Document:

Exhibit 10.70 License Agreement & Amendment

    EXHIBIT
      10.70

    
 

    Confidential

    

    LICENSE
      AGREEMENT

    

    This
      License Agreement (the “Agreement”),
      dated
      the 16th
      day of
      June, 2006 (the “Effective
      Date”),
      is by
      and between Bioscan, Inc., a District of Columbia corporation (“Bioscan”), and
      Imaging Diagnostic Systems, Inc., a Florida corporation (“IDSI”).

    

    INTRODUCTION

    

    1. IDSI
      owns
      or otherwise has the right to grant licenses under certain intellectual
      property.

    

    2. IDSI
      has
      begun development of a system currently known as the Laser Imager for Lab
      Animals (“LILA”) system.

    

    3. Bioscan
      is in the business of developing and marketing imaging products.

    

    4. IDSI
      is
      in the business of developing and marketing imaging products for clinical
      applications.

    

    5. IDSI
      and
      Bioscan are interested in establishing a licensing relationship.

    

    NOW,
      THEREFORE, Bioscan and IDSI agree as follows:

    

    Article
      I

    Definitions

    

    When
      used
      in this Agreement, each of the following terms shall have the meanings set
      forth
      in this Article I:

    

    1.1 “Affiliate”.
      Affiliate means, with respect to a Person, any Person that controls, is
      controlled by, or is under common control with such Person. For purposes of
      this
      Section 1.1, “control”
      shall
      refer to (a) direct or indirect ownership of fifty percent (50%) or more of
      the
      stock or shares having the right to vote for the election of directors of such
      Person or (b) the possession, directly or indirectly, of the power to direct,
      or
      cause the direction of, the management or policies of such Person whether
      through the ownership of voting securities, by contract or
      otherwise.

    

    1.2 “Bankruptcy Code”,
      Bankruptcy Code means Title 11 of the United States Code, as
      amended.

    

    1.3 “Business
      Day”.
      Business Day means a day other than a Saturday or Sunday or federal
      holiday.

    

    

    

    

    

    

    
      
        
          
          

        

        
          
            

          

        

        
          
          

        

      

    

    

    

    1.4 “Commercial
      Year”.
      Commercial Year means each of the following: (a) the twelve (12) month period
      beginning on the Market Release Date (the “First
      Commercial Year”)
      and (b)
      each twelve (12) month period beginning on the anniversary of the Market Release
      Date (the “Second
      Commercial Year”,
      the
“Third
      Commercial Year”,
      etc.).

    

    1.5 “Commercialization”
or
      “Commercialize”.
      Commercialization or Commercialize means any activities directed to
      manufacturing, marketing, promoting, distributing, selling or importing a
      product.

    

    1.6 “Competitive
      Product”.
      Competitive Product means any product that is a substitute for or otherwise
      competitive with any Product or potential Product, regardless of the stage
      of
      Development or Commercialization of such Product or potential
      Product.

    

    1.7 “Confidential
      Information”.
      Confidential Information means all proprietary documents, technology or other
      information actually disclosed by one Party (the “Disclosing
      Party”)
      to the other (the “Receiving
      Party”)
      pursuant to this Agreement or the Prior CDA and marked as “confidential” or
“proprietary”. Notwithstanding the foregoing to the contrary, information that
      is orally or visually disclosed by a Party, or is disclosed in writing without
      an appropriate letter, stamp or legend, shall constitute Confidential
      Information of such Party for sixty (60) days after its disclosure and
      thereafter shall remain Confidential Information if, within such 60-day period
      after such disclosure, the Disclosing Party delivers to the Receiving Party
      a
      written document or documents describing the information and referencing the
      place and date of such oral, visual or written disclosure and the names of
      the
      persons to whom such disclosure was made. “Confidential
      Information”
shall
      not include information to the extent such information:

    (a) is
      or
      becomes generally available to the public other than as a result of disclosure
      thereof by the Receiving Party or its Affiliates; (b) is lawfully received
      by
      the Receiving Party on a non-confidential basis from a Third Party that is
      not
      itself under any obligation of confidentiality or nondisclosure to the
      Disclosing Party or any other Person with respect to such information; (c)
      is
      already known to the Receiving Party at the time of disclosure by the Disclosing
      Party; or (d) can be shown by the Receiving Party to have been independently
      developed by the Receiving Party without reference to the Disclosing Party’s
      Confidential Information.

    

    1.8 “Control”
or
      “Controlled”.
      Control
      or Controlled means, with respect to any Intellectual Property Right, the
      possession (whether by ownership or license, other than by a license granted
      pursuant to this Agreement) by a Party or its Affiliates of the ability to
      grant
      to the other Party access, ownership, a license and/or a sublicense as provided
      herein without violating the terms of any agreement or other arrangement with
      any Third Party entered into or existing as of the time such Party or its
      Affiliates would first be required hereunder to grant the other Party such
      access, ownership, license, or sublicense.

    

    1.9 “Cost
      of Goods
      Sold”.
      Cost of
      Goods Sold means, with respect to a Product sold by Bioscan or its Affiliates,
      Bioscan’s or its Affiliates’ actual cost to acquire such Product from a Third
      Party or Bioscan’s or any of its Affiliates’ direct variable costs for materials
      and labor to make such Product, excluding all allocations of indirect costs
      and
      all overhead, including without limitation rent, real estate depreciation,
      utilities, insurance, equipment lease payments, equipment depreciation, and
      selling, general and administrative or similar expenses.

    

    

    
      
        
          
          

        

        
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    1.10 “Cover”,
      “Covering”
or
      “Covered”.
      Cover,
      Covering or Covered means, with respect to a product, that, but for a license
      granted to a Party under a Valid Claim included in the Patent Rights under
      which
      such license is granted, the manufacture, use, sale, offer for sale,
      importation, Development or Commercialization of such product or the practice
      of
      such technology by such Party would infringe such Valid Claim (or in the case
      of
      a Patent Right that is a patent application, would infringe a Valid Claim in
      such patent application if it were to issue as a patent).

    

    1.11 “Development”
or
      “Develop”.
      Development or Develop means research, discovery and development of a product,
      but excluding Commercialization.

    

    1.12 “Due
      Diligence Period”.
      Due
      Diligence Period means the period beginning on the Effective Date and ending
      on
      August 31, 2006.

    

    1.13 “Field”.
      Field means imaging of any animal, but expressly excluding all imaging of
      humans.

    

    1.14 “GAAP”.
      GAAP means United States Generally Accepted Accounting Principles, consistently
      applied.

    

    1.15 “Gross
      Margin”.
      Gross
      Margin means, with respect to the applicable royalty period, the quotient,
      expressed as a percentage, of (a) the result of subtracting the Cost of Goods
      Sold for Products sold by Bioscan or its Affiliates during such royalty period
      from the Net Sales in such royalty period, and (b) Net Sales in such royalty
      period,

    

    1.16 “IDSI
      Intellectual Property”.
      IDSI
      Intellectual Property means (a) IDSI Patent Rights, (b) IDSI LILA Software,
      (c)
      IDSI Know-How, (d) the IDSI LILA Documentation, and (e) all Intellectual
      Property Rights in the foregoing.

    

    1.17 “IDSI Know-How”,
      IDSI
      Know-How means the following, to the extent considered Confidential Information
      hereunder: (a) the reconstruction algorithm disclosed by IDSI to Bioscan
      pursuant to the Prior CDA or this Agreement, and (b) any other know-how
      disclosed by IDSI to Bioscan pursuant to the Prior CDA or this
      Agreement.

    

    1.18 “IDSI LILA
      Software”.
      IDSI
      LILA Software means (a) the software developed by or for IDSI (other than any
      software provided by Bioscan) for the LILA system, including the image
      acquisition and reconstruction software and any other software associated
      therewith, and any derivative works thereof, or other software Controlled by
      IDSI which is useful for image acquisition and processing with the LILA system,
      in all forms, including source and object code forms; provided, however,
      that
      IDSI’s proprietary breast image reconstruction software library and routines
      shall only be provided to Bioscan as a dynamic link library (a DLL) (the
“Reconstruction
      Software”)
      (b) all
      other software (in source and object code forms) related to the LILA system;
      (c)
      all documentation associated with the software in clauses (a) or (b); and (d)
      all Intellectual Property Rights in the foregoing.

    

    1.19 “IDSI
      Patent Rights”.
      IDSI
      Patent Rights means all Patent Rights Controlled by IDSI on the Effective Date
      or thereafter during the term of this Agreement that (a) are set forth in
Exhibit
      A,
      as
      amended from time to time by mutual agreement of the Parties, (b) are
      foreign

    

    
      
        
          
          

        

        
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    counterparts
      of the Patent Rights set forth in Exhibit
      A,
      as
      amended from time to time by mutual agreement of the Parties, (c) claim priority
      from or are otherwise based on the Patent Rights set forth in Exhibit
      A,
      as
      amended from time to time by mutual agreement of the Parties, or (d) otherwise
      claim or cover optical imaging technology or image acquisition or reconstruction
      algorithms. The absence of a Patent Right from Exhibit
      A
      as
      attached to this Agreement or as amended is not dispositive of whether such
      Patent Right is included in IDSI Patent Rights.

    

    1.20 “IDSI Transferred
      Technology”.
      IDSI
      Transferred Technology means all of the following as in existence on the
      Technology Transfer Date: (a) one copy of the IDSI LILA Software in an
      industry-standard electronic format; (b) a list, in an industry-standard
      electronic format, of the names, addresses and other contact information for
      the
      vendors that provide the components for the LILA system prototype; (c) one
      copy
      (in an industry-standard electronic format or, if not then available in such
      format, in the form in which such documentation then exists) of all
      documentation related to the LILA system that may help Bioscan with the further
      development of the Product (the “
      IDSI
      LILA Documentation”)
      and (d)
      one copy (in an industry-standard electronic format or, if not then available
      in
      such format, in the form in which such documentation then exists) of any patent
      applications included in the IDSI Patent Rights.

    

    1.21 “Improvements”.
      Improvements means, with respect to Bioscan, the Bioscan Improvements, and,
      with
      respect to IDSI, the IDSI Improvements.

    

    1.22 “Intellectual
      Property Rights”.
      Intellectual Property Rights means Patent Rights, copyrights, trade secrets
      and
      other forms of proprietary or industrial rights pertaining to inventions,
      know-how, works of authorship and other forms of intellectual property, but
      excluding trademarks.

    

    1.23 “LILA
      Inventory and Drawings”.
      LILA
      Inventory and Drawings means all of the following as in existence on the
      Technology Transfer Date: (a) all prototypes or other forms of the LILA system;
      (b) a complete set of the mechanical, electrical, assembly and other drawings
      developed by IDSI for the assembly and manufacture of the LILA system; (c)
      all
      jigs and other assembly materials developed by IDSI for use in the manufacture
      of the LILA prototype; (d) all related hardware and related documentation that
      may help Bioscan with the further development of the Product; and (e) all
      copyrights or any other Intellectual Property Rights (other than any rights
      under the IDSI Patent Rights) in the foregoing.

    

    1.24
      “Market
      Release Date”.
      Market
      Release Date means the first date on which a production Product is sold and
      delivered to a Third Party by Bioscan, its Affiliate or sublicensee in any
      country in the Territory.

    

    1.25 “Net
      Sales”.
      Net
      Sales means, with respect to the Products during the applicable royalty period,
      the gross amounts received by Bioscan and its Affiliates in respect of sales
      of
      such Products to Third Parties less the following deductions:

    

    (a) Trade,
      cash and/or quantity discounts actually allowed and taken with respect to such
      sales;

    

    

    

    

    
      
        
          
          

        

        
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    (b) Tariffs,
      duties, excises, sales taxes or other taxes imposed upon and paid with respect
      to the production, sale, delivery or use of such Products (excluding national,
      state or local taxes based on income);

    

    (c) Amounts
      repaid or credited by reason of rejections, defects, recalls or returns or
      because of chargebacks, refunds, rebates or retroactive price reductions;
      and

    

    (d) Freight,
      insurance and other transportation charges incurred in shipping such Products
      to
      Third Parties.

    

    Such
      amounts shall be determined from the books and records of Bioscan and its
      Affiliates, maintained in accordance with GAAP.

    

    In
      the
      event the Product is sold as part of a Combination Product (as defined below),
      the Net Sales from the Combination Product, for the purposes of determining
      royalty payments, shall be determined by multiplying the Net Sales (as
      determined above) of the Combination Product, during the applicable royalty
      period, by the greater of (A) fifty percent (50%) or (B) the fraction, A/A+B,
      where A is Bioscan’s list price for the Product during the applicable royalty
      period, and B is Bioscan’s list price for the Independent Component(s) (as
      defined below) included in the Combination Product during the applicable royalty
      period; provided, however,
      that,
      if the Product and all such Independent Component(s) are not sold separately
      by
      Bioscan during the applicable royalty period, such that there is no Bioscan
      list
      price for the Product and each such Independent Component(s) during the
      applicable royalty period, then, for the purposes of determining royalty
      payments, A/A+B shall equal fifty percent (50%) such that fifty percent (50%)
      of
      the Net Sales of the Combination Product shall be the basis for determining
      royalty payments.

    

    As
      used
      above, the term “Combination
      Product”
means
      any product in which a Product is sold in a single housing in combination with
      other component(s) which would not be Product(s) if such component(s) were
      sold
      separately (the “Independent
      Component(s)”)
      and
      either (i) the Independent Component(s) is(are) sold separately by Bioscan
      during the applicable royalty period or (b) the product is of a type described
      on Exhibit
      B.

    

    1.26 “Party”.
      Party
      means Bioscan or IDSI; “Parties”
means
      Bioscan and IDSI.

    

    1.27 “Patent
      Rights”.
      Patent
      Rights means existing and future United States and foreign patents and patent
      applications, and all substitutions, divisions, continuations,
      continuations-in-part, reissues, reexaminations and extensions.

    

    1.28 “Person”.
      Person
      means any natural person or any corporation, company, partnership, joint
      venture, firm or other entity, including without limitation a
      Party.

    

    1.29 “Prior CDA”.
      Prior
      CDA means the Non-Disclosure Agreement between the Parties dated on or about
      October 26, 2005,

    

    1.30 “Product”.
      Product means any optical imaging product Covered by a Valid Claim of IDSI
      Patent Rights.

    

    

    
      
        
          
          

        

        
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    1.31 “Territory”.
      Territory means all countries of the world.

    

    1.32 “Third Party”.
      Third
      Party means any Person other than a Party or any of its Affiliates.

    

    1.33 “Valid
      Claim”.
      Valid
      Claim means a claim (a) of any issued, unexpired patent that has not been
      revoked or held unenforceable or invalid by a decision of a court or
      governmental agency of competent jurisdiction from which no appeal can be taken,
      or with respect to which an appeal is not taken within the time allowed for
      appeal, and that has not been disclaimed or admitted to be invalid or
      unenforceable through reissue, disclaimer or otherwise, or (b) of any patent
      application that has not been cancelled, withdrawn or abandoned nor been pending
      for more than seven (7) years.

    

    1.34 Additional
      Definitions.
      Each of
      the following definitions is set forth in the section of this Agreement
      indicated below:

    

    
      	
              Definitions

            	
              Section

            
	
              AAA

            	
              12.1(a)

            
	
              Agreement

            	
              Preamble

            
	
              Bioscan

            	
              Preamble

            
	
              Bioscan
                Improvements

            	
              3.1

            
	
              Bioscan
                Indemnified Parties

            	
              8.2

            
	
              Breaching
                Party

            	
              10.2(c)

            
	
              Combination
                Product

            	
              1.25

            
	
              Competitive
                Infringement

            	
              5.3
                (a)(i)

            
	
              Disclosing
                Party

            	
              1.7

            
	
              Effective
                Date

            	
              Preamble

            
	
              IDSI

            	
              Preamble

            
	
              IDSI
                Improvements

            	
              3.2

            
	
              IDSI
                Indemnified Parties

            	
              8.1

            
	
              IDSI
                LILA Documentation

            	
              1.20

            
	
              Independent
                Component(s)

            	
              1.25

            
	
              Invalidity
                Claim

            	
              5.5

            
	
              Joint
                IP

            	
              5.1(b)

            
	
              LILA

            	
              Preamble

            
	
              Receiving
                Party

            	
              1.7

            
	
              Reconstruction
                Software

            	
              1.18

            
	
              Royalty
                Termination Date

            	
              4.5(c)

            
	
              Technology
                Transfer Date

            	
              2.1

            
	
              Technology
                Transfer Fee

            	
              2.1

            
	
              Term

            	
              10.1

            
	
              Transfer

            	
              13.3(b)

            
	
              Transferee

            	
              13.3(b)

            

    

    

    

    

    

    
      
        
          
          

        

        
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    Article
      II

    Grant of
      License and Technology Transfer to Bioscan

    

    2.1 License
      Grant.
      Subject
      to the terms and conditions of this Agreement, IDSI hereby grants to Bioscan
      an
      exclusive (even as to IDSI), sublicenseable, royalty-bearing (in accordance
      with
      Section 4.5) license, under the IDSI Intellectual Property and IDSI’s right in
      any Joint IP, to (a) make, use, sell, offer for sale, import, and otherwise
      Develop and Commercialize Products in the Territory, which Products may be
      marketed solely for use in the Field, (b)copy and make derivative works of
      the
      IDSI LILA Software and the IDSI LILA Documentation, and (c) distribute, execute,
      perform and display the IDSI LILA Software and the IDSI LILA Documentation
      in or
      with the Products. Bioscan agrees not to exercise the rights under this license
      unless and until Bioscan purchases the LILA Inventory and Drawings pursuant
      to
      Section 4.3 and pays to IDSI a one-time technology transfer fee of US$250,000
      (which shall be paid in accordance with and subject to Section 2.3(d)) (such
      US$250,000 fee, the “Technology
      Transfer
      Fee”;
      the date on which the last of such payments is made to IDSI, the “Technology
      Transfer

    Date”).

    

    2.2
      Restriction
      on Purchasers.
      During
      the Term, Bioscan shall:

    

    (a) not
      sell
      the Product to a purchaser if Bioscan knows that such purchaser intends to
      use
      such Product to perform human imaging; and

    

    (b) include
      in the standard quotations it provides to purchasers of the Products the
      following language, or language which is substantially equivalent:

    

    Restriction
      on Use.
      As a
      condition of sale of this product, purchaser agrees not to use the product
      or
      the intellectual property embodied in the product to perform human imaging
      or to
      manufacture a device to perform human imaging. Failure to comply with this
      restriction may constitute an infringement of patent rights and other
      intellectual property rights of seller or third parties and a breach of the
      terms of the sale of this product and could subject purchaser to damages and/or
      an injunction.

    

    2.3 Technology
      Transfer.

    

    (a) Within
      fourteen (14) days after the Technology Transfer Date, IDSI shall provide the
      IDSI Transferred Technology to Bioscan.

    

    (b) During
      the Due Diligence Period, Bioscan may conduct due diligence (including legal
      and
      technical diligence) with respect to the IDSI Intellectual Property, the IDSI
      Transferred Technology and the LILA Inventory and Drawings, using Bioscan
      employees and outside consultants, and IDSI shall cooperate with such due
      diligence process by (i) promptly providing to Bioscan and its attorneys a
      complete copy of each agreement pursuant to which IDSI licenses the right to
      use
      the IDSI Intellectual Property, and (ii) allowing Bioscan to make two (2) one
      day visits to IDSI’s facilities and by designating a knowledgeable IDSI employee
      to answer Bioscan’s questions by telephone for one hour every two (2) weeks.
      IDSI shall have no

    

    
      
        
          
          

        

        
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    obligation
      to provide further assistance during the Due Diligence Period and shall provide
      any such assistance in its sole discretion. 

    

    (c) During
      the six (6) month period following the Due Diligence Period, IDSI shall
      cooperate with Bioscan’s Development of the Products by designating a
      knowledgeable IDSI employee to answer Bioscan’s questions by telephone for one
      hour every month. IDSI shall have no obligation to provide such assistance
      after
      such six month period and shall provide any further assistance in its sole
      discretion.

    

    (d) Bioscan
      shall pay the Technology Transfer Fee in accordance with the following
      schedule:

    

    (i) An
      initial installment of US$50,000 on or before the end of the Due Diligence
      Period, i.e., August 31, 2006;

    

    (ii) An
      additional installment of US$100,000 on or before September 30, 2006;
      and

    

    (iii)
      The
      final installment of US$100,000 on or before October 16, 2006.

    

    For
      the
      sake of clarity, if Bioscan pays the initial installment in accordance with
      Section 2.3(d)(i), the additional installments shall be due and payable in
      accordance with Sections 2.3(d)(ii) and 2.3(d)(ui). If Bioscan does not pay
      the
      initial installment in accordance with Section 2.3(d)(i), Bioscan shall have
      no
      obligation to pay the Technology Transfer Fee or to purchase the LILA Inventory
      and Drawings and shall not be in breach with respect thereto, and this Agreement
      shall automatically terminate in accordance with Section l0.1(a). If Bioscan
      pays the initial installment of the Technology Transfer Fee but fails to pay
      a
      subsequent installment, then IDSI may terminate this Agreement in accordance
      with Section 10.2(c).

    

    2.4 Conversion
      to Non-Exclusive License.
      If the
      Market Release Date does not occur on or before the date which is twenty-four
      (24) months after the Technology Transfer Date, then IDSI may convert the
      exclusive license granted to Bioscan in Section 2.1 into a non-exclusive license
      by providing written notice thereof to Bioscan at any time before the Market
      Release Date. By way of example, if the Technology Transfer Date is September
      6,
      2006, then, if the Market Release Date does not occur on or before September
      6,
      2008, IDSI may convert the exclusive license granted to Bioscan in Section
      2.1
      into a non-exclusive license by providing written notice thereof to Bioscan
      at
      any time before the Market Release Date.

    

    Article
      III

    Grant
      Back License to IDSI

    

    3.1 Grant
      Back License.
      In the
      event that, on or before the Market Release Date, Bioscan makes any
      modifications or enhancements to the Reconstruction Software (the “Bioscan
      Improvements”).
      and
      if IDSI requests a license with respect to the Biosean Improvements, then (a)
      Bioscan shall grant to IDSI, subject to the terms and conditions of this
      Agreement, a non-

    

    
      
        
          
          

        

        
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    exclusive,
      non-sublicenseable, non-transferable, royalty-free license to copy and make
      derivative works of the Bioscan Improvements solely for incorporation in the
      software used in and sold with IDSI’s clinical Computed Tomography Laser
      Mammography system, and to distribute, execute, perform and display the Bioscan
      Improvements solely as incorporated into the software used in and sold with
      IDSI’s clinical Computed Tomography Laser Mammography system; and Bioscan shall
      provide a copy of the software for the Bioscan Improvements only as a dynamic
      link library (a DLL). The license granted to IDSI under this Section 3.1 shall
      terminate immediately upon the expiration or termination of the license granted
      to Bioscan under Section 2.1.

    

    3.2 Additional
      Disclosure,
      If
      Bioscan makes any Bioscan Improvements after the Market Release Date or IDSI
      makes any modifications or enhancements to the Reconstruction Software at any
      time after the Technology Transfer Date (the “IDSI
      Improvements”),
      and if
      IDSI or Bioscan, respectively, requests access to such other Party’s
      Improvements (which request may be made no more than once per year), then such
      other Party shall deliver a copy of the software for such Improvements only
      as a
      dynamic link library (a DLL) and such software shall automatically be included
      in the license granted to the requesting Party under Section 3.1 or 2.1,
      respectively.

    

    Article
      IV

    Financial
      Provisions

    

    4.1 Initial
      License Fee.
      On the
      Effective Date, Bioscan shall pay to IDSI US$1 in partial consideration for
      the
      licenses granted to Bioscan pursuant to Article II.

    

    4.2 Technology
      Transfer.
      Unless
      and until Bioscan pays the Technology Transfer Fee and purchases the LILA
      Inventory and Drawings, IDSI shall have no obligation to provide the IDSI
      Transferred Technology to Bioscan.

    

    4.3 Inventory
      and Drawing Purchase.

    

    (a) On
      the
      Technology Transfer Date, Bioscan shall purchase from IDSI, and IDSI shall
      sell
      to Bioscan, all right, title and interest in and to the LILA Inventory and
      Drawings for the lesser of (a) its then-current book value, as recorded on
      IDSI’s books in accordance with GAAP and based on a physical inventory, or (b)
      US$69,000.

    

    (b) Within
      fourteen (14) days after the Technology Transfer Date, IDSI shall put Bioscan
      in
      possession and control of the LILA Inventory and Drawings.

    

    (c) Notwithstanding
      any provisions of law imposing the burden of such taxes on IDSI, Bioscan shall
      be responsible for and shall pay all sales, use and transfer taxes, and all
      governmental charges, if any, upon the sale or transfer of the LILA Inventory
      and Drawings.

    

    (d) Each
      Party hereby waives compliance with the provisions of any bulk transfers statute
      applicable to the LILA Inventory and Drawings.

    

    

    

    
      
        
          
          

        

        
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    4.4 Sales
      Milestone.
      Bioscan
      shall pay to IDSI a one-time payment of US$1,000,000 within thirty (30) days
      after the sale by Bioscan or its Affiliates, on or after the Market Release
      Date, of the seven hundred fiftieth (750th) unit of the Product(s).

    

    4.5 Royalties.

    

    (a) Royalties
      During First Two Commercial Years.
      With
      respect to each of the first two (2) Commercial Years, Bioscan shall pay to
      IDSI, within thirty (30) days after the end of such Commercial Year, (i)
      US$250,000 if ten (10) or more Products are sold by Bioscan, its Affiliates
      or
      sublicensees during such Commercial Year, or (ii) if fewer than ten (10)
      Products are sold by Bioscan, its Affiliates or sublicensees during such
      Commercial Year, the lesser of (A) US$250,000 or (B) a royalty of six percent
      (6%) of Net Sales during such Commercial Year, if, during such Commercial Year,
      the Gross Margin is less than sixty-five percent (65%), or (ii) a royalty of
      eight percent (8%) of Net Sales during such Commercial Year, if, during such
      Commercial Year, the Gross Margin is greater than or equal to sixty-five percent
      (65%).

    

    (b) Royalties
      After First Two Commercial Years.
      Within
      thirty (30) days after the end of each calendar quarter during the Third
      Commercial Year and each subsequent Commercial Year, Bioscan shall pay to IDSI
      (i) a royalty of six percent (6%) of Net Sales during such calendar quarter,
      if,
      during such calendar quarter, the Gross Margin is less than sixty-five percent
      (65%), or (ii) a royalty of eight percent (8%) of Net Sales during such calendar
      quarter, if, during such calendar quarter, the Gross Margin is greater than
      or
      equal to sixty-five percent (65%).

    

    
      	 	
              (c)

            	
              Length
                of Payments.

            

    

    

    (i) The
      amounts payable under Sections 4.5(a) and (b) shall continue with respect to
      a
      Product, on a country-by-country basis, until the expiration of all Valid Claims
      of IDSI Patent Rights that Cover the sale of such Product in such country;
      provided,
      however,
      that,
      no further royalties shall be due under Section 4.5(b) once Bioscan has paid
      to
      IDSI royalties of US$3,000,000 thereunder (such expiration date or the date
      on
      which such payment is made, the “Royalty
      Termination Date”).

    

    (ii) Upon
      the
      Royalty Termination Date, the license under Section 2.1 shall become perpetual,
      irrevocable, fully-paid up and royalty-free; provided, however, that Bioscan’s
      obligation under Section 4.4 shall remain in effect unless already paid in
      full.

    

    (d) Offsets,
      If
      Bioscan is permitted, pursuant to Section 5.2(a)(ii), to offset any amounts
      from
      any payments due to IDSI pursuant to this Section 4.5, but cannot offset the
      entire amount against payments due to IDSI during any royalty period, Bioscan
      may offset the remainder against future payments due to IDSI
      hereunder.

    

    
      	 	
              (e)

            	
              Reports
                and Accounting.

            

    

    

    (i) Reports;
      Payments.
      Bioscan
      shall deliver to IDSI, within forty-five (45) days after the end of each royalty
      period in Sections 4.5(a) and (b), reasonably detailed written accountings
      of
      Net Sales that are subject to payment obligations to IDSI under this Section
      4.4
      for such royalty period. Such reports shall indicate (A) Net Sales, (B) the
      calculation

    

    
      
        
          
          

        

        
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    of
      payment amounts owed to IDSI pursuant to this Section 4.5 from such Net Sales,
      and (C) the Gross Margin with respect to such royalty period. When Bioscan
      delivers such accountings to IDSI, Bioscan shall also deliver all payments
      due
      under this Section 4.5 to IDSI for such royalty period.

    

    (ii) Audits
      by IDSI.
      Bioscan
      shall keep, and shall require its Affiliates to keep, complete and accurate
      records of the latest three (3) years relating to Net Sales and Gross Margins.
      For the sole purpose of verifying payments payable to IDSI pursuant to this
      Section 4.5, IDSI shall have the right, no more than once each calendar year,
      at
      IDSI’s expense to retain an independent certified public accountant selected by
      IDSI and reasonably acceptable to Bioscan, to review such records in the
      location(s) where such records are maintained by Bioscan or its Affiliates
      upon
      reasonable notice and during regular business hours and under obligations of
      confidence to Bioscan. Results of such review shall be made available to both
      IDSI and Bioscan. If the review reflects an underpayment to IDSI, such
      underpayment shall be promptly remitted to IDSI. If the underpayment is equal
      to
      or greater than five percent (5%) of the royalties that were otherwise due
      under
      this Section 4.5, Bioscan shall pay all of the costs of such
      review.

    

    4.6 Currency
      and Method of_Payments.
      All
      payments under this Agreement shall be made in United States dollars by transfer
      to such bank account as IDSI may designate from time to time. Any royalties
      due
      hereunder with respect to amounts in currencies other than United States dollars
      shall be payable in their United States dollar equivalents, calculated using
      the
      applicable conversion rates for buying United States dollars as published by
      The
      Wall Street Journal
      for the
      last Business Day of the royalty period for which such royalties are
      payable.

    

    4.7 United
      States Dollars.
      All
      dollar ($) amounts specified in this Agreement are United States dollar
      amounts.

    

    Article
      V

    Intellectual
      Property Protection and Related Matters

    

    5.1 Ownership.

    

    (a) As
      between the Parties, IDSI shall own the IDSI Intellectual Property; provided, however,
      that
      Bioscan shall own any modifications, enhancements, improvements or derivative
      works of the IDSI LILA Software or IDSI LILA Documentation made by or for
      Bioscan, its Affiliates or sublicensees.

    

    (b) If
      any
      inventions are conceived and reduced to practice or otherwise developed jointly
      by IDSI or its Affiliates, on the one hand, and Bioscan or its Affiliates,
      on
      the other hand, then such inventions and all Intellectual Property Rights
      therein (collectively, the “Joint
      IP”)
      shall
      be owned jointly by IDSI and Bioscan on the basis of an undivided one-half
      interest. Notwithstanding anything to the contrary herein, each Party shall
      have
      the right to exploit such Joint IP, or sell, license or otherwise transfer
      such
      Joint IP to its Affiliates or any Third Party, without the consent of the other
      Party so long as such exploitation, sale, license or transfer is subject to
      the
      licenses granted pursuant to this Agreement and is otherwise consistent with
      this Agreement.

    

    

    
      
        
          
          

        

        
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    (c) Inventorship
      shall be determined in accordance with U.S. patent laws.

    

    5.2 Prosecution
      and Maintenance of Patent
      Rights.

    

    (a) IDSI
      Patent Rights.

    

    (i)
      IDSI
      shall have the first right and option to file and prosecute any patent
      applications and to maintain any patents included in the 11)5! Patent Rights,
      all at 1051’s expense.

    

    (ii) If
      IDSI
      declines the option to file and prosecute any such patent applications or
      maintain any such patents, it shall give Bioscan reasonable notice to this
      effect, sufficiently in advance to permit Bioscan to undertake such filing,
      prosecution and/or maintenance without a loss of rights, and thereafter Bioscan
      may, upon written notice to IDSI, file and prosecute such patent applications
      and maintain such patents in the name of IDSI, at Bioscan’s expense,
provided
      that
      Bioscan shall be entitled to reimbursement for such expenses from IDSI to the
      extent that such expenses are reasonably necessary in light of the purpose
      of
      this Agreement and the transactions contemplated hereby. IDSI shall reimburse
      Bioscan for such amounts within thirty (30) days after receipt of an invoice
      therefor. Notwithstanding the foregoing, Bioscan shall not be entitled to deduct
      any claimed reimbursement from any payments due to IDSI pursuant to Section
      4.5.

    

    (b) Joint
      Patent Rights.

    

    (i) Bioscan
      shall have the first right and option to file and prosecute any patent
      applications and to maintain any patents included in the Joint IP in the name
      of
      both Parties. If Bioscan declines the option to file and prosecute any such
      patent applications or maintain any such patents, it shall give IDSI reasonable
      notice to this effect, sufficiently in advance to permit IDSI to undertake
      such
      filing, prosecution and/or maintenance without a loss of rights, and thereafter
      IDSI may, upon written notice to Bioscan, file and prosecute such patent
      applications and maintain such patents in the name of both Parties.

    

    (ii) Bioscan
      shall pay all expenses under Section 5.2(b)(i) with respect to any Joint IP
      whose applicability is limited to small animal imaging and each Party shall
      bear
      fifty percent (50%) of all expenses under Section 5.2(b)(i) with respect to
      any
      other Joint IP; provided,
      however,
      that if
      a Party does not wish to bear such expenses, then it shall provide notice to
      the
      other Party to such effect and, effective as of the date of receipt of such
      notice, (A) such Joint IP shall be assigned to the other Party, and (B) such
      Joint IP shall be considered the other Party’s Intellectual Property Right and
      shall no longer be Joint IP.

    

    (c) Cooperation,
      Each
      Party shall cooperate with the prosecuting Party with respect to the filing,
      prosecution, maintenance and extension of patents and patent applications
      pursuant to this Section 5.2, including:

    

    (i) the
      execution of all such documents and instruments and the performance of such
      acts
      as may be reasonably necessary in order to permit the prosecuting Party to
      file,
      prosecute, maintain or extend patents and patent applications as provided for
      in
      this Section 5.2;

    

    
      
        
          
          

        

        
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    (ii) making
      its employees, agents and consultants reasonably available to the prosecuting
      Party (or to the prosecuting Party’s authorized attorneys, agents or
      representatives), to the extent reasonably necessary to enable the prosecuting
      Party to file, prosecute or maintain patents and patent applications as provided
      for in this Section 5.2;

    

    (iii)
      providing the prosecuting Party with copies of all material correspondence
      with
      the United States Patent and Trademark Office or its foreign counterparts
      pertaining to the filing, prosecution or maintenance of patents and patent
      applications as provided for in this Section 5.2; and

    

    (iv)
      cooperating, if necessary and appropriate, with the prosecuting

    Party
      in
      gaining patent term extensions wherever applicable to such Patent
      Rights.

    

    5.3 Third
      Party Infringement.

    

    (a) IDSI
      Patent Right.

    

    (i) Notifications
      of Third Party Infringement,
      Each
      Party agrees to notify the other Party when it becomes aware of the reasonable
      probability of infringement of the IDSI Intellectual Property arising from
      or
      relating to the making, using, offering for sale, sale, importation, Development
      or Commercialization of any Competitive Product in the Field, or the copying,
      modification distribution, execution, performance or display of any software
      therein (“Competitive
      Infringement”).

    

    (ii) Infringement
      Action.
      Within
      ninety (90) days of becoming aware of any Competitive Infringement, IDSI shall
      decide whether to institute an infringement suit or take other appropriate
      action that it believes is reasonably required to enforce the IDSI Intellectual
      Property. If IDSI fails to institute such suit or take such action within such
      ninety (90) day period, then Bioscan shall have the right at its sole discretion
      to institute such suit or take other appropriate action in the name of either
      or
      both Parties.

    

    (iii)
       Costs.
      Each
      Party shall assume and pay all of its own out-of-pocket costs incurred in
      connection with any litigation or proceedings described in this Section 5.3(a),
      including without limitation the fees and expenses of such Party’s
      counsel.

    

    (iv)
       Recoveries.
      As any
      proceeding described in this Section 5.3(a) or any counterclaim or similar
      claim
      asserted in a proceeding described in Section 5.5 with respect to IDSI
      Intellectual Property in the Field begins, the Parties shall negotiate in good
      faith the allocation between the Parties of any recovery obtained by any Party
      as a result of such proceeding or counterclaim, by settlement or otherwise,
      with
      the goal of ensuring that each Party is compensated in proportion to its loss
      with respect to such proceeding or counterclaim; provided,
      however,
      that in
      any event such recovery shall first be applied to reimburse each Party for
      all
      litigation costs in connection with such proceeding paid by such Party and
      not
      otherwise recovered (on a pro rata basis based on each Party’s respective
      litigation costs, to the extent the recovery is less than all such litigation
      costs). If the Parties are not able to agree on such an allocation prior to
      the
      receipt by either Party of such recovery, the Parties shall request the judge
      presiding over such proceeding or counterclaim to allocate such recovery to
      ensure that each

    

    
      
        
          
          

        

        
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    Party
      is
      compensated in proportion to its loss with respect to such proceeding or
      counterclaim and, if such judge cannot or will not do so, the provisions of
      Article XII shall be applied to allocate such recovery to ensure that each
      Party
      is compensated in proportion to its loss with respect to such proceeding or
      counterclaim.

    

    (b) Joint
      IP.

    

    (i) Notifications
      of Third Party Infringement,
      Each
      Party shall notify the other Party when it becomes aware of the reasonable
      probability of infringement of the Joint IP by a Third Party.

    

    (ii) Infringement
      Action.
      Within
      ninety (90) days of becoming aware of infringement of the Joint IP, Bioscan
      shall decide whether to institute an infringement suit or take other appropriate
      action that it believes is reasonably required to enforce the Joint IP. If
      Bioscan fails to institute such suit or take such action within such ninety
      (90)
      day period, then IDSI shall have the right at its sole discretion to institute
      such suit or take other appropriate action in the name of either or both
      Parties.

    

    (iii)
      Costs.
      Each
      Party shall assume and pay fifty percent (50%) of all out-of-pocket costs
      (including attorneys fees) incurred by either Party in connection with any
      litigation or proceedings described in this Section 5.3(b). Within thirty (30)
      days after the end of each calendar quarter, each Party shall provide to the
      other an accounting of such costs incurred by such Party during such quarter
      and
      the Party which has so incurred fewer costs than the other Party during such
      quarter shall pay to such other Party, within thirty (30) days after receipt
      of
      the other’s accounting, an amount such that each Party has borne fifty percent
      (50%) of such costs incurred by both Parties.

    

    (iv)
       Recoveries.
      Any
      recovery obtained by any Party as a result of any proceeding described in this
      Section 5.3(b) or from any counterclaim or similar claim asserted in a
      proceeding described in Section 5.5 with respect to Joint IP, by settlement
      or
      otherwise, shall be applied in the following order of priority:

    

    (A) first,
      to
      reimburse each Party for all out-of-pockets costs incurred by such Party in
      connection with such proceeding and not otherwise recovered (which, to the
      extent the recovery is less than all such unrecovered litigation costs, shall
      be
      apportioned so that each Party shall have borne fifty percent (50%) of such
      costs incurred by both Parties from such proceeding); and

    

    (B) second,
      the remainder of the recovery shall be paid fifty percent (50%) to each
      Party.

    

    (c) Cooperation;
      Settlements.
      In the
      event that either Bioscan or IDSI takes action pursuant to Sections 5.3(a)
      or
      (b), the other Party shall cooperate with the Party so acting to the extent
      reasonably possible, including the joining of suit if necessary or desirable.
      Neither Party shall settle or compromise any claim or proceeding relating to
      IDSI Intellectual Property or

    

    
      
        
          
          

        

        
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    Joint
      IP
      without obtaining the prior written consent of the other Party, such consent
      not
      to be unreasonably withheld.

    

    5.4 Claimed
      Infringement; Third Party Actions.
      In the
      event that a Party becomes aware of any claim that the Development or
      Commercialization of the Products in the Field infringes the Intellectual
      Property Rights of any Third Party, such Party shall promptly notify the other
      Party. Each Party shall provide to the other Party copies of any notices it
      receives from Third Parties regarding any alleged infringement or
      misappropriation of Third Party Intellectual Property Rights arising out of
      or
      in connection with the Development or Commercialization of any Product in the
      Field. Such notices shall be provided promptly, but in no event after more
      than
      fifteen (15) days following receipt thereof. IDSI shall not settle any such
      claim without Bioscan’s prior written consent.

    

    

      5.5 Patent
        Invalidity Claim,
        If a
        Third Party at any time asserts a claim that any IDSI Intellectual Property
        in
        the Field or Joint IP is invalid or otherwise unenforceable (an “Invalidity
        Claim”),
        whether as a defense in an infringement action brought by Bioscan or IDSI
        pursuant to Section 5.3 or in an action brought against Bioscan or IDSI
        described in Section 5.4, the Parties shall cooperate with each other in
        preparing and formulating a response to such Invalidity Claim. Neither Party
        shall settle or compromise any Invalidity Claim without the consent of the
        other
        Party, which consent shall not be unreasonably withheld.

    5.6 Patent
      Marking.
      Bioscan
      agrees to comply with the patent marking statutes in each country in which
      Products are sold by Bioscan and/or its Affiliates.

    

    Article
      VI

    Confidentiality

    

    6.1 Confidential
      Information.
      The
      Receiving Party shall (a) not use any of the Disclosing Party’s Confidential
      Information except in connection with the activities contemplated by this
      Agreement, (b) maintain in confidence the Disclosing Party’s Confidential
      Information (except to the extent reasonably necessary for regulatory approval
      of Products, for the filing, prosecution and maintenance of Patent Rights or
      to
      Develop and Commercialize Products in accordance with this Agreement), and
      (c)
      not otherwise disclose the Disclosing Party’s Confidential Information to any
      other person, firm, or agency, governmental or private (except consultants,
      advisors and Affiliates in accordance with Section 6.3), without the prior
      written consent of the Disclosing Party. If the Disclosing Party’s Confidential
      Information is required to be disclosed by the Receiving Party to comply with
      applicable laws or regulations, to defend or prosecute litigation or to comply
      with legal process, the Receiving Party may do so,

    provided
      that (y)
      to the extent permitted by law, the Receiving Party provides written notice
      of
      such disclosure request to the Disclosing Party within two Business Days
      following receipt of the request and (z) the Receiving Party discloses
      Confidential Information of the Disclosing Party only to the extent reasonably
      necessary and no sooner than reasonably required for such legal compliance
      or
      litigation purpose.

    

    6.2 Reconstruction
      Software and Improvements,
      The
      Reconstruction Software and the IDSI improvements shall be IDSI’s Confidential
      Information, subject to Sections 1.7(a)

    

    

    
      
        
          
          

        

        
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    through
      (d). The Bioscan Improvements shall be Bioscan’s Confidential Information,
      subject to Sections 1.7(a) through (d).

    

    6.3 Employee,
      Consultant and Advisor Obligations,
      The
      Receiving Party agrees that it and its Affiliates shall provide the Disclosing
      Party’s Confidential Information only to those employees, consultants and
      advisors of the Receiving Party, its Affiliates or sublicensees permitted
      hereunder who have a need to know such Confidential Information to assist the
      Receiving Party in fulfilling its obligations or exercising its rights under
      this Agreement; provided
      that the
      Receiving Party shall remain responsible for any failure by its, its Affiliates’
and sublicensees’ respective employees, consultants and advisors to treat such
      Confidential Information as required under Section 6.1.

    

    6.4 Term.
      All
      obligations of confidentiality imposed under this Article VI shall expire five
      (5) years following termination or expiration of this Agreement.

    

    6.5 Equitable
      Relief.
      Each
      Party acknowledges and agrees that the other Party would be damaged irreparably
      in the event that (a) a Party breaches the provisions of this Article VI, (b)
      Bioscan uses the Reconstruction Software, as received from IDSI pursuant to
      Section 2.3(a), outside the Field or otherwise breaches Section 2.1 with respect
      to IDSI’s Reconstruction Software, or (c) IDSI uses Bioscan’s reconstruction
      software, as received from Bioscan pursuant to Section 3, in the Field or
      otherwise breaches Section 3.1 with respect to Bioscan’s reconstruction
      software. Accordingly, each Party agrees that the other Party shall be entitled
      to an injunction or other equitable relief to prevent such breaches and to
      enforce specifically such provisions of this Agreement in any action instituted
      in any court of the United States or any state thereof having jurisdiction
      over
      the Parties and the matter, in addition to any other remedy to which it may
      be
      entitled, at law or in equity.

    

    Article
      VII

    Representations
      and Warranties

    

    7.1 Representations
      of Authority.
      Bioscan
      and IDSI each represents and warrants to the other that, as of the Effective
      Date, it has full right, power and authority to enter into this Agreement and
      to
      perform its respective obligations under this Agreement.

    

    7.2 Consents.
      Bioscan
      and IDSI each represents and warrants that all necessary consents, approvals
      and
      authorizations of all government authorities and other Persons required to
      be
      obtained by such Party in connection with the execution, delivery and
      performance of this Agreement have been obtained; provided
      that no
      representation or warranty is given with respect to governmental approvals
      necessary for the manufacture, use, sale, offer for sale or importation of
      the
      Products.

    

    7.3 No
      Conflict.
      Bioscan
      and IDSI each represents and warrants that, notwithstanding anything to the
      contrary in this Agreement, the execution and delivery of this Agreement and
      the
      performance of such Party’s obligations hereunder (a) do not conflict with or
      violate any requirement of applicable laws or regulations and (b) do not and
      will not conflict with, violate or breach or constitute a default of, or require
      any consent under, any contractual

    

    

    
      
        
          
          

        

        
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    obligations
      of such Party, except such consents as shall have been obtained prior to the
      Effective Date.

    

    7.4 Fees
      Payable.
      Bioscan
      and IDSI each represents and warrants that there are no broker’s commissions,
      finder’s fees or other amounts payable with regard to this transaction, other
      than the fee (if any) due to ICA^2 (IC Squared) LLC, which shall be paid in
      full
      by IDSI.

    

    7.5 Intellectual
      Property.
      IDSI
      represents and warrants to Bioscan that (a) IDSI owns the entire right, title
      and interest in and to, or owns the exclusive right to use, the IDSI
      Intellectual Property, free and clear of all claims, liabilities, licenses,
      liens, pledges, charges and encumbrances of any kind; (b) IDSI has the right
      to
      grant to Bioscan the rights and licenses under the ]DSI Intellectual Property
      granted in this Agreement; (c) none of the IDSI Patent Rights was fraudulently
      procured from the relevant governmental patent granting authority; (d) as of
      the
      Effective Date, there is no claim or demand of any Person, or any proceeding
      which is pending or threatened, that asserts the invalidity, misuse or
      unenforceability of the IDSI Patent Rights or challenges IDSI’s ownership of the
      IDSI Intellectual Property or makes any adverse claim with respect thereto,
      and,
      to the knowledge of IDSI, there is no basis for any such claim, demand or
      proceeding; (e) as of the Effective Date, there is no claim or demand of any
      Person, or any proceeding which is pending or threatened, that asserts that
      the
      manufacture, use, sale, offer for sale, importation or other Development or
      Commercialization of the Product would or could infringe the Intellectual
      Property Rights of any Third Party, and, to the knowledge of IDSI, there is
      no
      basis for any such claim, demand or proceeding; and (f) to the knowledge of
      IDSI, as of the Effective Date, the IDSI Intellectual Property is not being
      infringed by any Third Party.

    

    7.6 Transferred Technology.
      IDSI
      represents and warrants to Bioscan, as of the Technology Transfer Date and
      at
      all times thereafter until Bioscan is put in possession and control of the
      LILA
      Inventory and Drawings, that IDSI is the sole, true and lawful owner of the
      LILA
      Inventory and Drawings, and has the right to sell and transfer to Bioscan good,
      clear record and marketable title to the LILA Inventory and Drawings, free
      and
      clear of all claims, liabilities, licenses, liens, pledges, charges and
      encumbrances of any kind.

    

    7.7 No Warranties,
      EXCEPT
      AS OTHERWISE EXPRESSLY SET FORTH IN THIS ARTICLE VII, THE PARTIES MAKE NO
      REPRESENTATIONS AND EXTEND NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED,
      INCLUDING ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR
      PURPOSE, NONINFRINGEMENT OR ANY IMPLIED WARRANTIES AS TO THE VALIDITY OR
      ENFORCEABILITY OF ANY IDSI PATENT RIGHTS.

    

    Article
      VIII

    Indemnification

    

    8.1 Bioscan.
      Bioscan
      agrees to defend, indemnify and hold harmless IDSI, its Affiliates and its
      and
      their respective directors, officers, employees and agents (the “IDSI Indemnified
      Parties”)
      from
      and against any losses, costs, damages, fees or expenses arising out of any
      Third Party claim to the extent arising out of (a) any breach by Bioscan of
      any
      of its representations or warranties pursuant to Article VII of this Agreement,
      (b) death or personal bodily injury from the Development or Commercialization
      of
      Products by Bioscan, its Affiliates

    

    
      
        
          
          

        

        
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    or
      sublicensees, (c) the infringement of the IDSI Intellectual Property through
      the
      Development or Commercialization of Products marketed by Bioscan or its
      Affiliates for use outside the Field in breach of Section 2.1, or (d) the
      infringement of the IDSI Intellectual Property through the use of a Product
      outside the Field by a Third Party who purchases such Product from Bioscan
      or
      its Affiliates, with respect to which purchaser Bioscan breached its obligations
      under Section 2.2(a) or (b). In the event of any Third Party claim against
      the
      IDSI Indemnified Parties in respect of which indemnity may be sought hereunder,
      IDSI shall promptly notify Bioscan in writing of the claim and Bioscan shall
      manage and control, at its sole expense, the defense of the claim and its
      settlement. The IDSI Indemnified Parties shall cooperate with Bioscan and may,
      at their option and expense, be represented in any such action or proceeding.
      Bioscan shall not be liable for any litigation costs or expenses incurred by
      the
      IDSI Indemnified Parties without Bioscan’s prior written authorization. In
      addition, Bioscan shall not be responsible for the indemnification of any IDSI
      Indemnified Party to the extent arising from negligence or intentional
      misconduct by such Person, or as the result of any settlement or compromise
      by
      the IDSI Indenmified Parties without Bioscan’s prior written
      consent.

    

    8.2 IDSI.
      IDSI
      agrees to defend, indemnify and hold harmless Bioscan, its Affiliates and
      sublicensees and its and their respective directors, officers, employees and
      agents (the “Bioscan
      Indemnified Parties”)
      from
      and against any losses, costs, damages, fees or expenses arising out of any
      Third Party claim to the extent arising out of (a) any breach by IDSI of any
      of
      its representations or warranties pursuant to Article VII of this Agreement
      or
      (b) death or personal bodily injury from the use by IDSI, its Affiliates or
      licensees of the Bioscan Improvements. In the event of any Third Party claim
      against the Bioscan Indemnified Parties in respect of which indemnity may be
      sought hereunder, Bioscan shall promptly notify IDSI in writing of the claim
      and
      IDSI shall manage and control, at its sole expense, the defense of the claim
      and
      its settlement (subject to Section 5.4). The Bioscan Indemnified Parties shall
      cooperate with IDSI and may, at their option and expense, be represented in
      any
      such action or proceeding. IDSI shall not be liable for any litigation costs
      or
      expenses incurred by the Bioscan Indemnified Parties without IDSI’s prior
      written authorization. In addition, IDSI shall not be responsible for the
      indemnification of any Bioscan Indemnified Party to the extent arising from
      negligence or intentional misconduct by such Person, or as the result of any
      settlement or compromise by the Bioscan Indemnified Parties without IDSI’s prior
      written consent. Notwithstanding anything to the contrary herein, in the event
      that IDSI does not pay the cost of the defense of such claim and its settlement,
      then Bioscan may, in addition to its other rights and remedies, undertake the
      defense of such claim and may settle such claim without IDSI’s consent and
      offset the cost of such defense and settlement against any further payment
      obligations of Bioscan to IDSI hereunder.

    

    Article
      IX

    Limitation
      of Liability

    

    9.1 No Consequential Damages.
      EXCEPT
      WITH RESPECT TO A BREACH OF ARTICLE VI, NEITHER PARTY WILL BE LIABLE FOR
      INDIRECT, INCIDENTAL, CONSEQUENTIAL SPECIAL, EXEMPLARY OR PUNITIVE DAMAGES
      ARISING OUT OF THIS AGREEMENT OR THE EXERCISE OF ITS RIGHTS HEREUNDER, OR FOR
      LOST PROFITS ARISING FROM OR RELATING TO ANY BREACH OF THISAGREEMENT, REGARDLESS
      OF ANY NOTICE OF SUCH DAMAGES. NOTHING 

    

    
      
        
          
          

        

        
          18

          
            

          

        

        
          
          

        

      

    

    

    INTHIS
      SECTION 9.1 IS INTENDED TO LIMIT OR RESTRICT THE INDEMNIFICATION RIGHTS OR
      OBLIGATIONS OF EITHER PARTY WITH RESPECT TO THIRD PARTY CLAIMS.

    

    Article
      X

    Term
      and Termination

    

    10.1 Term.
      Unless
      terminated earlier pursuant to Section 10.2, this Agreement shall commence
      on
      the Effective Date and shall expire (a) on the expiration of the Due Diligence
      Period, in the event Bioscan fails to pay the initial installment of the
      Technology Transfer Fee in accordance with Section 2.3(d)(i), or (b) the earlier
      of (i) the expiration of the last to expire of all Valid Claims of IDSI Patent
      Rights or (ii) the date upon which Bioscan is no longer obligated to provide
      royalty payments to IDSI under Section 4.3, in the event Bioscan pays the
      initial installment of the Technology Transfer Fee in accordance with Section
      2.3(d)(i) (such date, pursuant to Section 10.1(a) or (b), the “Term”).

    

    10.2 Termination.

    

    (a) Termination
      for Commercialization Failure,
      If the
      Market Release Date does not occur on or before the third (3rd) anniversary
      of
      the Effective Date, then IDSI may terminate this Agreement by providing written
      notice thereof to Bioscan at any time before the Market Release
      Date.

    

    (b) Termination
      for Convenience.
      Bioscan
      may terminate this Agreement at any time after the Technology Transfer Date
      by
      providing written notice thereof to IDSI.

    

    (c) Termination
      For Material Breach.
      Upon
      any material breach of this Agreement, including without limitation any payment
      default hereunder, by either Party (in such capacity, the “Breaching
      Party”),
      the
      other Party may terminate this Agreement by providing thirty (30) days’ written
      notice to the Breaching Party, specifying the material breach. The termination
      shall become effective at the end of the thirty (30) day period unless the
      Breaching Party cures such breach during such period; provided, however, that
      IDSI may terminate the Agreement on 10 days’ written notice in the event of a
      payment default by Bioscan under Section 2.3(d)(ii) or (iii) or Section 4.3,
      provided that the breach is not cured within such 10-day period.

    

    10.3 Effects
      of Termination,

    

    (a) Upon
      any
      expiration or termination of this Agreement, nothing in this Agreement shall
      be
      construed to release either Party from any obligations that matured prior to
      the
      effective date of expiration or termination, and the following provisions shall
      expressly survive any such expiration or termination: Sections 4..5(e)(ii),
      5.1,
      5.2(b),5.2(c), 5.3(b), 5.3(c), 5.5 (regarding Joint IP), 6, 7.7, 8, 9.1, 10.3,
      11, 12 and 13.

    

    (b) Upon
      any
      expiration of this Agreement pursuant to Section 10.1(b), Section 4.5(c)(ii)
      shall expressly survive such expiration.

    

    
      
        
          
          

        

        
          19

          
            

          

        

        
          
          

        

      

    

    

    

    

    

    (e) Upon
      any
      expiration of this Agreement pursuant to Section 10.1(b)(ii), the following
      provisions shall expressly survive such expiration until the expiration of
      the
      last to expire of all Valid Claims of IDSI Patent Rights: Sections 5.2(a),
      5.3(a), 5.4, 5.5 (regarding IDSI Intellectual Property), 5.6 and
      7.5.

    

    (d) Upon
      any
      expiration or termination of this Agreement, each Receiving Party shall return
      to the Disclosing Party the Confidential Information of the Disclosing Party,
      including all copies and reproductions thereof and will not retain any copies,
      extracts, analyses, or other reproductions, in whole or in part, of such
      Confidential Information, except that (i) each Receiving Party may retain the
      Disclosing Party’s Confidential Information to the extent necessary to exercise
      its licenses which survive termination or expiration, and (ii) one copy may
      be
      retained by the legal counsel of the Receiving Party for purposes of complying
      with the Receiving Party’s obligations hereunder.

    

    (e) Upon
      a
      termination of this Agreement in accordance with Section 10.2, the licenses
      granted by IDSI to Bioscan hereunder shall terminate as of the effective date
      of
      such termination; provided
      that
      upon termination by IDSI pursuant to Section 10.2(a) or (c) any sublicense
      under
      such licenses granted to any Third Party by Bioscan prior to the effective
      date
      of such termination (i) shall survive on the conditions that IDSI shall have
      the
      right to receive all payments and other consideration payable to Bioscan in
      accordance with the sublicense agreement and such sublicensee shall assume
      all
      of Bioscan’s obligations under Section 2 of this Agreement and (ii) thereafter
      may be terminated by IDSI upon thirty (30) days’ notice of a material breach of
      the terms thereof by such sublicensee that is not cured prior to the expiration
      of such thirty (30) day period, but, notwithstandling the foregoing clauses
      (i)
      and (ii), IDSI shall not assume, and shall not be responsible to any sublicensee
      for, any representations, warranties or obligations of Bioscan to any
      sublicensee.

    

    (f) Termination
      shall be in addition to, and shall not prejudice, any of the Parties’ remedies
      at law or in equity.

    

    Article
      XI

    Effect
      of Bankruptcy

    

    11.1 All
      rights and licenses now or hereafter granted under or pursuant to this
      Agreement, including under Sections 2.1 and 3.1, are rights to “intellectual
      property” (as defined in Section 101(35A) of the Bankruptcy Code). For purposes
      of clarification and without limiting any of the rights granted hereunder,
      the
      debtor Party hereby acknowledges that the following shall constitute
      embodiments, as such term is used in 11 U.S.C. §365, of the intellectual
      property licensed under this Agreement: a right to access and to benefit from,
      and, in the case of any tangible item of which there is a fixed or limited
      quantity, to obtain a pro rata portion of, each of the following to the extent
      related to any right or license granted under or pursuant to any Section of
      this
      Agreement: (a) software, (b) documentation, and (c) all other embodiments of
      such intellectual property in the debtor Party’s possession or control or in the
      possession and control of any Third Party but which the debtor Party has the
      right to access or benefit from and to make available to the non-debtor Party.
      The debtor Party agrees not to interfere with the non-debtor Party’s exercise
      under the Bankruptcy Code of rights and licenses to intellectual property
      licensed hereunder (or under any agreement supplemental hereto) and embodiments
      thereof in

    

    
      
        
          
          

        

        
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    accordance
      with this Agreement and agrees to use commercially reasonable efforts (but
      not
      including any obligation of the debtor Party to incur expenses or make any
      payment in connection therewith) to assist the non-debtor Party to obtain such
      intellectual property and embodiments thereof in the possession or control
      of
      any such Third Parties (which the debtor Party has the right to access or
      benefit from and to make available to the non-debtor Party) as reasonably
      necessary or desirable for the non-debtor Party to exercise such rights and
      licenses in accordance with this Agreement (or under any agreement supplemental
      hereto). In the event the debtor Party files for protection under the Bankruptcy
      Code, unless and until such Party rejects this Agreement pursuant to 11 U.S.C.
      §365, on the written request of the non-debtor Party, the debtor Party shall
      perform this Agreement or provide to the non-debtor Party the intellectual
      property (including any embodiment of such intellectual property) licensed
      hereunder and under any agreement supplemental hereto held by the debtor Party.
      In the event the non-debtor Party elects to retain its rights under 11 U.S.C.
      §365(n)(l)(B), the debtor Party shall provide to the non-debtor Party such
      intellectual property (including any embodiment of such intellectual property)
      hereunder and under any agreement supplemental hereto held by the debtor
      Party.

    

    11.2 All
      rights, powers and remedies of the non-debtor Party provided herein are in
      addition to and not in substitution for any and all other rights, powers and
      remedies now or hereafter existing at law or in equity (including, without
      limitation, the Bankruptcy Code) in the event of the commencement of a
      Bankruptcy Code case by or against the debtor Party. The non-debtor Party,
      in
      addition to the rights, power and remedies expressly provided herein, shall
      be
      entitled to exercise all other such rights and powers and resort to all other
      such remedies as may now or hereafter exist at law or in equity (including,
      without limitation, the Bankruptcy Code) in such event. The Parties agree that
      they intend the foregoing rights to extend to the maximum extent permitted
      by
      law.

    

    Article
      XII

    Dispute
      Resolution

    

    12.1 General.
      Any
      controversy, claim or dispute arising out of or relating to this Agreement
      shall
      be resolved through binding arbitration as follows:

    

    (a) Either
      Party may submit such dispute to arbitration by notifying the other Party,
      in
      writing, of such dispute. Within thirty (30) days after receipt of such notice,
      the Parties shall designate in writing a single arbitrator to resolve the
      dispute; provided, however,
      that if
      the Parties cannot agree on an arbitrator within such 30-day period, the
      arbitrator shall be selected by the Atlanta, Georgia, office of the American
      Arbitration Association (the “AAA”). The arbitrator shall be a lawyer
      knowledgeable and experienced in the law concerning the subject matter of the
      dispute, and shall not be an Affiliate, employee, consultant, officer, director
      or stockholder of any Party.

    

    (b) Within
      thirty (30) days after the designation of the arbitrator, the arbitrator and
      the
      Parties shall meet, at which time the Parties shall be required to set forth
      in
      writing all disputed issues and a proposed ruling on the merits of each such
      issue.

    

    (c) The
      arbitrator shall set a date for a hearing, which shall be no later than
      forty-five (45) days after the submission of written proposals pursuant to
      Section 12.1(b), to

    

    
      
        
          
          

        

        
          21

          
            

          

        

        
          
          

        

      

    

    

    

    

    discuss
      each of the issues identified by the Parties. The Parties shall have the right
      to be represented by counsel. Except as provided herein, the arbitration shall
      be governed by the Commercial Arbitration Rules of the AAA; provided, however,
      that
      the U.S. Federal Rules of Evidence shall apply with regard to the admissibility
      of evidence and the arbitration shall be conducted by a single
      arbitrator.

    

    (d) The
      arbitrator shall use his or her best efforts to rule on each disputed issue
      within thirty (30) days after the completion of the hearing described in Section
      12.1(c). The determination of the arbitrator as to the resolution of any dispute
      shall be binding and conclusive upon all Parties. All rulings of the arbitrator
      shall be in writing and shall be delivered to the Parties.

    

    (e) The
      attorneys’ fees of the Parties in any arbitration, fees of the arbitrator and
      costs and expenses of the arbitration shall be bone by the Parties as determined
      by the arbitrator.

    

    (f) Any
      arbitration pursuant to this Section 12.1 shall be conducted in the English
      language in Atlanta, Georgia.

    

    (g) At
      any
      time, a party may seek or obtain preliminary, interim or conservatory measures
      from the arbitrator or from a court.

    

    Article
      XIII

    Miscellaneous
      Provisions

    

    13.1 Governing
      Law.
      This
      Agreement shall be construed and the respective rights of the Parties determined
      (including the validity and applicability of the arbitration provision set
      forth
      in Section 12.1, and the conduct of any arbitration, enforcement of any arbitral
      award and any other questions of arbitration law or procedure arising
      thereunder) according to the substantive laws of the State of Delaware,
      notwithstanding the provisions governing conflict of laws under such Delaware
      law to the contrary.

    

    13.2 Force
      Majeure. Neither Party shall be liable for failure or delay in performance
      of
      any obligation under this Agreement, other than payment of any amount due and
      payable, if such failure or delay is caused by circumstances beyond the
      reasonable control of the Party concerned, which may include failures resulting
      from fires, earthquakes, power surges or failures, accidents, labor stoppages,
      war, revolution, civil commotion, acts of public enemies, blockade, embargo,
      inability to secure materials or labor, any law, order, proclamation,
      regulation, ordinance, demand, or requirement having a legal effect of any
      government or any judicial authority or representative of any such government,
      acts of God, or acts or omissions of communications carriers, or other causes
      beyond the reasonable control of the Party affected, whether or not similar
      to
      the foregoing. Any such cause shall delay the performance of the affected
      obligation until such cause is removed. The affected Party shall use
      commercially reasonable efforts to remove the cause of such delay.

    

    

    

    
      
        
          
          

        

        
          22

          
            

          

        

        
          
          

        

      

    

    

    

    

    

    13.3 Assignment.

    

    (a) Neither
      Party may assign this Agreement in whole or in part without the consent of
      the
      other, except (i) to an Affiliate of the assigning Party or (ii) to an acquirer
      of all or substantially all of the assets or equity of the assigning Party
      to
      which the subject matter of this Agreement pertains. Any assignment not in
      accordance with the foregoing shall be void.

    

    (b) The
      licenses granted to Bioscan under this Agreement are appurtenant to and run
      with
      the IDSI Intellectual Property and shall bind any Transferee (as defined below).
      IDSI shall (i) ensure that any Person acquiring any right, title or interest
      in
      or to the IDSI Intellectual Property, or any Intellectual Property Rights
      underlying the licenses granted herein, including any purchaser, assignee or
      transferee of such intellectual property rights or any Person obtaining a
      security interest therein, (collectively, “Transferees”)
      shall
      be bound by the licenses and other rights granted to Bioscan under this
      Agreement, and (ii) require that Transferees confirm in writing prior to any
      such sale, assignment, transfer or acquisition of any right, title or interest
      in or to such intellectual property rights (“Transfer”) that the licenses and
      other rights granted to Bioscan under this Agreement shall not be affected
      in
      any manner by such Transfer.

    

    13.4 Entire
      Agreement; Amendments.
      This
      Agreement constitutes the entire agreement between the Parties with respect
      to
      the subject matter hereof, and supersedes all previous arrangements with respect
      to the subject matter hereof, whether written or oral, including the Prior
      CDA.
      Any amendment or modification to this Agreement shall be made in writing signed
      by both Parties.

    

    13.5 Notices.

    

    Notices
      to IDSI shall be addressed to:

    

    Imaging
      Diagnostic Systems, Inc.

    6531
      NW
      18th
      Court

    Plantation,
      FL 33313

    Attention:
      Chief Executive Officer

    Facsimile
      No.: (954) 581-0555

    

    Notices
      to Bioscan shall be addressed to:

    

    Bioscan,
      Inc.

    4590
      MacArthur Blvd., NW

    Washington,
      DC 20007

    Attention:
      Chief Executive Officer

    Facsimile
      No.: (202) 333-8514

    

    Any
      Party
      may change its address by giving notice to the other Party in the manner herein
      provided. Any notice required or provided for by the terms of this Agreement
      shall be in writing and shall be (a) sent by registered or certified mail,
      return receipt requested, postage prepaid, (b) sent via a reputable overnight
      or
      international express courier service, (c) sent by facsimile transmission,
      or
      (d) personally delivered, in each case properly addressed in

    

    
      
        
          
          

        

        
          23

          
            

          

        

        
          
          

        

      

    

    

    

    

    accordance
      with the paragraph above. The effective date of notice shall be the actual
      date
      of receipt by the Party receiving the same.

    

    13.6 Public
      Announcements.
      Any
      announcements or similar publicity with respect to the execution of this
      Agreement shall be agreed upon by the Parties in advance of such announcement;
      provided
      that (a)
      either Party may make any public announcements that are required, as reasonably
      determined by the announcing Party, by applicable law, by applicable stock
      exchange or Nasdaq regulation or by order or other ruling of a court, and (b)
      Bioscan may announce and advertise the Development and Commercialization of
      the
      Products.

    

    13.7 Independent
      Contractors.
      It is
      understood and agreed that the relationship between the Parties hereunder is
      that of independent contractors and that nothing in this Agreement shall be
      construed as authorization for either IDSI or Bioscan to act as agent for the
      other.

    

    13.8 No
      Strict Construction.
      This
      Agreement has been prepared jointly and shall not be strictly construed against
      any Party.

    

    13.9 Headings.
      The
      captions or headings of the sections or other subdivisions hereof are inserted
      only as a matter of convenience or for reference and shall have no effect on
      the
      meaning of the provisions hereof.

    

    13.10 No
      Implied Waivers;
      Rights Cumulative.
      No
      failure on the part of IDSI or Bioscan to exercise, and no delay in exercising,
      any right, power, remedy or privilege under this Agreement, or provided by
      statute or at law or in equity or otherwise, shall impair, prejudice or
      constitute a waiver of any such right, power, remedy or privilege or be
      construed as a waiver of any breach of this Agreement or as an acquiescence
      therein, nor shall any single or partial exercise of any such right, power,
      remedy or privilege preclude any other or further exercise thereof or the
      exercise of any other right, power, remedy or privilege.

    

    13.11 Severability.
      If any
      provision hereof should be held invalid, illegal or unenforceable in any respect
      in any jurisdiction, then, to the fullest extent permitted by law, (a) all
      other
      provisions hereof shall remain in full force and effect in such jurisdiction
      and
      shall be liberally construed in order to carry out the intentions of the Parties
      as nearly as may be possible and (b) such invalidity, illegality or
      unenforceability shall not affect the validity, legality or enforceability
      of
      such provision in any other jurisdiction. To the extent permitted by applicable
      law, IDSI and Bioscan hereby waive any provision of law that would render any
      provision hereof prohibited or unenforceable in any respect.

    

    13.12 Execution
      in Counterparts.
      This
      Agreement may be executed in counterparts, each of which counterparts, when
      so
      executed and delivered, shall be deemed to be an original, and all of which
      counterparts, taken together, shall constitute one and the same
      instrument.

    

    13.13 No
      Third Party Beneficiaries.
      No
      person or entity other than IDSI, Bioscan and their respective Affiliates and
      permitted assignees hereunder shall be deemed an intended beneficiary hereunder
      or have any right to enforce any obligation of this Agreement.

    

    

    

    
      
        
          
          

        

        
          24

          
            

          

        

        
          
          

        

      

    

    

    

    

    13.14 Construction
      of this Agreement.
      Except
      where the context otherwise requires, wherever used, the singular will include
      the plural, the plural the singular, the use of any gender will be applicable
      to
      all genders, and the word “or” is used in the inclusive sense. When used in this
      Agreement, “including” and “includes” mean “including without limitation” and
“includes without limitation”, respectively. References to either Party include
      the successors and permitted assigns of such Party.

    

    [Remainder
      of Page Intentionally Left Blank]

    

    

    

    

    

    

    

    

    
      
        
          
          

        

        
          25

          
            

          

        

        
          
          

        

      

    

    

    

    

    IN
      WITNESS WHEREOF, the Parties have executed this Agreement as of the date
      first

    set
      forth
      above

    

    

    

    

    BIOSCAN,
      INC

    

    

    

    By:
      /s/
      Theodore Kleinman

    Theodore
      Kleinman 

    President
      and Chief Executive Officer

    

    

    IMAGING
      DIAGNOSTIC SYSTEMS, INC.

    

    

    

    By:
      /s/
      Tim Hansen

    Tim
      Hansen

    Chief
      Executive Officer

    

    

    

    

    

    
      
        
          
          

        

        
          26

          
            

          

        

        
          
          

        

      

    

    

    

    

    Exhibit
      A

    

    IDSI
      Patent Rights

    

    

           
      June 16, 2006

    

    
      	
              Imaging
                Diagnostic Systems, US Patents & Applications Relevant to
                LILA

            
	
              Description

            	
              Case

            	
              Filing
                Date

            	
              Patent

            
	
              Diagnostic
                Tomographic Laser Imaging Apparatus, Electronics &
                Imaging

            	
              6356

            	
              6/7/95

            	
              5,692,511

            
	
              Laser
                Imaging Apparatus Using Biomedical Markers that Bind to Cancer
                Cells

            	
              6647

            	
              1/16/98

            	
              5,952,664

            
	
              Device
                for Determining the Contour of the Surface of an Object Being
                Scanned

            	
              6558

            	
              11/6/97

            	
              6,044,288

            
	
              Detector
                Array for Use in a Laser Imaging Apparatus

            	
              6573

            	
              11/4/97

            	
              6,100,520

            
	
              Method
                for Reconstructing the Image of an Object Scanned with a Laser Imaging
                Apparatus

            	
              6574

            	
              11/28/97

            	
              6,130,958

            
	
              Detector
                Array using Variable Amplifiers for use in a Laser Imaging
                Apparatus

            	
              6572

            	
              11/26/97

            	
              6,150,649

            
	
              Detector
                Array using Variable Amplifiers for use in a Laser Imaging
                Apparatus

            	
              6572

            	
              11/15/00

            	
              6,331,700

            
	
              Medical
                optical imaging scanner using multiple wavelength simultaneous data
                acquisition for breast imaging

            	
              6997

            	
              5/20/00

            	
              6,571,116

            
	
              Method
                for Improving the Accuracy of Data Obtained in a Laser Imaging
                Apparatus

            	
              7205

            	
              3/14/02

            	
              6,681,130

            
	
              Optical
                Computed Tomography Scanner for Small Laboratory Animals

            	
              7325

            	
              11/21/03

            	
              Pending

            
	
              Optical
                Computed Tomography Scanner for Small Laboratory Animals (Two
                Laser)

            	
              7325-1

            	
              5/25/04

            	
              Divisional

            
	
              Laser
                Imaging Apparatus with Variable Scanning Parameters  

            	
              7471

            	
              10/04/05

            	
              Provisional

            

    

    

    9
      US
      patents issued, 3 US patents pending that are pertinent to LILA

    

    

    

    

    

    

    
      
        
          
          

        

        
          27

          
            

          

        

        
          
          

        

      

    

    

    

    Exhibit
      B

    

    Specified
      Independent Components

    

    
      	
              •

            	
              Any
                product where the Independent Component(s) is (are) an X-ray, CT,
                MRI,
                nuclear medicine, PET, ultrasound or optical imaging component(s),
                or any
                other component mutually agreed upon by the
                Parties

            

    

    

    

    

    

    

    

    
      
        
          
          

        

        
          28

          
            

          

        

        
          
          

        

      

    

    

    

    Confidential

    

    AMENDMENT

    

    This
      AMENDMENT (the “Amendment”)
      is
      entered into as of August 30, 2006 (the “Amendment
      Effective Date”),
      by and
      between Bioscan, Inc., a District of Columbia corporation (“Bioscan”),
      and
      Imaging Diagnostic Systems, Inc., a Florida corporation (“IDSI”;
      Bioscan and IDSI collectively, the “Parties”).

    

    WHEREAS,
      the Parties are parties to that License Agreement, dated as of the 16th day
      of
      June, 2006 (the “Agreement”);

    

    WHEREAS,
      Bioscan is willing to commit to pay the Technology Transfer Fee (as defined
      in
      the Agreement), and the Parties are willing to amend the installment payment
      schedule with respect thereto;

    

    WHEREAS,
      in accordance with Section 13.4 of the Agreement, the Parties desire to amend
      the Agreement as set forth herein;

    

    NOW,
      THEREFORE, for good and valuable consideration, the receipt and sufficiency
      of
      which are hereby acknowledged, and with the specific intent to be bound hereby,
      the Parties hereby agree as follows:

    

    Article
      1. Definitions.
      Capitalized terms used, but not defined, herein shall have the meaning ascribed
      to them in the Agreement.

    

    Article
      2. Payment
      Plan.
      Section
      2.3(d) of the Agreement is hereby amended to read in its entirety as
      follows:

    

    “(d)
      Bioscan shall pay the Technology Transfer Fee in accordance with the following
      schedule:

    

    (i) An
      initial installment of US$50,000 on or before October 15, 2006;

    

    (ii) An
      additional installment of US$100,000 on or before November 15, 2006;
      and

    

    (iii)
      The
      final installment of US$100,000 on or before December 15, 2006.

    

    If
      Bioscan fails to pay any installment of the Technology Transfer Fee, then IDSI
      may terminate this Agreement in accordance with Section 10.2(c).

    

    IDSI
      may
      invoice Bioscan for the installments due hereunder at any time prior to the
      date
      such installment is due, but Bioscan shall have no obligation to pay any such
      installment except as provided in this Section 2.3(d). Any language on
      such

    

    

    
      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

    

    

    

    

    invoice
      inconsistent with or in addition to the terms of this Agreement shall
      be

    void.”

    

    Article
      3.  Term.
      Section
      10.1 of the Agreement is hereby amended to read in its entirety as
      follows:

    

    “10.1
      Term.
      Unless
      terminated earlier pursuant to Section 10.2, this Agreement shall commence
      on
      the Effective Date and shall expire on the earlier of (i) the expiration of
      the
      last to expire of all Valid Claims of IDSI Patent Rights or (ii) the date upon
      which Bioscan is no longer obligated to provide royalty payments to IDSI under
      Section 4.5 (the “Term”).”

    

    Article
      4.  Payment
      Breach Termination.
      Section
      10.2(c) of the Agreement is hereby amended to read in its entirety as
      follows:

    

    “(c)
      Termination
      For Material Breach.
      Upon
      any material breach of this Agreement, including without limitation any payment
      default hereunder, by either Party (in such capacity, the “Breaching
      Party”),
      the
      other Party may terminate this Agreement by providing thirty (30) days’ written
      notice to the Breaching Party, specifying the material breach. The termination
      shall become effective at the end of the thirty (30) day period unless the
      Breaching Party cures such breach during such period; provided, however, that
      IDSI may terminate the Agreement on 10 days’ written notice in the event of a
      payment default by Bioscan under Section 2.3(d)(i), (ii) or (iii) or Section
      4.3, provided that the breach is not cured within such 10-day
      period.”

    

    Article
      5.
       Effect
      on Agreement.
      Except
      as amended by this Amendment, the Agreement shall remain in full force and
      effect. After the date of this Amendment, every reference in the Agreement
      to
      the “Agreement” shall mean the Agreement as amended by this
      Amendment.

    

    

    IN
      WITNESS WHEREOF, the Parties have executed this Agreement as of the date first
      set forth above.

    

    BIOSCAN,
      INC

    

    By:
      /s/ 
      Theodore Kleinman

    Theodore
      Kleinman 

    President
      and Chief Executive Officer

    

    

    IMAGING
      DIAGNOSTIC SYSTEMS. INC.

    

    By:
      /s/
      Tim Hansen

    Tim
      Hansen

    Chief
      Executive Officer

    

     

    
 

    
2Exhibit 10

Exhibit 10.1

 

NOVARTIS CORPORATION

2001 STOCK INCENTIVE PLAN

FOR NORTH AMERICAN EMPLOYEES

(as amended through December 31, 2005)

 

	
            1.
 	
            Purpose
 

The purpose of the Plan is to provide a means through which the Company and its Subsidiaries may attract able persons to enter and remain in the employ or in a consulting relationship with the Company and its Subsidiaries and to provide a means whereby they can acquire and maintain Stock ownership, or be paid incentive compensation measured by reference to the value of Stock, thereby strengthening their commitment to the welfare of the Company and its Subsidiaries and promoting an identity of interest between shareholders of Novartis AG and these employees, directors and consultants.  So that the appropriate incentive can be provided, the Plan provides for granting Incentive Stock Options, Nonqualified Stock Options, Stock Appreciation Rights, Restricted Stock Awards or any combination of the foregoing.

	
            2.
 	
            Definitions
 

The following definitions shall be applicable throughout the Plan.

(a)            “ADS” means a Novartis AG American Depositary Share, each of which represents one ordinary share of Novartis AG, nominal value CHF 0.50 per share.

(b)            “Award” means, individually or collectively, any Incentive Stock Option, Nonqualified Stock Option, Stock Appreciation Right, Restricted Stock or Restricted Stock Unit Award under the Plan.

(c)            “Award Agreement” means the electronic or paper award notice or agreement, if any, between the Company (or one of its Subsidiaries) and a Participant who was granted an Award which defines rights and obligations of the parties with respect to such Award in addition to those set forth in the Plan.

	
            (d)
 	
            “Board” means the Board of Directors of the Company.  
 

(e)            “Cause” means the Company, a Subsidiary or any other member of the Novartis Group (as the case may be) with which the Participant has an employment, consulting or other contractual relationship having cause to terminate the Participant’s employment or service with the Novartis Group in accordance with the provisions of any existing employment, consulting or any other agreement between the Participant and the Company, such Subsidiary or such other member of the Novartis Group (as the case may be) or, in the absence of such an employment, consulting or other agreement which defines or describes such cause, upon (i) the determination by the Company, such Subsidiary or such other member of the Novartis Group (as the case may be) with which the Participant has a relationship that the Participant has engaged, during the performance of his duties to the Company, Subsidiary or such other member of the Novartis Group, in significant acts or omissions constituting dishonesty, willful misconduct or gross negligence relating to the business of the Company, such Subsidiary or such other member of the Novartis Group.

(f)             “Change in Control” shall, unless in the case of a particular award, the applicable Award Agreement states otherwise, be deemed to occur if:

 

	
             	
            Exhibit 10.1

            Page 1
	
             

 

 

 

(i)             Novartis AG enters into any agreement to engage in a transaction, the consummation of which would result in any “person,” as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than (A) Novartis AG itself or any other member of the Novartis Group, (B) any trustee or other fiduciary holding securities under an employee benefit plan of Novartis AG or any other member of the Novartis Group or (C) any combination of persons described in the foregoing clauses (A) and (B)) becoming the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of Novartis AG representing thirty-three and one-third percent (33-1/3%) or more of the combined voting power of the then outstanding securities of Novartis
AG, provided that such transaction actually does occur; 

(ii)            the corporation, partnership, limited liability company or other business organization by which a Participant is employed ceases to be a member of the Novartis Group (whether by reason of sale, spin-off, public offering or otherwise), provided that in such event, should the Participant be offered continued employment by the business organization for a period of at least six (6) months following the date the employer ceased being a member of the Novartis Group (the “Transition Employment Period”) with compensation and benefits equal to or greater than the Participant’s compensation and benefits immediately before the employer ceased being a member of the Novartis Group, no Change in Control shall be deemed to have occurred with respect to
such Participant unless he or she remains employed throughout the Transition Employment period or unless the Participant’s employment earlier terminates due to retirement, death or disability or is involuntarily terminated for reasons other than for Cause;

(iii)           individuals who constitute the Board of Directors of Novartis AG (the “Novartis Board”), and any new director (other than a director designated by a person who has entered into an agreement with Novartis AG to effect a transaction described in clause (i), (iv) or (v) of this Section 2(f)) whose election by the Novartis Board or nomination for election by the shareholders of Novartis AG was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved (unless the approval of the election or nomination for election of such new directors was in connection with an actual or threatened election or proxy contest), cease for any reason to
constitute at least a majority thereof;  

(iv)           Novartis AG enters into any agreement to engage in a transaction, the consummation of which would result in, or the shareholders of Novartis AG approve, a merger or consolidation of Novartis AG with any other corporation, and such merger or consolidation actually does occur other than (a) a merger or consolidation which would result in the voting securities of Novartis AG outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by converted into voting securities of the surviving entity) more than fifty percent (50%) of the combined voting power of the voting securities of Novartis AG or such surviving entity outstanding immediately after such merger or consolidation or (b) a merger or consolidation effected to implement a recapitalization of Novartis AG (or
similar transaction) in which no “person” (as defined above in (i), including the exemptions thereto) acquires fifty percent (50%) or more of the combined voting power of Novartis AG’s then outstanding securities; or

(v)            Novartis AG enters into any agreement to engage in a transaction, the consummation of which would result in, or the shareholders of Novartis AG approve, a complete liquidation of Novartis AG or the sale or disposition by Novartis AG of all or substantially all of the assets of Novartis AG or any transaction having a similar effect, provided that such liquidation, sale or disposition actually does occur.

(g)            “Code” means the Internal Revenue Code of 1986, as amended.  Reference in the Plan to any section of the Code shall be deemed to include any amendments or successor provisions to such section and any regulations under such section.

 

 

	
             	
            Exhibit 10.1

            Page 2
	
             

 

 

 

 

(h)            “Committee” means Policy Committee of the Board or such other committee appointed by the Board to administer the Plan.

	
            (i)
 	
            “Company” means Novartis Corporation, a New York corporation.
 

(j)             “Date of Grant” means the date on which the granting of an Award is authorized or such other date as may be specified in such authorization.

(k)            “Disability” and “Disabled” shall have the meaning set forth in Section 22(e)(3) of the Code.

(l)             “Eligible Person” means (i) a person regularly employed in the United States or Canada by the Company, a Subsidiary or any other member of the Novartis Group (including any such person who is working in the United States on secundment or other nonpermanent basis) who makes a significant contribution to the financial results of any of the foregoing entities; (ii) a director of the Company or a Subsidiary (including non-employee directors) or (iii) a consultant to the Company or a Subsidiary.

	
            (m)
 	
            “Exchange Act” means the Securities Exchange Act of 1934.
 

(n)            “Fair Market Value” on a given date means (i) if the Stock is listed on a national securities exchange in the United States, the closing sale price reported as having occurred on the primary exchange with which the Stock is listed and traded (currently the New York Stock Exchange) on such date, or, if there is no such sale on that date, then on the last preceding date on which such a sale was reported; (ii) if the Stock is not listed on any national securities exchange but is quoted in the National Market System of the National Association of Securities Dealers Automated Quotation System the trade price of the last sale reported on such date, or, if there is no such sale on that date, then on the last preceding date on which a sale was reported; or (iii) if the Stock is not listed on a
national securities exchange nor quoted in the National Market System of the National Association of Securities Dealers Automated Quotation System on a last sale basis, the amount determined by the Committee to be the fair market value based upon a good faith attempt to value the Stock accurately.

	
            (o)
 	
            “Holder” means a Participant who has been granted an Award.
 

(p)            “Incentive Stock Option” means an Option granted by the Committee to a Participant under the Plan which is designated by the Committee as an “incentive stock option” within the meaning of Section 422 of the Code.

(q)            “Nonqualified Stock Option” means an Option granted under the Plan which is not designated as an Incentive Stock Option.

(r)             “Normal Termination” means termination of employment or service with the Novartis Group:  (i) with written approval of the Committee; or (ii)  by the member of the Novartis Group with which the Participant has an employment, consulting or other contractual relationship without Cause.

(s)            “Novartis AG” means Novartis AG, the parent of the Company, the stock of which is traded on the SWX Swiss Exchange and the ADSs of which are listed on the New York Stock Exchange.

(t)             “Novartis Group” means Novartis AG and each corporation, partnership, limited liability company or other business organization (each a “Business Entity”) more than 50% of the voting power of which is owned by Novartis AG either directly or indirectly through one or more intermediate Business Entities more than 50% of the voting power of each of which is owned either directly by Novartis AG or by another such intermediate Business Entity.

 

 

	
             	
            Exhibit 10.1

            Page 3
	
             

 

 

 

 

	
            (u)
 	
            “Option” means an Award granted under Section 7 of the Plan.
 
	
            (v)
 	
            “Option Period” means the period described in Section 7(c).  
 
	
            (w)
 	
            “Option Price” means the exercise price set for an Option described in Section 7(a).
 

(x)            “Participant” means an Eligible Person who has been selected by the Committee in its sole discretion to participate in the Plan and to receive an Award pursuant to Section 6.

	
            (y)
 	
            “Plan” means the Company’s 2001 Stock Incentive Plan.
 

(z)            “Restricted Period” means, with respect to any share of Restricted Stock or any Restricted Stock Unit, the period of time determined by the Committee during which such Award is subject to the restrictions set forth in Section 9 of the Plan.

(aa)          “Restricted Stock” means shares of Stock issued or transferred to or on behalf of a Participant subject to forfeiture and the other restrictions set forth in Section 9 of the Plan.

(bb)         “Restricted Stock Award” means an Award of Restricted Stock or Restricted Stock Units granted under Section 9 of the Plan.

	
            (bb1)
 	
            “Restricted Stock Unit” means the potential right to acquire one share of Stock.
 

(cc)          “Retirement” means a Participant’s termination of employment from the Novartis Group for any reason other than Cause after such Participant has attained age 55 or older and completed 10 or more years of service, or any other date approved by the Committee.  Notwithstanding anything in this Plan to the contrary, for purposes of any Restricted Stock granted on or after February 4, 2004, no termination of employment from the Novartis Group will constitute a “Retirement” without the consent of the Committee.

	
            (dd)
 	
            “Securities Act” means the Securities Act of 1933, as amended.
 

(ee)          “Stock” means ADSs or such other authorized shares of stock of Novartis AG as from time to time may be authorized for use under the Plan.

(ff)           “Stock Appreciation Right” or “SAR” means an Award granted under Section 8 of the Plan.

	
            (gg)
 	
            “Strike Price” means the price set for an SAR described in Section 8(a).
 

(hh)         “Subsidiary” means any corporation or other legal entity that is organized in the United States (including under the laws of any State) or Canada and more than 50% of whose stock having general voting power (or, in the case of a legal entity other than a corporation, more than 50% of the voting interests in which) is owned, directly or indirectly, by Novartis AG.

	
            3.
 	
            Effective Date, Duration and Shareholder Approval
 

The Plan is effective as of January 1, 2001.  

The expiration date of the Plan, after which no Awards may be granted hereunder, shall be December 31, 2010; provided, however, that the administration of the Plan shall continue in effect until all matters relating to the payment of Awards previously granted have been settled.

	
            4.
 	
            Administration
 

The Plan shall be administered by the Committee composed of at least three persons.  The majority of the members of the Committee shall constitute a quorum.  The acts of a majority of the members present at any meeting at which a quorum is present or acts approved in writing by a majority of the Committee shall be deemed the acts of the Committee.

 

	
             	
            Exhibit 10.1

            Page 4
	
             

 

 

 

 

Subject to the provisions of the Plan, the Committee, in its sole discretion, shall have exclusive power to:

	
            (i)
 	
            Select the Eligible Persons to participate in the Plan;
 
	
            (ii)
 	
            Determine the nature and extent of the Awards to be made to each Participant;
 
	
            (iii)
 	
            Determine the time or times when Awards will be made to Eligible Persons;
 
	
            (iv)
 	
            Determine the duration of each Restricted Period;
 
	
            (v)
 	
            Determine the conditions to which the payment of Awards may be subject;
 

(vi)           Prescribe the form of Award Agreement, if any, or other form or forms evidencing Awards; and

(vii)          Cause records to be established in which there shall be entered, from time to time as Awards are made to Eligible Persons, the date of each Award, the number of Incentive Stock Options, Nonqualified Stock Options, SARs, Restricted Stock Units and shares of Restricted Stock awarded by the Committee to each Eligible Person, and the expiration date and the duration of any applicable Restricted Period.

(viii)         Modify existing Awards as it determines to be appropriate and consistent with the Plan and applicable law.

The Committee shall have the authority, subject to the provisions of the Plan, to establish, adopt, or revise such rules and regulations and to make all such determinations relating to the Plan as it may deem necessary or advisable for the administration of the Plan.  The Committee’s interpretation of the Plan or any documents evidencing Awards granted pursuant thereto and all decisions and determinations by the Committee with respect to the Plan shall be final, binding, and conclusive on all parties unless otherwise determined by the Board.

	
            5.
 	
            Grant of Awards; Shares Subject to the Plan
 

The Committee may, from time to time, grant Awards of Options, Stock Appreciation Rights, Restricted Stock Units or Restricted Stock, under the Plan to one or more Eligible Persons; provided, however, that:

(a)            Subject to Section 11, the aggregate number of shares of Stock made subject to all Awards may not exceed 120,000,000; 

(b)            Such shares shall be deemed to have been used in payment of Awards whether they are actually delivered or the Fair Market Value equivalent of such shares is paid in cash.  In the event any Option, SAR not attached to an Option or Restricted Stock Award, shall be surrendered, terminate, expire, or be forfeited, the number of shares of Stock no longer subject thereto shall thereupon be released and shall thereafter be available for new Awards under the Plan; and

(c)            Stock delivered by the Company in settlement of Awards under the Plan may be authorized and unissued Stock or Stock held in the treasury of Novartis AG or held by another member of the Novartis Group or may be purchased on the open market or by private purchase. 

	
            6.
 	
            Eligibility
 

Participation shall be limited to Eligible Persons selected by the Committee.

 

	
             	
            Exhibit 10.1

            Page 5
	
             

 

 

 

 

	
            7.
 	
            Stock Options
 

The Committee is authorized to grant one or more Incentive Stock Options or Nonqualified Stock Options to any Participant; provided, however, that no Incentive Stock Options shall be granted to any Participant who is not an employee of the Company or a Subsidiary.  Each Option so granted shall be subject to the following conditions or to such other conditions as may be reflected in any applicable Award Agreement.

(a)            Option Price.  The exercise price (“Option Price”) per share of Stock for each Option shall be set by the Committee at the time of grant but, with respect to Incentive Stock Options shall not be less than the Fair Market Value of a share of Stock at the Date of Grant.

(b)            Manner of Exercise and Form of Payment.  Options which have become exercisable may be exercised by delivery of a notice of exercise to the Committee or its designee, in a form prescribed by the Committee or its designee, accompanied by payment of the Option Price.  The Option Price shall be payable by bank draft or certified personal check and/or shares of Stock valued at the Fair Market Value at the time the Option is exercised (provided that such Stock has been held by the Participant for at least six months) or, in the discretion of the Committee, either (i) in other property having a fair market value on the date of exercise equal to the Option Price, or (ii) by delivering to the Committee a copy of
irrevocable instructions to a stockbroker to deliver promptly to the Company an amount of sale or loan proceeds sufficient to pay the Option Price.

(c)            Vesting, Option Period and Expiration.  Options shall vest and become exercisable in such manner and on such date or dates determined by the Committee, which vesting shall take place no sooner than three years after the date of grant, unless a shorter period is designated as provided in subparagraph (d) below.  Options shall be exercisable as soon as administratively practicable following their vesting.  Options shall expire after such period (the “Option Period’) as may be determined by the Committee, which Option Period (i) in the case of Incentive Stock Options shall be ten years and (ii) in the case of Nonqualified Stock Options shall be ten years unless the Committee shall specify a longer period than ten years in individual
circumstances, as determined by the Committee, on the basis of national tax law other than U.S. law concerning the valuation of the Option at grant and on the resulting tax liability of the Participant), which different period shall not affect the terms and conditions of any such Option other than with respect to the Option Period.  If an Option is exercisable in installments, such installments or portions thereof which become exercisable shall remain exercisable until the Option expires.  Unless otherwise stated in the applicable Option Award Agreement or unless otherwise extended in the exercise of its discretion by the Committee, the Option shall expire earlier than the end of the Option Period in the following circumstances:

(i)             If prior to the end of the Option Period, the Holder shall undergo a Normal Termination, the Option shall expire on the earlier of the last day of the Option Period or the date that is ninety days after the date of such Normal Termination.  In such event, the Option shall remain exercisable by the Holder until its expiration, only to the extent the Option was exercisable at the time of such Normal Termination.

(ii)            If the Holder dies or the Holder’s employment with the Novartis Group is terminated by reason of Retirement prior to the end of the Option Period and while still in the employ or service of the Company, a Subsidiary or another member of the Novartis Group, or within thirty days of Normal Termination, such Holder becomes Disabled, the Option shall become 100% vested and nonforfeitable and shall expire on the earlier of the last day of the Option Period or the date that is (i) one year with respect to an Incentive Stock Option and (ii) three years with respect to a Nonqualified Stock Option after the date of death, Disability or Retirement of the Holder.  In the event of death, the Option shall remain exercisable by the person or persons to whom the Holder’s rights under the Option pass by
will or the applicable laws of descent and distribution until its expiration, only to the extent the Option was exercisable by the Holder at the time of death.

 

	
             	
            Exhibit 10.1

            Page 6
	
             

 

(iii)           If the Holder ceases employment or service with all members of the Novartis Group for reasons other than Normal Termination, death, Disability or Retirement, the Option shall expire immediately upon such cessation of employment or service.

(iv)           Notwithstanding anything in the Plan to the contrary, for Options granted on or after February 4, 2003, if a Holder’s employment with all members of the Novartis Group is terminated by reason of death, Disability or Retirement prior to the end of the Option Period, the Option shall become 100% vested and nonforfeitable and shall expire on the last day of the Option Period.

(v)            Notwithstanding anything in the Plan to the contrary, for Options granted on or after February 1, 2006, if a Holder’s employment with all members of the Novartis Group is terminated by reason of Normal Termination, and within thirty days of such Normal Termination such Holder becomes Disabled, the Option shall become 100% vested and nonforfeitable and shall expire on the last day of the Option Period.

(d)            Discretionary Authority.  Notwithstanding any vesting dates or exercise periods set by the Committee, the Chairman of the Board of the Company may, in his sole discretion, accelerate the exercisability of any Option, delay or defer the expiration of any Option (but not beyond its original Option Period) or, in the case of any Nonqualified Stock Option, set a different Option Period which may be longer or shorter than ten years, which actions shall not affect the terms and conditions of any such Option other than with respect to exercisability, expiration and/or the Option Period applicable thereto.  

(e)            Other Terms and Conditions.  An Option granted under the Plan may be evidenced by an Award Agreement, which may contain such provisions as may be determined by the Committee and, except as may be specifically stated otherwise in such Award Agreement, such Option shall be subject to the following terms and conditions:

(i)             Each Option issued pursuant to this Section 7 or portion thereof that is exercisable shall be exercisable for the full amount or for any part thereof, subject to any limitations that may be imposed on the partial exercise in the discretion of the Committee to reflect the need for administrative convenience.

(ii)            Each ADS purchased through the exercise of an Option issued pursuant to this Section 7 shall be paid for in full at the time of the exercise.  Each Option shall cease to be exercisable, as to any share of Stock, when the Holder purchases the share or exercises a related SAR or when the Option expires.

(iii)           Subject to Sections 7(i) and 10(k), Options issued pursuant to this Section 7 shall not be transferable by the Holder except by will or the laws of descent and distribution and shall be exercisable during the Holder’s lifetime only by him.

(iv)           Each Option issued pursuant to this Section 7 shall vest and become exercisable by the Holder in accordance with the vesting schedule established by the Committee and set forth in the Award Agreement, consistent with the requirements of subparagraph (c) above.

(v)            Any Award Agreement may contain a provision that, upon demand by the Committee for such a representation, the Holder shall deliver to the Committee at the time of any exercise of an Option issued pursuant to this Section 7 a representation in the form prescribed by the Committee that the shares to be acquired upon such exercise are to be acquired for investment and not for resale or with a view to the distribution thereof.  Upon such demand, delivery of such representation prior to the delivery of any shares issued upon exercise of an Option issued pursuant to this Section 7 shall be a condition precedent to the right of the Holder or such other person to purchase any shares.  In the event certificates for Stock are delivered under the Plan with respect to which such investment
representation has been obtained, the Committee may cause a legend or legends to be placed on such certificates to make appropriate reference to such representation and to restrict transfer in the absence of compliance with applicable federal or state securities laws.

 

 

	
             	
            Exhibit 10.1

            Page 7
	
             

 

 

 

 

(vi)           Any Incentive Stock Option Award Agreement shall contain a provision requiring the Holder to notify the Company in writing immediately after the Holder makes a disqualifying disposition of any Stock acquired pursuant to the exercise of such Incentive Stock Option.  A disqualifying disposition is any disposition (including any sale) of such Stock before the later of (a) two years after the Date of Grant of the Incentive Stock Option or (b) one year after the date the Holder acquired the Stock by exercising the Incentive Stock Option.

(f)             Incentive Stock Option Grants to 10% Shareholders.  Notwithstanding anything to the contrary in this Section 7, if an Incentive Stock Option is granted to a Holder who owns stock representing more than ten percent of the voting power of all classes of stock of Novartis AG or of a Subsidiary, the Option Period shall not exceed five years from the Date of Grant of such Option and the Option Price shall be at least 110 percent of the Fair Market Value (on the Date of Grant) of the Stock subject to the Option.

(g)            $100,000 Per Year Limitation for Incentive Stock Options.  To the extent the aggregate Fair Market Value (determined as of the Date of Grant) of Stock for which Incentive Stock Options are exercisable for the first time by any Participant during any calendar year (under all plans of the Company and its Subsidiaries) exceeds $100,000, such excess Incentive Stock Options shall be treated as Nonqualified Stock Options.

(h)            Voluntary Surrender.  The Committee may permit the voluntary surrender of all or any portion of any Nonqualified Stock Option issued pursuant to this Section 7 and its corresponding SAR, if any, granted under the Plan to be conditioned upon the granting to the Holder of a new Option for the same or a different number of shares as the Option surrendered or require such voluntary surrender as a condition precedent to a grant of a new Option to such Participant.  Such new Option shall be exercisable at an Option Price, during an Option Period, and in accordance with any other terms or conditions specified by the Committee at the time the new Option is granted, all determined in accordance with the provisions of the Plan without regard to the Option
Price, Option Period, or any other terms and conditions of the Nonqualified Stock Option surrendered.

(i)             Tradable Options.  The Committee may grant Nonqualified Stock Options that the Holder may sell on or after the date such Options become vested to a Market Maker in accordance with procedures established from time to time by the Committee and by the Market Maker.  For purposes of this Section 7(i), the term “Market Maker” shall mean UBS Warburg, or any other entity identified from time to time by the Committee.  Upon the sale by a Holder of such Options to the Market Maker, and notwithstanding any other provision of this Plan to the contrary, such Options shall not expire until the last day of the Option Period.

(j)             Deferral of Proceeds.  For Options granted on and after February 4, 2004, to the extent permitted under the terms of a nonqualified deferred compensation plan maintained by the Company or a Subsidiary, a Participant may defer the proceeds of the exercise or sale of such Options under such deferred compensation plan.

	
            8.
 	
            Stock Appreciation Rights
 

Any Option granted under the Plan may include SARs, either at the Date of Grant or, except in the case of an Incentive Stock Option, by subsequent amendment.  The Committee also may award SARs to Eligible Persons independent of any Option.  An SAR shall confer on the Holder thereof the right to receive in shares of Stock, cash or a combination thereof the value equal to the excess of the Fair Market Value of one share of Stock on the date of exercise over the Strike Price of the SAR, with respect to every share of Stock for which the SAR is granted.  An SAR shall be subject to such terms and conditions not inconsistent with the Plan as the Committee shall impose, including, but not limited to, the following:

 

	
             	
            Exhibit 10.1

            Page 8
	
             

 

 

 

(a)            Strike Price.  The Strike Price per share of Stock for which an SAR is granted shall be set by the Committee at the time of grant, but (i) with respect to an SAR granted in connection with an Option the Strike Price shall be equal to the Option Price of such Option and (ii) with respect to an SAR granted independently of an Option, the Strike Price shall not be less than 100% of the Fair Market Value of a share of Stock at the Date of Grant.

(b)            Vesting.  SARs granted in connection with an Option shall become exercisable, be transferable and shall expire according to the same vesting schedule, transferability rules and expiration provisions as the corresponding Option.  An SAR granted independently of an Option shall become exercisable, be transferable and shall expire in accordance with a vesting schedule, transferability rules and expiration provisions as established by the Committee and reflected in an Award Agreement.

(c)            Automatic Exercise.  If on the last day of the Option Period (or in the case of an SAR granted independently of an Option, the period established by the Committee after which the SAR shall expire), the Fair Market Value of the Stock exceeds the Strike Price, the Holder has not exercised the SAR or the corresponding Option (if any), and neither the SAR nor the corresponding Option (if any), has expired, such SAR shall be deemed to have been exercised by the Holder on such last day and the Company shall make the appropriate payment therefor.

(d)            Payment.  Upon the exercise of an SAR, the Company shall pay to the Holder an amount equal to the number of shares subject to the SAR multiplied by the excess, if any, of the Fair Market Value of one share of Stock on the exercise date over the Strike Price.  The Company shall pay such excess in cash, in shares of Stock valued at Fair Market Value, or any combination thereof, as determined by the Committee.  Fractional shares shall be settled in cash.

(e)            Method of Exercise.  A Holder may exercise an SAR after such time as the SAR vests by filing an irrevocable notice with the Committee or its designee, in a form prescribed by the Committee or its designee, specifying the number of SARs to be exercised, and the date on which such SARs were awarded.

(f)             Expiration.  Each SAR shall cease to be exercisable, as to any share of Stock, when the Holder exercises the SAR or exercises a related Option, with respect to such share of Stock.  An SAR shall expire ten years after its Date of Grant, unless the Committee shall specify a shorter period.

(g)            Deferral of Proceeds.  To the extent permitted under the terms of a nonqualified deferred compensation plan maintained by the Company or a Subsidiary, a Participant may defer the proceeds of the exercise of an SAR under such deferred compensation plan.

 

	
            9.
 	
            Restricted Stock and Restricted Stock Unit Awards
 	
             

	
             
	
            
                          (a)
 	
            Award of Restricted Stock and Restricted Stock Units.
 
					

(i)             The Committee shall have the discretion and authority (1) to grant Restricted Stock and Restricted Stock Units, (2) to issue or transfer Restricted Stock and Restricted Stock Units to Eligible Persons, and (3) to establish terms, conditions and restrictions applicable to such Restricted Stock and Restricted Stock Units, including the Restricted Period, which may differ with respect to each grantee, the time or times at which Restricted Stock or Restricted Stock Units shall be granted or become vested, the number of shares or units to be covered by each grant and the consideration, if any, required to be paid by a Participant for an award of Restricted Stock or Restricted Stock Units.

 

	
             	
            Exhibit 10.1

            Page 9
	
             

 

 

 

 

(ii)            The Holder of a Restricted Stock Award shall execute and deliver to the Company (or acknowledge by electronic means) any Award Agreement issued with respect to the Restricted Stock and Restricted Stock Units setting forth the restrictions applicable to such Restricted Stock and Restricted Stock Units.  If the Committee determines that the Restricted Stock shall be held in escrow rather than delivered to the Holder or held in a brokerage account by the Company (or in such other form as the Committee determines to be appropriate) pending the release of the applicable restrictions, the Holder additionally shall execute and deliver to the Company (1) an escrow agreement satisfactory to the Committee, and (2) the appropriate blank stock powers with respect to the Restricted Stock covered by such
agreements.  If a Holder shall fail to execute or acknowledge by electronic means any required Restricted Stock Award Agreement and, if applicable, an escrow agreement and stock powers, the Award shall be null and void.  Subject to the restrictions set forth in Section 9(b), the Holder shall generally have the rights and privileges of a shareholder as to such Restricted Stock, including the right to vote such Restricted Stock.  At the discretion of the Committee, cash dividends (or cash dividend equivalents) and stock dividends with respect to the Restricted Stock and Restricted Stock Units may be either currently paid to the Holder, withheld by Novartis AG for the Holder’s account or issued as additional Restricted Stock Units, and interest may be paid on the amount of cash dividends withheld at a rate and subject to such terms as determined by the Committee.  Cash dividends (or cash dividend equivalents) or stock dividends so withheld by the Committee shall not be subject
to forfeiture.  Only Holders who are Eligible Persons on the date on which the dividend (or cash dividend equivalents) payments are to be made, withheld or issued, as the case may be, are eligible to receive the dividend (or cash dividend equivalents).

(iii)           Upon the Award of Restricted Stock, the Committee may cause a Stock certificate registered in the name of the Holder to be issued and, if it so determines, deposited together with the Stock powers with an escrow agent designated by the Committee.  If an escrow arrangement is used, the Committee shall cause the escrow agent to issue to the Holder a receipt evidencing any Stock certificate held by it registered in the name of the Holder.  The Committee may also elect to hold such Restricted Stock in such form as it determines to be appropriate.

	
            (b)
 	
            Restrictions.
 

(i)             Restricted Stock and Restricted Stock Units awarded to a Participant shall be subject to the following restrictions until the expiration of the Restricted Period, and to such other terms and conditions as may be set forth in any applicable Award Agreement: (1) if an escrow arrangement is used, the Holder shall not be entitled to delivery of any Stock certificate; (2) the shares of Restricted Stock shall be subject to the restrictions on transferability set forth in the Award Agreement; and (3) the shares or units shall be subject to forfeiture to the extent provided in subparagraph (d) below and in the Award Agreement and, to the extent such shares of Restricted Stock are forfeited, any Stock certificates that have been issued shall be returned to the Company, and all rights of the Holder to
such shares and as a shareholder shall terminate without further obligation on the part of the Company.

(ii)            The Committee shall have the authority to remove any or all of the restrictions on the Restricted Stock or Restricted Stock Units whenever it may determine that, by reason of changes in applicable laws or other changes in circumstances arising after the date of the Restricted Stock Award, such action is appropriate.

(c)            Restricted Period.  The Restricted Period of Restricted Stock and Restricted Stock Units shall commence on the Date of Grant and shall expire from time to time as to that part of the Restricted Stock and Restricted Stock Units indicated in a schedule established by the Committee and set forth in any Award Agreement.

(d)            Forfeiture Provisions.  If a Holder’s employment with the Company and all members of the Novartis Group is terminated by reason of death, Disability or Retirement, all restrictions on the Award shall expire.  Except to the extent determined by the Committee and reflected in the underlying Award Agreement, in the event a Holder terminates employment with the Company and all members of the Novartis Group during a Restricted Period for any reason other than death, Disability or Retirement, that portion of the Award with respect to which restrictions have not expired shall be completely forfeited.

 

 

	
             	
            Exhibit 10.1

            Page 10
	
             

 

 

 

 

(e)            Delivery of Stock.   Upon the expiration of the Restricted Period with respect to any shares of Restricted Stock and Restricted Stock Units covered by a Restricted Stock Award, the restrictions set forth in Section 9(b) and any Award Agreement shall be of no further force or effect with respect to shares of Restricted Stock and Restricted Stock Units which have not then been forfeited.  With respect to Restricted Stock, unless the Holder has made a proper and timely deferral election under Section 9(h) below, the Committee will hold (net of any tax withholding) shares of Stock in a brokerage account in the name of the Holder or his beneficiary (or will hold such stock in such other form as the Committee determines to be appropriate) until the
Holder or his beneficiary provides direction regarding the delivery of such shares of Stock.  If an escrow arrangement is used for shares of Restricted Stock, upon such expiration, the Company shall deliver to the Holder, or his beneficiary, without charge, the shares of Restricted Stock which have not then been forfeited and with respect to which the Restricted Period has expired (to the nearest full share) and any cash dividends or Stock dividends credited to the Holder’s account with respect to such Restricted Stock and the interest thereon, if any.  With respect to Restricted Stock Units, unless a Holder has made a proper and timely deferral election under Section 9(f) or Section 9(h) below, the Company shall credit (net of any tax withholding) shares of Stock reflecting the number of Restricted Stock Units which have not then been forfeited and to which the Restricted Period has expired to a brokerage account in the name of the Holder or his beneficiary (or hold
such shares in such other form as the Committee determines to be appropriate) until the Holder or his beneficiary provides direction regarding the delivery of such shares of Stock.

(f)             Deferral of Restricted Stock Units.  The Restricted Stock Award may permit the Holder of Restricted Stock Units to request the deferral of payment of vested Restricted Stock Units to a date later than the payment date specified in the Award. The Committee will determine any terms and conditions, including the timing of such election, of such deferral.

(g)            Stock Restrictions.  To the extent a certificate is issued representing Restricted Stock awarded under the Plan, each such certificate shall bear the following legend until the end of the Restricted Period with respect to such Stock:

(i)             “Transfer of this certificate and the shares represented hereby is restricted pursuant to the terms of a Restricted Stock Agreement, dated as of _____________, between Novartis Corporation and a copy of such Agreement is on file at the offices of the Company at 608 Fifth Avenue New York, New York 10020.”

(ii)            Stop transfer orders shall be entered with Novartis AG’s transfer agent and registrar against the transfer of legended securities.

(h)            Deferral of Proceeds.  To the extent permitted under the terms of a nonqualified deferred compensation plan maintained by the Company or a Subsidiary, for Restricted Stock or Restricted Stock Units granted on or after February 4, 2004, the Participant may defer the proceeds of any transfer of such Restricted Stock or Restricted Stock Units under such nonqualified plan.

	
            10.
 	
            General
 

(a)            Additional Provisions of an Award.  Awards under the Plan also may be subject to such other provisions (whether or not applicable to the benefit awarded to any other Participant) as the Committee determines appropriate including, without limitation, provisions to assist the Participant in financing the purchase of Stock upon the exercise of Options, provisions for the forfeiture of or restrictions on resale or other disposition of shares of Stock acquired under any Award, provisions giving the Company the right to repurchase shares of Stock acquired under any Award in the event the Participant elects to dispose of such shares, and provisions to comply with Federal and state securities laws and Federal and state tax withholding requirements.  Any such
provisions shall be reflected in the applicable Award agreement.  The Committee shall not be required to provide uniform terms for Awards to all Participants and, in determining the provisions to be included in Awards made to any Participant, may take into account such considerations as it considers reasonable or appropriate (which, without limitation, may include tax considerations related to such Participant’s residence or nationality).

 

	
             	
            
            Exhibit 10.1

            Page 11
	
             

 

 

 

(b)            Privileges of Stock Ownership.  Except as otherwise specifically provided in the Plan, no person shall be entitled to the privileges of stock ownership in respect of shares of Stock which are subject to Awards hereunder until such shares have been issued to that person.

(c)            Government and Other Regulations.  The obligation of the Company to make payment of Awards in Stock or otherwise shall be subject to all applicable laws, rules, and regulations, and to such approvals by governmental agencies as may be required.  Notwithstanding any terms or conditions of any Award to the contrary, the Company shall be under no obligation to offer to sell or to sell and shall be prohibited from offering to sell or selling any shares of Stock pursuant to an Award unless such shares have been properly registered for sale pursuant to the Securities Act with the Securities and Exchange Commission or unless the Company has received an opinion of counsel, satisfactory to the Company, that such shares may be offered or sold without such
registration pursuant to an available exemption therefrom and the terms and conditions of such exemption have been fully complied with.  The Company shall be under no obligation to register for sale under the Securities Act any of the shares of Stock to be offered or sold under the Plan.  If the shares of Stock offered for sale or sold under the Plan are offered or sold pursuant to an exemption from registration under the Securities Act, the Company may restrict the transfer of such shares and may legend any Stock certificates representing such shares in such manner as it deems advisable to ensure the availability of any such exemption.

(d)            Tax Withholding.  Notwithstanding any other provision of the Plan, the Company or a Subsidiary, as appropriate, shall have the right to deduct from all Awards cash and/or Stock, valued at Fair Market Value on the date of payment, in an amount necessary to satisfy all Federal, state or local taxes as required by law to be withheld with respect to such Awards and, in the case of Awards paid in Stock, the Holder or other person receiving such Stock may be required to pay to the Company or a Subsidiary prior to delivery of such Stock, the amount of any such taxes which the Company or a Subsidiary is required to withhold, if any, with respect to such Stock.  Subject in particular cases to the disapproval of the Committee, the Company or a Subsidiary may
accept shares of Stock of equivalent Fair Market Value in payment of such withholding tax obligations if the Holder of the Award elects to make payment in such manner.

(e)            Claim to Awards and Employment or Service Rights.  No employee or other person shall have any claim or right to be granted an Award under the Plan or, having been selected for the grant of an Award, to be selected for a grant of any other Award.  Neither the Plan nor any action taken hereunder shall be construed as a contract of employment or as giving any Participant any right to be retained in the employ or service of the Company, a Subsidiary or any member of the Novartis Group.

(f)             Designation and Change of Beneficiary.  Each Participant may file with the Committee a designation in a form prescribed by the Committee of one or more persons as the beneficiary who shall be entitled to receive the rights or amounts payable with respect to an Award due under the Plan upon his death.  A Participant may, from time to time, revoke or change his beneficiary designation without the consent of any prior beneficiary by filing a new designation with the Committee.  The last such designation received by the Committee shall be controlling; provided, however, that no designation, or change or revocation thereof, shall be effective unless received by the Committee prior to the
Participant’s death, and in no event shall it be effective as of a date prior to such receipt.  If no beneficiary designation is filed by the Participant, the beneficiary shall be deemed to be his or her spouse or, if the Participant is unmarried at the time of death, his or her estate.

(g)            Payments to Persons Other Than Participants.  If the Committee shall find that any person to whom any amount is payable under the Plan is unable to care for his affairs because of illness or accident, or is a minor, or has died, then any payment due to such person or his estate (unless a prior claim therefor has been made by a duly appointed legal representative) may, if the Committee so directs the Company, be paid to his spouse, child, relative, an institution maintaining or having custody of such person, or any other person deemed by the Committee to be a proper recipient on behalf of such person otherwise entitled to payment.  Any such payment shall be a complete discharge of the liability of the Committee and the Company therefor.

 

 

	
             	
            
            Exhibit 10.1

            Page 12
	
             

 

 

 

 

(h)            No Liability of Committee Members.  No member of the Committee shall be personally liable by reason of any contract or other instrument executed by such member or on his behalf in his capacity as a member of the Committee nor for any mistake of judgment made in good faith, and the Company shall indemnify and hold harmless each member of the Committee and each other employee, officer or director of the Company to whom any duty or power relating to the administration or interpretation of the Plan may be allocated or delegated, against any cost or expense (including counsel fees) or liability (including any sum paid in settlement of a claim) arising out of any act or omission to act in connection with the Plan unless arising out of such person’s own
fraud or willful bad faith; provided, however, that approval of the Board shall be required for the payment of any amount in settlement of a claim against any such person.  The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company’s Articles of Incorporation or By-Laws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.

(i)             Governing Law.  The Plan shall be governed by and construed in accordance with the internal laws of the State of New York without regard to the principles of conflicts of law thereof.

(j)             Funding.  No provision of the Plan shall require the Company, for the purpose of satisfying any obligations under the Plan, to purchase assets or place any assets in a trust or other entity to which contributions are made or otherwise to segregate any assets, nor shall the Company maintain separate bank accounts, books, records or other evidence of the existence of a segregated or separately maintained or administered fund for such purposes.  Holders shall have no rights under the Plan other than as unsecured general creditors of the Company, except that insofar as they may have become entitled to payment of additional compensation by performance of services, they shall have the same rights as other employees under general law.

(k)            Nontransferability.  A person’s rights and interest under the Plan, including amounts payable, may not be sold, assigned, donated, or transferred or otherwise disposed of, mortgaged, pledged or encumbered except, in the event of a Holder’s death, to a designated beneficiary to the extent permitted by the Plan, or in the absence of such designation, by will or the laws of descent and distribution; provided, however, the Committee may, in its sole discretion, allow in an Award Agreement for transfer of Awards other than Incentive Stock Options to other persons or entities as long as such transferability does not adversely impact the ability of Novartis AG to register the Stock underlying
Awards pursuant to the Securities Act.

(l)             Reliance on Reports.  Each member of the Committee and each member of the Board shall be fully justified in relying, acting or failing to act, and shall not be liable for having so relied, acted or failed to act in good faith, upon any report made by the independent public accountant of the Company and its Subsidiaries and upon any other information furnished in connection with the Plan by any person or persons other than himself.

(m)           Relationship to Other Benefits.  No payment under the Plan shall be taken into account in determining any benefits under any pension, retirement, profit sharing, group insurance or other benefit plan of the Company except as otherwise specifically provided in such other plan.

	
            (n)
 	
            Expenses.  The expenses of administering the Plan shall be borne by the Company.
 

(o)            Pronouns.  Masculine pronouns and other words of masculine gender shall refer to both men and women.

 

 

	
             	
            Exhibit 10.1

            Page 13
	
             

 

 

 

 

(p)            Titles and Headings.  The titles and headings of the sections in the Plan are for convenience of reference only, and in the event of any conflict, the text of the Plan, rather than such titles or headings shall control.

	
            11.
 	
            Changes in Capital Structure
 

Awards granted under the Plan and any Award Agreements shall be subject to equitable adjustment or substitution, as determined by the Committee in its sole discretion, as to the number, price or kind of a share of Stock or other consideration subject to such Awards (i) in the event of changes in the outstanding ADS or in the capital structure of Novartis AG by reason of stock dividends, stock splits, reverse stock splits, recapitalizations, reorganizations, mergers, consolidations, combinations, exchanges, or other relevant changes in capitalization occurring after the Date of Grant of any such Award, (ii) in the event of any change in applicable laws or any change in circumstances which results in or would result in any substantial dilution or enlargement of the rights granted to, or available for, Participants in the Plan, or (iii) upon the occurrence of any other event which otherwise warrants equitable
adjustment because it interferes with the intended operation of the Plan.  In addition, in the event of any such corporate or other event, the aggregate number of shares of Stock available under the Plan shall be appropriately adjusted by the Committee, whose determination shall be conclusive.  The Company shall give each Participant notice of an adjustment hereunder and, upon notice, such adjustment shall be conclusive and binding for all purposes.

Notwithstanding the above, in the event of any of the following:  (i) Novartis AG is merged or consolidated with another corporation or entity and, in connection therewith, consideration is received by shareholders of Novartis AG in a form other than stock or other equity interests of the surviving entity;  (ii) all or substantially all of the assets of Novartis AG are acquired by another person; (iii) the reorganization or liquidation of Novartis AG; or the execution by Novartis AG of a written agreement to undergo an event described in clauses (i), (ii) or (iii) above, then the Committee may, in its sole discretion, cancel any outstanding Awards and pay to the Holders thereof, in cash, the value of such Awards based upon the price per share of Stock received or to be received by other shareholders of Novartis AG in the event.  The terms of this Section 11 may be varied by the
Committee in any particular Award agreement.

	
            12.
 	
            Change in Control
 

Except to the extent stated otherwise in any individual Award Agreement, or except as otherwise provided in the exercise of discretion by the Compensation Committee of Novartis AG, upon the occurrence of a Change in Control (i) all outstanding Options and freestanding SARs shall become immediately exercisable in full and (ii) all restrictions with respect to outstanding shares of Restricted Stock and Restricted Stock Units shall lapse.

	
            13.
 	
            Nonexclusivity of the Plan
 

Neither the adoption of this Plan by the Board nor, if applicable, the submission of this Plan to the shareholders of the Company or Novartis AG for approval shall be construed as creating any limitations on the power of the Board to adopt such other incentive arrangements as it may deem desirable, including, without limitation, the granting of stock options otherwise than under this Plan, and such arrangements may be either applicable generally or only in specific cases.

	
            14.
 	
            Amendment and Termination
 

The Board or the Committee may, at any time, or from time to time, amend, terminates or suspend and, if suspended, reinstate, the Plan in whole or in part in its sole discretion; provided that any such amendment shall be contingent on obtaining the approval of the shareholders of the Company or Novartis AG if the Committee determines that such approval is necessary to comply with any requirement of law or rule of any stock exchange on which the equity securities of Novartis AG are traded.  The Board or the Committee may not cancel, reduce or otherwise alter outstanding vested Awards in a manner adverse to a Participant unless it obtains the express written consent of the affected individual Participant.

 

	
             	
            Exhibit 10.1

            Page 14
	
             

 

 

 

 

	
            15.
 	
            Canadian Participants
 

Addendum A hereto shall apply at all times to Participants who are Canadian residents.

	
            16.
 	
            Code Section 409A
 

If any Award under this Plan is determined to be covered by the requirements of Section 409A of the Internal Revenue Code, the Committee shall take such actions as it deems appropriate (including, but not limited to reformation of the Award) to cause such Award to be distributable at a time and in a manner that is consistent with the requirements of Code Section 409A.

	
            17.
 	
            Exclusive Provisions
 

This Plan and any Award Agreement entered into with Participants contemplated by this Plan and consistent with this Plan’s terms, contains the entire provisions with respect to the subject matter hereof, and supercedes all prior negotiations, instruments and oral understandings.

 

 

 

 

 

 

 

 

 

 

 

 

 

	
             	
            Exhibit 10.1

            Page 15
	
             

 

ADDENDUM A

ADDENDUM FOR CANADIAN PARTICIPANTS

 

Addendum to The Novartis Corporation 2001 Stock Incentive Plan for North American Employees, hereinafter, referred to as the “Plan”.  The provisions of this Addendum shall apply at all times to Canadian resident employees who are eligible to participate in the Plan (hereinafter “Canadian Participants”).

With respect to Section 5 of the Plan, the Committee cannot unilaterally decide to pay cash to a Canadian Participant exercising his/her Option and must at all times deliver Stock to such Participant.  The Canadian Participant, can however, elect to receive the Fair Market Value equivalent of such Stock in cash at the time of exercise.

With respect to Section 7 of the Plan, the Option Price cannot be paid by a Canadian Participant by the delivery or tender of Stock previously acquired under the Plan or any other Novartis plan.  

 A Canadian Participant who has received Stock in satisfaction of his/her Option Award under the Plan cannot cause Novartis AG, or any corporation with which it does not deal at arm’s length, to redeem, acquire or cancel the Stock delivered by the Committee on exercise of the Option.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

	
             	
            
            Exhibit 10.1

            Addendum A

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