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exv10w40

 

EXHIBIT 10.40

Confidential Treatment Requested

EXECUTION VERSION

CATHETER DEVELOPMENT AGREEMENT

          This Catheter Development Agreement is made as of the 3rd day of May, 2006, between
The Spectranetics Corporation, a Delaware corporation (“Spectranetics”), and BioScan Technologies
Ltd, an Israeli Corporation (“BioScan”).

Recitals

          A. BioScan has knowledge and experience in the area of catheter based Photoacoustic Imaging
and Measurement (as defined below) in medical applications and has filed patent applications with
respect to Photoacoustic Imaging and Measurement. BioScan has not yet incorporated its technology
in a commercial product and desires to have the opportunity to do so with catheters manufactured by
Spectranetics.

          B. Spectranetics is in the business of designing, manufacturing and selling excimer laser
systems, catheters and other products for use in various medical applications. Among other
products, Spectranetics makes and sells disposable catheters for use with its excimer laser system
in Atherectomy (as defined below) procedures.

          C. BioScan and Spectranetics have agreed to jointly develop a new disposable multi-function
catheter for use with Spectranetics’ excimer laser system for optically guided Atherectomy
procedures using Spectranetics’ existing catheter technology and Photoacoustic Imaging and
Measurement technology owned by BioScan or developed by BioScan and/or Spectranetics during the
course of the development project. The parties also desire to provide for the ownership and
licensing of intellectual property resulting from the development project.

Agreement

          Accordingly, for good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Spectranetics and BioScan agree as follows:

1. Definitions. As used in this Agreement, the following terms have the indicated
meanings, whether used in the singular or plural form:

     “Atherectomy” means medical devices and methods that cut to remove obstructions from arteries,
veins or intravascular grafts, including, without limitation, devices that use energy (mechanical,
laser, electrical or other) to penetrate intravascular obstructions for purposes of restoring blood
flow.

     “Background IP” means, as to each party, all Intellectual Property that such party owns or has
the right to use as of the date of this Agreement.

 

			
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     “Budget” means the budget for Phase I of Project as set forth in the Scope of Work, as the
same may be amended in writing from time to time by the parties.

     “Confidential Information” means verbal and written (including electronic) disclosures from
either party to the other, whether made before or after the date of this Agreement, which concern
the disclosing party, including, without limitation, information concerning the disclosing party’s
business, operations, customers, suppliers, products, technology, Intellectual Property or research
and development efforts, but shall not include (or shall cease to include) information that: (a) at
the time of disclosure or thereafter is published or otherwise publicly available through no fault
of the receiving party (but only after, and only to the extent that, it is published or publicly
available); or, (b) that the receiving party can show by written documentation; (i) was known to it
at the time of disclosure, free of restriction; (ii) has been or hereafter is disclosed to the
receiving party without any obligation of confidentiality by another source who is in lawful
possession of such information and has the right to disclose it to the receiving party; (iii) is
developed by the receiving party independent of the disclosing party’s Confidential Information; or
(c) is disclosed by the receiving party pursuant to the order or requirement of a court,
administrative agency or other governmental body, provided that the receiving party promptly
informs the disclosing party of the requirement to make such disclosure, takes all reasonable steps
to limit such disclosure and does not inhibit the disclosing party in taking whatever lawful steps
the disclosing party considers necessary to attempt to preserve the confidentiality of such
information, and provided further that the exception in this clause (c) shall be applicable only to
the extent necessary to allow the receiving party to comply with such order or requirement.
Disclosures that are specific shall not be deemed to be within the foregoing exceptions merely
because they are embraced by general disclosures that are within an exception.

     “Developed IP” means all Intellectual Property invented or created by either party or jointly
by the parties during the course of and in connection with the Project.

     “FDA Approval Date” means the earlier of: (i) the date on which a Project Catheter receives
approval for marketing or selling from the United States Food and Drug Administration or any
successor agency; (ii) the date on which Spectranetics or anyone on its behalf commences marketing
a Project Catheter in the United States; (iii) the date on which Spectranetics or anyone on its
behalf completes the first commercial sale of any Project Catheter in the United States; or (iv)
the date on which Spectranetics or anyone on its behalf accomplishes sales of Project Catheters
outside the United States for an amount equal to $5 million in the aggregate in the preceding
12-month period.

     “Field” means all Atherectomy applications.

     “Intellectual Property” means patents, patent applications and patent rights, including
continuations and continuations in part, inventions, business methods, trademarks, trademark
applications, service marks, business marks, trade names, brand names, other names and slogans
embodying business or product goodwill, trade dress, copyright registration, copyrights
(including those in computer software, development documentation, programming tools, drawings,
specifications and data), trade secrets, know-how, protocols, mask works, industrial designs,
formulae, processes and technical information, including Confidential Information, and

 

			
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any rights
under licenses to any of the foregoing, in each case, whether or not subject to statutory
registration or protection in any country.

     “Phase I of Project” means the feasibility phase evaluation described in the Scope of Work in
connection with the development of a Project Catheter pursuant to this Agreement.

     “Phase II of Project” means the development of a commercial version of the Project Catheter as
contemplated by Section 2.3.

     “Photoacoustic Imaging and Measurement” means a process using any or all of photoacoustic
imaging, measured data or fiberoptic sensing through optical fibers.

     “Project” means the development of a Project Catheter pursuant to this Agreement, including
both Phase I of Project and Phase II of Project.

     “Project Catheter” means a catheter incorporating Background IP owned by BioScan or Developed
IP, whether owned by BioScan or by Spectranetics. The parties contemplate that such catheter will
be developed by BioScan and Spectranetics as described in the Scope of Work and as further
developed in Phase II of Project. If the Project is terminated by either party prior to completion
as provided in this Agreement, including any election by Spectranetics not to proceed with Phase II
of Project pursuant to Section 2.3, a catheter shall not be deemed a Project Catheter unless it
contains Background IP owned by BioScan or Developed IP, whether owned by BioScan or by
Spectranetics.

     “Scope of Work” means the scope of work attached to this Agreement as Exhibit A, as
such may be amended from time to time by consent of the parties, which includes by reference the
Spectranetics Laser Guidance Needs described in Exhibit B.

2. Project. 

          Section 2.1 Performance. BioScan and Spectranetics will perform Phase I of Project as
described in the Scope of Work. Phase I of Project will be performed primarily at BioScan’s
facility by BioScan’s personnel or personnel retained by BioScan for purposes of Phase I of Project
as contemplated by the Budget. The time frames for completion of Phase I of Project set forth in
the Scope of Work are approximate, but BioScan and Spectranetics will use commercially reasonable
efforts to complete the work within those time frames, it being understood that failure to complete
Phase I of Project within those time frames shall not be considered a breach of this Agreement by
any party.

          Section 2.2 Costs; Budget. BioScan and Spectranetics shall bear the costs of Phase I
of Project as provided in the Scope of Work. Spectranetics will pay BioScan the budgeted amounts
as specified in the Scope of Work. Within 30 days after the end of each calendar quarter, BioScan
will provide Spectranetics a written progress report on Phase I of
Project specifying in reasonable detail the costs incurred to date with a comparison to
budgeted amounts and the progress of the work on Phase I of Project with a comparison to the time
frames set forth in the Scope of Work. Each progress report shall indicate whether, based on the
costs

 

			
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incurred and progress made to the date of the report, BioScan believes that Phase I of
Project will be completed within Budget and within the time frames set forth in the Scope of Work
and, if not, what the anticipated costs and timing of Phase I of Project are expected to be. If
any progress report indicates that Phase I of Project will not be completed within the Budget,
Spectranetics and BioScan shall consult with each other to determine whether to modify Phase I of
Project, modify the Budget or terminate the Project as provided in Section 6.1, it being understood
that neither party will have an obligation to spend amounts or resources in excess of those
provided for in the Scope of Work and that failure to complete Phase I of Project within the Budget
shall not be considered a breach of this Agreement by any party. The Budget is not intended as a
fixed amount payable to BioScan, and therefore notwithstanding the payment schedule set forth in
the Scope of Work, Spectranetics shall only be responsible for the budgeted costs and expenses
actually incurred by BioScan in performing Phase I of Project. If the amounts paid by
Spectranetics exceed the budgeted costs and expenses actually incurred by BioScan on an aggregate
basis, as established by the final progress report for Phase I of Project, BioScan shall refund the
excess at the time such final progress report is due. In no event shall Spectranetics be
responsible for any costs and expenses incurred by BioScan in excess of those contemplated by the
Budget, as amended from time to time unless it had agreed to such costs or expenses. BioScan shall
require its personnel and consultants to keep appropriate records of time spent on Phase I of
Project to support the personnel and consulting costs charged to Phase I of Project. If the time
frames for Phase I of Project given in the Scope of Work are extended, the parties shall negotiate
in good faith a revised payment schedule to correspond to the new time frames.

          Section 2.3 Phase II of Project. If Phase I of Project is successfully completed, the
parties currently contemplate entering into an addendum to this Agreement pursuant to which they
would conduct Phase II of Project to mutually develop a commercial product for use in the Field
based on the prototype developed in Phase I of Project. Spectranetics would fund the costs of
Phase II of Project. Following completion of Phase I of Project, Spectranetics shall give BioScan
notice indicating whether or not Spectranetics elects to proceed with Phase II of Project. If
Spectranetics elects to proceed with Phase II of Project, Spectranetics, after consultation with
BioScan, shall prepare a scope of work for Phase II of Project and submit the scope of work to
BioScan. Within a reasonable time after its receipt of such proposed scope of work, BioScan, after
consultation with Spectranetics, shall prepare a budget for the portions of such proposed scope of
work submitted by Spectranetics that are to be performed by BioScan, with such changes in the
portions of the proposed scope of work to be performed by BioScan as BioScan may reasonably
consider appropriate taking into account Spectranetics’ stated goals and BioScan’s capabilities and
commitments. The parties shall act reasonably and in good faith in proposing the scope of work,
the budget, an addendum to this Agreement setting forth the scope of work and budget (as described
below) and any changes to any thereof under this Section 2.3, and shall negotiate reasonably and in
good faith to agree upon the portions of the scope of work to be performed by BioScan, the budget
therefor and such addendum. If they agree upon the scope of work, but are unable to agree on a
budget for the portions of the scope of work to be
performed by BioScan, either party may submit the disagreement over the budget to a mutually
agreeable un-affiliated arbitrator (who was not engaged by either party in the past) who shall have
at least 10 years of experience in medical device project management in projects of the kind

 

			
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contemplated herein and whose sole mandate will be to determine the appropriate amount to be
budgeted for the item or items on which the parties were unable to agree. If the parties are
unable to agree on an arbitrator or on rules of conducting the arbitration, either party may apply
to the New York office of the American Arbitration Association for the appointment of an arbitrator
with the qualifications and experience described above and the arbitrator shall conduct the
arbitration in New York according to the rules of the American Arbitration Association. The costs
of the arbitration (and of any proceedings before the American Arbitration Association) shall be
borne equally by the parties. After the scope of work has been agreed to and the budget has been
agreed to or determined by arbitration, the parties shall enter into a mutually acceptable addendum
to this Agreement agreeing to the scope of work and budget for Phase II of Project. Sections 2.1
and 2.2 above shall apply to Phase II of Project, mutatis mutandis, and unless the parties agree
otherwise, all other provisions of this Agreement would continue to apply, including, without
limitation Spectranetics’ license and rights to commercialize the resulting product and the
termination events. The scope of work and budget for Phase II shall include a line item for making
appropriate patent and other searches for the mutual benefit of the parties as required to ensure
that no Developed IP infringes on the rights of any third party.

3. Intellectual Property.

          Section 3.1 Background IP. Each party shall retain all of its ownership and other
rights in and to its Background IP, and, except as otherwise expressly set forth in this Agreement,
nothing in this Agreement shall constitute a transfer to the other party of any such Background IP
or a license to the other party to use any such Background IP. BioScan represents and warrants to
Spectranetics that Exhibit C to this Agreement is a complete list of BioScan’s patents and patent
applications included in BioScan’s Background IP that are relevant to the Project or the Field.
Spectranetics represents and warrants to BioScan that Exhibit D to this Agreement is a complete
list of Spectranetics’ patents and patent applications included in Spectranetics Background IP that
are relevant to the Project or the Field.

          Section 3.2 Ownership, Protection and Enforcement of Developed IP.

          Section 3.2.1. Ownership. As between BioScan and Spectranetics: (i) BioScan shall be
the owner of all right, title and interest in and to any Developed IP that either (A) can be used
outside the Field (whether or not it can be used in the Field) or (B) is based upon or incorporates
Photoacoustic Imaging and Measurement processes or technology, and any improvements and
developments thereto, and Spectranetics shall have no right, title or interest therein except as
provided in Section 4.1 below; and (ii) Spectranetics shall be the owner of all right, title and
interest in and to any Developed IP to the extent it can be used solely in the Field and is not
based upon and does not incorporate Photoacoustic Imaging and Measurement processes or technology,
and any improvements and developments thereto, and BioScan shall have no right, title or interest
therein except as provided below.

          To the extent any right, title or interest in Developed IP does, by operation of law, become
vested in any party in a manner that does not conform to this Section 3.2.1, each party agrees to
and hereby does transfer any such right, title and interest to the other party so as to reflect the
ownership provided for in this Section 3.2.1.

 

			
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          Section 3.2.2. Protection and Enforcement. The party owning any Background IP or
Developed IP shall be responsible to apply for, maintain, prosecute, and enforce patents or
otherwise take steps to protect any Background IP or Developed IP it owns, including but not
limited to, deciding which inventions shall be subject to patent protection, selecting the
countries for patenting, and selecting the person that shall be responsible for preparing,
prosecuting, and maintaining the application and any resulting patent. The party owning the
Background IP or Developed IP shall update the other party on a reasonably current basis as to the
status of each such patent application or patent.

          Should BioScan decide to abandon or to not maintain any Background IP or Developed IP owned by
it in any jurisdiction, notice of the same shall be given to Spectranetics at least 30 days before
the date of any abandonment or maintenance payment date so that Spectranetics can determine whether
to prosecute and/or maintain the same, in which case Spectranetics may do so at its own expense
(and reimburse BioScan to the extent it incurs any related fees, costs or expenses in connection
with any action taken at Spectranetics’ request) and shall be the beneficiary of such portion of
the Background IP or Developed IP in the relevant jurisdiction(s) to the extent and only to the
extent necessary to exercise its rights as licensee under Section 4.1, provided,
however, that this provision shall not grant Spectranetics any property or other ownership
rights or license in any Background IP or Developed IP owned by BioScan that is not otherwise
provided for in this Agreement. In no event shall Spectranetics agree to any settlement that shall
affect any BioScan Background IP or BioScan Developed IP outside the Field without BioScan’s
advance written consent.

          Each party shall have the exclusive right but not the duty to enforce its own Background IP;
provided that to the extent and only to the extent enforcing such Background IP is necessary to
protect Spectranetics’ interests as licensee under Section 4.1 and BioScan decides not to pursue an
enforcement action, Spectranetics may pursue such enforcement action at its own expense (and
reimburse BioScan to the extent it incurs any related fees, costs or expenses in connection with
any action taken at Spectranetics’ request), but the right to pursue such enforcement shall not
grant Spectranetics any property or other ownership rights or license in BioScan’s Background IP
not otherwise provided for in this Agreement. In no event shall Spectranetics agree to any
settlement that shall affect any BioScan Background IP or BioScan Developed IP outside the Field
without BioScan’s advance written consent.

          The parties shall consult with one another in any decision to enforce the Developed IP against
any third party. Spectranetics shall have the exclusive right but not the duty to decide to cause
the enforcement against any third party of Developed IP it owns, and BioScan shall have the
exclusive right but not the duty to decide to cause the enforcement against any third party of any
Developed IP it owns; provided, however, that to the extent and only to the extent
enforcing such Background IP is necessary to protect Spectranetics’ interests
as licensee under Section 4.1 and BioScan decides not to pursue an action to enforce such
Developed IP, Spectranetics may pursue such enforcement action at its own expense (and reimburse
BioScan to the extent it incurs any related fees, costs or expenses in connection with any action
taken at Spectranetics’ request), but the right to pursue enforcement shall not grant Spectranetics
any property or other ownership rights or license in any Developed IP owned by

 

			
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BioScan that is not
otherwise provided for in this Agreement. In no event shall Spectranetics agree to any settlement
that shall affect any BioScan Background IP or BioScan Developed IP outside the Field without
BioScan’s advance written consent.

          The party bringing (or causing to be brought) any action to enforce Background IP or Developed
IP shall bear or accrue all fees, costs and expenses of the action and shall be entitled to receive
all recoveries in the action; provided that, if the other party is also joined in the action and
the recoveries in the suit include damages suffered by both parties, the fees, costs and expenses
of the action and the recoveries in the action shall be shared as follows: (i) the recoveries
shall be shared based on the proportion in which they were awarded to the parties by the court, or
if the court has not done so, the recoveries shall be first applied to cover the costs of the
parties and thereafter in the proportion that the losses or lost profits caused by such
infringement or action by a third party affected the parties (and if the parties cannot agree on
such proportion it shall be determined by an arbitrator, who shall be determined as and shall
determine the issue according to the same procedures provided in Section 4.2); and (ii) the fees,
costs and expenses of the action (to the extent not recovered from the defendants) shall be shared
in the same proportion as the recoveries, except that the fees, costs and expenses borne by the
other party (i.e., the party that did not bring the action) shall not exceed its share of
the recoveries in such action.

          If a third party brings an action (directly or as a counterclaim or otherwise in response to
any action initiated by either of the parties to this Agreement) challenging the validity,
enforceability or ownership of any Background IP or Developed IP, the party that owns the
Intellectual Property in question shall have the sole right but not the duty to defend the action.
If BioScan decides not to defend any such action relating to any Background IP or Developed IP
owned by it, Spectranetics may defend such action at its own expense (and, subject to Section 8
herein, reimburse BioScan to the full extent it incurs any related fees, costs or expenses in
connection with any action taken at Spectranetics’ request) to the extent and only to the extent
necessary to protect its interests as licensee under Section 4.1, but the right to defend such
action shall not grant Spectranetics any property or other ownership rights or license in BioScan
Background IP or Developed IP not otherwise provided for in this Agreement. Subject to Section 8,
any party defending any action shall be responsible for all judgments entered in the action,
except, that, notwithstanding the foregoing, in the event that both parties are joined in such
action, each party shall be entitled to conduct its own defense, and, subject to Section 8, shall
bear all fees, costs, liabilities and expenses incurred by it in such defense and shall be
responsible for all judgments entered against it in the action.

          In all cases to enforce or defend any Background IP or Developed IP, each party shall
cooperate with the other in such enforcement effort or defense. Without limiting the generality of
the foregoing, the party that is bringing or defending any such action may require
the other party to join as a party in such action to the extent that such joinder is necessary
for the effective prosecution or defense of the action, but, subject to Section 8, the party
bringing or defending the action shall reimburse the other party for all fees, costs or expenses
incurred as a result of such joinder.

 

			
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          Notwithstanding anything in this Agreement to the contrary, to the extent any Developed IP is
determined by the parties or pursuant to arbitration as provided in Section 4.2 to infringe any
Intellectual Property rights of any third party, the parties shall use all commercially reasonable
efforts to eliminate or mitigate the effects of such infringement, including, without limitation,
redesigning or making such other changes to the Project Catheter as necessary.

          Section 3.2.3. Survival of Rights and Obligations. The provisions of this Section
3.2 shall survive expiration or termination of this Agreement, provided, however,
that neither party shall have any rights to be informed of or participate in the maintenance or
enforcement (or the decision not to do any of them or to pursue by itself the same) of the other
party’s Intellectual Property if the license granted pursuant to Section 4.1 shall have been
terminated.

          Section 3.3 Inventor Compensation. Each party shall be responsible for paying any
fees, costs, compensation, or other remuneration that are required by statute, regulation,
agreement, or otherwise related to the use of their inventions, including those related to
Developed IP, to its respective employees, agents, or contractors.

          Section 3.4 Disclosure. Each party shall make prompt, full and complete written
disclosure to the other party of all information relating to the disclosing party’s Background IP
that is or will be relevant to the Project or the Project Catheter. Each party shall make prompt,
full and complete written disclosure to the other party of all information relating to Developed IP
developed by the disclosing party during the course of the Project. Each party shall provide the
other with reasonable technical support to understand and apply the information so disclosed as
reasonably necessary to complete and evaluate the Project and the Project Catheter and otherwise to
give effect to the purpose and intent of this Agreement.

          Section 3.5 Confidentiality. Each party agrees with respect to Confidential
Information disclosed by the other party:

               (a) to hold such Confidential Information in confidence and not to disclose it within or
outside of its own organization except (i) to its employees and consultants who have a need to know
such information in connection with the Project and who are subject to agreements restricting
disclosure and use of such Confidential Information to the same extent as this Agreement and (ii)
as necessary to exercise its rights as licensee under Section 4;

               (b) not to use such Confidential Information for any purpose other than the Project and the
exercise of its rights as licensee under Section 4; and

               (c) to use the same degree of care in protecting the confidentiality of such Confidential
Information as it uses in protecting its own proprietary information, but in no event less than
reasonable care.

          Section 3.6 Regulatory Approvals. For so long as the license granted pursuant to
Section 4.1 is in effect, Spectranetics shall have the exclusive right (but no obligation) to seek
regulatory approvals for the Project Catheter for use solely in the Field and to conduct any tests,

 

			
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trials or other procedures in connection therewith. BioScan shall provide such assistance as
Spectranetics may reasonably request in connection therewith, provided that Spectranetics shall pay
any out-of-pocket expenses of BioScan in providing such assistance

          Section 3.7 Commercially Reasonable Efforts. Spectranetics shall use Commercially
Reasonable Efforts to obtain any required regulatory approvals and market Project Catheters in the
United States. “Commercially Reasonable Efforts” shall mean efforts of a degree and kind,
including the level of attention and care and the providing of funding and manpower, as are
consistent with the then current stage of product life cycle for a product with the same commercial
potential of the Project Catheter. Such efforts shall in no event be less than the efforts that
companies similar to Spectranetics in size and stage apply with respect to products of similar
commercial potential, consistent with the exercise of good business judgment.

4. License to Spectranetics. 

          Section 4.1 Grant. BioScan hereby grants to Spectranetics an exclusive, perpetual
(except as provided herein), worldwide license to use and practice: (A) all of BioScan’s Background
IP and all future developments and improvements thereto, limited to the Field (the “BioScan
Background IP License)”; and (B) all Developed IP owned by BioScan and all future developments and
improvements thereto, limited to the Field (the “BioScan Developed IP License”), in each case,
subject to the provisions of this Agreement. The license includes the exclusive right to make,
have made (subject to the limitations described in the following paragraph), use and sell or
otherwise transfer catheters and related devices and methods for use in the Field, directly or
through one or more subcontractors, during and after completion of the Project. The license will
also include the right to develop, improve, test, evaluate, conduct clinical trials with respect
to, and obtain regulatory approvals for catheters and related devices and methods used in the
Field. Subject to the provisions of this Agreement, this license shall be exclusive in the Field
both as to BioScan and as to third parties. Without limiting the generality of the foregoing and
subject to the provisions of this Agreement, including, without limitation, Section 6.2 hereof,
BioScan shall not use or practice any BioScan Background IP or Developed IP or any future
development or improvement thereof in the Field.

          This license, or any portion of it may not be assigned or sublicensed by Spectranetics without
BioScan’s consent, which shall not be unreasonably withheld or delayed, except that, subject to
Sections 6.2 and 6.3 herein, Spectranetics may (i) sublicense to independent contractors for the
purposes of clinical trials or for the purpose of manufacturing any Project Catheters, pursuant to
sublicense agreements containing provisions protecting Intellectual Property owned by BioScan that
are reasonably satisfactory to BioScan; (ii) sublicense to end users of Project Catheters to the
extent necessary to allow them to evaluate and use the Project Catheters; (iii) sublicense to
independent contractors for the purposes of (A) completing the development of the Project Catheter
solely if the Project is terminated prior to completion as provided in this Agreement, provided
that, in the circumstances described in Section 6.2(g), Spectranetics’ right to sublicense under
this clause (A) shall be conditioned upon its first having complied with Section 2.3, or (B)
designing and developing subsequent

 

			
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generations of or improvements to the Project Catheter after
completion of its initial development (i.e., Phase I and Phase II of the Project), in each case
pursuant to sublicense agreements containing provisions protecting the Intellectual Property owned
by BioScan that are reasonably satisfactory to BioScan (and provided that to the extent any
actions, developments or improvements taken or made by such independent contractors cause any
Project Catheter to infringe any other party’s Intellectual Property, any resulting Liabilities (as
defined in Section 8) shall be deemed to be included in Liabilities for which Spectranetics shall
indemnify BioScan as provided in Section 8.3(b) and shall not result in any reduction of royalties
as provided in the second paragraph of Section 4.2); and (iv) assign this license and its other
rights and duties under this Agreement without such consent to a successor by merger, sale of
assets or otherwise to all or substantially all of Spectranetics’ business and assets relating to
the sale of catheters for use in the Field.

          Nothing in this Agreement or the performance hereof shall operate to grant Spectranetics or
otherwise vest in Spectranetics any right, title, or interest in or to any of the BioScan
Background IP or BioScan Developed IP or any other Intellectual Property owned by BioScan licensed
hereto other than the licenses granted pursuant to this Section 4.1. To the extent any such right,
title or interest does, by operation of law, become vested in Spectranetics, Spectranetics agrees
to and hereby does transfer any such right, title and interest to BioScan.

          Section 4.2 Royalty. Spectranetics shall pay BioScan a royalty for the license
granted in Section 4.1 as provided in this Section 4.2 and in Section 4.3. Spectranetics shall pay
BioScan a royalty equal to the “Applicable Percentage” of the sales price of each Project Catheter.
For that purpose, sales price means the amount actually invoiced by Spectranetics for such Project
Catheters, excluding taxes, insurance, freight or other separately stated charges, net of returns
and allowances. “Applicable Percentage” means (i) if and for so long as the Project Catheters or
any portion thereof are covered by a patent or patent application owned by BioScan, [*****] and
(ii) at all other times, [*****], subject to the provisions of Section 6.2. The royalty shall be
payable quarterly within 60 days following the end of each calendar quarter. Each royalty payment
shall be accompanied by a reasonably detailed schedule of invoiced sales of Project Catheters by
Spectranetics and returns and allowances made during the period and a calculation of the royalties
due as a result thereof. In the event of any return of or allowance in respect of a Project
Catheter as to which royalty has previously been paid, the royalty on the amount of such return or
allowance shall be deducted from subsequent royalty payments. In no event will Spectranetics be
entitled to retroactively adjust the Applicable Percentage with respect to any royalty payments
that were already paid.

          If in the opinion of both parties herein it is necessary or advisable for Spectranetics to pay
any royalty or other fee to a person other than BioScan or Spectranetics or
any of their affiliates in order to be able to use any BioScan Background IP or Developed IP
owned by BioScan (and not as a result of the combination of the same by any person other than
BioScan with any Intellectual Property owned by a third party) in a Project Catheter without
infringing the rights of such other person, the amount of such royalty or fee shall be offset
against the royalty payable to BioScan under this Section 4.2. If Spectranetics and BioScan cannot
agree on whether or not to pay a royalty or fee to such a person, or the amount of the

 

			
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royalty or fee to be paid, Spectranetics may pay the royalty or fee to such person, without offsetting any
payments so made against the royalties payable to BioScan, and submit the matter to binding
arbitration before a mutually agreeable un-affiliated arbitrator (who was not engaged by either
party in the past) who shall be a practicing patent attorney with at least 10 years experience in
dealing with Intellectual Property disputes. If the parties are unable to agree on an arbitrator
or on rules of conducting the arbitration, either party may apply to the New York office of the
American Arbitration Association for the appointment of an arbitrator with the qualifications and
experience described above and the arbitrator shall conduct the arbitration in New York according
to the rules of the American Arbitration Association. The sole charge of the arbitrator shall be
to determine whether the use of BioScan Background IP or Developed IP owned by BioScan in a Project
Catheter infringed the Intellectual Property right of such other person (and such infringement was
not as a result of the combination of the same by any person other than BioScan with any third
party Intellectual Property) and, if so, the amount of the royalty or other fee that it was
commercially reasonable to agree to pay. If the arbitrator determines that such use did infringe
the Intellectual Property rights of such other person (and was not a result of such a combination),
BioScan shall pay to Spectranetics an amount equal to the smallest of (i) the amount previously
paid by Spectranetics to such person, (ii) the amount that would have been previously paid to such
person based on the royalty or other fee that the arbitrator determined to be commercially
reasonable or (iii) the royalties previously paid to BioScan hereunder, plus, in each case,
interest at a rate of 6% from the date that each such offset was or would have been made or each
such royalty payment was made to the date of such payment by BioScan, and Spectranetics shall
offset all royalties or fees paid to such other person that were not recovered from the payment by
BioScan under clauses (i), (ii) or (iii) above (not to exceed the amount that the arbitrator
determined to be commercially reasonable) against future royalty payments to BioScan. If the
arbitrator determines a range rather than a specific number for the royalty or fee that it would
have been commercially reasonable to pay, the midpoint of the range shall be used for purposes of
calculating such payment and offset. If the arbitrator determines that such use did not infringe
the Intellectual Property rights of such other person (or was a result of such a combination),
Spectranetics shall not offset any amounts paid to such person against the royalties payable to
BioScan hereunder. Notwithstanding the foregoing, if the parties agree that it is necessary or
advisable to pay a royalty or other fee to such a person, but are unable to agree on the amount of
the royalty or fee, and Spectranetics pays a royalty or fee to such person that is higher than the
royalty or fee that BioScan was willing to approve under this Section, Spectranetics may offset
against royalties payable to BioScan the amount that BioScan was willing to approve (as evidenced
by a written offer from BioScan) and arbitrate only the amount of the royalty or other fee pursuant
to this Section.

          Notwithstanding anything to the contrary above, in order to maintain the exclusivity of the
BioScan Background IP License, Spectranetics shall be required to pay BioScan minimum royalties
pursuant to this Section 4.2 as follows:

 

			
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	 	Quarters after FDA Approval Date
	 	 	 	Minimum Annual
	 

	 	 	 	 	 	Royalty Payable

           [

                                         *****

]                              

          The minimum royalties given above are for a four-quarter period and not for each quarter
within the period. To the extent the aggregate amounts of royalties paid pursuant to this Section
4.2 in any four quarter period are less than the minimum amount described above for such four
quarters, Spectranetics shall pay any shortfall together with the payment of the last quarterly
payment made with regard to such four quarter period. In the event Spectranetics fails to pay such
minimums within 30 days of the date they are due, the BioScan Background IP License shall become,
automatically and without any further action, a non-exclusive license, but all other terms of this
Agreement shall remain in place. The conversion of the BioScan Background IP License to a
non-exclusive license shall be BioScan’s sole and exclusive remedy for any failure by Spectranetics
to pay the minimum royalties provided above.

          Section 4.3 Additional Royalty. In addition to the royalty payable under Section 4.2,
Spectranetics shall pay an additional royalty of [*****] of the sales price (as defined in Section
4.2) of the first [*****] of Project Catheters sold by Spectranetics, provided,
however, that Spectranetics shall pay BioScan [*****] pursuant to this Section 4.3
regardless of the number of Project Catheters sold no later than 24 months from the FDA Approval
Date, all subject to Section 6.2. The additional royalty shall be payable quarterly upon the
payment of royalties pursuant to Section 4.2 (in which case it shall be accompanied by the same
documentation, and will be subject to the same procedures as, royalties payable pursuant to Section
4.2) and any remaining amounts on the date that is 24 months from the FDA Approval Date.
Additional royalties payable under this Section 4.3 shall be offset by royalties paid to third
parties as provided in Section 4.2, without duplication. For the avoidance of doubt, in no event
shall the aggregate additional royalties payable under this Section 4.3 exceed [*****].

          Section 4.4 Improvements and Developments. For so long as the license provided in
Section 4.1 is in effect, any improvements or developments of BioScan Background IP or Developed IP
during or after the termination of the Project which are or would be useful in the manufacture,
sale or use of catheters or related devices or procedures in the Field shall be included in the
license granted to Spectranetics herein. BioScan shall make prompt, full and
complete written disclosures to Spectranetics of all information relating to each such
improvement or development.

 

			
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5. Milestone Payments to BioScan. In addition to the payments to BioScan described in the
Scope of Work and in Sections 4.2 and 4.3 above, Spectranetics will make payments to BioScan upon
the achievement of the milestones described below in the amounts set forth below:

	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 Milestone 
	 	 	 	 Amount	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	               [ 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 *****	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	            ]	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	[*****]
	 	 	 	[*****]	 	 

Each payment shall be made within 30 days after the achievement of the milestone. Any
decision to seek or not seek any FDA approval or clearance shall be made by Spectranetics.

6. Term and Termination. 

          Section 6.1 Right to Terminate Project. The Project shall continue until all
deliverables described in the Scope of Work (and in any subsequent scope of work in the addendum
described in Section 2.3) have been completed provided that:

               (i) BioScan and Spectranetics may terminate the Project by mutual agreement at any time;

               (ii) Spectranetics may terminate the Project at any time upon 30 days notice to BioScan, but
the effective date of such termination shall not be earlier than six months after the date of this
Agreement;

               (iii) BioScan may terminate the Project if the Project Catheter has not been submitted for
approval by the United States Food and Drug Administration or any successor agency within [*****]
of the date of this Agreement (or, if such approval is not required, commercial sales of Project
Catheters have not commenced within [*****] or if the
FDA Approval Date has not occurred within [*****] of the date of this Agreement;
provided, however, that the periods established in this clause (iii) shall be
automatically extended by the amount of any delay in completion of Phase I of Project from the time
frames set forth in the

 

			
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Scope of Work or any delay in completion of Phase II of Project from the
time frames set forth in the addendum contemplated by Section 2.3, in each case, to the extent, and
only to the extent, such delay is due to BioScan’s failure to use commercially reasonable efforts
to perform its obligations pursuant to this Agreement and any such addendum;

               (iv) Either party may terminate the Project if the other party fails to perform its
obligations under this Agreement in any material respect and such failure is not cured within 60
days after notice of nonperformance to the other party; and

               (v) Either party may terminate the Project if, after completion of Phase I of Project,
Spectranetics gives notice to BioScan pursuant to Section 2.3 that Spectranetics elects to proceed
with Phase II of Project, but the parties are unable to agree on the portions of a scope of work
for Phase II of Project that are to be performed by BioScan or on an addendum pursuant to Section
2.3; provided that a party may not terminate under this Section 6.1(v) unless it has first
performed its obligations under Section 2.3.

          Section 6.2 Effect of Termination.

               (a) If BioScan and Spectranetics terminate the Project by mutual consent under Section 6.1(i),
the termination agreement shall specify the effects of termination.

               (b) If Spectranetics terminates the Project prior to completion under Section 6.1(ii) the
BioScan Background IP License shall automatically and without any further action terminate, but
otherwise the provisions of Sections 3 through 19 shall remain in full force and effect, except
that any milestone payment that has not previously become due shall not thereafter become due or
payable.

               (c) If Spectranetics terminates the Project pursuant to Section 6.1(iv), the BioScan
Background IP License shall become non-exclusive, but otherwise the provisions of Sections 3
through 19 shall remain in full force and effect, except that the Applicable Percentage shall be
[*****] rather than [*****], no minimum royalties will be payable, the additional royalties
described in Section 7.3 shall not be payable and any milestone payment that has not previously
become due shall not thereafter become due or payable.

               (d) If BioScan terminates the Project pursuant to Section 6.1(iv), the BioScan Background IP
License shall automatically and without any further action terminate, but otherwise the provisions
of Sections 3 through 19 shall remain in full force and effect.

               (e) If, after completion of Phase I of Project, Spectranetics gives notice to BioScan that
Spectranetics does not elect to proceed with Phase II of Project as
provided in Section 2.3, Spectranetics shall be deemed to have terminated the Project pursuant
to Section 6.1(ii).

 

			
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               (f) If BioScan terminates the Project pursuant to Section 6.1(iii) then from and after such
termination, the BioScan Background IP License shall become non-exclusive, but otherwise the
provisions of Sections 3 through 19 shall remain in full force and effect, except that BioScan
shall have no obligations to continue and provide any services or products to Spectranetics or
anyone on its behalf.

               (g) If either party terminates the Project under Section 6.1(v), the provisions of Sections 3
through 19 shall remain in full force and effect, except that Spectranetics may conduct Phase II of
Project independent of BioScan, directly or through an independent contractor as provided in
Section 4.1.

               (h) Upon any termination of the Project, each party shall comply with Sections 3.4 and 3.5
with respect to all Developed IP developed prior to termination and during any wind-down phase of
the Project.

               (i) If the Project is terminated by Spectranetics pursuant to Section 6.1(ii), Spectranetics
shall be responsible for all budgeted costs incurred by BioScan in performing the Project prior to
the date of such termination not previously paid and all reasonable costs incurred in winding-down
operations related to the Project, such as paying severance to employees and paying for any
outstanding orders of materials or services, it being understood that severance must be consistent
with industry practice in Israel for such situations and related only to employees primarily
engaged in the Project.

          Section 6.3 Right to Terminate License. Notwithstanding Section 6.2 above, BioScan
may terminate all licenses granted to Spectranetics under Section 4.1: (i) if Spectranetics fails
to pay any royalty due under Section 4.2 or 4.3 and such failure continues for 30 days after
written notice of nonpayment from BioScan; provided that no right to terminate shall arise as a
result of any failure to pay the minimum royalties provided in Section 4.2 or if there is a bona
fide dispute over the amount of royalty due and Spectranetics pays the amount due within 30 days
following the resolution of that dispute; or (ii) if Spectranetics uses any BioScan Background IP
or BioScan Developed IP outside the Field or otherwise materially breaches or violates the terms of
any license granted pursuant to Section 4.1, and such use, breach or violation continues for more
than 30 days of being notified of the same.

7. Audit Right. BioScan shall have the right, at its expense, to audit Spectranetics’
books and records relating to the sale of Project Catheters to verify royalties due under this
Agreement. Spectranetics shall have the right, at its expense, to audit BioScan’s books and
records with respect to the Project to verify the costs and expenses incurred by BioScan in
connection with the Project. All information obtained in such an audit shall be Confidential
Information, but may be used by either party to enforce its rights under this Agreement.

8. Indemnity.

          Section 8.1 Indemnity by Spectranetics. Spectranetics shall defend, indemnify and
hold BioScan, its affiliates and their respective officers, directors, stockholders, partners,
members, employees and agents, harmless from and against any claims, damages, liabilities,

 

			
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Confidential Treatment Requested

losses, costs or expenses (including reasonable attorneys’ fees) (collectively, “Liabilities”) relating to
or arising out of (a) any claim by any third party for personal injury or property damage resulting
from the use of any Project Catheter, or (b) any breach of any representation or failure of
Spectranetics to perform any covenant or agreement made or contained in this Agreement.

          Section 8.2 Indemnity by BioScan. BioScan shall defend, indemnify and hold
Spectranetics, its affiliates and their respective officers, directors, stockholders, partners,
members, employees and agents, harmless from and against any Liabilities relating to or arising out
of any breach of any representation or failure of BioScan to perform any covenant or agreement made
or contained in this Agreement.

          Section 8.3 Indemnity for Breach of Intellectual Property of Third Parties. (a)
BioScan shall defend, indemnify and hold Spectranetics, its affiliates and their respective
officers, directors, stockholders, partners, members, employees and agents, harmless from and
against any Liabilities relating to or arising out of claims by any third party that
Spectranetics’ use in a Project Catheter of any BioScan Background IP or any Developed IP owned by
BioScan infringes the Intellectual Property rights of such third party, provided,
however, that: (i) BioScan’s indemnity will not extend to a combination by any person other
than BioScan of the BioScan Background IP or any Developed IP owned by BioScan with any
Intellectual Property of a third party where such combination is the cause of such infringement;
and (ii) BioScan’s liability pursuant to this Section 8.3(a) shall be limited to the amounts paid
by Spectranetics to BioScan pursuant to Section 4.2, as reduced by any offsets under the second
paragraph of Section 4.2 (including, if such Liabilities exceed the amounts already so paid, any
amounts that thereafter become payable to BioScan pursuant to Section 4.2 after the date of any
relevant judgment, such amounts to be recovered by Spectranetics by offset against such future
royalties as they become due, but in any case without duplication of any reduction of royalties
provided for in Section 4.2) and shall be reduced by any amounts paid by BioScan directly to such
third party with respect to the claims described in this Section 8.3(a); and (b) Spectranetics
shall defend, indemnify and hold BioScan, its affiliates and their respective officers, directors,
stockholders, partners, members, employees and agents, harmless from and against any Liabilities
relating to or arising out of claims by any third party that any Project Catheter infringes the
Intellectual Property rights of such third party, if and to the extent such amounts are not covered
by Section 8.3(a) (i.e., for any Liabilities arising from or related to claims covered by 8.3(a),
BioScan shall indemnify Spectranetics to the extent provided therein and Spectranetics shall
indemnify BioScan for any excess amounts).

          Section 8.4 Defense of Claims. In the case of any third-party claim against which
indemnification is claimed under this Section 8, the person claiming indemnification (the
“Indemnified Person”) shall give prompt written notice of the claim to the party from which
indemnification is sought (the “Indemnifying Party”), provided that no delay in giving such
notice shall excuse the Indemnifying Party from its obligation to indemnify unless and except to
the extent that its ability to defend the third-party claim is impaired by such delay. The
Indemnifying Party shall be entitled to defend and settle the third-party claim, provided that no
settlement shall be entered into without the Indemnified Person’s consent, which consent shall

 

			
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not be unreasonably withheld, except that the Indemnifying party may settle any claim without the
Indemnified Person’s consent if the settlement involves no obligation other than the payment of
money from which the Indemnifying Party provides complete indemnification hereunder and includes a
complete release of the Indemnified Person. If the Indemnifying Party fails to assume the defense
of the claim, the Indemnified Person shall defend the claim and shall be entitled to be indemnified
against the reasonable legal fees and other costs incurred in such defense. If the Indemnifying
Party assumes the defense of a third-party claim, it shall not be responsible for any legal fees or
related costs thereafter incurred by the Indemnified Person in connection with the claim; provided
that, if the Indemnifying Person is also a party to the claim and the representation of both the
Indemnified Person and the Indemnifying Party by the same counsel would involve a conflict of
interest for such counsel, the Indemnified Person may retain separate counsel to defend the claim
on its behalf and shall be entitled to indemnification against the reasonable legal fees and
related costs incurred in such defense. If the Indemnified Person defends any third-party claim,
whether as a result of the Indemnifying Party’s failure to assume the defense or as a result of a
conflict of interest, the Indemnified Person shall not settle the claim without the Indemnifying
Party’s consent, which consent shall not be unreasonably withheld. Amounts paid by an Indemnified
Person in a settlement entered into in compliance with this Section 8.3 shall be included in the
liabilities and losses against which the Indemnified Person is entitled to be indemnified under
Section 8.1 or 8.2. The parties shall cooperate in the defense of any claim, including making
documents and personnel available for interviews, depositions, hearings, trials and appeals, but
the Indemnifying Party shall reimburse the Indemnified Person for out-of-pocket costs in providing
such cooperation.

          Section 8.5 LIMITATION OF LIABILITY. EXCEPT AS SET FORTH IN SECTIONS 8.1, 8.2 AND
8.3 WITH RESPECT TO INDEMNIFICATION FOR THIRD PARTY CLAIMS, IN NO EVENT SHALL EITHER PARTY BE
LIABLE FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL OR EXEMPLARY DAMAGES (EVEN IF IT HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES) ARISING FROM SUCH PARTY’S PERFORMANCE OR FAILURE TO
PERFORM ANY COVENANT OR AGREEMENT MADE OR CONTAINED IN THIS AGREEMENT, INCLUDING LOSS OF PROFITS,
CONTRACTS, BUSINESS, REPUTATION OR GOODWILL

          Section 8.6 Sole Remedy. This Section 8 states the parties’ sole liabilities and
remedies for the matters covered herein.

9. Notices. All notices and other communications required or permitted hereunder shall be
in writing and may be given by any means selected by the sender. Each such notice or other
communication shall be effective (i) if sent by recognized courier for delivery to the recipient’s
address given below upon receipt; (ii) if sent by facsimile transmission, upon confirmation of
transmission by the sender’s fax machine; or (iii) if sent by any other means, when actually
received. The parties’ addresses and fax numbers for notice purposes, until changed by notice
given under this Section, are as follows:

 

			
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The Spectranetics Corporation

96 Talamine Court

Colorado Springs, Colorado 80907-5186

Attn: Guy Childs

Fax No.: 719-633-4207

BioScan Technology Ltd

P.O.Box 281

Yokneam Elite, 20692, Israel

Attn: Avram Matcovitch and Yacov Geva

Fax No.: +972 (4) 9937364

10. Remedies. All remedies under this Agreement, at law or in equity, shall be cumulative.
The Parties hereto agree that irreparable damage would occur if any of the provisions hereunder
relating to Confidential Information and Intellectual Property were not performed in accordance
with their terms or were otherwise breached and that each party shall have the right to injunctive
relief and other equitable remedies to enforce such provisions, without posting any bond or other
security.

11. Waiver. No failure or delay by either party in exercising any right, power or
privilege under this Agreement shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise of any right, power or privilege hereunder.

12. Successors and Assigns. This Agreement will inure to the benefit of and be binding
upon each of the parties hereto and their respective successors and assigns, provided that, except
to a party that acquires all or substantially all of its assets, stock or business or as otherwise
provided herein, neither party may assign its rights or delegate its duties hereunder without the
consent of the other party, not to be unreasonably withheld or delayed.

13. Severability. If it is found in a final judgment by a court of competent jurisdiction
(not subject to further appeal) that any term or provision hereof is invalid or unenforceable (a)
the remaining terms and provisions hereof will be unimpaired and will remain in full force and
effect and (b) the invalid or unenforceable provision or term will be replaced by a term or
provision that is valid and enforceable and that comes closest to expressing the intention of such
invalid or unenforceable term or provision.

14. Entire Agreement; Modification. This Agreement embodies the entire agreement and
understanding of the parties hereto and supersedes any prior agreements, arrangements and
understandings relating to the matters provided for herein. No alteration, waiver, amendment,
change or supplement hereto will be binding or effective unless the same is set forth in writing
signed by a duly authorized representative of each party.

15. Dispute Resolution. The Parties hereby irrevocably submit to the non-exclusive
jurisdiction of the courts of the State of New York, and the federal courts of the United States of
America located in the Southern District of New York solely in respect of the interpretation and
enforcement of the provisions of this Agreement and of the documents referred to in this

 

			
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Agreement, and hereby waive, and agree not to assert, as a defense in any action, suit or proceeding for the
interpretation or enforcement hereof or of any such document, that it is not subject thereto or
that such action, suit or proceeding may not be brought or is not maintainable in said courts or
that the venue thereof may not be appropriate or that this Agreement or any of such documents may
not be enforced in or by said courts, and the Parties irrevocably agree that all claims with
respect to such action or proceeding shall be heard and determined in such a New York state or
federal court. The Parties hereby consent to and grant any such court jurisdiction over the person
of the Parties and over the subject matter of any such dispute.. The prevailing party in any
litigation shall be entitled to recover, in addition to any other relief awarded by the court, its
reasonable costs and expenses, including attorneys’ fees, of preparing for and participating in the
litigation. If each party prevails on specific issues in the litigation, the court may allocate
the costs incurred by all parties on a basis it deem appropriate.

16. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL
RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED HEREBY.

17. Public Disclosure. Neither party shall make public disclosure of the existence or
terms of this Agreement without the advance approval of the other party, except as required by
applicable law. BioScan acknowledges that Spectranetics is a public company in the United States
and is required to publicly report and release material information concerning its business.
Spectranetics intends to issue a press release disclosing that it has entered into this Agreement
and may in the future be required or desire to issue additional press releases concerning this
Agreement or to refer to and include this Agreement in reports filed with the Securities and
Exchange Commission. Spectranetics shall provide the text of any such press release or report
(limited to the portion relating to this Agreement) to BioScan for review as far in advance as is
reasonably practicable and BioScan shall promptly review and approve or provide specific comments
on the text. Neither party shall include the other party’s name in any advertising, product
literature or other publicly disseminated materials without the advance approval of the other
party, except as required by applicable law.

18. Governing Law. This Agreement shall be governed by and construed under the laws of the
State of New York, without regard to its conflict of law provisions.

19. Independent Contractor. This Agreement does not constitute and shall not be construed
as constituting a partnership or joint venture between the Parties. Neither Party shall have any
right to obligate or bind the other Party in any manner whatsoever, and nothing herein contained
shall give, or is intended to give, any rights of any kind to any third persons. Each Party is an
independent contractor not affiliated with the other Party, and shall retain its independent status
throughout this Agreement and use its own discretion in its performance thereof. No employment
relationship is created by this Agreement.

 

			
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     IN WITNESS WHEREOF, the parties have executed this Catheter Development Agreement as of the
day and year first above written.

	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 	 	The Spectranetics Corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ John Schulte	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	John Schulte	 	 
	 

	 	Title:
	 	Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	 	 	BioScan Technologies Ltd.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Avram Matcovitch	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Avram Matcovitch	 	 
	 

	 	Title:
	 	Chief Executive Officer	 	 

 

			
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EXHIBIT A

Scope of Work

Project Description, Objectives, and Deliverables

The goal of the Project is to combine Spectranetics fiberoptic excimer laser catheter
technology with BioScan’s fiberoptic imaging technology. There is a large clinical need for
ablative devices with imaging or guidance means to navigate across CTOs and/or to debulk lesions in
the vasculature. This document will serve as the plan for Phase I of Project which is to
determine the feasibility of combining the 2 technologies to produce a catheter with ablation and
imaging capabilities. Reference the attached document in Exhibit B “Spectranetics Laser Guidance
Needs” which defines the overall requirements for the combined ablative imaging device.

Objectives:

Feasibility: Investigate physics and optimized configuration of a mixed-technology device

           [

*****

]                                        

Deliverables

	a)	 	Individual technical reports detailing outcomes of engineering testing

b) Test results summary
	 
	c)	 	Preliminary specifications and recommendations on the optimal catheter design that meet the
requirements listed in Exhibit B;
	 
	d)	 	Preliminary specifications and recommendations on the optimal image system design that meet
the requirements listed in Exhibit B.

Time Frame and Technical Plan

The time frame for Phase I of Project is [*****]. For the purposes of determining successful
completion within these timeframes, each time frame shall have a 20% additional time added to it,
rounded to the [*****] (e.g., aggregate time frame shall be [*****]).

 

			
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Development Plan:

[

*****

]                                        

Budget

Equipment

	a)	 	CVX- 300 Excimer laser, to be provided by Spectranetics,
	 
	b)	 	Equipment and materials list

	 	 	 	 	 	 	 
	 	 	Design/	 	 	 	 
	Equipment /Tools	 	Manufacture	 	Purchased	 	Total Cost
	Short pulse Excimer****

	 	Spectranetics	 	 	 	 
	Green Laser

	 	Bioscan	 	 	 	 
	Power Meter

	 	 	 	[*****]	 	 
	Hydrophone

	 	 	 	[*****]	 	 
	Computer

	 	 	 	[*****]	 	 
	Acquisition board

	 	 	 	[*****]	 	 
	Accessories

	 	 	 	[*****]	 	 
	Phantom

	 	[*****]	 	 	 	 
	Tissues

	 	 	 	[*****]	 	 
	Scope

	 	[*****]	 	 	 	 
	Ultrasonic transducer

	 	[*****]	 	 	 	 
	Optics & Mechanic components

(optic switch)

	 	[*****]
	 	[*****]	 	 
	Electronic components

(photo-diodes, print,

passive/active components)

	 	 	 	[*****]	 	 
	Animal lab

	 	[*****]	 	 	 	 
	Material (fibers, connectors,

glues, polyimide tubes, ...)

	 	 	 	[*****]	 	 
	 
	 	 	 	 	 	 
	TOTAL

	 	[*****]
	 	[*****]
	 	[*****]

 

			
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Securities and Exchange Commission.

2

 

Confidential Treatment Requested

*** If a short Excimer laser is not required

c) Except for the laser to be provided by Spectranetics, all equipment will be provided and/or
purchased by BioScan. BioScan owns or has access to all other equipment necessary for Phase I of
Project and shall make it available for use in Phase I of Project without charge.

Personnel (BioScan side)

	 	 	 	 	 	 	 	 	 	 	 
	Personnel	 	Months	 	Time, %	 	Salary	 	Benefits	 	Total Cost
	R&D Mng.

	 	[	 	 	 	 	 	 	 	 
	Project Manger
	 	 	 	 	 	 	 	 	 	 
	Electr. Eng.
	 	 	 	 	 	 	 	 	 	 
	Physicist
	 	 	 	 	 	 	 	 	 	 
	Software eng.

	 	 	 	 	 	*****	 	 	 	 
	Bio-Engineer
	 	 	 	 	 	 	 	 	 	 
	Electro-optics
	 	 	 	 	 	 	 	 	 	 
	Technician
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	]

Spectranetics will provide required technical support, materials, and facilities in Colorado
Springs.

Budget Summary

	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	COMMENTS	 
	 	Materials

	 	 	[*****]
	 	 	[*****]	 
	 	Equipment

	 	 	[*****]
	 	 	[*****]	 
	 	Facilities

	 	 	[*****]
	 	 	[*****]	 
	 	Personnel

	 	 	[*****]	 	 	 	 
	 	Consultancy (technique)

	 	 	[*****]
	 	 	[*****]	 
	 	Travel

	 	 	[*****]
	 	 	[*****]	 
	 	Legal

	 	 	[*****]
	 	 	[*****]	 
	 	Unexpected

	 	 	[*****]
	 	 	[*****]	 
	 	Total

	 	 	[*****]	 	 	 	 
	 

 

			
	*****	 	Confidential portions of the material have been omitted and filed separately with the
Securities and Exchange Commission.

3

 

Confidential Treatment Requested

Payments to BioScan:

Spectranetics will pay [*****] to BioScan using the following schedule:

[

                                         *****

]                                        

Payment of Costs

BioScan will be responsible for facility, equipment, materials, travel, and personnel costs
incurred during Phase I of Project and will own all equipment (except the CVX-300 laser) and
materials purchased for Phase I of Project.

Spectranetics will provide, at its expense, a CVX-300 laser, fibers, catheters, technical support,
Spectranetics personnel travel, and a lab space at its facility in Colorado Springs.

 

			
	*****	 	Confidential portions of the material have been omitted and filed separately with the
Securities and Exchange Commission.

4

 

Confidential Treatment Requested

EXHIBIT B

Spectranetics Laser Guidance Needs

Spectranetics is focusing its research and development efforts in 2 areas: [*****]. Merging
guidance technology (imaging, detection, etc.) with our excimer laser technology would improve our
ability to safely and consistently [*****].

[

*****

]                    

 

			
	*****	 	Confidential portions of the material have been omitted and filed separately with the
Securities and Exchange Commission.

5

 

Confidential Treatment Requested

EXHIBIT C

BioScan Patents and Patent Applications

	 	 	 	 	 	 	 	 	 	 	 	 	 
	Pat Att.	 	Title	 	Inventors	 	 	Comments	 
	[
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	*****	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	]     	 

 

			
	*****	 	Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.

1

 

Confidential Treatment Requested

EXHIBIT D

Spectranetics Patents and Patent Applications

[

*****

 ]

 

			
	*****	 	Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.

1

 

Confidential Treatment Requested

FOREIGN PATENTS

[

*****

 ]

 

			
	*****	 	Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.

2

 

Confidential Treatment Requested

LICENSED PATENTS

[

*****

 ]

 

			
	*****	 	Confidential portions of the material have been omitted and filed separately with the Securities and Exchange Commission.

3exv10w3

 

Exhibit 10.3

EXECUTION COPY

TECHNICAL SERVICES AGREEMENT

By and Among

CHlNACAST TECHNOLOGY (SHANGHAI) LIMITED

THE CCLX SHAREHOLDERS

and

CHlNACAST LI XIANG CO LTD

Dated as of 11th August 2003

 

 

     This
TECHNICAL SERVICES AGREEMENT (“Agreement”) is entered into
as of
11th August
2003, by and among ChinaCast Technology (Shanghai) Limited, a wholly foreign-owned limited
liability enterprise organized and existing under the laws of the
People’s Republic of China (“PRC”) (“CCT
Shanghai”); CHINACAST LI XIANG CO LTD (CHINESE
CHARACTERS), a limited
liability company organized and existing under the laws of the PRC (“CCLX”); CHINACAST CO., LTD.
a limited liability company organized and existing under the laws of the PRC, (“CCL”); and LI
WEI, an individual and citizen of the PRC, (“LW”) (CCL and LW are referred to collectively as the
“CCLX Shareholders”). CCLX and CCT Shanghai are each individually referred to herein as a “Party”
and both are collectively referred to herein as the “Parties”.

RECITALS

     WHEREAS, CCLX wishes to secure the assistance of CCT Shanghai to assist CCLX in the
implementation of CCLX’s businesses in the PRC, which are in relation to the provision of computer,
telecommunications, and information technology products and services including but not limited to
the provision of internet service and content and generally, to perform all acts, matters and
things as may be consistent with, necessary for and incidental to the attainment of the foregoing
object (the “Business”);

     AND WHEREAS, CCT Shanghai wishes to assist CCLX to implement the Business;

     NOW THEREFORE, in consideration of the foregoing and the mutual promises, covenants and
agreements contained in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are acknowledged expressly, the Parties hereby agree as follows:

ARTICLE I. PROVISION OF SERVICES AND ANCILLARY EQUIPMENT

     Section 1.1 Services. CCT Shanghai will, during the term of this Agreement and to the
extent of CCLX’s needs, provide and CCLX will take and pay for the Services set forth in Appendix
A, with respect to the Business. CCT Shanghai will provide the Services solely in the capacity of
an independent contractor and consultant to CCLX. The General Manager of CCLX will retain all
authority and responsibility to conduct the affairs of and to manage CCLX. CCT Shanghai may, at
its option, assign any of its rights hereunder and/or delegate the performance of the Services
described in this Section 1.1 to a subcontractor or affiliate of CCT Shanghai; provided that any
such assignment, delegation, or subcontract will not relieve CCT Shanghai of its obligations
hereunder. CCLX shall not assign this Agreement without the prior written approval of CCT
Shanghai.

     Section 1.2 Equipment. In connection with provision of the Services hereunder, CCT
Shanghai will supply to CCLX for its use ancillary Equipment as set forth in Appendix B hereto
together with certain associated software and technical documentation. Such use of ancillary
Equipment by CCLX will be without additional charge.

     Section 1.3
Obligation to Return Equipment. Upon the occurrence of any of the
following events in the determination of CCT Shanghai, CCLX will promptly take all action to

1

 

deliver and return the Equipment and the related software and documentation in the possession of
CCLX to CCT Shanghai, except to the extent CCT Shanghai has waived its right to the return of such
Equipment as contemplated in Section 2.3 hereof: (i) termination of this Agreement, or (ii)
material breach by CCLX of this Agreement, the pledge agreement among ChinaCast Co., Ltd. (“CCL”),
Beijing Col Network Technology Co., Ltd., Shenzhen Zhongxun Teng Investment Development Co., Ltd.,
Tibet Tiantai Investment Management Co., Ltd. and CCT Shanghai dated November 15, 2000 and amended
pursuant to the supplemental deed of even date between the same parties (collectively, the “CCL
Pledge Agreement”) or the pledge agreement among CCLX, CCL, Li Wei and CCT Shanghai of even date
(the “CCLX Pledge Agreement” and together with the CCL Pledge Agreement, the “Pledge Agreements”).
In the event CCLX fails to promptly and fully return the Equipment in good operating condition and
the related software and documentation to CCT Shanghai in its sole determination, such event shall
be an equipment return default (“Equipment Return Default”), and CCT Shanghai shall be entitled to
immediately avail itself of any and all legal actions and proceedings to recover the Equipment
and/or to foreclose upon the Pledged Collateral pursuant to each of. the Pledge Agreements.

     Section 1.4 Rights to Use Equipment and Software. CCT Shanghai
hereby
grants to CCLX the non-exclusive, non-transferable right to use all Equipment and software
provided by CCT Shanghai under this Agreement solely in the conduct of the Business.

     Section 1.5 Warranty. CCT Shanghai warrants that the Services will be provided in a
good and workmanlike manner, exercising that degree of skill, diligence, prudence and foresight
which would reasonably be expected from a fully skilled, experienced and competent contractor
and/or operator engaged in the same type of undertaking under the same or similar conditions in
the same or a similar location. CCLX’s sole and exclusive remedy for breach of this warranty will
be the provision of replacement Services by CCT Shanghai. CCT Shanghai makes no other warranty,
express or implied, relating to the Services, ancillary Equipment, software, know how or other
things delivered under this Agreement.

ARTICLE II. COMPENSATION

     Section 2.1 Compensation. As compensation for the performance of the Services,
including the provision of ancillary Equipment, CCLX will pay to CCT Shanghai on the tenth
business day of each calendar month, in Renminbi and in immediately available funds in an account
designated by CCT Shanghai, service fees in an amount equal the difference between the total cash
revenue CCLX has received in the preceding month and CCLX’s cash paid out or allocated to pay for
the operating expenses (including without limitation cost reimbursements and taxes as contemplated
in Section 2.2 and 2.4) as agreed between CCLX and CCT Shanghai from time to time, for that
preceding month in amounts not exceeding the applicable monthly operating expenses budget in the
CCLX business plan approved by the Board of Directors of CCLX from time to time (“Service Fee”).

     Section 2.2 Cost Reimbursement. CCLX will, within 30 days of receipt of CCT Shanghai’s
invoice with reasonable supporting documentation, reimburse CCT Shanghai for all costs and fees
incurred in connection with the exportation, importation, shipping and delivery of the Equipment,
including, but not limited to, freight, customs duties, taxes, warehousing, and insurance costs.

2

 

     Section 2.3 CCT Shanghai Right to Decline Return of Equipment. CCT Shanghai may, from
time to time, subject only to applicable PRC law and to the terms of each of the Pledge Agreements,
elect to decline the return of any item of equipment (the “Transferred Equipment”) to CCLX and
cause Relinquishment (as defined in the Pledge Agreement). Upon receipt of notice of Relinquishment
(as specified below), the CCLX Shareholders shall assign, transfer and deliver to CCT Shanghai, or
its designated Affiliate (as defined in the Pledge Agreement) or third party, free from any
interest of the CCLX Shareholders all of their respective right, title and interest in and to the
corresponding amount of Ownership Rights (as defined in each of the Pledge Agreements) to be
transferred as set forth in the notice of Relinquishment. The CCLX Shareholders shall promptly take
all actions to execute any documents or instruments necessary to initiate and complete all
proceedings and procedures required to transfer their respective Ownership Rights. Such
Relinquishment, once effected, shall terminate CCLX’s obligation under Section 1.3 above to return
such Transferred Equipment to CCT Shanghai.

     CCT Shanghai will make such election by providing to CCLX a written notice of Relinquishment
together with a calculation of the average of the replacement cost of the Transferred Equipment
and the original cost of such Transferred Equipment (such average being the “Cost of Transferred
Equipment”) together with a calculation of the number of shares in CCLX which are of equal value
to such the Cost of Transferred Equipment, such •calculation to be made by dividing the net asset
value of CCLX (as determined by CCLX’s accountants based on CCLX’s books of the close of the most
recent calendar quarter increased by the Cost of Transferred Equipment), by the total number of
Ownership Certificates as of the close of the most recent calendar quarter. In the event CCLX
disputes in good faith any of the foregoing calculations, CCT Shanghai may retain an
internationally-recognized independent accounting firm selected by CCT Shanghai to make such
calculations and the Parties will be bound by the calculations of such accounting firm. CCLX will
pay for the services of the accounting firm if such firms binding calculations are no more
favorable to CCLX than CCT Shanghai’s calculations, which CCLX challenged, otherwise, CCT Shanghai
will pay for the services of the accounting firm.

     Section 2.4 Taxes. CCLX will pay all import duties, value-added taxes and business
taxes arising from the provision of Services and ancillary Equipment set forth in Appendices A and
B respectively.

ARTICLE III. TERM

     This Agreement will be effective upon its execution by the Parties and will continue for a
term of twenty years, provided that CCT Shanghai may terminate this Agreement without cause by
giving CCLX notice of termination no less than one year prior to the effective date of
termination.

ARTICLE IV. LIMITATIONS OF LIABILITY

     Section 4.1 Limitation of Liability. Notwithstanding anything to the contrary
contained in this Agreement, neither CCT Shanghai nor its shareholders, nor any of its or their

3

 

respective directors, officers, agents, or employees, nor any person or entity controlling any of
the forgoing will be liable to CCLX for any claim arising under or in connection with this
Agreement except claims for injury or death caused to persons or damage to tangible personal
property to the extent caused by CCT Shanghai and except for claims based on CCT Shanghai’s gross
negligence or willful misconduct in the performance of its obligations hereunder. No act or
omission which may be the result of an error of judgment or mistake made in good faith will be
considered gross negligence or willful misconduct. Notwithstanding anything to the contrary
contained in this Agreement, CCLX will have no right to recover indirect, special, incidental,
consequential, or punitive damages or damages for loss of profits that may result from any action
or inaction of CCT Shanghai in connection with this Agreement.

     Section 4.2 Force Majeure. Failure of either Party to perform any obligations
hereunder will be excused (except that any obligation to pay money will not be excused) to the
extent such failure is attributable to events which are beyond the control of the defaulting Party
including, without limitation, earthquakes, typhoons, flood, fire, war, or the action or inaction
of any governmental authority (events of “Force Majeure”). A Party claiming the event of Force
Majeure will notify the other Party within fifteen (15) days,
explaining the nature of such event of Force Majeure, the anticipated duration and actions required by the affected Party to correct
the deficiencies resulting from such event. Upon an event of Force Majeure, the Parties will
immediately consult with each other to find an equitable solution and will use -commercially
reasonable efforts to mitigate the consequences caused by such event.

ARTICLE V. ADMINISTRATION

     Section 5.1 Representative. Each Party will, by notice to the other Party, appoint one
individual who will represent the appointing Party in all matters relating to this Agreement.
Either Party may change its representative at any time by notice to the other Party.

     Section 5.2 Right to Inspect. CCLX will have the right, at its reasonable request and
expense, to inspect any Service or ancillary Equipment provided under this Agreement and to
inspect any records kept by CCT Shanghai as required by this Agreement.

     Section 5.3 Employees. All personnel used by CCT Shanghai in the performance of this
Agreement will be employed or otherwise retained by CCT Shanghai and will not be deemed employees
of CCLX. CCT Shanghai will be responsible for supervising such individuals, for paying all salaries
and benefits and for meeting all government liabilities with respect to such individuals.

     Section 5.4 Exchange of Information and Confidentiality. The Parties will exchange
information as may be reasonably necessary to implement this Agreement. Each Party will maintain
in confidence and will use solely for the purposes of this Agreement all information disclosed by
the other Party in a writing marked “Confidential” or “Proprietary” provided that:

     a. The receiving Party may disclose such information in compliance with any requirement of any
governmental authority, provided that the receiving Party uses best reasonable efforts to afford
the disclosing Party notice and an opportunity to object to such disclosure;

4

 

     b. The receiving Party may disclose such information to its agents or employees
who have a need to know such information and who have agreed in writing to protect such
information from further disclosure on terms substantially similar to the terms of this
Section 5.4; and

     c. The receiving Party may disclose such information if such information has
entered the public domain (other than through the unauthorized disclosure of the receiving
Party).

ARTICLE
VI. MISCELLANEOUS

     Section 6.1 Authority. Each of the Parties hereby represents and warrants to the
other Party that each has the power to execute and perform this Agreement; and that this Agreement
upon execution will constitute the valid, lawful, binding and enforceable obligations of each
Party.

     Section 6.2 compliance with Law. The Parties will comply with all laws in the
performance of this Agreement and their respective business activities. Without limiting the
foregoing, CCT Shanghai and CCLX agree not to pay or promise to pay or give or promise to give
anything of value, either directly or indirectly, to an official of the Chinese or any other
government for the purpose of influencing an act or decision of any such government or its
officials in connection with the performance of this Agreement and their respective business
activities.

     Section 6.3 . Relationship of Parties. The Parties will perform their obligations
under this Agreement as independent contractors. Nothing in this Agreement will render the Parties
hereto liable as partners, associates, or joint venturers or to create a partnership, joint
venture or association.

     Section 6.4 Governing Law; Dispute Resolution. This Agreement will be governed by, and
construed in accordance with, the laws of the PRC. The Parties will use their best efforts to
resolve all disputes arising in connection with this Agreement promptly through friendly
negotiations. In the event that no settlement is reached within thirty days following notice by one
Party to the other of the occurrence of a dispute, the dispute will, at the request of either
Party, be referred to and finally resolved by arbitration in Beijing at the China International
Economic and Trade Arbitration Commission (“CIETAC”) in accordance with its Rules then in effect
(which Rules are deemed to be incorporated by reference into this section). Such arbitration will
be conducted in the English and Chinese languages by a panel of three arbitrators. Each of CCLX and
CCT Shanghai will appoint one arbitrator. The third arbitrators will be mutually agreed upon by
CCLX and CCT Shanghai. In the event CCLX and CCT Shanghai fail to agree within 20 days, the third
arbitrator will be appointed by CIETAC pursuant to its Rules within 30 days from the date of
receipt of notice to make such appointment. If selected pursuant to the immediately preceding
sentence, the third arbitrator must be chosen from among the CIETAC panel of arbitrators from one
of the following countries: Australia, Canada, Germany, Hong Kong Japan, Singapore, Sweden,
Switzerland and the United States. The arbitrators will decide in their award the allocation of
costs, including the arbitrators’ fees and all other costs to which the dispute may give rise. The
award of the arbitrators will be final and without appeal. Any

5

 

competent court may enforce such award.

     Section 6.5 Language. This Agreement is written and executed in both the English and
Chinese languages, each of which will be of equal force and effect.

     Section 6.6 Amendments. This Agreement and its provisions may be amended,
interpreted, waived, discharged or terminated only by a writing signed by each of the Parties
hereto.

     Section 6.7 Notices. All notices and other communications required or permitted
hereunder shall be in the English language, in writing and shall be (i) mailed by registered or
certified mail, postage prepaid; (ii) sent by facsimile or electronic mail with electronic
confirmation of receipt; or (iii) delivered by hand or by an internationally-recognized overnight
courier with written confirmation of receipt, addressed (a) if to a party hereto, at such Party’s
address set forth below, or at such other address as such Party shall have furnished to the other
Parties in writing:

	 	 	 	 	 
	If to ChinaCast Technology (Shanghai) Limited:
	Address:	 	8th Floor, Tianjin Building

167 Connaught Road West

Hong Kong
	 

	 	Attn:
	 	Mr Ron Chan
	 

	 	Tel:
	 	852 2811 2389
	 

	 	Fax:
	 	852 2811 2973
	 

	 	E-mail:
	 	ronchan@chinacast.com.cn
	 
	 	 	 	 
	If to CCLX:
	 	 	 	 
	Address:	 	15th Ruoy Chai International Building

No. 8 Yong An Dong Li

Jian Guo Men Wai Avenue

Beijing 100022

PRC
	 

	 	Attn:
	 	Mr Yin Jian Ping
	 

	 	Tel:
	 	86 10 6566 778
	 

	 	Fax:
	 	86 10 8528 8366
	 

	 	E-mail:
	 	yinjp@chinacast.com.cn
	 
	 	 	 	 
	If to CCL:
	 	 	 	 
	Address:	 	15th Ruoy Chai International Building

No. 8 Yong An Dong Li

Jian Guo Men Wai Avenue

Beijing 100022

PRC
	 

	 	Attn:
	 	Mr Yin Jian Ping
	 

	 	Tel:
	 	86 10 6566 778
	 

	 	Fax:
	 	86 10 8528 8366
	 

	 	E-mail:
	 	yinjp@chinacast.com.cn

6

 

	 	 	 	 	 
	If to LW:
	 	 	 	 
	Address:	 	15th Floor, Ruoy Chai International Building

No. 8 Yong An Dong Li 
Jian
Guo Men Wai Avenue 
Beijing
100022 
PRC
	 

	 	Tel:
	 	86 10 65667788
	 

	 	Fax:
	 	(86) 10-8528 8366
	 

	 	E-mail:
	 	wei.li@chinacast.com.cn

Each such notice or other communication shall for all purposes of this Agreement be treated as
effective or having been given (x) in the case of personal delivery or delivery by facsimile or by
electronic mail, on the date of such delivery, (y) in the case
of an internationally-recognized overnight courier, on the fifth business day after the date when sent and (z) in the case of
mailing, on the tenth business day following that on which the piece of mail containing such
communication has been deposited in a regularly maintained receptacle for the deposit of mail,
addressed and mailed as aforesaid.

     Section 6.8 Further Assurances. CCT Shanghai and CCLX each agree to execute and
deliver such additional documents and to take such additional actions as may be necessary or
appropriate to effect the provisions of this Agreement and all transactions contemplated hereby.

     Section 6.9 Severability. In the event that any provision of this Agreement becomes
or is declared by a competent authority to be illegal, unenforceable or void, this Agreement
shall continue in full force and effect without said provision, and the Parties shall promptly
negotiate in good faith (such negotiations to be subject to the arbitration clauses of this
Agreement) a legal and enforceable replacement provision which as nearly as possible puts the
Parties in the position in which they would have been were such provision not declared illegal,
unenforceable or void.

     Section 6.10 No Third Party Beneficiary. Nothing in this Agreement, express or
implied, is intended to confer upon any Person other than the Parties hereto and their
respective permitted successors and assigns any rights, benefits, or obligations hereunder.

     Section 6.11 Remedies Cumulative. Subject to the limitations set forth in Article
IV hereof, the rights and remedies available under this Agreement or otherwise available will be
cumulative of all other rights and remedies and may be exercised successively.

     Section 6.12 CCLX Shareholders. CCL and LW jointly and severally agree to the
terms and conditions of this Agreement and shall take any and all action to ensure the due and
prompt performance of this Agreement by CCLX and each of the CCLX Shareholders.

     Section 6.13 Counterpart Execution. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original but all of which together will constitute
one and the same instrument.

7

 

     IN WITNESS WHEREOF, the Parties and the CCLX Shareholders hereto have caused this Agreement to
be executed and delivered as of the date first written above.

	 	 	 	 	 
	 

	 	CHINACAST TECHNOLOGY (SHANGHAI) LIMITED	 	 
	 
	 	 	 	 
	 

	 	By:
/s/ Chan Tze
Ngan

Name: Chan Tze Ngan

Title: Director

	 	
	 
	 	 	 	 
	 

	 	CHINACAST LI XIANG CO LTD	 	 
	 
	 	 	 	 
	

	 	By:
/s/ Yin
Jian Ping

Name: Yin Jian Ping

Title: Director
	 	 
	 
	 	 	 	 
	 

	 	CHINACAST CO., LTD.	 	 
	 
	 	 	 	 
	 

	 	By: 
/s/ Yin Jian Ping

Name: Yin Jian Ping

Title: Director

	 	
	 
	 	 	 	 
	 

	 	LI WEI	 	 

8

 

APPENDIX A 

SERVICES

Statement of Work

For Technical Goods and Services To

ChinaCast Li Xiang Co Ltd from

ChinaCast Technology (Shanghai) Limited

1. INTRODUCTION

This Statement of Work (“SOW”) describes certain technical services and other advice, consulting,
and services, and the provision of ancillary Equipment, Software and Know-How (individually and
collectively “Services”) that ChinaCast Technology (Shanghai) Limited (“CCT Shanghai”) will
provide to ChinaCast Li Xiang Co Ltd (“CCLX”) in conjunction with CCLX’s 3 primary areas of
business, being;

	1.	 	Turbo 163 via DirecPC
	 
	2.	 	Digital Data Network (DDN Enhancement)
	 
	3.	 	Cablenet

These businesses are described in greater detail below.

1.1 DirecPC Services

CCT Shanghai will provide Services as specified in this SOW to support CCLX’s provision to its
customers (CCLX’s customers are referred to as
“Customers”) of high speed broadband services via
satellite (“Turbo 163 via DirecPC”).

CCT Shanghai and CCLX expect that the Services to support the provision of Turbo 163 via DirecPC
service will include advice, related technical and other consulting and services in connection
with (i) the supply, operation and maintenance of a DirecPC Network Operations Center (“NOC”);
(ii) the supply, installation and maintenance of service access kits for Customers (“DAKS”); and
(iii) the payment of the space segment bandwidth fee and of sales, marketing, fulfillment, billing
and Customer care services. CCLX will be responsible for the operation and maintenance of the NOC
and will own and sell DAKS.

1.2 DDN Enhancement Services

CCT Shanghai will provide Services as specified in this SOW to support CCLX’s provision to China
Telecom of high speed broadband services and facilities to enhance the availability and geographic
coverage of China Telecom’s Digital Data Network (“DDN”).

CCT Shanghai and CCLX expect that the Services will include advice, related technical and other
consulting and services in connection with the installation, operations and maintenance of a main
NOC in Beijing and approximately 30 interconnection facilities locations throughout the PRC. CCT
Shanghai would also provide high speed back up channels and VSAT terminals at Customer sites
requiring high speed service.

9

 

1.3 Cablenet Services

The Cablenet business can be described as 3 different services;

	1.	 	TV Distribution — CCLX provides facilities for the delivery of up to 100 channels of
TV content to cable Multi-System Operators (“MSOs”) throughout China.
	 
	2.	 	One Way — CCLX provides facilities for the delivery of high speed internet data
through one-way cable plant in China. The return channel is via the China Telecom
“163” service. This business is essentially the “Turbo 163 via DirecPC” service
delivered via cable.
	 
	3.	 	Two Way — CCLX provides facilities for high speed and interactive TV services via
2-way cable plant in China.

The various service offerings of the Cablenet business will allow MSOs to leverage their
respective infrastructures to deliver high-bandwidth interactive data services. Cablenet will
provide to MSOs a turnkey solution, which includes a technology platform and a brand as well as
ongoing marketing, customer service, billing and product development support. The MSOs bear the
cost of maintaining their cable systems, distributing required subscriber equipment, installing
the broadband services in subscribers’ homes.

1.3.1 Cablenet TV Distribution

The objective of the TV Distribution service is to centralize the distribution of content so as to
provide an aggregate of 100 video channels to be offered to MSO’s throughout China. The service
delivery is based on satellite so as to provide efficiency in the transmission of content. The
initial service will start with approximately 8 channels but will expand over time as the number
of video channels increase.

While SARFT will be active in the aggregation of content it is envisioned that CCLX, with the
support and assistance of CCT Shanghai, will expand its services to include content aggregation
and generation. As these additional services are to be developed in the future they are not
described in this SOW.

In support of the TV Distribution service, CCLX, with the technical support and assistance of CCT
Shanghai, will do the following:

	•	 	Establish a central TV uplink facility
	 
	•	 	Obtain satellite space segment sufficient to support the transmission of the TV content
throughout China. CCT Shanghai will support and assist CCL by defining
requirements and negotiating relevant contracts and agreements. CCL will execute
contracts and agreements and will be responsible for payment and other obligations
thereunder.
	 
	•	 	Market the TV delivery facilities to various cable MSO’s throughout the PRC
	 
	•	 	Supply, install, commission and operate receiving equipment at enlisted MSO
headend facilities

1.3.2 Cablenet Two-Way Data

The Two-Way Data service is a broadband service which provides for both high speed data delivery
as well as interactive TV to cable subscribers. The Two-Way Data service requires

10

 

advanced cable infrastructure like Two-way hybrid fiber-coaxial. Currently only 5% of cable
systems in China are Two-Way capable but this percentage is forecast to grow rapidly as the
existing cable plant is upgraded to two-way capability. To support the Two-Way services Cablenet
will introduce a “platform” consisting of head-end equipment which will enable to provision of
advanced services.

With the TV programming/ Internet content synchronization function installed, subscribers would be
able to experience an unprecedented multimedia experience. Subscribers will be able to view linear
content and simultaneously tap the resources of the Internet to drill down more detailed
information to interact at any number of levels including e-commerce.

CCT Shanghai will provide technical support and assistance to CCLX in the following activities
relating to the Cablenet business:

	•	 	Marketing support for various MSOs as “resellers” or “distributors” of the Cablenet
service
	 
	•	 	Working with SARFT and other PRC governmental organizations to establish the
necessary regulatory approvals for content and technology supporting the Cablenet
service business
	 
	•	 	Establishment of the network infrastructure to support the provision of the various
Cablenet services
	 
	•	 	Installation, commissioning and technical support, advice, services and consulting in
connection with the operation and management of the network facilities used to
provide the Cablenet services at various MSOs.

1.3.3 Cablenet One-Way Data

As noted above the One Way Data service entails the provision of DirecPC services to subscribers
via a one way cable infrastructure. With the exception of the distribution and fulfillment of
subscriber equipment all aspects of the operation of this service are substantially the same as
described in the “Turbo 163 via DirecPC” service. In the Cablenet business the MSOs will be
responsible for the distribution and fulfillment services associated with the subscriber
equipment. Consequently the remainder of this document focuses only on the TV Distribution service
and Two Way Data service of Cablenet. It is envisaged that in 5 years, the One-Way service will be
phased out slowly as the cable plant of various MSO’s are upgraded to support two-way digital
operations.

1.4 Service Overview

CCT Shanghai will provide technical advice, consultation and services in connection with DirecPC,
DDN and Cablenet Services and CCLX will accept and pay for the following technical advice,
consultation and services to support CCLX in:

	1.	 	Complete NOC operation support, consisting of 24-hour per day, 365-days per year
technical support services, network supervision and control, and trouble reporting,
isolation and resolution.
	 
	2.	 	Installation services for Customer premise equipment (“CPE”) including Head-end
Equipment, DAKs and/or VSATs, including planning and scheduling and assistance
in securing permits and approvals when required.

11

 

	3.	 	Procurement support, including traffic analysis and planning, of Internet bandwidth
sufficient to support the network and its growth to maintain the network performance
	 
	4.	 	Space segment bandwidth and support, including the planning of satellite transponder
capacity required to support CCLX’s network and its growth, and technical support
and assistance in procurement of such satellite transponder capacity.
	 
	5.	 	CPE maintenance, including 8:00 a.m. to 6:00 p.m., Monday through Friday service
coverage, trouble reporting, remote service dispatch, problem isolation and resolution,
and supplementary maintenance and repair or replacement services when required.
	 
	6.	 	Monthly reports and other information listing data on installation schedules and
service outages.
	 
	7.	 	Program Management, including network planning and implementation of Service.
	 
	8.	 	Provision and maintenance of terrestrial communications between Customer premises
and service nodes as required. In the case of the DirecPC service, CCLX will be
responsible for the provision and maintenance of terrestrial communications between
the China Telecom 163 internet backbone and the NOC.
	 
	9.	 	Sales and Marketing Support — This includes sales collateral material, white papers,
marketing seminar support, PR/promotions support, etc.
	 
	10.	 	Customer Care/Billing Platform Support.
	 
	11.	 	Administrative Support — Accounting/finance and legal support.
	 
	12.	 	Research & Development/Engineering Support — Product and service development
and engineering support.

2. ANCILLARY EQUIPMENT PROVIDED

To the extent of CCLX’s requirements, and incident to its provision to CCLX of technical advice,
consultation and services, CCT Shanghai will provide CCLX ancillary equipment including, but not
limited to the following types:

	•	 	Hughes Network Systems DirecPC NOC hardware and software
	 
	•	 	Hughes Network Systems ISBN/PES hardware and software
	 
	•	 	Hughes Network Systems TRES hardware and software
	 
	•	 	Hughes Network Systems Bandwidth On Demand software
	 
	•	 	Intel Digital Architecture (IDA), a two-way cable network infrastructure consisting of
various hardware and software systems
	 
	•	 	Video Uplink Facility including video retransmission equipment
	 
	•	 	Radio Frequency Transmission (RFT) facility at the Beijing NOC sufficient to
support the traffic for this site
	 
	•	 	Customer Care Platform to support the recording and tracking of customer contact
information including billing
	 
	•	 	Head-end Video down-link

12

 

	•	 	Two-Way Cable Head-end equipment
	 
	•	 	Test equipment
	 
	•	 	Spare parts
	 
	•	 	Office supplies
	 
	•	 	Tools

2.1 Use of Proprietary Domain Names

CCT Shanghai or its affiliate will provide CCLX the non-exclusive use of the following proprietary
domain names.

www.turbo163.net

www.turbo163.com

www.direct163.com

CCT Shanghai will formulate the domain name strategy for the various CCLX business and
provide the necessary domain names for CCLX’s non-exclusive use.

3. NETWORK OPERATIONS

3.1 Space Segment

CCT Shanghai will provide advisory support services to assist CCLX to comply with PRC regulatory
requirements and to use satellite transponder capacity in an effective manner. CCT Shanghai will
provide technical support to CCLX for the purpose of generating accurate forecasts for transponder
capacity requirements. While CCLX will enter into contractual arrangement with satellite
transponder provider, CCT Shanghai or its parent company would pay for the satellite transponder
capacity sufficient to meet service demand.

3.2 Program Team

In order to ensure the smooth, timely provision of technical advice, consultation and services and
that work proceeds at the planned rate, CCT Shanghai will put into place a program team consisting
of experienced professionals in the various areas of expertise required. This team will be headed
by a Program Manager to coordinate all CCT Shanghai resources required for the successful conduct
of the support services and work, and to ensure that required coordination takes place between CCT
Shanghai and CCLX personnel.

Tasks to be performed by the program team shall be in the areas including:

	•	 	Schedules
	 
	•	 	Pricing
	 
	•	 	Agreement negotiations
	 
	•	 	Status reporting
	 
	•	 	Staffing
	 
	•	 	Subcontractor interface
	 
	•	 	Specification compliance
	 
	•	 	Space segment technical support
	 
	•	 	Selection of technical staff
	 
		 	

13

 

	•	 	Regulatory agency support
	 
	•	 	Test plans
	 
	•	 	System reliability
	 
	•	 	Network analysis
	 
	•	 	System configuration
	 
	•	 	NOC site survey
	 
	•	 	NOC installation specification
	 
	•	 	Acceptance test procedures
	 
	•	 	Remote installation specification
	 
	•	 	Onsite installation and test of the NOC earth station and baseband equipment
	 
	•	 	Documentation preparation

3.2.1 Progress Reports and Program Status Review

At least once a month, appropriate CCT Shanghai and CCLX personnel will meet to discuss issues
affecting the provision of the services including such key issues as the schedule of network
deployment, network configurations, the manufacture and.installation of products, development and
implementation of new and improved technologies and procedures. As part of such meetings and at any
other mutually agreeable times senior account management personnel will meet to discuss;

	(i)	 	Forecasts for the following quarter for the number of Subscribers so that CCT
Shanghai can anticipate demand for manufacture and installation and provision of the
services;
	 
	(ii)	 	any additional services that may be requested or required, and
	 
	(iii)	 	any changes to CCLX deployment plan for the services, including, among other
things, procurement of additional Internet bandwidth, leasing of
transponders and
service in extended geographical areas.

For such period of time as CCT Shanghai and CCLX mutually agree, operational personnel from both
CCT Shanghai and CCLX will meet in person or by conference call at least once every two weeks to
discuss operational, day-to-day issues that may arise in connection with the provision of the
services.

3.3 System Analysis And Support

CCT Shanghai will provide system analyses of the network to estimate overall system capacity,
traffic capabilities, satellite resource requirements, and the specific network configuration
required to support CCLX’s identified traffic. Furthermore, CCT Shanghai will make available, for
the term of this Agreement, systems analysis services to assist CCLX in determining future
optional expansion requirements.

CCT Shanghai will also assist CCLX in planning for such things as antenna sizes and/or RF power
sizes for CPE sites based upon the specific space segment selected and CCLX specified
requirements, such as availability and video capability. CCT Shanghai will provide necessary
satellite link budgets.

3.3.1 System Analysis Reports

CCT Shanghai will periodically provide the results of system analyses of capacity, traffic

14

 

capabilities, satellite resource requirements, and network configuration.

CCT Shanghai will make the results of CPE antenna size and/or SSPA size analyses available within
thirty (30) days after the specification of the space segment and the appropriate CPE sites.

3.3.2 Regulatory Agency Support

CCT Shanghai will provide technical support and consultation in support of CCLX’s applications for
any relevant licenses from local regulatory authorities. CCT Shanghai technical support includes
implementation planning, interface investigation and specification, and detailed satellite link
engineering. As part of this activity, CCT Shanghai will prepare the technical documentation
required to support the required filings for the network operating license.

3.4 Network Operation

CCT Shanghai-will provide resources to support the.operation of the CCLX NOCs 24 hours per day,
365 days per year. CCT Shanghai will provide qualified engineers and operations center personnel
as required to adequately monitor the system as mutually agreed by CCT Shanghai and CCLX. CCT
Shanghai will make available personnel at the NOC to provide technical advice, consultation and
network control services, consisting of monitoring, configuration management, and troubleshooting,
including field dispatch. NOC personnel will also provide technical assistance for onsite
management and maintenance of the NOC facilities themselves. CCT Shanghai will provide technical
advice, consultation and support for all aspects of NOC operation including the following:

	•	 	Staffing
	 
	•	 	Preventive Maintenance
	 
	•	 	Reports
	 
	•	 	Record Keeping
	 
	•	 	Trouble-shooting
	 
	•	 	Traffic analysis
	 
	•	 	System expansion

3.5 Business Planning

Once per quarter representatives from CCT Shanghai and CCLX shall meet to conduct business
planning for the following quarter. In the fourth quarter of every year a full business budget
for the following year will be developed.

3.6 Redundancy and Backup

Ancillary Equipment will include redundancy of critical NOC and NOC RF components on a 1:1 basis.
All other traffic carrying NOC components are redundant on a 1:N basis. This redundancy will
assure availability in spite of occasional failures of such
components.

3.7 Internet Backhaul Connection

CCLX will provide necessary data circuits between China Telecom Internet exchange and the

15

 

NOG facility. CCLX will be responsible for the cost and performance of these circuits. Unless
otherwise agreed by CCT Shanghai and CCLX, all Customer connectivity to the Internet will be
effected through these circuits connected to the China Telecom Internet exchange. CCLX will be
responsible for the monitoring and maintenance of these Internet backhaul connections.

3.8 Information Monitoring

CCT Shanghai will provide, on a monthly basis, such ongoing and updated information regarding the
performance of the network service as the parties will agree.

3.9 Service Level Quality Control and Measurement

CCT Shanghai will monitor the quality of Services on a continuing basis and will
report to CCLX reasonable measure of the quality of Services and
Equipment. CCT Shanghai will also
establish and implement reasonable programs for the continuous improvement of Service quality and
performance.

3.10 Security

CCT
Shanghai will work to ensure that CCLX’s Subscribers’ privacy and security are protected over
the services by using a Conditional Access System and Digital Encryption Standard (DES 128K)
security algorithm.

3.11 Turbol63 Dial-up Connectivity

4. FULFILLMENT SERVICES

CCT Shanghai is responsible for the shipment, installation and commissioning of Head-end equipment
ordered by MSOs.

The nature of the Cablenet business is such that CCLX’s Customers will be the cable MSO’s in
China. The MSO’s will be responsible for the distribution, installation and maintenance of
end-user equipment to individual subscribers. CCT Shanghai will be responsible for the
distribution of the end-user equipment to the MSO’s.

4.1 Permits and Approvals

CCT Shanghai will provide CCLX with assistance and support in order to obtain and maintain the
relevant government approvals required for CCLX. CCT Shanghai will also assist and support CCLX to
obtain landlord approvals and will determine if construction permits or zoning variances are
required and, if so, assist and support CCLX in obtaining such permits at the time the site survey
is performed. After all permits and approvals have been obtained, CCLX will authorize CCT Shanghai
to schedule and perform site preparation and installation of the equipment.

16

 

4.2 Planning and Scheduling

CCT Shanghai will installation Equipment according to a schedule to be provided and maintained by
CCT Shanghai, with the cooperation of CCLX.

CCT Shanghai will endeavor to complete installation within sixty (60) days of notification of need
to install a site. CCT Shanghai and CCLX agree, however, that additional time may be required if
CCT Shanghai encounters delays in obtaining any necessary permits or variances, or if nonstandard
installations (as defined herein) are required.

4.3 Site Preparation

The site survey report, if required, will identify technically suitable locations for installing
the indoor and outdoor CPE (including Head-End equipment) and cables.

For sites identified as requiring preparation by CCT Shanghai, CCT Shanghai will perform the
following tasks:

	1)	 	Provide necessary independent contractor for structural or electrical work, as
required, at additional cost.
	 
	2)	 	Construct a standard antenna mounting point of the standard type
	 
	3)	 	Provide suitable access for the connecting cable from the exterior of the building to
the interior and through any concrete, masonry, or fire barrier walls between the
indoor and outdoor units.

4.4 Maintenance Services

	A.	 	CCT Shanghai will provide maintenance services to CCLX to ensure the availability
of the service NOC 24 hours per day, 365 days per year by single nationwide number
telephone access for resolution of problems with the Turbo 163 via DirecPC, DDN
and Cablenet services. The NOC will provide a single point of contact for the
origination, administration, and tracking of Customer trouble reports, CCT Shanghai
personnel contact names, telephone numbers, and other trouble reporting and
escalation procedures. CCT Shanghai will provide a NOC technical support
document detailing these procedures will be provided to CCLX after execution of this
Technical Services Agreement.
	 
	B.	 	Corrective Maintenance — CCT Shanghai will provide corrective maintenance for the
various ancillary equipment provided by the CCT Shanghai in support of the CCLX
businesses. CCT Shanghai will restore ancillary equipment to good working condition
by performing the following corrective maintenance as required:

	 	1)	 	Diagnostic testing to determine the existence and cause of the malfunction

	 
	 	2)	 	Removal and replacement of any malfunctioning Field Replaceable Unit
(FRU)
	 
	 	3)	 	Reorientation (re-pointing) of the antenna subsystem
	 
	 	4)	 	Repair or replacement of interconnecting cables
	 
	 	5)	 	Reloading initializing instructions and re-commissioning

17

 

	 	6)	 	Verification of proper operation and completion of service report
	 
	 	7)	 	Notification to the NOC and the Customer host that Equipment has been
restored to operational status

	C.	 	Service Coverage and Response Times
	 
	 	 	Service coverage hours, including related travel, will be selected on a site-by-site basis
from the coverage available for that site. The available coverage plans are:

	 	1)	 	Normal Service Coverage (8:00 a.m. to 6:00 p.m., local time, Monday through
Friday, holidays excepted)
	 
	 	2)	 	Continuous Service Coverage (24 hours per day, 365 days per year).
	 
	 	At certain sites only Normal Service Coverage is available.
	 
	 	CCT Shanghai will use reasonable efforts to ensure that within sixty (60) minutes of a
request for maintenance, the NOC personnel will determine the problem and isolate the
fault. CCT Shanghai and CCLX acknowledge, however, that such maintenance response time
represents a target and failure to meet such maintenance response time target shall in no
event be construed as a breach of this Technical Services Agreement. Upon determining the
problem and isolating the fault, the NOC personnel will authorize field Service dispatch,
and the Customer Service Representative (CSR) will be onsite at Customer’s premises,
according to the maintenance response time table given below, from the time of
authorization by the NOC.
	 
	 	Maintenance Response Time Table (Targets)

	 	 	 	 	 
	 	Distance from Service Office	 	Response Time	 
	 	  0 - 50 miles
	 	12 hours
	 
	 	  51 - 100 miles
	 	24 hours	 
	 	101 - 150 miles
	 	24 hours	 
	 	151 - 200 miles
	 	24 hours	 
	 	Over 200 miles
	 	48 hours	 

	D.	 	Spare Parts Support
	 
	 	 	Spares will be provided as part of this Agreement. An inventory of spare parts (typically
5% of installed hardware) will be pre-positioned at CCT Shanghai-designated local
maintenance facilities for support of all CPE supported by that office.
	 
	 	 	Spares for the CPE antenna subsystem, including reflectors, mounts, anti-icing equipment,
modems, and if applicable, certain video equipment will be centrally stocked at a
designated location in China.
	 
	 	 	Malfunctioning Equipment will be replaced on a one-for-one exchange basis by a functionally
equivalent spare part.

18

 

	E.	 	Remote maintenance does not include any of the following services;

	 	1)	 	Maintenance, repair, or replacement of parts damaged or lost through
catastrophe, accident, lightning, theft, misuse, fault, or negligence of CCL, or
causes external to the Equipment, such as, but not limited to, failure of, or
faulty, electrical power or air conditioning, operator error, failure, or
malfunction of data communication Equipment not provided to CCL by CCT Shanghai, or
from any cause other than intended and ordinary use
	 
	 	2)	 	Changes, modifications, or alterations in or to the Equipment other than
approved upgrades and configuration changes
	 
	 	3)	 	De-installation, relocation, or removal of the Equipment or any accessories,
attachments, or other devices

4.5 Remote Reports and Other Information

CCT Shanghai will provide CCLX with the following standard reports on a monthly basis:

	A.	 	Chronological list of trouble reports summarizing determined problem(s) and resolution(s) at
remote site(s) with timed duration of remote site outage, Service availability for the
preceding month will also be provided,
	 
	B.	 	A summary report showing all open (with days to completion) and completed work orders for
new and existing CPE locations during the preceding month.

5. SALES AND MARKETING

CCT Shanghai shall provide technical advice, consultation and services in connection with the
management of sales and marketing for the following businesses:

	1.	 	Turbo 163 via DirecPC
	 
	2.	 	DDN
	 
	3.	 	Cablenet

5.1 Management

CCT Shanghai will support and assist CCLx in the sales and marketing of the DDN service to
potential end users. This will include providing sales collateral material, white papers, marketing
seminar support, PR/promotions support, etc. It is envisioned that the following personnel will
initially be required for the sales and marketing of the various services:

	A.	 	Vice President, Marketing
	 
	B.	 	Manager, Public Relations (minimum 4 PR events/year)
	 
	C.	 	Market Research Specialists (4)
	 
	D.	 	Channel Support Specialists (10)
	 
	E.	 	Regional Sales Managers (5)
	 
	F.	 	Sales Executives (25)
	 
	G.	 	Manager, Sales Administration
	 
	H.	 	Sales Administration Support (10)

19

 

The organization of the direct sales force is represented by the following diagram;

The VP of Sale/Marketing will be responsible for oversight of all sales/marketing activities.

The Manager of Marketing will be responsible for the following key areas;

	•	 	Product Marketing
	 
	•	 	Direct Marketing
	 
	•	 	Web Based Marketing

The Regional Sales Managers are responsible for the oversight of the direct sales staff. 

5.2
Turbo 163 via DirecPC and DDN Sales

CCT Shanghai will make available personnel and assist CCLX to maintain a sales force to handle
direct sales targeting the following (but not limited to) market segments;

	•	 	Internal Trade
	 
	•	 	Coals and Mines
	 
	•	 	Agencies and entities under the Economic and Trade Commissions
	 
	•	 	Telecom and Communication Industries
	 
	•	 	Multi-National Corporations
	 
	•	 	Education

5.2.1 Channel Management For Turbo 163 via DirecPC

CCT Shanghai will provide technical assistance in connection with the set up of various sales
channels for the Turbo 163 via DirecPC service. These sales channels will be “Value Added
Resellers” (VAR) who will be responsible for certain targeted market segments. The VARs may
include the following;

	•	 	IBM — targeting the banking and finance sectors
	 
	•	 	IBM — targeting the intelligent building sector
	 
	•	 	Infobank — targeting the banking and finance sectors
	 
	•	 	Blueexpress — bundled Turbo 163 and PC services
	 
	•	 	China Telecom — sales to consumers for Turbo 163 service
	 
	•	 	Existing 163 service resellers

CCT Shanghai is responsible for enlisting and maintaining the VARs. Support activities include
product and market training, support of product demonstrations, provision of collateral materials
and other informational materials. CCT Shanghai sales staff will also accompany VARs on visits to
key accounts as well as host customer visits to the NOC facility.

20

 

5.3 Cablenet Sales

There are approximately 1300 cable operators (MSOs) in China. The main focus of the
sales and marketing activities of the Cablenet business group is to sign-up as many of these
1300 cable operators as possible as “subscribers” to the various services supported by the
Cablenet business. In fact, the MSOs will essentially act as “distributors” of these services
and resell the content or access to their own customers.

The sales effort to reach these MSOs will be though direct access utilizing sales staff employed
by CCT Shanghai. Distribution channels will not be utilized in support of this effort.

CCT Shanghai will assist CCLX in the sales and marketing of the Cablenet services to potential
MSOs. This will include providing sales collateral material, white papers, marketing seminar
support, PR/promotions support, etc. It is envisioned that the following personnel will
initially be required to support the sales and marketing of the Cablenet service:

	A.	 	Vice President, Marketing
	 
	B.	 	Manager, Public Relations (minimum 4 PR events/year)
	 
	C.	 	Market Research Specialists (2)
	 
	D.	 	Sales Executives (5)
	 
	E.	 	Manager, Sales Administration

The VP of Sale/Marketing will be responsible for oversight of all sales/marketing activities.

5.4 Publicity Campaign

CCT Shanghai will be responsible for implementing a China-wide publicity campaign to highlight the
service availability. Various forms of PR events are necessary to influence the major ISP/lCPs in
China and well as Internet users.

PR events mainly include: promotion, press/products releases, expositions, technical seminars,
speeches and consultations, annual reports, charity and donations, sponsoring, community
persuasions, signal publicity, company’s periodicals, news creation etc.

5.5 Market Analysis and Service Tariff Structure

In support of the marketing efforts for the various CCLx businesses, CCT Shanghai will conduct
the relevant market analysis. These activities will include the following;

	•	 	Competitive analysis
	 
	•	 	Identification of target market segments
	 
	•	 	Identification and development of “value added” services
	 
	•	 	Service tariff modeling and analysis

5.6 Collateral Materials

21

 

CCT Shanghai will generate the collateral material required to support the sales and
marketing efforts. These materials will include the following;

	•	 	Product brochures
	 
	•	 	Application white papers
	 
	•	 	Packaging materials
	 
	•	 	Advertisements
	 
	•	 	Web based materials
	 
	•	 	Customer gifts
	 
	•	 	Customer deliverable marketing CD-ROM
	 
	•	 	User handbook and operating procedures

5.7 Advertising Campaigns

The CCT Shanghai will be responsible for conducting a variety of advertising campaigns designed to
raise awareness about CCLX’s services and to attract and retain subscribers to CCLX’s services. It
is anticipated that CCT Shanghai will utilize different types of media as follows: Plane
media:50%, Television: 20%, Billboards: 25%, Web: 5%. CCT Shanghai will be responsible for
advertising content generation as well as placement.

6. ADMINISTRATION

CCT Shanghai will provide consulation and advice to CCLX in connection with human resource
management, bookkeeping, accounting, financial planning, legal and corporate strategic planning
services.

6.1 Accounting

CCT Shanghai will provide advisory services relating to the administration of all accounting
operations of CCLX in support of the service. This includes administration of accounts receivable,
accounts payable, payroll and other accounting related services.

CCT Shanghai Services will also cover CCLX’s:

	(i)	 	quarterly management accounts for the various businesses within 45 days after the
end of each fiscal quarter;
	 
	(ii)	 	monthly management accounts for the various businesses within 30 days after the end
of each month; and
	 
	(iii)	 	an annual budget for the various businesses within 30 days prior to the end of each
fiscal year.

6.2 Human Resources

CCT Shanghai will assist and provide advice to the human resources operation to support CCL’s
operation. CCT Shanghai will provide a headcount report to CCLX at the end of each month and will
assist and provide advice for the recruitment to support the Turbo 163 via DirecPC business.

6.3 Legal and Corporate planning

22

 

CCT Shanghai will assist and provide advice to support CCLX in working out a proper legal
structure for the Turbo 163 via DirecPC service. CCT Shanghai is also responsible for the
administration support and corporate planning of the Turbo 163 via DirecPC business.

7. EQUIPMENT AND SOFTWARE

In addition to the provision of services and technical know-how CCT Shanghai will provide to CCLX
all of the networking equipment required in support of the business plan for the Turbo 163 via
DirecPC, DDN and Cablenet services.

7.1 Turbo 163 via DirecPC Equipment Already Supplied

The following subsections describe equipment and software which have already been provided to CCLX.

7.1.1 Turbo 163 via DirecPC NOC Equipment And Software

The Turbo 163 via DirecPC business is supported by the following baseband hardware subsystems at
the NOC. The equipment and software listed below are fully described in the document “DirecPC
Technical Specification” published by Hughes Network Systems.

	 	 	 	 	 
	Foundation NOC
	 

	 	S/W
	 	Software License
	 

	 	SAGW
	 	Satellite Gateway
	 

	 	IF
	 	IF System
	 

	 	HM95
	 	Health Monitor
	 

	 	QAPC
	 	Quality Assurance Monitor
	 

	 	FRNTEND
	 	Subscriber Management Front End
	 

	 	RTR
	 	System Reuter
	 

	 	SWTCH
	 	Ethernet Switch
	 

	 	TOCS/COMS
	 	Dial in Communication Device
	 

	 	CNSL
	 	Monitoring Consele
	 

	 	CAC
	 	Conditional Access Controller
	 

	 	FRWL
	 	Firewall
	 

	 	HPRK
	 	Racks
	 

	 	SPAR
	 	NOC Spares
	 
	 	 	 	 
	Turbo Internet System
	 

	 	S/W
	 	Software License
	 

	 	TIGW
	 	Turbo Internet System(10 online 2 red 20000 subs)
	 
	 	 	 	 
	Package Delivery System
	 

	 	S/W
	 	Software License
	 

	 	PDSV
	 	Package Delivery Server
	 

	 	PDSV
	 	Package Delivery Scheduler
	 

	 	NFS
	 	Storage Device
	 

	 	PDMC
	 	Package Delivery Gateway

23

 

	 	 	 	 	 
	IP Multicast System
	 

	 	S/W
	 	Software License
	 

	 	PDMC
	 	IP Multicast Gateway
	 

	 	BCPC
	 	Broadcaster
	 
	 	 	 	 
	Webcast System
	 

	 	S/W
	 	Software License
	 

	 	WEBC
	 	Webcast System
	 
	 	 	 	 
	NewsCast System
	 

	 	S/W
	 	Software License
	 

	 	NEWS
	 	NewsCast System
	 
	 	 	 	 
	Autocommissioning System
	 

	 	S/W
	 	Software License
	 

	 	ACS
	 	Autocommissioning System
	 
	 	 	 	 
	Email Alert System
	 

	 	S/W
	 	Software License
	 

	 	EMAIL
	 	Email Alert System
	 
	 	 	 	 
	Dedicated Bandwidth System
	 

	 	S/W
	 	Software License
	 

	 	DBW
	 	Dedicated Bandwidth System
	 
	 	 	 	 
	Fair Access License
	 

	 	S/W
	 	Software License
	 

	 	FAP
	 	Fair Access License

7.1.2 NOC RFT Uplink Facility

CCT Shanghai has provided to CCLX Radio Frequency Transmission (RFT) equipment consisting of a
KU-Band 6.1 meter antenna and associated amplifiers, up/down converters, LNB and spare parts. In
addition, CCT Shanghai has installed and tested this equipment on the NOC facility of CCLX.

7.1.3 Turbo 163 via DirecPC CPE Equipment

The Customer Premise Equipment (CPE) provided to CCLX consists of quantity 3,000 DirecPC Access
Kits (DAKs). Each DAK consists of the following elements;

	•	 	Antenna
	 
	•	 	LNB

24

 

	•	 	PCI Card
	 
	•	 	DAK Client Software
	 
	•	 	Mounting hardware
	 
	•	 	Installation instructions
	 
	•	 	Packaging

7.1.4 System Integration

CCT Shanghai will perform integration and testing of the DirecPC and DDN systems. System
acceptance test has been conducted to verify that the delivered product meets the specification
requirements. These tests have been performed by CCT Shanghai with CCLX’s assistance. The
combination of the NOC earth station, baseband equipment, and DAKs meet the performance
requirements as outlined in the CCLX business plan.

7.1.5 Expansion of Network

To support the expansion of the Turbo 163 via DirecPC and DDN services CCT Shanghai will provide
to CCLX additional equipment and software licenses. It is anticipated that the following types of
equipment will be provided;

	•	 	Additional RFT uplink facilities to support the DDN business
	 
	•	 	Additional HNS DirecPC NOC equipment (as described above)
	 
	•	 	Additional HNS DirecPC DAK CPE
	 
	•	 	HNS TRES satellite modems and earth stations in support of the DDN business
	 
	•	 	HNS ISBN baseband equipment and software licenses in support of the DDN
business
	 
	•	 	HNS PES equipment in support of the DDN business

The functionality and performance of these systems are defined in the following documents;

	•	 	HNS DirecPC Technical Specification
	 
	•	 	HNS ISBN/PES Technical Specification
	 
	•	 	HNS TRES Technical Specification
	 
	•	 	HNS TRES BOD Technical Specification

7.2 Cablenet Equipment and Software

To support the Cablenet services it will be necessary to deploy a significant amount of network
infrastructure. This infrastructure will generally fall into three categories;

	1.	 	Network infrastructure
	 
	2.	 	Cable headend infrastructure
	 
	3.	 	Subscriber equipment

7.2.1 TV Distribution Service

The subsections below describe the equipment subsystems that are supplied in support of the TV
Distribution business.

7.2.1.1 Uplink Facility

Satellite transmission will be used to efficiently distribute the aggregated video content to

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cable MSOs throughout China. In support of this video distribution CCT Shanghai will provide
technical assistance and advice to assist CCLX in establishing an uplink facility consisting of
the following key elements;

	1.	 	RF Subsystem including a 6.1 meter KU band antenna and all of the attendant
electronics to provide fully redundant transmission to the satellite. Some of these
components include;

	 	•	 	Antenna tracking control unit
	 
	 	•	 	High power amplifiers
	 
	 	•	 	Low noise receivers
	 
	 	•	 	Frequency up converters
	 
	 	•	 	Frequency down converters
	 
	 	•	 	RF Management and Control subsystem
	 
	 	•	 	Redundancy switching equipment
	 
	 	•	 	Spare parts

	2.	 	MPEG2/DVB Encoder Modulation Subsystem consisting of the following key
elements;

	 	•	 	Variable rate modulators
	 
	 	•	 	MPEG/DVB Encoders
	 
	 	•	 	Switching equipment

	3.	 	DTH Receive Subsystem (Video Turn Around) consisting of the following
components;

	 	•	 	Antenna subsystem
	 
	 	•	 	Low noise receivers
	 
	 	•	 	Video receivers

	4.	 	Video Distribution Subsystem consisting of the following components;

	 	•	 	Audio and video monitors
	 
	 	•	 	Switching matrix
	 
	 	•	 	Studio quality recording equipment

	5.	 	Conditional Access Subsystem to provide secure control of the video signal.

7.2.1.2 Head-end TV Receiving Equipment

For each MSO subscribing to the TV distribution service CCT Shanghai will install a set of
equipment at the cable head-end which will enable to reception of the aggregated TV content that is
distributed over the satellite. The following will be the key components provided by CCT Shanghai
at the Head-end;

	•	 	Receive-only satellite antenna and receiver subsystem including LNA
	 
	•	 	TV Receiver for each video channel subscriber by the MSO. The TV receivers
include the necessary conditional access equipment to decode the signals.
	 
	•	 	Video distribution cabling to provide for interconnect of the downlinked TV content
into the MSO head-end.

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7.2.1.3 Subscriber Equipment

Subscriber equipment will be provided by the Cable MSOs.

7.2.2 Two-Way Service

7.2.2.1 Network Infrastructure

The following schematics diagram represents what is expected to be the typical network
infrastructure at each MSO’s NOC.

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7.2.2.2 Head-end Equipment

CCT Shanghai will provide technical services and advice in connection with the deployment of
the NOC for two way services. CCT Shanghai will be responsible for installing software onto the
NOC servers and integrate the NOC servers and software with other business system servers (such as
those for Turbol63). CCT Shanghai will provide technical service in connection with specifying and
installing the networking equipment in the NOC and will assist and support CCLX in managing the
NOC.

CCT Shanghai will also be responsible for the training of MSO personnel for local support.

7.2.2.3 Subscriber Equipment

CCT Shanghai will be responsible for identifying OEMs that are capable of building the Client Box.

7.2.2.4 Technical Support

Technical issues from End Users or MSO should first be escalated to CCT Shanghai’s level 1
(technical) support group. It is expected that CCT Shanghai’s level 1 support should be able to
handle about 90% of the calls that come in. They would be expected to be able to answer calls that
involved installation questions, or known problems that are listed in the Errata, Application
notes, Hints documents, Technical advisories, or CCT Shanghai’s technical database. If that group
can not solve the problem, then the issue should get escalated to CCT Shanghai’s level 2
(Engineering) support group.

CCT Shanghai’s level 2 support will continue to work the problem with diligence and try to provide
a resolution. It is expected that this group will be able to handle 90% of the issues that get
escalated from CCT Shanghai’s level 1 support. Issues that cannot be resolved by CCT Shanghai’s
level 2 support will be escalated to the attention of the equipment vendor’s Field Application
Engineer for who shall be located in Hong Kong. Before escalation to the equipment vendor, it is
expected that CCT Shanghai Product Support will verify the nature of the problem and further try to
isolate the cause of the problem if necessary. In order to facilitate swift and effective diagnosis
and resolution or errors, CCT Shanghai shall maintain the representative configuration(s) of each
system deployed for use as fault replication and defect isolation test beds.

One representative (along with one alternate) from CCT Shanghai’s level 2 Product Support Group
should be selected to manage the interface between CCT Shanghai and the equipment vendor’s Field
Application Engineer. The purpose of this single interface will be to make sure information
flowing from the equipment vendor to CCT Shanghai gets disseminated to the proper parties within
CCT Shanghai, and to set priorities of escalation flowing from CCT Shanghai to the equipment
vendor. CCT Shanghai will provide a list of contact names to the equipment vendor. Callers to the
equipment vendor’s Field Application Engineer who are not on this list of approved contacts will
be referred back to an individual on the approved contact list.

Upon escalation to the equipment vendor’s FAE, CCT Shanghai will submit a detailed technical
description of the problem as well as the details of CCT Shanghai’s efforts to

28

 

resolve it. Upon receiving this information, the FAE will first try and reproduce the fault
using CCT Shanghai’s fault replication and defect isolation test beds. If reproducible, it will be
entered on an internal the equipment vendor defect tracking database (Tracker) and assigned a
tracking number and severity level (as defined above). The equipment vendor’s FAE shall have
access to all appropriate systems and facilities as required to pursue correction of active
defects.

The status of each open issue reported by CCT Shanghai will be tracked and reported to CCT
Shanghai according to severity level as defined above.

It is expected that the equipment vendor’s FAE will be able to handle 90% of the calls that get
escalated to him/her. Issues that can not be resolved by the FAE will get escalated to the
equipment vendor’s Engineering Organization. It is expected that the equipment vendor’s
Engineering organization will be able to resolve 100% of the issues that get escalated to them
from the FAE.

It should be noted that in all cases above, resolution of a problem does not necessarily mean a
fix, but could mean a workaround or decision not to fix. The problem would then be documented as
an errata.

7.3 Inventory

In order to provide CCLX with adequate inventory to expand the service businesses CCT Shanghai
will supply a rolling 3 month inventory of equipment. The inventory will be determined by the
current business plans for the various services.

7.4 Shipment Schedule

Once every quarter CCT Shanghai will evaluate the inventory of equipment to determine what
replenishments or new stocking is required. The evaluation will use both the business plans as
well as marketing forecasts to determine the amount of inventory to be stocked. It is anticipated
that the lead time to supply CPE is typically 3 months while the lead time to supply NOC related
equipment is typically 6 months.

7.5 Customer Care Platform

CCT Shanghai will provide CCLX with a customer care and billing platform services. This includes
the provision of a call center, web-based customer support, problem tracking, problem escalation
procedures and monthly billing invoices.

8. CCLX OBLIGATIONS

To facilitate provision of the Equipment and Services by CCT Shanghai, CCLX will meet the
following obligations:

	A.	 	CCLX hereby grants CCT Shanghai and CCT Shanghai’ authorized representatives access, subject
to CCLX’s reasonable security restrictions, to Equipment and related locations and areas of
CCLX’s facilities and premises, and will arrange permitted access to areas of third-Party
facilities and premises for the purpose of CCT Shanghai

29

 

	 	 	performing the work required under this Agreement. CCT Shanghai will comply with CCLX’s
reasonable rules and regulations for access, a copy of which will be furnished to CCT
Shanghai by CCLX promptly after execution of this Agreement.
	 
	B.	 	CCLX will provide safe access to Equipment on CCLX premises and will maintain
the environment where the Equipment is located in a safe and secure condition.
	 
	C.	 	CCLX will provide CCT Shanghai with access to electrical power, water, and other
utilities as required for efficient Service.
	 
	D.	 	Procure and obtain any and all Government Approvals which may be required under
any applicable law for the operation and maintenance of the business services.

CCLX will reimburse CCT Shanghai for all costs incurred by CCT Shanghai as a result of CCLX’s
failure to meet such obligations.

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APPENDIX B 

EQUIPMENT

Cisco2621 and accessories

Cisco3640, Cisco4700 and accessories

Datacom RF unit

Cyberstream broadcasting equipment

VZU-6994PC 550W KU

HP SE Base Model with One-Touch

HP Server for CAC

HP LH6000r & LP2000r Net server

DirecWay Shannon System

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