EXCLUSIVE LICENSE AGREEMENT FOR THE OPTICAL SECTIONING MICROSCOPE

Exhibit 10.9

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EXCLUSIVE LICENSE AGREEMENT FOR THE OPTICAL SECTIONING MICROSCOPE

THIS LICENSE AGREEMENT is made and is effective this                                           by and between THE REGENTS OF THE UNIVERSITY OF CALIFORNIA , a California nonprofit corporation having its statewide administrative offices at 300 Lakeside Drive, 22nd Floor, Oakland, California 94612–3550, (hereinafter referred to as “The Regents”), and APPLIED PRECISION, INC. , having a principal place of business at 8505 S.E. 68th Street, Mercer Island, Washington 98040, (hereinafter referred to as the “Licensee”).

RECITALS

WHEREAS , certain technology, generally characterized as “Multi-Wavelength Optical Sectioning Microscope, SA3”, which has utility to image a sample in three dimensions as a function of time and wave length, (hereinafter collectively referred to as the “Technology”), was conceived and developed in the course of research at the University of California, San Francisco Campus (UCSF) by David A. Agard, John W. Sedat, Melvin 0. Jones, and Chwen–Shong H. Chen (hereinafter collectively referred to as the “Investigators”);

WHEREAS , Professor Zvi Kam (hereinafter referred to as “Collaborator”) at the Weizman Institute in Rehovot, Israel collaborates with and provides technical assistance and testing of Technology to Investigators;

WHEREAS , in the course of said research at UCSF, certain copyrighted software related to the Technology and generally characterized in Appendix A, which is attached hereto and made a part hereof by this reference thereto, was developed by the Investigators (hereinafter referred to as the “Software”) and is

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covered by Regents’ Copyright and Regents’ Property Rights as defined below;

WHEREAS , the Technology, the Software and the Schematics were made in the course of research conducted at UCSF under an affiliation agreement between The Regents and the Howard Hughes Medical Institute (“HHMI”) and as a consequence this License Agreement is subject to obligations, as indicated herein, to the HHMI;

WHEREAS , The Regents have obtained from HHNI an assignment of the rights to the Technology, the Software and the Schematics subject to a paid–up, nonexclusive, irrevocable license to HHMI for noncommercial purposes only with no right to assign or sublicense.

WHEREAS , Licensee acknowledges right of The Regents and HHNI to publish any and all technical data resulting from any research performed by HHNI at any facility of The Regents relating to the Schematics, Software and the Technology;

WHEREAS , the Regents is desirous to grant such licenses to Licensee in order for the Technology, software, and Schematics to be developed, utilized, and marketed so that the Products therefrom and other benefits can be enjoyed by the general public;

NOW, THEREFORE , in consideration of the premises and of the covenants herein contained, the parties hereto agree as follows:

1. DEFINITIONS

As used in this Agreement, the following terms shall have the meaning set forth below:

1.1 “Technology Products” means (a)  Products which incorporate the Technology supplied to Licensee by the Regents under this Agreement, and any Derivative Works thereof, or products , for which the use, reproduction, distribution, and display of the Technology, or preparation of Derivative Works thereof would constitute, but for the licenses granted to Licensee pursuant to this agreement, a misappropriation of Regents’ Property Rights; (b) any product to be used in a manner requiring the performance of the Licensed Method, or any product produced by the Licensed Method for the manufacture, use, or sale in a particular country for which Licensee is licensed under this Agreement; or (c)  Products which constitute the practice of the Licensed Method itself or (d)  Schematic Products or Derivative Works, thereof . Technology Products shall be subject to applicable government importation laws and regulations on Technology Products made outside a particular country in which such Technology Products are used or sold.

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1.2 “Licensed Method” means any process or method that is covered by Regents’ Property Rights in the country in which such process or method is used, or the use or practice of which would constitute, but for the license granted to the Licensee pursuant to this Agreement, a misappropriation of Regents’ Property Rights. Practice of the Licensed Method shall be subject to applicable government importation laws and regulations on Technology Products made outside a particular country in which such Technology Products are used or sold.

1.3 “Regents’ Copyright” means those rights covering Software Products obtained under title 17 of the United States Code and applicable related treaty provisions with other countries and that are assigned to The Regents.

1.4 “Software Products” means the Software, as defined in Appendix A hereto, which, by this reference thereto is incorporated herein, supplied to Licensee by The Regents under this Agreement and any Derivative Works thereof for which the reproduction, Distribution, display, performance, or preparation of Derivative Works would constitute, but for the licenses granted to Licensee pursuant to this Agreement, an infringement of Regents’ Copyright Rights or Regents’ Patent Rights or would constitute but for the licenses granted to Licensee pursuant to this Agreement a misappropriation of Regents’ Property Rights.

1.5 “Derivative Works” means any revisions, modifications, translations, abridgements, condensations, expansions, enhancements or supplements of the Technology Products or Software Products or Schematic Products or any other form in which such Software Products or Schematic Products may be recast, transferred or adapted by Licensee.

1.6 “Source code” means the source code, the internal documentation to the source code, and the external reference specifications to the source code of the Software Products.

1.7 “Distribute/Distribution” means transfer by any means whatsoever, including, but not limited to, sale, rental, lease, display, loan, sublicense, or the like.

1.8 “Products” means Technology Products and Software Products.

1.9 “Schematic Products” means the electrical and mechanical engineering drawings and schematics related to the Technology supplied to Licensee and any Derivative Works thereof, for which the use, reproduction, Distribution, or display of the Schematic Product, or preparation of Derivative Works thereof would constitute, but for the licenses granted to Licensee pursuant to this agreement, a misappropriation of Regents’ Property Rights.

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1.10 “Net Sales” means [*] For sales of Products to a Joint Venture or Affiliate (as defined in Paragraphs 1.11 and 1.12 below) that are provided by Licensee to the Joint Venture or Affiliate [*]. Where Licensee or its sublicensee Distributes Products for end use to itself, an Affiliate, or a Joint Venture (excluding purposes of demonstration to customers, testing, or the like) then such Distribution shall be [*] .

1.11 “Affiliate(s)” of a party means any entity which, directly or indirectly, controls such party, is controlled by such party or is under common control with such party (“control” for these purposes being defined as the actual, present capacity to elect a majority of the directors of such affiliate, or if not, the capacity to elect at least half the members that control fifty percent (50%) of the outstanding stock or other voting rights entitled to elect directors) provided, however, that in any country where the local law shall not permit foreign equity participation of a majority, then a “Affiliate” shall include any company in which the Licensee shall own or control, directly or indirectly, the maximum percentage of such outstanding stock or voting rights permitted by local law. Each reference to Licensee herein shall be meant to include its Affiliates.

1.12 “Joint Venture” means any separate entity established pursuant to an agreement between a third party and Licensee to constitute a vehicle for a joint venture, which separate entity purchases, sells or acquires Products from Licensee at prices substantially different from those at which Licensee would have charged other purchasers that deal at arms length with Licensee. If such separate entity is established, then The Regents shall collect from Licensee royalties on the Net Sales of Products by the entity and shall not collect royalties on Net Sales of Products by Licensee. Each reference to Licensee herein shall be meant to include it Joint Ventures.

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1.13 “Regents’ Property Rights” means all The Regents’ personal proprietary rights covering the tangible personal property in Technology Products, Software Products and Schematic Products.

2. GRANT

2.1 Subject to the limitations set forth in this Agreement, The Regents Grants to Licensee an exclusive world wide and irrevocable right and license under Regents’ Property Rights to practice the Licensed Method, to make, have made, Distribute, use and/or sell Products where Regents’ Property Rights exist.

2.2 Subject to the limitations set forth in this Agreement, The Regents grants to Licensee an exclusive worldwide and irrevocable right and license under Regents’ Copyright to make, have made, Distribute, use and/or sell Software Products and to prepare Derivative Works therefrom where Regents’ copyright exists, except Licensee may not prepare Derivative Works to that portion of the Software which makes up the Kernel Library (Image Visualization Environment) without the prior written approval of Investigators.

2.3 Subject to the limitations set forth in this Agreement, The Regents grants to Licensee an exclusive worldwide and irrevocable license under Regents’ Property Rights to possess and use the Technology Products, software Products and Schematic to prepare Derivative works therefrom, and to make, have made, use, Distribute, and sell software Products throughout the world where The Regents may lawfully grant such a license.

2.4 The licenses granted under Regents’ Property Rights set forth in Paragraph 2.3 immediately above expressly limit the rights granted to Licensee in the Technology Products, Software Products and Schematic Products to those licenses expressly stated in this agreement and for no other purpose.

2.5 Under Regents’ Property Rights, Licensee’s right to transfer possession of the Source Code or Schematic Products to third parties other than its agents, consultants, contractors, sublicensees, and such other third parties within the scope of the rights and licenses granted to Licensee hereunder which source code and Schematic products Licensee possesses under the license granted in Paragraph 2.3 above, is expressly excluded from this Agreement. Except as otherwise stated in this Agreement, Licensee shall not attempt to sell, donate, abandon or otherwise transfer such source code or Schematic Products to any third party. Licensee acknowledges that title to the tangible material comprising the source code or the Schematic Products is owned by The Regents and that title is not being transferred to Licensee under this Agreement.

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2.6 The Regents shall have no obligation to provide support, advice, or maintenance services for the Software Products.

2.7 The Regents also grants to Licensee the right to grant sublicenses to third parties to make, have made, use, distribute, and/or sell Products and to practice the Licensed Method on such terms as are consistent with the provisions of this Agreement provided that Licensee has current exclusive rights thereto under this Agreement. To the extent applicable, such sublicenses shall include all the rights of and obligations due to The Regents and the HHMI that are contained in this Agreement [*]

2.8 Licensee shall notify The Regents of each sublicense granted hereunder [*]

2.9 Upon termination of this Agreement for any reason, any or all sublicenses that are granted by Licensee pursuant to this Agreement will remain subject to the terms of such sublicenses in effect and shall be assigned to and assumed by The Regents, except that The Regents shall not be bound by any duties or obligations set forth in any sublicenses that extent beyond the duties and obligations of The Regents provided for in this Agreement.

2.10 [*]

2.11 Licensee acknowledges that prior to this Agreement, The Regents [*] , listed in Appendix B, which is attached hereto and made a part hereof by this reference thereto. [*]

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3. UP-FRONT FEES

3.1 Licensee shall pay to The Regents [*] upon execution of this Agreement by Licensee. [*]

3.2 [*]

4. ROYALTIES

4.1 Licensee shall further pay to the Regents [*] :

(4.1a) [*]

(4.1b) [*]

4.2 The parties recognize that certain products subject to royalties provided by subparagraph 4.1 may originate in part from the Software, or Derivatives thereof, and in part from concepts, technology, software, devices or products outside the field of Multi-Wavelength Optical Sectioning Microscopy which have been or may in the future be developed or acquired by Licensee or its sublicensees (the Outside Technology). [*]

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4.3 [*]

4.4 [*]

4.5 Licensee shall be entitled to renegotiate with The Regents for a reduction in minimum annual royalties in the event that Licensee indicates in writing that the market for Technology Products will not support the minimum annual royalty payments specified in Paragraph 4.3 above. In such event, The Regents and Licensee shall promptly enter into good-faith negotiations to appropriately reduce the minimum annual royalties provided that Licensee can show sufficient evidence to The Regents of the reduced market for Technology Products. Such reduction in the minimum annual royalties shall be based on fifty percent (50%) of the anticipated annual earned royalties due The Regents from sales of Technology Products in light of the new market projections. Any negotiation for such reduction in minimum annual royalties shall be conducted in the last quarter of either the calendar year 1994 or the calendar year 1995 at the time The Regents and Licensee negotiate for a reduction in the royalty

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rate provided for in Paragraph 4.2. [*]

4.6 Earned royalties shall accrue to the Regents when Technology Products are invoiced, or if not invoiced, when delivered to an unrelated third party (excluding purposes of demonstration, testing or the like), provided, however, that where Licensee Distributes Technology Products for end use to itself, an Affiliate, or a Joint Venture (excluding purposes of demonstration to customers, testing or the like), then in such cases royalties shall accrue to The Regents when Technology Products are invoiced, or if not invoiced, used by Licensee, or delivered to an Affiliate, or a Joint Venture.

4.7 Earned Royalties accruing to The Regents shall be paid to The Regents quarterly on or before the following dates of each calendar year:

February 28

May 31

August 31

November 30

Each such payment will be for royalties which accrued within the Licensee’s most recently completed calendar quarter.

4.8 All monies due The Regents shall be payable in United States Dollars. When Technology Products are sold for currency other than United States Dollars, the earned royalties will first be determined in the foreign currency of the country in which such Technology Products were sold and then converted into equivalent United States Dollars. The exchange rate will be that published in The Wall Street Journal on the last business day of the calendar quarter and will be quoted in local currency per U.S. dollar.

4.9 Royalties earned with respect to sales on Technology Products shall not be reduced by any value-added taxes, fees or other charges imposed by the government of any country. The Licensee shall also be responsible for all bank transfer charges.

4.10 To the maximum extent permitted under applicable law, the Licensee shall be responsible for the administration and payment of all taxes in the United States other than The Regents’ income or related taxes, whether federal, state, or local government taxes, however designated or levied on this Agreement or related Software Products transferred by The Regents to the Licensee, including any sales and use taxes and state and local privilege or excise taxes based on gross revenues. Any such payments made under this Paragraph 4.9 shall not be deductible or creditable against the royalties due The Regents.

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4.11 Notwithstanding the provisions of Article 26 (FORCE MAJEURE), if at any time legal restrictions prevent prompt remittance of part or all royalties by the Licensee with respect to any country where a Technology Product is sold or Distributed, the Licensee shall convert the amount owned to The Regents into United States funds and shall pay The Regents directly for the amount impounded.

5. DUE DILIGENCE

5.1 The Licensee, upon execution of this Agreement, shall use diligent commercial efforts to proceed with the development, manufacture and sale of Technology Products and Software Products (or the functional equivalent of the Software Products) and shall use diligent commercial efforts to market the same within a reasonable time after execution of this Agreement and in reasonable quantities sufficient to meet the market demands there for.

5.2 The Licensee shall be entitled to exercise reasonable business judgment in meeting its due diligence obligations hereunder.

5.3 [*]

5.4 At the request of either party, any controversy or claim arising out of or relating to the diligence provisions of

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this Article shall be finally settled by binding arbitration conducted in accordance with the provisions of Paragraphs 5.5 through 5.13 herein.

5.5 To exercise the right to terminate this Agreement or reduce Licensee’s exclusive licenses to nonexclusive licenses for lack of diligence required in Paragraphs 5.1 and 5.3 hereof, The Regents must give the Licensee prior written notice of the deficiency. The Licensee thereafter has sixty (60) days from receipt of such notice to cure the deficiency or if such deficiency is of such a nature that it cannot be completely cured within said sixty (60) days, to be diligently working to cure such deficiency or sixty (60) days to request arbitration under Paragraph 5.4. If the Regents has not received a written request for arbitration within said sixty (60) days or reasonable tangible evidence that the deficiency has been cured within the sixty (60) day period or that Licensee is diligently working to cure such deficiency within said sixty (60) day period, then The Regents may, at its option terminate this Agreement or reduce Licensee’s exclusive licenses to nonexclusive licenses by giving written notice to the Licensee. All notices hereunder shall be given as required by Article 19 (NOTICES).

5.6 Either party may refer any controversy or claim arising out of or relating to this Article 5 (DILIGENCE) or the breach thereof, to arbitration under the provisions of this Article 5 by so notifying the other party in writing in accordance with the provisions of Article 18 (NOTICES) stating the nature of the dispute to be resolved.

5.7 Within fifteen (15) business days following such notice three arbitrators shall be selected by the following process:

5.8 Within five (5) business days after selection of the three arbitrators, the arbitrators shall meet with the parties at which time the parties shall each present in writing the issue to be resolved and a proposed ruling on it. Such writing shall be served on the other party in advance and be limited to no more than twenty (20) pages.

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5.9 The following general provisions shall apply to the arbitration proceeding: