  against Company, its officers,
directors and employees arising out of any  negligent act or omission of University, its
faculty, employees or agents.

In
the event any such claim is made or lawsuit is initiated, the persons or party  against
whom such lawsuit is brought or claim is made shall promptly notify the  other party in
writing, and shall cooperate fully in the defense of such lawsuit  and permit the
indemnifying party or its insurance carrier to defend such a  claim or lawsuit.

The
provisions of this paragraph shall continue beyond the termination of this  Agreement.

3

---

| | 8.
INSURANCE
| | ------------

Company
and University each agree to carry and keep in force, each at its expense,  general
liability insurance with limits not less than $1,000,000 per person and  $3,000,000
aggregate to cover liability for damages on account of bodily or  personal injury or
death to any person, or damage to property of any person.  Company shall keep in force
product liability insurance with commercially  reasonable limits that are acceptable to
the University prior to the first  commercial sale. Such insurance shall not be cancelled
for any cause without at  least 30 days prior written notice to the other party. Such
cancellation shall  be cause for termination.

Companys
insurance shall contain an endorsement naming the University as an additional  insured
with respect to this Agreement. Company shall provide a certificate of  insurance or a
self-insurance letter (if Company is self-insured) stating the  limits of coverage. Such
insurance shall be written to cover claims incurred,  discovered, manifested or made
during or after the expiration of this Agreement.  Insurance Certificates should be sent
to the University of Miami, attention Dr.  Gary Margules, Director, Office of Technology
Transfer, 1400 Northwest  10th Avenue, Dominion Tower, Suite 906, Miami,
Florida 33136.

| | 9.
MATERIALS
| | ------------

All
equipment and materials acquired for use in connection with the research program  will be
the property of University at the termination of the program. Except as  may be otherwise
provided in this Agreement, title to any Equipment provided by  Company to University
shall pass to University at the time of delivery thereof  to University.

| | 10.
DISCLOSURE OF INFORMATION
| | -----------------------------

University
shall use reasonable care not to disclose to third parties information provided  by
Company that is designated in writing by Company as confidential.

| | 11.
USE OF NAME
| | ---------------

Company
agrees that it will not under any circumstances use the name of University or  any
faculty or employee in advertising, publicity, or otherwise, without the  express written
permission of Mr. Alan J. Fish, Assistant Vice President of  Business Services, 327 Max
Orovitz Building, 1507 Levante Avenue, Coral Gables,  Florida 33124-1432. University
shall acknowledge Companys support of the  research program under this Agreement in
scientific publications and other  scientific communications.

4

---

| | 12.
RIGHTS OF THIRD PARTIES
| | ---------------------------

It
is recognized that the work of some proposed research program participants may  be
supported in part by contracts and grants between University and third  parties.
University will use reasonable efforts to identify and disclose to  Company any terms in
those contracts or grants of persons working under this  Agreement which may conflict
with University obligations under the Agreement.  University and Company agree to use
their best efforts to resolve such conflict.

Company
understands that some University employees have private consulting agreements  with third
parties and for which University disclaims responsibility, since such  consulting
agreements are not within the Universitys jurisdiction.

| | 13.
EXPORT REGULATIONS
| | ----------------------

It
is understood that the University is subject to United States laws and  regulations
controlling the export of technical data, computer software,  laboratory prototypes and
other commodities (including the Arms Export Control  Act as amended and the Export
Administration Act of 1979), and that its  obligations hereunder are contingent on
compliance with applicable United States  export laws and regulations. The transfer of
certain technical data and  commodities may require a license from the cognizant agency
of the United States  government and/or written assurances by company that company shall
not export  data or commodities to certain foreign countries without prior approval of
such  agency. The University neither represents that a license shall not be required,
nor that if required, it shall be issued.

| | 14.
ENTIRE AGREEMENT
| | --------------------

This
Agreement constitutes the entire understanding between the parties with respect  to the
subject matter within and supersedes all previous agreements, whether  written or oral,
relating to the subject matter. Amendments to this Agreement  shall be effective only if
in writing and signed by an authorized representative  of both University and Company.

| | 15.
RELATIONSHIP OF THE PARTIES
| | -------------------------------

For
the purposes of this Agreement, the parties shall be deemed to be independent
contractors and not agents or employees of the other party. Neither party shall  have
authority to make any representations or commitments of any kind, or to  take any action,
which shall be binding on the other party, except as may be  explicitly provided for
herein or authorized by the other party in writing and  except as required by law.

5

---

| | 16.
ASSIGNMENT
| | --------------

The
Agreement shall not be assignable by either party without the prior written  consent of
the other party.

| | 17.
EFFECT OF WAIVER
| | --------------------

No
waiver of any default, condition, provisions or breach of this agreement shall  be deemed
to imply or constitute a waiver of any other like default, condition,  provision or
breach of this Agreement.

| | 18.
Notice under this Agreement shall be given the parties at the following  addresses:
| | ---------------------------------------------------------------------------------------

| | FOR THE UNIVERSITY:
Ms. Aida Diaz-Piedra
Controller
Office of Controller
212 Max Orovitz Bldg.
1507 Levante Avenue
Coral Gables, FL 33124-1422
Mr. Alan J. Fish
Assistant Vice President
Business Services
327 Max Orovitz Bldg.
1507 Levante Avenue
Coral Gables, FL  33124-1432
Dr. Norman H. Altman, VMD
Vice Provost and
Associate Dean for Research
P.O. Box 016960 (R-64)
1600 N.W. 10th Avenue
Miami, Florida  33101
FOR THE COMPANY:
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

6

---

| | 19.
GOVERNING LAW
| | -----------------

| | This
Agreement shall be governed by the laws of the state of Florida.
| | ---------------------------------------------------------------------

| | IN
WITNESS WHEREOF, the parties have executed this Agreement.
| | -------------------------------------------------------------

|UTEK
CORPORATION
By:  
Title
Date |  | UNIVERSITY OF MIAMI
By:  
Title
Date
Principal Investigator
Date
|--------------------------------- |  | ----------------------------------------------------------------

7

---

Exhibit
A

# Masking
an Auxiliary Channel in the Phase Spectrum of Stereo Audio
Research and Development Activities

Introduction

The
efficient and secure transmission and storage of audio and video over
non-homogeneous and non-secure computer networks, such as the Internet, is
becoming an issue of crucial importance. A new method of joint stereo coding has
been developed (UM2000-19/U.S. Provisional Patent App. No. 60/238,009; Iliev
& Scordilis), which enables watermarking information to the original signal
in a manner that is not perceptible by listening. This is achieved by using
principles of binaural hearing, and in particular the minimum audible angle
(MAA), which is the minimum detectable angular displacement of a sound source.

A
sequence of experiments was conducted that extended the MAA results for simple
acoustic stimuli, as reported in the literature, to more complex sounds. Angular
displacement of a sound source was translated to a frequency-dependent
interaural phase difference (IPD). The predicted IPD tolerance was tested in a
series of phychoacoustic experiments where the short-time phase spectrum of
various audio signals was randomly varied within the range controlled by the
MAA. Listening tests concluded that such phased disturbances remained inaudible,
thus confirming the validity of this new theoretical principle. The practical
application of this principle was then developed and tested by encoding new
digital information in various forms (text, images, speech and music) into the
phase spectrum of stereo audio signals in a manner that complied with our
binaural tolerance principle. Masking the new information was assured even
though distortion resulting from transforming the original (masker) signal from
the time into the frequency domain and back (via the fast Fourier transform)
added to the masked signal, which was detected after recovery.

This
new technique is much simpler than simultaneous frequency masking in the power
spectrum, which is commonly used, and it can be implemented in real-time on
common personal computers. The optimum maximum capacity of the masked channel
was determined experimentally. The computational efficiency and the substantial
auxiliary channel provide by this method allows for the simultaneous encoding of
a masked digital multimedia channel and it can be used in many applications
where the inclusion of parallel or secure information in an audio signal is
important.

Outline
of R&D Activities

Development
and testing of this new watermarking method has been completed utilizing the
Matlab signal-processing environment from Mathworks, Natick, MA. Matlab allows
for the efficient encoder and decoder debugging, plotting of intermediate
results and generation of the required audio files for formal evaluation. While
this environment will continue to serve as a platform for further system
enhancements, the resulting code is not optimized to run in real time. The
practical utilization of this application requires that it operates in
near-real-time, and that it is provided with the necessary interfaces for
processing external multimedia data. Effort to transform this watermarking
system into a portable, efficient, robust, secure and real-time operating
encoder and decoder modules will include the following stages:

---

| | a)
Code Efficiency and Portability
| | ----------------------------------

| | The
main goal of this activity is to produce an application for operation on Intel
Pentium personal computers (or equivalent) operating under Windows 95/98/2000 or
Windows NT. The current Matlab code will be rewritten and into C/C++ and further
optimized. Another goal of this activity is that encoding and decoding might be
done in near-real-time.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | b)
Interface Optimization
| | -------------------------

| | Data
to be watermarked may be in any digital form and represent text, sound or
images. Interfaces will be included to the application so that the system is
easily utilized. This way, encoding such signals into the main stereo audio
masker will be done in a user-friendly or system friendly manner either by an
automatic process or manually after prompting by an operator.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | c)
System Robustness
| | --------------------

| | The
survival and integrity of the watermark is of prime importance. Diverse,
non-homogeneous channels and storage media may transform digital audio
information into a variety of formats very different from the original.
Watermark robustness will tested on the following processes:
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o
Two successive A/D, D/A conversions
o Steady-state time compression/expansion
of time by a factor of 10%
o Pitch invariant time-compression/expansion 
o Amplitude
and frequency modulation (AM & FM) broadcasting
o Audio coding such as MPEG,
AC-3, DAB, MS Media, RealAudio
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
obtained results will be used to propose methods that would increase the
robustness and survivability of the watermark
| | --------------------------------------------------------------------------------------------------------------------------

| | d)
System Security
| | ------------------

| | Embedded
watermark should not be detectable or removable without proprietary tools or a
secure key. A number of cryptographic techniques have been proposed for
increasing data security. Such techniques will be investigated for their
applicability to this system.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------