MANUFACTURING LICENSE AND TECHNOLOGY TRANSFER AGREEMENT January 28, 1991

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Exhibit 10.20

MANUFACTURING LICENSE

AND TECHNOLOGY TRANSFER AGREEMENT

January 28, 1991

Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as [*]. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

MANUFACTURING LICENSE AND TECHNOLOGY TRANSFER AGREEMENT

TABLE OF CONTENTS

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MANUFACTURING LICENSE AND TECHNOLOGY TRANSFER AGREEMENT

        This Manufacturing License and Technology Transfer Agreement ("Agreement") is made and entered into this 28th day of January, 1991, by and between Schonberg Radiation Corporation, a California corporation having its principal place of business in Santa Clara, California ("Company"), and Accuray Associates, a California limited partnership having its principal place of business in Santa Clara, California ("Licensee").

        WHEREAS, the Company is engaged in the business of designing, engineering, manufacturing and selling linear accelerator products; and

        WHEREAS, the Company has acquired extensive know-how and related technical information with respect to such products; and

        WHEREAS, the Company has developed and is the exclusive owner of certain proprietary information, intellectual property rights and know-how related to such products;

        WHEREAS, Licensee wishes to manufacture, modify, use, sell, reproduce and distribute products utilizing the Company's proprietary information, intellectual property rights, know-how and related technical information; and

        WHEREAS, Licensee desires to obtain from the Company an exclusive, worldwide license, subject to field of use restrictions, to use all of the Company's intellectual property to manufacture, reproduce, modify, use, sell and otherwise distribute its products; and

        WHEREAS, Licensee wishes to acquire ownership of certain technology which may be developed with funds obtained by the Company through certain government grants.

        NOW, THEREFORE, in consideration of the mutual promises contained herein, the parties hereby agree as follows:

        1.     Definitions.     As used herein:

• •         (a)     Documentation.     The term "Documentation" shall mean any and all of the documents in the Company's possession relating to the manufacture, testing, use, sale or other distribution of the Licensed Product.

            (b)     Exercise Date.     The term "Exercise Date" shall mean the date on which any of the conditions set forth in paragraph 3 ("Exercise Preconditions") hereof are satisfied.

            (c)     Improvements.     The term "Improvements" shall mean any improvements, enhancements, adaptations, modifications or derivations, whether or not patentable.

            (d)     Licensed Copyrights.     The term "Licensed Copyrights" means any registered or unregistered copyrights of the Company as such exist on the Exercise Date that are relevant to, or may be reasonably required for, or in connection with, the development, design, manufacture, reproduction, testing, modification, application, use, sale or other distribution of the Licensed Product and the modification, translation, reproduction and distribution of the Documentation.

            (e)     Licensed Know-How.     The term "Licensed Know-How" shall mean any and all software, techniques, methods, drawings, formulae, specifications, designs, toolings, skills, concepts, trade secrets, vendor lists, technical and applications information and know-how existing on the Exercise Date, and all documentation or written or recorded data in the possession of the Company on the Exercise Date, whether patented or not, that are relevant to, or may be reasonably required for, or in connection with, the development, design, manufacture, reproduction, modification, testing, application, use, sale or other distribution of the Licensed Product.

            (f)     Licensed Patents.     The term "Licensed Patents" means (i) any United States or foreign applications filed by the Company which are based on the Licensed Know-How; (ii) any foreign patent applications based upon said United States patent applications; (iii) any additions, continuations, continuations-in-part, divisions, reissues or extensions based thereon; and (iv) any

    United States or foreign patent or other intellectual property rights obtained from any of said United States or foreign patent applications.

            (g)     Licensed Product.     The term "Licensed Product" shall mean the hardware product described on the attached Exhibit 1 as modified or enhanced from time to time by (i) all Improvements thereto developed by the Company prior to the Exercise Date and (ii) all Improvements thereto developed by Licensee at any time.

            (h)     Licensed Rights.     The term "Licensed Rights" shall mean the Company's Licensed Know-How, Licensed Patents and Licensed Copyrights.

            (i)     Medical Applications.     The term "Medical Applications" shall mean any and all applications involving x-ray and electron treatments which utilize stereotaxic localization for the definition of target volumes including radiosurgery and stereotaxic radiotherapy.

        2.     License Grant.     

• •         (a)     Manufacturing License.     The Company grants to Licensee a perpetual, exclusive, worldwide license, subject to the right to exercise such rights set forth in paragraph 3 ("Exercise Preconditions") to use the Licensed Rights and Licensed Know-How (including any Improvements thereto developed by the Company prior to the Exercise Date) to manufacture (or have manufactured pursuant to paragraph 8 ("Subcontracting") hereof) Licensed Products for Medical Applications and an exclusive worldwide license to use, sell or otherwise distribute, make Improvements to, and repair such Licensed Products; provided, however, that the Company retains the right to manufacture the Licensed Products for sale to Licensee pursuant to the terms of the Purchase Agreement (as defined below) and all rights to the Licensed Product for applications other than Medical Applications.

            (b)     Documentation.     The Company grants to Licensee a perpetual, nonexclusive, worldwide license to use, reproduce, modify, translate and distribute the Documentation pursuant to the terms of this Agreement.

        3.     Exercise Preconditions.     Licensee may only exercise its rights under paragraph 2 ("License Grant") under any of the following circumstances:

• •         (a)     Insolvency, Bankruptcy.     The insolvency of the Company or the commencement by or against the Company of any case or proceeding under any bankruptcy, reorganization, insolvency or moratorium law, or any other law or laws for the relief of debtors which case or proceeding is not dismissed within thirty (30) days after a petition is first filed against the Company.

            (b)     Inadequate Supply.     The Company at any time becomes unwilling or unable to supply products under that certain OEM Purchase Agreement dated January 28, 1991 between the Company and Licensee (the "Purchase Agreement") in a sufficient quantity to meet Accuray's requirements. The parties agree that the Company's failure to meet Accuray's delivery requirements within 45 business days after the delivery date scheduled pursuant to the terms of the Purchase Agreement shall be deemed to be conclusive evidence of the Company's inability to meet Licensee's requirements.

            (c)     Acquisition of Company.     The Company is acquired through a merger, sale of all or substantially all of its assets or a purchase of more than fifty percent of its outstanding capital stock by a person or persons not affiliated with the Company as of the date of this Agreement.

            (d)     Breach of Purchase Agreement.     The Company is in material breach under the terms of the Purchase Agreement.

            (e)     Six (6) Months Notice.     Six (6) months after Licensee delivers written notice to the Company that it intends to exercise its right to manufacture (or have manufactured) the Licensed Product; provided, that in such event the Licensee shall purchase from the Company at its cost all

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• • of the Company's remaining inventory related to the manufacture of the Licensed Products which is not useable by the Company in the manufacture of the Company's products for sale to customers other than the Licensee.

            4.     Improvements.     

            (a)     Company Improvements.     Subject to Licensee's rights under paragraph 2 ("License Grant"), the Company shall own the entire right, title and interest to all Improvements developed by it. However, the Company shall, during the term hereof, promptly disclose such Improvements to Licensee and upon the request of Licensee, shall enter into good faith negotiations with Licensee for a license to such Improvements which are developed after the Exercise Date.

            (b)     Licensee Improvements.     Licensee shall own the entire right, title and interest to Improvements developed by it. However, Licensee shall, during the term hereof, promptly disclose such Improvements to the Company and, upon the request of the Company, shall enter into good faith negotiations for a license to such Improvements.

            5.     Royalties.     

            (a)     Amount of Payment.     Licensee shall pay to the Company a royalty of $[*] for each Licensed Product manufactured by Licensee, or by a third party on Licensee's behalf, which is sold or otherwise distributed (a "Royalty Bearing Product") until such time as the Maximum Royalty Amount (as defined below) has been paid to the Company under this Agreement; provided, however, that the Maximum Royalty Amount shall be reduced by the full amount of any research and development costs which are paid for by Licensee under the terms of the Purchase Agreement in connection with the delivery of the Initial Units (as defined in the Purchase Agreement). The Maximum Royalty Amount shall be calculated as follows: (i) if the Exercise Date occurs on or prior to the fifth anniversary of the date hereof, the Maximum Royalty Amount shall be $[*] and (ii) if the Exercise Date occurs after the fifth anniversary of the date hereof, the Maximum Royalty Amount shall be $[*], $[*] of which shall be paid by the Licensee in a lump sum payment upon delivery by the Company of the Documentation. Upon payment in full for the royalties accrued during such period, the licenses granted under this Agreement shall become fully-paid and royalty-free.

            (b)     Payment Terms.     Royalties shall be paid within twenty (20) business days after the end of each quarter during which Licensee ships a Royalty Bearing Product to any user. Concurrently with the royalty payment, Licensee shall submit to the Company a written report for the preceding calendar quarter setting forth the total number of Royalty Bearing Products shipped during the quarter, and a calculation of the total royalties owed to the Company for such quarter.

            (c)     Records.     Licensee shall keep accurate records of the Royalty Bearing Products for a minimum of three (3) years from shipment in sufficient detail to enable the royalties payable to the Company to be determined accurately. To enable the Company from time to time to determine the accuracy of such records, Licensee shall permit an independent certified public accountant, acceptable to both parties, to inspect its pertinent records following reasonable notice and during reasonable business hours, not more frequently than annually. To protect Licensee's confidential business information, the report of such accountant to the Company shall be confined solely to statements regarding the accuracy of royalty payments made to the Company by Licensee. Except as specified below, such inspections shall be at the expense of the Company. If such inspection discloses an underpayment of more than 5%, Licensee shall reimburse the Company for the cost of such inspection and shall promptly pay the Company all previously unpaid amounts plus interest

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• • Certain information on this page has been redacted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

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thereon at the rate of eighteen percent (18%) per annum or the highest interest rate permitted by law, whichever is lower. The Company's inspection rights pursuant to this paragraph shall terminate two (2) years after the licenses granted under this Agreement become fully-paid and royalty-free.

• •         (d)     Taxes.     Licensee further agrees to pay any sales, use, excise, value added, or similar tax not based on the Company's income which the Company may incur to any state in respect of this Agreement if the Company submits an invoice to Licensee on a timely basis reflecting the amount of any such tax. If a resale certificate or other certificates or document of exemption is required in order to exempt any transaction under this Agreement from sales or use tax liability, Licensee will promptly furnish such certificate or document to the Company.

            6.     Duties of Company.     

            (a)     Delivery of Documentation.     The Company agrees to furnish to Licensee all current versions of Documentation then existing within ten (10) business days after the Exercise Date; provided, however, that if the Licensee exercises its rights under subparagraph 3(e) ("Six Months Notice") above, the Company will furnish the Documentation to Licensee at least sixty (60) days prior to the Exercise Date. If Documentation is provided to Licensee prior to the Exercise Date, the Company shall be required to provide any updates or modifications to such Documentation which are made prior to the Exercise Date within ten (10) business days after the Exercise Date.

            (b)     Training.     The Company will furnish help to Licensee in the form of transfer of the Licensed Rights and instruction in the manufacture of the Licensed Products by providing free of charge, 500 person-hours of a qualified person's time for engineering know-how, manufacturing know-how, and service know-how, at times reasonably requested by Licensee during the first eighteen (18) months after the Exercise Date. In addition, during the first two (2) years after the Exercise Date, Licensee shall have the right to purchase from the Company additional consultation services at the Company's standard engineering, manufacturing or service consultant rate in effect at the time of the request. At Licensee's request, the Company will provide this training at Licensee's premises, provided that Licensee will pay all reasonable transportation and living expenses for training at any facility which is more than fifty (50) miles from the Company's principal place of business.

            (c)     Visitation Rights.     Upon reasonable advance notice during the first two (2) years after the Exercise Date and provided that Licensee's manufacturing license under paragraph 2 ("License Grant") remains in effect, the Company shall allow Licensee's personnel to visit the Company's place of business and discuss and inspect the Company's method of manufacturing the Licensed Product and related matters concerning the technology transferred to Licensee hereunder.

            7.     Rights Under Government Grants.     

            (a)     Subcontract of Research and Development.     The Company has submitted a proposal entitled "Computer Mediated Stereotaxic Radiosurgery" to the Department of Health and Human Services for a Phase II Small Business Innovation Research Grant (the "SBIR Grant"). In addition, the Company is a Private Sector Participant along with Stanford University in a project entitled "Computer Mediated Stereotaxic Radiosurgery" which is being funded by a California Competitive Technology Grant (the "CCT Grant"). If the Company is awarded the SBIR Grant, it will subcontract to Licensee the maximum amount which it is entitled for research and development to be conducted under the SBIR Grant. In addition, the Company will use Licensee's employees as consultants wherever possible and appropriate. The Company also agrees to consult with Licensee in the selection of equipment to be purchased with funds from the SBIR Grant and will transfer to Licensee, upon completion of the research and development, all computer equipment and related equipment purchased with the SBIR Grant, subject to the rights of the U.S. Government to such equipment under the SBIR Grant.

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• •         (b)     Inclusion in Licensed Rights.     Any patent applications, copyrights, trade secrets or other intellectual property rights which result from the research and development under the SBIR Grant and/or the CCT Grant and which directly relate to the manufacture of the Licensed Products shall be included in the definition of Licensed Rights.

            (c)     Technology Transfer.     The Company will transfer and assign to Licensee all right, title and interest which it acquires at any time in any patents, patent applications, copyrights, trade secrets or other intellectual property which results from the research and development conducted utilizing the SBIR Grant and/or the CCT Grant and is not directly related to the manufacture of the Licensed Products or other linear accelerator devices.

        8.     Subcontracting.     Licensee shall have the right to contract with a third party to manufacture all or any part of the Licensed Product for Licensee's exclusive benefit so long as such subcontractor agrees to the same obligations and limitations as are imposed upon Licensee in the manufacture of the Licensed Product under this Agreement, including the Company's termination rights set forth in paragraph 13 ("Termination") hereof; provided, however, that if Licensee has exercised its rights under Paragraph 2 ("License Grant") pursuant to Paragraph 3(c) ("Acquisition of Company") or Paragraph 3(e) ("Six (6) Months Notice"), Licensee shall not be entitled, without the prior written consent of the Company, to use any subcontractor to manufacture the Licensed Products which manufactures X-Band linear accelerators for the industrial market. Licensee agrees that a breach by its subcontractor of the obligations and limitations of this Agreement shall be deemed to be a breach by Licensee under this Agreement.

        9.     Indemnification.     

• •         (a)     Infringement of Proprietary Rights.     In the event that a third party makes any claim, which the Licensee reasonably believes to be valid, that (i) the manufacture, reproduction, use, sale or other distribution of the Licensed Product or any part or component thereof, and/or (ii) the use, reproduction or distribution of the Documentation infringes, violates or misappropriates the intellectual property rights of any third party, the Company will use its best efforts to modify the design of the Licensed Product at no cost to the Licensee so that is no longer infringing and continues to comply with the Specifications in all materials respects; provided, however, that this obligation will not cover any claim that the Licensed Product infringes any third party's rights as used in combination with any software or hardware not supplied by the Company, if that claim could have been avoided by the use of the Licensed Product alone or with other software or hardware. In the event that the Company is unable, after using its best efforts, to modify the design of the Licensed Product so that it is no longer infringing, Licensee shall be entitled to offset against any portion of the Maximum Royalty Amount which remained unpaid as of the date on which Licensee gives the Company notice of the third party claim, any royalties or lump sum payments made by Licensee to the party claiming that the Licensed Product infringes its intellectual property rights.

            (b)     Breach of Representations and Warranties.     The Company agrees to indemnify and hold Licensee and its affiliates harmless from any loss, cost, damage or expense (collectively a "Loss") suffered by Licensee and/or its affiliates to the extent such Loss arises from a breach of the Company's representations and warranties contained in