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As filed with the Securities and Exchange Commission on November 13, 2006

Registration No. 333-            

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

ACCURAY INCORPORATED
(Exact name of registrant as specified in its charter)

California (before reincorporation)
Delaware (after reincorporation)
(State or other jurisdiction
of incorporation or organization)		   3841
(Primary Standard Industrial
Classification Code Number)		   77-0268932
(I.R.S. Employer
Identification Number)

1310 Chesapeake Terrace, Sunnyvale, California 94089
(408) 716-4600
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)

Euan S. Thomson, Ph.D.
Chief Executive Officer
Accuray Incorporated
1310 Chesapeake Terrace
Sunnyvale, California 94089
(408) 716-4600
(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies To:

Michael W. Hall, Esq.
Laura I. Bushnell, Esq.
Jean-Marc Corredor, Esq.
Latham & Watkins LLP
140 Scott Drive
Menlo Park, California 94025
(650) 328-4600		   Mario M. Rosati, Esq.
Mark L. Reinstra, Esq.
Gavin T. McCraley, Esq.
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304
(650) 493-9300

        Approximate date of commencement of the proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.

        If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. o

        If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

        If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

        If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

CALCULATION OF REGISTRATION FEE

Title of Each Class of
Securities to be Registered
   Proposed Maximum
Aggregate Offering
Price(1)
   Amount of
Registration Fee
Common stock, $0.001 par value per share   $230,000,000   $24,610
(1)
Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.


        The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information contained in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and we are not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

Preliminary Prospectus

Subject to Completion, dated November 13, 2006

                shares

GRAPHIC

Common Stock

        This is the initial public offering of our common stock. We are offering                                    shares of the common stock offered by this prospectus, and the selling stockholders are offering                         shares. We will not receive any proceeds from the sale of shares to be offered by the selling stockholders. We expect the initial public offering price to be between $            and $            per share.

        Currently no public market currently exists for our common stock. We are applying to have our common stock listed on The NASDAQ Global Market under the symbol "ARAY."

        This investment involves risk. See "Risk Factors" beginning on page 9.

        Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 
   Per share
   Total
Public Offering Price   $     $  
Underwriting Discounts and Commissions   $     $  
Proceeds, Before Expenses, to Accuray Incorporated   $     $  
Proceeds, Before Expenses, to the Selling Stockholders   $     $  

        The underwriters have a 30-day option to purchase up to an additional                        shares of common stock from us and the selling stockholders to cover over-allotments, if any.

        The underwriters are offering the common stock as set forth under "Underwriting." Delivery of the shares will be made on or about                                    , 2007.

JPMorgan   UBS Investment Bank


Piper Jaffray

Jefferies & Company

The date of this prospectus is                                    , 2006

        You should rely only on the information contained in this prospectus. Neither we, nor the underwriters, have authorized anyone to provide you with additional information or information different from that contained in this prospectus. We are offering to sell, and seeking offers to buy, shares of our common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of shares of our common stock.


TABLE OF CONTENTS

 
   Page
Prospectus Summary   1
Risk Factors   9
Special Note Regarding Forward-looking Statements   29
Use of Proceeds   30
Dividend Policy   30
Capitalization   31
Dilution   32
Selected Consolidated Financial Data   33
Management's Discussion and Analysis of Financial Condition and Results of Operations   35
Business   51
Management   75
Certain Relationships and Related Transactions   99
Principal and Selling Stockholders   102
Description of Capital Stock   104
Material United States Federal Income Tax Consequences to Non-United States Holders of Our Common Stock   108
Shares Eligible for Future Sale   112
Underwriting   114
Legal Matters   118
Experts   118
Change in Accountants   118
Where You Can Find More Information   119
Index to Consolidated Financial Statements   F-1

        CyberKnife®, our logo, Accuray™, AXUM®, Express™, Synchrony®, Xsight™, InView™, MultiPlan™, Xchange™ and RoboCouch™ are our trademarks. All other service marks, trademarks and trade names referred to in this prospectus are the property of their respective owners. Unless the context requires otherwise, the words "Accuray," "we," "Company," "us" and "our" refer to Accuray Incorporated. For purposes of this prospectus, the term "stockholder" shall refer to the holders of our common stock.

i


PROSPECTUS SUMMARY

        This summary highlights selected information appearing elsewhere in this prospectus and does not contain all the information you should consider before investing in our common stock. You should carefully read this prospectus in its entirety before investing in our common stock, including the section entitled "Risk Factors," and our consolidated financial statements and related notes and our consolidated pro forma financial statements and related notes included elsewhere in this prospectus.

Our Business

        We have developed the first and only commercially available intelligent robotic radiosurgery system, the CyberKnife system, designed to treat solid tumors anywhere in the body as an alternative to traditional surgery. For over 30 years, traditional radiosurgery systems, or systems that deliver precise, high dose radiation directly to a tumor, have been used primarily to destroy brain tumors. Our CyberKnife system represents the next generation of radiosurgery systems, combining continuous image-guidance technology with a compact linear accelerator that has the flexibility to move in three dimensions according to the treatment plan. This combination, which we refer to as intelligent robotics, extends the benefits of radiosurgery to the treatment of tumors anywhere in the body. The CyberKnife system autonomously tracks, detects and corrects for tumor and patient movement in real-time during the procedure, enabling delivery of precise, high dose radiation typically with sub-millimeter accuracy. Traditional radiosurgery systems have limited mobility and generally require the use of rigid frames, restricting the ability to effectively treat tumors outside of the brain. The CyberKnife system does not have these limitations and therefore has increased flexibility to treat tumors throughout the body from many different directions, while minimizing the delivery of radiation to healthy tissue and vital organs. The CyberKnife procedure requires no anesthesia, can be performed on an outpatient basis and allows for the treatment of patients that otherwise would not have been treated with radiation or who may not have been good candidates for surgery. In addition, the CyberKnife procedure avoids many of the potential risks and complications that are associated with other treatment options and is more cost effective than traditional surgery.

        The CyberKnife system has received U.S. Food and Drug Administration, or FDA, 510(k) clearance to provide treatment planning and image-guided robotic radiosurgery for tumors anywhere in the body where radiation treatment is indicated. The CyberKnife system has also received a CE mark for sale in Europe and has been approved for various indications in Japan, Korea, Taiwan, China and other countries. We estimate that over 20,000 patients worldwide have been treated with the CyberKnife system since its commercial introduction. Our customers have increasingly used the CyberKnife system for indications outside of the brain, including for tumors on or near the spine and in the lung, liver, prostate and pancreas. Based on customer data, more than 50% of patients treated with the CyberKnife system in the United States during the three months ended September 30, 2006 were treated for tumors outside of the brain.

        We market the CyberKnife system through a direct sales force in the United States and a combination of direct sales personnel and distributors in the rest of the world. As of September 30, 2006, we had 83 CyberKnife systems installed at customer sites and 78 pending installation. Of the 83 systems installed, 52 are in the United States. For the year ended June 30, 2006, our net revenue was $52.9 million, our net loss was $33.7 million and our net cash provided by operating activities was $25.5 million.

Cancer Market and Traditional Treatment

        According to the World Health Organization, or WHO, an estimated 7.6 million people died of cancer in 2005, accounting for 13% of all deaths worldwide. The WHO estimates that there are 24.6 million people living with cancer worldwide, with approximately 10.9 million new cases being

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diagnosed every year. Cancer is the second leading cause of death in the United States, after heart disease. The American Cancer Society, or ACS, estimates that approximately 1.4 million new cases of cancer will be diagnosed in the United States in 2006 and approximately 564,000 Americans will die as a result of cancer in the same period. The ACS broadly divides cancers into two groups: solid tumor cancers, which are characterized by the growth of malignant tumors within the body in areas such as the brain, lung, liver, breast or prostate, and hematological, or blood-borne, cancers, such as leukemia. The ACS estimates that solid tumor cancers will account for approximately 1.3 million, or 92%, of new cancer cases diagnosed in the United States in 2006.

        Traditional methods for the treatment of solid tumor cancers include surgery, radiation therapy and chemotherapy. Surgery is especially appropriate for certain types of cancer, such as breast cancer, where tumors are often well-defined and surgically accessible. However, many types of solid tumors, including those affecting the brain, spine, lungs and various other organs, present significant challenges to traditional surgical approaches because they occur in hard-to-reach areas or lie within or in close proximity to critical organs. In addition, traditional surgery is highly invasive, painful and involves significant risks, including those associated with anesthesia, infection and other complications. Traditional surgery also entails significant costs and recovery times, and in some cases may not be an option due to a patient's physical condition or age.

        Radiation therapy, as opposed to radiosurgery, is typically used to treat the area around a tumor site after surgery, though it can also be used to directly target the tumor in certain instances when surgery is not possible. The goal of radiation therapy is to eliminate all cancer cells in an intended treatment region. However, healthy tissue outside of the intended treatment region also receives radiation. Recent advances in radiation therapy have focused on improving the shape and targeting ability of the radiation beams to minimize unnecessary irradiation of healthy tissue. However, the majority of such radiation treatments are still delivered using gantry-based linear accelerator systems that have a limited range of motion, a limited ability to accurately target and conform to tumor shape and are unable to compensate for tumor and patient movement during treatment. Therefore, the treatment plans using these methods generally include not only the tumor, but also the surrounding healthy tissue to ensure that the entire tumor is treated.

Development of Radiosurgery

        Radiosurgery systems differ from traditional radiation therapy systems in that they are designed to deliver a very high cumulative dose of radiation, in a single or small number of treatments, specifically targeted at the tumor rather than at a broader region surrounding the tumor area. One of the initial radiosurgery techniques was frame-based radiosurgery for the treatment of brain tumors. Although frame-based radiosurgery represents an advancement in cancer treatment, it has significant shortcomings. The necessity for a stereotactic frame to be screwed into a patient's skull makes the procedure more complicated and painful than traditional radiation therapy. In addition, because it is difficult to precisely reposition the head frame for multiple treatments, these systems are very rarely used when more than one dose of radiation is required.

        Manufacturers have also developed frame-based radiosurgery systems to enable the treatment of tumors outside the brain, such as tumors on or near the spine and in the lung, liver, prostate and pancreas. However, frame-based approaches to delivering radiosurgery for tumors in such locations are rarely as accurate as frame-based systems used to treat brain tumors. This lack of accuracy may compromise the efficacy of traditional radiosurgery for tumors outside the brain and may increase the likelihood of delivering significant radiation doses to surrounding healthy tissue.

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The CyberKnife System Solution

        We have developed and commercialized the CyberKnife system, an intelligent robotic radiosurgery system designed to treat solid tumors throughout the body as an alternative to traditional surgery. The CyberKnife system uses intelligent robotics to precisely deliver high dose radiation to a tumor, typically with sub-millimeter accuracy. Our system tracks, detects and corrects for tumor and patient movement in real-time during treatment, limiting the potential damage to surrounding healthy tissue. Key benefits of the CyberKnife system include:

        Treatment of inoperable or surgically complex tumors.    The CyberKnife system can be used to treat tumors that cannot be treated with traditional surgical techniques because of their location, number, size, shape or proximity to vital tissues or organs, or because of the age or health of the patient.

        Treatment of tumors throughout the body.    The CyberKnife system has been cleared by the FDA to provide treatment planning and image-guided radiosurgery for tumors anywhere in the body where radiation treatment is indicated.

        Real-time tracking of tumor movement.    The CyberKnife system is able to treat tumors that may change position due to tumor and patient movement during treatment with a level of accuracy associated with radiosurgery procedures for brain tumors.

        Significant patient benefits.    Patients may be treated with the CyberKnife system on an outpatient basis, without anesthesia, and without the risks and complications inherent in traditional surgery. In addition, patients do not require a stereotactic frame or other substantial pre-treatment preparation, and typically there is no recovery time or hospital stay associated with the CyberKnife procedure.

        Facilitates additional revenue generation through increased patient volumes.    We believe that the CyberKnife system allows our customers to effectively treat patients that otherwise would not have been treated with radiation or who may not have been good candidates for surgery. Therefore, we believe the treatment of these patients provides additional revenue for our customers. In addition, because the CyberKnife procedure is a non-invasive, outpatient procedure requiring little or no recovery time, hospitals can treat more patients than through traditional surgery.

        Upgradeable modular design.    Our CyberKnife system has a modular design which facilitates the implementation of upgrades without requiring our customers to purchase an entirely new system. We have a well-established track record of developing and delivering state-of-the-art upgrades to our customers, enabling our customers to take advantage of the continued evolution of our CyberKnife system. We continue to develop and offer new clinical capabilities enhancing ease of use, reducing treatment times, improving accuracy and improving patient access.

        Key components and technologies of our CyberKnife system include:

        Compact X-band linear accelerator.    Our proprietary compact X-band linear accelerator, the component that generates the radiation that destroys the tumor, is smaller and weighs significantly less than standard medical linear accelerators typically used in radiation therapy.

        Robotic manipulator.    The manipulator arm, with six-degrees-of-freedom range of movement, is designed to move and direct the linear accelerator with an extremely high level of precision and repeatability and allows doses of radiation to be delivered from nearly any direction.

        Real-time image-guidance system with continuous target tracking and feedback.     Real-time image-guided robotics enables the CyberKnife system to continuously detect and correct for tumor and patient movement throughout the entire treatment without the need for clinician intervention.

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        Synchrony respiratory tracking system.    The CyberKnife system employs a proprietary motion tracking system called Synchrony to target tumors that move with patient respiration, allowing clinicians to significantly reduce treatment margins while eliminating the need for gating or breath-holding techniques.

        Xsight Spine Tracking System.    The Xsight Spine Tracking System eliminates the need for invasive surgical implantation of small, inert metal markers, known as fiducials, when treating tumors on or near the spine, by using skeletal structures to automatically locate and track tumors during treatment.

        RoboCouch patient positioning system.    The RoboCouch robotically aligns patients prior to treatments, reducing patient set up times and enabling faster treatments.

        Xsight Lung Tracking System.    The Xsight Lung Tracking System directly tracks the anatomy of some lung tumors without the need for implanted fiducials and is integrated with the Synchrony respiratory tracking system.

        Xchange robotic collimator changer.    The Xchange robotic collimator changer automatically exchanges secondary collimators, which determine the radiation beam size, during treatment. The use of multiple collimators can enable faster treatments than the use of a single collimator.

        In-Room CT System.    The In-Room CT System enables diagnostic quality 3D and 4D patient imaging just prior to treatment. Combined with the RoboCouch Patient Positioning System, the In-Room CT System provides a smooth and efficient scan-to-treatment transition without having to enter the treatment room or move the patient.

        4D Treatment Optimization and Planning System.    Our 4D Treatment Optimization and Planning System optimizes treatment by taking into account the movement of the tumor as well as the movement and deformation of the surrounding tissue, thereby minimizing treatment margins and radiation exposure to healthy tissue.

        Other features.    The CyberKnife system also includes proprietary treatment planning software and remote review capabilities.

Shared Ownership Programs, Product Services and Upgrades

        We provide a variety of services to support the successful operation and use of our CyberKnife systems. We expect that these services will enable us to generate a recurring revenue stream that will continue to comprise an important portion of our revenue. We offer shared ownership programs under which we provide a CyberKnife system to a customer while retaining ownership of that system. Under this program we generally receive the greater of a minimum monthly payment or a portion of the revenue generated from the use of that system. As of September 30, 2006, we had entered into 22 shared ownership programs, of which 10 are installed and 12 are pending installation.

        We also offer several multiyear service plans for an annual fee. Currently, our most comprehensive service plan is the Diamond Elite multiyear service plan, which provides for annual renewal for four years, including the one-year warranty period. The multiyear service plan is typically signed by the customer at the same time as the CyberKnife system purchase contract. In addition to providing technical support, this service plan provides our customers the opportunity to acquire up to two unspecified future upgrades per year, when and if they become available. As of September 30, 2006, 59 of our customers had purchased service plans.

Our Strategy

        Our goal is to have the CyberKnife system become the standard of care for the treatment of solid tumors anywhere in the body as an alternative to traditional surgery. We believe our technology can

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significantly enhance the applications of radiosurgery by increasing the number and type of tumors that can be treated effectively. The key elements of our strategy include:


Corporate Information

        We were incorporated in California in 1990 and commenced operations in 1992. We plan to reincorporate in Delaware prior to the closing of this offering. Our principal offices are located at 1310 Chesapeake Terrace, Sunnyvale, California 94089, and our telephone number is (408) 716-4600. We maintain a website at http://www.accuray.com. The information contained on our website is not incorporated into and does not constitute a part of this prospectus, and the only information that you should rely on in making your decision whether to invest in our common stock is the information contained in this prospectus.

5

The Offering

Common stock offered by Accuray                    shares

Common stock offered by the selling stockholders
 
                 shares

Common stock to be outstanding after this offering
 
                 shares

Use of proceeds
 
We expect to use the net proceeds of this offering for sales and marketing initiatives, research and development activities, increased working capital and general corporate purposes. In addition, we may use a portion of the proceeds to acquire complementary technologies, products or businesses.

Proposed NASDAQ Global Market symbol
 
ARAY

        The number of shares of common stock to be outstanding after this offering is based on 41,954,435 shares outstanding as of June 30, 2006 and excludes:

        Except as otherwise indicated, information in this prospectus reflects or assumes the following:

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Summary Consolidated Financial Data

        The following table presents summary consolidated financial data. We derived the summary consolidated statements of operations data for the years ended June 30, 2004, 2005 and 2006 and the summary consolidated balance sheet as of June 30, 2006 from our audited consolidated financial statements and notes thereto that are included elsewhere in this prospectus. Our historic results are not necessarily indicative of the results that may be expected in the future. You should read this data together with our consolidated financial statements and related notes included elsewhere in this prospectus and the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of this prospectus.

 
   Years ended June 30,
  
 
   2004
   2005
   2006
  
 
   (in thousands, except per share data)

  
Consolidated Statements of Operations Data:                    
Total net revenue   $ 19,569   $ 22,377   $ 52,897  
Total cost of revenue(1)     8,496     11,115     27,492  
   
 
 
 
  Gross profit     11,073     11,262     25,405  
Operating expenses:                    
  Selling and marketing(1)     10,647     16,361     25,186  
  Research and development(1)     7,311     11,655     17,788  
  General and administrative(1)     4,672     8,129     15,923  
   
 
 
 
    Total operating expenses     22,630     36,145     58,897  
   
 
 
 

Loss from operations
 
 
(11,557
)
 
(24,883
)
 
(33,492
)
Interest and other income (expense), net     (136 )   (238 )   56  
   
 
 
 
Loss before provision for income taxes     (11,693 )   (25,121 )   (33,436 )
Provision for income taxes     3     68     258  
   
 
 
 
Net loss   $ (11,696 ) $ (25,189 ) $ (33,694 )
   
 
 
 
Net loss per common share:                    
    Basic and diluted   $ (1.00 ) $ (1.76 ) $ (2.11 )
   
 
 
 
Weighted average common shares outstanding used in computing net loss per common share:                    
    Basic and diluted     11,737     14,283     15,997  
   
 
 
 
Pro forma net loss per share, basic and diluted (unaudited)(2)               $ (0.81 )
               
 
Pro forma weighted average common shares outstanding, basic and diluted (unaudited)(2)                 41,709  
               
 
(1)
Includes stock-based compensation expense as follows:

 
  
   Years ended June 30,
 
  
   2004
   2005
   2006
 
  
   (in thousands)
  Total cost of revenue   $ 190   $ 454   $ 863
  Selling and marketing     826     1,903     2,569
  Research and development     648     1,157     1,574
  General and administrative     785     2,812     3,237
(2)
See note 2 to our consolidated financial statements for a description of the method used in calculating our pro forma net loss per share (unaudited), basic and diluted and pro forma weighted average common shares outstanding, basic and diluted (unaudited).

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   Years ended June 30,
 
   2004
   2005
   2006
Selected Operating Data:                  
Number of CyberKnife systems installed per year                  
  United States     7     14     22
  International     9     10     6
   
 
 
  Total     16     24     28
   
 
 

Net cash provided by operating activities (in thousands)
 
$
4,906
 
$
18,015
 
$
25,505
 
   As of June 30, 2006
 
   Actual
   Pro forma(1)
   Pro forma as adjusted(2)
 
    
   (unaudited)

   (unaudited)
 
   (in thousands)
Consolidated Balance Sheet Data:                
  Cash and cash equivalents   $ 27,856   $ 28,381    
  Deferred cost of revenue     56,588     56,588    
  Total assets     138,623     139,148    
  Short-term debt     —     —    
  Deferred revenue     149,664     149,664    
  Working capital (deficit)     (3,783 )   (3,258 )  
  Redeemable convertible preferred stock     27,504     —    
  Total stockholders' equity (deficiency)     (80,855 )   (52,826 )  
(1)
The pro forma balance sheet data presented above gives effect to (i) the conversion of all outstanding shares of our preferred stock into an aggregate of 25,186,285 shares of common stock immediately prior to the closing of this offering and (ii) the exercise of a warrant to purchase 525,000 shares of common stock immediately prior to the closing of this offering.

(2)
The pro forma as adjusted balance sheet data reflects (i) the conversion of all outstanding shares of our preferred stock into an aggregate of 25,186,285 shares of common stock immediately prior to the closing of this offering, (ii) the exercise of a warrant to purchase 525,000 shares of common stock immediately prior to the closing of this offering and (iii) the sale of the                shares of common stock in this offering at an assumed initial public offering price of $                per share, after deducting underwriting discounts and commissions and estimated offering expenses.

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RISK FACTORS

        An investment in our common stock involves significant risks. You should carefully consider the risks described below and the other information in this prospectus, including our consolidated financial statements and related notes, before you decide to invest in our common stock. If any of the following risks actually occur, our business, prospects, financial condition and results of operations could be materially harmed, the trading price of our common stock could decline and you could lose all or part of your investment. The risks and uncertainties described below are those that we currently believe may materially affect us. Additional risks and uncertainties that we are unaware of or that we currently deem immaterial may also become important factors that affect us.

Risks Related to Our Business

We have a large accumulated deficit, expect future losses and may be unable to achieve or maintain profitability.

        We have incurred net losses in every fiscal period since our inception. As of June 30, 2006, we had an accumulated deficit of $120.6 million. We expect to continue to incur net losses in the future, particularly as we increase our manufacturing, sales and marketing, and administrative activities and as we continue our research and development activities. Our ability to achieve and maintain long-term profitability is largely dependent on our ability to successfully market and sell the CyberKnife system and to control our costs and effectively manage our growth. We are required to defer revenue associated with our legacy multiyear service plans due to specified obligations related to the delivery of upgrades to the CyberKnife system. Therefore, our deferred revenue will be higher in the short term and we may not be able to recognize some portions of our deferred revenue until we have satisfied all obligations for delivery of upgrades. We cannot assure you that we will be able to achieve or maintain profitability. In the event we fail to achieve and maintain profitability, our stock price could decline.

If the CyberKnife system does not achieve widespread market acceptance, we will not be able to generate the revenue necessary to support our business.

        Achieving physician, patient, hospital administrator and third-party payor acceptance of the CyberKnife system as a preferred method of tumor treatment will be crucial to our continued success. Physicians will not begin to use or increase the use of the CyberKnife system unless they determine, based on experience, clinical data and other factors, that the CyberKnife system is a safe and effective alternative to current treatment methods. The CyberKnife system was initially used primarily for the treatment of tumors in the brain, and the broader use of the system to treat tumors elsewhere in the body has been a more recent development. As a result, physician and patient acceptance of the CyberKnife system as a broad-based tool for treatment of solid tumor cancers anywhere in the body has not yet been fully demonstrated, particularly as compared to products, systems or technologies that have longer histories in the marketplace. The CyberKnife system is a major capital purchase and purchase decisions are greatly influenced by hospital administrators who are subject to increasing pressures to reduce costs. These and other factors may affect the rate and level of the CyberKnife system's market acceptance, including:

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        If the CyberKnife system is unable to achieve or maintain market acceptance, our business would be harmed and our stock price would decline.

The high unit price of the CyberKnife system, as well as other factors may contribute to substantial fluctuations in our operating results and stock price.

        Because of the high unit price of the CyberKnife system, and the relatively small number of units installed each quarter, each installation of a CyberKnife system can represent a significant component of our revenue for a particular quarter. Therefore, if we do not install a CyberKnife system when anticipated, our operating results may vary significantly and our stock price may be materially harmed. These fluctuations and other potential fluctuations mean that you should not rely upon our operating results in any particular period as an indication of future performance. In particular, factors which may contribute to these fluctuations may include:

        These factors are difficult to forecast and may contribute to substantial fluctuations in our quarterly revenues and substantial variation from our projections, particularly during the periods in which our sales volume is low. Any failure to meet investor expectations regarding our operating results may cause our stock price to decline.

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We experience a long and variable sales and installation cycle, which may result in inconsistent quarterly results.

        The CyberKnife system has a lengthy sales and purchase order cycle because it is a major capital equipment item and requires the approval of senior management at purchasing institutions. The sales process in the United States often begins with a letter of intent between us and the customer. After the letter of intent is signed, we enter into a definitive purchase contract with the customer. Generally following the execution of the contract, the customer begins the building or renovation of a facility to house the CyberKnife system, which together with the subsequent installation of the CyberKnife system, can take approximately 12 months or longer to complete. During this period, the customer must build a radiation-shielded facility to house their CyberKnife system. In order to construct this facility, the customer must typically obtain radiation device installation permits, which are granted by state and local government bodies, each of which may have different criteria for permit issuance. If a permit were denied for installation at a specific hospital or treatment center, our CyberKnife system could not be installed at that location.

        Under our revenue recognition policy, we generally do not recognize revenue attributable to a CyberKnife system purchase until after installation has occurred. For international sales through distributors, we typically recognize revenue when the system is delivered to the end user's site. Therefore the long sales cycle together with the timing of CyberKnife system shipments and installations may result in significant fluctuations in our reporting of quarterly revenues. Under our current forms of purchase and service contracts, we receive a majority of the purchase price for the CyberKnife system upon installation of the system. Events beyond our control may delay installation and the satisfaction of contingencies required to receive cash inflows and recognize revenue, such as:

        In the event that a customer does not, for any of the reasons above or other reasons, proceed with installation of the system after entering into a purchase contract, we would only recognize the deposit portion of the purchase price as revenue. Therefore, delays in the installation of CyberKnife systems or customer cancellations would adversely affect our cash flows and revenue, which would harm our results of operations and could cause our stock price to decline.

If third-party payors do not continue to provide sufficient coverage and reimbursement to healthcare providers for use of the CyberKnife system, our revenue would be adversely affected.

        Our ability to commercialize our products successfully will depend in significant part on the extent to which appropriate coverage and reimbursement for our products and related procedures are obtained from third-party payors, including governmental payors such as Medicare. Third-party payors, and in particular managed care organizations, are increasingly challenging the prices charged for medical products and services and instituting cost containment measures to control or significantly influence the purchase of medical products and services. These cost containment measures, if instituted in a manner affecting the coverage for or payment of our products, could have a material adverse effect on our operating results.

        Uncertainty exists as to the coverage and reimbursement status of new medical products and services and new indications for existing products. The CyberKnife procedure is currently covered and

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reimbursed by Medicare and other governmental and non-governmental third-party payors. However, we cannot assure you that the CyberKnife procedure will continue to be reimbursed at current rates or that third-party payors will continue to consider our products cost-effective relative to other treatments and provide coverage and reimbursement for our products, in whole or in part. For 2007, the Centers for Medicare and Medicaid Services, or CMS, has issued a final rule that will result in a downward adjustment to the reimbursement rates for treatments using our technology in the hospital outpatient department. For example, for the calendar years 2004 to 2006, the Medicare billing codes for treatments using the CyberKnife system in the hospital outpatient department were assigned a national payment rate of $5,250 for the first treatment and $3,750 for each treatment thereafter, up to a maximum of five treatments. For the 2007 calendar year, under the finalized Medicare payment rules, the national payment rate for procedures billed using these codes will be $3,896 and $2,645, respectively.

        In addition, new billing codes for stereotactic radiosurgery have been established by the American Medical Association, effective 2007. The CMS has determined that the new codes would not be used for hospital outpatient claims under the prospective payment system for 2007 and, instead, existing billing codes for our technology would continue to be in effect. It remains unclear how the billing codes will be used for procedures in other settings for Medicare purposes or how they will be used by non-Medicare payors. Payment amounts for 2007 under the Medicare physician fee schedule for freestanding settings may result in a decrease from current payment amounts if these codes are required for billing our technology. Physicians, hospitals and other healthcare providers may be reluctant to purchase the CyberKnife system or may decline to do so entirely if they determine there is not sufficient coverage and reimbursement from third-party payors for the cost of the CyberKnife procedure. In addition, if physicians or hospital administrators believe that our CyberKnife system will add costs to a procedure, but will not add sufficient offsetting economic or clinical benefits, adoption could be impaired. Any reduction or limitation in use of the CyberKnife system could have an adverse impact on our sales.

        Our success in international markets also depends upon the eligibility of reimbursement for the CyberKnife procedure through government-sponsored healthcare payment systems and third-party payors. Reimbursement and healthcare payment systems in international markets vary significantly by country and, within some countries, by region. In many international markets, payment systems may control reimbursement for procedures performed using new products as well as procurement of these products. In addition, as economies of emerging markets develop, these countries may implement changes in their healthcare delivery and payment systems. Furthermore, healthcare cost containment efforts similar to those underway in the United States are prevalent in many of the other countries in which we intend to sell our products and these efforts are expected to continue. Market acceptance of our products in a particular country may depend on the availability and level of reimbursement in that country. In the event that our customers are unable to obtain adequate reimbursement for the CyberKnife procedures in international markets in which we are selling, or are seeking to sell, CyberKnife systems, market acceptance of our products would be adversely affected.

Future legislative or regulatory changes to the healthcare system may affect our business.

        Even if third-party payors provide adequate coverage and reimbursement for the CyberKnife procedure, adverse changes in third-party payors' general policies toward reimbursement could preclude market acceptance for our products and materially harm our sales and revenue growth, which could cause our stock price to decline. In the United States, there have been, and we expect there will continue to be, a number of legislative and regulatory changes and proposals to change the healthcare system, and some could involve changes that significantly affect our business. For instance, on December 8, 2003, President George W. Bush signed into law the Medicare Prescription Drug, Improvement and Modernization Act of 2003, which, among other things, established a new prescription drug benefit and changed reimbursement methodologies for drugs and devices used in

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hospital outpatient departments and in the home. In addition, certain federal regulatory changes occur at least annually. The CMS has determined that, beginning in 2007, treatments in hospital outpatient departments using our technology will no longer be assigned a new technology classification and, instead, will be transitioned to a classification that would result in a reduction in Medicare payments to hospitals. Further, new billing codes that go into effect in 2007 may be required by third-party payors and may result in a decrease in payments for services using our technology. A downward adjustment in reimbursement could have a material adverse effect on our operations.

        Future legislative or policy initiatives directed at reducing costs could be introduced at either the federal or state level. We cannot predict the impact on our business of any legislation or regulations related to the healthcare system that may be enacted or adopted in the future.

We are required to comply with federal and state "fraud and abuse" laws, and, if we are unable to comply with such laws, we could face substantial penalties and we could be excluded from government healthcare programs, which would adversely affect our business, financial condition and results of operations.

        We are directly, or indirectly through our customers, subject to various federal and state laws pertaining to healthcare fraud and abuse. These laws which directly or indirectly affect our ability to operate our business primarily include, but are not limited to, the following:

        The following arrangements with purchasers and their agents have been identified by the Office of the Inspection General of the Department of Health and Human Services as ones raising potential risk of violation of the federal Anti-Kickback Statute:


        We have various arrangements with physicians, hospitals and other entities which implicate these laws. For example, physicians own our stock who also provide medical advisory and other consulting and personal services. Similarly, we have a variety of different types of arrangements with our customers. For example, our placement and shared ownership programs entail the provision of our CyberKnife system to our customers under a deferred payment program, where we generally receive

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the greater of a fixed minimum payment or a portion of the revenues of services. Included in the fee we charge for the placement and shared ownership programs are a variety of services, including physician training, educational and marketing support, general reimbursement guidance and technical support, and, in the case of the placement program, certain services and upgrades are provided without additional charge based on procedure volume. In the past, we have also provided loans to our customers. We also provide research grants to customers to support customer studies related to, among other things, our CyberKnife systems. Certain of these arrangements do not meet Anti-Kickback Statute safe harbor protections, which may result in increased scrutiny by government authorities having responsibility for enforcing these laws.

        If our past or present operations are found to be in violation of any of the laws described above or other similar governmental regulations to which we or our customers are subject, we may be subject to the applicable penalty associated with the violation, including significant civil and criminal penalties, damages, fines, imprisonment and exclusion from the Medicare and Medicaid programs. The impact of any such violations may lead to curtailment or restructuring of our operations, which could adversely affect our ability to operate our business and our financial results. The risk of our being found in violation of these laws is increased by the fact that many of these laws are open to a variety of interpretations. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses, divert our management's attention from the operation of our business and damage our reputation. If enforcement action were to occur, our reputation and our business and financial condition may be harmed, even if we were to prevail or settle the action. Similarly, if the physicians or other providers or entities with whom we do business are found to be non-compliant with applicable laws, they may be subject to sanctions, which could also have a negative impact on our business. See "Business—Regulatory Matters" for further information regarding federal and state fraud and abuse laws.

Modifications, upgrades and future products related to the CyberKnife system or new indications may require new U.S. Food and Drug Administration, or FDA, premarket approvals or 510(k) clearances, and such modifications, or any defects in design or manufacture may require us to recall or cease marketing the CyberKnife system until approvals or clearances are obtained.

        The CyberKnife system is a medical device that is subject to extensive regulation in the United States by local, state and the federal government, including by the FDA. The FDA regulates virtually all aspects of a medical device's design, development, testing manufacturing, labeling, storage, record keeping, reporting, sale, promotion, distribution and shipping. Before a new medical device, or a new use of or claim for an existing product, can be marketed in the United States, it must first receive either premarket approval or 510(k) clearance from the FDA, unless an exemption exists. Either process can be expensive and lengthy. The FDA's 510(k) clearance process usually takes from three to twelve months, but it can last longer. The process of obtaining premarket approval is much more costly and uncertain than the 510(k) clearance process and it generally takes from one to three years, or even longer, from the time the application is filed with the FDA. Despite the time, effort and cost, there can be no assurance that a particular device will be approved or cleared by the FDA through either the premarket approval process or 510(k) clearance process.

        Medical devices may be marketed only for the indications for which they are approved or cleared. The FDA also may change its policies, adopt additional regulations, or revise existing regulations, each of which could prevent or delay premarket approval or 510(k) clearance of our device, or could impact our ability to market our currently cleared device. We are also subject to medical device reporting regulations which require us to report to the FDA if our products cause or contribute to a death or a serious injury, or malfunction in a way that would likely cause or contribute to a death or a serious injury. We also are subject to Quality System and Medical Device Reporting regulations, which regulate the manufacturing and installation and also require us to report to the FDA if our products cause or contribute to a death or serious injury, or malfunction in a way that would likely cause or contribute to

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a death or serious injury. Our products are also subject to state regulations and various worldwide laws and regulations.

        A component of our strategy is to continue to upgrade the CyberKnife system. Upgrades previously released by us required 510(k) clearance before we were able to offer them for sale. We expect our future upgrades will similarly require 510(k) clearance; however, future upgrades may be subject to the substantially more time consuming and uncertain premarket approval process.

        The FDA requires device manufacturers to make a determination of whether or not a modification requires an approval or clearance; however, the FDA can review a manufacturer's decision not to submit for additional approvals or clearances. Any modification to an FDA approved or cleared device that would significantly affect its safety or efficacy or that would constitute a major change in its intended use would require a new premarket approval or 510(k) clearance. We cannot assure you that the FDA will agree with our decisions not to seek approvals or clearances for particular device modifications or that we will be successful in obtaining 510(k) clearances for modifications.

        We have obtained 510(k) clearances for the CyberKnife system for the treatment of tumors anywhere in the body where radiation is indicated. We have made modifications to the CyberKnife system in the past and may make additional modifications in the future that we believe do not or will not require additional approvals or clearances. If the FDA disagrees and requires us to obtain additional premarket approvals or 510(k) clearances for any modifications to the CyberKnife system and we fail to obtain such approvals or clearances or fail to secure approvals or clearances in a timely manner, we may be required to cease manufacturing and marketing the modified device or to recall such modified device until we obtain FDA approval or clearance and we may be subject to significant regulatory fines or penalties.

        In addition, even if the CyberKnife system is not modified, the FDA and similar governmental authorities in other countries in which we market and sell our products have the authority to require the recall of our products in the event of material deficiencies or defects in design or manufacture. A government mandated recall, or a voluntary recall by us, could occur as a result of component failures, manufacturing errors or design defects, including defects in labeling and user manuals. Any recall could divert management's attention, cause us to incur significant expenses, harm our reputation with customers, negatively affect our future sales and business, require redesign of the CyberKnife system, harm our operating results, and result in a decline in our stock price. In these circumstances, we may also be subject to significant enforcement action. If any of these events were to occur, our ability to introduce new or enhanced products in a timely manner would be adversely affected, which in turn would harm our future growth.

Our reliance on single source suppliers for critical components of the CyberKnife system could harm our ability to meet demand for our products in a timely and cost effective manner.

        We currently depend on single source suppliers for some of the critical components necessary for the assembly of the CyberKnife system, including the robotic manipulator, imaging plates, robotic couch and magnetron. If any single source suppliers were to cease delivering components to us or fail to provide the components on a timely basis, we might be required to qualify an alternate supplier and we would likely experience a lengthy delay in our manufacturing processes, which would result in delays of shipment to end users. We cannot assure you that our single source suppliers will be able or willing to meet our future demands.

        We generally do not maintain large volumes of inventory. Furthermore, if we are required to change the manufacturer of a critical component of the CyberKnife system, we will be required to verify that the new manufacturer maintains facilities, procedures and operations that comply with our quality requirements. We also will be required to assess the new manufacturer's compliance with all applicable regulations and guidelines, which could further impede our ability to manufacture our products in a timely manner. If the change in manufacturer results in a significant change to the

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product, a new 510(k) clearance would be necessary, which would likely cause substantial delays. The disruption or termination of the supply of key components for the CyberKnife system could harm our ability to generate revenue, lead to customer dissatisfaction and damage our reputation and cause the price of our common stock to decline.

Our accountants have identified and reported to us material weaknesses for the years ended June 30, 2004, 2005 and 2006, relating to our internal controls over financial reporting. If we fail to maintain proper and effective internal controls, our ability to produce accurate financial statements could be impaired, which could adversely affect our operating results, our ability to operate our business and our stock price.

        In connection with the audit of our consolidated financial statements for the years ended June 30, 2004, 2005 and 2006, our independent registered public accounting firm identified material weaknesses and significant deficiencies in our internal controls over financial reporting. These weaknesses and deficiencies relate to a lack of segregation of duties and the misapplication of accounting policies, including policies related to revenue recognition and stock-based compensation.

        Our independent registered public accounting firm was not, however, engaged to audit, nor has it audited, the effectiveness of our internal controls over financial reporting. Accordingly, our independent registered public accounting firm has not rendered an opinion on our internal controls over financial reporting. Likewise, we have not performed an evaluation of internal controls over financial reporting, as we are not currently required to comply with Section 404 of the Sarbanes-Oxley Act of 2002. If such an evaluation had been performed or when we are required to perform such an evaluation, additional material weaknesses, significant deficiencies and other control deficiencies may have been or may be identified. Ensuring that we have adequate internal financial and accounting controls and procedures in place to help ensure that we can produce accurate financial statements on a timely basis is a costly and time-consuming effort that needs to be evaluated frequently.

        Even after any corrective actions are implemented, the effectiveness of our controls and procedures may be limited by a variety of risks including:


        Although we have taken measures to remediate the material weaknesses as well as the other significant deficiencies and control deficiencies, we cannot assure you that we have identified all, or that we will not in the future have additional material weaknesses, significant deficiencies and control deficiencies. Our independent registered public accounting firm has not evaluated any of the measures we have taken, or that we propose to take, to address the material weaknesses and the significant deficiencies and control deficiencies discussed above. Any failure to maintain or implement required new or improved controls, or any difficulties we encounter in implementation, could cause us to fail to meet our periodic reporting obligations or result in material misstatements in our consolidated financial statements. Any such failure could also adversely affect management's assessment of our disclosure controls and procedures, required with the filing of our quarterly and annual reports after our initial public offering, and the results of periodic management evaluations and annual auditor attestation reports regarding the effectiveness of our internal controls over financial reporting that will be required when the Securities and Exchange Commission's, or SEC's, rules under Section 404 of the Sarbanes-Oxley Act of 2002 become applicable to us beginning with our Annual Report on Form 10-K for the year ending June 30, 2008.

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        The existence of a material weakness could result in errors in our consolidated financial statements that could result in a restatement of our consolidated financial statements, cause us to fail to meet our reporting obligations and cause investors to lose confidence in our reported financial information, leading to a decline in our stock price.

Our industry is subject to intense competition and rapid technological change, which may result in products or new tumor treatments that are superior to the CyberKnife system. If we are unable to anticipate or keep pace with changes in the marketplace and the direction of technological innovation and customer demands, our products may become less useful or obsolete and our operating results will suffer.

        The medical device industry in general and the non-invasive cancer treatment field in particular are subject to intense and increasing competition and rapidly evolving technologies. Because our products often have long development and government approval cycles, we must anticipate changes in the marketplace and the direction of technological innovation and customer demands. To compete successfully, we will need to continue to demonstrate the advantages of our products and technologies over well-established alternative procedures, products and technologies, and convince physicians and other healthcare decision makers of the advantages of our products and technologies. Traditional surgery and other forms of minimally invasive procedures, chemotherapy or other drugs remain alternatives to the CyberKnife system. Also, we compete directly with traditional radiosurgery systems primarily from Elekta AB (publ), or Elekta, BrainLAB AG, the Integra Radionics business of Integra LifeSciences Holdings Corporation, or Radionics, and Varian Medical Systems, Inc., or Varian.

        The market for standard linear accelerators, or linacs, is dominated by three companies: Elekta, Siemens AG and Varian. In addition, TomoTherapy Incorporated recently introduced a radiation therapy product. The CyberKnife system is not typically used to perform traditional radiation therapy and therefore does not usually compete directly with standard medical linacs that perform standard radiation therapy. However, some manufacturers of standard linac based radiation therapy systems, including Varian and Elekta, have products that can be used in combination with body and/or head frames and image-guidance systems to perform radiosurgery. In addition, many government, academic and business entities are investing substantial resources in research and development of cancer treatments, including surgical approaches, radiation treatment, drug treatment, gene therapy and other approaches. Successful developments that result in new approaches for the treatment of cancer could reduce the attractiveness of our products or render them obsolete.

        Our future success will depend in large part on our ability to establish and maintain a competitive position in current and future technologies. Rapid technological development may render the CyberKnife system and its technologies obsolete. Many of our competitors have or may have greater corporate, financial, operational, sales and marketing resources, and more experience in research and development than we have. We cannot assure you that our competitors will not succeed in developing or marketing technologies or products that are more effective or commercially attractive than our products or that would render our technologies and products obsolete. We may not have the financial resources, technical expertise, marketing, distribution or support capabilities to compete successfully in the future. Our success will depend in large part on our ability to maintain a competitive position with our technologies.

        Our competitive position also depends on:

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If the CyberKnife system is not competitive based on these or other factors, our business would be harmed.

We must obtain and maintain regulatory approvals in international markets in which we sell, or seek to sell, our products.

        In order for us to market and sell the CyberKnife system internationally, either through direct sales personnel or through distributors, we must obtain and maintain regulatory clearances applicable to the countries and regions in which we are selling, or are seeking to sell, our products. These regulatory approvals and clearances, and the process required to obtain and maintain them, vary substantially among international jurisdictions. In some jurisdictions, we rely on our distributors to manage the regulatory process and we are dependent on their ability to do so effectively. For example, in Japan, our clearances are currently limited to use of the CyberKnife system in the head and neck. In addition, our regulatory approval in Japan was suspended for a period of twelve months during 2003 as a result of a failure of our distributor to coordinate product modifications and obtain necessary regulatory clearances in a timely manner. In the event that we are unable to obtain and maintain regulatory clearances for the CyberKnife system, including new clearances for system upgrades and use of the system anywhere in the body, in international markets we have entered or desire to enter, our international sales could fail to grow or decline. These events would harm our business and could cause our stock price to decline.

It is difficult and costly to protect our intellectual property and our proprietary technologies, and we may not be able to ensure their protection.

        Our success depends significantly on our ability to obtain, maintain and protect our proprietary rights to the technologies used in our products. Patents and other proprietary rights provide uncertain protections, and we may be unable to protect our intellectual property. For example, we may be unsuccessful in defending our patents and other proprietary rights against third party challenges.

        In addition to patents, we rely on a combination of trade secrets, copyright and trademark laws, nondisclosure agreements and other contractual provisions and technical security measures to protect our intellectual property rights. These measures may not be adequate to safeguard the technology underlying our products. If they do not protect our rights adequately, third parties could use our technology, and our ability to compete in the market would be reduced. Although we have attempted to obtain patent coverage for our technology where available and appropriate, there are aspects of the technology for which patent coverage was never sought or never received. There are also countries in which we sell or intend to sell the CyberKnife system but have no patents or pending patent

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applications. Our ability to prevent others from making or selling duplicate or similar technologies will be impaired in those countries in which we have no patent protection. Although we have several issued patents in the United States and in foreign countries protecting aspects of the CyberKnife system, our pending United States and foreign patent applications may not issue, may issue only with limited coverage or may issue and be subsequently successfully challenged by others and held invalid or unenforceable.

        Similarly, our issued patents and those of our licensors may not provide us with any competitive advantages. Competitors may be able to design around our patents or develop products which provide outcomes comparable or superior to ours. Our patents may be held invalid or unenforceable as a result of legal challenges by third parties, and others may challenge the inventorship or ownership of our patents and pending patent applications. In addition, the laws of some foreign countries may not protect our intellectual property rights to the same extent as do the laws of the United States. In the event a competitor infringes upon our patent or other intellectual property rights, enforcing those rights may be difficult and time consuming. Even if successful, litigation to enforce our intellectual property rights or to defend our patents against challenge could be expensive and time consuming and could divert our management's attention. We may not have sufficient resources to enforce our intellectual property rights or to defend our patents against a challenge.

        We also license patent and other proprietary rights to aspects of our technology to third parties in fields where we currently do not operate. Disputes with our licensors may arise regarding the scope and content of these licenses. Further, our ability to expand into additional fields with our technologies may be restricted by our existing licenses or licenses we may grant to third parties in the future.

        In October 2006, we received a letter from American Science and Engineering, Inc., or AS&E, expressing concerns that we may be using certain intellectual property we acquired from AS&E in a manner that breaches, or may breach, our contractual obligations under a license agreement with them in certain nonmedical fields. While we do not believe our activities breach or violate the terms of the license agreement, we cannot assure you that AS&E will not commence litigation on the grounds that we are in breach of our obligations under the license agreement.

        The policies we use to protect our trade secrets may not be effective in preventing misappropriation of our trade secrets by others. In addition, confidentiality agreements executed by our employees, consultants and advisors may not be enforceable or may not provide meaningful protection for our trade secrets or other proprietary information in the event of unauthorized use or disclosure. Litigating a trade secret claim is expensive and time consuming, and the outcome is unpredictable. In addition, courts outside the United States are sometimes less willing to protect trade secrets. Moreover, our competitors may independently develop equivalent knowledge methods and know-how. If we are unable to protect our intellectual property rights, we may be unable to prevent competitors from using our own inventions and intellectual property to compete against us, and our business may be harmed.

Because the medical device industry is characterized by competing intellectual property, we may be sued for violating the intellectual property rights of others.

        The medical device industry is characterized by a substantial amount of litigation over patent and other intellectual property rights. In particular, the field of radiation treatment of cancer is well established and crowded with the intellectual property of competitors and others. A number of companies in our market, as well as universities and research institutions, have issued patents and have filed patent applications which relate to the use of stereotactic radiosurgery to treat solid cancerous and benign tumors.

        Determining whether a product infringes a patent involves complex legal and factual issues, and the outcome of patent litigation actions is often uncertain. We have not conducted an extensive search of patents issued to third parties, and no assurance can be given that third party patents containing claims covering our products, parts of our products, technology or methods do not exist, have not been

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filed, or could not be filed or issued. Because of the number of patents issued and patent applications filed in our technical areas or fields, our competitors or other third parties may assert that our products and the methods we employ in the use of our products are covered by United States or foreign patents held by them. In addition, because patent applications can take many years to issue and because publication schedules for pending applications vary by jurisdiction, there may be applications now pending of which we are unaware, and which may result in issued patents which our current or future products infringe. Also, because the claims of published patent applications can change between publication and patent grant, there may be published patent applications that may ultimately issue with claims that we infringe. There could also be existing patents that one or more of our products or parts may infringe and of which we are unaware. As the number of competitors in the market for less invasive cancer treatment alternatives grows, and as the number of patents issued in this area grows, the possibility of patent infringement claims against us increases. Some of our competitors may be able to sustain the costs of complex patent litigation more effectively than we can because they have substantially greater resources. In addition, any uncertainties resulting from the initiation and continuation of any litigation could have a material adverse effect on our ability to raise the funds necessary to continue our operations.

        In the event that we become subject to a patent infringement or other intellectual property lawsuit and if the relevant patents or other intellectual property were upheld as valid and enforceable and we were found to infringe or violate the terms of a license to which we are a party, we could be prevented from selling our products unless we could obtain a license or were able to redesign the product to avoid infringement. If we were unable to obtain a license or successfully redesign our system, we might be prevented from selling our system. If there is an allegation or determination that we have infringed the intellectual property rights of a competitor or other person, we may be required to pay damages, or a settlement or ongoing royalties. In these circumstances, we may be unable to sell our products at competitive prices or at all, our business and operating results could be harmed and our stock price may decline.

We could become subject to product liability claims, product recalls, other field actions and warranty claims that could be expensive, divert management's attention and harm our business.

        Our business exposes us to potential liability risks that are inherent in the manufacturing, marketing and sale of medical device products. We may be held liable if the CyberKnife system causes injury or death or is found otherwise unsuitable during usage. Our products incorporate sophisticated components and computer software. Complex software can contain errors, particularly when first introduced. In addition, new products or enhancements may contain undetected errors or performance problems that, despite testing, are discovered only after installation. Because our products are designed to be used to perform complex surgical procedures, defects could result in a number of complications, some of which could be serious and could harm or kill patients. It is also possible that defects in the design, manufacture or labeling of our products might necessitate a product recall or other field corrective action, which may result in warranty claims beyond our expectations and may harm our reputation. A product liability claim, regardless of its merit or eventual outcome, could result in significant legal defense costs. The coverage limits of our insurance policies may not be adequate to cover future claims. If sales of our products increase or we suffer future product liability claims, we may be unable to maintain product liability insurance in the future at satisfactory rates or with adequate amounts. A product liability claim, any product recalls or other field actions or excessive warranty claims, whether arising from defects in design or manufacture or otherwise, could negatively affect our sales or require a change in the design, manufacturing process or the indications for which the CyberKnife system may be used, any of which could harm our reputation and business, result in a decline in revenue and cause our stock price to fall.

        In addition, if a product we designed or manufactured is defective, whether due to design or manufacturing defects, improper use of the product or other reasons, we may be required to notify

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regulatory authorities and/or to recall the product, possibly at our expense. In 2002, we were subject to a product recall in Japan, as a result of a failure of our prior distributor to coordinate product modifications and obtain necessary regulatory approvals in a timely manner. A required notification to a regulatory authority or recall could result in an investigation by regulatory authorities of our products, which could in turn result in required recalls, restrictions on the sale of the products or other civil or criminal penalties. The adverse publicity resulting from any of these actions could cause customers to review and potentially terminate their relationships with us. These investigations or recalls, especially if accompanied by unfavorable publicity or termination of customer contracts, could result in our incurring substantial costs, losing revenues and damaging our reputation, each of which would harm our business.

The safety and efficacy of our products for certain uses is not yet supported by long-term clinical data and may therefore prove to be less safe and effective than initially thought.

        Although we believe that the CyberKnife system has advantages over competing products and technologies, we do not have sufficient clinical data demonstrating these advantages for all tumor indications. For example, because our CyberKnife procedures are relatively new, we have limited clinical data relating to the effectiveness of the CyberKnife system as a means of local control. In addition, we have only limited five-year patient survival rate data, which is a common long-term measure of clinical effectiveness in cancer treatment. Further, future patient studies or clinical experience may indicate that treatment with the CyberKnife system does not improve patient outcomes. Such results could slow the adoption of our products by physicians, significantly reduce our ability to achieve expected revenues and could prevent us from becoming profitable. In addition, if future results and experience indicate that our products cause unexpected or serious complications or other unforeseen negative effects, the FDA could rescind our clearances, our reputation with physicians, patients and others may suffer and we could be subject to significant legal liability.

The CyberKnife system has been in use for a limited period of time for uses outside the brain and the medical community has not yet developed a large quantity of peer-reviewed literature that supports safe and effective use in those locations in the body.

        The CyberKnife system was initially cleared by regulatory authorities for the treatment of tumors in the brain and neck. More recently, the CyberKnife system has been cleared to treat tumors anywhere in the body where radiation is indicated, and our future growth is dependent in large part on continued growth in full body use of the system. Currently, however, there are a limited number of peer-reviewed medical journal publications regarding the safety and efficacy of the CyberKnife system for treatment of tumors outside the brain or spine. If later studies show that the CyberKnife system is less effective or less safe with respect to particular types of solid tumors, use of the CyberKnife system could fail to increase or could decrease and our growth and operating results would therefore be harmed.

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International sales of the CyberKnife system account for a significant portion of our revenue, which exposes us to risks inherent in international operations.

        We anticipate that a significant portion of our revenue will continue to be derived from sales of the CyberKnife system in foreign markets. This revenue and related operations will therefore continue to be subject to the risks associated with international operations, including:

        In addition, future imposition of, or significant increases in, the level of customs duties, export quotas, regulatory restrictions or trade restrictions could materially harm our business. Currently, the majority of our international sales are denominated in U.S. dollars. As a result, an increase in the value of the U.S. dollar relative to foreign currencies could require us to reduce our sales price or make our products less competitive in international markets. If we are unable to address these risks and challenges effectively, our international operations may not be successful and our business would be materially harmed.

We depend on third-party distributors to market and distribute the CyberKnife system in international markets. If our distributors fail to successfully market and distribute the CyberKnife system, our business will be materially harmed.

        We depend on a limited number of distributors in our international markets. These international distribution relationships are exclusive by geographic region. We cannot control the efforts and resources our third-party distributors will devote to marketing the CyberKnife system. Our distributors may not be able to successfully market and sell the CyberKnife system, may not devote sufficient time and resources to support the marketing and selling efforts and may not market the CyberKnife system at prices that will permit the product to develop, achieve or sustain market acceptance. If we or our distributors terminate our existing agreements, finding new distributors could be an expensive and time-consuming process and sales could decrease during and after any transition period. If we are unable to attract additional international distributors, our international revenue may not grow. If our distributors experience difficulties, do not actively market the CyberKnife system or do not otherwise perform under our distribution agreements, our potential for revenue from international markets may be dramatically reduced, and our business could be harmed. In certain cases our distributors are responsible for the service and support of our CyberKnife systems.

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We have limited experience and capability in manufacturing and may encounter manufacturing problems or delays that could result in lost revenue.

        The CyberKnife system is complex, and requires the integration of a number of components from several sources of supply. We must manufacture and assemble these complex systems in commercial quantities in compliance with regulatory requirements and at an acceptable cost. We have a limited history of manufacturing commercial quantities of the CyberKnife system. In particular, we have recently begun manufacturing compact linacs as a component of the CyberKnife system. Our linac components are extremely complex devices and require significant expertise to manufacture, and as a result of our limited manufacturing experience we may have difficulty producing needed materials in a commercially viable manner. We may encounter difficulties in scaling up production of the CyberKnife system, including problems with quality control and assurance, component supply shortages, increased costs, shortages of qualified personnel and/or difficulties associated with compliance with local, state, federal and foreign regulatory requirements. If our manufacturing capacity does not keep pace with product demand, we will not be able to fulfill orders in a timely manner which in turn may have a negative effect on our financial results and overall business. Conversely, if demand for our products decreases, the fixed costs associated with excess manufacturing capacity may adversely affect our financial results.

        Our manufacturing processes and the manufacturing processes of our third-party suppliers are required to comply with the FDA's Quality System Regulation, or QSR. The QSR is a complex regulatory scheme that covers the methods and documentation of the design, testing, production processes, controls, manufacturing, labeling, quality assurance, packaging, storage and shipping of our products. We are also subject to state requirements and licenses applicable to manufacturers of medical devices. Because our manufacturing processes include diagnostic and therapeutic X-ray equipment and laser equipment, we are subject to the electronic product radiation control provisions of the Federal Food, Drug and Cosmetic Act, which requires that we file reports with the FDA, applicable states and our customers regarding the distribution, manufacturing and installation of these types of equipment. The FDA enforces the QSR and the electronic product radiation control provisions through periodic unannounced inspections. We have been, and anticipate in the future to be, subject to such inspections. Our failure or the failure of a third-party supplier to pass a QSR inspection or to comply with these and other applicable regulatory requirements could result in disruption of our operations and manufacturing delays. Our failure to take prompt and satisfactory corrective action in response to an adverse inspection or our failure to comply with applicable standards could result in enforcement actions, including a public warning letter, a shutdown of our manufacturing operations, a recall of our products, civil or criminal penalties, or other sanctions, which would cause our sales and business to suffer. We cannot assure you that the FDA or other governmental authorities would agree with our interpretation of applicable regulatory requirements or that we or our third-party suppliers have in all instances fully complied with all applicable requirements.

        If we cannot achieve the required level and quality of production, we may need to outsource production or rely on licensing and other arrangements with third parties who possess sufficient manufacturing facilities and capabilities in compliance with regulatory requirements. Even if we could outsource needed production or enter into licensing or other third party arrangements, this could reduce our gross margin and expose us to the risks inherent in relying on others. We also cannot assure you that our suppliers will deliver an adequate supply of required components on a timely basis or that they will adequately comply with the QSR. Failure to obtain these components on a timely basis would disrupt our manufacturing processes and increase our costs, which would harm our operating results.

23


We depend on key employees, the loss of whom would adversely affect our business. If we fail to attract and retain employees with the expertise required for our business, we cannot grow or achieve profitability.

        We are highly dependent on the members of our senior management, operations and research and development staff. Our future success will depend in part on our ability to retain these key employees and to identify, hire and retain additional personnel. Competition for qualified personnel in the medical device industry, particularly in northern California, is intense, and finding and retaining qualified personnel with experience in our industry is very difficult. We believe there are only a limited number of individuals with the requisite skills to serve in many of our key positions and we compete for key personnel with other medical equipment and software manufacturers and technology companies, as well as universities and research institutions. It is increasingly difficult to hire and retain these persons, and we may be unable to replace key persons if they leave or fill new positions requiring key persons with appropriate experience. A significant portion of our compensation to our key employees is in the form of stock option grants. A prolonged depression in our stock price could make it difficult for us to retain our employees and recruit additional qualified personnel. We do not maintain, and do not currently intend to obtain, key employee life insurance on any of our personnel. If we fail to hire and retain personnel in key positions, we may be unable to grow our business successfully.

If we do not effectively manage our growth, our business may be significantly harmed.

        The number of our employees increased from 194 as of June 30, 2005 to 364 as of September 30, 2006. In addition, we have significantly expanded our development and operational facilities, including our recent acquisition of a linac manufacturing facility and our new manufacturing site. In order to implement our business strategy, we expect continued growth in our employee and infrastructure requirements, particularly as we expand our manufacturing and sales and marketing capacities. To manage our growth, we must expand our facilities, augment our management, operational and financial systems, hire and train additional qualified personnel, scale-up our manufacturing capacity and expand our marketing and distribution capabilities. Our manufacturing, assembly and installation process is complex and occurs over many months, and we must effectively scale this entire process to satisfy customer expectations and changes in demand. We also expect to increase the number of sales and marketing personnel as we expand our business. Further, to accommodate our growth and compete effectively, we will be required to improve our information systems. We cannot be certain that our personnel, systems, procedures and internal controls will be adequate to support our future operations. If we cannot manage our growth effectively, our business will suffer.

Any failure in our physician training efforts could result in lower than expected product sales and potential liabilities.

        A critical component of our sales and marketing efforts is the training of a sufficient number of physicians to properly utilize the CyberKnife system. We rely on physicians to devote adequate time to learn to use our products. If physicians are not properly trained, they may misuse or ineffectively use our products. This may result in unsatisfactory patient outcomes, patient injury and related liability or negative publicity which could have an adverse effect on our product sales.

We will incur increased costs as a result of being a public company.

        As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. In addition, the Sarbanes-Oxley Act of 2002, as well as new rules subsequently implemented by the SEC and the NASDAQ Global Market, or NASDAQ, have required changes in corporate governance practices of public companies. In particular, as a public company we will be required to comply with Section 404 of the Sarbanes-Oxley Act of 2002 regarding management assessment of internal controls. We will first become subject to Section 404 in connection with the audit

24


of our consolidated financial statements for the fiscal year ending June 30, 2008, and we expect to incur substantial additional audit fees and costs for that year's audit as well as for future audits. We expect that being a public company in the current regulatory environment will increase our financial and legal compliance costs and will make some activities more time-consuming and costly. In addition, we will incur other costs associated with public company reporting requirements. We also expect these new rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified persons to serve on our board of directors or as executive officers. We are currently evaluating and monitoring developments with respect to these new rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.

Our ability to raise capital in the future may be limited, and our failure to raise capital when needed could prevent us from executing our growth strategy.

        While we believe that our existing cash, short-term and long-term investments and the proceeds from this offering will be sufficient to meet our anticipated cash needs for at least the next 12 months, the timing and amount of our working capital and capital expenditure requirements may vary significantly depending on numerous factors, including:

        If our capital resources are insufficient to satisfy our liquidity requirements, we may seek to sell additional equity securities or debt securities or obtain other debt financing. The sale of additional equity securities or convertible debt securities would result in additional dilution to our stockholders. Additional debt would result in increased expenses and could result in covenants that would restrict our operations. We have not made arrangements to obtain additional financing, and there is no assurance that financing, if required, will be available in amounts or on terms acceptable to use, if at all.

We may attempt to acquire new businesses, products or technologies, and if we are unable to successfully complete these acquisitions or to integrate acquired businesses, products, technologies or employees, we may fail to realize expected benefits or harm our existing business.

        Our success will depend, in part, on our ability to expand our product offerings and grow our business in response to changing technologies, customer demands and competitive pressures. In some circumstances, we may determine to do so through the acquisition of complementary businesses, products or technologies rather than through internal development. The identification of suitable acquisition candidates can be difficult, time consuming and costly, and we may not be able to successfully complete identified acquisitions. Furthermore, even if we successfully complete an acquisition, we may not be able to successfully integrate newly acquired organizations, products or technologies into our operations, and the process of integration could be expensive, time consuming and may strain our resources. In addition, we may be unable to retain employees of acquired companies, or retain the acquired company's customers, suppliers, distributors or other partners who are our competitors or who have close relationships with our competitors. Consequently, we may not achieve anticipated benefits of the acquisitions which could harm our existing business. In addition, future acquisitions could result in potentially dilutive issuances of equity securities or the incurrence of debt, contingent liabilities or expenses, or other charges such as in-process research and development,

25


any of which could harm our business and affect our financial results or cause a reduction in the price of our common stock.

Our operations are vulnerable to interruption or loss due to natural disasters, epidemics, terrorist acts and other events beyond our control, which would adversely affect our business.

        Our manufacturing facility is located in a single location in Sunnyvale, California. We do not maintain a backup manufacturing facility, so we depend on our current facility for the continued operation of our business. In addition, we conduct a significant portion of other activities including administration and data processing at facilities located in the State of California which has experienced major earthquakes in the past, as well as other natural disasters. We carry limited earthquake insurance for inventory only. Such coverage may not be adequate or continue to be available at commercially reasonable rates and terms. In the event of a major earthquake or other disaster affecting our facilities, it could significantly disrupt our operations, delay or prevent product manufacture and shipment for the time required to repair, rebuild or replace our manufacturing facilities, which could be lengthy, and result in large expenses to repair or replace the facilities. In addition, concerns about terrorism or an outbreak of epidemic diseases such as avian influenza or severe acute respiratory syndrome, or SARS, especially in our major markets of North America, Europe and Asia could have a negative effect on travel and our business operations, and result in adverse consequences on our revenues and financial performance.

Risks Related to this Offering

The price of our common stock may fluctuate significantly, which could lead to losses for stockholders.

        The trading prices of the stock of newly public companies can experience extreme price and volume fluctuations. These fluctuations often have been unrelated or out of proportion to the operating performance of these companies. We expect our stock price to be similarly volatile. These broad market fluctuations may continue and could harm our stock price. Any negative change in the public's perception of the prospects of companies that employ similar technology or sell into similar markets could also depress our stock price, regardless of our actual results.

        Factors affecting the trading price of our common stock will include:

26

Substantial sales of our common stock by our stockholders could depress our stock price regardless of our operating results.

        Sales of substantial amounts of our common stock in the public market after this offering could reduce the prevailing market prices for our common stock. Upon the closing of this offering, based on 41,954,435 shares outstanding as of June 30, 2006, we will have                 shares of common stock outstanding. Of these, all of the shares sold in this offering will be freely tradable without restriction or further registration. Substantially all of the 41,954,435 shares of our common stock held by existing stockholders are subject to lock-up agreements with the underwriters which prohibit the sale of such shares for 180 days after the date of this prospectus, subject to an extension of no more than 34 additional days. All of these shares will be eligible for resale upon the expiration of the lock-up period and in some cases to volume restrictions under Rule 144 and our right of repurchase.

Our directors, executive officers and major stockholders will own approximately      % of our outstanding common stock after this offering, which could limit your ability to influence the outcome of key transactions, including changes of control.

        After this offering, directors, executive officers, and current holders of 5% or more of our outstanding common stock, will, in the aggregate, own approximately       % of our outstanding common stock. As a result, a small number of stockholders will have voting control and would be able to control the election of directors and the approval of significant corporate transactions. This concentration of ownership may also delay, deter or prevent a change of control of our company and will make some transactions more difficult or impossible without the support of these stockholders.

We have implemented anti-takeover provisions that could discourage or prevent a takeover, even if an acquisition would be beneficial in the opinion of our stockholders.

        Provisions of our certificate of incorporation and bylaws could make it more difficult for a third party to acquire us, even if doing so would be beneficial in the opinion of our stockholders. These provisions include:

        In addition, Section 203 of the Delaware General Corporation Law may discourage, delay or prevent a change of control of our company. Generally, Section 203 prohibits stockholders who, alone or together with their affiliates and associates, own more than 15% of the subject company from engaging in certain business combinations for a period of three years following the date that the stockholder became an interested stockholder of such subject company without approval of the board or 662/3% of the independent stockholders. The existence of these provisions could adversely affect the voting power of holders of common stock and limit the price that investors might be willing to pay in the future for shares of our common stock. See "Description of capital stock—anti-takeover effect of provisions of the amended and restated certificate of incorporation and bylaws" included elsewhere in this prospectus.

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An active trading market for our common stock may not develop.

        Prior to this offering, there has been no public market for our common stock. Although our common stock has been approved for quotation on NASDAQ, an active trading market for our shares may never develop or be sustained following this offering. Accordingly, you may not be able to sell your shares quickly or at the market price if trading in our stock is not active. The initial public offering price for our common stock was determined through negotiations between the underwriters and us. The initial public offering price may vary from the market price of our common stock after the closing of this offering. Investors may not be able to sell their common stock at or above the initial public offering price.

We have not paid dividends in the past and do not expect to pay dividends in the future.

        We have never declared or paid cash dividends on our capital stock. We currently intend to retain all future earnings for the operation and expansion of our business and, therefore, do not anticipate declaring or paying cash dividends in the foreseeable future. The payment of dividends will be at the discretion of our board of directors and will depend on our results of operations, capital requirements, financial condition, prospects, contractual arrangements, any limitations on payments of dividends present in our current and future debt agreements, and other factors our board of directors may deem relevant. We are subject to several covenants under our debt arrangements that place restrictions on our ability to pay dividends. If we do not pay dividends, a return on your investment will only occur if our stock price appreciates.

We have broad discretion to use the offering proceeds, and our investment of these proceeds may not yield a favorable, or any, return.

        The net majority of the proceeds of this offering are not allocated for specific uses. Additionally, we may decide to use proceeds that are currently anticipated for a specific use for a different purpose. Thus, our management has broad discretion over how these proceeds are used and could spend the proceeds in ways with which you may not agree. We cannot assure you that the proceeds will be invested in a way that yields a favorable, or any, return for us.

New investors in our common stock will experience immediate and substantial dilution.

        The initial public offering price will be substantially higher than the book value per share of our common stock. If you purchase common stock in this offering, you will incur dilution of $            in net tangible book value per share of common stock, based on an assumed initial public offering price of $                        per share. In addition, the number of shares available for issuance under our stock option and employee stock purchase plans may increase annually without further stockholder approval. Investors will incur additional dilution upon the exercise of stock options and warrants. See "Dilution."

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

        This prospectus includes forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends affecting the financial condition of our business. Forward-looking statements should not be read as guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time those statements are made and/or management's good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited to:

        In addition, in this prospectus, the words "believe," "may," "will," "estimate," "continue," "anticipate," "intend," "expect," "predict," "potential" and similar expressions, as they relate to Accuray, our business and our management, are intended to identify forward-looking statements. In light of these risks and uncertainties, the forward-looking events and circumstances discussed in this prospectus may not occur and actual results could differ materially from those anticipated or implied in the forward-looking statements.

        Forward-looking statements speak only as of the date the statements are made. You should not put undue reliance on any forward-looking statements. We assume no obligation to update forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information, except to the extent required by applicable securities laws. If we do update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.

29


USE OF PROCEEDS

        We estimate that the net proceeds to us from the sale of the shares of common stock offered by us will be approximately $                        , or approximately $                        if the underwriters' over-allotment option is exercised in full, based on an assumed initial public offering price of $                        per share and after deducting underwriting discounts and commissions and estimated offering expenses. We will not receive any proceeds from the sale of shares to be offered by the selling stockholders.

        The principal purposes of this offering are to obtain additional capital and to create a public market for our common stock. Of the net proceeds we will receive from this offering, we expect to use approximately:

        We may also use a portion of the net proceeds for the acquisition of, or investment in, companies, technologies, products or assets that complement our business. We have no present understandings, commitments or agreements to enter into any material acquisitions or investments. Pending these uses, we intend to invest the net proceeds of this offering in short-term, investment-grade interest-bearing securities or guaranteed obligations of the U.S. government.


DIVIDEND POLICY

        We have never declared or paid and do not anticipate declaring or paying any cash dividends on our common stock in the near future. Any future determination as to the declaration and payment of dividends, if any, will be at the discretion of our board of directors and will depend on then existing conditions, including our financial condition, operating results, contractual restrictions, capital requirements, business prospects and other factors our board of directors may deem relevant.

30


CAPITALIZATION

        The following table shows:


 
   As of June 30, 2006
 
   Actual
   Pro forma
   Pro forma
as adjusted
 
    
   (unaudited)

   (unaudited)
 
   (in thousands, except share data)
Redeemable convertible preferred stock, no par value, 30,000,000 shares authorized, 17,419,331 shares issued and outstanding, $40,354 liquidation preference, actual; preferred stock, par value $0.001 per share, 5,000,000 shares authorized, no shares issued and outstanding, pro forma and pro forma as adjusted   $ 27,504   $ —   $  

Stockholders' equity (deficiency):
Common stock, no par value, 70,000,000 shares authorized; 16,243,150 shares issued and outstanding, actual; 100,000,000 shares authorized, par value $0.001 per share, 41,954,435 shares issued and outstanding, pro forma;                         shares issued and outstanding, pro forma as adjusted
 
 
13,276
 
 
42
 
 
 
Additional paid-in capital     43,988     85,251      
Notes receivable from stockholders     (206 )   (206 )    
Deferred stock-based compensation     (17,272 )   (17,272 )    
Accumulated deficit     (120,641 )   (120,641 )    
   
 
 
  Stockholders' equity (deficiency)     (80,855 )   (52,826 )    
   
 
 
    Total capitalization   $ (53,351 ) $ (52,826 ) $  
   
 
 

        The outstanding share information set forth above is as of June 30, 2006, and excludes:

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DILUTION

        If you invest in our common stock, your interest will be diluted immediately to the extent of the difference between the public offering price per share of our common stock and the pro forma net tangible book value per share of our common stock after this offering. As of June 30, 2006, our pro forma net tangible book value deficiency is approximately $58.8 million, or $1.40 per share of common stock. Pro forma net tangible book value per share represents the amount of our total tangible assets less total liabilities, divided by shares of common stock outstanding after giving effect to (1) the conversion of all outstanding shares of our preferred stock into an aggregate of 25,186,285 shares of common stock and (2) the exercise of a warrant to purchase 525,000 shares of common stock at an exercise price of $1.00 per share, immediately prior to the closing of this offering.

        Dilution in pro forma net tangible book value per share represents the difference between the amount per share paid by buyers of shares of our common stock in this offering and the pro forma net tangible book value per share of our common stock immediately following this offering.

        After giving effect to the receipt of the net proceeds from our sale of shares of common stock in this offering at an assumed initial public offering price of $                        per share and after expenses, our pro forma net tangible book value as of June 30, 2006, would have been approximately $                        million, or $                        per share of common stock. This represents an immediate increase in pro forma net tangible book value of $                        per share to existing stockholders and an immediate dilution of $                        per share to new investors purchasing shares at the initial public offering price. The following table illustrates the per share dilution:

Assumed initial public offering price         $  
  Pro forma net tangible book value as of June 30, 2006   $ (1.40 )    
  Increase in pro forma net tangible book value attributable to new investors as of June 30, 2006            
   
     
Pro forma net tangible book value as of June 30, 2006, as adjusted to give effect to this offering            
         
Dilution to new investors         $  
         

        The following table shows, on the pro forma basis described above, the difference between existing stockholders and new investors in this offering with respect to the number of shares of common stock purchased from us, the total consideration paid and the average price paid per share, before deducting underwriting discounts and commissions and estimated offering expenses.

 
   Shares purchased
   Total consideration
    
 
   Average
price
per share
 
   Number
   Percent
   Amount
   Percent
 
   (in thousands)

    
Existing stockholders       %   $     %   $  
New investors                        
   
 
 
 
 
  Total       100.0%   $     100.0%   $  
   
 
 
 
 

        The outstanding share information set forth above is as of June 30, 2006, and excludes:


        To the extent that any outstanding options are exercised, new investors will experience further dilution.

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SELECTED CONSOLIDATED FINANCIAL DATA

        The following selected consolidated financial data should be read in conjunction with, and are qualified by reference to, our consolidated financial statements and related notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations" appearing elsewhere in this prospectus. The consolidated statements of operations for the years ended June 30, 2004, 2005 and 2006, and the consolidated balance sheet data at June 30, 2005 and 2006, are derived from, and are qualified by reference to, the consolidated financial statements that have been audited by our independent registered public accounting firm, which are included elsewhere in this prospectus. The consolidated statements of operations data for the years ended June 30, 2002 and 2003 and the consolidated balance sheet data at June 30, 2002, 2003 and 2004 are derived from our audited consolidated financial statements not included in this prospectus. The historical results presented below are not necessarily indicative of future results.

 
   Years ended June 30,
  
 
   2002
   2003
   2004
   2005
   2006
  
 
   (in thousands, except per share data)

  
Consolidated Statements of Operations Data:                                
Total net revenue   $ 19,354   $ 2,710   $ 19,569   $ 22,377   $ 52,897  
Total cost of revenue(1)     11,721     3,027     8,496     11,115     27,492  
   
 
 
 
 
 
  Gross profit     7,633     (317 )   11,073     11,262     25,405  
Operating expenses:                                
  Selling and marketing(1)     5,053     6,710     10,647     16,361     25,186  
  Research and development(1)     5,223     5,844     7,311     11,655     17,788  
  General and administrative(1)     2,755     3,015     4,672     8,129     15,923  
   
 
 
 
 
 
    Total operating expenses     13,031     15,569     22,630     36,145     58,897  
   
 
 
 
 
 

Loss from operations
 
 
(5,398
)
 
(15,886
)
 
(11,557
)
 
(24,883
)
 
(33,492
)
Interest and other income (expense), net     (399 )   46     (136 )   (238 )   56  
   
 
 
 
 
 

Loss before provision for income taxes
 
 
(5,797
)
 
(15,840
)
 
(11,693
)
 
(25,121
)
 
(33,436
)
Provision for income taxes     —     —     3     68     258  
   
 
 
 
 
 
Net loss     (5,797 )   (15,840 )   (11,696 )   (25,189 )   (33,694 )
Deemed dividend(2)     (6,961 )   (339 )   —     —     —  
   
 
 
 
 
 
Net loss attributable to ordinary stockholders   $ (12,758 ) $ (16,179 ) $ (11,696 ) $ (25,189 ) $ (33,694 )
   
 
 
 
 
 
Net loss per common share:                                
    Basic and diluted   $ (1.21 ) $ (1.53 ) $ (1.00 ) $ (1.76 ) $ (2.11 )
   
 
 
 
 
 
Weighted average common shares outstanding used in computing net loss per share:                                
    Basic and diluted     10,563     10,608     11,737     14,283     15,997  
   
 
 
 
 
 
Pro forma net loss per share, basic and diluted (unaudited)(3)                           $ (0.81 )
                           
 
Pro forma weighted average common shares outstanding, basic and diluted (unaudited)(3)                             41,709  
                           
 
(1)
Includes stock-based compensation expense as follows:

 
  
   Years ended June 30,
 
  
   2002
   2003
   2004
   2005
   2006
 
  
   (in thousands)
  Cost of revenue   $ 132   $ 71   $ 190   $ 454   $ 863
  Selling and marketing     96     453     826     1,903     2,569
  Research and development     200     319     648     1,157     1,574
  General and administrative     400     451     785     2,812     3,237
(2)
In accordance with EITF Issue No. 98-5, "Accounting for Convertible Securities With Beneficial Conversion Features or Contingently Adjustable Conversion Features" and EITF Issue No. 00-27, "Application of EITF Issue No. 98-5 to Certain Convertible Instruments," we recognized deemed dividends as related to the contingent beneficial conversion features of our preferred stock.

(3)
See note 2 to our consolidated financial statements for a description of the method used in calculating our pro forma net loss per share (unaudited), basic and diluted and pro forma weighted average common shares outstanding (unaudited).

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   Years ended June 30,
 
   2004
   2005
   2006
Selected Operating Data:                  
Number of CyberKnife systems installed per year                  
  United States     7     14     22
  International     9     10     6
   
 
 
  Total     16     24     28
   
 
 
 
Net cash provided by operating activities (in thousands)
 
$
4,906
 
$
18,015
 
$
25,505
 
   As of June 30,
  
 
   2002
   2003
   2004
   2005
   2006
  
 
   (in thousands)

  
Consolidated Balance Sheet Data:                                
  Cash and cash equivalents   $ 2,063   $ 6,676   $ 9,722   $ 17,024   $ 27,856  
  Deferred cost of revenue     —     10,987     22,443     36,476     56,588  
  Total assets     11,925     32,347     52,443     86,860     138,623  
  Short-term debt     —     277     817     2,893     —  
  Long-term debt, net of current portion     —     1,151     —     —     —  
  Deferred revenue     1,287     25,703     47,953     89,975     149,664  
  Working capital (deficit)     1,428     489     (163 )   2,181     (3,783 )
  Redeemable convertible preferred stock     22,332     27,504     27,504     27,504     27,504  
  Stockholders' equity (deficiency)     (23,632 )   (33,048 )   (38,861 )   (56,172 )   (80,855 )

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        You should read the following discussion of our consolidated financial condition and results of operations in conjunction with the financial statements and the notes thereto included elsewhere in this prospectus. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this prospectus, particularly in "Risk Factors."

Overview

        We have developed the first and only commercially available intelligent robotic radiosurgery system, the CyberKnife system, designed to treat solid tumors anywhere in the body as an alternative to traditional surgery. The CyberKnife system combines continuous image-guidance technology with a compact linear accelerator, or linac, that moves in three dimensions according to the treatment plan. This combination, which we refer to as intelligent robotics, extends the benefits of radiosurgery to the treatment of tumors anywhere in the body. The CyberKnife system autonomously tracks, detects and corrects for tumor and patient movement in real-time during the procedure, enabling delivery of precise, high dose radiation typically with sub-millimeter accuracy. The CyberKnife procedure requires no anesthesia, can be performed on an outpatient basis and allows for the treatment of patients that otherwise would not have been treated with radiation or who may not have been good candidates for surgery. In addition, the CyberKnife procedure avoids many of the potential risks and complications that are associated with other treatment options and is more cost effective than traditional surgery.

        In July 1999, we obtained 510(k) clearance from the FDA to market the CyberKnife system for the treatment of tumors and certain other conditions in the head, neck and upper spine. In August 2001, we received FDA clearance for the treatment of tumors anywhere in the body where radiation treatment is indicated. In September 2002, we received a CE mark for the sale of the CyberKnife system in Europe. The CyberKnife system has also been approved for various indications in Japan, Korea, Taiwan, China and other countries. We estimate that over 20,000 patients worldwide have been treated with the CyberKnife system since its commercial introduction.

        In the United States, we sell to customers, including hospitals and stand-alone treatment facilities, directly through our sales organization, which as of September 30, 2006 included 19 sales personnel. Outside the United States, we sell to customers in over 30 countries directly and through distributors. We have sales and service offices in Paris, France and Hong Kong, China.

        Our CyberKnife systems are either sold to our customers or placed with our customers pursuant to our shared ownership programs. As of September 30, 2006, we had 83 CyberKnife systems installed at customer sites, including 73 sold and 10 pursuant to shared ownership programs and 78 pending installation, including 66 sold and 12 pursuant to shared ownership programs. Of the 73 systems sold and installed, 42 are in the United States, 24 are in Asia and 7 are in Europe. Of the 66 sold and pending installation, 35 are in the United States, 25 are in Asia and 6 are in Europe. Under the shared ownership program, we retain title to the CyberKnife system while the customer has use of the system. Our shared ownership contracts generally require a minimum monthly payment from the customer, and we may earn additional revenue through the use of the system at the site. Generally, minimum monthly payments are equivalent to the revenue generated from treating three to four patients per month, and any revenue received from additional patients is shared between us and the customer. As of September 30, 2006, we had 22 shared ownership programs, of which 10 are installed and 12 are pending installation. Our legacy shared ownership program was known as the placement program.

        We manufacture and assemble our CyberKnife systems at our manufacturing facility in Sunnyvale, California. We purchase major components, including the robotic manipulator, treatment table,

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magnetron, imaging cameras and computers, from outside suppliers, some of which are single source. We manufacture certain other electronic and electrical subsystems, including the linear accelerator. We then assemble and integrate these components with our proprietary software and perform testing prior to shipment to customer sites.

        We generate revenue by selling the CyberKnife system and by providing ongoing services and upgrades to customers following installation of the CyberKnife system. The current list price for the CyberKnife system is approximately $4.1 million, which includes installation, initial training and a one-year warranty. We also offer optional hardware and software, technical enhancements and upgrades to the CyberKnife system, as part of our multiyear service plans. Currently, our most comprehensive service plan is our Diamond Elite multiyear service plan, or Diamond plan. Under our Diamond plan, customers are eligible to receive up to two upgrades per year, when and if available. The Diamond plan has a list price of $460,000 per year, and provides for annual renewal for four years including the one-year warranty period. The customer may cancel the service plan at any time. As of September 30, 2006, 59 of our customers had purchased service plans.

        Our total net revenue was $19.6 million, $22.4 million and $52.9 million during the years ended June 30, 2004, 2005 and 2006, respectively. Our net loss was $11.7 million, $25.2 million and $33.7 million during the years ended June 30, 2004, 2005 and 2006, respectively. Our net cash provided by operating activities was $4.9 million, $18.0 million and $25.5 million during the years ended June 30, 2004, 2005 and 2006, respectively. As of June 30, 2006, our backlog was approximately $312.2 million. We anticipate that this backlog will be recognized over the next five years as we complete installations, deliver upgrades and provide service.

Material Weaknesses in Internal Controls

        In connection with the audit of our consolidated financial statements for the years ended June 30, 2004, 2005 and 2006, our independent registered public accounting firm identified material weaknesses and significant deficiencies in our internal controls over financial reporting. These weaknesses and deficiencies relate to a lack of segregation of duties and the misapplication of accounting policies, including policies related to revenue recognition and stock-based compensation.

        Our efforts to remediate these material weaknesses in our internal controls over financial reporting consist of the following corrective actions: (i) hiring and training additional, qualified finance and accounting personnel; and (ii) strengthening our processes and procedures related to complex revenue recognition and equity transactions. However, even after these corrective actions are implemented, the effectiveness of our controls and procedures may be limited by a variety of risks.

        Although we have taken measures to remediate the material weaknesses as well as the other significant deficiencies and control deficiencies, we cannot assure you that we have identified all, or that we will not in the future have additional material weaknesses, significant deficiencies and control deficiencies.

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Financial Operations

Sales and Installation Cycle

        The CyberKnife system has a relatively long sales and installation cycle because it is a major capital item and requires the approval of senior management at purchasing institutions. The typical sales and installation cycle is 12 to 18 months in duration and involves multiple steps, which may include pre-selling activity, execution of a letter of intent, or LOI, execution of contracts for the purchase or acquisition of the CyberKnife system and multiyear service plans, and installation of the CyberKnife system. Prior to installation, a purchasing institution must typically obtain a radiation device installation permit, and in some cases, a certificate of need, both of which must be granted by state and local government bodies. In addition, the purchasing institution must build a radiation shielded facility or upgrade an existing facility to house the CyberKnife system. On average it takes three months from the signing of an LOI to the execution of a contract. We typically receive a $450,000 deposit at the time the CyberKnife system purchase contract is executed, and the remaining balance for the purchase of the CyberKnife system upon installation. The customer also typically signs a service plan contract at the time of signing a CyberKnife system purchase contract.

        Upon installation, we recognize the CyberKnife system purchase price minus the fair value of one year of service. We recognize the fair value of the first year of service as revenue pro rata over the twelve months following installation. In addition, if the customer has purchased our Diamond plan and assuming annual renewals, we would receive the $460,000 payment at the beginning of the second, third and fourth years of the multiyear service plan and recognize the revenue pro rata over each year.

Legacy Service Plans

        Prior to introducing our Diamond plan, we offered a Platinum Elite multiyear service plan, or Platinum plan. These legacy service plans are structured so that we have an obligation to deliver two upgrades per year over the course of the multiyear service plan. If we fail to deliver the upgrades, our customers are entitled to receive refunds of up to $200,000. We no longer offer these legacy service plans to new customers.

        The Platinum plan obligates us to deliver two upgrades per year during the term of the contract. We have not yet established fair value for those future obligations; hence, generally accepted accounting principles in the United States, or GAAP, requires that we cannot begin to recognize any of the revenue derived from the sale of the CyberKnife system or the associated service plans until those obligations have been fulfilled. Therefore, the payments made by our customers who have our legacy Platinum plan are categorized as deferred revenue and will be recognized as revenue when we fulfill all obligations to deliver upgrades. Once we fulfill all upgrade obligations with respect to a specific Platinum plan, we will ratably recognize the revenue from the purchase of the CyberKnife system and the Platinum plan over the remaining life of the contract.

Warranty

        All customers purchasing a CyberKnife system receive a one-year warranty. In the event that a customer does not purchase a multiyear service plan, we recognize the CyberKnife system purchase price minus the fair value of one year of support upon installation. We recognize the value of one year of support pro rata over the twelve months following installation. If the customer does purchase a multiyear service plan, the revenue recognition is as described above.

Shared Ownership Programs Revenue

        As of June 30, 2006, our shared ownership programs involved U.S. sites only. Revenue from our shared ownership programs that is based on a minimum monthly payment is recognized monthly.

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Revenue in excess of the monthly minimum is recognized upon our receipt of a usage report from our customer. We recognized revenue from shared ownership programs of $4.8 million, $8.1 million and $8.1 million for the years ended June 30, 2004, 2005 and 2006, respectively. In limited cases, we received nonrefundable upfront payments from shared ownership program customers which are treated as deferred revenue and recognized over the term of the contract.

        The CyberKnife system shared ownership units are recorded within property, plant and equipment and are depreciated over their estimated life of ten years. Depreciation and warranty expense attributable to shared ownership units are recorded within product costs of revenue as they are incurred.

Japan Customized Service Revenue

        In May and December 2003, we entered into separate contractual arrangements to deliver customized services to our distributor in Japan for 22 CyberKnife systems previously sold. These customized services consist of two upgrade levels and are being delivered over an extended period concurrent with the distributor's efforts to coordinate delivery with their end user customers. Once the obligations under the upgrade programs for these 22 systems are complete, we do not plan to offer this customized service program and will instead be offering our standard multiyear service plans.

International Sales Revenue

        For international sales, we recognize revenue once we have met all of our obligations associated with the purchase agreement, other than for undelivered service elements for which we have vendor specific objective evidence, or VSOE, of fair value. In most cases, this occurs after the distributor has shipped the unit to the end user, assuming all other obligations have been satisfied. Payments are sometimes secured through letters of credit. In situations where we are directly responsible for installation, we recognize revenue once we have installed the CyberKnife system and have confirmed performance against specification.

        In November 2005, we introduced the Ruby multiyear service plan, or Ruby plan, for international customers. Under the Ruby plan, customers are eligible to receive software only upgrades when and if available. We expect to recognize revenue for Ruby plans in a manner similar to revenue recognition under our Diamond plans.

        In situations with legacy plans where we have future obligations related to software upgrades that are subject to potential refunds, we defer revenue from the sale and service of the CyberKnife system until the final upgrade has been delivered and accepted. After we have delivered all upgrades associated with a service plan and thus eliminated any contractual right to a refund, we ratably recognize the revenue from the sale of the CyberKnife system and the plan over the remaining life of the contract or until we have VSOE of the fair value of remaining undelivered elements. Net revenue from international customers was $6.7 million, $8.1 million and $12.1 million for the years ended June 30, 2004, 2005 and 2006, respectively.

Backlog

        We define backlog as the sum of the following two components: deferred revenue and future payments that our customers are contractually committed to make, but which we have not yet received. Backlog includes contractual commitments from CyberKnife system purchase agreements, service plans and minimum payment requirements associated with our shared ownership programs.

        As of June 30, 2006, our backlog was approximately $312.2 million, which includes $149.7 million of deferred revenue and $162.5 million of contractually committed future payments from customers. Of the total backlog, $187.7 million represents CyberKnife system sales, and $124.5 million represents

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revenue through service plans and shared ownership programs. We anticipate that this backlog will be recognized over the next five years as installations occur, upgrades are delivered and services are provided. Although backlog includes contractual commitments from our customers, we may be unable to convert all of this backlog into recognized revenue due to factors outside our control.

Results of Operations

Overview

        Our results of operations are divided into the following components:

        Net revenue.    Our net revenue consists primarily of revenue from the sale of CyberKnife systems, revenue generated from shared ownership programs, revenue generated from sales of upgrades, customized services and multiyear service plans and revenue from the sale of linacs for other uses.

        Cost of revenue.    Cost of revenue consists primarily of material, labor and overhead costs. In future periods we expect cost of revenue to decrease as a percentage of total net revenue due to improved absorption of manufacturing overhead costs associated with increased production volumes, improved efficiencies for supplies and materials and improved labor and manufacturing efficiencies.

        Selling and marketing expenses.    Selling and marketing expenses consist primarily of costs for personnel and costs associated with participation in medical conferences, physician symposia, and promotional activities. In future periods, we expect selling and marketing expenses to grow in absolute terms as we increase headcount and further increase participation in trade shows and symposia and invest in other marketing and promotional activities, but to continue to decrease as a percentage of total net revenue as we leverage our existing infrastructure and realize economies of scale.

        Research and development expenses.    Research and development expenses consist primarily of activities associated with our product development, regulatory, and clinical organizations. In future periods, we expect research and development expenses to grow in absolute terms as we increase headcount and development activities, but to decrease as a percentage of total net revenue as we leverage our existing infrastructure and realize economies of scale.

        General and administrative expenses.    General and administrative expenses consist primarily of compensation and related costs for finance and human resources, and expenses related to accounting, legal and other consulting fees. In future periods, we expect general and administrative expenses to grow in absolute terms as we become subject to the reporting requirements of a public company and incur additional costs related to the overall growth of our business, but to decrease as a percentage of total net revenue as we leverage our existing infrastructure and realize economies of scale.

        Interest and other income.    Interest and other income consists primarily of interest earned on our cash and cash equivalents.

        Interest and other expense.    Interest and other expense consists primarily of interest expense related to advance payments received in relation to our shared ownership program.

Deferred Revenue—Legacy Multiyear Service Plans

        We are required to defer all of the revenue associated with our legacy multiyear service plans, including our Platinum and Gold service plans, until we have satisfied all of the specified obligations related to the delivery of upgrades to the CyberKnife system during the life of the service plan. This includes deferring the cash received for the purchase of the CyberKnife system and multiyear service plans until we have delivered all upgrades for which the customer is eligible to receive. Once we have satisfied obligations for delivery of upgrades under the plans, we recognize revenue pro rata over the remaining life of the service plan. We have not offered these legacy multiyear service plans to new

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customers since we introduced our Diamond plan in October 2005, but continue to service 45 legacy plans as of September 30, 2006. Therefore, our deferred revenue has been higher in certain periods where we have installed more units with legacy contracts, and it will be higher in the short term until we can satisfy the contractual obligations and recognize the revenue associated with those installed units. This has led to significant fluctuations in total net revenue in historical periods. Consequently, our operating expenses as a percentage of total net revenue are relatively higher, when compared to companies at a similar stage of commercialization, in the periods where we have had a higher mix of deferred revenue and thus lower total net revenue. In future periods, we expect operating expenses as a percentage of total net revenue to decline.

Year Ended June 30, 2005 Compared to Year Ended June 30, 2006

        Net revenue.    Total net revenue increased from $22.4 million for the year ended June 30, 2005 to $52.9 million for the year ended June 30, 2006. Product revenue increased from $9.6 million for the year ended June 30, 2005 to $36.1 million for the year ended June 30, 2006, primarily attributable to an increase from fiscal 2005 to 2006 in the number of CyberKnife system units shipped and installed and a change in the mix of service plans. In the year ended June 30, 2005, 24 CyberKnife system units were installed, including 21 units sold, and 3 units attributable to our shared ownership programs. In the year ended June 30, 2006, 28 were installed, including 25 that were sold, and 3 that were attributable to our shared ownership programs. Pursuant to our service plans, we recognized revenue from the sale of 2 and 11 CyberKnife systems in fiscal 2005 and 2006, respectively. Service revenue increased from $3.1 million for the year ended June 30, 2005 to $4.8 million for the year ended June 30, 2006, primarily attributable to an increase in the number of customer sites under a service plan. Revenue from upgrades and sales of linacs classified as "Other revenue" in our consolidated statements of operations, increased from $1.6 million for the year ended June 30, 2005 to $3.8 million for the year ended June 30, 2006.

        Cost of revenue.    Total cost of revenue increased from $11.1 million for the year ended June 30, 2005 to $27.5 million for the year ended June 30, 2006. The increase was primarily attributable to an increase in CyberKnife systems installed and recognized as revenue during fiscal 2006 compared to fiscal 2005, as well as an increase of $409,000 in stock-based compensation expense. As a percentage of total net revenue, total cost of revenue was 49.7% and 52.0% for the year ended June 30, 2005 and 2006, respectively. The increase in total cost of revenue as a percentage of total net revenue was a result of costs associated with introducing our latest generation CyberKnife system.

        Selling and marketing expenses.    Selling and marketing expenses increased from $16.4 million for the year ended June 30, 2005 to $25.2 million for the year ended June 30, 2006. The increase was primarily attributable to an increase of $3.0 million in salary and related costs largely due to increased headcount, an increase of $1.4 million in travel and related expenses attributable to selling and marketing activities, an increase of $1.1 million in consulting expenses, an increase of $1.0 million in marketing and promotional activities, an increase of $820,000 in sales commission expenses resulting from increased sales volume and an increase of $666,000 in stock-based compensation expense. As a percentage of total net revenue, selling and marketing expenses decreased from 73.1% for the year ended June 30, 2005 to 47.6% for the year ended June 30, 2006.

        Research and development expenses.    Research and development expenses increased from $11.7 million for the year ended June 30, 2005 to $17.8 million for the year ended June 30, 2006. The increase was primarily attributable to an increase of $3.4 million in salary and related costs largely due to increased headcount, an increase of $1.5 million in consulting services, an increase of $515,000 in purchases of non-inventory materials and an increase of $417,000 in stock-based compensation expense. As a percentage of total net revenues, research and development expenses decreased from 52.1% for the year ended June 30, 2005 to 33.6% for the year ended June 30, 2006.

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        General and administrative expenses.    General and administrative expenses increased from $8.1 million for the year ended June 30, 2005 to $15.9 million for the year ended June 30, 2006. The increase was primarily attributable to an increase in legal and accounting costs of $3.4 million, an increase in salary and related costs of $2.1 million, an increase of $565,000 in other consulting fees and an increase of $425,000 in stock-based compensation expense. As a percentage of total net revenue, general and administrative expenses decreased from 36.3% for the year ended June 30, 2005 to 30.1% for the year ended June 30, 2006.

        Interest and other income.    Interest and other income increased from $156,000 for the year ended June 30, 2005 to $438,000 for the year ended June 30, 2006. The increase was due to larger cash balances kept in interest bearing accounts.

        Interest and other expense.    Interest and other expense decreased from $394,000 for the year ended June 30, 2005 to $382,000 for the year ended June 30, 2006. The decrease was primarily attributable to a decrease in interest expense on advanced payments received from third party financing arrangements in connection with our shared ownership programs.

        Provision for income taxes.    The provision for income taxes increased from $68,000 for the year ended June 30, 2005 to $258,000 for the year ended June 30, 2006 due to an increase in foreign operations, as well as federal alternative minimum tax and additional state taxes.

        As of June 30, 2006, we had federal and state net operating loss carryforwards of $40.6 million and $16.6 million, respectively. These federal and state net operating loss carryforwards are available to offset against future taxable income, if any, in varying amounts and will begin to expire in varying amounts beginning in 2009 and 2007 for federal and state purposes, respectively. The amounts of and benefits from net operating loss carryforwards may be subject to a substantial annual limitation due to changes in ownership under the Internal Revenue Code of 1986. The annual limitation may result in the expiration of our net operating losses before they can be used. In addition, among other matters, realization of the entire deferred tax asset is dependent on our ability to generate sufficient taxable income prior to the expiration of the carryforwards. While we had taxable income in 2006, based on the available objective evidence and the history of losses, we cannot conclude that the net deferred tax assets will be realized. Accordingly, we have recorded a valuation allowance equal to the amount of our net deferred tax assets.

Year Ended June 30, 2004 Compared to Year Ended June 30, 2005

        Net revenue.    Total net revenue increased from $19.6 million for the year ended June 30, 2004 to $22.4 million for the year ended June 30, 2005. The increase was primarily attributable to increases in shared ownership revenue and service revenue, offset by a decrease in product revenue. The decrease in product revenue from $12.6 million for the year ended June 30, 2004 to $9.6 million for the year ended June 30, 2005 was primarily due to a change in the mix of service plans in fiscal 2005 versus fiscal 2004. In the year ended June 30, 2004, 16 CyberKnife systems were installed, including 15 units sold and 1 unit attributable to our shared ownership programs. In the year ended June 30, 2005, 24 CyberKnife systems were installed, including 21 units sold and 3 units attributable to our shared ownership programs. Pursuant to our service plans, we recognized revenue from the sale of 5 and 2 CyberKnife systems in fiscal 2004 and 2005, respectively. Shared ownership revenue increased from $4.8 million for the year ended June 30, 2004 to $8.1 million for the year ended June 30, 2005, primarily due to an increase in the number of shared ownership sites and an increase in patient treatment volume at the existing sites. Service revenue increased from $2.0 million for the year ended June 30, 2004 to $3.1 million for the year ended June 30, 2005, due to an increase in the number of customer sites under a service program. Other revenue increased from $125,000 for the year ended June 30, 2004 to $1.6 million for the year ended June 30, 2005 due to an increase in the number of shipped upgrade units.

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        Cost of revenue.    Total cost of revenue increased from $8.5 million for the year ended June 30, 2004 to $11.1 million for the year ended June 30, 2005. The increase was primarily attributable to an increase in cost of shared ownership revenue from $1.1 million for the year ended June 30, 2004 to $1.6 million for the year ended June 30, 2005, and an increase in cost of service revenue from $1.3 million for the year ended June 30, 2004 to $2.0 million for the year ended June 30, 2005. The increase in cost of shared ownership revenue is primarily due to an increase in the number of shared ownership sites, and the increase in cost of service revenue is primarily due to an increase in number of customer sites under a service plan. As a percentage of total net revenue, total cost of revenue was 43.4% and 49.7% for the years ended June 30, 2004 and 2005, respectively. The increase in total cost of revenue as a percentage of total net revenue in fiscal 2005 was due primarily to the decrease in product revenue, which typically results in higher gross margins than our other sources of revenue.

        Selling and marketing expenses.    Selling and marketing expenses increased from $10.6 million for the year ended June 30, 2004 to $16.4 million for the year ended June 30, 2005. The increase was primarily attributable to an increase of $2.5 million in salary and related costs, largely due to increased headcount, an increase of $1.1 million in stock-based compensation expense, an increase of $964,000 in travel, an increase of $778,000 in marketing and promotional activities and an increase of $375,000 in sales commission expenses resulting from increased sales volume. As a percentage of total net revenue, selling and marketing expenses were 54.4% and 73.1% for the years ended June 30, 2004 and 2005, respectively.

        Research and development expenses.    Research and development expenses increased from $7.3 million for the year ended June 30, 2004 to $11.7 million for the year ended June 30, 2005. The increase was primarily attributable to an increase in salary and related costs of $1.8 million, an increase in consulting services of $1.7 million, and an increase of $509,000 in stock-based compensation expense. As a percentage of total net revenue, research and development expenses increased from 37.4% for the year ended June 30, 2004 to 52.1% for the year ended June 30, 2005.

        General and administrative expenses.    General and administrative expenses increased from $4.7 million for the year ended June 30, 2004 to $8.1 million for the year ended June 30, 2005. The increase was primarily attributable to an increase of $2.0 million in stock-based compensation expense, an increase of $1.1 million in salary and related costs and an increase of $345,000 in consulting expenses. As a percentage of total net revenue, general and administrative expenses were 23.9% for the year ended June 30, 2004 and 36.3% for the year ended June 30, 2005.

        Interest and other income.    Interest and other income increased from $13,000 for the year ended June 30, 2004 to $156,000 for the year ended June 30, 2005. This increase was due to larger cash balances kept in interest bearing accounts.

        Interest and other expense.    Interest and other expense increased from $149,000 for the year ended June 30, 2004 to $394,000 for the year ended June 30, 2005. Interest and other expense for the year ended June 30, 2005 was comprised primarily of $190,000 in interest expense related to advanced payments received in relation to the shared ownership program and $93,000 of interest expense related to a note payable to American Science and Engineering, Inc., or AS&E, associated with the acquisition of the High Energy Systems, or HES, business.

        Provision for income taxes.    The provision for income taxes increased from $3,000 for the year ended June 30, 2004 to $68,000 for the year ended June 30, 2005 due to an increase in foreign operations and additional state taxes.

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Stock-Based Compensation Expense

        Stock-based compensation expense is reflected on our income statement in accordance with Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation, or SFAS 123, and SFAS No. 148, Accounting for Stock-Based Compensation—Transition and Disclosure, or SFAS 148. In accordance with the requirements of SFAS 123, we have recorded deferred stock-based compensation for the estimated fair value of options awarded on the date of grant. This deferred stock-based compensation is being amortized to expense over the period during which the options become exercisable, generally four years. During the years ended June 30, 2004, 2005 and 2006, we reversed $1.1 million, $1.2 million and $1.7 million, respectively, of deferred stock-based compensation expense related to cancellations of unvested options of certain employees who had been granted stock options and subsequently terminated their employment with us. During the years ended June 30, 2004, 2005 and 2006, we amortized $2.3 million, $5.5 million and $7.9 million, of stock-based compensation expense, respectively, for stock options granted to employees.

        The stock-based compensation expense related to non-employees fluctuates as the underlying assumptions fluctuate. During the years ended June 30, 2004, 2005 and 2006, we recognized $137,000, $164,000 and $186,000 of stock-based compensation expense, respectively, for stock options granted to non-employees. For certain stock option grants, we made modifications to the option terms. These modifications included extension of the vesting period and acceleration of vesting. During the years ended June 30, 2004, 2005 and 2006, we recognized $0, $631,000 and $112,000 of stock-based compensation expense, respectively, for modifications of stock options granted.

High Energy Systems Acquisition

        In January 2005, we acquired AS&E's HES business for $8.4 million. This acquisition included the intellectual property associated with our X-band linac and included the hiring of key employees from AS&E. HES had been the sole source manufacturer of the linac used in the CyberKnife system. We believe that the HES acquisition stabilizes the sourcing of a component critical to the CyberKnife system and provides opportunities for focused cost reduction efforts to improve overall product margins. In addition to making and developing our own compact linacs, we supply linacs to AS&E for non-destructive testing and national security uses and to a medical device manufacturer for medical applications.

Liquidity and Capital Resources

        We have used cash from operations and the sale of our equity securities to fund our working capital needs and our capital expenditure requirements. Since our inception and through June 30, 2006, we have obtained financing of $40.8 million primarily through private placements of debt and equity securities, and the exercise of warrants and options. At June 30, 2006, we had $27.9 million in cash and cash equivalents. We believe that we have sufficient cash resources and anticipated cash flows, without the proceeds of this offering, to continue in operation for at least the next 12 months.

Cash Flows From Operating Activities

        Net cash provided by operating activities was $25.5 million for the year ended June 30, 2006. Our net loss of $33.7 million during fiscal 2006 was offset by a $39.6 million increase in deferred revenue, net of deferred cost of revenue, non-cash charges of $8.2 million related to stock-based compensation charges and $3.8 million of depreciation and amortization expense on purchases of property and equipment. The increase in deferred revenue, net of deferred cost of revenue, was primarily a result of the timing differences between invoicing customers under service contracts and the recognition of revenue over the contractual service period, and the continued installation of units covered by our legacy service plans. Other significant working capital changes that contributed to positive cash flow in

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fiscal 2006 included an increase in customer advances of $10.9 million due to increased payments made by customers in advance of product shipments and an increase in accrued liabilities of $9.4 million primarily due to increases in accrued commissions on higher revenues and other compensation related accruals due to increased headcount. Significant working capital changes that offset positive cash flows in fiscal 2006 included an increase in accounts receivable of $6.6 million and an increase in inventory of $4.3 million as a result of increased revenues and volumes of orders from our customers.

        Net cash provided by operating activities was $18.0 million for the year ended June 30, 2005. Our net loss of $25.2 million during fiscal 2005 was offset by a $28.0 million increase in deferred revenue, net of deferred cost of revenue, non-cash charges of $6.3 million related to stock-based compensation charges and $2.1 million of depreciation and amortization expense on purchases of property and equipment. The increase in deferred revenue, net of deferred cost of revenue, was primarily a result of the continued installation of units covered by our legacy service plans. Other significant working capital changes that contributed to positive cash flow in fiscal 2005 included customer advances of $3.7 million due to increased payments made by customers in advance of product shipment, an increase in accounts payable of $2.1 million and an increase in accrued liabilities of $1.9 million due to increases in the volume of our business. Significant working capital changes that offset positive cash flows in fiscal 2005 included an increase in inventory of $2.3 million as a result of increased volumes of orders from our customers and inventory acquired in the HES acquisition.

        Net cash provided by operating activities was $4.9 million for the year ended June 30, 2004. Our net loss of $11.7 million during fiscal 2004 was offset by a $10.8 million increase in deferred revenue, net of deferred cost of revenue, non-cash charges of $2.4 million related to stock-based compensation charges and $1.5 million of depreciation and amortization expense on purchases of property and equipment. The increase in deferred revenue, net of deferred cost of revenue, was primarily a result of the continued installation of units covered by our legacy service plans. Other significant working capital changes that contributed to positive cash flow in fiscal 2004 included customer advances of $1.8 million due to increased payments made by customers in advance of product shipment and an increase in accrued liabilities of $1.4 million and an increase in accounts payable of $1.1 million due to increases in the volume of our business.

Cash Flows From Investing Activities

        Net cash used in investing activities was $12.4 million for the year ended June 30, 2006 compared to $12.3 million for the year ended June 30, 2005 and $5.3 million for the year ended June 30, 2004. The net cash used in investing activities in fiscal 2006 was primarily due to purchases of property and equipment of $13.6 million. In fiscal 2005, net cash used in investing activities was primarily due to purchases of property and equipment of $6.2 million and cash paid for the acquisition of HES of $5.6 million. Net cash used in investing activities in fiscal 2004 was due to purchases of property and equipment of $5.6 million.

Cash Flows From Financing Activities

        Net cash used in financing activities was $2.2 million for the year ended June 30, 2006. Net cash provided by financing activities was $1.6 million for the year ended June 30, 2005 and $3.4 million for the year ended June 30, 2004. The net cash used in financing activities in fiscal 2006 was due to the payment of a note payable of $3.0 million offset by proceeds from the exercise of common stock options and common stock warrants of $705,000. In fiscal years 2005 and 2004, net cash provided by financing activities was attributable to proceeds from the exercise of common stock options and common stock warrants of $1.7 million and $3.4 million, respectively.

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Operating Capital and Capital Expenditure Requirements

        Our future capital requirements depend on numerous factors. These factors include but are not limited to the following:

        We believe that our current cash and cash equivalents, along with the cash we expect to generate from operations and our net proceeds from this offering, will be sufficient to meet our anticipated cash needs for working capital and capital expenditures for at least 12 months. If these sources of cash and the net proceeds from this offering are insufficient to satisfy our liquidity requirements, we may seek to sell additional equity or debt securities or obtain a credit facility. The sale of additional equity or convertible debt securities could result in dilution to our stockholders. If additional funds are raised through the issuance of debt securities, these securities could have rights senior to those associated with our common stock and could contain covenants that would restrict our operations. Additional financing may not be available at all, or in amounts or on terms acceptable to us. If we are unable to obtain this additional financing, we may be required to reduce the scope of our planned product development and marketing efforts.

Contractual Obligations and Commitments

        The following table is a summary of our long-term contractual cash obligations as of June 30, 2006:

 
   Payments due by period
 
   Less than
 
   Total
   1 year
   1 – 3 years
   4 – 5 years
 
   (in thousands)
Operating leases   $6,715   $1,984   $4,023   $708
   
 
 
 

Off Balance Sheet Arrangements

        We do not have any off balance sheet arrangements.

Inflation

        We do not believe that inflation has had a material impact on our business and operating results during the periods presented.

Critical Accounting Policies and Estimates

        The discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingent

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assets and liabilities at the date of the consolidated financial statements, as well as revenue and expenses during the reporting periods. We evaluate our estimates and judgments on an ongoing basis. We base our estimates on historical experience and on various other factors we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could therefore differ materially from those estimates under different assumptions or conditions.

        Our significant accounting policies are more fully described in the notes to our consolidated financial statements included elsewhere in this prospectus. We believe the following are our critical accounting policies including the more significant estimates and assumptions used in preparation of our consolidated financial statements.

Revenue Recognition

        Revenue is generated from the sale of our products, our shared ownership programs, and by providing related services, which include installation services, post-contract customer support, or PCS, training and consulting. Our products and upgrades to those products include more than incidental software and accordingly, we account for the sale of our products pursuant to Statement of Position No. 97-2, Software Revenue Recognition, or SOP 97-2, as amended.

        We recognize product revenues, for sales of the CyberKnife system, replacement parts and accessories, when there is persuasive evidence of an arrangement, the fee is fixed or determinable, collection of the fee is probable and delivery has occurred as prescribed by SOP 97-2. Payments received in advance of product shipment are recorded as customer advances and are recognized as revenue or deferred revenue upon product shipment or installation.

        For arrangements with multiple elements, we allocate arrangement consideration to services and PCS, based upon VSOE of fair value of the respective elements. VSOE of fair value for the services element is based upon our standard rates charged for the services when such services are sold separately or based upon the prices established by management having the relevant authority when that service is not yet being sold separately. When contracts contain multiple elements, and VSOE of fair value exists for all undelivered elements, we account for the delivered elements, principally the CyberKnife system unit, based upon the "residual method" as prescribed by SOP No. 98-9, Modification of SOP No. 97-2 with Respect to Certain Transactions. If VSOE of fair value does not exist for the undelivered elements, all revenue is deferred until the earlier of: (1) delivery of all elements; or (2) establishment of VSOE of fair value for all undelivered elements.

        Upgrade services revenues relate to the sale of specialized services specifically contracted to provide current technology capabilities for units previously sold through a distributor into the Japan market. There are two upgrade programs, one of which includes training and PCS elements. Both programs include elements where VSOE of fair value has not been established for the PCS. As a result, associated revenues are deferred and recognized ratably over the term of the PCS arrangement, generally four years.

        Service revenue for providing PCS, which includes warranty services, extended warranty services, unspecified when-and-if available product updates, and technical support is deferred and recognized ratably over the service period, generally one year, until no further obligation exists. At the time of sale, we provide for the estimated incremental costs of meeting product warranty if the incremental warranty costs are expected to exceed the related service revenues. Training and consulting service revenues, that are not deemed essential to the functionality of the CyberKnife system, are recognized as such services are performed. Costs associated with providing PCS and maintenance services are recognized when incurred, except when those costs are related to units where revenue recognition has been deferred. In those cases, the costs are deferred until the recognition of the related revenue and are recognized over the period of revenue recognition.

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        For all sales, we use either a signed agreement or a binding purchase order as evidence of an arrangement. Sales to third party distributors are evidenced by a distribution agreement governing the relationship together with binding purchase orders on a transaction-by-transaction basis. We record revenue from arrangements with distributors based on a sell-through method where revenue is recognized upon shipment of the products to the end user customer once all revenue recognition criteria are met. These criteria require that persuasive evidence of an arrangement exists, the fees are fixed or determinable, collection of the resulting receivable is probable and there is no right of return. Our agreements with customers and distributors do not contain product return rights.

        We assess the probability of collection based on a number of factors, including past transaction history with the customer and the credit-worthiness of the customer. We generally do not request collateral from our customers. If we determine that collection of a fee is not probable, we will defer the fee and recognize revenue upon receipt of cash.

        We also enter into shared ownership programs with certain customers. Under the terms of such programs, we retain title to the CyberKnife system, while the customer has use of the system. We generally receive a minimum monthly payment and earn additional revenues from the customer based upon its use of the product. We may provide unspecified upgrades to the products during the term of each program, when and if available. Upfront non-refundable payments from the customer are deferred and recognized as revenue over the contractual period. Revenues from shared ownership programs are recorded as they become earned and receivable, and are included within shared ownership revenue in the statement of operations.

        The CyberKnife system shared ownership units are recorded within property, plant and equipment on our balance sheet and are depreciated over their estimated useful life of ten years. Depreciation and warranty expense attributable to the shared ownership units are recorded within product cost of revenue as they are incurred.

Deferred Revenue and Deferred Cost of Revenue

        Deferred revenue consists of deferred product revenue, deferred shared ownership revenue, deferred service revenue and deferred other revenue. Deferred product revenue arises from the timing differences between the shipment of products and satisfaction of all revenue recognition criteria consistent with our revenue recognition policy. Deferred shared ownership revenue results from the receipt of advance payments of monthly minimum lease payments, which will be recognized ratably over the term of the shared ownership program. Deferred service revenue results from the advance payment for services to be delivered over a period of time, usually one year. Service revenue is recognized ratably over the service period. Deferred other revenue results primarily from the Japan upgrade services programs and is due to timing difference between the receipt of cash payments for those upgrades and final delivery to the end user customer. Deferred cost of revenue consists of the direct costs associated with the manufacture of units, direct service costs for which the revenue has been deferred in accordance with our revenue recognition policies and deferred costs associated with Japan upgrade revenues. Deferred revenue and associated deferred cost of revenue that are expected to be realized within one year are classified as current liabilities and current assets, respectively.

Stock-Based Compensation Expense

        Effective July 1, 2003, we began to account for stock-based employee compensation arrangements in accordance with SFAS 123 and SFAS 148. Under SFAS 123, stock-based compensation expense is measured on the date of grant based on the fair value of the award. Upon adoption of this standard, we elected to use the retrospective restatement method of transition.

        We believe the fair value of the stock options is more reliably measurable than the fair value of the services received. The estimated fair value of the stock options granted is calculated at the date of

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grant using the Black-Scholes option pricing model, as prescribed by SFAS 123, using fair values of common stock between $2.63 and $7.63 per share and the following weighted-average assumptions during the years ended June 30, 2004, 2005 and 2006:

 
   Years ended June 30,
  
 
   2004
   2005
   2006
  
Risk-free interest rate   3.77 % 3.81 % 4.42 %
Dividend yield   —   —   —  
Weighted-average expected life   6.25 years   6.25 years   6.25 years  
Expected volatility   99.6 % 94.8 % 86.7 %

        In accordance with the requirements of SFAS 123, we have recorded deferred stock-based compensation for the estimated fair value of our options on the date of grant. This deferred stock-based compensation is amortized to expense over the period during which the options become exercisable, generally four years. During the years ended June 30, 2004, 2005 and 2006, we reversed $1.1 million, $1.2 million and $1.7 million, respectively, of deferred stock-based compensation related to cancellations of unvested options of certain employees who had been granted stock options and subsequently terminated their employment with us. During the years ended June 30, 2004, 2005 and 2006, we amortized $2.3 million, $5.5 million and $7.9 million of stock-based compensation expense, respectively, for stock options granted to employees.

        Stock-based compensation expense related to stock options granted to non-employees is recognized as the stock options are earned in accordance with SFAS 123 and Emerging Issues Task Force No. 96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services. We believe that the fair value of the stock options is more reliably measurable than the fair value of the services received. The estimated fair value of the stock options granted is calculated using the Black-Scholes option pricing model, as prescribed by SFAS 123, using fair values of common stock between $2.63 and $7.63 per share and the following weighted-average assumptions during the years ended June 30, 2004, 2005 and 2006:

 
   2004
   2005
   2006(1)
Risk-free interest rate   4.45 % 4.20 % —
Dividend yield   —   —   —
Weighted-average expected life   10 years   10 years   —
Expected volatility   75.0 % 71.0 % —
(1)
No options granted to non-employees in 2006.

        The stock-based compensation expense related to non-employees fluctuates as the underlying assumptions fluctuate. During the years ended June 30, 2004, 2005 and 2006, we recognized $137,000, $164,000 and $186,000 of stock-based compensation expense, respectively, for stock options granted to non-employees. For certain stock option grants, we made modifications to the option terms. These modifications included extension of the vesting period and acceleration of vesting. During the years ended June 30, 2004, 2005 and 2006, we recognized $0, $631,000 and $112,000 of stock-based compensation expense, respectively, for modifications of stock options granted.

Quantitative and Qualitative Disclosures About Market Risk

        We do not utilize derivative financial instruments, derivative commodity instruments or other market risk sensitive instruments, positions or transactions.

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        For direct sales outside the United States it is likely we will sell in the local currency. For the year ended June 30, 2006, all of our executed sales contracts were denominated in U.S. dollars, with the exception of four sales contracts denominated in Euros. Future fluctuations in the value of the U.S. dollar may affect the price competitiveness of our products outside the United States. Some of our commissions related to sales of the CyberKnife system are payable in Euros. To the extent that management can predict the timing of payments under these contracts, we may engage in hedging transactions to mitigate such risks.

        From time to time, we invest our excess cash primarily in money market funds, U.S. government securities, corporate bonds and commercial paper. Accordingly, we believe that while the instruments we hold are subject to changes in the financial standing of the issuer of such securities, we are not subject to any material risks arising from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices or other market changes that affect market risk sensitive instruments.

Recent Accounting Pronouncements

        In May 2005, the Financial Accounting Standards Board, or FASB, issued SFAS No. 154, Accounting Changes and Error Corrections, or SFAS 154. SFAS 154 replaces Accounting Principles Board, or APB, Opinion No. 20, or APB 20, and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements, and applies to all voluntary changes in accounting principle, and changes the requirements for accounting for and reporting of a change in accounting principle. APB 20 previously required that most voluntary changes in accounting principle be recognized by including in net income of the period of change a cumulative effect of changing to the new accounting principle whereas SFAS 154 requires retrospective application to prior periods' financial statements of a voluntary change in accounting principle unless it is impracticable. SFAS 154 enhances the consistency of financial information between periods. SFAS 154 will be effective in fiscal years beginning after December 15, 2005. Early adoption is permitted. We do not expect that the adoption of SFAS 154 will have a material impact on its results of operations or financial position.

        In December 2004, the FASB issued a Statement, Share-Based Payment, an amendment of FASB Statements Nos. 123 and 95, or SFAS 123R, that addresses the accounting for share-based payment transactions in which a company receives employee services in exchange for either equity instruments of the company or liabilities that are based on the fair value of the company's equity instruments or that may be settled by the issuance of such equity instruments. The statement eliminates the ability to account for share-based compensation transactions using the intrinsic value method and generally requires that such transactions be accounted for using a fair-value-based method and recognized as expense in the consolidated statements of operations. This new standard will be effective for us beginning with our fiscal year ending June 30, 2007.

        We plan to adopt SFAS 123R using the modified prospective method, under which compensation cost is recognized beginning with the effective date (a) based on the requirements of SFAS 123R for all share-based payments granted or modified after the effective date and (b) based on the previous requirements of SFAS 123 for all awards granted to employees prior to the effective date of SFAS 123R that remain unvested on the effective date. The amounts disclosed within our footnotes are not necessarily indicative of the amounts that will be expensed upon the adoption of SFAS 123R. Compensation expense calculated under SFAS 123R may differ from the amounts currently disclosed within our footnotes based on changes in the fair value of our common stock, changes in the number of options granted or the terms of such options, the treatment of tax benefits and changes in interest rates or other factors. Upon adoption of SFAS 123R, we plan to use the Black-Scholes model to value the compensation expense associated with employee stock options and stock purchases under our employee stock purchase plan.

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        We expect this standard will not have a significant impact on the consolidated statements of operations and consolidated statements of cash flows. SFAS 123R also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as cash flow from financing activities, rather than as cash flow from operations as required under SFAS 123. This requirement will reduce net cash flows from operations and increase net cash flows from financing activities in periods after adoption to the extent that such excess tax benefits are realized.

        In March 2005, the SEC issued Staff Accounting Bulletin, or SAB, No. 107, regarding the Staff's interpretation of SFAS 123R. This interpretation provides the Staff's views regarding interactions between SFAS 123R and certain SEC rules and regulations and provides interpretations of the valuation of share-based payments for public companies. The interpretive guidance is intended to assist companies in applying the provisions of SFAS 123R and investors and users of the financial statements in analyzing the information provided. We will follow the guidance prescribed in SAB 107 in connection with our adoption of SFAS 123R.

        In June 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, or FIN 48. This interpretation clarifies the accounting for uncertainty in income taxes recognized in the financial statements in accordance with SFAS No. 109, Accounting for Income Taxes. FIN 48 is effective for fiscal years beginning after December 15, 2006. We have not yet determined what impact the adoption of this standard will have on our consolidated financial statements.

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BUSINESS

Overview

        We have developed the first and only commercially available intelligent robotic radiosurgery system, the CyberKnife system, designed to treat solid tumors anywhere in the body as an alternative to traditional surgery. For over 30 years, traditional radiosurgery systems, or systems that deliver precise, high dose radiation directly to a tumor, have been used primarily to destroy brain tumors. Our CyberKnife system represents the next generation of radiosurgery systems, combining continuous image-guidance technology with a compact linear accelerator that has the flexibility to move in three dimensions according to the treatment plan. This combination, which we refer to as intelligent robotics, extends the benefits of radiosurgery to the treatment of tumors anywhere in the body. The CyberKnife system autonomously tracks, detects and corrects for tumor and patient movement in real-time during the procedure, enabling delivery of precise, high dose radiation typically with sub-millimeter accuracy. Traditional radiosurgery systems have limited mobility and generally require the use of rigid frames, restricting the ability to effectively treat tumors outside of the brain. The CyberKnife system does not have these limitations and therefore has increased flexibility to treat tumors throughout the body from many different directions, while minimizing the delivery of radiation to healthy tissue and vital organs. The CyberKnife procedure requires no anesthesia, can be performed on an outpatient basis and allows for the treatment of patients that otherwise would not have been treated with radiation or who may not have been good candidates for surgery. In addition, the CyberKnife procedure avoids many of the potential risks and complications that are associated with other treatment options and is more cost effective than traditional surgery.

        The CyberKnife system has received U.S. Food and Drug Administration, or FDA, 510(k) clearance to provide treatment planning and image-guided robotic radiosurgery for tumors anywhere in the body where radiation treatment is indicated. The CyberKnife system has also received a CE mark for sale in Europe and has been approved for various indications in Japan, Korea, Taiwan, China and other countries. As of September 30, 2006, 83 CyberKnife systems were installed and are in use: 52 in the United States, 10 of which are pursuant to our shared ownership programs, 24 in Asia and 7 in Europe. In addition, as of September 30, 2006, we had 78 CyberKnife systems pending installation, 12 of which will be placed with our customers pursuant to our shared ownership programs. We estimate that over 20,000 patients worldwide have been treated with the CyberKnife system since its commercial introduction. Our customers have increasingly used the CyberKnife system for indications outside of the brain for tumors on or near the spine and in the lung, liver, prostate and pancreas. Based on customer data, more than 50% of patients treated with the CyberKnife system in the United States during the three months ended September 30, 2006 were treated for tumors outside of the brain.

Cancer Market Overview

        According to the World Health Organization, or WHO, an estimated 7.6 million people died of cancer in 2005, accounting for 13% of all deaths worldwide. The WHO estimates that there are 24.6 million people living with cancer worldwide, with approximately 10.9 million new cases being diagnosed every year. Cancer is the second leading cause of death in the United States, after heart disease. The American Cancer Society, or ACS, estimates that approximately 564,000 Americans will die as a result of cancer in 2006. The ACS also estimates that approximately 1.4 million new cases of cancer will be diagnosed in the United States in 2006, with continued increases in the prevalence of cancer forecasted as the U.S. population ages. The National Institutes of Health estimates that the treatment of cancer accounted for more than $74.0 billion in direct medical costs in 2005.

        Cancers can be divided broadly into two groups: solid tumor cancers, which are characterized by the growth of malignant tumors within the body in areas such as the brain, lung, liver, breast or prostate, and hematological, or blood-borne, cancers, such as leukemia. The ACS estimates that solid

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tumor cancers will account for approximately 1.3 million, or approximately 92%, of new cancer cases diagnosed and will account for approximately 500,000 cancer-related deaths in the United States in 2006. In addition, cancers that initially appear in one region of the body as a primary tumor, such as in the breast or prostate, even when diagnosed and treated, can lead to the development of tumors in other locations of the body, or secondary tumors. This is referred to as metastatic disease.

Traditional Treatments

        Traditional methods for the treatment of solid tumor cancers include surgery, radiation therapy, chemotherapy and other drugs. Surgery and radiation are forms of local control, because the tumor is either directly removed through surgery or irradiated with the objective of destroying the cancer cells comprising the tumor. Chemotherapy is a systemic treatment method which involves the administration of drugs with the objective of killing cancer cells anywhere in the body, including any remaining cancer cells that were not destroyed by local treatment.

Surgical Removal of Tumors

        A common treatment approach, if applicable to the patient and tumor type, is the removal of the tumor through surgery, with follow-up radiation therapy to kill any remaining cancer cells in the area surrounding the tumor. Surgery is especially appropriate for certain types of cancer, such as breast cancer, where tumors are often well-defined and surgically accessible. However, many types of solid tumors, including those affecting the brain, the spine, the lungs and various other organs, present significant challenges to a traditional surgical approach. In many instances, these tumors occur in hard to reach areas or lie within or in close proximity to critical organs. Accordingly, it may be difficult or impossible to surgically access or remove the entire tumor or organ affected. For example, many tumors located near the base of the skull are difficult to treat with traditional surgery without substantial risk of injury to the visual pathways or other critical brain regions.

        Traditional surgery is highly invasive, painful and involves significant operative and post-operative risks, including risks associated with anesthesia, infection and other complications. For example, surgery is very difficult to perform on lung tumors because incisions in the sternum are often required to access the lung and because the lung is in motion due to respiration. Lung surgery also entails significant risks of post-surgical complications, including severe bleeding and pneumonia. Traditional surgery also entails significant costs and recovery times, particularly for more complex and difficult surgeries. In addition, for elderly or seriously ill patients, surgery is not typically an alternative, even if the tumor were otherwise operable.

        Over the past several years, minimally invasive surgical techniques including cryotherapy, radiofrequency ablation and ethanol injections have been developed to ablate tumors; however, these techniques have significant limitations. Cancer cells may not be fully ablated or destroyed and the energy source used in the procedure may damage adjoining healthy tissue or organs. In addition, these techniques are currently only available for a limited range of cancer indications. As a result, these techniques remain in limited use.

Radiation Therapy

        Radiation therapy has been used for several decades to treat the area around a tumor site, typically as an adjunct to surgery after the tumor has been removed, in an attempt to eliminate remaining cancer cells in that area. Radiation therapy is also used to directly target the tumor in certain instances when surgery is not possible. The goal of radiation therapy is to eliminate all cancer cells in an intended treatment region. However, healthy tissue outside of the intended treatment region also receives substantial radiation. In order to minimize the damage to healthy tissue surrounding the tumor area, a large number of fractions, or staged treatments, are administered daily over multiple

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weeks. Despite the use of fractionated treatments, radiation therapy can still damage healthy tissue in the treated region, particularly since treatment delivery is relatively imprecise. Besides the potential damage to healthy tissue, radiation therapy may have a number of other adverse side effects including nausea and skin reactions. The nature and severity of these side effects can vary significantly depending on the area of the body treated and on the patient.

        Improvements in radiation therapy.    Recent advances in radiation therapy have focused on improving the shaping and targeting of the radiation beams to minimize irradiation of healthy tissue. These advances include the development of Intensity Modulated Radiation Therapy, or IMRT, which is designed to improve conformality of the beam to the shape of the tumor, and Image-Guided Radiation Therapy, or IGRT, which is designed to improve targeting accuracy. However, the majority of these treatments are delivered using gantry-based linear accelerator systems that rotate the radiation source on a single axis and therefore have a limited range of motion, which restricts treatment delivery options and generally requires manual repositioning of the patient during treatment. In addition, IMRT and IGRT have a limited ability to accurately target tumors, to conform to tumor shape, and to detect and compensate for tumor and patient motion during treatment. This results in having a cumulative radiation dose pattern for IMRT and IGRT treatments which generally includes not only the tumor, but also surrounding healthy tissue.

Development of Radiosurgery

        Based on the demonstrated principles of radiation as a method of destroying cancer cells, manufacturers have developed radiosurgery systems that have initially shown to be effective in the treatment of brain tumors and there have been various attempts to develop similarly accurate systems to perform radiosurgery elsewhere in the body. By destroying the tumor with a high dose of radiation, radiosurgery systems have been shown to be effective at local control without the risks, costs and other limitations of traditional surgery. Radiosurgery systems differ from traditional radiation therapy systems in that they are designed to deliver a very high cumulative dose of radiation, in a single or small number of treatments specifically targeted at the tumor rather than at a region surrounding the tumor area. The delivery of more accurate radiation allows higher doses to be delivered, increasing the probability of tumor cell death and better local control. In addition, radiosurgery can be used on patients who cannot, due to advanced age or other health reasons, tolerate traditional surgery.

        Frame-based radiosurgery.    One of the initial radiosurgery techniques was frame-based radiosurgery for the treatment of brain tumors. This procedure begins by attaching a rigid metal frame, known as a stereotactic frame, to the patient's head by screwing it into the skull through the skin. Besides immobilizing the patient, the frame forms a fixed coordinate system that is used to target a tumor inside the head. Once the frame is attached, the physician then images the head, typically with a computed tomography, or CT, scan, to identify the tumor location relative to the frame. The physician then uses the acquired images to develop a treatment plan, and the patient receives treatment. The entire process usually lasts between four and eight hours.

        Although frame-based radiosurgery represents an advancement in cancer treatment, it has significant shortcomings. The necessity for a stereotactic frame to be screwed onto a patient's skull or affixed to the body restricts the area of the body which can be treated. In addition, frame-based radiosurgery systems do not generally succeed in conforming the radiation dose to the tumor, because beam orientations are limited, and therefore it is difficult to match the shape of the treated volume with the shape of the tumors. Further, because it is difficult to precisely reposition the head frame for multiple treatments, these systems are very rarely used when more than one dose of radiation is required. Frame-based radiosurgery approaches have been used for treatment of tumors in other parts of the body, but suffer from significant drawbacks. In particular, it is not practical to attach a frame rigidly to parts of the body other than the head. Tumors in soft tissue organs such as the lung, liver, pancreas and prostate are not rigidly fixed to any external reference points and can move significantly

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during treatment due to normal bodily functions. Frame-based approaches to delivering radiosurgery for tumors in such locations are rarely as accurate as frame-based systems used to treat brain tumors. This lack of accuracy for tumors located outside the head may compromise the efficacy of traditional radiosurgery and increase the likelihood of delivering significant radiation doses to otherwise healthy tissue.

The CyberKnife System Solution

        We have developed and commercialized the CyberKnife system, an intelligent robotic radiosurgery system designed to treat solid tumors throughout the body where radiation is indicated as an alternative to traditional surgery. The CyberKnife system combines continuous image-guidance technology with a compact linear accelerator mounted on a computer-controlled manipulator arm to precisely deliver high doses of radiation to a tumor from many different directions. Our system tracks, detects and corrects for tumor and patient movement in real-time during treatment and precisely delivers high doses of radiation to a tumor typically with sub-millimeter accuracy. Key benefits of the CyberKnife system include:

        Treatment of inoperable or surgically complex tumors.    The CyberKnife system can be used to target tumors that cannot be easily treated with traditional surgical techniques because of their location, number, size, shape or proximity to vital tissues or organs, or because of the age or health of the patient. The CyberKnife system's intelligent robotics are designed to enable the delivery of radiation doses that conform closely to the shape of the tumor. This enables the precise targeting of a tumor, while at the same time minimizing damage to surrounding healthy tissue. Treatments performed with the CyberKnife system can also be staged over two to five treatment sessions.

        Treatment of tumors throughout the body.    The CyberKnife system has been cleared by the FDA to provide treatment planning and image-guided radiosurgery for tumors anywhere in the body where radiation treatment is indicated. Unlike frame-based radiosurgery systems, which are generally limited to treating brain tumors, the CyberKnife system is being used for the treatment of primary and metastatic tumors outside the brain, including tumors on or near the spine and in the lung, liver, prostate and pancreas.

        Real-time tracking of tumor movement.    We believe the CyberKnife system is the first device that is designed to enable the treatment of tumors that may change position due to tumor and patient movement during treatment with a level of accuracy associated with radiosurgery procedures for brain tumors. In addition, our Synchrony motion tracking system enables highly accurate treatment of tumors that move with respiration.

        Significant patient benefits.    Patients may be treated with the CyberKnife system on an outpatient basis without anesthesia and without the risks and complications inherent in traditional surgery. The CyberKnife procedure is well tolerated. Patients do not require substantial pre-treatment preparation, and typically there is little to no recovery time or hospital stay associated with the CyberKnife procedure. In addition, the CyberKnife system eliminates the need for an invasive stereotactic frame to be screwed onto the patient's skull or affixed to other parts of the body.

        Facilitates additional revenue generation through increased patient volumes.    We believe that the CyberKnife system allows our customers to effectively treat patients that otherwise would not have been treated with radiation or who may not have been good candidates for surgery. Therefore, we believe the treatment of these patients generates additional revenue without affecting our customers' traditional radiation therapy practices. In addition, because the CyberKnife treatment is a non-invasive, outpatient procedure requiring little or no recovery time, hospitals can treat more patients than through traditional surgery. In traditional surgery, the time a patient must be at the facility for the procedure and the recovery time tend to be measured in days. With the CyberKnife system, the entire

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procedure is generally completed within 90 minutes, and the patient often leaves the facility very shortly after treatment. Even if the patient receives four to five treatments, the total time the patient is at the hospital or treatment center is still shorter than with traditional surgery. Furthermore, the additional time the patient must be at the hospital, the more resources the hospital must dedicate to the patient. The reduction in overall time and resources required for the CyberKnife procedure, when compared to traditional surgery, leads to an increase in the volume of procedures performed and lower per procedure costs for the hospital. The combination of incremental revenue generation and lower per procedure cost makes the CyberKnife system an attractive addition to our customers' cancer treatment practice.

        Upgradeable modular design.    Our CyberKnife system has a modular design which facilitates the implementation of upgrades without requiring our customers to purchase an entirely new system. We have a well-established track record of developing and delivering state-of-the-art upgrades to our customers, enabling our customers to take advantage of the continued evolution of our CyberKnife system. We continue to develop and offer new clinical capabilities enhancing ease of use, reducing treatment times, improving accuracy and improving patient access.

Our Strategy

        Our goal is to have the CyberKnife system become the standard of care for the treatment of solid tumors, particularly those that are difficult to treat with traditional surgery. We believe our technology can significantly enhance the applications of radiosurgery by increasing the number and type of tumors which can be treated effectively. Key elements of our strategy include the following:

        Increase physician adoption and patient awareness to drive utilization.    We are continually working to increase adoption and awareness of our CyberKnife system and demonstrate its advantages over traditional treatment methods. We intend to increase the number of worldwide sales and marketing personnel in order to increase sales and drive utilization of the CyberKnife system. In addition, we will continue to hold and sponsor symposia and educational meetings and to support clinical studies in an effort to demonstrate the clinical benefits of the CyberKnife system. Finally, we will continue to assist our customers in increasing patient awareness in their communities by helping them develop marketing and educational campaigns.

        Continue to expand the radiosurgery market.    While radiosurgery has traditionally been used to treat brain tumors, the CyberKnife system has received FDA clearance for and is increasingly being used to treat tumors anywhere in the body where radiation is indicated. Based on customer data, more than 50% of patients treated with the CyberKnife system in the United States during the three months ended September 30, 2006 were treated for tumors outside of the brain. We are facilitating studies to further demonstrate the CyberKnife system's efficacy for treating tumors outside of the brain, and we believe these studies will increase overall utilization of the CyberKnife system and continue to expand the number of patients eligible for radiosurgery. In addition, we are continuing to develop new upgrades to enable the CyberKnife system to be even better suited for treating tumors anywhere in the body where radiation is indicated.

        Continue to innovate through clinical development and collaboration.    The clinical success of the CyberKnife system is due in large part to the collaborative partnerships we have developed over the last decade with clinicians, researchers and patients. We proactively seek out and rely on constructive feedback from CyberKnife system users to learn what is needed to enhance the technology. Due to this collaborative process, we continually refine and upgrade the CyberKnife system, which ultimately improves our competitive position in the radiosurgery market. Our upgrades are designed to improve the ease of use and accuracy of treatment, decrease the treatment times, and improve the utilization for specific types of tumors. For example, in recent years, we introduced Synchrony, a motion tracking system that is designed to track tumors that move with patient respiration and the Xsight Spine

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Tracking System, a new target tracking technology, which eliminates the need for surgical implantation of small, inert metal markers, known as fiducials, in the treatment of spinal tumors. In 2006, we introduced the Patient Archive and Restore System, the RoboCouch patient positioning system, the Xsight Lung Tracking System and the Xchange robotic collimator changer. We also maintain close relationships with our customers through our shared ownership programs and service plans. This further enables us to understand their needs and allows us to develop new technologies and upgrades that improve and expand clinical applications and drive increased utilization of our CyberKnife system.

        Leverage our installed base to generate additional recurring revenue.    We have designed the CyberKnife system so that customers may upgrade their previously purchased systems as we introduce new features. We generate additional revenue by selling multiyear service plans that provide eligibility to receive upgrades, when and if available. These contracts are typically signed at the time of CyberKnife system purchase and generate additional revenue throughout the life of the contract. In addition, we sell upgrades to our existing customers who are not covered by service plans or who have exhausted the upgrades deliverable pursuant to their service plans. Finally, we offer shared ownership programs, which enable customers to reduce the upfront investment required for the CyberKnife system in exchange for sharing a significant portion of revenue with us that is derived from each procedure.

        Continue to expand international sales and geographic reach.    We intend to increase our sales and distribution capabilities outside of the United States to take advantage of the large international opportunity for our products. We currently have regional offices in Paris, France and Hong Kong, China, and our sales and distribution channels cover more than 30 countries. We intend to increase our international revenue by increasing the number of distributors and direct sales and support personnel in targeted new international markets, and by further penetrating our established international markets.

        Pursue acquisitions, strategic partnerships and joint ventures.    We intend to actively pursue acquisitions, strategic partnerships and joint ventures that we believe may allow us to complement our growth strategy, increase market share in our current markets and expand into adjacent markets, broaden our technology and intellectual property and strengthen our relationships with our customers.

The CyberKnife System

        Our principal product is the CyberKnife system, an intelligent robotic radiosurgery system that enables the treatment of tumors anywhere in the body where radiation is indicated without the need for invasive surgery or stereotactic frames. The current list price for the CyberKnife system is approximately $4.1 million, which includes initial training, installation and a one-year warranty. We also offer optional hardware and software, technical enhancements and upgrades to the CyberKnife system, as well as service contracts and training to assist customers in realizing the full benefits of the CyberKnife system. As of September 30, 2006, we had 83 units installed at customer sites: 52 in the United States, 10 of which are pursuant to our shared ownership programs, 24 in Asia and 7 in Europe. In addition as of September 30, 2006, we had 78 CyberKnife systems pending installation, 12 of which will be placed pursuant to our shared ownership programs.

        The CyberKnife system combines continuous image-guidance technology with a compact linear accelerator mounted on a computer-controlled manipulator arm to precisely deliver high doses of radiation to the tumor from numerous directions during treatment. Our patented image-guidance technology correlates low dose, real-time treatment X-rays with previously taken CT images of the tumor and surrounding tissue to precisely direct each beam of radiation. This enables delivery of a highly conformal, non-isocentric dose of radiation to the tumor, with minimal radiation delivered to surrounding healthy tissue. With its autonomous ability to track, detect and correct for even the slightest tumor and patient movement throughout the entire treatment, the CyberKnife system gives clinicians an effective, uninterrupted and accurate treatment alternative.

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        Key components and technologies of the CyberKnife system include the following:

        Compact X-band linear accelerator.    This compact linac generates the radiation that destroys the tumor. We believe we are the only commercial manufacturer of a compact X-band linac. This technology allows us to manufacture linacs that are smaller and weigh significantly less than standard medical linacs used in radiation therapy while achieving similar performance. Our linac can provide high energy X-ray beams of different diameters and intensities without the use of radioactive material.

        Robotic manipulator.    The manipulator arm, with six-degrees-of-freedom range of movement, is designed to move and direct the linac with an extremely high level of precision and repeatability. The manipulator arm allows doses of radiation to be delivered from nearly any direction and position, without the limitations of gantry-based systems, creating a non-isocentric composite dose pattern that can precisely conform to the shape of each treated tumor. This flexibility enhances the ability to diversify beam trajectories and beam entrance and exit points, helping to minimize risks of dose toxicity. Furthermore, the rapid response time of the manipulator arm allows tracking of tumors that move with respiration in real-time.

        Real-time image-guidance system with continuous target tracking and feedback.    Without the need for clinician intervention or treatment interruption, the CyberKnife system's revolutionary real-time image-guided robotics enables the CyberKnife system to continuously monitor and correct for patient and tumor movements throughout treatment. The CyberKnife system is able to provide the precise delivery of radiation because of the virtually instantaneous and continuous feedback loop between X-ray-based target localization and automatic correction of the radiation beam throughout the entire treatment. This target tracking and feedback technology uses two digital image detectors to capture low energy X-ray images. The image guidance software carries out an automated comparison of the X-ray images with the patient's CT scan to detect, track and correct for any movement of the tumor or patient before and during the treatment delivery. This allows the CyberKnife system to dynamically target the tumor and adjust the position of the beam to follow the motion of the tumor throughout the treatment, directing the beam to precisely match tumor movement.

        X-ray sources.    The low-energy X-ray sources generate orthogonal X-ray images to determine the location of bony landmarks or implanted fiducials throughout the entire treatment.

        Image detectors.    The image detectors capture high-resolution anatomical images throughout the treatment. These live images are continually compared to previously captured digitally reconstructed radiographs to determine real-time patient positioning. Based on this information, the robotic manipulator instantly corrects for any detected movement. In October 2005, we introduced larger, in-floor X-ray image detectors, which provide greater treatment access.

        In addition to the key components listed above, we also offer the following components and features, several of which have been introduced as upgrades since 2004, including:

        Synchrony respiratory tracking system.    The CyberKnife system employs a proprietary motion tracking system called Synchrony, for targeting tumors that move during respiration. Synchrony software and hardware correlate tumor movement due to respiration with the CyberKnife system treatment beam allowing it to continuously track the tumor as it moves throughout the respiratory cycle. Through this process the CyberKnife system delivers beams synchronized in real-time to tumor position while adapting to changes in breathing patterns, allowing for the delivery of highly conformal radiation with reduced treatment margins and unprecedented clinical accuracy of approximately 1.5 millimeters.

        Xsight Spine Tracking System.    For most extracranial tumors, the CyberKnife system uses implanted fiducials to track the position of the tumor throughout treatment. However, the Xsight Spine Tracking System eliminates the need for surgical implantation of fiducials in the delivery of radiosurgery treatments on or near the spine. The Xsight Spine Tracking System utilizes skeletal structures to

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automatically locate and track tumors with sub-millimeter accuracy. We believe no other commercially available technology today offers this capability.

        RoboCouch patient positioning system.    Fully integrated with the CyberKnife system, the RoboCouch intelligently positions the patient to the planned treatment position with unprecedented accuracy, providing not only greater set up precision, but significantly streamlining the patient set up process. The versatility of the RoboCouch allows for automated patient positioning prior to treatment. Additionally, the RoboCouch offers greater positioning flexibility, a lower patient loading height, and a higher patient weight capacity limit when compared to our AXUM treatment couch.

        Xsight Lung Tracking System.    The Xsight Lung Tracking System delivers radiosurgical accuracy to some lung tumors without the need for implanted fiducials. The Xsight Lung Tracking System directly tracks the anatomy of the tumor. Integrated with the Synchrony Respiratory Tracking System, treatment margins are significantly minimized by tracking the motion of the tumor as it moves in respiration.

        Xchange robotic collimator changer.    The Xchange robotic collimator changer automatically exchanges secondary collimators, which determine the radiation beam size, during the treatment. The use of multiple collimators can enable faster treatments than the use of a single collimator.

        In-Room CT System.    The In-Room CT System enables diagnostic quality 3D and 4D patient imaging just prior to treatment. Combined with the RoboCouch patient positioning system, the In-Room CT System provides a smooth and efficient scan-to-treatment transition without having to re-enter the treatment room or manually move the patient.

        4D Treatment Optimization and Planning System.    Our 4D Treatment Optimization and Planning System optimizes treatment by taking into account the movement of the tumor as well as the movement and deformation of the surrounding tissue, thereby minimizing margins and radiation exposure to healthy tissue.

        MultiPlan treatment planning system.    Our proprietary intuitive planning system called MultiPlan is designed for radiosurgery and includes a standard computer workstation. MultiPlan calculates a treatment plan that produces a pattern of radiation designed to conform to the tumor. The MultiPlan system uses input images from multiple modalities, including computed tomography, or CT, magnetic resonance imaging, or MRI, positron emission tomography, or PET, and 3D angiography. After the physician outlines a tumor and critical adjacent tissues on the computer, a radiation scientist uses the MultiPlan system to plan the number, intensity, position and direction of radiation beams. Using unique and patented software algorithms, the system calculates and displays the resultant treatment plan for evaluation, optimization and approval by the physician.

        Patient Archive and Restore System.    The Patient Archive and Restore System increases utilization by moving the archive and restore processes from the treatment delivery workstation to an independent archiving system.

        InView remote review system.    The CyberKnife system employs a remote review workstation to allow referring physicians to participate in the treatment process, called InView. InView allows physicians to fuse and contour diagnostic images as well as review potential treatment plans as generated by MultiPlan prior to the CyberKnife procedure. By placing InView in physician offices or clinics, we believe that we can expand the number of patients referred for treatment using the CyberKnife system.

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        AXUM treatment couch.    AXUM is a computer-controlled treatment couch integrated with the image- guidance system that automatically aligns the patient for treatment at the beginning of the procedure. AXUM moves the treatment couch to position the patient so that the tumor is in the center of the imaging field. When the tumor is correctly positioned, treatment begins and the CyberKnife system tracking software guides the radiation beams to the precise tumor location.

CyberKnife System Clinical Workflow

        The CyberKnife procedure involves scanning, planning, treatment and follow-up, and may be performed on an outpatient basis.

        Scanning.    Prior to treatment with the CyberKnife system, the patient undergoes imaging procedures to determine the size, shape and location of the tumor. The process begins with a standard high-resolution CT scan. Preparation for the scan may also include the placement of fiducials, in or around the tumor when treating tumors outside the brain. For certain tumors, such as brain and spinal tumors, where greater differentiation between different types of soft tissue is required, other imaging techniques, such as MRI, angiography, or PET, may also be used to more accurately differentiate the tumor from surrounding healthy tissue. Our software helps integrate CT scans and other imaging data into the pre-treatment planning process.

        Planning.    Following the scanning, the image data is then digitally transferred to the CyberKnife system's treatment planning workstation, where the treating physician identifies the exact size, shape and location of the tumor to be targeted and the surrounding vital structures to be avoided. A qualified physician and/or radiation scientist or physicist then uses our proprietary software to generate a treatment plan to provide the desired radiation dose to the identified tumor location without exceeding the tolerance of adjacent healthy tissue. As part of the treatment plan, our proprietary planning software automatically determines the number, duration and angles of delivery of the radiation beams.

        Treatment.    During a CyberKnife procedure, a patient lies on the treatment table, which automatically positions the patient. Anesthesia is not required, as the procedure is painless and non-invasive. The treatment, which generally lasts between 30 and 90 minutes, typically involves the administration of between 100 and 200 radiation beams delivered from different directions, each lasting from 10 to 15 seconds. Prior to the delivery of each beam of radiation, the CyberKnife system has the ability to simultaneously take a pair of X-ray images and compare them to the original CT scan. This image guided approach continuously tracks, detects and corrects for any movement of the patient and tumor throughout the treatment to ensure precise targeting. The patient usually leaves the facility immediately upon completion of the procedure.

        Follow-up.    Follow-up imaging, generally with either CT or MRI, is usually performed in the weeks and months following the treatment to confirm the destruction and eventual elimination of the treated tumor.

Shared Ownership Programs and Other Services

        We provide a variety of services to support the operation and use of our CyberKnife systems. We expect that these services will enable us to generate a recurring revenue stream that will continue to make up an important portion of our revenue.

CyberKnife System Shared Ownership Programs

        We offer shared ownership programs under which we provide a CyberKnife system to a customer while retaining ownership of that system. In addition, we provide physician training, educational support, general reimbursement guidance and technical support, as well as possible future upgrades to customers under this program. In return, these customers are generally required to pay us the greater

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of a minimum payment or a portion of the revenue generated through the use of the CyberKnife system. Generally, this minimum monthly payment is equivalent to the revenue generated from treating three to four patients per month, and any revenue received from additional patients is shared between us and the customer. Customers who participate in our shared ownership programs are responsible for costs associated with facility preparation and professional and administrative personnel required to operate the CyberKnife system. Our legacy shared ownership programs were known as our placement programs.

        The shared ownership programs typically have a term of five years, during which the customer has the option to purchase the system at pre-determined prices. As of September 30, 2006, we had entered into 22 shared ownership programs, of which 10 are installed and 12 are pending installation.

Warranty and Support Services

        We provide a one-year warranty on the purchase of the CyberKnife system. In addition, for a fee that is fixed at the time of purchase, customers can enroll in one of our multiyear service plans:

        Diamond Elite multiyear service plan.    Under our Diamond Elite multiyear service plan, or Diamond plan, our customers have the opportunity to acquire up to two unspecified future upgrades per year, when and if they become available. If we offer more than two upgrades a year, customers can exchange their right to receive future upgrades for the current upgrades available. The Diamond plan currently lists in the United States for $460,000 per year, and provides for annual renewals for four years.

        Ruby multiyear service plan.    Under our Ruby multiyear service plan, or Ruby plan, customers outside the United States have the opportunity to acquire up to two unspecified future software upgrades per year when and if they become available. The Ruby multiyear service plan currently lists for $380,000 per year and provides for annual renewals for four years.

        Basic and Emerald multiyear service plans.    We also offer a basic multiyear service plan, and our Emerald multiyear service plan, or Emerald plan, following the initial one-year warranty period. Under our Emerald plan, customers receive a higher level of support, including a faster response time and coverage for all replacement parts. The current annual prices of our basic and Emerald service plans are $220,000 and $275,000, respectively.

        Legacy multiyear service plans.    Prior to November 2005, we offered our Platinum multiyear service plan, or Platinum plan, to customers in the United States and our Gold Elite multiyear service plan, or Gold plan, to customers outside the United States. While these plans are no longer offered, as of September 30, 2006 we were still servicing approximately 29 customers pursuant to Platinum plans and approximately 16 customers through our distributors pursuant to Gold plans. These multiyear service plans typically provide for annual renewals for four years, including the one-year warranty period.

        Under our Platinum plan, in addition to technical support, customers have the opportunity to acquire at least two future upgrades per year for a maximum of eight upgrades over the three or four year term of the arrangement, for an annual fee of approximately $425,000. If we do not offer at least two upgrades per year, the customer would be entitled to a refund of $100,000 for each upgrade not offered. To date no refunds have been required or are due pursuant to these multiyear service plans.

        Under our Gold plan, customers typically have the opportunity to acquire up to two unspecified future software upgrades per year, for an annual fee of $350,000. If we do not offer an upgrade in any particular year, the customer would be entitled to a refund of $100,000 for each upgrade not offered, except in Japan. Pursuant to the Gold plan customers are required to pay for additional hardware if required for the implementation of new software features.

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        Installation and service.    We perform the installation and service of the CyberKnife system in the United States and in selected countries outside the United States. In addition, we have trained third-party service organizations and trained our distributors in Korea and Italy to perform the CyberKnife system installation and service. We employ service engineers and technical staff with a high degree of expertise, which is required due to the complexity of the CyberKnife system. As of September 30, 2006, we had 65 engineers, technicians and support personnel in our installations, service and support group. We intend to increase the number of our installation and service personnel as our sales increase.

        Training.    In addition to the training we offer with the initial installation of the CyberKnife system and the training required when an upgrade is installed, we offer various training sessions for our customers or our distributors for an additional fee.

Sales and Marketing

        We currently market the CyberKnife system through a direct sales force in the United States and a combination of direct sales personnel and distributors in the rest of the world. Support of our international sales is handled through our European and Asian headquarters in Paris, France and in Hong Kong, China. As of September 30, 2006, we had a total of 94 employees in our worldwide sales and marketing group compared to 50 as of June 30, 2005. We expect to continue to increase the number of sales and marketing personnel as we expand our business.

        In the United States we use a combination of sales directors, sales specialists, customer account sales executives, product managers, account managers and training specialists. Sales directors and sales specialists are responsible for selling the CyberKnife system to hospitals and stand-alone treatment facilities. Customer account sales executives sell upgrade products to existing customers. Our product managers help market our current products and work with our engineering group to identify and develop upgrades and enhancements for the CyberKnife system. Our account managers are primarily responsible for supporting the CyberKnife systems with marketing and education after installation is completed. Our training specialists train radiation oncologists, surgeons, physicists and radiation therapists.

        In addition to marketing to hospitals and stand-alone treatment facilities, we market to radiation oncologists, neurosurgeons, general surgeons, oncology specialists and other referring physicians. We will continue to increase our focus on marketing and education efforts to surgical specialists and oncologists responsible for treating tumors throughout the body. Our marketing activities also include efforts to inform and educate cancer patients about the benefits of the CyberKnife system.

        According to the American Society for Therapeutic Radiology and Oncology, or ASTRO, as of 2004 there were approximately 2,010 hospitals and stand-alone treatment facilities in the United States providing radiation therapy services. There are a total of 5,756 hospitals in the United States registered with the American Hospital Organization as of 2004. Our sales and marketing strategy is to target the hospitals and treatment facilities currently providing radiation therapy services, however, in the future we believe that the CyberKnife system will be marketed to hospitals that do not have radiation therapy facilities. In addition, we believe that free-standing cancer centers present a future opportunity to market the CyberKnife system within the United States.

Manufacturing and Assembly

        We purchase major components of the CyberKnife system, including the robotic manipulator, treatment table, magnetron, imaging cameras and computers, from outside suppliers. We manufacture certain other electronic and electrical subsystems, including the linac, at our Sunnyvale, California facility. We then assemble and integrate these components with our proprietary software for treatment planning and treatment delivery and perform essential testing prior to shipment to customer sites.

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Approximately 50,000 square feet in our Sunnyvale facilities are presently dedicated to these manufacturing and assembly activities.

        In January 2005, we acquired American Science and Engineering's, or AS&E, High Energy Systems, or HES, business for $8.4 million. This acquisition provided us with the sole ownership of the intellectual property associated with our X-band linac, trade secrets and know-how used in the manufacturing process and included the hiring of key technologists previously employed by AS&E. HES had been the sole source manufacturer of the linac used in the CyberKnife system.

        Single source suppliers presently provide us with several components, including the magnetron, the treatment couches and the imaging plates. In most cases, if a supplier were unable to deliver these components, we believe that we would be able to find other sources for these components subject to any regulatory qualifications, if required. In the event of a disruption in any of these suppliers' ability to deliver a component, we would need to secure a replacement supplier. Additionally, any disruption or interruption of the supply of key subsystems could result in increased costs and delays in deliveries of CyberKnife systems, which could adversely affect our reputation and results of operations.

Intellectual Property

        The proprietary nature of, and protection for, our products, product components, processes and know-how are important to our business. We seek patent protection in the United States and internationally for our product systems and other technology where available and when appropriate. Our policy is to patent or in-license the technology, inventions and improvements that we consider important to the development of our business. In addition, we use license agreements to selectively convey rights to our intellectual property to others. We also rely on trade secrets, know-how and continuing innovation to develop and maintain our competitive position.

        As of October 31, 2006, we hold 10 U.S. patents, 3 allowed U.S. patent applications, 56 pending U.S. patent applications, and are pursuing additional U.S. patent applications on additional key inventions to enhance our intellectual property rights. The first of our patents will expire in 2010 and currently the last of our patents will expire in 2026. As of October 31, 2006, we also hold 21 foreign patents, 14 pending published PCT application and 23 foreign patent applications which correspond to our issued U.S. patents and pending U.S. patent applications. We cannot be sure that any patents will issue from any of our pending patent applications, nor can we assure you that any of our existing patents or any patents that may be granted to us in the future will be commercially useful in protecting our technology. An additional key component of our intellectual property is our proprietary software used in planning and delivering the CyberKnife system's therapeutic radiation dose. Through the HES acquisition, we acquired certain intellectual property rights for the compact linac used in current versions of the CyberKnife system.

        In addition to our patents, we also rely upon trade secrets, know-how, trademarks, copyright protection and continuing technological and licensing opportunities to develop and maintain our competitive position. We require our employees, consultants and outside scientific collaborators to execute confidentiality and invention assignment agreements upon commencing employment or consulting relationships with us.

        Patents may provide some degree of protection for our intellectual property. However, patent protection involves complex legal and factual determinations and is therefore uncertain. In addition, the laws governing patentability and the scope of patent coverage continue to evolve, particularly in the areas of technology of interest to us. As a result, we cannot assure you that patents will issue from any of our patent applications. The scope of any of our issued patents may not be sufficiently broad to offer meaningful protection. In addition, our issued patents or patents licensed to us may be successfully challenged, invalidated, circumvented or unenforceable so that our patent rights would not create an effective competitive barrier. Moreover, the laws of some foreign countries may not protect

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our proprietary rights to the same extent as do the laws of the United States. In view of these factors, our intellectual property positions bear some degree of uncertainty.

        We have also entered into licensing agreements with third parties relating to rights and technologies. On January 30, 1991, we entered into a Manufacturing License and Technology Transfer Agreement with Schonberg Radiation Corporation under which Schonberg granted us a perpetual exclusive license to use and manufacture products utilizing some of Schonberg's patent and other intellectual property rights relating to the design, engineering and manufacturing of the compact linacs that may be used in the CyberKnife system for medical applications.

        In December 2004 and in connection with the HES acquisition, we entered into a license agreement with AS&E relating to the intellectual property we obtained from the HES acquisition. We granted AS&E an exclusive, worldwide, fully paid license for use of the purchased intellectual property in the national security and non-destructive testing markets, as well as a non-exclusive worldwide, fully paid license of the intellectual property for all uses other than (a) the national security and non-destructive testing markets and (b) medical use or applications. In addition, we received an exclusive, worldwide, fully paid license to any modifications, improvements, enhancements or new developments to the acquired intellectual property by AS&E which are limited to medical uses or applications. We recently began the development of a next-generation linac, using technology developed independently from the intellectual property we obtained from the HES acquisition. We are developing this technology for medical uses and applications and other markets, including national security and non-destructive testing. In October 2006, we received a letter from AS&E expressing concerns that we may be using the intellectual property obtained from the HES acquisition in a manner that breaches, or may intend to breach, our contractual obligations under the license agreement. While we do not believe our activities breach or violate the terms of the license agreement, we cannot assure you that AS&E will not assert that we are breaching our obligations under our license agreement with them.

        On July 9, 1997, we entered into a license agreement with The Board of Trustees of the Leland Stanford Junior University for technology and patents to develop, manufacture, use and sell products utilizing feature matching image registration techniques for radiosurgery.

        Although we are not currently a party to any legal proceedings relating to our intellectual property, in the future, third parties may file claims asserting that our technologies or products infringe on their intellectual property. We cannot predict whether third parties will assert these claims against us or against the licensors of technology licensed to us, or whether those claims will harm our business. If we are forced to defend against these claims, whether they are with or without any merit, whether they are resolved in favor of or against us or our licensors, we may face costly litigation and diversion of management's attention and resources. As a result of these disputes, we may have to develop costly non-infringing technology, or enter into licensing agreements. These agreements, if necessary, may be unavailable on terms acceptable to us, if at all, which could seriously harm our business or financial condition.

Research and Development

        Continued innovation is critical to our future success. Our current product development activities include projects expanding clinical applications in radiosurgery, driving product differentiation, and continually improving the CyberKnife system's capabilities. Some of our product upgrades include AXUM, Express, Synchrony, Xsight Spine Tracking System, InView, MultiPlan and RoboCouch. Research activities strive to enable new product development opportunities by developing new technologies and advancing areas of existing core technology such as a next generation linac.

        The modular design of our products supports rapid development for new clinical capabilities and performance enhancements by generally allowing each subsystem to evolve within the overall platform design. Access to regular product upgrades protects customer investment in the CyberKnife system,

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facilitates the rapid adoption of new features and capabilities among existing installed base customers, and drives increasing value in our multiyear service plans. These upgrades will generally consist of software and hardware enhancements designed to increase the ease of use of our CyberKnife system and improve the speed and accuracy of treatment.

        As of September 30, 2006, we had 96 employees in our research and development departments. Research and development expenses for the fiscal years ended June 30, 2004, 2005 and 2006 were $7.3 million, $11.7 million and $17.8 million, respectively. We plan to continue to increase our investment in research and development in future periods.

Competition

        The medical device industry in general, and the non-invasive cancer treatment field in particular, are subject to intense and increasing competition and rapidly evolving technologies. Because our products often have long development and government approval cycles, we must anticipate changes in the marketplace and the direction of technological innovation and customer demands. To compete successfully, we will need to continue to demonstrate the advantages of our products and technologies over well-established alternative procedures, products and technologies, and convince physicians and other healthcare decision makers of the advantages of our products and technologies. Traditional surgery, minimally invasive procedures, radiation therapy chemotherapy and other drugs are other means to treat cancer. Also, we compete directly with frame-based radiosurgery systems primarily from Elekta AB (publ), or Elekta, BrainLAB AG, and the Integra Radionics business of Integra Life Sciences Holding Corporation.

        The market for standard linacs is dominated by three companies: Elekta, Siemens AG, or Siemens, and Varian Medical Systems, Inc., or Varian. In addition, a new entrant, TomoTherapy Incorporated, or TomoTherapy, recently introduced a radiation therapy product. The CyberKnife system does not perform radiotherapy and generally does not compete directly with standard medical linacs that perform traditional radiotherapy, although some manufacturers of standard accelerator systems, including Varian and Elekta, claim some radiosurgery capabilities by using their radiation therapy products with body and or head frame systems and image-guidance systems. In addition, many government, academic and business entities are investing substantial resources in research and development of cancer treatments, including surgical approaches, radiation treatment, drug treatment, gene therapy and other approaches. Successful developments that result in new approaches for the treatment of cancer could reduce the attractiveness of our products or render them obsolete.

        Our future success will depend in large part on our ability to establish and maintain a competitive position in current and future technologies. Rapid technological development may render the CyberKnife system and its technologies obsolete. Many of our competitors have or may have greater corporate, financial, operational, sales and marketing resources, and more experience in research and development than we have. We cannot assure you that our competitors will not succeed in developing or marketing technologies or products that are more effective or commercially attractive than our products or that would render our technologies and products obsolete. We may not have the financial resources, technical expertise, marketing, distribution or support capabilities to compete successfully in the future. Our success will depend in large part on our ability to maintain a competitive position with our technologies.

        Our competitive position also depends on:

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Reimbursement

        In the United States, healthcare providers generally rely on third-party payors, principally private insurers and governmental payors such as Medicare and Medicaid, to cover and reimburse all or part of the cost of a medical procedure performed with a medical device. Our ability to commercialize our products successfully depends in significant part on the extent to which appropriate coverage and reimbursement for our products and related procedures are obtained from third-party payors. We cannot assure you that government or private third-party payors will cover and reimburse the procedures using our technology in whole or in part in the future or that payment rates will be adequate.

        Medicare coverage and reimbursement policies are particularly significant to our business. Not only is Medicare the single largest third-party payor, but many other governmental and commercial payors follow its coverage and reimbursement policies. The Medicare coverage and reimbursement policies are developed by the Centers for Medicare and Medicaid Services, or CMS, the federal agency responsible for administering the Medicare program and its contractors. Medicare reimbursement rates for the same or similar procedures vary due to geographic location, nature of the facility in which the procedure is performed (e.g., teaching or community hospital) and other factors.

        Medicare coverage for procedures using our technology currently exists in the hospital outpatient setting and in the free-standing clinic setting. For hospital outpatient procedures, where currently the vast majority of procedures using our CyberKnife system are performed, Medicare payments generally are made under a prospective payment system, which is based on the Ambulatory Payment Classifications, or APCs, under which procedures are categorized.

        CMS assigns procedures that are comparable clinically and in terms of resources to the same APC. Hospitals are paid the applicable APC payment rate for the outpatient procedure, regardless of the actual cost for such treatment. CMS will frequently categorize a procedure or service in a new technology APC where the procedure does not have sufficient claims data to be placed in an existing APC that is appropriate in terms of clinical characteristics and resource costs. Once CMS has collected sufficient claims data on the procedure being paid under a new technology APC, the agency will assign the procedure to an existing APC group. Procedures generally are reimbursed under new technology APCs for two to three years. Beginning in 2004, both planning and treatment using our CyberKnife

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system were assigned to new technology APCs. Medicare accomplished this through certain temporary billing codes: Healthcare Common Procedure Coding System, or HCPCS, code G0338 ("Linear- accelerator-based stereotactic radiosurgery planning"), HCPCS code G0339 ("Image-guided robotic linear accelerator-based stereotactic radiosurgery, complete course of therapy in one session, or first session of fractionated treatment") for the first or single treatment, and HCPCS code G0340 ("Image-guided robotic linear accelerator-based stereotactic radiosurgery, delivery including collimator changes and custom plugging, fractionated treatment, all lesions, per session, second through fifth sessions, maximum five sessions per course of treatment") for any subsequent treatments.

        For 2006, CMS determined that planning for stereotactic radiosurgery procedures using our technology should be reported using several Category I Current Procedure Terminology, or CPT, codes. The CPT planning codes are assigned to clinical APCs with payment levels that resulted in a slight increase in payment in 2006 and 2007 as compared to prior years.

        For 2004 to 2006, placement of HCPCS codes G0339 and G0340 in the new technology APCs resulted in a national payment rate of $5,250 for the first treatment and $3,750 for each treatment thereafter, up to a maximum of five treatments. For the 2007 calendar year, CMS has determined that procedures performed in the hospital outpatient department using our technology be transitioned from the new technology APCs to two clinical APCs. Under the finalized payment rules, the national payment rate for procedures billed using HCPCS code G0339 will be paid $3,896, and procedures billed under HCPCS code G0340 will be paid $2,645. These changes in APC assignment result in a decrease in payment as compared to previous years and could have a material adverse impact on our sales and utilization of our technology.

        Medicare payment to free-standing clinics generally is based on the physician fee schedule. There are no national payment rates for HCPCS codes G0339 and G0340, and Medicare contractors determine the payment rates for their jurisdiction. We understand that some Medicare contractors may require the use of other billing codes for the procedures.

        In addition to Medicare reimbursement to hospitals and clinics, physicians receive reimbursement for their professional services in the hospital outpatient setting and the free-standing clinic setting. Payment is based on the physician fee schedule, and payment amounts are updated on an annual basis. Beginning 2007, CMS changed how it determines payment levels under the physician fee schedule. Specifically, CMS revised the methodology for calculating the physician work component, which reflects physician time and intensity of effort in performing a procedure or service. The CMS also changed its methodology for calculating the practice expense component, which reflects the overhead expenses that a physician incurs, such as rent, equipment and salaries. With these changes, we expect a slight change in reimbursement for physician professional services performed in connection with the CyberKnife procedure. At this time, we cannot predict the full impact of these changes on the Company's operations.

        We also cannot assure you that Medicare will continue to cover and reimburse the procedures using the CyberKnife system, or that the amounts reimbursed under applicable codes will be adequate. While private third-party payors frequently follow Medicare coverage, coding and payment determinations, we cannot assure you that these payors will adopt coverage and reimbursement policies similar to those established by Medicare or whether they will cover and reimburse the procedures using CyberKnife systems in whole or in part. In the United States, we believe that a majority of private healthcare payors provide coverage for CyberKnife procedures under negotiated contracts with hospitals and clinics.

        Effective January 1, 2007, the American Medical Association, or AMA, has established four new Category I CPT codes relating to stereotactic radiosurgery, scheduled to become effective January 1, 2007. Third-party payors may decide to use three of these codes to describe treatment (CPT codes 77372 and 77373) and treatment management (CPT code 77435) using our technology. CMS has

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announced that these codes would not be used for our technology for Medicare payments for hospital outpatient services under the prospective payment system in 2007. These codes were assigned values for payments under the Medicare physician fee schedule for 2007 and may be required by Medicare contractors for use in other settings. At this time, the extent to which any of these codes would be required by Medicare contractors for services using our technology and performed in free-standing clinics or by other third-party payors is unclear. It is also unclear at this time whether the new codes will coexist with or replace the existing codes for treatment using our technology (HCPCS codes G0339 and G0340) and how the level of reimbursement would be impacted by the new codes. If the new codes are required by Medicare contractors for 2007, the reimbursement rates under the 2007 Medicare physician fee schedule could result in a material adverse effect on our business.

        The current emphasis on cost-containment by third-party payors makes it exceedingly difficult for new medical devices and surgical procedures to obtain adequate coverage and reimbursement. Often, it is necessary to convince these payors that the new devices or procedures will establish an overall cost savings compared to currently reimbursed devices and procedures. We believe that the CyberKnife system may offer an opportunity for payors to reduce the cost of treatment for solid tumors as compared with surgical removal; however, we cannot assure you that payors will agree that these advantages exist or that payors will make reimbursement decisions based upon any such advantages. Hospitals would be less likely to purchase our products if they do not receive sufficient levels of reimbursement. In addition, if physicians or hospital administrators believe that our system will add cost to a procedure but will not add sufficient offsetting economic or clinical benefits, physician adoption could be impaired. Any reduction or limitation in use of our products could cause our sales to suffer.

        Reimbursement by third-party payors is often positively influenced by the existence of peer-reviewed publications of long-term safety and efficacy data. We have collected and published data on clinical results for patients that have undergone surgical procedures involving use of the CyberKnife system, although we do not yet have long-term safety and efficacy data for a significant patient population size. We cannot assure you that our products will continue to be covered and reimbursed without publication of additional data, including data supporting long-term safety and efficacy of the CyberKnife system.

        We have hired a director of reimbursement and have established a dedicated reimbursement group that seeks to provide education to physicians and facilities in working with payors on coverage and reimbursement issues for procedures involving the use of the CyberKnife system. This group assists our customers in obtaining pre-approval from third-party payors for patients who will be undergoing treatment using the CyberKnife system, and provides our customers with copies of relevant coverage, coding and payment policies, including those of the Medicare program, as well as published literature and clinical data supporting clinical safety and efficacy in the device.

        To further support adequate coverage and reimbursement, a group of customers has formally organized into a non-profit organization to pursue adequate reimbursement, coverage and payment of our product worldwide, with a strong emphasis on the United States. This group, the CyberKnife Coalition, has a charter to promote patient access to CyberKnife system technology and treatment, and realize adequate coverage and reimbursement to support that treatment. The Coalition seeks to assure and advocate that procedures using the CyberKnife system continue to be reimbursed at appropriate levels by Medicare and other third-party payors.

        Internationally, reimbursement and healthcare payment systems vary substantially from country to country and include single-payor, government managed systems as well as systems in which private payors and government-managed systems exist side-by-side. Our ability to achieve market acceptance or significant sales volume in international markets we enter will be dependent in large part on the availability of reimbursement for procedures performed using our products under health care payment

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systems in such markets. To date, healthcare providers in Europe have been able to successfully negotiate coverage contracts with their local payors at adequate payment rates.

Regulatory Matters

Domestic Regulation

        Our products and software are medical devices subject to regulation by the U.S. Food and Drug Administration, or FDA, as well as other regulatory bodies. FDA regulations govern the following activities that we perform and will continue to perform to ensure that medical products distributed domestically or exported internationally are safe and effective for their intended uses:

        FDA pre-market clearance and approval requirements.    Unless an exemption applies, each medical device we wish to commercially distribute in the United States will require either prior 510(k) clearance or pre-market approval from the FDA. The FDA classifies medical devices into one of three classes. Devices deemed to pose lower risks are placed in either class I or II, which requires the manufacturer to submit to the FDA a pre-market notification requesting permission to commercially distribute the device. This process is generally known as 510(k) clearance. Some low risk devices are exempted from this requirement. Devices deemed by the FDA to pose the greatest risks, such as life-sustaining, life-supporting or implantable devices, or devices deemed not substantially equivalent to a previously cleared 510(k) device, are placed in class III, requiring pre-market approval. All of our current products are class II devices.

        510(k) clearance pathway.    When a 510(k) clearance is required, we must submit a pre-market notification demonstrating that our proposed device is substantially equivalent to a previously cleared 510(k) device or a device that was in commercial distribution before May 28, 1976 for which the FDA has not yet called for the submission of pre-market approval applications, or PMA. By regulation, the FDA is required to clear or deny a 510(k) pre-market notification within 90 days of submission of the application. As a practical matter, clearance may take longer. The FDA may require further information, including clinical data, to make a determination regarding substantial equivalence.

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        In July 1999, we received 510(k) clearance for the CyberKnife system for use in the head and neck regions of the body. In August, 2001, we received 510(k) clearance for the CyberKnife system to provide treatment planning and image guided stereotactic radiosurgery and precision radiotherapy for lesions, tumors and conditions anywhere in the body where radiation treatment is indicated. In April 2002, we received 510(k) clearance for the Synchrony Motion Tracking System as an option to the CyberKnife system, intended to enable dynamic image guided stereotactic radiosurgery and precision radiotherapy of lesions, tumors and conditions that move under influence of respiration.

        Pre-market approval (PMA) pathway.    A PMA must be submitted to the FDA if the device cannot be cleared through the 510(k) process. A PMA must be supported by extensive data, including but not limited to, technical, preclinical, clinical trials, manufacturing and labeling to demonstrate to the FDA's satisfaction the safety and effectiveness of the device. No device that we have developed has required pre-market approval, nor do we currently expect that any future device or indication will require pre-market approval.

        Product modifications.    After a device receives 510(k) clearance or a PMA, any modification that could significantly affect its safety or effectiveness, or that would constitute a significant change in its intended use, will require a new clearance or approval. We have modified aspects of our CyberKnife system family of products since receiving regulatory clearance, and we have applied for and obtained additional 510(k) clearances for these modifications when we determined such clearances were required for the modifications. The FDA requires each manufacturer to make this determination initially, but the FDA can review any such decision and can disagree with a manufacturer's determination. If the FDA disagrees with our determination not to seek a new 510(k) clearance or PMA, the FDA may retroactively require us to seek 510(k) clearance or pre-market approval. The FDA could also require us to cease marketing and distribution and/or recall the modified device until 510(k) clearance or pre-market approval is obtained. Also, in these circumstances, we may be subject to significant regulatory fines or penalties. From January 1, 2003 to September 30, 2006, we submitted an additional seven 510(k) clearances notifications for modifications made to the operation of the CyberKnife system. These applications were cleared by the FDA.

        Pervasive and continuing regulation.    After a device is placed on the market, numerous regulatory requirements apply. These include:

        The FDA has broad post-market and regulatory enforcement powers. We are subject to unannounced inspections by the FDA and the Food and Drug Branch of the California Department of Health Services to determine our compliance with the QSR and other regulations, and these inspections may include the manufacturing facilities of some of our subcontractors. In the past, our prior facility has been inspected, and observations were noted. In May 2004 and April 2006, during routine inspections performed by the FDA, two minor observations were made in each inspection. We have taken corrective action on the minor observations in response to the FDA's observations. There were no observations that involved a material violation of regulatory requirements. We believe that we are in substantial compliance with the QSR.

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        Failure to comply with applicable regulatory requirements can result in enforcement action by the FDA, which may include any of the following sanctions:

        The FDA also has the authority to require us to repair, replace or refund the cost of any medical device that we have manufactured or distributed. If any of these events were to occur, they could have a material adverse effect on our business.

        Radiological health.    Because our CyberKnife system contains both laser and X-ray components, and because we assemble these components during manufacturing and service activities, we are also regulated under the Electronic Product Radiation Control Provisions of the Federal Food, Drug, and Cosmetic Act. This law requires laser and X-ray products to comply with regulations and applicable performance standards, and manufacturers of these products to certify in product labeling and reports to the FDA that their products comply with all such standards. The law also requires manufacturers to file new product reports, and to file annual reports and maintain manufacturing, testing and sales records, and report product defects. Various warning labels must be affixed. Assemblers of diagnostic X-ray systems are also required to certify in reports to the FDA, equipment purchasers, and where applicable, to state agencies responsible for radiation protection, that diagnostic and/or therapeutic X-ray systems they assemble meet applicable requirements. Failure to comply with these requirements could result in enforcement action by the FDA, which can include injunctions, civil penalties, and the issuance of warning letters. In the past, we failed to submit required reports to the FDA in a timely fashion. To correct our reporting deficiencies we initiated in 2003, a corrective action plan that included, among other things, filing all past due reports with the FDA, applicable state agencies, and customers. We have also developed and implemented procedures to ensure future reports are made in a timely manner. While we believe all past reporting deficiencies have been corrected, we cannot assure you that FDA will deem our corrective actions sufficient or that FDA will not initiate enforcement action against us.

Fraud and Abuse Laws

        We are subject to various federal and state laws pertaining to healthcare fraud and abuse, including anti-kickback laws and physician self-referral laws. Violations of these laws are punishable by significant criminal and civil sanctions, including, in some instances, exclusion from participation in federal and state healthcare programs, including Medicare and Medicaid. Because of the far-reaching nature of these laws, there can be no assurance that we would not be required to alter one or more of our practices to be in compliance with these laws. Evolving interpretations of current laws, or the adoption of new federal or state laws or regulations could adversely affect many of the arrangements we have with customers and physicians. In addition, there can be no assurance that the occurrence of one or more violations of these laws or regulations would not result in a material adverse effect on our financial condition and results of operations.

        Anti-kickback laws.    Our operations are subject to broad and changing federal and state anti-kickback laws. The Office of the Inspector General of the Department of Health and Human Services, or the OIG, is primarily responsible for enforcing the federal Anti-Kickback Statute and

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generally for identifying fraud and abuse activities affecting government programs. The federal Anti-Kickback Statute, prohibits persons from knowingly and willfully soliciting, receiving, offering or providing remuneration directly or indirectly to induce either the referral of an individual, or the furnishing, recommending, or arranging of a good or service, for which payment may be made under a federal health care program such as Medicare and Medicaid. "Remuneration" has been broadly interpreted to include anything of value, including such items as gifts, discounts, the furnishing of supplies or equipment, credit arrangements, waiver of payments, and providing anything of value at less than fair market value.

        Penalties for violating the federal Anti-Kickback Statute include criminal fines of up to $25,000 and/or imprisonment for up to five years for each violation, civil fines of up to $50,000 and possible exclusion from participation in federal health care programs such as Medicare and Medicaid. Many states have adopted prohibitions similar to the federal Anti-Kickback Statute, some of which apply to the referral of patients for healthcare services reimbursed by any source, not only by the Medicare and Medicaid programs, and do not include comparable exceptions.

        The Office of the Inspector General of the Department of Health and Human Services, or OIG, has issued safe harbor regulations which set forth certain activities and business relationships that are deemed safe from prosecution under the federal Anti-Kickback Statute. There are safe harbors for various types of arrangements, including, without limitation, certain investment interests, leases and personal services and management contracts. The failure of a particular activity to comply in all regards with the safe harbor regulations does not mean that the activity violates the federal Anti-Kickback Statute or that prosecution will be pursued. However, conduct and business arrangements that do not fully satisfy each applicable safe harbor may result in increased scrutiny by government enforcement authorities such as the OIG.

        The OIG has identified the following arrangements with purchasers and their agents as ones raising potential risk of violation of the federal Anti-Kickback Statute:


        We have a variety of financial relationships with physicians who are in a position to generate business for us. For example, physicians own our stock who also provide medical advisory and other consulting and personal services. Similarly, we have a variety of different types of arrangements with our customers. For example, our placement and shared ownership programs entail the provision of our CyberKnife system to our customers under a deferred payment program, where we generally receive the greater of a fixed minimum payment or a portion of the revenues of services. Included in the fee we charge for the placement and shared ownership programs are a variety of services, including

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physician training, educational and marketing support, general reimbursement guidance and technical support, and, in the case of the placement program, certain services and upgrades are provided without additional charge based on procedure volume. In the past, we have also provided loans to our customers. We also provide research grants to customers to support customer studies related to, among other things, our CyberKnife systems.

        If our past or present operations are found to be in violation of the federal Anti-Kickback Statute or similar government regulations to which we or our customers are subject, we or our officers may be subject to the applicable penalty associated with the violation, including significant civil and criminal penalties, damages, fines, imprisonment, and exclusion from the Medicare and Medicaid programs. The impact of any such violation may lead to curtailment or restructuring of our operations. Any penalties, damages, fines, or curtailment or restructuring of our operations could adversely affect our ability to operate our business and our financial results. The risk of our being found in violation of these laws is increased by the fact that some of these laws are open to a variety of interpretations. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses, divert our management's attention from the operation of our business and damage our reputation. If an enforcement action were to occur, our reputation and our business and financial condition could be harmed, even if we were to prevail or settle the action. Similarly, if the physicians or other providers or entities with whom we do business are found to be non-compliant with applicable laws, they may be subject to sanctions, which could also have a negative impact on our business.

        Physician self-referral laws.    We are also subject to federal and state physician self-referral laws. The federal Ethics in Patient Referral Act of 1989, commonly known as the Stark Law, prohibits, subject to certain exceptions, physician referrals of Medicare and Medicaid patients to an entity providing certain "designated health services" if the physician or an immediate family member has any financial relationship with the entity. The Stark Law also prohibits the entity receiving the referral from billing any good or service furnished pursuant to an unlawful referral.

        A person who engages in a scheme to circumvent the Stark Law's referral prohibition may be fined up to $100,000 for each such arrangement or scheme. In addition, any person who presents or causes to be presented a claim to the Medicare or Medicaid programs in violation of the Stark Law is subject to civil monetary penalties of up to $15,000 per bill submission, an assessment of up to three times the amount claimed, and possible exclusion from federal healthcare programs such as Medicare and Medicaid. Various states have corollary laws to the Stark Law, including laws that require physicians to disclose any financial interest they may have with a healthcare provider to their patients when referring patients to that provider. Both the scope and exceptions for such laws vary from state to state.

        Federal False Claims Act.    The federal False Claims Act prohibits the knowing filing or causing the filing of a false claim or the knowing use of false statements to obtain payment from the federal government. When an entity is determined to have violated the False Claims Act, it must pay three times the actual damages sustained by the government, plus mandatory civil penalties of between $5,500 and $11,000 for each separate false claim. Suits filed under the False Claims Act, known as "qui tam" actions, can be brought by any individual on behalf of the government and such individuals, sometimes known as "relators" or, more commonly, as "whistleblowers", may share in any amounts paid by the entity to the government in fines or settlement. In addition, certain states have enacted laws modeled after the federal False Claims Act. Qui tam actions have increased significantly in recent years, causing greater numbers of healthcare companies to have to defend a false claim action, pay fines or be excluded from Medicare, Medicaid or other federal or state healthcare programs as a result of an investigation arising out of such action. We have retained the services of a reimbursement consultant, for which we pay certain consulting fees, to provide us and facilities that have purchased a CyberKnife system or acquired a CyberKnife system through our shared ownership program with

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general reimbursement advice. While we believe this will assist our customers in filing proper claims for reimbursement; and such consultants do not submit claims on behalf of our customers, the fact that we provide these consultant services could expose us to additional scrutiny and possible liability in the event one of our customers is investigated as a result of any of these laws.

        HIPAA.    The Health Insurance Portability and Accountability Act of 1996, or HIPAA, created two new federal crimes: healthcare fraud and false statements relating to healthcare matters. The healthcare fraud statute prohibits knowingly and willfully executing a scheme to defraud any healthcare benefit program, including private payors. A violation of this statute is a felony and may result in fines, imprisonment or exclusion from government sponsored programs. The false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services. A violation of this statute is a felony and may result in fines or imprisonment.

International Regulation

        International sales of medical devices are subject to foreign government regulations, which vary substantially from country to country. The time required to obtain clearance or approval by a foreign country may be longer or shorter than that required for FDA clearance or approval, and the requirements may be different.

        The primary regulatory environment in Europe is that of the European Union and the three additional member states of the European Economic Area, or EEA, which have adopted similar laws and regulations with respect to medical devices. The European Union has adopted numerous directives and the European Committee for Standardization has promulgated standards regulating the design, manufacture, clinical trials, labeling and adverse event reporting for medical devices. Devices that comply with the requirements of the relevant directive will be entitled to bear CE conformity marking, indicating that the device conforms with the essential requirements of the applicable directives and, accordingly, may be commercially distributed throughout the member states of the European Economic Area.

        The method of assessing conformity to applicable standards and directives depends on the type and class of the product, but normally involves a combination of self-assessment by the manufacturer and a third-party assessment by a notified body, an independent and neutral institution appointed by a European Union member state to conduct the conformity assessment. This relevant assessment may consist of an audit of the manufacturer's quality system (currently ISO 13485), provisions of the Medical Devices Directive, and specific testing of the manufacturer's device. In September 2002, our facility was awarded the ISO 13485 certification, which replaces the ISO 9001 and EN 46001 approvals, which has been subsequently maintained through periodic assessments, in accordance with the expiration dates of the standards, and we are currently authorized to affix the CE mark to our products, allowing us to sell our products throughout the European Economic Area.

        We are also currently subject to regulations in Japan. A Japanese distributor received the first government approval to market the CyberKnife system from the Ministry of Health and Welfare in November 1996. In December, 2003, we received approval from the Ministry of Health, Labour and Welfare to market the CyberKnife system in Japan and a new distributor, Chiyoda Technol Corporation, was appointed to distribute the CyberKnife system. Current clinical use in Japan is limited to head and neck applications. Although we and our distributor have applied for approval of broader clinical use of the CyberKnife system in Japan, it is not possible to accurately predict the timing of this approval.

        We are subject to additional regulations in other foreign countries, including, but not limited to, Canada, Taiwan, China and Korea, in order to sell our products. We intend that either we or our

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distributors will receive any necessary approvals or clearance prior to marketing our products in those international markets.

State Certificate of Need Laws

        In some states, a certificate of need or similar regulatory approval is required prior to the acquisition of high-cost capital items or the provision of new services. These laws generally require appropriate state agency determination of public need and approval prior to the acquisition of such capital items or addition of new services. Certificate of need regulations may preclude our customers from acquiring the CyberKnife system, whether through purchase or our shared ownership programs, and from performing stereotactic radiosurgery procedures using the CyberKnife system. Several of our prospective customers currently are involved in appeals of certificate of need determinations. If these appeals are not resolved in favor of these prospective customers, they may be precluded from purchasing and/or performing services using the CyberKnife system. Certificate of need laws are the subject of continuing legislative activity, and a significant increase in the number of states regulating the acquisition and use of the CyberKnife system through certificate of need or similar programs could adversely affect us.

Employees

        As of September 30, 2006, we had 364 employees worldwide, including 96 in research and development, 94 in sales and marketing, 65 in installation and service, 49 in manufacturing, and 60 in administration. None of the employees is represented by a labor union or is covered by a collective bargaining agreement. We have never experienced any employment-related work stoppages and we believe our relationship with our employees is good.

Facilities

        We lease approximately 176,000 square feet of product development, manufacturing and administrative space in three buildings in Sunnyvale, California, and approximately 25,000 square feet of development and manufacturing space in Mountain View, California. Our headquarters building, which is approximately 73,000 square feet, is leased to us until February 2008 and an additional office building, which is approximately 53,000 square feet, is leased to us until May 2010. Our manufacturing facility in Sunnyvale is approximately 50,000 square feet and is leased to us until July 2011. The Mountain View facility is leased to us until October 2010. We have the right to renew the term of our headquarters lease for one three-year term upon prior written notice and the fulfillment of certain conditions. We also maintain offices in France and China. We believe our current facilities are adequate to meet our current needs, but additional space, including additional radiation-shielded areas in which systems can be assembled and tested, will be required in the future to accommodate anticipated increases in manufacturing needs.

Legal Proceedings

        From time to time we are involved in legal proceedings arising in the ordinary course of our business. We believe that there is no litigation pending that could have a material adverse effect on our results of operations and financial condition.

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MANAGEMENT

Directors and Executive Officers

        Our directors and executive officers as of the filing are as follows:

Name
   Age
   Position(s)
Euan S. Thomson, Ph.D.   44   President, Chief Executive Officer and Director
Robert E. McNamara   49   Senior Vice President, Chief Financial Officer
Chris A. Raanes   41   Senior Vice President, Chief Operating Officer
Eric P. Lindquist   46   Senior Vice President, Chief Marketing Officer
Wade B. Hampton   51   Senior Vice President, Worldwide Sales
Wayne Wu(1)(2)   43   Chairman of the Board of Directors
John R. Adler, Jr., M.D.   52   Director
Ted T.C. Tu.   50   Director
Roderick A. Young(1)(2)   63   Director
Li Yu(1)(2)   65   Director
(1)
Member of the audit committee

(2)
Member of the compensation committee

        Euan S. Thomson, Ph.D. has served as our Chief Executive Officer and a member of our board of directors since March 2002, and as our President since October 2002. From March 1999 to February 2002, Dr. Thomson served during various periods as President, Chief Executive Officer and a member of the board of directors of Photoelectron Corporation, a publicly held medical device company. In July 2003, Photoelectron Corporation filed for bankruptcy. Prior to joining Photoelectron, Dr. Thomson held various positions as a medical physicist within the United Kingdom National Health Service and worked as a consultant for medical device companies, including Varian Oncology Systems and Radionics, Inc. Dr. Thomson holds a B.S. in Physics, an M.S. in Radiation Physics and a Ph.D. in Physics, with an emphasis on stereotactic brain radiotherapy, each from the University of London.

        Robert E. McNamara has served as our Senior Vice President, Chief Financial Officer since December 2004. From March 2003 to June 2004, Mr. McNamara served initially as a consultant and then as Chief Executive Officer for InDefense, Inc., a security software company that was acquired by Microsoft, Inc. From March 2001 to August 2002, Mr. McNamara served as Senior Vice President and Chief Financial Officer of Recourse Technologies, Inc., a security software firm that was acquired by Symantec Corporation. From August 1997 to July 1998, Mr. McNamara served as Executive Vice President and Chief Financial Officer for Somnus Medical Technologies, Inc., a medical device company. From April 1995 to August 1997, Mr. McNamara served as Chief Financial Officer of Target Therapeutics Inc., a medical device company. Mr. McNamara currently sits on the board of directors of Northstar Neuroscience Inc., a medical device company. Mr. McNamara holds a B.S. in Accounting from the University of San Francisco and an M.B.A. from the Wharton School at the University of Pennsylvania.

        Chris A. Raanes has served as our Senior Vice President, Chief Operating Officer since October 2002. From December 1999 to March 2002, Mr. Raanes served as Vice President and General Manager of Digital Imaging for PerkinElmer Optoelectronics, a business unit of PerkinElmer, Inc. From December 1998 to December 1999, Mr. Raanes was the General Manager of Amorphous Silicon, a business unit of PerkinElmer, Inc. From July 1992 to December 1998, Mr. Raanes held a number of positions, including President and General Manager of EG&G, at Reticon, a subsidiary of a predecessor to PerkinElmer. Mr. Raanes holds a B.S. and an M.S., each in Electrical Engineering, from the Massachusetts Institute of Technology.

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        Eric P. Lindquist has served as our Senior Vice President, Chief Marketing Officer since November 2004. From March 2004 to November 2004, Mr. Lindquist served as Senior Vice President of Marketing at Omnicell, Inc., a healthcare services company. From March 1997 to March 2004, Mr. Lindquist served in various senior management roles, including President of Brain LAB, Inc. and Director of North American Sales of BrainLAB AG, each a medical technology company. Mr. Lindquist holds a B.S. in Mechanical Engineering from Washington State University, an M.S. in Mechanical Engineering from Stanford University and an M.B.A. from the Haas School of Business at the University of California, Berkeley.

        Wade B. Hampton has served as our Senior Vice President, Worldwide Sales since August 2006. From March 2003 to August 2006, Mr. Hampton served in various senior management roles, including Senior Vice President, Americas at Lumenis Ltd., a medical device company. From October 2001 to February 2003, he served as Vice President of International at Natus Medical, Inc., a medical device company. From September 1999 to October 2001 he served as Vice President of International at Coherent, Inc., a medical device company. From January 1997 to September 1999, he served in various positions, including President and Vice President, at Andros Incorporated, a scientific instrumentation company. Mr. Hampton holds a B.A. in Business Administration from the University of Florida.

        Wayne Wu has served as a member of our board of directors since April 1998 and the Chairman of our board of directors since May 2004. Since June 2005, Mr. Wu has been the President of Pacific Health Investment, Inc., a life science investments company. From February 1998 through May 2005, he served as manager of Pacific Republic Capital Group, a life science investments fund. Mr. Wu holds a B.S. in Mathematics from the National Central University in Taiwan and an M.A. in Mathematics from the University of Southern California.

        John R. Adler, Jr., M.D. is one of our founders and has served as a member of our board of directors since December 1990. From September 1999 through May 2004, Dr. Adler served as Chairman of our board of directors, and from October 1999 to March 2002, as our Chief Executive Officer. From January 1995 until July 1999, he served as the Vice Chairman of our board of directors. Since September 1987, Dr. Adler has been a member of the faculty at Stanford University and a Professor of Neurosurgery and Radiation Oncology at Stanford University since September 1998. Dr. Adler also serves on the editorial boards of Computer-Aided Surgery, The Journal of Medical Robotics and Computer Assisted Surgery, Chinese Journal of Clinical Oncology and Technology in Cancer Research and Treatment. Dr. Adler holds an A.B. in Biochemistry from Harvard College and an M.D. from Harvard Medical School.

        Ted T.C. Tu has served as a member of our board of directors since May 2004. Mr. Tu is the president of President International Development Corporation, an investment holding company. From April 1997 to May 2000, Mr. Tu served as Vice President of Uni-President Enterprises Corp, an international conglomerate. Mr. Tu holds a B.A. in Industry and Business Administration from National Taiwan University and an M.B.A. from the University of Houston.

        Roderick A. Young has served as a member of our board of directors since June 2004. Since May 2006, Mr. Young has been a Venture Partner of Three Arch Partners, a venture capital firm, focusing on the healthcare industry. From February 2003 to July 2005, Mr. Young served as the Chief Executive Officer and President of Vivant Medical, Inc., a medical device company that was acquired by Tyco International Ltd. From October 1998 to October 2002, Mr. Young served as the President and Chief Executive Officer of Targesome, Inc., a biotechnology company, of which he was a founder. From 1998 to 2001, Mr. Young served as a director of MCT Medical Inc., a medical device company that he co-founded and that was acquired by Vivant Medical, Inc. From 1993 to 1998, he served as President and Chief Executive Officer of General Surgical Innovations, Inc., a surgical device company that was acquired to Tyco International, Ltd. Mr. Young is a member of the board of directors of North

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American Scientific, Inc., a medical device company. Mr. Young holds a B.S. in Industrial Engineering from Stanford University and an M.B.A. from Harvard Business School.

        Li Yu has served as a member of our board of directors since June 2004. Since December 1991, Mr. Yu has served as the Chairman of the board of directors and, since 1993, as the President and Chief Executive Officer of Preferred Bank, a financial institution. From 1982 to 1987, he served as Chairman of the Board of California Pacific National Bank, which was acquired by an entity subsequently acquired by Bank of America. Mr. Yu holds an M.B.A. from the University of California, Los Angeles.

Board Composition

        Our board of directors may establish from time to time by resolution the authorized number of directors. Seven directors are currently authorized. In accordance with our amended and restated certificate of incorporation to be in effect upon the closing of this offering, our board of directors will be divided into three classes with staggered three-year terms. At each annual meeting of stockholders, the successors to directors whose terms then expire will be elected to serve from the time of election and qualification until the third annual meeting following election. Our directors will be divided among the three classes as follows:

        Our amended and restated certificate of incorporation will provide that the authorized number of directors may be changed only by resolution of the board of directors. Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors. The division of our board of directors into three classes with staggered three-year terms may delay or prevent a change of our management or a change of control at our company.

Board Committees

        Our board of directors has the following committees: an audit committee and a compensation committee. Upon the closing of this offering, our board will also have a nominating and corporate governance committee. The composition and responsibilities of each committee are described below. Members serve on these committees until their resignation or until otherwise determined by our board.

Audit Committee

        Our audit committee oversees our corporate accounting and financial reporting process. Among other matters, the audit committee evaluates the independent auditors' qualifications, independence and performance; determines the engagement of the independent auditors; reviews and approves the scope of the annual audit and the audit fee; discusses with management and the independent auditors the results of the annual audit and the review of our quarterly consolidated financial statements; approves the retention of the independent auditors to perform any proposed permissible non-audit services; monitors the rotation of partners of the independent auditors on the Accuray engagement team as required by law; reviews our critical accounting policies and estimates; oversees our internal audit function and annually reviews the audit committee charter and the committee's performance. The current members of our audit committee are Mr. Young, who is the chair of the committee, Mr. Yu

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and Mr. Wu. All members of our audit committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and NASDAQ. Our board has determined that Mr. Young is an audit committee financial expert as defined under the applicable rules of the SEC and has the requisite financial sophistication as defined under the applicable rules and regulations of NASDAQ. Mr. Young, Mr. Yu and Mr. Wu are independent directors as defined under the applicable rules and regulations of the SEC and NASDAQ. The audit committee operates under a written charter that satisfies the applicable standards of the SEC and NASDAQ.

Compensation Committee

        Our compensation committee reviews and recommends policies relating to compensation and benefits of our officers and employees. The compensation committee reviews and approves corporate goals and objectives relevant to compensation of our chief executive officer and other executive officers, evaluates the performance of these officers in light of those goals and objectives, and sets the compensation of these officers based on such evaluations. The compensation committee also administers the issuance of stock options and other awards under our stock plans. The compensation committee will review and evaluate, at least annually, the performance of the compensation committee and its members, including compliance of the compensation committee with its charter. The current members of our compensation committee members are Mr. Young, Mr. Wu and Mr. Yu, with Mr. Yu serving as the chair of the committee. Each of the members of our compensation committee are independent under the applicable rules and regulations of the SEC, NASDAQ and the Internal Revenue Service.

Nominating and Corporate Governance Committee

        Upon the closing of this offering, our board of directors will form a nominating and corporate governance committee. The nominating and corporate governance committee will be responsible for making recommendations to our board of directors regarding candidates for directorships and the size and composition of our board. In addition, the nominating and corporate governance committee will be responsible for overseeing our corporate governance guidelines and reporting and making recommendations to our board concerning governance matters. We expect that the composition of our nominating and corporate governance committee will meet the criteria for independence under, and the functioning of our nominating and corporate governance committee will comply with the applicable rules and regulations of the SEC and NASDAQ.

        There are no family relationships among any of our directors or executive officers.

Compensation Committee Interlocks and Insider Participation

        None of the members of our compensation committee has at any time during the prior three years been an officer or employee of ours. None of our executive officers currently serves or in the prior three years has served as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving on our board or compensation committee.

Director Compensation

        Following the closing of this offering, each non-management director (including Dr. Adler, but excluding any director who is also an employee) shall receive an annual cash retainer of $30,000 per year, paid quarterly, except that the lead director shall receive an annual cash retainer of $60,000 per year, paid quarterly. Such directors shall also receive an additional annual cash retainer of $5,000 per year, paid quarterly, for being a member of our compensation committee, except that the chairperson of our compensation committee shall receive an additional annual cash retainer of $10,000 per year, paid quarterly. Non-management directors shall also receive an additional annual cash retainer of

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$3,000 per year, paid quarterly, for being a member of our nominating and corporate governance committee, except that the chairperson of our nominating and corporate governance committee shall receive an additional annual cash retainer of $5,000 per year, paid quarterly. Non-management directors shall also receive an additional annual cash retainer of $10,000 per year, paid quarterly, for being a member of our audit committee, except that the chairperson of our audit committee shall receive an additional annual cash retainer of $20,000 per year, paid quarterly.

        To date, we have granted options to our non-employee directors in accordance with the following guidelines. Upon becoming a board member, each non-employee director receives an option to purchase 90,000 shares of common stock. These options vest monthly over the first year of service such that 50% of the options are vested upon the first anniversary of the director's commencement of service. The remaining options vest monthly over the following two years. Each non-employee director also receives an annual option grant to purchase 90,000 shares of common stock for serving on a board committee and an additional option grant to purchase 9,000 share of common stock for serving as chair of a board committee. Option grants in connection with board committee service may not exceed 18,000 shares of common stock per year, regardless of the number of committees served on or chaired. All options described in the foregoing shall vest fully upon a change of control.

        All of our directors are reimbursed for the reasonable expenses incurred in connection with attending the meetings of our board of directors.

        In March 2004, we entered into a consulting agreement with Dr. Adler. This agreement had a term of two years. Under the consulting agreement, Dr. Adler provided consulting services and marketing support, including support of the CyberKnife Society. Dr. Adler was entitled to receive a minimum payment of $154,000 per year, payable at the end of each three months commencing March 1, 2004. Dr. Adler's compensation under this consulting agreement was not to exceed $175,000 per year. For his support of the CyberKnife Society, Dr. Adler received a retainer fee of $2,000 per month and was granted a stock option to purchase 100,000 shares of common stock, vesting monthly over three years, commencing on October 1, 2003. In April 2006, we entered into a new consulting agreement with Dr. Adler and terminated his prior consulting agreement. Under the existing consulting agreement, Dr. Adler is entitled to receive a maximum compensation of $137,000 per year, payable at the beginning of each quarter beginning on April 1, 2006. Additionally Dr. Adler entered into a consulting agreement with the CyberKnife Society in April 2006. We assumed the contractual obligations of the CyberKnife Society under this agreement, effective as of October 3, 2006. Under this consulting agreement, Dr. Adler provides services to the CyberKnife Society and is entitled to receive a maximum compensation of $76,000 per year, payable at the beginning of each quarter beginning on April 1, 2006. This agreement has a term of one year and will renew for successive one-year periods, unless 30 days' written notice of termination is provided by either party prior to the expiration of each one-year period. We paid Dr. Adler $10,300, $266,700 and $195,300 pursuant to these agreements during the years ended June 30, 2004, 2005 and 2006, respectively.

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Executive Compensation

Summary Compensation Table

        The following table presents compensation information for our fiscal year ended June 30, 2006 paid to or accrued for our chief executive officer and each of our four other most highly compensated executive officers who were serving as executive officers as of the end of June 30, 2006, who we refer to as our named executive officers. The compensation includes long-term awards granted in our 2006 fiscal year. The compensation table excludes other compensation in the form of perquisites and other personal benefits that constituted less than 10% of the total annual salary and bonus for the executive officer in the fiscal year ended June 30, 2006.

 
   Annual compensation(1)
   Long-term
compensation awards
Name and
principal position(s)
   Salary
   Bonus
   Other annual
compensation
   Securities
underlying
options
   All other
compensation
Euan S. Thomson, Ph.D.   $ 340,000   $ 265,200   —   198,000   —
  Chief Executive Officer and President                        

Robert E. McNamara
 
$
225,000
 
$
99,000
 
—
 
150,000
 
—
  Sr. Vice President, Chief Financial Officer                        

Chris A. Raanes
 
$
250,000
 
$
120,000
 
—
 
60,000
 
—
  Sr. Vice President, Chief Operating Officer                        

Eric P. Lindquist
 
$
225,000
 
$
99,000
 
—
 
35,000
 
—
  Sr. Vice President, Chief Marketing Officer                        

John W. Allison, Ph.D.(2)
 
$
153,750
 
$
21,000
 
$113,052
 
—
 
—
  Vice President, Engineering                        

Curtis L. Goode
 
$
199,500
 
$
110,000
 
—
 
—
 
—
  Vice President, U.S. Sales                        
(1)
Includes amounts earned but deferred at the election of the executive, such as salary deferrals under our 401(k) Plan.

(2)
Dr. Allison left our company in March 2006. The amount included in Other Annual Compensation relates to severance payments made to Dr. Allison.

Option Grants in Fiscal Year 2006

        The following table sets forth information regarding options granted to each of our named executive officers during the fiscal year ended June 30, 2006. The exercise prices of the options we granted were the fair market value of our common stock on the date of grant, as determined by our board of directors.

        The potential realizable value is calculated based on the ten-year term of the option at the time of grant. The potential realizable values at 5% and 10% appreciation are calculated by:

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        Stock price appreciation of 5% and 10% is assumed pursuant to the rules promulgated by the Securities and Exchange Commission and does not represent our prediction of our stock price performance. The options in this table were granted under our 1998 Equity Incentive Plan, have ten year terms and, unless otherwise noted, vest over a period of four years. We have not granted any stock appreciation rights.

        The percentage shown below of options granted is based on options to purchase an aggregate of 1,407,883 shares of Common Stock we granted to employees during fiscal year 2006.

 
    
   Individual grants
    
    
 
    
   Potential realizable value at assumed annual rates of stock price appreciation for option term
 
   Number of
securities
underlying
options
granted
   % of total
options granted
to employees
in fiscal year
2006
    
    
Name
   Exercise price per
share
   Expiration
date
  5%
   10%
Euan S. Thomson, Ph.D.   158,000   11.2%   $4.38   11/7/2015   $400,652   $996,980
    40,000   2.8%   6.73   4/5/2016   164,460   414,065

Robert E. McNamara
 
150,000
 
10.7%
 
4.38
 
11/7/2015
 
380,366
 
946,500

Chris A. Raanes
 
60,000
 
4.3%
 
4.38
 
11/7/2015
 
152,146
 
378,600

Eric P. Lindquist
 
35,000
 
2.5%
 
4.38
 
11/7/2015
 
88,752
 
220,850

John W. Allison, Ph.D(1)
 
—
 
—
 
—
 
—
 
—
 
—

Curtis L. Goode
 
—
 
—
 
—
 
—
 
—
 
—
(1)
Dr. Allison left the company in March 2006.

Fiscal Year 2006 Option Values

        The following table describes for our named executive officers the exercisable and unexercisable options held by them as of June 30, 2006. The "Value of Unexercised In-the-Money Options at June 30, 2006" shown in the table was calculated based on an assumed initial public offering price of $                        per share, less the per share exercise price, multiplied by the number of shares issuable upon exercise of the option.

 
   Number of securities underlying unexercised options at June 30, 2006
   Value of unexercised in-the-money options at June 30, 2006
Name
  Exercisable
   Unexercisable
   Exercisable
   Unexercisable
Euan S. Thomson, Ph.D.   1,198,334   579,666        
Robert E. McNamara   187,500   462,500        
Chris A. Raanes   477,500   182,500        
Eric P. Lindquist   138,543   246,457        
John W. Allison, Ph.D.(1)   —   —        
Curtis L. Goode   151,042   98,958        
(1)
Dr. Allison left the company in March 2006.

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Employment, Change of Control and Severance Agreements

Euan S. Thomson, Ph.D.

        On November 10, 2006, we entered into an employment letter agreement with Dr. Thomson which amends and restates our prior employment letter agreement with him. Under the agreement, Dr. Thomson will serve as our President and Chief Executive Officer. The agreement provides that he is entitled to receive an annual base salary of $420,000 and is eligible to participate in our executive bonus plan under which he may earn annual incentive bonuses targeted at 60% of his base salary based upon the attainment of performance criteria established and evaluated by our company. Subject to approval by our board and pursuant to our incentive award plan, our company has agreed to grant Dr. Thomson an option to purchase 40,000 shares of our common stock not later than the first regularly scheduled meeting of our board of each calendar year during the period of his employment by our company. Each such option will be granted with an exercise price per share equal to the fair market value of a share of our common stock on the date of grant and will vest in equal monthly installments over a 4-year period from the date of grant.

        Under our letter agreement with Dr. Thomson, in the event of a termination of his employment by our company without "cause" or by Dr. Thomson for "good reason," as each term is defined in the agreement, Dr. Thomson will be entitled to receive a severance payment in an amount equal to the sum of 12 months of his annual base salary then in effect, a pro rata portion of his target annual bonus for the year of such termination, plus 100% of his target annual bonus then in effect. In addition, in the event of such a termination of employment, Dr. Thomson's then outstanding stock options will become vested and exercisable immediately prior to the effective time of such termination to the extent they would have become vested during the 12-month period following the date of such termination had he remained employed by our company through such period, and our company will pay for 12 months of COBRA continuation coverage for Dr. Thomson and his eligible dependents if he elects such coverage upon such a termination. In the event of a change in control of our company (as defined in the employment letter) during the term of Dr. Thomson's employment, all of his then outstanding stock options will become fully vested and exercisable immediately prior to the effective time of such change in control. If such a change in control occurs and Dr. Thomson's employment is terminated either (i) by our company without cause or by Dr. Thomson for good reason within twelve months following the change in control or (ii) by Dr. Thomson for any reason within the 30-day period immediately following the change in control, then in lieu of the severance payments and benefits described above, he will be entitled to receive a severance payment in an amount equal to the sum of 18 months of his annual base salary then in effect, a pro rata portion of his target annual bonus for the year of such termination, plus 150% of his target annual bonus then in effect. In addition, our company will pay for 18 months of COBRA continuation coverage for Dr. Thomson and his eligible dependents if he elects such coverage. The foregoing benefits and payments may be subject to a delay of up to 6 months as necessary to avoid the imposition of additional tax under Section 409A of the Code. In addition, if any payments or benefits payable to Dr. Thomson under the employment letter or otherwise would be subject to the excise tax under Section 4999 of the Code, such payments and/or benefits will be reduced to the extent necessary so that no amount will be subject to such excise tax, provided that such reduction will only occur if Dr. Thomson will be in a more favorable after-tax position than if no such reduction was made.

        The employment letter also provides for certain restrictive covenants by Dr. Thomson, including a confidentiality covenant that will apply during his employment with our company and thereafter, a non-solicitation covenant for the duration of his employment and one year thereafter, and a non-competition covenant for the duration of his employment.

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Robert E. McNamara

        On November 10, 2006, we entered into an employment letter agreement with Mr. McNamara which amends and restates our prior employment letter agreement with him. Under the agreement, Mr. McNamara will serve as our Senior Vice President and Chief Financial Officer. The agreement provides that he is entitled to receive an annual base salary of $275,000 and is eligible to participate in our executive bonus plan under which he may earn annual incentive bonuses targeted at 40% of his base salary based upon the attainment of performance criteria established and evaluated by our company.

        Under our letter agreement with Mr. McNamara, in the event of a termination of his employment by our company without "cause" or by Mr. McNamara for "good reason," as each term is defined in the agreement, or if a change in control of our company (as defined in the employment letter) occurs and Mr. McNamara terminates his employment for any reason within the 30-day period immediately following such change in control, then Mr. McNamara will be entitled to receive a severance payment in an amount equal to the sum of 12 months of his annual base salary then in effect, a pro rata portion of his target annual bonus for the year of such termination, plus 100% of his target annual bonus then in effect. In addition, our company will pay for 12 months of COBRA continuation coverage for Mr. McNamara and his eligible dependents if he elects such coverage upon such a termination. In the event of a termination of Mr. McNamara's employment by our company without cause or by Mr. McNamara for good reason prior to a change in control, Mr. McNamara's then outstanding stock options to purchase shares of our common stock will become vested and exercisable immediately prior to the effective time of such termination to the extent they would have become vested during the 12-month period following the date of such termination had he remained employed by our company through such period. In the event of a change in control of our company during the term of Mr. McNamara's employment, all of his then outstanding stock options will become fully vested and exercisable immediately prior to the effective time of such change in control. The foregoing benefits and payments may be subject to a delay of up to 6 months as necessary to avoid the imposition of additional tax under Section 409A of the Code. In addition, if any payments or benefits payable to Mr. McNamara under the employment letter or otherwise would be subject to the excise tax under Section 4999 of the Code, such payments and/or benefits will be reduced to the extent necessary so that no amount will be subject to such excise tax, provided that such reduction will only occur if Mr. McNamara will be in a more favorable after-tax position than if no such reduction was made.

        The employment letter also provides for certain restrictive covenants by Mr. McNamara, including a confidentiality covenant that will apply during his employment with our company and thereafter, a non-solicitation covenant for the duration of his employment and one year thereafter, and a non-competition covenant for the duration of his employment.

Chris A. Raanes

        On November 10, 2006, we entered into an employment letter agreement with Mr. Raanes which amends and restates our prior employment letter agreement with him. Under the agreement, Mr. Raanes will serve as our Senior Vice President and Chief Operating Officer. The agreement provides that he is entitled to receive an annual base salary of $290,000 and is eligible to participate in our executive bonus plan under which he may earn annual incentive bonuses targeted at 40% of his base salary based upon the attainment of performance criteria established and evaluated by our company.

        Under our letter agreement with Mr. Raanes, in the event of a termination of his employment by our company without "cause" or by Mr. Raanes for "good reason," as each term is defined in the agreement, Mr. Raanes will be entitled to receive a severance payment in an amount equal to the sum of 8 months of his annual base salary then in effect, a pro rata portion of his target annual bonus for the year of such termination, plus 662/3% of his target annual bonus then in effect. In addition, our

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company will pay for 8 months of COBRA continuation coverage for Mr. Raanes and his eligible dependents if he elects such coverage upon such a termination. If a change in control of our company (as defined in the employment letter) occurs during the term of Mr. Raanes' employment and his employment is terminated by our company without cause or by Mr. Raanes for good reason, in each case within the 12-month period following the change in control, then in addition to the foregoing severance payments and benefits, all of Mr. Raanes' then outstanding stock options to purchase shares of the Company's common stock will become fully vested and exercisable immediately prior to the effective time of such termination of employment. The foregoing benefits and payments may be subject to a delay of up to 6 months as necessary to avoid the imposition of additional tax under Section 409A of the Code. In addition, if any payments or benefits payable to Mr. Raanes under the employment letter or otherwise would be subject to the excise tax under Section 4999 of the Code, such payments and/or benefits will be reduced to the extent necessary so that no amount will be subject to such excise tax, provided that such reduction will only occur if Mr. Raanes will be in a more favorable after-tax position than if no such reduction was made.

        The employment letter also provides for certain restrictive covenants by Mr. Raanes, including a confidentiality covenant that will apply during his employment with our company and thereafter, a non-solicitation covenant for the duration of his employment and one year thereafter, and a non-competition covenant for the duration of his employment.

Eric P. Lindquist

        On November 10, 2006, we entered into an employment letter agreement with Mr. Lindquist which amends and restates our prior employment letter agreement with him. Under the agreement, Mr. Lindquist will serve as our Senior Vice President and Chief Marketing Officer. The agreement provides that he is entitled to receive an annual base salary of $275,000 and is eligible to participate in our executive bonus plan under which he may earn annual incentive bonuses targeted at 40% of his base salary based upon the attainment of performance criteria established and evaluated by our company.

        Under our letter agreement with Mr. Lindquist, in the event of a termination of his employment by our company without "cause" or by Mr. Lindquist for "good reason," as each term is defined in the agreement, Mr. Lindquist will be entitled to receive a severance payment in an amount equal to the sum of 8 months of his annual base salary then in effect, a pro rata portion of his target annual bonus for the year of such termination, plus 662/3% of his target annual bonus then in effect. In addition, our company will pay for 8 months of COBRA continuation coverage for Mr. Lindquist and his eligible dependents if he elects such coverage upon such a termination. If a change in control of our company (as defined in the employment letter) occurs during the term of Mr. Lindquist's employment and his employment is terminated by our company without cause or by Mr. Lindquist for good reason, in each case within the 12-month period following the change in control, then in addition to the foregoing severance payments and benefits, all of Mr. Lindquist's then outstanding stock options to purchase shares of the Company's common stock will become fully vested and exercisable immediately prior to the effective time of such termination of employment. The foregoing benefits and payments may be subject to a delay of up to 6 months as necessary to avoid the imposition of additional tax under Section 409A of the Code. In addition, if any payments or benefits payable to Mr. Lindquist under the employment letter or otherwise would be subject to the excise tax under Section 4999 of the Code, such payments and/or benefits will be reduced to the extent necessary so that no amount will be subject to such excise tax, provided that such reduction will only occur if Mr. Lindquist will be in a more favorable after-tax position than if no such reduction was made.

        The employment letter also provides for certain restrictive covenants by Mr. Lindquist, including a confidentiality covenant that will apply during his employment with our company and thereafter, a non-solicitation covenant for the duration of his employment and one year thereafter, and a

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non-competition covenant for the duration of his employment. In addition, we have agreed to indemnify Mr. Lindquist in the event a suit is filed against him in connection with his non-competition agreement with a former employer.

John W. Allison, Ph.D.

        In July 2004, we entered into an offer letter agreement with Dr. Allison, our former Vice President, Engineering. Under the agreement Dr. Allison was entitled to receive an initial base salary of $205,000, subject to increase by our board, and was eligible to participate in our executive bonus arrangements under which Dr. Allison may earn incentive bonuses up to 40% of his base salary based upon achievement of objectives by our company and personal objectives set by our board. In addition, Dr. Allison received an additional one-time bonus of $20,000 paid after six months of full employment by us. Dr. Allison was granted an option to purchase 250,000 shares of common stock at an exercise price of $2.50 per share. Such options vest 25% upon the anniversary of Dr. Allison's commencement of employment with our company, 1/12 of the aggregate number of shares subject to the option vest monthly over the next 16 months, 1/2 of the aggregate number of shares subject to the option vest monthly over the next 24 months and 1/6 of the aggregate number of shares subject to the option vest monthly over the final nine months, such that all options are vested upon the fourth anniversary of Dr. Allison's commencement of employment with our company.

        In March 2006, Dr. Allison ended his employment with our company under terms set forth in his separation agreement. Under this agreement, Dr. Allison was entitled to receive severance payments equal to six months of his base salary, two weeks of salary for every year employed and a lump sum payment of $35,000.

Wade B. Hampton

        On November 10, 2006, we entered into an employment letter agreement with Mr. Hampton which amends and restates our prior employment letter agreement with him. Under the agreement, Mr. Hampton will serve as our Senior Vice President, Worldwide Sales. The agreement provides that he is entitled to receive an annual base salary of $250,000 and is eligible to participate in our executive bonus plan under which he may earn annual incentive bonuses targeted at 75% of his base salary based upon the attainment of performance criteria established and evaluated by our company. In addition, pursuant to our incentive award plan and the terms of our prior employment letter agreement with him, our company has granted Mr. Hampton an option to purchase 250,000 shares of our common stock with an exercise price per share equal to $10.00. The option will vest over a 4-year period from the date of commencement of Mr. Hampton's employment with our company, with 25% of the shares subject to the option vesting on the first anniversary of such date, and the remaining 75% vesting in equal monthly installments on each monthly anniversary thereafter. Our company has agreed to recommend to our board that our company grant Mr. Hampton an additional option no later than the September 30 following each of the first three anniversaries of Mr. Hampton's commencement of employment with our company to purchase 100,000 shares of our common stock, with each such option to have an exercise price per share equal to the fair market value of a share of our common stock on the date of grant and to vest in equal monthly installments over a 4-year period from the date of grant.

        Under our letter agreement with Mr. Hampton, in the event of a termination of his employment by our company without "cause" or by Mr. Hampton for "good reason," as each term is defined in the agreement, Mr. Hampton will be entitled to receive a severance payment in an amount equal to the sum of 6 months of his annual base salary then in effect, a pro rata portion of his target annual bonus for the year of such termination, plus 50% of his target annual bonus then in effect. In addition, our company will pay for six months of COBRA continuation coverage for Mr. Hampton and his eligible dependents if he elects such coverage upon such a termination. If a change in control of our company (as defined in the employment letter) occurs during the term of Mr. Hampton's employment and his

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employment is terminated by our company without cause or by Mr. Hampton for good reason, in each case within the 12-month period following the change in control, then in addition to the foregoing severance payments and benefits, all of Mr. Hampton's then outstanding stock options to purchase shares of the Company's common stock will become fully vested and exercisable immediately prior to the effective time of such termination of employment. The foregoing benefits and payments may be subject to a delay of up to six months as necessary to avoid the imposition of additional tax under Section 409A of the Code. In addition, if any payments or benefits payable to Mr. Hampton under the employment letter or otherwise would be subject to the excise tax under Section 4999 of the Code, such payments and/or benefits will be reduced to the extent necessary so that no amount will be subject to such excise tax, provided that such reduction will only occur if Mr. Hampton will be in a more favorable after-tax position than if no such reduction was made.

        The employment letter also provides for certain restrictive covenants by Mr. Hampton, including a confidentiality covenant that will apply during his employment with our company and thereafter, a non-solicitation covenant for the duration of his employment and one year thereafter, and a non-competition covenant for the duration of his employment.

Executive Officer Bonuses

        In August 2006, our board of directors and our compensation committee approved 2007 bonuses for certain of our executive officers. Our board of directors designated for each executive officer a target bonus amount, expressed as a percentage of his or her base salary (60% for our chief executive officer, 40% for our senior vice presidents). Our executive officers are eligible to receive bonuses if certain individual and corporate performance criteria are achieved during the 2007 fiscal year, and such bonuses are payable in cash. Furthermore, executive officers are entitled to receive a discretionary bonus amount, which may be in addition to or subtracted from such officer's target bonus amount, also expressed as a percentage of his or her base salary (50% for our chief executive officer, 30% for our senior vice presidents). Bonus payments will be based on the compensation committee's evaluation of our achievement of corporate performance goals for 2007, which were determined by the compensation committee. The use of corporate performance goals is intended to establish a link between the executive's pay and our business performance. The individual performance of each of the executive officers during 2007 will be evaluated according to the achievement of individual performance goals, which were approved by the chief executive officer and the relevant vice presidents prior to the approval of the 2007 executive bonuses by our board of directors. The board of directors is responsible for approving any bonus payment to our chief executive officer pursuant to the 2007 executive bonuses and the compensation committee is responsible for approving any bonus payment to any other executive officer pursuant to the 2007 executive bonuses.

1993 Stock Option Plan

        Our 1993 Stock Option Plan was adopted by our board in 1993. The maximum number of shares of our common stock that may be issued or awarded under the 1993 Stock Option Plan is 1,744,268 shares. As of June 30, 2006, options to purchase approximately 450,000 shares of our common stock were outstanding under this plan. We do not intend to grant any additional options under the 1993 Stock Option Plan after the completion of this offering. The following is a description of the material features and provisions of the 1993 Stock Option Plan as it relates to these outstanding options.

Stock Options

        Under the 1993 Stock Option Plan, we may grant incentive stock options intended to qualify for special tax treatment under Section 422 of the Code and non-qualified stock options. The term of options granted under the 1993 Stock Option Plan may not exceed 10 years, except that in the case of

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an incentive stock option granted to an individual who owns more than 10% of our stock, the term of such option may not exceed 5 years. The plan provides that the exercise price of incentive stock options granted under the plan may not be less than the fair market value of our common stock at the time of grant, and the exercise price of non-qualified stock options may not be less than 85% of the fair market value of our common stock at the time of grant. Options granted to an individual who owns more than 10% of our stock at the time of grant must have an exercise price not less than 110% of the fair market value of our common stock at the time of grant. The 1993 Stock Option Plan provides that the vesting and exercisability period of options granted under the plan will be determined by the plan administrator and set forth in the stock option agreement evidencing the option grant. During the lifetime of the optionee, the option is exercisable only by the optionee. Options are not assignable or transferable by the optionee, except by will or by the laws of descent and distribution.

Administration

        The 1993 Stock Option Plan is administered by our board or a duly appointed committee of our board. Our board (or its committee) determines all questions of interpretation of the plan and any options granted under this plan, and such determinations are final and binding.

Eligibility

        Under the terms of the 1993 Stock Option Plan, incentive stock options may only be granted to our employees (including officers and directors who were also employees) and employees of qualifying parent or subsidiary corporations. Non-qualified stock options may be granted to employees, directors and individuals who render services as consultants, advisors or other independent contractors.

Adjustments/Change of Control

        The 1993 Stock Option Plan provides that in the event of a stock dividend, stock split, reverse stock split, recapitalization, combination, reclassification or like change in our capital structure, then equitable adjustments may be made to the number of shares and exercise prices of the remaining outstanding options. In addition, the plan provides that in the case of a transfer of control (as defined in the plan), the plan administrator may, in its sole discretion, provide that any unexercisable and/or unvested portion of the outstanding options will be immediately exercisable and vested as of a date prior to the transfer of control, or arrange with the surviving, continuing, successor or purchaser corporation (or its parent corporation) for such corporation to either assume our rights and obligations under outstanding options or substitute options for such corporation for such outstanding options.

Termination or Amendment

        The 1993 Stock Option Plan provides that our board can terminate or amend this plan at any time, although certain amendments may require stockholder approval and an amendment cannot adversely affect any rights under an outstanding grant without the grantee's consent, unless such an amendment is required to enable an option designated as an incentive stock option to qualify as an incentive stock option.

1998 Equity Incentive Plan

        Our 1998 Equity Incentive Plan was originally adopted by our board of directors and approved by our stockholders in 1998. Subject to certain adjustments set forth in the plan, the maximum number of shares of our common stock that may be issued or awarded under 1998 Equity Incentive Plan is 14,100,000 shares. As of June 30 2006, options to purchase 10,450,285 shares of our common stock were outstanding under this plan. We do not intend to grant any additional awards under the 1998 Equity Incentive Plan after the consummation of this offering. The following is a description of the material features and provisions of the 1998 Equity Incentive Plan.

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Awards

        Under the 1998 Equity Incentive Plan, we may grant incentive stock options intended to qualify for special tax treatment under Section 422 of the Code, non-qualified stock options, stock grants, stock appreciation rights and stock purchase rights. As of June 30, 2006, only stock options have been granted under this plan.

Stock Options and Stock Appreciation Rights

        Options granted under the 1998 Equity Incentive Plan will be designated as incentive stock options or non-qualified stock options. Notwithstanding whether an option is designated as an incentive stock option, to the extent that the aggregate fair market value of the shares with respect to which such designated incentive stock option is exercisable for the first time by any optionee during any calendar year exceeds $100,000, such excess options will be treated as non-qualified stock options. Subject to the grantee's continued employment, options and stock appreciation rights generally vest at a rate of at least 20% per year over not more than five years from the date of grant, but the plan administrator has the authority to provide that an option may become fully exercisable, subject to reasonable conditions such as continued employment, at any time or during any period established by the plan administrator. Each option or stock appreciation right will expire after a term determined at the time of grant. However, in the case of an incentive stock option such term shall not exceed 10 years, and in the case of an option granted to a person who owns more than 10% of our stock on the date of grant, such term shall not exceed 5 years. The plan provides that incentive options may not have exercise prices less than the fair market value at the time of grant, and non-qualified stock options may not have exercise prices less than 85% of the fair market value at the time of grant. If the grantee owns more than 10% of our stock, the option may not have an exercise price less than 110% of the fair market value at the time of grant. Stock appreciation rights will be settled in cash or shares (or some combination thereof) having a value, at the time of settlement, equal to the difference between the initial value assigned to the stock appreciation right and the fair market value of our shares at the time of settlement.

        The 1998 Equity Incentive Plan provides that if a grantee's employment or consulting relationship with us terminates, other than for disability or death, the grantee may, within 90 days after termination (or such other period of time as determined by the plan administrator), exercise his or her option or stock appreciation right to the extent that the option or stock appreciation right has vested by the date of termination. If a grantee's employment with us terminates due to death or disability, the grantee (or the grantee's estate) may, within 12 months thereafter, exercise his or her option or stock appreciation right to the extent that the option or stock appreciation right has vested by the date of termination of employment or consulting relationship. Other than by will or other transfer on death, options and stock appreciation rights are not transferable.

Stock Grants and Stock Purchase Rights

        Stock grants and stock purchase rights may be issued either alone, in addition to, or in tandem with other awards granted under the plan and/or cash awards made outside of the plan. Stock purchase rights confer on the grantee the right to purchase some number of shares of our common stock determined by the plan administrator. The plan provides that the purchase price of the shares subject to stock purchase rights granted under the plan may not be less than 50% of the fair market value of the shares as of the date of the offer. Stock purchase rights cease to be exercisable not later than 30 days after grant. The offer of a stock grant or stock purchase right is accepted by execution of a restricted stock purchase agreement, in a form determined by the plan administrator.

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Administration

        The 1998 Equity Incentive Plan is currently administered by our compensation committee. The administrator, whether our board or a committee, has the authority to determine the fair market value of the common stock for the purposes of making an award, select the eligible persons to whom awards may be granted, make the awards, determine the number of shares to be covered by each award, offer to buy out for cash or shares a granted option or stock appreciation right and determine the form, terms and conditions of any agreement by which any award is made. The administrator may also determine, among other things, whether an option or stock appreciation right will be paid in cash rather than stock and the restrictions applicable to any stock grants or purchase rights.

Eligibility

        Under the terms of the 1998 Equity Incentive Plan, non-qualified stock options, stock appreciation rights, stock grants and stock purchase rights may be granted to employees, non-employee directors and consultants of our company and our qualifying parent or subsidiary corporations. Incentive stock options may be granted only to our employees (including officers and directors who are also employees) and employees of qualifying parent or subsidiary corporations.

Foreign Participants

        In order to comply with the laws in other countries in which we and our subsidiaries operate or have persons eligible to participate in the plan, the plan administrator has the power to determine which of our subsidiaries will be covered by the plan, determine which of our directors, employees and consultants outside the United States are eligible to participate in the plan, modify the terms and conditions of any award granted to such eligible individuals to comply with applicable foreign laws, establish subplans and modify any terms and procedures (with certain exceptions), and take any action that it deems advisable with respect to local governmental regulatory exemptions or approvals.

Adjustments

        If a stock split, reverse stock split, stock dividend, combination or reclassification of our common stock, or any other increase or decrease in the number of issued shares of our common stock occurs without receipt of consideration by us, then our board can make equitable adjustments to the terms of the 1998 Equity Incentive Plan. In particular, our board can make an equitable adjustment in the number of shares authorized for issuance under this plan but as to which no options or stock appreciation rights have yet been granted or which have been returned to the 1998 Equity Incentive Plan upon cancellation or expiration of an option or stock appreciation right, as well as the price per share covered by each outstanding option or stock appreciation right.

Change of Control

        The 1998 Equity Incentive Plan includes change of control provisions which may result in the accelerated vesting of outstanding option grants and stock appreciation rights. In the event of a merger or consolidation of our company with or into another corporation or the sale of all or substantially all of our assets, any outstanding options and stock appreciation rights will be assumed or an equivalent option or stock appreciation right will be substituted by the successor corporation or its parent or subsidiary. In the event that the successor corporation does not agree to assume or substitute outstanding options and stock appreciation rights granted under this plan, our board will provide for the participants to have the right to exercise all such options or stock appreciation rights previously granted, including those which would not otherwise be exercisable. Such options and stock appreciation rights will be considered assumed if, following the merger, each option or stock appreciation right confers the right to purchase, or receive the appreciation in fair market value, for each share of stock subject to the option or stock appreciation right immediately prior to the merger, the consideration

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received in the merger by our stockholders. However, if the consideration received in the merger is not solely common stock of the successor corporation or its parent, our board may, with the consent of the successor corporation and the plan participants, provide for the consideration to be received upon exercise of the option or stock appreciation right to be solely common stock of the successor corporation or its parent equal in fair market value to the per share consideration received by our stockholders.

Termination or Amendment

        The 1998 Equity Incentive Plan provides that our board can amend, alter, suspend or discontinue this plan at any time, although certain amendments may require stockholder approval and an amendment cannot adversely affect any rights under an outstanding grant without the grantee's consent.

2007 Incentive Award Plan

        Our board of directors plans to adopt, subject to stockholder approval, our 2007 Incentive Award Plan, for the benefit of employees and consultants of our company and our subsidiaries and members of our board. The 2007 Incentive Award Plan will become effective upon the closing of this offering. No determination has been made as to the types or amounts of awards that will be granted to specific individuals pursuant to the plan. The following is a description of the material features and provisions of the 2007 Incentive Award Plan.

Shares Available for Awards

        Subject to certain adjustments set forth in the plan, the maximum number of shares of our common stock that may be issued or awarded under the 2007 Incentive Award Plan is                  shares. If any shares covered by an award granted under the plan are forfeited, or if an award expires or terminates, the shares covered by the award will again be available for grant under the plan.

Awards

        The 2007 Incentive Award Plan provides for the grant of incentive stock options, nonqualified stock options, restricted stock, stock appreciation rights, performance shares, performance stock units, dividend equivalents, stock payments, deferred stock, restricted stock units, performance bonus awards, and performance-based awards to eligible individuals. Except as otherwise provided by the plan administrator, no award granted under the plan may be assigned, transferred or otherwise disposed of by the grantee, except by will or the laws of descent and distribution.

        The maximum number of shares of our common stock which may be subject to awards granted to any one participant during any calendar year is            and the maximum amount that may be paid to a participant in cash during any calendar year with respect to cash-based awards is $                    . However, these limits will not apply until the earliest of the first material modification of the plan, the issuance of all of the shares reserved for issuance under the plan, the expiration of the plan, or the first meeting of our stockholders at which directors are to be elected that occurs more than three years after the completion of this offering.

Stock Options

        Stock options, including both nonqualified stock options and incentive stock options, within the meaning of Section 422 of the Code, may be granted under the 2007 Incentive Award Plan. The option exercise price of all stock options granted pursuant to the plan will not be less than 100% of the fair market value of our stock on the date of grant. No incentive stock option may be granted to a grantee who owns more than 10% of our stock unless the exercise price is at least 110% of the fair market value at the time of grant. Notwithstanding whether an option is designated as an incentive stock option, to the extent that the aggregate fair market value of the shares with respect to which such option is exercisable for the first time by any optionee during any calendar year exceeds $100,000, such excess will be treated as a nonqualified stock option.

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        Each independent director will automatically be granted an option to purchase            shares of our stock on the date on which this offering is consummated and an option to purchase            shares on the date of each subsequent annual stockholders meeting at which he or she is reelected to our board. Each independent director who is initially elected to our board after the completion of this offering will automatically be granted an option to purchase            shares of our stock on the date of such election and an option to purchase             shares of our stock on the date of each subsequent annual stockholders meeting at which he or she is reelected to our board. The exercise price of all options granted to independent directors will be equal to the fair market value of our common stock on the date of grant, and each such option will vest            .

        Payment of the exercise price of an option may be made in cash or, with the consent of the plan administrator, shares of our stock with a fair market value on the date of delivery equal to the exercise price of the option or exercised portion thereof or other property acceptable to the plan administrator (including the delivery of a notice that the participant has placed a market sell order with a broker with respect to shares then issuable upon exercise of the option, and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to us in satisfaction of the option exercise price). However, no participant who is a member of our board of directors or an "executive officer" of Accuray within the meaning of Section 13(k) of the Securities Exchange Act of 1934, as amended, or Exchange Act, will be permitted to pay the exercise price of an option in any method which would violate Section 13(k) of the Exchange Act.

        Stock options may be exercised as determined by the plan administrator, but in no event after the tenth anniversary of the date of grant. However, in the case of an incentive stock option granted to a person who owns more than 10% of our stock on the date of grant, such term will not exceed 5 years.

Restricted Stock

        Eligible employees, consultants and directors may be issued restricted stock in such amounts and on such terms and conditions as determined by the plan administrator. Restricted stock will be evidenced by a written restricted stock agreement. The restricted stock agreement will contain restrictions on transferability and other such restrictions as the plan administrator may determine, including, without limitation, limitations on the right to vote restricted stock or the right to receive dividends on the restricted stock. These restrictions may lapse separately or in combination at such times, pursuant to such circumstances, in such installments, or otherwise, as the plan administrator determines at the time of grant of the award or thereafter.

Stock Appreciation Rights

        A stock appreciation right, or SAR, is the right to receive payment of an amount equal to the excess of the fair market value of a share of our stock on the date of exercise of the SAR over the fair market value of a share of our stock on the date of grant of the SAR. The plan administrator may issue SARs in such amounts and on such terms and conditions as it may determine, consistent with the terms of the plan. The plan administrator may elect to pay SARs in cash, in our stock or in a combination of cash and our stock.

Other Awards Under the Plan

        The 2007 Incentive Award Plan provides that the plan administrator may also grant or issue performance shares, performance stock units, dividend equivalents, stock payments, deferred stock, restricted stock units, performance bonus awards and performance-based awards or any combination thereof to eligible employees, consultants and directors. The term of each such grant or issuance will be set by the plan administrator in its discretion. The plan administrator may establish the exercise price or purchase price, if any, of any such award.

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        Payments with respect to any such award will be made in cash, in our stock or in a combination of cash and our stock, as determined by the plan administrator. Any such award will be subject to such additional terms and conditions as determined by the plan administrator and will be evidenced by a written award agreement.

        Performance shares.    Awards of performance shares are denominated in a number of shares of our stock and may be linked to any one or more performance criteria determined appropriate by the plan administrator, in each case on a specified date or dates or over any period or periods determined by the plan administrator.

        Performance stock units.    Awards of performance stock units are denominated in unit equivalent of shares of our stock and/or units of value, including dollar value of shares of our stock, and may be linked to any one or more performance criteria determined appropriate by the plan administrator, in each case on a specified date or dates or over any period or periods determined by the plan administrator.

        Dividend equivalents.    Dividend equivalents are rights to receive the equivalent value (in cash or our stock) of dividends paid on our stock. They represent the value of the dividends per share paid by us, calculated with reference to the number of shares that are subject to any award held by the participant.

        Stock payments.    Stock payments include payments in the form of our stock, options or other rights to purchase our stock made in lieu of all or any portion of the compensation that would otherwise be paid to the participant. The number of shares will be determined by the plan administrator and may be based upon specific performance criteria determined appropriate by the plan administrator, determined on the date such stock payment is made or on any date thereafter.

        Deferred stock.    Deferred stock may be awarded to participants and may be linked to any performance criteria determined to be appropriate by the plan administrator. Stock underlying a deferred stock award will not be issued until the deferred stock award has vested, pursuant to a vesting schedule or performance criteria set by the plan administrator, and unless otherwise provided by the plan administrator, recipients of deferred stock generally will have no rights as a stockholder with respect to such deferred stock until the time the vesting conditions are satisfied and the stock underlying the deferred stock award has been issued.

        Restricted stock units.    Restricted stock units may be granted to any participant in such amounts and subject to such terms and conditions as determined by the plan administrator. At the time of grant, the plan administrator will specify the date or dates on which the restricted stock units will become fully vested and nonforfeitable, and may specify such conditions to vesting as it deems appropriate. At the time of grant, the plan administrator will specify the maturity date applicable to each grant of restricted stock units which will be no earlier than the vesting date or dates of the award and may be determined at the election of the participant. On the maturity date, we will transfer to the participant one unrestricted, fully transferable share of our stock for each restricted stock unit scheduled to be paid out on such date and not previously forfeited.

        Performance bonus awards.    Any participant selected by the plan administrator may be granted a cash bonus payable upon the attainment of performance goals that are established by the plan administrator and relate to any one or more performance criteria determined appropriate by the plan administrator on a specified date or dates or over any period or periods determined by the plan administrator. Any such cash bonus paid to a "covered employee" within the meaning of Section 162(m) of the Code may be a performance-based award as described below.

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Performance-Based Awards

        The plan administrator may grant awards other than options and stock appreciation rights to employees who are or may be "covered employees," as defined in Section 162(m) of the Code, that are intended to be performance-based awards within the meaning of Section 162(m) of the Code in order to preserve the deductibility of these awards for federal income tax purposes. Participants are only entitled to receive payment for a performance-based award for any given performance period to the extent that pre-established performance goals set by the plan administrator for the period are satisfied. With regard to a particular performance period, the plan administrator will have the discretion to select the length of the performance period, the type of performance-based awards to be granted, and the goals that will be used to measure the performance for the period. In determining the actual size of an individual performance-based award for a performance period, the plan administrator may reduce or eliminate (but not increase) the award. Generally, a participant will have to be employed by us or any of our qualifying subsidiaries on the date the performance-based award is paid to be eligible for a performance-based award for any period.

Administration

        With respect to stock option grants and other awards granted to our independent directors, the 2007 Incentive Award Plan will be administered by our full board of directors. With respect to all other awards, the plan will be administered by a committee consisting of at least two directors, each of whom qualifies as a non-employee director pursuant to Rule 16b of the Exchange Act, an "outside director" pursuant to Section 162(m) of the Code and an independent director under the rules of the principal securities market on which our shares are traded. Immediately following the completion of this offering, this committee will be our compensation committee. In addition, our board may at any time exercise any rights and duties of the committee under the plan except with respect to matters which under Rule 16b-3 under the Exchange Act or Section 162(m) of the Code are required to be determined in the sole discretion of the committee.

        The plan administrator will have the exclusive authority to administer the plan, including, but not limited to, the power to determine award recipients, the types and sizes of awards, the price and timing of awards and the acceleration or waiver of any vesting restriction. Only our employees and employees of our qualifying corporate subsidiaries are eligible to be granted options that are intended to qualify as "incentive stock options" under Section 422 of the Code.

Eligibility

        Persons eligible to participate in the 2007 Incentive Award Plan include all members of our board of directors and all employees and consultants of our company and our subsidiaries, as determined by the plan administrator.

Foreign Participants

        In order to comply with the laws in other countries in which we and our subsidiaries operate or have persons eligible to participate in the plan, the plan administrator will have the power to determine which of our subsidiaries will be covered by the plan, determine which of our directors, employees and consultants outside the United States are eligible to participate in the plan, modify the terms and conditions of any award granted to such eligible individuals to comply with applicable foreign laws, establish subplans and modify any terms and procedures (with certain exceptions), and take any action that it deems advisable with respect to local governmental regulatory exemptions or approvals.

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Adjustments

        If there is any stock dividend, stock split, combination or exchange of shares, merger, consolidation, spin-off, recapitalization or other distribution (other than normal cash dividends) of our assets to stockholders, or any other change affecting the shares of our stock or the share price of our stock, the plan administrator will make proportionate adjustments to any or all of the following in order to reflect such change: (i) the aggregate number and type of shares that may be issued under the plan, (ii) the terms and conditions of any outstanding awards (including, without limitation, any applicable performance targets or criteria with respect thereto), and (iii) the grant or exercise price per share for any outstanding awards under the plan. Any adjustment affecting an award intended as "qualified performance-based compensation" will be made consistent with the requirements of Section 162(m) of the Code. The plan administrator also has the authority under the 2007 Incentive Award Plan to take certain other actions with respect to outstanding awards in the event of a corporate transaction, including provision for the cash-out, termination, assumption or substitution of such awards.

Change of Control

        Except as may otherwise be provided in any written agreement between the participant and us, in the event of a change of control of our company in which awards are not converted, assumed, or replaced by the successor, such awards will become fully exercisable and all forfeiture restrictions on such awards will lapse. Upon, or in anticipation of, a change of control, the plan administrator may cause any and all awards outstanding under the 2007 Incentive Award Plan to terminate at a specific time in the future and will give each participant the right to exercise such awards during a period of time as the plan administrator, in its sole and absolute discretion, determines.

Termination or Amendment

        With the approval of our board of directors, the plan administrator may terminate, amend, or modify the 2007 Incentive Award Plan at any time. However, stockholder approval will be required for any amendment to the extent necessary and desirable to comply with any applicable law, regulation or stock exchange rule, to increase the number of shares available under the plan, to permit the grant of options with an exercise price below fair market value on the date of grant, or to extend the exercise period for an option beyond ten years from the date of grant. In addition, absent stockholder approval, no option may be amended to reduce the per share exercise price of the shares subject to such option below the per share exercise price as of the date the option was granted and, except to the extent permitted by the plan in connection with certain changes in capital structure, no option may be granted in exchange for, or in connection with, the cancellation or surrender of an option having a higher per share exercise price.

Employee Stock Purchase Plan

        Our board of directors plans to adopt, subject to stockholder approval, our Employee Stock Purchase Plan. The plan will become effective upon the closing of this offering. The following is a description of the material features and provisions of the plan.

Administration

        The Employee Stock Purchase Plan will be administered by a committee consisting of at least two members of our board of directors, each of whom is a "non-employee director" for purposes of Rule 16b-3 under the Exchange Act. Initially, this committee will be the compensation committee of our board. Subject to the terms and conditions of the plan, the committee has the authority to make all determinations and to take all other actions necessary or advisable for the administration of the plan.

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The committee is also authorized to adopt, amend and rescind rules relating to the administration of the plan. Our board of directors may at any time exercise the rights and duties of the committee to administer the plan.

Eligibility

        Our employees and the employees of our designated subsidiaries who customarily work more than 20 hours per week and more than five months per calendar year are eligible to participate in the Employee Stock Purchase Plan. Each eligible employee who is employed by us or any of our designated subsidiaries on the day immediately preceding the effective date of this prospectus will automatically become a participant in the plan with respect to the first offering period. Each person who, during the course of an offering period, becomes an eligible employee subsequent to the enrollment date will be eligible to become a participant in the plan on the first day of the first purchase period following the day on which he or she becomes an eligible employee. However, no employee is eligible to participate in the plan if, immediately after the election to participate, such employee would own stock (including stock such employee may purchase under outstanding rights under the plan) representing 5% or more of the total combined voting power or value of all classes of our stock or the stock of any of our parent or subsidiary corporations. In addition, no employee is permitted to participate if the rights of the employee to purchase our common stock under the plan and all similar purchase plans maintained by us or our subsidiaries would accrue at a rate which exceeds $25,000 of the fair market value of such stock (determined at the time the right is granted) for each calendar year.

Shares Reserved

        Subject to certain adjustments set forth in the plan, the maximum number of shares of our common stock that may be issued under the Employee Stock Purchase Plan is                        shares. In addition, the number of shares available for issuance under the plan will be automatically increased on the first day of each of our fiscal years during the term of the plan, commencing on July 1, 200  , by a number of shares equal to the least of: (1)     of our outstanding capital stock on such date; (2)                          shares; or (3) a lesser amount determined by our board of directors.

Enrollment

        Except with respect to the first offering period, eligible employees become participants in the Employee Stock Purchase Plan by executing a subscription agreement and filing it with us 15 days (or such shorter or longer period as may be determined by the plan administrator) prior to the applicable enrollment date. By enrolling in the plan, a participant is deemed to have elected to purchase the maximum number of whole shares of our common stock that can be purchased with the compensation withheld during each purchase period within the offering period for which the participant is enrolled.

Terms

        Offerings; exercise dates.    Under the Employee Stock Purchase Plan, an offering period will last for not more than     months. Offering periods under the plan will initially be    -month periods, each comprised of        -month purchase periods. Under the plan, purchases will be made    times during each offering period on the last trading day of each purchase period, and the dates of such purchases will be "exercise dates." A new purchase period will begin the day after each exercise date. The first offering period under the plan will begin on the effective date of this Registration Statement and will continue until May 31, 2007. After the first offering period, a new    -month offering period will begin on each June 1st and December 1st thereafter during the term of the plan. The plan administrator may change the duration and timing of offering periods and exercise dates under the plan. If the fair market value per share of our common stock on any exercise date is less than the fair market value per share

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on the start date of the    -month offering period, then that offering period will automatically terminate, and a new    -month offering period will begin on the next trading day. All participants in the terminated offering period will automatically be transferred to the new offering period.

        Price and payment.    Employees electing to participate in the Employee Stock Purchase Plan will authorize payroll deductions made on each pay day during each offering period until the employee instructs us to stop the deductions or until the employee's employment is terminated. Participants may contribute up to 20% of their compensation through payroll deductions, and the accumulated deductions will be applied to the purchase of shares on each semi-annual exercise date. Compensation for purposes of the plan means an employee's base straight time gross earnings and commissions, but excludes payments for overtime, shift premium, incentive compensation, incentive payments, bonuses, expense reimbursements, fringe benefits and other compensation. The purchase price per share will be equal to 85% of the fair market value of a share of our common stock on the first trading day of the applicable offering period or, if lower, 85% of the fair market value of a share of our common stock on the semi-annual exercise date. No employee is permitted to purchase more than                        shares during each offering period or more than                        shares during each purchase period.

        The fair market value of a share of our common stock on any date will equal the closing sales price of a share of common stock on NASDAQ for such date, or if no sale occurred on such date, the first trading date immediately prior to such date during which a sale occurred, as reported in The Wall Street Journal or such other source as the plan administrator may deem reliable for such purposes.

        Termination of participation.    Employees may end their participation in an offering at any time during the offering period, and participation ends automatically on failure to qualify as an eligible employee for any reason. Upon such termination of the employee's participation in the Employee Stock Purchase Plan, such employee's payroll deductions not already used to purchase stock under the plan will be returned to the employee.

Adjustments

        In the event of a stock split, reverse stock split, stock dividend or similar change in our capitalization, the number of shares available for issuance under the plan and the purchase price and number of shares covered by options outstanding under the plan will be appropriately adjusted.

        In the event we merge with or into another corporation or sell all or substantially all of our assets, the outstanding rights under the plan will be assumed or an equivalent right substituted by the successor company or its parent or subsidiary. If the successor company or its parent or subsidiary refuses to assume the outstanding rights or substitute an equivalent right, then the offering period then in progress will be shortened by setting a new exercise date prior to the effective date of the transaction and all outstanding purchase rights will automatically be exercised on the new exercise date. The purchase price will be equal to 85% of the fair market value of a share of our common stock on the first trading day of the applicable offering period in which an acquisition occurs or, if lower, 85% of the fair market value of a share of our common stock on the date the purchase rights are exercised.

Termination or Amendment

        Our board of directors may at any time and for any reason terminate or amend the Employee Stock Purchase Plan. Generally, no amendment may make any change in any option previously granted which adversely affects the rights of any participant without such participant's consent, provided that an offering period may be terminated by our board of directors if it determines that the termination of the offering period or the plan is in the best interests of our company and our stockholders. To the extent necessary to comply with Section 423 of the Code, we will obtain stockholder approval of any amendment to the plan.

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        Without stockholder consent and without regard to whether any participant rights may be considered to have been "adversely affected," the plan administrator may change the offering periods, limit the frequency and/or number of changes in the amount withheld during an offering period, and establish such other limitations or procedures as it determines consistent with the plan. In addition, in the event our board of directors determines that the ongoing operation of the plan may result in unfavorable financial accounting consequences, our board may, in its discretion and, to the extent necessary or desirable, modify or amend the plan to reduce or eliminate such accounting consequence. Such modifications or amendments will not require stockholder approval or the consent of any plan participants.

        Unless earlier terminated by the plan administrator, the Employee Stock Purchase Plan will terminate on the tenth anniversary of the date of its initial adoption by our board.

Registration of Shares on Form S-8

        We intend to file with the SEC a registration statement on Form S-8 covering the shares of common stock issuable under the 1993 Stock Option Plan, the 1998 Equity Incentive Plan, the 2007 Incentive Award Plan and the Employee Stock Purchase Plan.

401(k) Plan

        We sponsor a defined contribution plan intended to qualify under Section 401 of the Code, or a 401(k) plan. Employees who are at least 18 years of age are generally eligible to participate and may enter the plan on the first day of the month coinciding with or following their date of hire. Participants may make pre-tax contributions to the plan of up to 100% of their eligible compensation, subject to a statutorily prescribed annual limit. Each participant is fully vested in his or her contributions and the investment earnings, if employed on or before December 31, 2005. For those employed on or after January 1, 2006, a four year (25% per year) vesting schedule is applied to matching and discretionary employer contributions. We make matching contributions to the 401(k) plan in an amount equal to 100% of employee salary deferrals. In applying this matching percentage, however, matching contributions in any plan year will not exceed $2,000. Contributions by the participants to the plan, and the income earned on these contributions, are generally not taxable to the participants until withdrawn. Participant contributions are held in trust as required by law. Individual participants may direct the trustee to invest their accounts in authorized investment alternatives.

Limitations of Liability and Indemnification

        Our amended and restated certificate of incorporation and amended and restated bylaws, each to be effective upon the completion of this offering, will provide that we will indemnify our directors and officers, and may indemnify our employees and other agents, to the fullest extent permitted by the Delaware General Corporation Law, which prohibits our amended and restated certificate of incorporation from limiting the liability of our directors for the following:


        If Delaware law is amended to authorize corporate action further eliminating or limiting the personal liability of a director, then the liability of our directors will be eliminated or limited to the fullest extent permitted by Delaware law, as so amended. Our amended and restated certificate of

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incorporation does not eliminate a director's duty of care and, in appropriate circumstances, equitable remedies, such as injunctive or other forms of non-monetary relief, remain available under Delaware law. This provision also does not affect a director's responsibilities under any other laws, such as the federal securities laws or other state or federal laws. Under our amended and restated bylaws, we are also be empowered to enter into indemnification agreements with our directors, officers, employees and other agents and to purchase insurance on behalf of any person whom we are required or permitted to indemnify.

        In addition to the indemnification required in our amended and restated certificate of incorporation and amended and restated bylaws, we entered into indemnification agreements with each of our current directors, officers, and some employees before the completion of this offering. These agreements provide for the indemnification of our directors, officers, and some employees for all reasonable expenses and liabilities incurred in connection with any action or proceeding brought against them by reason of the fact that they are or were our agents. We believe that these bylaw provisions and indemnification agreements are necessary to attract and retain qualified persons as directors and officers. We also maintain directors' and officers' liability insurance.

        The limitation of liability and indemnification provisions in our amended and restated certificate of incorporation and amended and restated bylaws may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duties. They may also reduce the likelihood of derivative litigation against directors and officers, even though an action, if successful, might benefit us and our stockholders. A stockholder's investment may be harmed to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions. Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, or the Securities Act, may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act, and is, therefore, unenforceable. There is no pending litigation or proceeding naming any of our directors or officers as to which indemnification is being sought, nor are we aware of any pending or threatened litigation that may result in claims for indemnification by any director or officer.

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Distribution Agreements

Japanese Distributor

        In June 1993, we entered into a distribution agreement with Marubeni Machinery & Engineering Corporation, a Japanese corporation, or Marubeni, which is an affiliate of Marubeni Corporation, a holder of more than 5% of our outstanding voting stock, to exclusively distribute the CyberKnife system in Japan. The agreement became effective on the date we first received an order from Marubeni, and the terms of the agreement provide that it would continue until seven years after approval from the Japanese Ministry of Health for the CyberKnife system, which approval was granted in November 1996. The agreement was subject to automatic renewal for two year periods, provided certain conditions are met. On December 1, 1995, the Medical Division of Marubeni established itself as Meditec Corporation, a Japanese corporation, or Meditec. With our written consent, Marubeni transferred its rights and responsibilities under the distribution agreement to Meditec, an entity affiliated with Marubeni. Under the agreement, the specific terms for each sale of the CyberKnife system by us to Meditec were generally set forth on a form of purchase order.

        In May 2003, we entered into an agreement with Meditec, under which we agreed, among other things, to upgrade previously purchased CyberKnife systems by Meditec. The aggregate purchase price for these upgrades was approximately $16.9 million. Under the agreement Meditec agreed to pay us a deposit of $1.0 million. The agreement provided that if we changed distributors in Japan, we would first fill new orders in Japan from existing inventory held by Meditec, with a payment of at least $1.5 million to be paid to Meditec when a system was installed. In addition, we agreed to refurbish one system for approximately $300,000. In January 2004, we entered into a distribution agreement with a different Japanese distributor and no longer distribute our products through Meditec in Japan. Existing Meditec customers at that time have been transitioned to the new distributor. During the years ended June 30, 2004, 2005 and 2006, we received payments of $13.1 million, $2.8 million and $9.8 million, respectively, relating to products and services provided to Meditec. As of September 30, 2006, Meditec had no outstanding accounts receivable with us.

Taiwanese Distributor

        In June 2004, we entered into distribution agreements with President Medical Technologies, Co., Ltd. Inc., a Taiwanese corporation, or PMTC, to exclusively distribute the CyberKnife system in Taiwan, Hong Kong and Macao SAR. This agreement became effective on June 1, 2004 and will expire on December 31, 2008. This agreement replaced a prior agreement with PMTC effective as of September 1, 2002, which replaced a prior agreement effective as of March 1, 2000. The term of the current agreement may be extended for additional one year periods if we and PMTC mutually agree. Under the agreement, PMTC must provide us a purchase order or letter of intent nine months in advance of the order's proposed shipment date. Within four to six months prior to the proposed shipment date, PMTC must pay us a non-refundable amount of $450,000. Of the balance, 90% is due upon presentation of documents evidencing shipment and 10% is due upon 180 days following shipment. The agreement may be terminated by either party for a material breach of the agreement which is not cured within 45 days of notice of that breach, or upon a change of control of us. Either party may terminate the agreement without cause within the first two years of the agreement, upon six months advance written notice to the other party. Payments from PMTC were $3.9 million, $21,000 and $632,000 for the years ended June 30, 2004, 2005 and 2006, respectively.

        President (BVI) International Investment Holdings Ltd., an affiliate of PMTC, is a holder of more than 5% of our outstanding voting stock. In addition, Mr. Tu, one of our directors, is President of President International Development Corporation, of which President (BVI) International Investment Holdings Ltd. is a wholly owned subsidiary, and is a director of PMTC.

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Investors' Rights Agreement

        We and certain holders of our capital stock have entered into an agreement, pursuant to which these stockholders will have registration rights with respect to their shares of common stock following this offering. See "Description of capital stock—registration rights" for a further description of the terms of this agreement.

Employment, Change of Control and Severance Agreements

        We have entered into offer letter agreements which contain certain change of control and severance provisions with our executive officers. See "Management—employment, change of control and severance agreements."

Consulting Agreements

        We are a party to two consulting agreements with Dr. Adler, one of our directors. See "Management—director compensation."

Indemnification of Directors and Officers

        Our articles of incorporation and bylaws in effect as of the date of this prospectus provide that we will indemnify each of our directors and officers to the fullest extent permitted by the California General Corporation Law. Our amended and restated certificate of incorporation and amended and restated bylaws to be effective upon the completion of this offering provide that we will indemnify each of our directors and officers to the fullest extent permitted by the Delaware General Corporation Law. Furthermore, we have entered into indemnification agreements with each of our directors and officers. For further information, see "Management—limitations of liability and indemnification." In addition, certain indemnification provisions are contained in Mr. Lindquist's offer letter. For further information, see "Management—employment, change of control and severance agreements.

Issuances of Common Stock

        We have issued options to our executive officers. See "Management—executive compensation."

        In June 2004 we granted Franz Cristiani, a former member of our board of directors, options exercisable for 108,000 shares of our common stock, Mr. Young options exercisable for 99,000 shares of our common stock, and Mr. Yu options exercisable for 99,000 shares of our common stock, all with an exercise price of $1.75 per share.

        In November 2004 we granted Mr. Wu options exercisable for 90,000 shares of our common stock, Mr. Young options exercisable for 9,000 shares of our common stock, and Mr. Yu options exercisable for 9,000 shares of our common stock, each with an exercise price of $3.50 per share.

        In June 2005 we granted Mr. Cristiani options exercisable for 18,000 shares of our common stock, Mr. Young options exercisable for 9,000 shares of our common stock, and Mr. Yu options exercisable for 9,000 shares of our common stock, each with an exercise price of $3.50 per share.

        In November 2005 we granted Mr. Young options exercisable for 9,000 shares of our common stock and Mr. Yu options exercisable for 9,000 shares of our common stock, each with an exercise price of $4.38 per share.

        In August 2006 we granted, each of Messrs. Cristiani, Wu, Young and Yu options exercisable for 18,000 shares of our common stock, each with an exercise price of $9.50 per share.

        In March 2004, we issued 2,280,000 shares of our common stock to Pacific Republic Capital, of which Wayne Wu, a director of Accuray, is an affiliate, upon exercise of a warrant to purchase shares

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of our common stock for an aggregate exercise price of $3,192,000. In March 2005, we issued 1,000,000 shares of our common stock to Pacific Republic Capital upon exercise of a warrant to purchase shares of our common stock for an aggregate exercise price of $1,400,000.

Other Arrangements

        Dr. Adler, a member of our board of directors, is a Professor of Neurosurgery and Radiation Oncology at Stanford University. During the years ended June 30, 2004, 2005 and 2006, we recognized revenue of $100,000, $585,000 and $195,000, respectively, relating to products and services provided to Stanford University. Advances and deferred revenue of $195,000 and $1,340,000 were recorded at June 30, 2005 and 2006, respectively, relating to payments made by Stanford University. We also have a license agreement with Stanford University. See "Business—intellectual property."

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PRINCIPAL AND SELLING STOCKHOLDERS

        The following table presents information as to the beneficial ownership of our common stock as of November 10, 2006 by:

        Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Unless otherwise indicated below, to our knowledge, the persons and entities named in the table have sole voting and sole investment power with respect to all shares beneficially owned, subject to community property laws where applicable. Shares of our common stock subject to options or warrants that are currently exercisable or exercisable within 60 days of November 10, 2006 are deemed to be outstanding and to be beneficially owned by the person holding the options or warrants for the purpose of computing the percentage ownership of that person but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.

        This table lists applicable percentage ownership based on 41,915,897 shares of common stock outstanding as of November 10, 2006, after giving effect to the conversion of our outstanding preferred stock into 25,186,285 shares of common stock immediately prior to the closing of this offering and the exercise of a warrant to purchase 525,000 shares of common stock immediately prior to the closing of this offering.

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        Unless otherwise indicated, the address for each of the stockholders in the table below is c/o Accuray Incorporated, 1310 Chesapeake Terrace, Sunnyvale, California 94089.

 
   Beneficial Ownership Prior to the Offering
    
    
Name and Address of Beneficial Owner
   Shares Beneficially Owned(1)
   Options and Warrants Exercisable Within 60 Days of November 10, 2006
   Percent before the Offering
   Shares Being Offered
   Percent after the Offering
5% Stockholders                    
President (BVI) International Investment Holdings Ltd.(2)   15,500,919   —   37.0 %      
Marubeni Corporation(3)   3,350,939   —   8.0        

Executive Officers and Directors
 
 
 
 
 
 
 
 
 
 
Euan S. Thomson, Ph.D   1,380,919   1,380,919   3.2        
Robert E. McNamara   306,251   306,251   *        
Chris A. Raanes   552,501   552,501   1.3        
Eric P. Lindquist   197,799   197,799   *        
Wade B. Hampton   —   —   *        
Wayne Wu(4)   813,280   74,625   1.9        
John R. Adler, Jr., M.D.   1,865,004   1,260,234   4.3        
Ted T.C. Tu(2)(5)   15,500,919   —   37.0        
Roderick A. Young   105,875   105,875   *        
Li Yu   104,688   104,688   *        
All executive officers and directors as a group (10 persons)   20,827,236   3,982,892   45.4 %      
*
Represents beneficial ownership of less than one percent (1%) of the outstanding shares of our common stock.

(1)
Includes shares of common stock issuable pursuant to stock options and warrants exercisable within 60 days of November 10, 2006.

(2)
The address of President (BVI) International Investment Holdings Ltd., or PIIH, and Mr. Tu is 10F-1, No. 560, Sec.4, Chung Hsiao East Road, Taipei 110, Taiwan, R.O.C. Mr. Tu, one of our directors, is the President of President International Development Corporation, or PIDC. PIIH is a wholly owned subsidiary of PIDC.

(3)
The address of Marubeni Corporation is 4-2 Ohtemachi 1-Chome, Chiyoda-Ku, Tokyo, Japan.

(4)
Includes 148,580 shares held by Mr. Wu's spouse. Mr. Wu disclaims beneficial ownership of such shares, except to the extent of his pecuniary interest therein.

(5)
Includes 15,500,919 shares held by PIIH.

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DESCRIPTION OF CAPITAL STOCK

General

        Upon the closing of this offering, our amended and restated certificate of incorporation will authorize us to issue up to 100,000,000 shares of common stock, $0.001 par value per share, and 5,000,000 shares of preferred stock, $0.001 par value per share. The following information assumes our reincorporation in Delaware, the filing of our amended and restated certificate of incorporation and the conversion of all outstanding shares of our preferred stock into shares of common stock upon the completion of this offering.

        Prior to the closing of this offering, we plan to reincorporate from California to Delaware to take advantage of the substantial and established judicial precedent in the Delaware courts as to the legal principles applicable to actions that may be taken by a corporation and to the conduct of a corporation's board of directors.

        As of June 30, 2006, and assuming the conversion of all outstanding preferred stock into common stock and the exercise of a warrant to purchase 525,000 shares of common stock immediately prior to the consummation of this offering, there were outstanding:


Common Stock

Dividend Rights

        Subject to preferences that may apply to shares of preferred stock outstanding at the time, the holders of outstanding shares of our common stock are entitled to receive dividends out of funds legally available at the times and in the amounts that our board of directors may determine.

Voting Rights

        Each holder of common stock is entitled to one vote for each share of common stock held on all matters submitted to a vote of stockholders. Cumulative voting for the election of directors will not be provided for in our amended and restated certificate of incorporation, which means that the holders of a majority of the shares voted can elect all of the directors then standing for election.

No Preemptive or Similar Rights

        Our common stock is not entitled to preemptive rights and is not subject to conversion or redemption.

Right to Receive Liquidation Distributions

        Upon our dissolution or liquidation, dissolution or winding-up, the assets legally available for distribution to our stockholders are distributable ratably among the holders of our common stock, subject to the preferential rights and payment of liquidation preferences, if any, on any outstanding shares of preferred stock.

Preferred Stock

        Upon the completion of this offering, our board of directors will have the authority, without further action by our stockholders, to issue up to 5,000,000 shares of preferred stock in one or more series and to fix the rights, preferences, privileges and restrictions thereof. These rights, preferences and privileges could include dividend rights, conversion rights, voting rights, terms of redemption,

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liquidation preferences, sinking fund terms and the number of shares constituting any series or the designation of such series, any or all of which may be greater than the rights of common stock. The issuance of our preferred stock could adversely affect the voting power of holders of common stock and the likelihood that such holders will receive dividend payments and payments upon liquidation. In addition, the issuance of preferred stock could have the effect of delaying, deferring or preventing a change of control of our company or other corporate action. Upon completion of this offering, no shares of preferred stock will be outstanding, and we have no present plan to issue any shares of preferred stock.

Anti-Takeover Provisions

Certificate of Incorporation and Bylaws to be in Effect Upon the Completion of This Offering

        Our amended and restated certificate of incorporation to be in effect upon the completion of this offering will provide for our board of directors to be divided into three classes, with staggered three-year terms. Only one class of directors will be elected at each annual meeting of our stockholders, with the other classes continuing for the remainder of their respective three-year terms. Because our stockholders do not have cumulative voting rights, our stockholders holding a majority of the shares of common stock outstanding will be able to elect all of our directors. Our amended and restated certificate of incorporation and amended and restated bylaws to be effective upon the completion of this offering will provide that all stockholder action must be effected at a duly called meeting of stockholders and not by a consent in writing, and that only our board of directors, chairman of the board, chief executive officer, or president (in the absence of a chief executive officer) may call a special meeting of stockholders.

        Our amended and restated certificate of incorporation will require a 662/3% stockholder vote for the amendment, repeal or modification of certain provisions of our amended and restated certificate of incorporation and amended and restated bylaws relating to the classification of our board of directors, the requirement that stockholder actions be effected at a duly called meeting, and the designated parties entitled to call a special meeting of the stockholders. The combination of the classification of our board of directors, the lack of cumulative voting and the 662/3% stockholder voting requirements will make it more difficult for our existing stockholders to replace our board of directors as well as for another party to obtain control of us by replacing our board of directors. Since our board of directors has the power to retain and discharge our officers, these provisions could also make it more difficult for existing stockholders or another party to effect a change in management. In addition, the authorization of undesignated preferred stock makes it possible for our board of directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to change our control.

        These provisions may have the effect of deterring hostile takeovers or delaying changes in our control or management. These provisions are intended to enhance the likelihood of continued stability in the composition of our board of directors and its policies and to discourage certain types of transactions that may involve an actual or threatened acquisition of us. These provisions are designed to reduce our vulnerability to an unsolicited acquisition proposal. The provisions also are intended to discourage certain tactics that may be used in proxy fights. However, such provisions could have the effect of discouraging others from making tender offers for our shares and, as a consequence, they also may inhibit fluctuations in the market price of our shares that could result from actual or rumored takeover attempts. Such provisions may also have the effect of preventing changes in our management.

Section 203 of the Delaware General Corporation Law

        We are subject to Section 203 of the Delaware General Corporation Law, which prohibits a Delaware corporation from engaging in any business combination with any interested stockholder for a

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period of three years after the date that such stockholder became an interested stockholder, with the following exceptions:

        In general, Section 203 defines business combination to include the following:

        In general, Section 203 defines an "interested stockholder" as an entity or person who, together with the person's affiliates and associates, beneficially owns, or within three years prior to the time of determination of interested stockholder status did own, 15% or more of the outstanding voting stock of the corporation.

Acceleration of Options Upon Change of Control

        Under our 1998 Equity Incentive Plan and 2007 Incentive Award Plan, in the event of certain mergers, a reorganization or consolidation of our company with or into another corporation or the sale of all or substantially all of our assets or all of our capital stock wherein the successor corporation does not assume outstanding options or issue equivalent options, our board of directors is required to accelerate vesting of options outstanding under that plan.

Registration rights

Demand Registration Rights

        After the completion of this offering, the holders of approximately 25,186,285 shares of our common stock will be entitled to certain demand registration rights. At any time beginning six months after the consummation of this offering, the holders of at least 30% of these shares can request that we

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register all or a portion of their shares. We will only be required to file two registration statements upon the stockholders' exercise of these demand registration rights. Additionally, we will not be required to effect a demand registration during the period beginning 60 days prior to the filing and six months following the effectiveness of a registration statement relating to a public offering of our securities.

Piggyback Registration Rights

        After the completion of this offering, the holders of approximately 25,186,285 shares of common stock will be entitled to certain piggyback registration rights. As a result, whenever we propose to file a registration statement under the Securities Act, other than with respect to a registration related to employee benefit plans, debt securities, or corporate reorganizations, the holders of registrable securities are entitled to notice of the registration and have the right, subject to limitations that the underwriters may impose on the number of shares included in the registration, to include their registrable shares in the registration. We will pay the registration expenses of the holders of registrable securities for the incidental or piggyback registrations.

Form S-3 Registration Rights

        After the completion of this offering, the holders of approximately 25,186,285 shares of our common stock will be entitled to request that we register their shares on Form S-3 if we are eligible to file a registration statement on Form S-3 and if the aggregate price to the public of the shares offered is at least $2.0 million. These stockholders may make an unlimited number of requests for registration on Form S-3. However, we will not be required to effect a registration on Form S-3 during the period beginning 60 days prior and six months following any underwritten public offering of our common stock or if we have effected two such registrations in a given 12 month period. Additionally, we are obligated to pay the registration expenses of only the first four of any such registrations on Form S-3.

        The registration rights described above will expire, with respect to any particular stockholder, after our initial public offering, when that stockholder can sell its shares under Rule 144 of the Securities Act during any 90-day period. In any event, all such registration rights shall expire three years after the consummation of this offering.

        In connection with this offering, each stockholder that has registration rights agreed not to sell or otherwise dispose of any securities without the prior written consent the underwriters for a period of 180 days, which may be extended in certain circumstances. See section entitled "Underwriting."

Listing

        We are applying to have our common stock listed on NASDAQ under the symbol "ARAY."

Transfer Agent and Registrar

        After the completion of this offering the transfer agent and registrar for our common stock will be Mellon Investor Services LLC.

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MATERIAL UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES TO NON-UNITED STATES HOLDERS OF OUR COMMON STOCK

        The following discussion describes the material U.S. federal income tax consequences to non-U.S. holders (as defined below) of the acquisition, ownership and disposition of our common stock issued pursuant to this offering. This discussion is not a complete analysis of all the potential U.S. federal income tax consequences relating thereto, nor does it address any estate tax consequences or any tax consequences arising under any state, local or foreign tax laws or any other U.S. federal tax laws. This discussion is based on the Code, Treasury Regulations promulgated thereunder, judicial decisions, and published rulings and administrative pronouncements of the Internal Revenue Service, or the IRS, all as in effect as of the date of this offering. These authorities may change, possibly retroactively, resulting in U.S. federal income tax consequences different from those discussed below. No ruling has been or will be sought from the IRS with respect to the matters discussed below, and there can be no assurance that the IRS will not take a contrary position regarding the tax consequences of the acquisition, ownership or disposition of our common stock, or that any such contrary position would not be sustained by a court.

        This discussion is limited to non-U.S. holders who purchase our common stock issued pursuant to this offering and who hold our common stock as a capital asset within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion does not address all U.S. federal income tax considerations that may be relevant to a particular holder in light of that holder's particular circumstances. This discussion also does not consider any specific facts or circumstances that may be relevant to holders subject to special rules under the U.S. federal income tax laws, including, without limitation, U.S. expatriates, partnerships and other pass-through entities, "controlled foreign corporations," "passive foreign investment companies," "foreign personal holding companies," corporations that accumulate earnings to avoid U.S. federal income tax, financial institutions, insurance companies, brokers, dealers or traders in securities, commodities or currencies, tax-exempt organizations, tax-qualified retirement plans, persons subject to the alternative minimum tax, and persons holding our common stock as part of a hedging or conversion transaction or straddle, or a constructive sale, or other risk reduction strategy.

        PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISORS REGARDING THE PARTICULAR U.S. FEDERAL INCOME TAX CONSEQUENCES TO THEM OF ACQUIRING, OWNING AND DISPOSING OF OUR COMMON STOCK, AS WELL AS ANY TAX CONSEQUENCES ARISING UNDER ANY STATE, LOCAL OR FOREIGN TAX LAWS AND ANY OTHER U.S. FEDERAL TAX LAWS.

Definition of Non-U.S. Holder

        For purposes of this discussion, a non-U.S. holder is any beneficial owner of our common stock that is not a "U.S. person" or a partnership for U.S. federal income tax purposes. A U.S. person is any of the following:

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        If a partnership (or other entity taxed as a partnership for U.S. federal income tax purposes) holds our common stock, the tax treatment of a partner in the partnership generally will depend on the status of the partner and upon the activities of the partnership. Accordingly, partnerships that hold our common stock and partners in such partnerships are urged to consult their tax advisors regarding the specific U.S. federal income tax consequences to them.

Distributions on Our Common Stock

        Payments on our common stock will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Amounts not treated as dividends for U.S. federal income tax purposes will constitute a return of capital and will first be applied against and reduce a holder's adjusted tax basis in the common stock, but not below zero. Any excess will be treated as capital gain.

        Dividends paid to a non-U.S. holder of our common stock that are not effectively connected with a United States trade or business conducted by such holder generally will be subject to U.S. federal withholding tax at a rate of 30% of the gross amount of the dividends, or such lower rate specified by an applicable tax treaty. To receive the benefit of a reduced treaty rate, a non-U.S. holder must furnish to us or our paying agent a valid IRS Form W-8BEN (or applicable successor form) certifying such holder's qualification for the reduced rate. This certification must be provided to us or our paying agent prior to the payment of dividends and must be updated periodically. Non-U.S. holders that do not timely provide us or our paying agent with the required certification, but which qualify for a reduced treaty rate, may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the IRS.

        If a non-U.S. holder holds our common stock in connection with the conduct of a trade or business in the United States, and dividends paid on the common stock are effectively connected with such holder's United States trade or business, the non-U.S. holder will be exempt from U.S. federal withholding tax. To claim the exemption, the non-U.S. holder must furnish to us or our paying agent a properly executed IRS Form W-8ECI (or applicable successor form).

        Any dividends paid on our common stock that are effectively connected with a non-U.S. holder's U.S. trade or business (or if required by an applicable tax treaty, attributable to a permanent establishment maintained by the non-U.S. holder in the United States) generally will be subject to U.S. federal income tax on a net income basis in the same manner as if such holder were a resident of the United States, unless an applicable tax treaty provides otherwise. A non-U.S. holder that is a foreign corporation also may be subject to a branch profits tax equal to 30% (or such lower rate specified by an applicable tax treaty) of a portion of its effectively connected earnings and profits for the taxable year. Non-U.S. holders are urged to consult any applicable tax treaties that may provide for different rules.

        A non-U.S. holder who claims the benefit of an applicable income tax treaty generally will be required to satisfy applicable certification and other requirements prior to the distribution date. Non-U.S. holders should consult their tax advisors regarding their entitlement to benefits under a relevant income tax treaty.

Gain on Disposition of Our Common Stock

        A non-U.S. holder generally will not be subject to U.S. federal income tax on any gain realized upon the sale or other disposition of our common stock unless:

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        Generally, a corporation is a USRPHC if the fair market value of its U.S. real property interests equals or exceeds 50% of the sum of the fair market value of its worldwide real property interests plus its other assets used or held for use in a trade or business. We believe that we currently are not and will not become a USRPHC. However, because the determination of whether we are a USRPHC depends on the fair market value of our U.S. real property interests relative to the fair market value of our other business assets, there can be no assurance that we will not become a USRPHC in the future. In the event we do become a USRPHC, as long as our common stock is regularly traded on an established securities market, our common stock will be treated as U.S. real property interests only with respect to a non-U.S. holder that actually or constructively holds more than 5% of our common stock.

        Unless an applicable tax treaty provides otherwise, gain described in the first bullet point above will be subject to U.S. federal income tax on an net income basis in the same manner as if such holder were a resident of the United States. Non-U.S. holders that are foreign corporations also may be subject to a branch profits tax equal to 30% (or such lower rate specified by an applicable tax treaty) of a portion of its effectively connected earnings and profits for the taxable year. Non-U.S. holders are urged to consult any applicable tax treaties that may provide for different rules.

        Gain described in the second bullet point above will be subject to U.S. federal income tax at a flat 30% rate, but may be offset by U.S. source capital losses.

Information Reporting and Backup Withholding

        We must report annually to the IRS and to each non-U.S. holder the amount of dividends on our common stock paid to such holder and the amount of any tax withheld with respect to those dividends. These information reporting requirements apply even if no withholding was required because the dividends were effectively connected with the holder's conduct of a U.S. trade or business, or withholding was reduced or eliminated by an applicable tax treaty. This information also may be made available under a specific treaty or agreement with the tax authorities in the country in which the non-U.S. holder resides or is established. Backup withholding, currently at a 28% rate, however, generally will not apply to payments of dividends to a non-U.S. holder of our common stock provided the non-U.S. holder furnishes to us or our paying agent the required certification as to its non-U.S. status, such as by providing a valid IRS Form W-8BEN or W-8ECI, or certain other requirements are met. Notwithstanding the foregoing, backup withholding may apply if either we or our paying agent has actual knowledge, or reason to know, that the holder is a U.S. person that is not an exempt recipient.

        Payments of the proceeds from a disposition by a non-U.S. holder of our common stock made by or through a foreign office of a broker generally will not be subject to information reporting or backup withholding. However, information reporting (but not backup withholding) will apply to those payments if the broker does not have documentary evidence that the beneficial owner is a non-U.S. holder, an exemption is not otherwise established, and the broker is:

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        Payment of the proceeds from a non-U.S. holder's disposition of our common stock made by or through the U.S. office of a broker generally will be subject to information reporting and backup withholding unless the non-U.S. holder certifies as to its non-U.S. holder status under penalties of perjury, such as by providing a valid IRS Form W-8BEN or W-8ECI, or otherwise establishes an exemption from information reporting and backup withholding.

        Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against a non-U.S. holder's U.S. federal income tax liability, provided the required information is timely furnished to the IRS.

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SHARES ELIGIBLE FOR FUTURE SALE

        Prior to this offering, there has been no public market for our common stock, and we cannot predict the effect, if any, that market sales of shares of our common stock or the availability of shares of our common stock for sale will have on the market price of our common stock prevailing from time to time. Nevertheless, sales of substantial amounts of our common stock, including shares issued upon exercise of outstanding warrants or options, in the public market after this offering could adversely affect market prices prevailing from time to time and could impair our ability to raise capital through the sale of our equity securities.

        Upon the completion of this offering, based on the number of shares outstanding as of June 30, 2006, we will have                                    shares of common stock outstanding, assuming no exercise of the underwriters' over allotment option and no exercise of outstanding options or warrants. Of the outstanding shares, all of the shares sold in this offering will be freely tradable, except that any shares held by our affiliates, as that term is defined in Rule 144 under the Securities Act, may only be sold in compliance with the limitations described below.

        The remaining                        shares of common stock will be deemed restricted securities as defined under Rule 144. Restricted securities may be sold in the public market only if registered or if they qualify for an exemption from registration under Rule 144, 144(k) or 701 promulgated under the Securities Act, which rules are summarized below. Subject to the lock-up agreements described below, all of these restricted securities will be available for sale in the public market beginning 180 days after the date of this prospectus under Rule 144, subject in some cases to volume limitations, Rule 144(k) or Rule 701.

Lock-Up Agreements

        All of our directors and officers and substantially all of our stockholders have signed lock-up agreements under which they have agreed not to sell, transfer or dispose of, directly or indirectly, any shares of our common stock or any securities into or exercisable or exchangeable for shares of our common stock without the prior written consent of J.P. Morgan Securities Inc. and UBS Securities LLC, for a period of 180 days, subject to a possible extension under certain circumstances, after the date of this prospectus. These agreements are described below under "Underwriting."

Rule 144

        In general, under Rule 144 as currently in effect, a person, or group of persons whose shares are required to be aggregated, who has beneficially owned shares that are restricted securities as defined in Rule 144 for at least one year is entitled to sell, within any three-month period commencing 90 days after the date of this prospectus, a number of shares that does not exceed the greater of:

        In addition, a person who is not deemed to have been an affiliate at any time during the three months preceding a sale and who has beneficially owned the shares proposed to be sold for at least two years would be entitled to sell these shares under Rule 144(k) without regard to the requirements described above. To the extent that shares were acquired from one of our affiliates, a person's holding period for the purpose of effecting a sale under Rule 144 would commence on the date of transfer from the affiliate.

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Rule 701

        In general, under Rule 701 of the Securities Act, any of our employees, directors, officers, consultants or advisors who purchased shares from us in connection with a compensatory stock or option plan or other written agreement is eligible to resell those shares in reliance on Rule 144, but without compliance with certain restrictions, including the holding period contained in Rule 144. However, substantially all shares issued under Rule 701 are subject to lock-up agreements and will only become eligible for sale at the expiration of such agreements.

Registration Rights

        On the date beginning 180 days after the date of this prospectus, the holders of 30,023,175 shares of our common stock, or their transferees, will be entitled to certain rights with respect to the registration of those shares under the Securities Act. For a description of these registration rights, please see "Description of Capital Stock—registration rights." After these shares are registered, they will be freely tradable without restriction under the Securities Act.

Stock Options

        As of June 30, 2006, options to purchase a total of 10,900,285 shares of our common stock were outstanding. We intend to file a registration statement on Form S-8 under the Securities Act to register all shares of our common stock subject to outstanding options, all shares of our common stock issued upon exercise of stock options and all shares of our common stock issuable under our stock option and employee stock purchase plans. Accordingly, shares of our common stock issued under these plans will be eligible for sale in the public markets, subject to vesting restrictions and the lock-up agreements described above.

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UNDERWRITING

        J.P. Morgan Securities Inc. and UBS Securities LLC are acting as joint bookrunning managers of the offering, and, together with Piper Jaffray & Co. and Jefferies & Company, Inc., are acting as representatives of the underwriters named below. Subject to the terms and conditions stated in the underwriting agreement dated the date of this prospectus, each underwriter named below has agreed to purchase, and we and the selling stockholders have agreed to sell to that underwriter, the number of shares set forth opposite the underwriter's name.

Underwriter
   Number of shares
J.P. Morgan Securities Inc.    
UBS Securities LLC    
Piper Jaffray & Co.    
Jefferies & Company, Inc.    
  Total    

        The underwriting agreement provides that the obligations of the underwriters to purchase the shares included in this offering are subject to approval of legal matters by counsel and to other conditions. The underwriters are obligated to purchase all the shares (other than those covered by the over-allotment option described below) if they purchase any of the shares.

        The underwriters propose to offer some of the shares directly to the public at the public offering price set forth on the cover page of this prospectus and some of the shares to dealers at the public offering price less a concession not to exceed $                        per share. The underwriters may allow, and dealers may reallow, a concession not to exceed $                        per share on sales to other dealers. If all of the shares are not sold at the initial offering price, the representatives may change the public offering price and the other selling terms.

        We and the selling stockholders have granted to the underwriters an option, exercisable for 30 days from the date of this prospectus, to purchase up to                                    additional shares of our common stock at the public offering price less the underwriting discount. The underwriters may exercise the option solely for the purpose of covering over-allotments, if any, in connection with this offering. To the extent the option is exercised, each underwriter must purchase a number of additional shares approximately proportionate to that underwriter's initial purchase commitment.

        We, our officers and directors and our other stockholders have agreed that, for a period of 180 days from the date of this prospectus, we and they will not, without the prior written consent of each of J.P. Morgan Securities Inc. and UBS Securities LLC, dispose of or hedge any shares of our common stock or any securities convertible into or exchangeable for our common stock, subject to customary exceptions. After the 180-day lock-up period, these shares may be sold, subject to applicable securities laws. Notwithstanding the foregoing, for the purpose of allowing the underwriters to comply with NASD Rule 2711(f)(4), if:

then in each case the initial 180-day lock-up period will be extended until the expiration of the 18-day period beginning on the issuance of the earnings release or the occurrence of the material news or material event, unless J.P. Morgan Securities Inc. and UBS Securities LLC waive, in writing, such extension.

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        Prior to this offering, there has been no public market for our common stock. Consequently, the initial public offering price for the shares was determined by negotiations between us and the representatives. Among the factors considered in determining the initial public offering price were our record of operations, our current financial condition, our future prospects, our markets, the economic conditions in and future prospects for the industry in which we compete, our management, and currently prevailing general conditions in the equity securities markets, including current market valuations of publicly traded companies considered comparable to our company. We cannot assure you, however, that the prices at which the shares will sell in the public market after this offering will not be lower than the initial public offering price or that an active trading market in our common stock will develop and continue after this offering.

        The following table shows the underwriting discounts and commissions that we and the selling stockholders are to pay to the underwriters in connection with this offering. These amounts are shown assuming both no exercise and full exercise of the underwriters' option to purchase additional shares of common stock.

 
   Paid by us
   Paid by the selling stockholders
 
   No exercise
   Full exercise
   No exercise
   Full exercise
Per share   $   $   $   $
   
 
 
 
Total   $   $   $   $
   
 
 
 

        In connection with the offering, the underwriters may purchase and sell shares of our common stock in the open market. These transactions may include short sales and syndicate covering transactions. Short sales involve syndicate sales of common stock in excess of the number of shares to be purchased by the underwriters in the offering, which creates a syndicate short position. "Covered" short sales are sales of shares made in an amount up to the number of shares represented by the underwriters' over-allotment option. In determining the source of shares to close out the covered syndicate short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the overallotment option. Transactions to close out the covered syndicate short involve either purchases of our common stock in the open market after the distribution has been completed or the exercise of the over-allotment option. The underwriters may also make "naked" short sales of shares in excess of the over-allotment option. The underwriters must close out any "naked" short position by purchasing shares of our common stock in the open market. A "naked" short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the shares in the open market after pricing that could adversely affect investors who purchase in the offering.

        In addition, the underwriters may stabilize or maintain the price of our common stock by bidding for or purchasing shares of our common stock in the open market and may impose penalty bids. If penalty bids are imposed, selling concessions allowed to syndicate members or other broker-dealers participating in this offering are reclaimed if shares of our common stock previously distributed in this offering are repurchased, whether in connection with stabilization transactions or otherwise. The effect of these transactions may be to stabilize or maintain the market price of our common stock at a level above that which might otherwise prevail in the open market. The imposition of a penalty bid may also affect the price of our common stock to the extent that it discourages resales of our common stock. The magnitude or effect of any stabilization or other transactions is uncertain. These transactions may be effected on NASDAQ or otherwise and, if commenced, may be discontinued at any time.

        Any of these activities may have the effect of preventing or retarding a decline in the market price of our common stock. They may also cause the price of our common stock to be higher than the price

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that would otherwise exist in the open market in the absence of these transactions. The underwriters may conduct these transactions on NASDAQ or in the over-the-counter market, or otherwise. If the underwriters commence any of these transactions, they may discontinue them at any time.

        We estimate that our total expenses of this offering will be $                        .

        The underwriters may, from time to time, engage in transactions with and perform services for us in the ordinary course of their business.

        A prospectus in electronic format may be made available on the websites maintained by one or more of the underwriters. The representatives may agree to allocate a number of shares to underwriters for sale to their online brokerage account holders. The representatives will allocate shares to underwriters that may make Internet distributions on the same basis as other allocations. In addition, shares may be sold by the underwriters to securities dealers who resell shares to online brokerage account holders.

        We and the selling stockholders have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act, or to contribute to payments the underwriters may be required to make because of any of those liabilities.

Notice to Prospective Investors in the European Economic Area

        In relation to each member state of the European Economic Area that has implemented the Prospectus Directive (each, a relevant member state), with effect from and including the date on which the Prospectus Directive is implemented in that relevant member state (the relevant implementation date), an offer of our common stock described in this prospectus may not be made to the public in that relevant member state prior to the publication of a prospectus in relation to our common stock that has been approved by the competent authority in that relevant member state or, where appropriate, approved in another relevant member state and notified to the competent authority in that relevant member state, all in accordance with the Prospectus Directive, except that, with effect from and including the relevant implementation date, an offer of securities may be offered to the public in that relevant member state at any time:

        Each purchaser of our common stock described in this prospectus located within a relevant member state will be deemed to have represented, acknowledged and agreed that it is a "qualified investor" within the meaning of Article 2(1)(e) of the Prospectus Directive.

        For purposes of this provision, the expression an "offer to the public" in any relevant member state means the communication in any form and by any means of sufficient information on the terms of the offer and the securities to be offered so as to enable an investor to decide to purchase or subscribe the securities, as the expression may be varied in that member state by any measure implementing the Prospectus Directive in that member state, and the expression "Prospectus Directive" means Directive 2003/71/ EC and includes any relevant implementing measure in each relevant member state.

        The sellers of our common stock have not authorized and do not authorize the making of any offer of our common stock through any financial intermediary on their behalf, other than offers made

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by the underwriters with a view to the final placement of our common stock as contemplated in this prospectus. Accordingly, no purchaser of our common stock, other than the underwriters, is authorized to make any further offer of our common stock on behalf of the sellers or the underwriters.

Notice to Prospective Investors in the United Kingdom

        This prospectus is only being distributed to, and is only directed at, persons in the United Kingdom that are qualified investors within the meaning of Article 2(1)(e) of the Prospectus Directive, or Qualified Investors, that are also (i) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000, or Financial Promotion, Order 2005, or the Order, or (ii) high net worth entities, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as relevant persons). This prospectus and its contents are confidential and should not be distributed, published or reproduced (in whole or in part) or disclosed by recipients to any other persons in the United Kingdom. Any person in the United Kingdom that is not a relevant person should not act or rely on this document or any of its contents.

Notice to Prospective Investors in France

        Neither this prospectus nor any other offering material relating to our common stock described in this prospectus has been submitted to the clearance procedures of the Autorité des Marchés Financiers or by the competent authority of another member state of the European Economic Area and notified to the Autorité des Marchés Financiers. Our common stock have not been offered or sold and will not be offered or sold, directly or indirectly, to the public in France. Neither this prospectus nor any other offering material relating to our common stock has been or will be:

Such offers, sales and distributions will be made in France only:

        Our common stock may be resold directly or indirectly, only in compliance with Articles L.411-1, L.411-2, L.412-1 and L.621-8 through L.621-8-3 of the French Code monétaire et financier.

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LEGAL MATTERS

        Certain legal matters with respect to the legality of the issuance of the shares of common stock offered by this prospectus will be passed upon for us by Latham & Watkins LLP, Menlo Park, California. Certain legal matters in connection with the offering will be passed upon for the underwriters by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo Alto, California.


EXPERTS

        Our consolidated financial statements for the years ended June 30, 2004, 2005, and 2006 were audited by Grant Thornton LLP. The consolidated financial statements as of June 30, 2005 and 2006, and for each of the three years in the period ended June 30, 2006, included in this prospectus have been so included in reliance on the reports of Grant Thornton LLP, independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.


CHANGE IN ACCOUNTANTS

        On June 1, 2006, with the approval of our board of directors, we dismissed PricewaterhouseCoopers LLP as our independent registered public accounting firm previously engaged as the principal accountant to audit our consolidated financial statements and engaged Grant Thornton LLP as our independent registered public accounting firm. Although we had engaged PricewaterhouseCoopers LLP to audit our financial statements for the fiscal years ended June 30, 2004 and 2005, PricewaterhouseCoopers LLP had not completed these audits at the time of their dismissal and accordingly, had not delivered to us a report on our financial statements for that period.

        During the 2004 and 2005 fiscal years and the subsequent interim period preceding PricewaterhouseCoopers LLP's dismissal, there were no reportable events (as defined in Item 304(a)(1)(iii) of Regulation S-K) or disagreements with PricewaterhouseCoopers LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which reportable events or disagreements, if not resolved to the satisfaction of PricewaterhouseCoopers LLP, would have caused it to make reference to the subject matter of the reportable events or disagreements in connection with its reports, other than a material weakness relating to the misapplication of revenue recognition accounting policies which PricewaterhouseCoopers LLP identified relative to fiscal 2004.

        PricewaterhouseCoopers LLP was provided with a copy of the above statements and we requested that it furnish a letter addressed to the Commission stating whether it agrees with these statements. A copy of PricewaterhouseCoopers LLP's letter, if any, will be included as an exhibit to the registration statement of which this prospectus is a part.

        During the 2004 and 2005 fiscal years, and the subsequent interim period prior to engaging Grant Thornton LLP, neither we nor anyone on our behalf consulted Grant Thornton LLP regarding either (1) the application of accounting principles to a specified transaction regarding us, either completed or proposed, or the type of audit opinion that might be rendered on our consolidated financial statements, or (2) any matter regarding us that was a disagreement, as that term is defined in Item 304(a)(1)(iv) of Regulation S-K, or a reportable event, as that term is defined in Item 304(a)(1)(iii) of Regulation S-K. Grant Thornton LLP has reported on the consolidated financial statements for each of the fiscal years ended June 30, 2004, 2005 and 2006 included in this prospectus.

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WHERE YOU CAN FIND MORE INFORMATION

        We have filed with the Securities and Exchange Commission a registration statement on Form S-1 under the Securities Act with respect to the common stock. This prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement, some items of which are contained in exhibits to the registration statement as permitted by the rules and regulations of the Commission. For further information with respect to us and our common stock, we refer you to the registration statement, including the exhibits and the consolidated financial statements and notes filed as a part of the registration statement. Statements contained in this prospectus concerning the contents of any contract or any other document are not necessarily complete. If a contract or document has been filed as an exhibit to the registration statement, please see the copy of the contract or document that has been filed. Each statement is this prospectus relating to a contract or document filed as an exhibit is qualified in all respects by the filed exhibit. The exhibits to the registration statement should be referenced for the complete contents of these contracts and documents. You may obtain copies of this information by mail from the Public Reference Section of the SEC, 100 F Street, N.E., Room 1580, Washington, D.C. 20549, at prescribed rates. You may obtain information on the operation of the public reference rooms by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet website that contains reports, proxy statements and other information about issuers, like us, that file electronically with the SEC. The address of that website is www.sec.gov.

        As a result of this offering, we will become subject to the information and reporting requirements of the Exchange Act and, in accordance with this law, will file periodic reports, proxy statements and other information with the Commission. These periodic reports, proxy statements and other information will be available for inspection and copying at the Commission's public reference facilities and the website of the SEC referred to above.

119


ACCURAY INCORPORATED

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 
   Page
Report of Independent Registered Public Accounting Firm   F-2
Consolidated Balance Sheets   F-3
Consolidated Statements of Operations   F-4
Consolidated Statements of Temporary Equity and Stockholders' Equity (Deficiency)   F-5
Consolidated Statements of Cash Flows   F-7
Notes to Consolidated Financial Statements   F-8

F-1


Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders
Accuray Incorporated

We have audited the accompanying consolidated balance sheets of Accuray Incorporated and subsidiaries as of June 30, 2005 and 2006, and the related consolidated statements of operations, temporary equity and stockholders' equity (deficiency), and cash flows for each of the three years in the period ended June 30, 2006. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Accuray Incorporated and subsidiaries as of June 30, 2005 and 2006, and the consolidated results of their operations and their cash flows for each of the three years in the period ended June 30, 2006 in conformity with accounting principles generally accepted in the United States of America.

/s/ Grant Thornton LLP

San Francisco, California
November 7, 2006

F-2


Accuray Incorporated

Consolidated Balance Sheets

(in thousands, except share amounts)

 
    
    
   (unaudited)

  
 
   June 30,
   Pro forma
stockholders'
equity (deficiency) at June 30, 2006
  
 
   2005
   2006
  
 
  
 
 
Assets                    
Current assets:                    
  Cash and cash equivalents   $ 17,024   $ 27,856        
  Restricted cash     158     1        
  Accounts receivable, net of allowance for doubtful accounts of $45 and $20 at June 30, 2005 and 2006, respectively     5,087     11,698        
  Inventories     6,371     10,100        
  Prepaid expenses and other current assets     1,933     3,512        
  Deferred cost of revenue—current     3,095     4,810        
   
       
    Total current assets     33,668     57,977        
   
       
Property and equipment, net     12,961     21,945        
Goodwill     4,495     4,495        
Intangible assets, net     1,688     1,446        
Deferred cost of revenue—noncurrent     33,381     51,778        
Other assets     667     982        
   
       
    Total assets   $ 86,860   $ 138,623        
   
       

Liabilities, temporary equity and stockholders' equity (deficiency)
 
 
 
 
 
 
 
 
 
 
Current liabilities:                    
  Accounts payable   $ 5,445   $ 4,726        
  Accrued compensation     2,827     8,561        
  Other accrued liabilities     2,805     6,494        
  Note payable—current     2,893     —        
  Customer advances—current     10,152     10,338        
  Deferred revenue—current     7,365     31,641        
   
       
    Total current liabilities     31,487     61,760        
   
       

Long-term liabilities:
 
 
 
 
 
 
 
 
 
 
  Customer advances—noncurrent     1,431     12,191        
  Deferred revenue—noncurrent     82,610     118,023        
   
       
    Total liabilities     115,528     191,974        
   
       
Commitments and contingencies (Note 8)                    
Temporary equity:                    
  Redeemable convertible preferred stock, no par value                    
    Authorized: 30,000,000 shares; issued and outstanding: 17,419,331 shares at June 30, 2005 and 2006; liquidation amount: $36,497 and $40,354 at June 30, 2005 and 2006, respectively; Pro forma: preferred stock, par value $0.001 per share; 5,000,000 shares authorized, no shares issued and outstanding (unaudited)     27,504     27,504     —  
   
       

Stockholders' equity (deficiency)
 
 
 
 
 
 
 
 
 
 
  Common stock, no par value, 70,000,000 shares authorized, 15,815,532 and 16,243,150 shares issued and outstanding at June 30, 2005 and 2006, respectively; Pro forma: 100,000,000 shares authorized, par value $0.001 per share, 41,954,435 shares issued and outstanding (unaudited)     12,653     13,276     42  
  Additional paid-in capital     37,481     43,988     85,251  
  Notes receivable from stockholders     (331 )   (206 )   (206 )
  Deferred stock-based compensation     (19,008 )   (17,272 )   (17,272 )
  Accumulated other comprehensive loss     (20 )   —     —  
  Accumulated deficit     (86,947 )   (120,641 )   (120,641 )
   
 
    Total stockholders' equity (deficiency)     (56,172 )   (80,855 ) $ (52,826 )
   
 
    Total liabilities, temporary equity and stockholders' equity (deficiency)   $ 86,860   $ 138,623        
   
       

Assets and liabilities include related party transaction amounts as follows:
 
 
   2005
   2006
    
  
 
  
   
  
  Accounts receivable   $ 440   $ 1        
  Deferred cost of revenue—current   $ 2,512   $ 2,929        
  Deferred cost of revenue—noncurrent   $ 9,919   $ 7,254        
  Customer advances—current   $ —   $ 2,290        
  Customer advances—noncurrent   $ 1,000   $ 3,951        
  Deferred revenue—current   $ 5,571   $ 7,169        
  Deferred revenue—noncurrent   $ 18,032   $ 15,375        

The accompanying notes are an integral part of these consolidated financial statements.

F-3


Accuray Incorporated

Consolidated Statements of Operations

(in thousands, except share amounts)

 
   Years ended June 30,
  
 
   2004
   2005
   2006
  
 
  
 
Net revenue:                    
  Products   $ 12,639   $ 9,636   $ 36,089  
  Shared ownership programs     4,831     8,067     8,145  
  Services     1,974     3,050     4,848  
  Other     125     1,624     3,815  
   
 
    Total net revenue     19,569     22,377     52,897  
Cost of revenue:                    
  Costs of products     6,135     6,422     18,531  
  Costs of shared ownership programs     1,076     1,572     2,513  
  Costs of services     1,275     2,044     3,948  
  Costs of other     10     1,077     2,500  
   
 
    Total cost of revenue     8,496     11,115     27,492  
   
 
    Gross profit     11,073     11,262     25,405  
   
 
Operating expenses:                    
    Selling and marketing     10,647     16,361     25,186  
    Research and development     7,311     11,655     17,788  
    General and administrative     4,672     8,129     15,923  
   
 
    Total operating expenses     22,630     36,145     58,897  
   
 
Loss from operations     (11,557 )   (24,883 )   (33,492 )
Other income (expense):                    
  Interest and other income     13     156     438  
  Interest and other expense     (149 )   (394 )   (382 )
   
 
Loss before provision for income taxes     (11,693 )   (25,121 )   (33,436 )
Provision for income taxes     3     68     258  
   
 
Net loss   $ (11,696 ) $ (25,189 ) $ (33,694 )
   
 
Net loss per common share, basic and diluted   $ (1.00 ) $ (1.76 ) $ (2.11 )
   
 
Weighted-average shares used in computing net loss per common share, basic and diluted     11,737,265     14,282,643     15,997,419  
   
 

Revenue and cost of revenue include related party transaction amounts as follows:
 

 
 
2004
 
2005
 
2006
 
 
  
 
Net revenue:                    
  Products   $ 2,225   $ 7,252   $ —  
  Services   $ 113   $ 1,446   $ 2,195  
  Other   $ 100   $ 1,583   $ 3,754  
Cost of revenue:                    
  Costs of products   $ 1,062   $ 1,954   $ —  
  Costs of services   $ —   $ 47   $ 140  
  Costs of other   $ 10   $ 1,037   $ 2,463  

Costs of revenue, selling and marketing, research and development, and general and administrative charges include stock-based compensation as follows:
 

 
 
2004
 
2005
 
2006
 
 
  
 
  Cost of revenue   $ 190   $ 454   $ 863  
  Selling and marketing   $ 826   $ 1,903   $ 2,569  
  Research and development   $ 648   $ 1,157   $ 1,574  
  General and administrative   $ 785   $ 2,812   $ 3,237  

The accompanying notes are an integral part of these consolidated financial statements.

F-4


Accuray Incorporated

Consolidated Statements of Temporary Equity
and Stockholders' Equity (Deficiency)

(in thousands, except share amounts)

 
   Redeemable convertible preferred stock
    
    
    
    
    
    
    
    
  
 
   Common stock
   Additional
paid-in
capital
   Notes
receivable
from
stockholders
   Deferred
stock-based
compensation
   Accumulated
other
comprehensive
income (loss)
    
   Total
stockholders'
equity (deficiency)
  
 
   Accumulated
deficit
  
 
   Shares
   Amount
   Shares
   Amount
  
 
  
 
 
Balances at June 30, 2003   17,419,331   $ 27,504   10,706,625   $ 7,316   $ 11,846   $ —   $ (2,148 ) $ —   $ (50,062 ) $ (33,048 )
Exercise of common stock warrants   —     —   2,280,000     3,192     —     —     —     —     —     3,192  
Exercise of stock options   —     —   610,739     249     —     —     —     —     —     249  
Deferred stock-based compensation   —     —   —     —     11,365     —     (11,365 )   —     —     —  
Reversal of deferred stock-based compensation   —     —   —     —     (1,078 )   —     1,078     —     —     —  
Amortization of deferred stock-based compensation   —     —   —     —     —     —     2,312     —     —     2,312  
Compensation expense related to options issued to non-employees   —     —   —     —     137     —     —     —     —     137  
Cumulative translation adjustment   —     —   —     —     —     —     —     (7 )   —     (7 )
Net loss   —     —   —     —     —     —     —     —     (11,696 )   (11,696 )
                                                     
 
Total comprehensive loss                                                       (11,703 )
   
 
 
Balances at June 30, 2004   17,419,331     27,504   13,597,364     10,757     22,270     —     (10,123 )   (7 )   (61,758 )   (38,861 )
Exercise of common stock warrants   —     —   1,000,000     1,400     —     —     —     —     —     1,400  
Exercise of stock options   —     —   842,315     416     —     —     —     —     —     416  
Exercise of stock options using notes   —     —   447,839     331     —     (331 )   —     —     —     —  
Stock repurchased   —     —   (71,986 )   (251 )   —     —     —     —     —     (251 )
Deferred stock-based compensation   —     —   —     —     15,631     —     (15,631 )   —     —     —  
Reversal of deferred stock-based compensation   —     —   —     —     (1,215 )   —     1,215     —     —     —  
Amortization of deferred stock-based compensation   —     —   —     —     —     —     5,531     —     —     5,531  
Compensation expense related to options issued to non-employees   —     —   —     —     164     —     —     —     —     164  
Compensation expense related to modification of options granted   —     —   —     —     631     —     —     —     —     631  
Cumulative translation adjustment   —     —   —     —     —     —     —     (13 )   —     (13 )
Net loss   —     —   —     —     —     —     —     —     (25,189 )   (25,189 )
                                                     
 
Total comprehensive loss                                                       (25,202 )
   
 
 
Balances at June 30, 2005   17,419,331     27,504   15,815,532     12,653     37,481     (331 )   (19,008 )   (20 )   (86,947 )   (56,172 )

F-5


Accuray Incorporated

Consolidated Statements of Temporary Equity
and Stockholders' Equity (Deficiency) (continued)

(in thousands, except share amounts)

 
   Redeemable convertible preferred stock
    
    
    
    
    
    
    
    
  
 
   Common stock
   Additional
paid-in
capital
   Notes
receivable
from
stockholders
   Deferred
stock-based
compensation
   Accumulated
other
comprehensive
income (loss)
    
   Total
stockholders'
equity (deficiency)
  
 
   Accumulated
deficit
  
 
   Shares
   Amount
   Shares
   Amount
  
 
  
 
 
Balances at June 30, 2005   17,419,331     27,504   15,815,532     12,653     37,481     (331 )   (19,008 )   (20 )   (86,947 )   (56,172 )
Exercise of common stock warrants   —     —   16,666     167     —     —     —     —     —     167  
Exercise of stock options   —     —   431,659     538     —     —     —     —     —     538  
Payment received on notes used to exercise stock options   —     —   —     —     —     125     —     —     —     125  
Stock repurchased   —     —   (20,707 )   (82 )   —     —     —     —     —     (82 )
Deferred stock-based compensation   —     —   —     —     7,860     —     (7,860 )   —     —     —  
Reversal of deferred stock-based compensation   —     —   —     —     (1,651 )   —     1,651     —     —     —  
Amortization of deferred stock-based compensation   —     —   —     —     —     —     7,945     —     —     7,945  
Compensation expense related to options issued to non-employees   —     —   —     —     186     —     —     —     —     186  
Compensation expense related to modification of options granted   —     —   —     —     112     —     —     —     —     112  
Cumulative translation adjustment   —     —   —     —     —     —     —     20     —     20  
Net loss   —     —   —     —     —     —     —     —     (33,694 )   (33,694 )
                                                     
 
Total comprehensive loss                                                       (33,674 )
   
 
 
Balances at June 30, 2006   17,419,331   $ 27,504   16,243,150   $ 13,276   $ 43,988   $ (206 ) $ (17,272 ) $ —   $ (120,641 ) $ (80,855 )
   
 
 

The accompanying notes are an integral part of these consolidated financial statements.

F-6


Accuray Incorporated

Consolidated Statements of Cash Flows

(in thousands)

 
   Years ended June 30,
  
 
   2004
   2005
   2006
  
 
  
 
Cash Flows From Operating Activities                    
Net loss   $ (11,696 ) $ (25,189 ) $ (33,694 )
Adjustments to reconcile net loss to net cash provided by operating activities:                    
  Depreciation and amortization     1,450     2,080     3,806  
  Stock-based compensation     2,449     6,326     8,243  
  Provision for bad debts     106     45     (21 )
  Loss on write-down of inventories     53     1,747     619  
  Loss on disposal of fixed assets     57     932     54  
  Accrued interest expense on note payable     —     93     103  
  Changes in assets and liabilities:                    
    Accounts receivable     (1,943 )   (293 )   (6,590 )
    Inventories     (219 )   (2,294 )   (4,348 )
    Prepaid expenses and other current assets     (144 )   (939 )   (1,579 )
    Deferred cost of revenue     (11,457 )   (14,028 )   (20,112 )
    Other assets     (271 )   (112 )   (315 )
    Accounts payable     1,061     2,077     (719 )
    Accrued liabilities     1,427     1,866     9,423  
    Customer advances     1,784     3,682     10,946  
    Deferred revenue     22,249     42,022     59,689  
   
 
      Net cash provided by operating activities     4,906     18,015     25,505  

Cash Flows From Investing Activities
 
 
 
 
 
 
 
 
 
 
Purchases of property and equipment     (5,617 )   (6,249 )   (13,602 )
Cash received for tenant improvements     300     —     1,000  
Restricted cash     23     (153 )   157  
Business acquisition, net of cash acquired     —     (5,613 )   —  
Purchase of investment     —     (250 )   —  
   
 
      Net cash used in investing activities     (5,294 )   (12,265 )   (12,445 )

Cash Flows From Financing Activities
 
 
 
 
 
 
 
 
 
 
Payment of note payable     —     —     (2,996 )
Exercise of common stock options for cash     249     342     538  
Payment received on notes used to exercise stock options     —     —     64  
Stock repurchase     —     (177 )   (21 )
Exercise of common stock warrants for cash     3,192     1,400     167  
   
 
      Net cash provided by (used in) financing activities     3,441     1,565     (2,248 )
Effect of exchange rate changes on cash     (7 )   (13 )   20  
   
 
Net increase in cash and cash equivalents     3,046     7,302     10,832  
Cash and cash equivalents at beginning of period     6,676     9,722     17,024  
   
 
Cash and cash equivalents at end of period   $ 9,722   $ 17,024   $ 27,856  
   
 

Supplemental Disclosure of Cash Flow Information
 
 
 
 
 
 
 
 
 
 
Cash paid for interest   $ 4   $ 8   $ —  
Income taxes paid   $ —   $ 527   $ 183  

Non-cash Investing and Financing Activities
 
 
 
 
 
 
 
 
 
 
Note payable from business acquisition   $ —   $ 2,800   $ —  
Common stock options exercised using notes   $ —   $ 331   $ —  
Cashless stock repurchase and options exercised   $ —   $ 74   $ 122  
Settlement of receivable in exchange for reduction in debt     (611 )   (817 )   —  

Cash flows include related party transaction amounts as follows:
 

 
 
2004
 
2005
 
2006
 
 
  
 
Accounts receivable   $ 1,575   $ 423   $ 439  
Deferred cost of revenue   $ (7,910 ) $ 3,272   $ 2,248  
Customer advances   $ (770 ) $ —   $ 5,241  
Deferred revenue   $ 13,955   $ (8,131 ) $ (1,059 )

The accompanying notes are an integral part of these consolidated financial statements.

F-7


Accuray Incorporated


Notes to Consolidated Financial Statements

1.  Description of Business

        Accuray Incorporated (the "Company") was incorporated in California in December 1990 and commenced operations in January 1992. The Company designs, develops and sells the CyberKnife system, an image-guided robotic radiosurgery system used for the treatment of solid tumors anywhere in the body.

2.  Summary of Significant Accounting Policies

Pro Forma Stockholders' Equity (Deficiency) (Unaudited)

        Upon the consummation of the initial public offering ("IPO") contemplated herein, all of the outstanding shares of Series A, A1, B and C preferred stock will be automatically converted into 25,186,285 shares of common stock. The June 30, 2006 unaudited pro forma stockholders' equity (deficiency) has been prepared assuming the conversion of Series A, A1, B and C preferred stock outstanding as of June 30, 2006 into common stock and the exercise of a warrant to purchase 525,000 shares of common stock.

Liquidity

        The Company has incurred net losses each year since inception. At June 30, 2006, the Company had an accumulated deficit of $120,641,000. Although the Company has recorded positive cash flow from operations for each of the last four fiscal years, in order to continue its operations and achieve its business objectives, the Company must achieve profitability or obtain additional debt or equity financing. There can be no assurance that the Company will be able to obtain additional debt or equity financing on terms acceptable to the Company, or at all. The failure of the Company to obtain sufficient funds on acceptable terms when needed could have a material adverse effect on the Company's business, results of operations and financial condition.

        The failure of the Company to win widespread acceptance of its products by hospitals, physicians and patients could have a material adverse effect on the Company's business, results of operations, future cash flows and financial condition.

Basis of Presentation and Principles of Consolidation

        In December 2003, the Company formed a wholly owned subsidiary, Accuray International SARL, headquartered in Geneva, Switzerland. The purpose of Accuray International is to manage the sales, marketing and service activities of Accuray's international subsidiaries. In January 2004, the Company formed a wholly owned subsidiary, Accuray Europe SARL, headquartered in Paris, France. The purpose of Accuray Europe is to market the Company's products in Europe. In January 2005, the Company completed the purchase of the High Energy Systems Division ("HES") of American Science and Engineering, Inc. ("AS&E") and integrated this operation into the Company's existing manufacturing operation. In October 2005, the Company formed a wholly owned subsidiary, Accuray UK Ltd, headquartered in London, United Kingdom. The purpose of Accuray UK Ltd is to market the Company's products in the United Kingdom and other countries in northern Europe. In December 2005, the Company formed a wholly owned subsidiary, Accuray Asia Limited, headquartered in Hong Kong, SAR. The purpose of Accuray Asia Limited is to market the Company's products in Asia. The consolidated financial statements include the accounts of the subsidiaries, and all inter-company transactions and balances have been eliminated.

F-8


Foreign Currency

        The Company's international subsidiaries use their local currencies as their functional currencies. For those subsidiaries, assets and liabilities are translated at exchange rates in effect at the balance sheet date and income and expense accounts at average exchange rates during the year. Resulting translation adjustments are recorded directly to accumulated comprehensive income within the statement of stockholders' equity (deficiency). Foreign currency transaction gains and losses are included as a component of interest and other income.

Use of Estimates

        The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Key estimates and assumptions made by the Company relate to stock-based compensation, allowances, valuation allowances for deferred tax assets, impairment of long-lived assets, goodwill and deferred revenue and costs for services. Actual results could differ from those estimates.

Cash and Cash Equivalents

        The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. Cash equivalents consist of amounts invested in money market accounts and amounted to $14,519,000 and $3,623,000 at June 30, 2005 and 2006, respectively.

Restricted Cash

        Restricted cash amounts include amounts deposited as collateral to assure future credit availability, typically credit card purchases, arrangements in contracts with others requiring that specific cash amounts be set aside, or the Company's statements of intention with regard to particular deposits. Restricted cash amounts were $158,000 and $1,000 at June 30, 2005 and 2006, respectively.

Fair Value of Financial Instruments

        The carrying values of the Company's financial instruments including cash and cash equivalents, restricted cash, accounts receivable and accounts payable are approximately equal to their respective fair values due to the relatively short-term nature of these instruments. Based upon interest rates currently available to the Company for debt with similar terms, the carrying value of the Company's note payable is also approximately equal to its fair value.

Concentration of Credit Risk and Other Risks and Uncertainties

        The Company's cash and cash equivalents are deposited with one major financial institution. At times, deposits in this institution exceed the amount of insurance provided on such deposits. The Company has not experienced any losses in such accounts and believes that it is not exposed to any significant risk on these balances.

F-9


        The following summarizes revenues from customers in excess of 10% of total net revenue:

 
   Years ended June 30,
  
 
   2004
   2005
   2006
  
 
  
 
AB Medica s.p.a. (Italy)   22 % —   —  
Illinois CyberTechnologies (Bloomington, IL)   15 % —   —  
Meditec/Marubeni Corporation (related party)   —   32 % 11 %
President Medical Technology Corportion (related party)   12 % 12 % —  
St. Anthony's Hospital (Oklahoma City, OK)   16 % —   —  
   
 
    65 % 44 % 11 %
   
 

        The following summarizes the accounts receivable from customers in excess of 10% of total accounts receivable:

 
   Years ended June 30,
  
 
   2004
   2005
   2006
  
 
  
 
AB Medica s.p.a. (Italy)   14 % —   —  
Atlantic Health System (Summit, NJ)   42 % —   —  
Cowealth Medical Science (China)   —   —   18 %
Mission Hospitals (Asheville, NC)   —   19 % —  
Neurochirurgische Praxis (Germany)   —   12 % —  
Northwest Community Healthcare (Arlington Heights, IL)   —   —   26 %
Shadyside Hospital (Pittsburgh, PA)   —   22 % —  
St. Joseph's Hospital (Phoenix, AZ)   —   13 % —  
   
 
    56 % 66 % 44 %
   
 

        Accounts receivable are typically not collateralized. The Company performs ongoing credit evaluations of its customers and maintains reserves for potential credit losses. Accounts receivable are deemed past due in accordance with the contractual terms of the agreement. Accounts are charged against our allowance for doubtful accounts once collection efforts are unsuccessful. Historically, such losses have been within management's expectations. The Company's allowance for doubtful accounts was approximately $45,000 and $20,000 at June 30, 2005 and 2006, respectively.

        The Company is subject to risks common to companies in the medical device industry including, but not limited to: new technological innovations, dependence on key personnel, dependence on key suppliers, protection of proprietary technology, compliance with government regulations, uncertainty of widespread market acceptance of products, product liability and the need to obtain additional financing. The Company's products include components subject to rapid technological change. Certain components used in manufacturing have relatively few alternative sources of supply, and establishing additional or replacement suppliers for such components cannot be accomplished quickly. While the Company has ongoing programs to minimize the adverse effect of such uncertainty and considers technological change in estimating its allowances, uncertainty continues to exist.

F-10


        The products currently under development by the Company may require clearance by the U.S. Food and Drug Administration ("FDA") or other international regulatory agencies prior to commercial sales. There can be no assurance that the Company's products will receive the necessary clearance. If the Company were denied such clearance or such clearance was delayed, it could have a material adverse impact on the Company.

Inventories

        Inventories are stated at the lower of cost (on a first-in, first-out basis) or market. Excess and obsolete inventories are written down generally based on historical sales and forecasted demand, as judged by management. The Company determines inventory and product costs through use of standard costs which approximate actual average costs.

Revenue Recognition

        Revenue is generated from the sale of products, shared ownership programs, and by providing related services, which include installation services, post-contract customer support ("PCS"), training and consulting. The Company's products and upgrades to those products include software that is essential to the functionality of the products and accordingly, the Company accounts for the sale of its products pursuant to Statement of Position No. 97-2, Software Revenue Recognition ("SOP 97-2"), as amended.

        The Company recognizes product revenues for sales of the CyberKnife system, replacement parts and accessories when there is persuasive evidence of an arrangement, the fee is fixed or determinable, collection of the fee is probable and delivery has occurred as prescribed by SOP 97-2. Payments received in advance of product shipment are recorded as customer advances and are recognized as revenue or deferred revenue upon product shipment or installation.

        For arrangements with multiple elements, the Company allocates arrangement consideration to services and PCS based upon vendor specific objective evidence ("VSOE") of fair value of the respective elements. VSOE of fair value for the services element is based upon the Company's standard rates charged for the services when such services are sold separately or based upon the price established by management having the relevant authority when that service is not yet being sold separately. When contracts contain multiple elements, and VSOE of fair value exists for all undelivered elements, the Company accounts for the delivered elements, principally the CyberKnife system, based upon the "residual method" as prescribed by SOP No. 98-9, Modification of SOP No. 97-2 with Respect to Certain Transactions. If VSOE of fair value does not exist for all the undelivered elements, all revenue is deferred until the earlier of; (1) delivery of all elements, or (2) establishment of VSOE of fair value for all undelivered elements.

        Upgrade services revenues relate to the sale of specialized services specifically contracted to provide current technology capabilities for units previously sold through a distributor into the Japan market. The upgrade programs include elements where VSOE of fair value has not been established for the PCS. As a result, associated revenues are deferred and recognized ratably over the term of the PCS arrangement, generally four years.

F-11


        Service revenue for providing PCS, which includes warranty services, extended warranty services, unspecified when and if available product updates and technical support is deferred and recognized ratably over the service period, generally one year, until no further obligation exists. At the time of sale, the Company provides for the estimated incremental costs of meeting product warranty if the incremental warranty costs are expected to exceed the related service revenues. Training and consulting service revenues, that are not deemed essential to the functionality of the CyberKnife system, are recognized as such services are performed.

        Costs associated with providing PCS and maintenance services are expensed when incurred, except when those costs are related to units where revenue recognition has been deferred. In those cases, the costs are deferred until the recognition of the related revenue and are recognized over the period of revenue recognition.

        For all sales, the Company uses either a signed agreement or a binding purchase order as evidence of an arrangement. Sales to third party distributors are evidenced by a distribution agreement governing the relationship together with binding purchase orders on a transaction-by-transaction basis. The Company records revenues from an arrangement with distributors based on a sell-through method where revenue is recognized upon shipment of the product to the end user customer once all revenue recognition criteria are met. These criteria require that persuasive evidence of an arrangement exists, the fees are fixed or determinable, collection of the resulting receivable is probable and there is no right of return.

        The Company's agreements with customers and distributors do not contain product return rights.

        The Company assesses the probability of collection based on a number of factors, including past transaction history with the customer and the credit-worthiness of the customer. The Company generally does not request collateral from its customers. If the Company determines that collection of a fee is not probable, the Company will defer the fee and recognize revenue upon receipt of cash.

        The Company also enters into shared ownership programs with certain customers. Under the terms of such programs, the Company retains title to its CyberKnife system, while the customer has use of the product. The Company generally receives a minimum monthly payment and earns additional revenues from the customer based upon its use of the product. The Company may provide unspecified upgrades to the product during the term of each program when and if available. Upfront non-refundable payments from the customer are deferred and recognized as revenue over the contractual period. Revenues from shared ownership programs are recorded as they become earned and receivable and are included within shared ownership program revenues in the consolidated statements of operations. During the years ended June 30, 2004, 2005 and 2006, the Company recognized approximately $4,831,000, $8,067,000 and $8,145,000, respectively, of revenue from these shared ownership programs.

        The CyberKnife systems associated with the Company's shared ownership programs are recorded within property, plant and equipment and are depreciated over their estimated useful life of ten years. Depreciation and warranty expense attributable to the CyberKnife shared ownership systems are recorded within costs of products.

F-12


Deferred Revenue and Deferred Cost of Revenue

        Deferred revenue consists of deferred product revenue, deferred shared ownership program revenue, deferred service revenue and deferred other revenue. Deferred product revenue arises from timing differences between the shipment of product and satisfaction of all revenue recognition criteria consistent with the Company's revenue recognition policy. Deferred shared ownership program revenue results from the receipt of advance monthly minimum lease payments, which will be recognized ratably over the term of the shared ownership program. Deferred service revenue results from the advance payment for services to be delivered over a period of time, usually one year. Service revenue is recognized ratably over the service period. Deferred other revenue results primarily from the Japan upgrade services programs and is due to timing differences between the receipt of cash payments for those upgrades and final delivery to the end user customer. Deferred cost of revenue consists of the direct costs associated with the manufacture of units, direct service costs for which the revenue has been deferred in accordance with the Company's revenue recognition policies, and deferred costs associated with the Japan upgrade services. Deferred revenue, and associated deferred cost of revenue, expected to be realized within one year are classified as current liabilities and current assets, respectively.

Customer Advances

        Customer advances represent payments made by customers in advance of product shipment.

Property and Equipment

        Property and equipment are recorded at cost less accumulated depreciation and amortization. Depreciation is calculated using the straight-line method over the estimated useful lives of the related assets. Leasehold improvements are amortized on a straight-line basis over the life of the lease or the estimated useful life of the asset, whichever is shorter. Machinery and equipment are depreciated over five years. Furniture and fixtures are depreciated over four years. Computer and office equipment are depreciated over three years. CyberKnife systems covered by the shared ownership program are depreciated over their estimated useful life of ten years. Repairs and maintenance costs, which are not considered improvements and do not extend the useful life of the property and equipment, are expensed as incurred. The cost and related accumulated depreciation of property and equipment sold or no longer in service are eliminated from the accounts and any gain or loss is included in the statements of operations.

Impairment of Long-Lived Assets

        In accordance with the provisions of Statement of Financial Accounting Standards ("SFAS") No. 144, Accounting for the Impairment or Disposal of Long-lived Assets, the Company reviews long-lived assets, including property and equipment, for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. Under SFAS No. 144, an impairment loss would be recognized when estimated undiscounted future cash flows expected to result from the use of the asset and its eventual disposition is less than its carrying amount.

F-13


Impairment, if any, is measured as the amount by which the carrying amount of a long-lived asset exceeds its fair value. Through June 30, 2006, there have been no such losses.

Goodwill and Purchased Intangible Assets

        Goodwill represents the excess of acquisition cost over the fair value of tangible and identified intangible net assets of businesses acquired. Goodwill is not amortized, but is tested for impairment on an annual basis and between annual tests in certain circumstances, and written down when impaired. Purchased intangible assets other than goodwill are amortized over their useful lives unless their lives are determined to be indefinite. Purchased intangible assets are carried at cost, less accumulated amortization. Amortization is computed over the estimated useful lives of the respective assets which is typically seven years.

Shipping and Handling

        The Company's shipping and handling costs billed to customers are included in product revenue. Shipping and handling costs incurred are included in costs of products.

Research and Development Costs

        Costs related to research, design and development of products are charged to research and development expense as incurred. These costs include direct salary costs for research and development personnel, cost for materials used in research and development activities, costs for outside services and allocated portions of facilities and other corporate costs.

Software Development Costs

        Software development costs are included in research and development and are expensed as incurred. After technological feasibility is established, material software development costs are capitalized. The capitalized cost is then amortized on a straight-line basis over the estimated product life, or on the ratio of current revenues to total projected product revenue, whichever is greater. To date, the period between achieving technological feasibility, which the Company has defined as the establishment of a working model which typically occurs when the beta testing commences, and the general availability of such software has been short and software development costs qualifying for capitalization have been insignificant. Accordingly, the Company has not capitalized any software development costs.

Advertising Expenses

        The Company expenses the costs of advertising and promoting its products and services as incurred. Advertising expense was $18,000, $16,000 and $20,000 for the years ended June 30, 2004, 2005 and 2006, respectively.

F-14


Stock-Based Compensation

        Effective July 1, 2003, the Company began to account for stock-based employee compensation arrangements in accordance with Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation ("SFAS 123"), and SFAS No. 148, Accounting for Stock-Based Compensation-Transition and Disclosure ("SFAS 148"). Under SFAS 123, stock-based compensation expense is measured on the date of grant based on the fair value of the award. Upon adoption of this standard, the Company elected to use the retrospective restatement method of transition.

        The Company believes that the fair value of the stock options is more reliably measurable than the fair value of the services received. The estimated fair value of the stock options granted is calculated at the date of grant using the Black-Scholes option pricing model, as prescribed by SFAS 123, using fair values of common stock between $2.63 and $7.63 per share and the following weighted-average assumptions during the years ended June 30, 2004, 2005 and 2006:

 
   Years ended June 30,
  
 
   2004
   2005
   2006
  
 
  
 
Risk-free interest rate   3.77 % 3.81 % 4.42 %
Dividend yield   —   —   —  
Weighted-average expected life   6.25 years   6.25 years   6.25 years  
Expected volatility   99.6 % 94.8 % 86.7 %

        In accordance with the requirements of SFAS 123, the Company has recorded deferred stock-based compensation for the estimated fair value of the options on the date of grant. This deferred stock-based compensation is amortized to expense over the period during which the options become exercisable, generally four years. During the years ended June 30, 2004, 2005 and 2006, the Company reversed $1,078,000, $1,215,000 and $1,651,000, respectively, of deferred stock-based compensation related to cancellations of unvested options of certain employees who had been granted stock options and subsequently terminated their employment with the Company. During the years ended June 30, 2004, 2005 and 2006, the Company amortized $2,312,000, $5,531,000 and $7,945,000 of stock-based compensation expense, respectively, for stock options granted to employees.

        Stock-based compensation expense related to stock options granted to non-employees is recognized as the stock options are earned in accordance with SFAS 123 and Emerging Issues Task Force No. 96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services. The Company believes that the fair value of the stock options is more reliably measurable than the fair value of the services received. The estimated fair value of the stock options granted is calculated using the Black-Scholes option pricing model, as

F-15


prescribed by SFAS 123, using fair values of common stock between $2.63 and $7.63 per share and the following weighted-average assumptions during the years ended June 30, 2004, 2005 and 2006:

 
   Years Ended June 30,
 
   2004
   2005
   2006(1)
 
  
Risk-free interest rate   4.45 % 4.20 % —
Dividend yield   —   —   —
Weighted-average expected life   10 years   10 years   —
Expected volatility   75.0 % 71.0 % —
(1)
No options granted to non-employees in 2006.

        The stock-based compensation expense related to non-employees fluctuates as the underlying assumptions fluctuate. During the years ended June 30, 2004, 2005 and 2006, the Company recognized $137,000, $164,000 and $186,000 of stock-based compensation expense, respectively, for stock options granted to non-employees.

        For certain stock option grants, the Company made modifications to the option terms. These modifications included extension of the vesting period and acceleration of vesting. During the years ended June 30, 2004, 2005 and 2006, the Company recognized $0, $631,000 and $112,000 of stock-based compensation expense, respectively, for modifications of stock options granted.

Net Loss Per Common Share

        Basic net loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding during the fiscal year. Diluted net loss per share is computed by dividing net loss by the weighted-average number of dilutive common shares outstanding during the fiscal year. Dilutive shares outstanding are calculated by adding to the weighted shares outstanding any common stock equivalents from outstanding stock options and warrants based on the treasury stock method. In fiscal years when net income is reported, the calculation of diluted net income per share typically results in lower earnings per share than is calculated using the basic method. In fiscal years when a net loss is reported, such as the fiscal years ended June 30, 2004, 2005 and 2006, these potential shares from stock options and warrants are not included in the calculation because they would have an anti-dilutive effect, meaning the loss per share would be reduced. Therefore, in fiscal years when a loss is reported, the calculation of basic and diluted net loss per share results in the same value.

F-16


        For the fiscal years ended June 30, 2004, 2005 and 2006, the basic and diluted net loss per share were based on weighted-average shares of 11,737,265, 14,282,643, and 15,997,419, respectively. The number of anti-dilutive shares excluded from the calculation of diluted net loss per share is as follows:

 
   Years Ended June 30,
 
   2004
   2005
   2006
 
  
Outstanding securities not included in diluted net loss per share calculation            
Preferred stock (as if converted)   25,186,285   25,186,285   25,186,285
Options to purchase common stock   5,230,102   5,641,864   7,225,143
Warrants   1,383,675   428,157   451,353
   
    31,800,062   31,256,306   32,862,781
   

        Pro forma net loss per share assuming conversion of preferred stock and an outstanding warrant for the fiscal year ended June 30, 2006 was as follows (in thousands, except share amounts):

 
   June 30,
2006
  
Historical        
Numerator:        
  Net loss   $ (33,694 )

Denominator:
 
 
 
 
  Weighted-average shares of common stock outstanding used in computing basic and diluted net loss per share:     15,997,419  
   
 
Basic and diluted net loss per share:   $ (2.11 )
   
 
Pro forma (unaudited)        
Net loss:   $ (33,694 )
Denominator for pro forma basic and diluted net loss per share:        
  Shares used above:     15,997,419  
  Pro forma adjustments to reflect assumed conversion of preferred stock and exercise of a warrant from the date of issuance:     25,711,285  
   
 
Shares used to compute pro forma basic and diluted net loss per common share:     41,708,704  
   
 
Pro forma basic and diluted net loss per share:   $ (0.81 )
   
 

F-17

Income Taxes

        Deferred tax assets and liabilities are determined based on the differences between financial reporting and tax bases of assets and liabilities, using tax rates expected to be in effect when the differences will reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized.

Comprehensive Loss

        Comprehensive loss is defined as the change in equity from transactions and other events and circumstances other than those resulting from investments by owners and distributions to owners. For the years ended June 30, 2004, 2005 and 2006, the Company recorded comprehensive losses of $11,703,000, $25,202,000 and $33,674,000, respectively. Comprehensive loss is comprised of net loss and the cumulative translation adjustment arising upon consolidation of the Company's foreign subsidiaries.

Segment Information

        The Company has determined that it operates in only one segment in accordance with SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information ("SFAS 131") as it only reports profit and loss information on an aggregate basis to its chief operating decision maker. The Company's long-lived assets maintained outside the United States are insignificant.

        The following summarizes revenue by geographic region (in thousands):

 
   Years Ended June 30,
 
   2004
   2005
   2006
 
  
United States   $ 12,893   $ 14,295   $ 40,826
Europe     4,338     464     3,390
Asia (except Japan)     2,338     2,707     3,058
Japan     —     4,911     5,623
   
  Total   $ 19,569   $ 22,377   $ 52,897
   

Recent Accounting Pronouncements

        In May 2005, the Financial Accounting Standards Board ("FASB") issued SFAS No. 154, Accounting Changes and Error Corrections ("SFAS 154"). SFAS 154 replaces Accounting Principles Board ("APB") Opinion No. 20 ("APB 20") and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements, and applies to all voluntary changes in accounting principle, and changes the requirements for accounting for and reporting of a change in accounting principle. APB 20 previously required that most voluntary changes in accounting principle be recognized by including in net income of the period of change the cumulative effect of changing to the new accounting principle whereas SFAS 154 requires retrospective application to prior periods' financial statements of a voluntary change in accounting principle unless it is impracticable. SFAS 154 enhances the consistency of financial information between periods. SFAS 154 will be effective in fiscal years beginning after December 15, 2005. Early adoption is permitted. The Company does not expect that the adoption of SFAS 154 will have a material impact on its results of operations or financial position.

F-18


        In December 2004, the FASB issued a Statement, Share-Based Payment, an amendment of FASB Statements Nos. 123 and 95 ("SFAS 123R") that addresses the accounting for share-based payment transactions in which a company receives employee services in exchange for either equity instruments of the company or liabilities that are based on the fair value of the company's equity instruments or that may be settled by the issuance of such equity instruments. The statement eliminates the ability to account for share-based compensation transactions using the intrinsic value method and generally requires that such transactions be accounted for using a fair-value-based method and recognized as expense in the consolidated statements of operations. The effective date of the new standard is as of the beginning of the annual reporting periods that start after December 15, 2005, which will be fiscal year 2007 for the Company.

        The Company plans to adopt SFAS 123R using the modified prospective method, under which compensation cost is recognized beginning with the effective date (a) based on the requirements of SFAS 123R for all share-based payments granted or modified after the effective date and (b) based on the previous requirements of SFAS 123 for all awards granted to employees prior to the effective date of SFAS 123R that remain unvested on the effective date. The amounts disclosed within our footnotes are not necessarily indicative of the amounts that will be expensed upon the adoption of SFAS 123R. Compensation expense calculated under SFAS 123R may differ from the amounts currently disclosed within our footnotes based on changes in the fair value of our common stock, changes in the number of options granted or the terms of such options, the treatment of tax benefits and changes in interest rates or other factors. Upon adoption of SFAS 123R, the Company plans to use the Black-Scholes model to value the compensation expense associated with employee stock options and stock purchases under its employee stock purchase plan.

        The Company expects this standard will not have a significant impact on the consolidated statements of operations and consolidated statements of cash flows. SFAS 123R also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as cash flow from financing activities, rather than as cash flow from operations as required under SFAS 123. This requirement will reduce net cash flows from operations and increase net cash flows from financing activities in periods after adoption to the extent that such excess tax benefits are realized. The Company cannot estimate what those amounts will be in the future.

        In March 2005, the SEC issued Staff Accounting Bulletin ("SAB") No. 107 regarding the Staff's interpretation of SFAS 123R. This interpretation provides the Staff's views regarding interactions between SFAS 123R and certain SEC rules and regulations and provides interpretations of the valuation of share-based payments for public companies. The interpretive guidance is intended to assist companies in applying the provisions of SFAS 123R and investors and users of the financial statements in analyzing the information provided. The Company will follow the guidance prescribed in SAB 107 in connection with its adoption of SFAS 123R.

        In June 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes ("FIN 48"). This interpretation clarifies the accounting for uncertainty in income taxes recognized in the financial statements in accordance with SFAS No. 109, Accounting for Income Taxes. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company has not yet determined the impact that adoption of this standard will have on its consolidated financial statements.

F-19


3. Balance Sheet Components

Accounts Receivable, Net

        Accounts receivable, net consists of the following (in thousands):

 
   June 30,
  
 
   2005
   2006
  
 
  
 
Accounts receivable   $ 4,719   $ 10,866  
Unbilled fees and services     413     852  
   
 
      5,132     11,718  
Less: Allowance for doubtful accounts     (45 )   (20 )
   
 
    $ 5,087   $ 11,698  
   
 

Inventories

        Inventories consist of the following (in thousands):

 
   June 30,
 
   2005
   2006
 
  
Raw materials   $ 2,640   $ 4,447
Work-in-process     2,225     1,559
Finished goods     1,506     4,094
   
    $ 6,371   $ 10,100
   

Property and Equipment

        Property and equipment consist of the following (in thousands):

 
   June 30,
  
 
   2005
   2006
  
 
  
 
Furniture and fixtures   $ 670   $ 1,038  
Computer and office equipment     2,750     4,271  
Leasehold improvements     2,316     6,325  
Machinery and equipment     5,861     8,313  
CyberKnife shared ownership systems     8,204     12,380  
   
 
      19,801     32,327  
Less: Accumulated depreciation and amortization     (6,840 )   (10,382 )
   
 
Property and equipment, net   $ 12,961   $ 21,945  
   
 

        Depreciation and amortization expense related to property and equipment for the years ended June 30, 2004, 2005 and 2006 was $1,450,000, $1,958,000 and $3,564,000, respectively. Accumulated depreciation related to the CyberKnife systems attributable to the shared ownership programs for the years ended June 30, 2005 and 2006 was $1,273,000 and $2,327,000, respectively.

F-20


        Under the terms of the shared ownership programs, the Company retains title to its CyberKnife system, while the customer has use of the product. The Company generally receives a minimum monthly payment and earns additional revenues from the customer based upon its use of the product.

        Future minimum revenues under the shared ownership arrangements as of June 30, 2006 are as follows (in thousands):

Year ending June 30,
    
2007   $ 2,653
2008     3,018
2009     2,568
2010     2,028
2011     1,242
2012 and thereafter     440
   
  Total   $ 11,949
   

        Total contingent revenues, included in shared ownership revenue, earned from the CyberKnife systems attributable to the shared ownership programs were approximately $3,966,000, $6,739,000 and $6,090,000 for the years ended June 30, 2004, 2005 and 2006, respectively.

4. Business Combination

        On January 10, 2005, the Company completed the purchase of the High Energy Systems Division ("HES") of American Science and Engineering, Inc. ("AS&E") and integrated this operation into the Company's existing manufacturing operation. HES had been the sole source manufacturer of the linear accelerator used in the CyberKnife system. The transaction was accounted for in accordance with SFAS 141, Business Combinations, ("SFAS 141") but lacked the materiality to be incorporated into the accompanying financial statements for presented periods prior to the acquisition date. The transaction was valued at approximately $8,413,000 and the consideration was comprised of $5,500,000 in cash, a note payable for $2,800,000 due one year after closing, and expenses related to the transaction. The total purchase cost of HES was as follows (in thousands):

Net tangible assets   $ 2,108
Goodwill and other purchased intangible assets:      
  Complete technology     1,740
  Customer contract / relationship     70
  Goodwill     4,495
   
    Total purchase price   $ 8,413
   

        The Company allocated the purchase price based on the fair value of the net tangible and intangible assets acquired. Tangible assets were valued at carrying costs, subsequent to due diligence supporting those costs. The fair value of the intangible assets acquired was determined through

F-21


valuation by a third-party valuation firm as a basis for the allocation of the purchase price to those assets in accordance with SFAS 141. The purchase price was settled as follows (in thousands):

Cash   $ 5,500
Note payable     2,800
Transaction costs and expenses     113
   
  Total   $ 8,413
   

        Pro forma information has not been presented as the pro forma impact is immaterial.

5. Goodwill and Other Purchased Intangibles

        Goodwill and other intangible assets with indefinite lives are not amortized in accordance with SFAS 142, Goodwill and Other Intangible Assets ("SFAS 142"). Intangible assets with determinable useful lives are amortized on a straight line basis over their useful lives. Goodwill and other intangible assets have resulted from the Company's January 2005 acquisition of HES. SFAS 142 requires that the Company perform an annual test for impairment of intangible assets with indefinite lives, and interim tests if indications of potential impairment exist. The Company performed the annual test for impairment in December 2005 concluding that there was no impairment of goodwill. At June 30, 2006, there have been no indicators indicating a need to perform an interim test.

        The amortization expense relating to intangible assets for the periods ending June 30, 2004, 2005 and 2006 was $0, $122,000 and $242,000, respectively. The following represents the gross carrying amounts and accumulated amortization of amortized intangible assets at June 30, 2005 and 2006 (in thousands):

 
   June 30,
  
 
   2005
   2006
  
 
  
 
Complete technology   $ 1,740   $ 1,740  
Customer contract / relationship     70     70  
   
 
      1,810     1,810  
Less: Accumulated amortization     (122 )   (364 )
   
 
Intangible assets, net   $ 1,688   $ 1,446  
   
 

        The following table represents the estimated useful life of the intangible assets subject to amortization:

 
   Years
Amortized intangible assets:    
  Complete technology   7.0
  Customer contract / relationship   7.0

F-22

        The estimated future amortization expense of purchased intangible assets as of June 30, 2006, is as follows (in thousands):

Year ending June 30,
    
2007   $ 259
2008     259
2009     259
2010     259
2011     259
2012 and thereafter     151
   
  Total   $ 1,446
   

6. Debt

        During the year ended June 30, 2003, the Company entered into a loan agreement with a shared ownership program customer. Under the terms of the agreement, the Company received $1,500,000 in exchange for a note payable. The principal balance on the note carried interest at a rate of 7.5% per annum. A portion of the monthly payments received by the Company under the terms of the shared ownership program was first applied to the note payable. The note was secured by the CyberKnife system operated by the customer. The note was repaid in full in March 2005.

        In January 2004, the Company entered into a financing agreement with a commercial bank. Under the terms of the agreement, the Company could offer domestic and export accounts receivable to the bank in exchange for advances up to an amount not to exceed $2,500,000. Amounts advanced under the agreement carried interest at a rate of 9.6% per annum. The term of the arrangement was for twelve months following the effective date. Collateral for amounts advanced consisted of the Company's rights, title and interest in all goods and equipment, inventory, contract rights, general intangibles, and cash. At June 30, 2005 and 2006 advances against the financing arrangement were zero. The agreement terminated in January 2005.

        In conjunction with its acquisition of HES, the Company executed a promissory note in the principal amount of $2,800,000 as part of the purchase price. The note carried an interest rate of 7%, simple interest. The note, together with accrued and unpaid interest, was payable on the earlier of consummation of an initial public offering of the Company's common stock, or January 10, 2006. The note was repaid in full in January 2006.

7. Service Plan Contracts

        Service contract revenue for providing parts, warranty, product updates and customer support is deferred and recognized ratably over the contractual service period, generally one year, until no further obligation exists.

F-23


        Deferred service contract revenue included in deferred revenue was (in thousands):

Balance at June 30, 2003   $ 1,883  
 
Add payments received
 
 
5,218
 
  Less revenue recognized     (1,098 )
   
 
Balance at June 30, 2004     6,003  
 
Add payments received
 
 
8,890
 
  Less revenue recognized     (2,573 )
   
 
Balance at June 30, 2005     12,320  
 
Add payments received
 
 
20,419
 
  Less revenue recognized     (3,635 )
   
 
Balance at June 30, 2006   $ 29,104  
   
 

        Costs incurred under service contracts included in cost of revenue were $970,000, $851,000 and $1,691,000 during the years ended June 30, 2004, 2005 and 2006, respectively.

8. Commitments and Contingencies

Operating Lease Agreements

        The Company leases office space under non-cancellable operating leases with various expiration dates through June 2011. Rent expense was $458,000, $964,000 and $1,956,000 for the years ended June 30, 2004, 2005 and 2006, respectively. The terms of the facility leases provide for rental payments on a graduated scale. The Company recognizes rent expense on a straight-line basis over the lease period, and has accrued for rent expense incurred but not paid.

        Future minimum lease payments under noncancelable operating lease agreements as of June 30, 2006 are as follows (in thousands):

Year ending June 30,
    
2007   $ 1,984
2008     1,738
2009     1,228
2010     1,057
2011     708
   
  Total   $ 6,715
   

        The Company enters into standard indemnification agreements with its landlords and all superior mortgagees and their respective directors, officers' agents, and employees in the ordinary course of business. Pursuant to these agreements, the Company will indemnify, hold harmless, and agree to reimburse the indemnified party for losses suffered or incurred by the indemnified party, generally the landlords, in connection with any loss, accident, injury, or damage by any third party with respect to the lease agreement facilities. The term of these indemnification agreements is from the commencement of the lease agreements until termination of the lease agreements. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is

F-24


unlimited; however, the Company has not incurred claims or costs to defend lawsuits or settle claims related to these indemnification agreements.

Royalty Agreements

        The Company entered into a license and royalty agreement with Schonberg Research Corporation ("Schonberg") in January 1991 in exchange for an exclusive license to use certain technology. Under the terms of the agreement, as amended in April 1996, the Company is obligated to pay Schonberg $25,000 for each CyberKnife system sold that includes the licensed technology. Maximum total aggregate payments under this license agreement are $2,500,000. Royalty expense recognized in cost of revenue or deferred revenue sold under this agreement was $250,000, $375,00 and $850,000 during the years ended June 30, 2004, 2005 and 2006, respectively. At June 30, 2006, the Company had a remaining commitment of approximately $169,000 related to this license and royalty agreement. At June 30, 2005 and 2006, the Company had accrued amounts of $119,000 and $219,000, respectively, included in other accrued liabilities in the consolidated balance sheets relating to this license and royalty agreement.

        In July 1997, the Company entered into a license and royalty agreement with Stanford University ("Stanford") under which the Company has a non-exclusive license to use certain technology. Under this agreement, the Company is obligated to pay Stanford up to $10,000 for each CyberKnife system sold that includes the licensed technology, with the stipulation that the Company must make minimum annual payments of $25,000. Royalty expense recorded in cost of revenue or deferred cost of revenue was $55,000, $80,000 and $175,000 for the years ended June 30, 2004, 2005 and 2006, respectively.

        In January 1999, the Company entered into a license and royalty agreement with Professor Dr. Achim Schweikard ("Schweikard") of the University of Munich. Under this agreement, the Company has a non-exclusive license to use certain technology. The Company is obligated to pay Schweikard up to $5,000 for each CyberKnife system sold that includes the licensed technology, with the stipulation that the Company must make miniumum annual payments of $5,000. Royalty expense under this agreement recorded in cost of revenue or deferred cost of revenue was $30,000, $115,000 and $120,000 for the years ended June 30, 2004, 2005 and 2006, respectively.

Other Commitments

        During November 1999, in connection with the amendment of a purchase and distribution agreement, the Company committed to pay another party 50% of the amount by which the sale price of the next CyberKnife system sold in the United States exceeded $1,500,000. The Company also committed to pay the other party $50,000 each time the Company receives final payment for each of the next fourteen CyberKnife systems sold in the United States. The Company paid $250,000 and $350,000 to the other party in connection with sales to third parties occurring in the years ended June 30, 2005 and June 30, 2004, respectively. At June 30, 2006, the Company had no outstanding commitments regarding this amended agreement.

Contingencies

        From time to time, the Company may become involved in litigation relating to claims arising from the ordinary course of business. Management does not believe the final disposition of these matters will

F-25


have a material adverse effect on the financial position, results of operations or future cash flows of the Company.

Software License Indemnity

        Under the terms of the Company's software license agreements with its customers, the Company agrees that in the event the software sold infringes upon any patent, copyright, trademark, or any other proprietary right of a third party, it will indemnify its customer licensees, against any loss, expense, or liability from any damages that may be awarded against its customer. The Company includes this infringement indemnification in all of its software license agreements and selected managed services arrangements. In the event the customer cannot use the software or service due to infringement and the Company cannot obtain the right to use, replace or modify the license or service in a commercially feasible manner so that it no longer infringes, then the Company may terminate the license and provide the customer a refund of the fees paid by the customer for the infringing license or service. The Company has recorded no liability associated with this indemnification, as it is not aware of any pending or threatened actions that are probable losses.

F-26

9.  Redeemable Convertible Preferred Stock

Redeemable Convertible Preferred Stock

        As of June 30, 2004, 2005 and 2006, the Company had redeemable convertible preferred stock outstanding, as follows (in thousands):

 
   June 30,
 
   2004
   2005
   2006
 
  
Authorized shares     30,000     30,000     30,000
   
Outstanding shares:                  
  Series C     11,182     11,182     11,182
  Series A     4,500     4,500     4,500
  Series A1     1,071     1,071     1,071
  Series B     667     667     667
   
    Total outstanding shares     17,419     17,419     17,419
   
Liquidation amount:                  
  Series C   $ 16,069   $ 19,285   $ 23,142
  Series A     9,000     9,000     9,000
  Series A1     3,212     3,212     3,212
  Series B     5,000     5,000     5,000
   
    Total liquidation amount   $ 33,281   $ 36,497   $ 40,354
   
Proceeds, net of issuance costs                  
  Series C   $ 11,044   $ 11,044   $ 11,044
  Series A     8,621     8,621     8,621
  Series A1     3,212     3,212     3,212
  Series B     4,627     4,627     4,627
   
    Total proceeds, net of issuance costs   $ 27,504   $ 27,504   $ 27,504
   

Dividend Rights

        The holders of the Company's Series A, A1 and B preferred stock are entitled to receive cash dividends in preference to the holders of the Company's common stock, at the rate of 10% per year of the outstanding liquidation preference amounts. The holders of Series C preferred stock are entitled to receive dividends at a rate of 8% of the purchase price per annum in preference to the holders of the Company's Series A, A1 and B preferred stock and common stock. Such dividends shall be payable only when funds are legally available and only if, as and when declared by the Company's Board of Directors, and are non-cumulative. As of June 30, 2006, no dividends have been declared.

Liquidation Rights

        Upon any liquidation, dissolution or winding up of the Company, the holders of Series C preferred stock shall be entitled to an amount equal to a 20% annual internal rate of return on the original issue price per share of Series C preferred stock (which is $1.00) plus an amount equal to any dividends

F-27


declared but unpaid thereon, if any, in preference to any distribution to Series A, A1, Series B or common stock (collectively referred to as "junior stock").

        If the assets of the Company are insufficient to pay the full Series C liquidation preference amounts, then the available assets of the Company shall be distributed ratably among the holders of the Series C preferred stock.

        After the holders of Series C preferred stock have been paid the amounts to which they shall be entitled, the holders of Series A, A1 and B preferred stock shall be entitled to receive a liquidation preference amount equal to the liquidation value per share multiplied by the number of shares outstanding. The liquidation value of each share of Series A, A1 and B preferred stock is defined as the price paid per share. In February 1999, 4,500,000 shares of Series A preferred stock were issued at a price of $2.00 per share, in December 1999 and January 2000, 1,070,666 shares of Series A1 preferred stock were issued at a price of $3.00 per share, and in March 2001, 666,665 shares of Series B preferred stock were issued at a price of $7.50 per share.

        If the assets of the Company are insufficient to pay the Series A, A1 and B liquidation preference amounts, the available assets shall be distributed to the holders of Series A, A1 and B preferred stock ratably in proportion to the preference amounts they would otherwise be entitled to receive. After payment of the liquidation preference amounts, any remaining assets of the Company shall be distributed ratably to the holders of the Company's common stock.

        A consolidation or merger of the Company, or a sale of all or substantially all of its assets, shall be deemed to be a liquidation or winding up for purposes of the liquidation preference if: (i) the fair value of the per share consideration to be received by a holder of preferred stock pursuant to any of the above-mentioned transactions is less than the purchase price of the preferred stock plus accrued but unpaid dividends; and (ii) the existing stockholders of the Company hold less than 50% of the voting power of the successor or surviving corporation.

Voting Rights

        The holders of preferred stock have voting rights equal to the holders of the Company's common stock. Each holder of preferred stock is entitled to the number of votes equal to the number of shares of common stock into which the shares of preferred stock are convertible.

Conversion Rights and Antidilution Provisions

        The original terms of the Series A, A1, B and C preferred stock provide that each share of preferred stock is convertible into one share of the Company's common stock, subject to certain anti-dilution provisions. Such conversion shall occur at the option of the holder of such preferred share at any time or automatically upon the closing of a firmly underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, in which the gross cash proceeds to the Company are at least $5,000,000.

        The conversion ratio of outstanding preferred stock, as well as its liquidation rights, shall be adjusted to prevent dilution in the event of any subdivision or combination of the Company's common

F-28


stock or any distribution by the Company of a stock dividend or stock split. The conversion ratio of preferred stock shall be adjusted to prevent dilution upon the Company's issuance, on or after the closing of an offering of common stock or common stock equivalents for a consideration per share which is less than the conversion value of the preferred stock, with the following exceptions: (i) the issuance of common stock or options to purchase common stock to employees, officers, directors or members of the Scientific Advisory Board, with the approval of the Board of Directors, at not less than fair value; (ii) the conversion of any outstanding preferred shares; and (iii) any dividend or distribution on any shares of such common or preferred stock or common stock equivalents described above.

        During the years ended June 30, 2002 and 2003, the Company issued 6,000,000 and 5,182,000 shares, respectively, of Series C preferred stock at a price of $1.00 share. These issuances triggered certain anti-dilution rights of the existing Series A, A1 and B preferred stock. As a result of these triggers, the outstanding shares of Series A, A1 and B preferred stock will convert into 6,834,693, 2,169,606 and 4,999,986 shares of common stock, respectively, at June 30, 2006.

        The deemed liquidation provisions and the extent of the preferred stockholding result in the preferred stock having redemption features that are not solely within the control of the Company and, accordingly, require disclosure of the preferred stock as temporary equity in accordance with EITF Topic D-98.

10.  Stockholders' Equity (Deficiency)

Common Stock

        As of June 30, 2005, the Company's amended Articles of Incorporation authorized the Company to issue 70,000,000 shares of common stock. As of June 30, 2006, 16,243,150 shares of common stock were issued and outstanding.

Stock Option Plans

        In 1993, the Company's stockholders approved the 1993 Stock Option Plan (the "1993 Plan"). Under the 1993 Plan, the Board of Directors is authorized to grant options to purchase shares of common stock at fair value, as determined by the Board of Directors, to employees, directors and consultants.

        In 1998, the Company's stockholders approved the 1998 Equity Incentive Plan (the "1998 Plan"). Under the 1998 Plan, the Board of Directors is authorized to grant options to purchase shares of common stock to employees, directors and consultants. As of June 30, 2006, the 1993 Plan continued to remain in effect along with the 1998 Plan.

        Only employees are eligible to receive incentive stock options. Non-employees may be granted non-qualified options. The Board of Directors has the authority to set the exercise price of all options granted, subject to the exercise price of incentive stock options being no less than 100% of the fair value, as determined by the Board of Directors, of a share of common stock on the date of grant; and no less than 85% of the fair value for a non-qualified stock options.

F-29


        Generally, the Company's outstanding options vest at a rate of 25% per year. However, certain options granted to certain employees vest based upon performance. Continued vesting typically terminates when the employment or consulting relationship ends.

        The maximum term of the options granted to persons who owned at least 10% of the voting power of all outstanding stock on the date of grant is 5 years. The maximum term of all other options is 10 years.

        Combined activity under the 1993 Plan and the 1998 Plan (the "Plans") is summarized as follows:

 
    
   Options outstanding
 
   Shares
available
for grant
   Number of
options
   Weighted
average
exercise
price
Balance at June 30, 2003   1,160,017   6,026,650   $ 0.66
 
Additional shares reserved
 
3,152,402
 
—
 
$
—
  Plan shares expired   (50,000 ) —   $ —
  Options granted   (3,727,500 ) 3,727,500   $ 1.06
  Options canceled   519,992   (519,992 ) $ 1.04
  Options exercised   —   (610,739 ) $ 0.41
   
     
Balance at June 30, 2004   1,054,911   8,623,419   $ 0.82
 
Additional shares reserved
 
2,200,000
 
—
 
$
—
  Options granted   (3,589,500 ) 3,589,500   $ 3.26
  Options canceled   425,371   (425,371 ) $ 1.24
  Options exercised   —   (1,290,154 ) $ 0.58
   
     
Balance at June 30, 2005   90,782   10,497,394   $ 1.67
 
Additional shares reserved
 
2,900,000
 
—
 
$
—
  Options granted   (1,407,883 ) 1,407,883   $ 4.80
  Options canceled   573,333   (573,333 ) $ 2.15
  Options exercised   —   (431,659 ) $ 1.25
   
     
Balance at June 30, 2006   2,156,232   10,900,285   $ 2.07
   
     

F-30

        The options outstanding and exercisable, by exercise price, at June 30, 2004 were as follows:

 
   Options outstanding
   Options exercisable
Exercise price
   Number of
options
   Weighted
average
remaining
contractual
life (years)
   Weighted
average
exercise
price
   Number of
options
   Weighted
average
exercise
price
$0.25 – $0.60   1,100,000   3.90   $ 0.27   1,100,000   $ 0.27
$0.75   6,046,831   7.97   $ 0.75   3,008,818   $ 0.75
$0.85 – $3.00   1,472,188   9.62   $ 1.54   97,942   $ 2.08
$3.75   4,400   6.76   $ 3.75   4,400   $ 3.75
   
           
     
    8,623,419   7.73   $ 0.82   4,211,160   $ 0.66
   
           
     

        The options outstanding and exercisable, by exercise price, at June 30, 2005 were as follows:

 
   Options outstanding
   Options exercisable
Exercise price
   Number of
options
   Weighted
average
remaining
contractual
life (years)
   Weighted
average
exercise
price
   Number of
options
   Weighted
average
exercise
price
$0.25 – $0.40   605,000   2.86   $ 0.26   605,000   $ 0.26
$0.75   4,953,535   6.87   $ 0.75   3,394,116   $ 0.75
$0.85 – $3.00   2,252,959   8.82   $ 1.89   682,538   $ 1.74
$3.50 – $3.75   2,685,900   9.57   $ 3.50   62,026   $ 3.51
   
           
     
    10,497,394   7.75   $ 1.67   4,743,680   $ 0.87
   
           
     

        The options outstanding and exercisable, by exercise price, at June 30, 2006 were as follows:

 
   Options outstanding
   Options exercisable
Exercise price
   Number of
options
   Weighted
average
remaining
contractual
life (years)
   Weighted
average
exercise
price
   Number of
options
   Weighted
average
exercise
price
$0.25 – $0.40   535,000   1.86   $ 0.26   535,000   $ 0.26
$0.75   4,542,376   5.79   $ 0.75   3,989,593   $ 0.75
$0.85 – $3.00   1,861,313   7.78   $ 1.78   1,118,288   $ 1.73
$3.50 – $3.75   2,601,213   8.56   $ 3.50   1,000,547   $ 3.50
$3.76 – $6.73   1,360,383   9.38   $ 4.82   119,395   $ 4.42
   
           
     
    10,900,285   7.05   $ 2.07   6,762,823   $ 1.35
   
           
     

        The weighted average fair values of options granted were $3.16, $4.45 and $5.53 per share for the years ended June 30, 2004, 2005 and 2006, respectively.

F-31


Warrants

        During April 2000, in connection with an extension of a line of credit, the Company issued a warrant to purchase 1,000,000 shares of common stock at $3.00 per share to Pacific Republic. Using the Black-Scholes option pricing model, the Company estimated that the fair value of the warrants was $2,754,000 on the date of issue, with the following assumptions: fair value of a share of common stock equal to $3.90; term of 5 years; exercise price of $3.00; volatility of 75.0%; dividend rate of 0% and risk-free interest rate of 6.26%. The estimated fair value of the warrant was amortized to interest expense over the remaining term of the line of credit. During February 2002, in connection with an extension of Pacific Republic's line of credit to the Company and Series C financing, the Company reduced the exercise price of the 1,000,000 warrants from $3.00 per share to $1.40 per share. The Company measured the incremental fair value of the warrants at the date of modification, using the Black-Scholes option pricing model. The incremental value of $127,000 was recorded as interest expense during the year ended June 30, 2002. During March 2005, Pacific Republic exercised the warrants to purchase 1,000,000 shares of common stock at $1.40 per share.

        During March 1999, in connection with a preferred stock financing, the Company issued a warrant to Pacific Republic to purchase 2,280,000 shares of common stock at $2.00 per share. Using the Black-Scholes option pricing model, the Company estimated that the fair value of these warrants was $369,000 on the date of issue. The estimated fair value of these warrants was recorded as an issuance cost against the proceeds of the preferred stock, with a corresponding credit to additional paid-in capital. During February 2002, in connection with an extension of Pacific Republic's line of credit to the Company and Series C financing, the Company reduced the exercise price of the 2,280,000 warrants from $2.00 per share to $1.40 per share. The Company measured the incremental fair value of the warrants at the date of modification, using the Black-Scholes option pricing model. The incremental value of $143,000 was recorded as interest expense during the year ended June 30, 2002. During March 2004, Pacific Republic exercised the warrants to purchase 2,280,000 shares of common stock at $1.40 per share.

        In August 2002, in connection with the renegotiation of a contractual commitment with a distributor, the Company issued a warrant to purchase 525,000 shares of common stock at an exercise price of $1.00 per share. Using the Black-Scholes option pricing model, the Company estimated that the fair value of the warrant was $225,000 on the date of issue and recorded the warrant in additional paid in capital. Such warrant remains outstanding at June 30, 2006 and expires on August 8, 2007.

        In connection with the Series B preferred stock financing in April 2001, the Company was obligated to issue up to 333,333 warrants to purchase common stock at a price per share of $10.00, based on the Company not meeting certain deadlines relating to an initial public offering of the Company's common stock. Using the Black-Scholes option pricing model, the Company estimated the fair value of the warrants to be $373,000 based on the following assumptions: fair value of a share of common stock equal to $3.00; term of 5 years; exercise price of $10.00; volatility of 75.0%; dividend rate of 0% and risk-free interest rate of 5.34%. The estimated fair value of the warrants was credited to additional paid-in capital with a corresponding debit to Series B preferred stock. During November 2005, warrants to purchase 16,666 shares of common stock were exercised, and the remaining 316,667 warrants expired unexercised in April 2006.

F-32


11.  Income Taxes

        The provision for income taxes consists of the following (in thousands):

 
   June 30,
 
   2004
   2005
   2006
 
  
Current:                  
  Federal   $ —   $ —   $ 134
  State     3     4     54
  Foreign     —     64     70
   
Total current     3     68     258

Deferred:
 
 
 
 
 
 
 
 
 
  Federal     —     —     —
  State     —     —     —
  Foreign     —     —     —
   
Total deferred     —     —     —
   
Total provision   $ 3   $ 68   $ 258
   

        A reconciliation of income taxes at the statutory federal income tax rate to net income taxes included in the accompanying consolidated statements of operations is as follows (in thousands):

 
   June 30,
  
 
   2004
   2005
   2006
  
 
  
 
U.S. federal taxes (benefit):                    
  At federal statutory rate   $ (3,977 ) $ (8,608 ) $ (11,304 )
  State tax, net of federal benefit     (676 )   (1,315 )   (1,571 )
  Stock-based compensation expense     629     1,236     1,894  
  Change in valuation allowance     4,060     8,745     11,277  
  Credits     (132 )   (408 )   (437 )
  Change in state rate     —     256     —  
  Federal alternative minimum tax     —     —     134  
  Other     99     98     195  
  Foreign     —     64     70  
   
 
Total   $ 3   $ 68   $ 258  
   
 

        Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax

F-33


purposes. Significant components of the Company's deferred tax assets at June 30, 2005 and 2006 were as follows (in thousands):

 
   June 30,
  
 
   2005
   2006
  
 
  
 
Deferred tax assets:              
  Federal and state net operating losses   $ 17,350   $ 14,853  
  Accrued vacation     318     603  
  Deferred revenue     9,265     17,969  
  Credits     2,142     2,579  
  Capitalized research and development     552     481  
  Other     3,265     7,223  
   
 
    Total deferred tax assets     32,892     43,708  

Deferred tax liabilities:
 
 
 
 
 
 
 
  Fixed assets     (1,408 )   (947 )
   
 
    Total deferred tax liabilities     (1,408 )   (947 )

Valuation allowance
 
 
(31,484
)
 
(42,761
)
   
 
Net deferred tax assets:   $ —   $ —  
   
 

        At June 30, 2006, the Company had approximately $40,623,000 in federal and $16,562,000 in state net operating loss carryforwards, which expire in varying amounts beginning in 2009 and 2007 for federal and state purposes, respectively. In addition, at June 30, 2006, the Company had federal and state research and development tax credits of approximately $1,541,000 and $1,347,000, respectively. The federal research credits will begin to expire in 2008 and the state research credits have no expiration date

        Utilization of the Company's net operating loss may be subject to substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code and similar state provisions. Such an annual limitation could result in the expiration of the net operating loss carryforwards before utilization.

        The Company has established a 100% valuation allowance against its deferred tax assets due to the uncertainty surrounding the realization of such assets.

F-34


12.  Other Income (Expense)

        For the fiscal years ended June 30, 2004, 2005 and 2006, interest and other income consisted of the following (in thousands):

 
   Years Ended June 30,
  
 
   2004
   2005
   2006
  
Interest income   $ 33   $ 198   $ 501  
Gain (loss) on asset disposition     (27 )   (18 )   (44 )
Foreign currency transaction gain (loss)     —     (26 )   (21 )
  Other     7     2     2  
   
 
    $ 13   $ 156   $ 438  
   
 
 
   Years Ended June 30,
  
 
   2004
   2005
   2006
  
Interest expense   $ (96 ) $ (291 ) $ (324 )
State sales and local taxes     (52 )   (88 )   (23 )
Other     (1 )   (15 )   (35 )
   
 
    $ (149 ) $ (394 ) $ (382 )
   
 

13.  Related Party Transactions

        During the years ended June 30, 2004, 2005 and 2006, the Company recognized revenue of $0, $7,106,000 and $5,624,000, respectively, relating to products and services provided to Meditec. Meditec's parent, Marubeni Corporation, is a preferred stockholder of the Company. At June 30, 2005 and 2006, amounts of $22,183,000 and $25,120,000, respectively, were recorded as deferred revenue and advances relating to payments made by Meditec for certain products and services. At June 30, 2005 and 2006, no amounts were due from Meditec.

        During the years ended June 30, 2004, 2005 and 2006, the Company recognized revenue of $100,000, $585,000 and $195,000, respectively, relating to products and services provided to Stanford. The Company's former Chief Executive Officer was an active member of the faculty at Stanford. Currently, he is a member of the Company's Board of Directors and he holds the position of Professor of Neurosurgery and Radiation Oncology at Stanford. Advances and deferred revenue of $195,000 and $1,340,000 were recorded at June 30, 2005 and 2006, respectively, relating to payments made by Stanford. The Company also has a license agreement with Stanford as disclosed in Note 8. At June 30, 2005 and 2006, no amounts were due from Stanford.

        During the years ended June 30, 2004, 2005 and 2006, the Company recognized revenue of $2,338,000, $2,590,000 and $130,000, respectively, relating to products and services provided to President Medical Technology Co. ("President"). President is related to President International Development Corporation, a preferred stockholder of the Company. At June 30, 2005 and 2006, amounts of $2,225,000 and $2,325,000, respectively, were recorded as deferred revenue and advances relating to payments made by President for certain products and services. At June 30, 2005 and 2006, amounts of $440,000 and $1,000, respectively, were recorded as trade accounts receivable from President.

F-35

14.  Employee Benefit Plans

        The Company's employee savings and retirement plan is qualified under Section 401(k) of the United States Internal Revenue Code. Employees may make voluntary, tax-deferred contributions to the 401(k) Plan up to the statutorily prescribed annual limit. The Company makes discretionary matching contributions to the 401(k) Plan on behalf of employees up to the limit determined by the Board of Directors. The Company contributed $201,000, $283,000 and $528,000 to the 401(k) Plan during the years ended June 30, 2004, 2005 and 2006, respectively.

15.  Supplemental Disclosures

        The following is supplemental disclosure of valuation and qualifying accounts (in thousands):

 
   Beginning Balance
   Charges (Deductions) to Operations
   Write-offs
   Ending Balance
Accounts receivable allowances                    
Year ended June 30, 2004   $ —   106   —   $ 106
Year ended June 30, 2005   $ 106   45   (106 ) $ 45
Year ended June 30, 2006   $ 45   (21 ) (4 ) $ 20

F-36

                        Shares
 ACCURAY INCORPORATED
 Common Stock

GRAPHIC

PROSPECTUS

Through and including                        , 2006 (the 25th day after the date of this prospectus) federal securities law may require all dealers that effect transactions in these securities, whether or not participating in this offering, to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

JPMorgan   UBS Investment Bank


Piper Jaffray

Jefferies & Company


PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13.    Other Expenses of Issuance and Distribution

        The following table sets forth the costs and expenses, other than underwriting discounts and commissions, payable in connection with the sale and distribution of the securities being registered. All amounts are estimated except the Securities and Exchange Commission registration fee and the NASD filing fee. All the expenses below will be paid by the Registrant.

Item
   Amount
Securities and Exchange Commission Registration fee   $ 24,610
NASD filing fee     23,500
Initial NASDAQ Global Market listing fee     5,000
Legal fees and expenses     *
Accounting fees and expenses     *
Printing and engraving expenses     *
Transfer Agent and Registrar fees     *
Blue Sky fees and expenses     *
Miscellaneous Fees and Expenses     *
   
Total   $ *
   
*
To be provided by amendment.

Item 14.    Indemnification of Directors and Officers

        Section 145 of the Delaware General Corporation Law authorizes a court to award, or a corporation's board of directors to grant indemnity to directors and officers in terms sufficiently broad to permit such indemnification under certain circumstances for liabilities, including reimbursement for expenses incurred, arising under the Securities Act of 1933, as amended. Our certificate of incorporation to be in effect upon the completion of this offering provides for indemnification of our directors, officers, employees and other agents to the maximum extent permitted by the Delaware General Corporation Law, and our bylaws to be in effect upon the completion of this offering provide for indemnification of our directors, officers, employees and other agents to the maximum extent permitted by the Delaware General Corporation Law. In addition, we have entered into indemnification agreements with our directors, officers and some employees containing provisions which are in some respects broader than the specific indemnification provisions contained in the Delaware General Corporation Law. The indemnification agreements may require us, among other things, to indemnify our directors against certain liabilities that may arise by reason of their status or service as directors and to advance their expenses incurred as a result of any proceeding against them as to which they could be indemnified. Reference is also made to Section 9(c) of the underwriting agreement to be filed as Exhibit 1.1 hereto, which provides for indemnification by the underwriter of our officers and directors against certain liabilities. Reference is also made to the offer letter with Eric P. Lindquist filed as Exhibit 10.12 hereto, which provides for indemnification by the Registrant of Mr. Lindquist in the event a suit is filed against him in connection with his non-competition agreement with a former employer.

II-1


Item 15.    Recent Sales of Unregistered Securities

        The Registrant was incorporated in California in 1990. Prior to the completion of this offering, the Registrant will reincorporate in Delaware and all of the stockholders of the California corporation will exchange all of their outstanding shares of common stock and preferred stock of the California corporation for newly issued shares of the Delaware corporation with equivalent rights and preferences. Each outstanding warrant and option to purchase shares of common stock of the California corporation will be convertible into corresponding warrants or options to purchase shares of common stock of the Delaware corporation.

        From November 1, 2003 through the date of this registration statement, the Registrant has made sales of the following unregistered securities:

        1.     The Registrant sold an aggregate of 2,225,141 shares of common stock to employees, directors and consultants for consideration in the form of cash and forfeited shares in the aggregate amount of $8,239,723.01 upon the exercise of stock options and stock awards, 83,433 shares of which have been repurchased.

        2.     The Registrant granted stock options and stock awards to employees, directors and consultants under its 1998 Equity Incentive Plan covering an aggregate of 7,788,020 shares of common stock, with exercise prices ranging from $0.85 to $10.00 per share. Of these, options covering an aggregate of 744,052 were cancelled without being exercised.

        3.     The Registrant claimed exemption from registration under the Securities Act for the sales and issuances of securities in the transactions described in paragraphs (1) and (2) above under Section 4(2) of the Securities Act in that such sales and issuances did not involve a public offering or under Rule 701 promulgated under the Securities Act, in that they were offered and sold either pursuant to written compensatory plans or pursuant to a written contract relating to compensation, as provided by Rule 701.

        4.     In January and May 2003, the Registrant issued 100,000 shares of its common stock to an investor upon exercise of a warrant to purchase shares of its common stock for an aggregate exercise price of $50,000. In March 2004, the Registrant issued 2,280,000 shares of its common stock to Pacific Republic Capital upon exercise of a warrant to purchase shares of its common stock for an aggregate exercise price of $3,192,000. In March 2005, the Registrant issued 1,000,000 shares of its common stock to Pacific Republic Capital upon exercise of a warrant to purchase shares of its common stock for an aggregate exercise price of $1,400,000. In November 2005, the Registrant issued 16,666 shares of its common stock to an investor upon exercise of a warrant to purchase shares of its common stock for an aggregate exercise price of $167,000.

        5.     The Registrant claimed exemption from registration under the Securities Act for the sale and issuance of securities in the transactions described in paragraph (4) by virtue of Section 4(2) and/or Regulation D promulgated thereunder as transactions not involving any public offering. All of the purchasers of unregistered securities for which the Registrant relied on Section 4(2) and/or Regulation D represented that they were accredited investors as defined under the Securities Act. The Registrant claimed such exemption on the basis that (a) the purchasers in each case represented that they intended to acquire the securities for investment only and not with a view to the distribution thereof and that they either received adequate information about the registrant or had access, through employment or other relationships, to such information and (b) appropriate legends were affixed to the stock certificates issued in such transactions.

II-2

Item 16.    Exhibits and Financial Statements

(a)   Exhibits

Exhibit No.
   Description of Exhibit
1.1 * Form of Underwriting Agreement.

3.1
 
Amended and Restated Articles of Incorporation of Registrant.

3.2
*
Amended and Restated Certificate of Incorporation of Registrant, to be filed upon the completion of this offering.

3.3
 
Bylaws of Registrant.

3.4
*
Bylaws of Registrant, to be in effect upon the completion of this offering.

4.1
 
Common Stock Warrant dated August 9, 2002 by and between Registrant and Hazem Chehabi, M.D.

4.2
 
Investor Rights Agreement dated October 30, 2006 by and between Registrant and purchasers of Series A Preferred Stock, Series A1 Preferred Stock, Series B Preferred Stock and Series C Preferred Stock and certain holders of common stock.

5.1
*
Form of Opinion of Latham & Watkins LLP.

10.1
 
Industrial Complex Lease dated July 14, 2003 by and between Registrant and MP Caribbean, Inc., as amended by the First Amendment to Industrial Complex Lease effective as of December 9, 2004 and the Second Amendment to Industrial Complex Lease effective as of September 25, 2006.

10.2
 
Standard Industrial Lease effective as of June 30, 2005 by and between Registrant and The Realty Associates Fund III, L.P.

10.3
 
Accuray Incorporated 1993 Stock Option Plan and forms of agreements relating thereto.

10.4
 
Accuray Incorporated 1998 Equity Incentive Plan and forms of agreements relating thereto.

10.5
*
Accuray Incorporated 2007 Incentive Award Plan and forms of agreements relating thereto.

10.6
*
Accuray Incorporated Employee Stock Purchase Plan and forms of agreements relating thereto.

10.7
 
Form of Indemnification Agreement by and between Registrant and each of its directors and executive officers.

10.8
 
Employment Terms Letter dated November 10, 2006 by and between Registrant and Euan S. Thomson, Ph.D.

10.9
 
Employment Terms Letter dated November 10, 2006 by and between Registrant and Chris A. Raanes.

10.10
 
Employment Terms Letter dated November 10, 2006 by and between Registrant and Robert E. McNamara.

10.11
 
Offer Letter dated July 22, 2004 by and between Registrant and John W. Allison, Ph.D.

10.12
 
Employment Terms Letter dated November 10, 2006 by and between Registrant and Eric Lindquist.
     

II-3


10.13
 
Employment Terms Letter dated November 10, 2006 by and between Registrant and Wade Hampton.

10.14
 
Independent Contractor Agreement effective as of April 1, 2006 by and between Registrant and John R. Adler, as amended effective as of May 24, 2006.

10.15
 
Independent Contractor Agreement effective as of April 1, 2006 by and between the CyberKnife Society and John R. Adler, as amended effective as of October 3, 2006.

10.16
 
License Agreement effective as of December 12, 2004 by and between Registrant and American Science and Engineering, Inc.

10.17
 
Assignment & Assumption of License and Consent by Supplier effective as of January 10, 2005 by and among Registrant, American Science and Engineering, Inc., Yuri Batygin, and Anatoliy Zapreier.

10.18
†
Nonexclusive End-User Software License Agreement dated September 9, 2005 by and between Registrant and The Regents of the University of California.

10.19
†
License Agreement effective as of July 9, 1997 by and between Registrant and The Board of Trustees of the Leland Stanford Junior University.

10.20
†
Manufacturing License and Technology Transfer Agreement effective as of January 28, 1991 by and between Registrant and Schonberg Radiation Corporation, as amended on April 15, 1996 and November 11, 2002.

10.21
*†
Non-Exclusive System Partner Agreement effective as of September 23, 2005 by and between Registrant and KUKA Robotics Corporation.

10.22
†
Consulting Agreement effective as of March 11, 2004 by and between Registrant and Forte Automation Systems, Inc.

10.23
†
Amended and Restated International Distributor Agreement effective as of April 1, 2004 by and between Registrant and President Medical Technologies Co., Ltd. Inc.

10.24
†
Commission Agreement effective as of August 10, 2006 by and between Registrant and President Medical Technologies Co., Ltd. Inc.

10.25
*
Assignment Agreement effective as of December 29, 2004 by and between President Medical Technologies Co., Ltd. Inc. and Cowealth Medical Science & Biotechnology Incorporated.

10.26
†
International Distributor Agreement dated January 21, 2004 by and between Registrant and Chiyoda Technol Corporation.

10.27
 
Form of Training Center Agreement.

10.28
 
Form International of Distributor Agreement.

10.29
 
Form of Sales Agent Agreement.

10.30
 
Form of CyberKnife G4 Purchase Agreement.

10.31
 
Form of Diamond Elite Service Agreement.

10.32
 
Form of Emerald Elite Service Agreement.

10.33
 
Form of Emerald Basic Service Agreement.

10.34
 
Form of International Ruby Elite Service Agreement.

10.35
 
Form of International Diamond Elite Service Agreement.
     

II-4


10.36
 
Form of International Emerald Elite Service Agreement.

10.37
 
Form of Platinum Elite Service Agreement.

10.38
 
Form of Silver Elite Service Agreement.

10.39
 
Form of International Platinum Elite Service Agreement.

10.40
 
Form of International Gold Elite Service Agreement.

10.41
 
Form of International Silver Elite Service Agreement.

10.42
 
Form of CyberKnife G4 Shared Ownership Agreement.

10.43
 
Form of CyberKnife G4 Placement Agreement.

10.44
 
Separation Agreement and Release effective as of April 14, 2006 by and between Registrant and John W. Allison, Ph.D.

21.1
 
List of subsidiaries.

23.1
 
Consent of Latham & Watkins LLP (included in Exhibit 5.1).

23.2
 
Consent of Grant Thornton LLP, independent registered public accounting firm.

24.1
 
Power of Attorney (see page II-7).
*
To be filed by amendment. All other exhibits are filed herewith.

†
Portions of the exhibit have been omitted pursuant to a request for confidential treatment. The omitted information has been filed seperately with the Securities and Exchange Commission.

(b)   Financial Statement Schedules

        None.

Item 17.    Undertakings

        Insofar as indemnification for liabilities arising under the Securities Act may be permitted as to directors, officers and controlling persons of Accuray pursuant to the provisions described in Item 14, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by Accuray of expenses incurred or paid by a director, officer or controlling person of Accuray in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

        The undersigned registrant hereby undertakes that:

        (1)   For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus as filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by Accuray pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

        (2)   For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement

II-5


relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

        The undersigned registrant hereby undertakes to provide the underwriter at the closing specified in the underwriting agreements, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

        That for the purpose of determining liability under the Securities Act of 1933 to any purchaser, if the registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

        That for the purpose of determining liability under the Securities Act of 1933 to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

        (i)    Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;

        (ii)   Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;

        (iii)  The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and

        (iv)  Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

II-6


SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, as amended, we have duly caused this Registration Statement on Form S-1 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Sunnyvale, State of California, on the 13th day of November 2006.

    ACCURAY INCORPORATED

 
 
By:
/s/  E. S. THOMSON      
Euan S. Thomson, Ph.D.
 President and Chief Executive Officer


POWER OF ATTORNEY

        KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Euan S. Thomson, Ph.D. and Robert E. McNamara, and each of them, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement (including any registration statement filed by a corporation that is a successor to Accuray Incorporated by merger) and to sign any registration statement for the same offering covered by the Registration Statement that is to be effective upon filing pursuant to Rule 462 promulgated under the Securities Act of 1933, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

        Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

Signature
   Title
   Date

 
 
 
 
 
/s/  E. S. THOMSON      
Euan S. Thomson, Ph.D		   President and Chief Executive Officer and Director (principal executive officer)   November 13, 2006

/s/  R. E. MCNAMARA      
Robert E. McNamara
 
Senior Vice President, Chief Financial Officer (principal financial and accounting officer)
 
November 13, 2006

/s/  WAYNE WU      
Wayne Wu
 
Chairman of the Board and Director
 
November 13, 2006
         

II-7


/s/  JOHN R. ADLER, JR. M.D.      
John R. Adler, Jr., M.D.
 
Director
 
November 13, 2006

/s/  TED T. C. TU      
Ted T. C. Tu
 
Director
 
November 13, 2006

/s/  RODERICK A. YOUNG      
Roderick A. Young
 
Director
 
November 13, 2006

/s/  LI YU      
Li Yu
 
Director
 
November 13, 2006

II-8


EXHIBIT INDEX

Exhibit No.
   Description of Exhibit
1.1 * Form of Underwriting Agreement.

3.1
 
Amended and Restated Articles of Incorporation of Registrant.

3.2
*
Amended and Restated Certificate of Incorporation of Registrant, to be filed upon the completion of this offering.

3.3
 
Bylaws of Registrant.

3.4
*
Bylaws of Registrant, to be in effect upon the completion of this offering.

4.1
 
Common Stock Warrant dated August 9, 2002 by and between Registrant and Hazem Chehabi, M.D.

4.2
 
Investor Rights Agreement dated October 30, 2006 by and between Registrant and purchasers of Series A Preferred Stock, Series A1 Preferred Stock, Series B Preferred Stock and Series C Preferred Stock and certain holders of common stock.

5.1
*
Form of Opinion of Latham & Watkins LLP.

10.1
 
Industrial Complex Lease dated July 14, 2003 by and between Registrant and MP Caribbean, Inc., as amended by the First Amendment to Industrial Complex Lease effective as of December 9, 2004 and the Second Amendment to Industrial Complex Lease effective as of September 25, 2006.

10.2
 
Standard Industrial Lease effective as of June 30, 2005 by and between Registrant and The Realty Associates Fund III, L.P.

10.3
 
Accuray Incorporated 1993 Stock Option Plan and forms of agreements relating thereto.

10.4
 
Accuray Incorporated 1998 Equity Incentive Plan and forms of agreements relating thereto.

10.5
*
Accuray Incorporated 2007 Incentive Award Plan and forms of agreements relating thereto.

10.6
*
Accuray Incorporated Employee Stock Purchase Plan and forms of agreements relating thereto.

10.7
 
Form of Indemnification Agreement by and between Registrant and each of its directors and executive officers.

10.8
 
Employment Terms Letter dated November 10, 2006 by and between Registrant and Euan S. Thomson, Ph.D.

10.9
 
Employment Terms Letter dated November 10, 2006 by and between Registrant and Chris A. Raanes.

10.10
 
Employment Terms Letter dated November 10, 2006 by and between Registrant and Robert E. McNamara.

10.11
 
Offer Letter dated July 22, 2004 by and between Registrant and John W. Allison, Ph.D.

10.12
 
Employment Terms Letter dated November 10, 2006 by and between Registrant and Eric Lindquist.

10.13
 
Employment Terms Letter dated November 10, 2006 by and between Registrant and Wade Hampton.

10.14
 
Independent Contractor Agreement effective as of April 1, 2006 by and between Registrant and John R. Adler, as amended effective as of May 24, 2006.
     


10.15
 
Independent Contractor Agreement effective as of April 1, 2006 by and between the CyberKnife Society and John R. Adler, as amended effective as of October 3, 2006.

10.16
 
License Agreement effective as of December 12, 2004 by and between Registrant and American Science and Engineering, Inc.

10.17
 
Assignment & Assumption of License and Consent by Supplier effective as of January 10, 2005 by and among Registrant, American Science and Engineering, Inc., Yuri Batygin, and Anatoliy Zapreier.

10.18
†
Nonexclusive End-User Software License Agreement dated September 9, 2005 by and between Registrant and The Regents of the University of California.

10.19
†
License Agreement effective as of July 9, 1997 by and between Registrant and The Board of Trustees of the Leland Stanford Junior University.

10.20
†
Manufacturing License and Technology Transfer Agreement effective as of January 28, 1991 by and between Registrant and Schonberg Radiation Corporation, as amended on April 15, 1996 and November 11, 2002.

10.21
*†
Non-Exclusive System Partner Agreement effective as of September 23, 2005 by and between Registrant and KUKA Robotics Corporation.

10.22
†
Consulting Agreement effective as of March 11, 2004 by and between Registrant and Forte Automation Systems, Inc.

10.23
†
Amended and Restated International Distributor Agreement effective as of April 1, 2004 by and between Registrant and President Medical Technologies Co., Ltd. Inc.

10.24
†
Commission Agreement effective as of August 10, 2006 by and between Registrant and President Medical Technologies Co., Ltd. Inc.

10.25
*
Assignment Agreement effective as of December 29, 2004 by and between President Medical Technologies Co., Ltd. Inc. and Cowealth Medical Science & Biotechnology Incorporated.

10.26
†
International Distributor Agreement dated January 21, 2004 by and between Registrant and Chiyoda Technol Corporation.

10.27
 
Form of Training Center Agreement.

10.28
 
Form of International Distributor Agreement.

10.29
 
Form of Sales Agent Agreement.

10.30
 
Form of CyberKnife G4 Purchase Agreement.

10.31
 
Form of Diamond Elite Service Agreement.

10.32
 
Form of Emerald Elite Service Agreement.

10.33
 
Form of Emerald Basic Service Agreement.

10.34
 
Form of International Ruby Elite Service Agreement.

10.35
 
Form of International Diamond Elite Service Agreement.

10.36
 
Form of International Emerald Elite Service Agreement.

10.37
 
Form of Platinum Elite Service Agreement.

10.38
 
Form of Silver Elite Service Agreement.

10.39
 
Form of International Platinum Elite Service Agreement.
     


10.40
 
Form of International Gold Elite Service Agreement.

10.41
 
Form of International Silver Elite Service Agreement.

10.42
 
Form of CyberKnife G4 Shared Ownership Agreement.

10.43
 
Form of CyberKnife G4 Placement Agreement.

10.44
 
Separation Agreement and Release effective as of April 14, 2006 by and between Registrant and John W. Allison, Ph.D.

21.1
 
List of subsidiaries.

23.1
 
Consent of Latham & Watkins LLP (included in Exhibit 5.1).

23.2
 
Consent of Grant Thornton LLP, independent registered public accounting firm.

24.1
 
Power of Attorney (see page II-7).
*
To be filed by amendment. All other exhibits are filed herewith.

†
Portions of the exhibit have been omitted pursuant to a request for confidential treatment. The omitted information has been filed seperately with the Securities and Exchange Commission.



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TABLE OF CONTENTS
PROSPECTUS SUMMARY
RISK FACTORS
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
USE OF PROCEEDS
DIVIDEND POLICY
CAPITALIZATION
DILUTION
SELECTED CONSOLIDATED FINANCIAL DATA
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
BUSINESS
MANAGEMENT
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
PRINCIPAL AND SELLING STOCKHOLDERS
DESCRIPTION OF CAPITAL STOCK
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES TO NON-UNITED STATES HOLDERS OF OUR COMMON STOCK
SHARES ELIGIBLE FOR FUTURE SALE
UNDERWRITING
LEGAL MATTERS
EXPERTS
CHANGE IN ACCOUNTANTS
WHERE YOU CAN FIND MORE INFORMATION
ACCURAY INCORPORATED INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
Accuray Incorporated Consolidated Balance Sheets (in thousands, except share amounts)
Accuray Incorporated Consolidated Statements of Operations (in thousands, except share amounts)
Accuray Incorporated Consolidated Statements of Temporary Equity and Stockholders' Equity (Deficiency) (in thousands, except share amounts)
Accuray Incorporated Consolidated Statements of Temporary Equity and Stockholders' Equity (Deficiency) (continued) (in thousands, except share amounts)
Accuray Incorporated Consolidated Statements of Cash Flows (in thousands)
Accuray Incorporated Notes to Consolidated Financial Statements
PART II INFORMATION NOT REQUIRED IN PROSPECTUS
SIGNATURES
POWER OF ATTORNEY
EXHIBIT INDEX

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Exhibit 3.1


AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
ACCURAY INCORPORATED.

        Euan Thompson and Robert McNamara hereby certify that:

        ONE:    They are the duly elected and acting President and Assistant Secretary, respectively, of Accuray Incorporated, a California corporation (the "Corporation").

        TWO:    The Articles of Incorporation of this Corporation are amended and restated in their entirety to read as follows:

I.

        The name of the Corporation is Accuray Incorporated.

II.

        The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of California other than the banking business, the trust company business or the practice of a profession permitted to be incorporated by the California Corporations Code.

III.

        This Corporation is authorized to issue two classes of stock to be designated, respectively, "Common Stock" and "Preferred Stock." The total number of shares which the Corporation is authorized to issue is Eighty-Seven Million Four Hundred Nineteen Thousand Three Hundred Thirty-One (87,419,331) shares, Seventy Million (70,000,000) shares of which shall be Common Stock (the "Common Stock"), and Seventeen Million Four Hundred Nineteen Thousand Three Hundred Thirty-One (17,419,331) shares of which shall be Preferred Stock (the "Preferred Stock"). None of such shares has any par value. Four Million Five Hundred Thousand (4,500,000) of the authorized shares of Preferred Stock are hereby designated "Series A Preferred Stock" (the "Series A Preferred"), One Million One Hundred Seventy Thousand Six Hundred Sixty-Six (1,070,666) of the authorized shares of Preferred Stock are hereby designated "Series A-1 Preferred Stock" (the "Series A-1 Preferred"), Six Hundred Sixty-Six Thousand Six Hundred Sixty-Five (666,665) of the authorized shares of Preferred Stock are hereby designated "Series B Preferred Stock" (the "Series B Preferred") and Eleven Million One Hundred Eighty-Two Thousand (11,182,000) of the authorized shares of Preferred Stock are hereby designated "Series C Preferred Stock" (the "Series C Preferred"). The Series A Preferred, Series A-1 Preferred, Series B Preferred and the Series C Preferred are collectively referred to herein as the "Series Preferred."

        The rights, preferences, privileges, restrictions and other matters relating to the Series Preferred are as follows:

1

2

3

4

        The holders of the Series Preferred shall have the following rights with respect to the conversion of the Series Preferred into shares of Common Stock:

5

6

7

8

9

10

        Section 5.    No Reissuance of Series Preferred.    No share or shares of Series Preferred acquired by the Corporation by reason of purchase, conversion or otherwise shall be reissued, and all such shares shall be cancelled, retired and eliminated from the shares which the Corporation shall be authorized to issue.

        Section 6.    No Preemptive Rights.    Shareholders shall have no preemptive rights except as granted by the Corporation pursuant to written agreements.

        Section 7.    Redemption.    The Series Preferred is not redeemable.

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IV.

        The liability of the directors of the Corporation for monetary damages shall be eliminated to the fullest extent permissible under California law.

        The Corporation is authorized to provide indemnification of agents (as defined in Section 317 of the California Corporations Code) for breach of duty to the Corporation and its shareholders through bylaw provisions, agreements with agents, votes of shareholders or disinterested directors or any or all of the above, in excess of the indemnification otherwise permitted by Section 317 of the General Corporation Law of California, subject to the limits on such excess indemnification set forth in Section 204 of the General Corporation Law of California. If, after the effective date of this Article, California law is amended in a manner which permits a corporation to limit the monetary or other liability of its directors or to authorize indemnification of, or advancement of such defense expenses to, its directors or to authorize indemnification of, or advancement of such defense expenses to, its directors or other persons, in any such case to a greater extent than is permitted on such effective date, the references in this Article to "California law" shall to that extent be deemed to refer to California law as so amended.

        Any repeal or modification of this Article shall only be prospective and shall not affect the rights under this Article in effect at the time of the alleged occurrence of any action or omission to act giving rise to liability."

        THREE:    The foregoing amendment and restatement of the articles of incorporation has been duly approved by the Board of Directors of this Corporation.

        FOUR:    The foregoing amendment and restatement of the articles of incorporation has been duly approved by the required vote of shareholders in accordance with Sections 902 and 903 of the California Corporations Code. The Corporation has two classes of stock outstanding and such classes of stock are entitled to vote with respect to the amendment herein set forth. The total number of outstanding shares of Common Stock of the Corporation is 16,269,238, the total number of outstanding shares of Series A Preferred is 4,500,000, the total number of outstanding shares of Series A-1 Preferred is 1,070,666, the total number of outstanding shares of Series B Preferred is 666,665 and the total number of outstanding shares of Series C Preferred is 11,182,000. The number of shares voting in favor of the amendment equaled or exceeded the vote required. The percentage vote required was more than fifty percent (50%) of the outstanding shares of Common Stock and Preferred Stock, voting together on an as converted to Common Stock basis, more than fifty percent (50%) of the outstanding shares of Preferred Stock, voting as a separate class, and more than fifty percent (50%) of the outstanding shares of the Series C Preferred, in each case, voting separately as a single class.

        The undersigned, Euan Thompson and Robert McNamara, the President and Assistant Secretary, respectively, of Accuray Incorporated, declare under penalty of perjury that the matters set out in the foregoing Certificate are true of their own knowledge.

        Executed at Sunnyvale, California on October 18, 2006.


 
 
/s/ Euan Thomson
EUAN THOMSON, President

 
 
/s/ Robert McNamara
ROBERT MCNAMARA, Assistant Secretary


SIGNATURE PAGE TO AMENDED AND RESTATED ARTICLES OF INCORPORATION

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Exhibit 3.3


BY-LAWS

OF

ACCURAY INCORPORATED


INDEX

Section
   Page
ARTICLE I. OFFICES   1
  Section 1.1   Principal Executive Office   1
  Section 1.2   Other Offices   1

ARTICLE II. MEETINGS OF SHAREHOLDERS
 
1
  Section 2.1   Place of Meetings   1
  Section 2.2   Annual Meetings   1
  Section 2.3   Special Meetings   1
  Section 2.4   Notice of Meetings or Reports   1
  Section 2.5   Adjourned Meetings and Notice Thereof   2
  Section 2.6   Voting   2
  Section 2.7   Quorum   3
  Section 2.8   Consent of Absentees   3
  Section 2.9   Action Without Meeting   3
  Section 2.10   Proxies   4

ARTICLE III. DIRECTORS
 
4
  Section 3.1   Powers   4
  Section 3.2   Number of Directors   4
  Section 3.3   Election and Term of Office   4
  Section 3.4   Resignation   5
  Section 3.5   Removal   5
  Section 3.6   Vacancies   5
  Section 3.7   Organization Meeting   5
  Section 3.8   Other Regular Meetings   5
  Section 3.9   Calling Meetings   5
  Section 3.10   Place of Meetings   5
  Section 3.11   Telephonic Meetings   6
  Section 3.12   Notice of Special Meetings   6
  Section 3.13   Waiver of Notice   6
  Section 3.14   Action Without Meeting   6
  Section 3.15   Quorum   6
  Section 3.16   Adjournment   7
  Section 3.17   Inspection Rights   7
  Section 3.18   Fees and Compensation   7

ARTICLE IV. EXECUTIVE COMMITTEE AND OTHER COMMITTEES
 
7
  Section 4.1   Executive Committee   7
  Section 4.2   Other Committees   7
  Section 4.3   Minutes and Reports   7
  Section 4.4   Meetings   8
  Section 4.5   Term of Office of Committee Members   8

ARTICLE V. OFFICERS
 
8
  Section 5.1   Officers   8
  Section 5.2   Election   8
  Section 5.3   Subordinate Officers, etc   8
  Section 5.4   Removal and Resignation   8
  Section 5.5   Vacancies   9

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  Section 5.6   Chairman of the Board   9
  Section 5.7   President   9
  Section 5.8   Vice President   9
  Section 5.9   Secretary   9
  Section 5.10   Treasurer and Chief Financial Officer   9
  Section 5.11   Assistant Secretary   10
  Section 5.12   Compensation   10

ARTICLE VI. MISCELLANEOUS
 
10
  Section 6.1   Record Date   10
  Section 6.2   Inspection of Corporate Records   10
  Section 6.3   Execution of Corporate Instruments   11
  Section 6.4   Ratification by Shareholders   11
  Section 6.5   Annual Report   11
  Section 6.6   Representation of Shares of Other Corporations   11
  Section 6.7   Inspection of By-Laws   12

ARTICLE VII. SHARES OF STOCK
 
12
  Section 7.1   Form of Certificates   12
  Section 7.2   Transfer of Shares   12
  Section 7.3   Lost Certificates   12

ARTICLE VIII. INDEMNIFICATION
 
12
  Section 8.1   Indemnification by Corporation   12
  Section 8.2   Right of Claimant to Bring Suit   13
  Section 8.3   Indemnification of Employees and Agents of the Corporation   13
  Section 8.4   Rights Not Exclusive   13
  Section 8.5   Indemnity Agreements   13
  Section 8.6   Insurance   14
  Section 8.7   Amendment, Repeal or Modification   14

ARTICLE IX. AMENDMENTS
 
14
  Section 9.1   Power of Shareholders   14
  Section 9.2   Power of Directors   14

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BY-LAWS

OF

ACCURAY INCORPORATED


ARTICLE I.

OFFICES

        The principal executive office for the transaction of the business of the corporation is hereby fixed and located at 3300 Keller Street, Bldg. 101, City of Santa Clara, County of Santa Clara, State of California. The Board of Directors is hereby granted full power and authority to change said principal office from one location to another.

        Branch or subordinate offices may at any time be established by the Board of Directors at any place or places where the corporation is qualified to do business.


ARTICLE II.

MEETINGS OF SHAREHOLDERS

        All meetings of shareholders shall be held either at the principal executive office or at any other place within or without the State of California which may be designated either by the Board of Directors or by the written consent of a majority of the shareholders entitled to vote thereat as determined pursuant to Section 6.1 of these By-Laws given either before or after the meeting.

        The annual meetings of shareholders shall be held on such day and at such hour as may be fixed by the Board of Directors. At such meeting, Directors shall be elected, and any other proper business may be transacted.

        Special meetings of the shareholders may be called at any time by the Board of Directors, the Chairman of the Board, the President, or by the holders of shares entitled to cast not less than ten percent (10%) of the votes at the meeting. Notice of such special meeting shall be given in the same manner as for the annual meeting of shareholders. Notices of any special meetings shall specify in addition to the place, date and hour of such meeting, the general nature of the business to be transacted thereat.

        Written notice of each meeting of shareholders shall be given not less than ten (10) days nor more than sixty (60) days before the date of the meeting to each shareholder entitled to vote thereat. Such notice shall be given either personally or by mail or other means of written communication, addressed or delivered to each shareholder entitled to vote at such meeting at the address of such shareholder appearing on the books of the corporation or given by him to the corporation for the purpose of such

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notice. If no such address appears or is given, notice shall be given either personally or by mail or other means of written communication addressed to the shareholder at the place where the principal executive office of the corporation is located, or by publication at least once in a newspaper of general circulation in the county in which said office is located. The notice shall be deemed to have been given at the time when delivered personally or deposited in the mail or sent by other means of written communication.

        The same procedure for the giving of notice shall apply to the giving of any report to shareholders.

        All such notices shall state the place, the date and the hour of such meeting, and shall state such matters, if any, as may be expressly required by the California Corporations Code.

        Upon request by any person or persons entitled to call a special meeting, the Chairman of the Board, President, Vice President or Secretary shall within twenty (20) days after receipt of the request cause notice to be given to the shareholders entitled to vote that a special meeting will be held at a time requested by the person or persons calling the meeting, but not less than thirty-five (35) nor more than sixty (60) days after receipt of the request.

        All other notices shall be sent by the Secretary or an Assistant Secretary, or if there be no such officer, or in the case of his neglect or refusal to act, by any other officer, or by persons calling the meeting.

        Any shareholders' meeting, annual or special, whether or not a quorum is present, may be adjourned from time to time by the vote of a majority of the shares, represented either in person or by proxy, but in the absence of a quorum, no other business may be transacted at such meeting, except as provided in Section 2.7 of these By-Laws.

        When a shareholders' meeting is adjourned to another time or place, notice of the adjourned meeting need not be given if the time and place thereof are announced at the meeting at which the adjournment is taken; except that if the adjournment is for more than forty-five (45) days or if after the adjournment a new record date is fixed for the adjourned meeting, notice of the adjourned meeting shall be given to each shareholder of record entitled to vote thereat.

        At the adjourned meeting, the corporation may transact any business which might have been transacted at the original meeting.

        Except as otherwise provided in the Articles of Incorporation and subject to Section 6.1 of these By-Laws, each outstanding share, regardless of class, shall be entitled to one vote on each matter submitted to a vote of shareholders. Vote may be viva voce or by ballot; provided, however, that elections for directors must be by ballot upon demand made by a shareholder at the meeting and before the voting begins.

        Every shareholder entitled to vote at any election for Directors may cumulate his votes and give one candidate a number of votes equal to the number of directors to be elected, multiplied by the number of votes to which his shares are entitled, or to distribute his votes on the same principle among as many candidates as he thinks fit, provided that no shareholder shall be entitled to cumulate votes unless such candidate or candidates names have been placed in nomination prior to the voting and the shareholder has given notice at the meeting, prior to the voting, of the shareholder's intention to cumulate the shareholder's votes. If any one shareholder has given such notice, all shareholders may cumulate their votes for candidates in nomination. The candidates receiving the highest number of

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votes of the shares entitled to be voted for them, up to the number of directors to be elected by such shares, shall be elected.

        Any holder of shares entitled to vote on any matter may vote part of the shares in favor of the proposal and refrain from voting the remaining shares or vote them against the proposal, other than elections to office, but, if the shareholder fails to specify the number of shares such shareholder is voting affirmatively, it shall be conclusively presumed that the shareholder's approving vote is with respect to all shares said shareholder is entitled to vote.

        A majority of the shares entitled to vote, represented in person or by proxy, shall constitute a quorum at any meeting of shareholders. If a quorum is present, the affirmative vote of a majority of the shares represented at the meeting and entitled to vote on any matter shall be the act of the shareholders, unless otherwise required by the Articles of Incorporation.

        The shareholders present at a duly called or held meeting at which a quorum is present may continue to do business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum, if any action taken (other than adjournment) is approved by at least a majority of the shares required to constitute a quorum.

        The transactions of any meeting of shareholders, if not duly called and noticed, and wherever held, shall be as valid as though had at a meeting duly held after regular call and notice, if a quorum is present either in person or by proxy, and if, either before or after the meeting, each of the shareholders entitled to vote, not present in person or by proxy, signs a written waiver of notice, or a consent to the holding of such meeting, or an approval of the minutes thereof. All such waivers, consents, or approvals shall be filed with the corporate records or made a part of the minutes of the meeting.

        Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when a person objects, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened; provided, that attendance at a meeting is not a waiver of any right to object to the consideration of matters required by law or these By-Laws to be included in the notice but not so included if such objection is expressly made at the meeting.

        Any action which may be taken at any meeting of shareholders may be taken without a meeting and without prior notice, if a consent in writing, setting forth the actions so taken, shall be signed by the holders of outstanding shares having not less than the minimum number of votes which would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted; provided, that except to fill a vacancy as provided in Section 3.6 of these By-Laws, Directors may not be elected by written consent except by unanimous written consent of all shares entitled to vote for the election of Directors.

        Unless the consents of all shareholders entitled to vote have been solicited in writing, notice of the following actions approved by shareholders without a meeting by less than unanimous written consent shall be given to those shareholders entitled to vote who have not consented in writing at least ten (10) days before the consummation of the action authorized by such approval:

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        Unless the consents of all shareholders entitled to vote have been solicited in writing, prompt notice of the taking of any corporate action not listed above which is approved by shareholders without a meeting by less than unanimous written consent, shall be given to those shareholders entitled to vote who have not consented in writing.

        Such notice shall be given as provided in Section 2.4 of these By-Laws.

        Every person entitled to vote shares may authorize another person or persons to act by proxy with respect to such shares. No proxy shall be valid after the expiration of eleven (11) months from the date thereof unless otherwise provided in the proxy.


ARTICLE III.

DIRECTORS

        Subject to the limitations stated in the Articles of Incorporation, these By-Laws, and the California Corporations Code as to actions which shall be approved by the shareholders or by the affirmative vote of a majority of the outstanding shares entitled to vote, and subject to the duties of Directors as prescribed by the California Corporations Code, all corporate powers shall be exercised by, or under the direction of, and the business and affairs of the corporation shall be managed by, the Board of Directors.

        The authorized number of Directors of the corporation shall be not less than four (4) nor more than six (6) and the exact number of Directors initially authorized shall be five (5). The exact number of Directors may be fixed within the limits specified in this Section 3.2 by a By-law duly adopted by the shareholders or by a resolution of the Board of Directors. The minimum or maximum number of Directors provided in this Section 3.2 may be changed or a definite number fixed without provision for an indefinite, by a By-law duly adopted by the affirmative vote of a majority of the outstanding shares entitled to vote.

        The Directors shall be elected at each annual meeting of shareholders, but if any such annual meeting is not held, or the Directors are not elected thereat, the Directors may be elected at any special meeting of the shareholders held for that purpose. All Directors shall hold office until the expiration of the term for which elected and until their respective successors are elected, except in the case of the death, resignation or removal of any Director. A Director need not be a shareholder.

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        Any Director may resign effective upon giving written notice to the Chairman of the Board, the President, the Secretary or the Board of Directors of the corporation, unless the notice specifies a later time for the effectiveness of such resignation. If the resignation is effective at a future time, a successor may be elected to take office when the resignation becomes effective.

        The entire Board of Directors or any individual Director may be removed from office, prior to the expiration of their or his term of office only in the manner and within the limitations provided by the California Corporations Code.

        No reduction of the authorized number of Directors shall have the effect of removing any Director prior to the expiration of such Director's term of office.

        A vacancy in the Board of Directors shall be deemed to exist in case of the death, resignation or removal of any Director, or if the authorized number of Directors be increased, or if the shareholders fail at any annual or special meeting of shareholders at which any Director or Directors are elected to elect the full authorized number of Directors to be voted for at that meeting.

        Vacancies in the Board of Directors may be filled by a majority of the Directors then in office, whether or not less than a quorum, or by a sole remaining Director. Each Director so elected shall hold office until the expiration of the term for which he was elected and until his successor is elected at an annual or a special meeting of the shareholders, or until his death, resignation or removal.

        The shareholders may elect a Director or Directors at any time to fill any vacancy or vacancies not filled by the Directors. Any such election by written consent other than to fill a vacancy created by removal requires the consent of a majority of the outstanding shares entitled to vote. A Director may not be elected by written consent to fill a vacancy created by removal except by unanimous written consent of all shares entitled to vote for the election of directors.

        Immediately after each annual meeting of shareholders, the Board of Directors shall hold a regular meeting for the purpose of organization, the election of officers and the transaction of other business. No notice of such meeting need be given.

        The Board of Directors may provide by resolution the time and place for the holding of regular meetings of the Board; provided, however, that if the date so designated falls upon a legal holiday, then the meeting shall be held at the same time and place on the next succeeding day which is not a legal holiday. No notice of such regular meetings of the Board need be given.

        Meetings of the Board of Directors for any purpose or purposes shall be held whenever called by the Chairman of the Board, the President or the Secretary or any two Directors of the corporation.

        Meetings of the Board of Directors shall be held at any place within or without the State of California which may be designated in the notice of the meeting, or, if not stated in the notice or there

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is no notice, designated by resolution of the Board. In the absence of such designation, meetings of the Board of Directors shall be held at the principal executive office of the corporation.

        Members of the Board may participate in a regular or special meeting through use of conference telephone or similar communications equipment, so long as all members participating in such meeting can hear one another. Participation in a meeting pursuant to this Section 3.11 constitutes presence in person at such meeting.

        Written notice of the time and place of special meetings of the Board of Directors shall be delivered personally to each Director, or sent to each Director by mail, telephone or telegraph. In case such notice is sent by mail, it shall be deposited in the United States mail at least four (4) days prior to the time of the holding of the meeting. In case such notice is delivered personally, or by telephone or telegraph, it shall be so delivered at least forty-eight (48) hours prior to the time of the holding of the meeting. Such notice may be given by the Secretary of the corporation or by the persons who called said meeting. Such notice need not specify the purpose of the meeting, and notice shall not be necessary if appropriate waivers, consents and/or approvals are filed in accordance with Section 3.13 of these By-Laws.

        Notice of a meeting need not be given to any Director who signs a waiver of notice, whether before or after the meeting, or who attends the meeting without protesting, prior thereto or at its commencement, the lack of notice to such Director.

        The transactions of any meeting of the Board of Directors, however called and noticed or wherever held, shall be as valid as though had at a meeting duly held after regular call and notice if a quorum is present and if, either before or after the meeting, each of the Directors not present signs a written waiver of notice, a consent to holding the meeting or an approval of the minutes thereof. All such waivers, consents and approvals shall be filed with the corporate records or made a part of the minutes of the meeting.

        Any action required or permitted to be taken by the Board of Directors may be taken without a meeting, if all members of the Board shall individually or collectively consent in writing to such action. Such written consent or consents shall be filed with the minutes of the proceedings of the Board. Such action by written consent shall have the same force and effect as a unanimous vote of such Directors.

        A majority of the authorized number of Directors shall constitute a quorum for the transaction of business. Every act or decision done or made by a majority of the Directors present at a meeting duly held at which a quorum is present shall be the act of the Board of Directors, unless the Articles of Incorporation, or the California Corporations Code, specifically requires a greater number. In the absence of a quorum at any meeting of the Board of Directors, a majority of the Directors present may adjourn the meeting as provided in Section 3.16 of these By-Laws. A meeting at which a quorum is initially present may continue to transact business, notwithstanding the withdrawal of enough Directors to leave less than a quorum, if any action taken is approved by at least a majority of the required quorum for such meeting.

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        Any meeting of the Board of Directors, whether or not a quorum is present, may be adjourned to another time and place by the vote of a majority of the Directors present. Notice of the time and place of the adjourned meeting need not be given to absent Directors if said time and place are fixed at the meeting adjourned.

        Every Director shall have the absolute right at any time to inspect, copy and make extra copies of, in person or by agent or attorney, all books, records and documents of every kind and to inspect the physical properties of the corporation.

        Directors shall not receive any stated salary for their services as directors, but, by resolution of the Board, a fixed fee, with or without expenses of attendance, may be allowed for attendance at each meeting. Nothing herein contained shall be construed to preclude any Director from serving the corporation in any other capacity as an officer, agent, employee, or otherwise, and receiving compensation therefor.


ARTICLE IV.

EXECUTIVE COMMITTEE AND OTHER COMMITTEES

        The Board of Directors may, by resolution adopted by a majority of the authorized number of Directors, appoint an executive committee, consisting of two or more Directors. The Board may designate one or more Directors as an alternate member of such committee, who may replace any absent member of any meeting of the committee. The executive committee, subject to any limitations imposed by the California Corporations Code, or by resolution adopted by the affirmative vote of a majority of the authorized number of Directors, or imposed by the Articles of Incorporation or by these By-Laws, shall have and may exercise all of the powers of the Board of Directors.

        The Board of Directors may, by resolution adopted by a majority of the authorized number of Directors, designate such other committees, each consisting of two or more Directors, as it may from time to time deem advisable to perform such general or special duties as may from time to time be delegated to any such committee by the Board of Directors, subject to the limitations contained in the California Corporations Code, or imposed by the Articles of Incorporation or by these By-Laws. The Board may designate one or more Directors as alternate members of any committee, who may replace any absent member at any meeting of the committee.

        Each committee shall keep regular minutes of its proceedings, which shall be filed with the Secretary. All action by any committee shall be reported to the Board of Directors at the next meeting thereof, and, insofar as rights of third parties shall not be affected thereby, shall be subject to revision and alteration by the Board of Directors.

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        Except as otherwise provided in these By-Laws or by resolution of the Board of Directors, each committee shall adopt its own rules governing the time and place of holding and the method of calling its meetings and the conduct of its proceedings and shall meet as provided by such rules, and it shall also meet at the call of any member of the committee. Unless otherwise provided by such rules or by resolution of the Board of Directors, committee meetings shall be governed by Sections 3.11, 3.12 and 3.13 of these By-Laws.

        The term of office of any committee member shall be as provided in the resolution of the Board of Directors designating him but shall not exceed his term as a Director. Any member of a committee may be removed at any time by resolution adopted by Directors holding a majority of the directorships, either present at a meeting of the Board or by written approval thereof.


ARTICLE V.

OFFICERS

        The officers of the corporation shall be a President, a Vice President, a Secretary, and a Treasurer, who shall be the Chief Financial Officer of the corporation. The corporation may also have, at the discretion of the Board of Directors, a Chairman of the Board, one or more additional Vice Presidents, one or more Assistant Treasurers, and such other officers as may be appointed in accordance with the provisions of Section 5.3. One person may hold two or more offices.

        The officers of the corporation, except such officers as may be appointed in accordance with the provisions of Sections 5.3 and 5.5, shall be chosen annually by the Board of Directors and each shall hold his office until he shall resign or shall be removed or otherwise disqualified to serve, or his successor shall be elected and qualified.

        The Board of Directors may appoint such other officers as the business of the corporation may require, each of whom shall hold office for such period, have such authority and perform such duties as are provided in these By-Laws or as the Board of Directors may from time to time determine.

        Any officer may be removed, either with or without cause, by a majority of the Directors at the time in office, at any regular or special meeting of the Board, or, except in case of an officer chosen by the Board of Directors, by an officer upon whom such power of removal may be conferred by the Board of Directors.

        Any officer may resign at any time by giving written notice to the corporation. Any such resignation shall take effect at the date of the receipt of such notice or at any later time specified therein; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.

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        A vacancy in any office because of death, resignation, removal, disqualification or any other cause shall be filled in the manner prescribed in these By-Laws for regular appointments to such office.

        The Chairman of the Board, if there shall be such an officer, shall, if present, preside at all meetings of the Board of Directors, and exercise and perform such other powers and duties as may be from time to time assigned to him by the Board of Directors or prescribed by these By-Laws.

        Subject to such supervisory powers, if any, as may be given by the Board of Directors to the Chairman of the Board, if there be such an officer, the President shall be the general manager and chief executive officer of the corporation and shall, subject to the control of the Board of Directors, have general supervision, direction, and control of the business and officers of the corporation. He shall preside at all meetings of the shareholders. He shall be ex officio a member of all the standing committees, including the executive committee, if any, and shall have the general powers and duties of management usually vested in the office of president of a corporation, and shall have such other powers and duties as may be prescribed by the Board of Directors or by these By-Laws.

        In the absence or disability of the President, the Vice Presidents in order of their rank as fixed by the Board of Directors, or if not ranked, the Vice President designated by the Board of Directors, shall perform the duties of the President, and when so acting shall have all the powers of, and be subject to all the restrictions upon, the President. The Vice Presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the Board of Directors or these By-Laws.

        The Secretary shall keep, or cause to be kept, a book of minutes in written form of the proceedings of the Board of Directors, committees of the Board, and shareholders. Such minutes shall include all waivers of notice, consents to the holding of meetings, or approvals of the minutes of meetings executed pursuant to these By-Laws or the California Corporations Code. The Secretary shall keep, or cause to be kept at the principal executive office or at the office of the corporation's transfer agent or registrar, a record of its shareholders, giving the names and addresses of all shareholders and the number and class of shares held by each.

        The Secretary shall give or cause to be given, notice of all meetings of the shareholders and of the Board of Directors required by these By-Laws or by law to be given, and shall keep the seal of the corporation in safe custody, and shall have such other powers and perform such other duties as may be prescribed by the Board of Directors or these By-Laws.

        The Treasurer and Chief Financial Officer shall keep and maintain, or cause to be kept and maintained, adequate and correct books and records of account in written form or any other form capable of being converted into written form.

        The Treasurer and Chief Financial Officer shall deposit all monies and other valuables in the name and to the credit of the corporation with such depositaries as may be designated by the Board of Directors. He shall disburse all funds of the corporation as may be ordered by the Board of Directors,

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shall render to the President and Directors, whenever they request it, an account of all of his transactions as Treasurer and Chief Financial Officer and of the financial condition of the corporation, and shall have such other powers and perform such other duties as may be prescribed by the Board of Directors or by these By-Laws.

        The Assistant Secretary shall have all the powers, and perform all the duties of, the Secretary in the absence or inability of the Secretary to act.

        The compensation of the officers shall be fixed from time to time by the Board of Directors, and no officer shall be prevented from receiving such compensation by reason of the fact that he is also a Director of the corporation.


ARTICLE VI.

MISCELLANEOUS

        The Board of Directors may fix, in advance, a time in the future as the record date for the determination of shareholders entitled to notice of any meeting or to vote or entitled to receive payment of any dividend or other distribution or allotment of any rights or entitled to exercise any rights in respect of any other lawful action. Shareholders on the record date are entitled to notice and to vote or receive the dividend, distribution or allotment of rights or to exercise the rights, as the case may be, notwithstanding any transfer of any shares in the books of the corporation after the record date, except as otherwise provided by law. Said record date shall not be more than sixty (60) or less than ten (10) days prior to the date of such meeting, nor more than sixty (60) days prior to any other action.

        A determination of shareholders of record entitled to notice of or to vote at a meeting of shareholders shall apply to any adjournment of the meeting unless the Board fixes a new record date for the adjourned meeting, but the Board shall fix a new record date if the meeting is adjourned for more than forty-five (45) days from the date set for the original meeting.

        If no record date is fixed by the Board of Directors, the record date shall be fixed pursuant to the California Corporations Code.

        The accounting books and records, and minutes of proceedings of the shareholders and the Board of Directors and committees of the Board shall be open to inspection upon written demand made upon the corporation by any shareholder or the holder of a voting trust certificate, at any reasonable time during usual business hours, for a purpose reasonably related to his interest as a shareholder, or as the holder of such voting trust certificate. The record of shareholders shall also be open to inspection by any shareholder or holder of a voting trust certificate at any time during usual business hours upon written demand on the corporation, for a purpose reasonably related to such holder's interest as a shareholder or holder of a voting trust certificate. Such inspection may be made in person or by an agent or attorney, and shall include the right to copy and to make extracts.

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        The Board of Directors may, in its discretion, determine the method and designate the statutory officer or officers, or other person or persons, to execute any corporate instrument or document, or to sign the corporate name without limitation, except where otherwise provided by law, and such execution or signature shall be binding upon the corporation. Unless otherwise specifically determined by the Board of Directors, formal contracts of the corporation, promissory notes, mortgages, evidences of indebtedness, conveyances or other instruments in writing, and any assignment or endorsement thereof, executed or entered into between the corporation and any person, may be signed by the Chairman of the Board, the President, any Vice President, the Secretary or the Treasurer of the corporation.

        The Board of Directors may, subject to applicable notice requirements, in its discretion, submit any contract or act for approval or ratification of the shareholders at any annual meeting of shareholders, or at any special meeting of shareholders called for that purpose; and any contract or act which shall be approved or ratified by the affirmative vote of a majority of the shares entitled to vote represented at a duly held meeting at which a quorum is present, or by the written consent of shareholders, shall be as valid and binding upon the corporation and upon the shareholders thereof as though approved or ratified by each and every shareholder of the corporation, unless a greater vote is required by law for such purpose.

        For so long as the corporation has less than 100 holders of record of its shares, the mandatory requirement of an annual report is hereby expressly waived. The Board of Directors may, in its discretion, cause an annual report to be sent to the shareholders. Such reports shall contain at least a balance sheet as of the close of such fiscal year and an income statement and statement of changes in financial position for such fiscal year, and shall be accompanied by any report thereon of independent accountants, or if there is no such report, the certificate of an authorized officer of the corporation that such statements were prepared without audit in the books and records of the corporation.

        A shareholder or shareholders holding at least five percent (5%) of the outstanding shares of any class of the corporation may make a written request to the corporation for an income statement and/or a balance sheet of the corporation for the three-month, six-month or nine-month period of the current fiscal year ended more than thirty (30) days prior to the date of the request, and such statement shall be delivered or mailed to the person making the request within thirty (30) days thereafter. Such statements shall be accompanied by the report thereon, if any, of any independent accountants engaged by the corporation or the certificates of an authorized officer of the corporation that such financial statements were prepared without audit from the books and records of the corporation.

        The President and Vice President of this corporation are authorized to vote, represent and exercise on behalf of the corporation all rights incident to any and all shares of any other corporation or corporations standing in the name of this corporation. The authority herein granted to said officers to vote or represent on behalf of this corporation any and all shares held by this corporation and any other corporation or corporations may be exercised either by such officers in person or by any person authorized so to do by proxy or power of attorney and duly executed by said officers.

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        The corporation shall keep in its principal executive office in this State the original or a copy of the By-Laws as amended or otherwise altered to date, which shall be open to inspection by the shareholders at all reasonable times during office hours.


ARTICLE VII.

SHARES OF STOCK

        Certificates for shares of stock of the corporation shall be in such form and design as the Board of Directors shall determine and shall be signed in the name of the corporation by the Chairman of the Board, or the President or Vice President and by the Treasurer or an Assistant Treasurer or the Secretary or any Assistant Secretary. Each certificate shall state the certificate number, the date of issuance, the number, class or series and the name of the record holder of the shares represented thereby, the name of the corporation, and, if the shares of the corporation are classified or if any class of shares has two or more series, there shall appear the statement required by the California Corporations Code.

        Shares of stock may be transferred in any manner permitted or provided by law. Before any transfer of stock is entered upon the books of the corporation, or any new certificate issued therefor, the older certificate, properly endorsed, shall be surrendered and cancelled, except when a certificate has been lost, stolen or destroyed.

        The Board of Directors may order a new certificate for shares of stock to be issued in the place of any certificate alleged to have been lost, stolen or destroyed, but in every such case, the owner or the legal representative of the owner of the lost, stolen or destroyed certificates may be required to give the corporation a bond (or other adequate security) in such form and amount as the Board may deem sufficient to indemnify it against any claim that may be made against the corporation (including any expense or liability) on account of the alleged loss, theft or destruction of any such certificate or issuance of such new certificate.


ARTICLE VIII.

INDEMNIFICATION

        Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative ("Proceeding"), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, or was a director, officer, employee or agent of a corporation which was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation, whether the basis of such Proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the corporation to the fullest extent authorized by the California General Corporation Law, against all

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expenses, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that, except as provided in Section 8.2 of this Article VIII, the corporation shall indemnify any such person seeking indemnity in connection with a Proceeding (or part thereof) initiated by such person only if such Proceeding (or part thereof) was authorized by the board of directors of the corporation. The right to indemnification conferred by this Section shall include the right to be paid by the corporation expenses incurred in defending any such Proceeding in advance of its final disposition to the fullest extent authorized by the California General Corporation Law; provided, however, that, if required by the California General Corporation Law, the payment of such expenses incurred by such person in advance of the final disposition of such Proceeding shall be made only upon delivery to the corporation of an undertaking, by or on behalf of such person, to repay all amounts so advanced if it should be determined ultimately that such person is not entitled to be indemnified under this Section or otherwise.

        If a claim under Section 8.1 of this Article VIII is not paid in full by the corporation within ninety (90) days after a written claim has been received by the corporation, the claimant may at any time thereafter bring suit against the corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any Proceeding in advance of its final disposition where the required undertaking, if any, has been tendered to the corporation) that the claimant has not met the standards of conduct which make it permissible under the California General Corporation Law for the corporation to indemnify the claimant for the amount claimed. Neither the failure of the corporation (including its board of directors, independent legal counsel, or it shareholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the California General Corporation Law, nor an actual determination by the corporation (including its board of directors, independent legal counsel, or its shareholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that claimant has not met the applicable standard of conduct.

        The corporation may, to the extent authorized from time to time by the Board of Directors, grant rights to indemnification, and to the advancement of expenses to any employee or agent of the corporation to the fullest extent of the provisions of this Article with respect to the indemnification of and advancement of expenses to directors and officers of the corporation.

        The rights conferred on any person by this Article VIII above shall not be exclusive of any other right which such person may have or hereafter acquire under any statute, provision of the Articles of Incorporation, By-Law, agreement, vote of shareholders or disinterested directors or otherwise.

        The Board of Directors is authorized to enter into a contract with any Director, officer, employee or agent of the corporation, or any person who is or was serving at the request of the corporation as a Director, officer, employee or agent of another corporation, partnership, joint venture, trust or other

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enterprise, including employee benefit plans, or any person who was a director, officer, employee or agent of a corporation which was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation, providing for indemnification rights equivalent to or, if the Board of Directors so determines, greater than, those provided for in this Article VIII.

        The corporation may purchase and maintain insurance, at its expense, to protect itself and any Director, officer, employee or agent of the corporation or another corporation (including a predecessor corporation), partnership, joint venture, trust or other enterprise against any such expense, liability or loss, whether or not the corporation would have the power to indemnify such person against such expense, liability or loss under the California Corporations Code.

        Any amendment, repeal or modification of any provision of this Article VIII by the shareholders or the Directors of the corporation shall not adversely affect any right or protection of a Director or officer of the corporation existing at the time of such amendment, repeal or modification.


ARTICLE IX.

AMENDMENTS

        New By-Laws may be adopted or these By-Laws may be amended or repealed by the affirmative vote of a majority of the outstanding shares entitled to vote or by the written consent thereof, except as otherwise provided by law or by the Articles of Incorporation.

        Subject to the right of shareholders as provided in Section 9.1 of these By-Laws, By-Laws other than a By-Law or amendment thereof specifying or changing the authorized number of Directors, or the minimum or maximum number of a variable Board of Directors, or changing from a fixed to a variable Board of Directors or vice versa, may be adopted, amended or repealed by the approval of the Board of Directors.

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Certificate of Secretary

        I, John R. Adler, hereby certify:

        That I am the duly elected and acting Secretary of Accuray Incorporated, a California corporation; and

        That the foregoing By-Laws comprising twenty-four (24) pages, constitute the original By-Laws of said corporation as duly adopted the sole incorporator of the corporation.

        IN WITNESS WHEREOF, I have hereunder subscribed my name and affixed the seal of said corporation this 10th day of January, 1991.


 
 
/s/  JOHN R. ADLER      
John R. Adler, Secretary

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BY-LAWS OF ACCURAY INCORPORATED
INDEX
BY-LAWS OF ACCURAY INCORPORATED
ARTICLE I. OFFICES
ARTICLE II. MEETINGS OF SHAREHOLDERS
ARTICLE III. DIRECTORS
ARTICLE IV. EXECUTIVE COMMITTEE AND OTHER COMMITTEES
ARTICLE V. OFFICERS
ARTICLE VI. MISCELLANEOUS
ARTICLE VII. SHARES OF STOCK
ARTICLE VIII. INDEMNIFICATION
ARTICLE IX. AMENDMENTS
Certificate of Secretary

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Exhibit 4.1

Common Stock Warrant
Number C-14

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH RULE 144 UNDER THE ACT, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES, REASONABLY SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.

Void after 8 August 2007


ACCURAY INCORPORATED
COMMON STOCK PURCHASE WARRANT

        THIS CERTIFIES THAT, for value received, Hazem Chehabi, M.D. is entitled to purchase from ACCURAY INCORPORATED, a California corporation (the "Company"), for the period of five (5) years beginning on the Date of Grant set forth below, five hundred twenty-five thousand (525,000) shares of common stock of the Company. The per share price to be paid for the Common to be issued hereunder shall be the Warrant Price, initially one dollar ($1.00) per share, as adjusted pursuant to the terms hereof.

        1.    Definitions.    As used herein, the following terms, unless the context otherwise requires, shall have the following meanings:

        2.    Issuance of Warrant and Consideration Therefor.    This Warrant is issued in consideration of the payment of ten thousand dollars ($10,000) and of the Holder's surrender concurrently with the issuance by the Company of this Warrant of warrant number C-4, expiring 1 November 2004, to purchase 225,000 shares of the common stock of the Company at $0.75 per share.

        3.    Term.    The purchase right represented by this Warrant is exercisable only during the period commencing upon the Date of Grant and ending on the earliest of (a) fifth anniversary of the Date of Grant, (b) the closing of an underwritten public offering of the Company's Common Stock registered under the Act, or (c) upon the closing of a consolidation or merger of the Company (other than with its parent or wholly-owned subsidiary) with or into, or the transfer of all or substantially all of the Company's assets to, another corporation (unless the owners of the capital stock of the Company, prior to such transaction, continue to own a majority of the capital stock of the surviving corporation).

        4.    Method of Exercise and Payment.    

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        5.    Adjustment of Warrant Price and Number of Shares.    The number of securities issuable upon the exercise of this Warrant and the Warrant Price shall be subject to adjustment from time to time upon the occurrence of certain events, as follows:

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        6.    Notices of Record Date, Etc.    In the event of (a) any taking by the Company of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution (the "Distribution"), (b) any capital reorganization or reclassification of the stated capital of the Company or any consolidation or merger of the Company with any other corporation or corporations (other than a wholly-owned subsidiary), or the sale or distribution of all or substantially all of the Company's property and assets (the "Reorganization Event"), or (c) any proposed filing of a registration statement under the Act in connection with a primary public offering of the Company's Common Stock (the "Registration Event"), the Company will mail or cause to be mailed to the Holder a notice specifying (i) the date of any such Distribution stating the amount and character of such Distribution, (ii) the date on which any such Reorganization Event or Registration Event is expected to become effective, and (iii) the time, if any, that is to be fixed as to when the holders of record of the Company's securities shall be entitled to exchange their shares of the Company's securities for securities or other property deliverable upon such Reorganization Event. Such notice shall be mailed at least thirty (30) days prior to the date therein specified

        7.    Compliance with Act; Transferability and Negotiability of Warrant; Disposition of Shares.    

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        8.    Rights of Shareholders.    No Holder shall be entitled to vote or receive dividends or be deemed the holder of Shares or any other securities of the Company which may at any time be issuable on the exercise of this Warrant for any purpose, nor shall anything contained herein be construed to confer upon the Holder, as such, any of the rights of a shareholder of the Company or any right to vote for the election of directors or upon any matter submitted to shareholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization, issuance of stock, reclassification of stock, consolidation, merger, transfer of assets or otherwise) or to receive notice of meetings, or to receive dividends or subscription rights or otherwise until this Warrant shall have been exercised and the Shares issuable upon exercise hereof shall have become deliverable, as provided herein.

        9.    Replacement of Warrants.    On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form and amount to the Company or, in the case of mutilation, on surrender and cancellation of this Warrant, the Company at its expense shall execute and deliver, in lieu of this Warrant, a new warrant of like tenor.

        10.    Exchange of Warrant.    Subject to the other provisions of this Warrant, on surrender of this Warrant for exchange, properly endorsed and subject to the provisions of this Warrant with respect to compliance with the Act, the Company at its expense shall issue to or on the order of the Holder a new warrant or warrants of like tenor, in the name of the Holder or as the Holder (on payment by the

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Holder of any applicable transfer taxes) may direct, for the number of Shares issuable upon exercise thereof.

        11.    Notices    All notices and other communications from the Company to the Holder, or vice versa, shall be deemed delivered and effective when given personally or mailed by first-class registered or certified mail, postage prepaid, to such address as may have been furnished to the Company or the Holder, as the case may be, in writing by the Company or such Holder from time to time.

        12.    Waiver.    This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought.

        13.    Governing Law.    This Warrant shall be governed by and construed in accordance with the laws of the State of California, as such laws are applied to agreements entered into in California and to be performed solely by California residents. The Company represents to the Holder that this Warrant constitutes the legal, valid and binding obligation of the Company enforceable in accordance with its terms, subject to laws of general application relating to bankruptcy, insolvency and the relief of debtors and rules of law governing specific performance, injunctive relief and other equitable remedies.

        14.    Titles and Subtitles; Forms of Pronouns.    The titles of the Sections and Subsections of this Warrant are for convenience only and are not to be considered in construing this Warrant. All pronouns used in this Warrant shall be deemed to include masculine, feminine and neuter forms.

        15.    Expiration.    Subject to earlier termination pursuant to Section 3 above, the right to exercise this Warrant shall expire at 5:00 P.M. California time on the ending date determined in accordance with Paragraph 3.

Dated:   9 Aug, 2002
   ACCURAY INCORPORATED

 
 
 
 
By:
 
/s/  DONALD CADDES      
        Title:   President & COO

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EXHIBIT A

NOTICE OF EXERCISE

TO: ACCURAY INCORPORATED

        1.     The undersigned Holder of the attached original, executed Common Stock Purchase Warrant hereby elects to exercise its purchase right under such Warrant with respect to                                      Shares, as defined in the Warrant, of Accuray Incorporated Common.

        2.     The undersigned Holder elects to pay the aggregate Warrant Price for such Shares (the "Exercise Shares") in the following manner:

        3.     Please issue a stock certificate or certificates representing the appropriate number of Shares in the name of the undersigned or in such other names as is specified below;

    Name:  
   

 
 
Address:
 

 
 

 
 
 
 

 
 

 
 
Tax Ident. No.:
 

 
 
Date.
   HOLDER:



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ACCURAY INCORPORATED COMMON STOCK PURCHASE WARRANT
EXHIBIT A NOTICE OF EXERCISE

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Exhibit 4.2


ACCURAY INCORPORATED
INVESTORS' RIGHTS AGREEMENT
OCTOBER 30, 2006


TABLE OF CONTENTS

 
   Page
Section 1 Definitions   1
  1.1 Certain Definitions   1
Section 2 Registration Rights   4
  2.1 Requested Registration   4
  2.2 Company Registration   6
  2.3 Registration on Form S-3   8
  2.4 Expenses of Registration   8
  2.5 Registration Procedures   8
  2.6 Indemnification   9
  2.7 Information by Holder   11
  2.8 Restrictions on Transfer   11
  2.9 Rule 144 Reporting   13
  2.10 Market Stand-Off Agreement   13
  2.11 Delay of Registration   13
  2.12 Transfer or Assignment of Registration Rights   13
  2.13 Limitations on Subsequent Registration Rights   14
  2.14 Termination of Registration Rights   14
Section 3 Covenants of the Company   14
  3.1 Basic Financial Information and Inspection Rights   14
  3.2 Inspections   14
  3.3 Aggregation of Stock   15
  3.4 Confidentiality   15
  3.5 Termination of Covenants   15
Section 4 Waiver of Prior Rights Agreement   15
  4.1 Amendment, Waiver and Termination of Prior Rights Agreement   15
Section 5 Right of First Refusal   15
  5.1 Right of First Refusal   15
  5.2 Assignment of Right of First Refusal   16
  5.3 Termination of Right of First Refusal   16
Section 6 Miscellaneous   16
  6.1 Amendment   16
  6.2 Notices   17
  6.3 Governing Law   17
  6.4 Successors and Assigns   17
  6.5 Entire Agreement   17
  6.6 Delays or Omissions   17
     

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  6.7 Severability   18
  6.8 Titles and Subtitles   18
  6.9 Counterparts   18
  6.10 Telecopy Execution and Delivery   18
  6.11 Jurisdiction; Venue   18
  6.12 Further Assurances   18
  6.13 Termination Upon Change of Control   18
  6.14 Conflict   18
  6.15 Attorneys' Fees   18

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ACCURAY INCORPORATED
INVESTORS' RIGHTS AGREEMENT

        This Investors' Rights Agreement (this "Agreement") is made as of October 30, 2006, by and among Accuray Incorporated, a California corporation (the "Company"), and the holders of the Company's Series C Preferred Stock as converted ("Prior C Holders"), the holders of the Company's Series A Preferred Stock ("Series A Holders"), the holders of the Company's Series A-1 Preferred Stock ("Series A-1 Holders"), the holders of the Company's Series B Preferred Stock ("Series B Holders") and the holders of the Company's Series C Preferred Stock ("Series C Holders"). The Prior C Holders, the Series A Holders, the Series B Holders and the Series C Holders are listed on Exhibit A and are referred to herein either collectively as the "Investors" or individually as an "Investor". Unless otherwise defined herein, capitalized terms used in this Agreement have the meanings ascribed to them in Section 1.


RECITALS

        WHEREAS:    The Company and each of the Investors has previously entered into agreements granting certain registration rights to each of the Investors;

        WHEREAS:    The Company and the Prior C Holders entered into an Prior C Rights Agreement, pursuant to which the Company granted certain registration rights to the Prior C Holders;

        WHEREAS:    The Company and the Series A Holders entered into a Series A Rights Agreement, pursuant to which the Company granted certain registration rights to the Series A Holders;

        WHEREAS:    The Company and the Series A-1 Holders entered into a Series A-1 Rights Agreement, pursuant to which the Company granted certain registration rights to the Series A-1 Holders;

        WHEREAS:    The Company and the Series B Holders entered into a Series B Rights Agreement, pursuant to which the Company granted certain registration rights to the Series B Holders;

        WHEREAS:    The Company and the Series C Holders each entered into a Series C Rights Agreement, pursuant to which the Company granted certain registration rights to the Series C Holders;

        WHEREAS:    The Company and the Investors each desire to adopt this Agreement in order to clarify the rights of the Investors under the Prior Rights Agreements, and each desire to waive any rights they may have under the Prior Agreements, and to terminate the Prior Agreements upon adoption of this Agreement;

        NOW, THEREFORE:    In consideration of the mutual promises and covenants set forth herein, and other consideration, the receipt and adequacy of which is hereby acknowledged, the Company and the Investors hereto agree as follows:


Section 1
Definitions

        1.1    Certain Definitions.    As used in this Agreement, the following terms shall have the meanings set forth below:

        (a)   "Board" shall mean the Company's Board of Directors.

        (b)   "Commission" shall mean the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act.

        (c)   "Common Stock" means the Common Stock of the Company.

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        (d)   "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, or any similar successor federal statute and the rules and regulations thereunder, all as the same shall be in effect from time to time.

        (e)   "Holder" shall mean any Investor who holds Registrable Securities and any holder of Registrable Securities to whom the registration rights conferred by this Agreement have been duly and validly transferred in accordance with Section 2.12 of this Agreement.

        (f)    "Indemnified Party" shall have the meaning set forth in Section 2.6(c) hereto.

        (g)   "Indemnifying Party" shall have the meaning set forth in Section 2.6(c) hereto.

        (h)   "Initial Public Offering" shall mean the closing of the Company's first firm commitment underwritten public offering of the Company's Common Stock registered under the Securities Act.

        (i)    "Initiating Holders" shall mean any Holder or Holders who in the aggregate hold not less than thirty percent (30%) of the outstanding Registrable Securities.

        (j)    "Inspection Rights" shall have the meaning set forth in Section 3.2 hereto.

        (k)   "Prior C Rights Agreement" shall mean Section 7 of the Series C Preferred Stock Purchase Agreement between the Company and the Prior C Holders, dated August, 1994, pursuant to which the Company granted certain registration rights to the Prior C Holders.

        (l)    "New Securities" shall mean any shares of capital stock of the Company, including Common Stock and Preferred Stock, whether authorized or not, and rights, options, or warrants to purchase said shares of capital stock, and securities of any type whatsoever that are, or may become, convertible into capital stock; provided, however, that the term "New Securities" does not include (i) securities issued upon conversion of the Shares; (ii) securities issued to employees, consultants, officers, and directors of the Company, pursuant to any arrangement or Company employee benefit plan, in each case approved by the Board; (iii) securities issued pursuant to any rights or agreements, including, without limitation, convertible securities, options, bonds, debentures, notes or other evidences of indebtedness and warrants, provided that the Company shall have complied with the right of first offer established by Section 5 below with respect to the initial sale or grant by the Company of such rights or agreements; (iv) securities issued in connection with any stock split, stock dividend or recapitalization by the Company; (v) securities issued pursuant to the acquisition of another entity by the Company by merger, purchase of substantially all of the assets or shares or other reorganization whereby the Company will own not less than a majority of the voting power of the surviving or successor business, provided that such transaction was approved by the Board; (vi) securities issued pursuant to the acquisition of technology or other intellectual property by outright purchase or exclusive license, provided that such transaction was approved by the Board; (vii) securities issued to lenders, financial institutions, equipment lessors or real estate lessors of the Company in connection with a bona fide borrowing or leasing transaction, in each case approved by the Board; (viii) securities issued to vendors or customers of the Company, or to other persons in similar commercial arrangements with the Company other than for primarily equity financing purposes, if such issuance is in each case approved by the Board; (ix) securities issued in connection with corporate partnering transactions other than for primarily equity financing purposes, if such issuance is in each case approved by the Board; and (x) any right, option, or warrant to acquire any security convertible into the securities excluded from the definition of New Securities pursuant to clauses (i) through (ix) above.

        (m)  "Other Selling Stockholders" shall mean persons other than Holders who, by virtue of agreements with the Company, are entitled to include their securities in certain registrations hereunder.

        (n)   "Other Registrable Securities" shall mean securities of the Company, with respect to which registration rights have been granted.

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        (o)   "Pro Rata Portion" means the ratio that (x) the sum of the number of shares of the Company's Common Stock held by an Series C Holder immediately prior to the issuance of New Securities, assuming full exercise and/or conversion of the Shares and all Company securities exercisable and/or convertible into the Company's Common Stock then held by such Series C Holder, bears to (y) the sum of the total number of shares of the Company's Common Stock then outstanding, assuming full exercise and/or conversion of all Company securities exercisable and/or convertible into the Company's Common Stock then outstanding.

        (p)   "Prior Rights Agreements" shall mean, collectively, the Prior C Rights Agreement, the Series A Rights Agreement, the Series A-1 Rights Agreement, the Series B Rights Agreement and the Series C Rights Agreement, as such terms are defined herein.

        (q)   "Qualifying IPO" shall mean an Initial Public Offering where the aggregate net proceeds to the Company (before deductions of underwriters' commissions and expenses) equals or exceeds $25,000,000 at a price per share to the public equal to at least $3.00 (as adjusted for stock dividends, combinations, subdivisions or stock splits with respect to such shares).

        (r)   "Registrable Securities" shall mean (i) shares of Common Stock issued or issuable pursuant to the conversion of the Shares and (ii) any Common Stock issued as a dividend or other distribution with respect to or in exchange for or in replacement of the shares referenced in (i) above; provided, however, that Registrable Securities shall not include any shares of Common Stock described in clause (i) or (ii) above which have previously been registered or which have been sold to the public either pursuant to a registration statement or Rule 144, or which have been sold in a private transaction in which the transferor's rights under this Agreement are not validly assigned in accordance with this Agreement.

        (s)   The terms "register," "registered" and "registration" shall refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act and applicable rules and regulations thereunder, and the declaration or ordering of the effectiveness of such registration statement.

        (t)    "Registration Expenses" shall mean all expenses incurred in effecting any registration pursuant to this Agreement, including, without limitation, all registration, qualification, and filing fees, printing expenses, escrow fees, fees and disbursements of counsel for the Company, blue sky fees and expenses, and expenses of any regular or special audits incident to or required by any such registration, but shall not include Selling Expenses, fees and disbursements of counsel for the Holders and the compensation of regular employees of the Company, which shall be paid in any event by the Company.

        (u)   "Restricted Securities" shall mean any Registrable Securities required to bear the first legend set forth in Section 2.8(c) hereof.

        (v)   "Rule 144" shall mean Rule 144 as promulgated by the Commission under the Securities Act, as such Rule may be amended from time to time, or any similar successor rule that may be promulgated by the Commission.

        (w)  "Rule 145" shall mean Rule 145 as promulgated by the Commission under the Securities Act, as such Rule may be amended from time to time, or any similar successor rule that may be promulgated by the Commission

        (x)   "Rule 415" shall mean Rule 415 as promulgated by the Commission under the Securities Act, as such Rule may be amended from time to time, or any similar successor rule that may be promulgated by the Commission.

        (y)   "Securities Act" shall mean the Securities Act of 1933, as amended, or any similar successor federal statute and the rules and regulations thereunder, all as the same shall be in effect from time to time.

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        (z)   "Selling Expenses" shall mean all underwriting discounts, selling commissions and stock transfer taxes applicable to the sale of Registrable Securities and fees and disbursements of counsel for any Holder.

        (aa) "Series A Rights Agreement" shall mean the Amended and Restated Registration Rights Agreement, dated March, 2001, pursuant to which the Company granted certain registration rights to the Series A Holders;

        (bb) "Series A-1 Rights Agreement" shall mean the Amended and Restated Registration Rights Agreement, dated June 6, 2001, pursuant to which the Company granted certain registration rights to the Series A-1 Holders;

        (cc) "Series B Rights Agreement" shall mean Amended and Restated Registration Rights Agreement, dated June 6, 2001, pursuant to which the Company granted certain registration rights to the Series B Holders.

        (dd) "Series C Rights Agreement" shall mean Series C Registration Rights Agreements, dated variously from February 7, 2002 through June 30, 2002, pursuant to which the Company granted certain registration rights to the Series C Holders.

        (ee) "Series C Registrable Securities" shall mean the shares of Series C Preferred Stock held by the Series C Holders.

        (ff)  "Shares" shall mean the shares of the Company's Series C Preferred Stock, as converted, held by the Prior C Holders, the shares of Series A Preferred Stock held by the Series A Holders, the shares of Series A-1 Preferred Stock held by the Series A-1 Holders, the shares of Series B Preferred Stock held by the Series B Holders, the shares of Series C Preferred Stock held by the Series C Holders, and the shares of Common Stock issuable or issued upon conversion of any of the "Shares".

        (gg) "Withdrawn Registration" shall mean a forfeited demand registration under Section 2.1 in accordance with the terms and conditions of Section 2.4.


Section 2
Registration Rights

        2.1    Requested Registration.    

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        2.2    Company Registration.    

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        2.3    Registration on Form S-3.    

        2.4    Expenses of Registration.    All Registration Expenses incurred in connection with registrations pursuant to Sections 2.1, 2.2 and 2.3 hereof shall be borne by the Company; provided, however, that the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Sections 2.1 and 2.3 if the registration request is subsequently withdrawn at the request of the Holders of a majority of the Registrable Securities to be registered or because a sufficient number of Holders shall have withdrawn so that the minimum offering conditions set forth in Sections 2.1 and 2.3 are no longer satisfied (in which case all participating Holders shall bear such expenses pro rata among each other based on the number of Registrable Securities requested to be so registered), unless the Holders of a majority of the Registrable Securities agree to forfeit their right to a demand registration pursuant to Section 2.1. All Selling Expenses relating to securities registered on behalf of the Holders shall be borne by the holders of securities included in such registration pro rata among each other on the basis of the number of Registrable Securities so registered.

        2.5    Registration Procedures.    In the case of each registration effected by the Company pursuant to Section 2, the Company will keep each Holder advised in writing as to the initiation of each registration and as to the completion thereof. At its expense, the Company will use its commercially reasonable efforts to:

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        2.6    Indemnification.    

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        2.7    Information by Holder.    Each Holder of Registrable Securities shall furnish to the Company such information regarding such Holder and the distribution proposed by such Holder as the Company may reasonably request in writing and as shall be reasonably required in connection with any registration, qualification, or compliance referred to in this Section 2.

        2.8    Restrictions on Transfer.    

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        The Holders consent to the Company making a notation on its records and giving instructions to any transfer agent of the Restricted Securities in order to implement the restrictions on transfer established in this Section 2.8.

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        2.9    Rule 144 Reporting.    With a view to making available the benefits of certain rules and regulations of the Commission that may permit the sale of the Restricted Securities to the public without registration, the Company agrees to use its commercially reasonable efforts to:

        2.10    Market Stand-Off Agreement.    Each Holder hereby agrees that such Holder shall not sell or otherwise transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale, of any Common Stock (or other securities) of the Company held by such Holder (other than those included in the registration) during the one hundred eighty (180) day period following the effective date of a registration statement of the Company filed under the Securities Act; provided that all officers, directors and holders of not less than one percent (1%) of the Company's securities are similarly obligated; and provided further that should the Company release any amount of securities, then this release shall be effected on a pro rata basis with respect to all Holders so obligated under this Section 2.10. The obligations described in this Section 2.10 shall not apply to a registration relating solely to the Company's employee benefit plans, or a registration relating solely to a transaction on Form S-4 or similar forms that may be promulgated in the future. The Company may impose stop-transfer instructions and may stamp each such certificate with the second legend set forth in Section 2.8(c) hereof with respect to the shares of Common Stock (or other securities) subject to the foregoing restriction until the end of such one hundred eighty (180) day period. Each Holder agrees to execute a market standoff agreement with said underwriters in customary form consistent with the provisions of this Section 2.10.

        2.11    Delay of Registration.    No Holder shall have any right to take any action to restrain, enjoin, or otherwise delay any registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 2.

        2.12    Transfer or Assignment of Registration Rights.    The rights to cause the Company to register securities granted to a Holder by the Company under this Section 2 may be transferred or assigned by a Holder only to (i) a transferee or assignee of not less than 100,000 shares of Registrable Securities (as presently constituted and subject to subsequent adjustments for stock splits, stock dividends, reverse stock splits, and the like) or (ii) a transferee or assignee of all of the transferring Holder's Registrable Securities); provided that (i) such transfer or assignment of Registrable Securities is effected in accordance with the terms of Section 2.8 hereof and applicable securities laws, (ii) the Company is

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given written notice prior to said transfer or assignment, stating the name and address of the transferee or assignee and identifying the securities with respect to which such registration rights are intended to be transferred or assigned and (iii) the transferee or assignee of such rights assumes in writing the obligations of such Holder under this Agreement, including without limitation the obligations set forth in Section 2.10.

        2.13    Limitations on Subsequent Registration Rights.    From and after the date of this Agreement, the Company shall not, without the prior written consent of a majority in interest of the Holders, enter into any agreement with any holder or prospective holder of any securities of the Company giving such holder or prospective holder any registration rights the terms of which are pari passu with or senior to the registration rights granted to the Holders hereunder.

        2.14    Termination of Registration Rights.    The right of any Holder to request registration or inclusion in any registration pursuant to Section 2.1, 2.2 or 2.3 shall terminate on the earlier of (i) such date, on or after the closing of the Company's first registered public offering of Common Stock, on which all shares of Registrable Securities held or entitled to be held upon conversion by such Holder may immediately be sold under Rule 144 during any ninety (90)-day period, and (ii) three (3) years after the closing of a Qualifying IPO.


Section 3
Covenants of the Company

        The Company hereby covenants and agrees, as follows:

        3.1    Basic Financial Information and Inspection Rights.    So long as an Investor is a Holder of not less than 100,000 shares of Registrable Securities (as adjusted for any stock splits, consolidations and the like) (each a "Major Investor"), the Company will furnish to such Major Investor the following reports:

        3.2    Inspection.    The Company shall permit each Major Investor, at such Major Investor's expense, to visit and inspect the Company's properties, to examine its books of account and other

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records, and to discuss the Company's affairs, finances and accounts with its officers, all at such reasonable times as may be requested by the Major Investor (the "Inspection Rights").

        3.3    Aggregation of Stock.    All Shares held or acquired by affiliated entities or persons shall be aggregated together for the purpose of determining the availability of any rights under Sections 3.1 and 3.2.

        3.4    Confidentiality.    Anything in this Agreement to the contrary notwithstanding, the Holders shall not have access to or the right to receive any confidential, trade secrets or classified information of the Company as reasonably determined in good faith by the Company's Board of Directors. The Company shall not be required to comply with any information rights of Section 3.1 with respect to any Holder if the Company's Board of Directors reasonably determines in good faith that such Holder is a competitor or an officer, employee, director or holder of more than ten percent (10%) of a competitor. Each Holder acknowledges that the information received by it pursuant to this Agreement is confidential and for its use only in connection with its relationship to the Company, and it will not misuse such confidential information or use such confidential information in violation of the Exchange Act or reproduce, disclose or disseminate such information to any other person (other than its employees or agents having a need to know the contents of such information, and its attorneys or other legal or financial advisors, who in each case shall be subject to confidentiality requirements at least as restrictive as those set forth herein), unless the Company has made such information available to the public generally or such Holder is required to disclose such information by a governmental authority.

        3.5    Termination of Covenants.    The covenants set forth in this Section 3 shall terminate and be of no further force and effect after the closing of a Qualifying IPO.


Section 4
Waiver of Prior Rights Agreements

        4.1    Amendment, Waiver and Termination of Prior Rights Agreements.    Effective and contingent upon execution of this Agreement by the Company and the Investors, the Prior Rights Agreements, or such portions of those agreements as either explicitly or implicitly might be construed to grant any registration rights contrary to those rights set forth herein, are amended and restated in their entirety and shall be of no further force and effect, and the Prior Rights Agreements shall be terminated.


Section 5
Right of First Refusal

        5.1    Right of First Refusal.    

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        5.2    Assignment of Right of First Refusal.    The right of first refusal granted hereunder may be assigned by a Series C Holder only to a transferee or assignee of not less than 100,000 shares of Series C Registrable Securities (as appropriately adjusted for stock splits and the like) then outstanding, provided that the Company is given written notice at the time of or within a reasonable time after said assignment, stating the name and address of the transferee or assignee and identifying the securities with respect to which such rights are being assigned. Notwithstanding the foregoing, the right of first refusal granted hereunder is assignable (i) between and among any Series C Holders; (ii) to an Affiliate of a Series C Holder or (iii) to a Series C Holder which is (A) a partnership to its partners or retired partners in accordance with partnership interests, (B) a limited liability company to its members or former members in accordance with their interest in the limited liability company, (C) a corporation to its stockholders in accordance with their interests in the corporation or (D) to the Series C Holder's family member or trust for the benefit of an individual Series C Holder.

        5.3    Termination of Right of First Refusal.    The right of first refusal granted under Section 5.1 of this Agreement shall expire immediately prior to the earlier of: (i) any reorganization, merger, consolidation or similar transaction (or series of related transactions) in which the outstanding capital stock of the Company immediately prior to such transaction or series of related transactions represents less than a majority of the voting power of (1) the surviving entity or, (2) the parent of such surviving entity if the surviving entity is owned by such parent, immediately following such transaction or series of related transactions; (ii) the consummation of an Qualifying IPO.


Section 6
Miscellaneous

        6.1    Amendment.    Except as expressly provided herein, neither this Agreement nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument referencing this Agreement and signed by the Company and the Holders of two-thirds in interest of the Registrable Securities; provided, however, that if any amendment, waiver, discharge or termination operates in a manner that treats any Holder different from other Holders, the consent of such Holder shall also be required for such amendment, waiver, discharge or termination. Any such amendment, waiver, discharge or termination effected in accordance with this paragraph shall be binding upon each Holder and each future holder of all such securities of Holder. Each Holder acknowledges that by the

16

operation of this paragraph, the holders of a majority of the Registrable Securities will have the right and power to diminish or eliminate all rights of such Holder under this Agreement.

        6.2    Notices.    All notices and other communications required or permitted hereunder shall be in writing and shall be mailed by registered or certified mail, postage prepaid, sent by facsimile or electronic mail or otherwise delivered by hand or by messenger addressed:

        Each such notice or other communication shall for all purposes of this Agreement be treated as effective or having been given when delivered if delivered personally, or, if sent by mail, at the earlier of its receipt or 72 hours after the same has been deposited in a regularly maintained receptacle for the deposit of the United States mail, addressed and mailed as aforesaid or, if sent by facsimile, upon confirmation of facsimile transfer or, if sent by electronic mail, upon confirmation of delivery when directed to the electronic mail address set forth on the Schedule of Investors.

        6.3    Governing Law.    This Agreement shall be governed in all respects by the internal laws of the State of California as applied to agreements entered into among California residents to be performed entirely within California, without regard to principles of conflicts of law.

        6.4    Successors and Assigns.    This Agreement, and any and all rights, duties and obligations hereunder, shall not be assigned, transferred, delegated or sublicensed by any Investor without the prior written consent of the Company. Any attempt by an Investor without such permission to assign, transfer, delegate or sublicense any rights, duties or obligations that arise under this Agreement shall be void. Subject to the foregoing and except as otherwise provided herein, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto.

        6.5    Entire Agreement.    This Agreement and the exhibits hereto constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof. No party hereto shall be liable or bound to any other party in any manner with regard to the subjects hereof or thereof by any warranties, representations or covenants except as specifically set forth herein.

        6.6    Delays or Omissions.    Except as expressly provided herein, no delay or omission to exercise any right, power or remedy accruing to any party to this Agreement upon any breach or default of any other party under this Agreement shall impair any such right, power or remedy of such non-defaulting party, nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring, nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any party of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement or by law or otherwise afforded to any party to this Agreement, shall be cumulative and not alternative.

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        6.7    Severability.    If any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, portions of such provision, or such provision in its entirety, to the extent necessary, shall be severed from this Agreement, and such court will replace such illegal, void or unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the extent possible, the same economic, business and other purposes of the illegal, void or unenforceable provision. The balance of this Agreement shall be enforceable in accordance with its terms.

        6.8    Titles and Subtitles.    The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. All references in this Agreement to sections, paragraphs and exhibits shall, unless otherwise provided, refer to sections and paragraphs hereof and exhibits attached hereto.

        6.9    Counterparts.    This Agreement may be executed in any number of counterparts, each of which shall be enforceable against the parties that execute such counterparts, and all of which together shall constitute one instrument.

        6.10    Telecopy Execution and Delivery.    A facsimile, telecopy or other reproduction of this Agreement may be executed by one or more parties hereto and delivered by such party by facsimile or any similar electronic transmission device pursuant to which the signature of or on behalf of such party can be seen. Such execution and delivery shall be considered valid, binding and effective for all purposes. At the request of any party hereto, all parties hereto agree to execute and deliver an original of this Agreement as well as any facsimile, telecopy or other reproduction hereof.

        6.11    Jurisdiction; Venue.    With respect to any disputes arising out of or related to this Agreement, the parties consent to the exclusive jurisdiction of, and venue in, the state courts in Santa Clara County in the State of California (or in the event of exclusive federal jurisdiction, the courts of the Northern District of California).

        6.12    Further Assurances.    Each party hereto agrees to execute and deliver, by the proper exercise of its corporate, limited liability company, partnership or other powers, all such other and additional instruments and documents and do all such other acts and things as may be necessary to more fully effectuate this Agreement.

        6.13    Termination Upon Change of Control.    Notwithstanding anything to the contrary herein, this Agreement (excluding any then-existing obligations) shall terminate upon (a) the acquisition of the Company by another entity by means of any transaction or series of related transactions to which the Company is party (including, without limitation, any stock acquisition, reorganization, merger or consolidation but excluding any sale of stock for capital raising purposes) other than a transaction or series of transactions in which the holders of the voting securities of the Company outstanding immediately prior to such transaction continue to retain (either by such voting securities remaining outstanding or by such voting securities being converted into voting securities of the surviving entity), as a result of shares in the Company held by such holders prior to such transaction, at least fifty percent (50%) of the total voting power represented by the voting securities of the Corporation or such surviving entity outstanding immediately after such transaction or series of transactions; or (b) a sale, lease or other conveyance of all substantially all of the assets of the Company.

        6.14    Conflict.    In the event of any conflict between the terms of this Agreement and the Company's Certificate of Incorporation or its Bylaws, the terms of the Company's Certificate of Incorporation or its Bylaws, as the case may be, will control.

        6.15    Attorneys' Fees.    In the event that any suit or action is instituted to enforce any provision in this Agreement, the prevailing party in such dispute shall be entitled to recover from the losing party all fees, costs and expenses of enforcing any right of such prevailing party under or with respect to this

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Agreement, including without limitation, such reasonable fees and expenses of attorneys and accountants, which shall include, without limitation, all fees, costs and expenses of appeals.

[Remainder of Page Intentionally Left Blank]

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        IN WITNESS WHEREOF, the parties hereto have executed this Investors' Rights Agreement effective as of the day and year first above written.

    ACCURAY INCORPORATED
a California corporation

 
 
By:
 
/s/  EUAN THOMSON      
        Name: Euan Thomson
        Title: President and CEO

[Signature Page to Investors' Rights Agreement]

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        IN WITNESS WHEREOF, the parties hereto have executed this Investors' Rights Agreement effective as of the day and year first above written.

 
    
    INVESTOR

 
 
/s/  PAUL BATE      
(Signature)

 
 
Paul Bate
(Name of Investor)

 
 
(Name and Title of Signatory, if Applicable)

[Signature Page to Investors' Rights Agreement]

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        IN WITNESS WHEREOF, the parties hereto have executed this Investors' Rights Agreement effective as of the day and year first above written.

 
    
    INVESTOR

 
 
/s/  JACQUELINE CASTER/ANDREW CASTER      
(Signature)

 
 
Jacqueline Caster/Andrew Caster
(Name of Investor)

 
 
Trustee/Trustee
(Name and Title of Signatory, if Applicable)
    Andrew and Jacqueline Caster
Living Trust

[Signature Page to Investors' Rights Agreement]

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        IN WITNESS WHEREOF, the parties hereto have executed this Investors' Rights Agreement effective as of the day and year first above written.

 
    
    INVESTOR

 
 
/s/  YANG, JAU-CHANG      
(Signature)

 
 
Yang, Jau-Chang
(Name of Investor)

 
 
(Name and Title of Signatory, if Applicable)

[Signature Page to Investors' Rights Agreement]

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        IN WITNESS WHEREOF, the parties hereto have executed this Investors' Rights Agreement effective as of the day and year first above written.

 
    
    INVESTOR

 
 
/s/  ALLEN CHAO      
(Signature)

 
 
Allen Chao
(Name of Investor)

 
 
(Name and Title of Signatory, if Applicable)

[Signature Page to Investors' Rights Agreement]

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        IN WITNESS WHEREOF, the parties hereto have executed this Investors' Rights Agreement effective as of the day and year first above written.

 
    
    INVESTOR

 
 
/s/  TSENG WEI-JENG      
(Signature)

 
 
China United Investments Inc.
(Name of Investor)

 
 
Tseng Wei-Jeng, Director
(Name and Title of Signatory, if Applicable)

[Signature Page to Investors' Rights Agreement]

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        IN WITNESS WHEREOF, the parties hereto have executed this Investors' Rights Agreement effective as of the day and year first above written.

 
    
    INVESTOR

 
 
/s/  JOSIE FITSIMONS      
(Signature)

 
 
Josie Fitsimons
(Name of Investor)

 
 
(Name and Title of Signatory, if Applicable)

[Signature Page to Investors' Rights Agreement]

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        IN WITNESS WHEREOF, the parties hereto have executed this Investors' Rights Agreement effective as of the day and year first above written.

 
    
    INVESTOR

 
 
/s/  KAO-HSIANG WANG      &
/s/  CHIUNG-JUNG WANG CHIU      
(Signature)

 
 
Kao-Hsiang Wang
Chiung-Jung Wang Chiu
(Name of Investor)

 
 
(Name and Title of Signatory, if Applicable)

[Signature Page to Investors' Rights Agreement]

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        IN WITNESS WHEREOF, the parties hereto have executed this Investors' Rights Agreement effective as of the day and year first above written.

 
    
    INVESTOR

 
 
/s/  YVONNE HUSON      
(Signature)

 
 
Yvonne Huson
(Name of Investor)

 
 
(Name and Title of Signatory, if Applicable)

[Signature Page to Investors' Rights Agreement]

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        IN WITNESS WHEREOF, the parties hereto have executed this Investors' Rights Agreement effective as of the day and year first above written.

 
    
    INVESTOR

 
 
/s/  YVONNE M. HUSON      
(Signature)

 
 
Yvonne M. Huson
(Name of Investor)

 
 
Member R.S. Huson Marital Trust
(Name and Title of Signatory, if Applicable)

[Signature Page to Investors' Rights Agreement]

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        IN WITNESS WHEREOF, the parties hereto have executed this Investors' Rights Agreement effective as of the day and year first above written.

 
    
    INVESTOR

 
 
/s/  NG SIOK KEOW      
(Signature)

 
 
Ng Siok Keow
(Name of Investor)

 
 
(Name and Title of Signatory, if Applicable)

[Signature Page to Investors' Rights Agreement]

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        IN WITNESS WHEREOF, the parties hereto have executed this Investors' Rights Agreement effective as of the day and year first above written.

 
    
    INVESTOR

 
 
/s/  TENG A-HUA      
(Signature)

 
 
Kingland Overseas Development Inc.
(Name of Investor)

 
 
Teng A-Hua/Managing Director
(Name and Title of Signatory, if Applicable)

 
 
For and on behalf of
KINGLAND OVERSEAS DEVELOPMENT INC.

 
 
/s/  TENG A-HUA      
Authorized Signature(s)

[Signature Page to Investors' Rights Agreement]

31

        IN WITNESS WHEREOF, the parties hereto have executed this Investors' Rights Agreement effective as of the day and year first above written.

 
    
    INVESTOR

 
 
/s/  KING LING WONG      
(Signature)

 
 
King Ling Wong and Lee Min Wong Trustees
Under Declaration of Trust Dated Oct. 5, 1990
(Name of Investor)

 
 
King Ling Wong, Trustee
(Name and Title of Signatory, if Applicable)

[Signature Page to Investors' Rights Agreement]

32

        IN WITNESS WHEREOF, the parties hereto have executed this Investors' Rights Agreement effective as of the day and year first above written.

 
    
    INVESTOR

 
 
/s/  HUAN-CHIU KUO      
(Signature)

 
 
Huan-Chiu Kuo
(Name of Investor)

 
 
(Name and Title of Signatory, if Applicable)

[Signature Page to Investors' Rights Agreement]

33

        IN WITNESS WHEREOF, the parties hereto have executed this Investors' Rights Agreement effective as of the day and year first above written.

 
    
    INVESTOR

 
 
/s/  YAO-CHANG KUO      
(Signature)

 
 
Yao-Chang Kuo
(Name of Investor)

 
 
(Name and Title of Signatory, if Applicable)

[Signature Page to Investors' Rights Agreement]

34

        IN WITNESS WHEREOF, the parties hereto have executed this Investors' Rights Agreement effective as of the day and year first above written.

 
    
    INVESTOR

 
 
/s/  KOICHI MOKUDAI      
(Signature)

 
 
Maruberi Corporation
(Name of Investor)

 
 
Koichi Mokudai, General Manager, Solution Business Dept.
(Name and Title of Signatory, if Applicable)

[Signature Page to Investors' Rights Agreement]

35

        IN WITNESS WHEREOF, the parties hereto have executed this Investors' Rights Agreement effective as of the day and year first above written.

 
    
    INVESTOR

 
 
/s/  NORWYN R. NEWBY      
(Signature)

 
 
Norwyn R. Newby
(Name of Investor)

 
 
(Name and Title of Signatory, if Applicable)

[Signature Page to Investors' Rights Agreement]

36

        IN WITNESS WHEREOF, the parties hereto have executed this Investors' Rights Agreement effective as of the day and year first above written.

 
    
    INVESTOR

 
 
/s/  PHILIP R. CONLEY    
/s/  FRANCES K. CONLEY      
(Signature)

 
 
Philip R. Conley
Frances K. Conley
(Name of Investor)

 
 
As Community Property
(Name and Title of Signatory, if Applicable)

[Signature Page to Investors' Rights Agreement]

37

        IN WITNESS WHEREOF, the parties hereto have executed this Investors' Rights Agreement effective as of the day and year first above written.

 
    
    INVESTOR

 
 
/s/  KUAN-MING LIN      
(Signature)

 
 
PK Venture Capital Corp.
PK II Venture Capital Corp.
(Name of Investor)

 
 
Kuan-Ming Lin, President
(Name and Title of Signatory, if Applicable)

[Signature Page to Investors' Rights Agreement]

38

        IN WITNESS WHEREOF, the parties hereto have executed this Investors' Rights Agreement effective as of the day and year first above written.

    INVESTOR

 
 
PRESIDENT (BVI) INTERNATIONAL
INVESTMENT HOLDINGS LTD.

 
 
/s/  [ILLEGIBLE]      
(Signature)

 
 
Name:
 
[ILLEGIBLE]

 
 
Title:
 

[Signature Page to Investors' Rights Agreement]

39

        IN WITNESS WHEREOF, the parties hereto have executed this Investors' Rights Agreement effective as of the day and year first above written.

 
    
    INVESTOR

 
 
/s/  GEORGE ROBINSON      
(Signature)

 
 
George Robinson
(Name of Investor)

 
 
(Name and Title of Signatory, if Applicable)

[Signature Page to Investors' Rights Agreement]

40

        IN WITNESS WHEREOF, the parties hereto have executed this Investors' Rights Agreement effective as of the day and year first above written.

 
    
    INVESTOR

 
 
/s/  THOMAS J. FOGARTY      
(Signature)

 
 
Thomas Fogarty Separate Property Trust
Trust DTD 2/6/87
(Name of Investor)

 
 
Thomas J. Fogarty, Trustee
(Name and Title of Signatory, if Applicable)

[Signature Page to Investors' Rights Agreement]

41

        IN WITNESS WHEREOF, the parties hereto have executed this Investors' Rights Agreement effective as of the day and year first above written.

 
    
    INVESTOR

 
 
/s/  TSENG WEI-JERNG      
(Signature)

 
 
UC Fund II
(Name of Investor)

 
 
Tseng Wei-Jerng, Director
(Name and Title of Signatory, if Applicable)

[Signature Page to Investors' Rights Agreement]

42

        IN WITNESS WHEREOF, the parties hereto have executed this Investors' Rights Agreement effective as of the day and year first above written.

 
    
    INVESTOR

 
 
/s/  TSENG WEI-JERNG      
(Signature)

 
 
United Investments Funds
(Name of Investor)

 
 
Tseng Wei-Jerng, Director
(Name and Title of Signatory, if Applicable)

[Signature Page to Investors' Rights Agreement]

43

        IN WITNESS WHEREOF, the parties hereto have executed this Investors' Rights Agreement effective as of the day and year first above written.

 
    
    INVESTOR

 
 
/s/  TSENG WEI-JERNG      
(Signature)

 
 
UNITED VENTURE CAPITAL CORPORATION
(Name of Investor)

 
 
Tseng Wei-Jerng, Director
(Name and Title of Signatory, if Applicable)

[Signature Page to Investors' Rights Agreement]

44

        IN WITNESS WHEREOF, the parties hereto have executed this Investors' Rights Agreement effective as of the day and year first above written.

 
    
    INVESTOR

 
 
/s/  S. OSTERMAIER      
(Signature)

 
 
Venture Select GmbH & Co./Alpha Fonds KG
(Name of Investor)

 
 
S. Ostermaier, Managing Director
(Name and Title of Signatory, if Applicable)

[Signature Page to Investors' Rights Agreement]

45

        IN WITNESS WHEREOF, the parties hereto have executed this Investors' Rights Agreement effective as of the day and year first above written.

 
    
    INVESTOR

 
 
/s/  KNUD WOLLENBEGER      
(Signature)

 
 
Knud Wollenberger
(Name of Investor)

 
 
(Name and Title of Signatory, if Applicable)

[Signature Page to Investors' Rights Agreement]

46

        IN WITNESS WHEREOF, the parties hereto have executed this Investors' Rights Agreement effective as of the day and year first above written.

 
    
    INVESTOR

 
 
/s/  YVONNE M. HUSON      
(Signature)

 
 
Yvonne M. Huson, Trustee
Richard S. Huson Martial u/t/a 9/4/98
(Name of Investor)

 
 
(Name and Title of Signatory, if Applicable)

[Signature Page to Investors' Rights Agreement]

47

        IN WITNESS WHEREOF, the parties hereto have executed this Investors' Rights Agreement effective as of the day and year first above written.

 
    
    INVESTOR

 
 
/s/  YVONNE M. HUSON      
(Signature)

 
 
Yvonne M. Huson, Trustee
Richard S. Huson Marital Trust u/t/a 9/4/98
(Name of Investor)

 
 
(Name and Title of Signatory, if Applicable)

[Signature Page to Investors' Rights Agreement]

48


EXHIBIT A
INVESTORS

Prior C Holders:

Series A Preferred Holders:

Series A-1 Preferred Holders:

Series B Preferred Holders:

Series C Preferred Holders:

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QuickLinks

ACCURAY INCORPORATED INVESTORS' RIGHTS AGREEMENT OCTOBER 30, 2006
TABLE OF CONTENTS
ACCURAY INCORPORATED INVESTORS' RIGHTS AGREEMENT
RECITALS
Section 1 Definitions
Section 2 Registration Rights
Section 3 Covenants of the Company
Section 4 Waiver of Prior Rights Agreements
Section 5 Right of First Refusal
Section 6 Miscellaneous
EXHIBIT A INVESTORS

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Exhibit 10.1

INDUSTRIAL COMPLEX LEASE
(California)

Industrial Complex:   CARIBBEAN CORPORATE CENTER

Landlord:
 
MP CARIBBEAN, INC.

Tenant:
 
ACCURAY INCORPORATED

Reference Date:
 
JULY 9, 2003


INDEX TO LEASE

TITLE
    
   PAGE
ARTICLE 1.   DEFINITIONS AND CERTAIN BASIC PROVISIONS   2
ARTICLE 2.   GRANTING CLAUSE   3
ARTICLE 3.   DELIVERY OF DEMISED PREMISES   3
ARTICLE 4.   RENT   4
ARTICLE 5.   FINANCIAL REPORTS   5
ARTICLE 6.   TENANT'S RESPONSIBILITY FOR TAXES, OTHER REAL ESTATE CHARGES AND INSURANCE EXPENSES   5
ARTICLE 7.   COMMON AREA   6
ARTICLE 8.   SECURITY DEPOSIT   8
ARTICLE 9.   USE AND CARE OF DEMISED PREMISES   10
ARTICLE 10.   MAINTENANCE AND REPAIR OF DEMISED PREMISES   11
ARTICLE 11.   ALTERATIONS   12
ARTICLE 12.   LANDLORD'S RIGHT OF ACCESS   13
ARTICLE 13.   SIGNS; STORE FRONTS   14
ARTICLE 14.   UTILITIES   14
ARTICLE 15.   INSURANCE COVERAGES   15
ARTICLE 16.   WAIVER OF LIABILITY; MUTUAL WAIVER OF SUBROGATION   16
ARTICLE 17.   DAMAGES BY CASUALTY   17
ARTICLE 18.   EMINENT DOMAIN   18
ARTICLE 19.   ASSIGNMENT AND SUBLETTING   19
ARTICLE 20.   SUBORDINATION; ATTORNMENT; ESTOPPELS   21
ARTICLE 21.   TENANT'S INDEMNIFICATION   22
ARTICLE 22.   DEFAULT BY TENANT AND REMEDIES   23
ARTICLE 23.   INTENTIONALLY DELETED   27
ARTICLE 24.   HOLDING OVER   27
ARTICLE 25.   NOTICES   28
ARTICLE 26.   COMMISSIONS   28
ARTICLE 27.   REGULATIONS   28
ARTICLE 28.   HAZARDOUS MATERIALS   30
ARTICLE 29.   MISCELLANEOUS   32

EXHIBIT "A"
 
DEMISED PREMISES
 
 
EXHIBIT "B"   CONSTRUCTION: TENANT ACCEPTANCE OF SPACE "AS IS"    
EXHIBIT "C"   TENANT CONSTRUCTION RULES AND REGULATIONS    
EXHIBIT "D"   RIGHT OF FIRST OPPORTUNITY    
EXHIBIT "E"   RENEWAL OPTION    

INDUSTRIAL COMPLEX LEASE
(California)

ARTICLE 1.
DEFINITIONS AND CERTAIN BASIC PROVISIONS

        1.1   The following list sets out certain defined terms and certain financial and other information pertaining to this lease:

Prior to Commencement Date:   570 Del Ray Avenue
Sunnyvale, California 94085

Upon Commencement Date:
 
1310 Chesapeake Terrace
Sunnyvale, CA 94089

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Months
   Monthly Minimum
Guaranteed Rental
01 - 12:   $ 24,000.00
13 - 24:   $ 26,000.00
25 - 36:   $ 38,000.00
37 - 48:   $ 40,000.00

Tenants Pro Rata Share of Building Common Area Costs:
 
55.11
%

Tenant's Pro Rata Share of Parcel Common Area Costs:
 
27.13
%

Tenant's Pro Rata Share of Industrial Complex Common
 
15.78
%
 
Areas Costs:
 
 
 

ARTICLE 2.
GRANTING CLAUSE

        2.1   Landlord leases the Demised Premises to Tenant, and Tenant leases the Demised Premises from Landlord, upon all of the terms and conditions set forth in this lease. Further, provided no event of default has occurred under this lease, Landlord agrees to make available to Tenant, at no additional charge to Tenant, on an unreserved basis in common with the other tenants of the Industrial Complex, the number of parking spaces set out in Section 1.1(s) above.

        2.2   Tenant shall have the right of first opportunity more particularly described on Exhibit "D" attached hereto.

ARTICLE 3.
DELIVERY OF DEMISED PREMISES

        3.1   The Demised Premises are being leased "AS IS", with Tenant accepting all defects, if any, and Landlord makes no warranty of any kind, express or implied, with respect to the Demised Premises (without imitation, Landlord makes no warranty as to the habitability, fitness or suitability of the Demised Premises for a particular purpose nor as to the absence of any toxic or otherwise hazardous substances). This Section 3.1 is subject to any contrary requirements under applicable law; however, in this regard Tenant acknowledges that it has been given the opportunity to inspect the Demised Premises and to have qualified experts inspect the Demised Premises prior to the execution of this lease.

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        3.2   Commencing on the Commencement Date, Tenant shall have full access to the Demised Premises in order to make preparations for its occupancy thereof, including for space planning, construction of tenant improvements, fixturization and the installation of Tenant's telephone and computer equipment and cabling and Tenant's furniture and other personal property. Tenant shall not be obligated to pay minimum guaranteed rental or any common area pass-through charges during this period preceding the Rent Commencement Date. Tenant must provide Landlord with a certificate of insurance prior to gaining possession of the Demised Premises.

        3.3   If, and so long as, Tenant pays the rent and keeps, observes and performs each and every term, covenant and condition of this lease on the part of Tenant to be kept, observed and performed, Tenant shall peaceably enjoy the Demised Premises throughout the term without hindrance by Landlord or any person lawfully claiming through or under Landlord, subject to the provisions of this lease.

ARTICLE 4.
RENT

        4.1   Intentionally deleted.

        4.2   Rental shall accrue from the Rent Commencement Date, and shall be payable to Landlord at Agent's address specified in Section 1.1(g) above or at such other address as Landlord shall so notify Tenant from time to time.

        4.3   Tenant shall pay to Landlord minimum guaranteed rental in monthly installments in the amounts specified in Section 1.1(l) of this lease. The first such monthly installment shall be due and payable upon execution of this lease by Tenant, and subsequent installments shall be due and payable on or before the first day of each succeeding calendar month during the lease term following the Rent Commencement Date; provided that if the Rent Commencement Date is a date other than the first day of a calendar month, there shall be due and payable on or before such date as minimum guaranteed rental for the balance of such calendar month a sum equal to that proportion of the rent specified for the first full calendar month as herein provided, which the number of days from the Rent Commencement Date to the end of the calendar month during which the Rent Commencement Date shall fall bears to the total number of days in such month. Tenant agrees to pay to Landlord, if assessed by the jurisdiction in which the Industrial Complex is located, any sales, excise or other tax imposed, assessed or levied in connection with Tenant's payment of rents.

        4.4   It is understood that the minimum guaranteed rental is payable on or before the first day of each calendar month following the Rent Commencement Date (in accordance with Sections 4.2 and 4.3 above), without offset or deduction of any nature. In the event any rental is not received within five (5) days after written notice, or if any rental payment is by check which is returned for insufficient funds, then in addition to the past due amount Tenant shall pay to Landlord one of the following (the choice to be at the sole option of Landlord unless one of the choices is improper under applicable law, in which event the other alternative will automatically be deemed to have been selected): (a) a late charge in an amount equal to ten percent (10%) of the rental then due, in order to compensate Landlord for its administrative and other overhead expenses; or (b) interest on the rental then due at the maximum contractual rate which could legally be charged in the event of a loan of such rental to Tenant (but in no event to exceed 11/2% per month), such interest to accrue continuously on any unpaid balance due to Landlord by Tenant during the period commencing with the rental due date and terminating with the date on which Tenant makes full payment of all amounts owing to Landlord at the time of said payment. Notwithstanding the foregoing, such five (5)-day notice period shall not be available to Tenant more than once in any twelve (12)-month period, following which (i.e. on the second (2nd) such occurrence and thereafter) the late charge or interest shall be imposed immediately following failure to pay minimum guaranteed rental when due. Any such late charge or interest

4


payment shall be payable as additional rental under this lease, shall not be considered a waiver by Landlord of any default by Tenant hereunder, and shall be payable immediately on demand.

        4.5   If Tenant fails in two (2) consecutive months to make rental payments within five (5) days after it is due, Landlord, in order to reduce its administrative costs, may require, by giving written notice to Tenant (and in addition to any late charge or interest accruing pursuant to Section 4.4 above, as well as any other rights and remedies accruing pursuant to Article 22 or Article 23 below, or any other provision of this lease or at law), that minimum guaranteed rentals are to be paid quarterly in advance instead of monthly, and that all future rental payments are to be made on or before the due date by cash, cashier's check, or money order and that the delivery of Tenant's personal or corporate check will no longer constitute a payment of rental as provided in this lease. Any acceptance of a monthly rental payment or of a personal or corporate check thereafter by Landlord shall not be construed as a subsequent waiver of said rights.

        4.6   Tenant shall pay when due any and all sales taxes levied, imposed or assessed by the United States of America, the State of California, or any political subdivision thereof or other taxing authority upon the minimum guaranteed rental, additional rent and all other sums payable hereunder.

ARTICLE 5.
FINANCIAL REPORTS

        5.1   Tenant shall, promptly following request by Landlord from time to time, but not more often than once per calendar year, furnish a true and accurate audited statement of its financial condition prepared in conformity with recognized accounting principles and in a form reasonably satisfactory to Landlord. In addition, Landlord may from time to time request of Tenant copies of Tenant's most recent unaudited quarterly financial statements, which shall be delivered to Landlord promptly.

ARTICLE 6.
TENANT'S RESPONSIBILITY FOR TAXES, OTHER REAL ESTATE CHARGES AND INSURANCE EXPENSES

        6.1   Tenant shall be liable for all taxes levied against personal property and trade fixtures placed by Tenant in the Demised Premises which taxes shall be paid when due and before any delinquency. If any such taxes are levied against Landlord or Landlord's property and if Landlord elects to pay the same or if the assessed value of Landlord's property is increased by inclusion of personal property and trade fixtures placed by Tenant in the Demised Premises and Landlord elects to pay the taxes based on such increase, Tenant shall pay to Landlord upon demand that part of such taxes for which Tenant is primarily liable hereunder.

        6.2   Tenant shall also be liable for Tenant's Proportionate Share (as specified in Section 1.1(r) above) of all "real estate charges" (as defined below) and "insurance expenses" (as defined below) related to the Industrial Complex or Landlord's ownership of the Industrial Complex. Tenant's obligations under this Section 6.2 shall be prorated during any partial year (i.e., the first year and the last year of the lease term). Tenant's Proportionate Share shall be adjusted as reasonably determined by Landlord in the event that the total rentable area of the buildings in the Industrial Complex shall change after the date hereof. "Real estate charges" shall include ad valorem taxes, general and special assessments, parking surcharges, any tax or charge for governmental services (such as street maintenance or fire protection) which are attributable to the transfer or transaction directly or indirectly represented by this lease, by any sublease or assignment hereunder or by other leases in the Industrial Complex or by any document to which Tenant is a party creating or transferring (or reflecting the creation or transfer of) any interest or an estate in the Demised Premises and any tax or charge which replaces or is in addition to any of such above-described "real estate charges"; real estate charges shall also include any fees, expenses or costs (including attorneys' fees, expert fees and the like) incurred by Landlord in protesting or contesting any assessments levied or the tax rate. "Real estate charges" shall not be deemed to include sales tax payable by Tenant pursuant to Section 4.6 above and

5


any franchise, estate, inheritance or general income tax. "Insurance expenses" shall include all premiums and other expenses incurred by Landlord for liability insurance and fire and extended coverage property insurance (plus whatever endorsements or special coverages which Landlord, in Landlord's sole discretion, may consider appropriate) business interruption, and rent loss, earthquake and any other insurance policy which may be carried by Landlord insuring the Demised Premises, the Common Area, the Industrial Complex, or any improvements thereon.

        6.3   At Landlord's sole option, Landlord and Tenant shaft attempt to obtain separate assessments for Tenant's obligations pursuant to Section 6.1 and, with respect to Section 6.2, for such of the "real estate charges" as are readily susceptible of separate assessment. To the extent of a separate assessment, Tenant agrees to pay such assessment before it becomes delinquent and to keep the Demised Premises free from any lien or attachment moreover, as to all periods of time during the lease term, this covenant of Tenant shall survive the termination of the lease. With regard to the calendar year during which the lease term expires, Landlord at its option either may bill Tenant when the charges become payable or may charge Tenant an estimate of Tenant's pro rata share of whichever charges have been paid directly by Landlord (based upon information available for the current year plus, if current year information is not adequate in itself, information relating to the immediately preceding year).

        6.4   At such time as Landlord has reason to believe that at some time within the immediately succeeding twelve (12) month period Tenant will owe Landlord any amounts pursuant to one or more of the preceding sections of this Article 6, Landlord may direct that Tenant prepay monthly a pro rata portion of the prospective future payment (i.e., the prospective future payment divided by the number of months before the prospective future payment will be due). Tenant agrees that any such prepayment directed by Landlord shall be due and payable monthly on the same day that minimum guaranteed rental is due.

        6.5   In the event that any payment due from Tenant to Landlord is not received within five (5) days after its due date for any reason whatsoever, or if any such payment is by check which is returned for insufficient funds, then in addition to the amount then due, Tenant shall pay to Landlord interest on the amount then due at the maximum contractual rate which could legally be charged in the event of a loan of such amount to Tenant (but in no event to exceed 1-1/2% per month), such interest to accrue continuously on any unpaid balance until paid.

ARTICLE 7.
COMMON AREA

        7.1   The term "Common Area" is defined for all purposes of this lease as that part of the Industrial Complex intended for the common use of all tenants, including among other facilities (as such may be applicable to the Industrial Complex), parking areas, private streets and alleys, landscaping, curbs, loading areas, sidewalks, recreation/picnic areas, malls and promenades, lighting facilities, drinking fountains, meeting rooms, public toilets, and the like, but excluding (i) space in buildings (now or hereafter existing) designated for rental for commercial purposes, as the same may exist from time to time; (ii) streets and alleys maintained by a public authority; (iii) areas within the Industrial Complex which may from time to time not be owned by Landlord (unless subject to a cross-access agreement benefiting the area which includes the Demised Premises); and (iv) areas leased to a single-purpose user where access is restricted. In addition, although the roofs of the buildings in the Industrial Complex are not literally part of the Common Area, they will be deemed to be so included for purposes of (x) Landlord's ability to prescribe rules and regulations regarding same, and (y) their inclusion for purposes of common area maintenance reimbursements. Landlord reserves the right to change from time to time the dimensions and location of the Common Area, as well as the dimensions, identities, locations and types of any buildings, signs or other improvements in the Industrial Complex. For example, and without limiting the generality of the immediately preceding sentence, Landlord may

6

from time to time substitute for any parking area other areas reasonably accessible to the tenants of the Industrial Complex, which areas may be elevated, surface or underground.

        7.2   Tenant, and its employees and customers, and when duly authorized pursuant to the provisions of this lease, its sub-tenants, licensees and concessionaires, shall have the nonexclusive right to use the Common Area (excluding roofs of buildings in the Industrial Complex) as constituted from time to time, such use to be in common with Landlord, other tenants in the Industrial Complex and other persons permitted by Landlord to use the same, and subject to rights of governmental authorities, easements, other restrictions of record, and such reasonable rules and regulations governing use as Landlord may from time to time prescribe. For example, and without limiting the generality of Landlord's ability to establish rules and regulations governing all aspects of the Common Area, Tenant agrees as follows:

        7.3   Landlord shall be responsible for the operation, management and maintenance of the Common Area, the manner of maintenance and the expenditures therefor to be in the sole discretion of Landlord, but to be generally in keeping with similar industrial centers within the same geographical area as the Industrial Complex. Landlord shall be the sole determinant of the type and amount of access control services to be provided, if any. Landlord shall not be liable to Tenant, and Tenant hereby waives any claim against Landlord for (i) any unauthorized or criminal entry of third parties into the Demised Premises or Industrial Complex, (ii) any damage to persons or property, except to the extent caused by the gross negligence or willful misconduct of Landlord, or (iii) any loss of property in and about the Demised Premises or Industrial Complex from any unauthorized or criminal acts of third parties, regardless of any action, inaction, failure, breakdown or insufficiency of access control services.

        7.4   In addition to the rentals and other charges prescribed in this lease, Tenant shall pay to Landlord Tenant's Proportionate Share of the cost of operation and maintenance of the Common Area which may be incurred by Landlord in its discretion (hereinafter, collectively "Common Area Charges"), including, among other costs, those for lighting, painting, cleaning, policing, inspecting, repairing and replacing; Tenant's Proportionate Share of capital expenditures and expenses incurred by Landlord to increase the operating efficiency of the Industrial Complex or to cause the Common Area to comply with applicable Regulations (as such term is defined in Section 27.1), it being agreed that the cost of such capital expenditures and installation shall be amortized over the reasonable life of the capital expenditure, with the reasonable life and amortization schedule being determined in accordance with generally accepted accounting principles consistently applied; a reasonable portion of whatever management fee Landlord pays to the property manager for the Industrial Complex; a reasonable allowance for Landlord's overhead costs and the cost of any insurance for which Landlord is not reimbursed pursuant to Section 6.2, but specifically excluding all expenses paid or reimbursed pursuant to Article 6. In addition, although the roofs of the buildings in the Industrial Complex are not literally part of the Common Area, Landlord and Tenant agree that roof maintenance, repair and replacement shall be included as a common area maintenance item to the extent not specifically allocated to Tenant under this lease nor to another tenant pursuant to its lease. With regard to capital expenditures other than the capital expenditures contemplated by the first sentence of this Section, (i) the original investment in capital improvements, i.e., upon the initial construction of the Industrial Complex, shall not be included, and (ii) improvements and replacements, to the extent capitalized on Landlord's

7


records, shall be included only to the extent of a reasonable depreciation or amortization (including interest accruals commensurate with Landlord's interest costs). If this lease should commence on a date other than the first day of a calendar year or terminate on a date other than the last day of a calendar year, Tenant's reimbursement obligations under this Section 7.4 shall be prorated based upon Landlord's expenses for the entire calendar year. Tenant shall make such payment to Landlord on demand, at intervals not more frequent than monthly. Landlord may, at its option, make monthly or other periodic charges based upon the estimated annual cost of operation and maintenance of the Common Area, payable in advance but subject to adjustment after the end of the year on the basis of the actual cost for such year. Landlord has the right to establish as a reserve, such amounts as Landlord deems reasonable for the maintenance, repair and restoration of the roof and parking areas of the Industrial Complex. In the event that any payment due from Tenant to Landlord is not received within five (5) days after its due date for any reason whatsoever, or if any such payment is by check which is returned for insufficient funds, then, in addition to the amount then due, Tenant shall pay to Landlord interest on the amount then due at the maximum contractual rate which could legally be charged in the event of a loan of such amount to Tenant (but in no event to exceed 1-1/2% per month), such interest to accrue continuously on any unpaid balance until paid. Any delay or failure of Landlord in delivering any estimate or statement described in this Section 7.4 or in computing or billing Tenant's Proportionate Share of the foregoing Common Area Charges shall not constitute a waiver of Landlord's right to require an increase in rent as provided herein or in any way impair the continuing obligations of Tenant under this Section.

        7.5   Landlord and Tenant agree that Tenant's Proportionate Share of the Common Area Charges will be divided into the three components set forth in Section 1.1(r) above. For the purposes of this lease, "Building Common Area Costs" shall consist of those Common Area Charges which Landlord determines pertain exclusively to the Building; "Parcel Common Area Costs" shall consist of those Common Area Charges which Landlord determines shall be shared among the buildings located on the same real property tax parcel as Tenant; and "Industrial Complex Common Area Costs" shall consist of those Common Area Charges which Landlord determines shall be shared among all the buildings at the Industrial Complex. For purposes of determining Tenant's Proportionate Share of Common Area Charges, (1) Tenant's Pro Rata Share of Building Common Area Costs shall equal a fraction the numerator of which shall be the square footage of the Premises and the denominator of which shall be the square footage of the Building; (2) Tenant's Pro Rata Share of Parcel Common Area Costs shall equal a fraction the numerator of which shall be the square footage of the Premises and the denominator of which shall be the square footage of all buildings located on the same real property tax parcel as Tenant; and (3) Tenant's Pro Rata Share of Industrial Complex Common Area Costs shall equal a fraction the numerator of which shall be the square footage of the Premises and the denominator of which shall be the square footage of all buildings at the Industrial Complex. Landlord and Tenant expressly acknowledge and agree that for purposes of calculating Tenant's payments of Common Area Charges, the percentages listed as Tenant's Pro Rata Share of Building Common Area Costs, Parcel Common Area Costs and Industrial Complex Common Area Costs in Section 1.1(r) above, respectively, are correct.

ARTICLE 8.
SECURITY DEPOSIT

        8.1   Tenant acknowledges its obligation to deposit with Landlord the sum stated in Section 1.1(n) above, to be held by Landlord without interest as security for the performance by Tenant of Tenant's covenants and obligations under this lease ("Security Deposit"). Tenant agrees that such Security Deposit may be commingled with Landlord's other funds and that such Security Deposit is not an advance payment of rental or a measure of Landlord's damages in case of default by Tenant. Upon the occurrence of any event of default by Tenant, Landlord may, from time to time, without prejudice to any other remedy provided herein or provided by law, use such funds to the extent necessary to make

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good any arrears of rentals and any other damage, injury, expense or liability caused to Landlord by such event of default, and Tenant shall pay to Landlord on demand the amount so applied in order to restore the Security Deposit to its original amount. If Tenant is not then in default hereunder, any remaining balance of such Security Deposit shall be returned by Landlord to Tenant upon termination of this lease (subject to the provisions of Section 19.6 below). Tenant hereby waives the protections of Section 1950.7(c) of the California Civil Code, as it may hereafter be amended, or similar laws of like import.

        8.2   Alternatively, Tenant may fulfill its obligation to provide a Security Deposit under this lease by delivering to Landlord, either concurrently with the execution of this lease by Tenant, or at any later date during the lease term, an original irrevocable standby letter of credit (the "Letter of Credit") in the amount specified in Section 1.1(n) above, naming Landlord as beneficiary, which Landlord may draw upon to cure any default under this lease or to compensate Landlord for any damage Landlord incurs as a result of Tenant's failure to perform any of its obligations hereunder. Any such draw on the Letter of Credit shall not constitute a waiver of any other rights of Landlord with respect to such default or failure to perform. The Letter of Credit shall be issued by a major commercial bank reasonably acceptable to Landlord, with a San Francisco or San Jose service and claim point for the Letter of Credit, have an expiration date not earlier than sixty (60) days after the Expiration Date (or, in the alternative, have a term of not less than one (1) year and be automatically renewable for an additional one (1) year period unless written notice of non-renewal is given by the issuer to Landlord not later than sixty (60) days prior to the expiration thereof) and shall provide that landlord may make partial and multiple draws thereunder, up to the face amount thereof. In addition, the Letter of Credit shall provide that, in the event of Landlord's assignment or other transfer of its interest in this lease, the Letter of Credit shall be freely transferable by Landlord, without charge and without recourse, to the assignee or transferee of such interest and the bank shall confirm the same to Landlord and such assignee or transferee. The Letter of Credit shall provide for same day payment to Landlord upon the issuer's receipt of a sight draft from Landlord together with Landlord's certificate certifying that the requested sum is due and payable from Tenant and Tenant has failed to pay, and with no other conditions, and otherwise be in form and content satisfactory to Landlord. If the Letter of Credit has an expiration date earlier than sixty (60) days after the Expiration Date, then throughout the term hereof, Tenant shall provide evidence of renewal of the Letter of Credit to Landlord at least sixty (60) days prior to the date the Letter of Credit expires. If Landlord draws on the Letter of Credit pursuant to the terms hereof, Tenant shall immediately replenish the Letter of Credit or provide Landlord with an additional letter of credit conforming to the requirements of this paragraph so that the amount available to Landlord from the Letter(s) of Credit provided hereunder is the amount specified above in Section 1.1(n). Tenant's failure to deliver any replacement, additional or extension of the Letter of Credit, or evidence of renewal of the Letter of Credit, within the time specified under this lease shall entitle Landlord to draw upon the Letter of Credit then in effect. If no event of default (or breach that subsequently matures into an event of default) is outstanding at the expiration or termination of this lease, then within sixty (60) days after such expiration or termination, Landlord shall return to Tenant the Letter of Credit or the balance of the Letter of Credit proceeds then held by Landlord; provided, however, that in no event shall any such return be construed as an admission by Landlord that Tenant has performed all of its covenants and obligations hereunder.

        8.3   If Landlord liquidates the Letter of Credit as provided in the penultimate sentence of Section 8.2 above, Landlord shall hold the funds received from the Letter of Credit as security for Tenant's performance under this lease, and Landlord shall not be required to segregate such Security Deposit from its other funds, and no interest shall accrue or be payable to Tenant with respect thereto. Such funds shall be handled in a manner consistent with the terms of Section 8.1 above.

        8.4   Notwithstanding the foregoing provisions of this Article 8 to the contrary, if Tenant has faithfully performed all of its obligations under this lease and is not then and has not been in default hereunder, then the amount of the Security Deposit or Letter of Credit, as applicable, may be reduced

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to $150,000.00 after the occurrence of three (3) consecutive calendar quarters of profitability by Tenant, as hereafter defined, and as proven to Landlord's reasonable satisfaction following submission to Landlord by Tenant of documentation evidencing same.

        8.5   Notwithstanding the foregoing provisions of this Article 8 to the contrary, if Tenant has faithfully performed all of its obligations under this lease and is not then and has not been in default hereunder, and the reduction described in Section 8.4 has occurred, then the amount of the Security Deposit or Letter of Credit, as applicable, may be reduced from $150,000.00 to $75,000 after the occurrence of two (2) additional consecutive calendar quarters of profitability by Tenant, as hereafter defined, and as proven to Landlord's reasonable satisfaction following submission to Landlord by Tenant of documentation evidencing same.

        8.6   For the purposes of Sections 8.4 and 8.5 above, "consecutive calendar quarters of profitability by Tenant" shall be deemed to have been achieved if either of the following shall occur:

        The calendar quarter preceding the Commencement Date (i.e., ending on June 30, 2003), if profitable, may count toward the three (3) calendar quarters required for Section 8.4 above.

ARTICLE 9.
USE AND CARE OF DEMISED PREMISES

        9.1   The Demised Premises shall be used and occupied by Tenant solely for the permitted use specified in Section 1.1(o) above and for no other purpose. Tenant, at its sole cost and expense, shall obtain and keep in effect during the term, all permits, licenses and other authorizations necessary to permit Tenant to use and occupy the Demised Premises for the permitted use. Without limiting the generality of the foregoing, Tenant shall not use or store any gasoline or flammable or so called "Red Label materials in or about the Demised Premises. All equipment used within the Demised Premises shall be subject to approval by Landlord's insurance carriers and shall be Underwriters Laboratory or Factory Mutual approved for the uses intended, evidence of which shall be furnished to Landlord upon request. Tenant shall not operate any machinery or equipment in the Demised Premises which, in Landlord's sole discretion, shall cause any excessive noise, vibration, damage or disturbance to the other tenants in the Industrial Complex.

        9.2   Tenant shall take good care of the Demised Premises and keep the same free from waste at all times. Tenant shall not over-load the floors in the Demised Premises, nor deface or injure the Demised Premises; provided, however, that Landlord and Tenant agree that if Tenant needs to reinforce or install anchors in the flooring in portions of the Demised Premises to accommodate Tenant's permitted use, Landlord will not unreasonably withhold its consent to Tenant's request for approval of same nor will Landlord require Tenant to remove at termination any such anchors or reinforcement which, after Tenant restoration, do not leave holes in the floor or cause the floor surface to be uneven. Tenant shall keep the Demised Premises and all sidewalks, service-ways and loading areas adjacent to the Demised Premises neat, clean and free from dirt, rubbish, ice or snow at all times. Tenant shall store all trash and garbage within the Demised Premises or in a trash dumpster or similar container approved by Landlord as to type, location and screening; and Tenant shall arrange for the regular pick-up of such trash and garbage at Tenant's expense (unless Landlord finds its necessary to furnish such a service, in which event Tenant shall be charged an equitable portion of the total of the charges to all tenants using the service). Receiving and delivery of goods and merchandise and removal

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of garbage and trash shall be made only in the manner and areas prescribed by Landlord. Tenant shall not operate an incinerator or burn trash or garbage within the Industrial Complex.

ARTICLE 10.
MAINTENANCE AND REPAIR OF DEMISED PREMISES

        10.1 Landlord shall keep the foundation, the exterior walls (except plate glass; windows, doors and other exterior openings; window and door frames, molding, closure devices, locks and hardware; special store fronts; lighting, heating, air conditioning, plumbing and other electrical, mechanical and electromotive installations, equipment and fixtures; signs, placards, decorations or other advertising media of any type; and interior painting or other treatment of the interior side of the exterior walls) and the roof (subject to the second sentence in Section 7.4 above) of the Demised Premises in good repair. Landlord, however, shall not be required to make any repairs occasioned by the act or negligence of Tenant, its agents, contractors, employees, subtenants, invitees, customers, licensees and concessionaires (including, but not limited to, roof leaks resulting from Tenant's installation of air conditioning equipment or any other roof penetration or placement); and the provisions of the previous sentence are expressly recognized to be subject to the provisions of Article 17 and Article 18 of this lease. In the event that the Demised Premises should become in need of repairs required to be made by Landlord hereunder, Tenant shall give immediate written notice thereof to Landlord and Landlord shall have a reasonable time after receipt by Landlord of such written notice in which to make such repairs. Landlord shall not be liable to Tenant for any interruption of Tenant's business or inconvenience caused due to any work performed in the Demised Premises or in the Industrial Complex pursuant to Landlord's rights and obligations under this lease, so long as the work is performed without gross negligence or willful misconduct

        10.2 Tenant shall keep the Demised Premises in good, clean and habitable condition and shall at its sole cost and expense keep the Demised Premises free of insects, rodents, vermin and other pests and make all needed repairs and replacements, including, replacement of cracked or broken glass, except for repairs and replacements required to be made by Landlord under the provisions of Section 10.1, Article 17 and Article 18. Without limiting the coverage of the previous sentence, it is understood that Tenant's responsibilities therein include the repair and replacement in accordance with all applicable Regulations (as defined in Section 27.1 below) of all lighting, heating, air conditioning, plumbing and other electrical, mechanical and electromotive installations, equipment and fixtures and also include all utility repairs in ducts, conduits, pipes and wiring, and any sewer stoppage located in, under and above the Demised Premises, regardless of when or how the defect or other cause for repair or replacement occurred or became apparent; provided, however, that as to the maintenance and repair of the HVAC equipment in the Demised Premises, Landlord shall have the option of contracting directly with an HVAC servicing company for any such work and charging Tenant for all costs thereof. If any repairs required to be made by Tenant hereunder are not made within ten (10) days after written notice delivered to Tenant by Landlord, Landlord may at its option make such repairs without liability to Tenant for any loss or damage which may result to its stock or business by reason of such repairs and Tenant shall pay to Landlord upon demand, as additional rental hereunder, the cost of such repairs plus interest at the maximum contractual rate which could legally be charged in the event of a loan of such payment to Tenant (but in no event to exceed 1-1/2% per month), such interest to accrue continuously from the date of payment by Landlord until repayment by Tenant At the expiration of this lease, Tenant shall surrender the Demised Premises in good condition, excepting reasonable wear and tear and losses required to be restored by Landlord in Section 10.1, Article 17 and Article 18 of this lease.

        10.3 Tenant waives the right to make repairs at Landlords expense under Sections 1941 and 1942 of the California Civil Code and all other laws now or hereafter in effect.

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ARTICLE 11.
ALTERATIONS

        11.1 Tenant shall not make any alterations, additions or improvements to the Demised Premises (collectively, the "Alterations") without the prior written consent of Landlord, except for the installation of unattached, movable trade fixtures which may be installed without drilling, cutting or otherwise defacing the Demised Premises. Tenant shall furnish complete plans and specifications to Landlord at the time it requests Landlord's consent to any Alterations if the desired Alterations (i) will affect the Industrial Complex's mechanical, electrical, plumbing or life safety systems or services, or (ii) will affect any structural component of the Demised Premises or the Industrial Complex, or (iii) will require the filing of plans and specifications with any governmental or quasi-governmental agency or authority, or (iv) will cost in excess of Twenty-Five Thousand Dollars ($25,000.00). Subsequent to obtaining Landlord's consent and prior to commencement of the Alterations, Tenant shall deliver to Landlord any building permit required by applicable law and a copy of the executed construction contract(s). Tenant shall reimburse Landlord with ten (10) days after the rendition of a bill for all of Landlord's actual out-of-pocket costs incurred in connection with any Alterations, including, without limitation, all management, engineering, outside consulting, and construction fees incurred by or on behalf of Landlord for the review and approval of Tenant's plans and specifications and for the monitoring of construction of the Alterations. If Landlord consents to the making of any Alterations, such Alterations shall be made by Tenant at Tenant's sole cost and expense by a contractor approved in writing by Landlord, such approval not to be unreasonably withheld. Tenant shall give Landlord not less than ten (10) days advance written notice of the commencement of Tenant's Alterations to enable Landlord to post and record notices of nonresponsibility. Tenant shall require its contractor to maintain insurance in such amounts and in such form as Landlord may require. Any construction, alteration, maintenance, repair, replacement, installation, removal or decoration undertaken by Tenant in connection with the Demised Premises shall be completed in accordance with plans and specifications which must be approved by Landlord, shall be carried out in a good, workmanlike and prompt manner and in accordance with the provisions of Exhibit "C" attached hereto, shall comply with an applicable Regulations of the authorities having jurisdiction thereof, and shall be subject to supervision by Landlord or its employees, agents or contractors. Without limiting the generality of the immediately preceding sentence, any installation or replacement of Tenant's heating or air conditioning equipment must be effected strictly in accordance with Landlord's instructions, the Clean Air Act and any other applicable Regulations. Without Landlord's prior written consent, Tenant shall not use any portion of the Common Areas either within or without the Industrial Complex in connection with the making of any Alterations. If the Alterations which Tenant causes to be constructed result in Landlord being required to make any alterations and/or improvements to other portions of the Industrial Complex in order to comply with any applicable Regulations, then Tenant shall reimburse Landlord upon demand for all costs and expenses incurred by Landlord in making such alterations and/or improvements. Any Alterations made by Tenant shall become the property of Landlord upon installation and shall remain on and be surrendered with the Demised Premises upon the expiration or sooner termination of this lease; provided, however, that Tenant shall, upon demand by Landlord, at Tenant's sole cost and expense, forthwith and with all due diligence remove all or any portion of any Alterations made by Tenant which are requested by Landlord to be removed and repair and restore the Demised Premises in a good and workmanlike manner to their original condition, reasonable wear and tear excepted. Notwithstanding the foregoing, at Tenant's request, Landlord shall advise Tenant at the time of Landlord's approval of any Alteration requested by Tenant whether Landlord shall require that the Alteration be removed by Tenant from the Demised Premises at the expiration or earlier termination of the lease term; provided, however, that in all events Tenant shall be obligated to remove the demonstration cell and the light lead shielding around same.

        11.2 All construction work done by Tenant within the Demised Premises shall be performed in a good and workmanlike manner with new materials of first-class quality, lien-free and in compliance

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with all governmental requirements and Regulations, and in such manner as to cause a minimum of interference with other construction in progress and with the transaction of business in the Industrial Complex. Tenant agrees to indemnify Landlord and hold Landlord harmless against any loss, liability or damage resulting from such work, and Tenant shall, if requested by Landlord, furnish a bond or other security satisfactory to Landlord against any such loss, liability or damage.

        11.3 In the event Tenant uses a general contractor to perform construction work within the Demised Premises, Tenant shall, prior to the commencement of such work, require said general contractor to execute and deliver to Landlord a waiver and release of any and all claims against Landlord and liens against the Industrial Complex to which such contractor might at any time be entitled. The delivery of the waiver and release of lien within the time period set forth above shall be a condition precedent to Tenant's ability to enter on and begin its construction work at the Demised Premises and, if applicable, to any reimbursement from Landlord for its construction work.

        11.4 Nothing contained in this lease shall be construed as constituting the consent or request of Landlord, express or implied, to or for the performance by any contractor, laborer, materialman or vendor of any labor or services or for the furnishing of any materials for any construction, alteration, addition, repair or demolition of or to the Demised Premises or any part thereof. All materialmen, contractors, artisans, mechanics, laborers and any other persons now or hereafter furnishing any labor, services, materials, supplies or equipment to Tenant with respect to any portion of the Demised Premises are hereby charged with notice that they must look exclusively to Tenant to obtain payment for same. Tenant and any subtenants shall have no power to do any act or make any contract which may create or be the foundation of any lien, mortgage or other encumbrance upon the reversionary or other estate of Landlord, or any interest of Landlord in the Demised Premises. NOTICE IS HEREBY GIVEN THAT LANDLORD IS NOT AND SHALL NOT BE LIABLE FOR ANY LABOR, SERVICES OR MATERIALS FURNISHED OR TO BE FURNISHED TO TENANT OR TO ANYONE HOLDING THE DEMISED PREMISES OR ANY PART THEREOF, AND THAT NO MECHANICS' OR OTHER LIENS FOR ANY SUCH LABOR, SERVICES OR MATERIALS SHALL ATTACH TO OR AFFECT THE INTEREST OF LANDLORD IN AND TO THE DEMISED PREMISES.

        11.5 In the event that Landlord elects to remodel all or any portion of the Industrial Complex, Tenant will cooperate with such remodeling, including Tenant's tolerating temporary inconveniences (and even the temporary removal of Tenant's signs in order to facilitate such remodeling, as it may relate to the exterior of the Demised Premises).

ARTICLE 12.
LANDLORD'S RIGHT OF ACCESS

        12.1 Landlord and Landlord's agents and representatives shall have the right to enter the Demised Premises at any time in case of an emergency, and at all reasonable times for any purpose permitted pursuant to the terms of this lease, including, but not limited to, examining the Demised Premises; making such repairs or alterations therein as may be necessary or appropriate in Landlord's sole judgment for the safety and preservation thereof; erecting, installing, maintaining, repairing or replacing wires, cables, conduits, vents, ducts, risers, pipes, HVAC equipment or plumbing equipment running in, to or through the Demised Premises; showing the Demised Premises to prospective purchasers or mortgagees and during the last year of this lease, prospective tenants; and posting notices of nonresponsibility.

        12.2 If requested in writing by Landlord, Tenant shall give Landlord a key for all of the doors for the Demised Premises, excluding Tenant's vaults, safes and files. Landlord shall have the right to use any and all means to open the doors to the Demised Premises in an emergency in order to obtain entry thereto without liability to Tenant therefor. Any entry to the Demised Premises by Landlord by any of

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the foregoing means, or otherwise, shall not be construed or deemed to be a forcible or unlawful entry into or a detainer of the Demised Premises, or an eviction, partial eviction or constructive eviction of Tenant from the Demised Premises or any portion thereof, and shall not relieve Tenant of its obligations hereunder.

ARTICLE 13.
SIGNS; STORE FRONTS

        13.1 Tenant shall not place or permit to be placed any signs upon (i) the roof of the Demised Premises, or (ii) the Common Areas or any exterior area of the Industrial Complex without Landlord's prior written approval which approval shall not be unreasonably withheld or delayed provided any proposed sign for the Demised Premises is placed only in those locations as may be designated by Landlord, complies with the sign criteria promulgated by Landlord from time to time, and complies with applicable city ordinances. Upon request of Landlord, Tenant shall immediately remove any sign, advertising material or lettering which Tenant has placed or permitted to be placed upon the exterior or interior surface of any door or window or at any point inside the Demised Premises, on the exterior of the Industrial Complex if required in connection with any cleaning, maintenance or repairs to the Industrial Complex or which, in Landlord's reasonable opinion, is of such a nature as to not be in keeping with the standards of the Industrial Complex and if Tenant fails to do so, Landlord may without liability remove the same at Tenant's expense. Tenant shall comply with such regulations as may from time to time be promulgated by Landlord governing signs, advertising material or lettering of an tenants in the Industrial Complex.

ARTICLE 14.
UTILITIES

        14.1 Tenant shall obtain all water, electricity, sewerage, gas, telephone and other utilities directly from the public utility company furnishing same. Any meters required in connection therewith shall be installed at Tenant's sole cost. Tenant shall pay all utility deposits and fees, and all monthly service charges for water, electricity, sewage, gas, telephone and any other utility services furnished to the Demised Premises during the term of this lease. In the event any such utilities are not separately metered on the Commencement Date, then until such time as such services are separately metered, Tenant shall pay Landlord Tenant's equitable share of the cost of such services, as determined by Landlord. If for any reason the use of any utility is measured on a meter(s) indicating the usage of Tenant and other tenants of the Industrial Complex. Tenant and such other tenants shall allocate the cost of such utility amongst themselves and shall each be responsible for the payment of its allocable share. Landlord shall furnish and install all piping, feeders, risers and other connections necessary to bring utilities to the perimeter walls of the Demised Premises. Anything to the contrary notwithstanding, Tenant shall remain obligated for the payment of Tenant's pro rata share of any heating costs and/or other utilities or services furnished to the Common Areas pursuant to Section 7.4.

        14.2 Tenant shall have the right to use the existing heating, air conditioning and ventilation equipment in the Demised Premises, if any. All such equipment shall be maintained, repaired and replaced, as necessary, by Tenant at its sole expense and shall be surrendered by Tenant to Landlord at the end of the term of this lease together with the Demised Premises. Landlord makes no representation or warranty as to the condition or capacity of such equipment. Landlord shall have no obligation whatsoever to provide the Demised Premises with any additional heat, air conditioning, ventilation or hot water.

        14.3 Landlord shall not be liable for any interruption whatsoever, nor shall Tenant be entitled to an abatement or reduction of rent on account thereof, in utility services not furnished by Landlord, nor for interruptions in utility services furnished by Landlord which are due to fire, accident, strike, acts of

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God or other causes beyond the control of Landlord or which are necessary or useful in connection with making any alterations, repairs or improvements.

        14.4 Tenant shall not install any equipment which exceeds or overloads the capacity of the utility facilities serving the Demised Premises.

ARTICLE 15.
INSURANCE COVERAGES

        15.1 Landlord shall procure and maintain throughout the term of this lease a policy or policies of insurance, at its sole cost and expense (but subject to Article 6 above), causing the industrial Complex to be insured under standard fire and extended coverage insurance (excluding hurricane and storm insurance unless readily obtainable at commercially reasonable rates) and liability insurance (plus whatever endorsements or special coverages Landlord, in its sole discretion, may consider appropriate), to the extent necessary to comply with Landlord's obligations pursuant to other provisions of this lease. All payments for losses thereunder shall be made solely to Landlord. If the annual premiums charged to Landlord shall exceed the standard rates because Tenant's operations, the contents of the Demised Premises, or improvements made to the Demised Premises beyond standard improvements result in extra-hazardous exposure, Tenant shall pay the excess amount of the premium upon demand therefor by Landlord.

        15.2 Tenant shall procure and maintain throughout the term of this lease, at its sole cost and expense, all of the following insurance coverages:

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        15.3 In addition to the foregoing, Tenant shall obtain certificates of insurance evidencing Commercial General Liability Insurance, including Completed Operations, Motor Vehicle Liability Insurance, Worker's Compensation Insurance and Employer's Liability Insurance in the amounts required above from any contractor or subcontractor engaged by Tenant for repairs or maintenance during the lease term, and such liability insurance shall name Landlord, SSR Realty Advisors, Inc., South Bay Development Company or any successor property manager or managing agent for the Complex, any mortgagee, and such other parties as Landlord shall from time to time designate, as additional insureds as their respective interests may appear, through an ISO Additional Insured Endorsement CG20261185 or equivalent, and shall provide that any loss shall be payable to Landlord and such other additional insured parties as their respective interests may appear.

ARTICLE 16.
WAIVER OF LIABILITY; MUTUAL WAIVER OF SUBLETTING

        16.1 Landlord and Landlord's agents and employees shall not be liable to Tenant, nor to Tenant's employees, agents, contractors, subcontractors, invitees, subtenants or licensees, nor to any other person whomsoever, for any injury to person or damage to property caused by the Demised Premises or other portions of the Industrial Complex becoming out of repair or by defect or failure of any structural element of the Demised Premises or of any equipment, pipes or wiring, or broken glass, or by the backing up of drains, or by gas, water, steam, electricity, or oil leaking, escaping or flowing into the Demised Premises (except where due to Landlord's willful failure to make repairs required to be made

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by Landlord hereunder, after the expiation of a reasonable time after written notice to Landlord of the need for such repairs), nor shall Landlord be liable to Tenant, nor to Tenant's employees, agents, contractors, subcontractors, invitees, subtenants or licensees, nor to any other person whomsoever, for any loss or damage that may be occasioned by or through the acts or omissions of other tenants of the Industrial Complex or of any other persons whomsoever, excepting only duly authorized employees and agents of Landlord. Landlord shall not be held responsible in any way on account of any construction, repair or reconstruction (including widening) of any private or public roadways, walkways or utility lines.

        16.2 Landlord shall not be liable to Tenant or to Tenant's employees, agents, contractors, subcontractors, invitees, subtenants or licensees, or to any other person whomsoever, for any injury to person or damage to property on or about the Demised Premises or the Common Area caused by the negligence or misconduct of Tenant, its employees, agents, contractors, subcontractors, invitees, subtenants or licensees, or of any other person entering the Industrial Complex under express or implied invitation of Tenant (with the exception of invitees in the Common Area), or arising out of the use of the Demised Premises by Tenant and the conduct of its business therein, or arising out of any breach or default by Tenant in the performance of its obligations under this lease; and Tenant hereby agrees to indemnify, defend and hold Landlord harmless from any loss, expense or claims arising out of such damage or injury. Furthermore, Tenant agrees to indemnify, defend and hold Landlord harmless from and against any and all liability, claims, demands, causes of action of any kind and nature arising or growing out of or in any way connected with Tenant's use, occupancy, management or control of the Demised Premises and Tenant's operations or activities in the Industrial Complex. Upon notice from Landlord, Tenant shall defend any such claim, demand, cause of action or suit referenced hereinabove at Tenant's expense by counsel satisfactory to Landlord in its sole discretion.

        16.3 Landlord and Tenant each hereby release the other from any and all liability or responsibility to the other, or to any other party claiming through or under them by way of subrogation or otherwise, for any loss or damage to property caused by a casualty which is insurable under standard fire and extended coverage insurance; provided, however, that this mutual waiver shall be applicable only with respect to a loss or damage occurring during the time when property insurance policies, which are readily available in the marketplace, contain a clause or permit an endorsement to the effect that any such release shall not adversely affect or impair the policy or the right of the insured party to receive proceeds under the policy; provided, further, that this release shall not be applicable to the portion of any damage which is not reimbursed by the damaged party's insurer because of the "deductible" in the damaged party's insurance coverage. The release specified in this Section 16.3 is cumulative with any releases or exculpation's which may be contained in other provisions of this lease. Landlord and Tenant agree that all policies of insurance obtained by them pursuant to the terms of this lease shall contain provisions or endorsements thereto waiving the insurer's rights of subrogation with respect to claims against the other, and, unless the policies permit waiver of subrogation without notice to the insurer, each shall immediately notify its insurance companies of the existence of the waiver and indemnity provisions set forth in this lease. The provisions of this Article 16 shall survive the expiration or sooner termination of this lease.

ARTICLE 17.
DAMAGES BY CASUALTY

        17.1 Tenant shall give immediate written notice to Landlord of any damage caused to the Demised Premises by fire or other casualty.

        17.2 In the event that the Demised Premises shall be damaged or destroyed by fire or other casualty insurable under standard fire and extended coverage insurance and Landlord does not elect to terminate this lease as hereinafter provided, Landlord shall proceed with reasonable diligence and at its sole cost and expense to rebuild and repair the Demised Premises. In the event (a) the Building is

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destroyed or substantially damaged by a casualty not covered by Landlord's insurance, or (b) such Building is destroyed or rendered untenantable to an extent in excess of fifty percent (50%) of the first floor area by a casualty covered by Landlord's insurance, or (c) the holder of a mortgage, deed of trust or other lien on such Building at the time of the casualty elects, pursuant to such mortgage, deed of trust or other lien, to require the use of all or part of Landlord's insurance proceeds in satisfaction of all or part of the indebtedness secured by the mortgage, deed of trust or other lien, or (d) the Demised Premises shall be damaged to the extent of fifty percent (50%) or more of the cost of replacement, then Landlord may elect either to terminate this lease or to proceed to rebuild and repair the Demised Premises. Landlord shall give written notice to Tenant of such election within sixty (60) days after the occurrence of such casualty, which notice shall include Landlord's reasonable estimate of the time needed to substantially restore the Demised Premises ("Landlord's Estimate"), and, if Landlord elects to rebuild and repair, Landlord shall proceed to do so with reasonable diligence and at its sole cost and expense. Notwithstanding anything to the contrary in this Section 17.2, in the event (i) the Building is destroyed or rendered untenantable or (ii) the Demised Premises are substantially damaged and the repair of such damage will not (per Landlord's Estimate) be substantially completed within two hundred forty (240) days of the casualty, then Tenant may elect to terminate this lease without penalty by notice given to Landlord within fifteen (15) days of Tenant's receipt of Landlord's Estimate (or prior thereto in the event the Demised Premises are destroyed or rendered untenantable). In the event that Landlord should fail to substantially complete such repairs and restoration by the date set forth in Landlord's Estimate, Tenant may elect to terminate this lease by written notice to Landlord ("Tenant's Termination Notice"), such termination to be effective thirty (30) days after Landlord's receipt of such notice; provided, however, that if within ten (10) days of Landlord's receipt of Tenant's Termination Notice, Landlord shall notify Tenant that it estimates that such repairs and material restoration can be completed within thirty (30) days after the original date estimated by Landlord, then Tenant's Termination Notice shall be void and of no further force and effect. If, however, Landlord does not complete such repairs and material restoration within such thirty (30) day period, Tenant may at its option and as its sole remedy for such delay terminate this lease by delivering written notice to Landlord, within ten (10) days after the expiration of said period of time, whereupon the lease shall end on the date of such notice or such later date fixed in such notice as if the date of such notice was the date originally fixed in this lease for the expiration of the term.

        17.3 Landlord's obligation to rebuild and repair under this Article 17 shall in any event be limited to restoring the Demised Premises to substantially the condition in which the same existed prior to such casualty, exclusive of any alterations, additions, improvements, fixtures, signs and equipment installed by Tenant. Tenant agrees that promptly after completion of such work by Landlord, Tenant will proceed with reasonable diligence and at Tenant's sole cost and expense to restore, repair and replace all alterations, additions, improvements, fixtures, signs and equipment installed by Tenant.

        17.4 Tenant agrees that during any period of reconstruction or repair of the Demised Premises, it will continue the operation of its business within the Demised Premises to the extent practicable. During the period from the occurrence of the casualty until Landlord's repairs are completed, the minimum guaranteed rental shall be reduced to such extent as may be fair and reasonable under the circumstances; however, there shall be no abatement of the charges provided for herein.

        17.5 Tenant hereby waives the provisions of California Civil Code Sections 1932(2) and 1933(4) and the provisions of any successor or other law of like import

ARTICLE 18.
EMINENT DOMAIN

        18.1 If more than thirty percent (30%) of the floor area of the Demised Premises should be taken for any public or quasi-public use under any governmental law, ordinance or regulation or by right of eminent domain or by private purchase in lieu thereof, this lease shall terminate and the rent shall be

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abated during the unexpired portion of this lease, effective on the date physical possession is taken by the condemning authority.

        18.2 If less than thirty percent (30%) of the floor area of the Demised Premises should be taken as aforesaid, this lease shall not terminate; however, the minimum guaranteed rental payable hereunder during the unexpired portion of this lease shall be reduced in proportion to the area taken, effective on the date physical possession is taken by the condemning authority. Following such partial taking, Landlord shall make all necessary repairs or alterations to the remaining premises required to make the remaining portions of the Demised Premises an architectural whole, but in no event shall Landlord be required to expend an amount greater than the award actually received by Landlord in connection with such taking.

        18.3 If any part of the Common Area should be taken as aforesaid, this lease shall not terminate, nor shall the rent payable hereunder be reduced, except that either Landlord or Tenant may terminate this lease if the area of the Common Area remaining following such taking plus any additional parking area provided by Landlord in reasonable proximity to the Industrial Complex shall be less than seventy percent (70%) of the area of the Common Area immediately prior to the taking. Any election to terminate this lease in accordance with this provision shall be evidenced by written notice of termination delivered to the other party within thirty (30) days after the date physical possession is taken by the condemning authority.

        18.4 All compensation awarded for any taking (or the proceeds of private sale in lieu thereof) of the Demised Premises or Common Area shall be the property of Landlord, and Tenant hereby assigns its interest in any such award to Landlord; provided, however, Landlord shall have no interest in any award made to Tenant for Tenant's moving and relocation expenses or for the loss of Tenant's fixtures and other tangible personal property if a separate award for such items is made to Tenant as long as such separate award does not reduce the amount of the award that would otherwise be awarded to Landlord.

        18.5 The rights contained in this Article 18 shall be Tenant's sole and exclusive remedy in the event of a taking or condemnation. Each party waives the provisions of Sections 1265.130 and 1265.150 of the California Code of Civil Procedure and the provisions of any successor or other law of like import.

        18.6 Notwithstanding anything to the contrary, Landlord may terminate this lease with no further liability to Tenant if (i) fifty percent (50%) or more of the gross leasable area of the Industrial Complex is taken or (ii) if following any taking, Landlord's mortgagee elects to require Landlord to apply all or a portion of such award to the outstanding indebtedness.

ARTICLE 19.
ASSIGNMENT AND SUBLETTING

        19.1 Tenant shall not assign or in any manner transfer this lease or any estate or interest therein, or sublet the Demised Premises or any part thereof, or grant any license, concession or other right of occupancy of any portion of the Demised Premises without the prior written consent of Landlord. Landlord agrees that it will not withhold consent in a wholly unreasonable and arbitrary manner (as further explained in Section 29.4 of this lease); however, in determining whether or not to grant its consent, Landlord shall be entitled to take into consideration factors such as Landlord's desired tenant mix and the reputation and net worth of the proposed transferee. Further, Landlord shall not be required to consent to any assignment or sublease that would result in a violation of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). Any purported assignment or sublease that would result in a violation of ERISA shall be void and of no effect. Landlord shall be entitled to charge Tenant a reasonable fee for processing Tenant's request. Consent by Landlord to one or more assignments or sublettings shall not operate as a waiver of Landlord's rights as to any subsequent assignments and sublettings. In all events, Landlord can refuse to consent to an assignment

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or sublease if there shall exist any uncured default of Tenant or a matter which will become a default with the passage of time.

        19.2 If Tenant is a corporation, partnership or other entity and if at any time during the term of this lease the person or persons who own a majority of either the outstanding voting rights or the outstanding ownership interests of Tenant at the time of the execution of this lease cease to own a majority of such voting rights or ownership interests (except as a result of transfers by devise or descent), the loss of a majority of such voting rights or ownership interests shall be deemed an assignment of this lease by Tenant and, therefore, subject in all respects to the provisions of Section 19.1 above. The previous sentence shall not apply, however, if at the time of the execution of this lease, Tenant is a corporation and the outstanding voting shares of capital stock of Tenant are listed on a recognized security exchange or over-the-counter market. Furthermore, the disposition and acquisition of shares in the initial public offering of the stock of the Tenant originally named herein, or the private placement of the stock of the Tenant originally named herein in connection with equity financing purposes only, shall not be deemed a violation of the terms of this Section 19.2.

        19.3 Notwithstanding anything to the contrary contained herein, and without prejudice to Landlord's right to require a written assumption from each assignee, any person or entity to whom this lease is assigned including, without limitation, assignees pursuant to the provisions of the Bankruptcy Code, 11 U.S.C. Paragraph 101, et seq. (the "Bankruptcy Code"), shall automatically be deemed, by acceptance of such assignment or sublease or by taking actual or constructive possession of the Demised Premises, to have assumed all obligations of Tenant arising under this lease effective as of the earlier of the date of such assignment or sublease or the date on which the assignee or sublessee obtains possession of the Demised Premises. In the event this lease is assigned to any person or entity pursuant to the provisions of the Bankruptcy Code, any and all monies or other consideration payable or otherwise to be delivered in connection with such assignment shall be paid or delivered to Landlord and shall remain the exclusive property of Landlord and not constitute the property of Tenant or Tenant's estate within the meaning of the Bankruptcy Code. All such money or other consideration not paid or delivered to Landlord shall be held in trust for the benefit of Landlord and shall be promptly paid or delivered to Landlord.

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        19.4 Notwithstanding any assignment or subletting, Tenant and any guarantor of Tenant's obligations under this lease shall at all times remain fully responsible and liable for the payment of the rent herein specified and for compliance with all of its other obligations under this lease (even if future assignments and sub-lettings occur subsequent to the assignment or subletting by Tenant, and regardless of whether or not Tenant's approval has been obtained for such future assignments and sublettings). Moreover, in the event that the rental due and payable by a sublessee (or a combination of the rental payable under such sublease plus any bonus or other consideration therefor or incident thereto) exceeds the rental payable under this lease, or if with respect to a permitted assignment, permitted license or other transfer by Tenant permitted by Landlord, the consideration payable to Tenant by the assignee, licensee or other transferee exceeds the rental payable under this lease, then Tenant shall be bound and obligated to pay Landlord all such excess rental and other excess consideration within ten (10) days following receipt thereof by Tenant from such sublessee, assignee, licensee or other transferee, as the case may be. Finally, in the event of an assignment or subletting, it is understood and agreed that all rentals paid to Tenant by an assignee or sublessee shall be received by Tenant in trust for Landlord, to be forwarded immediately to Landlord without offset or reduction of any kind; and upon election by Landlord such rentals shall be paid directly to Landlord as specified in Section 4.2 of this lease (to be applied as a credit and offset to Tenant's rental obligation).

        19.5 Tenant shall not mortgage, pledge or otherwise encumber its interest in this lease or in the Demised Premises.

        19.6 In the event of the transfer and assignment by Landlord of its interest in this lease and in the Building to a person expressly assuming Landlord's obligations under this lease, Landlord shall thereby be released from any further obligations hereunder, and Tenant agrees to look solely to such successor in interest of the Landlord for performance of such obligations. Any security given by Tenant to secure performance of Tenant's obligations hereunder may be assigned and transferred by Landlord to such successor in interest and Landlord shall thereby be discharged of any further obligation relating thereto.

        19.7 Notwithstanding anything to the contrary contained herein, Landlord shall have the option, in its sole discretion, in the event of any proposed subletting or assignment, to terminate this lease, or in the case of a proposed subletting of less than the entire Demised Premises for substantially all of the remaining term of this lease, to recapture the portion of the Demised Premises to be sublet, as of the date the subletting or assignment is to be effective. The option shall be exercised by Landlord giving Tenant written notice within twenty (20) days following Landlord's receipt of Tenant's written notice as required above. If this lease shall be terminated with respect to the entire Demised Premises, the term shall end on the date stated in Tenant's notice as the effective date of the sublease or assignment as if that date had been originally fixed in this lease for the expiration of the term. If Landlord recaptures only a portion of the Demised Premises (in the event of a proposed subletting of less than the entire Demised Premises as above described), the minimum guaranteed rental during the unexpired term shall abate, proportionately, based on the minimum guaranteed rental due as of the date immediately prior to such recapture.

        19.8 Tenant hereby waives any suretyship defenses it may now or hereafter have to an action brought by Landlord including those contained in Sections 2787 through 2856, inclusive, 2899 and 3433 of the California Civil Code, as now or hereafter amended, or similar laws of like import.

ARTICLE 20.
SUBORDINATION; ATTORNMENT; ESTOPPELS

        20.1 Tenant accepts this lease subject and subordinate to any mortgage, deed of trust or other lien presently existing or hereafter placed upon the Industrial Complex or any portion of the Industrial Complex which includes the Demised Premises, and to any renewals, modifications and extensions

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thereof and this subordination shall be self operative and no further instrument of subordination is needed. Tenant agrees that any mortgagee shall have the right at any time to subordinate its mortgage, deed of trust or other lien to this lease; provided, however, notwithstanding that this lease may be (or is made to be) superior to a mortgage, deed of trust or other lien, the mortgagee shall not be liable for prepaid rentals, security deposits and claims accruing during or with respect to Landlord's ownership, any amendment or modification made to this lease without its prior written consent or any offsets or claims against Landlord; further provided that the provisions of a mortgage, deed of trust or other lien relative to the right of the mortgagee with respect to proceeds arising from an eminent domain taking (including a voluntary conveyance by Landlord) and provisions relative to proceeds arising from insurance payable by reason of damage to or destruction of the Demised Premises shall be prior and superior to any contrary provisions contained in this instrument with respect to the payment or usage thereof. Landlord is hereby irrevocably vested with full power and authority to subordinate this lease to any mortgage, deed of trust or other lien hereafter placed upon the Demised Premises or the Industrial Complex as a whole, and Tenant agrees upon demand to execute such further instruments subordinating this lease as Landlord may request. If the holder of any mortgage, indenture or deed of trust or similar instrument (each a "Mortgagee") succeeds to Landlord's interest in the Demised Premises, Tenant shall, upon request of any such Mortgagee, automatically become the tenant of and attorn to and recognize such Mortgagee as the landlord under this lease and will pay to it all rents and other amounts payable by Tenant under this lease, in accordance with the applicable terms of this lease. Notwithstanding that the foregoing provisions of this Section are self-operative, upon request of Landlord or any Mortgagee, Tenant shall execute and deliver to Landlord and to such Mortgagee a subordination and attornment agreement in recordable form confirming the foregoing and otherwise in form and substance acceptable to Landlord and such Mortgagee.

        20.2 Tenant may not exercise any remedies for default by Landlord hereunder unless and until Landlord and the holder(s) of any indebtedness secured by mortgage, deed of trust or other lien on the Demised Premises shall have received written notice of such default and a reasonable time (not less than 60 days) shall thereafter have elapsed without the default having been cured.

        20.3 Tenant agrees that it will from time to time, within seven (7) days of receipt of written request from Landlord, execute and deliver to Landlord a written statement addressed to Landlord (and to such other parties as may be designated by Landlord), which statement shall identify Tenant and this lease, shall certify that this lease is unmodified and in full force and effect (or if there have been modifications, that the same is in full force and effect as so modified), shall confirm that Landlord is not in default as to any obligations of Landlord under this lease (or if Landlord is in default, specifying any default), shall confirm Tenant's agreements contained above in this Article 20, and shall contain such other information or confirmations as Landlord may reasonably require. Landlord is hereby irrevocably appointed and authorized as the agent and attorney-in-fact of Tenant to execute and deliver any such written statement on Tenant's behalf if Tenant fails to do so within seven (7) days after Tenant's receipt of a written request from Landlord to Tenant.

ARTICLE 21.
TENANT'S INDEMNIFICATION

        21.1 Tenant shall indemnify, defend and hold harmless Landlord, Landlord's asset manager, Landlord's subasset manager, Landlord's partners, any subsidiary or affiliate of Landlord and the officers, directors, shareholders, partners, employees, managers, independent contractors, attorneys and agents of any of the foregoing (collectively, the "Indemnitees") from and against any and all claims, demands, causes of action, judgments, costs and expenses, and all losses and damages (including consequential and punitive damages) arising from Tenant's use of the Demised Premises or from the conduct of its business or from any activity, work, or other acts or things done, permitted or suffered by Tenant in or about the Demised Premises, and shall further indemnify, defend and hold harmless the

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Indemnitees from and against any and all claims arising from any breach or default in the performance of any obligation on Tenant's part to be performed under the terms of this lease, or arising from any act, omission or negligence or willful or criminal misconduct of Tenant, or any officer, agent, employee, independent contractor, guest, or invitee thereof, and from all costs, attorneys' fees and disbursements, and liabilities incurred in the defense of any such claim or any action or proceeding which may be brought against, out of or in any way related to this lease. Upon notice from Landlord, Tenant shall defend any such claim, demand, cause of action or suit at Tenant's expense by counsel satisfactory to Landlord in its sole discretion. As a material part of the consideration to Landlord for this lease, Tenant hereby assumes all risk of damage to property or injury to persons in, upon or about the Demised Premises from any cause, and Tenant hereby waives all claims with respect thereto against landlord. Tenant shall give immediate notice to Landlord in case of casualty or accidents in the Demised Premises. The provisions of this Article 21 shall survive the expiration or sooner termination of this lease.

        21.2 All personal property of Tenant, including goods, wares, merchandise, inventory, trade fixtures and other personal property of Tenant, shall be stored at the sole risk of Tenant. Landlord or its agents shall not be liable for any loss or damage to persons or property resulting from fire, explosion, falling plaster, steam, gas, electricity, water or rain which may leak from any part of the Industrial Complex or from the pipes, appliances or plumbing works therein or from the roof, street or subsurface or from any other places resulting from dampness or any other cause whatsoever, or from the act or negligence of any other tenant or any officer, agent, employee, contractor or guest of any such tenant, except personal injury caused by or due to the gross negligence or willful misconduct of Landlord. Landlord or its agents shall not be liable for interference with the electrical service, ventilation, or for any latent defect in the Demised Premises.

        21.3 The parties hereto acknowledge that all or a part of the Demised Premises may be used for the storage and shipment of goods not owned by Tenant, and Landlord is not willing to enter into this lease unless Tenant indemnifies the Indemnitees to Landlord's satisfaction from any liability on the part of the Indemnitees to the owner(s) of such goods for damage to the same arising out of any acts or omissions of the Indemnitees. As a material inducement to Landlord to enter into this lease, Tenant agrees to defend, indemnify and hold the Indemnitees harmless from and against any and all losses, claims, liabilities, obligations and damages imposed upon or incurred or asserted against the Indemnitees by reason of damage to goods of persons storing such goods with Tenant, notwithstanding the fact that such losses, claims, liabilities, obligations or damages may have been caused by the acts or omissions of Landlord. Tenant agrees that at all times during which it shall store goods not owned by it in the Demised Premises, it shall insure the indemnity described under this Section 21.3 in a manner reasonably satisfactory to Landlord. Landlord shall not be deemed a bailee, consignee, or warehouseman (or responsible for the standard of care incidental thereto) with respect to any goods stored or shipped to or from the Demised Premises for consignment or bailment and Tenant shall insert a cause to that effect in all warehouse receipts or consignment agreements for the storage or shipment of goods to or from the Demised Premises.

ARTICLE 22.
DEFAULT BY TENANT AND REMEDIES

        22.1 The following events shall be deemed to be events of default by Tenant under this lease:

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        22.2 Upon the occurrence of any such event of default, Landlord shall have the option to pursue any one or more of the following remedies to the extent permitted by law:

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        22.3 It is expressly agreed that in determining "the unpaid rent" as that term is used throughout Sections 2.22(c)(i) and 22.2(c)(ii) above, there shall be added to the minimum guaranteed rental (as specified in Section 1.1(l) of this lease) a sum equal to the charges for maintenance of the Common Area (as specified in Section 7.4 of this lease), and the payments for taxes, charges and insurance (as specified in Article 6 of this Lease).

        22.4 It is further agreed that, in addition to payments required pursuant to Sections 22.2(b) and 22.2(c) above, Tenant shall compensate Landlord for all expenses incurred by Landlord in repossession (including, among other expenses, any increase in insurance premiums caused by the vacancy of the Demised Premises), all expenses incurred by Landlord in reletting (including, among other expenses, repairs, remodeling, replacements, advertisements and brokerage fees), all concessions granted to a new tenant upon reletting (including, among other concessions, renewal options), all losses incurred by Landlord as a direct or indirect result of Tenant's default (including, among other losses, any adverse reaction by Landlord's mortgagee or by other tenants or potential tenants of the Industrial Complex) and a reasonable allowance for Landlord's administrative efforts, salaries and overhead attributable directly or indirectly to Tenant's default and Landlord's pursuing the rights and remedies provided herein and under applicable law.

        22.5 Landlord may restrain or enjoin any breach or threatened breach of any covenant, duty or obligation of Tenant herein contained without the necessity of proving the inadequacy of any legal remedy or irreparable harm. The remedies of Landlord hereunder shall be deemed cumulative and not exclusive of each other.

        22.6 If on account of any breach or default by Tenant in its obligations hereunder, Landlord shall employ an attorney to present, enforce or defend any of Landlord's rights or remedies hereunder, Tenant agrees to pay any reasonable attorneys' fees incurred by Landlord in such connection.

        22.7 Intentionally deleted.

        22.8 In the event of any default described in Section 22.1(d) of this lease, any assumption and assignment must conform with the requirements of the Bankruptcy Code and, in order to provide Landlord with the assurances contemplated by the Bankruptcy Code, Tenant must fulfill the following

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obligations, in addition to any other reasonable obligations that Landlord may require, before any assumption of this lease is effective: (i) all defaults under Section 22.1(a) of this lease must be cured within ten (10) days after the date of assumption; (ii) all other defaults under Section 22.1 of this lease other than under Section 22.1(d) must be cured within fifteen (15) days after the date of assumption; (iii) all actual monetary losses incurred by Landlord (including, but not limited to, reasonable attorneys' fees) must be paid to Landlord within ten (10) days after the date of assumption; and (iv) Landlord must receive within ten (10) days after the date of assumption a security deposit in the amount of six (6) months minimum guaranteed rent (using the minimum guaranteed rent in effect for the first full month immediately following the assumption) and an advance prepayment of minimum guaranteed rent in the amount of three (3) months minimum guaranteed rent (using the minimum guaranteed rent in effect for the first full month immediately following the assumption), both sums to be held by Landlord in accordance with Section 22.7 above and deemed to be rent under this lease for the purposes of the Bankruptcy Code as amended and from time to time in effect.

ARTICLE 23.
INTENTIONALLY DELETED

ARTICLE 24.
HOLDING OVER

        24.1 In the event Tenant remains in possession of the Demised Premises after the expiration of this lease and without the execution of a new lease or an amendment hereto, it shall be deemed to be occupying said premises as a tenant from month to month at a rental equal to the rental herein provided plus one hundred percent (100%) of such amount and otherwise subject to all the conditions, provisions and obligations of this lease insofar as the same are applicable to a month-to-month tenancy. Notwithstanding the foregoing, so tong as Landlord does not have a letter of intent under negotiation (or executed) for some or all of the Demised Premises with a bona fide third party replacement tenant which desires occupancy or access to make tenant improvements during the holdover period, Tenant's holdover rent for the first month following the term expiration date shall be set at a rental equal to the rental herein provided plus fifty percent (50%) of such amount, and Tenant's holdover rent for the second month following the term expiration date shall be set at a rental equal to the rental herein provided plus seventy-five percent (75%) of such amount, in each case subject to all the conditions, provisions and obligations of this lease insofar as the same are applicable to a month-to-month tenancy. Neither any provision hereof nor acceptance by Landlord of rent after such expiration or earlier termination shall be deemed a consent to a holdover hereunder or result in a renewal of this lease or an extension of the term. Notwithstanding any provision to the contrary contained herein, (i) Landlord expressly reserves the right to require Tenant to surrender possession of the Demised Premises upon the expiration of the term of this lease or upon the earlier termination hereof, the right to reenter the Demised Premises, and the right to assert any remedy at law or in equity to evict Tenant and collect

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damages in connection with any such holding over, and (ii) Tenant shall indemnify, defend and hold Landlord harmless from and against any and all claims, demands, actions, losses, damages, obligations, costs and expenses, including, without limitation, attorneys' fees incurred or suffered by Landlord by reason of Tenant's failure to surrender the Demised Premises on the expiration or earlier termination of this lease in accordance with the provisions of this lease.

ARTICLE 25.
NOTICES

        25.1 Wherever any notice is required or permitted hereunder, such notice shall be in writing. Any notice or document required or permitted to be delivered hereunder shall be deemed to be delivered when actually received by the designated addressee or, if earlier and regardless of whether actually received or not, when deposited in the United States mail, postage prepaid, certified mail, return receipt requested, addressed to the parties hereto at the respective addresses set out in Section 1.1 above (or at Landlord's option, to Tenant at the Demised Premises), or at such other addresses as they have theretofore specified by written notice.

        25.2 If and when included within the term "Landlord" as used in this instrument there are more than one person, firm or corporation, all shall jointly arrange among themselves for their joint execution of such a notice specifying some individual at some specific address for the receipt of notices and payments to Landlord; if and when included within the term "Tenant" as used in this instrument there are more than one person, firm or corporation, all shall jointly arrange among themselves for their joint execution of such a notice specifying some individual at some specific address for the receipt of notices and payments to Tenant. All parties included within the terms "Landlord" and "Tenant," respectively, shall be bound by notice and payments given in accordance with the provisions of this Article to the same effect as if each had received such notice or payment. In addition, Tenant agrees that actions by Landlord and notices to Tenant hereunder may be taken or given by Agent, Landlord's attorney, or any other property manager or agent.

        25.3 A copy of any notice or document required or permitted to be delivered hereunder to Landlord shall simultaneously be delivered to Agent.

ARTICLE 26.
COMMISSIONS

        26.1 Tenant and Landlord warrant that they have had no dealings with any broker or agent in connection with this lease, other than Agent and Tenant's Broker, whose commissions shall be paid by Landlord. Landlord and Tenant covenant to pay, hold harmless and indemnify each other from and against any and all cost, expense or liability for any compensation, commissions or charges claimed by any other broker or agent utilized by the indemnitor with respect to this lease or the negotiation hereof:

ARTICLE 27.
REGULATIONS

        27.1 Landlord and Tenant acknowledge that there are now in effect and may hereafter be enacted or go into effect federal, state, county and municipal laws, orders, rules, directives and regulations relating to or affecting the Demised Premises or the Industrial Complex, concerning the impact on the environment of construction, land use, maintenance and operation of structures, toxic or otherwise hazardous substances, and the conduct of business, including, without limitation, the Americans With Disabilities Act of 1990 and the Clean Air Act and regulations issued thereunder (all of the foregoing, as amended from time to time, being herein called the "Regulations"). Tenant will not cause or permit to be caused, any act or practice, by negligence, omission or otherwise, that would adversely affect the

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environment or do anything or permit anything to be done that would violate any of said Regulations. Moreover, Tenant shall have no claim against Landlord by reason of any changes Landlord may make in the Industrial Complex or the Demised Premises pursuant to said Regulations or any charges imposed upon Tenant, Tenant's customers or other invitees pursuant to same. As a material part of the consideration to Landlord for this lease, Tenant acknowledges that Landlord shall have no liability to Tenant to the extent Landlord, acting in good faith, complies with any governmental law, regulation or order, including without limitation the USA Patriot's Act (also known as the "Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001").

        27.2 If, by reason of any Regulations, the payment to, or collection by, Landlord of any rental or other charge (collectively referred to hereinafter as "Lease Payments") payable by Tenant to Landlord pursuant to the provisions of this lease is in excess of the amount (the "Maximum Charge") permitted by the Regulations, then Tenant, during the period (the "Freeze Period") when the Regulations shall be in force and effect shall not be required to pay, nor shall Landlord be permitted to collect, any sum in excess of the Maximum Charge. Upon the earlier of (i) the expiration of the Freeze Period, or (ii) the issuance of a final order or judgment of a court of competent jurisdiction declaring the Regulations to be invalid or not applicable to the provisions of this lease, Tenant, to the extent not then prescribed by law, and commencing with the first day of the month immediately following, shall pay to Landlord as additional rental, in equal monthly installments during the balance of the term of this lease, a sum equal to the cumulative difference between the Maximum Charges and the Lease Payments during the Freeze Period. If any provisions of this Section, or the application thereof, shall to any extent be declared to be invalid and unenforceable, the same shall not be deemed to affect any of the other provisions of this Section or of this lease, all of which shall be deemed valid and enforceable to the fullest extent permitted by law.

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        27.3 Tenant acknowledges that it will be wholly responsible for any accommodations or alterations which need to be made to the Demised Premises to accommodate disabled employees and customers of Tenant, including without limitation, the requirements under the Americans With Disabilities Act of 1990 and any equivalent California law. Any alterations made to the Demised Premises in order to comply with either statute must be made solely at Tenant's expense and in compliance with any terms and requirements of this lease. Landlord agrees to make reasonable efforts to ensure that the Common Area is in compliance with the applicable disability access laws as of the date hereof. If a complaint is received by Landlord from either a private or government source regarding disability access to the Common Area of the Industrial Complex, Landlord reserves the right to mediate, contest, comply with or otherwise respond to such complaint as Landlord deems to be reasonably prudent under the circumstances. If Landlord decides to make alterations to the Common Area of the Industrial Complex in response to any such complaints or in response to legal requirements Landlord considers to be applicable to the Common Area of the Industrial Complex, the cost of such alterations shall be included in the Common Area maintenance charge under this lease. Landlord and Tenant agree that so long as the governmental entity or entities charged with enforcing such statutes have not expressly required Landlord to take specific action to effectuate compliance with such statutes, Landlord shall be conclusively deemed to be in compliance with such statutes. Tenant agrees to provide Landlord with written notice should Tenant become aware of a violation of such statutes with respect to the Common Area. In the event Landlord is required to take action to effectuate compliance with such statutes, Landlord shall have a reasonable period of time to make the improvements and alterations necessary to effectuate such compliance, which period of time shall be extended by any time necessary to cause any necessary improvements and alterations to be made.

ARTICLE 28.
HAZARDOUS MATERIALS

        28.1 During the term of this lease, Tenant shall comply with all Environmental Laws and Environmental Permits (each as defined in Section 28.7 hereof) applicable to the operation or use of the Demised Premises, will cause all other persons occupying or using the Demised Premises to comply with all such Environmental Laws and Environmental Permits, will immediately pay or cause to be paid all costs and expenses incurred by reason of such compliance, and will obtain and renew all Environmental Permits required for the operation or use of the Demised Premises.

        28.2 Tenant shall not generate, use, treat, store, handle, release or dispose of, or permit the generation, use, treatment, storage, handling, release or disposal of Hazardous Materials (as defined in Section 28.7 hereof) on the Demised Premises, or the Industrial Complex, or transport or permit the transportation of Hazardous Materials to or from the Demised Premises or the Industrial Complex except for limited quantities used or stored at the Demised Premises and required in connection with the routine operation and maintenance of the Demised Premises, and then only upon the written consent of Landlord and in compliance with all applicable Environmental Laws and Environmental Permits.

        28.3 At any time and from time to time during the term of this lease, Landlord may perform an environmental site assessment report concerning the Demised Premises, prepared by an environmental consulting firm chosen by Landlord, indicating the presence or absence of Hazardous Materials caused or permitted by Tenant and the potential cost of any compliance, removal or remedial action in connection with any such Hazardous Materials on the Demised Premises. Tenant shall grant and hereby grants to Landlord and its agents access to the Demised Premises and specifically grants Landlord an irrevocable non-exclusive license to undertake such an assessment. The cost of any such environmental site assessment shall be borne by Landlord unless (i) Landlord initiates same based on Landlord's reasonable belief that Tenant has caused or permitted a Hazardous Materials problem on or at the Demised Premises, (ii) the results of such assessment indicate that Tenant has caused or permitted a

30


Hazardous Materials problem on or at the Demised Premises, or (iii) such assessment is initiated by Landlord incident to the occurrence of an event of default by Tenant under this Article 28. If Tenant shall be held responsible for the costs of the assessment as above described, Tenant shall promptly pay Landlord for the reasonable costs of such assessment on demand.

        28.4 Tenant will immediately advise Landlord in writing of any of the following: (1) any pending or threatened Environmental Claim (as defined in Section 28.7 hereof) against Tenant relating to the Demised Premises or the Industrial Complex; (2) any condition or occurrence on the Demised Premises or the Industrial Complex that (a) results in noncompliance by Tenant with any applicable Environmental Law, or (b) could reasonably be anticipated to form the basis of an Environmental Claim against Tenant or Landlord or the Demised Premises; (3) any condition or occurrence on the Demised Premises or any property adjoining the Demised Premises that could reasonably be anticipated to cause the Demised Premises to be subject to any restrictions on the ownership, occupancy, use or transferability of the Demised Premises under any Environmental Law; and (4) the actual or anticipated taking of any removal or remedial action by Tenant in response to the actual or alleged presence of any Hazardous Material on the Demised Premises or the Industrial Complex. All such notices shall describe in reasonable detail the nature of the claim, investigation, condition, occurrence or removal or remedial action and Tenant's response thereto. In addition, Tenant will provide Landlord with copies of all communications regarding the Demised Premises with any government or governmental agency relating to Environmental Laws, all such communications with any person relating to Environmental Claims, and such detailed reports of any such Environmental Claim as may reasonably be requested by Landlord.

        28.5 Tenant will not change or permit to be changed the present use of the Demised Premises unless Tenant shall have notified Landlord thereof in writing and Landlord shall have determined, in its sole and absolute discretion, that such change will not result in the presence of Hazardous Materials on the Demised Premises except for those described in Section 28.2 above.

        28.6 Tenant agrees to defend, indemnify and hold harmless the Indemnitees (as defined in Section 21.1) from and against all obligations (including removal and remedial actions), losses, claims, suits, judgments, liabilities, penalties, damages (including consequential and punitive damages), costs and expenses (including attorneys' and consultants' fees and expenses) of any kind or nature whatsoever that may at any time be incurred by, imposed on or asserted against such Indemnitees directly or indirectly based on, or arising or resulting from (a) the actual or alleged presence of Hazardous Materials on the Industrial Complex which is caused or permitted by Tenant and (b) any Environmental Claim relating in any way to Tenant's operation or use of the Demised Premises (the "Hazardous Materials Indemnified Matters"). The provisions of this Article 28 shall survive the expiration or sooner termination of this lease.

        28.7 (a) "Hazardous Materials" means (i) petroleum or petroleum products, natural or synthetic gas, asbestos in any form that is or could become friable, urea formaldehyde foam insulation, and radon gas; (ii) any substances defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "extremely hazardous wastes," "restricted hazardous

31

wastes," "toxic substances, "toxic pollutants," "contaminants" or "pollutants," or words of similar import, under any applicable Environmental Law; and (iii) any other substance exposure to which is regulated by any governmental authority; (b) "Environmental Law" means any federal, state or local statute, law, rule, regulation, ordinance, code, policy or rule of common law now or hereafter in effect and in each case as amended, and any judicial or administrative interpretation thereof, including any judicial or administrative order, consent decree or judgment, relating to the environment, health, safety or Hazardous Materials, including without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, 42 U.S.C. §§ 9601 et seq; the Resource Conservation and Recovery Act, 42 U.S.C. §§ 6901 et seq.; the Hazardous Materials Transportation Act, 49 U.S.C. §§ 1801 et seq.; the Clean Water Act, 33 U.S.C. §§ 1251 et seq.; the Toxic Substances Control Act, 15 U.S.C. §§ 2601 et seq.; the Clean Air Act, 42 U.S.C. §§ 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C. §§ 300f et seq.; the Atomic Energy Act, 42 U.S.C. §§ 2011 et seq.; the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. §§ 136 et seq.; and the Occupational Safety and Health Act, 29 U.S.C. §§ 651 et seq.; (c) "Environmental Claims" means any and all administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of non-compliance or violation, investigations, proceedings, consent orders or consent agreements relating in any way to any Environmental Law or any Environmental Permit, including without limitation (i) any and all Environmental Claims by governmental or regulatory authorities for enforcement, cleanup, removal, response, remedial or other actions or damages pursuant to any applicable Environmental Law and (ii) any and all Environmental Claims by any third party seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief resulting from Hazardous Materials or arising from alleged injury or threat of injury to health, safety or the environment; and (d) "Environmental Permits" means all permits, approvals, identification numbers, licenses and other authorizations required under any applicable Environmental Law.

        28.8 In no event shall Tenant be liable for any costs, losses or claims due to the presence of Hazardous Materials in the Demised Premises (i) if such Hazardous Materials were present in the Demised Premises prior to Tenant's occupancy of the Demised Premises (other than as a result of Tenants acts or omissions), or (ii) if such Hazardous Materials were present in the Demised Premises solely as the result of Landlord's acts or omissions.

ARTICLE 29.
MISCELLANEOUS

        29.1 Nothing in this lease shall be deemed or construed by the parties hereto, nor by any third party, as creating the relationship of principal and agent or of partnership or of joint venture between the parties hereto, it being understood and agreed that neither the method of computation of rent, nor any other provision contained herein, nor any acts of the parties hereto, shall be deemed to create any relationship between the parties hereto other than the relationship of landlord and tenant.

        29.2 Tenant shall not for any reason withhold or reduce Tenant's required payments of rentals and other charges provided in this lease, it being agreed that the obligations of Landlord under this tease are independent of Tenants obligations except as may be otherwise expressly provided. The immediately preceding sentence shall not be deemed to deny Tenant the ability of pursuing all rights granted it under this lease or at law; however, at the direction of Landlord, Tenant's claims in this regard shall be litigated in proceedings different from any litigation involving rental claims or other claims by Landlord against Tenant (i.e., each party may proceed to a separate judgment without consideration, counterclaim or offset as to the claims asserted by the other party).

        29.3 The liability of Landlord, any agent of Landlord, or any of their respective officers, directors, shareholders, or employees to Tenant for or in respect of any default by Landlord under the terms of this lease or in respect of any other claim or cause of action shall be limited to the interest of Landlord in the Industrial Complex, and Tenant agrees to look solely to Landlord's interest in the Industrial

32


Complex for the recovery and satisfaction of any judgment against Landlord, any agent of Landlord, or any of their respective officers, directors, shareholders, and employees.

        29.4 In all circumstances under this lease where the prior consent of one party (the "consenting party"), whether it be Landlord or Tenant, is required before the other party (the "requesting party") is authorized to take any particular type of action, such consent shall not be withheld in a wholly unreasonable and arbitrary manner; however, the requesting party agrees that its exclusive remedy if it believes that consent has been withheld improperly (including, but not limited to, consent required from Landlord pursuant to Section 19.1) shall be to institute litigation either for a declaratory judgment or for a mandatory injunction requiring that such consent be given (with the requesting party hereby waiving any claim for damages, attorneys' fees or any other remedy unless the consenting party refuses to comply with a court order or judgment requiring it to grant its consent).

        29.5 Whenever a period of time is herein prescribed for action to be taken by Landlord or Tenant, such party shall not be liable or responsible for, and there shall be excluded from the computation of any such period of time, any delays due to strikes, riots, acts of God, shortages of labor or materials, war, governmental laws, regulations or restrictions or any other causes of any kind whatsoever which are beyond the reasonable control of such party, except for the payment of rent due hereunder.

        29.6 If any provision of this lease should be held to be invalid or unenforceable, the validity and enforceability of the remaining provisions of this lease shall not be affected thereby.

        29.7 Intentionally deleted.

        29.8 The laws of the State of California shall govern the interpretation, validity, performance and enforcement of this lease. Venue for any action under this lease shall be the county in which rentals are due pursuant to Section 4.2 and Section 1.1 of this lease.

        29.9 The captions used herein are for convenience only and do not limit or amplify the provisions hereof.

        29.10 Whenever herein the singular number is used, the same shall include the plural, and words of any gender shall include each other gender.

        29.11 All covenants and obligations contained within this lease shall bind and inure to the benefit of Landlord, its successors and assigns, and shall be binding upon and inure to the benefit of Tenant, and its permitted successors and assigns.

        29.12 This lease contains the entire agreement between the parties, and no rights are created in favor of either party other than as specified or expressly contemplated in this lease. No brochure, rendering, information or correspondence shall be deemed to be a part of this agreement unless specifically incorporated herein by reference. In addition, no agreement shall be effective to change, modify or terminate this lease in whole or in part unless such is in writing and duly signed by the party against whom enforcement of such change, modification or termination is sought.

        29.13 LANDLORD AND TENANT HEREBY ACKNOWLEDGE THAT THEY ARE NOT RELYING UPON ANY BROCHURE, RENDERING, INFORMATION, REPRESENTATION OR PROMISE OF THE OTHER, OR OF THE AGENT, EXCEPT AS MAY BE EXPRESSLY SET FORTH IN THIS LEASE.

        29.14 No waiver of any of the terms, covenants, provisions, conditions, rules and regulations imposed by this lease, and no waiver of any legal or equitable relief or remedy, shall be implied by the failure of Landlord to assert any rights, declare any forfeiture, or for any other reason. No waiver of any of the terms, provisions, covenants, conditions, rules and regulations shall be valid unless it shall be in writing signed by Landlord. No waiver by Landlord or forgiveness of performance by Landlord for one or more tenants shall constitute a waiver or forgiveness of performance in respect to Tenant.

33


Landlord's consent to or approval of any act by Tenant requiring Landlord's consent or approval under this lease shall not be deemed to render unnecessary the obtaining of Landlord's consent to or approval of any subsequent act of Tenant. No act or thing done by Landlord or Landlord's agents during the term of this lease shall be deemed an acceptance of a surrender of the Demised Premises, unless in writing signed by Landlord. The delivery of the keys to any employee or agent of Landlord shall not operate as a termination of this lease or a surrender of the Demised Premises. The acceptance of any rent by Landlord following a breach of this lease by Tenant shall not constitute a waiver by Landlord of such breach or any other breach unless such waiver is expressly stated in a writing signed by Landlord.

        29.15 Tenant shall deliver and surrender to Landlord possession of the Demised Premises (including all of Tenant's permanent work upon and to the Demised Premises, all replacements and all fixtures permanently attached to the Demised Premises) immediately upon the expiration of the term or the termination of this lease in as good condition and repair as the same were on the delivery date (loss by any insured casualty and ordinary wear and tear only excepted) and deliver the keys at the office of Landlord or Landlord's agent; provided, however, that upon Landlord's request made at least thirty (30) days prior to the end of the term, or the date Tenant is otherwise required to vacate the Demised Premises, Tenant shall remove all fixtures and equipment affixed to the Demised Premises by Tenant, and repair and restore the Demised Premises to their condition on the delivery date (loss by any insured casualty and ordinary wear and tear only excepted), at Tenant's sole expense, subject to the last sentence of Section 11.1 above. The removal shall be performed prior to the earlier of the end of the term or the date Tenant is required to vacate the Demised Premises.

        29.16 Tenant shall not record this lease. Without the prior written consent of Landlord, Tenant shall not record any memorandum of this lease, short form or other reference to this lease.

        29.17 The submission of this lease for examination does not constitute a reservation of or option for the Demised Premises or any other space in the Industrial Complex, and shall not vest any right in Tenant. This lease shall become effective as a lease only upon its execution and delivery by the parties.

        29.18 LANDLORD AND TENANT HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS LEASE OR ANY DOCUMENTS CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF EITHER PARTY ARISING OUT OF OR RELATED IN ANY MANNER WITH THE DEMISED PREMISES (INCLUDING WITHOUT LIMITATION, ANY ACTION TO RESCIND OR CANCEL THIS LEASE OR ANY CLAIMS OR DEFENSES ASSERTING THAT THIS LEASE WAS FRAUDULENTLY INDUCED OR IS OTHERWISE VOID OR VOIDABLE). THIS WAIVER IS A MATERIAL INDUCEMENT FOR LANDLORD TO ENTER INTO AND ACCEPT THIS LEASE.

        29.19 If Tenant is a corporation (including any form of professional association), then each individual executing or attesting this lease on behalf of such corporation covenants, warrants and represents that he or she is duly authorized to execute or attest and deliver this lease on behalf of such corporation. If Tenant is a partnership (general or limited) or limited liability company, then each individual executing this lease on behalf of the partnership or company hereby covenants, warrants and represents that he or she is duly authorized to execute and deliver this lease on behalf of the partnership or company in accordance with the partnership agreement or membership agreement, as the case may be, or an amendment thereto, now in effect.

        [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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        29.20 This lease consists of twenty-nine Articles and Exhibits "A" through "E". With the exception of Article 7, in the event any provision of an exhibit shall be inconsistent with a provision in the body of the lease, the provision as set forth in the exhibit shall be deemed to control.

        EXECUTED as of the latest date accompanying a signature by Landlord or Tenant below.

        LANDLORD:

    MP CARIBBEAN, INC.
a Delaware corporation

 
 
By:
/s/  THOMAS KLUGHER      
     
    Name: Thomas Klugher
     
    Title: Vice President
     

 
 
Date of Signature:
7/14/03

TENANT:
 
 
 
 
    ACCURAY INCORPORATED,
a California corporation

 
 
By:
/s/ Chris A. Raanes
     
    Name: Chris A. Raanes
     
    Title: COO
     

 
 
By:
/s/ John M. Harland
     
    Name: John M. Harland
     
    Title: CFO and Ass't Secretary
     

 
 
Date of Signature:
11 July, 2003

35

GRAPHIC

A-1

GRAPHIC

A-2


EXHIBIT "B"

CONSTRUCTION; TENANT ACCEPTANCE OF SPACE "AS IS"

ARTICLE I. GENERAL

        Tenant hereby accepts the Demised Premises "as is" and "ready for occupancy." Subject to Article IV below, Landlord shall have no obligation to perform any tenant improvements in the Demised Premises or to fund any such improvements. Prior to any modification of the Demised Premises by or on behalf of Tenant, Tenant shall adhere to the following as well as the provisions contained in Article 11 of the lease:

ARTICLE II. PRE-CONSTRUCTION OBLIGATIONS

        A.    Complete plans, diagrams, schedules and other data relating to work to be performed by Tenant in the Demised Premises must be furnished by Tenant to Landlord in form sufficient to obtain a building permit. Without limiting the generality of the immediately preceding sentence, Tenant's submissions must include a floor plan, a reflected ceiling plan, a plumbing plan, elevations of walls and a fixture plan. All drawings shall be at scale of either 1/8" or 1/4".

        B.    Tenant shall secure Landlord's written approval of all designs, plans, specifications, materials, contractors and contracts for work to be performed by Tenant before beginning the work (including following whatever "work letter" instructions, if any, which Landlord may deliver to Tenant in connection with the work), and shall secure all necessary licenses and permits to be used in performing the work. Tenant's finished work shall be subject to Landlord's approval and acceptance.

        C.    The insurance requirements under Article 15 of this lease and the indemnity requirements under Article 16 of this lease shall expressly apply during the construction contemplated in this exhibit, and Tenant shall provide evidence of appropriate insurance coverage prior to beginning any of Tenant's work. Tenant shall provide Landlord with evidence of insurance covering both Tenant and Tenant's contractor against damage to their personal property, as well as against third-party liability and workers' compensation claims arising out of all construction and associated activities. All policies of insurance shall be subject to Landlord's prior approval and shall be endorsed showing Landlord as an additional named insured (or if permitted by Landlord, may provide a waiver of subrogation against Landlord).

ARTICLE III. DESCRIPTION OF TENANT'S WORK

        A.    Signs: Tenant shall pay for all signs and the installation thereof, including the electrical hook-up, subject to the provisions of Section 13.1 of this lease.

        B.    Utilities: All meters or other measuring devices in connection with utility services shall be provided by Tenant. All service deposits shall be made by Tenant at Tenant's expense.

        C.    All work undertaken by Tenant shall be at Tenant's expense and shall not damage the Building or any part thereof. Any roof penetration shall be performed by Landlord's roofer or, at Landlord's option, by a bonded roofer approved in advance by Landlord. The work shall be begun only after Landlord has given consent, which consent shall in part be conditioned upon Tenant's plans, to include materials acceptable to Landlord, in order to prevent injury to the roof and to spread the weight of the equipment being installed. Tenant shall also be responsible for obtaining and paying for professional inspections of any structural work (including, without limitation, any roof work or concrete work).

        D.    All work performed by or at the behest of Tenant shall be in compliance with all applicable Regulations.

B-1


        E.    Any code-required upgrades to the Demised Premises required as a result of Tenant's work performed under the terms of this Exhibit "B" or under the terms of Article 11 of the lease shall be at Tenant's sole cost and expense, and shall not be deemed warranted by Landlord.

        F.     Subject to Landlord's prior approval of the exact location, not to be unreasonably withheld, and subject to applicable law, Tenant, at its own expense, shall be authorized to identify up to twenty (20) parking spaces near the entrance to the Demised Premises as "visitor parking" spots and may stencil the curbs accordingly. Up to four (4) of said twenty (20) spots closest to the front door of the Demised Premises may be stenciled as "Accuray Visitor Parking" spots. Landlord shall have no obligation to police or monitor compliance with same by visitors to the Industrial Complex or other tenants thereof. Landlord hereby approves the twenty (20) parking spaces designated on the attached Exhibit "B-1".

ARTICLE IV. TENANT IMPROVEMENT ALLOWANCE

        A.    Tenant shall be entitled to a tenant improvement allowance (the "Tenant Improvement Allowance") in the maximum amount of Three Hundred Thousand and No/100 Dollars ($300,000.00) for the costs relating to the initial design and construction of Tenant's improvements which are permanently affixed to the Demised Premises (the "Tenant Improvements"). In no event shall Landlord be obligated to make disbursements for Tenant Improvements in a total amount which exceeds the Tenant Improvement Allowance. Notwithstanding the foregoing, no portion of the Tenant Improvement Allowance may be applied to Tenant Improvements made to any portion of the Demised Premises which is then the subject of a sublease, or Tenant Improvements made to prepare any portion of the Demised Premises for a proposed or anticipated subtenant or assignee, or for material or supplies not located on the Demised Premises. The Tenant Improvement Allowance may, however, be used for (i) the purchase and installation of Tenants onsite telephone system and cabling, (ii) furnishings for the Demised Premises, and (iii) Tenant's relocation costs.

        B.    Landlord shall reimburse Tenant for costs and expenses actually incurred by Tenant for work actually performed, construction in place and/or materials delivered to the Demised Premises in connection with the design and construction of the Tenant Improvements (as described in Paragraph IV.A above) upon receipt (not more frequently than monthly) of (i) a written request from Tenant for reimbursement, (ii) invoices of Tenant's contractor, subcontractors or suppliers, as applicable, with evidence of payment thereof, (iii) conditional lien waivers executed by Tenant's contractor, subcontractors or suppliers, as applicable, for their portion of the work covered by the reimbursement request, (iv) in the case of final payment, unconditional lien waivers and mechanic's lien releases executed by Tenant's contractor, subcontractors or suppliers, as applicable (all such waivers and releases to be in the form prescribed by California Civil Code Section 3262), and (v) all other information and documentation reasonably requested by Landlord. Landlord may withhold the amount of any and all retentions provided for in the original contracts or subcontracts until expiration of the applicable lien periods or Landlord's receipt of unconditional lien waivers and mechanic's lien releases executed by Tenant's contractor, subcontractors or suppliers, as applicable.

        C.    Under no circumstances shall Landlord be required to fund any portion of the Tenant Improvement Allowance when Tenant is in default under this lease.

        D.    In the event any portion of the Tenant Improvement Allowance has not been funded as a reimbursement by that date which is one hundred eighty (180) days after the Commencement Date of this lease, such amount shall no longer be available for the payment of expenses in connection with the Tenant Improvements and shall be forfeited

B-2


EXHIBIT "B-1"

DIAGRAM OF VISITOR PARKING SPACES

[See Attached]

GRAPHIC

B-1-11


EXHIBIT "C"

TENANT CONSTRUCTION RULES AND REGULATIONS

        1.     All demolition, removals and other categories of work that may inconvenience other tenants or disturb building operations must be scheduled and performed before or after normal working hours, and the property manager for the Industrial Complex (the "Property Manager") shall be provided with at least twenty-four (24) hours notice prior to proceeding with such work.

        2.     All structural and floor loading requirements shall be subject to the prior approval of the Industrial Complex's structural engineer. Approval shall be obtained by Tenant and any fees shall be at Tenant's sole expense.

        3.     All mechanical (HVAC, plumbing and sprinkler) and electrical requirements shall be subject to the prior approval of Landlord's mechanical and electrical engineers. When necessary, Property Manager will require engineering and shop drawings, which drawings must be approved by Property Manager before the work is started. Drawings shall be prepared by Tenant and all approvals shall be obtained by Tenant.

        4.     If the shutdown of risers and mains for electrical, HVAC, sprinkler and/or plumbing work is required, such work shall be supervised by a representative of Landlord at Tenant's sole expense at a time approved in advance by Property Manager.

        5.     Tenant's general contractor is responsible to do all of the following:

        6.     If Tenant's general contractor is negligent in any of its responsibilities, Tenant shall be charged for the corrective work done by Landlord's personnel.

        7.     No electrical cords are to be stretched across any walkways or public areas in any manner that would cause any safety hazard.

        8.     Radios may not be played if the sound can be heard in the Common Area or in other tenant suites.

        9.     Electrical rooms may not be used to store any materials, fixtures, etc.

        10.   All sprinkler shut downs, draining or filling shall be scheduled and coordinated with the Landlord's chief engineer or his delegate.

        11.   Bracing, soldering or welding shall be scheduled in advance with Property Manager.

        12.   Dust shall be kept at a minimum to avoid smoke detector activation.

        13.   If requested by Tenant, Property Manager shall provide space in the parking lot at a location to be determined by Landlord for a trash and debris bin during construction of the tenant improvements.

        14.   Damage to any pre-installed fixtures (e.g., water fountains, sinks, lights, commodes, signage, etc.) shall be repaired at Tenant's sole expense.

        15.   Tenant's general contractor shall coordinate the keying schedule, Tenant's key requirements and cylinder installation with Landlord's designated locksmith.

C-1


        16.   Where appropriate, Tenant shall submit to Property Manager a final "as-built' set of drawings showing all items of work in full detail. "As-built" shall be sepias, vellums, mylars or on Autocad.

        17.   Throughout the construction period and upon conclusion of the work, Tenant's general contractor shall cause the work areas and all other affected areas to be clean and free of debris.

C-2


EXHIBIT "D"

RIGHT OF FIRST OPPORTUNITY

        On condition that Tenant has fully complied with all the terms and conditions of this lease and is not then in default under any of the terms and conditions of the lease beyond any applicable notice and cure period, Tenant shall have a one-time right of first opportunity to negotiate a lease amendment to expand the Demised Premises to incorporate the entirety of the adjacent 32,576 square foot space in the Building commonly known as 1314 Chesapeake Terrace (the "Adjacent Space") when Landlord notifies Tenant ("Landlord's Notice") that Landlord is ready to enter into lease negotiations for such space with a third party.

        (a)   When Landlord is about to enter into such lease negotiations, Landlord shall deliver Landlord's Notice of Tenant's opportunity to negotiate, and shall identify in Landlord's Notice the minimum guaranteed rental for the Adjacent Space. The annual minimum guaranteed rental payable by Tenant for the Adjacent Space for the remainder of the term shall be set at the then fair market rental value for the Adjacent Space as determined by Landlord in its sole good faith discretion. The lease term for the Adjacent Space shall be coterminous with the term for the Demised Premises and shall commence upon delivery.

        (b)   Tenant shall have (5) days from receipt of Landlord's Notice in which to notify Landlord in writing of Tenant's decision and/or to negotiate an alternative minimum guaranteed rental amount. If Tenant accepts Landlord's proposal, or if the parties mutually agree within said five (5) day period to an alternative proposal, then Landlord and Tenant shall, within ten (10) days, execute an amendment to this lease incorporating the Adjacent Space into the Demised Premises, setting forth Tenant's minimum guaranteed rental and new proportionate shares, and any other adjustments to the lease negotiated by the parties (or logically necessitated by the addition of the Adjacent Space). If Tenant declines Landlord's proposal (or otherwise does not reach agreement with Landlord regarding terms for the expansion), or if Tenant does not timely respond to Landlord's proposal, Landlord shall then be free to lease the Adjacent Space to any third party or parties on such terms as Landlord may elect in its sole and absolute discretion, without any further liability to Tenant whatsoever with respect to the Adjacent Space.

        (c)   If the Demised Premises are expanded as hereinabove provided, the Adjacent Space shall be delivered to Tenant in its "AS IS" condition (without requirement for any tenant improvement allowance, unless same shall be agreed upon by the parties). Tenant shall have the option of performing tenant improvements in the Adjacent Space subject to all of the terms and provisions of the lease.

        (d)   Notwithstanding anything to the contrary set forth herein, this right of first opportunity shall not be available to any assignee or subtenant of Tenant who becomes the "Tenant" hereunder.

D-1


EXHIBIT "E"

RENEWAL OPTION

        Tenant shall have the right to renew the term of this lease for one (1) four (4)-year term upon prior written notice ("Tenant's Election Notice") to Landlord given not sooner than fifteen (15) months nor later than nine (9) months prior to the term expiration date; provided that at the time Tenant gives such notice to Landlord and for the remainder of the initial term of this lease (i) this lease has not been assigned and Tenant continues to occupy at least ninety percent (90%) of the rentable square footage of the Demised Premises and (ii) Tenant is not in default hereunder. During the renewal term, the provisions of this lease, as it may be amended in writing prior to the date of the commencement of such renewal term, shall continue in effect except that Tenant shall occupy the Demised Premises in its then "AS IS" condition and there shall be no abatement of rent, nor shall there be credit or allowances given to Tenant for improvements to the Demised Premises, and the minimum guaranteed rental will be an amount equal to whatever monthly rental (plus whatever periodic adjustments) Landlord is then quoting to prospective tenants for new leases of comparable space in the Industrial Complex for a comparable term (as confirmed by written statement delivered to Tenant by a representative of Landlord within fifteen (15) days of delivery of Tenant's Election Notice), or if no comparable space exists in the Industrial Complex, then one hundred percent (100%) of the projected prevailing market rate of rent for comparable space with comparable finish-out in comparable industrial buildings in comparable locations, as of the term expiration date (as confirmed by written statement delivered to Tenant by a representative of Landlord within fifteen (15) days of delivery of Tenant's Election Notice); provided, however, that in no event shall the minimum guaranteed rental rate during such renewal term be less than the fully escalated minimum guaranteed rental rate being paid by Tenant during the last full calendar month of the initial lease term. It is understood and agreed that Tenant's submittal of Tenant's Election Notice shall bind Tenant to a four (4)-year extension of this lease.

        If by the date forty-five (45) days following delivery of Tenant's Election Notice, Landlord and Tenant have not agreed in writing as to the amount of the minimum guaranteed rental for the renewal term, the parties shall determine the projected prevailing market rental rate in accordance with the following procedure. Landlord and Tenant shall each appoint one real estate appraiser, and the two so appointed shall select a third. Said real estate appraisers shall each be licensed in the State of California, specializing in the field of commercial real estate in the City of Sunnyvale, California, having no less than ten (10) years experience in such field, unaffiliated with either Landlord or Tenant, and recognized as ethical and reputable within their field. Landlord and Tenant agree to make their appointments promptly within ten (10) days after expiration of the forty-five (45) day negotiation period, or sooner if mutually agreed upon. The two appraisers selected by Landlord and Tenant shall promptly select a third appraiser within thirty (30) days after they both have been appointed, and each appraiser, within forty-five (45) days after the third appraiser is selected, shall submit his or her determination of the then projected prevailing market rate of rent for comparable space with comparable finish-out in comparable industrial buildings in comparable locations. The prevailing market rental rate shall be the mean of the two closest rental determinations.

        Once the minimum guaranteed rental for the renewal term has been established, the parties shall memorialize same in a writing to be prepared by Landlord.

E-1


FIRST AMENDMENT TO INDUSTRIAL COMPLEX LEASE

        This FIRST AMENDMENT TO INDUSTRIAL COMPLEX LEASE ("Amendment") is made as of this 9th day of December, 2004 ("Effective Date"), by and between MP CARIBBEAN, INC., a Delaware corporation ("Landlord"), and ACCURAY INCORPORATED, a California corporation ("Tenant").


RECITALS

        A.    Pursuant to that certain Industrial Complex Lease, dated as of July 9, 2003, entered into by and between Landlord and Tenant ("Lease"), Landlord currently leases to Tenant, and Tenant leases from Landlord, certain Demised Premises (as defined in the Lease and more particularly shown on the plan attached as Exhibit "A" thereto), consisting of approximately forty thousand (40,000) rentable square feet in that certain Building located at 1310 Chesapeake Terrace, Sunnyvale, California. Except to the extent otherwise expressly provided in this Amendment, for purposes hereof, the Demised Premises (i.e., 1310 Chesapeake Terrace) shall be referred to herein as the "Original Premises."

        B.    Tenant desires to (i) expand the Demised Premises by leasing from Landlord certain premises adjoining the Original Premises and (ii) extend the Lease term, and Landlord is willing to permit the same, subject to the terms and conditions of this Amendment.

        C.    Capitalized terms used in this Amendment shall have the meaning ascribed to such terms in the Lease unless otherwise defined in this Amendment.

        NOW, THEREFORE, in consideration of the foregoing recitals and other consideration, the sufficiency of which is hereby acknowledged, Landlord and Tenant hereby amend, modify and supplement the Lease as follows:

        1.    Lease of Additional Premises.    Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord, those certain premises consisting of approximately thirty-two thousand five hundred seventy-six (32,576) rentable square feet located in that certain Building in the Industrial Complex located at 1314 Chesapeake Terrace and more particularly shown on Exhibit "B" attached hereto ("Additional Premises"). Tenant's lease of the Additional Premises shall be subject to all of the terms and conditions of the Lease, except as set forth in this Amendment. Landlord and Tenant hereby agree and acknowledge that, from and after the Additional Premises Delivery Date (as defined in Section 2 below), (A) the term "Demised Premises" as used in the Lease shall collectively refer to (i) the Original Premises and (ii) the Additional Premises and (B) the rentable square footage of the Demised Premises shall be seventy-two thousand five hundred seventy-six (72,576).

        2.    Condition of Additional Premises.    The Additional Premises are being leased to Tenant in "AS IS" condition with Tenant accepting all defects, if any; and, subject to the express provisions of this Section 2 and Section 3 hereof, Landlord makes no warranty of any kind, express or implied, with respect to the Additional Premises (without limitation, Landlord makes no warranty as to the habitability, fitness or suitability of the Demised Premises for a particular purpose nor as to the absence of any toxic or otherwise hazardous substances). This Section 2 is subject to any contrary requirements under applicable law; however, in this regard, Tenant acknowledges that it has been given the opportunity to inspect the Additional Premises and to have qualified experts inspect the Additional Premises prior to the execution of this Amendment. Except for Landlord's obligation to make the Allowance available to Tenant under the Work Letter Agreement attached hereto as Exhibit "C" ("Work Letter Agreement"), Landlord shall have no obligation to alter, repair or improve the Additional Premises for Tenant's use and occupancy thereof. Notwithstanding the foregoing, Landlord shall be responsible for any improvements or alterations that may be required under the Americans With Disabilities Act and regulations promulgated thereunder with respect to the Additional Premises in its existing condition as of the date hereof without regard to any improvements to be made by or behalf of Tenant. Tenant shall be responsible for any improvements or alterations that may be required to be made to the Additional Premises under the Americans With Disabilities Act and regulations promulgated thereunder with respect to any improvements made to the Additional Premises by or on


behalf of Tenant. In addition, to the extent any Hazardous Materials are discovered in the Additional Premises and removal of such Hazardous Materials is required under applicable Environmental Laws, Landlord shall remove such Hazardous Materials from the Premises at its sole cost and expense.

        3.    Delivery of Additional Premises.    Landlord shall deliver the Additional Premises to Tenant on or before December 22, 2004 ("Additional Premises Delivery Date") in order to allow Tenant to make preparations for its occupancy thereof, including for space planning, construction of tenant improvements, fixturization and the installation of Tenant's telephone, communications and computer equipment, cabling, furniture and personal property, all in accordance with the terms and conditions of the Work Letter Agreement. Landlord shall deliver the Additional Premises to Tenant in the condition specified in Section 2 above; provided, however, that the roof, heating, ventilating and air conditioning system, electrical, plumbing and lighting systems in the Additional Premises shall be in good working order on the Additional Premises Delivery Date. Tenant shall not be obligated to pay guaranteed minimum rental or Tenant's Proportionate Share of any real estate charges, insurance expenses or Common Area Charges during the period from the Additional Premises Delivery Date until the Additional Premises Rent Commencement Date (as defined in Section 5). Tenant shall provide Landlord with certificates of insurance showing Tenant maintains the insurance coverage required of Tenant under Sections 15.2 and 15.3 of the Lease with respect to the Additional Premises prior to taking possession of the Additional Premises.

        4.    Extension of Lease Term.    Landlord and Tenant hereby extend the Lease term for the Original Premises for an additional five (5) calendar months until February 29, 2008 and the Lease term for the Additional Premises shall commence January 1, 2005 and expire on February 29, 2008 ("Extended Term").

        5.    Rental.    

        (a)    Additional Premises.    Commencing on January 1, 2005 ("Additional Premises Rent Commencement Date") and continuing on the first day of each calendar month thereafter during the Extended Term, Tenant shall pay guaranteed minimum rental for the Additional Premises as follows ("Additional Premises Guaranteed Minimum Rental"):

Extended Term
Lease Month
   Monthly Guaranteed
Minimum Rental
   Monthly
Rental Rates
1-2   $ 0   $ O/RSF
3-14   $ 21,774.40   $ .65/RSF
15-26   $ 22,803.20   $ .70/RSF
27-38   $ 24,432   $ .75/RSF

        The Additional Premises Guaranteed Minimum Rental shall be paid by Tenant during the Extended Term at the same time and in the same manner as set forth in Article 4 of the Lease; provided however, Tenant shall pay the Additional Premises Guaranteed Monthly Rental for the third (3rd) month of the Extended Term upon execution of this Amendment by Tenant.

        (b)    Original Premises.    During the Extended Term, Tenant shall continue to pay minimum guaranteed rental for the Original Premises in the amount set forth in the Lease. During the last five (5) calendar months of the Extended Term, Tenant shall pay minimum guaranteed rental for the Original Premises in the amount of Thirty Thousand Dollars ($30,000) per month.

        6.    Tenant's Proportionate Share.    Commencing with the Additional Premises Rent Commencement Date, Tenant pay the real estate charges, insurance expenses and Common Area Charges applicable to the Additional Premises in accordance with Articles 6 and 7 of the Lease. From

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and after the Additional Premises Rent Commencement Date, Tenant's Proportionate Share with respect to the Demised Premises shall be as follows:

Tenant's Prorata Share of Building Common Area Costs   44.89 %
Tenant's Prorata Share of Parcel Common Area Costs   22.09 %
Tenant's Prorata Share of Industrial Complex Common Area Costs   12.85 %

        7.    Additional Security Deposit.    Concurrently with the execution of this Amendment, Tenant shall deposit with Landlord cash in the amount of Twenty-four Thousand Four Hundred Thirty-two Dollars ($24,432) ("Additional Security Deposit"), which Additional Security Deposit shall be held by Landlord as part of the Security Deposit in accordance with Article 8 of the Lease. Notwithstanding anything contained in Article 8 of the Lease, the Additional Security Deposit shall be held by Landlord separate and apart from any letter of credit Tenant has delivered to Landlord as part of the original Security Deposit.

        8.    Parking.    From and after the Additional Premises Rent Commencement Date, Tenant shall be entitled to use a total of two hundred sixty-five (265) unreserved parking spaces in the parking areas of the Industrial Complex in connection with the Demised Premises in accordance with Article 7 of the Lease. Tenant shall be authorized to identify an additional twelve (12) "visitor parking" spaces, including four (4) "Accuray Visitor Parking" spaces in accordance with Exhibit "B", Article III, Section F of the Lease, and to be shown in a revised Exhibit "B-1" which the parties shall approve in writing and substitute for the existing Exhibit "B-1" attached to this Lease.

        9.    Brokers.    Each party represents and warrants to the other party that it has not had dealings in any manner with any real estate broker, finder or other person with respect to the negotiation and execution of this Amendment except Wayne Mascia Associates, who has acted as Tenant's broker ("Tenant's Broker"), and South Bay Development Corporation, who has acted as Landlord's broker ("Landlord's Broker"). Except as to commissions and fees to be paid as provided hereunder, Tenant shall indemnify, defend and hold harmless Landlord from all damage, loss, liability and expense (including attorneys' fees and related costs) arising out of or resulting from any claims for commissions or fees that may or have been asserted against Landlord by any broker, finder or other person with whom Tenant has or purportedly has dealt with in connection with the negotiation and execution of this Amendment. Landlord shall pay broker leasing commissions to Tenant's Broker and Landlord's Broker pursuant to a separate agreement. Landlord and Tenant agree that Landlord shall not be obligated to pay any broker leasing commissions, consulting fees, finder fees or any other fees or commissions arising out of or relating to any extension of the Extended Term or to any further expansion or relocation of the Demised Premises at any time. All indemnities of Tenant set forth in this Amendment shall survive the expiration or earlier termination of the Lease.

        10.    Right of First Opportunity.    The Right of First Opportunity set forth in Exhibit "D" to the Lease is hereby deleted.

        11.    Option to Renew.    The Renewal Option set forth in Exhibit "E" to the Lease is hereby deleted and the following inserted in its place:

        (a)    Grant of Option.    Tenant shall have the right to renew the term of this Lease upon the expiration of the Extended Term as to the entire Demised Premises (i.e., the Original Premises and Additional Premises) for one three-year term ("Renewal Term") upon prior written notice ("Tenant's Election Notice") to Landlord given not sooner than two hundred seventy (270) days nor later than one hundred eighty (180) days prior to the expiration of the Extended Term; provided that at the time Tenant gives such notice to Landlord and for the remainder of the Extended Term, (i) this Lease has not been assigned and Tenant continues to occupy ninety percent (90%) of the rentable square footage of the Demised Premises and (ii) Tenant is not in default under the Lease. During the Renewal Term, the provisions of this Lease, as it may be further amended in writing prior to the date of the

3


commencement of the Renewal Term, shall continue in effect except that Tenant shall occupy the Demised Premises in its then "AS IS" condition and there shall be no abatement of rent, nor shall there be credit or allowances given to Tenant for improvements to the Demised Premises, and the minimum guaranteed rental will be an amount equal to whatever monthly rental (plus whatever periodic adjustments) Landlord is then quoting to prospective tenants for new leases of comparable space in the Industrial Complex for a comparable term (as confirmed by written statement delivered to Tenant by a representative of Landlord within fifteen (15) days of delivery of Tenant's Election Notice ["Landlord's Confirmation Statement"]), or if no comparable space exists in the Industrial Complex, then one hundred percent (100%) of the projected prevailing market rate of rent for comparable space with comparable finish-out in comparable industrial buildings in comparable locations, as of the Extended Term expiration date (as confirmed by Landlord's Confirmation Statement delivered to Tenant by a representative of Landlord within fifteen (15) days of delivery of Tenant's Election Notice); provided, however, in no event shall the minimum guaranteed rental rate during such renewal term be less than the fully escalated minimum guaranteed rental rate being paid by Tenant with respect to the Original Premises during the last full calendar month of the Extended Term. Within fifteen (15) days after Tenant's receipt of Landlord's Confirmation Statement, Tenant may deliver to Landlord a written revocation of its exercise of the renewal right. In such event, Tenant's Election Notice shall be null and void and the Lease shall expire upon the expiration of the Extended Term. Tenant's failure to deliver such written revocation within said fifteen (15) day period shall be deemed Tenant's waiver of its right to revoke its exercise of the renewal right hereunder.

        12.    ERISA Certificate.    Concurrently with Tenant's execution and delivery of this Amendment, Tenant shall execute and deliver to Landlord an ERISA Certificate in the form attached hereto as Exhibit "C."

        13.    Corporate Authority.    Concurrently with the execution and delivery of this Amendment, Tenant shall provide Landlord with a certificate of incumbency or other evidence satisfactory to Landlord that the individuals executing this Amendment on behalf of Tenant are authorized to execute this Amendment and bind Accuray, Incorporated.

        14.    Bonus Rent.    Notwithstanding anything contained in Section 19.4 of the Lease, in the event the rental due and payable by a sublessee (or a combination of the rental payable under such sublease plus any bonus or other consideration therefore or incident thereto) exceeds the rental payable under this Lease, or the rental payable with respect to the portion of the Demised Premises subject to the sublease, or if with respect to a permitted assignment, permitted license or other transfer by Tenant permitted by Landlord, the consideration payable to Tenant by the assignee, licensee or other transferee exceeds the rental payable under the Lease, or the rental payable with respect to the portion of the Demises Premises subject to such assignment, license or other transfer, then Tenant shall be bound and obligated to pay Landlord fifty percent (50%) of all such excess rental and other excess consideration within ten (10) days following receipt thereof from such sublessee, assignee, licensee or other transferee, as the case may be, less (a) reasonable brokerage fees paid by Tenant in connection with the transaction, and (b) reasonable legal fees paid by Tenant in connection with the transaction.

        15.    Effect of Amendment.    Except as modified herein, the terms and provisions of the Lease shall remain unmodified and continue in full force and effect. In the event of any conflict between the terms and provisions of this Amendment and the terms and provisions of the Lease, the terms and provisions of this Amendment shall prevail.

4


        IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first set forth above.

    TENANT:

 
 
ACCURAY, INCORPORATED,
a California corporation

 
 
By:
/s/  CHRIS A. RAANES      

 
 
Its:
COO

 
 
Printed Name:
Chris A. Raanes

 
 
By:
/s/  ROBERT E. MCNAMARA      

 
 
Its:
CFO

 
 
Printed Name:
Robert E. McNamara


 

 

LANDLORD:

 
 
MP CARIBBEAN INC.,
a Delaware corporation

 
 
By:
/s/  MICHAEL J. KRIER      

 
 
Its:
Vice President
Michael J. Krier

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FLOOR PLAN

6

FLOOR PLAN

7

MAP

8

EXHIBIT "C"
WORK LETTER AGREEMENT

ARTICLE I.    GENERAL

        Tenant hereby accepts the Additional Premises "as is" and "ready for occupancy. Subject to Article IV below, Landlord shall have no obligation to perform any tenant improvements in the Additional Premises or to fund any such improvements. Prior to any modification of the Additional Premises by or on behalf of Tenant, Tenant shall adhere to the following as well as the provisions contained in Article 11 of the lease:

ARTICLE II.    PRE-CONSTRUCTION OBLIGATIONS

A.
Complete plans, diagrams, schedules and other data relating to work to be performed by Tenant in the Additional Premises must be furnished by Tenant to Landlord in form sufficient to obtain a building permit. Without limiting the generality of the immediately preceding sentence, Tenant's submissions must include a floor plan, a reflected ceiling plan, a plumbing plan, elevations of walls and a fixture plan. All drawings shall be at scale of either 1/8' or 1/4".

B.
Tenant shall secure Landlord's written approval of all designs, plans, specifications, materials, contractors and contracts for work to be performed by Tenant before beginning the work (including following whatever "work letter" instructions, if any, which Landlord may deliver to Tenant in connection with the work), and shall secure all necessary licenses and permits to be used in performing the work. Tenant's finished work shall be subject to Landlord's approval and acceptance.

C.
The insurance requirements under Article 15 of the Lease and the indemnity requirements under Article 16 of the Lease shall expressly apply during the construction contemplated in this exhibit, and Tenant shall provide evidence of appropriate insurance coverage prior to beginning any of Tenant's work. Tenant shall provide Landlord with evidence of insurance covering both Tenant and Tenant's contractor against damage to their personal property, as well as against third-party liability and workers' compensation claims arising out of all construction and associated activities. All policies of insurance shall be subject to Landlord's prior approval and shall be endorsed showing Landlord as an additional named insured (or if permitted by Landlord, may provide a waiver of subrogation against Landlord).

ARTICLE III.    DESCRIPTION OF TENANT'S WORK

A.
Signs: Tenant shall pay for all signs and the installation thereof, including the electrical hook-up, subject to the provisions of Section 13.1 of this lease.

B.
Utilities: All meters or other measuring devices in connection with utility services shall be provided by Tenant. All service deposits shall be made by Tenant at Tenant's expense.

C.
All work undertaken by Tenant shall be at Tenant's expense and shall not damage the Building or any part thereof. Any roof penetration shall be performed by Landlord's roofer or, at Landlord's option, by a bonded roofer approved in advance by Landlord. The work shall be begun only after Landlord has given consent, which consent shall in part be conditioned upon Tenant's plans, to include materials acceptable to Landlord, in order to prevent injury to the roof and to spread the weight of the equipment being installed. Tenant shall also be responsible for obtaining and paying for professional inspections of any structural work (including, without limitation, any roof work or concrete work).

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D.
All work performed by or at the behest of Tenant shall be in compliance with all applicable Regulations, the terms and conditions set forth in Article 11 of the Lease and the Tenant Construction Rules and Regulations attached as Exhibit "C" to the Lease.

E.
Any code-required upgrades to the Additional Premises required as a result of Tenant's work performed under the terms of this Exhibit "C" or under the terms of Article 11 of the Lease shall be at Tenant's sole cost and expense, and shall not be deemed warranted by Landlord.

ARTICLE IV.    TENANT IMPROVEMENT ALLOWANCE

A.
Tenant shall be entitled to a tenant improvement allowance (the "Tenant Improvement Allowance") in the maximum amount of One Hundred Sixty-two Thousand Eight Hundred Eighty and No/100 Dollars ($162,880.00) for the costs relating to the initial design and construction of Tenant's improvements which are permanently affixed to the Additional Premises (the "Tenant Improvements"). In no event shall Landlord be obligated to make disbursements for Tenant Improvements in a total amount which exceeds the Tenant Improvement Allowance. Notwithstanding the foregoing, no portion of the Tenant Improvement Allowance may be applied to Tenant Improvements made to any portion of the Additional Premises which is then the subject of a sublease, or Tenant Improvements made to prepare any portion of the Additional Premises for a proposed or anticipated subtenant or assignee, or for material or supplies not located on the Additional Premises.

B.
Landlord shall reimburse Tenant for costs and expenses actually incurred by Tenant for work actually performed, construction in place and/or materials delivered to the Additional Premises in connection with the design and construction of the Tenant Improvements (as described in Paragraph IV.A above) upon receipt (not more frequently than monthly) of (i) a written request from Tenant for reimbursement, (ii) invoices of Tenant's contractor, subcontractors or suppliers, as applicable, with evidence of payment thereof, (iii) conditional lien waivers executed by Tenant's contractor, subcontractors or suppliers, as applicable, for their portion of the work covered by the reimbursement request, (iv) in the case of final payment, unconditional lien waivers and mechanic's lien releases executed by Tenant's contractor, subcontractors or suppliers, as applicable (all such waivers and releases to be in the forms prescribed by California Civil Code Section 3262), and (v) all other information and documentation reasonably requested by Landlord. Landlord may withhold the amount of any and all retentions provided for in the original contracts or subcontracts until expiration of the applicable lien periods or Landlord's receipt of unconditional lien waivers and mechanic's lien releases executed by Tenant's contractor, subcontractors or suppliers, as applicable.

C.
Under no circumstances shall Landlord be required to fund any portion of the Tenant Improvement Allowance when Tenant is in default under the Lease.

D.
In the event any portion of the Tenant Improvement Allowance has not been funded as a reimbursement by that date which is one hundred eighty (180) days after the Additional Premises Deliver Date, such amount shall no longer be available for the payment of expenses in connection with the Tenant Improvements and shall be forfeited.

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EXHIBIT "D"

ERISA CERTIFICATE

        THIS ERISA CERTIFICATE is made as of December 9, 2004, by ACCURAY, INCORPORATED, a California corporation, having offices at 1310 Chesapeake Terrace, Sunnyvale, California ("Lessee"), in favor of MP Caribbean, Inc. a Delaware corporation ("Lessor") and the General Motors Hourly-Rate Employees Pension Plan, the General Motors Retirement Program for Salaried Employees, the Employees Retirement Plan for GMAC Mortgage Group, the Saturn Individual Retirement Plan for Represented Team Members, the Saturn Personal Choices Retirement Plan for Non-Represented Team Members, the Delphi Hourly-Rate Employees Pension Plan, and the Delphi Retirement Program for Salaried Employees, its shareholders/interestholders, c/o SSR Realty Advisors, Inc., One California Street, Suite 1400, San Francisco, CA 94111.


WITNESSETH:

        WHEREAS, Lessor and Lessee anticipate entering into a First Amendment to Industrial Complex Lease (the "Lease Agreement"), pursuant to which Lessor shall lease to Lessee, and Lessee shall lease from Lessor, certain real property, known as and located at 1314 Chesapeake Terrace, Sunnyvale, California.

        WHEREAS, Lessor is in need of certain information regarding Lessee so that it may proceed with the Lease Agreement.

        NOW, THEREFORE, Lessee hereby certifies, represents, warrants and covenants to Lessor that as of the date hereof:

        Representation 1.    Type of Lessee (check applicable boxes)    

        ý    Lessee is not an "employee benefit plan" ("Plan") as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), which is subject to Title 1 of ERISA.

        ý    Lessee is not a "governmental plan" within the meaning of Section 3(32) of ERISA.

        Representation 2.    Complete if Lessee is not a Plan and Has Shareholders or Interestholders (check applicable boxes)    

        One or more of the following circumstances also is true:

        o     Equity interests in Lessee are publicly offered securities within the meaning of 29 C.F.R. Section 2510.3-101(b)(2);

        ý    Less than 25 percent of all equity interests in Lessee are held by "benefit plan investors," which are defined as: (i) any employee benefit plan, whether or not subject to Title 1 of ERISA; (ii) any plan described in Section 4975(e)(1) of the Internal Revenue Code of 1986, as amended; and (iii) any entity whose underlying assets include plan assets by reason of a plan's investment in the entity; or

        ý    Lessee is a corporation that qualifies as an "operating company," a "venture capital operating company," or a "real estate operating company" within the meaning of 29 C.F.R. Section 2510.3-101(c), (d) and (e) (each, an "Operating Company").

        Representation 3.    Lessee's relation to Lessor and Lessor's Shareholders/Interestholders (check applicable boxes.)    

        Lessee is not a party in interest as defined in section 3(14) of ERISA with respect to Lessor or its shareholders or interestholders, the General Motors Hourly-Rate Employees Pension Plan, the General Motors Retirement Program for Salaried Employees, the Employees Retirement Plan for GMAC

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Mortgage Group, the Saturn Individual Retirement Plan for Represented Team Members, the Saturn Personal Choices Retirement Plan for Non-Represented Team Members, the Delphi Hourly-Rate Employees Pension Plan, and the Delphi Retirement Program for Salaried Employees, because Lessee is not:

        ý    a fiduciary (including, but not limited to, any administrator, officer, trustee or custodian), counsel, or employee of Lessor or its shareholders or interestholders ("Fiduciary");

        ý    a person providing services to Lessor or its shareholders or interestholders ("Service Provider");

        ý    an employer any of whose employees are provided employment benefits by Lessor or its shareholders or interestholders ("Employer");

        ý    an employee organization any of whose members are provided employment benefits coverage by Lessor or its shareholders or interestholders ("Employee Organization");

        ý    an owner, direct or indirect, of 50 percent or more of (i) the combined voting power of all classes of stock entitled to vote or the total value of shares of all classes of stock of a corporation, (ii) the capital interest or the profits interest of a partnership, or (iii) the beneficial interest of a trust or unincorporated enterprise, which is an Employer or an Employee Organization ("Owner");

        ý    a spouse, ancestor, lineal descendant, or spouse of a lineal descendant of a Fiduciary, Service Provider, Employer, or an Owner;

        ý    a corporation, partnership, or trust or estate of which (or in which) 50 percent or more of (i) the combined voting power of all classes of stock entitled to vote or the total value of shares of all classes of stock of such corporation, (ii) the capital interest or profits interest of such partnership, or (iii) the beneficial interest of such trust or estate is owned directly or indirectly, or held by a Fiduciary, Service Provider, Employer, Employee Organization, or Owner ("Corporate Owner");

        ý    an employee, officer, director (or an individual having powers or responsibilities similar to those of officers or directors), or a 10 percent or more shareholder directly or indirectly, of a Service Provider, Employer, Employee Organization, Owner, or a Corporate Owner; or

        ý    a 10 percent or more (directly or indirectly in capital or profits) partner or joint venturer of a Service Provider, Employer, Employee Organization, Owner, or a Corporate Owner.

        Representation 4.    Indemnity, Guaranty    

        Lessee shall indemnify Lessor and defend and hold Lessor harmless from and against all loss, cost, damage and expense (including, without limitation, attorneys' fees and costs incurred in the investigation, defense and settlement of claims and losses incurred in correcting any prohibited transaction, and in obtaining any individual prohibited transaction exemption under ERISA that may be required, in Lessor's sole discretion) that Lessor may incur, directly or indirectly, as a result of the Lessee's representation contained in this certificate.

12


        Representation 5.    Survival    

        Lessee represents that the certifications, representations, warranties and covenants contained herein shall remain true and correct throughout the term of the Lease Agreement.

    ACCURAY, INCORPORATED,
a California corporation

 
 
BY:
/s/  [SIGNATURE ILLEGIBLE]      

 
 
NAME:
Signature Illegible

 
 
ITS:
Vice President and Controller

13


SECOND AMENDMENT TO INDUSTRIAL COMPLEX LEASE

        THIS SECOND AMENDMENT TO INDUSTRIAL COMPLEX LEASE (this "Amendment") is made and entered into as of September 25, 2006, by and between BRCP CARIBBEAN PORTFOLIO, LLC, a Delaware limited liability company("Landlord"), and ACCURAY INCORPORATED, a California corporation ("Tenant").


RECITALS

A.
Landlord (as successor in interest to MP Caribbean, Inc., a Delaware corporation) and Tenant are parties to that certain Industrial Complex Lease dated as of July 9, 2003 (the "Original Lease"), which Original Lease has been previously amended by that First Amendment to Industrial Complex Lease dated as of December 9, 2004 (the "First Amendment") (collectively, the "Lease"). Pursuant to the Lease, Landlord has leased to Tenant space currently containing approximately 72,576 rentable square feet (the "Original Premises") described as approximately 40,000 rentable square feet in that certain building located at 1310 Chesapeake Terrace, Sunnyvale, California and approximately 32,576 rentable square feet in that certain building located at 1314 Chesapeake Terrace, Sunnyvale, California (collectively, the "Buildings"), which are a part of the approximately 253,540 rentable square foot industrial complex commonly referred to as Caribbean Corporate Center (the "Industrial Complex").

B.
Tenant has requested that additional space containing approximately 52,992 rentable square feet of the building located at 1315 Chesapeake Terrace, Sunnyvale, California (the "Expansion Building") and shown on Exhibit A hereto (the "Expansion Space") which is a part (of the Industrial Complex, be added to the Original Premises and that the Lease be appropriately amended and Landlord is willing to do the same on the following terms and conditions.

        NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant agree as follows:

        1.    Expansion and Effective Date.    Effective as of the Expansion Effective Date (defined below), the Original Premises is increased from approximately 72,576 rentable square feet of the Industrial Complex to approximately 125,568 rentable square feet of the Industrial Complex by the addition of the Expansion Space, and from and after the Expansion Effective Date, the Original Premises and the Expansion Space, collectively, shall be deemed the Demised Premises, as defined in the Lease and as used herein. The term for the Expansion Space (the "Expansion Space Term") shall commence on the Expansion Effective Date and end upon the expiration of the forty-second (42nd) full calendar month of the Expansion Space Term (i.e., May 31, 2010). For clarity, the parties hereto intend the following: (i) subject to the terms and conditions of the Lease, as amended hereby, the Expansion Space Term shall end on May 31, 2010, and (ii) the Extended Term (as defined in the First Amendment) for the Original Premises shall end, subject to the terms and conditions of the Lease, as amended hereby on February 29, 2008, unless Tenant validly elects to exercise its Renewal Option set forth in Section 11 of the First Amendment. Nothing set forth herein shall modify the Extended Term (as defined in the First Amendment) of the Original Premises. The Expansion Space is subject to all the terms and conditions of the Lease except as expressly modified herein and except that Tenant shall not be entitled to receive any allowances, abatements or other financial concessions granted with respect to the Original Premises unless such concessions are expressly provided for herein with respect to the Expansion Space.

        (a)   The "Expansion Effective Date" shall be November 15, 2006. Landlord shall use good faith, commercially reasonable efforts to substantially complete the Expansion Space Improvements on or before the Expansion Effective Date; provided, however, that Tenant hereby acknowledges and agrees that any delays in such substantial completion of the Expansion Space Improvements shall not subject

1


Landlord to any liability therefor and the Expansion Effective Date shall not be delayed or extended as a result thereof. Landlord represents that as of the date of this Amendment, the Expansion Space is currently vacant and no other tenant is in possession thereof.

        2.    Minimum Guaranteed Rental.    In addition to Tenant's obligation to pay minimum guaranteed rental for the Original Premises, Tenant shall pay Landlord minimum guaranteed rental for the Expansion Space as follows:

Period of Term
   Annual Rate
Per Square Foot
   Annual Minimum
Guaranteed Rental
   Monthly Minimum
Guaranteed Rental
Month 1 - Month 6   $ 6.90   $ 365,644.80   $ 30,470.40
Month 7 - Month 12   $ 13.80   $ 731,289.60   $ 60,940.80
Month 13 - Month 24   $ 14.40   $ 763,084.80   $ 63,590.40
Month 25 - Month 36   $ 15.00   $ 794,880.00   $ 66,240.00
Month 37 - Month 42   $ 15.60   $ 826,675.20   $ 68,889.60

        All such minimum guaranteed rental shall be payable by Tenant in accordance with the terms of the Lease, as amended hereby.

        3.    Tenant's Proportionate Share.    During the Expansion Space Term, Tenant's Proportionate Share for the Expansion Building is 100%. Tenant's Proportionate Share for the Parcel Common Area Costs (consisting of the Common Area Charges for the real property tax parcel containing 1310 and 1314 Chesapeake Terrace, Sunnyvale, California) for the Original Premises is 49.22% (i.e., 27.13% as specified in the Original Lease, plus 22.09% as specified in the First Amendment). Tenant's Proportionate Share for the Parcel Common Area Costs (consisting of the Common Area Charges for the real property tax parcel containing 1315 Chesapeake Terrace, Sunnyvale, California) for the Expansion Space is 50.0%. Tenant's Proportionate Share for the Industrial Complex Common Area Costs is increased during the Expansion Space Term from 28.63% (i.e., 15.78% as specified in the Original Lease plus 12.85% specified in the First Amendment) to 49.53%. Tenant's Proportionate Share shall be appropriately decreased following the first to occur of the following: (i) the expiration of the Extended Term (as defined in the First Amendment) if the Demised Premises is reduced (i.e., Tenant shall not have validly exercised its Renewal Option set forth in Section 11 of the First Amendment), and (ii) the expiration of the Expansion Space Term (i.e., Tenant shall have validly exercised its Renewal Option with respect to the Original Premises set forth in Section 11 of the First Amendment).

        4.    Taxes, Other Real Estate Charges, Insurance Expenses and Common Area Charges.    For the period commencing with the Expansion Effective Date and ending on the termination of the Expansion Space Term, Tenant shall pay for Tenant's Proportionate Share of Taxes, Other Real Estate Charges, Insurance Expenses and Common Area Charges applicable to the Expansion Space in accordance with the terms of the Lease. Tenant's Proportionate Share of Taxes, Other Real Estate Charges and Common Area Charges for the Expansion Space are estimated to be $15,897.60 per month.

        Notwithstanding anything to the contrary, so long as Tenant is not in default under the Lease, as amended hereby, Tenant shall be entitled to a fifty percent (50%) abatement of Tenant's Proportionate Share of Taxes. Other Real Estate Charges, Insurance Expenses and Common Area Charges applicable to the Expansion Space, as described in this Amendment for six (6) full calendar months of the Expansion Space Term, commencing with the first full calendar month of the Expansion Space Term (collectively, the "Abated Additional Rent"). If Tenant defaults under the Lease at any time during the Expansion Space Term and fails to cure such default within any applicable cure period under the Lease, then all Abated Additional Rent shall immediately become due and payable. Only Tenant's Proportionate Share of Taxes, Other Real Estate Charges, Insurance Expenses and Common Area Charges shall be abated pursuant to this Section, as more particularly described herein, and all other

2


costs and charges specified in the Lease, as amended hereby, shall remain as due and payable pursuant to the provisions of the Lease.

        5.    Additional Security Deposit.    Upon Tenant's execution hereof, Tenant shall pay Landlord the sum of $68,889.60 which is added to and becomes part of the Security Deposit, if any, held by Landlord as provided under Section 8 of the Original Lease as security for payment of rent and the performance of the other terms and conditions of the Lease by Tenant. Accordingly, simultaneous with the execution hereof, the Security Deposit is increased from $324,432.00 to $393,321.16.

        6.    Expansion Space Improvements.    Except as expressly provided for in this Amendment, including, without limitation, Section 9 below, Tenant has inspected the Expansion Space and agrees to accept the same "as is" without any agreements, representations, understandings or obligations on the part of Landlord to perform any alterations, repairs or improvements. Landlord shall perform improvements to the Expansion Space in accordance with the terms and conditions set forth in Exhibit B hereto.

        7.    Early Access to Expansion Space.    During any period that Tenant shall be permitted to enter the Expansion Space prior to the date Landlord substantially completes the Expansion Space Improvements and tenders possession of the Expansion Space to Tenant for Tenant's permitted use, (e.g., to perform Exhibit Work, install cable, or perform alterations or improvements, if any), Tenant shall comply with all terms and provisions of the Lease, except, with respect to any period of such early access prior to the Expansion Effective Date, Tenant shall not be required to comply with those provisions requiring payment of minimum guaranteed rental or Taxes, Other Real Estate Charges, Insurance Expenses and Common Area Charges as to the Expansion Space. If Tenant takes possession of the Expansion Space prior to the date Landlord substantially completes the Expansion Space Improvements and tenders possession of the Expansion Space to Tenant for any reason whatsoever (other than the performance of the Exhibit Work or other work in the Expansion Space described below in this Section 7), such possession shall be subject to all the terms and conditions of the Lease and this Amendment, and Tenant shall pay minimum guaranteed rental and taxes, Other Real Estate Charges, Insurance Expenses and Common Area Charges as applicable to the Expansion Space to Landlord on a per diem basis for each day of occupancy prior to the Expansion Effective Date. Subject to the terms of the Lease, as amended hereby, Landlord grants Tenant the right to enter the Expansion Space, following full execution and delivery of this Amendment, the additional Security Deposit and certificates of insurance for the Expansion Space to Landlord, solely for the purpose of construction of Tenant's trade show exhibits (the "Exhibit Work"), provided that such Exhibit Work shall not be located near or otherwise occur proximate to Landlord's construction of the Expansion Space Improvements (as determined by Landlord). In the event that Landlord reasonably determines that Tenant's performance of the Exhibit Work or other work in the Expansion Space set forth below in this Section 7 is compromising Landlord's ability to timely and reasonably perform the Expansion Space Improvements or that Tenant is causing a dangerous situation for Landlord, Tenant or their respective contractors or employees, Landlord, in its sole discretion, may (i) require that Tenant immediately vacate the Expansion Space and remove any personal property of Tenant contained therein, in which event Tenant shall so vacate the Expansion Space and remove such property, or (ii) require that Tenant relocate (including Tenant's personal property) to another location in the Expansion Space (determined by Landlord), in which event Tenant shall so relocate to such location. In addition to the foregoing, during such period of early access, Tenant may, (i) following installation of the ceiling grid in the Expansion Space, install telecommunications and data cabling in the Expansion Space, and (ii) following Landlord's installation of the carpeting in the Expansion Space, install equipment, furnishings and other personalty, all at Tenant's sole risk. Tenant shall be liable for any utilities or special services provided to Tenant during such period. Landlord may withdraw such permission to enter the Expansion Space prior to the substantial completion of the Expansion Space Improvements and delivery of the Expansion Space to Tenant at any time that Landlord reasonably determines that

3


such entry by Tenant is causing a dangerous situation for Landlord, Tenant or their respective contractors or employees, or if Landlord reasonably determines that such entry by Tenant is hampering or otherwise preventing Landlord from proceeding with the completion of the Expansion Space Improvements described in Exhibit B attached hereto at the earliest possible date. In any event, during any period of such early access, Tenant shall promptly vacate the Expansion Space (and remove any personal property therefrom) upon notice from Landlord that Landlord is prepared to begin installation of carpeting in the Expansion Space (pursuant to the Plans).

        8.    Access.    Tenant shall have access to the Expansion Space for Tenant and its employees, agents, representatives, customers, visitors, invitees, licensees and contractors 24 hours per day/7 days per week, subject to the terms of the Lease, as amended hereby, and such security or monitoring systems as Landlord may reasonably impose, including, without limitation, sign-in procedures and/or presentation of identification cards.

        9.    Base Building Systems.    However, notwithstanding the foregoing, Landlord agrees that the base Building electrical, heating, ventilation and air conditioning, roof and plumbing systems located in the Expansion Space shall be in good working order as of the date Landlord delivers possession of the Expansion Space to Tenant. Except to the extent caused by the acts or omissions of Tenant or any of Tenant's employees, agents, representatives, customers, visitors, invitees, licensees, contractors, assignees or subtenants or by any alterations or improvements performed by or on behalf of tenant, if such systems are not in good working order as of the date possession of the Expansion Space is delivered to Tenant and Tenant provides Landlord with notice of the same within sixty (60) days following the date Landlord delivers possession of the Expansion Space to Tenant for Tenant's permitted use (excluding the early access period set forth in Section 7 above), Landlord shall be responsible for repairing or restoring the same; provided, however, that the sixty (60) day period described above shall be increased to one hundred twenty (120) days for the roof only. In the event that any such system is not in good working order and Tenant so notifies Landlord of the same during the stated time periods set forth above, Landlord shall in good faith make commercially reasonable efforts to bring such system into good working order within a commercially reasonable time.

        10.    Parking.    In addition to the parking rights Tenant has under the Lease, Tenant shall have the right to the nonexclusive use of Tenant's Proportionate Share of parking spaces (3.5 unreserved parking spaces per 1,000 rentable square feet of the Expansion Space), which as of the date of this Amendment shall be one hundred eighty-five (185) unreserved parking spaces (the "Expansion Space Parking Spaces"), for the parking of such number of motor vehicles in the parking facilities of the Industrial Complex designated by Landlord; such rights are not transferable without Landlord's approval. The use of such parking facilities for the Original Premises and/or the Expansion Space shall be subject to such rules and regulations as are adopted by Landlord from time to time for the use of such facilities. Tenant acknowledges and agrees that, to the fullest extent permitted by law, Landlord shall not be responsible for any loss or damage to Tenant or Tenant's property (including, without limitation, any loss or damage to any Tenant or of Tenant's trustees, members, principals, beneficiaries, partners, officers, directors, employees, mortgagee(s) and agents, and the respective principals and members of any such agents (collectively, the "Tenant Parties") automobile or the contents thereof due to theft, vandalism or accident) arising from or related to use of any of the parking facilities, whether or not such loss or damage results from Landlord's or any Landlord Parties' (as defined in Section 12(d) below) negligence (provided that the foregoing limitation on Landlord's liability shall not apply to Landlord's gross negligence or willful misconduct). Of the Expansion Space Parking Spaces, Tenant shall be authorized to identify fifteen (15) "visitor parking" spaces, including ten (10) "Accuray Visitor Parking" spaces in accordance with Article III, Section F of Exhibit B of the Original Lease.

4


        11.    Other Provisions.    Landlord and Tenant agree that, effective as of the date of this Amendment (unless different effective dates are specifically referenced in this Section), the Lease shall be amended in the following additional respects:

5

        12.    Miscellaneous.    

        (a)   This Amendment, including Exhibit A and Exhibit B hereto, sets forth the entire agreement between the parties with respect to the matters set forth herein. There have been no additional oral or written representations or agreements. Unless specifically set forth in this Amendment, under no circumstances shall Tenant be entitled to any rent abatement, improvement allowance, leasehold

6

improvements, or other work to the Premises, or any similar economic incentives that may have been provided Tenant in connection with entering into the Lease.

        (b)   Except as herein modified or amended, the provisions, conditions and terms of the Lease shall remain unchanged and in full force and effect. In the case of any inconsistency between the provisions of the Lease and this Amendment, the provisions of this Amendment shall govern and control. The capitalized terms used in this Amendment shall have the same definitions as set forth in the Lease to the extent that such capitalized terms are defined therein and not redefined in this Amendment.

        (c)   Submission of this Amendment by Landlord is not an offer to enter into this Amendment but rather is a solicitation for such an offer by Tenant. Landlord shall not be bound by this Amendment until Landlord has executed and delivered the same to Tenant.

        (d)   Tenant hereby represents to Landlord that Tenant has dealt with no broker in connection with this Amendment other than Wayne Mascia Associates ("Tenant's Broker"). Tenant agrees to indemnify and hold Landlord, its trustees, members, principals, beneficiaries, partners, officers, directors, employees, mortgagee(s) and agents, and the respective principals and members of any such agents (collectively, the "Landlord Parties") harmless from all claims of any brokers, except Tenant's Broker, claiming to have represented Tenant in connection with this Amendment. Landlord hereby represents to Tenant that Landlord has dealt with no broker in connection with this Amendment other than Colliers International ("Landlord's Broker"). Landlord agrees to indemnify and hold Tenant harmless from all claims of any brokers, except Landlord's Broker, claiming to have represented Landlord in connection with this Amendment. Landlord shall pay broker leasing commissions to Tenant's Broker and Landlord's Broker pursuant to a separate agreement and the parties hereto acknowledge and agree that this provision shall supersede any provision to the contrary in the Lease.

        (e)   Each signatory of this Amendment represents hereby that he or she has the authority to execute and deliver the same on behalf of the party hereto for which such signatory is acting. Tenant hereby represents and warrants that neither Tenant, nor any persons or entities holding any legal or beneficial interest whatsoever in Tenant, are (i) the target of any sanctions program that is established by Executive Order of the President or published by the Office of Foreign Assets Control, U.S. Department of the Treasury ("OFAC"); (ii) designated by the President or OFAC pursuant to the Trading with the Enemy Act, 50 U.S.C. App. § 5, the International Emergency Economic Powers Act, 50 U.S.C. §§ 1701-06, the Patriot Act, Public Law 107-56, Executive Order 13224 (September 23, 2001) or any Executive Order of the President issued pursuant to such statutes; or (iii) named on the following list that is published by OFAC: "List of Specially Designated Nationals and Blocked Persons." If the foregoing representation is untrue at any time during the Term, an uncured event of default under the Lease will be deemed to have occurred, without the necessity of notice to Tenant.

        (f)    Redress for any claim against Landlord under the Lease and this Amendment shall be limited to and enforceable only against and to the extent of Landlord's interest in the Building. The obligations of Landlord under the Lease are not intended to and shall not be personally binding on, nor shall any resort be had to the private properties of, any of its trustees or board of directors and officers, as the case may be, its investment manager, the general partners thereof, or any beneficiaries, stockholders, employees, or agents of Landlord or the investment manager.

[SIGNATURES ARE ON FOLLOWING PAGE]

7

        IN WITNESS WHEREOF, Landlord and Tenant have duly executed this Amendment as of the day and year first above written,

    LANDLORD:

 
 
BRCP CARIBBEAN PORTFOLIO, LLC,
a Delaware limited liability company

 
 
By:
/s/  JOHN FOSTER      

 
 
Name:
John Foster

 
 
Title:
Managing Director

 
 
TENANT:

 
 
ACCURAY INCORPORATED,
a California corporation

 
 
By:
/s/  CHRIS A. RAANES 9/27/2006      

 
 
Name:
Chris A. Raanes

 
 
Title:
Chief Operating Officer


 

 

By:

/s/  DARREN J. MILLIKEN      

 
 
Name:
Darren J. Milliken

 
 
Title:
General Counsel
9/27/2006

8

EXHIBIT A

OUTLINE AND LOCATION OF EXPANSION SPACE

        This Exhibit is attached to and made a part of the Second Amendment to Industrial Complex Lease dated September 25, 2006 by and between BRCP CARIBBEAN PORTFOLIO, LLC, a Delaware limited liability company ("Landlord") and ACCURAY INCORPORATED, a California corporation ("Tenant").

MAP

A-1

MAP

A-2

EXHIBIT B

EXPANSION SPACE IMPROVEMENTS

        This Exhibit is attached to and made a part of the Second Amendment to Industrial Complex Lease dated September 25, 2006 by and between BRCP CARIBBEAN PORTFOLIO, LLC, a Delaware limited liability company ("Landlord") and ACCURAY INCORPORATED, a California corporation ("Tenant"). Capitalized terms not otherwise defined in this Exhibit B shall have the meaning given to such terms in the Amendment of which this Exhibit B is a part.

1.
Landlord shall perform improvements to the Expansion Space in accordance with the plans prepared by aai Design, dated July 27, 2006 (the "Plans"). The improvements to be performed by Landlord in accordance with the Plans are hereinafter referred to as the "Expansion Space Improvements." It is agreed that construction of the Expansion Space Improvements will be completed at Landlord's sole cost and expense (subject to the terms of Section 2 below) using Building standard methods, materials and finishes and as otherwise reasonably determined by Landlord (provided however, that (i) with respect to Landlord's obligation to install new carpeting within the Expansion Space, Landlord shall install the following non-Building standard carpet pursuant to the Plans: Manufacturer: Crossley, Style: Moraine 30363, Color: Mont Blanc 03658, 28 ounce, Pile: Dynex SD Nylon, and (ii) with respect to any Landlord obligation to paint the interior walls of the Expansion Space, Landlord shall use the following Kelly Moore Paints: Light Blue (1686-222 Medium Tint, 05-0677 BA-Color), Dark Blue (1010-333 Deep Tint, 04-0167 BA-Color), Light Green (1686-222 Medium Tint, 00-2416 BA-Color) and White (1686-121, 02-0014 BA-Color). Landlord shall substantially complete the Expansion Space improvements. For purposes of the foregoing, "substantially complete" shall mean that Landlord shall obtain from the appropriate governmental authorities, with respect to the Expansion Space Improvements performed by Landlord or its contractors in the Expansion Space, all approvals necessary for the occupancy of the Premises. Landlord shall enter into a direct contract for the Expansion Space Improvements with a general contractor selected by Landlord. In addition, Landlord shall have the right to select and/or approve of any subcontractors used in connection with the Expansion Space Improvements. Landlords supervision or performance of any work for or on behalf of Tenant shall not be deemed a representation by Landlord that such Plans or the revisions thereto comply with applicable insurance requirements or that the improvements constructed in accordance with the Plans and any revisions thereto will be adequate for Tenant's use, it being agreed that Tenant shall be responsible for the configuration of the Expansion Space and the placement of Tenant's furniture, appliances and equipment therein. Landlord, at its sole cost and expense, shall be responsible for correcting any violations of Federal, City and State or local laws, regulations or ordinances with respect to the Expansion Space improvements prior to the installation of any furniture, equipment and other personal property of Tenant and, unless and only to the extent contributed to or exacerbated by Tenant or any of its contractors, agents, employees or invitees, Tenant shall have no liability for any fines incurred by Landlord in connection with any such violation. Notwithstanding the foregoing, so long as the same does not prohibit Tenant from using the Expansion Space for the permitted use, Landlord shall have the right to contest any alleged violation in good faith, including, without limitation, the right to apply for and obtain a waiver or deferment of compliance, the right to assert any and all defenses allowed by law and the right to appeal any decisions, judgments or rulings to the fullest extent permitted by law. Landlord, after the exhaustion of any and all rights to appeal or contest, will make all repairs, additions, alterations or improvements necessary to comply with the terms of any final order or judgment. Notwithstanding the foregoing, Tenant, not Landlord, shall be responsible for the correction of any violations that arise out of or in connection with any claims brought under any provision of the Americans with Disabilities Act other than Title III (compliance with Title III of the Americans with Disabilities Act shall be Landlord's responsibility pursuant to this Section 1 above regarding Landlord's

B-1

2.
If Tenant shall request any revisions to the Plans, Landlord shall have such revisions prepared at Tenant's sole cost and expense and Tenant shall reimburse Landlord for the cost of preparing any such revisions to the Plans, plus any applicable state sales or use tax thereon, upon demand. Promptly upon completion of the revisions, Landlord shall notify Tenant in writing of the increased cost in the Expansion Space Improvements, if any, resulting from such revisions to the Plans. Tenant, within one business day, shall notify Landlord in writing whether it desires to proceed with such revisions. In the absence of such written authorization, Landlord shall have the option to continue work on the Expansion Space disregarding the requested revision. Tenant shall be responsible for any delay caused by Tenant in completion of the Expansion Space resulting from any revision to the Plans. If such revisions result in an increase in the cost of Expansion Space Improvements, such increased costs, plus any applicable state sales or use tax thereon, shall be payable by Tenant upon demand. Notwithstanding anything herein to the contrary, all revisions to the Plans shall be subject to the approval of Landlord.

3.
In addition the Expansion Space Improvements, Landlord shall perform base Building system restoration and repairs in the Expansion Space required of Landlord pursuant to Section 9 of this Amendment.

4.
This Exhibit B shall not be deemed applicable to any additional space added to the Expansion Space at any time or from time to time, whether by any options under the Lease, as amended hereby, or otherwise, or to any portion of the Premises or any additions to the Premises in the event of a renewal or extension of the Term of the Lease, whether by any options under the Lease or otherwise, unless expressly so provided in the Lease or any amendment or supplement to the Lease, as amended hereby.

B-2



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INDUSTRIAL COMPLEX LEASE (California)
INDEX TO LEASE
EXHIBIT "B" CONSTRUCTION; TENANT ACCEPTANCE OF SPACE "AS IS"
EXHIBIT "B-1" DIAGRAM OF VISITOR PARKING SPACES [See Attached]
EXHIBIT "C" TENANT CONSTRUCTION RULES AND REGULATIONS
EXHIBIT "D" RIGHT OF FIRST OPPORTUNITY
EXHIBIT "E" RENEWAL OPTION
FIRST AMENDMENT TO INDUSTRIAL COMPLEX LEASE
RECITALS
WITNESSETH
SECOND AMENDMENT TO INDUSTRIAL COMPLEX LEASE
RECITALS

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Exhibit 10.2


STANDARD INDUSTRIAL LEASE
(Multiple Tenant—Tenant Pays its Percentage Share of Operating Expenses,
Real Property Taxes and Insurance Costs—NO Base Year)

1.     BASIC LEASE PROVISIONS.

  1.1   DATE:   June 30, 2005
             
  1.2   LANDLORD:   The Realty Associates Fund III, L.P.,
a Delaware limited partnership

 
1.3
 
TENANT:
 
Accuray Incorporated,
a California corporation

 
1.4
 
PREMISES ADDRESSES:
 
1306-1310 Orleans Drive, Sunnyvale, California

 
1.5
 
APPROXIMATE LEASABLE AREA OF PREMISES:
(in square feet)
 
50,000

 
1.6
 
USE:
 
Manufacturing, assembly, research and development and general office purposes

 
1.7
 
TERM:
 
Commencement Date through the date that is six (6) years after the Rent Commencement Date (the "Initial Term")

 
1.8
 
COMMENCEMENT DATE:
 
July 1, 2005

 
 
 
RENT COMMENCEMENT DATE:
 
The first to occur of (a) substantial completion of the Tenant Improvements (as defined in the Work Letter Agreement), (b) Lessee's occupancy of the Premises for the purpose of operating its business (as opposed to constructing the Tenant Improvements), or (c) January 1, 2006.

 
1.9
 
MONTHLY BASE RENT:
 
Prior to Rent Commencement Date:
$0;

 
 
 
 
 
Rent Commencement Date through
 
          12th full calendar month: $42,500.00;
          13th month through 24th month: $44,000.00;
          25th month through 36th month: $45,500.00;
          37th month through 48th month: $47,000.00;
          49th month through 60th month: $48,500.00;
                      and
          61st month through 72nd month $50,000.00.

 
1.10
 
BASE RENT PAID UPON EXECUTION:
 
$42,500.00
             

1


 
 
 
APPLIED TO:
(insert month(s))
 
First full month of term of Lease

 
1.11
 
TENANT'S PERCENTAGE SHARE:
 
See section 6.4

 
1.12
 
SECURITY DEPOSIT:
 
$50,000.00

 
1.13
 
NUMBER OF PARKING SPACES:
 
151

 
1.14
 
REAL ESTATE BROKER:
 
 

 
 
 
                LANDLORD:
 
CB Richard Ellis, Inc.

 
 
 
                TENANT:
 
Wayne Mascia and Associates

 
1.15
 
EXHIBITS ATTACHED TO LEASE:
 
Exhibit A—"Premises;"
Exhibit B—Intentionally deleted;
Exhibit C—"Rules and Regulations;"
Exhibit D—"Form of HazMat Certificate";
Exhibit E—"Work Letter Agreement";
Exhibit F—"Addendum to Lease"

 
1.16
 
ADDRESSES FOR NOTICES:
 
 

 
 
 
                LANDLORD:
 
The Realty Associates Fund III, L.P.
c/o TA Associates Realty
1301 Dove Street, Suite 860
Newport Beach, California 92660
Attn: Asset Manager/Orleans

 
 
 
                WITH A COPY TO:
 
CB Richard Ellis, Inc.
225 West Santa Clara Street, Suite 1050
San Jose, California 95113
Attention: Property Manager/Orleans

 
 
 
                TENANT:
 
Accuray Incorporated
1310 Chesapeake Terrace
Sunnyvale, California 94089
Attention: Chief Operating Officer

2.     Premises.

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3

3.     TERM.

4.     USE.

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5.
BASE RENT.    Tenant shall pay Base Rent in the amount set forth on the first page of this Lease. The first month's Base Rent, the Security Deposit, and the first monthly installment of estimated Operating Expenses (as hereafter defined) shall be due and payable on the date this Lease is executed by Tenant, and Tenant promises to pay to Landlord in advance, without demand, deduction or set-off, monthly installments of Base Rent on or before the first day of each calendar month succeeding the Rent Commencement Date. Payments of Base Rent for any fractional calendar month shall be prorated. All payments required to be made by Tenant to Landlord hereunder shall be payable at such address as Landlord may specify from time to time by written notice delivered in accordance herewith. Tenant shall have no right at any time to abate, reduce, or set off any rent due hereunder except where expressly provided in this Lease.

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6.     OPERATING EXPENSE PAYMENTS

6

For purposes of this Lease, a "Capital Improvement" shall be an improvement to the Project that Landlord is obligated or permitted to make pursuant to this Lease, the cost of which is not fully deductible in the year incurred in accordance with generally accepted accounting principles; provided, however, that, at Landlord's option, the following items shall be treated as expenses and not Capital Improvements: (i) the cost of painting all or part of the Project, (ii) the cost of resurfacing and restriping roadways and parking areas and (iii) the cost of any items Tenant is obligated to pay for pursuant to section 12.1 that Landlord elects, in its sole discretion, to include in Operating Expenses. Real Property Taxes (as defined below) shall be reimbursed to Landlord as provided below and shall not be treated as an Operating Expense. References to facilities, services, utilities or other items in this section shall not impose an obligation on Landlord to have said facilities or to provide said services unless such facilities and services already exist at the Project.

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8

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7.
SECURITY DEPOSIT.    Tenant shall deliver to Landlord at the time it executes this Lease the security deposit set forth in section 1.12 as security for Tenant's faithful performance of Tenant's obligations hereunder. If Tenant fails to pay Base Rent or other charges due hereunder, or otherwise defaults with respect to any provision of this Lease, Landlord may use all or any portion of said deposit for the payment of any Base Rent or other charge due hereunder, to pay any other sum to which Landlord may become obligated by reason of Tenant default, or to compensate Landlord for any loss or damage which Landlord may suffer thereby. If Landlord so uses or applies all or any portion of said deposit, Tenant shall within ten (10) days after written demand therefor deposit cash with Landlord in an amount sufficient to restore said deposit to its full amount. Landlord shall not be required to keep said security deposit separate from its general accounts. If Tenant performs all of Tenant's obligations hereunder, said deposit, or so much thereof as has not heretofore been applied by Landlord, shall be returned, without payment of interest or other amount for its use, to Tenant (or, at Landlord's option, to the last assignee, if any, of Tenant's interest hereunder) at the expiration of the term hereof, and after Tenant has vacated the Premises. No trust relationship is created herein between Landlord and Tenant with respect to said security deposit. Tenant acknowledges that the security deposit is not an advance payment of any kind or a measure of Landlord's damages in the event of Tenant's default. Tenant hereby waives the provisions of any law which is inconsistent with this section.

8.     UTILITIES.

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9.     REAL AND PERSONAL PROPERTY TAXES.

11

10.   INSURANCE.

12

13

11.   LANDLORD'S REPAIRS.

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12.   TENANT'S REPAIRS.

15

16

13.   ALTERATIONS AND SURRENDER.

17

18

14.   DAMAGE AND DESTRUCTION.

19

20

15.
CONDEMNATION.    If any portion of the Premises or the Project are taken under the power of eminent domain, or sold under the threat of the exercise of said power (all of which are herein called "condemnation"), this Lease shall terminate as to the part so taken as of the date the condemning authority takes title or possession, whichever first occurs; provided that if so much of the Premises or Project are taken by such condemnation as would substantially and adversely affect the operation and profitability of Tenant's business conducted from the Premises, and said taking lasts for ninety (90) days or more, Tenant shall have the option, to be exercised only in writing within thirty (30) days after Landlord shall have given Tenant written notice of such taking (or in the absence of such notice, within thirty (30) days after the condemning authority shall have taken possession), to terminate this Lease as of the date the condemning authority takes such possession. If a taking lasts for less than ninety (90) days, Tenant's rent shall be abated during said period but Tenant shall not have the right to terminate this Lease. If Tenant does not terminate this Lease in accordance with the foregoing, this Lease shall remain in full force and effect as to the portion of

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22

16.   ASSIGNMENT AND SUBLETTING.

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24

25

17.   DEFAULT; REMEDIES.

26

27

28

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18.
LANDLORD'S RIGHT TO CURE DEFAULT; PAYMENTS BY TENANT.    All covenants and agreements to be kept or performed by Tenant under this Lease shall be performed by Tenant at Tenant's sole cost and expense and without any reduction of rent. If Tenant shall fail to perform any of its obligations under this Lease, Landlord may, but shall not be obligated to, after three (3) days' prior written notice to Tenant, make any such payment or perform any such act on Tenant's behalf without waiving its rights based upon any default of Tenant and without releasing Tenant from any obligations hereunder. Tenant shall pay to Landlord, within ten (10) days after delivery by Landlord to Tenant of statements therefor, an amount equal to the expenditures reasonably made by Landlord in connection with the remedying by Landlord of Tenant's defaults pursuant to the provisions of this section.

19.
INDEMNITY.    Tenant shall indemnify, defend, protect, and hold harmless Landlord, its partners, subpartners, parent organization, affiliates, subsidiaries, and their respective officers, directors, legal representatives, successors, assigns, agents, servants, employees and independent contractors and each of them (collectively, "Landlord Parties") from any and all loss, cost, damage, expense and liability (including without limitation court costs and reasonable attorneys' fees) (collectively, "Claims") incurred in connection with or arising from (a) any cause in or on the Premises or (b) any acts, omissions or negligence of Tenant or of any person claiming by, through or under Tenant, its partners, subpartners, parent organization, affiliates, subsidiaries and their respective officers, directors, contractors, agents, servants, employees, invitees, guests or licensees and each of them (collectively, "Tenant Parties") at the Project; provided, however, that Tenant shall not be required to indemnify and hold Landlord harmless from any Claims for death or personal injury by any person, company or entity resulting from the negligence or willful misconduct of the Landlord Parties. Landlord shall indemnify, defend, protect, and hold harmless Tenant from any Claim resulting from injuries to persons caused by the negligence or willful misconduct of Landlord. Tenant's agreement to indemnify and hold Landlord harmless, and Landlord's agreement to indemnify and hold Tenant harmless are not intended to and shall not relieve any insurance carrier of its obligations under policies required to be carried by Landlord or Tenant, respectively, pursuant to this Lease to the extent such policies cover the results of such acts, omissions or willful misconduct. The provisions of this Section shall survive the expiration or sooner termination of this Lease. The Indemnified Parties need not first pay any Damages to be indemnified hereunder. This

30

20.
EXEMPTION OF LANDLORD FROM LIABILITY.    Except as may be otherwise provided in section 19, Tenant hereby agrees that Landlord shall not be liable for injury to Tenant's business or any loss of income therefrom or for loss of or damage to the merchandise, tenant improvements, fixtures, furniture, equipment, computers, files, automobiles, or other property of Tenant, Tenant's employees, agents, contractors or invitees, or any other person in or about the Project, nor shall Landlord be liable for injury to the person of Tenant, Tenant's employees, agents, contractors or invitees, whether such damage or injury is caused by or results from any cause whatsoever including, but not limited to, theft, criminal activity at the Project, negligent security measures, bombings or bomb scares, Hazardous Materials, fire, steam, electricity, gas, water or rain, flooding, breakage of pipes, sprinklers, plumbing, air conditioning or lighting fixtures, or from any other cause, whether said damage or injury results from conditions arising upon the Premises or upon other portions of the Project, or from other sources or places, or from new construction or the repair, alteration or improvement of any part of the Project, and regardless of whether the cause of the damage or injury arises out of Landlord's or its employees', agents' or contractors' negligent or intentional acts. Landlord shall not be liable for any damages arising from any act or neglect of any employees, agents, contractors or invitees of any other tenant, occupant or user of the Project, nor from the failure of Landlord to enforce the provisions of the lease of any other tenant of the Project. Except as may be otherwise provided in section 19, Tenant, as a material part of the consideration to Landlord hereunder, hereby assumes all risk of damage to Tenant's property or business or injury to persons in, upon or about the Project arising from any cause, including Landlord's negligence or the negligence of its employees, agents or contractors, and Tenant hereby waives all claims in respect thereof against Landlord, its employees, agents and contractors.

21.
LANDLORD'S LIABILITY.    Tenant acknowledges that Landlord shall have the right to transfer all or any portion of its interest in the Project and to assign this Lease to the transferee. Tenant agrees that in the event of such a transfer Landlord shall automatically be released from all lability under this Lease to the extent the same arises after the date of such transfer, and Tenant hereby agrees to look solely to Landlord's transferee for the performance of Landlord's obligations hereunder after the date of the transfer. Upon such a transfer, Landlord shall, at its option, return Tenant's security deposit to Tenant or transfer Tenant's security deposit to Landlord's transferee and, in either event, Landlord shall have no further liability to Tenant for the return of its security deposit. Subject to the rights of any lender holding a mortgage or deed of trust encumbering all or part of the Project, Tenant agrees to look solely to Landlord's equity interest in the Project for the collection of any judgment requiring the payment of money by Landlord arising out of (a) Landlord's failure to perform its obligations under this Lease or (b) the negligence or willful misconduct of Landlord, its partners, employees and agents. No other property or assets of Landlord shall be subject to levy, execution or other enforcement procedure for the satisfaction of any judgment or writ obtained by Tenant against Landlord. No partner, employee or agent of Landlord shall be personally liable for the performance of Landlord's obligations hereunder or be named as a party in any lawsuit arising out of or related to, directly or indirectly, this Lease and the obligations of Landlord hereunder. The obligations under this Lease do not constitute personal obligations of the individual partners of Landlord, if any, and Tenant shall not seek recourse against the individual partners of Landlord or their assets.

22.
SIGNS.    Subject to sections 2 and 3 of the Addendum, Tenant shall be allowed to install building and monument signage to advertise its business at its sole expense. Said signage shall comply with all applicable municipal codes and building/project standards. Otherwise, Tenant shall not make

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23.
PARKING.    During the term and subject to the rules and regulations attached hereto as Exhibit "C," as modified by Landlord from time to time (the "Rules"), Tenant shall be entitled to use the number of parking spaces set forth in section 1.13 in the Common Area parking lot of the Project. Tenant's parking rights are in common with the parking rights of any other tenants of the Project, and all of Tenant's parking spaces are unreserved parking spaces. Landlord reserves the right at any time to designate areas in the Common Areas where Tenant may or may not park (e.g., landlord shall have the right to require Tenant to park solely in the parking spaces that are within the Premises). If Tenant commits or allows in the parking lot any of the activities prohibited by the Lease or the Rules, then Landlord shall have the right, without notice, in addition to such other rights and remedies that it may have, to remove or tow away the vehicle involved and charge the cost to Tenant, which cost shall be immediately payable by Tenant upon demand by Landlord. Tenant's parking rights are the personal rights of Tenant, and Tenant shall not transfer, assign or otherwise convey its parking rights separate and apart from this Lease. All parking spaces may only be used for parking vehicles no larger than full-size passenger automobiles or pick-up trucks. Landlord, in addition to its other remedies, shall have the right to remove or tow away any other vehicles. Landlord shall not be responsible for enforcing Tenant's parking rights against any third parties provided, however, if another tenant is interfering with Tenant's parking rights, Landlord shall cooperate with Tenant in attempting to cause the tenant to end such interference, provided, further, that Landlord shall have no obligation to bring a legal action against the non-complying tenant. Tenant shall not permit or allow any vehicles that belong to or are controlled by Tenant or Tenant's employees, suppliers, shippers, customers or invitees to be loaded, unloaded or parked in areas other than those designated by Landlord for such activities.

24.
BROKER'S FEE.    Tenant and Landlord each represent and warrant to the other that neither has had any dealings or entered into any agreements with any person, entity, broker or finder other than the persons, if any, listed in section 1.14 in connection with the negotiation of this Lease, and no other broker, person, or entity is entitled to any commission or finder's fee in connection with the negotiation of this Lease, and Tenant and Landlord each agree to indemnify, defend and hold the other harmless from and against any claims, damages, costs, expenses, attorneys' fees or liability for compensation or charges which may be claimed by any such unnamed broker, finder or other similar party by reason of any dealings, actions or agreements of the indemnifying party. The commission payable to Landlord's broker with respect to this Lease shall be pursuant to the terms of the separate commission agreement in effect between Landlord and Landlord's broker. Landlord's broker shall pay a portion of its commission to Tenant's broker, if so provided in any agreement between Landlord's broker and Tenant's broker. Nothing in this Lease shall impose any obligation on Landlord to pay a commission or fee to any party other than Landlord's broker.

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25.   ESTOPPEL CERTIFICATE

26.
FINANCIAL INFORMATION.    From time to time, at Landlord's request, but not more often than once in any twelve-month period, Tenant shall cause the following financial information to be delivered to Landlord, at Tenant's sole cost and expense, upon not less than ten (10) days' advance written notice from Landlord: (a) a current financial statement for Tenant and Tenant's financial statements for the previous two accounting years, (b) a current financial statement for any guarantor(s) of this Lease and the guarantor'(s) financial statements for the previous two accounting years and (c) such other financial information pertaining to Tenant or any guarantor as Landlord or any lender or purchaser of Landlord may reasonably request. All financial statements shall be prepared in accordance with generally accepted accounting principals consistently applied and, if such is the normal practice of Tenant, shall be audited by an independent certified public accountant. Tenant hereby authorizes Landlord, from time to time, without notice to Tenant, to obtain a credit report or credit history on Tenant from any credit reporting company.

27.   ENVIRONMENTAL MATTERS/HAZARDOUS MATERIALS

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28.   SUBORDINATION

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29.   OPTIONS

30.
LANDLORD RESERVATIONS.    Landlord shall have the right: (a) to change the name and address of the Project or Building upon not less than ninety (90) days prior written notice; provided, however, in such event Landlord shall reimburse Tenant for all reasonable costs Tenant pays to third parties for the replacement of pre-printed stationery, address labels and other

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31.
CHANGES TO PROJECT.    Landlord shall have the right, in Landlord's sole discretion, from time to time, to make changes to the size, shape, location, number and extent of the improvements comprising the Project (hereinafter referred to as "Changes") including, but not limited to, the interior and exterior of buildings, the Common Ardeas, HVAC, electrical systems, communication systems, fire protection and detection systems, plumbing systems, security systems, parking control systems, driveways, entrances, parking spaces, parking areas and landscaped areas; provided, however, that Landlord shall not materially change the location of the exterior walls of the Building or materially change the location of the Common Areas within the Building in a way that would materially and adversely effect Tenant's use of the Premises without the prior written consent of Tenant, which consent shall not be unreasonably withheld, conditioned or delayed. In connection with the Changes, Landlord may, among other things, erect scaffolding or other necessary structures at the Project, limit or eliminate access to portions of the Project, including portions of the Common Areas, or perform work in the Building, which work may create noise, dust or leave debris in the Building. Tenant hereby agrees that such Changes and Landlord's actions in connection with such Changes shall in no way constitute a constructive eviction of Tenant or entitle Tenant to any abatement of rent. Landlord shall have no responsibility or for any reason be liable to Tenant for any direct or indirect injury to or interference with Tenant's business arising from the Changes, nor shall Tenant be entitled to any compensation or damages from Landlord for any inconvenience or annoyance occasioned by such Changes or Landlord's action in connection with such Changes. If a Change will materially interfere with Tenant's use of the Premises, Landlord shall use commercially reasonable efforts to provide Tenant with advance notice of such Change. Landlord shall use commercially reasonable efforts to minimize disruption to Tenant's business operations caused by Changes.

32.
INTENTIONALLY DELETED.

33.
HOLDING OVER.    If Tenant remains in possession of the Premises or any part thereof after the expiration or earlier termination of the term hereof with Landlord's consent, such occupancy shall be a tenancy from month to month upon all the terms and conditions of this Lease pertaining to the obligations of Tenant, except that the Base Rent payable shall be the one hundred fifty percent (150%) of the Base Rent payable immediately preceding the termination date of this Lease, and all Options, if any, shall be deemed terminated and be of no further effect. If Tenant remains in possession of the Premises or any part thereof, after the expiration of the term hereof without Landlord's consent, Tenant shall, at Landlord's option, be treated as a tenant at sufferance or a trespasser. Nothing contained herein shall be construed to constitute Landlord's consent to Tenant holding over at the expiration or earlier termination of the Lease term or to give Tenant the right to hold over after the expiration or earlier termination of the Lease term. Tenant hereby agrees to indemnify, hold harmless and defend Landlord from any cost, loss, claim or liability (including attorneys' fees) Landlord may incur as a result of Tenant's failure to surrender possession of the Premises to Landlord upon the termination of this Lease.

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34.   LANDLORD'S ACCESS

35.
SECURITY MEASURES.    Tenant hereby acknowledges that Landlord shall have no obligation whatsoever to provide guard service or other security measures for the benefit of the Premises or the Project, and Landlord shall have no liability to Tenant due to its failure to provide such services. Tenant assumes all responsibility for the protection of Tenant, its agents, employees, contractors and invitees and the property of Tenant and of Tenant's agents, employees, contractors and invitees from acts of third parties. Nothing herein contained shall prevent Landlord, at Landlord's sole option, from implementing security measures for the Project or any part thereof, in which event Tenant shall participate in such security measures and the cost thereof shall be included within the definition of Operating Expenses, and Landlord shall have no liability to Tenant and its agents, employees, contractors and invitees arising out of Landlord's negligent provision of security measures. Landlord shall have the right, but not the obligation, to require all persons entering or leaving the Project to identify themselves to a security guard and to reasonably establish that such person should be permitted access to the Project.

36
EASEMENTS.    Landlord reserves to itself the right, from time to time, to grant such easements, rights and dedications that Landlord deems necessary or desirable, and to cause the recordation of parcel maps and restrictions, so long as such easements, rights, dedications, maps and restrictions do not unreasonably interfere with the use of the Premises by Tenant. Tenant shall sign any of the aforementioned documents within ten (10) days after Landlord's request, and Tenant's failure to do so shall constitute a default by Tenant. The obstruction of Tenant's view, air or light by any structure erected in the vicinity of the Project, whether by Landlord or third parties, shall in no way affect this Lease or impose any liability upon Landlord.

37
TRANSPORTATION MANAGEMENT.    Tenant shall fully comply at its sole expense with all present or future programs implemented or required by any governmental or quasi-governmental entity or Landlord to manage parking, transportation, air pollution or traffic in and around the Project or the metropolitan area in which the Project is located.

38
SEVERABILITY.    The invalidity of any provision of this Lease as determined by a court of competent jurisdiction shall in no way affect the validity of any other provision hereof.

39
TIME OF ESSENCE.    Time is of the essence with respect to each of the obligations to be performed by Tenant and Landlord under this Lease.

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40
DEFINITION OF ADDITIONAL RENT.    All monetary obligations of Tenant to Landlord under the terms of this Lease, including but not limited to, Base Rent, Tenant's Percentage Share of Operating Expenses and late charges shall be deemed to be rent.

41
INCORPORATION OF PRIOR AGREEMENTS.    This Lease and the attachments listed in section 1.15 contain all agreements of the parties with respect to the lease of the Premises and any other matter mentioned herein. No prior or contemporaneous agreement or understanding pertaining to any such matter shall be effective. Except as otherwise stated in this Lease, Tenant hereby acknowledges that no real estate broker nor Landlord nor any employee or agents of any of said persons has made any oral or written warranties or representations to Tenant concerning the condition or use by Tenant of the Premises or the Project or concerning any other matter addressed by this Lease.

42
AMENDMENTS.    This Lease may be modified in writing only, signed by the parties in interest at the time of the modification.

43
NOTICES.    All notices required or permitted by this Lease shall be in writing and may be delivered (a) in person (by hand, by messenger or by courier service), (b) by U.S. Postal Service regular mail, (c) by U.S. Postal Service certified mail, return receipt requested, (d) by U.S. Postal Service Express Mail, Federal Express or other overnight courier, or (e) by facsimile transmission, and shall be deemed sufficiently given if served in a manner specified in this section. The addresses set forth in section 1.16 of this Lease shall be the address of each party for notice purposes. Landlord or Tenant may by written notice to the other specify a different address for notice purposes, except that upon Tenant's taking possession of the Premises, the Premises shall constitute Tenant's address for the purpose of mailing or delivering notices to Tenant. A copy of all notices required or permitted to be given to Landlord hereunder shall be concurrently transmitted to such party or parties at such addresses as Landlord may from time to time hereinafter designate by written notice to Tenant. Any notice sent by regular mail or by certified mail, return receipt requested, shall be deemed given three (3) days after deposited with the U.S. Postal Service. Notices delivered by U.S. Express Mail, Federal Express or other courier shall be deemed given on the date delivered by the carrier to the appropriate party's address for notice purposes. If any notice is transmitted by facsimile transmission, the notice shall be deemed delivered upon telephone confirmation of receipt of the transmission thereof at the appropriate party's address for notice purposes. A copy of all notices delivered to a party by facsimile transmission shall also be mailed to the party on the date the facsimile transmission is completed. If notice is received on Saturday, Sunday or a legal holiday, it shall be deemed received on the next business day. Nothing contained herein shall be construed to limit Landlord's right to serve any notice to pay rent or quit or similar notice by any method permitted by applicable law, and any such notice shall be effective if served in accordance with any method permitted by applicable law whether or not the requirements of this section have been met.

44
WAIVERS.    No waiver by Landlord or Tenant of any provision hereof shall be deemed a waiver of any other provision hereof or of any subsequent breach by Landlord or Tenant of the same or any other provision. Landlord's consent to, or approval of, any act shall not be deemed to render unnecessary the obtaining of Landlord's consent to or approval of any subsequent act by Tenant. The acceptance of rent hereunder by Landlord shall not be a waiver of any preceding breach by Tenant of any provision hereof, other than the failure of Tenant to pay the particular rent so accepted, regardless of Landlord's knowledge of such preceding breach at the time of acceptance of such rent. No acceptance by Landlord of partial payment of any sum due from Tenant shall be deemed a waiver by landlord of its right to receive the full amount due, nor shall any endorsement or statement on any check or accompanying letter from Tenant be deemed an accord and satisfaction. Tenant hereby waives California Code of Civil Procedure section 1179 and Civil Code section 3275 which allow tenants to obtain relief from the forfeiture of a lease. Tenant hereby

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45
COVENANTS.    This Lease shall be construed as though Landlord's covenants contained herein are independent and not dependent and Tenant hereby waives the benefit of any statute to the contrary. All provisions of this Lease to be observed or performed by Tenant are both covenants and conditions.

46
BINDING EFFECT; CHOICE OF LAW.    Subject to any provision hereof restricting assignment or subletting by Tenant, this Lease shall bind the parties, their heirs, personal representatives, successors and assigns. This Lease shall be governed by the laws of the state in which the Project is located, and any litigation concerning this Lease between the parties hereto shall be initiated in the county in which the Project is located.

47
ATTORNEYS' FEES.    If Landlord or Tenant brings an action to enforce the terms hereof or declare rights hereunder, the prevailing party in any such action, or appeal thereon, shall be entitled to its reasonable attorneys' fees and court costs to be paid by the losing party as fixed by the court in the same or separate suit, and whether or not such action is pursued to decision or judgment. The attorneys' fee award shall not be computed in accordance with any court fee schedule, but shall be such as to fully reimburse all attorneys' fees and court costs reasonably incurred in good faith. Landlord shall be entitled to reasonable attorneys' fees and all other costs and expenses incurred in the preparation and service of notices of default and consultations in connection therewith, whether or not a legal action is subsequently commenced in connection with such default. Landlord and Tenant agree that attorneys' fees incurred with respect to defaults and bankruptcy are actual pecuniary losses within the meaning of section 365(b)(1)(B) of the Bankruptcy Code or any successor statute.

48
AUCTIONS.    Tenant shall not conduct, nor permit to be conducted, either voluntarily or involuntarily, any auction or going-out-of-business sale upon the Premises or the Common Areas.

49
MERGER.    The voluntary or other surrender of this Lease by Tenant, or a mutual cancellation thereof, or a termination by Landlord, shall not result in the merger of Landlord's and Tenant's estates and shall, at the option of the Landlord, terminate all or any existing subtenancies or may, at the option of Landlord, operate as an assignment to Landlord of any or all of such subtenancies.

50
QUIET POSSESSION.    Subject to the other terms and conditions of this Lease, and the rights of any lender, and provided Tenant is not in default hereunder, Tenant shall have quiet possession of the Premises for the entire term hereof subject to all of the provisions of this Lease.

51
AUTHORITY.    If Tenant is a corporation, trust, limited liability company, limited liability partnership or general or limited partnership, Tenant, and each individual executing this Lease on behalf of such entity, represents and warrants that such individual is duly authorized to execute and deliver this Lease on behalf of said entity, that said entity is duly authorized to enter into this Lease, and that this Lease is enforceable against said entity in accordance with its terms. If Tenant is a corporation, trust, limited liability company, limited liability partnership or other partnership, Tenant shall deliver to Landlord upon demand evidence of such authority satisfactory to Landlord.

52
CONFLICT.    Except as otherwise provided herein to the contrary, any conflict between the printed provisions, exhibits, addenda or riders of this Lease and the typewritten or handwritten provisions, if any, shall be controlled by the typewritten or handwritten provisions.

53
MULTIPLE PARTIES.    If more than one person or entity is named as Tenant herein, the obligations of Tenant shall be the joint and several responsibility of all persons or entities named herein as

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54
INTERPRETATION.    This Lease shall be interpreted as if it was prepared by both parties, and ambiguities shall not be resolved in favor of Tenant because all or a portion of this Lease was prepared by Landlord. The captions contained in this Lease are for convenience only and shall not be deemed to limit or alter the meaning of this Lease. As used in this Lease, the words tenant and landlord include the plural as well as the singular. Words used in the neuter gender include the masculine and feminine gender.

55
PROHIBITION AGAINST RECORDING.    Neither this Lease, nor any memorandum, affidavit or other writing with respect thereto, shall be recorded by Tenant or by anyone acting through, under or on behalf of Tenant. Landlord shall have the right to record a memorandum of this Lease, and Tenant shall execute, acknowledge and deliver to Landlord for recording any memorandum prepared by Landlord.

56
RELATIONSHIP OF PARTIES.    Nothing contained in this Lease shall be deemed or construed by the parties hereto or by any third party to create the relationship of principal and agent, partnership, joint venture or any association between Landlord and Tenant.

57
RULES AND REGULATIONS.    Tenant agrees to abide by and conform to the Rules and to cause its employees, suppliers, customers and invitees to so abide and conform. Landlord shall have the right, from time to time, to modify, amend and enforce the Rules in a nondiscriminatory manner. Landlord shall not be responsible to Tenant for the failure of other persons, including, but not limited to, other tenants, their agents, employees and invitees, to comply with the Rules. Modifications or amendments to the Rules shall be binding upon Tenant provided that Tenant has received written notice thereof.

58
RIGHT TO LEASE.    Landlord reserves the absolute right to effect such other tenancies in the Project as Landlord in its sole discretion shall determine, and Tenant is not relying on any representation that any specific tenant or number of tenants will occupy the Project.

59
CONFIDENTIALITY.    Tenant acknowledges and agrees that the terms of this Lease are confidential and constitute proprietary information of Landlord. Disclosure of the terms hereof could adversely affect the liability of Landlord to negotiate other leases with respect to the Project and may impair Landlord's relationship with other tenants of the Project. Tenant agrees that it and its partners, officers, directors and employees shall use commercially reasonable efforts not disclose the terms of this Lease to any person or entity except (a) the brokers, attorneys and accountants employed by Tenant who are involved in this transaction and (b) as required in any legal proceeding or in connection with any other mandatory disclosure obligation of Tenant, without the prior written consent of Landlord, which may be given or withheld by Landlord, in Landlord's sole discretion. Tenant shall instruct its brokers, attorneys and accountants to maintain the confidentiality of the terms of this Lease. It is understood and agreed that damages alone would be inadequate remedy for the breach of this provision by Tenant, and Landlord shall also have the right to seek specific performance of this provision and to seek injunctive relief to prevent its breach or continued breach.

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WAIVER OF JURY TRIAL.    LANDLORD AND TENANT HEREBY WAIVE THEIR RESPECTIVE RIGHT TO TRAIL BY JURY OF ANY CAUSE OF ACTION, CLAIM, COUNTERCLAIM OR CROSS-COMPLAINT IN ANY ACTION, PROCEEDING AND/OR HEARING BROUGHT BY EITHER LANDLORD AGAINST TENANT OR TENANT AGAINST LANDLORD ON ANY MATTER WHATSOEVER ARISING OUT OF, OR IN ANY WAY CONNECTED WITH, THIS LEASE, THE RELATIONSHIP OF LANDLORD AND TENANT, TENANT'S USE OR OCCUPANCY OF THE PREMISES, OR ANY CLAIM OF

42


 
 
By:
/s/  SCOTT W. AMLING      
(Officer)    Scott W. Amling
                Regional Director

 
 
By:
/s/  SCOTT W. AMLING      
(Officer)    Scott W. Amling
                Regional Director

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By:
/s/  CHRIS A. RAANES      
Chris A. Raanes
(print name)

 
 
Its:
Chief Operating Officer
(print title)

 
 
By:
/s/  ROBERT E. MCNAMARA      
Robert E. McNamara
(print name)

 
 
Its:
Chief Operating Officer
(print title)
(1)
If Tenant is a corporation, the authorized officers must sign on behalf of the corporation and indicate the capacity in which they are signing. The Lease must be executed by the president or vice president and the secretary or assistant secretary, unless the bylaws or a resolution of the board of directors shall otherwise provide, in which event, the bylaws or a certified copy of the resolution, as the case may be, must be attached to this Lease.

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EXHIBIT A

PREMISES

        Exhibit A is intended only to show the general layout of the Premises, and shall not be interpreted to increase the size of the Premises beyond the number of leasable square feet set forth in section 1.5. Exhibit A is not to be scaled and any measurements or distances shown on Exhibit A are approximates only.

        [to be attached]

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EXHIBIT A

[PREMISES MAP OMITTED]

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EXHIBIT B

        Intentionally deleted.

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EXHIBIT C

RULES AND REGULATIONS

GENERAL RULES

        Tenant shall faithfully observe and comply with the following Rules and Regulations:

        1.     Tenant shall not alter any locks or install any new or additional locks or bolts on any doors or windows of the Premises without obtaining Landlord's prior written consent. Tenant shall bear the cost of any lock changes or repairs required by Tenant.

        2.     Access to the Project may be refused unless the person seeking access has proper identification or has a previously received authorization for access to the Project. Landlord and its agents shall in no case be liable for damages for any error with regard to the admission to or exclusion from the Project of any person. In case of invasion, mob, riot, public excitement or other commotion, Landlord reserves the right to prevent access to the Project during the continuance thereof by any means it deems appropriate for the safety and protection of life and property.

        3.     No cooking shall be done or permitted on the Premises, nor shall the Premises be used for any improper, objectionable or immoral purposes. Notwithstanding the foregoing, Underwriters' Laboratory-approved equipment and microwave ovens may be used in the Premises for heating food and brewing coffee, tea, hot chocolate and similar beverages for employees and visitors of Tenant, provided that such use is in accordance with all applicable federal, state and city laws, codes, ordinances, rules and regulations; and provided further that such cooking does not result in odors escaping from the Premises.

        4.     No boring or cutting for wires shall be allowed without the consent of Landlord. Tenant shall not install any radio or television antenna, satellite dish, loudspeaker or other device on the roof or exterior walls of the Building. Tenant shall not interfere with broadcasting or reception from or in the Project or elsewhere.

        5.     Landlord reserves the right to exclude or expel from the Project any person who, in the judgment of Landlord, is intoxicated or under the influence of liquor or drugs, or who shall in any manner do any act in violation of any of these Rules and Regulations.

        6.     Tenant shall store all its trash and garbage within the interior of the Premises or in other locations approved by Landlord, in Landlord's sole discretion. No material shall be placed in the trash boxes or receptacles if such materials is of such nature that it may not be disposed of in the ordinary and customary manner of removing and disposing of trash in the vicinity of the Project without violation of any law or ordinance governing such disposal.

        7.     Tenant shall comply with all safety, fire protection and evacuation procedures and regulations established by Landlord or any governmental agency.


PARKING RULES

        1.     Tenant shall not permit or allow any vehicles that belong to or are controlled by Tenant or Tenant's employees, suppliers, shippers, customers or invitees to be loaded, unloaded or parked in areas other than those designated by Landlord for such activities and at times approved by Landlord. Users of the parking area will obey all posted signs and park only in the areas designated for vehicle parking. Tenant and its customers, employees, shippers and invitees shall comply with all rules and regulations adopted by Landlord from time to time relating to truck parking and/or truck loading and unloading.

        2.     Landlord reserves the right to relocate all or a part of parking spaces within the parking area.

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        3.     Landlord will not be responsible for any damage to vehicles, injury to persons or loss of property, all of which risks are assumed by the party using the parking area.

        4.     The maintenance, washing, waxing or cleaning or vehicles in the parking area or Common Areas is prohibited.

        5.     Tenant shall be responsible for seeing that all of its employees, agents, contractors and invitees comply with the applicable parking rules, regulations, laws and agreements.

        6.     At Landlord's request, Tenant shall provide Landlord with a list which includes the name of each person using the parking facilities based on Tenant's parking rights under this Lease and the license plate number of the vehicle being used by that person. Tenant shall provide Landlord with an updated list within five (5) days after any part of the list becomes inaccurate.

Landlord reserves the right at any time to change or rescind any one or more of these Rules and Regulations, or to make such other and further reasonable Rules and Regulations as in Landlord's judgment may from time to time be necessary for the management, safety, care and cleanliness of the Project, and for the preservation of good order therein, as well as for the convenience of other occupants and tenants therein; provided, however, any new rule that will materially and adversely interfere with Tenant's business operations (as they exist on the Commencement Date) shall require Tenant's prior written consent (such consent not to be unreasonably withheld). Landlord may waive any one or more of these Rules and Regulations for the benefit of any particular tenant, but not such waiver by Landlord shall be construed as a waiver of such Rules and Regulations in favor of any other tenant, nor prevent Landlord from thereafter enforcing any such Rules or Regulations against any or all tenants of the Project. Tenant shall be deemed to have read these Rules and Regulations and to have agreed to abide by them as a condition of its occupancy of the Premises.

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EXHIBIT D

Form of HazMat Certificate

General Information

Name of Responding Company: Accuray Inc.

Mailing Address: 1310 Chesapeake Terrace, Sunnyvale, CA 94089

Signature: (Steve Strunk)

Title: Director of Manufacturing Phone: (408) 716-4795

Date: 6/30/05 Age of Facility: 24 years Length of Occupancy: New Tenant

Major products manufactured and/or activities conducted on the property: Manufactures and sells stereotactic radiosurgery systems together with related service and parts.

 
    
    
    
Type of Business Activity(ies):
(check all that apply)		   Hazardous Materials Activities:
(check all that apply)
            machine shop               degreasing
            light assembly               chemical/etching/milling
    x       research and development               wastewater treatment
    x       product service or repair               painting
            photo processing               striping
            automotive service and repair               cleaning
    x       Manufacturing               printing
            Warehouse               analytical lab
            integrated/printed circuit               plating
            chemical/pharmaceutical product               chemical/missing/synthesis
                    silkscreen
                    lathe/mill machining
                    deionizer water product
                    photo masking
                    wave solder
                    metal finishing

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HAZARDOUS MATERIALS/WASTE HANDLING AND STORAGE

A.    Are hazardous materials handled on any of your shipping and receiving docks in container quantities greater than one gallon?     x      Yes                No

B.    If Hazardous materials or waste are stored on the premises, please check off the nature of the storage and type(s) of materials below:

 
    
    
    
Types of Storage Container Stored
(list above-ground storage only)		   Type of Hazardous Materials and/or Waste
    x       1 gallon or 3 liter bottles/cans       x       acid
    x       5 to 30 gallon carboys               phenol
    x       55 gallon drums               caustic/alkaline cleaner
            Tanks               cyanide
                    photo resist stripper
            x       paint
            x       flammable solvent
                    gasoline/diesel fuel
            x       nonflammable/chlorinated solvent
            x       oil/cutting fluid

C.    Do you accumulate hazardous waste onsite?     x      Yes                No

        If yes, how is it being handled?

 
    
    
    
            on-site treatment or recovery        
            discharged to sewer        
    x       hauled offsite   If hauled offsite, by whom        Romic    
            Incineration        

D.    Indicate your hazardous waste storage status with Department of Health Services

 
    
    
    
    x       Generator        
            interim status facility        
            permitted TSDF        
            none of the above        

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WASTEWATER TREATMENT/DISCHARGE

A.    Do you discharge industrial wastewater to:

 
    
    
    
            Sewer        
            storm drain        
            surface water        
    x       no industrial discharge        

B.    Is your industrial wastewater treated before discharge?             Yes                No    (Not Applicable—No Industrial Discharge)

        If yes, what type of treatment is being conducted?

 
    
    
    
            Neutralization        
            metal hydroxide formation        
            closed-loop treatment        
            cyanide destruct        
            HF treatment        
            Other        


SUBSURFACE OF CONTAINMENT OF HAZARDOUS MATERIALS/WASTES

A.    Are buried tanks/sumps being used for any of the following:

        (Not applicable—No Subsurface Containment of Hazardous Materials/Wastes)

 
    
    
    
            hazardous waste storage        
            chemical storage        
            gasoline/diesel fuel storage        
            waste treatment        
            wastewater neutralization        
            industrial wastewater treatment        
            none of the above        

B.    If buried tanks are located onsite, indicate their construction:

        (Not Applicable—No Subsurface Containment of Hazardous Materials/Wastes)

 
    
    
    
    
    
            Steel               fiberglass               concrete
            inside open vault               double walled        

C.    Are hazardous materials or untreated industrial wastewater transported via buried piping to tanks, process areas or treatment areas?             Yes                No

        (Not Applicable—No Subsurface Containment of Hazardous Materials/Wastes)

D.    Do you have wet floors in your process areas?             Yes                No

        (Not Applicable—No Subsurface Containment of Hazardous Materials/Wastes)

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        If yes, name processes:          

E.    Are abandoned underground tanks or sumps located on the property?             Yes                No

        (Not Applicable—No Subsurface Containment of Hazardous Materials/Wastes)


HAZARDOUS MATERIALS SPILLS

A.    Have hazardous materials ever spilled to:

 
    
    
    
            Sewer        
            the storm drain        
            onto the property        
    x       no spills have occurred        

B.    Have you experienced any leaking underground tanks or sumps?             Yes        x      No (New Tenant)

C.    If spills have occurred, were they reported?             Yes                No

        Check which the government agencies that you contacted regarding the spill(s):

 
    
    
    
            Department of Health Services        
            Department of Fish and Game        
            Environmental Protection Agency        
            Regional Water Quality Control Board        
            Fire Department        

D.    Have you been contacted by a government agency regarding soil or groundwater contamination on your site?             Yes        X      No

        Do you have exploratory wells onsite?             Yes        x      No

        If yes, indicate the following:

        Number of wells:               Approximate depth of wells:               Well diameters:          

        PLEASE ATTACH ENVIRONMENTAL REGULATORY PERMITS, AGENCY REPORTS THAT APPLY TO YOUR OPERATION AND HAZARDOUS WASTE MANIFESTS.

        Check off those enclosed: (Not at this Time. HMIS, HMMP and Hazardous Waste Manifest will soon be available.)

 
    
    
    
            Hazardous Materials Inventory Statement, HMIS
            Hazardous Materials Management Plan, HMMP
            Department of Health Services, Generatory Inspection Report
            Underground Tank Registrations
            Industrial Wastewater Discharge Permit
            Hazardous Waste Manifest

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EXHIBIT E

WORK LETTER AGREEMENT

        This Work Letter Agreement is attached to a Standard Industrial Lease entered into between The Realty Associates Fund III, L.P. ("Landlord"), and Accuray Incorporated ("Tenant") (the "Lease") covering certain premises (the "Premises") more particularly described in the Lease, and is incorporated into the Lease by this reference.

        1.     Tenant Improvements.    For purposes of this Lease, the "Tenant Improvements" shall mean the improvements to the Premises described on the Final Construction Drawings (as defined below). All Tenant Improvements made to the Premises shall be performed by Tenant. Subject to the reimbursement limitations set forth in section 2.2 below, the Tenant Improvements shall be paid for from the Tenant Improvement Allowance (as defined below) or shall be paid for by Tenant, at Tenant's sole cost and expense. The Tenant Improvements to be constructed by Tenant shall include, but shall not be limited to, demolition, concrete work, iron work, rough and finish carpentry, insulation, sheet metal, glass and glazing, doors, door frames and hardware, dry wall, acoustical ceiling, flooring, painting and wall coverings, accessories and partitions, kitchen equipment, fire extinguishers and cabinets, window coverings, plumbing, HVAC equipment, relocation of existing and installation of new fire sprinkler heads, electrical, prefabricated partitions, telephone systems, cabling systems, final clean-up and labor, miscellaneous specialties, planning, engineering, plan checking, permitting, architectural and other design costs, general contractor and subcontractor general conditions, overhead and profit, moving and insurance costs. Compliance with the Americans with Disabilities Act and all other handicap regulations relating to the construction of the Tenant Improvements or the use or occupancy of the Premises shall be paid for by Tenant from the Tenant Improvement Allowance or Tenant's own funds.

        2.     Tenant Improvement Allowance.

        2.1    Tenant Improvement Allowance.    Tenant shall be entitled to a Tenant Improvement Allowance (the "Tenant Improvement Allowance") in a total amount equal to One Million Dollars ($1,000,000). The Tenant Improvement Allowance shall be used, subject to the limitations set forth in section 2.2 below, to reimburse Tenant for the costs it incurs relating to the initial design and construction of the Tenant Improvements. In no event shall Landlord be obligated to make disbursements pursuant to this Work Letter Agreement in a total amount which exceeds the Tenant Improvement Allowance. Any portion of the Tenant Improvement Allowance not disbursed in accordance with this Work Letter Agreement shall be retained by Landlord and shall no longer be available to Tenant for any purpose.

        2.2    Disbursement of the Tenant Improvement Allowance.    

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        3.     Space Plan and Construction Drawings.

        3.1    Space Plan.    Attached hereto as Exhibit 1 is a space plan describing the improvements Tenant will make to the Premises (the "Space Plan"). The Space Plan provides for the construction of six radiation cells, four of which will be built initially, and two of which are hereby approved by Landlord, but may be built by Tenant at a later date.

        3.2    Construction Drawings.    Tenant shall use an architect reasonably acceptable to Landlord to prepare construction drawings for the improvements described on the Space Plan (the "Architect"). In addition, Tenant shall retain engineering consultants (the "Engineers") that are reasonably acceptable to Landlord to prepare all plans and engineering drawings relating to the structural, mechanical, electrical, plumbing, HVAC, life safety, and sprinkler work in the Premises. The plans and specifications to be prepared by Architect and the Engineers hereunder shall reflect only the improvements described on the final Space Plan and shall be known collectively as the "Construction Drawings." Tenant and Architect shall verify, in the field, the dimensions of the Premises and the conditions at the Premises, and Tenant and Architect shall be solely responsible for the same, and Landlord shall have no

55


responsibility in connection therewith. Landlord's review of the Construction Drawings are for its sole benefit and Landlord shall have no liability to Tenant or Tenant's Agents arising out of or based on Landlord's review. Accordingly, notwithstanding that any Construction Drawings are reviewed by Landlord or its space planner, architect, engineers and consultants, and notwithstanding any advice or assistance which may be rendered to Tenant or Tenant's Agents by Landlord or Landlord's space planner, architect, engineers and consultants, Landlord shall have no liability whatsoever in connection therewith and shall not be responsible for any omissions or errors arising therefrom.

        3.3    Preparation of Final Construction Drawings.    Tenant shall promptly cause the Architect and the Engineers to complete the Construction Drawings which shall be comprised of a fully coordinated set of architectural, structural, mechanical, electrical and plumbing working drawings in a form which will allow Tenant to obtain all applicable permits (collectively, the "Final Construction Drawings") and shall submit three (3) copies of the Final Construction Drawings to Landlord for Landlord's approval, which shall not be unreasonably withheld, conditioned or delayed. Landlord shall advise Tenant within ten (10) business days after Landlord's receipt of the Final Construction Drawings for the Premises if the same are unsatisfactory or incomplete in any respect. If Tenant is so advised, Tenant shall immediately revise the Final Construction Drawings to reflect Landlord's comments.

        3.4    Permits and Changes.    The Final Construction Drawings shall be approved by Landlord commencement of construction of the Tenant Improvements. After approval by Landlord of the Final Construction Drawings, Tenant may submit the same to the City of Sunnyvale in order to obtain all applicable building permits. Tenant hereby agrees that neither Landlord nor Landlord's consultants shall be responsible for obtaining any building permits or a certificate of occupancy for the Premises and that obtaining the same shall be Tenant's sole responsibility; provided, however, that Landlord shall cooperate with Tenant in executing permit applications and performing other ministerial acts reasonably necessary to enable Tenant to obtain any such permits or certificate of occupancy. No changes, modifications or alterations in the Final Construction Drawings may be made without the prior written consent of Landlord, which consent shall not be unreasonably withheld or delayed.

        3.5    Compliance with Laws.    Tenant shall be solely responsible for constructing the Tenant Improvements in compliance with all laws. Tenant acknowledges and agrees that it may be obligated to modify, alter or upgrade the existing Premises and the systems therein in order to complete the construction of the Tenant Improvements, and Landlord shall have no liability or responsibility for modifying, altering or upgrading the Premises or its existing systems.

        4.     Construction of Tenant Improvements.

        4.1    Tenant's Selection of Contractors.    

        4.2    Construction of Tenant Improvements by Tenant's Agents.    

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57

        4.3    Notice of Completion; Copy of Record Set of Plans.    Within ten (10) days after completion of construction of the Tenant Improvements, and as a condition to Landlord's final reimbursement of the Tenant Improvement Allowance, Tenant shall cause a Notice of Completion to be recorded in the office of the Recorder of Santa Clara County in accordance with Section 3093 of the Civil Code of the State of California or any successor statute, and shall furnish a copy thereof to Landlord upon such recordation. If Tenant fails to do so, Landlord may execute and file the same on behalf of Tenant as Tenant's agent for such purpose, at Tenant's sole cost and expense. At the conclusion of construction, and as a condition to Landlord's final reimbursement of the Tenant Improvement Allowance, (a) Tenant shall cause the Architect and Contractor (i) to update the Construction Drawings as necessary to reflect all changes made to the Final Construction Drawings during the course of construction, (ii) to certify to the best of their knowledge that the "record-set" of as-built drawings are true and correct and (iii) to deliver to Landlord two (2) sets of copies of such record set of drawings, and (b) Tenant shall deliver to Landlord a copy of all warranties, guaranties, and operating manuals and information relating to the improvements, equipment, and systems in the Premises.

        5.     Completion.    Tenant hereby covenants and agrees to cause the Tenant Improvements to be completed as soon as reasonably possible following the Commencement Date. Subject to the performance by Landlord of its obligations with respect to the funding of the Tenant Improvement Allowance, Tenant agrees to cause the Tenant Improvements to be paid for, at Tenant's sole cost end expense. Tenant shall be primarily obligated to complete the construction of the Tenant Improvements, and the failure of Tenant's Agents to perform their obligations with respect to the construction of the Tenant Improvements shall not relieve Tenant of its obligation to complete the construction of the Tenant Improvements. Tenant acknowledges and agrees that its obligation to pay Base Rent and other amounts due under the Lease as of the Rent Commencement Date is not conditioned on Tenant's completion of the Tenant Improvements prior to the Rent Commencement Date or at any other time.

        6.     Miscellaneous.

        6.1    Tenant's Representative.    Tenant has designated Chris Rearms as its sole representative with respect to the matters set forth in this Work Letter Agreement, and, until further notice to Landlord, Tenant's representative shall have full authority and responsibility to act on behalf of the Tenant as required in this Work Letter Agreement.

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        6.2    Landlord's Representative.    Landlord has designated Kevin Morris as its sole representative with respect to the matters set forth in this Work Letter Agreement, and until further notice to Tenant, Landlords, representative shall have full authority and responsibility to act on behalf of the Landlord as required in this Work Letter Agreement.

        6.3    Time of the Essence.    Unless otherwise indicated, all references herein to a "number of days" shall mean and refer to calendar days. If any item requiring approval is timely disapproved by Landlord, the procedure for preparation of the document and approval thereof shall be repeated until the document is approved by Landlord.

        6.4    Tenant's Default.    Notwithstanding any provision to the contrary contained in the Lease, if Tenant commits a default as defined in section 17.1 of the Lease, and fails to cure such default during any applicable cure period, then, in addition to all other rights and remedies granted to Landlord pursuant to the Lease, Landlord shall have the right to withhold payment of all or any portion of the Tenant Improvement Allowance until such default is cured. The failure of Tenant or Landlord to perform any of Its obligations under this Work Letter Agreement shall constitute a default under the Lease, subject to the applicable cure periods set forth therein.

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Exhibit 1 to Work Letter Agreement

(Space Plan)

        [GRAPHIC OMITTED]

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EXHIBIT F

Addendum to Standard Industrial Lease (the "Lease")
dated the 30th day of June, 2005, Between
The Realty Associates Fund III, L.P. ("Landlord") and
Accuray Incorporated ("Tenant")

        It is hereby agreed by Landlord and Tenant that the provisions of this Addendum are a part of the Lease. If there is a conflict between the terms and conditions of this Addendum and the terms and conditions of the Lease, the terms and conditions of this Addendum shall control. Capitalized terms in this Addendum shall have the same meaning as capitalized terms in the Lease, and, if a Work Letter Agreement is attached to this Lease, as those terms have been defined in the Work Letter Agreement.

        1.     Option to Extend.    Landlord hereby grants to Tenant the option to extend the term of the Lease for one (1) four (4)-year period (the "Extension Option") commencing when the initial lease term expires upon each and all of the following terms and conditions:

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        2.     Building Signage.    Subject to the following terms and conditions, Landlord shall permit Tenant to install, at Tenant's sole cost and expense, a building sign (the "Building Sign") containing Tenant's name above the entrance to the Building:

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        3.     Monument Sign.    Tenant shall have the non-exclusive right to place its name in the lower position on the monument sign located on the corner of Orleans Drive and Moffett Park Drive (the "Monument Sign"). Ion America Corporation has the right to the top position on the Monument Sign. Landlord shall have the right to approve the size, design, location and color of Tenant's name on the Monument Sign, in Landlord's reasonable discretion. Tenant shall maintain its name in good condition. The Monument Sign will include spaces for the names of multiple tenants, and Tenant acknowledges that Landlord may elect to add additional names to the Monument Sign. If Tenant assigns the Lease or subleases the entire Premises, Landlord shall not unreasonably withhold its consent to the modification of the Monument Sign to state the name of the person or entity to whom the Lease is assigned or to whom the Premises is subleased provided that the assignee or subtenant obtains from the City all required approvals and permits.

        4.     Confidentiality.    Landlord acknowledges the confidential nature of the work to be performed by Tenant within the Premises and agrees that it shall use commercially reasonable efforts to keep confidential all confidential information observed or obtained by Landlord regarding any products and other information of or relating to Tenant's business, except to the extent such information is required to be disclosed to a third party by law, which obligation shall survive expiration or sooner termination of this Lease.

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        IN WITNESS WHEREOF, the parties hereto have respectively executed this Addendum.


 
 
By:
/s/  SCOTT W. AMLING      
(Officer)    Scott W. Amling
                Regional Director

 
 
By:
/s/  SCOTT W. AMLING      
(Officer)    Scott W. Amling
                Regional Director

 
 
By:
/s/  CHRIS A. RAANES      
Chris A. Raanes
(print name)

 
 
Its:
Chief Operating Officer
(print name)

 
 
By:
/s/  ROBERT E. MCNAMARA      
Robert E. McNamara
(print name)

 
 
Its:
Chief Financial Officer
(print name)

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QuickLinks

STANDARD INDUSTRIAL LEASE (Multiple Tenant—Tenant Pays its Percentage Share of Operating Expenses, Real Property Taxes and Insurance Costs—NO Base Year)
EXHIBIT A PREMISES
EXHIBIT A
EXHIBIT B
EXHIBIT C RULES AND REGULATIONS GENERAL RULES
PARKING RULES
EXHIBIT D Form of HazMat Certificate General Information
HAZARDOUS MATERIALS/WASTE HANDLING AND STORAGE
WASTEWATER TREATMENT/DISCHARGE
SUBSURFACE OF CONTAINMENT OF HAZARDOUS MATERIALS/WASTES
HAZARDOUS MATERIALS SPILLS
EXHIBIT E WORK LETTER AGREEMENT
Exhibit 1 to Work Letter Agreement (Space Plan)
EXHIBIT F

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Exhibit 10.3


ACCURAY INCORPORATED
1993 STOCK OPTION PLAN

        1.    Purpose.    The Accuray Incorporated 1993 Stock Option Plan (the "Plan") is established to attract, retain and reward persons providing services to Accuray Incorporated and any successor corporation thereto (collectively referred to as the "Company"), and any present or future parent and/or subsidiary corporations of such corporation (all of whom along with the Company being individually referred to as a "Participating Company" and collectively referred to as the "Participating Company Group"), and to motivate such persons to contribute to the growth and profits of the Participating Company Group in the future. For purposes of the Plan, a parent corporation and a subsidiary corporation shall be as defined in sections 424(e) and 424(f) of the Internal Revenue Code of 1986, as amended (the "Code").

        2.    Administration.    The Plan shall be administered by the Board of Directors of the Company (the "Board") and/or by a duly appointed committee of the Board having such powers as shall be specified by the Board. Any subsequent references herein to the Board shall also mean the committee if such committee has been appointed and, unless the powers of the committee have been specifically limited, the committee shall have all of the powers of the Board granted herein, including, without limitation, the power to terminate or amend the Plan at any time, subject to the terms of the Plan and any applicable limitations imposed by law. All questions of interpretation of the Plan or of any options granted under the Plan (an "Option") shall be determined by the Board, and such determinations shall be final and binding upon all persons having an interest in the Plan and/or any Option. Options may be either incentive stock options as defined in section 422 of the Code ("Incentive Stock Options") or nonqualified stock options. Any officer of a Participating Company shall have the authority to act on behalf of the Company with respect to any matter, right, obligation, or election which is the responsibility of or which is allocated to the Company herein, provided the officer has apparent authority with respect to such matter, right, obligation, or election.

        3.    Eligibility.    Options may be granted only to employees (including officers and directors who are also employees) and directors of the Participating Company Group or to individuals who are rendering services as consultants, advisors, or other independent contractors to the Participating Company Group. For purposes of the foregoing sentence, "employees" shall include prospective employees to whom Options are granted in connection with written offers of employment with the Participating Company Group and "consultants" or "advisors" shall include prospective consultants or advisors to whom Options are granted in connection with written consulting or advising offers with the Participating Company Group. The Board shall, in its sole discretion, determine which persons shall be granted Options (an "Optionee"). A director of the Company may only be granted a nonqualified stock option unless the director is also an employee of the Company. An individual who is rendering services as a consultant, advisor, or other independent contractor and an individual granted an option before becoming an employee may only be granted a nonqualified stock option. Eligible persons may be granted more than one (1) Option.

        4.    Shares Subject to Option.    Options shall be for the purchase of shares of the authorized but unissued common stock of the Company (the "Stock"), subject to adjustment as provided in paragraph 9 below. The maximum number of shares of Stock which may be issued under the Plan shall be Four Hundred Thousand (400,000) shares. In the event that any outstanding Option for any reason expires or is terminated or canceled, the shares allocable to the unexercised portion of such Option may again be subject to an Option grant.

        5.    Time for Granting Options.    All Options shall be granted, if at all, within ten (10) years from the earlier of the date the Plan is adopted by the Board or the date the Plan is duly approved by the shareholders of the Company.


        6.    Terms, Conditions and Form of Options.    Subject to the provisions of the Plan, the Board shall determine for each Option (which need not be identical) the number of shares of Stock for which the Option shall be granted, the option exercise price of the Option, the timing and terms of exercisability and vesting of the Option, whether the Option is to be treated as an Incentive Stock Option or as a nonqualified stock option and all other terms and conditions of the Option not inconsistent with the Plan. Options granted pursuant to the Plan shall be evidenced by written agreements specifying the number of shares of Stock covered thereby, in such form as the Board shall from time to time establish, which agreements may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions:

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        7.    Standard Forms of Stock Option Agreement.    

        8.    Authority to Vary Terms.    The Board shall have the authority from time to time to vary the terms of either of the standard forms of Stock Option Agreement described in paragraph 7 above either in connection with the grant of an individual Option or in connection with the authorization of a new standard form or forms; provided, however, that the terms and conditions of such revised or amended standard form or forms of stock option agreement shall be in accordance with the terms of the Plan.

        9.    Effect of Change in Stock Subject to Plan.    Appropriate adjustments shall be made in the number and class of shares of Stock subject to the Plan and to any outstanding Options and in the option exercise price of any outstanding Options in the event of a stock dividend, stock split, reverse stock split, recapitalization, combination, reclassification, or like change in the capital structure of the Company.

        10.    Transfer of Control.    A "Transfer of Control" shall be deemed to have occurred in the event any of the following occurs with respect to the Company:

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        In the event of a Transfer of Control, the Board, in its sole discretion, shall either (i) provide that any unexercisable and/or unvested portion of the outstanding Options shall be immediately exercisable and vested as of a date prior to the Transfer of Control, as the Board so determines, or (ii) arrange with the surviving, continuing, successor, or purchasing corporation or parent corporation thereof, as the case may be (the "Acquiring Corporation"), for the Acquiring Corporation to either assume the Company's rights and obligations under outstanding Options or substitute options for the Acquiring Corporation's stock for such outstanding Options. The exercise and/or vesting of any Option that was permissible solely by reason of this paragraph 10 shall be conditioned upon the consummation of the Transfer of Control. Any Options which are neither assumed or substituted for by the Acquiring Corporation in connection with the Transfer of Control nor exercised as of the date of the Transfer of Control shall terminate and cease to be outstanding effective as of the date of the Transfer of Control.

        11.    Provision of Information.    At least annually, copies of the Company's balance sheet and income statement for the just completed fiscal year shall be made available to each Optionee and purchasers of shares of Stock upon the exercise of an Option. The Company shall not be required to provide such information to persons whose duties in connection with the Company assure them access to equivalent information.

        12.    Options Non-Transferable.    During the lifetime of the Optionee, the Option shall be exercisable only by the Optionee. No Option shall be assignable or transferable by the Optionee, except by will or by the laws of descent and distribution.

        13.    Termination or Amendment of Plan.    The Board, including any duly appointed committee of the Board, may terminate or amend the Plan at any time; provided, however, that without the approval of the Company's shareholders, there shall be (a) no increase in the total number of shares of Stock covered by the Plan (except by operation of the provisions of paragraph 9 above), (b) no change in the class of persons eligible to receive Incentive Stock Options and (c) no expansion in the class of persons eligible to receive nonqualified stock options. In any event, no amendment may adversely affect any then outstanding Option or any unexercised portion thereof, without the consent of the Optionee, unless such amendment is required to enable an Option designated as an Incentive Stock Option to qualify as an Incentive Stock Option.

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THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.


ACCURAY INCORPORATED

INCENTIVE STOCK OPTION AGREEMENT

        Accuray Incorporated, (the "Company"), granted to the individual named below an option to purchase certain shares of common stock of the Company, in the manner and subject to the provisions of this Option Agreement.

        1.    Definitions:    

 
    
   Vested Ratio
    On Initial Vesting Date   1/4

 
 
Plus
 
 

 
 
For each full month
of the Optionee's
continous employment by a
Participating Company from the
Initial Vesting Date
 
1/48

 
 
In no event shall the Vested
Ratio exceed 1/1.
 
 

        2.    Status of the Option.    This Option is intended to be an incentive stock option as described in section 422 of the Code, but the Company does not represent or warrant that this Option qualifies as such. The Optionee should consult with the Optionee's own tax advisors regarding the tax effects of this Option and the requirements necessary to obtain favorable income tax treatment under section 422 of the Code, including, but not limited to, holding period requirements.

        3.    Administration.    All questions of interpretation concerning this Option Agreement shall be determined by the Board of Directors of the Company (the "Board") and/or by a duly appointed committee of the Board having such powers as shall be specified by the Board. Any subsequent references herein to the Board shall also mean the committee if such committee has been appointed and, unless the powers of the committee have been specifically limited, the committee shall have all of the powers of the Board granted in the Plan, including, without limitation, the power to terminate or amend the Plan at any time, subject to the terms of the Plan and any applicable limitations imposed by law. All determinations by the Board shall be final and binding upon all persons having an interest in the Option. Any officer of a Participating Company shall have the authority to act on behalf of the Company with respect to any matter, right, obligation, or election which is the responsibility of or which is allocated to the Company herein, provided the officer has apparent authority with respect to such matter, right, obligation, or election.

        4.    Exercise of the Option.    

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        5.    Non-Transferability of the Option.    The Option may be exercised during the lifetime of the Optionee only by the Optionee or the Optionee's guardian or legal representative as provided under section 422(b)(5) of the Code and may not be assigned or transferred in any manner except by will or by the laws of descent and distribution. Following the death of the Optionee, the Option, to the extent unexercised and exercisable by the Optionee on the date of death, may be exercised by the Optionee's legal representative or by any person empowered to do so under the deceased Optionee's will or under the then applicable laws of descent and distribution.

        6.    Termination of the Option.    The Option shall terminate and may no longer be exercised on the first to occur of (a) the Option Term Date as defined above, (b) the last date for exercising the Option following termination of employment as described in paragraph 7 below, or (c) upon a Transfer of Control as described in paragraph 8 below.

        7.    Termination of Employment.    

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        8.    Transfer of Control.    A "Transfer of Control" shall be deemed to have occurred in the event any of the following occurs with respect to the Company:

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        In the event of a Transfer of Control, the Board shall provide that any unexercised and/or unvested portion of the Option shall be immediately exercisable and vested as of a date prior to the Transfer of Control determined by the Board. The Option shall terminate effective as of the date of the Transfer of Control to the extent that the Option is neither assumed nor substituted by the Acquiring Corporation nor exercised as of the date of the Transfer of Control.

        9.    Effect of Change in Stock Subject to the Option.    Appropriate adjustments shall be made in the number, exercise price and class of shares of stock subject to the Option in the event of a stock dividend, stock split, reverse stock split, recapitalization, combination, reclassification, or like change in the capital structure of the Company. In the event a majority of the shares which are of the same class as the shares that are subject to the Option are exchanged for, converted into, or otherwise become (whether or not pursuant to a Transfer of Control) shares of another corporation (the "New Shares"), the Company may unilaterally amend the Option to provide that the Option is exercisable for New Shares. In the event of any such amendment, the number of shares and the exercise price shall be adjusted in a fair and equitable manner.

        10.    Rights as a Shareholder or Employee.    The Optionee shall have no rights as a shareholder with respect to any shares covered by the Option until the date of the issuance of a certificate or certificates for the shares for which the Option has been exercised. No adjustment shall be made for dividends or distributions or other rights for which the record date is prior to the date such certificate or certificates are issued, except as provided in paragraph 9 above. Nothing in the Option shall confer upon the Optionee any right to continue in the employ of a Participating Company or interfere in any way with any right of the Participating Company Group to terminate the Optionee's employment at any time.

        11.    Right of First Refusal.    

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        12.    Escrow.    

        13.    Stock Dividends Subject to Option Agreement.    If, from time to time, there is any stock dividend, stock split, or other change in the character or amount of any of the outstanding stock of the corporation the stock of which is subject to the provisions of this Option Agreement, then in such event any and all new substituted or additional securities to which the Optionee is entitled by reason of the Optionee's ownership of the shares acquired upon exercise of the Option shall be immediately subject to the Right of First Refusal with the same force and effect as the shares subject to the Right of First Refusal immediately before such event.

        14.    Notice of Sales Upon Disqualifying Disposition.    The Optionee shall dispose of the shares acquired pursuant to the Option only in accordance with the provisions of this Option Agreement. In addition, the Optionee shall promptly notify the Chief Financial Officer of the Company if the Optionee disposes of any of the shares acquired pursuant to the Option within one (1) year from the

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date the Optionee exercises all or part of the Option or within two (2) years of the date of grant of the Option. Until such time as the Optionee disposes of such shares in a manner consistent with the provisions of this Option Agreement, the Optionee shall hold all shares acquired pursuant to the Option in the Optionee's name (and not in the name of any nominee) for the one-year period immediately after exercise of the Option and the two-year period immediately after grant of the Option. At any time during the one-year or two-year periods set forth above, the Company may place a legend or legends on any certificate or certificates representing shares acquired pursuant to the Option requesting the transfer agent for the Company's stock to notify the Company of any such transfers. The obligation of the Optionee to notify the Company of any such transfer shall continue notwithstanding that a legend has been placed on the certificate or certificates pursuant to the preceding sentence.

        15.    Representations and Warranties.    In connection with the proposed purchase of the Option, the Optionee hereby agrees, represents and warrants as follows:

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        16.    Legends.    The Company may at any time place legends referencing the Right of First Refusal set forth in paragraph 11 above, and any applicable federal or state securities law restrictions on all certificates representing shares of stock subject to the provisions of this Option Agreement. The

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Optionee shall, at the request of the Company, promptly present to the Company any and all certificates representing shares acquired pursuant to the Option in the possession of the Optionee in order to effectuate the provisions of this paragraph 16. Unless otherwise specified by the Company, legends placed on such certificates may include, but shall not be limited to, the following:

        17.    Public Offerings.    The Optionee hereby agrees that in the event of any underwritten public offering of stock, including an initial public offering of stock, made by the Company pursuant to an effective registration statement filed under the Securities Act, the Optionee shall not offer, sell, contract to sell, pledge, hypothecate, grant any option to purchase or make any short sale of, or otherwise dispose of any shares of stock of the Company or any rights to acquire stock of the Company for such period of time from and after the effective date of such registration statement as may be established by the underwriter for such public offering; provided, however, that such period of time shall not exceed one hundred eighty (180) days from the effective date of the registration statement to be filed in connection with such public offering. The foregoing limitation shall not apply to shares registered in the initial public offering under the Securities Act.

        18.    Binding Effect.    This Option Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators, successors and assigns.

        19.    Termination or Amendment.    The Board, including any duly appointed committee of the Board, may terminate or amend the Plan and/or the Option at any time; provided, however, that no

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such termination or amendment may adversely affect the Option or any unexercised portion hereof without the consent of the Optionee unless such amendment is required to enable the Option to qualify as an Incentive Stock Option.

        20.    Integrated Agreement.    This Option Agreement constitutes the entire understanding and agreement of the Optionee and the Participating Company Group with respect to the subject matter contained herein, and there are no agreements, understandings, restrictions, representations, or warranties among the Optionee and the Company other than those as set forth or provided for herein. To the extent contemplated herein, the provisions of this Option Agreement shall survive any exercise of the Option and shall remain in full force and effect.

        21.    Applicable Law.    This Option Agreement shall be governed by the laws of the State of California as such laws are applied to agreements between California residents entered into and to be performed entirely within the State of California.

    ACCURAY INCORPORATED

 
 
By:
 

 
 
Title:
 

        The Optionee represents that the Optionee is familiar with the terms and provisions of this Option Agreement, including the Right of First Refusal set forth in paragraph 11, and hereby accepts the Option subject to all of the terms and provisions thereof. The Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Board upon any questions arising under this Option Agreement.

        The undersigned acknowledges receipt of a copy of the Plan.

Date:  
 

        The undersigned, being the spouse of the above-named Optionee, does hereby acknowledge that the undersigned has read and is familiar with the provisions of the above Option Agreement, including, without limitation, the provisions of paragraph 11 providing a right of first refusal in favor of the Company upon certain changes in record ownership, and the undersigned hereby agrees thereto and joins therein to the extent, if any, that the agreement and joinder of the undersigned may be necessary.

       
Spouse's Signature (if applicable)

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THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.


ACCURAY INCORPORATED

NONQUALIFIED STOCK OPTION AGREEMENT

        Accuray Incorporated, (the "Company"), granted to the individual named below an option to purchase certain shares of common stock of the Company, in the manner and subject to the provisions of this Option Agreement.

        1.    Definitions:    

    Vested Ratio

        2.    Status of the Option    This Option is intended to be a nonqualified stock option and shall not be treated as an incentive stock option as described in section 422(b) of the Code.

        3.    Administration    All questions of interpretation concerning this Option Agreement shall be determined by the Board of Directors of the Company (the "Board") and/or by a duly appointed committee of the Board having such powers as shall be specified by the Board. Any subsequent references herein to the Board shall also mean the committee if such committee has been appointed and, unless the powers of the committee have been specifically limited, the committee shall have all of the powers of the Board granted in the Plan, including, without limitation, the power to terminate or amend the Plan at any time, subject to the terms of the Plan and any applicable limitations imposed by law. All determinations by the Board shall be final and binding upon all persons having an interest in the Option. Any officer of a Participating Company shall have the authority to act on behalf of the Company with respect to any matter, right, obligation, or election which is the responsibility of or which is allocated to the Company herein, provided the officer has apparent authority with respect to such matter, right, obligation, or election.

        4.    Exercise of the Option.    

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        5.    Non-Transferability of the Option.    The Option may be exercised during the lifetime of an individual Optionee only by the Optionee or the Optionee's guardian or legal representative as provided under section 422(b)(5) of the Code and may not be assigned or transferred in any manner except by will or by the laws of descent and distribution. Following the death of the Optionee, the Option, to the extent unexercised and exercisable by the Optionee on the date of death, may be exercised by the Optionee's legal representative or by any person empowered to do so under the deceased Optionee's will or under the then applicable laws of descent and distribution. In case of an Optionee which is an entity other than an individual (or partnership or other group of individuals), the Option shall cease to be exercisable upon the dissolution or other winding up of the affairs of the Optionee.

        6.    Termination of the Option.    The Option shall terminate and may no longer be exercised on the first to occur of (a) the Option Term Date as defined above, (b) the last date for exercising the Option following termination of employment as described in paragraph 7 below, or (c) upon a Transfer of Control as described in paragraph 8 below.

        7.    Termination of Employment.    

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        8.    Transfer of Control.    A "Transfer of Control" shall be deemed to have occurred in the event any of the following occurs with respect to the Company:

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        In the event of a Transfer of Control, the Board shall provide that any unexercised and/or unvested portion of the Option shall be immediately exercisable and vested as of a date prior to the Transfer of Control determined by the Board. The Option shall terminate effective as of the date of the Transfer of Control to the extent that the Option is neither assumed nor substituted by the Acquiring Corporation nor exercised as of the date of the Transfer of Control.

        9.    Effect of Chang in Stock Subject to the Option.    Appropriate adjustments shall be made in the number, exercise price and class of shares of stock subject to the Option in the event of a stock dividend, stock split, reverse stock split, recapitalization, combination, reclassification, or like change in the capital structure of the Company. In the event a majority of the shares which are of the same class as the shares that are subject to the Option are exchanged for, converted into, or otherwise become (whether or not pursuant to a Transfer of Control) shares of another corporation (the "New Shares"), the Company may unilaterally amend the Option to provide that the Option is exercisable for New Shares. In the event of any such amendment, the number of shares and the exercise price shall be adjusted in a fair and equitable manner.

        10.    Rights as a Shareholder or Employee.    The Optionee shall have no rights as a shareholder with respect to any shares covered by the Option until the date of the issuance of a certificate or certificates for the shares for which the Option has been exercised. No adjustment shall be made for dividends or distributions or other rights for which the record date is prior to the date such certificate or certificates are issued, except as provided in paragraph 9 above. Nothing in the Option shall confer upon the Optionee any right to continue in the employ of a Participating Company or interfere in any way with any right of the Participating Company Group to terminate the Optionee's employment at any time.

        11.    Right of First Refusal.    

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        12.    Escrow.    

        13.    Stock Dividends Subject to Option Agreement.    If, from time to time, there is any stock dividend, stock split, or other change in the character or amount of any of the outstanding stock of the corporation the stock of which is subject to the provisions of this Option Agreement, then in such event any and all new substituted or additional securities to which the Optionee is entitled by reason of the Optionee's ownership of the shares acquired upon exercise of the Option shall be immediately subject to the Right of First Refusal with the same force and effect as the shares subject to the Right of First Refusal immediately before such event.

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        14.    Representations and Warranties.    In connection with the proposed purchase of the Option, the Optionee hereby agrees, represents and warrants as follows:

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        15.    Legends.    The Company may at any time place legends referencing the Right of First Refusal set forth in paragraph 11 above, and any applicable federal or state securities law restrictions on all certificates representing shares of stock subject to the provisions of this Option Agreement. The Optionee shall, at the request of the Company, promptly present to the Company any and all certificates representing shares acquired pursuant to the Option in the possession of the Optionee in order to effectuate the provisions of this paragraph 15. Unless otherwise specified by the Company, legends placed on such certificates may include, but shall not be limited to, the following:

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        16.    Public Offerings.    The Optionee hereby agrees that in the event of any underwritten public offering of stock, including an initial public offering of stock, made by the Company pursuant to an effective registration statement filed under the Securities Act, the Optionee shall not offer, sell, contract to sell, pledge, hypothecate, grant any option to purchase or make any short sale of, or otherwise dispose of any shares of stock of the Company or any rights to acquire stock of the Company for such period of time from and after the effective date of such registration statement as may be established by the underwriter for such public offering; provided, however, that such period of time shall not exceed one hundred eighty (180) days from the effective date of the registration statement to be filed in connection with such public offering. The foregoing limitation shall not apply to shares registered in the initial public offering under the Securities Act.

        17.    Binding Effect.    This Option Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators, successors and assigns.

        18.    Termination or Amendment.    The Board, including any duly appointed committee of the Board, may terminate or amend the Plan and/or the Option at any time; provided, however, that no such termination or amendment may adversely affect the Option or any unexercised portion hereof without the consent of the Optionee.

        19.    Integrated Agreement.    This Option Agreement constitutes the entire understanding and agreement of the Optionee and the Participating Company Group with respect to the subject matter contained herein, and there are no agreements, understandings, restrictions, representations, or warranties among the Optionee and the Company other than those as set forth or provided for herein. To the extent contemplated herein, the provisions of this Option Agreement shall survive any exercise of the Option and shall remain in full force and effect.

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        20.    Applicable Law.    This Option Agreement shall be governed by the laws of the State of California as such laws are applied to agreements between California residents entered into and to be performed entirely within the State of California.

    ACCURAY INCORPORATED

 
 
By:
 
 

 
 
Title:
 
 

        The Optionee represents that the Optionee is familiar with the terms and provisions of this Option Agreement, including the Right of First Refusal set forth in paragraph 11, and hereby accepts the Option subject to all of the terms and provisions thereof. The Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Board upon any questions arising under this Option Agreement.

        The undersigned acknowledges receipt of a copy of the Plan.

Dated:  
 

        The undersigned, being the spouse of the above-named Optionee, does hereby acknowledge that the undersigned has read and is familiar with the provisions of the above Option Agreement, including, without limitation, the provisions of paragraph 11 providing a right of first refusal in favor of the Company upon certain changes in record ownership, and the undersigned hereby agrees thereto and joins therein to the extent, if any, that the agreement and joinder of the undersigned may be necessary.

       
Spouse's Signature (if applicable)

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Exhibit 10.4


ACCURAY INCORPORATED

1998 EQUITY INCENTIVE PLAN

        1.    Purposes of the Plan.    The purposes of this Equity Incentive Plan are to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to Employees, non-Employee members of the Board and Consultants of the Company and its Parent and Subsidiaries and to promote the success of the Company's business. Options granted under the Plan may be incentive stock options (as defined under Section 422 of the Code) or non-statutory stock options, as determined by the Administrator at the time of grant of an option and subject to the applicable provisions of Section 422 of the Code, as amended, and the regulations promulgated thereunder. Stock purchase rights, stock grants and SARs may also be granted under the Plan.

        2.    Certain Definitions.    As used herein, the following definitions shall apply:

        3.    Stock Subject to the Plan.    Subject to the provisions of Section 13 of the Plan, the maximum aggregate number of Shares which may be optioned, issued or sold under the Plan is 2,341,307 Shares of Common Stock. The Shares may be authorized, but unissued Shares, reacquired Shares, Shares acquired on the open market specifically for distribution under this Plan, or any combination thereof. At no time may the maximum aggregate number of Shares issuable under the Plan exceed 30% of the outstanding common stock on the date hereof, provided, however, that such percentage limitation may be increased with the approval of the holders of 2/3 of the Company's outstanding securities as of the date of such increase.

        If an Option or SAR should expire or become unexercisable for any reason without having been exercised in full, or if shares of Restricted Stock are forfeited, the unused Shares which were subject thereto shall, unless the Plan shall have been terminated, become available for future grant under the Plan.

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        4.    Administration of the Plan.    

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        5.    Eligibility.    

        6.    Vesting.    Options or SARs granted under the Plan shall vest in annual increments of at least 20% over not more than five years from the date of each option grant, provided that the Plan Administrator may provide in any Agreement issued pursuant to the Plan that an option may become fully exercisable, subject to reasonable conditions such as continued employment, at any time or during any period established by the Plan Administrator.

        7.    Term of Plan.    The Plan shall become effective upon the earlier to occur of its adoption by the Board of Directors or its approval by the shareholders of the Company as described in Section 19 of the Plan. It shall continue in effect for a term of ten (10) years unless sooner terminated under Section 15 of the Plan.

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        8.    Terms of Options and SARs.    The term of each Option or SAR shall be the term stated in the written agreement evidencing such Option or SAR; provided, however, that in the case of an Incentive Stock Option, the term shall be no more than ten (10) years from the date of grant thereof or such shorter term as may be provided in the Option Agreement. However, in the case of an Option granted to an Optionee who, at the time the Option is granted, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the term of the Option shall be five (5) years from the date of grant thereof or such shorter term as may be provided in the written agreement evidencing such Option.

        9.    Option Exercise Price and Consideration.    

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        10.    Exercise of Options or SARs.    

        An Option or SAR may not be exercised for a fraction of a Share.

        An Option or SAR shall be deemed to be exercised when written notice of such exercise has been given to the Company in accordance with the terms of the Option or SAR by the person entitled to exercise such Option or SAR and, if an Option is to be exercised, full payment for the Shares with respect to which the Option is exercised has been received by the Company. Full payment may, as authorized by the Administrator, consist of any consideration and method of payment allowable under Section 8(b) of the Plan. Until the issuance (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company) of the stock certificate evidencing such Shares, no right to vote or receive dividends or any other rights as a shareholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued) such stock certificate promptly upon exercise of the Option. No adjustment will be made for a dividend or other right for which the record date is prior to the date the stock certificate is issued, except as provided in Section 13 of the Plan.

        Exercise of an Option or SAR in any manner shall result in a decrease in the number of Shares which thereafter may be available, both for purposes of the Plan and for sale under the Option or SAR, by the number of Shares as to which the Option or SAR is exercised.

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        11.    Non-Transferability of Options or SARs.    The Option or SAR may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Participant, only by the Participant. The terms of the Option or SAR shall be binding upon the executors, administrators, heirs, successors and assigns of the Participant.

        12.    Stock Grants and Stock Purchase Rights.    

        13.    Stock Withholding to Satisfy Withholding Tax Obligations.    At the discretion of the Administrator, Participants may satisfy withholding obligations as provided in this paragraph. When a Participant incurs tax liability in connection with an Option, stock grant, stock purchase right or SAR,

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which tax liability is subject to tax withholding under applicable tax laws, and the Participant is obligated to pay the Company an amount required to be withheld under applicable tax laws, the Participant may satisfy the withholding tax obligation by electing to have the Company withhold from the Shares to be issued upon exercise of the Option or SAR, or the Shares to be issued in connection with the stock grant or stock purchase right, if any, that number of Shares having a Fair Market Value equal to the amount required to be withheld. The Fair Market Value of the Shares to be withheld shall be determined on the date that the amount of tax to be withheld is to be determined (the "Tax Date").

        In the event that the Company elects to make a payment to the Participant in cash upon the exercise of a SAR, the Participant may satisfy the withholding tax obligation by electing to have the Company withhold from such payment the amount required to satisfy such withholding tax obligation.

        All elections by a Participant to have Shares or cash withheld for this purpose, as the case may be, shall be made in writing in a form acceptable to the Administrator and shall be subject to the following restrictions:

        In the event the election to have Shares or cash withheld is made by a Participant and the Tax Date is deferred under Section 83 of the Code because no election is filed under Section 83(b) of the Code, the Participant shall receive the full number of Shares or full amount of cash, as the case may be, with respect to which the Option, stock grant, stock purchase right or SAR is exercised but such Participant shall be unconditionally obligated to tender back to the Company the proper number of Shares, or the proper amount of cash, as the case may be, on the Tax Date.

        14.    Adjustments Upon Changes in Capitalization or Merger.    Subject to any required action by the shareholders of the Company, the number of shares of Common Stock covered by each outstanding Option or SAR, and the number of shares of Common Stock which have been authorized for issuance under the Plan but as to which no Options or SARs have yet been granted or which have been returned to the Plan upon cancellation or expiration of an Option or SAR, as well as the price per share of Common Stock covered by each such outstanding Option or SAR, shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of issued shares of Common Stock effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been "effected without receipt of consideration." Such adjustment shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an Option or SAR.

        In the event of the proposed dissolution or liquidation of the Company, the Board shall notify the Participant at least fifteen (15) days prior to such proposed action. To the extent it has not been previously exercised, the Option or SAR will terminate immediately prior to the consummation of such

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proposed action. In the event of a merger or consolidation of the Company with or into another corporation or the sale of all or substantially all of the Company's assets (hereinafter, a "merger"), the Option or SAR shall be assumed or an equivalent option or stock appreciation right shall be substituted by such successor corporation or a parent or subsidiary of such successor corporation. In the event that such successor corporation does not agree to assume the Option or SAR, or to substitute an equivalent option or stock appreciation right, the Board shall, in lieu of such assumption or substitution, provide for the Participant to have the right to exercise all Options or SARs previously granted to such Participant, including Options or SARs which would not otherwise be exercisable. If the Board makes an Option or SAR fully exercisable in lieu of assumption or substitution in the event of a merger, the Board shall notify the Participant that the Option or SAR shall be fully exercisable for a period of fifteen (15) days from the date of such notice, and the Option or SAR will terminate upon the expiration of such period. For the purposes of this paragraph, the Option or SAR shall be considered assumed if, following the merger, the Option or SAR, confers the right to purchase, or receive the appreciation in Fair Market Value, as the case may be, for each Share of stock subject to the Option or SAR immediately prior to the merger, the consideration (whether stock, cash, or other securities or property) received in the merger by holders of Common Stock for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the merger was not solely common stock of the successor corporation or its Parent, the Board may, with the consent of the successor corporation and the participant, provide for the consideration to be received upon the exercise of the Option or SAR, for each Share of stock subject to the Option or SAR, to be solely common stock of the successor corporation or its Parent equal in Fair Market Value to the per share consideration received by holders of Common Stock in the merger or sale of assets.

        15.    Time of Granting Options.    The date of grant of an Option or SAR shall, for all purposes, be the date on which the Administrator makes the determination granting such Option or SAR, or such other date as is determined by the Board. Notice of the determination shall be given to each Employee or Consultant to whom an Option or SAR is so granted within a reasonable time after the date of such grant.

        16.    Amendment and Termination of the Plan.    

        17.    Conditions Upon Issuance of Shares.    Shares shall not be issued pursuant to the exercise of an Option or SAR unless the exercise of such Option or SAR and the issuance and delivery of such Shares pursuant thereto shall comply with all relevant provisions of law, including, without limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules and regulations promulgated thereunder, and the requirements of any stock exchange upon which the Shares may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance.

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        As a condition to the exercise of an Option or SAR, the Company may require the person exercising such Option or SAR to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required by any of the aforementioned relevant provisions of law.

        18.    Reservation of Shares.    The Company, during the term of this Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan.

        The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company's counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.

        19.    Agreements.    Options, stock grants, stock purchase rights and SARs shall be evidenced by written agreements in such form as the Administrator shall approve from time to time.

        20.    Shareholder Approval.    Continuance of the Plan shall be subject to approval by the shareholders of the Company within twelve (12) months before or after the date the Plan is adopted. Such shareholder approval shall be obtained in the degree and manner required under applicable state and federal law.

        21.    Information to Participants.    The Company shall provide to each Participant, during the period for which such Participant has one or more Options or SARs outstanding, copies of all annual reports and other information which are provided to all shareholders of the Company. Further, the Company shall provide to each such Participant, at least annually, financial statements prepared by management of the Company. The Company shall not be required to provide such information or financial statement if the issuance of Options or SARs under the Plan is limited to key employees whose duties in connection with the Company assure their access to equivalent information.

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OPTION #                                     

THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.

ACCURAY INCORPORATED
1998 EQUITY INCENTIVE PLAN
INCENTIVE STOCK OPTION AGREEMENT

        The Optionee represents that the Optionee is familiar with the terms and provisions of this Option Agreement, including the Right of First Refusal set forth in paragraph 11 and hereby accepts the Option subject to all of the terms and provisions thereof. The Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Board upon any questions arising under this Option Agreement.

Date:  
 
Print name:

        The undersigned, being the spouse of the above-named Optionee, does hereby acknowledge that the undersigned has read and is familiar with the provisions of the above Option Agreement, including, without limitation, the provisions of paragraph 11 providing a right of first refusal in favor of the Company upon certain changes in record ownership, and the undersigned hereby agrees thereto and joins therein to the extent, if any, that the agreement and joinder of the undersigned may be necessary.

Date:  
 
Print name:

        Accuray Incorporated granted to the individual named in the attached Notice of Grant of Stock Options and Option Agreement an option to purchase certain shares of Common Stock of the Company, in the manner and subject to the provisions of this Option Agreement.

        1.    Definitions:    

        2.    Status of the Option.    This Option is intended to be an incentive stock option, but the Company does not represent or warrant that this Option qualifies as such. The Optionee should consult with the Optionee's own tax advisors regarding the tax effects of this Option and the requirements necessary to obtain favorable income tax treatment of Section 422 of the Code, including, but not limited to, holding period requirements.

        3.    Administration.    All questions of interpretation concerning this Option Agreement shall be determined by the Board of Directors of the Company (the "Board") and/or by a duly appointed committee of the Board having such powers as shall be specified by the Board, in accordance with the terms of the Plan. Any subsequent references herein to the Board shall also mean the committee if such committee has been appointed and, unless the powers of the committee have been specifically limited, the committee shall have all of the powers of the Board granted in the Plan, including, without limitation, the power to terminate or amend the Plan at any time, subject to the terms of the Plan and any applicable limitations imposed by law. All determinations by the Board shall be final and binding upon all persons having an interest in the Option.

        4.    Exercise of the Option.    

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        5.    Non-Transferability of the Option.    The Option may be exercised during the lifetime of the Optionee only by the Optionee or the Optionee's guardian or legal representative and may not be assigned or transferred in any manner except by will or by the laws of descent and distribution. Following the death of the Optionee, the Option, to the extent unexercised and exercisable by the Optionee on the date of death, may be exercised by the Optionee's legal representative or by any person empowered to do so under the deceased Optionee's will or under the then applicable laws of descent and distribution.

        6.    Termination of the Option.    The Option shall terminate and may no longer be exercised on the first to occur of (a) the Option Termination Date as defined above, (b) the last date for exercising the Option following termination of employment as described in paragraph 7 below, or (c) upon an "Ownership Change" to the extent provided in paragraph 8 below.

        7.    Termination of Employment.    

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        Except as provided in this paragraph 7(a), the Option shall terminate and may not be exercised after the Optionee ceases to be an employee of the Company.

        8.    Ownership Change.    

        In the event of an Ownership Change, the Option shall terminate and cease to be outstanding effective as of the date of the Ownership Change to the extent that the Option is neither assumed or substituted for in connection with the Ownership Change nor exercised as of the date of the Ownership Change.

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        9.    Effect of Change in Stock Subject to the Option.    Appropriate adjustments shall be made in the number, exercise price and class of shares of stock subject to the Option in the event of a stock dividend, stock split, reverse stock split, recapitalization, combination, reclassification, or like change in the capital structure of the Company. In the event a majority of the shares which are of the same class as the shares that are subject to the Option are exchanged for, converted into, or otherwise become shares of another corporation (the "New Shares"), the Company may unilaterally amend the Option to provide that the Option is exercisable for New Shares. In the event of any such amendment, the number of shares and the exercise price shall be adjusted in a fair and equitable manner.

        10.    Rights as a Shareholder or Employee.    The Optionee shall have no rights as a shareholder with respect to any shares covered by the Option until the date of the issuance of a certificate or certificates for the shares for which the Option has been exercised. No adjustment shall be made for dividends or distributions or other rights for which the record date is prior to the date such certificate or certificates are issued, except as provided in paragraph 9 above. Nothing in the Option shall confer upon the Optionee any right to continue in the employ of the Company or interfere in any way with any right of the Company to terminate the Optionee's employment at any time.

        11.    Right of First Refusal.    

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        12.    Stock Dividends Subject to Option Agreement.    If, from time to time, there is any stock dividend, stock split, or other change in the character or amount of any of the outstanding stock of the corporation the stock of which is subject to the provisions of this Option Agreement, then in such event any and all new substituted or additional securities to which the Optionee is entitled by reason of the Optionee's ownership of the shares acquired upon exercise of the Option shall be immediately subject to the Right of First Refusal with the same force and effect as the shares subject to the Right of First Refusal immediately before such event.

        13.    Notice of Sales Upon Disqualifying Disposition.    The Optionee shall dispose of the shares acquired pursuant to the Option only in accordance with the provisions of this Option Agreement. In addition, the Optionee shall promptly notify the President of the Company if the Optionee disposes of any of the shares acquired pursuant to the Option within one (1) year from the date the Optionee exercises all or part of the Option or within two (2) years of the date of grant of the Option. Until such time as the Optionee disposes of such shares in a manner consistent with the provisions of this Option Agreement, the Optionee shall hold all shares acquired pursuant to the Option in the

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Optionee's name (and not in the name of any nominee) for the one-year period immediately after exercise of the Option and the two-year period immediately after grant of the Option. At any time during the one-year or two-year periods set forth above, the Company may place a legend or legends on any certificate or certificates representing shares acquired pursuant to the Option requesting the transfer agent for the Company's stock to notify the Company of any such transfers. The obligation of the Optionee to notify the company of any such transfer shall continue notwithstanding that a legend has been placed on the certificate or certificates pursuant to the preceding sentence.

        14.    Legends.    The Company may at any time place legends referencing the Right of First Refusal set forth in paragraph 11 above and any applicable federal or state securities law restrictions on all certificates representing shares of stock subject to the provisions of this Option Agreement. The Optionee shall, at the request of the Company, promptly present to the Company any and all certificates representing shares acquired pursuant to the Option in the possession of the Optionee in order to effectuate the provisions of this paragraph 14. Unless otherwise specified by the Company, legends placed on such certificates may include, but shall not be limited to, the following:

        15.    Initial Public Offerings.    The Optionee hereby agrees that in the event of any underwritten public offering of stock, including an initial public offering of stock, made by the Company pursuant to an effective registration statement filed under the Securities Act, the Optionee shall not offer, sell, contract to sell, pledge, hypothecate, grant any option to purchase or make any short sale of, or otherwise dispose of any shares of stock of the Company or any rights to acquire stock of the Company for such period of time from and after the effective date of such registration statement as may be established by the underwriter for such public offering; provided, however, that such period of time shall not exceed one hundred eighty (180) days from the effective date of the registration statement to be filed in connection with such public offering. The foregoing limitation shall not apply to shares registered in the initial public offering under the Securities Act. The Optionee shall be subject to this paragraph provided and only if the officers and directors of the Company are also subject to similar arrangements.

        16.    Binding Effect.    This Option Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators, successors and assigns.

        17.    Termination or Amendment.    The Board, including any duly appointed committee of the Board, may terminate or amend the Plan at any time; provided, however, that no such action shall

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deprive any person, without such person's consent, of any rights previously granted pursuant to this Option Agreement.

        18.    Incorporation of Terms of Plan; Integrated Agreement.    The terms of the Plan are incorporated herein by reference. This Option Agreement constitutes the entire understanding and agreement of the Optionee and the Company with respect to the subject matter contained herein, and there are no agreements, understandings, restrictions, representations, or warranties among the Optionee and the Company other than those as set forth or provided for herein. To the extent contemplated herein, the provisions of this Option Agreement shall survive any exercise of the Option and shall remain in full force and effect.

        19.    Applicable Law.    This Option Agreement shall be governed by and construed in accordance with the laws of the State of California without regard to its choice of law provisions.

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OPTION #                                     

THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.

ACCURAY INCORPORATED
1998 EQUITY INCENTIVE PLAN


NONQUALIFIED STOCK OPTION AGREEMENT

        The Optionee represents that the Optionee is familiar with the terms and provisions of this Option Agreement, including the Right of First Refusal set forth in paragraph 11 and hereby accepts the Option subject to all of the terms and provisions thereof. The Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Board upon any questions arising under this Option Agreement.

Date:  
 
Print name:

        The undersigned, being the spouse of the above-named Optionee, does hereby acknowledge that the undersigned has read and is familiar with the provisions of the above Option Agreement, including, without limitation, the provisions of paragraph 11 providing a right of first refusal in favor of the Company upon certain changes in record ownership, and the undersigned hereby agrees thereto and joins therein to the extent, if any, that the agreement and joinder of the undersigned may be necessary.

Date:  
 
Print name:

        Accuray Incorporated granted to the individual named in the attached Notice of Grant of Stock Options and Option Agreement an option to purchase certain shares of Common Stock of the Company, in the manner and subject to the provisions of this Option Agreement.

        1.    Definitions:    

        2.    Status of the Option.    This Option is intended to be a nonqualified stock option and shall not be treated as an incentive stock option described in Section 422 of the Code.

        3.    Administration.    All questions of interpretation concerning this Option Agreement shall be determined by the Board of Directors of the Company (the "Board") and/or by a duly appointed committee of the Board having such powers as shall be specified by the Board, in accordance with the terms of the Plan. Any subsequent references herein to the Board shall also mean the committee if such committee has been appointed and, unless the powers of the committee have been specifically limited, the committee shall have all of the powers of the Board granted in the Plan, including, without limitation, the power to terminate or amend the Plan at any time, subject to the terms of the Plan and any applicable limitations imposed by law. All determinations by the Board shall be final and binding upon all persons having an interest in the Option.

        4.    Exercise of the Option.    

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        5.    Non-Transferability of the Option.    The Option may be exercised during the lifetime of the Optionee only by the Optionee or the Optionee's guardian or legal representative and may not be assigned or transferred in any manner except by will or by the laws of descent and distribution. Following the death of the Optionee, the Option, to the extent unexercised and exercisable by the Optionee on the date of death, may be exercised by the Optionee's legal representative or by any person empowered to do so under the deceased Optionee's will or under the then applicable laws of descent and distribution.

        6.    Termination of the Option.    The Option shall terminate and may no longer be exercised on the first to occur of (a) the Option Termination Date as defined above, (b) the last date for exercising the Option following termination of employment as described in paragraph 7 below, or (c) upon an "Ownership Change" to the extent provided in paragraph 8 below.

        7.    Termination of Employment.    

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        Except as provided in this paragraph 7(a), the Option shall terminate and may not be exercised after the Optionee, if an employee on the date the option is granted, ceases to be an employee of the Company.

        8.    Ownership Change.    An "Ownership Change" shall be deemed to have occurred in the event any of the following occurs with respect to the Company:

        In the event of an Ownership Change, the Option shall terminate and cease to be outstanding effective as of the date of the Ownership Change to the extent that the Option is neither assumed or substituted for in connection with the Ownership Change nor exercised as of the date of the Ownership Change.

        9.    Effect of Change in Stock Subject to the Option.    Appropriate adjustments shall be made in the number, exercise price and class of shares of stock subject to the Option in the event of a stock dividend, stock split, reverse stock split, recapitalization, combination, reclassification, or like change in the capital structure of the Company. In the event a majority of the shares which are of the same class as the shares that are subject to the Option are exchanged for, converted into, or otherwise become

4


shares of another corporation (the "New Shares"), the Company may unilaterally amend the Option to provide that the Option is exercisable for New Shares. In the event of any such amendment, the number of shares and the exercise price shall be adjusted in a fair and equitable manner.

        10.    Rights as a Shareholder or Employee.    The Optionee shall have no rights as a shareholder with respect to any shares covered by the Option until the date of the issuance of a certificate or certificates for the shares for which the Option has been exercised. No adjustment shall be made for dividends or distributions or other rights for which the record date is prior to the date such certificate or certificates are issued, except as provided in paragraph 9 above. Nothing in the Option shall confer upon the Optionee any right to continue in the employ of the Company or, in the case of an Optionee who is an employee on the date the option is granted, interfere in any way with any right of the Company to terminate the Optionee's employment at any time.

        11.    Right of First Refusal.    

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        12.    Stock Dividends Subject to Option Agreement.    If, from time to time, there is any stock dividend, stock split, or other change in the character or amount of any of the outstanding stock of the corporation the stock of which is subject to the provisions of this Option Agreement, then in such event any and all new substituted or additional securities to which the Optionee is entitled by reason of the Optionee's ownership of the shares acquired upon exercise of the Option shall be immediately subject to the Right of First Refusal with the same force and effect as the shares subject to the Right of First Refusal immediately before such event.

        13.   Legends.    The Company may at any time place legends referencing the Right of First Refusal set forth in paragraph 11 above and any applicable federal or state securities law restrictions on all certificates representing shares of stock subject to the provisions of this Option Agreement. The Optionee shall, at the request of the Company, promptly present to the Company any and all certificates representing shares acquired pursuant to the Option in the possession of the Optionee in order to effectuate the provisions of this paragraph 13. Unless otherwise specified by the Company, legends placed on such certificates may include, but shall not be limited to, the following:

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        14.    Initial Public Offerings.    The Optionee hereby agrees that in the event of any underwritten public offering of stock, including an initial public offering of stock, made by the Company pursuant to an effective registration statement filed under the Securities Act, the Optionee shall not offer, sell, contract to sell, pledge, hypothecate, grant any option to purchase or make any short sale of, or otherwise dispose of any shares of stock of the Company or any rights to acquire stock of the Company for such period of time from and after the effective date of such registration statement as may be established by the underwriter for such public offering; provided, however, that such period of time shall not exceed one hundred eighty (180) days from the effective date of the registration statement to be filed in connection with such public offering. The foregoing limitation shall not apply to shares registered in the initial public offering under the Securities Act. The Optionee shall be subject to this paragraph provided and only if the officers and directors of the Company are also subject to similar arrangements.

        15.    Binding Effect.    This Option Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators, successors and assigns.

        16.    Termination or Amendment.    The Board, including any duly appointed committee of the Board, may terminate or amend the Plan at any time; provided, however, that no such action shall deprive any person, without such person's consent, of any rights previously granted pursuant to this Option Agreement.

        17.    Incorporation of Terms of Plan; Integrated Agreement.    The terms of the Plan are incorporated herein by reference. This Option Agreement constitutes the entire understanding and agreement of the Optionee and the Company with respect to the subject matter contained herein, and there are no agreements, understandings, restrictions, representations, or warranties among the Optionee and the Company other than those as set forth or provided for herein. To the extent contemplated herein, the provisions of this Option Agreement shall survive any exercise of the Option and shall remain in full force and effect.

        18.    Applicable Law.    This Option Agreement shall be governed by and construed in accordance with the laws of the State of California without regard to its choice of law provisions.

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ACCURAY INCORPORATED 1998 EQUITY INCENTIVE PLAN
NONQUALIFIED STOCK OPTION AGREEMENT

Exhibit 10.7

ACCURAY INCORPORATED

INDEMNIFICATION AGREEMENT

        This Indemnification Agreement ("Agreement") is effective as of                        , 2006, by and between Accuray Incorporated, a Delaware corporation (the "Company"), and                         ("Indemnitee").

        A.    The Company recognizes the continued difficulty in obtaining liability insurance for its directors, officers, employees, controlling persons, fiduciaries and other agents and affiliates, the significant increases in the cost of such insurance and the general reductions in the coverage of such insurance.

        B.    The Company further recognizes the substantial increase in corporate litigation in general, subjecting directors, officers, employees, controlling persons, fiduciaries and other agents and affiliates to expensive litigation risks at the same time as the availability and coverage of liability insurance has been severely limited.

        C.    The current protection available to directors, officers, employees, controlling persons, fiduciaries and other agents and affiliates of the Company may not be adequate under the present circumstances, and directors, officers, employees, controlling persons, fiduciaries and other agents and affiliates of the Company (or persons who may be alleged or deemed to be the same), including the Indemnitee, may not be willing to continue to serve or be associated with the Company in such capacities without additional protection.

        D.    The Company (a) desires to attract and retain the involvement of highly qualified persons, such as Indemnitee, to serve and be associated with the Company, and (b) accordingly, wishes to provide for the indemnification and advancement of expenses to the Indemnitee to the maximum extent permitted by law.

        E.    In view of the considerations set forth above, the Company desires that Indemnitee shall be indemnified and advanced expenses by the Company as set forth herein.

        In consideration of the mutual promises and covenants contained herein, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

        1.    Certain Definitions.    

        (a)   "Change in Control" shall be deemed to have occurred if, on or after the date of this Agreement, (i) any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company acting in such capacity or a corporation owned directly or indirectly by the shareholders of the Company in substantially the same proportions as their ownership of stock of the Company, becomes the "beneficial owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing more than 50% of the total voting power represented by the Company's then outstanding Voting Securities (as defined below), (ii) during any period of two (2) consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the Company and any new director whose election by the Board of Directors or nomination for election by the Company's shareholders was approved by a vote of at least two thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof, or (iii) the shareholders of the Company approve a merger or consolidation of the Company with any other corporation other than a merger or consolidation which would result in the Voting Securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity) at least 80% of the total voting power represented by the Voting Securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or


(iv) the shareholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of (in one transaction or a series of related transactions) all or substantially all of the Company's assets.

        (b)   "Claim" shall mean with respect to a Covered Event (as defined below): any threatened, asserted, pending or completed action, suit, proceeding or alternative dispute resolution mechanism, or any hearing, inquiry or investigation that Indemnitee in good faith believes might lead to the institution of any such action, suit, proceeding or alternative dispute resolution mechanism, whether civil, criminal, administrative, investigative or other.

        (c)   References to the "Company" shall include, in addition to Accuray Incorporated, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger to which Accuray Incorporated (or any of its wholly owned subsidiaries) is a party, which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees, agents or fiduciaries, so that if Indemnitee is or was a director, officer, employee, agent or fiduciary of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee, agent or fiduciary of another corporation, partnership, joint venture, employee benefit plan, trust or other enterprise, Indemnitee shall stand in the same position under the provisions of this Agreement with respect to the resulting or surviving corporation as Indemnitee would have with respect to such constituent corporation if its separate existence had continued.

        (d)   "Covered Event" shall mean any event or occurrence related to the fact that Indemnitee is or was a director, officer, employee, agent or fiduciary of the Company, or any subsidiary of the Company, or is or was serving at the request of the Company as a director, officer, employee, agent or fiduciary of another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action or inaction on the part of Indemnitee while serving in such capacity.

        (e)   "Expenses" shall mean any and all losses, claims, damages expenses and liabilities, joint or several (including attorneys' fees and all other costs, expenses and obligations incurred in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to defend, to be a witness in or to participate in, any action, suit, proceeding, alternative dispute resolution mechanism, hearing, inquiry or investigation), judgments, fines, penalties and amounts paid in settlement (if such settlement is approved in advance by the Company, which approval shall not be unreasonably withheld) actually and reasonably incurred, of any Claim and any federal, state, local or foreign taxes imposed on the Indemnitee as a result of the actual or deemed receipt of any payments under this Agreement.

        (f)    "Expense Advance" shall mean a payment to Indemnitee pursuant to Section 3 of Expenses in advance of the settlement of or final judgement in any action, suit, proceeding or alternative dispute resolution mechanism, hearing, inquiry or investigation, which constitutes a Claim.

        (g)   "Independent Legal Counsel" shall mean an attorney or firm of attorneys, selected in accordance with the provisions of Section 2(d) hereof, who shall not have otherwise performed services for the Company or Indemnitee within the last three (3) years (other than with respect to matters concerning the rights of Indemnitee under this Agreement, or of other indemnitees under similar indemnity agreements).

        (h)   References to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on Indemnitee with respect to an employee benefit plan; and references to "serving at the request of the Company" shall include any service as a director, officer, employee, agent or fiduciary of the Company which imposes duties on, or involves services by, such director, officer, employee, agent or fiduciary with respect to an employee benefit plan, its participants or its beneficiaries; and if Indemnitee acted in good faith and in a manner Indemnitee reasonably

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believed to be in the interest of the participants and beneficiaries of an employee benefit plan, Indemnitee shall be deemed to have acted in a manner "not opposed to the best interests of the Company" as referred to in this Agreement.

        (i)    "Reviewing Party" shall mean, subject to the provisions of Section 2(d), any person or body appointed by the Board of Directors in accordance with applicable law to review the Company's obligations hereunder and under applicable law, which may include a member or members of the Company's Board of Directors, Independent Legal Counsel or any other person or body not a party to the particular Claim for which Indemnitee is seeking indemnification.

        (j)    "Section" refers to a section of this Agreement unless otherwise indicated.

        (k)   "Voting Securities" shall mean any securities of the Company that vote generally in the election of directors.

        2.    Indemnification.    

        (a)    Indemnification of Expenses.    Subject to the provisions of Section 2(b) below, the Company shall indemnify Indemnitee for Expenses to the fullest extent permitted by law if Indemnitee was or is or becomes a party to or witness or other participant in, or is threatened to be made a party to or witness or other participant in, any Claim (whether by reason of or arising in part out of a Covered Event), including all interest, assessments and other charges incurred in connection with or in respect of such Expenses.

        (b)    Review of Indemnification Obligations.    Notwithstanding the foregoing, in the event any Reviewing Party shall have determined (in a written opinion, in any case in which Independent Legal Counsel is the Reviewing Party) that Indemnitee is not entitled to be indemnified hereunder under applicable law, (i) the Company shall have no further obligation under Section 2(a) to make any payments to Indemnitee not made prior to such determination by such Reviewing Party and (ii) the Company shall be entitled to be reimbursed by Indemnitee (who hereby agrees to reimburse the Company) for all Expenses theretofore paid in indemnifying Indemnitee (within thirty (30) days after such determination); provided, however, that if Indemnitee has commenced or thereafter commences legal proceedings in a court of competent jurisdiction to secure a determination that Indemnitee is entitled to be indemnified hereunder under applicable law, any determination made by any Reviewing Party that Indemnitee is not entitled to be indemnified hereunder under applicable law shall not be binding and Indemnitee shall not be required to reimburse the Company for any Expenses theretofore paid in indemnifying Indemnitee until a final judicial determination is made with respect thereto (as to which all rights of appeal therefrom have been exhausted or lapsed). Indemnitee's obligation to reimburse the Company for any Expenses shall be unsecured and no interest shall be charged thereon.

        (c)    Indemnitee Rights on Unfavorable Determination; Binding Effect.    If any Reviewing Party determines that Indemnitee substantively is not entitled to be indemnified hereunder in whole or in part under applicable law, Indemnitee shall have the right to commence litigation seeking an initial determination by the court or challenging any such determination by such Reviewing Party or any aspect thereof, including the legal or factual bases therefor, and, subject to the provisions of Section 15, the Company hereby consents to service of process and to appear in any such proceeding. Absent such litigation, any determination by any Reviewing Party shall be conclusive and binding on the Company and Indemnitee.

        (d)    Selection of Reviewing Party; Change in Control.    If there has not been a Change in Control, any Reviewing Party shall be selected by the Board of Directors, and if there has been such a Change in Control (other than a Change in Control which has been approved by a majority of the Company's Board of Directors who were directors immediately prior to such Change in Control), any Reviewing Party with respect to all matters thereafter arising concerning the rights of Indemnitee to indemnification of Expenses under this Agreement or any other agreement or under the Company's

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Certificate of Incorporation or bylaws as now or hereafter in effect, or under any other applicable law, if desired by Indemnitee, shall be Independent Legal Counsel selected by the Indemnitee and approved by Company (which approval shall not be unreasonably withheld). Such counsel, among other things, shall render its written opinion to the Company and Indemnitee as to whether and to what extent Indemnitee would be entitled to be indemnified hereunder under applicable law and the Company agrees to abide by such opinion. The Company agrees to pay the reasonable fees of the Independent Legal Counsel referred to above and to indemnify fully such counsel against any and all expenses (including attorneys' fees), claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto. Notwithstanding any other provision of this Agreement, the Company shall not be required to pay Expenses of more than one Independent Legal Counsel in connection with all matters concerning a single Indemnitee, and such Independent Legal Counsel shall be the Independent Legal Counsel for any or all other Indemnitees unless (i) the Company otherwise determines or (ii) any Indemnitee shall provide a written statement setting forth in detail a reasonable objection to such Independent Legal Counsel representing other Indemnitees.

        (e)    Mandatory Payment of Expenses.    Notwithstanding any other provision of this Agreement other than Section 10 hereof, to the extent that Indemnitee has been successful on the merits or otherwise, including, without limitation, the dismissal of an action without prejudice, in defense of any Claim, Indemnitee shall be indemnified against all Expenses incurred by Indemnitee in connection therewith.

        (f)    Contribution.    If the indemnification provided for in this Agreement is for any reason held by a court of competent jurisdiction to be unavailable to an Indemnitee, then in lieu of indemnifying Indemnitee thereunder, the Company shall contribute to the amount paid or payable by Indemnitee as a result of such Expenses (i) in such proportion as is appropriate to reflect the relative benefits received by the Company and Indemnitee, or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company and Indemnitee in connection with the action or inaction which resulted in such Expenses, as well as any other relevant equitable considerations. In connection with the registration of the Company's securities, the relative benefits received by the Company and Indemnitee shall be deemed to be in the same respective proportions that the net proceeds from the offering (before deducting expenses) received by the Company and Indemnitee, in each case as set forth in the table on the cover page of the applicable prospectus, bear to the aggregate public offering price of the securities so offered. The relative fault of the Company and Indemnitee shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or Indemnitee and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

        The Company and Indemnitee agree that it would not be just and equitable if contribution pursuant to this Section 2(f) were determined by pro rata or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. In connection with the registration of the Company's securities, in no event shall Indemnitee be required to contribute any amount under this Section 2(f) in excess of the net proceeds received by Indemnitee from its sale of securities under such registration statement. No person found guilty of fraudulent misrepresentation (within the meaning of Section 11(1) of the Securities Act) shall be entitled to contribution from any person who was not found guilty of such fraudulent misrepresentation.

        3.    Expense Advances.    

        (a)    Obligation to Make Expense Advances.    The Company shall make Expense Advances to Indemnitee upon receipt of a written undertaking by or on behalf of the Indemnitee to repay such

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amounts if it shall ultimately be determined that the Indemnitee is not entitled to be indemnified therefor by the Company.

        (b)    Form of Undertaking.    Any written undertaking by the Indemnitee to repay any Expense Advances hereunder shall be unsecured and no interest shall be charged thereon.

        4.    Procedures for Indemnification and Expense Advances.    

        (a)    Timing of Payments.    All payments of Expenses (including without limitation Expense Advances) by the Company to the Indemnitee pursuant to this Agreement shall be made to the fullest extent permitted by law as soon as practicable after written demand by Indemnitee therefor is presented to the Company, but in no event later than forty-five (45) days after such written demand by Indemnitee is presented to the Company, except in the case of Expense Advances, which shall be made no later than twenty (20) days after such written demand by Indemnitee is presented to the Company.

        (b)    Notice/Cooperation by Indemnitee.    Indemnitee shall, as a condition precedent to Indemnitee's right to be indemnified or Indemnitee's right to receive Expense Advances under this Agreement, give the Company notice in writing as soon as practicable of any Claim made against Indemnitee for which indemnification will or could be sought under this Agreement. Notice to the Company shall be directed to the President or Chief Executive Officer of the Company at the address shown on the signature page of this Agreement (or such other address as the Company shall designate in writing to Indemnitee). In addition, Indemnitee shall give the Company such information and cooperation as it may reasonably require and as shall be within Indemnitee's power.

        (c)    No Presumptions; Burden of Proof.    For purposes of this Agreement, the termination of any Claim by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere, or its equivalent, shall not create a presumption that Indemnitee did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by this Agreement or applicable law. In addition, neither the failure of any Reviewing Party to have made a determination as to whether Indemnitee has met any particular standard of conduct or had any particular belief, nor an actual determination by any Reviewing Party that Indemnitee has not met such standard of conduct or did not have such belief, prior to the commencement of legal proceedings by Indemnitee to secure a judicial determination that Indemnitee should be indemnified under this Agreement or applicable law, shall be a defense to Indemnitee's claim or create a presumption that Indemnitee has not met any particular standard of conduct or did not have any particular belief. In connection with any determination by any Reviewing Party or otherwise as to whether the Indemnitee is entitled to be indemnified hereunder, the burden of proof shall be on the Company to establish that Indemnitee is not so entitled.

        (d)    Notice to Insurers.    If, at the time of the receipt by the Company of a notice of a Claim pursuant to Section 4(b) hereof, the Company has liability insurance in effect which may cover such Claim, the Company shall give prompt notice of the commencement of such Claim to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such Claim in accordance with the terms of such policies.

        (e)    Selection of Counsel.    In the event the Company shall be obligated hereunder to provide indemnification for or make any Expense Advances with respect to the Expenses of any Claim, the Company, if appropriate, shall be entitled to assume the defense of such Claim with counsel approved by Indemnitee (which approval shall not be unreasonably withheld) upon the delivery to Indemnitee of written notice of the Company's election to do so. After delivery of such notice, approval of such counsel by Indemnitee and the retention of such counsel by the Company, the Company will not be liable to Indemnitee under this Agreement for any fees or expenses of separate counsel subsequently employed by or on behalf of Indemnitee with respect to the same Claim; provided, however, that

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(i) Indemnitee shall have the right to employ Indemnitee's separate counsel in any such Claim at Indemnitee's expense and (ii) if (A) the employment of separate counsel by Indemnitee has been previously authorized by the Company, (B) Indemnitee shall have reasonably concluded that there may be a conflict of interest between the Company and Indemnitee in the conduct of any such defense, or (C) the Company shall not continue to retain such counsel to defend such Claim, then the fees and expenses of Indemnitee's separate counsel shall be Expenses for which Indemnitee may receive indemnification or Expense Advances hereunder. The Company shall have the right to conduct such defense as it sees fit in its sole discretion, including the right to settle any claim, action or proceeding against Indemnitee without the consent of Indemnitee, provided that the terms of such settlement include either: (i) a full release of Indemnitee by the claimant from all liabilities or potential liabilities under such claim; or (ii), in the event such full release is not obtained, the terms of such settlement do not limit any indemnification right Indemnitee may now, or hereafter, be entitled to under this Agreement, the Company's Certificate of Incorporation, bylaws, any agreement, any vote of shareholders or disinterested directors, the General Corporation Law of the State of Delaware (the "DGCL") or otherwise.

        5.    Additional Indemnification Rights; Nonexclusivity.    

        (a)    Scope.    The Company hereby agrees to indemnify the Indemnitee to the fullest extent permitted by law, notwithstanding that such indemnification is not specifically authorized by the other provisions of this Agreement, the Company's Certificate of Incorporation, the Company's bylaws or by statute. In the event of any change after the date of this Agreement in any applicable law, statute or rule which expands the right of a Delware corporation to indemnify a member of its board of directors or an officer, employee, agent or fiduciary, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits afforded by such change. In the event of any change in any applicable law, statute or rule which narrows the right of a Delaware corporation to indemnify a member of its board of directors or an officer, employee, agent or fiduciary, such change, to the extent not otherwise required by such law, statute or rule to be applied to this Agreement, shall have no effect on this Agreement or the parties' rights and obligations hereunder except as set forth in Section 10(a) hereof.

        (b)    Nonexclusivity.    The indemnification and the payment of Expense Advances provided by this Agreement shall be in addition to any rights to which Indemnitee may be entitled under the Company's Certificate of Incorporation, its bylaws, any other agreement, any vote of shareholders or disinterested directors, the DGCL, or otherwise. The indemnification and the payment of Expense Advances provided under this Agreement shall continue as to Indemnitee for any action taken or not taken while serving in an indemnified capacity even though subsequent thereto Indemnitee may have ceased to serve in such capacity.

        6.    No Duplication of Payments.    The Company shall not be liable under this Agreement to make any payment in connection with any Claim made against Indemnitee to the extent Indemnitee has otherwise actually received payment (under any insurance policy, provision of the Company's Certificate of Incorporation, bylaws or otherwise) of the amounts otherwise payable hereunder.

        7.    Partial Indemnification.    If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of Expenses incurred in connection with any Claim, but not, however, for the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion of such Expenses to which Indemnitee is entitled.

        8.    Mutual Acknowledgment.    Both the Company and Indemnitee acknowledge that in certain instances, federal law or applicable public policy may prohibit the Company from indemnifying its directors, officers, employees, agents or fiduciaries under this Agreement or otherwise. Indemnitee understands and acknowledges that the Company may be required in the future to undertake with the

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Securities and Exchange Commission to submit the question of indemnification to a court in certain circumstances for a determination of the Company's right under public policy to indemnify Indemnitee.

        9.    Liability Insurance.    To the extent the Company maintains liability insurance applicable to directors, officers, employees, agents or fiduciaries, Indemnitee shall be covered by such policies in such a manner as to provide Indemnitee the same rights and benefits as are provided to the most favorably insured of the Company's directors, if Indemnitee is a director; or of the Company's officers, if Indemnitee is not a director of the Company but is an officer; or of the Company's key employees, agents or fiduciaries, if Indemnitee is not an officer or director but is a key employee, agent or fiduciary.

        10.    Exceptions.    Notwithstanding any other provision of this Agreement, the Company shall not be obligated pursuant to the terms of this Agreement:

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        11.    Counterparts.    This Agreement may be executed in counterparts and by facsimile or electronic transmission, each of which shall constitute an original and all of which, together, shall constitute one instrument.

        12.    Binding Effect; Successors and Assigns.    This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors, assigns, including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Company, spouses, heirs, and personal and legal representatives. The Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all, or a substantial part, of the business and/or assets of the Company, by written agreement in form and substance satisfactory to Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place. This Agreement shall continue in effect regardless of whether Indemnitee continues to serve as a director, officer, employee, agent or fiduciary (as applicable) of the Company or of any other enterprise at the Company's request.

        13.    Expenses Incurred in Action Relating to Enforcement or Interpretation.    In the event that any action is instituted by Indemnitee under this Agreement or under any liability insurance policies maintained by the Company to enforce or interpret any of the terms hereof or thereof, Indemnitee shall be entitled to be indemnified for all Expenses incurred by Indemnitee with respect to such action (including without limitation attorneys' fees), regardless of whether Indemnitee is ultimately successful in such action, unless as a part of such action a court having jurisdiction over such action makes a final judicial determination (as to which all rights of appeal therefrom have been exhausted or lapsed) that each of the material assertions made by Indemnitee as a basis for such action was not made in good faith or was frivolous; provided, however, that until such final judicial determination is made, Indemnitee shall be entitled under Section 3 to receive payment of Expense Advances hereunder with respect to such action. In the event of an action instituted by or in the name of the Company under this Agreement to enforce or interpret any of the terms of this Agreement, Indemnitee shall be entitled to be indemnified for all Expenses incurred by Indemnitee in defense of such action (including without limitation costs and expenses incurred with respect to Indemnitee's counterclaims and cross-claims made in such action), unless as a part of such action a court having jurisdiction over such action makes a final judicial determination (as to which all rights of appeal therefrom have been exhausted or lapsed) that each of the material defenses asserted by Indemnitee in such action was made in bad faith or was frivolous; provided, however, that until such final judicial determination is made, Indemnitee shall be entitled under Section 3 to receive payment of Expense Advances hereunder with respect to such action.

        14.    Notices.    All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed duly given (i) if delivered by hand and signed for by the party addressed, on the date of such delivery, or (ii) if mailed by domestic certified or registered mail with postage prepaid, on the third business day after the date postmarked. Addresses for notice to either party are as shown on the signature page of this Agreement or as subsequently modified by written notice.

        15.    Consent to Jurisdiction.    The Company and Indemnitee each hereby irrevocably consent to the jurisdiction of the courts of the State of Delaware for all purposes in connection with any action or proceeding which arises out of or relates to this Agreement and agree that any action instituted under this Agreement shall be commenced, prosecuted and continued only in the Court of Chancery of the State of Delaware in and for Kent County, which shall be the exclusive and only proper forum for adjudicating such a claim.

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        16.    Severability.    The provisions of this Agreement shall be severable in the event that any of the provisions hereof (including any provision within a single section, paragraph or sentence) are held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable, and the remaining provisions shall remain enforceable to the fullest extent permitted by law. Furthermore, to the fullest extent possible, the provisions of this Agreement (including without limitation each portion of this Agreement containing any provision held to be invalid, void or otherwise unenforceable, that is not itself invalid, void or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.

        17.    Choice of Law.    This Agreement, and all rights, remedies, liabilities, powers and duties of the parties to this Agreement, shall be governed by and construed in accordance with the laws of the State of Delaware without regard to principles of conflicts of laws.

        18.    Subrogation.    In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all documents required and shall do all acts that may be necessary to secure such rights and to enable the Company effectively to bring suit to enforce such rights.

        19.    Amendment and Termination.    No amendment, modification, termination or cancellation of this Agreement shall be effective unless it is in writing signed by both the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed to be or shall constitute a waiver of any other provisions hereof (whether or not similar), nor shall such waiver constitute a continuing waiver.

        20.    Integration and Entire Agreement.    This Agreement sets forth the entire understanding between the parties hereto and supersedes and merges all previous written and oral negotiations, commitments, understandings and agreements relating to the subject matter hereof between the parties hereto.

        21.    No Construction as Employment Agreement.    Nothing contained in this Agreement shall be construed as giving Indemnitee any right to employment by the Company or any of its subsidiaries or affiliated entities.

(The remainder of this page is intentionally left blank.)

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        IN WITNESS WHEREOF, the parties hereto have executed this Indemnification Agreement as of the date first above written.

    ACCURAY INCORPORATED

 
 
By:
 

 
 
Name:
 

 
 
Title:
 

 
 
Address:
Accuray Incorporated
1310 Chesapeake Terrace
Sunnyvale, CA 94089
Attn: Chief Financial Officer

 
 
AGREED TO AND ACCEPTED BY:

 
 
INDEMNITEE:

  
 
 
 
   

 
 
Name:
 
     

 
 
Address:
 
     

 
 
 
 
     

 
 
 
 
     

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Exhibit 10.8

[ACCURAY LETTERHEAD]

November 10, 2006

Euan Thomson, Ph.D.

Dear Euan:

        Accuray Incorporated (the "Company") is pleased to offer to continue your employment as President and Chief Executive Officer of the Company on the terms and conditions set forth in this letter, effective as of November 10, 2006 (the "Effective Date"). This letter amends and restates in its entirety that certain employment letter, dated as of January 25, 2002, between you and the Company (the "Original Employment Letter").

        1.     TERM.    The employment relationship between you and the Company will be at-will. You and the Company will have the right to terminate the employment relationship at any time and for any reason whatsoever, with or without cause, and without any liability or obligation except as may be expressly provided herein.

        2.     POSITION, DUTIES AND RESPONSIBILITIES.    During the period of the employment relationship between you and the Company (the "Term"), the Company will employ you, and you agree to be employed by the Company, as Chief Executive Officer of the Company. In the capacity of Chief Executive Officer, you will have such duties and responsibilities as are normally associated with such position and will devote your full business time and attention serving the Company in such position. Your duties may be changed from time to time by the Company, consistent with your position. You will report to the Board of Directors of the Company (the "Board"), and will work full-time at our principal offices located at 1310 Chesapeake Terrace, Sunnyvale, California 94089 (or such other location in the greater Sunnyvale area as the Company may utilize as its principal offices), except for travel to other locations as may be necessary to fulfill your responsibilities.

        3.     BASE COMPENSATION.    During the Term, the Company will pay you a base salary of $420,000 per year, less payroll deductions and all required withholdings, payable in accordance with the Company's normal payroll practices and prorated for any partial month of employment. Your base salary may be subject to increase pursuant to the Company's policies as in effect from time to time.

        4.     ANNUAL BONUS.    In addition to the base salary set forth above, during the Term, you will be eligible to participate in the Company's executive bonus plan applicable to similarly situated executives of the Company. The amount of your annual bonus will be based on the attainment of performance criteria established and evaluated by the Company in accordance with the terms of such bonus plan as in effect from time to time, provided that, subject to the terms of such bonus plan, your target (but not necessarily maximum) annual bonus shall be 60% of your base salary actually paid for such year.

        5.     STOCK OPTION AWARDS.

        6.     BENEFITS AND VACATION.    During the Term, you will be eligible to participate in all incentive, savings and retirement plans, practices, policies and programs maintained or sponsored by the Company from time to time which are applicable to other similarly situated executives of the Company, subject to the terms and conditions thereof. During the Term, you will also be eligible for standard benefits, such as medical, vision and dental insurance, sick leave, vacations and holidays to the extent applicable generally to other similarly situated executives of the Company, subject to the terms and conditions of the applicable Company plans or policies. The benefits described in this Section 6 will be subject to change from time to time as deemed appropriate and necessary by the Company.

        7.     TERMINATION OF EMPLOYMENT.

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        8.     CODE SECTION 280G.

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        9.     RESTRICTIVE COVENANTS.

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        10.   COMPANY RULES AND REGULATIONS.    As an employee of the Company, you agree to abide by Company policies, procedures, rules and regulations as set forth in the Company's Employee Handbook or as otherwise promulgated. In addition, as a condition of your employment, you acknowledge that you and the Company have entered into that certain Employee Confidentiality and Inventions Agreement dated as of March 11, 2002, and you hereby agree to abide by the terms of that certain Employee Confidentiality and Inventions Agreement dated as of March 11, 2002, by and between you and the Company.

        11.   DIRECTORS' AND OFFICERS' INSURANCE.    During the Term, the Company shall provide you with coverage under the Company's directors' and officers' insurance policy, as in effect from time to time for senior executives of the Company.

        12.   WITHHOLDING.    The Company may withhold from any amounts payable under this letter such federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.

        13.   ARBITRATION.    Except as set forth in Section 9(e) above, any disagreement, dispute, controversy or claim arising out of or relating to this letter or the interpretation of this letter or any arrangements relating to this letter or contemplated in this letter or the breach, termination or invalidity thereof shall be settled by final and binding arbitration administered by JAMS/Endispute in Santa Clara County, California in accordance with the then existing JAMS/Endispute Arbitration Rules and Procedures for Employment Disputes. Except as provided herein, the Federal Arbitration Act shall govern the interpretation, enforcement and all proceedings. The arbitrator shall apply the substantive law (and the law of remedies, if applicable) of the state of California, or federal law, or both, as applicable, and the arbitrator is without jurisdiction to apply any different substantive law. The arbitrator shall have the authority to entertain a motion to dismiss and/or a motion for summary judgment by any party and shall apply the standards governing such motions under the Federal Rules of Civil Procedure. Judgment upon the award may be entered in any court having jurisdiction thereof. Each party shall pay his or its own attorneys' fees and expenses associated with such arbitration to the extent permitted by applicable law.

        14.   ENTIRE AGREEMENT.    As of the Effective Date, this letter, together with the Stock Option Agreement, constitutes the final, complete and exclusive agreement between you and the Company with respect to the subject matter hereof and replaces and supersedes any and all other agreements, offers or promises, whether oral or written, made to you by any member of the Company Group (including, without limitation, the Original Employment Letter).

        15.   SEVERABILITY.    Whenever possible, each provision of this letter will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this letter is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such

5


invalidity, illegality or unenforceability will not affect any other provision of this letter, but such invalid, illegal or unenforceable provision will be reformed, construed and enforced so as to render it valid, legal, and enforceable consistent with the intent of the parties insofar as possible.

        16.   ACKNOWLEDGEMENT.    You hereby acknowledge (a) that you have consulted with or have had the opportunity to consult with independent counsel of your own choice concerning this letter, and have been advised to do so by the Company, and (b) that you have read and understand this letter, are fully aware of its legal effect, and have entered into it freely based on your own judgment.

        17.   SECTION 409A OF THE CODE.    To the extent that any payments or benefits under this letter are deemed to be subject to Section 409A of the Code, this letter will be interpreted in accordance with Section 409A of the Code and Department of Treasury regulations and other interpretive guidance issued thereunder in order to (a) preserve the intended tax treatment of the benefits provided with respect to such payments and (b) comply with the requirements of Section 409A of the Code.

[SIGNATURE PAGE FOLLOWS]

6

        Please confirm your agreement to the foregoing by signing and dating the enclosed duplicate original of this letter in the space provided below for your signature and returning it to the Company. Please retain one fully-executed original for your files.

      Sincerely,

 
 
 
ACCURAY INCORPORATED,
a California corporation

 
 
 
By:
/s/ Wayne Wu
        Name: Wayne Wu
Title: Chairman

Accepted and Agreed,
this 10th day of November, 2006.
 
 
 

By:
/s/ Euan Thomson
 
 
 

7


EXHIBIT A

        For purposes of this letter, "Change in Control" means and includes each of the following:

        (a)   A transaction or series of transactions (other than an offering of the Company's common stock to the general public through a registration statement filed with the Securities and Exchange Commission) whereby any "person" or related "group" of "persons" (as such terms are used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (other than the Company, any of its subsidiaries, an employee benefit plan maintained by the Company or any of its subsidiaries or a "person" that, prior to such transaction, directly or indirectly controls, is controlled by, or is under common control with, the Company) directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company possessing more than 50% of the total combined voting power of the Company's securities outstanding immediately after such acquisition; or

        (b)   During any period of two consecutive years, individuals who, at the beginning of such period, constitute the Board together with any new director(s) (other than a director designated by a person who shall have entered into an agreement with the Company to effect a transaction described in clause (a) or clause (c) hereof) whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the two-year period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or

        (c)   The consummation by the Company (whether directly involving the Company or indirectly involving the Company through one or more intermediaries) of (x) a merger, consolidation, reorganization, or business combination or (y) a sale or other disposition of all or substantially all of the Company's assets in any single transaction or series of related transactions or (z) the acquisition of assets or stock of another entity, in each case other than a transaction:

        (d)   The Company's stockholders approve a liquidation or dissolution of the Company.



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EXHIBIT A

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Exhibit 10.9

[ACCURAY LETTERHEAD]

November 10, 2006

Chris A. Raanes

Dear Chris:

        Accuray Incorporated (the "Company") is pleased to offer to continue your employment as Senior Vice President, Chief Operating Officer of the Company on the terms and conditions set forth in this letter, effective as of November 10, 2006 (the "Effective Date"). This letter amends and restates in its entirety that certain employment letter, dated as of July 24, 2002, between you and the Company (the "Original Employment Letter").

        1.     TERM.    The employment relationship between you and the Company will be at-will. You and the Company will have the right to terminate the employment relationship at any time and for any reason whatsoever, with or without cause, and without any liability or obligation except as may be expressly provided herein.

        2.     POSITION, DUTIES AND RESPONSIBILITIES.    During the period of the employment relationship between you and the Company (the "Term"), the Company will employ you, and you agree to be employed by the Company, as Senior Vice President, Chief Operating Officer of the Company. In the capacity of Senior Vice President, Chief Operating Officer, you will have such duties and responsibilities as are normally associated with such position and will devote your full business time and attention serving the Company in such position. Your duties may be changed from time to time by the Company, consistent with your position. You will report to the Chief Executive Officer of the Company (the "CEO"), and will work full-time at our principal offices located at 1310 Chesapeake Terrace, Sunnyvale, California 94089 (or such other location in the greater Sunnyvale area as the Company may utilize as its principal offices), except for travel to other locations as may be necessary to fulfill your responsibilities.

        3.     BASE COMPENSATION.    During the Term, the Company will pay you a base salary of $290,000 per year, less payroll deductions and all required withholdings, payable in accordance with the Company's normal payroll practices and prorated for any partial month of employment. Your base salary may be subject to increase pursuant to the Company's policies as in effect from time to time.

        4.     ANNUAL BONUS.    In addition to the base salary set forth above, during the Term, you will be eligible to participate in the Company's executive bonus plan applicable to similarly situated executives of the Company. The amount of your annual bonus will be based on the attainment of performance criteria established and evaluated by the Company in accordance with the terms of such bonus plan as in effect from time to time, provided that, subject to the terms of such bonus plan, your target (but not necessarily maximum) annual bonus shall be 40% of your base salary actually paid for such year.

        5.     BENEFITS AND VACATION.    During the Term, you will be eligible to participate in all incentive, savings and retirement plans, practices, policies and programs maintained or sponsored by the Company from time to time which are applicable to other similarly situated executives of the Company, subject to the terms and conditions thereof. During the Term, you will also be eligible for standard benefits, such as medical, vision and dental insurance, sick leave, vacations and holidays to the extent applicable generally to other similarly situated executives of the Company, subject to the terms and conditions of the applicable Company plans or policies. The benefits described in this Section 5 will be subject to change from time to time as deemed appropriate and necessary by the Company.

        6.     TERMINATION OF EMPLOYMENT.

2

        7.     CODE SECTION 280G.

        8.     RESTRICTIVE COVENANTS.

3

        9.     COMPANY RULES AND REGULATIONS.    As an employee of the Company, you agree to abide by Company policies, procedures, rules and regulations as set forth in the Company's Employee Handbook or as otherwise promulgated. In addition, as a condition of your employment, you acknowledge that you and the Company have entered into that certain Employee Confidentiality and Inventions Agreement dated as of September 1, 2002, and you hereby agree to abide by the terms of that certain Employee Confidentiality and Inventions Agreement dated as of September 1, 2002, by and between you and the Company.

        10.   WITHHOLDING.    The Company may withhold from any amounts payable under this letter such federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.

        11.   ARBITRATION.    Except as set forth in Section 8(e) above, any disagreement, dispute, controversy or claim arising out of or relating to this letter or the interpretation of this letter or any arrangements relating to this letter or contemplated in this letter or the breach, termination or invalidity thereof shall be settled by final and binding arbitration administered by JAMS/Endispute in Santa Clara County, California in accordance with the then existing JAMS/Endispute Arbitration Rules and Procedures for Employment Disputes. Except as provided herein, the Federal Arbitration Act shall govern the interpretation, enforcement and all proceedings. The arbitrator shall apply the substantive law (and the law of remedies, if applicable) of the state of California, or federal law, or both, as applicable, and the arbitrator is without jurisdiction to apply any different substantive law. The arbitrator shall have the authority to entertain a motion to dismiss and/or a motion for summary judgment by any party and shall apply the standards governing such motions under the Federal Rules of Civil Procedure. Judgment upon the award may be entered in any court having jurisdiction thereof.

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Each party shall pay his or its own attorneys' fees and expenses associated with such arbitration to the extent permitted by applicable law.

        12.   ENTIRE AGREEMENT.    As of the Effective Date, this letter constitutes the final, complete and exclusive agreement between you and the Company with respect to the subject matter hereof and replaces and supersedes any and all other agreements, offers or promises, whether oral or written, made to you by any member of the Company Group (including, without limitation, the Original Employment Letter).

        13.   SEVERABILITY.    Whenever possible, each provision of this letter will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this letter is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision of this letter, but such invalid, illegal or unenforceable provision will be reformed, construed and enforced so as to render it valid, legal, and enforceable consistent with the intent of the parties insofar as possible.

        14.   ACKNOWLEDGEMENT.    You hereby acknowledge (a) that you have consulted with or have had the opportunity to consult with independent counsel of your own choice concerning this letter, and have been advised to do so by the Company, and (b) that you have read and understand this letter, are fully aware of its legal effect, and have entered into it freely based on your own judgment.

        15.   SECTION 409A OF THE CODE.    To the extent that any payments or benefits under this letter are deemed to be subject to Section 409A of the Code, this letter will be interpreted in accordance with Section 409A of the Code and Department of Treasury regulations and other interpretive guidance issued thereunder in order to (a) preserve the intended tax treatment of the benefits provided with respect to such payments and (b) comply with the requirements of Section 409A of the Code.

[SIGNATURE PAGE FOLLOWS]

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        Please confirm your agreement to the foregoing by signing and dating the enclosed duplicate original of this letter in the space provided below for your signature and returning it to Euan Thomson, Ph.D., Chief Executive Officer of the Company. Please retain one fully-executed original for your files.

      Sincerely,

 
 
 
ACCURAY INCORPORATED,
a California corporation

 
 
 
By:
/s/ Euan Thomson
        Name: Euan Thomson, Ph.D.
Title: Chief Executive Officer

Accepted and Agreed,
this 10th day of November, 2006.
 
 
 

By:
/s/ Chris A. Raanes
 
 
 

6


EXHIBIT A

        For purposes of this letter, "Change in Control" means and includes each of the following:

        (a)   A transaction or series of transactions (other than an offering of the Company's common stock to the general public through a registration statement filed with the Securities and Exchange Commission) whereby any "person" or related "group" of "persons" (as such terms are used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (other than the Company, any of its subsidiaries, an employee benefit plan maintained by the Company or any of its subsidiaries or a "person" that, prior to such transaction, directly or indirectly controls, is controlled by, or is under common control with, the Company) directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company possessing more than 50% of the total combined voting power of the Company's securities outstanding immediately after such acquisition; or

        (b)   During any period of two consecutive years, individuals who, at the beginning of such period, constitute the Board of Directors of the Company together with any new director(s) (other than a director designated by a person who shall have entered into an agreement with the Company to effect a transaction described in clause (a) or clause (c) hereof) whose election by the Board of Directors of the Company or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the two-year period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or

        (c)   The consummation by the Company (whether directly involving the Company or indirectly involving the Company through one or more intermediaries) of (x) a merger, consolidation, reorganization, or business combination or (y) a sale or other disposition of all or substantially all of the Company's assets in any single transaction or series of related transactions or (z) the acquisition of assets or stock of another entity, in each case other than a transaction:

        (d)   The Company's stockholders approve a liquidation or dissolution of the Company.



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EXHIBIT A

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Exhibit 10.10

[ACCURAY LETTERHEAD]

November 10, 2006

Robert E. McNamara

Dear Robert:

        Accuray Incorporated (the "Company") is pleased to offer to continue your employment as Senior Vice President, Chief Financial Officer of the Company on the terms and conditions set forth in this letter, effective as of November 10, 2006 (the "Effective Date"). This letter amends and restates in its entirety that certain employment letter, dated as of December 7, 2004, between you and the Company (the "Original Employment Letter").

        1.     TERM.    The employment relationship between you and the Company will be at-will. You and the Company will have the right to terminate the employment relationship at any time and for any reason whatsoever, with or without cause, and without any liability or obligation except as may be expressly provided herein.

        2.     POSITION, DUTIES AND RESPONSIBILITIES.    During the period of the employment relationship between you and the Company (the "Term"), the Company will employ you, and you agree to be employed by the Company, as Senior Vice President, Chief Financial Officer of the Company. In the capacity of Senior Vice President, Chief Financial Officer, you will have such duties and responsibilities as are normally associated with such position and will devote your full business time and attention serving the Company in such position. Your duties may be changed from time to time by the Company, consistent with your position. You will report to the Chief Executive Officer of the Company (the "CEO"), and will work full-time at our principal offices located at 1310 Chesapeake Terrace, Sunnyvale, California 94089 (or such other location in the greater Sunnyvale area as the Company may utilize as its principal offices), except for travel to other locations as may be necessary to fulfill your responsibilities.

        3.     BASE COMPENSATION.    During the Term, the Company will pay you a base salary of $275,000 per year, less payroll deductions and all required withholdings, payable in accordance with the Company's normal payroll practices and prorated for any partial month of employment. Your base salary may be subject to increase pursuant to the Company's policies as in effect from time to time.

        4.     ANNUAL BONUS.    In addition to the base salary set forth above, during the Term, you will be eligible to participate in the Company's executive bonus plan applicable to similarly situated executives of the Company. The amount of your annual bonus will be based on the attainment of performance criteria established and evaluated by the Company in accordance with the terms of such bonus plan as in effect from time to time, provided that, subject to the terms of such bonus plan, your target (but not necessarily maximum) annual bonus shall be 40% of your base salary actually paid for such year.

        5.     BENEFITS AND VACATION.    During the Term, you will be eligible to participate in all incentive, savings and retirement plans, practices, policies and programs maintained or sponsored by the Company from time to time which are applicable to other similarly situated executives of the Company, subject to the terms and conditions thereof. During the Term, you will also be eligible for standard benefits, such as medical, vision and dental insurance, sick leave, vacations and holidays to the extent applicable generally to other similarly situated executives of the Company, subject to the terms and conditions of the applicable Company plans or policies. The benefits described in this Section 5 will be subject to change from time to time as deemed appropriate and necessary by the Company.

        6.     TERMINATION OF EMPLOYMENT; CHANGE IN CONTROL.

2

        7.     CODE SECTION 280G.

        8.     RESTRICTIVE COVENANTS.

3

        9.     COMPANY RULES AND REGULATIONS.    As an employee of the Company, you agree to abide by Company policies, procedures, rules and regulations as set forth in the Company's Employee Handbook or as otherwise promulgated. In addition, as a condition of your employment, you acknowledge that you and the Company have entered into that certain Employee Confidentiality and Inventions Agreement dated as of December 13, 2004, and you hereby agree to abide by the terms of that certain Employee Confidentiality and Inventions Agreement dated as of December 13, 2004, by and between you and the Company.

        10.   WITHHOLDING.    The Company may withhold from any amounts payable under this letter such federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.

        11.   ARBITRATION.    Except as set forth in Section 8(e) above, any disagreement, dispute, controversy or claim arising out of or relating to this letter or the interpretation of this letter or any arrangements relating to this letter or contemplated in this letter or the breach, termination or invalidity thereof shall be settled by final and binding arbitration administered by JAMS/Endispute in Santa Clara County, California in accordance with the then existing JAMS/Endispute Arbitration Rules and Procedures for Employment Disputes. Except as provided herein, the Federal Arbitration Act shall govern the interpretation, enforcement and all proceedings. The arbitrator shall apply the substantive law (and the law of remedies, if applicable) of the state of California, or federal law, or both, as applicable, and the arbitrator is without jurisdiction to apply any different substantive law. The arbitrator shall have the authority to entertain a motion to dismiss and/or a motion for summary judgment by any party and shall apply the standards governing such motions under the Federal Rules

4


of Civil Procedure. Judgment upon the award may be entered in any court having jurisdiction thereof. Each party shall pay his or its own attorneys' fees and expenses associated with such arbitration to the extent permitted by applicable law.

        12.   ENTIRE AGREEMENT.    As of the Effective Date, this letter constitutes the final, complete and exclusive agreement between you and the Company with respect to the subject matter hereof and replaces and supersedes any and all other agreements, offers or promises, whether oral or written, made to you by any member of the Company Group (including, without limitation, the Original Employment Letter).

        13.   SEVERABILITY.    Whenever possible, each provision of this letter will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this letter is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision of this letter, but such invalid, illegal or unenforceable provision will be reformed, construed and enforced so as to render it valid, legal, and enforceable consistent with the intent of the parties insofar as possible.

        14.   ACKNOWLEDGEMENT.    You hereby acknowledge (a) that you have consulted with or have had the opportunity to consult with independent counsel of your own choice concerning this letter, and have been advised to do so by the Company, and (b) that you have read and understand this letter, are fully aware of its legal effect, and have entered into it freely based on your own judgment.

        15.   SECTION 409A OF THE CODE.    To the extent that any payments or benefits under this letter are deemed to be subject to Section 409A of the Code, this letter will be interpreted in accordance with Section 409A of the Code and Department of Treasury regulations and other interpretive guidance issued thereunder in order to (a) preserve the intended tax treatment of the benefits provided with respect to such payments and (b) comply with the requirements of Section 409A of the Code.

[SIGNATURE PAGE FOLLOWS]

5

        Please confirm your agreement to the foregoing by signing and dating the enclosed duplicate original of this letter in the space provided below for your signature and returning it to Euan Thomson, Ph.D., Chief Executive Officer of the Company. Please retain one fully-executed original for your files.

      Sincerely,

 
 
 
ACCURAY INCORPORATED,
a California corporation

 
 
 
By:
/s/ Euan Thomson
        Name: Euan Thomson, Ph.D.
Title: Chief Executive Officer

Accepted and Agreed,
this 9th day of November, 2006.
 
 
 

By:
/s/ Robert E. McNamara
 
 
 

6


EXHIBIT A

        For purposes of this letter, "Change in Control" means and includes each of the following:

        (a)   A transaction or series of transactions (other than an offering of the Company's common stock to the general public through a registration statement filed with the Securities and Exchange Commission) whereby any "person" or related "group" of "persons" (as such terms are used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (other than the Company, any of its subsidiaries, an employee benefit plan maintained by the Company or any of its subsidiaries or a "person" that, prior to such transaction, directly or indirectly controls, is controlled by, or is under common control with, the Company) directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company possessing more than 50% of the total combined voting power of the Company's securities outstanding immediately after such acquisition; or

        (b)   During any period of two consecutive years, individuals who, at the beginning of such period, constitute the Board of Directors of the Company together with any new director(s) (other than a director designated by a person who shall have entered into an agreement with the Company to effect a transaction described in clause (a) or clause (c) hereof) whose election by the Board of Directors of the Company or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the two-year period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or

        (c)   The consummation by the Company (whether directly involving the Company or indirectly involving the Company through one or more intermediaries) of (x) a merger, consolidation, reorganization, or business combination or (y) a sale or other disposition of all or substantially all of the Company's assets in any single transaction or series of related transactions or (z) the acquisition of assets or stock of another entity, in each case other than a transaction:

        (d)   The Company's stockholders approve a liquidation or dissolution of the Company.



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EXHIBIT A

Exhibit 10.11

[Accuray, Incorporated Letterhead]

July 22, 2004

Dear Dr. Allison:

        We are pleased to extend to you a position with Accuray Incorporated as Vice President of Engineering. Working in this capacity, you will report directly to me and have primary responsibility for Research, Development and Engineering at Accuray. This letter sets out the terms of your employment with the Company, which will start on August 9th, 2004.

        You will receive a salary of $205,000 annually ("Base Salary"), paid in accordance with the Company's regular payroll practices and subject to applicable withholdings. In addition, you will be eligible for an annual bonus of up to 40% of your earned Base Salary under Accuray's executive bonus plan, subject to applicable withholdings, based upon certain performance goals set for you and based on company achievements. You will also receive an additional one-time bonus of $20,000 payable after 6 months of full employment by Accuray. In addition, you will be entitled to participate in all of the benefit programs that Accuray makes available to its employees.

        As an added incentive, we will recommend to the Board of Directors and subject to their approval that you receive an Option to purchase 250,000 shares of Accuray common stock priced at the fair market value on the date of the grant ("Option") as determined by the Board. Your option will vest over a period of four years as follows: 25% on the anniversary of your Start Date, the remainder to vest in equal monthly parts (1/48th) thereafter. The Option will be subject to the terms and conditions of the Company's 1998 Stock Option Plan and Stock Option Agreement, which you will be required to sign as a condition precedent to receiving the Option.

        We will recommend to the Board of Directors that you be an Officer of the company. This will be subject to Board approval.

        In the event of change of control of the company, and, subsequently, you are terminated or constructively terminated (your job responsibilities or compensation substantially reduced, or you are required to relocate more than 40 miles from Accuray's current location), upon your termination, your options will vest immediately, and you will be entitled to 6 months of your Base Salary.

        If you join Accuray, your employment with the Company will be "at-will" and for no specified term. "At will" means that you are free to resign your position with the Company at any time, with or without cause or advance notice, as you deem appropriate. Similarly the Company has the right to terminate your employment at any time, without cause or advance notice. As a condition of your employment, you will be required to sign the Company's Employee Confidentiality and Assignment of Inventions Agreement, and provide the company with documents establishing your identity and right to work in the United States. These documents must be provided to the Company within three days after your employment Start Date or you may be subject to termination in accordance with Federal Immigration laws.

        In the event of any dispute or claim relating to or arising out of your employment relationship with the Company, or the termination or your employment with Company for any reason (including, but not limited to, any claims of breach of contract, wrongful termination, or age, sex, race, national origin, disability or other discrimination or harassment), you and the Company agree that all such disputes shall be fully, finally and exclusively resolved by binding arbitration conducted by the American Arbitration Association in Santa Clara County, CA. You and the Company hereby waive your respective rights to have any such disputes or claims tried by a judge or jury. Notwithstanding the foregoing, however, this arbitration provision shall not apply to any claims for injunctive relief by you or the Company or any relief sought to enforce the provisions of the employee Confidentiality and Assignment of Inventions Agreement or relating to the or arising out of the misuse or appropriation of the trade secrets or proprietary information.


        To indicate your acceptance of this offer, please sign and date this letter on the spaces below and return it to us no later than July 26, 2004. A duplicate original is enclosed for your records. This agreement, the Confidentiality and Assignment of Inventions Agreement, the Stock Option Plan and the Stock Option Agreement constitute the entire agreement between you and the Company regarding the terms and conditions of your employment, and they supersede all prior negotiations, representations or agreements between you and the Company. The Stock Option Plan and the Stock Option Agreement will be forwarded to you upon execution of this Employment Agreement and the Confidentiality and Assignment of Inventions Agreement. The provisions of this agreement regarding "at-will" employment and arbitration may only be modified by a written agreement signed by you and the Chief Executive Officer of the Company.

        I am excited to have you as part of the Accuray team and look forward to your contributions to the success of Accuray.

Sincerely,    

/s/  CHRIS A. RAANES      
Chris A. Raanes
Chief Operating Officer
 
 

        I accept the above terms of employment as stated, and I understand that my employment with the Company is at-will and for no specified term.

/s/  JOHN W. ALLISON      
   7/23/04
John W. Allison, Ph.D.   Date



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Exhibit 10.12


[Accuray Letterhead]

        November 10, 2006

Dear Eric:

        Accuray Incorporated (the "Company") is pleased to offer to continue your employment as Senior Vice President, Chief Marketing Officer of the Company on the terms and conditions set forth in this letter, effective as of November 10, 2006 (the "Effective Date"). This letter amends and restates in its entirety that certain employment letter, dated as of October 11, 2004, between you and the Company (the "Original Employment Letter").

        1.     Term. The employment relationship between you and the Company will be at-will. You and the Company will have the right to terminate the employment relationship at any time and for any reason whatsoever, with or without cause, and without any liability or obligation except as may be expressly provided herein.

        2.     Position, Duties and Responsibilities. During the period of the employment relationship between you and the Company (the "Term"), the Company will employ you, and you agree to be employed by the Company, as Senior Vice President, Chief Marketing Officer of the Company. In the capacity of Senior Vice President, Chief Marketing Officer, you will have such duties and responsibilities as are normally associated with such position and will devote your full business time and attention serving the Company in such position. Your duties may be changed from time to time by the Company, consistent with your position. You will report to the Chief Executive Officer of the Company (the "CEO"), and will work full-time at our principal offices located at 1310 Chesapeake Terrace, Sunnyvale, California 94089 (or such other location in the greater Sunnyvale area as the Company may utilize as its principal offices), except for travel to other locations as may be necessary to fulfill your responsibilities.

        3.     Base Compensation. During the Term, the Company will pay you a base salary of $275,000 per year, less payroll deductions and all required withholdings, payable in accordance with the Company's normal payroll practices and prorated for any partial month of employment. Your base salary may be subject to increase pursuant to the Company's policies as in effect from time to time.

        4.     Annual Bonus. In addition to the base salary set forth above, during the Term, you will be eligible to participate in the Company's executive bonus plan applicable to similarly situated executives of the Company. The amount of your annual bonus will be based on the attainment of performance criteria established and evaluated by the Company in accordance with the terms of such bonus plan as in effect from time to time, provided that, subject to the terms of such bonus plan, your target (but not necessarily maximum) annual bonus shall be 40% of your base salary actually paid for such year.

        5.     Benefits and Vacation. During the Term, you will be eligible to participate in all incentive, savings and retirement plans, practices, policies and programs maintained or sponsored by the Company from time to time which are applicable to other similarly situated executives of the Company, subject to the terms and conditions thereof. During the Term, you will also be eligible for standard benefits, such as medical, vision and dental insurance, sick leave, vacations and holidays to the extent applicable generally to other similarly situated executives of the Company, subject to the terms and conditions of the applicable Company plans or policies. The benefits described in this Section 5 will be subject to change from time to time as deemed appropriate and necessary by the Company.

        6.     Termination of Employment.

        7.     Code Section 280G.

        8.     Restrictive Covenants.

        9.     Company Rules and Regulations. As an employee of the Company, you agree to abide by Company policies, procedures, rules and regulations as set forth in the Company's Employee Handbook or as otherwise promulgated. In addition, as a condition of your employment, you acknowledge that you and the Company have entered into that certain Employee Confidentiality and Inventions Agreement dated as of October 12, 2004, and you hereby agree to abide by the terms of that certain Employee Confidentiality and Inventions Agreement dated as of October 12, 2004, by and between you and the Company.

        10.   Withholding. The Company may withhold from any amounts payable under this letter such federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.

        11.   Arbitration. Except as set forth in Section 8(e) above, any disagreement, dispute, controversy or claim arising out of or relating to this letter or the interpretation of this letter or any arrangements relating to this letter or contemplated in this letter or the breach, termination or invalidity thereof shall be settled by final and binding arbitration administered by JAMS/Endispute in Santa Clara County, California in accordance with the then existing JAMS/Endispute Arbitration Rules and Procedures for Employment Disputes. Except as provided herein, the Federal Arbitration Act shall govern the interpretation, enforcement and all proceedings. The arbitrator shall apply the substantive law (and the law of remedies, if applicable) of the state of California, or federal law, or both, as applicable, and the arbitrator is without jurisdiction to apply any different substantive law. The arbitrator shall have the authority to entertain a motion to dismiss and/or a motion for summary judgment by any party and shall apply the standards governing such motions under the Federal Rules of Civil Procedure. Judgment upon the award may be entered in any court having jurisdiction thereof. Each party shall pay his or its own attorneys' fees and expenses associated with such arbitration to the extent permitted by applicable law.

        12.   Indemnification. The Company shall indemnify you and hold you harmless for any liabilities actually incurred by you to the extent that your employment by the Company, in and of itself, results in a violation of your BrainLAB Non-Competition Agreement (the "Non-Competition Agreement"), provided that any such violation is not a result of any willful breach of the Non-Competition Agreement by you or your negligence or misconduct. In addition, you hereby acknowledge that the Company has advised you to consult with separate legal counsel regarding the Non-Competition Agreement and the provisions of this Section 12. Should you choose to do so, the Company will reimburse you for all reasonable legal consultation fees that you actually incur and submit to the Company in connection therewith.


        13.   Entire Agreement. As of the Effective Date, this letter constitutes the final, complete and exclusive agreement between you and the Company with respect to the subject matter hereof and replaces and supersedes any and all other agreements, offers or promises, whether oral or written, made to you by any member of the Company Group (including, without limitation, the Original Employment Letter).

        14.   Severability. Whenever possible, each provision of this letter will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this letter is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision of this letter, but such invalid, illegal or unenforceable provision will be reformed, construed and enforced so as to render it valid, legal, and enforceable consistent with the intent of the parties insofar as possible.

        15.   Acknowledgement. You hereby acknowledge (a) that you have consulted with or have had the opportunity to consult with independent counsel of your own choice concerning this letter, and have been advised to do so by the Company, and (b) that you have read and understand this letter, are fully aware of its legal effect, and have entered into it freely based on your own judgment.

        16.   Section 409A of the Code. To the extent that any payments or benefits under this letter are deemed to be subject to Section 409A of the Code, this letter will be interpreted in accordance with Section 409A of the Code and Department of Treasury regulations and other interpretive guidance issued thereunder in order to (a) preserve the intended tax treatment of the benefits provided with respect to such payments and (b) comply with the requirements of Section 409A of the Code.

[SIGNATURE PAGE FOLLOWS]

        Please confirm your agreement to the foregoing by signing and dating the enclosed duplicate original of this letter in the space provided below for your signature and returning it to Euan Thomson, Ph.D., Chief Executive Officer of the Company. Please retain one fully-executed original for your files.

 
    
    
    Sincerely,

 
 
ACCURAY INCORPORATED
a California corporation

 
 
By:
 
/s/  EUAN THOMSON      
    Name:   Euan Thomson, Ph.D.
    Title:   Chief Executive Officer
 
    
    
Accepted and Agreed,
this 11th day of November, 2006.		    

By:
 
/s/  ERIC LINDQUIST      
 
 


EXHIBIT A

For purposes of this letter, "Change in Control" means and includes each of the following:

        (a)   A transaction or series of transactions (other than an offering of the Company's common stock to the general public through a registration statement filed with the Securities and Exchange Commission) whereby any "person" or related "group" of "persons" (as such terms are used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (other than the Company, any of its subsidiaries, an employee benefit plan maintained by the Company or any of its subsidiaries or a "person" that, prior to such transaction, directly or indirectly controls, is controlled by, or is under common control with, the Company) directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company possessing more than 50% of the total combined voting power of the Company's securities outstanding immediately after such acquisition; or

        (b)   During any period of two consecutive years, individuals who, at the beginning of such period, constitute the Board of Directors of the Company together with any new director(s) (other than a director designated by a person who shall have entered into an agreement with the Company to effect a transaction described in clause (a) or clause (c) hereof) whose election by the Board of Directors of the Company or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the two-year period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or

        (c)   The consummation by the Company (whether directly involving the Company or indirectly involving the Company through one or more intermediaries) of (x) a merger, consolidation, reorganization, or business combination or (y) a sale or other disposition of all or substantially all of the Company's assets in any single transaction or series of related transactions or (z) the acquisition of assets or stock of another entity, in each case other than a transaction:

        (d)   The Company's stockholders approve a liquidation or dissolution of the Company.



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[Accuray Letterhead]
EXHIBIT A

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Exhibit 10.13

[Accuray Letterhead]

November 10, 2006

Dear Wade:

        Accuray Incorporated (the "Company") is pleased to offer to continue your employment as Senior Vice President, Worldwide Sales of the Company on the terms and conditions set forth in this letter, effective as of November 10, 2006 (the "Effective Date"). This letter amends and restates in its entirety that certain employment letter, dated as of August 11, 2006, between you and the Company (the "Original Employment Letter").

        1.     Term. The employment relationship between you and the Company will be at-will. You and the Company will have the right to terminate the employment relationship at any time and for any reason whatsoever, with or without cause, and without any liability or obligation except as may be expressly provided herein.

        2.     Position, Duties and Responsibilities. During the period of the employment relationship between you and the Company (the "Term"), the Company will employ you, and you agree to be employed by the Company, as Senior Vice President, Worldwide Sales of the Company. In the capacity of Senior Vice President, Worldwide Sales, you will have such duties and responsibilities as are normally associated with such position and will devote your full business time and attention serving the Company in such position. Your duties may be changed from time to time by the Company, consistent with your position. You will report to the Chief Executive Officer of the Company (the "CEO"), and will work primarily from your home in Texas, however will also work as reasonably required from our principal offices located at 1310 Chesapeake Terrace, Sunnyvale, California 94089 (or such other location in the greater Sunnyvale area as the Company may utilize as its principal offices), except for travel to other locations as may be necessary to fulfill your responsibilities.

        3.     Base Compensation. During the Term, the Company will pay you a base salary of $250,000 per year, less payroll deductions and all required withholdings, payable in accordance with the Company's normal payroll practices and prorated for any partial month of employment. Your base salary may be subject to increase pursuant to the Company's policies as in effect from time to time.

        4.     Annual Bonus. In addition to the base salary set forth above, during the Term, you will be eligible to participate in the Company's executive bonus plan applicable to similarly situated executives of the Company. The amount of your annual bonus will be based on the attainment of performance criteria established and evaluated by the Company in accordance with the terms of such bonus plan as in effect from time to time, provided that, subject to the terms of such bonus plan, your target (but not necessarily maximum) annual bonus shall be 75% of your base salary actually paid for such year. Exhibit A attached hereto sets forth the terms of your first annual bonus.

        5.     Stock Option Awards. You and the Company hereby acknowledge that pursuant to the terms of the Original Employment Letter, as of October 24, 2006, the Company granted you a stock option to purchase 250,000 shares of the Company's common stock (the "Initial Stock Option") at an exercise price of $10.00 per share. The Initial Stock Option was granted to you under the Company's 1998 Equity Incentive Plan, and, subject to your continued employment with the Company, the Initial Stock Option shall vest and become exercisable over a four (4) year period, with twenty-five percent (25%) of the shares subject thereto vesting on September 5, 2007, and the remaining seventy-five percent (75%) vesting in equal monthly installments on the fifth day of each month thereafter. In addition, the Company will annually recommend to the Board of Directors of the Company (the "Board") that the Company grant you a stock option no later than the September 30 following each of the first three anniversaries of your commencement of employment with the Company to purchase 100,000 shares of the Company's common stock (each, a "Subsequent Stock Option," and together with the Initial Stock


Option, the "Stock Options"). The exercise price per share of each Subsequent Stock Option shall be equal to the fair market value of a share of the Company's common stock on the date of grant, as determined in accordance with the Company's incentive award plan under which such Subsequent Stock Option is granted. Subject to your continued employment with the Company, each Subsequent Stock Option shall vest and become exercisable over a four (4) year period, with 1/48th of the shares subject thereto vesting in equal monthly installments on each monthly anniversary of the date of grant. Consistent with the foregoing, the terms and conditions of each Stock Option shall be set forth in a stock option agreement (each, a "Stock Option Agreement") to be entered into by the Company and you which shall evidence the grant of each such Stock Option.

        6.     Benefits and Vacation. During the Term, you will be eligible to participate in all incentive, savings and retirement plans, practices, policies and programs maintained or sponsored by the Company from time to time which are applicable to other similarly situated executives of the Company, subject to the terms and conditions thereof. During the Term, you will also be eligible for standard benefits, such as medical, vision and dental insurance, sick leave, vacations and holidays to the extent applicable generally to other similarly situated executives of the Company, subject to the terms and conditions of the applicable Company plans or policies. The benefits described in this Section 6 will be subject to change from time to time as deemed appropriate and necessary by the Company.

        7.     Termination of Employment.

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        8.     Code Section 280G.

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        9.     Restrictive Covenants.

        10.   Company Rules and Regulations. As an employee of the Company, you agree to abide by Company policies, procedures, rules and regulations as set forth in the Company's Employee Handbook or as otherwise promulgated. In addition, as a condition of your employment, you acknowledge that you and the Company have entered into that certain Employee Confidentiality and Inventions Agreement dated as of September 5, 2006, and you hereby agree to abide by the terms of that certain

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Employee Confidentiality and Inventions Agreement dated as of September 5, 2006, by and between you and the Company.

        11.   Withholding. The Company may withhold from any amounts payable under this letter such federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.

        12.   Arbitration. Except as set forth in Section 9(e) above, any disagreement, dispute, controversy or claim arising out of or relating to this letter or the interpretation of this letter or any arrangements relating to this letter or contemplated in this letter or the breach, termination or invalidity thereof shall be settled by final and binding arbitration administered by JAMS/Endispute in Santa Clara County, California in accordance with the then existing JAMS/Endispute Arbitration Rules and Procedures for Employment Disputes. Except as provided herein, the Federal Arbitration Act shall govern the interpretation, enforcement and all proceedings. The arbitrator shall apply the substantive law (and the law of remedies, if applicable) of the state of California, or federal law, or both, as applicable, and the arbitrator is without jurisdiction to apply any different substantive law. The arbitrator shall have the authority to entertain a motion to dismiss and/or a motion for summary judgment by any party and shall apply the standards governing such motions under the Federal Rules of Civil Procedure. Judgment upon the award may be entered in any court having jurisdiction thereof. Each party shall pay his or its own attorneys' fees and expenses associated with such arbitration to the extent permitted by applicable law.

        13.   Entire Agreement. As of the Effective Date, this letter, together with any Stock Option Agreement, constitutes the final, complete and exclusive agreement between you and the Company with respect to the subject matter hereof and replaces and supersedes any and all other agreements, offers or promises, whether oral or written, made to you by any member of the Company Group (including, without limitation, the Original Employment Letter).

        14.   Severability. Whenever possible, each provision of this letter will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this letter is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision of this letter, but such invalid, illegal or unenforceable provision will be reformed, construed and enforced so as to render it valid, legal, and enforceable consistent with the intent of the parties insofar as possible.

        15.   Acknowledgement. You hereby acknowledge (a) that you have consulted with or have had the opportunity to consult with independent counsel of your own choice concerning this letter, and have been advised to do so by the Company, and (b) that you have read and understand this letter, are fully aware of its legal effect, and have entered into it freely based on your own judgment.

        16.   Section 409A of the Code. To the extent that any payments or benefits under this letter are deemed to be subject to Section 409A of the Code, this letter will be interpreted in accordance with Section 409A of the Code and Department of Treasury regulations and other interpretive guidance issued thereunder in order to (a) preserve the intended tax treatment of the benefits provided with respect to such payments and (b) comply with the requirements of Section 409A of the Code.

[SIGNATURE PAGE FOLLOWS]

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        Please confirm your agreement to the foregoing by signing and dating the enclosed duplicate original of this letter in the space provided below for your signature and returning it to Euan Thomson, Ph.D., Chief Executive Officer of the Company. Please retain one fully-executed original for your files.

 
    
    
    Sincerely,

 
 
ACCURAY INCORPORATED
a California corporation

 
 
By:
 
/s/  EUAN THOMSON, PH.D.      
    Name:   Euan Thomson, Ph.D.
    Title:   Chief Executive Officer
 
    
    
Accepted and Agreed,
this 10th day of November, 2006.		    

By:
 
/s/  WADE HAMPTON      
Wade Hampton
 
 

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EXHIBIT A

        [Sales Commission Information Omitted]

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EXHIBIT B

        For purposes of this letter, "Change in Control" means and includes each of the following:

        (a)   A transaction or series of transactions (other than an offering of the Company's common stock to the general public through a registration statement filed with the Securities and Exchange Commission) whereby any "person" or related "group" of "persons" (as such terms are used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (other than the Company, any of its subsidiaries, an employee benefit plan maintained by the Company or any of its subsidiaries or a "person" that, prior to such transaction, directly or indirectly controls, is controlled by, or is under common control with, the Company) directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company possessing more than 50% of the total combined voting power of the Company's securities outstanding immediately after such acquisition; or

        (b)   During any period of two consecutive years, individuals who, at the beginning of such period, constitute the Board together with any new director(s) (other than a director designated by a person who shall have entered into an agreement with the Company to effect a transaction described in clause (a) or clause (c) hereof) whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the two-year period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or

        (c)   The consummation by the Company (whether directly involving the Company or indirectly involving the Company through one or more intermediaries) of (x) a merger, consolidation, reorganization, or business combination or (y) a sale or other disposition of all or substantially all of the Company's assets in any single transaction or series of related transactions or (z) the acquisition of assets or stock of another entity, in each case other than a transaction:

        (d)   The Company's stockholders approve a liquidation or dissolution of the Company.

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EXHIBIT A
EXHIBIT B

Exhibit 10.14

LOGO

INDEPENDENT CONTRACTOR AGREEMENT

        This Independent Contractor Agreement ("Agreement") is made effective as of April 1, 2006 by and between Accuray Inc., a California corporation (the "Company"), and John Adler, M.D. ("Contractor" and, together with the Company, the "Parties"). The Company desires to retain Contractor as an independent contractor to perform certain services for the Company and Contractor is willing to perform such services, on terms set forth more fully below. In consideration of the mutual promises contained herein, the Parties agree as follows:

        1.    Services.    

        During the term of this agreement, Contractor will provide services (the "Services") to the Company as described on Exhibit A attached to this Agreement. Contractor shall use his best efforts to perform the Services to the satisfaction of the Company and by the completion dates specified by the Company. Contractor shall not perform any Services for the Company other than as specifically authorized in Exhibit A.

        2.    Independent Contractor Status.    

        It is the Parties' intent that Contractor at all times, and with respect to all Services covered by this Agreement function as and remain an independent contractor, and not an employee or officer of the Company, and neither Party shall represent to third parties that Contractor is an employee or officer of the Company.

        (a)   Contractor shall be responsible for the payment of all taxes on amounts received from the Company for the Services. The Company will regularly report amounts paid to Contractor by filing Form 1099-MISC with the Internal Revenue service, as required by law. No part of Contractor's fees will be subject to withholding by the Company for payment of any social security, federal, state or other employee payroll taxes. Contractor agrees to indemnify and hold the Company harmless from any liability for, or assessment of, any such taxes imposed on the Company by relevant taxing authorities.

        (b)   Contractor shall retain the right to perform services for others during the term of this Agreement.

        (c)   Contractor will determine the method, details, and means of performing the Services. The Company shall have no right to, and shall not control, the manner or determine the method of accomplishment of the Services, though it may define the Services to be performed. Such Services may be amended, from time-to-time, by the Parties by written agreement, signed by the Contractor and the Company.

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        (d)   Contractor may, at Contractor's own expense, employ such assistants as the Contractor may deem necessary to perform the Services. The Company shall not control, direct or supervise the work of Contractor's assistants or employees in the performance of Services. The Contractor assumes full and sole responsibility for the quality of Services provided by the Contractor's assistants or employees, for the payment of all compensation and expenses of these assistants and employees, for state and federal income taxes and other applicable payroll taxes and withholding that may be required with respect to such assistants or employees, and for the provision of all benefits and insurance, including without limitation, Worker's Compensation Insurance, to such assistants or employees. Contractor shall furnish the Company with proof of Worker's Compensation Insurance coverage for all persons who provide Services pursuant to this Agreement.

        (e)   Contractor shall be responsible for all expenses incurred in the execution of Contractor's responsibilities pursuant to this Agreement, including, without limitation, all travel (including airfare and lodging), entertainment and dining expenses. No fines, taxes, bonds or fees imposed against Contractor, or costs of Contractor doing business, shall be reimbursable by the Company.

        (f)    Contractor shall not be eligible to participate in any fringe benefit program or any benefit plan of the Company.

        (g)   Contractor will have no authority to enter into contracts that bind the Company or to create obligations on the part of the Company without the prior written authorization of the Company.

        (h)   Contractor shall receive no office or administrative support from Company.

        3.    Fees.    

        As consideration for the Services to be provided by Contractor, the Company will compensate Contractor as described in Exhibit B to this Agreement. Company will pay Contractor Contractor's annual compensation in quarterly installments of $34,250, such quarterly installments to be paid in advance of each quarter beginning on the date on which this Agreement is signed by both Parties and thereafter on the first business day of each quarter. Compensation for Contractor's Services shall be conditioned on the actual performance by Contractor of Services and the Company's receipt and approval of accurate and detailed quarterly invoices, including records of time spent and Services performed, from Contractor in the form attached hereto as Exhibit D. Contractor shall submit such quarterly invoices for all Services performed by Contractor during the applicable quarter two (2) weeks prior to the end of such quarter (for example, for the first quarterly period of this Agreement, January 1, 2006 to March 31, 2006, Contractor's first quarterly invoice will be due to Company no later than March 17, 2006). If for any quarter, Contractor has not provided the level of Services required to earn the full quarterly installment for such quarter, then the quarterly installment for Contractor for the following quarter will be reduced in an amount equal to the amount that Contractor was overcompensated for the preceding quarter. If at the end of the term of this Agreement, Contractor has never performed certain services, and Contractor's failure to perform such services has not been offset against any subsequent quarter's installment, then Contractor will reimburse Company the corresponding amount for the services not performed within thirty (30) calendar days. The Parties acknowledge that payment for the Services provided hereunder is consistent with the fair market value of such Services and is not conditioned in any way on the volume or value of any business (i) between the Company and any other party, or (ii) resulting, directly or indirectly, from any of Contractor's activities hereunder.

        4.    Confidentiality.    

        (a)    Confidential Information.    "Confidential Information" means Company proprietary information, technical data, trade secrets or know-how, including, but not limited to, research, product plans, product specifications, services, customers, customer lists, pipeline documents, marketing plans and strategies, software, developments, inventions, processes, formulas, technology, designs, drawings,

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engineering, hardware configuration information, circuit board designs, logic designs for filters and/or circuit boards, Company financials or other business information disclosed by the Company either directly or indirectly in writing, orally, or by drawings or inspection of parts or equipment. Confidential Information also includes any other information designated by the Company as such upon its disclosure to the Contractor.

        (b)    Disclosure    Contractor will not, during or subsequent to the term of this Agreement, use the Company's Confidential Information for any purpose whatsoever other than the performance of the Services on behalf of the Company. Contractor will not disclose the Company's Confidential Information to any third party, and understands that said Confidential Information shall remain the sole property of the Company. Contractor further agrees to take all reasonable precautions to prevent any unauthorized disclosure of such Confidential Information including, but not limited to, having each employee of Contractor, if any, with access to any Confidential Information, execute a nondisclosure agreement containing provisions in the Company's favor substantially similar to Sections 4, 5 and 6 of this Agreement. Confidential Information does not include information which, upon disclosure to Contractor is part of the public domain; can be established by written evidence to have been in the possession of Contractor at the time of disclosure; is received by Contractor from a third party without restriction and without breach of this Agreement; or has become publicly known and made generally available through no wrongful act of Contractor. If Contractor is required to disclose Confidential Information by lawfully issued subpoena or by an authorized order of a government agency, Contractor will immediately so inform the Company, and will use best efforts to minimize the disclosure of such Confidential Information and will consult with and assist the Company in seeking a protective order prior to such disclosure.

        (c)    Indemnity.    Contractor agrees that Contractor will not, during the term of this Agreement, improperly use or disclose to the Company or any of its employees any proprietary information or trade secrets of any former or current employer or other person or entity with which Contractor has an agreement, or to which Contractor has a duty, to keep in confidence information acquired by Contractor, and that Contractor will not bring onto the premises of the Company any unpublished document, proprietary information, or trade secret belonging to such employer, person or entity unless consented to in writing by such employer, person or entity. Contractor will indemnify the Company and hold it harmless from and against all claims, liabilities, damages and expenses, including reasonable attorneys' fees and costs of suit, arising out of or in connection with any violation or claimed violation of a third party's rights resulting in whole or in part from the Services provided by Contractor under this Agreement.

        (d)    Third Parties.    Contractor recognizes that the Company has received and in the future will receive from third parties their confidential or proprietary information or trade secrets subject to a duty on the Company's part to maintain the confidentiality of such information and to use it only for certain limited purposes. Contractor agrees that Contractor owes the Company and such third parties, during the term of this Agreement and thereafter, a duty to hold all such confidential or proprietary information or trade secrets in the strictest confidence and not to disclose it to any person, firm or corporation or to use it except as necessary in carrying out the Services for the Company consistent with the Company's agreement with such third party.

        (e)    Return of Confidential Information.    Upon the termination of this Agreement, or upon the Company's earlier request, Contractor will deliver to the Company all of the Company's property and all Confidential Information in tangible form that Contractor may have in Contractor's possession or control.

        5.    Ownership.    

        (a)    Inventions.    Contractor agrees that all copyrightable material, notes, records, drawings, designs, inventions, improvements, developments, discoveries and trade secrets (collectively,

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"Inventions") conceived, made or discovered by Contractor, solely or in collaboration with others, during the period of this Agreement which relate in any manner to the business of the Company that Contractor may be directed to undertake, investigate or experiment with, or which Contractor may become associated with as a result of work, investigation or experimentation in the line of business of Company in performing the Services hereunder, are the sole property of the Company. Contractor further agrees to assign (or cause to be assigned) and does hereby assign fully to the Company all such Inventions and any copyrights, patents, mask work rights or other intellectual property rights relating thereto.

        (b)    Assistance.    Contractor agrees to assist Company, or its designee, at the Company's expense, in every proper way to secure the Company's rights in the Inventions and any copyrights, patents, mask work rights or other intellectual property rights relating thereto in any and all countries, including the disclosure to the Company of all pertinent information and data with respect thereto, the execution of all applications, specifications, oaths, assignments and all other instruments which the Company shall deem necessary in order to apply for and obtain such rights and in order to assign and convey to the Company, its successors, assigns and nominees the sole and exclusive rights, title and interest in and to such Inventions, and any copyrights, patents, mask work rights or other intellectual property rights relating thereto. Contractor further agrees that Contractor's obligation to execute or cause to be executed, when it is in Contractor's power to do so, any such instrument or papers shall continue after the termination of this Agreement.

        (c)    License.    Contractor agrees that if in the course of performing the Services, Contractor incorporates into any Invention developed hereunder any invention, improvement, development, concept, discovery or other proprietary information owned by Contractor or in which Contractor has an interest, the Company is hereby granted and shall have a nonexclusive, royalty-free, perpetual, irrevocable, worldwide license to make, have made, modify, use and sell such item as part of or in connection with such Invention.

        (d)    Agent.    Contractor agrees that if the Company is unable because of Contractor's unavailability for any reason to secure Contractor's signature to apply for or to pursue any application for any United States or foreign patents or mask work or copyright registrations covering the Inventions assigned to the Company above, then Contractor hereby irrevocably designates and appoints the Company and its duly authorized officers and agents as Contractor's agent and attorney-in-fact, to act for and in Contractor's behalf and stead to execute and file any such applications and to do all other lawfully permitted acts to further the prosecution and issuance of patents, copyright and mask work registrations thereon with the same legal force and effect as if executed by Contractor.

        6.    Originality and Noninfringement.    

        Contractor represents and warrants that all materials and Services provided hereunder will be original with Contractor and that the use thereof by the Company or its customers, representatives, distributors or dealers will not infringe any patent, copyright, trade secret or other intellectual property right of any third party. Contractor agrees to indemnify and hold the Company harmless against any liability, loss, cost, damage, claims, demands or expenses (including reasonable attorneys' fees) of the Company or its customers, representatives, distributors or dealers arising out of any infringement or claim of infringement with respect to any materials or Services provided by Contractor.

        7.    Reports.    

        Contractor agrees that Contractor will, from time-to-time during the term of this Agreement, keep the Company informed as to Contractor's progress in performing the Services hereunder and that Contractor will, as requested by the Company, prepare written reports with respect thereto. The Parties understand that the time required in the preparation of such written reports shall be considered time devoted to the performance of Contractor's Services.

4


        8.    Conflicting Obligations.    

        (a)    Performance.    Contractor acknowledges that Contractor will be available to perform the Services in a timely and responsible manner, except for the occasional circumstance in which a pre-existing clinical responsibility on the part of Contractor may conflict with a new commitment requested by the Company, subject to the requirements of the schedule of Services arranged by Company and Contractor pursuant to Section 1 of Exhibit A hereto. Failure to perform in a timely and responsible manner shall be a breach of this Agreement.

        (b)    No Conflicts.    Contractor represents and warrants that Contractor has no outstanding agreement or obligation that is in conflict with any provision of this Agreement, or that would preclude Contractor from complying with the provisions hereof, except as disclosed in Exhibit C hereto. Contractor further represents and warrants that Contractor will not enter into any such conflicting Agreement during the term of this Agreement.

        9.    Term and Termination.    

        (a)    Commencement.    This Agreement will commence on the date first above written and will continue for a period of one year (the "Initial Term"). Unless 30 days' written notice of termination is given by either Party prior to the expiration of the Initial Term, or any subsequent Term, this Agreement shall renew for successive one-year periods.

        (b)    Termination.    This Agreement may be terminated as follows:

        (c)    Survival.    Upon such termination, all rights and duties of the Parties toward each other shall cease except:

5

        10.    Assignment.    

        Neither this Agreement nor any right hereunder or interest herein may be assigned or transferred by the Company or the Contractor without the written consent of the other.

        11.    Arbitration and Equitable Relief.    

        (a)    Arbitration.    Except as provided in Section 11(b) below, the Company and Contractor agree that any dispute or controversy arising out of or relating to any interpretation, construction, performance or breach of this Agreement shall be settled by arbitration to be held in Santa Clara County, California before a single, neutral arbitrator associated with the Judicial Arbitration and Mediation Service ("JAMS"). The arbitrator shall be selected by the Parties or, if the Parties are unable to agree, by JAMS, in accordance with its selection practices. The arbitrator may grant injunctions or other relief in such dispute or controversy. The decision of the arbitrator shall be final, conclusive, and binding on the Parties to the arbitration. Judgment may be entered on the arbitrator's decision in any court of competent jurisdiction. Unless otherwise required to preserve the enforceability of this arbitration clause, the Company and Contractor shall each pay one-half of the costs and expenses of such arbitration.

        (b)    Equitable Relief.    Contractor agrees that it would be impossible or inadequate to measure and calculate the Company's damages from any breach of the covenants set forth in Section 4 or 5 herein. Accordingly, Contractor agrees that if Contractor breaches Sections 4 or 5, the Company will have available, in addition to any other right or remedy available, the right to obtain from any court of competent jurisdiction an injunction restraining such breach or threatened breach and specific performance of any such provision. Contractor further agrees that no bond or other security shall be required in obtaining such equitable relief and Contractor hereby consents to the issuances of such injunction and to the ordering of such specific performance.

        12.    Miscellaneous.    

        (a)    Amendments and Waivers.    Any term of this Agreement may be amended or waived only with the written consent of the Parties.

        (b)    Entire Agreement.    This Agreement, including the Exhibits hereto, constitutes the entire agreement of the Parties and supersedes and replaces all oral negotiations and prior writings with respect to the subject matter hereof.

        (c)    Notices.    Any notice required or permitted by this Agreement shall be in writing and shall be deemed sufficient upon receipt, when delivered personally or by courier or overnight delivery service, or three days after being deposited in the regular United States mail as certified or registered mail (airmail if sent internationally) with postage prepaid, if such notice is addressed to the party to be notified at such party's address or facsimile number as set forth below, or as subsequently modified by written notice.

        (d)    Governing Law.    The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of California, without giving effect to its principles of conflict of laws.

        (e)    Legal Fees.    If any dispute arises between the Parties with respect to matters covered by this Agreement which leads to a proceeding, pursuant to Section 11, to resolve such dispute, the prevailing party in any such proceeding shall be entitled to receive its reasonable attorneys' fees, expert witness fees and out-of-pocket costs incurred in connection with such proceeding, in addition to any other relief to which it may be entitled.

6


        (f)    Severability.    If one or more provisions of this Agreement are held to be unenforceable under applicable law, then such unenforceable provision shall be deemed modified so as to be enforceable (or if not subject to modification then eliminated herefrom) for the purpose of those procedures to the extent necessary to permit the remaining provisions to be enforced.

        (g)    Counterparts.    This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together will constitute one and the same instrument.

        (h)    Advice of Counsel.    EACH PARTY ACKNOWLEDGES THAT, IN EXECUTING THIS AGREEMENT, SUCH PARTY HAS HAD THE OPPORTUNITY TO SEEK THE ADVICE OF INDEPENDENT LEGAL COUNSEL, AND HAS READ AND UNDERSTOOD ALL OF THE TERMS AND PROVISIONS OF THIS AGREEMENT. THIS AGREEMENT SHALL NOT BE CONSTRUED AGAINST ANY PARTY BY REASON OF THE DRAFTING OR PREPARATION HEREOF.

        (i)    Compliance with Laws    The Parties agree to abide by the Company's compliance policies and all federal, state or local laws, regulations, ordinances or other legal requirements in connection with the performance of the Services hereunder. In addition, at all times during this Agreement, Contractor shall have in effect all licenses, permits and authorizations for all local, state, federal and foreign governmental agencies to the extent the same are necessary to the performance of the Services hereunder and will verify all such licenses, permits and authorizations are in place before performing any Services under this Agreement. Consultant shall not perform any Services under this Agreement for which he does not hold all necessary licenses, permits and authorizations and will hold the Company harmless in all respects for any claims or actions resulting from Contractor's violation of this provision.

[SIGNATURE PAGE FOLLOWS]

7

IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the day and year first written above.

JOHN ADLER, M.D.   ACCURAY, INC.

Signature:
/s/  JOHN ADLER      
 
Signature:
/s/  ERIC LINDQUIST      

Name:
John Adler, M.D.
 
Name:
Eric Lindquist

Title:
Contractor
 
Title:
SVP, Chief Marketing Officer

Address:
    
 
Address:
1310 Chesapeake Terrace
      
     Sunnyvale, CA 94089

Telephone:
    
 
Telephone:
408-716-4706

Date:
3/29/06
 
Date:
4/5/06

 
 
 
Signature:
/s/  DARREN MILLIKEN      

 
 
 
Name:
Darren Milliken

 
 
 
Title:
General Counsel

 
 
 
Address:
1310 Chesapeake Terrace
Sunnyvale, CA 94089

 
 
 
Telephone:
408-716-4600

 
 
 
Date:
4/4/06

8

EXHIBIT A

SERVICES

1.
Description of Services.    Contractor will be present at and participate in VIP visits arranged by Company at Stanford University Medical Center ("SUMC"). In addition, Contractor will travel to and participate in both domestic and international sales visits as requested by Company. Finally, Contractor will travel to and participate in certain domestic tradeshows which Company requests that Contractor attend. As soon as practicable following the execution of this Agreement, Contractor and the Company shall meet to schedule the specific Services to be performed during the first calendar quarter that this Agreement is in effect. Thereafter, Contractor and the Company shall meet at least thirty (30) days in advance of the end of each calendar quarter to schedule the Services to be performed during the subsequent calendar quarter.

2.
VIP Visits.    Contractor's duties and deliverables in connection with Contractor's participation in Company's VIP visits to SUMC (up to two (2) visits per month with a maximum of 13 visits per year) will include:

2.1.
Case Observation:    Contractor will participate in the observation of a case being treated in the CyberKnife Suite at SUMC.

2.2.
Question and Answer Sessions:    Contractor will participate in a thirty (30) minute question "Question and Answer" session following the observation in the CyberKnife suite for each VIP visit.

2.3.
Lunches/Dinners:    Contractor will attend a lunch or dinner meeting, as applicable, following the VIP visit.

3.
Sales Visits/Tradeshows.    Contractor's duties and deliverables in connection with Contractor's travel to and participation in sales visits and tradeshows will include:

3.1.
Domestic Sales Visits/Tradeshows:    Contractor will travel to and attend domestic sales visits and/or tradeshows as requested by Company, up to four (4) trips per year, with each trip to last for one (1) day.

3.2.
Europe and Emerging Market Sales Visits:    Contractor will travel to and attend sales visits in Europe and other international emerging markets (for example, China, India, or other miscellaneous emerging markets) as requested by Company. At Company's option, these sales visits shall consist of:

3.2.1.
Option 1:    Six (6) trips per year with four (4) trips lasting for four (4) days apiece (two full days with customer, the remaining days as travel), one (1) trip lasting for five (5) days (three full days with customer, the remaining days as travel), and one (1) trip lasting for three (3) days (one full day with customer, the remaining days as travel);

3.2.2.
Option 2:    Six (6) trips per year with each trip lasting for four (4) days (two full days with customer, the remaining days as travel); or

3.2.3.
Option 3:    Seven (7) trips per year with six (6) trips lasting for three (3) days (one full day with customer, the remaining days as travel) and one (1) trip lasting for four (4) days (two full days with customer, the remaining days as travel).

3.3.
To the extent possible, Company shall use commercially reasonable efforts to provide Contractor with at least three (3) weeks prior notice of any travel required in connection with sales visits and attendance at trade shows.

9

EXHIBIT B

COMPENSATION

1.
Compensation.    Contractor shall be compensated for Services performed according to this Agreement as follows:

1.1.
Compensation for VIP Visits:

•   Case Observation:   $500 per observation

•
 
Q & A Session:
 
$500 per Q&A session

•
 
Lunch or Dinner:
 
$500 per Lunch or Dinner

•
 
Maximum Compensation
per VIP Visit:
 
$1,500

•
 
Maximum Annual
Compensation for VIP Visits:*
 
$19,500 per year

*(maximum annual compensation for VIP Visits is based on thirteen (13) VIP visits per year with participation in case observation, Q&A Session and Lunch or Dinner at each VIP Visit)

•   Domestic Sales Visit/
Tradeshow:		   $4,250 per visit

•
 
Maximum Annual Compensation
for Domestic Sales Visits/
Tradeshows:*
 
$17,000 per year

 
 
*(maximum annual compensation for Domestic Sales Visits/Tradeshows is based on the maximum of four (4) trips per year, such trips to be selected by Company)

•   Europe and Emerging Market
Sales Visit:		    
Option 1
   Option 2
   Option 3
$13,500 per three (3) day visit   $16,750 per four (4) day visit   $13,958.33 per three (3) day visit

$16,750 per four (4) day visit
 
 
 
$16,750 per four (4) day visit

$20,000 per five (5) day visit
 
 
 
 
•   Maximum Annual Compensation
for Europe and Emerging
Market Sales Visits:*		   $100,500 per year
    *(maximum annual compensation for European and Emerging Market Sales Visits is based on the number of trips set forth under Option 1, Option 2 or Option 3 in Section 3.2 of Exhibit A above, as applicable)

10

11

EXHIBIT C

LIST OF POTENTIAL CONFLICTS

—none—
/s/DM

12

EXHIBIT D

CONTRACTOR TIME RECORD

Contractor:      
 
   
Date
   Description of Services Performed
   Locations of Services Performed
   Number of Days/Visits

  
 
 
 
 
 
 

  
 
 
 
 
 
 

  
 
 
 
 
 
 

  
 
 
 
 
 
 

  
 
 
 
 
 
 

        This record is a complete and accurate description of the Services I performed and the time spent in connection therewith on behalf of Accuray, Inc. on the dates specified above.

     
 
Contractor   Date

13

AMENDMENT ONE TO EXHIBIT B (COMPENSATION)

This Amendment One ("Amendment") to Exhibit B (Compensation) is issued under and subject to all of the terms and conditions of the Independent Contractor Agreement (the "Agreement") dated as of April 1, 2006 by and between Accuray, Inc. ("Company") and John Adler, M.D. ("Contractor").

1.
Compensation.    In addition to the Compensation set forth on Exhibit B to the Agreement (for Services performed by Contractor pursuant to the Agreement), Contractor shall be compensated for Services performed according to this Amendment as follows:

1.1.
Compensation for Costs re: Registering for Conferences/Submitting Abstracts:

[SIGNATURE PAGE FOLLOWS]

1

        IN WITNESS WHEREOF, the parties hereto have executed this Amendment One to Exhibit B (Compensation) as of the day and year written below.

JOHN ADLER, M.D.   ACCURAY, INC.

Signature:
/s/  JOHN ADLER      
 
Signature:
/s/  ERIC LINDQUIST      

Name:
John Adler, M.D.
 
Name:
Eric Lindquist

Title:
Contractor
 
Title:
SVP, Chief Marketing Officer

Address:
    
 
Address:
1310 Chesapeake Terrace
      
     Sunnyvale, CA 94089

Telephone:
    
 
Telephone:
408-716-4706

Date:
5/24/06
 
Date:
5/30/06

 
 
 
Signature:
/s/  DARREN MILLIKEN      

 
 
 
Name:
Darren Milliken

 
 
 
Title:
General Counsel

 
 
 
Address:
1310 Chesapeake Terrace
Sunnyvale, CA 94089

 
 
 
Telephone:
 
       

 
 
 
Date:
5/26/06

2



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Exhibit 10.15

         GRAPHIC


INDEPENDENT CONTRACTOR AGREEMENT

        This Independent Contractor Agreement ("Agreement") is made effective as of April 1, 2006 by and between the CyberKnife Society, a California non-profit organization (the "Society"), and John Adler, M.D. ("Contractor" and, together with the Society, the "Parties"). The Society desires to retain Contractor as an independent contractor to perform certain services for the Society and Contractor is willing to perform such services, on terms set forth more fully below. In consideration of the mutual promises contained herein, the Parties agree as follows:

1.     Services.

        During the term of this agreement, Contractor will serve as President and, when applicable, President Emeritus of the Board of the Society, and will provide services (the "Services") to the Society as described on Exhibit A attached to this Agreement. Contractor shall use his best efforts to perform the Services to the satisfaction of the Society and by the completion dates specified by the Society. Contractor shall not perform any Services for the Society other than as specifically authorized in Exhibit A.

2.     Independent Contractor Status.

        It is the Parties' intent that Contractor at all times, and with respect to all Services covered by this Agreement function as and remain an independent contractor, and not an employee of the Society, and neither Party shall represent to third parties that Contractor is an employee of the Society.

1

3.     Fees.

        As consideration for the Services to be provided by Contractor, the Society will compensate Contractor as described in Exhibit B to this Agreement. Society will pay Contractor Contractor's annual compensation in quarterly installments of $19,000, such quarterly installments to be paid in advance of each quarter beginning on the date on which this Agreement is signed by both Parties and thereafter on the first business day of each quarter. Contractor shall submit quarterly invoices for all Services performed by Contractor during the applicable quarter two (2) weeks prior to the end of such quarter (for example, for the first quarterly period of this Agreement, January 1, 2006 to March 31, 2006, Contractor's first quarterly invoice will be due to Society no later than March 17, 2006). If for any quarter, Contractor has not provided the level of Services required to earn the full quarterly installment for such quarter, then the quarterly installment for Contractor for the following quarter will be reduced in an amount equal to the amount that Contractor was overcompensated for the preceding quarter. If at the end of the term of this Agreement, Contractor has never performed certain services, and Contractor's failure to perform such services has not been offset against any subsequent quarter's installment, then Contractor will reimburse Society the corresponding amount for the services not performed within thirty (30) calendar days. The Parties acknowledge that payment for the Services provided hereunder is consistent with the fair market value of such Services.

4.     Confidentiality.

2

5.     Ownership.

3

6.     Originality and Noninfringement.

        Contractor represents and warrants that all materials and Services provided hereunder will be original with Contractor and that the use thereof by the Society or its customers, representatives, distributors or dealers will not infringe any patent, copyright, trade secret or other intellectual property right of any third party. Contractor agrees to indemnify and hold the Society harmless against any liability, loss, cost, damage, claims, demands or expenses (including reasonable attorneys' fees) of the Society or its customers, representatives, distributors or dealers arising out of any infringement or claim of infringement with respect to any materials or Services provided by Contractor.

7.     Reports.

        Contractor agrees that Contractor will, from time-to-time during the term of this Agreement, keep the Society informed as to Contractor's progress in performing the Services hereunder and that Contractor will, as requested by the Society, prepare written reports with respect thereto. The Parties understand that the time required in the preparation of such written reports shall be considered time devoted to the performance of Contractor's Services.

8.     Conflicting Obligations.

4

9.     Term and Termination.

5

10.   Assignment.

        Neither this Agreement nor any right hereunder or interest herein may be assigned or transferred by the Society or the Contractor without the written consent of the other.

11.   Arbitration and Equitable Relief.

12.   Miscellaneous.

6

        [SIGNATURE PAGE FOLLOWS]

7

        IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the day and year first written above.

JOHN ADLER, M.D.   THE CYBERKNIFE SOCIETY

Signature:
 
/s/ John Adler
 
Signature:
 
/s/ Kristine Gagliardi

Name:
 
John Adler, M.D.
 
Name:
 
Kristine Gagliardi

Title:
 
Contractor
 
Title:
 
Administrative Director of CyberKnife Society

Address:
 
    
 
Address:
 
1310 Chesapeake Terrace

 
 
    
 
 
 
Sunnyvale, CA 94089

Telephone:
 
    
 
Telephone:
 
  

Date:
 
3/29/06
 
Date:
 
4/5/06


 

 

 

 

Signature:

 

/s/ Darren Milliken

 
 
 
 
Name:
 
Darren Milliken

 
 
 
 
Address:
 
1310 Chesapeake Terrace

 
 
 
 
 
 
Sunnyvale, CA 94089

 
 
 
 
Title:
 
General Counsel

 
 
 
 
Date:
 
4/4/06

8


EXHIBIT A

SERVICES

1.
Description of Services.

1.1.
Contractor will serve as the President of the Society with such duties and responsibilities as are customarily associated with such position and as set forth in the Society's Bylaws. In addition, Consultant shall perform the following functions and duties:

1.1.1.
Users' Meeting. Contractor will attend and participate in the annual Users' Meeting for four (4) days per year. Contractor's participation in the annual Users' Meeting will include, but is not limited to: chairing all scientific sessions and Society breakout sessions, reviewing all abstracts and selecting oral presentations and awards and participating in the PDC quarterly meeting at the Users' Meeting.

1.1.2.
PDC Meetings. Contractor will attend and participate in certain PDC Meetings, as requested by the Society, up to two (2) per year with each lasting two (2) days, but excluding the PDC Meeting held at the annual Users' Meeting. Contractor's participation in such PDC Meetings will include, but is not limited to consulting with surgical specialists and radiation oncologists to develop new procedures using the CyberKnife.

1.1.3.
Publications/Books. Contractor will use his contacts within the industry to drive other individuals to write and publish publications on Robotic Radiosurgery at Stanford University and at other sites. Contractor will also author at least three (3) publishable peer-reviewed articles or chapters in a book on Robotic Radiosurgery, as requested by Society, including at least one (1) publishable peer-reviewed article that involves other CyberKnife centers or is a multi-center study.

1.1.4.
Society's Website. Contractor will write and edit at least two (2) pages per month on the Society's website, as requested by Society. Contractor will also participate each week in the online discussion board on the Society's website. Contractor will attend and participate in the monthly online meetings and webcast on the Society's website.

1.1.5.
Task Force. Contractor will participate in a task force advising the leadership of AANS/CNS on professional fees for Robotic Radiosurgery using the CyberKnife.

1.2.
The Parties acknowledge that the Society intends to appoint a new President during the term of this Agreement. Upon the appointment of a new President of the Society, Contractor shall assume the title of President Emeritus. As President Emeritus:

    1.2.1.
    Contractor shall no longer be responsible for the duties and responsibilities that are customarily associated with, or which are enumerated in the Society's Bylaws for, the position of President, however, Contractor will aid in the transition of the new President and help to educate the new President on the Society.

    1.2.2.
    Contractor shall continue to perform those functions and duties set forth in Sections 1.1.1 through 1.1.5 above.

1.3.
As soon as practicable following the execution of this Agreement, Contractor and the Society shall meet to schedule the specific Services to be performed during the first calendar quarter that this Agreement is in effect. Thereafter, Contractor and the Society shall meet at least thirty (30) days in advance of the end of each calendar quarter to schedule the Services to be performed during the subsequent calendar quarter.

9


EXHIBIT B

COMPENSATION


1.
 
President Compensation. Contractor shall be compensated for Services performed according to this Agreement as President or President Emeritus, as applicable, as follows:

 
 
1.1.
 
Compensation for Users' Meeting:

 
 
 
 
•
 
Attendance/Participation in annual Users' Meeting:
 
$3,375 per day

 
 
 
 
•
 
Maximum Annual Compensation for Attendance/Participation in annual Users' Meeting:*
 
$13,500 per year

 
 
 
 
 
 
* (maximum annual compensation for Users' Meeting is based on the maximum attendance/participation of 4 days per year)

 
 
1.2.
 
Compensation for PDC Meetings:
 
 

 
 
 
 
•
 
Attendance/Participation in certain PDC Meetings:
 
$7,000 per meeting

 
 
 
 
•
 
Maximum Annual Compensation for Attendance/Participation in PDC Meetings:*
 
$14,000 per year

 
 
 
 
 
 
* (maximum annual compensation for PDC Meetings is based on the maximum attendance/participation of 2 PDC Meetings per year)

 
 
1.3.
 
Compensation for Publications/Books:
 
 

 
 
 
 
•
 
Drive Publications on Robotic Radiosurgery/Articles or Chapters in Robotic Radiosurgery Book:
 
$23,500 per year

 
 
1.4.
 
Compensation for Society's Website:

 
 
 
 
•
 
Writing/Editing pages on Society's website; participating in online discussion board and online meetings/webcast:
 
$20,000 per year

 
 
1.5.
 
Compensation for Participating in Task Force:
 
 

 
 
 
 
•
 
Participate in task force advising leadership of AANS/CNS on professional fees for CK Radiosurgery:
 
$5,000 per year

 
 
1.6.
 
Total Compensation/Payment. As indicated above, Contractor's maximum possible annual compensation from Society is $76,000 to be paid quarterly in advance, in four (4) equal installments of $19,000 per quarter beginning on the day that this Agreement is signed by both Parties and thereafter on the first business day of each quarter. Should Contractor not perform certain of the above objectives, then future quarterly payments to Contractor may be offset by the corresponding amount of the Services not performed. If at the end of the term of this Agreement, certain Services were not performed, and Contractor's failure to perform such services has not been offset against any subsequent quarter's installment, then Contractor shall reimburse Society for the corresponding amount of the services not performed within thirty (30) calendar days.

10


EXHIBIT C

LIST OF POTENTIAL CONFLICTS

—none—
/s/ DM

11


[ACCURAY LOGO]


AMENDMENT ONE TO INDEPENDENT CONTRACTOR AGREEMENT

        This Amendment One to Independent Contractor Agreement ("Amendment") is made, effective as of October 3, 2006 ("Effective Date"), by and between Accuray Incorporated, a California Corporation with offices located at 1310 Chesapeake Terrace, Sunnyvale, California 94089, ("Accuray"), and John Adler, M.D. ("Contractor"), each separately being a "Party" and collectively the "Parties."

        On April 4, 2006, Contractor and The CyberKnife Society ("CKS"), a California non-profit organization, entered into an Independent Contractor Agreement (the "Agreement") whereby Contractor agreed to provide certain services to CKS as an independent contractor and, in exchange, CKS agreed to provide Contractor with certain compensation. On October 3, 2006 (the "Dissolution Date"), CKS filed a Certificate of Dissolution with the California Secretary of State. In connection with the dissolution of CKS, Accuray agreed that it would assume all of the obligations and responsibilities of CKS, including the Agreement. In consideration of the mutual promises contained in this Amendment, the Parties want to amend the Agreement on the terms and conditions set forth herein.

        The Parties hereby agree as follows:

1.
As of the Dissolution Date, Accuray agrees to assume all of CKS' rights and obligations under the Agreement and Contractor consents to such assumption by Accuray.

2.
As of the Dissolution Date, all references to the "CyberKnife Society" or the "Society" in the Agreement shall be deemed to refer to Accuray.

3.
All provisions of the Agreement, except as expressly modified by this Amendment, will remain in full force and effect and are hereby ratified and reaffirmed. In the case of direct conflict or conflict by reason of interpretation between any provision of this Amendment and the Agreement, this Amendment shall control and supersede the terms of the Agreement.

4.
This Amendment, in combination with the Agreement, contains the entire agreement of the Parties hereto with respect to the subject matter hereof, and supersedes all prior understandings, representations and warranties, written and oral.

[SIGNATURE PAGE FOLLOWS]


[ACCURAY LOGO]

        IN WITNESS WHEREOF, the Parties have caused this Amendment to be executed as of the Effective Date by their duly authorized representatives. The Parties acknowledge and agree that this Amendment does not become effective until it has been signed by all parties indicated below.

 
    
    
    
JOHN ADLER, M.D.   ACCURAY, INCORPORATED

Signature:
 
/s/  JOHN ADLER      
 
Signature:
 
/s/  ERIC LINDQUIST      

Name:
 
John Adler, M.D.
 
Name:
 
Eric Lindquist

Title:
 
Contractor
 
Title:
 
SVP, Chief Marketing Officer

Address:
 
    
    
 
Address:
 
1310 Chesapeake Terrace
Sunnyvale, CA 94089

Telephone:
 
    
 
Telephone:
 

Date:
 

 
Date:
 

 
 
 
 
Signature:
 
/s/  DARREN MILLIKEN      

 
 
 
 
Name:
 
Darren Milliken

 
 
 
 
Title:
 
General Counsel

 
 
 
 
Address:
 
1310 Chesapeake Terrace
Sunnyvale, CA 94089

 
 
 
 
Telephone:
 

 
 
 
 
Date:
 



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INDEPENDENT CONTRACTOR AGREEMENT
EXHIBIT A SERVICES
EXHIBIT B COMPENSATION
EXHIBIT C LIST OF POTENTIAL CONFLICTS
[ACCURAY LOGO]
AMENDMENT ONE TO INDEPENDENT CONTRACTOR AGREEMENT
[ACCURAY LOGO]

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Exhibit 10.16

Execution Version


LICENSE AGREEMENT

        This License Agreement is made as of the 12th day of December, 2004 (the "Effective Date"), by and between Accuray Incorporated, a California corporation ("Licensor"), and American Science and Engineering, Inc., a Massachusetts corporation ("Licensee"). Licensee and Licensor are each sometimes referred to herein as a "Party" and collectively as the "Parties."

Background

        Licensor and Licensee are also parties to an Asset Purchase Agreement dated December 12, 2004 ("Asset Purchase Agreement"). Under the Asset Purchase Agreement, Licensor is purchasing the Acquired Assets (as defined therein) from the Licensee, including the Intellectual Property (as defined therein, including without limitation, the Division Documentation pertaining to the Intellectual Property).

        To allow Licensee to use the Intellectual Property in various lines of business, Licensee desires to obtain a license from Licensor of the Intellectual Property. Licensor is willing to grant Licensee such a license on the terms and conditions stated in this License Agreement.

        Therefore, in consideration of the agreements contained in this License Agreement and in the Asset Purchase Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

1.    Definitions.    

2.    License Grants.    

1

3.    Patent Rights Subject to Reversion    

2

4.    Warranties.    

        5.    Indemnification.    

3

6.    Termination.    

7.    Miscellaneous.    

4

Notice shall be deemed given upon receipt, on the next business day in the case of Federal Express delivery, and on the third business day after mailing in the case of mailing.

[Remainder of page left blank intentionally.]

5

        IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this License Agreement as a sealed instrument as of the date first above written.

    ACCURAY INCORPORATED

 
 
By:
/s/  EUAN S. THOMSON      
    Name: Euan S. Thomson
    Title: President and CEO

    
 
AMERICAN SCIENCE AND ENGINEERING, INC.

 
 
By:
/s/  ANTHONY R. FABIANO      
      Name: Anthony R. Fabiano
      Title: President and CEO

6



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Exhibit 10.17


ASSIGNMENT AND ASSUMPTION OF LICENSE
AND CONSENT BY SUPPLIER

        This Assignment and Assumption of License and Consent by Yuri Batygin and Anatoliy Zapreiev (collectively, the "Supplier") is made as of January 10, 2004 by and between American Science and Engineering, Inc., a Delaware corporation ("Assignor"), and Accuray Incorporated, a California corporation ("Assignee"), with reference to the following facts (this "Assignment"):

        WHERAS, the Supplier and the Assignor are the current parties to that certain Beampath and Interface Program License Agreement (the "License") dated November 1, 2004 for the use of certain software as described more fully in the License;

        WHEREAS, the Assignor desired to transfer and assign to the Assignee all of the rights of the Assignor under the License and the Assignee desires to accept such transfer and assignment and assume all obligations of the Assignor thereunder; and

        WHERAS, the Assignor and Assignee acknowledge and agree that the foregoing assignment and assumption of the License requires the prior written consent of the Supplier as provided in the License.

        NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

        1.     Assignment and Assumption. Effective as of the Closing Date, as defined in the Asset Purchase Agreement by and between the Assignor and Assignee, dated as of December 12, 2004 (the "Effective Date"), the Assignor transfers and assigns to the Assignee all the rights of the Assignor under the License. The Assignee accepts such transfer and assignment and assumes all obligations of the Assignor under the License.

        2.     Counterparts. This Assignment may be executed in one or more counterparts (including a facsimile of the same), each of which shall be deemed an original, but all of which shall constitute one agreement. Facsimile signatures shall constitute a valid and binding method of execution of this instrument by a party.

        3.     Authority. Each party represents and warrants to the other that it is duly authorized to enter into this Assignment and perform its obligations without the consent or approval of any other party and that the person signing on its behalf is duly authorized to sign on behalf of such party.

[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK.]

        IN WITNESS WHEREOF, this Assignment has been executed as of the date first above written.


ASSIGNOR:
 
ASSIGNEE:

AMERICAN SCIENCE AND ENGINEERING, INC.
 
ACCURAY INCORPORATED

By:
 
/s/  ANDREY V. MISHIN      
 
By:
 
/s/  CHRIS A. RAANES 1/10/05      
    Name:   Andrey V. Mishin       Name:   Chris A. Raanes
    Title:   Vice President       Title:    

CONSENT BY SUPPLIER AND WAIVER OF NOTICE

        The undersigned is the Supplier under that License described in this Assignment. At the request of the Assignor and the Assignee, the undersigned, as Supplier under the License, consents to the assignment and assumption set forth in the Assignment, such consent granted pursuant to the above mentioned License and serving in part as an amendment to the License, and waives any notice provisions contained in the License that are applicable to such consent; provided, however, that

        (a)   Such consent will not release the Assignor from any obligations accruing or arising prior to the Effective Date of this Assignment;

        (b)   As a result of this Assignment, the Assignee will be responsible for payment of all sums and the performance of all obligations formerly belonging to the Assignor under the License;

        (c)   The consent to the foregoing assignment shall not be deemed consent to any subsequent assignment, sublease, license or other transfer of the License;

        This consent to this Assignment has been executed as of date set forth below the Supplier's signatures below.

SUPPLIER:    

/s/  YURI BATYGIN      
Prof. Yuri Batygin
 
 

/s/  ANATOLIY ZAPREIEV      
Anatoliy Zapreiev
 
 

Dated: January 10, 2005

2

Yuri Batygin and Anatoliy Zapreiev, jointly called

("Supplier")

BEAMPATH AND INTERFACE PROGRAM LICENSE AGREEMENT

with AMERICAN SCIENCE AND ENGINEERING, INC.

        READ THE FOLLOWING CAREFULLY BEFORE OPENING THIS PACKAGE. OPENING THE PACKAGE OR USING THE ENCLOSED COPY OF THE PROGRAM INDICATES YOUR ACCEPTANCE OF THESE TERMS AND CONDITIONS AND CREATES A LEGAL AGREEMENT BETWEEN YOU AND SUPPLIER, EVEN WITHOUT YOUR SIGNATURE. IF YOU DO NOT AGREE WITH THE TERMS AND CONDITIONS, YOU MAY PROMPTLY RETURN THE UNOPENED PACKAGE AND ACCOMPANYING MATERIALS WITH PROOF OF PAYMENT TO THE PARTY FROM WHOM THEY WERE ACQUIRED AND YOUR MONEY WILL BE REFUNDED.

        Supplier retains the ownership of this copy of the software, which is licensed to you for use, under the following conditions.

        1.     License. Supplier hereby grants to you, and you hereby accept, a non-exclusive License to:

        2.     Term. The License is effective from the date of your receipt of the Media and Documentation until terminated. You may terminate the License by returning to Supplier all Materials, erasing or destroying all copies or counterparts made by you, and removing the coding from your CPU. The License shall terminate automatically if you commit a breach of any material provision of this Agreement.

        3.     Your Responsibilities.

3

        4.     Limited Warranty. Supplier warrants that the Media will be free from defects in materials or workmanship under normal use during the first ninety (90) days from the date of delivery to you, and that it transfers good title to the Media and Documentation to you. No dealer, distributor, agent, or employee of Supplier is authorized to modify or add to this exclusive warranty.

        EXCEPT FOR THE EXPRESS WARRANTIES ABOVE, THE MATERIALS ARE PROVIDED "AS IS," WITHOUT ANY WARRANTY, EITHER EXPRESS OR IMPLIED. THERE ARE NO IMPLIED WARRANTIES AGAINST INFRINGEMENT OR OF MERCHANTABILITY OR OF FITNESS FOR A PARTICULAR PURPOSE. YOU ACCEPT THE ENTIRE RISK THAT THE PROGRAMS WILL NOT MEET YOUR NEEDS OR EXPECTATIONS AND THAT THEIR OPERATION WILL NOT BE UNINTERRUPTED OR ERROR-FREE.

        5.     Limitation of Remedies. Supplier's entire liability and your exclusive remedy (except as provided below for "Infringement") is limited to either:

        6.     Infringement. Supplier shall defend any suit or proceeding brought against you so far as it is based on a claim that the practicing of the Program or the use or copying of any Material, as such and not in combination with any other article or process, constitutes an infringement of any patent or copyright in the United States, if notified within ten (10) calendar days after commencement and given full and complete authority and assistance (at Supplier's expense) for the defense. Supplier shall pay all damages and costs awarded therein against you that do not exceed the fees received by Supplier hereunder, except that Supplier will not be responsible for any compromise made without its consent. If such an infringement claim is made or threatened, at its option Supplier shall either procure for you the right to continue using the Material or practicing the Program, modify it so it becomes non-infringing, replace it with a non-infringing counterpart, or accept the return of the Material, terminate the License, and refund a reasonable portion of the fees paid. THIS PARAGRAPH STATES

4

SUPPLIER'S ENTIRE OBLIGATION TO YOU WITH RESPECT TO ANY CLAIM OF INFRINGEMENT.

        7.     Supplier's Remedies. In addition to the termination rights set forth under "Term" above:

        8.     Export Provisions. You acknowledge that any export of the Programs, Media and Documentation may be subject to U.S. export control laws. You agree that you will not export or reexport these items, directly or indirectly, except in accordance with such laws.

        9.     General.


"Granted"
 
 
 
 

Prof. Yuri Batygin
 
/s/ Yuri Batygin
 
12/31/2004

Dr. Anatoliy Zapreev
 
/s/ Anatoliy Zapreev
 
12/31/2004

"Reviewed and Accepted"

Andrey Mishin, Vice President and General Manager, AS&E HESD

Dated 31 December, 2004
 
/s/ Andrey Mishin
 
12/31/04

5



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Exhibit 10.18


NONEXCLUSIVE END-USER SOFTWARE

LICENSE AGREEMENT

BETWEEN

THE REGENTS OF THE UNIVERSITY OF CALIFORNIA

AND

ACCURAY, INC.

OFFICIAL USE ONLY

May be exempt from public release under the Freedom of Information Act
(5 U.S.C. 552), exemption number and category:
 Exemption 4, Commercial/Proprietary Information
Department of Energy review required before public release
Name/Org: Sharon Trujillo, TT Division Date: August 29, 2005
Guidance (if applicable)

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.

License Agreement No. 05-C01862


TABLE OF CONTENTS

 
    
   Page
1.   DEFINITIONS   1
2.   GRANT   1
3.   LICENSE FEE   2
4.   INTELLECTUAL PROPERTY RIGHTS   2
5.   TERM OF THE LICENSE AGREEMENT   3
6.   TERMINATION BY THE UNIVERSITY   3
7.   TERMINATION BY THE LICENSEE   3
8.   DISPOSITION OF LICENSED SOFTWARE ON HAND UPON TERMINATION   4
9.   USE OF NAMES, TRADENAMES AND TRADEMARKS AND NONDISCLOSURE TERMS   4
10.   WARRANTY AND DISCLAIMER   4
11.   INFRINGEMENT   5
12.   WAIVER   5
13.   ASSIGNMENT AND CONTROLLING INTEREST   5
14.   INDEMNIFICATION   6
15.   NOTICES   6
16.   FORCE MAJEURE   6
17.   EXPORT CONTROL LAWS   7
18.   DISPUTE RESOLUTION   7
19.   GOVERNING LAW   7
20.   SURVIVAL   7
21.   GOVERNMENT APPROVAL OR REGISTRATION   7
22.   MISCELLANEOUS   8
APPENDIX A   10
APPENDIX B   11
APPENDIX C   12

THIS DOCUMENT IS FOR NEGOTIATION PURPOSES ONLY AND DOES NOT
CONSTITUTE AN AGREEMENT BETWEEN THE PARTIES
OUO

i

License Agreement No. 05-C01862


NON-EXCLUSIVE SOFTWARE LICENSE AGREEMENT

THIS LICENSE AGREEMENT, hereinafter referred to as "License Agreement" is entered into by and between THE REGENTS OF THE UNIVERSITY OF CALIFORNIA, a nonprofit educational institution and a public corporation of the State of California having its principal office at 1111 Franklin Street, Oakland, CA 94607, hereinafter referred to as the "University," and Accuray Inc., 1310 Chesapeake Terrace, Sunnyvale, CA 94089 hereinafter referred to as the "Licensee," the parties to this License Agreement being referred to individually as a "Party," and collectively as "Parties."

The University conducts research and development at Los Alamos National Laboratory for the U.S. Government under Contract No. W-7405-ENG-36, hereinafter referred to as the "Contract," with the U.S. Department of Energy, hereinafter referred to as the "DOE".

Rights in inventions, technical data and software made in the course of the University's research and development at Los Alamos National Laboratory are governed by the terms and conditions of the Contract.

Certain electron-linac particle-dynamics software entitled "PARMELA", Version 3, has been developed in the course of the University's research and development at Los Alamos National Laboratory.

The University desires that such software be developed and utilized to the fullest extent possible so as to enhance the accrual of economic and technological benefits to the U.S. domestic economy, and is therefore willing to grant an nonexclusive license to the Licensee in the Intellectual Property Rights that protect the software.

The Licensee desires to obtain from the University certain nonexclusive rights for the commercial use of the software.

Now, therefore, the Parties agree as follows:

1.     DEFINITIONS

2.     GRANT

1

3.     LICENSE FEE

4.     INTELLECTUAL PROPERTY RIGHTS

2


5.     TERM OF THE LICENSE AGREEMENT

6.     TERMINATION BY THE UNIVERSITY

7.     TERMINATION BY THE LICENSEE

3

8.     DISPOSITION OF LICENSED SOFTWARE ON HAND UPON TERMINATION

9.     USE OF NAMES, TRADENAMES AND TRADEMARKS

10.   WARRANTY AND DISCLAIMER

4

11.   INFRINGEMENT

12.   WAIVER

13.   ASSIGNMENT AND CONTROLLING INTEREST

5

14.   INDEMNIFICATION

15.   NOTICES

In the case of the Licensee:   In the case of the University:
Accuray Inc.
1310 Chesapeake Terrace
Sunnyvale, CA 94089
Attention: Mike Hernandez
Telephone: (408) 716-4799
Facsimile: (650) 969-6579
Email address: mhernandez@accuray.com		   Los Alamos National Laboratory
Technology Transfer Division
P.O. Box 1663, Mail Stop C334
Los Alamos, New Mexico 87545
Attention: License Compliance Officer
Telephone: (505) 665-9091
Facsimile: (505) 665-0154

For Courier Service:
 
For payments due the University:
Los Alamos National Laboratory
Technology Transfer Division
Bikini Atoll Road, Bldg. SM-30
Los Alamos, NM 87545
Attention: License Compliance Officer		   Los Alamos National Laboratory
Technology Transfer Division
P.O. Box 462
Los Alamos, NM 87544
Attention: License Compliance Officer

16.   FORCE MAJEURE

6

17.   EXPORT CONTROL LAWS

18.   DISPUTE RESOLUTION


19.   GOVERNING LAW

20.   SURVIVAL


Article 1   Definitions
Article 2   Grant
Article 3   License Fee
Article 6   Termination by the University
Article 7   Termination by the Licensee
Article 9   Use of Names, Tradenames and Trademarks
Article 10   Warranty and Disclaimer
Article 13   Assignment
Article 14   Indemnification
Article 18   Dispute Resolution
Article 20   Survival

21.   GOVERNMENT APPROVAL OR REGISTRATION

7

22.   MISCELLANEOUS

8

IN WITNESS WHEREOF, both the University and the Licensee have executed this License Agreement, in duplicate originals, by their respective officers on the day and year hereinafter written.

THE REGENTS OF THE UNIVERSITY OF CALIFORNIA:

By:   /s/  DUNCAN W. MCBRANCH      
Duncan W. McBranch
Director, Technology Transfer Division		    
Date:   9/8/05
    

Name of LICENSEE:

By:   /s/  CHRIS A. RAANES      
    
Printed Name:   Chris A. Raanes
    
Title:   Chief Operating Officer
    
Date:   09 Sept 2005
    

9


APPENDIX A

LICENSED SOFTWARE

PARMELA, Version 3.1, provided in executable form only, as disclosed in 2000

University's identification number. C-00,124

10

PROPRIETARY INFORMATION OF THE LICENSEE. TREAT AS SENSITIVE
INFORMATION. NOT SUBJECT TO PRODUCTION UNDER A FREEDOM
OF INFORMATION ACT (FOIA) REQUEST.

APPENDIX B

FEES

1.     Fees

[*]
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.

11


APPENDIX C

AUTHORIZED SITE(S)

In accordance with Paragraph 1.3 of this Agreement, the following information identifies the location and custodian information for the LICENSED SOFTWARE for which the University has granted rights herein:

Shorebird Facility
1383 Shorebird Way
Mountain View, CA 94043

Custodian: Mike Hernandez
Phone: (408)716-4799
FAX: (650)969-6579


Or

1310 Orleans Drive
Sunnyvale, CA 94089

Custodian: Mike Hernandez
Phone: (408)716-4799
FAX: (650)969-6579

12



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APPENDIX B FEES
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Exhibit 10.19


LICENSE AGREEMENT

Effective as of July 9th, 1997 ("Effective Date"), THE BOARD OF TRUSTEES OF THE LELAND STANFORD JUNIOR UNIVERSITY, a body having corporate powers under the laws of the State of California ("STANFORD"), and, ACCURAY INCORPORATED, a California corporation having a principal place of business at 570 Del Rey Avenue, Sunnyvale, California 94086 ("LICENSEE"), hereby agree as follows:

1.     BACKGROUND

2.     DEFINITIONS


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.

3.     GRANT

4.     DILIGENCE

5.     ROYALTIES


[*] 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.

2

6.     ROYALTY REPORTS, PAYMENTS AND ACCOUNTING


[*] 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.

3

7.     NEGATION OF WARRANTIES

8.     INDEMNITY

4

9.     MARKING


10.   STANFORD NAMES AND MARKS

11.   INFRINGEMENT BY OTHERS: PROTECTION OF PATENTS

5

12.   TERMINATION

and LICENSEE fails to remedy any such default, breach, or false report within thirty (30) calendar days after written notice thereof by STANFORD.

13.   ASSIGNMENT

14.   ARBITRATION

6

15.   NOTICES

        Either party may change its address upon written notice to the other party.

16.   WAIVER

17.   APPLICABLE LAW

7

        IN WITNESS WHEREOF, the parties hereto have executed this Agreement in duplicate originals by their duly authorized officers or representatives.

/s/  KATHARINE KU      
THE BOARD OF TRUSTEES OF
THE LELAND STANFORD JUNIOR UNIVERSITY
by Katharine Ku
Director of Technology Licensing		   DATE:   July 17, 1997

/s/  JAMES R. DOTY      
ACCUAY INCORPORATED
by James R. Doty, M.D.
Chairman and Chief Executive Officer
 
DATE:
 
July 18, 1997

8



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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

 
    
    
   Page
1.   Definitions   1

 
 
(a)
 
Documentation
 
1
    (b)   Exercise Date   1
    (c)   Improvements   1
    (d)   Licensed Copyrights   1
    (e)   Licensed Know-How   1
    (f)   Licensed Patents   1
    (g)   Licensed Product   2
    (h)   Licensed Rights   2
    (i)   Medical Applications   2

2.
 
License Grant
 
2

 
 
(a)
 
Manufacturing License
 
2
    (b)   Documentation   2

3.
 
Exercise Preconditions
 
2

 
 
(a)
 
Insolvency, Bankruptcy
 
2
    (b)   Inadequate Supply   2
    (c)   Acquisition of Company   2
    (d)   Breach of Purchase Agreement   2
    (e)   Six (6) Months Notice   2

4.
 
Improvements
 
3
    (a)   Company Improvements   3
    (b)   Licensee Improvements   3

5.
 
Royalties
 
3
    (a)   Amount of Payment   3
    (b)   Payment Terms   3
    (c)   Records   3
    (d)   Taxes   4

6.
 
Duties of Company
 
4
    (a)   Delivery of Documentation   4
    (b)   Training   4
    (c)   Visitation Rights   4

7.
 
Rights Under Government Grants
 
4
    (a)   Subcontract of Research and Development   4
    (b)   Inclusion in Licensed Rights   5
    (c)   Technology Transfer   5

8.
 
Subcontracting
 
5

9.
 
Indemnification
 
5
    (a)   Infringement of Proprietary Rights   5
    (b)   Breach of Representations and Warranties   5
             

i


10.
 
Representations and Warranties
 
5
    (a)   Authority   5
    (b)   No Conflicts   6
    (c)   Ownership   6
    (d)   Government Grants   6
    (e)   Adequate Documentation   6

11.
 
The Company's Vendors
 
6

12.
 
Limitation of Liability
 
6

13.
 
Termination
 
6
    (a)   Company's Rights   6
    (b)   Licensee's Rights   7
    (c)   Cure Period   7
    (d)   Licensee's Remedy Upon Termination   7
    (e)   The Company's Remedy Upon Termination   7
    (f)   Rights of Third Parties   7

14.
 
Termination of Exclusivity
 
8

15.
 
Arbitration
 
8
    (a)   Procedure   8
    (b)   Injunctive Relief   8

16.
 
Escrow of Documentation
 
8

17.
 
Patent Protection
 
9
    (a)   Patent Enforcement   9
    (b)   Maintenance   9
    (c)   Notice of New Patents   9

18.
 
Confidential Information
 
9
    (a)   Definition   9
    (b)   Nondisclosure Obligations   9
    (c)   Survival   10

19.
 
General Provisions
 
10
    (a)   Notices   10
    (b)   Waiver   10
    (c)   Severability   10
    (d)   Choice of Law   10
    (e)   Attorney's Fees   10
    (f)   Assignment   10
    (g)   Export Control   11
    (h)   Entire Agreement   11
    (i)   Independent Contractor   11
    (j)   Force Majeure   11
    (k)   Section Headings   11
Exhibits    

 
 
1
 
Licensed Product
 
 

ii


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:

        2.    License Grant.    

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

2

[*]
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.

3

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.

4

        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.    

        10.    Representations and Warranties.    

5

        11.    The Company's Vendors.    The Company has no contracts, agreements, understandings or arrangements of any kind with any of its vendors which prevent, or will prevent, Licensee from buying directly from any such vendor any standard commercial parts or assemblies necessary to assemble the Licensed Products. The Company will furnish its vendor list to Licensee within ten (10) business days following the Exercise Date; provided, however, that if the Licensee exercises its rights under paragraph 3(e) ("Six Months Notice") above, the Company shall provide such list to Licensee sixty (60) days prior to the Exercise Date.

        12.    Limitation of Liability.    NEITHER LICENSEE NOR THE COMPANY SHALL BE LIABLE TO THE OTHER PARTY UNDER ANY CIRCUMSTANCES FOR ANY LOST REVENUE, LOST PROFITS OR OTHER SPECIAL, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES UNDER ANY LEGAL THEORY, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

        13.    Termination.    

6

7

        14.    Termination of Exclusivity.    If the Licensee has not sold or otherwise distributed a minimum of [*] ([*]) systems incorporating Royalty Bearing Products (whether manufactured pursuant to the terms of this Agreement or purchased pursuant to the terms of the Purchase Agreement) ("Licensee Systems") prior to March 31, 1997, the manufacturing license granted in subparagraph 2(a) ("Manufacturing License") above shall become non-exclusive; provided, however, that in lieu of losing its exclusive rights under this Agreement, Licensee may, at its option, elect to make a cash payment to the Company in an amount equal to $[*] multiplied by the difference between [*] ([*]) and the number of Licensee Systems which Licensee has sold or otherwise distributed, which payment shall be credited in full against the Maximum Royalty Amount. Thereafter, the manufacturing license shall remain exclusive provided that in each successive twelve (12) month period, until the Maximum Royalty Amount is paid, Licensee sells or otherwise distributes at least [*] ([*]) Licensee Systems.

        16.    Escrow of Documentation.    The Company agrees to place in escrow (the "Escrow") with an independent third party escrow agent reasonably acceptable to the Licensee (the "Escrow Agent") within ninety (90) days of the date on which the Licensee obtains financing in the amount of at least $[*], one copy of the Documentation as it exists on that date. After the Company has delivered the first Initial Unit (as defined in the Purchase Agreement), the Documentation in the Escrow shall be revised or replaced to reflect the as built design requirements of the technology to be provided to the Licensee. In addition, the Company agrees to update the Documentation contained in the Escrow to reflect any Improvements and other modifications to the Licensed Product once each calendar year until the Exercise Date. The agreement between the Company, the Licensee and the Escrow Agent shall provide for the release of the Documentation at the request of the Licensee at any time on or after the date on which the Company is required to deliver the Documentation in accordance with subparagraph 6(a) ("Delivery of Documentation") of this Agreement. All costs and expenses related to establishing and maintaining the Escrow shall be borne by the Licensee.

[*]
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.

8

        17.    Patent Protection.    

        18.    Confidential Information.    

9

        19.    General Provisions.    

        Notices to the Company shall be addressed as follows:

10

11

        IN WITNESS WHEREOF, the parties hereto cause this Agreement to be signed by their duly designated representatives.

COMPANY:   LICENSEE:

SCHONBERG RADIATION CORPORATION
 
ACCURAY ASSOCIATES
        By:   Accuray Incorporated, General Partner

By:
 
/s/  RUSSELL G. SCHONBERG      
(Authorized signatory)
 
By:
 
/s/  JOSEPH G. DEPP      
(authorized Signatory)
Printed Name:   Russell G. Schonberg
   Printed Name:   Joseph G. Depp
Title:   CEO
   Title:   President

Date:
 
1/30/91
 
Date:
 
1/30/91

12

EXHIBIT 1
LICENSED PRODUCT

        The Licensed Product will consist of:

        1.     A 4 MeV standing-wave X-Band linear accelerator, with appropriate rf power source, modulator, and supporting electronics.

        2.     A primary collimator to restrict the radiation field to a maximum of 60 mm diameter at the treatment distance.

        3.     A dual dosimetry ion chamber system which will monitor the radiation exposure and terminate the exposure upon delivering a predetermined amount of radiation.

        4.     A set of secondary collimators providing circular field sizes, ranging from 5 mm to 35 mm in diameter.

        5.     A control system which can be interfaced to the Neurotron 1000 control system.

AMENDMENT

        Made and entered into this 15th day of April, 1996, by and between SCHONBERG RESEARCH CORPORATION, a California corporation, the name of which was previously Schonberg Radiation Corporation, having its principal place of business at 3300 Keller Street, Building #101, Santa Clara, California 95054 (sometimes called "SRC" or "Company"), and ACCURAY INCORPORATED, a California corporation which was the general partner in and is the successor to Accuray Associates, a California limited partnership, having its principal office at 570 Del Rey Avenue, Sunnyvale, California 94087 (sometimes called "Accuray," "Buyer" or "Licensee").

        The agreements between the parties which are amended hereby are:

        The License and the Purchase Agreement are sometimes referred to herein as the "Agreements." Initially capitalized terms herein are intended to have the meanings given them in the Agreements.

RECITALS

        Under the Agreements, SRC has built (or is in the process of building) six Licensed Products which have been (or are in the process of being) incorporated into six frameless stereotactic radiosurgery devices (variously called the "Neurotron 1000" or the "CyberKnife") assembled and sold to providers of medical treatment by Accuray.

        Unforeseen difficulties have caused delays and performance problems for the parties.

        While their expectations have changed in some respects, the parties nevertheless wish to maintain a business relationship between them as described in the Agreements, but to amend the Agreements to be consistent with their experience over the past five-plus years and with their changed expectations.

AGREEMENT

        In consideration of the foregoing, and of the promises contained herein, the parties hereto, intending to be legally bound hereby, agree as follows:

        1.     In the first paragraph on page 1 of both Agreements, "Schonberg Radiation Corporation" is amended to read "Schonberg Research Corporation," and "Accuray Associates, a California limited partnership having its principal place of business in Santa Clara, California" is amended to read "Accuray Incorporated, a California corporation having its principal place of business in Sunnyvale, California."

        2.     Paragraph 3.2 of the Purchase Agreement is amended and restated in its entirety to read as follows:

        3.     Paragraph 2.(a) of the License is amended and restated in its entirety to read as follows:

        2.    License Grant    

        4.     Section 3 of the License is deleted in its entirety and replaced by the statement, "This section intentionally omitted" so as to avoid renumbering subsequent sections.

        5.     Paragraph 5.(a) of the License is amended and restated in its entirety to read as follows:

        5.    Royalties.    

        6.     Paragraph 13.(a)(iv) of the License is deleted in its entirety and replaced by the statement, "This paragraph intentionally omitted" so as to avoid renumbering subsequent paragraphs.

[*]
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.

        7.     Section 14. of the License is amended and restated in its entirety to read as follows:

As of
   Cumulative
Royalty
March 31, 1997   $ [  *  ]
June 30, 1997   $ [  *  ]
September 30, 1997   $ [  *  ]
December 31, 1997   $ [  *  ]
March 31, 1998   $ [  *  ]
June 30, 1998   $ [  *  ]
September 30, 1998   $ [  *  ]
December 31, 1998   $ [  *  ]
March 31, 1999   $ [  *  ]
June 30, 1999(6)   $ [  *  ]
September 30, 1999   $ [  *  ]
December 31, 1999   $ [  *  ]
March 31, 2000   $ [  *  ]
June 30, 2000   $ [  *  ]
September 30, 2000   $ [  *  ]
December 31, 2000   $ [  *  ]
March 31, 2001   $ [  *  ]
June 30, 2001   $ [  *  ]
September 30, 2001   $ [  *  ]
December 31, 2001   $ [  *  ]

        8.     In paragraph 18.1 of the Purchase Agreement and in paragraph 19.(a) of the License, the names and addresses of the parties are amended to read as follows:

        9.     In the signature blocks on page 15 of the License and on page 16 of the Purchase Agreement, "SCHONBERG RADIATION CORPORATION" is amended to read "SCHONBERG RESEARCH CORPORATION", and "ACCURAY ASSOCIATES By: Accuray Incorporated, General Partner" is amended to read "ACCURAY INCORPORATED."

[*]
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.

2

        10.   EXHIBIT 1 to the License and EXHIBIT A to the Purchase Agreement are hereby amended and restated in their entirety to read as follows:

EXHIBIT 1/EXHIBIT A
LICENSED PRODUCT/PRODUCT

        The Licensed Product/Product will consist of:

        11.   Except as expressly amended above, the Agreements shall remain in full force and effect, and the parties shall be deemed to have substantially complied with their obligations under the Agreements up to and including the date first above written.

        IN WITNESS WHEREOF, the parties have caused this Amendment to be signed and attested by their respective officers, duly authorized thereunto, on the day and year first above written.

Attest:   SCHONBERG RESEARCH CORPORATION

/s/  [SIGNATURE ILLEGIBLE]      
 
By:
/s/  BRUCE G. SCHONBERG      

Attest:
 
ACCURAY INCORPORATED

/s/  BRUCE BOWDEN      
Secretary
 
By:
/s/  DONALD CADDES      
President

3

11 November 2002

Russell G. Schonberg
Schonberg Research Corporation
P.O. Box S
Los Altos, CA 94022

Dear Russ:

        This letter agreement amends agreements between Schonberg Research Corporation, a California Corporation, the name of which was previously Schonberg Radiation Corporation ("SRC" or "Company") and Accuray Incorporated, a California corporation, which was the general partner in and is the successor to Accuray Associates, a California limited partnership ("Accuray" or "Buyer" or "Licensee"). The agreements, which were amended by an amendment made and entered into on 15 April 1996 (the "Amendment"), are:

Initially capitalized terms herein are intended to have the meanings given them in the License, the Purchase Agreement, and the Amendment.

        The License, the Purchase Agreement, and the Amendment are hereby amended as follows:

        5.    Royalties    

        (a)    Amount of Payment.    For each Licensed Product manufactured by Licensee, the Company, or by a third party on Licensee's behalf which is sold or otherwise distributed (a "Royalty Bearing Product") after 1 April 1996, Licensee shall pay to the Company $[*], except that beginning 1 October 2002 the payment for the first such Royalty Bearing Product each calendar quarter shall be $[*], until such time as the Maximum Royalty Amount ($[*]) has been paid to the Company under this License; 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). Upon payment in full of the Maximum Royalty Amount as so reduced, the licenses granted under this License shall become fully-paid and royalty-free.

Sincerely,
Accuray Incorporated

/s/ John M. Harland
John M. Harland
Sr. Vice President & Chief Financial Officer

AGREED:

Schonberg Research Corporation

/s/ Russell G. Schonberg
Russell G. Schonberg
CEO

[*]
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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MANUFACTURING LICENSE AND TECHNOLOGY TRANSFER AGREEMENT January 28, 1991
TABLE OF CONTENTS
MANUFACTURING LICENSE AND TECHNOLOGY TRANSFER AGREEMENT

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Exhibit 10.22

CONSULTING AGREEMENT

        This Consulting Agreement ("Agreement") is made as of March 11, 2004 ("Effective Date"), by and between Accuray, a                                      corporation having its principal place of business at 1310 Chesapeake Terrace, Sunnyvale, CA 94089 ("Company"), and Forte Automation Systems, Inc., a corporation, whose address is 8155 Burden Road, Rockford, IL 61115 ("Consultant").

        Company desires to have Consultant perform consulting services for Company and Consultant desires to perform such services for Company, subject to and in accordance with the terms and conditions of this Agreement.

        NOW, THEREFORE, the parties agree as follows:

1.     SERVICES.

2.     RELATIONSHIP OF PARTIES.

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.

3.     OWNERSHIP AND INTELLECTUAL PROPERTY RIGHTS.

2

        4.     CONFIDENTIAL INFORMATION.    For purposes of this Agreement, "Confidential Information" means and will include: (i) any information, materials or knowledge regarding Company and its business, financial condition, products, programming techniques, customers, suppliers, technology or research and development that is disclosed to Consultant or to which Consultant has access in connection with performing Services; (ii) the Innovations; and (iii) the existence and terms and conditions of this Agreement Confidential Information will not include, however, any information that is or becomes part of the public domain through no fault of Consultant or that Company regularly gives to third parties without restrictions on use or disclosure. Consultant agrees to hold all Confidential Information in strict confidence, not to use it in any way, commercially or otherwise, except in performing the Services, and not to disclose it to others. Consultant further agrees to take all action reasonably necessary to protect the confidentiality of all Confidential Information including, without limitation, implementing and enforcing procedures to minimize the possibility of unauthorized use or disclosure of Confidential Information.

5.     WARRANTIES.

        6.     INDEMNIFICATION.    Consultant will indemnify and hold harmless Company from and against all claims, damages, losses and expenses, including court costs and reasonable attorneys' fees, arising out of or resulting from, and, at Company's option, Consultant will defend Company against:

7.     TERM AND TERMINATION.

3

8.    LIMITATION OF LIABILITY.    IN NO EVENT WILL COMPANY BE LIABLE FOR ANY SPECIAL, INCIDENTAL, PUNITIVE OR CONSEQUENTIAL DAMAGES OF ANY KIND IN CONNECTION WITH THIS AGREEMENT, EVEN IF COMPANY HAS BEEN INFORMED IN ADVANCE OF THE POSSIBILITY OF SUCH DAMAGES.

9.     GENERAL.

4

        IN WITNESS WHEREOF, the parties have signed this Agreement as of the Effective Date.

COMPANY:   CONSULTANT:


By:

 

/s/  MIKE SARACEN      
Title: Dir. Product Management
Date: March 11, 2005

 

By:

/s/  TOBY HENDERSON      
Title: President
Date: March 11, 2005

5


EXHIBIT A

Statement of Work

        This Statement of Work is issued under and subject to all of the terms and conditions of the Consulting Agreement dated as of March 11, 2005 by and between Accuray ("Company") and Forte Automation Systems, Inc ("Consultant").

        1.     Description of Services (see attached Proposal # 03-4984A, dated 7/28/03, as amended by attached Proposal # 04-5244, dated June 8, 2004).

        2.     Payment Terms [Include the following if the Consultant will be paid based on the completion of milestones] (see attached Proposal # 03-4984A, dated 7/28/03, as amended by attached Proposal # 04-5244, dated June 8, 2004).

        3.     Other Terms

AGREED AS OF                                     , 200    

  COMPANY:  

By:
/s/  MIKE SARACEN      
 
By:

Title:
Dir. Product Management
 
Title:

Proposal #   03-4984-A
Date   07/28/03

ACCURAY, INC.
Patient Couch Application

Mr. Mike Saracen

LOGO

        July 28, 2003

LOGO

Mr. Mike Saracen
Accuray, Inc.
570 Del Rey Avenue
Sunnyvale, CA 94086

Dear Mr. Saracen:

Thank you for your interest in Forte Automation Systems, Inc. to supply equipment for your patient couch application. Forte has considerable experience building custom robotics and automation applications in the fields of pharmaceutical equipment and medical devices.

Based on the input from our last meeting, we have redesigned the patient couch to include the features your team has requested.

We wish to thank you for the opportunity to quote your requirements and look forward to working with you and your company on this project.

If you have any questions on this proposal, or require additional information, please do not hesitate to contact us.

Sincerely,

FORTE AUTOMATION SYSTEMS, INC

/s/ Toby Henderson

2

SCOPE:

        Forte Automation Systems, Inc. will design and build a state of the art patient couch that will be integrated into your existing product.

        At your request, we have provided this quotation in three (3) phases:

PROJECT OBJECTIVES:

SYSTEM DELIVERABLES:

Phase One:

        Forte will provide mechanical designs to incorporate a variety of Forte standard servo mechanisms. The resulting package will yield a system with six-axis of freedom within the safety parameters that will be established during this phase.

        The design will take in account to the existing product constraints with respect to floor space and interface to your existing product.

        Controls specifications will be developed including electrical interface to your equipment, couch control, hardwire schematics, cabling drawings, and panel layouts.

3

        All documentation for custom designed equipment will be provided in either 3D or 2D electronic CAD format.

Phase Two:

        Forte will build a prototype patient couch and assist with the integration of the couch with your equipment. This phase will include the necessary mechanical hardware, control hardware, development of the system software, and testing of the fully assembled couch at Forte.

        Three (3) days of training is included for up to four (4) people at our Rockford plant.

        Integration with your equipment will be billed at our normal field service rates.

Phase Three:

        Forte will provide multiple duplicate systems including any design improvements discovered in phase two.

        Forte will be available to assist with installation training and service at your customer's site on request. Any non-warrantee service will be billed at our published service rates.

MISCELLANEOUS:

Electrical:

        System Power Requirements estimated at 480 VAC, 60 Hz, 30 Amps.

DOCUMENTATION:

        DESIGN APPROVAL: System design to be approved by Accuray, Inc. personnel prior to programming and manufacture.

        All documentation will be kept to latest revision, custom software inclusive. Forte will provide all manuals for all systems. Operations manuals will include start-up, calibration and set-up procedures. Software and mechanical drawings will be supplied in an electronic file format as well as one (1) bound hardcopy.

        Documentation will be written with recovery methods and written procedures easily understood by operational personnel.

        Set-up and calibration will be described in detail (mechanical reference, fixtures, critical measurements, and variable interaction) in our manual.

        All adjustments will be easily assessable. A preventive maintenance schedule and spare parts list (commercial and custom) with wear parts identified is part of the Forte standard documentation package.

4

        One (1) documentation package is included. Additional copies of manuals can be purchased for $250.00 per copy.

SPECIFICATIONS:

MAINTENANCE/SET-UP & CALIBRATION FIXTURES:

        Machine framework and major mechanicals will be designed for accessibility to internal components with clearance for removal of shafts, bearings, and slides. Critical alignment devices will be dowel pinned at a point that will effect assembly removal with minimal corruption of alignment and set-up.

        Fixtures and calibration jigs will be designed and included to aid in set-up. Special attention will be made to methods of mechanical adjustment and variable structure to insure reliable and expedient set-up of devices. Set-up and calibration routines and procedures with logic and data maps is part of the standard documentation.

SYSTEM SUPPORT/INSTALLATION & START-UP:

Project Management / System Support:

        Forte will assign a project engineer to your system, who will coordinate the project through concept, design, build, installation, and remain available to provide service or technical assistance after the system has been installed. During the build, Accuray, Inc. will have visitation rights at any time and will provide reasonable notice prior to arrival.

        All agreements will be made in writing. Any correspondence on the project will be recorded and kept in a bound chronological book. Design changes and engineering change orders will be copied to Accuray, Inc. for concurrence and recorded.

        Commencing upon bid award, a design kick-off meeting will be held and subsequent design reviews through the engineering/design process will be scheduled and attended by representatives of both companies.

        Prior to or shortly after the design kick-off meeting, the project schedule will be established and any deviations will be brought to the attention of Accuray, Inc.

5

Installation & Start-Up:

        Shipping, rigging, uncrating, and installation of basic services at your facility will be the responsibility of Accuray, Inc. Forte will provide these services, if requested by Accuray, Inc. at our standard field service rates.

        Forte will supply appropriate mechanical engineering and control system engineering personnel for installation supervision, start-up, and training at our quoted service rate. Forte will notify Accuray, Inc. of facility requirements within 2 months of project ship date.

MACHINE ACCEPTANCE/DELIVERY:

Machine Acceptance:

        Acceptance will be made by a run-off at Forte Automation Systems, Inc. facility, with personnel from Accuray, Inc. present.

        A second run-off will be performed at Accuray, Inc. with the system integrated into your product.

        Acceptance will be based on conformance to the build specifications established in phase one.

Project Schedule:

        Phase one deliverables can be completed in 8 - 10 weeks ARO.

        Phase two deliverables can be completed in 12 - 14 weeks ARO.

        Delivery of duplicate systems would require 10 - 12 weeks ARO.

        The project schedule will be reviewed at the time of order placement and is subject to change. The project schedule commences upon receipt of both a hard copy purchase order and down payment. At that time, a complete schedule will be provided. Necessary changes due to unforeseen circumstances will result in a change to the delivery schedule.

PRICING/TERMS:

Price:

One (1) Phase One Concept and Design as Described in
Forte Proposal #03-4984-A,
F.O.B. Rockford, IL		   $                        [*]
One (1) Phase Two Prototype Build as Described in
Forte Proposal #03-4984-A,
F.O.B. Rockford, IL		   $                        [*]
One (1) Phase Three Quantity Build Estimate as Described in
Forte Proposal #03-4984-A,
F.O.B. Rockford, IL		   $                        [*]/ea.
Installation Assistance, Start-Up and Training
at Your Plant		   $                        [*] / Hr. / Person Plus Expenses

        NOTE: Forte Automation Systems, Inc. Terms and Conditions and Warranty
sheet is attached and an inseparable part of this proposal.

6

Payment Terms:

        Payment to be made on a phase contract agreement as follows:

NOTE: Lease options are also available.

        [*] 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.

7

LOGO

        Proposal # 04-5244
June 8, 2004

         ACCURAY INC.
Prototype Robotic Patient Couch

         Mr. Mike Saracen

        June 8, 2004

LOGO

Mr. Mike Saracen
Accuray Inc.
1310 Chesapeake Terrace
Sunnyvale, CA 94089

Dear Mike:

At your request, we have evaluated costs to construct a 2nd and 3rd Prototype Robotic Patient Couch.

Tests to be conducted over the next several weeks will determine if a seventh-axis will be required for the production systems. Pending these results, we have included seventh-axis pricing as an option.

We wish to thank you for the opportunity to quote your requirements and look forward to working with you and your company on this project.

If you have any questions on this proposal, or require additional information, please do not hesitate to contact us.

Sincerely,

FORTE AUTOMATION SYSTEMS, INC.

Toby Henderson

2

SCOPE:

        Based on the input from our last review meeting, Forte will complete the following:

SYSTEM DELIVERABLES:

Forte will provide:

MISCELLANEOUS:

Electrical:

System power requirements estimated at 208 VAC, 60 Hz, 30 Amps.

DOCUMENTATION:

DESIGN APPROVAL: System design to be approved by Accuray, Inc. personnel prior to programming and manufacture.

All documentation will be kept to latest revision, custom software inclusive. Forte will provide all manuals for all systems. Operations manuals will include start-up, calibration and set-up procedures.

Set-up and calibration will be described in detail (mechanical reference, fixtures, critical measurements, and variable interaction) in our manual.

All adjustments will be easily assessable. A preventive maintenance schedule and spare parts list (commercial and custom) with wear parts identified are part of the Forte standard documentation package.

One (1) documentation package is included. Additional copies of manuals can be purchased for $250.00 per copy.

SYSTEM SUPPORT/INSTALLATION & START-UP:

Project Management / System Support:

Forte will assign a project engineer to your system, who will coordinate the project through concept, design, build, installation, and remain available to provide service or technical assistance after the system has been installed. During the build, Accuray, Inc. will have visitation rights at any time and will provide reasonable notice prior arrival.

All agreements will be made in writing. Any correspondence on the project will be recorded and kept in a bound chronological book. Design changes and engineering change orders will be copied to Accuray, Inc. for concurrence and recorded.

3


Commencing upon bid award, a design kick-off meeting will be held and subsequent design reviews through the engineering/design process will be scheduled and attended by representatives of both companies.

Prior to or shortly after the design kick-off meeting, the project schedule will be established and any deviations will be brought to the attention of Accuray, Inc.

Installation & Start-Up:

Shipping, rigging, uncrating, and installation of basic services at your facility will be the responsibility of Accuray, Inc. Forte will provide these services, if requested by Accuray, Inc. at our standard field service rates.

Forte will supply appropriate mechanical engineering and control system engineering personnel for installation supervision, start-up, and training at our quoted service rate. Forte will notify Accuray, Inc. of facility requirements within 2 months of project ship date.

MACHINE ACCEPTANCE/DELIVERY:

Machine Acceptance:

Acceptance will be made by a run-off at Forte Automation Systems, Inc. facility, with personnel from Accuray, Inc. present.

A second run-off will be performed at Accuray, Inc. with the system integrated into your product.

Acceptance will be based on conformance to the build specifications.

Project Schedule:

As we discussed, some of the motor and possibly controller re-sizing may be difficult to accomplish in the allotted time. Both Accuray, Inc. and Forte must work closely with Kuka to assure the delivery of robot kits and support required to make these control changes.

Engineering = 3 weeks.

Build = 8 weeks.

The project schedule will be reviewed at the time of order placement and is subject to change. The project schedule commences upon receipt of both a hard copy purchase order and down payment. At that time, a complete schedule will be provided. Necessary changes due to unforeseen circumstances will result in a change to the delivery schedule.

4


PRICING/TERMS:

Price:

One (1) Engineering as Described in Forte Proposal #04-5244,
F.O.B. Origin		   $            [*]

Build Two (2) Six-Axis Units as Described in Forte Proposal #04-5244,
F.O.B. Origin
 
$            [*]/Each

Build Two (2) Seventh-Axis Modules as Described in Forte Proposal #04-5244,
F.O.B. Origin
 
$            [*]/Each

Installation Assistance, Start-Up and Training at Your Plant
 
$[*] / Hr. / Person
Plus Expenses

NOTE: Forte Automation Systems, Inc. Terms and Conditions and Warranty
sheet is attached and an inseparable part of this proposal.

Payment Terms:
 
 

Payment to be made on a phase contract agreement as follows:
 
 
 
30% down payment with purchase order.
 
 
  30% due upon approval of engineering.    
  30% due upon acceptance at Forte Automation Systems, Inc. facility.    
  10% due net 30, following acceptance at Accuray Inc.'s facility.    
[*]
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.

5

        FORTE AUTOMATION SYSTEMS, INC. ("FORTE")
Terms, Conditions & Warranty

1.
Applicable Terms.    Any order resulting from this proposal will be subject to the written acknowledgment of Forte.

2.
Taxes.    Any taxes or additional costs, due to the federal, state or municipal legislation, to which the prices in this proposal are subject, will be by the purchaser.

3.
Duration.    The price set forth in the proposal is valid for 60 days.

4.
Delivery.    Forte will make every reasonable effort to meet the delivery period set forth on the proposal. Delivery period proposed is an estimate based on conditions on the date of the proposal and is subject to review and change per Forte's acknowledgment. All reference to delivery assumes the period to start on the date of Forte's acknowledgment of the Purchaser's formal written order, and all deliveries are contingent upon the timely performance of the purchaser in providing component parts/part samples, prints, and approvals as may be requested by Forte. Delivery shall be F.O.B. Forte's plant, Rockford, Illinois. Purchaser is deemed to have agreed to extend delivery date if delay is result of Purchaser's failure to provide in timely fashion component parts/part samples, prints, and approvals as may be requested by Forte.

5.
Delays.    Forte shall not be liable for any loss or damage for delay or non-delivery due to acts of civil or military authority, acts of the buyer, or by reason of "Force Majeur," which shall be deemed to mean all other causes not reasonably in the control of Forte, including but not limited to acts of God, war, strikes, labor disturbances, delays of carriers, inability to secure materials, labor or manufacture facilities. Any delay resulting from such causes shall extend corresponding shipping dates accordingly.

6.
Warranties and Remedies.    Goods are warranted, to the original purchaser for use, to be free of defects in material and workmanship within such tolerances as may be customary in the industry for a period of 90 days from the date of shipment. Forte, at its option, will repair or replace, or refund the purchase price of any machine or part which fails within the warranty period and is found upon examination by Forte to be defective in material or workmanship, or both. This warranty does not cover failures attributable to improper use or maintenance, exceeding rated capacity, alteration, accident, normal, wear of moving parts, or damages caused by shipment. Computer software, accessories, controls, hydraulics, and other components not manufactured by Forte are excluded from this warranty. For services on such parts, refer to applicable manufacturer's warranty. Purchaser must give written notice to Forte at the address shown below of any warranty claim within thirty days after failure, and if so instructed, return to Forte the parts to be replaced or repaired, with all transportation charges prepaid by purchaser. Replacement parts will be invoiced to purchaser, with credit issued for parts covered by this warranty and freight thereon. Removal and reinstallation of replacement parts shall be at purchaser's expense. THERE IS NO OTHER EXPRESS WARRANTY, ANY AND ALL IMPLIED WARRANTIES, INCLUDING MERCHANTABILITY AND FITNESS. FOR PARTICULAR PURPOSE, ARE HEREBY SPECIFICALLY DISCLAIMED AND EXCLUDED BY FORTE. INCIDENTAL AND CONSEQUENTIAL DAMAGES ARE EXPRESSLY EXCLUDED FROM THE REMEDIES AVAILABLE TO PURCHASER, AND THE REMEDIES PROVIDED IN THIS WARRANTY SHALL BE EXCLUSIVE.

7.
Damages.    Forte shall not be liable under any circumstances for consequential damages arising in whole or in part from any breach by Forte, AND ALL SUCH CONSEQUENTIAL DAMAGES ARE HEREBY SPECIFICALLY DISCLAIMED AND EXCLUDED BY FORTE.

8.
Security Interest.    Until paid in full for the purchase price, Forte retains a security interest in all goods delivered to Purchaser, and the products and proceeds thereof, for the purpose of securing payment of any and all indebtedness of Purchaser to Forte arising out of the sale of the goods noted hereon, together with all costs and expenses in connection therewith, including, but not limited to, expenses of retaking, preserving, repairing, maintaining, preparing for sale, and selling said collateral as well as reasonable attorney's fees, court costs, and other legal expenses.

9.
Patent and Copyright Infringement Indemnification.    Forte shall indemnify, defend, and hold Purchaser harmless (including attorneys' fees) from any claim that the product delivered hereunder is infringing on any valid copyright or patent, provided that Purchaser gives Forte timely written notice of such claim. Forte shall not be responsible for any compromise made in connection with such a claim without its consent. In the event of a final judgment which prohibits Purchaser's continued use of any product by reason of infringement, or if at any time Forte is of the opinion that any product is likely to become the cause of action for infringement, Forte may, at its sole discretion and expense, obtain the rights to continued use of such product, replace or modify such product so that the product is no longer infringing, or remove the product involved and refund to Purchaser the price thereof as depreciated or amortized over a five (5) year life. In no event shall Forte's liability to Purchaser under this section exceed the amount paid by Purchaser to Forte for any allegedly infringing product. Purchaser shall indemnify, defend, and hold Forte harmless from any loss, cost, or expense (including attorneys' fees) arising: (1) in connection with any claim that the product is infringing on a copyright or patent because of the way the product was modified, altered, or combined with any equipment, device, or software not supplied by Forte or because the product was used in a manner for which the same was not designed; or because the goods manufactured were done so in accordance with Purchaser's specifications (or modified in any way by Purchaser); (2) and also from any product liability claims based on alleged defects in Purchaser's design or modification.

10.
Special Manufactured Goods.    Purchaser shall hold harmless and defend Forte against all loss, damage, and expense (including attorneys' fees) arising from any patent or other property right infringement claims on goods manufactured in accordance with Purchaser's specifications and from any product liability claims based on alleged defects in Purchaser's design.

11.
Trade Uses, Governing Law.    All trade uses and customs of Forte's industry shall apply to this sale and shall constitute part of the agreement between Forte and Purchaser to the extent not inconsistent herewith. Except as modified herein, the Illinois Uniform Commercial Code shall govern this transaction. Typographical and clerical errors are subject to correction.

12.
Modifications.    No additions, modifications, or changes of the foregoing terms by Purchaser in connection with any order relating hereto shall be binding upon Forte unless specifically agreed to by Forte in writing.

Forte Automation Systems, Inc.
9918 North Alpine Road
Rockford, Illinois 61115
815/633-2300
815/633-7131 FAX



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CONSULTING AGREEMENT
EXHIBIT A Statement of Work

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Exhibit 10.23


ACCURAY INCORPORATED


AMENDED AND RESTATED
INTERNATIONAL DISTRIBUTOR AGREEMENT

This Amended and Restated International Distributor Agreement (this "Agreement") is effective as of April 1, 2004 (the "Effective Date"), by and between Accuray Incorporated, a Delaware corporation with its corporate headquarters located at 1310 Chesapeake Terrace, Sunnyvale, California 94089, USA, ("Accuray"), and President Medical Technologies Co., Ltd. Inc., a Taiwanese corporation with its principal place of business at 10F-1, No. 560, Sec. 4 Chung Hsiao East Rd, Taipei 110, Taiwan, Republic of China ("Distributor" or "PMTC"). Accuray and Distributor together shall be individually referred to herein as a "Party" or collectively referred to as the "Parties."

        WHEREAS, Accuray manufactures and sells full-body radiosurgery products using image-guided robotics, including the CyberKnife Stereotactic Radiosurgery System (the "CyberKnife"), which is approved by the United States Food and Drug Administration (FDA) to provide treatment planning and image-guided stereotactic radiosurgery and precision radiotherapy for lesions, tumors and conditions anywhere in the body where radiation treatment is indicated.

        WHEREAS, in order to achieve its business objectives, Accuray relies on qualified distributors to market and distribute its products in different territories;

        WHEREAS, Distributor is a leading distributor of hardware products in the Asian territory and Accuray wishes to appoint Distributor as its exclusive distributor in Taiwan and China, subject to the terms and conditions of this Agreement and Distributor wishes to accept such appointment;

        WHEREAS, the parties previously entered into a certain International Distributor Agreement as of [October 25, 2002], as amended by a certain amendment titled "Amendments to International Distributor Agreement Dated October 25, 2002", undated (collectively, the "Existing Agreement") for purposes of distributing the CyberKnife;

        WHEREAS, Accuray and Distributor wish to continue their relationship but desire to amend and restate the terms of their agreement in order to resolve any issues under the Existing Agreement and establish a relationship in which both parties will diligently pursue their obligations with a view to maximizing CyberKnife sales in Taiwan and China; and

        WHEREAS, Accuray and Distributor are entering into this Agreement as of the 1st day of June, 2004 (the "Effective Date") which replaces and terminates the Existing Agreement.

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.

1

NOW THEREFORE, in consideration of the covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, agree as follows:

Distributor — Name:   President Medical Technologies Co., Ltd. Inc. ("PMTC" and "Distributor")
Type of Legal Entity:   Corporation
Address of Principal Office:   10F-1, No. 560, Sec. 4 Chung Hsiao East Rd
Taipei 110, Taiwan
Republic of China
Territory:   Taiwan, Republic of China and Peoples Republic of China (including Hong Kong)
Initial Term:   Fifty-five (55) months, beginning June 1, 2004, and ending December 31, 2008 (unless extended as provided herein).

Signatures:

DISTRIBUTOR:   ACCURAY INCORPORATED:

By:
/s/  HUAN-CHIU KUO      
 
By:
/s/  EUAN THOMSON      

Typed name:
Huan-Chiu Kuo
 
Typed name:
Euan Thomson

Title:
General Manager
 
Title:
Chief Executive Officer
Date: 08-06-04
   Date: 11-06-04
      /s/  DARREN J. MILLIKEN                              6/11/04
General Counsel

2

1.     Definitions and Provisions

3

2.     Duties of Accuray

[*]
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.

4

5

6

[*]
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.

7


3.     Duties of Distributor

8

9

10

[*]
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.

11

[*]
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.

12

13

4.     Compensation and Payment

14

5.     Term and Termination

[*]
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.

15

6.     Dispute Resolution; Limitation of Liability; Governing Law

[*]
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.

16

7.     Miscellaneous Provisions

17


[EXHIBITS FOLLOW]

18


Exhibit A

PRODUCTS
(Including Current Pricing)

Products:

The CyberKnife® Stereotactic Radiosurgery System with DTS and one (1) workstation:

Pricing for the First CK Shipped to PMTC Territory in a Calendar Quarter

 
    
    
      PMTC Price     Total Price
BPasic CK with 1 workstation   $ [*]      
      * This price includes the first-year warranty parts.
Additional Configuration options that must be ordered at the same time as CK
With additional Workstation   $ [*]   $ [*]
With Express   $ [*]   $ [*]
With Axum   $ [*]   $ [*]
With Synchrony (when released)   $ [*]   $ [*]
With 4 Year extended Parts Warranty   $ [*]   $ [*]
 
    
    
Pricing for the Second CK Shipped to PMTC Territory in a Calendar Quarter
      PMTC Price     Total Price
Basic CK with 1 workstation   $ [*]*      
      *This price includes the first-year warranty parts.
Additional Configuration options that must be ordered at the same time as CK
With additional Workstation   $ [*]   $ [*]
With Express   $ [*]   $ [*]
With Axum   $ [*]   $ [*]
With Synchrony (when released)   $ [*]   $ [*]
With 4 Year extended Parts Warranty   $ [*]   $ [*]

Adjunct technologies usable with the CyberKnife:

 
    
    
    —    Spine Fiducials (5 screws/tumor)   US $[*] per screw
    —    Instrument Sets (1 set/Institution)   US $[*] per set
[*]
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.

19

Additional capabilities will be priced as Options.

Service Contracts:

[*]
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.

20


Exhibit B

PRODUCT VOLUMES

At a minimum PMTC will be required to purchase [*] ([*]) CyberKnife units annually to satisfy the following schedule of shipments by Accuray:

Distributor agrees to take title to each CyberKnife upon shipment according to the above schedule, and will provide adequate notice to Accuray of each shipment destination.

[*]
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.

21



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ACCURAY INCORPORATED
AMENDED AND RESTATED INTERNATIONAL DISTRIBUTOR AGREEMENT
[EXHIBITS FOLLOW]
Exhibit A PRODUCTS (Including Current Pricing)
Exhibit B PRODUCT VOLUMES

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Exhibit 10.24


COMMISSION AGREEMENT

        This Commission Agreement ("Agreement") is made as of August 10, 2006 ("Effective Date"), by and between ACCURAY INCORPORATED, a California Corporation with offices located at 1310 Chesapeake Terrace, Sunnyvale, California 94089, ("Accuray"), and PRESIDENT MEDICAL TECHNOLOGIES CO., LTD. INC., a Taiwanese corporation, located at 8F., No. 1, Guangfu S. Rd., Taipei 105, Taiwan, Republic of China ("PMTC"), each separately being a "Party" and collectively the "Parties".

        WHEREAS, the Parties entered into an Amended and Restated International Distributor Agreement ("Distributor Agreement") on April 1, 2004, naming PMTC as Accuray's exclusive distributor in certain specified territories, and pursuant to which PMTC is to receive a commission on the sale of CyberKnife Stereotactic Radiosurgery Systems within those territories;

        WHEREAS, PMTC consented by way of a letter dated December 28, 2005 to allow Accuray to sell a CyberKnife System to Hong Kong Adventist Hospital ("HKAH"), which is located within PMTC's exclusive territory; and

        WHEREAS, Accuray desires to pay PMTC an appropriate commission for the sale of the CyberKnife System to HKAH as specified herein.

        THEREFORE, the Parties hereby agree as follows:

        1.    HKAH Agreement.    On December 30, 2005 Accuray entered into a CyberKnife Quotation and Purchase Agreement with HKAH for the sale of a CyberKnife System at a total price of U.S. $[*], which contained the following payment terms:

        2.    PMTC Commission.    Accuray and PMTC have agreed that PMTC will receive a commission on the HKAH sale in the amount of U.S. $[*], as set forth in the Commission Analysis attached hereto as Exhibit A ("Commission"). The Commission was determined by taking into account PMTC's anticipated margin on an equivalent sale, and the additional costs incurred by Accuray as a result of promises made by PMTC to HKAH in the Letter of Intent signed by PMTC and HKAH. PMTC's Commission will be paid according to the following schedule, which approximates the payment schedule in the HKAH Purchase Agreement:

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.

1

        3.    Marketing Assistance.    One of the additional items promised by PMTC to HKAH was U.S. $[*] in marketing assistance, particularly in support of the grand opening of the CyberKnife Center at HKAH. Accuray will provide marketing assistance to HKAH up to U.S. $[*], which amount has been deducted from PMTC's Commission.

        4.    Assignment.    Neither party may assign this Agreement without the other party's prior written consent, except that Accuray may assign this Agreement, without PMTC's consent, to an affiliate or to a successor or acquirer, as the case may be, in connection with a merger or acquisition, or the sale of all or substantially all of Accuray's assets or the sale of that portion of Accuray's business to which this Agreement relates. Subject to the foregoing, this Agreement will bind and inure to the benefit of the parties' permitted successors and assigns.

        5.    Notices.    All notices required or permitted under this Agreement will be in writing and delivered in person, by overnight delivery service, or by registered or certified mail, postage prepaid with return receipt requested, and in each instance will be deemed given upon receipt. All communications will be sent to the addresses set forth below or to such other address as may be specified by either party in writing to the other party in accordance with this Section.

To Accuray:   To PMTC:

Accuray Incorporated
Attention: CFO
1310 Chesapeake Terrace
Sunnyvale, CA 94089
U.S.A.
 
President Medical Technologies Co., Ltd. Inc.
Attention: General Manager
8F., No. 1, Guangfu S. Rd.
Taipei 105, Taiwan
Republic of China

with cc to: General Counsel
 
 

        6.    Disputes and Governing Laws    

[*]
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.

2

        7.    Waiver.    The waiver of any breach or default of any provision of this Agreement will not constitute a waiver of any other right hereunder or of any subsequent breach or default.

        8.    Severability.    If any provision of this Agreement is held invalid or unenforceable by a court of competent jurisdiction, the remaining provisions of the Agreement will remain in full force and effect, and the provision affected will be construed so as to be enforceable to the maximum extent permissible by law.

        9.    Amendments.    Any amendment or modification of this Agreement must be made in writing and signed by duly authorized representatives of each party. For Accuray, a duly authorized representative must be any of the following: CEO, CFO or General Counsel.

        10.    Entire Agreement.    This Agreement, in combination with the Distributor Agreement, contains the entire agreement between the parties hereto with respect to the subject matter herein, and supersedes all previous understandings, representations and warranties, agreements, written and oral, made and entered into by and among Accuray and PMTC in relation to the HKAH CyberKnife System.

        11.    Counterparts.    This Agreement may be executed in counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

        IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the date set forth below by their duly authorized representatives. The parties acknowledge and agree that this Agreement does not become effective until it has been signed by all parties indicated below.

Accuray Incorporated President Medical Technologies Co., Ltd. Inc.

By: /s/ Robert E. McNamara                
By: /s/ Huan Chiu Kuo                

Print Name: Robert E. McNamara                
Print Name: Huan Chiu Kuo                

Title: SVP & CFO                
Title: General Manager                

Date: August 24, 2006                
Date: August 10, 2006                

/s/ Darren Milliken                        August 23, 2006
Darren J. Milliken
General Counsel

3

EXHIBIT A


PMTC's Commission Analysis

CYBERKNIFE SYSTEM PRICE
   Part #
   USD
  CyberKnife G4   022986   $[*]
  Xsight   22078   [*]
  CyRIS InView   22086   $[*]
  Additional CyRIS Multiplan   21695   $[*]
  Installation       [*]
       
Sub-Total for System Price:       $[*]
       

ADDITIONAL ITEMS PROMISED IN LETTER OF INTENT
 
 
 
 
  A: Extended Warranty Cost:       $[*]
       
    2nd year Emerald        
  B: Downtime compensation:       $[*]
       
    Six Calendar Months (in Emerald basis):        
  C: Training Tuition and T&E Cost:        
    Tuition for extra six (6) personnel:       $[*]
    Air ticket (economic class) for eleven (11):       $[*]
    Hotel Accommodation for eleven (11) each seven nights:       $[*]
       
  Sub-Total for C:       $[*]
       
  D: Shipment and Insurance       $[*]
       
    Air-flight with insurance:        
  E: Other Marketing Expenses       $[*]
       
    Grand opening ceremony & MISC        
Sub-Total for Additional Items:       $[*]
       
Total Cost Incurred:       $[*]
       
System Price to HKAH:       $[*]
       
Commission to PMTC: System Price — Total Cost Incurred       $[*]
       
Less: Down payment on LOI received from HKAH       $[*]
       
Commission Still Owed to PMTC: Commission Less $50,000 LOI payment       $[*]
       
[*]
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.

4



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COMMISSION AGREEMENT
PMTC's Commission Analysis

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Exhibit 10.26


ACCURAY INCORPORATED
INTERNATIONAL DISTRIBUTOR AGREEMENT

        This International Distributor Agreement ("the Agreement") is entered into by and between Accuray Incorporated, a Delaware corporation with its executive offices located at 1310 Chesapeake Terrace, Sunnyvale, California 94089, USA, and Chiyoda Technol Corporation, a corporation organized under the laws of Japan, with its executive offices located at 1-7-12, Yushima, Bunkyo-ku, Tokyo 113-8681, Japan, as of                        , 2004 (the "Effective Date").

        Accuray manufactures and sells full-body radiosurgery using image-guided robotics, including the CyberKnife, which is FDA approved to provide treatment planning and image-guided stereotactic radiosurgery and precision radiotherapy for lesions, tumors and conditions anywhere in the body where radiation treatment is indicated.

        In order to achieve its business objectives, Accuray relies on qualified distributors to market and distribute its products and services in different territories.

        Accuray wishes to appoint Distributor as its exclusive distributor in Japan, subject to the terms and conditions of this Agreement and Distributor wishes to accept such appointment.

1.     Definitions

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.

2.     Duties of Accuray

2

3

3.     Duties of Distributor

4

[*]
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.

5

[*]
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.

6

7

8

4.     Compensation and Payment

5.     Term and Termination

[*]
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.

9

6.     Dispute Resolution

10

7.     Confidentiality.

8.     Indemnities.

11

9.     Liability.

12

10.   Miscellaneous Provisions

13

Signatures:

DISTRIBUTOR:   ACCURAY INCOROPRATED:
         
         
By: /s/ Toshikazu Hosoda
   By: /s/ Euan S. Thomson
         
         
Typed Name: Toshikazu Hosoda
   Typed Name: Euan S. Thomson
         
         
Title: President and CEO
   Title: President and CEO
         
         
Date: 21 Jan. 2004
   Date: 21 Jan. 2004


[SIGNATURE PAGE TO THE ACCURAY INCORPORATED
INTERNATIONAL DISTRIBUTOR AGREEMENT]

14

Exhibit A

PRODUCTS AND SERVICES (INCLUDING CURRENT PRICING)

This Exhibit may be updated from time to time

(*)
The price of the service upgrade package is subject to further negotiation and will be determined by mutual agreement within thirty (30) days of the signature date of this Agreement.

(**)
The price of the High Throughput upgrade package, including Modified Linac output (400 MU/min), is subject to further negotiation, but will not be less than $[*], and will be determined by mutual agreement within thirty (30) days of the signature date of this Agreement.

Qty

   Product Description
  Chiyoda
Transfer Price

 
 
CyberKnife II
 
$[*]
    Robot   Incl.

1
 
Robot Manipulator
 
Incl.
1   Robot Control Unit   Incl.

 
 
Linac
 
 
1   Compact 6MV Linac (300 cGy/min)   Incl.
    Secondary Collimator Kit — 5mm, 7.5 mm, 10 mm, 12.5    
1   15 mm, 20 mm, 25 mm, 30 mm, 35 mm, 40 mm, 50 mm, 60 mm, Blank   Incl.
1   Chiller Rack Mount   Incl.
1   EPO Op Console   Incl.

 
 
Couch
 
 
1   5 Axis Motorized Treatment Couch (Low)   Incl.
1   Couch Hand Controller   Incl.
1   Tabletop Mattress   Incl.

 
 
Imaging System
 
 
2   Imaging Stands (Low)   Incl.
2   Amorphous Silicon Detectors   Incl.
2   X-ray Generators   Incl.
2   X-Ray Sources   Incl.
1   TLS PC   Incl.
1   TDS Software   Incl.

 
 
Sub-system Controls
 
 
[*]
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.

16

1   Power Distribution Unit   Incl.
1   Interface Control Chassis   Incl.
1   Control Modulator MCC   Incl.
1   ESCC Control Chassis   Incl.
1   TLSCC   Incl.
1   Equipment Rack   Incl.
1   PC Monitor   Incl.
1   Keyboard & Mouse   Incl.
1   3-way KVM Switch   Incl.

 
 
CyberKnife Software System
 
 
1   Treatment Delivery Software License   Incl.
1   Cranial treatment Skull Tracking   Incl.
1   Treatment Planning Software License   Incl.

 
 
Hardware Components
 
Incl.

1
 
Serial Port Server
 
Incl.
1   SGI Octane II Workstation (Primary)   Incl.
    Dual R12000A 400MHz/2MB cache    
    512 MB Memory    
    18 GB 10,000 RPM System Disk    
    21" Color Monitor VGA — Flat Trinitron Tilt/Swivel    

 
 
DAT20-INT Internal 4mm SCSI Tape, 20GB — Patient Data Archive/Restore
 
 
    40x SCSI CD-ROM Drive    
    IRIX Operating System    
    Mouse and Keyboard    
    Power Cords    

1
 
SMART UPS
 
Incl.
1   SGI Octane II Workstation (Primary)   Incl.
    Dual R12000A 400MHz/2MB cache    
    512 MB Memory    
    18 GB 10,000 RPM System Disk    
    21" Color Monitor VGA — Flat Trinitron Tilt/Swivel    

 
 
DAT20-INT Internal 4mm SCSI Tape, 20GB — Patient Data Archive/Restore
 
 
    40x SCSI CD-ROM Drive    
    IRIX Operating System    
    Mouse and Keyboard    
    Power Cords    

 
 
Manuals and IFU's
 
Incl.
1   CyberKnife II System Manuals & CD's   Incl.
1   Kuka Manipulator System Manuals   Incl.
1   Chiller Manual   Incl.
1   X-ray Detector Manuals   Incl.
1   Accuray 6MEV Medical X-ray CD   Incl.
1   X-Ray Generator Manual   Incl.
1   Couch   Incl.

17

    QA Tools   Incl.
1   Anthro 6D Head Phanton   Incl.
1   Ball Cube   Incl.
1   Pre-notched Dosimetry Film (20 Pieces)   Incl.
1   QA Calibration Tool   Incl.
1   Pinhole Collimator Align Tool   Incl.
1   Digital Level (1/10 degree)   Incl.
1   Ion Chamber Test Fixture   Incl.
1   Assy ISO Post   Incl.
1   Alignment Ball   Incl.
1   Pointer Calibration & Front Pointer   Incl.

 
 
Team Training
 
 
1   Technical & Clinical 5 persons (offered by CT)    
1   Onsite Training (offered by CT)    
1   Basic Physics and QA (offered by CT)    

 
 
Installation Kit
 
Incl.
1   8' Ladder   Incl.
1   Wrench allen Set   Incl.

 
 
Miscellaneous Components
 
Incl.
1   Color Laser Printer   Incl.

CK II Options

 
 
Service Upgrade Package
 
 
 
 
    (annual)   (*)   not incl.
1   Software diagnostic improvements, improved mathematical modeling, improved algorithms, bug-fixes, error corrections and Other service enhancements. No new features        

 
 
Gold Service Contract Package
 
 
 
 
    (software purchase contract; annual)   $[*]   Not incl.
1   One new software package / year        
    (i)  Transitional Customers are entitled to all software
      Upgrades that are available for installation in the Territory During the Term.		        
    (ii)  For Transitional Customers, the Gold Service Contract is effective for (4) years commencing on the Installation completion date.        
    (iii)  Payments are due annually, in advance.        

 
 
High Throughput (hardware + software)
 
(**)
 
 
1   Modified Linac output (400 MU/min)       not incl.
1   Express Software Module       Incl./w/Gold
[*]
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.

18

    Service Items       not incl.
1   Extended Parts Warranty per year   ¥ [*]   not incl.
    (Provides all parts for field service and maintenance, payable quarterly in advance. This pricing is based on twenty (20) Customers committing to this program. If less than twenty (20) Customers commit, Accuray reserves the right to increase the price or cancel the program.)        

 
 
Additional Treatment Planning Station
 
$[*]
 
not incl.
    1 Treatment Planning Software License    
    Dual R12000A 400MHz/2MB cache    
    512 MB Memory    
    18 GB 10,000 RPM System Disk    
    21" Color Monitor VGA — Flat Trinitron Tilt/Swivel    

 
 
DAT20-INT Internal 4mm SCSI Tape, 20GB — Patient Data Archive/Restore
 
 
    40x SCSI CD-ROM Drive    
    IRIX Operating System    
    Power Cords    

 
 
Additional Computer Items
 
not incl.
1   Additional 73 Gbyte Hard Disk (upgrade)   $[*]   not incl.
1   21" flat panel LCD monitor (upgrade   $[*]   not incl.
1   Cable Kit Add Octane to Hub   $[*]   not incl.
1   SGI 36 Gig Hard drive   $[*]   not incl.
1   SGI 18 Gig Hard drive   $[*]   not incl.
1   SGI Memory, 512MB   $[*]   not incl.

 
 
Additional Hardware Items
 
not incl.
1   Headrest w/Medtec mask (GE)   $[*]   not incl.
1   CT adapter — GE Lightspeed (no HDR)   $[*]   not incl.
1   CT adapter w/HDR — Siemens   $[*]   not incl.
1   Headrest w/ Medtec mask   $[*]   not incl.
1   Additional QA Items   not incl.
1   Alignment Jig 6D — 20cm   $[*]   not incl.
1   Head Phantom Kit (contains ball cube)   $[*]   not incl.
1   Gas Chromic Film (20 pack)   $[*]   not incl.
1   Film Ball cube (20 pack)   $[*]   not incl.
[*]
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.

19


Exhibit B

PRODUCT AND SERVICE MINIMUM VOLUMES

In addition to Meditec Orders, Distributor agrees to purchase, at a minimum, during the initial term of the contract ending December 31, 2006, and Accuray shall ship [*] CyberKnife systems on the dates specified:

[*] (***)
[*] (***)
[*]
[*]
[*]

(***)    The dates of shipment of the first [*] systems are subject to final negotiation and will be determined by mutual agreement within thirty (30) days of the signature date of this Agreement.

[*]
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.

20


Exhibit C

TRAINING

Phase
   Details
   Accuray Training
Obligations
   Distributor Training
Obligations
Phase 1:

 Upgrade Training
(current Meditec customers to be reinstalled and upgrade training to be conducted)		   Number: 1 - 10 sites

 Training consisting of:

(i) Technical
(ii) Onsite

 Timing:
(i) Users will review new hardware and new software changes prior to installation or prior to first patient treatments
(ii) Technical support to be provided by Accuray during the initial patient treatments.

 Funding: Customer training to be funded by Accuray.		   Technical Training:
• Train 2-3 people/site
• Train 2-3 sites together up to
    6 people/training
• 1.5 days at Accuray's Corporate
    Training Center
    • Faster, more accurate skull
       tracking algorithm
       • Submillimeter
           accuracy tracking
    • Importing DICOM RT files
    • Medical Imaging Import Tool (MIRIT)
    • Accufusion
    • Software and hardware
       changes associated with
       Express
    • Enhanced QA program
       • Ball cube
       • Automated QA
           treatment planning
       • BB test
    • KUKA robot
       • Use of the teach pendant
       • Manipulation of the robot
       • Troubleshooting the robot
    • Changes to recoverable
       and unrecoverable error
       handing
    • Changes to Treatment
       Planning System (TPS)
    • Changes to proximity
       detection program (PDP)
• Day at Stanford University
    Hospital observing patient
       treatments
    • Clinical observation of
       patient treatments
    • Discussions with peers

 Clinical Training:
• None.

 Onsite Training:
• 1-2 days conducted at the
    customer site
• Provide technical support
    for new software and
    hardware changes with
    initial patients
• Accuray Training personnel
    to support Chiyoda
    Training Specialist to
    attend, observe and learn		   Technical Training
• Chiyoda to send 1-2
    people to provide support
    to new customers

 Clinical Training:
• None.

Onsite Training:
• Chiyoda Training Specialist
    to attend, observe and learn.

21

Phase
   Details
   Accuray Training
Obligations
   Distributor Training
Obligations
Phase 2:
Transitional Customers
(Meditec customers not yet installed)		   Number: Circa 11-16 sites

 Customer Training consisting of:
(i) Technical
(ii) Clinical
(iii) Onsite

 Timing: Training to be conducted prior to installation of the CyberKnife.

 Funding: The Technical, Clinical and Onsite Training funded by Accuray.		   Technical Training
• Train 2-3 people/sites
• Train 1 team at a time
• 3 days at Accuray's
    Corporate Training Center    
    • Patient setup and
       immobilization
    • CT protocol guidelines
    • Importing DICOM
       RT files and Medical
       Imaging Import Tool
       (MIRIT)
    • Accufusion
    • Basic and Advanced
       use of the Treatment
       Planning System (TPS)
    • Mock patient treatments
       • Faster, more accurate
           skull tracking algorithm
    • Troubleshooting the
       system
       • Handling
           recoverable and
           unrecoverable errors
    • Proximity Detection
       Program (PDP)
    • Manipulation of the
       robot
       • Use of the teach
           pendant
    • QA program
       • Automated QA
           treatment
           planning
       • BB test
       • Film Analysis
    • Beam Commissioning
• 1 days at Stanford
    University Hospital
    observing patient
    treatments
    • Clinical observation
       of patient treatments
    • Discussions with
       peers

 Clinical Training:
• 1 day visit at a Japanese
    Training Center
    • Clinical observation
       of patient treatments
    • Discussions with peers		   Technical Training
• Chiyoda to send 1-2 people
    to technical training to
    provide support to new
    customers
• Chiyoda Training Specialist
    to observe and learn about
    CyberKnife

22

Phase
   Details
   Accuray Training
Obligations
   Distributor Training
Obligations
        • Accuray Training personnel
    and Chiyoda Training
    Specialist to support

 Onsite Training:
• 3-5 days conducted at the
    Customer site
• Provide technical support
    during initial patient
    treatments
• Accuray Training personnel
    to support Chiyoda
    Training Specialist to
    attend, observe and learn		    
Phase 3:

 New Customers
(new Chiyoda customers)		   Number: 17-50 sites

 Customer Training
consisting of:
(i) Technical
(ii) Clinical
(iii) Onsite

 Timing: Training to be conducted prior to installation of the CyberKnife following the 3 Sections of Customer Training

 Funding: Clinical and On-site training funded by Chiyoda Technology

 Proposed Training Site Options:
(i) Option 1: Train customers in the US at Accuray Corporate
Training Center for a $[*] for
technical training only; $[*] for
technical training plus 1 day
clinical observation at Stanford
with Stanford CyberKnife Team
    • Chiyoda Technology
       and Accuray Training
       Specialists to conduct
       technical training
 (ii) Option 2: Accuray along
with Chiyoda Technology to
establish and operate Training
Center in Japan modeled after
the Accuray Training Center.
Technical training to be funded
by Chiyoda Technology		   Technical Training:
• Train 2-3 people/site
• 3 days at Accuray's
    Corporate Training Center
    • Patient setup and
       immobilization
    • CT protocol
       guidelines
    • Importing DICOM
       RT files and Medical
       Imaging Import Tool
       (MIRIT)
    • Accufusion
    • Basic and Advanced
       use of the Treatment
       Planning System
       (TPS)
    • Mock patient
       treatments
    • Troubleshooting the system
       • Handling
           recoverable and
           unrecoverable
           errors
    • Proximity Detection
       Program (PDP)
    • Manipulation of the
       robot
       • Use of the teach
           pendant
    • QA program
       • Automated QA
           treatment
           planning
       • BB test
       • Film Analysis
    • Beam Commissioning		   Technical Training:
• Chiyoda to send 1-2 people
    to participate in the
    technical training

 Clinical Training:
• Chiyoda Training Specialist
    to support independently
    • Accuray Japanese
       Training Specialist to
       oversee

 Onsite Training:
• Chiyoda Training Specialist
    to support independently
    Accuray Japanese Training
    Specialist to oversee
[*]
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.

23

Phase
   Details
   Accuray Training
Obligations
   Distributor Training
Obligations
        Clinical Training:
• 1 day visit at a Japanese
    Training Center
    • Clinical observation
       of patient treatments
    • Discussions with
       peers
• Chiyoda Training Specialist
    to support independently
    • Accuray Japanese
       Training Specialist to
       oversee

 Onsite Training:
• 3-5 days conducted at the
    customer site
• Provide technical support
    during initial patient
    treatments
• Chiyoda Training Specialist
    to support independently
    • Accuray Japanese
       Training Specialist to
       oversee		    

24


Exhibit D

Exhibit Deleted

25


Exhibit E

EXISTING MEDITEC CUSTOMERS

Site Name
   Location
Current    
  1 Konan St. Hill H.   Ube, Yamaguchi
  2 Osaka Univ. H.   Suita, Osaka
  3 Okayama Kyokuto H.   Okayama, Okayama
  4 Kumamoto Radiosurgery Clinic   Kumamoto, Kumamoto
  5 Fujimoto Hayasuzu H.   Miyakonojo, Miyazaki
  6 Kyushu Univ. H.   Fukuoka, Fukuoka
  7 Imabari Saiseikai H.   Imabari, Ehime
  8 Kyoto Soseikai H.   Kyoto, Kyoto
  9 Tobata H   Kitakyushu, Fukuoka

Future
 
 
  10 [*]   [*]
  11 Tsushima City H.   Tsushima, Aichi
  12 [*]   [*]
  13 Oka H.   Oita, Oita
  14 Shinryokukai H.   Yokohama, Kanagawa
  15 Kanto Neurosurgical Hospital   Kumagaya, Saitama
       Asanokawa   (tent. Install date 3/03)
cancelled

List based on 9/2/03 Mdt/ATC installation schedule

These hospital names may change by mutual agreement within thirty (30) days of the signature date of this Agreement.

[*]
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.

26


Exhibit F

DISPUTE RESOLUTION

1.
Negotiation.    The parties shall attempt to resolve any dispute arising out of relating to this Agreement promptly by negotiation between executives who have authority to settle the controversy, as set forth in Section 6 of the Agreement.

2.
Mediation.    If the parties do not resolve the dispute within forty-five (45) days of undertaking negotiation thereof, either Party may refer the Dispute for mediation by the applicable mediation body (as provided below) or its successor (the "Mediation Organization") by providing the Mediation Organization and the other Party a written request for mediation, setting forth the details of the dispute and the relief requested. Each Party must then participate in the mediation in good faith and share equally in its costs. If a request for mediation is made, then the mediation shall take place in Santa Clara County, California. Mediation shall be conducted by JAMS or its successor, in accordance with the JAMS mediation rules and procedures then in effect Any mediation taking place between the parties will be conducted by: (i) a mediator agreed to by the parties selected from the applicable Mediation Organization's panel of neutrals; or (ii) if the parties do not agree on a mediator, a mediator nominated by the applicable Mediation Organization. Any mediation taking place between the parties shall be conducted in the English language. All offers, promises, conduct and statements, whether oral or written, made in the course of the mediation by any of the parties, their agents, employees, experts and attorneys, and by the mediator and any Mediation Organization employees, are confidential, privileged and inadmissible for any purpose, in any litigation or other proceeding involving the parties, provided that evidence that is otherwise admissible or discoverable shall not be rendered inadmissible or non-discoverable as a result of its use in the mediation.

3.
Arbitration.    If the dispute has not been resolved by non-binding means as provided herein within ninety (90) days of the initiation of such procedure, either party may initiate arbitration with respect to such matters at any time following the period provided for mediation, or determination by the mediator that the parties will not be able to resolve the issue through mediation, by filing a written request for arbitration to JAMS, as provided below, in accordance with JAMS arbitration procedures. If a request for arbitration is made, then the arbitration shall take place in Santa Clara County, California. Any arbitration taking place shall be conducted by JAMS or its successor, in accordance with the JAMS arbitration rules and procedures then in effect. Any arbitration taking place between the parties shall be conducted in the English language.

4.
Other Remedies.    Notwithstanding the foregoing, each Party shall have right before or during negotiation, mediation or arbitration to seek and obtain from the appropriate court provisional remedies such as attachment, preliminary injunction, replevin, etc., to avoid irreparable harm, maintain the status quo or preserve the subject matter of the negotiations, mediation or arbitration.

30



QuickLinks

ACCURAY INCORPORATED INTERNATIONAL DISTRIBUTOR AGREEMENT
[SIGNATURE PAGE TO THE ACCURAY INCORPORATED INTERNATIONAL DISTRIBUTOR AGREEMENT]
Exhibit B PRODUCT AND SERVICE MINIMUM VOLUMES
Exhibit C TRAINING
Exhibit D Exhibit Deleted
Exhibit E EXISTING MEDITEC CUSTOMERS
Exhibit F DISPUTE RESOLUTION

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 10.27


TRAINING CENTER AGREEMENT

        This Training Center Agreement ("Agreement") is made and entered into as of                                    , 200_ (the "Effective Date") by and between Accuray Inc., a California corporation having its principal place of business at 1310 Chesapeake Terrace, Sunnyvale, California 94089 ("Accuray"), and                                    , a                                    , with its principal place of business at                                    ("Training Center" and, together with Accuray, the "Parties"). Accuray desires to have Training Center provide training to certain of Accuray's customers regarding Accuray's CyberKnife® System and Training Center is willing to perform such training on the terms set forth more fully below. In consideration of the mutual promises contained herein, the Parties agree as follows:

1.     Training Services.

1

        Training Center will make reasonable attempts to match the backgrounds and/or specialties of its personnel conducting the Programs with the backgrounds and/or specialties of the Customers attending such Program.

2

            •        [List names of Training Center Representatives]

            •    

            •    

            •    

            •    

            •    

        The Training Center shall be responsible for ensuring that the Training Center Representatives are present at and conduct and/or participate in, as applicable, each scheduled Program. In the event that a Training Center Representative is unable to attend a scheduled Program, then the Training Center shall identify to Accuray a suitable individual with the same specialty and similar credentials and request Accuray's approval for such substitution. Any changes to the Training Center Representatives conducting and/or participating in a Program must receive prior written approval from Accuray, such approval not to be unreasonably withheld.

2.     Training Center Prerequisites.

        Training Center represents that: (i) as of the Effective Date of this Agreement it complies with the above Training Center Requirements; (ii) it will continue to do so during the term of this Agreement; and (iii) Training Center shall notify Accuray immediately in the event that it fails to meet any of the above Training Center Requirements during the term of this Agreement.

3.     Compensation.

3

                    •        Physicians: $375 USD per hour with a maximum of $3,000 USD per Program

                    •        Physicists: $300 USD per hour with a maximum of $2,400 USD per Program


4.     Independent Contractor Status.

4

5.     Confidentiality.

5

6.     HIPAA.

6


7.     Indemnification.

8.     Status of Training Center.

9.     Term.

10.   Termination.

7


11.   Effect of Termination.

12.   Damages.

13.   Limitation of Liability.

14.   Assignment.

15.   Arbitration and Equitable Relief.

8

16.   Miscellaneous.

9


To Accuray:   To Training Center:
 
Accuray Incorporated
 
  Attention: SVP, Chief Marketing Officer  
  1310 Chesapeake Terrace  
  Sunnyvale, CA 94089  
  with cc to: General Counsel    

[SIGNATURE PAGE FOLLOWS]

10

        IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed by their officers thereunto duly authorized as of the day and year first written above. The Parties acknowledge and agree that this Agreement does not become effective until it has been signed by all parties indicated below.

TRAINING CENTER   ACCURAY, INC.

Signature:                    
 
Signature:                    

Name:                    
 
Name: Eric Lindquist                   

Title:                    
 
Title: SVP, Chief Marketing Officer                   

Address:                    
 
Address: 1310 Chesapeake Terrace                   

                   
 
Sunnyvale, CA 94089                   

Telephone:                    
 
Telephone: (408) 716-4600                   

Date:                    
 
Date:                    

 
 
Signature:                    

 
 
Name: Darren J. Milliken                   

 
 
Title: General Counsel                   

 
 
Date:                    

SIGNATURE PAGE TO ACCURAY TRAINING CENTER AGREEMENT

11



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TRAINING CENTER AGREEMENT

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Exhibit 10.28


ACCURAY INCORPORATED
INTERNATIONAL DISTRIBUTOR AGREEMENT

        This International Distributor Agreement ("Agreement") is entered into by and between ACCURAY INCORPORATED, a California corporation with its executive offices located at 1310 Chesapeake Terrace, Sunnyvale, California 94089, USA ("Accuray"), and                                                         a corporation organized under the laws of                                     , with its executive offices located at                                                                         ("Distributor"), as of                                    ("Effective Date").

        Accuray manufactures and sells full-body radiosurgery systems using image-guided robotics, including the CyberKnife, which is FDA cleared in the United States to provide treatment planning and image-guided stereotactic radiosurgery and precision radiotherapy for lesions, tumors and conditions anywhere in the body where radiation treatment is indicated.

        In order to achieve its business objectives, Accuray relies on qualified distributors to market and distribute its products and services in different territories.

        Accuray wishes to appoint Distributor as its exclusive distributor in the Territory, as defined below, subject to the terms and conditions of this Agreement and Distributor wishes to accept such appointment.

1.     Definitions

1

2.     Duties of Accuray

2

3.     Duties of Distributor

3

4

5

6

7

8

4.     Compensation and Payment

5.     Term and Termination

9

10


6.     Dispute Resolution

11

7.     Confidentiality.

12

8.     Indemnities.

13

9.     Liability.

14

10.   Miscellaneous Provisions


To Accuray:

   To Distributor:
Accuray Incorporated    
Attention: Chief Financial Officer    
1310 Chesapeake Terrace    
Sunnyvale, CA 94089    

with cc to: General Counsel
 
 

15


SIGNATURE PAGE FOLLOWS

16

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the Effective Date by their duly authorized representatives.

DISTRIBUTOR:

   ACCURAY INCORPORATED:
By:
   By:
Print name:
   Print name: Robert E. McNamara
Title:
   Title: Sr. Vice President & Chief Financial Officer
Date:
   Date:

        The undersigned acknowledges that the terms and conditions of this Agreement meet the policies and procedures of Accuray.

Signed:
   Dated:
  General Counsel, Accuray Incorporated    


SIGNATURE PAGE TO INTERNATIONAL DISTRIBUTOR AGREEMENT

17


EXHIBIT A

PRODUCTS AND SERVICES (INCLUDING CURRENT PRICING)

BASE CYBERKNIFE® G4 CONFIGURATION—DISTRIBUTOR PRICING

QTY
   PRODUCT DESCRIPTION
   PART #'s
   PRICE IN
USD
   PRICE IN
EURO
 
   CYBERKNIFE® ROBOTIC RADIOSURGERY SYSTEM
   022986
   TBD
   TBD
 
   ROBOTIC TREATMENT DELIVERY SYSTEM
    
    
    
 
   Imaging System
   021942
   Incl.
   Incl.
1   In-floor Imaging Frame       Incl.   Incl.
2   Amorphous Silicon Detectors (40 cm × 40 cm)       Incl.   Incl.
2   X-Ray Generators       Incl.   Incl.
2   X-Ray Sources       Incl.   Incl.
1   Rack mounted Imaging System PC       Incl.   Incl.
    Linear Accelerator   021938   Incl.   Incl.
1   Compact 6MV Linac—600 MU/minute dose rate       Incl.   Incl.
1   Secondary Collimator Kit—5 mm, 7.5 mm, 10 mm, 12.5 mm, 15 mm, 20 mm, 25 mm, 30 mm, 35 mm, 40mm, 50 mm, 60 mm, Blank, Laser Collimator       Incl.   Incl.
1   Control Modulator Control Chassis       Incl.   Incl.
1   Contact Detection System       Incl.   Incl.
    Robotic Manipulator System   022866   Incl.   Incl.
1   Robotic Manipulator KR240       Incl.   Incl.
1   Manipulator Control Software       Incl.   Incl.
1   In-Floor Manipulator Frame       Incl.   Incl.
    AXUM™ Automated Patient Positioning System   020680   Incl.   Incl.
1   Treatment Couch and Couchtop       Incl.   Incl.
1   Treatment Couch Controller Software       Incl.   Incl.
1   Treatment Couch Hand Pendant       Incl.   Incl.
1   Treatment Couch Readout Display       Incl.   Incl.
1   Treatment Couch Head Baseplate       Incl.   Incl.
2   Med-Tec Indexed CT Overlay Kits (CT Overlay + Head Baseplate)       Incl.   Incl.
    Sub-System Controls and Hardware Components   Various   Incl.   Incl.
1   SGI Octane II Workstation (Treatment Delivery Computer)       Incl.   Incl.
    21" Flat Panel Display       Incl.   Incl.
1   Equipment Rack       Incl.   Incl.
1   Operator Control Console       Incl.   Incl.
1   Interface Control Chassis       Incl.   Incl.
1   E-Stop Control Chassis       Incl.   Incl.
1   Target Locating Subsystem Control Chassis       Incl.   Incl.
1   Power Distribution Unit       Incl.   Incl.
1   17" High resolution CRT Monitor       Incl.   Incl.
                 

18

1   Keyboard & Mouse       Incl.   Incl.
1   Serial Port Server       Incl.   Incl.
1   SMART (Uninterruptible Power Supply)       Incl.   Incl.
1   2550n HP Color Laser Printer       Incl.   Incl.
    Treatment Delivery System Software   Various   Incl.   Incl.
1   Treatment Delivery Software       Incl.   Incl.
1   Treatment Delivery Software License       Incl.   Incl.
1   Cranial Treatment Skull Tracking License       Incl.   Incl.
1   Extra-cranial Treatment with Fiducial Tracking License       Incl.   Incl.
1   Patient Record Database       Incl.   Incl.
    TREATMENT PLANNING SYSTEM            
    CyRIS™ MultiPlan—Treatment Planning System   021695   Incl.   Incl.
1   DELL Precision Workstation (Desktop or Minitower—Model 370 or Higher)       Incl.   Incl.
    Monitor:(1) 20" Flat Panel Monitor—Model: Samsung Syncmaster 213T Flat Panel            
    1 Year Manufacturer (DELL) Warranty            
1   Product Software            
    Microsoft Windows XP Professional SP1, NTFS w/Media            
    1 (Perpetual) License MultiPlan—Treatment Planning System            
1   Startup Wizard and Planning Templates            
    CLINICAL APPLICATION MODULES            
    Synchrony™ Respiratory Tracking System   023119   Incl.   Incl.
1   Synchrony computer and Synchrony software       Incl.   Incl.
1   Synchrony Camera Array       Incl.   Incl.
1   Fiber Optic Interface Kit       Incl.   Incl.
1   Synchrony Single-Patient Use Starter Kit (3 individual patient kits)       Incl.   Incl.
    Each Single-Patient Use kits contains:            
    —Synchrony Tracking Vest (small, medium or large)            
    —Tracking Marker Assembly (3 Markers attached to cables and a connector)            
    —Kit Storage Pouch with IFU & Identification Card            
    ACCESSORIES & TRAINING            
    QA Tools   020580   Incl.   Incl.
1   Anthropomorphic 6D Head Phantom       Incl.   Incl.
1   Ball Cube       Incl.   Incl.
1   Pre-notched Dosimetry Film (20 Pieces)       Incl.   Incl.
1   Digital Level (1/10 degree)       Incl.   Incl.
                 

19

1   Ion Chamber Test Fixture       Incl.   Incl.
1   ISO Post Assembly       Incl.   Incl.
1   Alignment Ball       Incl.   Incl.
1   Pointer Calibration & Front Pointer       Incl.   Incl.
1   AQA Tools       Incl.   Incl.
    Manuals   Various   Incl.   Incl.
1   CyberKnife® System Manuals       Incl.   Incl.
1   Robotic Manipulator System Manuals       Incl.   Incl.
1   Chiller Manual       Incl.   Incl.
1   X-ray Detector Manuals       Incl.   Incl.
1   Accuray 6MEV Medical X-ray CD       Incl.   Incl.
    Training       Incl.   Incl.
1   Technical & Clinical—5 people       Incl.   Incl.
1   Onsite Training for first patient treatment       Incl.   Incl.
1   Basic Physics and QA       Incl.   Incl.
NOTE   Products may not all be available in all countries, as product availability is subject to proper regulatory approval in each country. All prices shown in USD or Euros as specified.
 
   ADDITIONAL OPTIONS
   PART #
   PRICE IN
USD
   PRICE IN
EURO
 
   Synchrony™ Respiratory Tracking System Accessories
    
    
    
1   Synchrony Single-Patient Use Kit, 5 Pack, Small   20904   TBD   TBD
1   Synchrony Single-Patient Use Kit, 5 Pack, Medium   20905   TBD   TBD
1   Synchrony Single-Patient Use Kit, 5 Pack, Large   20906   TBD   TBD
1   Synchrony Single-Patient Use Kit, 10 Pack, Small   20883   TBD   TBD
1   Synchrony Single-Patient Use Kit, 10 Pack, Medium   20891   TBD   TBD
1   Synchrony Single-Patient Use Kit, 10 Pack, Large   20893   TBD   TBD
1   Synchrony Patient Kit, 10 Pack, Assorted   20894   TBD   TBD
    Includes 3 Small, 4 Medium & 3 Large Vests            
    Xsight™ Spine Tracking System   22078   TBD   TBD
1   1 Perpetual License Fiducial-Less Spine Tracking Software            
1   1 Xsight QA Phantom   20855        
    SGI Computer Upgrade Components            
1   73 BG Hard Drive   20534   TBD   TBD
1   SGI 181 GB Hard Drive   20533   TBD   TBD
1   SGI Memory, 1GB (2 × 512Mb)   18672   TBD   TBD
1   Cable Kit Add Octane to Hub   18326   TBD   TBD
1   20' Flat Panel Monitor   20483   TBD   TBD
                 

20

    CyRIS™ InView—Image Fusion and Contouring Station   22086        
1   DELL Precision Workstation (Desktop or Minitower—Model 370 or Higher)       TBD   TBD
    Monitor: (1) 21" Flat Panel Monitor—Model: Samsung Syncmaster 213T Flat Panel            
    1 Year Manufacturer (DELL) Warranty            
1   Product Software            
    Microsoft Windows XP Professional SP1, NTFS w/Media            
    1 Perpetual License InView—Image Fusion and Contouring Station            
1   Software Maintenance Fee       TBD   TBD
    Maintenance Fee of TBD/yr/System will also be billed at the anniversary
of installation and every year thereafter		    
    CyRIS™ MultiPlan—Treatment Planning System   21695        
1   DELL Precision Workstation (Desktop or Minitower—Model 370 or Higher)       TBD   TBD
    Monitor: (1) 20" Flat Panel Monitor—Model: Samsung Syncmaster 213T Flat Panel            
    1 Year Manufacturer (DELL) Warranty            
1   Product Software            
    Microsoft Windows XP Professional SP1, NTFS w/Media            
    1 Perpetual License MultiPlan—Treatment Planning System            
1   Software Maintenance Fee       TBD   TBD
    Maintenance Fee of TBD/yr/System will also be billed at the anniversary
of installation and every year thereafter		    
    Additional Patient Setup Items            
1   Additional Indexed CT Overlay Kits (CT Overlay + Head Baseplate)       TBD   TBD
1   CT Top Kit—Siemens Volume   20775   TBD   TBD
1   CT Top Kit—Siemens Somatom   20776   TBD   TBD
1   CT Top Kit—GE LiteSpeed   20777   TBD   TBD
1   CT Top Kit—GE Discovery   20778   TBD   TBD
1   CT Top Kit—GE HiSpeed   20779   TBD   TBD
1   Immobilization Starter Kit   021037   TBD   TBD
    Body Treatment Fiducial Kit            
1   Fiducial Instrument Set   18985   TBD   TBD
1   Single Pk Fiducial   19005   TBD   TBD
1   5 Pk Fiducial   19006   TBD   TBD
1   10 Pk Fiducial   19007   TBD   TBD
    Additional QA Options            
1   Alignment jig 6D—20cm   17722   TBD   TBD
                 

21

1   Head Phantom Kit (contains ball cube)   18161   TBD   TBD
1   GAF Chromic Film (20 pack)   17895   TBD   TBD
1   Film Ball cube (20 pack)   19366   TBD   TBD
1   Body Phantom Kit (contains film cube)   17801   TBD   TBD
1   Color Dye Diffuse Printer (Upgrade) (Not defined or Released)   TBD   TBD   TBD
1   AQA Tools   22349   TBD   TBD
    System Installation       TBD   TBD
1   Floor Frame Install            
1   System Qualification            
1   Installation Kit            
    Extended Parts Warranty (Parts Only, No Labor)       TBD   TBD
    One Year—Replacement of Defective Parts            
    Emerald Agreement (Basic Service and Parts)       TBD   TBD
    Requires Distributor to provide First-Line Field Service.            
    Includes service for up to 2 Multiplan and 3 InView systems            
    Ruby Agreement (Software Upgrades, Basic Service and Parts)       TBD   TBD
    Requires Distributor to provide First-Line Field Service.            
    Includes service for up to 2 Multiplan and 3 InView systems            
    Diamond Agreement (Software & Hardware Upgrades, Basic Service & Parts)       TBD   TBD
    Requires Distributor to provide First-Line Field Service.            
    Includes service for up to 2 Multiplan and 3 InView systems            
NOTE   Products may not all be available in all countries, as product availability is subject to proper regulatory approval in each country. All prices in USD or Euros as specified.    

22


BASE CYBERKNIFE® G3 CONFIGURATION—DISTRIBUTOR PRICING

QTY
   PRODUCT DESCRIPTION
   PART #'s
   PRICE IN
USD
   PRICE IN
EURO
 
   CYBERKNIFE® ROBOTIC RADIOSURGERY SYSTEM
   21682
   TBD
   TBD
 
   ROBOTIC TREATMENT DELIVERY SYSTEM
    
    
    
 
   Imaging System
   20829
   Incl.
   Incl.
1   Imaging Stands (Low)       Incl.   Incl.
2   Amorphous Silicon Detectors (20 cm × 20 cm)       Incl.   Incl.
2   X-Ray Generators       Incl.   Incl.
2   X-Ray Sources       Incl.   Incl.
1   Rack mounted Target Locating PC       Incl.   Incl.
    (Requires Octane Software—See CyberKnife Software System below)            
    Linear Accelerator   20404   Incl.   Incl.
1   Compact 6MV Linac—400 MU/minute       Incl.   Incl.
1   Secondary Collimator Kit—5 mm, 7.5 mm, 10 mm, 12.5 mm, 15 mm, 20 mm, 25 mm, 30 mm, 35 mm, 40mm, 50 mm, 60 mm, Blank, Laser Collimator       Incl.   Incl.
1   Control Modulator Control Chassis       Incl.   Incl.
    Robotic Manipulator System   20554   Incl.   Incl.
1   Robot Manipulator KR210       Incl.   Incl.
1   Robot Control Software       Incl.   Incl.
    AXUM™ Automated Patient Positioning System   20680   Incl.   Incl.
1   AXUM™ Treatment Couch            
1   AXUM™ Treatment Couchtop            
1   AXUM™ Controller Software            
1   AXUM™ Hand Pendant            
1   AXUM™ Readout Display            
1   AXUM™ Head Baseplate            
2   Med-Tec Indexed CT Overlay Kits (CT Overlay + Head Baseplate)            
    Sub-System Controls and Hardware Components   Various   Incl.   Incl.
1   Equipment Rack       Incl.   Incl.
1   Operator Control Console       Incl.   Incl.
1   Interface Control Chassis       Incl.   Incl.
1   E-Stop Control Chassis       Incl.   Incl.
1   Target Locating Subsystem Control Chassis       Incl.   Incl.
1   Power Distribution Unit       Incl.   Incl.
1   17" High resolution CRT Monitor       Incl.   Incl.
1   Keyboard & Mouse       Incl.   Incl.
1   Serial Port Server       Incl.   Incl.
1   SGI Octane II Workstation (Primary Treatment Delivery System and Treatment Planning System)       Incl.   Incl.
                 

23

    21" Flat Panel (Optional 21" CRT Monitor Available—see options section)            
1   SMART (Uninterruptible Power Supply)       Incl.   Incl.
1   2550n HP Color Laser Printer       Incl.   Incl.
    Treatment Delivery System Software   20389   Incl.   Incl.
1   Octane Software       Incl.   Incl.
1   Treatment Delivery Software License       Incl.   Incl.
1   Cranial Treatment Skull Tracking License       Incl.   Incl.
1   Extra-cranial Treatment with Fiducial Tracking License       Incl.   Incl.
1   Patient Record Database       Incl.   Incl.
    TREATMENT PLANNING SYSTEM            
    CyRIS™ MultiPlan™—Treatment Planning System   21695   Incl.   Incl.
1   DELL Precision Workstation (Desktop or Minitower—Model 370 or Higher)            
    Monitor: (1) 20" Flat Panel Monitor—Model: Samsung Syncmaster 213T Flat Panel            
    1 Year Manufacturer (DELL) Warranty            
    Product Software            
    Microsoft Windows XP Professional SP1, NTFS w/Media            
    1 Perpetual License MultiPlan—Treatment Planning System            
    CLINICAL APPLICATION MODULES            
    Synchrony™ Respiratory Tracking System   23119   Incl.   Incl.
1   Synchrony computer and Synchrony software       Incl.   Incl.
1   Synchrony Camera Array       Incl.   Incl.
1   Fiber Optic Interface Kit       Incl.   Incl.
1   Synchrony Single-Patient Use Starter Kit (3 individual patient kits)       Incl.   Incl.
    Each Single-Patient Use kits contains:            
    —Synchrony Tracking Vest (small, medium or large)            
    —Tracking Marker Assembly (3 Markers attached to cables and a connector)            
    —Kit Storage Pouch with IFU & Identification Card            
    ACCESSORIES & TRAINING            
    QA Tools   20580   Incl.   Incl.
1   Anthro 6D Head Phantom   18880   Incl.   Incl.
1   Ball Cube   19364   Incl.   Incl.
1   Pre-notched Dosimetry Film (20 Pieces)   19366   Incl.   Incl.
1   Digital Level (1/10 degree)   17832   Incl.   Incl.
                 

24

1   Ion Chamber Test Fixture   10181   Incl.   Incl.
1   Assy ISO Post   18901   Incl.   Incl.
1   Alignment Ball   16954   Incl.   Incl.
1   Pointer Calibration & Front Pointer   010370 & 016997   Incl.   Incl.
1   AQA Tools       Incl.   Incl.
    Manuals and CD's   Various   Incl.   Incl.
1   CyberKnife® System Manuals & CD's       Incl.   Incl.
1   Kuka® Manipulator System Manuals       Incl.   Incl.
1   Chiller Manual       Incl.   Incl.
1   X-ray Detector Manuals       Incl.   Incl.
1   Accuray 6MEV Medical X-ray CD       Incl.   Incl.
    Training       Incl.   Incl.
1   Technical & Clinical—5 people       Incl.   Incl.
1   Onsite Training for first patient treatment       Incl.   Incl.
1   Basic Physics and QA       Incl.   Incl.
NOTE   Products may not all be available in all countries, as product availability is subject to proper regulatory approval in each country. All prices in USD or Euros as specified.    
 
   ADDITIONAL OPTIONS
   PART #
   PRICE IN
USD
   PRICE IN
EURO
 
   Synchrony™ Respiratory Tracking System Accessories
    
    
    
1   Synchrony Single-Patient Use Kit, 5 Pack, Small   20904   TBD   TBD
1   Synchrony Single-Patient Use Kit, 5 Pack, Medium   20905   TBD   TBD
1   Synchrony Single-Patient Use Kit, 5 Pack, Large   20906   TBD   TBD
1   Synchrony Single-Patient Use Kit, 10 Pack, Small   20883   TBD   TBD
1   Synchrony Single-Patient Use Kit, 10 Pack, Medium   20891   TBD   TBD
1   Synchrony Single-Patient Use Kit, 10 Pack, Large   20893   TBD   TBD
1   Synchrony Patient Kit, 10 Pack, Assorted   20894   TBD   TBD
    Includes 3 Small, 4 Medium & 3 Large Vests            
    Xsight™ Spine Tracking System   22078   TBD   TBD
    1 Perpetual License Fiducial-Less Spine Tracking Software            
    1 Xsight QA Phantom   20855        
    Linear Accelerator Upgrade: 600 MU/minute   23120   TBD   TBD
    Imaging System Upgrade       TBD   TBD
1   Imaging System Upgrade: In Floor   23121   TBD   TBD
1   Imaging System Upgrade: On Floor   23122   TBD   TBD
    SGI Computer Upgrade Components            
1   73 BG Hard Drive   20534   TBD   TBD
                 

25

1   SGI 181 GB Hard Drive   20533   TBD   TBD
1   SGI Memory, 1GB (2 × 512Mb)   18672   TBD   TBD
1   Cable Kit Add Octane to Hub   18326   TBD   TBD
1   20' Flat Panel Monitor   20483   TBD   TBD
    CyRIS™ InView—Image Fusion and Contouring Station   22086        
1   DELL Precision Workstation (Desktop or Minitower—Model 370 or Higher)       TBD   TBD
    Minimal Processing Capability: Intel Pentium IV, 3.2GHz, Intel EM64T, 1m L2 Cache, 800 FSB MHz CPU            
    Memory (RAM)—4GB, 533MHz, DDR2 ECC SDRAM 4X1GB            
    Hard Drive: Minimum Capacity: 160 GB SATA 7200 RPM            
    Video Card: nVidia, Quadro 3400, 256MB, Dual VGA or DVI or Better       Incl.    
    Key Board: Entry Level Keyboard PS/2, No Hot Keys            
    CD-ROM: 48x CD-RW and 16 XD DVD+/-RW            
    Mouse: DELL USB 2-Button Optical Mouse with Scroll            
    Monitor: (1) 21" Flat Panel Monitor—Model: Samsung Syncmaster 213T Flat Panel       Incl.    
    1 Year Manufacturer (DELL) Warranty            
    Product Software            
    Microsoft Windows XP Professional SP1, NTFS w/Media            
    1 Perpetual License InView—Image Fusion and Contouring Station            
    Software Maintenance Fee       TBD   TBD
    Maintenance Fee of TBD/yr/System will also be billed at the anniversary of installation and every year thereafter            
    CyRIS™ MultiPlan—Treatment Planning System   21695   TBD   TBD
1   DELL Precision Workstation (Desktop or Minitower—Model 370 or Higher)            
    Monitor: (1) 20" Flat Panel Monitor—Model: Samsung Syncmaster 213T Flat Panel       Incl.    
    1 Year Manufacturer (DELL) Warranty            
    Product Software            
    Microsoft Windows XP Professional SP1, NTFS w/Media            
    1 Perpetual License MultiPlan—Treatment Planning System            
    Software Maintenance Fee       TBD   TBD
    Maintenance Fee of TBD/yr/System will also be billed at the anniversary of installation and every year thereafter            
                 

26

    Additional Patient Setup Items            
1   Additional Indexed CT Overlay Kits (CT Overlay + Head Baseplate)       TBD   TBD
1   CT Top Kit—Siemens Volume   20775   TBD   TBD
1   CT Top Kit—Siemens Somatom   20776   TBD   TBD
1   CT Top Kit—GE LiteSpeed   20777   TBD   TBD
1   CT Top Kit—GE Discovery   20778   TBD   TBD
1   CT Top Kit—GE HiSpeed   20779   TBD   TBD
1   Immobilization Starter Kit   021037   TBD   TBD
    Body Treatment Fiducial Kit            
1   Fiducial Instrument Set   18985   TBD   TBD
1   Single Pk Fiducial   19005   TBD   TBD
1   5 Pk Fiducial   19006   TBD   TBD
1   10 Pk Fiducial   19007   TBD   TBD
    Additional QA Options            
1   Alignment jig 6D—20cm   17722   TBD   TBD
1   Head Phantom Kit (contains ball cube)   18161   TBD   TBD
1   GAF Chromic Film (20 pack)   17895   TBD   TBD
1   Film Ball cube (20 pack)   19366   TBD   TBD
1   Body Phantom Kit (contains film cube)   17801   TBD   TBD
1   Color Dye Diffuse Printer (Upgrade) (Not defined or Released)   TBD   TBD   TBD
    System Installation       TBD   TBD
1   Floor Frame Install            
1   System Qualification            
1   Installation Kit            
    Extended Parts Warranty (Parts Only, No Labor)       TBD   TBD
    One Year—Replacement of Defective Parts            
    Emerald Agreement (Basic Service and Parts)       TBD   TBD
    Requires Distributor to provide First-Line Field Service.            
    Includes service for up to 2 Multiplan and 3 InView systems            
    Ruby Agreement (Software Upgrades, Basic Service and Parts)       TBD   TBD
    Requires Distributor to provide First-Line Field Service.            
    Includes service for up to 2 Multiplan and 3 InView systems            
    Diamond Agreement (Software & Hardware Upgrades, Basic Service & Parts)       TBD   TBD
    Requires Distributor to provide First-Line Field Service.            
    Includes service for up to 2 Multiplan and 3 InView systems            
NOTE   Products may not all be available in all countries, as product availability is subject to proper regulatory approval in each country. All prices in USD or Euros as specified.    

27


EXHIBIT B

PRODUCT AND SERVICE MINIMUM VOLUMES

        Distributor agrees to purchase and pay for, at a minimum, during the initial term of the contract and Accuray shall ship, Systems on the dates specified below:

28


EXHIBIT C

TRAINING

        Training is included with the purchase of a CyberKnife to the extent listed in Exhibit A. Accuray will be responsible for the travel and accommodation expenses of its personnel. Distributor will be responsible for the travel and accommodation expenses of Customer and any Distributor personnel.

        Additional training maybe purchased from Accuray according to the following price list, which may be updated from time to time.

Additional Training
#
   Course
   Duration
   Price †
1   CyberKnife Product Training—Surgeon   1.5 Days   TBD
1   CyberKnife Product Training—RTT   1.5 Days   TBD
1   CyberKnife Product Training—Radiation Oncologist   2.5 Days   TBD
1   CyberKnife Product Training—Physicist   4.5 Days   TBD
†
Payable to the Accuray Training Department in advance. Training will be held at Accuray Corporate Headquarters or at a designated training center. Travel and accommodation not included.

29


EXHIBIT D

ACCURAY INTERNATIONAL SERVICE AGREEMENTS TERMS SUMMARY ±

 
   Terms
   Accuray to Customer
U$D Pricing
   Accuray to Distributor
U$D Pricing
   Accuray to Distributor
€uro Pricing
Extended Parts Warranty   • Term: 1 year (after Standard Warranty Year), Optional 2nd
• Replacement Parts only
• No Updates or Bug Fixes
• No Upgrades
• No Uptime Guarantee
• No Labor		   $175,000 / year   TBD   TBD
Emerald Elite   • Term: 4 years (incl. Standard Warranty Year), Optional 5th
• All Parts included
• Updates & Bug Fixes only
• No Upgrades
• Service: 8am—9pm local time
• First Line Field Service—Distributor, 1 hour Response Time
• Escalated Service—Accuray, 24 hour Response Time
• Uptime: 95% ‡‡		   $275,000 / year
$72,000 / quarter
$25,000 / month		   TBD   TBD

Ruby
Elite
 
• Term: 4 years (incl. Standard Warranty Year), Optional 5th
• All Parts included
• Updates & Bug Fixes
• Upgrades (2 SW/year)—when and if available
• Service: 8am—9pm local time
• First Line Field Service—Distributor, 1 hour Response Time
• Escalated Service—Accuray, 24 hour Response Time
• Uptime: 95% ‡‡
 
$380,000 / year
$98,000 / quarter
$34,000 / month
 
TBD
 
TBD
                 

30

Diamond Elite   • Term: 4 years (incl. Standard Warranty Year), Optional 5th
• All Parts included
• Upgrades (2 HW or SW/year)—when and if available
• Service: 8am—9pm local time
• First Line Field Service—Distributor, 1 hour Response Time
• Escalated Service—Accuray, 24 hour Response Time
• Uptime: 95% ‡‡		   $460,000 / year
$120,000 / quarter
$41,000 / month		   TBD   TBD
Additional Upgrade Agreement   • Term: 1, 2, 3 or 4 years
• Upgrades (2/year)—when and if available)
• Available only to customers with currently effective,
paid-up Diamond Elite Service Agreement		   $200,000 / year   TBD   TBD
±
Int'l Agreements are not cancelable.

‡
Distributor is required under all agreements to provide end customer with same or greater service (including Uptime guarantees) as provided by Accuray.

‡‡
Penalty for failure to meet Uptime guarantee—1 week additional service for each percentage point below 95% (Accuray provides parts, Distributor provides labor for penalty period).

31


SAMPLE SERVICE AGREEMENTS

        The following are samples of the Distributor to Customer versions of the Service Agreements with U.S. Dollar pricing. The sample Service Agreements are by way of example only, and, subject to Section 2.4 (Product and Service Pricing), the specific terms of the agreements are subject to change without notice.

32


CYBERKNIFE® INTERNATIONAL DIAMOND ELITE SERVICE AGREEMENT

        Note: Pursuant to the terms of Distributor's Service Agreement with Accuray, you must provide service equal to or greater than the following terms.

1.
Scope of Service.    This Diamond Elite Service Agreement ("Agreement") is made by and between Accuray Incorporated's ("Accuray") authorized Distributor,                                     ("Distributor"), located at                                    , and                                    ("Customer"), for Distributor to provide planned maintenance service when scheduled by Accuray and corrective maintenance service when requested by Customer to maintain the CyberKnife System installed at Customer's site at                                    ("System") so that it performs substantially in accordance with the Specifications (User Manuals and Reference Guides) defined for the System revision as installed and/or upgraded.

1.1.
Effective Date.    This Agreement shall be effective as of demonstration of acceptance testing by Distributor as described in the CyberKnife Quotation and Purchase Agreement dated                                    , 2005 and signed by the parties, or the expiration of any prior service or warranty agreement, if applicable.

1.2.
Definitions:

1.2.1.
Bug Fix    means an error correction or minor change in the existing software and/or hardware configuration that is required in order to enable the existing software and/or hardware configuration to perform to the existing functional specification(s).

1.2.2.
Update    means a release of the software or a change to the existing hardware containing substantially only error corrections, minor new features, functionality and/or performance improvements, but that would not be required for the existing software and/or hardware configuration to perform to the existing functional specification(s) of that particular product. Such Update would not necessarily replace or extend the life of the existing software and/or hardware configuration of the product. For example, an Update of software would be indicated where the version number is changed by incrementing the numeric digits to the right of the decimal point, e.g., versions 1.1, 1.2, 1.3, and 1.4 would each be Updates of the software.

1.2.3.
Upgrade/Enhancement    means a release of the software or a change to the existing hardware containing major new features, functionality and/or performance improvements that would enable the existing software and/or hardware configuration to perform to the level of the next version of the software and/or hardware configuration and designed to replace the older software and/or hardware version of the same product and/or extend the useful life of that product. For example, an Upgrade/Enhancement of software would be indicated where the version number is changed by incrementing the numeric digits to the left of the decimal point, e.g., versions 1.0, 2.0, 3.0, and 4.0 would each be Upgrades/Enhancements of the software.

1.2.4.
New Version/New Product    means a release of the software or a change to the hardware that may or may not work with the existing software and/or hardware configuration, but that in its totality requires, in Accuray's sole opinion, enough change to the software and/or hardware configuration to be considered a New Version or New Product.

33

2.
Service Period.

2.1.
The Agreement Term    shall be for an initial period of four (4) years (years 1, 2, 3, & 4) from the Effective Date of this Agreement, including the warranty year, with an optional fifth year. There is no payment required under this Agreement in the first year ("Year 1" or the "Warranty Year"). Customer may elect to receive an additional optional fifth year (the "Optional Year 5") and on terms that are defined below (Section 3.4). Billing will commence on the day following the anniversary of the Effective Date of this Agreement.

2.2.
The Agreement Price    shall be one of the following, at Customer's option (indicate preferred option by checking a box, if no selection is made Customer will be billed on an annual basis). The Agreement Price shall cover the Base CyberKnife System, up to two (2) CyRIS Multiplan Systems (including the CyRIS MultiPlan System in the Base CyberKnife System), and up to three (3) CyRIS InView Workstations. If Customer has more than two (2) CyRIS MultiPlan Systems or three (3) CyRIS InView Workstations installed, then an additional charge of [Distributor to Insert Price re InView Service] per year per MultiPlan and [Distributor to Insert Price re MultiPlan Service] per year per InView, as applicable, will be added by Distributor to the Agreement Price set forth below.

o
ANNUAL: [Distributor to Insert Price] per year, paid yearly in advance, for years 2, 3, 4 and Optional Year 5.

o
QUARTERLY: [Distributor to Insert Price] per quarter, paid at the beginning of each quarter, for years 2, 3, 4 and Optional Year 5.

o
MONTHLY: [Distributor to Insert Price] per month, paid at the beginning of each month, for years 2, 3, 4 and Optional Year 5.

3.
Product Upgrades/Enhancements

3.1.
This Agreement is available only for equipment that was purchased directly from Distributor, installed by Accuray or Distributor engineers and has not been moved from its original installation location or disconnected from its original power supply without written permission or direction from Accuray or Distributor. This Agreement must immediately commence at the expiration of the factory warranty period or prior service agreement. In the event of lapse of service, Customer shall have the right to reinstate such service by payment of the current service fee for the then-current service period in addition to the reasonable costs for Distributor to inspect, repair, and return the System to the state at which the System would have been had a service agreement been in force continuously since the expiration of the System factory warranty.

34

4.
Software Maintenance (Bug Fixes and Updates)

4.1.
For the duration of this Agreement, Distributor will provide software Updates and Bug Fixes for software that is included as a part of the CyberKnife System. These Updates and Bug Fixes may be transmitted electronically to Customer for subsequent installation by Customer technicians. Corrections of significant complexity, however, may be installed by

35

5.
System Quality Assurance Testing

5.1.
The maintenance and support services provided by Distributor under this Agreement do not include any System Quality Assurance Testing ("QA"). System commissioning and QA are the sole responsibility of Customer, and Customer is advised to perform QA on a regular and ongoing basis. In addition, Customer is required to maintain up-to-date QA logs. If Customer fails to perform the appropriate QA of the System, and to record such QA in the appropriate logs, Distributor, upon giving Notice to Customer in accordance with Section 15 of this Agreement, reserves the right to terminate this Agreement.

5.2.
Prior to performing any scheduled service or preventive maintenance on the System, Distributor will review Customer's QA logs, and if such logs are not up-to-date, Distributor may refuse to service the System. In the event that the requested service is necessary to bring the System to a point where QA can be performed, Distributor will proceed with the service only after Customer signs a written acknowledgement that QA is Customer's sole responsibility and that appropriate QA will be performed prior to conducting any patient treatments.

6.
Service Coverage Period    [Note: Distributor must provide service equal or greater to the First Line Field Service, as set forth in Distributor's service agreement with Accuray.]

6.1.
The Service Coverage Period will be the hours of 8:00 AM to 9:00 PM local (to Customer's installation location) time Monday through Saturday (excluding local legal holidays). Customer has the option to request service during non-normal hours, in which case Customer shall pay the overtime premium portion of the non-normal hours worked. (Non-normal hourly rate minus normal hourly rate.) Distributor shall provide Customer with contact points to request service on a 24-hours-a-day, 7-days-a-week ("24/7") basis. Distributor, directly or remotely as the situation requires, either with its own personnel or through contractors, shall initially respond within one (1) hour of receipt of a call for service. The initial response shall include telephone support, including (as applicable) consultations, diagnostic assistance and advice on the use and maintenance of the System. In the event that the service issue cannot be resolved by telephone or other remote response, then Distributor will respond on-site. On-site response times will vary depending upon the level of service required.

6.2.
Customer will promptly notify Distributor, by calling Distributor's Customer Support Line at                                    [Note: Distributor will need to provide Customer with an appropriate contact number for 24/7 support], of any problem or defect with the System and, at no charge, provide Distributor and/or Accuray service engineers access to the System and use of adequate facilities and equipment at mutually agreeable times as necessary for Distributor and/or Accuray to perform the service. Customer shall have as many service

36

7.
Uptime [Note: Distributor must provide an Uptime guarantee equal or greater to the one set forth below, as set forth in Distributor's service agreement with Accuray.]

7.1.
Uptime/Downtime.    Uptime shall mean any time that the System is not down ("Uptime"). A down System means that a patient cannot be treated due to an actual malfunction of the System and that the System is immediately available for an Distributor service engineer to work on it ("Downtime").

7.2.
Guarantee.    Distributor will guarantee that the System shall have an Uptime percentage of at least 95% of normal treatment hours on an annual basis during the Term of this Agreement. Normal treatment hours shall be from 8:00 AM to 5:00 PM local time Monday through Friday (excluding legal holidays). The first 12-month period will start as of the Effective Date of this Agreement.

7.3.
Calculation.    Downtime will be calculated from the time a down System call is received by Distributor to the time of repair, counting normal treatment hours. The System will be calculated as up when the System repair has been completed and the System is available for treatment during normal treatment hours, whether or not patients are scheduled for treatment. Scheduled preventive maintenance, System upgrades, and time that the System is unavailable as a result of something beyond Distributor's control, including without limitation (i) Customer's use of the System for purposes other than its intended and authorized purposes, (ii) the negligence of Customer, (iii) the failure of Customer to operate the System in accordance with the User Manuals, (iv) use by untrained operators, (v) e-Stops, power outages or the like or (vi) the negligence of any party other than Distributor, will be calculated as Uptime.

7.4.
Reports.    Customer is responsible for recording and reporting Downtime to Distributor. Reports for the previous month's Downtime shall be provided to Distributor on or before the 15th day of each month.

7.5.
Failure to Meet Guarantee.    For each year of the term of this Agreement, if Distributor achieves a 12-month uptime average of less than 95%, the Agreement period will be extended one (1) week for every percentage point or fraction thereof below 95%.

37

8.
Replacement Parts

8.1.
Distributor shall make a commercially reasonable effort to supply at the time of need or stock with Distributor's regional service engineers all tools, equipment, replacement parts and Consumables as would reasonably be required by Distributor to perform the required repairs and return the System to good working order. Distributor shall make a commercially reasonable effort to maintain at its factory or service center(s) a stock of spare parts, including, in particular, long-procurement-lead-time parts.

8.2.
Replacement parts used under this Agreement may be either new manufacture or factory refurbished at Accuray's or Distributor's choice. All replacement parts and assemblies provided will be manufactured in accordance with Accuray's quality system, and any applicable laws and regulations. Parts replaced under this Agreement become the property of Distributor and will be disposed of by Distributor Field Service engineers. Notwithstanding the foregoing, all parts that are considered by local regulation to be "hazardous" or "contaminated" waste, or material that requires "special handling" will be disposed of or retained by Customer at Customer's facility.

9.
Exceptions

9.1.
All obligations of Distributor under this Agreement shall be suspended and/or cease in the event of:

9.1.1.
Damage from fire, accident, abuse, floods, lightning, natural disasters or other calamities commonly defined as "Acts of God".

9.1.2.
The intentional abuse of the System or negligence by Customer.

9.1.3.
System hardware or software alterations not authorized by Accuray or Distributor including any move of the System from its installation site (other than by or at the express written direction of Accuray or Distributor).

9.1.4.
Use of the System for other than its intended and authorized purposes, or in a manner not consistent with Accuray's User Manuals, including maintenance of the necessary operating environment and line current conditions, and the failure of Customer to cure such matter within thirty (30) days of actual written notice thereof from Distributor.

9.1.5.
Failure to make payments in accordance with the payment schedule set forth above in Section 2.2.

9.2.
If corrective action or adjustment of the System is performed by Customer's staff at the direction of Accuray or Distributor, such action or adjustment shall not reduce Distributor's responsibility under this Agreement or liability for the performance of the System.

10.
No Cancellation.    Neither party shall have the right to cancel this Agreement, except as set forth below in Section 11 "Breach."

11.
Breach.    Either party reserves the right to cancel this Agreement by written notice upon the breach of the other. An event of breach may include, but is not limited to, failure to make payment due under this Agreement, failure to provide access as required to execute the services contemplated by this Agreement, failure to perform and log QA, or the filing of notice under bankruptcy or equivalent laws. If the breaching party is unable or unwilling to cure or make a good faith effort to cure such breach within thirty (30) days of actual written notice the other party shall be relieved of all obligations under this Agreement and may terminate. Termination shall not be the terminating party's exclusive remedy, and the terminating party shall retain all other available legal and equitable remedies.

38

12.
Limitation of Liability and Warranty

12.1.
If it is determined in accordance with applicable law that any fault or neglect of either party, its employees or agents, substantially contributes to damage or injury to third parties, such party shall be responsible in such proportion as reflects its relative fault therefore, and shall hold the other party harmless from any liability or damages arising out of such fault or neglect. Distributor's liability arising under this Agreement shall be limited to an amount not to exceed the payment(s) received by Distributor for the then current Agreement year. In addition, Distributor shall not be liable to Customer in the event that Customer's or any third party's acts or omissions contributed in any way to any loss it sustained or the loss or damage is due to an act of God or other causes beyond its reasonable control. IN NO EVENT WILL DISTRIBUTOR BE LIABLE TO CUSTOMER FOR ANY LOST PROFITS, LOST SAVINGS, LOST REVENUES OR DOWNTIME, SPECIAL, INDIRECT, INCIDENTAL DAMAGES OR OTHER CONSEQUENTIAL DAMAGES ARISING OUT OF OR IN CONNECTION WITH THE AGREEMENT OR THE USE OR PERFORMANCE OF THE SYSTEM.

12.2.
This is a service agreement. THERE ARE NO INCLUDED OR IMPLIED DISTRIBUTOR WARRANTIES OF PRODUCT FITNESS FOR A PARTICULAR PURPOSE OR MERCHANTABILITY.

13.
Assignment.    Neither party may assign this Agreement without the other party's prior written consent, except that Distributor may assign this Agreement, without Customer's consent, to an affiliate or to a successor or acquirer, as the case may be, in connection with a merger or acquisition, or the sale of all or substantially all of Distributor's assets or the sale of that portion of Distributor's business to which this Agreement relates. Subject to the foregoing, this Agreement will bind and inure to the benefit of the parties' permitted successors and assigns.

14.
Disputes and Governing Laws

14.1.
In the event that a dispute arises between Distributor and Customer with respect to any subject matter governed by this Agreement, such dispute shall be settled as follows. If either party shall have any dispute with respect to this Agreement, that party shall provide written notification to the other party in the form of a claim identifying the issue or amount disputed including a detailed reason for the claim. The party against whom the claim is made shall respond in writing to the claim within 30 days from the date of receipt of the claim document. The party filing the claim shall have an additional 30 days after the receipt of the response to either accept the resolution offered by the other party or escalate the matter. If the dispute is not resolved, either party may notify the other in writing of their desire to elevate the claim to the President of Distributor and the Chief Executive Officer of Customer. Each shall negotiate in good faith and use his or her best efforts to resolve such dispute or claim. The location, format, frequency, duration and conclusion of these elevated discussions shall be left to the discretion of the representatives involved. If the negotiations do not lead to resolution of the underlying dispute or claim to the satisfaction of either party involved, then either party may pursue resolution by the courts as follows.

14.2.
All disputes arising out of or relating to this Agreement not otherwise resolved between Distributor and Customer shall be resolved in a court of competent jurisdiction in the                                     [Note: Please fill in an appropriate venue], and in no other place, provided that, in Distributor's sole discretion, such action may be heard in some other place designated by Distributor (if necessary to acquire jurisdiction over third persons), so that the dispute can be resolved in one action. Customer hereby consents to the jurisdiction of such court or courts and agrees to appear in any such action upon written notice thereof.

39

15.
Notices.    All notices required or permitted under this Agreement will be in writing and delivered in person, effective immediately, by overnight delivery service, effective two (2) business days after deposit with carrier, or by registered or certified mail, postage prepaid with return receipt requested, effective five (5) business days after deposit with carrier. All communications will be sent to the addresses set forth below or to such other address as may be specified by either party in writing to the other party in accordance with this Section.

To Distributor:

   To Customer:
 
        
Attention:   Attention:
        
 
        
 

with cc to:
 
 
        
   
16.
Waiver.    The waiver of any breach or default of any provision of this Agreement will not constitute a waiver of any other right hereunder or of any subsequent breach or default.

17.
Severability.    If any provision of this Agreement is held invalid or unenforceable by a court of competent jurisdiction, the remaining provisions of the Agreement will remain in full force and effect, and the provision affected will be construed so as to be enforceable to the maximum extent permissible by law.

18.
Force Majeure.    Neither party will be responsible for any failure or delay in its performance under this Agreement (except for the payment of money) due to causes beyond its reasonable control, including, but not limited to, labor disputes, strike, lockout, riot, war, fire, act of God, accident, failure or breakdown of components necessary to order completion; subcontractor, supplier or customer caused delays; inability to obtain or substantial rises in the prices of labor, materials or manufacturing facilities; curtailment of or failure to obtain sufficient electrical or other energy, raw materials or supplies; or compliance with any law, regulation or order, whether valid or invalid.

19.
Amendments.    Any amendment or modification of this Agreement must be made in writing and signed by duly authorized representatives of each party. For Distributor, a duly authorized representative must be any of the following:                                    [Enter title of person with authority to bind Distributor].

20.
Entire Agreement.    This Agreement contains the entire Agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior understandings, representations and warranties, written and oral. If any part of the terms and conditions stated herein are held void or unenforceable, such part will be treated as severable, leaving valid the remainder of the terms and conditions.

21.
Counterparts.    This Agreement may be executed in counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

40


SIGNATURE PAGE FOLLOWS

        IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the Effective Date by their duly authorized representatives.

DISTRIBUTOR

   CUSTOMER
By:
   By:
Print Name:
   Print Name:
Title:
   Title:
Date:
   Date:
        
    PLEASE MAKE CERTAIN THAT YOU HAVE SELECTED A PAYMENT OPTION IN ACCORDANCE WITH SECTION 2.2, ABOVE.

SIGNATURE PAGE TO INTERNATIONAL DIAMOND AGREEMENT

41


CYBERKNIFE® INTERNATIONAL RUBY ELITE SERVICE AGREEMENT

Note:
Pursuant to the terms of Distributor's Service Agreement with Accuray, you must provide service equal to or greater than the following terms.

1.
Scope of Service.    This Ruby Elite Service Agreement ("Agreement") is made by and between Accuray Incorporated's ("Accuray") authorized Distributor,                                      ("Distributor"), located at                                    , and                                      ("Customer"), for Distributor to provide planned maintenance service when scheduled by Accuray and corrective maintenance service when requested by Customer to maintain the CyberKnife System installed at Customer's site at                                    ("System") so that it performs substantially in accordance with the Specifications (User Manuals and Reference Guides) defined for the System revision as installed and/or upgraded.

1.1.
Effective Date.    This Agreement shall be effective as of demonstration of acceptance testing by Distributor as described in the CyberKnife Quotation and Purchase Agreement dated                                    , 2005 and signed by the parties, or the expiration of any prior service or warranty agreement, if applicable.

1.2.
Definitions:

1.2.1.
Bug Fix means an error correction or minor change in the existing software and/or hardware configuration that is required in order to enable the existing software and/or hardware configuration to perform to the existing functional specification(s).

1.2.2.
Update means a release of the software or a change to the existing hardware containing substantially only error corrections, minor new features, functionality and/or performance improvements, but that would not be required for the existing software and/or hardware configuration to perform to the existing functional specification(s) of that particular product. Such Update would not necessarily replace or extend the life of the existing software and/or hardware configuration of the product. For example, an Update of software would be indicated where the version number is changed by incrementing the numeric digits to the right of the decimal point, e.g., versions 1.1, 1.2, 1.3, and 1.4 would each be Updates of the software.

1.2.3.
Upgrade/Enhancement means a release of the software containing major new features, functionality and/or performance improvements that would enable the existing software configuration to perform to the level of the next version of the software configuration and designed to replace the older software version of the same product and/or extend the useful life of that product. For example, an Upgrade/Enhancement of software would be indicated where the version number is changed by incrementing the numeric digits to the left of the decimal point, e.g., versions 1.0, 2.0, 3.0, and 4.0 would each be Upgrades/Enhancements of the software.

1.2.4.
New Version/New Product means a release of the software or a change to the hardware that may or may not work with the existing software and/or hardware configuration, but that in its totality requires, in Accuray's sole opinion, enough change to the software and/or hardware configuration to be considered a New Version or New Product.

1.2.5.
Exclusions    Upgrades/Enhancements that have a list price of greater than $200,000 per Upgrade/Enhancement are specifically excluded from this Agreement. However, Upgrades/Enhancements that have a higher list price may be offered as more than a single Upgrade/Enhancement to Customers under this Agreement. If Upgrades/Enhancements that have a higher list price are offered as more than a single Upgrade/Enhancement then they will be offered as such to all customers. Examples of such

42

2.
Service Period.

2.1.
The Agreement Term shall be for an initial period of four (4) years (years 1, 2, 3, & 4) from the Effective Date of this Agreement, including the warranty year, with an optional fifth year. There is no payment required under this Agreement in the first year ("Year 1" or the "Warranty Year"). Customer may elect to receive an additional optional fifth year (the "Optional Year 5") on terms that are defined below (Section 3.4). Billing will commence on the day following the anniversary of the Effective Date of this Agreement.

2.2.
The Agreement Price shall be one of the following, at Customer's option (indicate preferred option by checking a box, if no selection is made Customer will be billed on an annual basis). The Agreement Price shall cover the Base CyberKnife System, up to two (2) CyRIS Multiplan Systems (including the CyRIS MultiPlan System in the Base CyberKnife System), and up to three (3) CyRIS InView Workstations. If Customer has more than two (2) CyRIS MultiPlan Systems or three (3) CyRIS InView Workstations installed, then an additional charge of [Distributor to Insert Price re InView Service] per year per MultiPlan and [Distributor to Insert Price re MultiPlan Service] per year per InView, as applicable, will be added by Distributor to the Agreement Price set forth below.

o
ANNUAL: [Distributor to Insert Price] per year, paid yearly in advance, for years 2, 3, 4 and Optional Year 5.

o
QUARTERLY: [Distributor to Insert Price] per quarter, paid at the beginning of each quarter, for years 2, 3, 4 and Optional Year 5.

o
MONTHLY: [Distributor to Insert Price] per month, paid at the beginning of each month, for years 2, 3, 4 and Optional Year 5.

3.
Product Upgrades/Enhancements

3.1.
This Agreement is available only for equipment that was purchased directly from Distributor, installed by Accuray or Distributor engineers and has not been moved from its original installation location or disconnected from its original power supply without written permission or direction from Accuray or Distributor. This Agreement must immediately commence at the expiration of the factory warranty period or prior service agreement. In the event of lapse of service, Customer shall have the right to reinstate such service by payment of the current service fee for the then-current service period in addition to the reasonable costs for Distributor to inspect, repair, and return the System to the state at which the System would have been had a service agreement been in force continuously since the expiration of the System factory warranty.

3.2.
Under this Agreement, Customer may receive Upgrades/Enhancements, when and if available in years 2, 3, and 4, up to two (2) Upgrades/Enhancements per year. Customer acknowledges and agrees that this in no way obligates Distributor to provide a minimum number of Upgrades/Enhancements and that there may be some years in which no Upgrades/Enhancements will be offered; however, in contrast, there may be years in which Distributor will offer multiple Upgrades/Enhancements and Customer may select up to two (2) of such Upgrades/Enhancements. Customer may receive an available Upgrade/Enhancement during Year 1 (the Warranty Year), or receive an additional Upgrade/Enhancement during years 2 or 3, and such Upgrade/Enhancement will replace Customer's opportunity for Upgrades/

43

4.
Software Maintenance (Bug Fixes and Updates)

4.1.
For the duration of the Agreement Term, Distributor will provide software Updates and Bug Fixes for software that is included as a part of the CyberKnife System. These Updates and Bug Fixes may be transmitted electronically to Customer for subsequent installation by Customer technicians. Corrections of significant complexity, however, may be installed by Distributor service engineers. Software maintenance will be included only for those product features that were originally purchased with the System or subsequently purchased separately by Customer from Distributor or taken under this Agreement as a System Upgrade/Enhancement.

4.2.
During the service periods, Distributor shall provide Customer with any and all applicable product notices regarding maintenance, support, Upgrades/Enhancements, Updates and Bug Fixes generally circulated to CyberKnife installations.

44

5.
System Quality Assurance Testing

5.1.
The maintenance and support services provided by Distributor under this Agreement do not include any System Quality Assurance Testing ("QA"). System commissioning and QA are the sole responsibility of Customer, and Customer is advised to perform QA on a regular and ongoing basis. In addition, Customer is required to maintain up-to-date QA logs. If Customer fails to perform the appropriate QA of the System, and to record such QA in the appropriate logs, Distributor, upon giving Notice to Customer in accordance with Section 15 of this Agreement, reserves the right to terminate this Agreement.

5.2.
Prior to performing any scheduled service or preventive maintenance on the System, Distributor will review Customer's QA logs, and if such logs are not up-to-date, Distributor may refuse to service the System. In the event that the requested service is necessary to bring the System to a point where QA can be performed, Distributor will proceed with the service only after Customer signs a written acknowledgement that QA is Customer's sole responsibility and that appropriate QA will be performed prior to conducting any patient treatments.

6.
Service Coverage Period [Note: Distributor must provide service equal or greater to the First Line Field Service, as set forth in Distributor's service agreement with Accuray.]

6.1.
The Service Coverage Period will be the hours of 8:00 AM to 9:00 PM local (to Customer's installation location) time Monday through Saturday (excluding local legal holidays). Customer has the option to request service during non-normal hours, in which case Customer shall pay the overtime premium portion of the non-normal hours worked. (Non-normal hourly rate minus normal hourly rate.) Distributor shall provide Customer with contact points to request service on a 24-hours-a-day, 7-days-a-week ("24/7") basis. Distributor, directly or remotely as the situation requires, either with its own personnel or through contractors, shall initially respond within one (1) hour of receipt of a call for service. The initial response shall include telephone support, including (as applicable) consultations, diagnostic assistance and advice on the use and maintenance of the System. In the event that the service issue cannot be resolved by telephone or other remote response, then Distributor will respond on-site. On-site response times will vary depending upon the level of service required.

6.2.
Customer will promptly notify Distributor, by calling Distributor's Customer Support Line at                                    [Note: Distributor will need to provide Customer with an appropriate contact number for 24/7 support], of any problem or defect with the System and, at no charge, provide Distributor and/or Accuray service engineers access to the System and use of adequate facilities and equipment at mutually agreeable times as necessary for Distributor and/or Accuray to perform the service. Customer shall have as many service calls as are reasonably needed to maintain the System so that it performs substantially in accordance with the Specifications during the period of this Agreement.

6.3.
Use of the facility CT scanner may be required for testing purposes and shall be scheduled to allow as expeditious completion of service as is reasonably possible. Facility staff will operate the CT scanner. If service is unreasonably delayed and Distributor and/or Accuray service engineers are required to remain on site, Distributor may choose to charge the current hourly service rates for the duration of the delay period.

6.4.
Distributor will perform System planned maintenance as prescribed in the current System maintenance manuals. Planned service will be scheduled at least two (2) weeks in advance and

45

7.
Uptime [Note: Distributor must provide an Uptime guarantee equal or greater to the one set forth below, as set forth in Distributor's service agreement with Accuray.]

7.1.
Uptime/Downtime.    Uptime shall mean any time that the System is not down ("Uptime"). A down System means that a patient cannot be treated due to an actual malfunction of the System and that the System is immediately available for an Distributor service engineer to work on it ("Downtime").

7.2.
Guarantee.    Distributor will guarantee that the System shall have an Uptime percentage of at least 95% of normal treatment hours on an annual basis during the Term of this Agreement. Normal treatment hours shall be from 8:00 AM to 5:00 PM local time Monday through Friday (excluding legal holidays). The first 12-month period will start as of the Effective Date of this Agreement.

7.3.
Calculation.    Downtime will be calculated from the time a down System call is received by Distributor to the time of repair, counting normal treatment hours. The System will be calculated as up when the System repair has been completed and the System is available for treatment during normal treatment hours, whether or not patients are scheduled for treatment. Scheduled preventive maintenance, System upgrades, and time that the System is unavailable as a result of something beyond Distributor's control, including without limitation (i) Customer's use of the System for purposes other than its intended and authorized purposes, (ii) the negligence of Customer, (iii) the failure of Customer to operate the System in accordance with the User Manuals, (iv) use by untrained operators, (v) e-Stops, power outages or the like or (vi) the negligence of any party other than Distributor, will be calculated as Uptime.

7.4.
Reports.    Customer is responsible for recording and reporting Downtime to Distributor. Reports for the previous month's Downtime shall be provided to Distributor on or before the 15th day of each month.

7.5.
Failure to Meet Guarantee.    For each year of the term of this Agreement, if Distributor achieves a 12-month uptime average of less than 95%, the Agreement period will be extended one (1) week for every percentage point or fraction thereof below 95%.

8.
Replacement Parts

8.1.
Distributor shall make a commercially reasonable effort to supply at the time of need or stock with Distributor's regional service engineers all tools, equipment, replacement parts and Consumables as would reasonably be required by Distributor to perform the required repairs and return the System to good working order. Distributor shall make a commercially reasonable effort to maintain at its factory or service center(s) a stock of spare parts, including, in particular, long-procurement-lead-time parts.

8.2.
Replacement parts used under this Agreement may be either new manufacture or factory refurbished at Accuray's or Distributor's choice. All replacement parts and assemblies provided will be manufactured in accordance with Accuray's quality system, and any applicable laws and regulations. Parts replaced under this Agreement become the property of Distributor

46

9.
Exceptions

9.1.
All obligations of Distributor under this Agreement shall be suspended and/or cease in the event of:

9.1.1.
Damage from fire, accident, abuse, floods, lightning, natural disasters or other calamities commonly defined as "Acts of God".

9.1.2.
The intentional abuse of the System or negligence by Customer.

9.1.3.
System hardware or software alterations not authorized by Accuray or Distributor including any move of the System from its installation site (other than by or at the express written direction of Accuray or Distributor).

9.1.4.
Use of the System for other than its intended and authorized purposes, or in a manner not consistent with Accuray's User Manuals, including maintenance of the necessary operating environment and line current conditions, and the failure of Customer to cure such matter within thirty (30) days of actual written notice thereof from Distributor.

9.1.5.
Failure to make payments in accordance with the payment schedule set forth above in Section 2.2.

9.2.
If corrective action or adjustment of the System is performed by Customer's staff at the direction of Accuray or Distributor, such action or adjustment shall not reduce Distributor's responsibility under this Agreement or liability for the performance of the System.

10.
No Cancellation.    Neither party shall have the right to cancel this Agreement, except as set forth below in Section 11 "Breach."

11.
Breach.    Either party reserves the right to cancel this Agreement by written notice upon the breach of the other. An event of breach may include, but is not limited to, failure to make payment due under this Agreement, failure to provide access as required to execute the services contemplated by this Agreement, failure to perform and log QA, or the filing of notice under bankruptcy or equivalent laws. If the breaching party is unable or unwilling to cure or make a good faith effort to cure such breach within thirty (30) days of actual written notice the other shall be relieved of all obligations under this Agreement and may terminate. Termination shall not be the terminating party's exclusive remedy, and the terminating party shall retain all other available legal and equitable remedies.

12.
Limitation of Liability and Warranty

12.1.
If it is determined in accordance with applicable law that any fault or neglect of either party, its employees or agents, substantially contributes to damage or injury to third parties, such party shall be responsible in such proportion as reflects its relative fault therefore, and shall hold the other party harmless from any liability or damages arising out of such fault or neglect. Distributor's liability arising under this Agreement shall be limited to an amount not to exceed the payment(s) received by Distributor for the then current Agreement year. In addition, Distributor shall not be liable to Customer in the event that Customer's or any third party's acts or omissions contributed in any way to any loss it sustained or the loss or damage is due to an act of God or other causes beyond its reasonable control. IN NO EVENT WILL DISTRIBUTOR BE LIABLE TO CUSTOMER FOR ANY LOST PROFITS, LOST SAVINGS, LOST REVENUES OR DOWNTIME, SPECIAL, INDIRECT, INCIDENTAL

47

13.
Assignment.    Neither party may assign this Agreement without the other party's prior written consent, except that Distributor may assign this Agreement, without Customer's consent, to an affiliate or to a successor or acquirer, as the case may be, in connection with a merger or acquisition, or the sale of all or substantially all of Distributor's assets or the sale of that portion of Distributor's business to which this Agreement relates. Subject to the foregoing, this Agreement will bind and inure to the benefit of the parties' permitted successors and assigns.

14.
Disputes and Governing Laws

14.1.
In the event that a dispute arises between Distributor and Customer with respect to any subject matter governed by this Agreement, such dispute shall be settled as follows. If either party shall have any dispute with respect to this Agreement, that party shall provide written notification to the other party in the form of a claim identifying the issue or amount disputed including a detailed reason for the claim. The party against whom the claim is made shall respond in writing to the claim within 30 days from the date of receipt of the claim document. The party filing the claim shall have an additional 30 days after the receipt of the response to either accept the resolution offered by the other party or escalate the matter. If the dispute is not resolved, either party may notify the other in writing of their desire to elevate the claim to the President of Distributor and the Chief Executive Officer of Customer. Each shall negotiate in good faith and use his or her best efforts to resolve such dispute or claim. The location, format, frequency, duration and conclusion of these elevated discussions shall be left to the discretion of the representatives involved. If the negotiations do not lead to resolution of the underlying dispute or claim to the satisfaction of either party involved, then either party may pursue resolution by the courts as follows.

14.2.
All disputes arising out of or relating to this Agreement not otherwise resolved between Distributor and Customer shall be resolved in a court of competent jurisdiction in the                                     [Note: Please fill in an appropriate venue], and in no other place, provided that, in Distributor's sole discretion, such action may be heard in some other place designated by Distributor (if necessary to acquire jurisdiction over third persons), so that the dispute can be resolved in one action. Customer hereby consents to the jurisdiction of such court or courts and agrees to appear in any such action upon written notice thereof. No action, regardless of form, arising out of, or in any way connected with this Agreement may be brought by Customer more than one (1) year after the cause of action has occurred.

15.
Notices.    All notices required or permitted under this Agreement will be in writing and delivered in person, effective immediately, by overnight delivery service, effective two (2) business days after deposit with carrier, or by registered or certified mail, postage prepaid with return receipt requested, effective five (5) business days after deposit with carrier. All communications will be

48

To Distributor:

   To Customer:
Attention:    
        
        
with cc to:    
16.
Waiver.    The waiver of any breach or default of any provision of this Agreement will not constitute a waiver of any other right hereunder or of any subsequent breach or default.

17.
Severability.    If any provision of this Agreement is held invalid or unenforceable by a court of competent jurisdiction, the remaining provisions of the Agreement will remain in full force and effect, and the provision affected will be construed so as to be enforceable to the maximum extent permissible by law.

18.
Force Majeure.    Neither party will be responsible for any failure or delay in its performance under this Agreement (except for the payment of money) due to causes beyond its reasonable control, including, but not limited to, labor disputes, strike, lockout, riot, war, fire, act of God, accident, failure or breakdown of components necessary to order completion; subcontractor, supplier or customer caused delays; inability to obtain or substantial rises in the prices of labor, materials or manufacturing facilities; curtailment of or failure to obtain sufficient electrical or other energy, raw materials or supplies; or compliance with any law, regulation or order, whether valid or invalid.

19.
Amendments.    Any amendment or modification of this Agreement must be made in writing and signed by duly authorized representatives of each party. For Distributor, a duly authorized representative must be any of the following:                                    [Enter title of person with authority to bind Distributor].

20.
Entire Agreement.    This Agreement contains the entire Agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior understandings, representations and warranties, written and oral. If any part of the terms and conditions stated herein are held void or unenforceable, such part will be treated as severable, leaving valid the remainder of the terms and conditions.

21.
Counterparts.    This Agreement may be executed in counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

SIGNATURE PAGE FOLLOWS

49

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the Effective Date by their duly authorized representatives.

DISTRIBUTOR

   CUSTOMER

By:
 
By:
Print Name:
   Print Name:
Title:
   Title:
Date:
   Date:

 
 
PLEASE MAKE CERTAIN THAT YOU HAVE SELECTED A PAYMENT OPTION IN ACCORDANCE WITH SECTION 2.2, ABOVE.

SIGNATURE PAGE TO INTERNATIONAL RUBY SERVICE AGREEMENT

50


CYBERKNIFE® INTERNATIONAL EMERALD ELITE SERVICE AGREEMENT

Note:
Pursuant to the terms of Distributor's Service Agreement with Accuray, you must provide service equal to or greater than the following terms.

1.
Scope of Service.    This Emerald Elite Service Agreement ("Agreement") is made by and between Accuray Incorporated's ("Accuray") authorized Distributor,                                      ("Distributor"), located at                                    , and                                      ("Customer"), for Distributor to provide planned maintenance service when scheduled by Accuray and corrective maintenance service when requested by Customer to maintain the CyberKnife System installed at Customer's site at                                    ("System") so that it performs substantially in accordance with the Specifications (User Manuals and Reference Guides) defined for the System revision as installed and/or upgraded.

1.1.
Effective Date.    This Agreement shall be effective as of demonstration of acceptance testing by Distributor as described in the CyberKnife Quotation and Purchase Agreement dated                                    , 2005 and signed by the parties, or the expiration of any prior service or warranty agreement, if applicable.

1.2.
Definitions:

1.2.1.
Bug Fix means an error correction or minor change in the existing software and/or hardware configuration that is required in order to enable the existing software and/or hardware configuration to perform to the existing functional specification(s).

1.2.2.
Update means a release of the software or a change to the existing hardware containing substantially only error corrections, minor new features, functionality and/or performance improvements, but that would not be required for the existing software and/or hardware configuration to perform to the existing functional specification(s) of that particular product. Such Update would not necessarily replace or extend the life of the existing software and/or hardware configuration of the product. For example, an Update of software would be indicated where the version number is changed by incrementing the numeric digits to the right of the decimal point, e.g., versions 1.1, 1.2, 1.3, and 1.4 would each be Updates of the software.

1.2.3.
Upgrade/Enhancement means a release of the software or a change to the existing hardware containing major new features, functionality and/or performance improvements that would enable the existing software and/or hardware configuration to perform to the level of the next version of the software and/or hardware configuration and designed to replace the older software and/or hardware version of the same product and/or extend the useful life of that product. For example, an Upgrade/Enhancement of software would be indicated where the version number is changed by incrementing the numeric digits to the left of the decimal point, e.g., versions 1.0, 2.0, 3.0, and 4.0 would each be Upgrades/Enhancements of the software.

1.2.4.
New Version/New Product means a release of the software or a change to the hardware that may or may not work with the existing software and/or hardware configuration, but that in its totality requires, in Accuray's sole opinion, enough change to the software and/or hardware configuration to be considered a New Version or New Product.

1.2.5.
Consumables means items that are not necessarily part of the CyberKnife system, but are consumed as part of the operation of the CyberKnife system, for example fiducials.

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2.
Service Period.

2.1.
The Agreement Term shall be for an initial period of four (4) years (years 1, 2, 3, & 4) from the Effective Date of this Agreement, including the warranty year, with an optional fifth year. There is no payment required under this Agreement in the first year ("Year 1"or the "Warranty Year"). Customer may elect to receive an additional optional fifth year (the "Optional Year 5"). Customer may exercise the option for Optional Year 5 by letter sent to Distributor, in accordance with the Notice provision set forth below, at any time up to thirty (30) days before the Optional Year 5 commences. If Customer does not exercise the option, there will be no charge to Customer, and Distributor will not provide Emerald coverage for Optional Year 5. If Customer exercises the option, Distributor is obligated to provide Emerald coverage on same terms as the previous Agreement years. Billing will commence on the day following the anniversary of the Effective Date of this Agreement.

2.2.
The Agreement Price shall be one of the following, at Customer's option (indicate preferred option by checking a box, if no selection is made Customer will be billed on an annual basis). The Agreement Price shall cover the Base CyberKnife System, up to two (2) CyRIS Multiplan Systems (including the CyRIS MultiPlan System in the Base CyberKnife System), and up to three (3) CyRIS InView Workstations. If Customer has more than two (2) CyRIS MultiPlan Systems or three (3) CyRIS InView Workstations installed, then an additional charge of [Distributor to Insert Price re InView Service] per year per MultiPlan and [Distributor to Insert Price re MultiPlan Service] per year per InView, as applicable, will be added by Distributor to the Agreement Price set forth below.

o
ANNUAL: [Distributor to Insert Price] per year, paid yearly in advance, for years 2, 3, 4 and Optional Year 5.

o
QUARTERLY: [Distributor to Insert Price] per quarter, paid at the beginning of each quarter, for years 2, 3, 4 and Optional Year 5.

o
MONTHLY: [Distributor to Insert Price] per month, paid at the beginning of each month, for years 2, 3, 4 and Optional Year 5.

3.
Equipment To Be Covered

3.1.
This Agreement is available only for equipment that was purchased directly from Distributor, installed by Accuray or Distributor engineers and has not been moved from its original installation location or disconnected from its original power supply without written permission or direction from Accuray or Distributor. This Agreement must immediately commence at the expiration of the factory warranty period or prior service agreement. In the event of lapse of service, Customer shall have the right to reinstate such service by payment of the current service fee for the then-current service period in addition to the reasonable costs for Distributor to inspect, repair, and return the System to the state at which the System would have been had a service agreement been in force continuously since the expiration of the System factory warranty.

4.
Software Maintenance (Bug Fixes and Updates)

4.1.
For the duration of the Agreement Term, Distributor will provide software Updates and Bug Fixes for software that is included as a part of the CyberKnife System. These Updates and Bug Fixes may be transmitted electronically to Customer for subsequent installation by Customer technicians. Corrections of significant complexity, however, may be installed by Distributor service engineers. Software maintenance will be included only for those product features that were originally purchased with the System or subsequently purchased separately

52

5.
System Quality Assurance Testing

5.1.
The maintenance and support services provided by Distributor under this Agreement do not include any System Quality Assurance Testing ("QA"). System commissioning and QA are the sole responsibility of Customer, and Customer is advised to perform QA on a regular and ongoing basis. In addition, Customer is required to maintain up-to-date QA logs. If Customer fails to perform the appropriate QA of the System, and to record such QA in the appropriate logs, Distributor, upon giving Notice to Customer in accordance with Section 15 of this Agreement, reserves the right to terminate this Agreement.

5.2.
Prior to performing any scheduled service or preventive maintenance on the System, Distributor will review Customer's QA logs, and if such logs are not up-to-date, Distributor may refuse to service the System. In the event that the requested service is necessary to bring the System to a point where QA can be performed, Distributor will proceed with the service only after Customer signs a written acknowledgement that QA is Customer's sole responsibility and that appropriate QA will be performed prior to conducting any patient treatments.

6.
Service Coverage Period [Note: Distributor must provide service equal or greater to the First Line Field Service, as set forth in Distributor's service agreement with Accuray.]

6.1.
The Service Coverage Period will be the hours of 8:00 AM to 9:00 PM local (to Customer's installation location) time Monday through Saturday (excluding local legal holidays). Customer has the option to request service during non-normal hours, in which case Customer shall pay the overtime premium portion of the non-normal hours worked. (Non-normal hourly rate minus normal hourly rate.) Distributor shall provide Customer with contact points to request service on a 24-hours-a-day, 7-days-a-week ("24/7") basis. Distributor, directly or remotely as the situation requires, either with its own personnel or through contractors, shall initially respond within one (1) hour of receipt of a call for service. The initial response shall include telephone support, including (as applicable) consultations, diagnostic assistance and advice on the use and maintenance of the System. In the event that the service issue cannot be resolved by telephone or other remote response, then Distributor will respond on-site. On-site response times will vary depending upon the level of service required.

6.2.
Customer will promptly notify Distributor, by calling Distributor's Customer Support Line at                                    [Note: Distributor will need to provide Customer with an appropriate contact number for 24/7 support], of any problem or defect with the System and, at no charge, provide Distributor and/or Accuray service engineers access to the System and use of adequate facilities and equipment at mutually agreeable times as necessary for Distributor and/or

53

7.
Uptime [Note: Distributor must provide an Uptime guarantee equal or greater to the one set forth below, as set forth in Distributor's service agreement with Accuray.]

7.1.
Uptime/Downtime.    Uptime shall mean any time that the System is not down ("Uptime"). A down System means that a patient cannot be treated due to an actual malfunction of the System and that the System is immediately available for an Distributor service engineer to work on it ("Downtime").

7.2.
Guarantee.    Distributor will guarantee that the System shall have an Uptime percentage of at least 95% of normal treatment hours on an annual basis during the Term of this Agreement. Normal treatment hours shall be from 8:00 AM to 5:00 PM local time Monday through Friday (excluding legal holidays). The first 12-month period will start as of the Effective Date of this Agreement.

7.3.
Calculation.    Downtime will be calculated from the time a down System call is received by Distributor to the time of repair, counting normal treatment hours. The System will be calculated as up when the System repair has been completed and the System is available for treatment during normal treatment hours, whether or not patients are scheduled for treatment. Scheduled preventive maintenance, System upgrades, and time that the System is unavailable as a result of something beyond Distributor's control, including without limitation (i) Customer's use of the System for purposes other than its intended and authorized purposes, (ii) the negligence of Customer, (iii) the failure of Customer to operate the System in accordance with the User Manuals, (iv) use by untrained operators, (v) e-Stops, power outages or the like or (vi) the negligence of any party other than Distributor, will be calculated as Uptime.

7.4.
Reports.    Customer is responsible for recording and reporting Downtime to Distributor. Reports for the previous month's Downtime shall be provided to Distributor on or before the 15th day of each month.

7.5.
Failure to Meet Guarantee.    For each year of the term of this Agreement, if Distributor achieves a 12-month uptime average of less than 95%, the Agreement period will be extended one (1) week for every percentage point or fraction thereof below 95%.

54

8.
Replacement Parts

8.1.
Distributor shall make a commercially reasonable effort to supply at the time of need or stock with Distributor's regional service engineers all tools, equipment, replacement parts and Consumables as would reasonably be required by Distributor to perform the required repairs and return the System to good working order. Distributor shall make a commercially reasonable effort to maintain at its factory or service center(s) a stock of spare parts, including, in particular, long-procurement-lead-time parts.

8.2.
Replacement parts used under this Agreement may be either new manufacture or factory refurbished at Accuray's or Distributor's choice. All replacement parts and assemblies provided will be manufactured in accordance with Accuray's quality system, and any applicable laws and regulations. Parts replaced under this Agreement become the property of Distributor and will be disposed of by Distributor Field Service engineers. Notwithstanding the foregoing, all parts that are considered by local regulation to be "hazardous" or "contaminated" waste, or material that requires "special handling" will be disposed of or retained by Customer at Customer's facility.

9.
Exceptions

9.1.
All obligations of Distributor under this Agreement shall be suspended and/or cease in the event of:

9.1.1.
Damage from fire, accident, abuse, floods, lightning, natural disasters or other calamities commonly defined as "Acts of God".

9.1.2.
The intentional abuse of the System or negligence by Customer.

9.1.3.
System hardware or software alterations not authorized by Accuray or Distributor including any move of the System from its installation site (other than by or at the express written direction of Accuray or Distributor).

9.1.4.
Use of the System for other than its intended and authorized purposes, or in a manner not consistent with Accuray's User Manuals, including maintenance of the necessary operating environment and line current conditions, and the failure of Customer to cure such matter within thirty (30) days of actual written notice thereof from Distributor.

9.1.5.
Failure to make payments in accordance with the payment schedule set forth above in Section 2.2.

9.2.
If corrective action or adjustment of the System is performed by Customer's staff at the direction of Accuray or Distributor, such action or adjustment shall not reduce Distributor's responsibility under this Agreement or liability for the performance of the System.

10.
No Cancellation.    Neither party shall have the right to cancel this Agreement, except as set forth below in Section 11 "Breach."

11.
Breach.    Either party reserves the right to cancel this Agreement by written notice upon the breach of the other. An event of breach may include, but is not limited to, failure to make payment due under this Agreement, failure to provide access as required to execute the services contemplated by this Agreement, failure to perform and log QA, or the filing of notice under bankruptcy or equivalent laws. If the breaching party is unable or unwilling to cure or make a good faith effort to cure such breach within thirty (30) days of actual written notice the other party shall be relieved of all obligations under this Agreement and may terminate. Termination shall not be the terminating party's exclusive remedy, and the terminating party shall retain all other available legal and equitable remedies.

55

12.
Limitation of Liability and Warranty

12.1.
If it is determined in accordance with applicable law that any fault or neglect of either party, its employees or agents, substantially contributes to damage or injury to third parties, such party shall be responsible in such proportion as reflects its relative fault therefore, and shall hold the other party harmless from any liability or damages arising out of such fault or neglect. Distributor's liability arising under this Agreement shall be limited to an amount not to exceed the payment(s) received by Distributor for the then current Agreement year. In addition, Distributor shall not be liable to Customer in the event that Customer's or any third party's acts or omissions contributed in any way to any loss it sustained or the loss or damage is due to an act of God or other causes beyond its reasonable control. IN NO EVENT WILL DISTRIBUTOR BE LIABLE TO CUSTOMER FOR ANY LOST PROFITS, LOST SAVINGS, LOST REVENUES OR DOWNTIME, SPECIAL, INDIRECT, INCIDENTAL DAMAGES OR OTHER CONSEQUENTIAL DAMAGES ARISING OUT OF OR IN CONNECTION WITH THE AGREEMENT OR THE USE OR PERFORMANCE OF THE SYSTEM.

12.2.
This is a service agreement. THERE ARE NO INCLUDED OR IMPLIED DISTRIBUTOR WARRANTIES OF PRODUCT FITNESS FOR A PARTICULAR PURPOSE OR MERCHANTABILITY.

13.
Assignment.    Neither party may assign this Agreement without the other party's prior written consent, except that Distributor may assign this Agreement, without Customer's consent, to an affiliate or to a successor or acquirer, as the case may be, in connection with a merger or acquisition, or the sale of all or substantially all of Distributor's assets or the sale of that portion of Distributor's business to which this Agreement relates. Subject to the foregoing, this Agreement will bind and inure to the benefit of the parties' permitted successors and assigns.

14.
Disputes and Governing Laws

14.1.
In the event that a dispute arises between Distributor and Customer with respect to any subject matter governed by this Agreement, such dispute shall be settled as follows. If either party shall have any dispute with respect to this Agreement, that party shall provide written notification to the other party in the form of a claim identifying the issue or amount disputed including a detailed reason for the claim. The party against whom the claim is made shall respond in writing to the claim within 30 days from the date of receipt of the claim document. The party filing the claim shall have an additional 30 days after the receipt of the response to either accept the resolution offered by the other party or escalate the matter. If the dispute is not resolved, either party may notify the other in writing of their desire to elevate the claim to the President of Distributor and the Chief Executive Officer of Customer. Each shall negotiate in good faith and use his or her best efforts to resolve such dispute or claim. The location, format, frequency, duration and conclusion of these elevated discussions shall be left to the discretion of the representatives involved. If the negotiations do not lead to resolution of the underlying dispute or claim to the satisfaction of either party involved, then either party may pursue resolution by the courts as follows.

14.2.
All disputes arising out of or relating to this Agreement not otherwise resolved between Distributor and Customer shall be resolved in a court of competent jurisdiction in the                                     [Note: Please fill in an appropriate venue], and in no other place, provided that, in Distributor's sole discretion, such action may be heard in some other place designated by Distributor (if necessary to acquire jurisdiction over third persons), so that the dispute can be resolved in one action. Customer hereby consents to the jurisdiction of such court or courts and agrees to appear in any such action upon written notice thereof. No

56

15.
Notices.    All notices required or permitted under this Agreement will be in writing and delivered in person, effective immediately, by overnight delivery service, effective two (2) business days after deposit with carrier, or by registered or certified mail, postage prepaid with return receipt requested, effective five (5) business days after deposit with carrier. All communications will be sent to the addresses set forth below or to such other address as may be specified by either party in writing to the other party in accordance with this Section.

To Distributor:

   To Customer:
Attention:   Attention:
        
        
with cc to:    
16.
Waiver.    The waiver of any breach or default of any provision of this Agreement will not constitute a waiver of any other right hereunder or of any subsequent breach or default.

17.
Severability.    If any provision of this Agreement is held invalid or unenforceable by a court of competent jurisdiction, the remaining provisions of the Agreement will remain in full force and effect, and the provision affected will be construed so as to be enforceable to the maximum extent permissible by law.

18.
Force Majeure.    Neither party will be responsible for any failure or delay in its performance under this Agreement (except for the payment of money) due to causes beyond its reasonable control, including, but not limited to, labor disputes, strike, lockout, riot, war, fire, act of God, accident, failure or breakdown of components necessary to order completion; subcontractor, supplier or customer caused delays; inability to obtain or substantial rises in the prices of labor, materials or manufacturing facilities; curtailment of or failure to obtain sufficient electrical or other energy, raw materials or supplies; or compliance with any law, regulation or order, whether valid or invalid.

19.
Amendments.    Any amendment or modification of this Agreement must be made in writing and signed by duly authorized representatives of each party. For Distributor, a duly authorized representative must be any of the following:                                    [Enter title of person with authority to bind Distributor].

20.
Entire Agreement.    This Agreement contains the entire Agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior understandings, representations and warranties, written and oral. If any part of the terms and conditions stated herein are held void or unenforceable, such part will be treated as severable, leaving valid the remainder of the terms and conditions.

21.
Counterparts.    This Agreement may be executed in counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

57

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the Effective Date by their duly authorized representatives.

DISTRIBUTOR

   CUSTOMER
By:
   By:
Print Name:
   Print Name:
Title:
   Title:
Date:
   Date:
     
    PLEASE MAKE CERTAIN THAT YOU HAVE SELECTED A PAYMENT OPTION IN ACCORDANCE WITH SECTION 2.2, ABOVE.

58


CYBERKNIFE® INTERNATIONAL EXTENDED PARTS WARRANTY AGREEMENT

Note:
Pursuant to the terms of Distributor's Warranty Agreement with Accuray, you must provide warranty service equal to or greater than the following terms.

1.
Scope of Warranty.    This is a Warranty Agreement by and between Accuray Incorporated's ("Accuray") authorized Distributor,                                      ("Distributor"), located at                                    , and                                      ("Customer"), for Distributor to provide replacement of all defective parts when requested by Customer to maintain the CyberKnife System installed at site at                                    ("System") so that it performs substantially in accordance with the specifications defined for the System revision as installed and/or updated under this Warranty Agreement, or upgraded under a separate agreement with Customer.

2.
Warranty Period.    This Warranty Agreement shall be for an initial period of one (1) year, beginning one (1) year after the date of demonstration of System acceptance testing to Customer ("Effective Date"), with an optional second year. The Agreement price shall be [Distributor to Insert Price] paid in advance. Customer may elect to receive an additional optional second year at the price of [Distributor to Insert Price]. Customer may exercise the option for optional second year by letter sent to Distributor, in accordance with the Notice provision set forth below, at any time up to twenty (20) days before the optional second year commences. If Customer exercises the option, Distributor is obligated to provide Extended Parts Warranty coverage on the same terms as the previous Agreement year. Billing will commence on the day following the anniversary of the Effective Date of this Agreement.

3.
Equipment to be Covered.    The Warranty Agreement is available only for equipment that was purchased directly from Distributor, installed by Accuray or Distributor, and has not been moved from its original installation location or disconnected from its original power supply without written permission or direction from Accuray or Distributor. This Warranty Agreement must immediately commence at the expiration of the factory warranty period.

4.
Replacement Parts

4.1.
Distributor shall make a commercially reasonable effort to supply at the time of need or stock with Distributor's regional service engineers all tools, equipment, replacement parts and Consumables as would reasonably be required by Distributor to perform the required repairs and return the System to good working order. Distributor shall make a commercially reasonable effort to maintain at its factory or service center(s) a stock of spare parts, including, in particular, long-procurement-lead-time parts.

4.2.
Replacement parts used under this Agreement may be either new manufacture or factory refurbished at Accuray's or Distributor's choice. All replacement parts and assemblies provided will be manufactured in accordance with Accuray's quality system, and any applicable laws and regulations. Parts replaced under this Agreement become the property of Distributor and will be disposed of by Distributor Field Service engineers. Notwithstanding the foregoing, all parts that are considered by local regulation to be "hazardous" or "contaminated" waste, or material that requires "special handling" will be disposed of or retained by Customer at Customer's facility.

5.
Warranty Exclusions.    All warranty replacement of parts shall be limited to malfunctions which are due and traceable to defects in original material or workmanship of the parts. The warranties set forth in this Warranty Agreement shall be void and of no further effect in the event of abuse, accident, alteration, misuse or neglect of the System or its component parts, including but not limited to user modification of the operating environment specified by Accuray.

59

6.
Exceptions

6.1.
All obligations of Distributor under this Agreement shall be suspended and/or cease in the event of:

6.1.1.
Damage from fire, accident, abuse, floods, lightning, natural disasters or other calamities commonly defined as "Acts of God".

6.1.2.
The intentional abuse of the System or negligence by Customer.

6.1.3.
System hardware or software alterations not authorized by Accuray or Distributor including any move of the System from its installation site (other than by or at the express written direction of Accuray or Distributor).

6.1.4.
Use of the System for other than its intended and authorized purposes, or in a manner not consistent with Accuray's User Manuals, including maintenance of the necessary operating environment and line current conditions, and the failure of Customer to cure such matter within thirty (30) days of actual written notice thereof from Distributor.

6.1.5.
Failure to make payments in accordance with the payment schedule set forth above in Section 2.2.

6.2.
If corrective action or adjustment of the System is performed by Customer's staff at the direction of Accuray or Distributor, such action or adjustment shall not reduce Distributor's responsibility under this Agreement or liability for the performance of the System.

7.
No Cancellation.    Neither party shall have the right to cancel this Agreement, except as set forth below in Section 8 "Breach."

8.
Breach.    Either party reserves the right to cancel this Agreement by written notice upon the breach of the other. An event of breach may include, but is not limited to, failure to make payment due under this Agreement, failure to provide access as required to execute the services contemplated by this Agreement, failure to perform and log QA, or the filing of notice under bankruptcy or equivalent laws. If the breaching party is unable or unwilling to cure or make a good faith effort to cure such breach within thirty (30) days of actual written notice the other shall be relieved of all obligations under this Agreement and may terminate. Termination shall not be the terminating party's exclusive remedy, and the terminating party shall retain all other available legal and equitable remedies.

9.
Limitation of Liability and Warranty

9.1.
Limitation of Liability.    If it is determined in accordance with applicable law that any fault or neglect of either party, its employees or agents, substantially contributes to damage or injury to third parties, such party shall be responsible in such proportion as reflects its relative fault therefore, and shall hold the other party harmless from any liability or damages arising out of such fault or neglect. Distributor's liability arising under this Agreement shall be limited to an amount not to exceed the payment(s) received by Distributor for the then current Agreement year. In addition, Distributor shall not be liable to Customer in the event that Customer's or any third party's acts or omissions contributed in any way to any loss it sustained or the loss or damage is due to an act of God or other causes beyond its reasonable control. IN NO EVENT WILL DISTRIBUTOR BE LIABLE TO CUSTOMER FOR ANY LOST PROFITS, LOST SAVINGS, LOST REVENUES OR DOWNTIME, SPECIAL, INDIRECT, INCIDENTAL DAMAGES OR OTHER CONSEQUENTIAL DAMAGES ARISING OUT OF OR IN CONNECTION WITH THE AGREEMENT OR THE USE OR PERFORMANCE OF THE SYSTEM.

60

10.
Assignment.    Neither party may assign this Warranty Agreement without the other party's prior written consent, except that Distributor may assign this Warranty Agreement, without Customer's consent, to an affiliate or to a successor or acquirer, as the case may be, in connection with a merger or acquisition, or the sale of all or substantially all of Distributor's assets or the sale of that portion of Distributor's business to which this Warranty Agreement relates. Subject to the foregoing, this Warranty Agreement will bind and inure to the benefit of the parties' permitted successors and assigns.

11.
Dispute Resolution

11.1.
Informal Dispute Resolution.    In the event that a dispute arises between Distributor and Customer with respect to any subject matter governed by this Agreement, such dispute shall be settled as follows. If either party shall have any dispute with respect to this Agreement, that party shall provide written notification to the other party in the form of a claim identifying the issue or amount disputed including a detailed reason for the claim. The party against whom the claim is made shall respond in writing to the claim within thirty (30) days from the date of receipt of the claim document. The party filing the claim shall have an additional thirty (30) days after the receipt of the response to either accept the resolution offered by the other party or escalate the matter. If the dispute is not resolved, either party may notify the other in writing of their desire to elevate the claim to the Chief Executive Officer or the highest ranking officer of Distributor and the Chief Executive Officer or the highest ranking officer of Customer. Each shall negotiate in good faith and use his or her best efforts to resolve such dispute or claim. The location, format, frequency, duration and conclusion of these elevated discussions shall be left to the discretion of the representatives involved. If the negotiations do not lead to resolution of the underlying dispute or claim to the satisfaction of either party involved, then either party may pursue resolution by the courts as follows.

11.2.
Jurisdiction and Venue.    All disputes under any contract concerning this Agreement not otherwise resolved between Distributor and Customer shall be resolved in a court of competent jurisdiction in the                                    [Note: Please fill in an appropriate venue], and in no other place, provided that, in Distributor's sole discretion, such action may be heard in some other place designated by Distributor (if necessary to acquire jurisdiction over third persons), so that the dispute can be resolved in one action. Customer hereby consents to the jurisdiction of such court or courts and agrees to appear in any such action upon written notice thereof. No action, regardless of form, arising out of, or in any way connected with, this Agreement may be brought by Customer more than one (1) year after the cause of action has occurred.

12.
Notices.    All notices required or permitted under this Agreement will be in writing and delivered in person, effective immediately, by overnight delivery service, effective two (2) business days after

61

To Distributor:

   To Customer:
Attention:   Attention:
        
        
        
with cc to:   Accuray Incorporated
Attention: Chief Financial Officer
& General Counsel
1310 Chesapeake Terrace
Sunnyvale, CA 94089
USA
13.
Waiver.    The waiver of any breach or default of any provision of this Agreement will not constitute a waiver of any other right hereunder or of any subsequent breach or default.

14.
Severability.    If any provision of this Agreement is held invalid or unenforceable by a court of competent jurisdiction, the remaining provisions of the Agreement will remain in full force and effect, and the provision affected will be construed so as to be enforceable to the maximum extent permissible by law.

15.
Force Majeure.    Neither party will be responsible for any failure or delay in its performance under this Agreement (except for the payment of money) due to causes beyond its reasonable control, including, but not limited to, labor disputes, strike, lockout, riot, war, fire, act of God, accident, failure or breakdown of components necessary to order completion; subcontractor, supplier or customer caused delays; inability to obtain or substantial rises in the prices of labor, materials or manufacturing facilities; curtailment of or failure to obtain sufficient electrical or other energy, raw materials or supplies; or compliance with any law, regulation or order, whether valid or invalid.

16.
Amendments.    Any amendment or modification of this Agreement must be made in writing and signed by duly authorized representatives of each party. For Distributor, a duly authorized representative must be any of the following:                                    [Enter title of person with authority to bind Distributor].

17.
Entire Agreement.    This Agreement contains the entire Agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior understandings, representations and warranties, written and oral. If any part of the terms and conditions stated herein are held void or unenforceable, such part will be treated as severable, leaving valid the remainder of the terms and conditions.

18.
Counterparts.    This Agreement may be executed in counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

SIGNATURE PAGE FOLLOWS

62

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the Effective Date by their duly authorized representatives.

DISTRIBUTOR

   CUSTOMER
By:
   By:
Print Name:
   Print Name:
Title:
   Title:
Date:
   Date:

        SIGNATURE PAGE TO INTERNATIONAL EXTENDED PARTS WARRANTY

63


ACCURAY CYBERKNIFE® ADDITIONAL DIAMOND UPGRADE AGREEMENT

Note:
Pursuant to the terms of Distributor's Additional Upgrade & Service Agreements with Accuray, you must provide service equal to or greater than the following terms.

1.
Scope of Agreement.    This CyberKnife Additional Upgrade Agreement ("Agreement") is made effective as of                                    , 2006 ("Effective Date"), by and between Accuray Incorporated's ("Accuray") authorized Distributor,                                      ("Distributor"), located at                                     , and                                      ("Customer"), for Distributor to provide Upgrades/Enhancements, when and if available, to the CyberKnife System installed at Customer's site at                                     ("System").

1.1.
Definitions:

1.1.1.
Bug Fix means an error correction or minor change in the existing software and/or hardware configuration that is required in order to enable the existing software and/or hardware configuration to perform to the existing functional specification(s).

1.1.2.
Update means a release of the software or a change to the existing hardware containing substantially only error corrections, minor new features, functionality and/or performance improvements, but that would not be required for the existing software and/or hardware configuration to perform to the existing functional specification(s) of that particular product. Such Update would not necessarily replace or extend the life of the existing software and/or hardware configuration of the product. For example, an Update of software would be indicated where the version number is changed by incrementing the numeric digits to the right of the decimal point, e.g., versions 1.1, 1.2, 1.3, and 1.4 would each be Updates of the software.

1.1.3.
Upgrade/Enhancement means a release of the software or a change to the existing hardware containing major new features, functionality and/or performance improvements that would enable the existing software and/or hardware configuration to perform to the level of the next version of the software and/or hardware configuration and designed to replace the older software and/or hardware version of the same product and/or extend the useful life of that product. For example, an Upgrade/Enhancement of software would be indicated where the version number is changed by incrementing the numeric digits to the left of the decimal point, e.g., versions 1.0, 2.0, 3.0, and 4.0 would each be Upgrades/Enhancements of the software.

1.1.4.
New Version/New Product means a release of the software or a change to the hardware that may or may not work with the existing software and/or hardware configuration, but that in its totality requires, in Accuray's sole opinion, enough change to the software and/or hardware configuration to be considered a New Version or New Product.

1.1.5.
Exclusions    Upgrades/Enhancements that have a list price of greater than $200,000 per Upgrade/Enhancement are specifically excluded from this Agreement. However, Upgrades/Enhancements that have a higher list price may be offered as more than a single Upgrade/Enhancement to Customers under this Agreement. If Upgrades/Enhancements that have a higher list price are offered as more than a single Upgrade/Enhancement then they will be offered as such to all customers. Examples of such components that would likely fall into this category are: the robot, and the patient couch. New Versions and New Products are also specifically excluded.

1.1.6.
Consumables means items that are not necessarily part of the CyberKnife system, but are consumed as part of the operation of the CyberKnife system, for example fiducials.

64

2.
Term & Payment Terms

2.1.
Customer has option of selecting either a one (1) year, two (2) Upgrade/Enhancement or two (2) year, four (4) Upgrade/Enhancement Agreement plan, as set forth below. Customer shall indicate its preferred option by checking one of the boxes below, if no selection is made Customer will signed up for a one (1) year agreement. Customer may only select an Agreement Term commensurate with the remaining term of the initial four (4) year Diamond term. For example, if Customer has three (3) years remaining of the initial four (4) year Diamond term, then Customer may only sign up for a three (3) year Agreement Term or less and the four (4) year Agreement Term would not be available.

o
Option #1—One (1) Year Agreement
3.
Product Upgrades/Enhancements

3.1.
This Agreement is available only for equipment that was purchased directly from Distributor, installed by Accuray or Distributor engineers and has not been moved from its original installation location or disconnected from its original power supply without written permission or direction from Accuray or Distributor. This Agreement is only available in conjunction with the [DATE] Diamond Elite Service Agreement signed by the parties and currently in effect ("Diamond Agreement"), and provided that Customer is current with all payments due under the Diamond Agreement and has used all upgrades allowed under the initial four (4) year term of the Diamond Agreement.

3.2.
Under this Agreement, Customer may receive Upgrades/Enhancements, when and if available, up to the number of Upgrades/Enhancements elected in Section 2.1 above, up to two (2) Upgrades/Enhancements per year per year during the Term. Customer acknowledges and

65

4.
Software Maintenance

4.1.
This Agreement does not include any software Updates and Bug Fixes for software that is included as a part of the CyberKnife System. Such Updates and Bug Fixes are the subject of the Diamond Agreement.

4.2.
Any Upgrades/Enhancements delivered pursuant to the terms of this Agreement will be considered part of Customer's System and will be serviced in accordance with the Diamond Agreement.

5.
No Cancellation.    Neither party shall have the right to cancel this Agreement, except as set forth below in Section 6 (Breach).

6.
Breach.    Either party reserves the right to cancel this Agreement by written notice upon the breach of the other. An event of breach may include, but is not limited to: failure to make payment due under this Agreement; failure to provide access as required to install any Upgrades/Enhancements contemplated by this Agreement; cancellation, termination, suspension or breach of the Diamond Agreement; or the filing of notice under bankruptcy or equivalent laws. If the

66

7.
Notices.    All notices required or permitted under this Agreement will be in writing and delivered in person, effective immediately, by overnight delivery service, effective two (2) business days after deposit with carrier, or by registered or certified mail, postage prepaid with return receipt requested, effective five (5) business days after deposit with carrier. All communications will be sent to the addresses set forth below or to such other address as may be specified by either party in writing to the other party in accordance with this Section.

To Distributor:

   To Customer:
Accuray Incorporated    
Attention: Chief Financial Officer    
1310 Chesapeake Terrace    
Sunnyvale, CA 94089    
        
with cc to: General Counsel    
8.
Amendments.    Any amendment or modification of this Agreement must be made in writing and signed by duly authorized representatives of each party. For Accuray, a duly authorized representative must be any of the following:                                    [Enter title of person with authority to bind Distributor].

9.
Diamond Agreement.    The following terms and conditions of the Diamond Agreement shall apply to this Agreement, however, in the event of a conflict between the terms of the Diamond Agreement and this Agreement, the terms and conditions of this Agreement shall take precedence.

9.1.
System Quality Assurance Testing;

9.2.
Service Coverage Period;

9.3.
Limitation of Liability and Warranty;

9.4.
Assignment;

9.5.
Disputes and Governing Laws;

9.6.
Waiver;

9.7.
Severability;

9.8.
Force Majeure; and

9.9.
Amendments.

10.
Entire Agreement.    This Agreement and the Diamond Agreement jointly contain the entire Agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior understandings, representations and warranties, written and oral. If any part of the terms and conditions stated herein are held void or unenforceable, such part will be treated as severable, leaving valid the remainder of the terms and conditions.

11.
Counterparts.    This Agreement may be executed in counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

67

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the Effective Date by their duly authorized representatives.

DISTRIBUTOR

   CUSTOMER
By:
   By:
Print Name:
   Print Name:
Title:
   Title:
Date:
   Date:
     
    PLEASE MAKE CERTAIN THAT YOU HAVE SELECTED AN UPGRADE/ENHANCEMENT OPTION IN ACCORDANCE WITH SECTION 2.1, ABOVE.

68


EXHIBIT E NOTE: CHECK CORRECT PAGE NUMBER.

DISPUTE RESOLUTION

1.
Negotiation.    The parties shall attempt to resolve any dispute arising out of relating to this Agreement promptly by negotiation between executives who have authority to settle the controversy, as set forth in Section 6 of the Agreement.

2.
Mediation.    If the parties do not resolve the dispute within forty-five (45) days of undertaking negotiation thereof, either Party may refer the Dispute for mediation by the applicable mediation body (as provided below) or its successor (the "Mediation Organization") by providing the Mediation Organization and the other Party a written request for mediation, setting forth the details of the dispute and the relief requested. Each Party must then participate in the mediation in good faith and share equally in its costs. If a request for mediation is made, then the mediation shall take place in Santa Clara County, California. Mediation shall be conducted by JAMS or its successor, in accordance with the JAMS mediation rules and procedures then in effect. Any mediation taking place between the parties will be conducted by: (i) a mediator agreed to by the parties selected from the applicable Mediation Organization's panel of neutrals; or (ii) if the parties do not agree on a mediator, a mediator nominated by the applicable Mediation Organization. Any mediation taking place between the parties shall be conducted in the English language. All offers, promises, conduct and statements, whether oral or written, made in the course of the mediation by any of the parties, their agents, employees, experts and attorneys, and by the mediator and any Mediation Organization employees, are confidential, privileged and inadmissible for any purpose, in any litigation or other proceeding involving the parties, provided that evidence that is otherwise admissible or discoverable shall not be rendered inadmissible or non-discoverable as a result of its use in the mediation.

3.
Arbitration.    If the dispute has not been resolved by non-binding means as provided herein within ninety (90) days of the initiation of such procedure, either party may initiate arbitration with respect to such matters at any time following the period provided for mediation, or determination by the mediator that the parties will not be able to resolve the issue through mediation, by filing a written request for arbitration to JAMS, as provided below, in accordance with JAMS arbitration procedures. If a request for arbitration is made, then the arbitration shall take place in Santa Clara County, California. Any arbitration taking place shall be conducted by JAMS or its successor, in accordance with the JAMS arbitration rules and procedures then in effect. Any arbitration taking place between the parties shall be conducted in the English language.

4.
Other Remedies.    Notwithstanding the foregoing, each Party shall have right before or during negotiation, mediation or arbitration to seek and obtain from the appropriate court provisional remedies such as attachment, preliminary injunction, replevin, etc., to avoid irreparable harm, maintain the status quo or preserve the subject matter of the negotiations, mediation or arbitration.

69


EXHIBIT F

PARTS LIST AND PRICES

The following is a list of spare parts required for most likely service needs. There are three (3) "Kit" options, with an approximate costs of U.S. $TBD, $TBD and $TBD per kit. Additional parts may be needed for multiple units. Accuray will also maintain a central inventory in the region to supplement the Distributor's in-country spare parts kit. Additional parts may be purchase separately from the identified Spare Parts Kits, and prices for such will be quoted by Accuray on receipt of a request from Distributor.

Please note that the content of the following Spare Parts Kit Options are subject to change, though the prices of such Kits is subject to Section 2.4 (Product and Service Pricing).

PART DESCRIPTION
   PART
NO.
   DISTRIBUTOR
SPARE PARTS
KIT A
   DISTRIBUTOR
SPARE PARTS
KIT B
   DISTRIBUTOR
SPARE PARTS
KIT C
X-Ray Head                
AFC Control PCA   01-3771-01   1   1   1
Phase Control PCA   01-4304-01   1   1   1
Phase Detector PCA   01-6164-01   1   1   1
AFC Power Supply Assy   01-4213-01       1   1
AFC Tuner Pot—New   021787   2   2   3
O'Ring Wave Guide   1200-00001           10
Laser   1000-00200   1   1   1
Laser Power Supply   4050-00001   1   2   3
Capacitor, 2500pf   1500-00020   3   3   6
Collimator Pot Assembly   01-7239-01   2   2   4
Assy Collimator Rot Lock   020183           3
Pulse Transformer Assy   01-7310-01   1   1   1
Despiking Resistor 2.0 kohm 50w   4700-00035   —   4   4
Bypass Cap 0.47 uF 600v-OBS-use 2 × 021444   1500-00064   —   2   2
0.1uF 1000V Capacitor   021444   —   2   2
Magnetron-Refurbished   018575           1
Mag//Pulse Xfmer Conn Assy   01-4651-01           1
Semi Ridgid Coax Assy   01-6268-01       1   1
Semi Ridgid Coax Assy   01-6269-01       1   1
Flex Waveguide   1000-00055       1   1
Dummy Load (Plastic)   021145           1
Hybrid Coupler   3450-00003           1
Ion Chamber   01-7130-01       1   1
Laser Mirror   1000-00210   2   2   2
Crystal Diode, Neg   2300-00003       1   1
Crystal Diode, Pos   2300-00004       1   1
Fuse .5A SloBlo   4300-00004           10
Fuse .2A SloBlo   4300-00014           5
Fuse 1.5A SloBlo   4300-00026           5
Bridge Rectifier 200V 40A   4750-00007   2   2   2
Diode, Gen Purpose 1A   4800-00026   6   6   6

70

PART DESCRIPTION
   PART
NO.
   DISTRIBUTOR
SPARE PARTS
KIT A
   DISTRIBUTOR
SPARE PARTS
KIT B
   DISTRIBUTOR
SPARE PARTS
KIT C
Modulator                
Thyratron DeQuing   5700-00001   1   1   1
Thyratron Deuterium (Main)   5700-00002   1   1   1
High Voltage wire 14g   6000-00080   5   5   5
HV Putty   1600-00170   1   1   1
Diode 7.5   4800-00024   3   3   3
Diode 10   4800-00022   3   3   3
Diode 15   4800-00021   3   3   3
Cap, PFN, .011uF 25KV   1500-00002   3   3   3
Relay 3 pdt 120 vac   4500-00002   1   2   3
Relay 4pdt   4500-00001   1   1   1
Relay 3 pdt 120 vac   4500-00003   1   1   1
Relay 3pdt 6vdc   4500-00005   1   1   1
Relay, Time Delay   4500-00009       1   1
XSFMR AUTO VAR W/DIAL&KNOB   5600-00007   —   1   1
Dequing Trigger Transformer   01-2699-01   1   1   1
Steering PS   4000-00020           1
Thyratron Driver PCA   01-1141-02   1   1   1
Ion Pump Monitor PCA   01-1617-01   1   1   1
High Voltage Divider PCA   01-3430-01           1
Dequing Trigger Generator PCA   01-3193-01   1   1   1
Thyratron Bias & Trigger PCA   01-3310-01   —   1   1
HV Rect 800V 8A   4750-00004   1   1   1
HV Rect 600V 8A   4750-00002   1   1   1
Lamp 28v,t13/4   2450-00032           2

Modulator Control Chassis
 
 
 
 
 
 
 
 
Fault Logic   01-3906-01   1   1   1
Trigger Generator   01-1433-01   1   1   1
Mag/Accel Htr Cont   01-3126-01   1   1   1
Fault Indicator   01-6895-01   1   1   1
Control Logic   01-4344-01   1   1   1
MCC/IFCC Interface   013509   1   1   1
Fan Water Interlock   020425   1   1   1
Fault Logic A3   01-3906-02   1   1   1
Counter Interface PCA   01-4363-01   1   1   1
Display Counter LCD   2950-00005           1
Fuse 2A SloBlo   4300-00002           5
PS +/-24V   4000-00002       1   1
Extender Card   1700-00002       1   1

71

PART DESCRIPTION
   PART
NO.
   DISTRIBUTOR
SPARE PARTS
KIT A
   DISTRIBUTOR
SPARE PARTS
KIT B
   DISTRIBUTOR
SPARE PARTS
KIT C
Gun Box                
Grid Drive PCA   01-5924-01   1   1   1
Grid Pulse Amp PCA   01-7131-01   1   1   1
Gun Curr. Sample & Hold PCA   01-6170-01   1   1   1
Gun Heater Xfmr   01-1875-01   1   1   1
Grid Pulse Xfmr   01-5074-01   1   1   1
Grid Bias PS   01-5073-01   1   1   1
Grid Bias PS PCA   01-5075-01   1   1   1
Grid Trigger Network PCA   01-6160-01   1   1   1
PWR SPLY 0-20 KV,0-1mA   4000-00003           1
Gun Filament PCA   01-4131-01   1   1   1
Grid Amp PCA   01-6168-01   1   1   1
Gun Interlock PCA   01-5958-01   1   1   1
Fuse 3A SloBlo   4300-00003           5
Rectifier Bridge 800v   4750-00008   1   1   1
Transorb 325v 6500a   014949   1   1   1
Cap, Elect 30uF 450V   1500-00112   2   2   2
Cap, Cer 0.47uF 600V   1500-00064   2   2   2

Dose Box
 
 
 
 
 
 
 
 
Dose Count PCB   01-3910-01   1   1   1
P.S. Monitor PCA   01-7143-01   1   1   1
Dose Bias PS Assy   01-5767-01   1   1   1
Fuse 1A SloBlo   4300-00015           10

Magnetron Box
 
 
 
 
 
 
 
 
Mag Fil Curr Mon PCA   01-4199-01   1   1   1
Mag Htr Xfmr 10V 20A   01-1849-01   1   1   1

Junction Box
 
 
 
 
 
 
 
 
Water Flow Switch (display type)   5100-00020   1   1   1
SF6 Fitting   1000-00130   1   1   2

IFCC
 
 
 
 
 
 
 
 
Dose Stif Board   010615   1   1   1
Transition Module   010817           1

Heat Exchanger
 
 
 
 
 
 
 
 
Filter-Affinity 5"   019405   5   5   5
Screen Strainer   019406   5   5   5

72

PART DESCRIPTION
   PART
NO.
   DISTRIBUTOR
SPARE PARTS
KIT A
   DISTRIBUTOR
SPARE PARTS
KIT B
   DISTRIBUTOR
SPARE PARTS
KIT C
TLS                
Power Supply 20c Detector   016940   1   1   2
Frame Grabber PCA—Squirel   019324   1   1   2
Silicon Grease   021734           2
Wavy Washers   021330   4   4   12
Rubber Washers   021735   4   4   12
IsoPost Assembly   018901           1
Isopost PCA   013418           1
TLS PC   020083           1
Video Card   019419   —   1   1
TLSCC   018283           1
X-ray Source Assy-60'cable   021242       1   1
HT Tank   016667   —   1   1
Generator Console   016669       1   1
HT Controller Board   020547           1
LF-RAC PCA   020548           1

Couch
 
 
 
 
 
 
 
 
Electronics Tray   021923           1
Axum Pendant   020656   1   1   2
Pendant—non AXUM   020501   1        
AXUM Display   020657       1   1
Pendant Holder   020957           1
Encoder 40"   021924   1   1   1
Limit Switch   021927   1   1   1
Serial Connection Board   021921   —   1   1

Robot
 
 
 
 
 
 
 
 
Kuka Cable Support (Tennis Raquet)   021127           1
KUKA PC   021215           1
KUKA PC CDROM   021732           1
KUKA PC HDD   021733   1   1   1
RDW Board   021729       1   1
DSE Board   021730       1   1
MFC2 Board   021731       1   1
Battery   021619   2   2   4
Fuse Kit   021620           2

SGI
 
 
 
 
 
 
 
 
Tape Drive 4mm 20GB   017681   1   1   1
Hard Drive 73GB   020534       1   1
Front Panel LED   021737   1   1   1

73

PART DESCRIPTION
   PART
NO.
   DISTRIBUTOR
SPARE PARTS
KIT A
   DISTRIBUTOR
SPARE PARTS
KIT B
   DISTRIBUTOR
SPARE PARTS
KIT C
ESCC                
ESCC Assy—AXUM   020575           1
Fuse 1A 3AG Fast Acting   014125           10
Fuse .25A 3AG Fast Acting   014124           10
Main Board PCA—AXUM   020477   1   1   1
ESCC/ISCC Interface   013510   1   1   1
Adapter Board   016122   1   1   1
Power Supply   018361           1

Synchrony
 
 
 
 
 
 
 
 
Break out Box   020885           1
Synchrony PC   020082           1

Power Distribution Unit (PDU)
 
 
 
 
 
 
 
 
LED Bulb, 120V, Amber   013580           5
Bulb, 60V, Incand, Clr   018540           5

Operator Console
 
 
 
 
 
 
 
 
Operator Console   019183           1
Bulb, 24V, Incand, Clr t31/4   013590           10
LED Bulb, 24V, White   019196           2

Cables
 
 
 
 
 
 
 
 
Gun HV Cable Assy   018370   1   1   1
Dose Cable   020015   1   1   1

CyRIS
 
 
 
 
 
 
 
 
    TBD            

Miscellaneous
 
 
 
 
 
 
 
 
Contact Block 2NO   013585       2   2
Keyswitch   010862       1   1
Pushbutton   013571       1   1
   
 
 
 
Total Kit Prices:   TBD   TBD   TBD
   
 
 
 

74



QuickLinks

ACCURAY INCORPORATED INTERNATIONAL DISTRIBUTOR AGREEMENT
SIGNATURE PAGE FOLLOWS
SIGNATURE PAGE TO INTERNATIONAL DISTRIBUTOR AGREEMENT
EXHIBIT A PRODUCTS AND SERVICES (INCLUDING CURRENT PRICING) BASE CYBERKNIFE® G4 CONFIGURATION—DISTRIBUTOR PRICING
BASE CYBERKNIFE® G3 CONFIGURATION—DISTRIBUTOR PRICING
EXHIBIT B PRODUCT AND SERVICE MINIMUM VOLUMES
EXHIBIT C TRAINING
EXHIBIT D ACCURAY INTERNATIONAL SERVICE AGREEMENTS TERMS SUMMARY ±
SAMPLE SERVICE AGREEMENTS
CYBERKNIFE® INTERNATIONAL DIAMOND ELITE SERVICE AGREEMENT
SIGNATURE PAGE FOLLOWS
CYBERKNIFE® INTERNATIONAL RUBY ELITE SERVICE AGREEMENT
CYBERKNIFE® INTERNATIONAL EMERALD ELITE SERVICE AGREEMENT
CYBERKNIFE® INTERNATIONAL EXTENDED PARTS WARRANTY AGREEMENT
ACCURAY CYBERKNIFE® ADDITIONAL DIAMOND UPGRADE AGREEMENT
EXHIBIT E NOTE: CHECK CORRECT PAGE NUMBER. DISPUTE RESOLUTION
EXHIBIT F PARTS LIST AND PRICES

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Exhibit 10.29


ACCURAY INCORPORATED
INTERNATIONAL SALES AGENT AGREEMENT

        This International Sales Agent Agreement ("Agreement") is entered into by and between ACCURAY INCORPORATED, a California corporation with its executive offices located at 1310 Chesapeake Terrace, Sunnyvale, California 94089, USA ("Accuray"), and                                                         , a corporation organized under the laws of                                    , with its executive offices located at                                     ("Agent"), as of                                    , 2006 ("Effective Date").

        Accuray manufactures and sells full-body radiosurgery systems using image-guided robotics, including the CyberKnife, which is FDA cleared in the United States to provide treatment planning and image-guided stereotactic radiosurgery and precision radiotherapy for lesions, tumors and conditions anywhere in the body where radiation treatment is indicated.

        In order to achieve its business objectives, Accuray relies on qualified distributors and sales agents to market and/or distribute its products and services in different territories.

        Accuray wishes to appoint Agent as its exclusive sales agent in the Territory, as defined below, subject to the terms and conditions of this Agreement and Agent wishes to accept such appointment.

1.     Definitions

1

2.     Duties of Accuray

2

3.     Duties of Agent

3

4

5

6

7

8

4.     Compensation and Payment

9

5.     Term and Termination

10

11

6.     Dispute Resolution

7.     Confidentiality.

12

8.     Indemnities.

13

9.     Liability.

14

10.   Miscellaneous Provisions


To Accuray:

   To Agent:
Accuray Incorporated
Attention: Chief Financial Officer
1310 Chesapeake Terrace
Sunnyvale, CA 94089		    

with cc to: General Counsel
 
 

15

SIGNATURE PAGE FOLLOWS

16

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the Effective Date by their duly authorized representatives.

AGENT:

   ACCURAY INCORPORATED:
By:
   By:
Print name:
   Print name: Robert E. McNamara
Title:
   Title: Sr. Vice President & Chief Financial Officer
Date:
   Date:

        The undersigned acknowledges that the terms and conditions of this Agreement meet the policies and procedures of Accuray.

Signed:
   Dated:
  General Counsel, Accuray Incorporated    

SIGNATURE PAGE TO INTERNATIONAL SALES AGENT AGREEMENT

17


EXHIBIT A

PRODUCTS AND SERVICES (INCLUDING CURRENT PRICING)

BASE CYBERKNIFE® G4 CONFIGURATION—ACCURAY LIST PRICE

QTY
   PRODUCT DESCRIPTION
   PART #'s
   PRICE IN
USD
 
   CYBERKNIFE® ROBOTIC RADIOSURGERY SYSTEM
   022986
   $4,100,000
 
   ROBOTIC TREATMENT DELIVERY SYSTEM
    
    
 
   Imaging System
   021942
   Incl.
1   In-floor Imaging Frame       Incl.
2   Amorphous Silicon Detectors (40 cm × 40 cm)       Incl.
2   X-Ray Generators       Incl.
2   X-Ray Sources       Incl.
1   Rack mounted Imaging System PC       Incl.
    Linear Accelerator   021938   Incl.
1   Compact 6MV Linac—600 MU/minute dose rate       Incl.
1   Secondary Collimator Kit—5 mm, 7.5 mm, 10 mm, 12.5 mm, 15 mm, 20 mm, 25 mm, 30 mm, 35 mm, 40mm, 50 mm, 60 mm, Blank, Laser Collimator       Incl.
1   Control Modulator Control Chassis       Incl.
1   Contact Detection System       Incl.
    Robotic Manipulator System   022866   Incl.
1   Robotic Manipulator KR240       Incl.
1   Manipulator Control Software       Incl.
1   In-Floor Manipulator Frame       Incl.
    AXUM™ Automated Patient Positioning System   020680   Incl.
1   Treatment Couch and Couchtop       Incl.
1   Treatment Couch Controller Software       Incl.
1   Treatment Couch Hand Pendant       Incl.
1   Treatment Couch Readout Display       Incl.
1   Treatment Couch Head Baseplate       Incl.
2   Med-Tec Indexed CT Overlay Kits (CT Overlay + Head Baseplate)       Incl.
    Sub-System Controls and Hardware Components   Various   Incl.
1   SGI Octane II Workstation (Treatment Delivery Computer)       Incl.
    21" Flat Panel Display       Incl.
1   Equipment Rack       Incl.
1   Operator Control Console       Incl.
1   Interface Control Chassis       Incl.
1   E-Stop Control Chassis       Incl.
1   Target Locating Subsystem Control Chassis       Incl.
1   Power Distribution Unit       Incl.
1   17" High resolution CRT Monitor       Incl.
1   Keyboard & Mouse       Incl.
             

18

1   Serial Port Server       Incl.
1   SMART (Uninterruptible Power Supply)       Incl.
1   2550n HP Color Laser Printer       Incl.
    Treatment Delivery System Software   Various   Incl.
1   Treatment Delivery Software       Incl.
1   Treatment Delivery Software License       Incl.
1   Cranial Treatment Skull Tracking License       Incl.
1   Extra-cranial Treatment with Fiducial Tracking License       Incl.
1   Patient Record Database       Incl.
    TREATMENT PLANNING SYSTEM        
    CyRIS™ MultiPlan—Treatment Planning System   021695   Incl.
1   DELL Precision Workstation (Desktop or Minitower—Model 370 or Higher)       Incl.
    Monitor:(1) 20" Flat Panel Monitor—Model: Samsung Syncmaster 213T Flat Panel        
    1 Year Manufacturer (DELL) Warranty        
1   Product Software        
    Microsoft Windows XP Professional SP1, NTFS w/Media        
    1 Perpetual License MultiPlan—Treatment Planning System        
1   Startup Wizard and Planning Templates        
    CLINICAL APPLICATION MODULES        
    Synchrony™ Respiratory Tracking System   023119   Incl.
1   Synchrony computer and Synchrony software       Incl.
1   Synchrony Camera Array       Incl.
1   Fiber Optic Interface Kit       Incl.
1   Synchrony Single-Patient Use Starter Kit (3 individual patient kits)       Incl.
    Each Single-Patient Use kits contains:        
    —Synchrony Tracking Vest (small, medium or large)        
    —Tracking Marker Assembly (3 Markers attached to cables and a connector)        
    —Kit Storage Pouch with IFU & Identification Card        
    Xsight™ Spine Tracking System   22078   Incl.
1   1 Perpetual License Fiducial-Less Spine Tracking Software        
1   1 Xsight QA Phantom   20855   Incl.
    ACCESSORIES & TRAINING        
    QA Tools   020580   Incl.
1   Anthropomorphic 6D Head Phantom       Incl.
1   Ball Cube       Incl.
             

19

1   Pre-notched Dosimetry Film (20 Pieces)       Incl.
1   Digital Level (1/10 degree)       Incl.
1   Ion Chamber Test Fixture       Incl.
1   ISO Post Assembly       Incl.
1   Alignment Ball       Incl.
1   Pointer Calibration & Front Pointer       Incl.
1   AQA Tools       Incl.
    Manuals   Various   Incl.
1   CyberKnife® System Manuals       Incl.
1   Robotic Manipulator System Manuals       Incl.
1   Chiller Manual       Incl.
1   X-ray Detector Manuals       Incl.
1   Accuray 6MEV Medical X-ray CD       Incl.
    Training       Incl.
1   Technical & Clinical—5 people       Incl.
1   Onsite Training for first patient treatment       Incl.
1   Basic Physics and QA       Incl.
NOTE   Products may not all be available in all countries, as product availability is subject to proper regulatory approval in each country. All prices shown in USD as specified.
 
   ADDITIONAL OPTIONS
   PART #
   PRICE IN
USD
 
   Synchrony™ Respiratory Tracking System Accessories
    
    
1   Synchrony Single-Patient Use Kit, 5 Pack, Small   20904   TBD
1   Synchrony Single-Patient Use Kit, 5 Pack, Medium   20905   TBD
1   Synchrony Single-Patient Use Kit, 5 Pack, Large   20906   TBD
1   Synchrony Single-Patient Use Kit, 10 Pack, Small   20883   TBD
1   Synchrony Single-Patient Use Kit, 10 Pack, Medium   20891   TBD
1   Synchrony Single-Patient Use Kit, 10 Pack, Large   20893   TBD
1   Synchrony Patient Kit, 10 Pack, Assorted   20894   TBD
    Includes 3 Small, 4 Medium & 3 Large Vests        
    SGI Computer Upgrade Components        
1   73 BG Hard Drive   20534   TBD
1   SGI 181 GB Hard Drive   20533   TBD
1   SGI Memory, 1GB (2 × 512Mb)   18672   TBD
1   Cable Kit Add Octane to Hub   18326   TBD
1   20' Flat Panel Monitor   20483   TBD
    CyRIS™ InView—Image Fusion and Contouring Station   22086   TBD
             

20

1   DELL Precision Workstation (Desktop or Minitower—Model 370 or Higher)       Incl.
    Monitor: (1) 21" Flat Panel Monitor—Model: Samsung Syncmaster 213T Flat Panel        
    1 Year Manufacturer (DELL) Warranty        
1   Product Software       Incl.
    Microsoft Windows XP Professional SP1, NTFS w/Media        
    Perpetual License InView—Image Fusion and Contouring Station       Incl.
1   Software Maintenance Fee       TBD
    Maintenance Fee of $TBD/yr/System will also be billed at the anniversary of installation and every year thereafter        
    CyRIS™ MultiPlan—Treatment Planning System   21695   TBD
1   DELL Precision Workstation (Desktop or Minitower—Model 370 or Higher)       Incl.
    Monitor:(1) 20" Flat Panel Monitor—Model: Samsung Syncmaster 213T Flat Panel        
    1 Year Manufacturer (DELL) Warranty        
1   Product Software       Incl.
    Microsoft Windows XP Professional SP1, NTFS w/Media        
    Perpetual License MultiPlan—Treatment Planning System       Incl.
1   Software Maintenance Fee       TBD
    Maintenance Fee of TBD/yr/System will also be billed at the anniversary
of installation and every year thereafter		    
    Additional Patient Setup Items        
1   Additional Indexed CT Overlay Kits (CT Overlay + Head Baseplate)       TBD
1   CT Top Kit—Siemens Volume   20775   TBD
1   CT Top Kit—Siemens Somatom   20776   TBD
1   CT Top Kit—GE LiteSpeed   20777   TBD
1   CT Top Kit—GE Discovery   20778   TBD
1   CT Top Kit—GE HiSpeed   20779   TBD
1   Immobilization Starter Kit   021037   TBD
    Body Treatment Fiducial Kit        
1   Fiducial Instrument Set   18985   TBD
1   Single Pk Fiducial   19005   TBD
1   5 Pk Fiducial   19006   TBD
1   10 Pk Fiducial   19007   TBD
    Additional QA Options        
1   Alignment jig 6D—20cm   17722   TBD
1   Head Phantom Kit (contains ball cube)   18161   TBD
1   GAF Chromic Film (20 pack)   17895   TBD
1   Film Ball cube (20 pack)   19366   TBD
             

21

1   Body Phantom Kit (contains film cube)   17801   TBD
1   Color Dye Diffuse Printer (Upgrade) (Not defined or Released)   TBD   TBD
1   AQA Tools   22349   TBD
    System Installation       TBD
1   Floor Frame Install        
1   System Qualification        
1   Installation Kit        
    Extended Parts Warranty (Parts Only, No Labor)       $175,000
    One Year—Replacement of Defective Parts        
    Emerald Agreement (Basic Service and Parts)       $275,000
    Requires Distributor to provide First-Line Field Service.        
    Includes service for up to 2 Multiplan and 3 InView systems        
    Ruby Agreement (Software Upgrades, Basic Service and Parts)       $380,000
    Requires Distributor to provide First-Line Field Service.        
    Includes service for up to 2 Multiplan and 3 InView systems        
    Diamond Agreement (Software & Hardware Upgrades, Basic Service & Parts)       $460,000
    Requires Distributor to provide First-Line Field Service.        
    Includes service for up to 2 Multiplan and 3 InView systems        
NOTE   Products may not all be available in all countries, as product availability is subject to proper regulatory approval in each country. All prices shown in USD as specified.    

22


BASE CYBERKNIFE® G3 CONFIGURATION—ACCURAY LIST PRICE

QTY
   PRODUCT DESCRIPTION
   PART #'s
   PRICE IN
USD
 
   CYBERKNIFE® ROBOTIC RADIOSURGERY SYSTEM
   21682
   $3,840,000
 
   ROBOTIC TREATMENT DELIVERY SYSTEM
    
    
 
   Imaging System
   20829
   Incl.
1   Imaging Stands (Low)       Incl.
2   Amorphous Silicon Detectors (20 cm × 20 cm)       Incl.
2   X-Ray Generators       Incl.
2   X-Ray Sources       Incl.
1   Rack mounted Target Locating PC       Incl.
    (Requires Octane Software—See CyberKnife Software System below)        
    Linear Accelerator   20404   Incl.
1   Compact 6MV Linac—400 MU/minute       Incl.
1   Secondary Collimator Kit—5 mm, 7.5 mm, 10 mm, 12.5 mm, 15 mm, 20 mm, 25 mm, 30 mm, 35 mm, 40mm, 50 mm, 60 mm, Blank, Laser Collimator       Incl.
1   Control Modulator Control Chassis       Incl.
    Robotic Manipulator System   20554   Incl.
1   Robot Manipulator KR210       Incl.
1   Robot Control Software       Incl.
    AXUM™ Automated Patient Positioning System   20680   Incl.
1   AXUM™ Treatment Couch        
1   AXUM™ Treatment Couchtop        
1   AXUM™ Controller Software        
1   AXUM™ Hand Pendant        
1   AXUM™ Readout Display        
1   AXUM™ Head Baseplate        
2   Med-Tec Indexed CT Overlay Kits (CT Overlay + Head Baseplate)        
    Sub-System Controls and Hardware Components   Various   Incl.
1   Equipment Rack       Incl.
1   Operator Control Console       Incl.
1   Interface Control Chassis       Incl.
1   E-Stop Control Chassis       Incl.
1   Target Locating Subsystem Control Chassis       Incl.
1   Power Distribution Unit       Incl.
1   17" High resolution CRT Monitor       Incl.
1   Keyboard & Mouse       Incl.
1   Serial Port Server       Incl.
1   SGI Octane II Workstation (Primary Treatment Delivery System and Treatment Planning System)       Incl.
    21" Flat Panel (Optional 21" CRT Monitor Available—see options section)        

23

1   SMART (Uninterruptible Power Supply)       Incl.
1   2550n HP Color Laser Printer       Incl.
    Treatment Delivery System Software   20389   Incl.
1   Octane Software       Incl.
1   Treatment Delivery Software License       Incl.
1   Cranial Treatment Skull Tracking License       Incl.
1   Extra-cranial Treatment with Fiducial Tracking License       Incl.
1   Patient Record Database       Incl.
    TREATMENT PLANNING SYSTEM        
    CyRIS™ MultiPlan™—Treatment Planning System   21695   Incl.
1   DELL Precision Workstation (Desktop or Minitower—Model 370 or Higher)       Incl.
    (1) 20" Flat Panel Monitor—Model: Samsung Syncmaster 213T Flat Panel        
    1 Year Manufacturer (DELL) Warranty        
1   Product Software       Incl.
    Microsoft Windows XP Professional SP1, NTFS w/Media        
1   Perpetual License MultiPlan—Treatment Planning System       Incl.
    CLINICAL APPLICATION MODULES        
    Synchrony™ Respiratory Tracking System   23119   Incl.
1   Synchrony computer and Synchrony software       Incl.
1   Synchrony Camera Array       Incl.
1   Fiber Optic Interface Kit       Incl.
1   Synchrony Single-Patient Use Starter Kit (3 individual patient kits)       Incl.
    Each Single-Patient Use kits contains:        
    —Synchrony Tracking Vest (small, medium or large)        
    —Tracking Marker Assembly (3 Markers attached to cables and a connector)        
    —Kit Storage Pouch with IFU & Identification Card        
1   Xsight™ Spine Tracking System   22078   Incl.
1   Perpetual License Fiducial-Less Spine Tracking Software       Incl.
1   Xsight QA Phantom   20855   Incl.
    ACCESSORIES & TRAINING        
    QA Tools   20580   Incl.
1   Anthro 6D Head Phantom   18880   Incl.
1   Ball Cube   19364   Incl.
1   Pre-notched Dosimetry Film (20 Pieces)   19366   Incl.
1   Digital Level (1/10 degree)   17832   Incl.
1   Ion Chamber Test Fixture   10181   Incl.
             

24

1   Assy ISO Post   18901   Incl.
1   Alignment Ball   16954   Incl.
1   Pointer Calibration & Front Pointer   010370 & 016997   Incl.
1   AQA Tools       Incl.
    Manuals and CD's   Various   Incl.
1   CyberKnife® System Manuals & CD's       Incl.
1   Kuka® Manipulator System Manuals       Incl.
1   Chiller Manual       Incl.
1   X-ray Detector Manuals       Incl.
1   Accuray 6MEV Medical X-ray CD       Incl.
    Training       Incl.
1   Technical & Clinical—5 people       Incl.
1   Onsite Training for first patient treatment       Incl.
1   Basic Physics and QA       Incl.
NOTE   Products may not all be available in all countries, as product availability is subject to proper regulatory approval in each country. All prices shown in USD as specified.    
 
   ADDITIONAL OPTIONS
   PART #
   PRICE IN
USD
 
   Synchrony™ Respiratory Tracking System Accessories
    
    
1   Synchrony Single-Patient Use Kit, 5 Pack, Small   20904   TBD
1   Synchrony Single-Patient Use Kit, 5 Pack, Medium   20905   TBD
1   Synchrony Single-Patient Use Kit, 5 Pack, Large   20906   TBD
1   Synchrony Single-Patient Use Kit, 10 Pack, Small   20883   TBD
1   Synchrony Single-Patient Use Kit, 10 Pack, Medium   20891   TBD
1   Synchrony Single-Patient Use Kit, 10 Pack, Large   20893   TBD
1   Synchrony Patient Kit, 10 Pack, Assorted   20894   TBD
    Includes 3 Small, 4 Medium & 3 Large Vests        
    Linear Accelerator Upgrade: 600 MU/minute   23120   TBD
    Imaging System Upgrade       TBD
1   Imaging System Upgrade: In Floor   23121   TBD
1   Imaging System Upgrade: On Floor   23122   TBD
    SGI Computer Upgrade Components        
1   73 BG Hard Drive   20534   TBD
1   SGI 181 GB Hard Drive   20533   TBD
1   SGI Memory, 1GB (2 × 512Mb)   18672   TBD
1   Cable Kit Add Octane to Hub   18326   TBD
             

25

1   20' Flat Panel Monitor   20483   TBD
    CyRIS™ InView—Image Fusion and Contouring Station   22086   TBD
1   DELL Precision Workstation (Desktop or Minitower—Model 370 or Higher)        
    Minimal Processing Capability: Intel Pentium IV, 3.2GHz, Intel EM64T, 1m L2 Cache, 800 FSB MHz CPU        
    Memory (RAM)—4GB, 533MHz, DDR2 ECC SDRAM 4X1GB        
    Hard Drive: Minimum Capacity: 160 GB SATA 7200 RPM        
    Video Card: nVidia, Quadro 3400, 256MB, Dual VGA or DVI or Better       Incl.
    Key Board: Entry Level Keyboard PS/2, No Hot Keys        
    CD-ROM: 48x CD-RW and 16 XD DVD+/-RW        
    Mouse: DELL USB 2-Button Optical Mouse with Scroll        
1   Monitor: (1) 21" Flat Panel Monitor—Model: Samsung Syncmaster 213T Flat Panel       Incl.
    1 Year Manufacturer (DELL) Warranty        
1   Product Software       Incl.
    Microsoft Windows XP Professional SP1, NTFS w/Media        
1   Perpetual License InView—Image Fusion and Contouring Station        
1   Software Maintenance Fee       TBD
    Maintenance Fee of TBD/yr/System will also be billed at the anniversary of installation and every year thereafter        
    CyRIS™ MultiPlan—Treatment Planning System   21695   TBD
1   DELL Precision Workstation (Desktop or Minitower—Model 370 or Higher)        
    Monitor:(1) 20" Flat Panel Monitor—Model: Samsung Syncmaster 213T Flat Panel       Incl.
    1 Year Manufacturer (DELL) Warranty        
1   Product Software       Incl.
    Microsoft Windows XP Professional SP1, NTFS w/Media        
    Perpetual License MultiPlan—Treatment Planning System       Incl.
1   Software Maintenance Fee       TBD
    Maintenance Fee of TBD/yr/System will also be billed at the anniversary of installation and every year thereafter        
    Additional Patient Setup Items        
1   Additional Indexed CT Overlay Kits (CT Overlay + Head Baseplate)       TBD
1   CT Top Kit—Siemens Volume   20775   TBD
1   CT Top Kit—Siemens Somatom   20776   TBD
1   CT Top Kit—GE LiteSpeed   20777   TBD
1   CT Top Kit—GE Discovery   20778   TBD
1   CT Top Kit—GE HiSpeed   20779   TBD
1   Immobilization Starter Kit   021037   TBD
             

26

    Body Treatment Fiducial Kit        
1   Fiducial Instrument Set   18985   TBD
1   Single Pk Fiducial   19005   TBD
1   5 Pk Fiducial   19006   TBD
1   10 Pk Fiducial   19007   TBD
    Additional QA Options        
1   Alignment jig 6D—20cm   17722   TBD
1   Head Phantom Kit (contains ball cube)   18161   TBD
1   GAF Chromic Film (20 pack)   17895   TBD
1   Film Ball cube (20 pack)   19366   TBD
1   Body Phantom Kit (contains film cube)   17801   TBD
1   Color Dye Diffuse Printer (Upgrade) (Not defined or Released)   TBD   TBD
    System Installation       TBD
1   Floor Frame Install        
1   System Qualification        
1   Installation Kit        
    Extended Parts Warranty (Parts Only, No Labor)       $175,000
    One Year—Replacement of Defective Parts        
    Emerald Agreement (Basic Service and Parts)       $275,000
    Requires Distributor to provide First-Line Field Service.        
    Includes service for up to 2 Multiplan and 3 InView systems        
    Ruby Agreement (Software Upgrades, Basic Service and Parts)       $380,000
    Requires Distributor to provide First-Line Field Service.        
    Includes service for up to 2 Multiplan and 3 InView systems        
    Diamond Agreement (Software & Hardware Upgrades, Basic Service & Parts)       $460,000
    Requires Distributor to provide First-Line Field Service.        
    Includes service for up to 2 Multiplan and 3 InView systems        
NOTE   Products may not all be available in all countries, as product availability is subject to proper regulatory approval in each country. All prices shown in USD as specified.    

27


EXHIBIT B

PRODUCT AND SERVICE MINIMUM VOLUMES

        During the initial term of this Agreement, Agent agrees to sell a minimum number of Systems per year as follows:

"Sale" shall mean that Accuray receives and accepts (such acceptance not to be unreasonably withheld) a signed Purchase Contract from a Customer.

28


EXHIBIT C

SALES AGENT COMMISSION

CyberKnife System Commission

CyberKnife G3 System
Purchase Price
   Commission %
   Commission $$
   Accuray $$
TBD   TBD   TBD   TBD
TBD   TBD   TBD   TBD
TBD   TBD   TBD   TBD
TBD   TBD   TBD   TBD
TBD   TBD   TBD   TBD
TBD   TBD   TBD   TBD
TBD   TBD   TBD   TBD
TBD   TBD   TBD   TBD
TBD   TBD   TBD   TBD
TBD   TBD   TBD   TBD
TBD   TBD   TBD   TBD
CyberKnife G4 System
Purchase Price
   Commission %
   Commission $$
   Accuray $$
TBD   TBD   TBD   TBD
TBD   TBD   TBD   TBD
TBD   TBD   TBD   TBD
TBD   TBD   TBD   TBD
TBD   TBD   TBD   TBD
TBD   TBD   TBD   TBD
TBD   TBD   TBD   TBD
TBD   TBD   TBD   TBD
TBD   TBD   TBD   TBD
TBD   TBD   TBD   TBD


Service Agreement Commission

Service Agreement Commission
Service Agreement
   Accuray List Price
   Agent Minimum Price
   Commission %
Diamond Elite Service   $ 460,000.00   TBD   TBD
Ruby Elite Service   $ 380,000.00   TBD   TBD
Emerald Elite Service   $ 375,000.00   TBD   TBD
Extended Parts Warranty   $ 175,000.00   TBD   TBD
Additional Upgrade Agreement   $ 200,000.00   TBD   TBD

29


EXHIBIT D

TRAINING

        Training is included with the purchase of a CyberKnife to the extent listed in Exhibit A. Accuray will be responsible for the travel and accommodation expenses of its personnel. Agent will be responsible for the travel and accommodation expenses of any Agent personnel.

        Additional training maybe purchased from Accuray according to the following price list, which may be updated from time to time. Customers should contract directly with Accuray for additional training services, and no Purchase Request is required.

Additional Training
#
   Course
   Duration
   Price †
1   CyberKnife Product Training—Surgeon   1.5 Days   TBD
1   CyberKnife Product Training—RTT   1.5 Days   TBD
1   CyberKnife Product Training—Radiation Oncologist   2.5 Days   TBD
1   CyberKnife Product Training—Physicist   4.5 Days   TBD
†
Payable to the Accuray Training Department in advance. Training will be held at Accuray Corporate Headquarters or at a designated training center. Travel and accommodation not included.

30


EXHIBIT E

ACCURAY INTERNATIONAL SERVICE AGREEMENTS TERMS SUMMARY ±

 
   Terms
   Accuray List Price U$D
   Agent Minimum Price U$D
Extended Parts Warranty   • Term: 1 year (after Standard Warranty Year), Optional 2nd
• Replacement Parts only
• No Updates or Bug Fixes
• No Upgrades
• No Uptime Guarantee
• No Labor		   $175,000 / year   TBD
Emerald Elite   • Term: 4 years (incl. Standard Warranty Year), Optional 5th
• All Parts included
• Updates & Bug Fixes only
• No Upgrades
• Service: 8am—9pm local time
• First Line Field Service—Agent, 1 hour Response Time
• Escalated Service—Accuray, 24 hour Response Time
• Uptime: 95%		   $275,000 / year
$72,000 / quarter
$25,000 / month		   TBD
Ruby
Elite		   • Term: 4 years (incl. Standard Warranty Year), Optional 5th
• All Parts included
• Updates & Bug Fixes
• Upgrades (2 SW/year)—when and if available
• Service: 8am—9pm local time
• First Line Field Service—Agent, 1 hour Response Time
• Escalated Service—Accuray, 24 hour Response Time
• Uptime: 95%		   $380,000 / year
$98,000 / quarter
$34,000 / month		   TBD
             

31

Diamond Elite   • Term: 4 years (incl. Standard Warranty Year), Optional 5th
• All Parts included
• Upgrades (2 HW or SW/year)—when and if available
• Service: 8am—9pm local time
• First Line Field Service—Agent, 1 hour Response Time
• Escalated Service—Accuray, 24 hour Response Time
• Uptime: 95%		   $460,000 / year
$120,000 / quarter
$41,000 / month		   TBD
Additional Upgrade Agreement   • Term: 1, 2, 3 or 4 years
• Upgrades (2/year)—when and if available)
• Available only to customers with currently effective,
paid-up Diamond Elite Service Agreement		   $200,000 / year   TBD
±
Int'l Agreements are not cancelable.

32


SAMPLE SERVICE AGREEMENTS

        The following are samples of the Service Agreements with U.S. Dollar pricing. The sample Service Agreements are by way of example only, and, subject to Section 2.4 (Product and Service Pricing), the specific terms of the agreements are subject to change without notice.

33


CYBERKNIFE® INTERNATIONAL DIAMOND ELITE SERVICE AGREEMENT

1.
Scope of Service.    This Diamond Elite Service Agreement ("Agreement") is made by and between ACCURAY INCORPORATED ("Accuray"), a California corporation, located at 1310 Chesapeake Terrace, Sunnyvale, CA 94089, and                                    ("Customer"), located at                                     , for Accuray to provide planned maintenance service when scheduled by Accuray and corrective maintenance service when requested by Customer to maintain the CyberKnife System installed at Customer's site at                                    ("System") so that it performs substantially in accordance with the Specifications (User Manuals and Reference Guides) defined for the System revision as installed and/or upgraded.

1.1.
Effective Date.    This Agreement shall be effective as of demonstration of acceptance testing by Accuray as described in the CyberKnife Quotation and Purchase Agreement dated                                    , 2006 and signed by the parties, or the expiration of any prior service or warranty agreement, if applicable.

1.2.
Definitions:

1.2.1.
Bug Fix    means an error correction or minor change in the existing software and/or hardware configuration that is required in order to enable the existing software and/or hardware configuration to perform to the existing functional specification(s).

1.2.2.
Update    means a release of the software or a change to the existing hardware containing substantially only error corrections, minor new features, functionality and/or performance improvements, but that would not be required for the existing software and/or hardware configuration to perform to the existing functional specification(s) of that particular product. Such Update would not necessarily replace or extend the life of the existing software and/or hardware configuration of the product. For example, an Update of software would be indicated where the version number is changed by incrementing the numeric digits to the right of the decimal point, e.g., versions 1.1, 1.2, 1.3, and 1.4 would each be Updates of the software.

1.2.3.
Upgrade/Enhancement    means a release of the software or a change to the existing hardware containing major new features, functionality and/or performance improvements that would enable the existing software and/or hardware configuration to perform to the level of the next version of the software and/or hardware configuration and designed to replace the older software and/or hardware version of the same product and/or extend the useful life of that product. For example, an Upgrade/Enhancement of software would be indicated where the version number is changed by incrementing the numeric digits to the left of the decimal point, e.g., versions 1.0, 2.0, 3.0, and 4.0 would each be Upgrades/Enhancements of the software.

1.2.4.
New Version/New Product    means a release of the software or a change to the hardware that may or may not work with the existing software and/or hardware configuration, but that in its totality requires, in Accuray's sole opinion, enough change to the software and/or hardware configuration to be considered a New Version or New Product.

1.2.5.
Exclusions    Upgrades/Enhancements that have a list price of greater than $200,000 per Upgrade/Enhancement are specifically excluded from this Agreement. However, Accuray may at its discretion, offer Upgrades/Enhancements that have a

34

2.
Service Period.

2.1.
The Agreement Term shall be for an initial period of four (4) years (years 1, 2, 3, & 4) from the Effective Date of this Agreement, including the warranty year, with an optional fifth year. There is no payment required under this Agreement in the first year ("Year 1" or the "Warranty Year"). Customer may elect to receive an additional optional fifth year (the "Optional Year 5") on terms that are defined below (Section 3.4). Billing will commence on the day following the anniversary of the Effective Date of this Agreement.

2.2.
The Agreement Price shall be one of the following, at Customer's option (indicate preferred option by checking a box, if no selection is made Customer will be billed on an annual basis). The Agreement Price shall cover the Base CyberKnife System, up to two (2) CyRIS Multiplan Systems (including the CyRIS MultiPlan System in the Base CyberKnife System), and up to three (3) CyRIS InView Workstations. If Customer has more than two (2) CyRIS MultiPlan Systems or three (3) CyRIS InView Workstations installed, then an additional charge of $18,750.00 per year per MultiPlan and $6,750.00 per year per InView, as applicable, will be added by Accuray to the Agreement Price set forth below.

o
ANNUAL: $460,000 per year, paid yearly in advance, for years 2, 3, 4 and Optional Year 5.

o
QUARTERLY: $120,000 per quarter, paid at the beginning of each quarter, for years 2, 3, 4 and Optional Year 5.

o
MONTHLY: $41,000 per month, paid at the beginning of each month, for years 2, 3, 4 and Optional Year 5.

3.
Product Upgrades/Enhancements

3.1.
This Agreement is available only for equipment that was purchased directly from Accuray, installed by Accuray engineers and has not been moved from its original installation location or disconnected from its original power supply without written permission or direction from Accuray. This Agreement must immediately commence at the expiration of the factory warranty period or prior service agreement. In the event of lapse of service, Customer shall have the right to reinstate such service by payment of the current service fee for the then-current service period in addition to the reasonable costs for Accuray to inspect, repair, and return the System to the state at which the System would have been had a service agreement been in force continuously since the expiration of the System factory warranty.

3.2.
Under this Agreement, Customer may receive Upgrades/Enhancements, when and if available in years 2, 3, and 4, up to two (2) Upgrades/Enhancements per year. Customer acknowledges and agrees that this in no way obligates Accuray to provide a minimum number of Upgrades/Enhancements and that there may be some years in which no Upgrades/Enhancements will be offered; however, in contrast, there may be years in which

35

4.
Software Maintenance (Bug Fixes and Updates)

4.1.
For the duration of the Agreement Term, Accuray will provide software Updates and Bug Fixes for software that is included as a part of the CyberKnife System. These Updates and Bug Fixes may be transmitted electronically to Customer for subsequent installation by Customer technicians. Corrections of significant complexity, however, may be installed by Accuray service engineers. Software maintenance will be included only for those product features that were originally purchased with the System or subsequently purchased separately by Customer from Accuray or taken under this Agreement as a System Upgrade/Enhancement.

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5.
System Quality Assurance Testing

5.1.
The maintenance and support services provided by Accuray under this Agreement do not include any System Quality Assurance Testing ("QA"). System commissioning and QA are the sole responsibility of Customer, and Customer is advised to perform QA on a regular and ongoing basis. In addition, Customer is required to maintain up-to-date QA logs. If Customer fails to perform the appropriate QA of the System, and to record such QA in the appropriate logs, Accuray, upon giving Notice to Customer in accordance with Section 16 of this Agreement, reserves the right to terminate this Agreement.

5.2.
Prior to performing any scheduled service or preventive maintenance on the System, Accuray will review Customer's QA logs, and if such logs are not up-to-date, Accuray may refuse to service the System. In the event that the requested service is necessary to bring the System to a point where QA can be performed, Accuray will proceed with the service only after Customer signs a written acknowledgement that QA is Customer's sole responsibility and that appropriate QA will be performed prior to conducting any patient treatments.

6.
Service Coverage Period

6.1.
The Service Coverage Period will be the hours of 8:00 AM to 9:00 PM local (to Customer's installation location) time Monday through Saturday (excluding local legal holidays). Customer has the option to request service during non-normal hours, in which case Customer shall pay the overtime premium portion of the non-normal hours worked. (Non-normal hourly rate minus normal hourly rate.) Accuray shall provide Customer with contact points to request service on a 24-hours-a-day, 7-days-a-week ("24/7") basis. Accuray, directly or remotely as the situation requires, either with its own personnel or through contractors, shall initially respond within one (1) hour of receipt of a call for service. The initial response shall include telephone support, including (as applicable) consultations, diagnostic assistance and advice on the use and maintenance of the System. In the event that the service issue cannot be resolved by telephone or other remote response, then Accuray will respond on-site. On-site response times will vary depending upon the level of service required.

6.2.
Customer will promptly notify Accuray, by calling Accuray's Customer Support Line at 1-408-716-4700, of any problem or defect with the System and, at no charge, provide Accuray service engineers access to the System and use of adequate facilities and equipment at mutually agreeable times as necessary for Accuray to perform the service. Customer shall have as many service calls as are reasonably needed to maintain the System so that it performs substantially in accordance with the Specifications during the period of this Agreement.

6.3.
Use of the facility CT scanner may be required for testing purposes and shall be scheduled to allow as expeditious completion of service as is reasonably possible. Facility staff will operate the CT scanner. If service is unreasonably delayed and Accuray service engineers are required to remain on site, Accuray may choose to charge the current hourly service rates for the duration of the delay period.

37

7.
Uptime

7.1.
Uptime/Downtime.    Uptime shall mean any time that the System is not down ("Uptime"). A down System means that a patient cannot be treated due to an actual malfunction of the System and that the System is immediately available for an Accuray service engineer to work on it ("Downtime").

7.2.
Guarantee.    Accuray will guarantee that the System shall have an Uptime percentage of at least 95% of normal treatment hours on an annual basis during the Term of this Agreement. Normal treatment hours shall be from 8:00 AM to 5:00 PM local time Monday through Friday (excluding legal holidays). The first 12-month period will start as of the Effective Date of this Agreement.

7.3.
Calculation.    Downtime will be calculated from the time a down System call is received by Accuray to the time of repair, counting normal treatment hours. The System will be calculated as up when the System repair has been completed and the System is available for treatment during normal treatment hours, whether or not patients are scheduled for treatment. Scheduled preventive maintenance, System upgrades, and time that the System is unavailable as a result of something beyond Accuray's control, including without limitation (i) Customer's use of the System for purposes other than its intended and authorized purposes, (ii) the negligence of Customer, (iii) the failure of Customer to operate the System in accordance with the User Manuals, (iv) use by untrained operators, (v) e-Stops, power outages or the like or (vi) the negligence of any party other than Accuray, will be calculated as Uptime.

7.4.
Reports.    Customer is responsible for recording and reporting Downtime to Accuray. Reports for the previous month's Downtime shall be provided to Accuray on or before the 15th day of each month.

7.5.
Failure to Meet Guarantee.    For each year of the term of this Agreement, if Accuray achieves a 12-month uptime average of less than 95%, the Agreement period will be extended one (1) week for every percentage point or fraction thereof below 95%.

8.
Replacement Parts

8.1.
Accuray shall make a commercially reasonable effort to supply at the time of need or stock with Accuray's regional service engineers all tools, equipment, replacement parts and Consumables as would reasonably be required by Accuray to perform the required repairs and return the System to good working order. Accuray shall make a commercially reasonable effort to maintain at its factory or service center(s) a stock of spare parts, including, in particular, long-procurement-lead-time parts.

8.2.
Replacement parts used under this Agreement may be either new manufacture or factory refurbished at Accuray's choice. All replacement parts and assemblies provided will be manufactured in accordance with Accuray's quality system, and any applicable laws and

38

9.
Exceptions

9.1.
All obligations of Accuray under this Agreement shall be suspended and/or cease in the event of:

9.1.1.
Damage from fire, accident, abuse, floods, lightning, natural disasters or other calamities commonly defined as "Acts of God".

9.1.2.
The intentional abuse of the System or negligence by Customer.

9.1.3.
System hardware or software alterations not authorized by Accuray including any move of the System from its installation site (other than by or at the express written direction of Accuray).

9.1.4.
Use of the System for other than its intended and authorized purposes, or in a manner not consistent with Accuray's User Manuals, including maintenance of the necessary operating environment and line current conditions, and the failure of Customer to cure such matter within thirty (30) days of actual written notice thereof from Accuray.

9.1.5.
Failure to make payments in accordance with the payment schedule set forth above in Section 2.2.

9.2.
If corrective action or adjustment of the System is performed by Customer's staff at the direction of Accuray, such action or adjustment shall not reduce Accuray's responsibility under this Agreement or liability for the performance of the System.

10.
No Cancellation.    Neither party shall have the right to cancel this Agreement, except as set forth below in Section 11 "Breach."

11.
Breach.    Either party reserves the right to cancel this Agreement by written notice upon the breach of the other. An event of breach may include, but is not limited to, failure to make payment due under this Agreement, failure to provide access as required to execute the services contemplated by this Agreement, failure to perform and log QA, or the filing of notice under bankruptcy or equivalent laws. If the breaching party is unable or unwilling to cure or make a good faith effort to cure such breach within thirty (30) days of actual written notice the other party shall be relieved of all obligations under this Agreement and may terminate. Termination shall not be the terminating party's exclusive remedy, and the terminating party shall retain all other available legal and equitable remedies.

12.
Limitation of Liability and Warranty

12.1.
If it is determined in accordance with applicable law that any fault or neglect of either party, its employees or agents, substantially contributes to damage or injury to third parties, such party shall be responsible in such proportion as reflects its relative fault therefore, and shall hold the other party harmless from any liability or damages arising out of such fault or neglect. Accuray's liability arising under this Agreement shall be limited to an amount not to exceed the payment(s) received by Accuray for the then current Agreement year. In addition, Accuray shall not be liable to Customer in the event that Customer's or any third party's acts or omissions contributed in any way to any loss it sustained or the loss or damage is due to an act of God or other causes beyond its reasonable control. IN NO

39

13.
Patient Information.    In performing the services hereunder, Accuray may receive from Customer, or create or receive on behalf of Customer, patient healthcare, billing, or other confidential patient information ("Patient Information"). Patient Information, as the term is used herein, includes all "Protected Health Information," as that term is defined in 45 CFR 164.501. Accuray shall use Patient Information only as necessary to provide the services to Customer as set forth in this Agreement. Accuray shall comply with all laws, rules and regulations relating to the confidentiality of Patient Information, including the applicable provisions of the privacy regulations promulgated pursuant to Health Insurance Portability and Accountability Act of 1996 ("HIPAA").

14.
Assignment.    Neither party may assign this Agreement without the other party's prior written consent, except that Accuray may assign this Agreement, without Customer's consent, to an affiliate or to a successor or acquirer, as the case may be, in connection with a merger or acquisition, or the sale of all or substantially all of Accuray's assets or the sale of that portion of Accuray's business to which this Agreement relates. Subject to the foregoing, this Agreement will bind and inure to the benefit of the parties' permitted successors and assigns.

15.
Disputes and Governing Laws

15.1.
In the event that a dispute arises between Accuray and Customer with respect to any subject matter governed by this Agreement, such dispute shall be settled as follows. If either party shall have any dispute with respect to this Agreement, that party shall provide written notification to the other party in the form of a claim identifying the issue or amount disputed including a detailed reason for the claim. The party against whom the claim is made shall respond in writing to the claim within 30 days from the date of receipt of the claim document. The party filing the claim shall have an additional 30 days after the receipt of the response to either accept the resolution offered by the other party or escalate the matter. If the dispute is not resolved, either party may notify the other in writing of their desire to elevate the claim to the President of Accuray and the Chief Executive Officer of Customer. Each shall negotiate in good faith and use his or her best efforts to resolve such dispute or claim. The location, format, frequency, duration and conclusion of these elevated discussions shall be left to the discretion of the representatives involved. If the negotiations do not lead to resolution of the underlying dispute or claim to the satisfaction of either party involved, then either party may pursue resolution by the courts as follows.

15.2.
All disputes arising out of or relating to this Agreement not otherwise resolved between Accuray and Customer shall be resolved in a court of competent jurisdiction, in Santa Clara County, State of California, and in no other place, provided that, in Accuray's sole discretion, such action may be heard in some other place designated by Accuray (if necessary to acquire jurisdiction over third persons), so that the dispute can be resolved in one action. Customer hereby consents to the jurisdiction of such court or courts and agrees to appear in any such action upon written notice thereof. No action, regardless of form, arising out of, or in any way connected with this Agreement may be brought by Customer more than one (1) year after the cause of action has occurred.

40

16.
Notices.    All notices required or permitted under this Agreement will be in writing and delivered in person, by overnight delivery service, or by registered or certified mail, postage prepaid with return receipt requested, and in each instance will be deemed given upon receipt. All communications will be sent to the addresses set forth below or to such other address as may be specified by either party in writing to the other party in accordance with this Section.

To Accuray:

   To Customer:
Accuray Incorporated
Attention: Chief Financial Officer
1310 Chesapeake Terrace
Sunnyvale, CA 94089		    

with cc to: General Counsel
 
 
17.
Waiver.    The waiver of any breach or default of any provision of this Agreement will not constitute a waiver of any other right hereunder or of any subsequent breach or default.

18.
Severability.    If any provision of this Agreement is held invalid or unenforceable by a court of competent jurisdiction, the remaining provisions of the Agreement will remain in full force and effect, and the provision affected will be construed so as to be enforceable to the maximum extent permissible by law.

19.
Force Majeure.    Neither party will be responsible for any failure or delay in its performance under this Agreement (except for the payment of money) due to causes beyond its reasonable control, including, but not limited to, labor disputes, strike, lockout, riot, war, fire, act of God, accident, failure or breakdown of components necessary to order completion; subcontractor, supplier or customer caused delays; inability to obtain or substantial rises in the prices of labor, materials or manufacturing facilities; curtailment of or failure to obtain sufficient electrical or other energy, raw materials or supplies; or compliance with any law, regulation or order, whether valid or invalid.

20.
Amendments.    Any amendment or modification of this Agreement must be made in writing and signed by duly authorized representatives of each party. For Accuray, a duly authorized representative must be any of the following: CEO, CFO, or General Counsel.

21.
Entire Agreement.    This Agreement contains the entire Agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior understandings, representations and warranties, written and oral. If any part of the terms and conditions stated herein are held void or unenforceable, such part will be treated as severable, leaving valid the remainder of the terms and conditions.

22.
Counterparts.    This Agreement may be executed in counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.


SIGNATURE PAGE FOLLOWS

41

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the Effective Date by their duly authorized representatives. The parties acknowledge and agree that this Agreement does not become effective until it has been signed by all parties indicated below.

ACCURAY INCORPORATED

   CUSTOMER
By:
   By:
Print Name: Doug Keare   Print Name:
Title: Vice President of Customer Service   Title:
  and Technical Support    
Date:
   Date:

 
 
PLEASE MAKE CERTAIN THAT YOU HAVE SELECTED A PAYMENT OPTION IN ACCORDANCE WITH SECTION 2.2, ABOVE.

The undersigned acknowledges that the terms and conditions of this Agreement meet the policies and procedures of Accuray.

Signed:
   Dated:
  General Counsel, Accuray Inc.    

SIGNATURE PAGE TO INTERNATIONAL DIAMOND AGREEMENT

42


ACCURAY CYBERKNIFE® INTERNATIONAL RUBY ELITE SERVICE AGREEMENT

1.
Scope of Service.    This Ruby Elite Service Agreement ("Agreement") is made by and between ACCURAY INCORPORATED ("Accuray"), a California corporation, located at 1310 Chesapeake Terrace, Sunnyvale, CA 94089, and                                      ("Customer"), located at                                     , for Accuray to provide planned maintenance service when scheduled by Accuray and corrective maintenance service when requested by Customer to maintain the CyberKnife System installed at Customer's site at                                      ("System") so that it performs substantially in accordance with the Specifications (User Manuals and Reference Guides) defined for the System revision as installed and/or upgraded.

1.1.
Effective Date.    This Agreement shall be effective as of demonstration of acceptance testing by Accuray as described in the CyberKnife Quotation and Purchase Agreement dated                                    , 2006 and signed by the parties, or the expiration of any prior service or warranty agreement, if applicable.

1.2.
Definitions:

1.2.1.
Bug Fix means an error correction or minor change in the existing software and/or hardware configuration that is required in order to enable the existing software and/or hardware configuration to perform to the existing functional specification(s).

1.2.2.
Update means a release of the software or a change to the existing hardware containing substantially only error corrections, minor new features, functionality and/or performance improvements, but that would not be required for the existing software and/or hardware configuration to perform to the existing functional specification(s) of that particular product. Such Update would not necessarily replace or extend the life of the existing software and/or hardware configuration of the product. For example, an Update of software would be indicated where the version number is changed by incrementing the numeric digits to the right of the decimal point, e.g., versions 1.1, 1.2, 1.3, and 1.4 would each be Updates of the software.

1.2.3.
Upgrade/Enhancement means a release of the software containing major new features, functionality and/or performance improvements that would enable the existing software configuration to perform to the level of the next version of the software configuration and designed to replace the older software version of the same product and/or extend the useful life of that product. For example, an Upgrade/Enhancement of software would be indicated where the version number is changed by incrementing the numeric digits to the left of the decimal point, e.g., versions 1.0, 2.0, 3.0, and 4.0 would each be Upgrades/Enhancements of the software.

1.2.4.
New Version/New Product means a release of the software or a change to the hardware that may or may not work with the existing software and/or hardware configuration, but that in its totality requires, in Accuray's sole opinion, enough change to the software and/or hardware configuration to be considered a New Version or New Product.

1.2.5.
Exclusions Upgrades/Enhancements that have a list price of greater than $200,000 per Upgrade/Enhancement are specifically excluded from this Agreement. However, Accuray may at its discretion, offer Upgrades/Enhancements that have a higher list price, as more than a single Upgrade/Enhancement to Customers under this Agreement. If Accuray offers Upgrades/Enhancements that have a higher list price as more than a single Upgrade/Enhancement then Accuray will make such offer to all of its customers. Examples of such components that would likely fall into this category are: the robot, and the patient couch. New Versions and New Products are also specifically excluded.

43

2.
Service Period.

2.1.
The Agreement Term shall be for an initial period of four (4) years (years 1, 2, 3, & 4) from the Effective Date of this Agreement, including the warranty year, with an optional fifth year. There is no payment required under this Agreement in the first year ("Year 1" or the "Warranty Year"). Customer may elect to receive an additional optional fifth year (the "Optional Year 5") on terms that are defined below (Section 3.4). Billing will commence on the day following the anniversary of the Effective Date of this Agreement.

2.2.
The Agreement Price shall be one of the following, at Customer's option (indicate preferred option by checking a box, if no selection is made Customer will be billed on an annual basis). The Agreement Price shall cover the Base CyberKnife System, up to two (2) CyRIS Multiplan Systems (including the CyRIS MultiPlan System in the Base CyberKnife System), and up to three (3) CyRIS InView Workstations. If Customer has more than two (2) CyRIS MultiPlan Systems or three (3) CyRIS InView Workstations installed, then an additional charge of $18,750.00 per year per MultiPlan and $6,750.00 per year per InView, as applicable, will be added by Accuray to the Agreement Price set forth below.

o
ANNUAL: $380,000 per year, paid yearly in advance, for years 2, 3, 4 and Optional Year 5.

o
QUARTERLY: $98,000 per quarter, paid at the beginning of each quarter, for years 2, 3, 4 and Optional Year 5.

o
MONTHLY: $34,000 per month, paid at the beginning of each month, for years 2, 3, 4 and Optional Year 5.

3.
Product Upgrades/Enhancements

3.1.
This Agreement is available only for equipment that was purchased directly from Accuray, installed by Accuray engineers and has not been moved from its original installation location or disconnected from its original power supply without written permission or direction from Accuray. This Agreement must immediately commence at the expiration of the factory warranty period or prior service agreement. In the event of lapse of service, Customer shall have the right to reinstate such service by payment of the current service fee for the then-current service period in addition to the reasonable costs for Accuray to inspect, repair, and return the System to the state at which the System would have been had a service agreement been in force continuously since the expiration of the System factory warranty.

44

4.
Software Maintenance (Bug Fixes and Updates)

4.1.
For the duration of the Agreement Term, Accuray will provide software Updates and Bug Fixes for software that is included as a part of the CyberKnife System. These Updates and Bug Fixes may be transmitted electronically to Customer for subsequent installation by Customer technicians. Corrections of significant complexity, however, may be installed by Accuray service engineers. Software maintenance will be included only for those product

45

5.
System Quality Assurance Testing

5.1.
The maintenance and support services provided by Accuray under this Agreement do not include any System Quality Assurance Testing ("QA"). System commissioning and QA are the sole responsibility of Customer, and Customer is advised to perform QA on a regular and ongoing basis. In addition, Customer is required to maintain up-to-date QA logs. If Customer fails to perform the appropriate QA of the System, and to record such QA in the appropriate logs, Accuray, upon giving Notice to Customer in accordance with Section 16 of this Agreement, reserves the right to terminate this Agreement.

5.2.
Prior to performing any scheduled service or preventive maintenance on the System, Accuray will review Customer's QA logs, and if such logs are not up-to-date, Accuray may refuse to service the System. In the event that the requested service is necessary to bring the System to a point where QA can be performed, Accuray will proceed with the service only after Customer signs a written acknowledgement that QA is Customer's sole responsibility and that appropriate QA will be performed prior to conducting any patient treatments.

6.
Service Coverage Period

6.1.
The Service Coverage Period will be the hours of 8:00 AM to 9:00 PM local (to Customer's installation location) time Monday through Saturday (excluding local legal holidays). Customer has the option to request service during non-normal hours, in which case Customer shall pay the overtime premium portion of the non-normal hours worked. (Non-normal hourly rate minus normal hourly rate.) Accuray shall provide Customer with contact points to request service on a 24-hours-a-day, 7-days-a-week ("24/7") basis. Accuray, directly or remotely as the situation requires, either with its own personnel or through contractors, shall initially respond within one (1) hour of receipt of a call for service. The initial response shall include telephone support, including (as applicable) consultations, diagnostic assistance and advice on the use and maintenance of the System. In the event that the service issue cannot be resolved by telephone or other remote response, then Accuray will respond on-site. On-site response times will vary depending upon the level of service required.

6.2.
Customer will promptly notify Accuray, by calling Accuray's Customer Support Line at 1-408-716-4700, of any problem or defect with the System and, at no charge, provide Accuray service engineers access to the System and use of adequate facilities and equipment at mutually agreeable times as necessary for Accuray to perform the service. Customer shall have as many service calls as are reasonably needed to maintain the System so that it performs substantially in accordance with the Specifications during the period of this Agreement.

6.3.
Use of the facility CT scanner may be required for testing purposes and shall be scheduled to allow as expeditious completion of service as is reasonably possible. Facility staff will operate the CT scanner. If service is unreasonably delayed and Accuray service engineers are required to remain on site, Accuray may choose to charge the current hourly service rates for the duration of the delay period.

46

7.
Uptime

7.6.
Uptime/Downtime.    Uptime shall mean any time that the System is not down ("Uptime"). A down System means that a patient cannot be treated due to an actual malfunction of the System and that the System is immediately available for an Accuray service engineer to work on it ("Downtime").

7.7.
Guarantee.    Accuray will guarantee that the System shall have an Uptime percentage of at least 95% of normal treatment hours on an annual basis during the Term of this Agreement. Normal treatment hours shall be from 8:00 AM to 5:00 PM local time Monday through Friday (excluding legal holidays). The first 12-month period will start as of the Effective Date of this Agreement.

7.8.
Calculation.    Downtime will be calculated from the time a down System call is received by Accuray to the time of repair, counting normal treatment hours. The System will be calculated as up when the System repair has been completed and the System is available for treatment during normal treatment hours, whether or not patients are scheduled for treatment. Scheduled preventive maintenance, System upgrades, and time that the System is unavailable as a result of something beyond Accuray's control, including without limitation (i) Customer's use of the System for purposes other than its intended and authorized purposes, (ii) the negligence of Customer, (iii) the failure of Customer to operate the System in accordance with the User Manuals, (iv) use by untrained operators, (v) e-Stops, power outages or the like or (vi) the negligence of any party other than Accuray, will be calculated as Uptime.

7.9.
Reports.    Customer is responsible for recording and reporting Downtime to Accuray. Reports for the previous month's Downtime shall be provided to Accuray on or before the 15th day of each month.

7.10.
Failure to Meet Guarantee.    For each year of the term of this Agreement, if Accuray achieves a 12-month uptime average of less than 95%, the Agreement period will be extended one (1) week for every percentage point or fraction thereof below 95%.

8.
Replacement Parts

8.1.
Accuray shall make a commercially reasonable effort to supply at the time of need or stock with Accuray's regional service engineers all tools, equipment, replacement parts and Consumables as would reasonably be required by Accuray to perform the required repairs and return the System to good working order. Accuray shall make a commercially reasonable effort to maintain at its factory or service center(s) a stock of spare parts, including, in particular, long-procurement-lead-time parts.

8.2.
Replacement parts used under this Agreement may be either new manufacture or factory refurbished at Accuray's choice. All replacement parts and assemblies provided will be manufactured in accordance with Accuray's quality system, and any applicable laws and regulations. Parts replaced under this Agreement become the property of Accuray and will be

47

9.
Exceptions

9.1.
All obligations of Accuray under this Agreement shall be suspended and/or cease in the event of:

9.1.1.
Damage from fire, accident, abuse, floods, lightning, natural disasters or other calamities commonly defined as "Acts of God".

9.1.2.
The intentional abuse of the System or negligence by Customer.

9.1.3.
System hardware or software alterations not authorized by Accuray including any move of the System from its installation site (other than by or at the express written direction of Accuray).

9.1.4.
Use of the System for other than its intended and authorized purposes, or in a manner not consistent with Accuray's User Manuals, including maintenance of the necessary operating environment and line current conditions, and the failure of Customer to cure such matter within thirty (30) days of actual written notice thereof from Accuray.

9.1.5.
Failure to make payments in accordance with the payment schedule set forth above in Section 2.2.

9.2.
If corrective action or adjustment of the System is performed by Customer's staff at the direction of Accuray, such action or adjustment shall not reduce Accuray's responsibility under this Agreement or liability for the performance of the System.

10.
No Cancellation.    Neither party shall have the right to cancel this Agreement, except as set forth below in Section 11 "Breach."

11.
Breach.    Either party reserves the right to cancel this Agreement by written notice upon the breach of the other. An event of breach may include, but is not limited to, failure to make payment due under this Agreement, failure to provide access as required to execute the services contemplated by this Agreement, failure to perform and log QA, or the filing of notice under bankruptcy or equivalent laws. If the breaching party is unable or unwilling to cure or make a good faith effort to cure such breach within thirty (30) days of actual written notice the other party shall be relieved of all obligations under this Agreement and may terminate. Termination shall not be the terminating party's exclusive remedy, and the terminating party shall retain all other available legal and equitable remedies.

12.
Limitation of Liability and Warranty

12.1.
If it is determined in accordance with applicable law that any fault or neglect of either party, its employees or agents, substantially contributes to damage or injury to third parties, such party shall be responsible in such proportion as reflects its relative fault therefore, and shall hold the other party harmless from any liability or damages arising out of such fault or neglect. Accuray's liability arising under this Agreement shall be limited to an amount not to exceed the payment(s) received by Accuray for the then current Agreement year. In addition, Accuray shall not be liable to Customer in the event that Customer's or any third party's acts or omissions contributed in any way to any loss it sustained or the loss or damage is due to an act of God or other causes beyond its reasonable control. IN NO EVENT WILL ACCURAY BE LIABLE TO CUSTOMER FOR ANY LOST PROFITS, LOST SAVINGS, LOST REVENUES OR DOWNTIME, SPECIAL, INDIRECT, INCIDENTAL DAMAGES OR

48

13.
Patient Information.    In performing the services hereunder, Accuray may receive from Customer, or create or receive on behalf of Customer, patient healthcare, billing, or other confidential patient information ("Patient Information"). Patient Information, as the term is used herein, includes all "Protected Health Information," as that term is defined in 45 CFR 164.501. Accuray shall use Patient Information only as necessary to provide the services to Customer as set forth in this Agreement. Accuray shall comply with all laws, rules and regulations relating to the confidentiality of Patient Information, including the applicable provisions of the privacy regulations promulgated pursuant to Health Insurance Portability and Accountability Act of 1996 ("HIPAA").

14.
Assignment.    Neither party may assign this Agreement without the other party's prior written consent, except that Accuray may assign this Agreement, without Customer's consent, to an affiliate or to a successor or acquirer, as the case may be, in connection with a merger or acquisition, or the sale of all or substantially all of Accuray's assets or the sale of that portion of Accuray's business to which this Agreement relates. Subject to the foregoing, this Agreement will bind and inure to the benefit of the parties' permitted successors and assigns.

15.
Disputes and Governing Laws

15.1.
In the event that a dispute arises between Accuray and Customer with respect to any subject matter governed by this Agreement, such dispute shall be settled as follows. If either party shall have any dispute with respect to this Agreement, that party shall provide written notification to the other party in the form of a claim identifying the issue or amount disputed including a detailed reason for the claim. The party against whom the claim is made shall respond in writing to the claim within 30 days from the date of receipt of the claim document. The party filing the claim shall have an additional 30 days after the receipt of the response to either accept the resolution offered by the other party or escalate the matter. If the dispute is not resolved, either party may notify the other in writing of their desire to elevate the claim to the President of Accuray and the Chief Executive Officer of Customer. Each shall negotiate in good faith and use his or her best efforts to resolve such dispute or claim. The location, format, frequency, duration and conclusion of these elevated discussions shall be left to the discretion of the representatives involved. If the negotiations do not lead to resolution of the underlying dispute or claim to the satisfaction of either party involved, then either party may pursue resolution by the courts as follows.

15.2.
All disputes arising out of or relating to this Agreement not otherwise resolved between Accuray and Customer shall be resolved in a court of competent jurisdiction, in Santa Clara County, State of California, and in no other place, provided that, in Accuray's sole discretion, such action may be heard in some other place designated by Accuray (if necessary to acquire jurisdiction over third persons), so that the dispute can be resolved in one action. Customer hereby consents to the jurisdiction of such court or courts and agrees to appear in any such action upon written notice thereof. No action, regardless of form, arising out of, or in any way connected with this Agreement may be brought by Customer more than one (1) year after the cause of action has occurred.

16.
Notices.    All notices required or permitted under this Agreement will be in writing and delivered in person, by overnight delivery service, or by registered or certified mail, postage prepaid with return receipt requested, and in each instance will be deemed given upon receipt. All

49

To Accuray:

   To Customer:
Accuray Incorporated
Attention: Chief Financial Officer
1310 Chesapeake Terrace
Sunnyvale, CA 94089		    
     
with cc to: General Counsel    
17.
Waiver.    The waiver of any breach or default of any provision of this Agreement will not constitute a waiver of any other right hereunder or of any subsequent breach or default.

18.
Severability.    If any provision of this Agreement is held invalid or unenforceable by a court of competent jurisdiction, the remaining provisions of the Agreement will remain in full force and effect, and the provision affected will be construed so as to be enforceable to the maximum extent permissible by law.

19.
Force Majeure.    Neither party will be responsible for any failure or delay in its performance under this Agreement (except for the payment of money) due to causes beyond its reasonable control, including, but not limited to, labor disputes, strike, lockout, riot, war, fire, act of God, accident, failure or breakdown of components necessary to order completion; subcontractor, supplier or customer caused delays; inability to obtain or substantial rises in the prices of labor, materials or manufacturing facilities; curtailment of or failure to obtain sufficient electrical or other energy, raw materials or supplies; or compliance with any law, regulation or order, whether valid or invalid.

20.
Amendments.    Any amendment or modification of this Agreement must be made in writing and signed by duly authorized representatives of each party. For Accuray, a duly authorized representative must be any of the following: CEO, CFO, or General Counsel.

21.
Entire Agreement.    This Agreement contains the entire Agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior understandings, representations and warranties, written and oral. If any part of the terms and conditions stated herein are held void or unenforceable, such part will be treated as severable, leaving valid the remainder of the terms and conditions.

22.
Counterparts.    This Agreement may be executed in counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

SIGNATURE PAGE FOLLOWS

50

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the Effective Date by their duly authorized representatives. The parties acknowledge and agree that this Agreement does not become effective until it has been signed by all parties indicated below.

ACCURAY INCORPORATED

   CUSTOMER

By:
 
By:

Print Name: Doug Keare
 
Print Name:

Title: Vice President of Customer Service
and Technical Support
 
Title:

Date:
 
Date:

 
 
PLEASE MAKE CERTAIN THAT YOU HAVE SELECTED A PAYMENT OPTION IN ACCORDANCE WITH SECTION 2.2, ABOVE.

The undersigned acknowledges that the terms and conditions of this Agreement meet the policies and procedures of Accuray.

Signed:
   Dated:
             General Counsel, Accuray Incorporated    

SIGNATURE PAGE TO INTERNATIONAL RUBY SERVICE AGREEMENT

51


ACCURAY CYBERKNIFE® INTERNATIONAL EMERALD ELITE SERVICE AGREEMENT

1.
Scope of Service.    This Emerald Elite Service Agreement ("Agreement") is made by and between ACCURAY INCORPORATED ("Accuray"), a California corporation, located at 1310 Chesapeake Terrace, Sunnyvale, CA 94089, and                                      ("Customer"), located at                                    , for Accuray to provide planned maintenance service when scheduled by Accuray and corrective maintenance service when requested by Customer to maintain the CyberKnife System installed at Customer's site at                                    ("System") so that it performs substantially in accordance with the Specifications (User Manuals and Reference Guides) defined for the System revision as installed and/or upgraded.

1.1.
Effective Date.    This Agreement shall be effective as of demonstration of acceptance testing by Accuray as described in the CyberKnife Quotation and Purchase Agreement dated                                    , 2006 and signed by the parties, or the expiration of any prior service or warranty agreement, if applicable.

1.2.
Definitions:

1.2.1.
Bug Fix means an error correction or minor change in the existing software and/or hardware configuration that is required in order to enable the existing software and/or hardware configuration to perform to the existing functional specification(s).

1.2.2.
Update means a release of the software or a change to the existing hardware containing substantially only error corrections, minor new features, functionality and/or performance improvements, but that would not be required for the existing software and/or hardware configuration to perform to the existing functional specification(s) of that particular product. Such Update would not necessarily replace or extend the life of the existing software and/or hardware configuration of the product. For example, an Update of software would be indicated where the version number is changed by incrementing the numeric digits to the right of the decimal point, e.g., versions 1.1, 1.2, 1.3, and 1.4 would each be Updates of the software.

1.2.3.
Upgrade/Enhancement means a release of the software or a change to the existing hardware containing major new features, functionality and/or performance improvements that would enable the existing software and/or hardware configuration to perform to the level of the next version of the software and/or hardware configuration and designed to replace the older software and/or hardware version of the same product and/or extend the useful life of that product. For example, an Upgrade/Enhancement of software would be indicated where the version number is changed by incrementing the numeric digits to the left of the decimal point, e.g., versions 1.0, 2.0, 3.0, and 4.0 would each be Upgrades/Enhancements of the software.

1.2.4.
New Version/New Product means a release of the software or a change to the hardware that may or may not work with the existing software and/or hardware configuration, but that in its totality requires, in Accuray's sole opinion, enough change to the software and/or hardware configuration to be considered a New Version or New Product.

1.2.5.
Consumables means items that are not necessarily part of the CyberKnife system, but are consumed as part of the operation of the CyberKnife system, for example fiducials.

2.
Service Period.

2.1.
The Agreement Term shall be for an initial period of four (4) years (years 1, 2, 3, & 4) from the Effective Date of this Agreement, including the warranty year, with an optional fifth year. There is no payment required under this Agreement in the first year ("Year 1" or the "Warranty Year"). Customer may elect to receive an additional optional fifth year

52

3.
Equipment To Be Covered

3.1.
This Agreement is available only for equipment that was purchased directly from Accuray, installed by Accuray engineers and has not been moved from its original installation location or disconnected from its original power supply without written permission or direction from Accuray. This Agreement must immediately commence at the expiration of the factory warranty period or prior service agreement. In the event of lapse of service, Customer shall have the right to reinstate such service by payment of the current service fee for the then-current service period in addition to the reasonable costs for Accuray to inspect, repair, and return the System to the state at which the System would have been had a service agreement been in force continuously since the expiration of the System factory warranty.

4.
Software Maintenance (Bug Fixes and Updates)

4.1.
For the duration of the Agreement Term, Accuray will provide software Updates and Bug Fixes for software that is included as a part of the CyberKnife System. These Updates and Bug Fixes may be transmitted electronically to Customer for subsequent installation by Customer technicians. Corrections of significant complexity, however, may be installed by Accuray service engineers. Software maintenance will be included only for those product features that were originally purchased with the System or subsequently purchased separately by Customer from Accuray or taken under this Agreement as a System Upgrade/Enhancement.

4.2.
Customer is not entitled to any Upgrades/Enhancements or New Versions/New Products under this Agreement. Customer may purchase Upgrades/Enhancements and New Versions/New Products separately, and such Upgrades/Enhancements or New Versions/New Products will then be maintained in accordance with the terms of this Agreement.

53

5.
System Quality Assurance Testing

5.1.
The maintenance and support services provided by Accuray under this Agreement do not include any System Quality Assurance Testing ("QA"). System commissioning and QA are the sole responsibility of Customer, and Customer is advised to perform QA on a regular and ongoing basis. In addition, Customer is required to maintain up-to-date QA logs. If Customer fails to perform the appropriate QA of the System, and to record such QA in the appropriate logs, Accuray, upon giving Notice to Customer in accordance with Section 16 of this Agreement, reserves the right to terminate this Agreement.

5.2.
Prior to performing any scheduled service or preventive maintenance on the System, Accuray will review Customer's QA logs, and if such logs are not up-to-date, Accuray may refuse to service the System. In the event that the requested service is necessary to bring the System to a point where QA can be performed, Accuray will proceed with the service only after Customer signs a written acknowledgement that QA is Customer's sole responsibility and that appropriate QA will be performed prior to conducting any patient treatments.

6.
Service Coverage Period

6.1.
The Service Coverage Period will be the hours of 8:00 AM to 9:00 PM local (to Customer's installation location) time Monday through Saturday (excluding local legal holidays). Customer has the option to request service during non-normal hours, in which case Customer shall pay the overtime premium portion of the non-normal hours worked. (Non-normal hourly rate minus normal hourly rate.) Accuray shall provide Customer with contact points to request service on a 24-hours-a-day, 7-days-a-week ("24/7") basis. Accuray, directly or remotely as the situation requires, either with its own personnel or through contractors, shall initially respond within one (1) hour of receipt of a call for service. The initial response shall include telephone support, including (as applicable) consultations, diagnostic assistance and advice on the use and maintenance of the System. In the event that the service issue cannot be resolved by telephone or other remote response, then Accuray will respond on-site. On-site response times will vary depending upon the level of service required.

6.2.
Customer will promptly notify Accuray, by calling Accuray's Customer Support Line at 1-408-716-4700, of any problem or defect with the System and, at no charge, provide Accuray service engineers access to the System and use of adequate facilities and equipment at mutually agreeable times as necessary for Accuray to perform the service. Customer shall have as many service calls as are reasonably needed to maintain the System so that it performs substantially in accordance with the Specifications during the period of this Agreement.

6.3.
Use of the facility CT scanner may be required for testing purposes and shall be scheduled to allow as expeditious completion of service as is reasonably possible. Facility staff will operate the CT scanner. If service is unreasonably delayed and Accuray service engineers are required to remain on site, Accuray may choose to charge the current hourly service rates for the duration of the delay period.

6.4.
Accuray will perform System planned maintenance as prescribed in the current System maintenance manuals. Planned service will be scheduled at least two (2) weeks in advance and will be performed at a mutually agreed-upon time. Upon completion of a service or preventive

54

7.
Uptime

7.11.
Uptime/Downtime.    Uptime shall mean any time that the System is not down ("Uptime"). A down System means that a patient cannot be treated due to an actual malfunction of the System and that the System is immediately available for an Accuray service engineer to work on it ("Downtime").

7.12.
Guarantee.    Accuray will guarantee that the System shall have an Uptime percentage of at least 95% of normal treatment hours on an annual basis during the Term of this Agreement. Normal treatment hours shall be from 8:00 AM to 5:00 PM local time Monday through Friday (excluding legal holidays). The first 12-month period will start as of the Effective Date of this Agreement.

7.13.
Calculation.    Downtime will be calculated from the time a down System call is received by Accuray to the time of repair, counting normal treatment hours. The System will be calculated as up when the System repair has been completed and the System is available for treatment during normal treatment hours, whether or not patients are scheduled for treatment. Scheduled preventive maintenance, System upgrades, and time that the System is unavailable as a result of something beyond Accuray's control, including without limitation (i) Customer's use of the System for purposes other than its intended and authorized purposes, (ii) the negligence of Customer, (iii) the failure of Customer to operate the System in accordance with the User Manuals, (iv) use by untrained operators, (v) e-Stops, power outages or the like or (vi) the negligence of any party other than Accuray, will be calculated as Uptime.

7.14.
Reports.    Customer is responsible for recording and reporting Downtime to Accuray. Reports for the previous month's Downtime shall be provided to Accuray on or before the 15th day of each month.

7.15.
Failure to Meet Guarantee.    For each year of the term of this Agreement, if Accuray achieves a 12-month uptime average of less than 95%, the Agreement period will be extended one (1) week for every percentage point or fraction thereof below 95%.

8.
Replacement Parts

8.1.
Accuray shall make a commercially reasonable effort to supply at the time of need or stock with Accuray's regional service engineers all tools, equipment, replacement parts and Consumables as would reasonably be required by Accuray to perform the required repairs and return the System to good working order. Accuray shall make a commercially reasonable effort to maintain at its factory or service center(s) a stock of spare parts, including, in particular, long-procurement-lead-time parts.

8.2.
Replacement parts used under this Agreement may be either new manufacture or factory refurbished at Accuray's choice. All replacement parts and assemblies provided will be manufactured in accordance with Accuray's quality system, and any applicable laws and regulations. Parts replaced under this Agreement become the property of Accuray and will be disposed of by Accuray Field Service engineers. Notwithstanding the foregoing, all parts that are considered by local regulation to be "hazardous" or "contaminated" waste, or material

55

9.
Exceptions

9.1.
All obligations of Accuray under this Agreement shall be suspended and/or cease in the event of:

9.1.1.
Damage from fire, accident, abuse, floods, lightning, natural disasters or other calamities commonly defined as "Acts of God".

9.1.2.
The intentional abuse of the System or negligence by Customer.

9.1.3.
System hardware or software alterations not authorized by Accuray including any move of the System from its installation site (other than by or at the express written direction of Accuray).

9.1.4.
Use of the System for other than its intended and authorized purposes, or in a manner not consistent with Accuray's User Manuals, including maintenance of the necessary operating environment and line current conditions, and the failure of Customer to cure such matter within thirty (30) days of actual written notice thereof from Accuray.

9.1.5.
Failure to make payments in accordance with the payment schedule set forth above in Section 2.2.

9.2.
If corrective action or adjustment of the System is performed by Customer's staff at the direction of Accuray, such action or adjustment shall not reduce Accuray's responsibility under this Agreement or liability for the performance of the System.

10.
No Cancellation.    Neither party shall have the right to cancel this Agreement, except as set forth below in Section 11 "Breach."

11.
Breach.    Either party reserves the right to cancel this Agreement by written notice upon the breach of the other. An event of breach may include, but is not limited to, failure to make payment due under this Agreement, failure to provide access as required to execute the services contemplated by this Agreement, failure to perform and log QA, or the filing of notice under bankruptcy or equivalent laws. If the breaching party is unable or unwilling to cure or make a good faith effort to cure such breach within thirty (30) days of actual written notice the other party shall be relieved of all obligations under this Agreement and may terminate. Termination shall not be the terminating party's exclusive remedy, and the terminating party shall retain all other available legal and equitable remedies.

12.
Limitation of Liability and Warranty

12.1.
If it is determined in accordance with applicable law that any fault or neglect of either party, its employees or agents, substantially contributes to damage or injury to third parties, such party shall be responsible in such proportion as reflects its relative fault therefore, and shall hold the other party harmless from any liability or damages arising out of such fault or neglect. Accuray's liability arising under this Agreement shall be limited to an amount not to exceed the payment(s) received by Accuray for the then current Agreement year. In addition, Accuray shall not be liable to Customer in the event that Customer's or any third party's acts or omissions contributed in any way to any loss it sustained or the loss or damage is due to an act of God or other causes beyond its reasonable control. IN NO EVENT WILL ACCURAY BE LIABLE TO CUSTOMER FOR ANY LOST PROFITS, LOST SAVINGS, LOST REVENUES OR DOWNTIME, SPECIAL, INDIRECT, INCIDENTAL DAMAGES OR OTHER CONSEQUENTIAL DAMAGES ARISING OUT OF OR IN CONNECTION WITH THE AGREEMENT OR THE USE OR PERFORMANCE OF THE SYSTEM.

56

12.2.
This is a service agreement. THERE ARE NO INCLUDED OR IMPLIED ACCURAY WARRANTIES OF PRODUCT FITNESS FOR A PARTICULAR PURPOSE OR MERCHANTABILITY.

13.
Patient Information.    In performing the services hereunder, Accuray may receive from Customer, or create or receive on behalf of Customer, patient healthcare, billing, or other confidential patient information ("Patient Information"). Patient Information, as the term is used herein, includes all "Protected Health Information," as that term is defined in 45 CFR 164.501. Accuray shall use Patient Information only as necessary to provide the services to Customer as set forth in this Agreement. Accuray shall comply with all laws, rules and regulations relating to the confidentiality of Patient Information, including the applicable provisions of the privacy regulations promulgated pursuant to Health Insurance Portability and Accountability Act of 1996 ("HIPAA").

14.
Assignment.    Neither party may assign this Agreement without the other party's prior written consent, except that Accuray may assign this Agreement, without Customer's consent, to an affiliate or to a successor or acquirer, as the case may be, in connection with a merger or acquisition, or the sale of all or substantially all of Accuray's assets or the sale of that portion of Accuray's business to which this Agreement relates. Subject to the foregoing, this Agreement will bind and inure to the benefit of the parties' permitted successors and assigns.

15.
Disputes and Governing Laws

15.1.
In the event that a dispute arises between Accuray and Customer with respect to any subject matter governed by this Agreement, such dispute shall be settled as follows. If either party shall have any dispute with respect to this Agreement, that party shall provide written notification to the other party in the form of a claim identifying the issue or amount disputed including a detailed reason for the claim. The party against whom the claim is made shall respond in writing to the claim within 30 days from the date of receipt of the claim document. The party filing the claim shall have an additional 30 days after the receipt of the response to either accept the resolution offered by the other party or escalate the matter. If the dispute is not resolved, either party may notify the other in writing of their desire to elevate the claim to the President of Accuray and the Chief Executive Officer of Customer. Each shall negotiate in good faith and use his or her best efforts to resolve such dispute or claim. The location, format, frequency, duration and conclusion of these elevated discussions shall be left to the discretion of the representatives involved. If the negotiations do not lead to resolution of the underlying dispute or claim to the satisfaction of either party involved, then either party may pursue resolution by the courts as follows.

15.2.
All disputes arising out of or relating to this Agreement not otherwise resolved between Accuray and Customer shall be resolved in a court of competent jurisdiction, in Santa Clara County, State of California, and in no other place, provided that, in Accuray's sole discretion, such action may be heard in some other place designated by Accuray (if necessary to acquire jurisdiction over third persons), so that the dispute can be resolved in one action. Customer hereby consents to the jurisdiction of such court or courts and agrees to appear in any such action upon written notice thereof. No action, regardless of form, arising out of, or in any way connected with this Agreement may be brought by Customer more than one (1) year after the cause of action has occurred.

16.
Notices.    All notices required or permitted under this Agreement will be in writing and delivered in person, by overnight delivery service, or by registered or certified mail, postage prepaid with return receipt requested, and in each instance will be deemed given upon receipt. All

57

To Accuray:   To Customer:

Accuray Incorporated
Attention: Chief Financial Officer
1310 Chesapeake Terrace
Sunnyvale, CA 94089
 
 

with cc to: General Counsel
 
 
17.
Waiver.    The waiver of any breach or default of any provision of this Agreement will not constitute a waiver of any other right hereunder or of any subsequent breach or default.

18.
Severability.    If any provision of this Agreement is held invalid or unenforceable by a court of competent jurisdiction, the remaining provisions of the Agreement will remain in full force and effect, and the provision affected will be construed so as to be enforceable to the maximum extent permissible by law.

19.
Force Majeure.    Neither party will be responsible for any failure or delay in its performance under this Agreement (except for the payment of money) due to causes beyond its reasonable control, including, but not limited to, labor disputes, strike, lockout, riot, war, fire, act of God, accident, failure or breakdown of components necessary to order completion; subcontractor, supplier or customer caused delays; inability to obtain or substantial rises in the prices of labor, materials or manufacturing facilities; curtailment of or failure to obtain sufficient electrical or other energy, raw materials or supplies; or compliance with any law, regulation or order, whether valid or invalid.

20.
Amendments.    Any amendment or modification of this Agreement must be made in writing and signed by duly authorized representatives of each party. For Accuray, a duly authorized representative must be any of the following: CEO, CFO, or General Counsel.

21.
Entire Agreement.    This Agreement contains the entire Agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior understandings, representations and warranties, written and oral. If any part of the terms and conditions stated herein are held void or unenforceable, such part will be treated as severable, leaving valid the remainder of the terms and conditions.

22.
Counterparts.    This Agreement may be executed in counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

58

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the Effective Date by their duly authorized representatives. The parties acknowledge and agree that this Agreement does not become effective until it has been signed by all parties indicated below.

ACCURAY INCORPORATED

   CUSTOMER

By:
 
By:
Print Name: Doug Keare
   Print Name:
Title: Vice President of Customer Service
           and Technical Support
   Title:
Date:
   Date:
     
    PLEASE MAKE CERTAIN THAT YOU HAVE SELECTED A PAYMENT OPTION IN ACCORDANCE WITH SECTION 2.2, ABOVE.

The undersigned acknowledges that the terms and conditions of this Agreement meet the policies and procedures of Accuray.


Signed:
 
Dated:
General Counsel, Accuray Incorporated    

59


CYBERKNIFE® INTERNATIONAL EXTENDED PARTS WARRANTY AGREEMENT

1.
Scope of Warranty.    This is a Warranty Agreement ("Warranty Agreement") is made by and between ACCURAY INCORPORATED ("Accuray"), a California corporation, located at 1310 Chesapeake Terrace, Sunnyvale, CA 94089, and                                     ("Customer"), located at                                    , for Accuray to provide replacement of all defective parts when requested by Customer to maintain the CyberKnife System installed at site at                                     ("System") so that it performs substantially in accordance with the specifications defined for the System revision as installed and/or updated under this Warranty Agreement, or upgraded under a separate agreement with Customer.

2.
Warranty Period.    This Warranty Agreement shall be for an initial period of one (1) year, beginning one (1) year after the date of demonstration of System acceptance testing to Customer ("Effective Date"), with an optional second year. The Agreement price shall be $                                    paid in advance. Customer may elect to receive an additional optional second year at the price of $                                    . Customer may exercise the option for optional second year by letter sent to Accuray, in accordance with the Notice provision set forth below, at any time up to twenty (20) days before the optional second year commences. If Customer exercises the option, Accuray is obligated to provide Extended Parts Warranty coverage on the same terms as the previous Agreement year. Billing will commence on the day following the anniversary of the Effective Date of this Agreement.

3.
Equipment to be Covered.    The Warranty Agreement is available only for equipment that was purchased directly from Accuray, installed by Accuray, and has not been moved from its original installation location or disconnected from its original power supply without written permission or direction from Accuray. This Warranty Agreement must immediately commence at the expiration of the factory warranty period.

4.
Replacement Parts

4.1.
Accuray shall make a commercially reasonable effort to supply at the time of need or stock with Accuray's regional service engineers all tools, equipment, replacement parts and Consumables as would reasonably be required by Accuray to perform the required repairs and return the System to good working order. Accuray shall make a commercially reasonable effort to maintain at its factory or service center(s) a stock of spare parts, including, in particular, long-procurement-lead-time parts.

4.2.
Replacement parts used under this Agreement may be either new manufacture or factory refurbished at Accuray's choice. All replacement parts and assemblies provided will be manufactured in accordance with Accuray's quality system, and any applicable laws and regulations. Parts replaced under this Agreement become the property of Accuray and will be disposed of by Accuray Field Service engineers. Notwithstanding the foregoing, all parts that are considered by local regulation to be "hazardous" or "contaminated" waste, or material that requires "special handling" will be disposed of or retained by Customer at Customer's facility.

5.
Warranty Exclusions.    All warranty replacement of parts shall be limited to malfunctions which are due and traceable to defects in original material or workmanship of the parts. The warranties set forth in this Warranty Agreement shall be void and of no further effect in the event of abuse, accident, alteration, misuse or neglect of the System or its component parts, including but not limited to user modification of the operating environment specified by Accuray.

60

6.
Exceptions

6.1.
All obligations of Accuray under this Agreement shall be suspended and/or cease in the event of:

6.1.1.
Damage from fire, accident, abuse, floods, lightning, natural disasters or other calamities commonly defined as "Acts of God".

6.1.2.
The intentional abuse of the System or negligence by Customer.

6.1.3.
System hardware or software alterations not authorized by Accuray including any move of the System from its installation site (other than by or at the express written direction of Accuray).

6.1.4.
Use of the System for other than its intended and authorized purposes, or in a manner not consistent with Accuray's User Manuals, including maintenance of the necessary operating environment and line current conditions, and the failure of Customer to cure such matter within thirty (30) days of actual written notice thereof from Accuray.

6.1.5.
Failure to make payments in accordance with the payment schedule set forth above in Section 2.2.

6.2.
If corrective action or adjustment of the System is performed by Customer's staff at the direction of Accuray, such action or adjustment shall not reduce Accuray's responsibility under this Agreement or liability for the performance of the System.

7.
No Cancellation.    Neither party shall have the right to cancel this Agreement, except as set forth below in Section 8 "Breach."

8.
Breach.    Either party reserves the right to cancel this Agreement by written notice upon the breach of the other. An event of breach may include, but is not limited to, failure to make payment due under this Agreement, failure to provide access as required to execute the services contemplated by this Agreement, failure to perform and log QA, or the filing of notice under bankruptcy or equivalent laws. If the breaching party is unable or unwilling to cure or make a good faith effort to cure such breach within thirty (30) days of actual written notice the other shall be relieved of all obligations under this Agreement and may terminate. Termination shall not be the terminating party's exclusive remedy, and the terminating party shall retain all other available legal and equitable remedies.

9.
Limitation of Liability and Warranty

9.1.
Limitation of Liability.    If it is determined in accordance with applicable law that any fault or neglect of either party, its employees or agents, substantially contributes to damage or injury to third parties, such party shall be responsible in such proportion as reflects its relative fault therefore, and shall hold the other party harmless from any liability or damages arising out of such fault or neglect. Accuray's liability arising under this Agreement shall be limited to an amount not to exceed the payment(s) received by Accuray for the then current Agreement year. In addition, Accuray shall not be liable to Customer in the event that Customer's or any third party's acts or omissions contributed in any way to any loss it sustained or the loss or damage is due to an act of God or other causes beyond its reasonable control. IN NO EVENT WILL ACCURAY BE LIABLE TO CUSTOMER FOR ANY LOST PROFITS, LOST SAVINGS, LOST REVENUES, SPECIAL, INDIRECT, INCIDENTAL DAMAGES OR OTHER CONSEQUENTIAL DAMAGES ARISING OUT OF OR IN CONNECTION WITH THE AGREEMENT, DOWNTIME OR THE USE OR PERFORMANCE OF THE SYSTEM.

61

10.
Assignment.    Neither party may assign this Warranty Agreement without the other party's prior written consent, except that Accuray may assign this Warranty Agreement, without Customer's consent, to an affiliate or to a successor or acquirer, as the case may be, in connection with a merger or acquisition, or the sale of all or substantially all of Accuray's assets or the sale of that portion of Accuray's business to which this Warranty Agreement relates. Subject to the foregoing, this Warranty Agreement will bind and inure to the benefit of the parties' permitted successors and assigns.

11.
Dispute Resolution

11.1.
Informal Dispute Resolution.    In the event that a dispute arises between Accuray and Customer with respect to any subject matter governed by this Agreement, such dispute shall be settled as follows. If either party shall have any dispute with respect to this Agreement, that party shall provide written notification to the other party in the form of a claim identifying the issue or amount disputed including a detailed reason for the claim. The party against whom the claim is made shall respond in writing to the claim within thirty (30) days from the date of receipt of the claim document. The party filing the claim shall have an additional thirty (30) days after the receipt of the response to either accept the resolution offered by the other party or escalate the matter. If the dispute is not resolved, either party may notify the other in writing of their desire to elevate the claim to the Chief Executive Officer of Accuray and the Chief Executive Officer or the highest ranking officer of Customer. Each shall negotiate in good faith and use his or her best efforts to resolve such dispute or claim. The location, format, frequency, duration and conclusion of these elevated discussions shall be left to the discretion of the representatives involved. If the negotiations do not lead to resolution of the underlying dispute or claim to the satisfaction of either party involved, then either party may pursue resolution by the courts as follows.

11.2.
Jurisdiction and Venue.    All disputes under any contract concerning this Agreement not otherwise resolved between Accuray and Customer shall be resolved in a court of competent jurisdiction in the County of Santa Clara, State of California, and in no other place, provided that, in Accuray's sole discretion, such action may be heard in some other place designated by Accuray (if necessary to acquire jurisdiction over third persons), so that the dispute can be resolved in one action. Customer hereby consents to the jurisdiction of such court or courts and agrees to appear in any such action upon written notice thereof. No action, regardless of form, arising out of, or in any way connected with, this Agreement may be brought by Customer more than one (1) year after the cause of action has occurred.

12.
Notices.    All notices required or permitted under this Warranty Agreement will be in writing and delivered in person, by confirmed facsimile transmission, by overnight delivery service, or by registered or certified mail, postage prepaid with return receipt requested, and in each instance will be deemed given upon receipt. All communications will be sent to the addresses set forth

62

To Accuray:

   To Customer:
Accuray Incorporated
Attention: Sr. Vice President & CFO
1310 Chesapeake Terrace
Sunnyvale, CA 94089
USA		                                     
Attention:                                 
                                  
                                  
                                    
        
        
        
with cc to:   General Counsel
13.
Waiver.    The waiver of any breach or default of any provision of this Agreement will not constitute a waiver of any other right hereunder or of any subsequent breach or default.

14.
Severability.    If any provision of this Agreement is held invalid or unenforceable by a court of competent jurisdiction, the remaining provisions of the Agreement will remain in full force and effect, and the provision affected will be construed so as to be enforceable to the maximum extent permissible by law.

15.
Force Majeure.    Neither party will be responsible for any failure or delay in its performance under this Agreement (except for the payment of money) due to causes beyond its reasonable control, including, but not limited to, labor disputes, strike, lockout, riot, war, fire, act of God, accident, failure or breakdown of components necessary to order completion; subcontractor, supplier or customer caused delays; inability to obtain or substantial rises in the prices of labor, materials or manufacturing facilities; curtailment of or failure to obtain sufficient electrical or other energy, raw materials or supplies; or compliance with any law, regulation or order, whether valid or invalid.

16.
Amendments.    Any amendment or modification of this Agreement must be made in writing and signed by duly authorized representatives of each party. For Accuray, a duly authorized representative must be any of the following: CEO, CFO or General Counsel.

17.
Entire Agreement.    This Agreement contains the entire Agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior understandings, representations and warranties, written and oral. If any part of the terms and conditions stated herein are held void or unenforceable, such part will be treated as severable, leaving valid the remainder of the terms and conditions.

18.
Counterparts.    This Agreement may be executed in counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

[SIGNATURE PAGE FOLLOWS]

63

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the Effective Date by their duly authorized representatives. The parties acknowledge and agree that this Agreement does not become effective until it has been signed by all parties indicated below.

ACCURAY INCORPORATED

   CUSTOMER
By:
   By:
Print Name: Doug Keare   Print Name:
Title: Vice President of Customer Service and Technical Support   Title:
Date:
   Date:

The undersigned acknowledges that the terms and conditions of this Agreement meet the policies and procedures of Accuray.

Signed:
   Dated:
General Counsel, Accuray Incorporated    

        SIGNATURE PAGE TO INTERNATIONAL EXTENDED PARTS WARRANTY

64


ACCURAY CYBERKNIFE® ADDITIONAL DIAMOND UPGRADE AGREEMENT

1.
Scope of Agreement.    This CyberKnife Additional Upgrade Agreement ("Agreement") is made effective as of                                    , 2006 ("Effective Date"), by and between ACCURAY INCORPORATED ("Accuray"), a California corporation, located at 1310 Chesapeake Terrace, Sunnyvale, CA 94089, and                                     ("Customer"), located at                                    , for Accuray to provide Upgrades/Enhancements, when and if available, to the CyberKnife System installed at Customer's site at                                    ("System").

1.1.
Definitions:

1.1.1.
Bug Fix means an error correction or minor change in the existing software and/or hardware configuration that is required in order to enable the existing software and/or hardware configuration to perform to the existing functional specification(s).

1.1.2.
Update means a release of the software or a change to the existing hardware containing substantially only error corrections, minor new features, functionality and/or performance improvements, but that would not be required for the existing software and/or hardware configuration to perform to the existing functional specification(s) of that particular product. Such Update would not necessarily replace or extend the life of the existing software and/or hardware configuration of the product. For example, an Update of software would be indicated where the version number is changed by incrementing the numeric digits to the right of the decimal point, e.g., versions 1.1, 1.2, 1.3, and 1.4 would each be Updates of the software.

1.1.3.
Upgrade/Enhancement means a release of the software or a change to the existing hardware containing major new features, functionality and/or performance improvements that would enable the existing software and/or hardware configuration to perform to the level of the next version of the software and/or hardware configuration and designed to replace the older software and/or hardware version of the same product and/or extend the useful life of that product. For example, an Upgrade/Enhancement of software would be indicated where the version number is changed by incrementing the numeric digits to the left of the decimal point, e.g., versions 1.0, 2.0, 3.0, and 4.0 would each be Upgrades/Enhancements of the software.

1.1.4.
New Version/New Product means a release of the software or a change to the hardware that may or may not work with the existing software and/or hardware configuration, but that in its totality requires, in Accuray's sole opinion, enough change to the software and/or hardware configuration to be considered a New Version or New Product.

1.1.5.
Exclusions Upgrades/Enhancements that have a list price of greater than $200,000 per Upgrade/Enhancement are specifically excluded from this Agreement. However, Accuray may at its discretion, offer Upgrades/Enhancements that have a higher list price, as more than a single Upgrade/Enhancement to Customers under this Agreement. If Accuray offers Upgrades/Enhancements that have a higher list price as more than a single Upgrade/Enhancement then Accuray will make such offer to all of its customers. Examples of such components that would likely fall into this category are: the robot, and the patient couch. New Versions and New Products are also specifically excluded.

1.1.6.
Consumables means items that are not necessarily part of the CyberKnife system, but are consumed as part of the operation of the CyberKnife system, for example fiducials.

65

2.
Term & Payment Terms

2.1.
Customer has option of selecting either a one (1) year, two (2) Upgrade/Enhancement or two (2) year, four (4) Upgrade/Enhancement Agreement plan, as set forth below. Customer shall indicate its preferred option by checking one of the boxes below, if no selection is made Customer will signed up for a one (1) year agreement. Customer may only select an Agreement Term commensurate with the remaining term of the initial four (4) year Diamond term. For example, if Customer has three (3) years remaining of the initial four (4) year Diamond term, then Customer may only sign up for a three (3) year Agreement Term or less and the four (4) year Agreement Term would not be available.

o
Option #1—One (1) Year Agreement
3.
Product Upgrades/Enhancements

3.1.
This Agreement is available only for equipment that was purchased directly from Accuray, installed by Accuray engineers and has not been moved from its original installation location or disconnected from its original power supply without written permission or direction from Accuray. This Agreement is only available in conjunction with the [DATE] Diamond Elite Service Agreement signed by the parties and currently in effect ("Diamond Agreement"), and provided that Customer is current with all payments due under the Diamond Agreement and has used all upgrades allowed under the initial four (4) year term of the Diamond Agreement.

3.2.
Under this Agreement, Customer may receive Upgrades/Enhancements, when and if available, up to the number of Upgrades/Enhancements elected in Section 2.1 above, up to two (2) Upgrades/Enhancements per year per year during the Term. Customer acknowledges and agrees that this in no way obligates Accuray to provide a minimum number of Upgrades/

66

4.
Software Maintenance

4.1.
This Agreement does not include any software Updates and Bug Fixes for software that is included as a part of the CyberKnife System. Such Updates and Bug Fixes are the subject of the Diamond Agreement.

4.2.
Any Upgrades/Enhancements delivered pursuant to the terms of this Agreement will be considered part of Customer's System and will be serviced in accordance with the Diamond Agreement.

5.
No Cancellation.    Neither party shall have the right to cancel this Agreement, except as set forth below in Section 6 (Breach).

6.
Breach.    Either party reserves the right to cancel this Agreement by written notice upon the breach of the other. An event of breach may include, but is not limited to: failure to make payment due under this Agreement; failure to provide access as required to install any Upgrades/Enhancements contemplated by this Agreement; cancellation, termination, suspension or breach of the Diamond Agreement; or the filing of notice under Federal bankruptcy laws. If the breaching party is unable or unwilling to cure or make a good faith effort to cure such breach within thirty (30) days of actual written notice the other party shall be relieved of all obligations under this

67

7.
Notices.    All notices required or permitted under this Agreement will be in writing and delivered in person, effective immediately, by overnight delivery service, effective two (2) business days after deposit with carrier, or by registered or certified mail, postage prepaid with return receipt requested, effective five (5) business days after deposit with carrier. All communications will be sent to the addresses set forth below or to such other address as may be specified by either party in writing to the other party in accordance with this Section.

To Accuray:

   To Customer:
Accuray Incorporated
Attention: Chief Financial Officer
1310 Chesapeake Terrace
Sunnyvale, CA 94089
with cc to: General Counsel		    
8.
Amendments.    Any amendment or modification of this Agreement must be made in writing and signed by duly authorized representatives of each party. For Accuray, a duly authorized representative must be any of the following: CEO, CFO, or General Counsel.

9.
Diamond Agreement.    The following terms and conditions of the Diamond Agreement shall apply to this Agreement, however, in the event of a conflict between the terms of the Diamond Agreement and this Agreement, the terms and conditions of this Agreement shall take precedence.

9.1.
System Quality Assurance Testing;

9.2.
Service Coverage Period;

9.3.
Limitation of Liability and Warranty;

9.4.
Assignment;

9.5.
Disputes and Governing Laws;

9.6.
Waiver;

9.7.
Severability;

9.8.
Force Majeure; and

9.9.
Amendments.

10.
Entire Agreement.    This Agreement and the Diamond Agreement jointly contain the entire Agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior understandings, representations and warranties, written and oral. If any part of the terms and conditions stated herein are held void or unenforceable, such part will be treated as severable, leaving valid the remainder of the terms and conditions.

11.
Counterparts.    This Agreement may be executed in counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

SIGNATURE PAGE FOLLOWS

68

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the Effective Date by their duly authorized representatives. The parties acknowledge and agree that this Agreement does not become effective until it has been signed by all parties indicated below.

ACCURAY INCORPORATED   CUSTOMER

By:
 
By:

Print Name: Doug Keare
 
Print Name:

Title: Vice President of Customer Service and Technical Support
 
Title:

Date:
 
Date:

 
 
PLEASE MAKE CERTAIN THAT YOU HAVE SELECTED AN UPGRADE/ENHANCEMENT OPTION IN ACCORDANCE WITH SECTION 2.1, ABOVE.

The undersigned acknowledges that the terms and conditions of this Agreement meet the policies and procedures of Accuray.

By:
    
Print Name: Darren J. Milliken    
Title: General Counsel, Accuray Incorporated    
Date:
    

69


EXHIBIT F

DISPUTE RESOLUTION

1.
Negotiation.    The parties shall attempt to resolve any dispute arising out of relating to this Agreement promptly by negotiation between executives who have authority to settle the controversy, as set forth in Section 6 of the Agreement.

2.
Mediation.    If the parties do not resolve the dispute within forty-five (45) days of undertaking negotiation thereof, either Party may refer the Dispute for mediation by the applicable mediation body (as provided below) or its successor (the "Mediation Organization") by providing the Mediation Organization and the other Party a written request for mediation, setting forth the details of the dispute and the relief requested. Each Party must then participate in the mediation in good faith and share equally in its costs. If a request for mediation is made, then the mediation shall take place in Santa Clara County, California. Mediation shall be conducted by JAMS or its successor, in accordance with the JAMS mediation rules and procedures then in effect. Any mediation taking place between the parties will be conducted by: (i) a mediator agreed to by the parties selected from the applicable Mediation Organization's panel of neutrals; or (ii) if the parties do not agree on a mediator, a mediator nominated by the applicable Mediation Organization. Any mediation taking place between the parties shall be conducted in the English language. All offers, promises, conduct and statements, whether oral or written, made in the course of the mediation by any of the parties, their agents, employees, experts and attorneys, and by the mediator and any Mediation Organization employees, are confidential, privileged and inadmissible for any purpose, in any litigation or other proceeding involving the parties, provided that evidence that is otherwise admissible or discoverable shall not be rendered inadmissible or non-discoverable as a result of its use in the mediation.

3.
Arbitration.    If the dispute has not been resolved by non-binding means as provided herein within ninety (90) days of the initiation of such procedure, either party may initiate arbitration with respect to such matters at any time following the period provided for mediation, or determination by the mediator that the parties will not be able to resolve the issue through mediation, by filing a written request for arbitration to JAMS, as provided below, in accordance with JAMS arbitration procedures. If a request for arbitration is made, then the arbitration shall take place in Santa Clara County, California. Any arbitration taking place shall be conducted by JAMS or its successor, in accordance with the JAMS arbitration rules and procedures then in effect. Any arbitration taking place between the parties shall be conducted in the English language.

4.
Other Remedies.    Notwithstanding the foregoing, each Party shall have right before or during negotiation, mediation or arbitration to seek and obtain from the appropriate court provisional remedies such as attachment, preliminary injunction, replevin, etc., to avoid irreparable harm, maintain the status quo or preserve the subject matter of the negotiations, mediation or arbitration.

70


EXHIBIT G

PARTS LIST AND PRICES

The following is a list of spare parts required for most likely service needs. There are three (3) "Kit" options, with an approximate costs of U.S. $TBD, $TBD and $TBD per kit. Additional parts may be needed for multiple units. Accuray will also maintain a central inventory in the region to supplement the Agent's in-country spare parts kit. Additional parts may be purchase separately from the identified Spare Parts Kits, and prices for such will be quoted by Accuray on receipt of a request from Agent.

Please note that the content of the following Spare Parts Kit Options are subject to change, though the prices of such Kits is subject to Section 2.4 (Product and Service Pricing).

PART DESCRIPTION
   PART
NO.
   AGENT
SPARE PARTS
KIT A
   AGENT
SPARE PARTS
KIT B
   AGENT SPARE PARTS
KIT C
X-Ray Head                
AFC Control PCA   01-3771-01   1   1   1
Phase Control PCA   01-4304-01   1   1   1
Phase Detector PCA   01-6164-01   1   1   1
AFC Power Supply Assy   01-4213-01       1   1
AFC Tuner Pot — New   021787   2   2   3
O'Ring Wave Guide   1200-00001           10
Laser   1000-00200   1   1   1
Laser Power Supply   4050-00001   1   2   3
Capacitor, 2500pf   1500-00020   3   3   6
Collimator Pot Assembly   01-7239-01   2   2   4
Assy Collimator Rot Lock   020183           3
Pulse Transformer Assy   01-7310-01   1   1   1
Despiking Resistor 2.0 kohm 50w   4700-00035   —   4   4
Bypass Cap 0.47 uF 600v-OBS-use 2 × 021444   1500-00064   —   2   2
0.1uF 1000V Capacitor   021444   —   2   2
Magnetron-Refurbished   018575           1
Mag//Pulse Xfmer Conn Assy   01-4651-01           1
Semi Ridgid Coax Assy   01-6268-01       1   1
Semi Ridgid Coax Assy   01-6269-01       1   1
Flex Waveguide   1000-00055       1   1
Dummy Load (Plastic)   021145           1
Hybrid Coupler   3450-00003           1

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PART DESCRIPTION
   PART
NO.
   AGENT
SPARE PARTS
KIT A
   AGENT
SPARE PARTS
KIT B
   AGENT SPARE PARTS
KIT C
X-Ray Head, Cont'd                
Ion Chamber   01-7130-01       1   1
Laser Mirror   1000-00210   2   2   2
Crystal Diode, Neg   2300-00003       1   1
Crystal Diode, Pos   2300-00004       1   1
Fuse .5A SloBlo   4300-00004           10
Fuse .2A SloBlo   4300-00014           5
Fuse 1.5A SloBlo   4300-00026           5
Bridge Rectifier 200V 40A   4750-00007   2   2   2
Diode, Gen Purpose 1A   4800-00026   6   6   6

Modulator
 
 
 
 
 
 
 
 
Thyratron DeQuing   5700-00001   1   1   1
Thyratron Deuterium (Main)   5700-00002   1   1   1
High Voltage wire 14g   6000-00080   5   5   5
HV Putty   1600-00170   1   1   1
Diode 7.5   4800-00024   3   3   3
Diode 10   4800-00022   3   3   3
Diode 15   4800-00021   3   3   3
Cap, PFN, .011uF 25KV   1500-00002   3   3   3
Relay 3 pdt 120 vac   4500-00002   1   2   3
Relay 4pdt   4500-00001   1   1   1
Relay 3 pdt 120 vac   4500-00003   1   1   1
Relay 3pdt 6vdc   4500-00005   1   1   1
Relay, Time Delay   4500-00009       1   1
XSFMR AUTO VAR W/DIAL&KNOB   5600-00007   —   1   1
Dequing Trigger Transformer   01-2699-01   1   1   1
Steering PS   4000-00020           1
Thyratron Driver PCA   01-1141-02   1   1   1
Ion Pump Monitor PCA   01-1617-01   1   1   1
High Voltage Divider PCA   01-3430-01           1
Dequing Trigger Generator PCA   01-3193-01   1   1   1
Thyratron Bias & Trigger PCA   01-3310-01   —   1   1
HV Rect 800V 8A   4750-00004   1   1   1
HV Rect 600V 8A   4750-00002   1   1   1
Lamp 28v,t1 3/4   2450-00032           2

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PART DESCRIPTION
   PART
NO.
   AGENT
SPARE PARTS
KIT A
   AGENT
SPARE PARTS
KIT B
   AGENT SPARE PARTS
KIT C
Modulator Control Chassis                
Fault Logic   01-3906-01   1   1   1
Trigger Generator   01-1433-01   1   1   1
Mag/Accel Htr Cont   01-3126-01   1   1   1
Fault Indicator   01-6895-01   1   1   1
Control Logic   01-4344-01   1   1   1
MCC/IFCC Interface   013509   1   1   1
Fan Water Interlock   020425   1   1   1
Fault Logic A3   01-3906-02   1   1   1
Counter Interface PCA   01-4363-01   1   1   1
Display Counter LCD   2950-00005           1
Fuse 2A SloBlo   4300-00002           5
PS +/-24V   4000-00002       1   1
Extender Card   1700-00002       1   1

Gun Box
 
 
 
 
 
 
 
 
Grid Drive PCA   01-5924-01   1   1   1
Grid Pulse Amp PCA   01-7131-01   1   1   1
Gun Curr. Sample & Hold PCA   01-6170-01   1   1   1
Gun Heater Xfmr   01-1875-01   1   1   1
Grid Pulse Xfmr   01-5074-01   1   1   1
Grid Bias PS   01-5073-01   1   1   1
Grid Bias PS PCA   01-5075-01   1   1   1
Grid Trigger Network PCA   01-6160-01   1   1   1
PWR SPLY 0-20 KV,0-1mA   4000-00003           1
Gun Filament PCA   01-4131-01   1   1   1
Grid Amp PCA   01-6168-01   1   1   1
Gun Interlock PCA   01-5958-01   1   1   1
Fuse 3A SloBlo   4300-00003           5
Rectifier Bridge 800v   4750-00008   1   1   1
Transorb 325v 6500a   014949   1   1   1
Cap, Elect 30uF 450V   1500-00112   2   2   2
Cap, Cer 0.47uF 600V   1500-00064   2   2   2

Dose Box
 
 
 
 
 
 
 
 
Dose Count PCB   01-3910-01   1   1   1
P.S. Monitor PCA   01-7143-01   1   1   1
Dose Bias PS Assy   01-5767-01   1   1   1

73

PART DESCRIPTION
   PART
NO.
   AGENT
SPARE PARTS
KIT A
   AGENT
SPARE PARTS
KIT B
   AGENT SPARE PARTS
KIT C
Fuse 1A SloBlo   4300-00015           10

Magnetron Box
 
 
 
 
 
 
 
 
Mag Fil Curr Mon PCA   01-4199-01   1   1   1
Mag Htr Xfmr 10V 20A   01-1849-01   1   1   1

Junction Box
 
 
 
 
 
 
 
 
Water Flow Switch (display type)   5100-00020   1   1   1
SF6 Fitting   1000-00130   1   1   2

IFCC
 
 
 
 
 
 
 
 
Dose Stif Board   010615   1   1   1
Transition Module   010817           1

Heat Exchanger
 
 
 
 
 
 
 
 
Filter-Affinity 5"   019405   5   5   5
Screen Strainer   019406   5   5   5

TLS
 
 
 
 
 
 
 
 
Power Supply 20c Detector   016940   1   1   2
Frame Grabber PCA—Squirel   019324   1   1   2
Silicon Grease   021734           2
Wavy Washers   021330   4   4   12
Rubber Washers   021735   4   4   12
IsoPost Assembly   018901           1
Isopost PCA   013418           1
TLS PC   020083           1
Video Card   019419   —   1   1
TLSCC   018283           1
X-ray Source Assy-60'cable   021242       1   1
HT Tank   016667   —   1   1
Generator Console   016669       1   1
HT Controller Board   020547           1
LF-RAC PCA   020548           1

Couch
 
 
 
 
 
 
 
 
Electronics Tray   021923           1
Axum Pendant   020656   1   1   2
Pendant—non AXUM   020501   1        
AXUM Display   020657       1   1
Pendant Holder   020957           1
Encoder 40"   021924   1   1   1

74

PART DESCRIPTION
   PART
NO.
   AGENT
SPARE PARTS
KIT A
   AGENT
SPARE PARTS
KIT B
   AGENT SPARE PARTS
KIT C
Limit Switch   021927   1   1   1
Serial Connection Board   021921   —   1   1

Robot
 
 
 
 
 
 
 
 
Kuka Cable Support (Tennis Raquet)   021127           1
KUKA PC   021215           1
KUKA PC CDROM   021732           1
KUKA PC HDD   021733   1   1   1
RDW Board   021729       1   1
DSE Board   021730       1   1
MFC2 Board   021731       1   1
Battery   021619   2   2   4
Fuse Kit   021620           2

SGI
 
 
 
 
 
 
 
 
Tape Drive 4mm 20GB   017681   1   1   1
Hard Drive 73GB   020534       1   1
Front Panel LED   021737   1   1   1

ESCC
 
 
 
 
 
 
 
 
ESCC Assy—AXUM   020575           1
Fuse 1A 3AG Fast Acting   014125           10
Fuse .25A 3AG Fast Acting   014124           10
Main Board PCA—AXUM   020477   1   1   1
ESCC/ISCC Interface   013510   1   1   1
Adapter Board   016122   1   1   1
Power Supply   018361           1

Synchrony
 
 
 
 
 
 
 
 
Break out Box   020885           1
Synchrony PC   020082           1

Power Distribution Unit (PDU)
 
 
 
 
 
 
 
 
LED Bulb, 120V, Amber   013580           5
Bulb, 60V, Incand, Clr   018540           5

Operator Console
 
 
 
 
 
 
 
 
Operator Console   019183           1
Bulb, 24V, Incand, Clr t31/4   013590           10
LED Bulb, 24V, White   019196           2

Cables
 
 
 
 
 
 
 
 
Gun HV Cable Assy   018370   1   1   1

75

PART DESCRIPTION
   PART
NO.
   AGENT
SPARE PARTS
KIT A
   AGENT
SPARE PARTS
KIT B
   AGENT SPARE PARTS
KIT C
Dose Cable   020015   1   1   1

CyRIS
 
 
 
 
 
 
 
 
    TBD            

Miscellaneous
 
 
 
 
 
 
 
 
Contact Block 2NO   013585       2   2
Keyswitch   010862       1   1
Pushbutton   013571       1   1
   
 
 
 
Total Kit Prices:   TBD   TBD   TBD
   
 
 
 

76



QuickLinks

ACCURAY INCORPORATED INTERNATIONAL SALES AGENT AGREEMENT
EXHIBIT A PRODUCTS AND SERVICES (INCLUDING CURRENT PRICING) BASE CYBERKNIFE® G4 CONFIGURATION—ACCURAY LIST PRICE
BASE CYBERKNIFE® G3 CONFIGURATION—ACCURAY LIST PRICE
EXHIBIT B PRODUCT AND SERVICE MINIMUM VOLUMES
EXHIBIT C SALES AGENT COMMISSION CyberKnife System Commission
Service Agreement Commission
EXHIBIT D TRAINING
EXHIBIT E ACCURAY INTERNATIONAL SERVICE AGREEMENTS TERMS SUMMARY ±
SAMPLE SERVICE AGREEMENTS
CYBERKNIFE® INTERNATIONAL DIAMOND ELITE SERVICE AGREEMENT
SIGNATURE PAGE FOLLOWS
ACCURAY CYBERKNIFE® INTERNATIONAL RUBY ELITE SERVICE AGREEMENT
ACCURAY CYBERKNIFE® INTERNATIONAL EMERALD ELITE SERVICE AGREEMENT
CYBERKNIFE® INTERNATIONAL EXTENDED PARTS WARRANTY AGREEMENT
ACCURAY CYBERKNIFE® ADDITIONAL DIAMOND UPGRADE AGREEMENT
EXHIBIT F DISPUTE RESOLUTION
EXHIBIT G PARTS LIST AND PRICES

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 10.30


CYBERKNIFE® G4 PURCHASE AGREEMENT

Customer:   Account Number:
                        ("Customer")    
Contact Name:   Quote ID:

Address:
 
Revision Number:

 
 
Revision Date:

RSD Contact:
 
Expiration Date:

Only valid for primary customer named above. This CyberKnife Purchase Agreement ("Agreement") is non-transferable and not for export outside the U.S.

CyberKnife® Robotic Radiosurgery System

A.   Quote
 
   Part Description
   Quantity
   Unit Price
   Line Total
  
1.   CyberKnife Robotic Radiosurgery System (See B Below)   1   $ 4,150,000.00   $ 4,150,000.00  
2.   Additional Options Total (See C Below)             $ 0.00  
3.   Special Promotion if this Agreement is signed by the Expiration Date. [However, should Customer, at any time prior to installation, decide not to purchase the InView Workstation or the MultiPlan Workstation, the additional discount will be cancelled.]                  
4.   Special Q2 2007 RoboCouch™ Patient Positioning System Promotion if Customer Purchases the RoboCouch in Section C.1. below. [ONLY APPLIES IF ROBOCOUCH IS PURCHASED.]             ($ 200,000.00 )
                 
 
              Total Due   $ 3,950,000.00  
                 
 

1

B.   The Base CyberKnife System—G4 Configuration                                                                              $4,150, 000.00
1.   Robotic Treatment Delivery System
    1.1.   Image-Guidance System
      1.1.1.   Diagnostic X-ray sources
      1.1.2.   In-Floor Amorphous Silicon X-Ray Detectors
    1.2.   600 MU/minute Linear Accelerator (Linac) with secondary collimators
    1.3   Robotic Manipulator
    1.4   Axum® Treatment Couch & Automatic Patient Positioning System
      1.4.1.   Two (2) CT Overlay Kits included
    1.5   Treatment Delivery Control Console

2.
 
Treatment Planning System
    2.1.   Two (2) MultiPlan™ Treatment Planning Workstations
    2.2.   CK Remote™ Open Architecture

3.
 
Clinical Application Modules
    3.1.   Synchrony® Respiratory Tracking System
    3.2.   Xsight™ Spine Tracking System

4.
 
Data Management Systems
    4.1.   Patient Archive and Restore System
C.   Additional Options
    o   RoboCouch Patient Positioning System   $800,000.00

 
 
When selecting RoboCouch Patient Positioning System, the Patient Treatment Couch (Section B.1.4) is removed from the Base CyberKnife System and replaced with the RoboCouch Patient Positioning System.

 
 
 
 
Patient Treatment Couch Credit
 
($350,000.00)
    o   MultiPlan Workstation       $125,000.00 each

 
 
 
 
Number of Additional MultiPlan Workstations:
 
MultiPlan Subtotal
 
$0.00
    o   InView Workstation       $45,000.00 each

 
 
 
 
Number of Additional InView Workstations:
 
InView Subtotal
 
$0.00
               
            Additional Options Total   $0.00
               

2

D.   Pricing and Inclusions
1.   Payment Terms:
    1.1.   $50,000 with the signed Letter of Intent between Accuray and the Customer ("LOI").
    1.2.   30% of the total amounts specified herein ("Purchase Price") less $50,000 LOI-payment, due with the Agreement.
    1.3.   60% of Purchase Price due upon delivery of the CyberKnife System (DATE.)
    1.4.   10% of the Purchase Price due upon Acceptance (as defined in Section 7 of the Accuray Terms and Conditions set forth below in Section G).

2.
 
Shipping Terms:
    2.1.   F.O.B. Destination.
    2.2.   Anticipated delivery scheduled for DATE.

3.
 
Site Preparation and Installation:
    3.1.   Site preparation at Customer's expense.
    3.2.   Installation included at Accuray's expense.

4.
 
Warranty:
    4.1.   1-year warranty includes all parts and labor.

5.
 
Training:
    5.1.   Training provided for up to 5 personnel (e.g. surgeon, radiation oncologist, physicist, radiation therapist). Hotel accommodations and travel costs are not included.
    5.2.   Additional attendees will be charged according to the then current training price list.
E.   Contingencies

        There are no contingencies.

F.   Preventive Maintenance and Service Contracts

3

    First Year (Warranty Year)   No Payment
    Second Year   $275,000.00 per year
    Third Year   $275,000.00 per year
    Fourth Year   $275,000.00 per year
    Fifth Year (optional)   $275,000.00 per year
    First Year (Warranty Year)   No Payment
    Second Year   $460,000.00 per year
    Third Year   $460,000.00 per year
    Fourth Year   $460,000.00 per year
    Fifth Year (optional)   $460,000.00 per year

        Payment Terms:    See Service Contracts, provided separately.

G.   Accuray Terms and Conditions of Sale
1.
Definitions; Terms.    "Accuray Products" means all products manufactured by Accuray Incorporated ("Accuray") including, but not limited to, Accuray-produced hardware, software, and firmware. "Accuray Services" means services of Accuray related to the warranty provided herein, but shall not include any services relating to a Preventive Maintenance and Service Contract between Customer and Accuray, which shall be governed by the terms of such separate Preventive Maintenance and Service Contract. "Accuray System" means the CyberKnife System provided by Accuray to Customer hereunder, which includes component parts produced by other manufacturers. "Accuray Update" means any update offered by Accuray to any Accuray Product or Accuray System. "Accuray Upgrade" means any upgrade offered by Accuray to any Accuray Product or Accuray System. "Specifications" means the user manuals, reference guides, and configuration documentation provided by Accuray to Customer in writing, as updated from time to time by Accuray. All Accuray Products, Accuray Services, Accuray System, Accuray Upgrades and Accuray Updates (collectively, "Accuray Deliverables") are furnished only on the terms and conditions stated herein. Any different or additional terms contained in Customer's purchase order, Purchase Term Agreement or similar documents shall not bind Accuray.

2.
Terms of Payment.

2.1.
Purchase Price; Payment Schedule.    The Purchase Prices for the Accuray Deliverables are as set forth in Section A above. Purchase Prices are valid only for the item on which such prices are specified. The Purchase Prices are exclusive of all taxes (including, but not limited to, any sales tax, use tax, or value- added tax or other similar tax), license fees, customs fees, duties, and similar charges. Customer shall pay for the Accuray Deliverables in accordance with the payment schedule set forth in Section D above and the terms of this Section 2, provided that if installation or Acceptance (as defined in Section 7) is delayed by Customer for reasons not attributable to Accuray, the payment amount due upon Acceptance of the applicable Accuray Deliverable shall be due and payable the earlier of (i) 60 calendar days after delivery or (ii) Acceptance. If the delivery of an Accuray Deliverable is delayed by Customer for reasons not attributable to Accuray, Customer shall pay Accuray's reasonable cost to store such deliverable (including, but not limited to, insurance and demurrage charges) and amounts due on the estimated delivery date specified in Section D above for such deliverable shall become due and payable on such date. Accuray's performance hereunder is subject to Accuray's approval of Customer's credit.

4

3.
Shipment.    Shipments are F.O.B. Destination. Customer shall inspect arriving shipments and report any visible damage or shortages to Accuray within 48 hours after delivery and any concealed damage within 10 days after delivery. If Customer does not report damage in accordance with the previous sentence, Customer shall bear the risk of loss with respect to such damage. For shipments outside the United States, Customer shall procure all necessary permits and licenses for such shipments and for compliance with any government regulations applicable at the destination. Delivery and installation dates set forth in Section D above, or otherwise agreed upon in writing by the parties are approximate. Accuray shall use reasonable efforts to meet all such delivery and installation dates but shall not be liable for delays.

4.
Installation.

4.1.
Installation by Accuray.    Accuray will notify Customer approximately 90 calendar days prior to the scheduled delivery of the Accuray System to coordinate installation details. Installation will be performed by Accuray. Accuray will assemble and test the Accuray System. Operation of the Accuray System by Accuray, as necessary for completion of installation or acceptance tests, is subject to Customer providing adequate radiation shielding protection and other site preparations required for the safety and protection of personnel and the Accuray Deliverables. Upon completion of the installation, Accuray's representatives will demonstrate proper machine operation by performing Accuray's acceptance test procedure. For clarity, Accuray is not responsible for any commissioning of the Accuray System, including, but not limited to, any calibration or radiation surveys. Such commissioning shall be the sole responsibility of Customer.

4.2.
Site Preparation.    Customer will be responsible for having the building, utilities, lighting, ventilation, air conditioning, mounting facilities, all necessary radiation shielding, patient positioning lasers, closed-caption TV system, intercom, and access to the room completed on the estimated delivery date and ready for installation of the Accuray System. Accuray will have no responsibility for any matter affecting or related to the adequacy of architectural design, utility service design, the radiation protection walls and barriers, patient viewing devices, or facility personnel safety devices at Customer's site. Architectural design, radiation protection walls and barriers and other safety devices must be approved by an expert in the radiation field and shall be Customer's responsibility.

5

5.
Training.

5.1.
Training.    Accuray will provide training for up to 5 Customer personnel (such personnel, collectively, the "Initial Group"). The Accuray training includes: (i) Technical Training, (ii) 1 Clinical Site Visit, and (iii) 1 on-site training session on the technical use of the Accuray System during first patient treatment, as each is described below. Customer shall be responsible for the travel and living expenses of all personnel sent for training. At the request of Customer, Accuray shall train additional Customer personnel beyond the Initial Group in accordance with Accuray's then current training price list and availability.

5.2.
Training Framework and Restrictions.    Due to logistical considerations, Accuray can only offer 1 Clinical Site Visit and 1 on-site training session during first patient treatment per Customer. As set forth below, Customer shall at a minimum send a Core Group (as defined in Section 5.3.1 below) for Technical Training prior to installation. However, because completion of the Technical Training is a prerequisite to the Clinical Site Visit and because completion of Technical Training and the Clinical Site Visit are prerequisites to the on-site training session during first patient treatment, Accuray strongly recommends that Customer send its entire Initial Group to Technical Training before the Clinical Site Visit. If Customer does not send its entire Initial Group to Technical Training prior to the Clinical Site Visit, then only Customer's Core Group personnel who have completed the Technical Training shall be able to participate in the Clinical Site Visit and subsequent on-site training session during first patient treatment. If Customer does not send its entire Initial Group to Technical Training prior to the Clinical Site Visit, then the remaining members of Customer's Initial Group shall only be eligible for Technical Training and must complete such Technical Training within 60 days of the first patient treatment or the option for such Technical Training shall be deemed waived by Customer.

5.3.
Technical Training

5.3.1.
Technical Training will occur at Accuray's training facility in Sunnyvale, California or such other regional training facility as Accuray may establish. At a minimum, Customer must include the following individuals in the first group that Customer sends to Technical Training:

(i)
at least 1 medical physicist or the individual who will be responsible for commissioning the Accuray System and performing the quality assurance testing and treatment planning at Customer's site if such individual is not a physicist; and

6

6.
Calibration and Local Requirements.

6.1.
Calibration.    Customer shall be solely responsible for all Accuray System commissioning and calibration. The dose rate and integrated dose measured by the accelerator transmission ionization chamber and dosimetry electronics must be calibrated by a qualified radiological physicist prior to use of the Accuray System for patient treatment. Customer shall be responsible for quality assurance testing and calibrating the Accuray System regularly. Customer also shall be responsible for radiation surveys which may be required by applicable law or regulation or which may be necessary to establish that radiation does not exceed safe levels. Accuray has no responsibility for any such commissioning, quality assurance testing, calibration or radiation surveys.

7

7.
Acceptance.    "Acceptance" of the Accuray System shall occur upon the earlier of (i) completion by Accuray of its acceptance test procedure that demonstrates that the Accuray System substantially conforms to the Specifications or (ii) execution of Accuray's acceptance form by Customer. In no event shall Customer or its agents use the Accuray System (or any portion thereof) for any purpose before Acceptance thereof without the express written approval of Accuray. Customer shall indemnify and hold Accuray harmless from any such use.

8.
Intellectual Property Rights Indemnity.

8.1.
Indemnity.    Accuray shall at its expense defend any action brought against Customer with respect to a claim by a third party that the design or manufacture of any Accuray Deliverable infringes any valid patent or other intellectual property right of the United States, and shall pay any damages awarded by a court arising from such claim, provided Customer gives Accuray prompt written notice of such claim and full authority, information and assistance in settling or defending such claim.

8.2.
Certain Remedies.    If a court judgment prohibits Customer's continued use of any Accuray Deliverable, or if at any time Accuray determines that any Accuray Deliverable may become subject to a cause of action for infringement, Accuray may at its expense either (i) procure a license to enable Customer to continue using such Accuracy Deliverable, (ii) replace such Accuray Deliverable with a non-infringing Accuray Deliverable, or (iii) remove such Accuray Deliverable and refund a pro-rated portion of the Purchase Price paid by the Customer for such Accuray Deliverable, which portion shall be calculated on a straight-line basis over a 5-year period beginning on the date of Acceptance (i.e., removal of the Accuray Deliverable at the end of the first year after Acceptance would result in a refund of 80% of the Purchase Price). Accuray shall have no liability hereunder with respect to any claims settled by Customer without Accuray's prior written consent.

8.3.
Exclusion.    Accuray excludes from any liability hereunder, and Customer shall indemnify and hold Accuray harmless from and against any expense, loss or liability resulting from claimed infringement of any third party intellectual property rights: (i) arising from the use of an Accuray Deliverable other than in accordance with the Specifications, (ii) based on the combination of equipment, processes, programming applications or materials not furnished by Accuray with the Accuray Deliverables, (iii) arising out of compliance by Accuray with Customer's designs, specifications or instructions, or (iv) damages incurred as a result of Customer's continued use of an Accuray Deliverable after Accuray has recommended in writing that Customer suspend such use. This Section 8 states Accuray's entire liability for any claim based upon or related to any alleged infringement by an Accuray Deliverable of intellectual property right.

9.
Warranty.

9.1.
Warranty.    Accuray warrants that (i) the hardware components of the Accuray Deliverables will be free from defects in material and workmanship and (ii) the hardware and software

8

10.
Mutual Indemnity.    If it is determined by a court in accordance with applicable law that the negligence of a party (the "Responsible Party"), its employees or agents causes damage or injury to a third party, the Responsible Party shall pay the other party for any damages awarded by a court or agreed to by the Responsible Party in a settlement arising from such claims to the extent such damages reflect the Responsible Party's relative fault therefor. Notwithstanding the foregoing, Accuray shall have no responsibility whatsoever for, and Customer shall indemnify and hold Accuray harmless from, all damage or injury to third parties which (i) results from the use, operation or service of any Accuray Deliverable by other than Accuray personnel prior to Acceptance and completion of the radiation survey by Customer, (ii) results from or relates to any use, operation or service of any Accuray Deliverable by a party not authorized to perform such service by Accuray, or (iii) any use by Customer or its agents of an Accuray Deliverable contrary to any written warning or instruction given by Accuray to Customer.

11.
Damages.    IN NO EVENT SHALL ACCURAY BE LIABLE FOR INCIDENTAL, CONSEQUENTIAL OR SPECIAL DAMAGES ARISING FROM OR RELATED TO THIS AGREEMENT EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. ACCURAY'S AGGREGATE LIABILITY ARISING FROM OR RELATED TO THIS AGREEMENT SHALL NOT EXCEED THE PAYMENT RECEIVED BY ACCURAY FOR THE ACCURAY DELIVERABLE RESULTING IN THE LOSS OR DAMAGE CLAIMED.

9

12.
Intellectual Property Ownership and License.    Accuray and its licensors retain all intellectual property rights in the Accuray Deliverables. Accuray hereby grants Customer a nonexclusive, non-transferable, royalty-free right to use the software provided in connection with the Accuray Deliverables only in machine readable form and only in combination with the Accuray Deliverable with which such software is provided. No such software shall be copied or decompiled in whole or in part by Customer, and Customer shall not disclose or provide any such software, or any portion thereof, to any third party. All rights in intellectual property not expressly granted hereunder are reserved by the owner of such intellectual property.

13.
Trademarks.    Accuray is the owner of the trademark CyberKnife® and related trademarks in the U.S. and around the world. If Customer wishes to use the CyberKnife or other Accuray trademarks in association with a business name, Accuray requires that Customer execute Accuray's standard royalty-free Trademark License Agreement specifying the requirements for and the nature of the acceptable use. Without the necessary license, Customer is not entitled to use the Accuray marks with a business name or to otherwise use language which would suggest a license with Accuray.

14.
Confidentiality.    All drawings, designs, specifications, manuals and software and other non-public information furnished to the Customer by Accuray hereunder shall remain the confidential and proprietary property of Accuray ("Confidential Information"). All such information, except as may be found in the public domain, shall be held in confidence by Customer and shall not be disclosed by Customer to any third parties or used by Customer other than in its operation of the Accuray Deliverables in accordance with the Specifications.

15.
Patient Information.

15.1.
Compliance with HIPAA.    In performing any services hereunder, Accuray may receive from Customer patient healthcare, billing, or other confidential patient information ("Patient Information"). Patient Information, as the term is used herein, includes all "Protected Health Information," as that term is defined in 45 CFR 164.501. Customer shall identify to Accuray in writing all such information when Customer provides such information to Accuray, and Accuray shall use Patient Information so identified by Customer only as necessary to provide the services to Customer as set forth herein. Accuray shall comply with all federal laws, rules and regulations relating to the confidentiality of Patient Information, including the applicable provisions of the privacy regulations promulgated pursuant to Health Insurance Portability and Accountability Act of 1996 ("HIPAA").

15.2.
De-Identified Information.    Customer shall provide Accuray with only de-identified Protected Health Information, in accordance with the requirements of 45 CFR 164.514. Any information provided to or shared with Accuray shall have all identifying patient information removed, including, but not limited to, names, addresses, zip codes, telephone numbers, social security numbers, medical record numbers, health plan numbers, and so on, and shall be assigned a de-identified record code in accordance with 45 CFR 164.514(c).

16.
Cancellations.    All payments made hereunder are non-refundable and no order accepted by Accuray may be canceled by Customer without Accuray's prior written consent. If Customer requests cancellation of any order and Accuray consents to such request, Customer agrees to pay Accuray a charge determined by Accuray to cover the reasonable costs of order processing, handling, re-testing, shipping, storage, repackaging and similar activities incurred by Accuray in connection with such cancellation.

17.
Assignment.    Neither party may assign this Agreement without the other party's prior written consent, except that Accuray may assign this Agreement without Customer's consent to an affiliate and either party may assign this Agreement without the other party's consent to a successor or

10

18.
Dispute Resolution.    Any dispute between Accuray and Customer arising from or related to this Agreement, excluding disputes regarding payment or Customer's unauthorized use or disclosure of Accuray Confidential Information or intellectual property, shall be settled as follows. The party initiating the dispute shall provide written notification to the other party identifying in detail the nature of the dispute. The other party shall respond in writing to the notification within 30 calendar days from the date of receipt of the notification. The party initiating the dispute shall have an additional 30 calendar days after the receipt of the response to either accept the resolution offered by the other party or escalate the matter. If the dispute is not resolved within the foregoing 30-day period, the parties shall escalate the claim to the President of Accuray and the Chief Executive Officer of Customer. Each shall negotiate in good faith and use his or her best efforts to resolve such dispute or claim. If the dispute is not resolved within 15 calendar days after escalation to the President and Chief Executive Officer as described above, then either party may pursue resolution by any means available at law or equity.

19.
Notices.    All notices required or permitted under this Agreement shall be in writing and if delivered in person, effective immediately, if delivered by reputable national or international overnight delivery service, effective 2 business days after deposit with carrier, or if delivered by registered or certified mail, postage prepaid with return receipt requested, effective 5 business days after deposit with carrier. All communications will be sent to the addresses set forth below or to such other address as may be specified by either party in accordance with this section.

To Accuray:
   To Customer:
Accuray Incorporated
Attention: Chief Financial Officer
1310 Chesapeake Terrace
Sunnyvale, CA 94089
Copy to: General Counsel		    
20.
Force Majeure.    Neither party will be responsible for any failure or delay in its performance under this Agreement (except for the payment of money) due to causes beyond its reasonable control, including, but not limited to, labor disputes, strike, lockout, riot, war, fire, acts of God, accident, failure or breakdown of components necessary for order completion; subcontractor or supplier caused delays; curtailment of or failure to obtain sufficient electrical or other energy, raw materials or supplies; or compliance with any law, regulation or order, whether valid or invalid.

21.
Governing Law.    The rights and obligations of the parties under this Agreement shall be governed in all respects by the laws of the United States and the State of California without regard to conflicts of laws principles that would require the application of the laws of any other jurisdiction. No action, regardless of form, arising out of or related to any Accuray Deliverable may be brought by Customer more than 1 year after Customer has or should have become aware of the cause of action.

22.
Waiver.    The waiver of any breach or default of any provision of this Agreement will not constitute a waiver of any other right hereunder or of any subsequent breach or default.

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23.
Severability.    If any provision of this Agreement is held invalid or unenforceable by a court of competent jurisdiction, the remaining provisions of this Agreement will remain in full force and effect, and the provision affected will be construed so as to be enforceable to the maximum extent permissible by law.

24.
Amendments.    Any amendment or modification of this Agreement must be made in writing and signed by duly authorized representatives of each party. For Accuray, a duly authorized representative must be any of the following: CEO, CFO, or General Counsel.

25.
Counterparts.    This Agreement may be executed in counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

26.
Entire Agreement.    This Agreement contains the entire agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior understandings, representations and warranties, written and oral. In the event of a conflict or inconsistency between the terms stated in a purchase order or other similar document and this Agreement, the terms of this Agreement shall govern.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their officers, thereunto duly authorized. The parties acknowledge and agree that this Agreement does not become effective until it has been signed by all parties indicated below.

ACCURAY INCORPORATED   CUSTOMER

By:                    
 
By:                    

Print Name: Robert E. McNamara                   
 
Print Name:                    

Title: Senior Vice President & Chief Financial Officer  
 
Title:                    

Date:                    
 
Date:                    

The undersigned acknowledges that the terms and conditions of this Agreement meet the policies and procedures of Accuray.

By:                      
Darren J. Milliken
General Counsel

Date:
 
                   

Please make sure that you have selected a Service Contract (Emerald Elite or Diamond Elite, Section F above). A separate Service Contract is provided for your signature.

Please attach payment to this signed Agreement and forward to:

Accuray Incorporated
ATTN: Contracts Administration
1310 Chesapeake Terrace
Sunnyvale, CA 94089
T. 408.716.4600
F. 408.716.4620

SIGNATURE PAGE TO ACCURAY CYBERKNIFE G4 PURCHASE AGREEMENT

13



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CYBERKNIFE® G4 PURCHASE AGREEMENT

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Exhibit 10.31


Accuray™ CyberKnife® Diamond Elite Service Agreement

1.
Scope of Service.    This Diamond Elite Service Agreement ("Agreement") is made by and between ACCURAY INCORPORATED ("Accuray"), a California corporation, located at 1310 Chesapeake Terrace, Sunnyvale, CA 94089, and                                      ("Customer"), located at                                    , for Accuray to provide planned maintenance service when scheduled by Accuray and corrective maintenance service when requested by Customer to maintain the CyberKnife System installed at Customer's site at                                    ("System") so that it performs substantially in accordance with the Specifications (User Manuals and Reference Guides) defined for the System revision as installed and/or upgraded.

1.1.
Effective Date.    This Agreement shall be effective as of demonstration of acceptance testing by Accuray as described in the CyberKnife Quotation and Purchase Agreement dated                                    , 2006 and signed by the parties, or the expiration of any prior service or warranty agreement, if applicable.

1.2.
Definitions:

1.2.1.
Bug Fix means an error correction or minor change in the existing software and/or hardware configuration that is required in order to enable the existing software and/or hardware configuration to perform to the existing functional specification(s).

1.2.2.
Update means a release of the software or a change to the existing hardware containing substantially only error corrections, minor new features, functionality and/or performance improvements, but that would not be required for the existing software and/or hardware configuration to perform to the existing functional specification(s) of that particular product. Such Update would not necessarily replace or extend the life of the existing software and/or hardware configuration of the product. For example, an Update of software would be indicated where the version number is changed by incrementing the numeric digits to the right of the decimal point, e.g., versions 1.1, 1.2, 1.3, and 1.4 would each be Updates of the software.

1.2.3.
Upgrade means a release of the software or a change to the existing hardware containing major new features, functionality and/or performance improvements that would enable the existing software and/or hardware configuration to perform to the level of the next version of the software and/or hardware configuration and designed to replace the older software and/or hardware version of the same product and/or extend the useful life of that product. For example, an Upgrade of software would be indicated where the version number is changed by incrementing the numeric digits to the left of the decimal point, e.g., versions 1.0, 2.0, 3.0, and 4.0 would each be Upgrades of the software.

1.2.4.
New Version/New Product means a release of the software or a change to the hardware that may or may not work with the existing software and/or hardware configuration, but that in its totality requires, in Accuray's sole opinion, enough change to the software and/or hardware configuration to be considered a New Version or New Product.

1.2.5.
Exclusions Upgrades that have a list price of greater than $200,000 per Upgrade are specifically excluded from this Agreement. However, Accuray may at its discretion, offer Upgrades that have a higher list price, as more than a single Upgrade to Customers under this Agreement. If Accuray offers Upgrades that have a higher list

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2.
Service Period.

2.1.
The "Agreement Term" shall be for an initial period of four (4) years (years 1, 2, 3, & 4) from the Effective Date of this Agreement, including the warranty year, with an optional fifth year. There is no payment required under this Agreement in the first year ("Year 1" or the "Warranty Year"). Customer may elect to receive an additional optional fifth year (the "Optional Year 5") on terms that are defined below (Section 3.4). Billing will commence on the day following the anniversary of the Effective Date of this Agreement.

2.2.
The "Agreement Price" shall be one of the following, at Customer's option (indicate preferred option by checking a box, if no selection is made Customer will be billed on an annual basis). The Agreement Price shall cover the Base CyberKnife System, up to two (2) Multiplan Workstations (including the MultiPlan Workstations in the Base CyberKnife System), and up to three (3) InView Workstations. If Customer has more than two (2) MultiPlan Workstations or three (3) InView Workstations installed, then an additional charge of $18,750.00 per year per MultiPlan and $6,750.00 per year per InView, as applicable, will be added by Accuray to the Agreement Price set forth below.

o
ANNUAL: $460,000 per year, paid yearly in advance, for years 2, 3, 4 and Optional Year 5.

o
QUARTERLY: $120,000 per quarter, paid at the beginning of each quarter, for years 2, 3, 4 and Optional Year 5.

o
MONTHLY: $41,000 per month, paid at the beginning of each month, for years 2, 3, 4 and Optional Year 5.

3.
Product Upgrades

3.1.
This Agreement is available only for equipment that was purchased directly from Accuray, installed by Accuray engineers and has not been moved from its original installation location or disconnected from its original power supply without written permission or direction from Accuray. This Agreement must immediately commence at the expiration of the factory warranty period or prior service agreement. In the event of lapse of service, Customer shall have the right to reinstate such service by payment of the current service fee for the then-current service period in addition to the reasonable costs for Accuray to inspect, repair, and return the System to the state at which the System would have been had a service agreement been in force continuously since the expiration of the System factory warranty.

3.2.
Under this Agreement, Customer may receive Upgrades, when and if available in years 2, 3, and 4, up to two (2) Upgrades per year. Customer acknowledges and agrees that this in no way obligates Accuray to provide a minimum number of Upgrades and that there may be some years in which no Upgrades will be offered; however, in contrast, there may be years in which Accuray will offer multiple Upgrades and Customer may select up to two (2) of such Upgrades. Customer may receive an available Upgrade during Year 1 (the Warranty Year), or receive an additional Upgrade during years 2 or 3, and such Upgrade will replace

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4.
Software Maintenance (Bug Fixes and Updates)

4.1.
For the duration of the Agreement Term, Accuray will provide software Updates and Bug Fixes for software that is included as a part of the CyberKnife System. These Updates and Bug Fixes may be transmitted electronically to Customer for subsequent installation by Customer technicians. Corrections of significant complexity, however, may be installed by Accuray service engineers. Software maintenance will be included only for those product features that were originally purchased with the System or subsequently purchased separately by Customer from Accuray or taken under this Agreement as a System Upgrade.

4.2.
During the Agreement Term, Accuray shall provide Customer with any and all applicable product notices regarding maintenance, support, Upgrades, Updates and Bug Fixes generally circulated by Accuray to Accuray Customers with CyberKnife installations.

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5.
System Quality Assurance Testing

5.1.
The maintenance and support services provided by Accuray under this Agreement do not include any System Quality Assurance Testing ("QA"). System commissioning and QA are the sole responsibility of Customer, and Customer is advised to perform QA on a regular and ongoing basis. In addition, Customer is required to maintain up-to-date QA logs. If Customer fails to perform the appropriate QA of the System, and to record such QA in the appropriate logs, Accuray, upon giving Notice to Customer in accordance with Section 16 (Notices) of this Agreement, reserves the right to terminate this Agreement.

5.2.
Prior to performing any scheduled service or Preventive Maintenance on the System, Accuray will review Customer's QA logs, and if such logs are not up-to-date, Accuray may refuse to service the System. In the event that the requested service is necessary to bring the System to a point where QA can be performed, Accuray will proceed with the service only after Customer signs a written acknowledgement that QA is Customer's sole responsibility and that appropriate QA will be performed prior to conducting any patient treatments.

6.
Service Coverage Period

6.1.
The Service Coverage Period will be the hours of 8:00 AM to 9:00 PM local time Monday through Saturday (excluding Federal holidays). Customer has the option to request service during non-normal hours, in which case Customer shall pay the overtime premium portion of the non-normal hours worked. (Non-normal hourly rate minus normal hourly rate.) Accuray shall provide Customer with contact points to request service on a 24-hours-a-day, 7-days-a-week ("24/7") basis. Accuray, directly or remotely as the situation requires, either with its own personnel or through contractors, shall initially respond within one (1) hour of receipt of a call for service. The initial response shall include telephone support, including (as applicable) consultations, diagnostic assistance and advice on the use and maintenance of the System. In the event that the service issue cannot be resolved by telephone or other remote response, then Accuray will respond on-site. On-site response times will vary depending upon the level of service required.

6.1.1.
Service Levels

6.1.1.1.
Level A:

6.1.1.1.1.
    System is down and Customer is unable to treat patients.

6.1.1.1.2.
    On-site support within 24 hours.

6.1.1.2.
Level B:

6.1.1.2.1.
    System is functioning, Customer is able to treat patients, but with some limitations or interruptions when treating patients.

6.1.1.2.2.
    On-site support within 72 hours.

6.1.1.3.
Level C:

6.1.1.3.1.
    System is functioning, Customer is able to treat patients, but with minor inconveniences or observations that require further investigation.

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7.
Uptime

7.1.
Uptime/Downtime.    Uptime shall mean any time that the System is not down ("Uptime"). A down System means that a patient cannot be treated due to an actual malfunction of the System and that the System is immediately available for an Accuray service engineer to work on it ("Downtime").

7.2.
Guarantee.    Accuray will guarantee that the System shall have an Uptime percentage of at least 98% of normal treatment hours on an annual basis during the Agreement Term. Normal treatment hours shall be from 8:00 AM to 5:00 PM local time Monday through Friday (excluding Federal holidays). The first 12-month period will start as of the Effective Date of this Agreement.

7.3.
Calculation.    Downtime will be calculated from the time a down System call is received by Accuray to the time of repair, counting normal treatment hours. The System will be calculated as up when the System repair has been completed and the System is available for treatment during normal treatment hours, whether or not patients are scheduled for treatment. Scheduled Preventive Maintenance, System upgrades, and time that the System is unavailable as a result of something beyond Accuray's control, including without limitation (i) Customer's use of the System for purposes other than its intended and authorized purposes, (ii) the negligence of Customer, (iii) the failure of Customer to operate the System in accordance with the User Manuals, (iv) use by untrained operators, (v) e-Stops, power outages or the like or (vi) the negligence of any party other than Accuray, will be calculated as Uptime.

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8.
Replacement Parts

8.1.
Accuray shall make a commercially reasonable effort to supply at the time of need or stock with Accuray's regional service engineers all tools, equipment, replacement parts and Consumables as would reasonably be required by Accuray to perform the required repairs and return the System to good working order. Accuray shall make a commercially reasonable effort to maintain at its factory or service center(s) a stock of spare parts, including, in particular, long-procurement-lead-time parts.

8.2.
Replacement parts used under this Agreement may be either new manufacture or factory refurbished at Accuray's choice. All replacement parts and assemblies provided will be manufactured in accordance with Accuray's quality system, and any applicable laws and regulations. Parts replaced under this Agreement become the property of Accuray and will be disposed of by Accuray Field Service engineers. Notwithstanding the foregoing, all parts that are considered by local regulation to be "hazardous" or "contaminated" waste, or material that requires "special handling" will be disposed of or retained by Customer at Customer's facility.

9.
Exceptions

9.1.
All obligations of Accuray under this Agreement shall be suspended and/or cease in the event of:

9.1.1.
Damage from fire, accident, abuse, floods, lightning, natural disasters or other calamities commonly defined as "Acts of God".

9.1.2.
The intentional abuse of the System or negligence by Customer.

9.1.3.
System hardware or software alterations not authorized by Accuray including any move of the System from its installation site (other than by or at the express written direction of Accuray).

9.1.4.
Use of the System for other than its intended and authorized purposes, or in a manner not consistent with Accuray's User Manuals, including maintenance of the necessary operating environment and line current conditions, and the failure of Customer to cure such matter within thirty (30) days of actual written notice thereof from Accuray.

9.1.5.
Failure to make payments in accordance with the payment schedule set forth above in Section 2.2.

9.2.
If corrective action or adjustment of the System is performed by Customer's staff at the direction of Accuray, such action or adjustment shall not reduce Accuray's responsibility under this Agreement or liability for the performance of the System.

10.
Cancellation.    Customer shall have the right to cancel and terminate this Agreement, with or without cause, at any time upon thirty (30) days' prior written notice to Accuray. There shall be no penalty for such cancellation and termination. Notwithstanding the foregoing, if Customer has ordered an Upgrade(s) in that year, and the payments made for that year at the time of

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11.
Breach.    Either party reserves the right to cancel this Agreement by written notice upon the breach of the other. An event of breach may include, but is not limited to, failure to make payment due under this Agreement, failure to provide access as required to execute the services contemplated by this Agreement, failure to perform and log QA, or the filing of notice under Federal bankruptcy laws. If the breaching party is unable or unwilling to cure or make a good faith effort to cure such breach within thirty (30) days of actual written notice the other party shall be relieved of all obligations under this Agreement and may terminate. Termination shall not be the terminating party's exclusive remedy, and the terminating party shall retain all other available legal and equitable remedies.

12.
Limitation of Liability and Warranty

12.1.
If it is determined in accordance with applicable law that any fault or neglect of either party, its employees or agents, substantially contributes to damage or injury to third parties, such party shall be responsible in such proportion as reflects its relative fault therefore, and shall hold the other party harmless from any liability or damages arising out of such fault or neglect. Accuray's liability arising under this Agreement shall be limited to an amount not to exceed the payment(s) received by Accuray for the then current Agreement year. In addition, Accuray shall not be liable to Customer in the event that Customer's or any third party's acts or omissions contributed in any way to any loss it sustained or the loss or damage is due to an act of God or other causes beyond its reasonable control. IN NO EVENT WILL ACCURAY BE LIABLE TO CUSTOMER FOR ANY LOST PROFITS, LOST SAVINGS, LOST REVENUES, SPECIAL, INDIRECT, INCIDENTAL DAMAGES OR OTHER CONSEQUENTIAL DAMAGES ARISING OUT OF OR IN CONNECTION WITH THE AGREEMENT, DOWNTIME OR THE USE OR PERFORMANCE OF THE ACCURAY SYSTEM, ACCURAY PRODUCTS, ACCURAY UPDATES OR ACCURAY UPGRADES.

12.2.
This is a service agreement. THERE ARE NO INCLUDED OR IMPLIED ACCURAY WARRANTIES OF PRODUCT FITNESS FOR A PARTICULAR PURPOSE OR MERCHANTABILITY.

13.
Patient Information.

13.1.
In performing the services hereunder, Accuray may receive from Customer, or create or receive on behalf of Customer, patient healthcare, billing, or other confidential patient information ("Patient Information"). Patient Information, as the term is used herein, includes all "Protected Health Information," as that term is defined in 45 CFR 164.501. Accuray shall use Patient Information only as necessary to provide the services to Customer as set forth in this Agreement. Accuray shall comply with all federal laws, rules and regulations relating to the confidentiality of Patient Information, including the applicable provisions of the privacy regulations promulgated pursuant to Health Insurance Portability and Accountability Act of 1996 ("HIPAA").

13.2.
Customer shall provide Accuray with only de-identified Protected Health Information, in accordance with the requirements of 45 CFR 164.514. Any information provided to or shared with Accuray in connection with this Agreement shall have all identifying patient

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14.
Assignment.    Neither party may assign this Agreement without the other party's prior written consent, except that Accuray may assign this Agreement, without Customer's consent, to an affiliate or to a successor or acquirer, as the case may be, in connection with a merger or acquisition, or the sale of all or substantially all of Accuray's assets or the sale of that portion of Accuray's business to which this Agreement relates. Subject to the foregoing, this Agreement will bind and inure to the benefit of the parties' permitted successors and assigns.

15.
Disputes and Governing Laws

15.1.
In the event that a dispute arises between Accuray and Customer with respect to any subject matter governed by this Agreement, such dispute shall be settled as follows. If either party shall have any dispute with respect to this Agreement, that party shall provide written notification to the other party in the form of a claim identifying the issue or amount disputed including a detailed reason for the claim. The party against whom the claim is made shall respond in writing to the claim within 30 days from the date of receipt of the claim document. The party filing the claim shall have an additional 30 days after the receipt of the response to either accept the resolution offered by the other party or escalate the matter. If the dispute is not resolved, either party may notify the other in writing of their desire to elevate the claim to the President of Accuray and the Chief Executive Officer of Customer. Each shall negotiate in good faith and use his or her best efforts to resolve such dispute or claim. The location, format, frequency, duration and conclusion of these elevated discussions shall be left to the discretion of the representatives involved. If the negotiations do not lead to resolution of the underlying dispute or claim to the satisfaction of either party involved, then either party may pursue resolution by the courts as follows.

15.2.
All disputes arising out of or relating to this Agreement not otherwise resolved between Accuray and Customer shall be resolved in a court of competent jurisdiction, in Santa Clara County, State of California, and in no other place, provided that, in Accuray's sole discretion, such action may be heard in some other place designated by Accuray (if necessary to acquire jurisdiction over third persons), so that the dispute can be resolved in one action. Customer hereby consents to the jurisdiction of such court or courts and agrees to appear in any such action upon written notice thereof. No action, regardless of form, arising out of, or in any way connected with this Agreement may be brought by Customer more than one (1) year after the cause of action has occurred.

16.
Notices.    All notices required or permitted under this Agreement will be in writing and delivered in person, effective immediately, by overnight delivery service, effective two (2) business days after deposit with carrier, or by registered or certified mail, postage prepaid with return receipt requested, effective five (5) business days after deposit with carrier. All communications will be sent to the addresses set forth below or to such other address as may be specified by either party in writing to the other party in accordance with this Section.

To Accuray:

   To Customer:
Accuray Incorporated    
Attention: Chief Financial Officer    
1310 Chesapeake Terrace    
Sunnyvale, CA 94089    
        
with cc to: General Counsel    

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17.
Trademarks.    Accuray is the owner of the trademark CyberKnife®, and related trademarks in the U.S. and around the world. If Customer wishes to use the CyberKnife or other Accuray trademarks in association with a business name, Accuray requires that Customer execute Accuray's standard royalty-free Trademark License Agreement specifying the requirements for and the nature of the acceptable use. Without the necessary license, Customer is not entitled to use the Accuray marks with a business name or to otherwise use language which would suggest a license with Accuray.

18.
Waiver.    The waiver of any breach or default of any provision of this Agreement will not constitute a waiver of any other right hereunder or of any subsequent breach or default.

19.
Severability.    If any provision of this Agreement is held invalid or unenforceable by a court of competent jurisdiction, the remaining provisions of the Agreement will remain in full force and effect, and the provision affected will be construed so as to be enforceable to the maximum extent permissible by law.

20.
Force Majeure.    Neither party will be responsible for any failure or delay in its performance under this Agreement (except for the payment of money) due to causes beyond its reasonable control, including, but not limited to, labor disputes, strike, lockout, riot, war, fire, act of God, accident, failure or breakdown of components necessary to order completion; subcontractor, supplier or customer caused delays; inability to obtain or substantial rises in the prices of labor, materials or manufacturing facilities; curtailment of or failure to obtain sufficient electrical or other energy, raw materials or supplies; or compliance with any law, regulation or order, whether valid or invalid.

21.
Amendments.    Any amendment or modification of this Agreement must be made in writing and signed by duly authorized representatives of each party. For Accuray, a duly authorized representative must be any of the following: CEO, CFO, or General Counsel.

22.
Entire Agreement.    This Agreement contains the entire Agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior understandings, representations and warranties, written and oral. If any part of the terms and conditions stated herein are held void or unenforceable, such part will be treated as severable, leaving valid the remainder of the terms and conditions.

23.
Counterparts.    This Agreement may be executed in counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

SIGNATURE PAGE FOLLOWS

9

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the date set forth below by their duly authorized representatives. The parties acknowledge and agree that this Agreement does not become effective until it has been signed by all parties indicated below.

ACCURAY INCORPORATED
   CUSTOMER
By:
   By:
Print Name:
   Print Name:
Title:
   Title:
Date:
   Date:
    PLEASE MAKE CERTAIN THAT YOU HAVE SELECTED A PAYMENT OPTION IN ACCORDANCE WITH SECTION 2.2, ABOVE.

        The undersigned acknowledges that the terms and conditions of this Agreement meet the policies and procedures of Accuray.

Signed:
   Dated:
  General Counsel, Accuray Incorporated    

SIGNATURE PAGE TO DIAMOND ELITE SERVICE AGREEMENT

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Accuray™ CyberKnife® Diamond Elite Service Agreement

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Exhibit 10.32


ACCURAY CYBERKNIFE® EMERALD ELITE SERVICE AGREEMENT

1.
Scope of Service.    This Emerald Elite Service Agreement ("Agreement") is made by and between ACCURAY INCORPORATED ("Accuray"), a California corporation, located at 1310 Chesapeake Terrace, Sunnyvale, CA 94089, and                                      ("Customer"), located at                                    , for Accuray to provide planned maintenance service when scheduled by Accuray and corrective maintenance service when requested by Customer to maintain the CyberKnife System installed at Customer's site at                                    ("System") so that it performs substantially in accordance with the Specifications (User Manuals and Reference Guides) defined for the System revision as installed and/or upgraded.

1.1.
Effective Date.    This Agreement shall be effective as of demonstration of acceptance testing by Accuray as described in the CyberKnife Quotation and Purchase Agreement dated                                    , 2006 and signed by the parties, or the expiration of any prior service or warranty agreement, if applicable.

1.2.
Definitions:

1.2.1.
Bug Fix. means an error correction or minor change in the existing software and/or hardware configuration that is required in order to enable the existing software and/or hardware configuration to perform to the existing functional specification(s).

1.2.2.
Update. means a release of the software or a change to the existing hardware containing substantially only error corrections, minor new features, functionality and/or performance improvements, but that would not be required for the existing software and/or hardware configuration to perform to the existing functional specification(s) of that particular product. Such Update would not necessarily replace or extend the life of the existing software and/or hardware configuration of the product. For example, an Update of software would be indicated where the version number is changed by incrementing the numeric digits to the right of the decimal point, e.g., versions 1.1, 1.2, 1.3, and 1.4 would each be Updates of the software.

1.2.3.
Upgrade. means a release of the software or a change to the existing hardware containing major new features, functionality and/or performance improvements that would enable the existing software and/or hardware configuration to perform to the level of the next version of the software and/or hardware configuration and designed to replace the older software and/or hardware version of the same product and/or extend the useful life of that product. For example, an Upgrade of software would be indicated where the version number is changed by incrementing the numeric digits to the left of the decimal point, e.g., versions 1.0, 2.0, 3.0, and 4.0 would each be Upgrades of the software.

1.2.4.
New Version/New Product. means a release of the software or a change to the hardware that may or may not work with the existing software and/or hardware configuration, but that in its totality requires, in Accuray's sole opinion, enough change to the software and/or hardware configuration to be considered a New Version or New Product.

1.2.5.
Consumables. means items that are not necessarily part of the CyberKnife system, but are consumed as part of the operation of the CyberKnife system, for example fiducials.

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2.
Service Period.

2.1.
The Agreement Term. shall be for an initial period of four (4) years (years 1, 2, 3, & 4) from the Effective Date of this Agreement, including the warranty year, with an optional fifth year. There is no payment required under this Agreement in the first year ("Year 1" or the "Warranty Year"). Customer may elect to receive an additional optional fifth year (the "Optional Year 5"). Customer may exercise the option for Optional Year 5 by letter sent to Accuray, in accordance with the Notice provision set forth below, at any time up to ten (10) days before the Optional Year 5 commences. If Customer does not exercise the option, there will be no charge to Customer, and Accuray will not provide Emerald coverage for Optional Year 5. If Customer exercises the option, Accuray is obligated to provide Emerald coverage on same terms as the previous Agreement years. Billing will commence on the day following the anniversary of the Effective Date of this Agreement.

2.2.
The Agreement Price. shall be one of the following, at Customer's option (indicate preferred option by checking a box, if no selection is made Customer will be billed on an annual basis). The Agreement Price shall cover the Base CyberKnife System, up to two (2) CyRIS Multiplan Systems (including the CyRIS MultiPlan System in the Base CyberKnife System), and up to three (3) CyRIS InView Workstations. If Customer has more than two (2) CyRIS MultiPlan Systems or three (3) CyRIS InView Workstations installed, then an additional charge of $18,750.00 per year per MultiPlan and $6,750.00 per year per InView, as applicable, will be added by Accuray to the Agreement Price set forth below.

o
ANNUAL: $275,000 per year, paid yearly in advance, for years 2, 3, 4 and Optional Year 5.

o
QUARTERLY: $72,000 per quarter, paid at the beginning of each quarter, for years 2, 3, 4 and Optional Year 5.

o
MONTHLY: $25,000 per month, paid at the beginning of each month, for years 2, 3, 4 and Optional Year 5.

3.
Equipment To Be Covered.

3.1.
This Agreement is available only for equipment that was purchased directly from Accuray, installed by Accuray engineers and has not been moved from its original installation location or disconnected from its original power supply without written permission or direction from Accuray. This Agreement must immediately commence at the expiration of the factory warranty period or prior service agreement. In the event of lapse of service, Customer shall have the right to reinstate such service by payment of the current service fee for the then-current service period in addition to the reasonable costs for Accuray to inspect, repair, and return the System to the state at which the System would have been had a service agreement been in force continuously since the expiration of the System factory warranty.

4.
Software Maintenance (Bug Fixes and Updates).    

4.1.
For the duration of the Agreement Term, Accuray will provide software Updates and Bug Fixes for software that is included as a part of the CyberKnife System. These Updates and Bug Fixes may be transmitted electronically to Customer for subsequent installation by Customer technicians. Corrections of significant complexity, however, may be installed by Accuray service engineers. Software maintenance will be included only for those product features that were originally purchased with the System or subsequently purchased separately by Customer from Accuray or taken under this Agreement as a System Upgrade.

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5.
System Quality Assurance Testing.

5.1.
The maintenance and support services provided by Accuray under this Agreement do not include any System Quality Assurance Testing ("QA"). System commissioning and QA are the sole responsibility of Customer, and Customer is advised to perform QA on a regular and ongoing basis. In addition, Customer is required to maintain up-to-date QA logs. If Customer fails to perform the appropriate QA of the System, and to record such QA in the appropriate logs, Accuray, upon giving Notice to Customer in accordance with Section 16 (Notices) of this Agreement, reserves the right to terminate this Agreement.

5.2.
Prior to performing any scheduled service or Preventive Maintenance on the System, Accuray will review Customer's QA logs, and if such logs are not up-to-date, Accuray may refuse to service the System. In the event that the requested service is necessary to bring the System to a point where QA can be performed, Accuray will proceed with the service only after Customer signs a written acknowledgement that QA is Customer's sole responsibility and that appropriate QA will be performed prior to conducting any patient treatments.

6.
Service Coverage Period.

6.1.
The Service Coverage Period will be the hours of 8:00 AM to 9:00 PM local time Monday through Saturday (excluding Federal holidays). Customer has the option to request service during non-normal hours, in which case Customer shall pay the overtime premium portion of the non-normal hours worked. (Non-normal hourly rate minus normal hourly rate.) Accuray shall provide Customer with contact points to request service on a 24-hours-a-day, 7-days-a-week ("24/7") basis. Accuray, directly or remotely as the situation requires, either with its own personnel or through contractors, shall initially respond within one (1) hour of receipt of a call for service. The initial response shall include telephone support, including (as applicable) consultations, diagnostic assistance and advice on the use and maintenance of the System. In the event that the service issue cannot be resolved by telephone or other remote response, then Accuray will respond on-site. On-site response times will vary depending upon the level of service required.

6.1.1.
Service Levels

6.1.1.1.
Level A:

6.1.1.1.1.
System is down and Customer is unable to treat patients.

6.1.1.1.2.
On-site support within 24 hours.

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7.
Uptime.

7.1.
Uptime/Downtime.    Uptime shall mean any time that the System is not down ("Uptime"). A down System means that a patient cannot be treated due to an actual malfunction of the System and that the System is immediately available for an Accuray service engineer to work on it ("Downtime").

7.2.
Guarantee.    Accuray will guarantee that the System shall have an Uptime percentage of at least 95% of normal treatment hours on an annual basis during the Agreement Term. Normal treatment hours shall be from 8:00 AM to 5:00 PM local time Monday through Friday (excluding legal holidays). The first 12-month period will start as of the Effective Date of this Agreement.

7.3.
Calculation.    Downtime will be calculated from the time a down System call is received by Accuray to the time of repair, counting normal treatment hours. The System will be calculated as up when the System repair has been completed and the System is available for

4

8.
Replacement Parts.

8.1.
Accuray shall make a commercially reasonable effort to supply at the time of need or stock with Accuray's regional service engineers all tools, equipment, replacement parts and Consumables as would reasonably be required by Accuray to perform the required repairs and return the System to good working order. Accuray shall make a commercially reasonable effort to maintain at its factory or service center(s) a stock of spare parts, including, in particular, long-procurement-lead-time parts.

8.2.
Replacement parts used under this Agreement may be either new manufacture or factory refurbished at Accuray's choice. All replacement parts and assemblies provided will be manufactured in accordance with Accuray's quality system, and any applicable laws and regulations. Parts replaced under this Agreement become the property of Accuray and will be disposed of by Accuray Field Service engineers. Notwithstanding the foregoing, all parts that are considered by local regulation to be "hazardous" or "contaminated" waste, or material that requires "special handling" will be disposed of or retained by Customer at Customer's facility.

9.
Exceptions.

9.1.
All obligations of Accuray under this Agreement shall be suspended and/or cease in the event of:

9.1.1.
Damage from fire, accident, abuse, floods, lightning, natural disasters or other calamities commonly defined as "Acts of God".

9.1.2.
The intentional abuse of the System or negligence by Customer.

9.1.3.
System hardware or software alterations not authorized by Accuray including any move of the System from its installation site (other than by or at the express written direction of Accuray).

9.1.4.
Use of the System for other than its intended and authorized purposes, or in a manner not consistent with Accuray's User Manuals, including maintenance of the necessary operating environment and line current conditions, and the failure of Customer to cure such matter within thirty (30) days of actual written notice thereof from Accuray.

9.1.5.
Failure to make payments in accordance with the payment schedule set forth above in Section 2.2.

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10.
Cancellation.    Customer shall have the right to cancel and terminate this Agreement, with or without cause, at any time upon thirty (30) days' prior written notice to Accuray. There shall be no penalty for such cancellation and termination.

11.
Breach.    Either party reserves the right to cancel this Agreement by written notice upon the breach of the other. An event of breach may include, but is not limited to, failure to make payment due under this Agreement, failure to provide access as required to execute the services contemplated by this Agreement, failure to perform and log QA, or the filing of notice under bankruptcy or equivalent laws. If the breaching party is unable or unwilling to cure or make a good faith effort to cure such breach within thirty (30) days of actual written notice the other party shall be relieved of all obligations under this Agreement and may terminate. Termination shall not be the terminating party's exclusive remedy, and the terminating party shall retain all other available legal and equitable remedies.

12.
Limitation of Liability and Warranty.    

12.1.
If it is determined in accordance with applicable law that any fault or neglect of either party, its employees or agents, substantially contributes to damage or injury to third parties, such party shall be responsible in such proportion as reflects its relative fault therefore, and shall hold the other party harmless from any liability or damages arising out of such fault or neglect. Accuray's liability arising under this Agreement shall be limited to an amount not to exceed the payment(s) received by Accuray for the then current Agreement year. In addition, Accuray shall not be liable to Customer in the event that Customer's or any third party's acts or omissions contributed in any way to any loss it sustained or the loss or damage is due to an act of God or other causes beyond its reasonable control. IN NO EVENT WILL ACCURAY BE LIABLE TO CUSTOMER FOR ANY LOST PROFITS, LOST SAVINGS, LOST REVENUES, SPECIAL, INDIRECT, INCIDENTAL DAMAGES OR OTHER CONSEQUENTIAL DAMAGES ARISING OUT OF OR IN CONNECTION WITH THE AGREEMENT, DOWNTIME OR THE USE OR PERFORMANCE OF THE ACCURAY SYSTEM, ACCURAY PRODUCTS, ACCURAY UPDATES OR ACCURAY UPGRADES.

12.2.
This is a service agreement. THERE ARE NO INCLUDED OR IMPLIED ACCURAY WARRANTIES OF PRODUCT FITNESS FOR A PARTICULAR PURPOSE OR MERCHANTABILITY.

13.
Patient Information.

13.1.
In performing the services hereunder, Accuray may receive from Customer, or create or receive on behalf of Customer, patient healthcare, billing, or other confidential patient information ("Patient Information"). Patient Information, as the term is used herein, includes all "Protected Health Information," as that term is defined in 45 CFR 164.501. Accuray shall use Patient Information only as necessary to provide the services to Customer as set forth in this Agreement. Accuray shall comply with all federal laws, rules and regulations relating to the confidentiality of Patient Information, including the applicable provisions of the privacy regulations promulgated pursuant to Health Insurance Portability and Accountability Act of 1996 ("HIPAA").

13.2.
Customer shall provide Accuray with only de-identified Protected Health Information, in accordance with the requirements of 45 CFR 164.514. Any information provided to or shared with Accuray in connection with this Agreement shall have all identifying patient

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14.
Assignment.    Neither party may assign this Agreement without the other party's prior written consent, except that Accuray may assign this Agreement, without Customer's consent, to an affiliate or to a successor or acquirer, as the case may be, in connection with a merger or acquisition, or the sale of all or substantially all of Accuray's assets or the sale of that portion of Accuray's business to which this Agreement relates. Subject to the foregoing, this Agreement will bind and inure to the benefit of the parties' permitted successors and assigns.

15.
Disputes and Governing Laws.

15.1.
In the event that a dispute arises between Accuray and Customer with respect to any subject matter governed by this Agreement, such dispute shall be settled as follows. If either party shall have any dispute with respect to this Agreement, that party shall provide written notification to the other party in the form of a claim identifying the issue or amount disputed including a detailed reason for the claim. The party against whom the claim is made shall respond in writing to the claim within 30 days from the date of receipt of the claim document. The party filing the claim shall have an additional 30 days after the receipt of the response to either accept the resolution offered by the other party or escalate the matter. If the dispute is not resolved, either party may notify the other in writing of their desire to elevate the claim to the President of Accuray and the Chief Executive Officer of Customer. Each shall negotiate in good faith and use his or her best efforts to resolve such dispute or claim. The location, format, frequency, duration and conclusion of these elevated discussions shall be left to the discretion of the representatives involved. If the negotiations do not lead to resolution of the underlying dispute or claim to the satisfaction of either party involved, then either party may pursue resolution by the courts as follows.

15.2.
All disputes arising out of or relating to this Agreement not otherwise resolved between Accuray and Customer shall be resolved in a court of competent jurisdiction, in Santa Clara County, State of California, and in no other place, provided that, in Accuray's sole discretion, such action may be heard in some other place designated by Accuray (if necessary to acquire jurisdiction over third persons), so that the dispute can be resolved in one action. Customer hereby consents to the jurisdiction of such court or courts and agrees to appear in any such action upon written notice thereof. No action, regardless of form, arising out of, or in any way connected with this Agreement may be brought by Customer more than one (1) year after the cause of action has occurred.

16.
Notices.    All notices required or permitted under this Agreement will be in writing and delivered in person, effective immediately, by overnight delivery service, effective two (2) business days after deposit with carrier, or by registered or certified mail, postage prepaid with return receipt requested, effective five (5) business days after deposit with carrier. All communications will be sent to the addresses set forth below or to such other address as may be specified by either party in writing to the other party in accordance with this Section.

To Accuray:

   To Customer:
Accuray Incorporated    
Attention: Chief Financial Officer    
1310 Chesapeake Terrace    
Sunnyvale, CA 94089    
        
with cc to: General Counsel   with cc to:

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17.
Trademarks.    Accuray is the owner of the trademark CyberKnife®, and related trademarks in the U.S. and around the world. If Customer wishes to use the CyberKnife or other Accuray trademarks in association with a business name, Accuray requires that Customer execute Accuray's standard royalty-free Trademark License Agreement specifying the requirements for and the nature of the acceptable use. Without the necessary license, Customer is not entitled to use the Accuray marks with a business name or to otherwise use language which would suggest a license with Accuray.

18.
Waiver.    The waiver of any breach or default of any provision of this Agreement will not constitute a waiver of any other right hereunder or of any subsequent breach or default.

19.
Severability.    If any provision of this Agreement is held invalid or unenforceable by a court of competent jurisdiction, the remaining provisions of the Agreement will remain in full force and effect, and the provision affected will be construed so as to be enforceable to the maximum extent permissible by law.

20.
Force Majeure.    Neither party will be responsible for any failure or delay in its performance under this Agreement (except for the payment of money) due to causes beyond its reasonable control, including, but not limited to, labor disputes, strike, lockout, riot, war, fire, act of God, accident, failure or breakdown of components necessary to order completion; subcontractor, supplier or customer caused delays; inability to obtain or substantial rises in the prices of labor, materials or manufacturing facilities; curtailment of or failure to obtain sufficient electrical or other energy, raw materials or supplies; or compliance with any law, regulation or order, whether valid or invalid.

21.
Amendments.    Any amendment or modification of this Agreement must be made in writing and signed by duly authorized representatives of each party. For Accuray, a duly authorized representative must be any of the following: CEO, CFO, or General Counsel.

22.
Entire Agreement.    This Agreement contains the entire Agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior understandings, representations and warranties, written and oral. If any part of the terms and conditions stated herein are held void or unenforceable, such part will be treated as severable, leaving valid the remainder of the terms and conditions.

23.
Counterparts.    This Agreement may be executed in counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

SIGNATURE PAGE FOLLOWS

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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the date set forth below by their duly authorized representatives. The parties acknowledge and agree that this Agreement does not become effective until it has been signed by all parties indicated below.

ACCURAY INCORPORATED

   CUSTOMER
By:
   By:
Print Name: Doug Keare   Print Name:
Title: Vice President of Customer Service
and Technical Support		   Title:
        
Date:
   Date:
        
    PLEASE MAKE CERTAIN THAT YOU HAVE SELECTED A PAYMENT OPTION IN ACCORDANCE WITH SECTION 2.2, ABOVE.

        The undersigned acknowledges that the terms and conditions of this Agreement meet the policies and procedures of Accuray.

Signed:
   Dated:
  General Counsel, Accuray Incorporated    

SIGNATURE PAGE TO EMERALD SERVICE AGREEMENT

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ACCURAY CYBERKNIFE® EMERALD ELITE SERVICE AGREEMENT

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Exhibit 10.33


ACCURAY CYBERKNIFE® EMERALD BASIC SERVICE AGREEMENT

1.
Scope of Service.    This Emerald Basic Service Agreement ("Agreement") is made by and between ACCURAY INCORPORATED ("Accuray"), a California corporation, located at 1310 Chesapeake Terrace, Sunnyvale, CA 94089, and                                      ("Customer"), located at                                    , for Accuray to provide planned maintenance service when scheduled by Accuray and corrective maintenance service when requested by Customer to maintain the CyberKnife System installed at Customer's site at                                    ("System") so that it performs substantially in accordance with the Specifications (User Manuals and Reference Guides) defined for the System revision as installed and/or upgraded.

1.1.
Effective Date.    This Agreement shall be effective as of demonstration of acceptance testing by Accuray as described in the CyberKnife Quotation and Purchase Agreement dated                                    , 2006 and signed by the parties, or the expiration of any prior service or warranty agreement, if applicable.

1.2.
Definitions:

1.2.1.
Bug Fix means an error correction or minor change in the existing software and/or hardware configuration that is required in order to enable the existing software and/or hardware configuration to perform to the existing functional specification(s).

1.2.2.
Update means a release of the software or a change to the existing hardware containing substantially only error corrections, minor new features, functionality and/or performance improvements, but that would not be required for the existing software and/or hardware configuration to perform to the existing functional specification(s) of that particular product. Such Update would not necessarily replace or extend the life of the existing software and/or hardware configuration of the product. For example, an Update of software would be indicated where the version number is changed by incrementing the numeric digits to the right of the decimal point, e.g., versions 1.1, 1.2, 1.3, and 1.4 would each be Updates of the software.

1.2.3.
Upgrade means a release of the software or a change to the existing hardware containing major new features, functionality and/or performance improvements that would enable the existing software and/or hardware configuration to perform to the level of the next version of the software and/or hardware configuration and designed to replace the older software and/or hardware version of the same product and/or extend the useful life of that product. For example, an Upgrade of software would be indicated where the version number is changed by incrementing the numeric digits to the left of the decimal point, e.g., versions 1.0, 2.0, 3.0, and 4.0 would each be Upgrades of the software.

1.2.4.
New Version/New Product means a release of the software or a change to the hardware that may or may not work with the existing software and/or hardware configuration, but that in its totality requires, in Accuray's sole opinion, enough change to the software and/or hardware configuration to be considered a New Version or New Product.

1.2.5.
Consumables means items that are not necessarily part of the CyberKnife system, but are consumed as part of the operation of the CyberKnife system, for example fiducials.

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2.
Service Period.

2.1.
The Agreement Term. shall be for an initial period of four (4) years (years 1, 2, 3, & 4) from the Effective Date of this Agreement, including the warranty year, with an optional fifth year. There is no payment required under this Agreement in the first year ("Year 1" or the "Warranty Year"). Customer may elect to receive an additional optional fifth year (the "Optional Year 5"). Customer may exercise the option for Optional Year 5 by letter sent to Accuray, in accordance with the Notice provision set forth below, at any time up to ten (10) days before the Optional Year 5 commences. If Customer does not exercise the option, there will be no charge to Customer, and Accuray will not provide Emerald Basic coverage for Optional Year 5. If Customer exercises the option, Accuray is obligated to provide Emerald Basic coverage on same terms as the previous Agreement years. Billing will commence on the day following the anniversary of the Effective Date of this Agreement.

2.2.
The Agreement Price. shall be one of the following, at Customer's option (indicate preferred option by checking a box, if no selection is made Customer will be billed on an annual basis). The Agreement Price shall cover the Base CyberKnife System, up to two (2) CyRIS Multiplan Systems (including the CyRIS MultiPlan System in the Base CyberKnife System), and up to three (3) CyRIS InView Workstations. If Customer has more than two (2) CyRIS MultiPlan Systems or three (3) CyRIS InView Workstations installed, then an additional charge of $18,750.00 per year per MultiPlan and $6,750.00 per year per InView, as applicable, will be added by Accuray to the Agreement Price set forth below.

o
ANNUAL: $220,000 per year, paid yearly in advance, for years 2, 3, 4 and Optional Year 5.

o
QUARTERLY: $53,250 per quarter, paid at the beginning of each quarter, for years 2, 3, 4 and Optional Year 5.

o
MONTHLY: $18,750 per month, paid at the beginning of each month, for years 2, 3, 4 and Optional Year 5.

3.
Equipment To Be Covered.

3.1.
This Agreement is available only for equipment that was purchased directly from Accuray, installed by Accuray engineers and has not been moved from its original installation location or disconnected from its original power supply without written permission or direction from Accuray. This Agreement must immediately commence at the expiration of the factory warranty period or prior service agreement. In the event of lapse of service, Customer shall have the right to reinstate such service by payment of the current service fee for the then-current service period in addition to the reasonable costs for Accuray to inspect, repair, and return the System to the state at which the System would have been had a service agreement been in force continuously since the expiration of the System factory warranty.

4.
Software Maintenance (Bug Fixes and Updates).

4.1.
For the duration of the Agreement Term, Accuray will provide software Updates and Bug Fixes for software that is included as a part of the CyberKnife System. These Updates and Bug Fixes may be transmitted electronically to Customer for subsequent installation by Customer technicians. Corrections of significant complexity, however, may be installed by Accuray service engineers. Software maintenance will be included only for those product features that were originally purchased with the System or subsequently purchased separately by Customer from Accuray or taken under this Agreement as a System Upgrade.

2

5.
System Quality Assurance Testing.

5.1.
The maintenance and support services provided by Accuray under this Agreement do not include any System Quality Assurance Testing ("QA"). System commissioning and QA are the sole responsibility of Customer, and Customer is advised to perform QA on a regular and ongoing basis. In addition, Customer is required to maintain up-to-date QA logs. If Customer fails to perform the appropriate QA of the System, and to record such QA in the appropriate logs, Accuray, upon giving Notice to Customer in accordance with Section 16 (Notices) of this Agreement, reserves the right to terminate this Agreement.

5.2.
Prior to performing any scheduled service or Preventive Maintenance on the System, Accuray will review Customer's QA logs, and if such logs are not up-to-date, Accuray may refuse to service the System. In the event that the requested service is necessary to bring the System to a point where QA can be performed, Accuray will proceed with the service only after Customer signs a written acknowledgement that QA is Customer's sole responsibility and that appropriate QA will be performed prior to conducting any patient treatments.

6.
Service Coverage Period.

6.1.
The Service Coverage Period will be the hours of 8:00 AM to 5:00 PM local time Monday through Saturday (excluding Federal holidays). Customer has the option to request service during non-normal hours, in which case Customer shall pay the overtime premium portion of the non-normal hours worked. (Non-normal hourly rate minus normal hourly rate.) Accuray shall provide Customer with contact points to request service on a 24-hours-a-day, 7-days-a-week ("24/7") basis. Accuray, directly or remotely as the situation requires, either with its own personnel or through contractors, shall initially respond within two (2) hours of receipt of a call for service. The initial response shall include telephone support, including (as applicable) consultations, diagnostic assistance and advice on the use and maintenance of the System. In the event that the service issue cannot be resolved by telephone or other remote response, then Accuray will respond on-site. On-site response times will vary depending upon the level of service required.

6.1.1.
Service Levels

6.1.1.1.
Level A:

6.1.1.1.1.
System is down and Customer is unable to treat patients.

6.1.1.1.2.
On-site support within 24 hours.

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7.
Uptime

7.1.
Uptime/Downtime.    Uptime shall mean any time that the System is not down ("Uptime"). A down System means that a patient cannot be treated due to an actual malfunction of the System and that the System is immediately available for an Accuray service engineer to work on it ("Downtime").

7.2.
Guarantee.    Accuray will guarantee that the System shall have an Uptime percentage of at least 98% of normal treatment hours on an annual basis during the Agreement Term. Normal treatment hours shall be from 8:00 AM to 5:00 PM local time Monday through Friday (excluding legal holidays). The first 12-month period will start as of the Effective Date of this Agreement.

7.3.
Calculation.    Downtime will be calculated from the time a down System call is received by Accuray to the time of repair, counting normal treatment hours. The System will be calculated as up when the System repair has been completed and the System is available for

4

8.
Replacement Parts.

8.1.
Accuray shall make a commercially reasonable effort to supply at the time of need or stock with Accuray's regional service engineers all tools, equipment, replacement parts and Consumables as would reasonably be required by Accuray to perform the required repairs and return the System to good working order. Accuray shall make a commercially reasonable effort to maintain at its factory or service center(s) a stock of spare parts, including, in particular, long-procurement-lead-time parts. THE FOLLOWING PARTS ARE NOT COVERED BY THIS SERVICE AGREEMENT, AND WILL BE BILLED AT LIST PRICE IF THEY SHOULD REQUIRE REPLACEMENT: MAGNETRON; POSITIONING X-RAY SOURCES; AMORPHOUS SILICON DETECTORS; AND WAVEGUIDE.

8.2.
Replacement parts used under this Agreement may be either new manufacture or factory refurbished at Accuray's choice. All replacement parts and assemblies provided will be manufactured in accordance with Accuray's quality system, and any applicable laws and regulations. Parts replaced under this Agreement become the property of Accuray and will be disposed of by Accuray Field Service engineers. Notwithstanding the foregoing, all parts that are considered by local regulation to be "hazardous" or "contaminated" waste, or material that requires "special handling" will be disposed of or retained by Customer at Customer's facility.

9.
Exceptions.

9.1.
All obligations of Accuray under this Agreement shall be suspended and/or cease in the event of:

9.1.1.
Damage from fire, accident, abuse, floods, lightning, natural disasters or other calamities commonly defined as "Acts of God".

9.1.2.
The intentional abuse of the System or negligence by Customer.

9.1.3.
System hardware or software alterations not authorized by Accuray including any move of the System from its installation site (other than by or at the express written direction of Accuray).

9.1.4.
Use of the System for other than its intended and authorized purposes, or in a manner not consistent with Accuray's User Manuals, including maintenance of the necessary operating environment and line current conditions, and the failure of

5

10.
Cancellation.    Customer shall have the right to cancel and terminate this Agreement, with or without cause, at any time upon thirty (30) days' prior written notice to Accuray. There shall be no penalty for such cancellation and termination.

11.
Breach.    Either party reserves the right to cancel this Agreement by written notice upon the breach of the other. An event of breach may include, but is not limited to, failure to make payment due under this Agreement, failure to provide access as required to execute the services contemplated by this Agreement, failure to perform and log QA, or the filing of notice under bankruptcy or equivalent laws. If the breaching party is unable or unwilling to cure or make a good faith effort to cure such breach within thirty (30) days of actual written notice the other party shall be relieved of all obligations under this Agreement and may terminate. Termination shall not be the terminating party's exclusive remedy, and the terminating party shall retain all other available legal and equitable remedies.

12.
Limitation of Liability and Warranty.

12.1.
If it is determined in accordance with applicable law that any fault or neglect of either party, its employees or agents, substantially contributes to damage or injury to third parties, such party shall be responsible in such proportion as reflects its relative fault therefore, and shall hold the other party harmless from any liability or damages arising out of such fault or neglect. Accuray's liability arising under this Agreement shall be limited to an amount not to exceed the payment(s) received by Accuray for the then current Agreement year. In addition, Accuray shall not be liable to Customer in the event that Customer's or any third party's acts or omissions contributed in any way to any loss it sustained or the loss or damage is due to an act of God or other causes beyond its reasonable control. IN NO EVENT WILL ACCURAY BE LIABLE TO CUSTOMER FOR ANY LOST PROFITS, LOST SAVINGS, LOST REVENUES, SPECIAL, INDIRECT, INCIDENTAL DAMAGES OR OTHER CONSEQUENTIAL DAMAGES ARISING OUT OF OR IN CONNECTION WITH THE AGREEMENT, DOWNTIME OR THE USE OR PERFORMANCE OF THE ACCURAY SYSTEM, ACCURAY PRODUCTS, ACCURAY UPDATES OR ACCURAY UPGRADES.

12.2.
This is a service agreement. THERE ARE NO INCLUDED OR IMPLIED ACCURAY WARRANTIES OF PRODUCT FITNESS FOR A PARTICULAR PURPOSE OR MERCHANTABILITY.

13.
Patient Information.

13.1.
In performing the services hereunder, Accuray may receive from Customer, or create or receive on behalf of Customer, patient healthcare, billing, or other confidential patient information ("Patient Information"). Patient Information, as the term is used herein, includes all "Protected Health Information," as that term is defined in 45 CFR 164.501. Accuray shall use Patient Information only as necessary to provide the services to Customer as set forth in this Agreement. Accuray shall comply with all federal laws, rules and regulations relating to the confidentiality of Patient Information, including the applicable

6

14.
Assignment.    Neither party may assign this Agreement without the other party's prior written consent, except that Accuray may assign this Agreement, without Customer's consent, to an affiliate or to a successor or acquirer, as the case may be, in connection with a merger or acquisition, or the sale of all or substantially all of Accuray's assets or the sale of that portion of Accuray's business to which this Agreement relates. Subject to the foregoing, this Agreement will bind and inure to the benefit of the parties' permitted successors and assigns.

15.
Disputes and Governing Laws.

15.1.
In the event that a dispute arises between Accuray and Customer with respect to any subject matter governed by this Agreement, such dispute shall be settled as follows. If either party shall have any dispute with respect to this Agreement, that party shall provide written notification to the other party in the form of a claim identifying the issue or amount disputed including a detailed reason for the claim. The party against whom the claim is made shall respond in writing to the claim within 30 days from the date of receipt of the claim document. The party filing the claim shall have an additional 30 days after the receipt of the response to either accept the resolution offered by the other party or escalate the matter. If the dispute is not resolved, either party may notify the other in writing of their desire to elevate the claim to the President of Accuray and the Chief Executive Officer of Customer. Each shall negotiate in good faith and use his or her best efforts to resolve such dispute or claim. The location, format, frequency, duration and conclusion of these elevated discussions shall be left to the discretion of the representatives involved. If the negotiations do not lead to resolution of the underlying dispute or claim to the satisfaction of either party involved, then either party may pursue resolution by the courts as follows.

15.2.
All disputes arising out of or relating to this Agreement not otherwise resolved between Accuray and Customer shall be resolved in a court of competent jurisdiction, in Santa Clara County, State of California, and in no other place, provided that, in Accuray's sole discretion, such action may be heard in some other place designated by Accuray (if necessary to acquire jurisdiction over third persons), so that the dispute can be resolved in one action. Customer hereby consents to the jurisdiction of such court or courts and agrees to appear in any such action upon written notice thereof. No action, regardless of form, arising out of, or in any way connected with this Agreement may be brought by Customer more than one (1) year after the cause of action has occurred.

16.
Notices.    All notices required or permitted under this Agreement will be in writing and delivered in person, effective immediately, by overnight delivery service, effective two (2) business days after deposit with carrier, or by registered or certified mail, postage prepaid with return receipt requested, effective five (5) business days after deposit with carrier. All communications will be

7

To Accuray:

   To Customer:
Accuray Incorporated    
Attention: Chief Financial Officer    
1310 Chesapeake Terrace    
Sunnyvale, CA 94089    
        
with cc to: General Counsel    
17.
Trademarks.    Accuray is the owner of the trademark CyberKnife®, and related trademarks in the U.S. and around the world. If Customer wishes to use the CyberKnife or other Accuray trademarks in association with a business name, Accuray requires that Customer execute Accuray's standard royalty-free Trademark License Agreement specifying the requirements for and the nature of the acceptable use. Without the necessary license, Customer is not entitled to use the Accuray marks with a business name or to otherwise use language which would suggest a license with Accuray.

18.
Waiver.    The waiver of any breach or default of any provision of this Agreement will not constitute a waiver of any other right hereunder or of any subsequent breach or default.

19.
Severability.    If any provision of this Agreement is held invalid or unenforceable by a court of competent jurisdiction, the remaining provisions of the Agreement will remain in full force and effect, and the provision affected will be construed so as to be enforceable to the maximum extent permissible by law.

20.
Force Majeure.    Neither party will be responsible for any failure or delay in its performance under this Agreement (except for the payment of money) due to causes beyond its reasonable control, including, but not limited to, labor disputes, strike, lockout, riot, war, fire, act of God, accident, failure or breakdown of components necessary to order completion; subcontractor, supplier or customer caused delays; inability to obtain or substantial rises in the prices of labor, materials or manufacturing facilities; curtailment of or failure to obtain sufficient electrical or other energy, raw materials or supplies; or compliance with any law, regulation or order, whether valid or invalid.

21.
Amendments.    Any amendment or modification of this Agreement must be made in writing and signed by duly authorized representatives of each party. For Accuray, a duly authorized representative must be any of the following: CEO, CFO, or General Counsel.

22.
Entire Agreement.    This Agreement contains the entire Agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior understandings, representations and warranties, written and oral. If any part of the terms and conditions stated herein are held void or unenforceable, such part will be treated as severable, leaving valid the remainder of the terms and conditions.

23.
Counterparts.    This Agreement may be executed in counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

SIGNATURE PAGE FOLLOWS

8

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the date set forth below by their duly authorized representatives. The parties acknowledge and agree that this Agreement does not become effective until it has been signed by all parties indicated below.

ACCURAY INCORPORATED

   CUSTOMER
By:
   By:
Print Name: Doug Keare   Print Name:
Title: Vice President of Customer Service
and Technical Support		   Title:
        
Date:
   Date:
        
    PLEASE MAKE CERTAIN THAT YOU HAVE SELECTED A PAYMENT OPTION IN ACCORDANCE WITH SECTION 2.2, ABOVE.

        The undersigned acknowledges that the terms and conditions of this Agreement meet the policies and procedures of Accuray.

Signed:
   Dated:
  General Counsel, Accuray Incorporated    

SIGNATURE PAGE TO EMERALD SERVICE AGREEMENT

9



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ACCURAY CYBERKNIFE® EMERALD BASIC SERVICE AGREEMENT

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Exhibit 10.34


ACCURAY CYBERKNIFE® INTERNATIONAL RUBY ELITE SERVICE AGREEMENT

1.
Scope of Service.    This Ruby Elite Service Agreement ("Agreement") is made by and between ACCURAY INCORPORATED ("Accuray"), a California corporation, located at 1310 Chesapeake Terrace, Sunnyvale, CA 94089, and                                      ("Customer"), located at                                    , for Accuray to provide planned maintenance service when scheduled by Accuray and corrective maintenance service when requested by Customer to maintain the CyberKnife System installed at Customer's site at                                    ("System") so that it performs substantially in accordance with the Specifications (User Manuals and Reference Guides) defined for the System revision as installed and/or upgraded.

1.1.
Effective Date.This Agreement shall be effective as of demonstration of acceptance testing by Accuray as described in the CyberKnife Quotation and Purchase Agreement dated                                    , 2006 and signed by the parties, or the expiration of any prior service or warranty agreement, if applicable.

1.2.
Definitions:

1.2.1.
Bug Fix means an error correction or minor change in the existing software and/or hardware configuration that is required in order to enable the existing software and/or hardware configuration to perform to the existing functional specification(s).

1.2.2.
Update means a release of the software or a change to the existing hardware containing substantially only error corrections, minor new features, functionality and/or performance improvements, but that would not be required for the existing software and/or hardware configuration to perform to the existing functional specification(s) of that particular product. Such Update would not necessarily replace or extend the life of the existing software and/or hardware configuration of the product. For example, an Update of software would be indicated where the version number is changed by incrementing the numeric digits to the right of the decimal point, e.g., versions 1.1, 1.2, 1.3, and 1.4 would each be Updates of the software.

1.2.3.
Upgrade/Enhancement means a release of the software containing major new features, functionality and/or performance improvements that would enable the existing software configuration to perform to the level of the next version of the software configuration and designed to replace the older software version of the same product and/or extend the useful life of that product. For example, an Upgrade/Enhancement of software would be indicated where the version number is changed by incrementing the numeric digits to the left of the decimal point, e.g., versions 1.0, 2.0, 3.0, and 4.0 would each be Upgrades/Enhancements of the software.

1.2.4.
New Version/New Product means a release of the software or a change to the hardware that may or may not work with the existing software and/or hardware configuration, but that in its totality requires, in Accuray's sole opinion, enough change to the software and/or hardware configuration to be considered a New Version or New Product.

1.2.5.
ExclusionsUpgrades/Enhancements that have a list price of greater than $200,000 per Upgrade/Enhancement are specifically excluded from this Agreement. However, Accuray may at its discretion, offer Upgrades/Enhancements that have a higher list price, as more than a single Upgrade/Enhancement to Customers under this Agreement. If Accuray offers Upgrades/Enhancements that have a higher list price as

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2.
Service Period.

2.1.
The Agreement Term shall be for an initial period of four (4) years (years 1, 2, 3, & 4) from the Effective Date of this Agreement, including the warranty year, with an optional fifth year. There is no payment required under this Agreement in the first year ("Year 1" or the "Warranty Year"). Customer may elect to receive an additional optional fifth year (the "Optional Year 5") on terms that are defined below (Section 3.4). Billing will commence on the day following the anniversary of the Effective Date of this Agreement.

2.2.
The Agreement Price shall be one of the following, at Customer's option (indicate preferred option by checking a box, if no selection is made Customer will be billed on an annual basis). The Agreement Price shall cover the Base CyberKnife System, up to two (2) CyRIS Multiplan Systems (including the CyRIS MultiPlan System in the Base CyberKnife System), and up to three (3) CyRIS InView Workstations. If Customer has more than two (2) CyRIS MultiPlan Systems or three (3) CyRIS InView Workstations installed, then an additional charge of $18,750.00 per year per MultiPlan and $6,750.00 per year per InView, as applicable, will be added by Accuray to the Agreement Price set forth below.

o
ANNUAL: $380,000 per year, paid yearly in advance, for years 2, 3, 4 and Optional Year 5.

o
QUARTERLY: $98,000 per quarter, paid at the beginning of each quarter, for years 2, 3, 4 and Optional Year 5.

o
MONTHLY: $34,000 per month, paid at the beginning of each month, for years 2, 3, 4 and Optional Year 5.

3.
Product Upgrades/Enhancements

3.1.
This Agreement is available only for equipment that was purchased directly from Accuray, installed by Accuray engineers and has not been moved from its original installation location or disconnected from its original power supply without written permission or direction from Accuray. This Agreement must immediately commence at the expiration of the factory warranty period or prior service agreement. In the event of lapse of service, Customer shall have the right to reinstate such service by payment of the current service fee for the then-current service period in addition to the reasonable costs for Accuray to inspect, repair, and return the System to the state at which the System would have been had a service agreement been in force continuously since the expiration of the System factory warranty.

3.2.
Under this Agreement, Customer may receive Upgrades/Enhancements, when and if available in years 2, 3, and 4, up to two (2) Upgrades/Enhancements per year. Customer acknowledges and agrees that this in no way obligates Accuray to provide a minimum number of Upgrades/Enhancements and that there may be some years in which no Upgrades/Enhancements will be offered; however, in contrast, there may be years in which Accuray will offer multiple Upgrades/Enhancements and Customer may select up to two (2) of such Upgrades/Enhancements. Customer may receive an available Upgrade/

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4.
Software Maintenance (Bug Fixes and Updates)

4.1.
For the duration of the Agreement Term, Accuray will provide software Updates and Bug Fixes for software that is included as a part of the CyberKnife System. These Updates and Bug Fixes may be transmitted electronically to Customer for subsequent installation by Customer technicians. Corrections of significant complexity, however, may be installed by Accuray service engineers. Software maintenance will be included only for those product features that were originally purchased with the System or subsequently purchased separately by Customer from Accuray or taken under this Agreement as a System Upgrade/Enhancement.

4.2.
During the service periods, Accuray shall provide Customer with any and all applicable product notices regarding maintenance, support, Upgrades/Enhancements, Updates and Bug Fixes generally circulated by Accuray to Accuray Customers with CyberKnife installations.

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5.
System Quality Assurance Testing

5.1.
The maintenance and support services provided by Accuray under this Agreement do not include any System Quality Assurance Testing ("QA"). System commissioning and QA are the sole responsibility of Customer, and Customer is advised to perform QA on a regular and ongoing basis. In addition, Customer is required to maintain up-to-date QA logs. If Customer fails to perform the appropriate QA of the System, and to record such QA in the appropriate logs, Accuray, upon giving Notice to Customer in accordance with Section 16 of this Agreement, reserves the right to terminate this Agreement.

5.2.
Prior to performing any scheduled service or preventive maintenance on the System, Accuray will review Customer's QA logs, and if such logs are not up-to-date, Accuray may refuse to service the System. In the event that the requested service is necessary to bring the System to a point where QA can be performed, Accuray will proceed with the service only after Customer signs a written acknowledgement that QA is Customer's sole responsibility and that appropriate QA will be performed prior to conducting any patient treatments.

6.
Service Coverage Period

6.1.
The Service Coverage Period will be the hours of 8:00 AM to 9:00 PM local (to Customer's installation location) time Monday through Saturday (excluding local legal holidays). Customer has the option to request service during non-normal hours, in which case Customer shall pay the overtime premium portion of the non-normal hours worked. (Non-normal hourly rate minus normal hourly rate.) Accuray shall provide Customer with contact points to request service on a 24-hours-a-day, 7-days-a-week ("24/7") basis. Accuray, directly or remotely as the situation requires, either with its own personnel or through contractors, shall initially respond within one (1) hour of receipt of a call for service. The initial response shall include telephone support, including (as applicable) consultations, diagnostic assistance and advice on the use and maintenance of the System. In the event that the service issue cannot be resolved by telephone or other remote response, then Accuray will respond on-site. On-site response times will vary depending upon the level of service required.

6.2.
Customer will promptly notify Accuray, by calling Accuray's Customer Support Line at 1-408-716-4700, of any problem or defect with the System and, at no charge, provide Accuray service engineers access to the System and use of adequate facilities and equipment at mutually agreeable times as necessary for Accuray to perform the service. Customer shall have as many service calls as are reasonably needed to maintain the System so that it performs substantially in accordance with the Specifications during the period of this Agreement.

6.3.
Use of the facility CT scanner may be required for testing purposes and shall be scheduled to allow as expeditious completion of service as is reasonably possible. Facility staff will operate the CT scanner. If service is unreasonably delayed and Accuray service engineers are required to remain on site, Accuray may choose to charge the current hourly service rates for the duration of the delay period.

6.4.
Accuray will perform System planned maintenance as prescribed in the current System maintenance manuals. Planned service will be scheduled at least two (2) weeks in advance and will be performed at a mutually agreed-upon time. Upon completion of a service or

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7.
Uptime

7.1.
Uptime/Downtime.    Uptime shall mean any time that the System is not down ("Uptime"). A down System means that a patient cannot be treated due to an actual malfunction of the System and that the System is immediately available for an Accuray service engineer to work on it ("Downtime").

7.2.
Guarantee.    Accuray will guarantee that the System shall have an Uptime percentage of at least 95% of normal treatment hours on an annual basis during the Term of this Agreement. Normal treatment hours shall be from 8:00 AM to 5:00 PM local time Monday through Friday (excluding legal holidays). The first 12-month period will start as of the Effective Date of this Agreement.

7.3.
Calculation.    Downtime will be calculated from the time a down System call is received by Accuray to the time of repair, counting normal treatment hours. The System will be calculated as up when the System repair has been completed and the System is available for treatment during normal treatment hours, whether or not patients are scheduled for treatment. Scheduled preventive maintenance, System upgrades, and time that the System is unavailable as a result of something beyond Accuray's control, including without limitation (i) Customer's use of the System for purposes other than its intended and authorized purposes, (ii) the negligence of Customer, (iii) the failure of Customer to operate the System in accordance with the User Manuals, (iv) use by untrained operators, (v) e-Stops, power outages or the like or (vi) the negligence of any party other than Accuray, will be calculated as Uptime.

7.4.
Reports.    Customer is responsible for recording and reporting Downtime to Accuray. Reports for the previous month's Downtime shall be provided to Accuray on or before the 15th day of each month.

7.5.
Failure to Meet Guarantee.    For each year of the term of this Agreement, if Accuray achieves a 12-month uptime average of less than 95%, the Agreement period will be extended one (1) week for every percentage point or fraction thereof below 95%.

8.
Replacement Parts

8.1.
Accuray shall make a commercially reasonable effort to supply at the time of need or stock with Accuray's regional service engineers all tools, equipment, replacement parts and Consumables as would reasonably be required by Accuray to perform the required repairs and return the System to good working order. Accuray shall make a commercially reasonable effort to maintain at its factory or service center(s) a stock of spare parts, including, in particular, long-procurement-lead-time parts.

8.2.
Replacement parts used under this Agreement may be either new manufacture or factory refurbished at Accuray's choice. All replacement parts and assemblies provided will be manufactured in accordance with Accuray's quality system, and any applicable laws and regulations. Parts replaced under this Agreement become the property of Accuray and will be disposed of by Accuray Field Service engineers. Notwithstanding the foregoing, all parts that are considered by local regulation to be "hazardous" or "contaminated" waste, or

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9.
Exceptions

9.1.
All obligations of Accuray under this Agreement shall be suspended and/or cease in the event of:

9.1.1.
Damage from fire, accident, abuse, floods, lightning, natural disasters or other calamities commonly defined as "Acts of God".

9.1.2.
The intentional abuse of the System or negligence by Customer.

9.1.3.
System hardware or software alterations not authorized by Accuray including any move of the System from its installation site (other than by or at the express written direction of Accuray).

9.1.4.
Use of the System for other than its intended and authorized purposes, or in a manner not consistent with Accuray's User Manuals, including maintenance of the necessary operating environment and line current conditions, and the failure of Customer to cure such matter within thirty (30) days of actual written notice thereof from Accuray.

9.1.5.
Failure to make payments in accordance with the payment schedule set forth above in Section 2.2.

9.2.
If corrective action or adjustment of the System is performed by Customer's staff at the direction of Accuray, such action or adjustment shall not reduce Accuray's responsibility under this Agreement or liability for the performance of the System.

10.
No Cancellation.    Neither party shall have the right to cancel this Agreement, except as set forth below in Section 11 "Breach."

11.
Breach.    Either party reserves the right to cancel this Agreement by written notice upon the breach of the other. An event of breach may include, but is not limited to, failure to make payment due under this Agreement, failure to provide access as required to execute the services contemplated by this Agreement, failure to perform and log QA, or the filing of notice under bankruptcy or equivalent laws. If the breaching party is unable or unwilling to cure or make a good faith effort to cure such breach within thirty (30) days of actual written notice the other party shall be relieved of all obligations under this Agreement and may terminate. Termination shall not be the terminating party's exclusive remedy, and the terminating party shall retain all other available legal and equitable remedies.

12.
Limitation of Liability and Warranty

12.1.
If it is determined in accordance with applicable law that any fault or neglect of either party, its employees or agents, substantially contributes to damage or injury to third parties, such party shall be responsible in such proportion as reflects its relative fault therefore, and shall hold the other party harmless from any liability or damages arising out of such fault or neglect. Accuray's liability arising under this Agreement shall be limited to an amount not to exceed the payment(s) received by Accuray for the then current Agreement year. In addition, Accuray shall not be liable to Customer in the event that Customer's or any third party's acts or omissions contributed in any way to any loss it sustained or the loss or damage is due to an act of God or other causes beyond its reasonable control. IN NO EVENT WILL ACCURAY BE LIABLE TO CUSTOMER FOR ANY LOST PROFITS, LOST SAVINGS, LOST REVENUES, SPECIAL, INDIRECT, INCIDENTAL DAMAGES OR OTHER CONSEQUENTIAL DAMAGES ARISING OUT OF OR IN

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13.
Patient Information.    In performing the services hereunder, Accuray may receive from Customer, or create or receive on behalf of Customer, patient healthcare, billing, or other confidential patient information ("Patient Information"). Patient Information, as the term is used herein, includes all "Protected Health Information," as that term is defined in 45 CFR 164.501. Accuray shall use Patient Information only as necessary to provide the services to Customer as set forth in this Agreement. Accuray shall comply with all laws, rules and regulations relating to the confidentiality of Patient Information, including the applicable provisions of the privacy regulations promulgated pursuant to Health Insurance Portability and Accountability Act of 1996 ("HIPAA").

14.
Assignment.    Neither party may assign this Agreement without the other party's prior written consent, except that Accuray may assign this Agreement, without Customer's consent, to an affiliate or to a successor or acquirer, as the case may be, in connection with a merger or acquisition, or the sale of all or substantially all of Accuray's assets or the sale of that portion of Accuray's business to which this Agreement relates. Subject to the foregoing, this Agreement will bind and inure to the benefit of the parties' permitted successors and assigns.

15.
Disputes and Governing Laws

15.1.
In the event that a dispute arises between Accuray and Customer with respect to any subject matter governed by this Agreement, such dispute shall be settled as follows. If either party shall have any dispute with respect to this Agreement, that party shall provide written notification to the other party in the form of a claim identifying the issue or amount disputed including a detailed reason for the claim. The party against whom the claim is made shall respond in writing to the claim within 30 days from the date of receipt of the claim document. The party filing the claim shall have an additional 30 days after the receipt of the response to either accept the resolution offered by the other party or escalate the matter. If the dispute is not resolved, either party may notify the other in writing of their desire to elevate the claim to the President of Accuray and the Chief Executive Officer of Customer. Each shall negotiate in good faith and use his or her best efforts to resolve such dispute or claim. The location, format, frequency, duration and conclusion of these elevated discussions shall be left to the discretion of the representatives involved. If the negotiations do not lead to resolution of the underlying dispute or claim to the satisfaction of either party involved, then either party may pursue resolution by the courts as follows.

15.2.
All disputes arising out of or relating to this Agreement not otherwise resolved between Accuray and Customer shall be resolved in a court of competent jurisdiction, in Santa Clara County, State of California, and in no other place, provided that, in Accuray's sole discretion, such action may be heard in some other place designated by Accuray (if necessary to acquire jurisdiction over third persons), so that the dispute can be resolved in one action. Customer hereby consents to the jurisdiction of such court or courts and agrees to appear in any such action upon written notice thereof. No action, regardless of form, arising out of, or in any way connected with this Agreement may be brought by Customer more than one (1) year after the cause of action has occurred.

16.
Notices.    All notices required or permitted under this Agreement will be in writing and delivered in person, by overnight delivery service, or by registered or certified mail, postage prepaid with

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To Accuray:

   To Customer:
Accuray Incorporated    
Attention: Chief Financial Officer    
1310 Chesapeake Terrace    
Sunnyvale, CA 94089    
        
with cc to: General Counsel   with cc to:
17.
Waiver.    The waiver of any breach or default of any provision of this Agreement will not constitute a waiver of any other right hereunder or of any subsequent breach or default.

18.
Severability.    If any provision of this Agreement is held invalid or unenforceable by a court of competent jurisdiction, the remaining provisions of the Agreement will remain in full force and effect, and the provision affected will be construed so as to be enforceable to the maximum extent permissible by law.

19.
Force Majeure.    Neither party will be responsible for any failure or delay in its performance under this Agreement (except for the payment of money) due to causes beyond its reasonable control, including, but not limited to, labor disputes, strike, lockout, riot, war, fire, act of God, accident, failure or breakdown of components necessary to order completion; subcontractor, supplier or customer caused delays; inability to obtain or substantial rises in the prices of labor, materials or manufacturing facilities; curtailment of or failure to obtain sufficient electrical or other energy, raw materials or supplies; or compliance with any law, regulation or order, whether valid or invalid.

20.
Amendments.    Any amendment or modification of this Agreement must be made in writing and signed by duly authorized representatives of each party. For Accuray, a duly authorized representative must be any of the following: CEO, CFO, or General Counsel.

21.
Entire Agreement.    This Agreement contains the entire Agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior understandings, representations and warranties, written and oral. If any part of the terms and conditions stated herein are held void or unenforceable, such part will be treated as severable, leaving valid the remainder of the terms and conditions.

22.
Counterparts.    This Agreement may be executed in counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

SIGNATURE PAGE FOLLOWS

8

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the Effective Date by their duly authorized representatives. The parties acknowledge and agree that this Agreement does not become effective until it has been signed by all parties indicated below.

ACCURAY INCORPORATED
   CUSTOMER
        
By:
   By:
Print Name: Doug Keare   Print Name:
Title: Vice President of Customer Service
and Technical Support		   Title:
        
Date:
   Date:
        
    PLEASE MAKE CERTAIN THAT YOU HAVE SELECTED A PAYMENT OPTION IN ACCORDANCE WITH SECTION 2.2, ABOVE.

        The undersigned acknowledges that the terms and conditions of this Agreement meet the policies and procedures of Accuray.

Signed:
   Dated:
  General Counsel, Accuray Incorporated    

SIGNATURE PAGE TO INTERNATIONAL RUBY SERVICE AGREEMENT

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ACCURAY CYBERKNIFE® INTERNATIONAL RUBY ELITE SERVICE AGREEMENT

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Exhibit 10.35


ACCURAY CYBERKNIFE® INTERNATIONAL DIAMOND ELITE SERVICE AGREEMENT

1.
Scope of Service.    This Diamond Elite Service Agreement ("Agreement") is made by and between ACCURAY INCORPORATED ("Accuray"), a California corporation, located at 1310 Chesapeake Terrace, Sunnyvale, CA 94089, and                                      ("Customer"), located at                                    , for Accuray to provide planned maintenance service when scheduled by Accuray and corrective maintenance service when requested by Customer to maintain the CyberKnife System installed at Customer's site at                                    ("System") so that it performs substantially in accordance with the Specifications (User Manuals and Reference Guides) defined for the System revision as installed and/or upgraded.

1.1.
Effective Date.    This Agreement shall be effective as of demonstration of acceptance testing by Accuray as described in the CyberKnife Quotation and Purchase Agreement dated                                    , 2006 and signed by the parties, or the expiration of any prior service or warranty agreement, if applicable.

1.2.
Definitions:

1.2.1.
Bug Fix means an error correction or minor change in the existing software and/or hardware configuration that is required in order to enable the existing software and/or hardware configuration to perform to the existing functional specification(s).

1.2.2.
Update means a release of the software or a change to the existing hardware containing substantially only error corrections, minor new features, functionality and/or performance improvements, but that would not be required for the existing software and/or hardware configuration to perform to the existing functional specification(s) of that particular product. Such Update would not necessarily replace or extend the life of the existing software and/or hardware configuration of the product. For example, an Update of software would be indicated where the version number is changed by incrementing the numeric digits to the right of the decimal point, e.g., versions 1.1, 1.2, 1.3, and 1.4 would each be Updates of the software.

1.2.3.
Upgrade/Enhancement means a release of the software or a change to the existing hardware containing major new features, functionality and/or performance improvements that would enable the existing software and/or hardware configuration to perform to the level of the next version of the software and/or hardware configuration and designed to replace the older software and/or hardware version of the same product and/or extend the useful life of that product. For example, an Upgrade/Enhancement of software would be indicated where the version number is changed by incrementing the numeric digits to the left of the decimal point, e.g., versions 1.0, 2.0, 3.0, and 4.0 would each be Upgrades/Enhancements of the software.

1.2.4.
New Version/New Product means a release of the software or a change to the hardware that may or may not work with the existing software and/or hardware configuration, but that in its totality requires, in Accuray's sole opinion, enough change to the software and/or hardware configuration to be considered a New Version or New Product.

1.2.5.
Exclusions Upgrades/Enhancements that have a list price of greater than $200,000 per Upgrade/Enhancement are specifically excluded from this Agreement. However, Accuray may at its discretion, offer Upgrades/Enhancements that have a higher list

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2.
Service Period.

2.1.
The Agreement Term shall be for an initial period of four (4) years (years 1, 2, 3, & 4) from the Effective Date of this Agreement, including the warranty year, with an optional fifth year. There is no payment required under this Agreement in the first year ("Year 1" or the "Warranty Year"). Customer may elect to receive an additional optional fifth year (the "Optional Year 5") on terms that are defined below (Section 3.4). Billing will commence on the day following the anniversary of the Effective Date of this Agreement.

2.2.
The Agreement Price shall be one of the following, at Customer's option (indicate preferred option by checking a box, if no selection is made Customer will be billed on an annual basis). The Agreement Price shall cover the Base CyberKnife System, up to two (2) CyRIS Multiplan Systems (including the CyRIS MultiPlan System in the Base CyberKnife System), and up to three (3) CyRIS InView Workstations. If Customer has more than two (2) CyRIS MultiPlan Systems or three (3) CyRIS InView Workstations installed, then an additional charge of $18,750.00 per year per MultiPlan and $6,750.00 per year per InView, as applicable, will be added by Accuray to the Agreement Price set forth below.

o
ANNUAL: $460,000 per year, paid yearly in advance, for years 2, 3, 4 and Optional Year 5.

o
QUARTERLY: $120,000 per quarter, paid at the beginning of each quarter, for years 2, 3, 4 and Optional Year 5.

o
MONTHLY: $41,000 per month, paid at the beginning of each month, for years 2, 3, 4 and Optional Year 5.

3.
Product Upgrades/Enhancements

3.1.
This Agreement is available only for equipment that was purchased directly from Accuray, installed by Accuray engineers and has not been moved from its original installation location or disconnected from its original power supply without written permission or direction from Accuray. This Agreement must immediately commence at the expiration of the factory warranty period or prior service agreement. In the event of lapse of service, Customer shall have the right to reinstate such service by payment of the current service fee for the then-current service period in addition to the reasonable costs for Accuray to inspect, repair, and return the System to the state at which the System would have been had a service agreement been in force continuously since the expiration of the System factory warranty.

3.2.
Under this Agreement, Customer may receive Upgrades/Enhancements, when and if available in years 2, 3, and 4, up to two (2) Upgrades/Enhancements per year. Customer acknowledges and agrees that this in no way obligates Accuray to provide a minimum number of Upgrades/Enhancements and that there may be some years in which no Upgrades/Enhancements will be offered; however, in contrast, there may be years in which

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4.
Software Maintenance (Bug Fixes and Updates)

4.1.
For the duration of the Agreement Term, Accuray will provide software Updates and Bug Fixes for software that is included as a part of the CyberKnife System. These Updates and Bug Fixes may be transmitted electronically to Customer for subsequent installation by Customer technicians. Corrections of significant complexity, however, may be installed by Accuray service engineers. Software maintenance will be included only for those product features that were originally purchased with the System or subsequently purchased separately by Customer from Accuray or taken under this Agreement as a System Upgrade/Enhancement.

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5.
System Quality Assurance Testing

5.1.
The maintenance and support services provided by Accuray under this Agreement do not include any System Quality Assurance Testing ("QA"). System commissioning and QA are the sole responsibility of Customer, and Customer is advised to perform QA on a regular and ongoing basis. In addition, Customer is required to maintain up-to-date QA logs. If Customer fails to perform the appropriate QA of the System, and to record such QA in the appropriate logs, Accuray, upon giving Notice to Customer in accordance with Section 16 of this Agreement, reserves the right to terminate this Agreement.

5.2.
Prior to performing any scheduled service or preventive maintenance on the System, Accuray will review Customer's QA logs, and if such logs are not up-to-date, Accuray may refuse to service the System. In the event that the requested service is necessary to bring the System to a point where QA can be performed, Accuray will proceed with the service only after Customer signs a written acknowledgement that QA is Customer's sole responsibility and that appropriate QA will be performed prior to conducting any patient treatments.

6.
Service Coverage Period

6.1.
The Service Coverage Period will be the hours of 8:00 AM to 9:00 PM local (to Customer's installation location) time Monday through Saturday (excluding local legal holidays). Customer has the option to request service during non-normal hours, in which case Customer shall pay the overtime premium portion of the non-normal hours worked. (Non-normal hourly rate minus normal hourly rate.) Accuray shall provide Customer with contact points to request service on a 24-hours-a-day, 7-days-a-week ("24/7") basis. Accuray, directly or remotely as the situation requires, either with its own personnel or through contractors, shall initially respond within one (1) hour of receipt of a call for service. The initial response shall include telephone support, including (as applicable) consultations, diagnostic assistance and advice on the use and maintenance of the System. In the event that the service issue cannot be resolved by telephone or other remote response, then Accuray will respond on-site. On-site response times will vary depending upon the level of service required.

6.2.
Customer will promptly notify Accuray, by calling Accuray's Customer Support Line at 1-408-716-4700, of any problem or defect with the System and, at no charge, provide Accuray service engineers access to the System and use of adequate facilities and equipment at mutually agreeable times as necessary for Accuray to perform the service. Customer shall have as many service calls as are reasonably needed to maintain the System so that it performs substantially in accordance with the Specifications during the period of this Agreement.

6.3.
Use of the facility CT scanner may be required for testing purposes and shall be scheduled to allow as expeditious completion of service as is reasonably possible. Facility staff will operate the CT scanner. If service is unreasonably delayed and Accuray service engineers are required to remain on site, Accuray may choose to charge the current hourly service rates for the duration of the delay period.

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7.
Uptime

7.1.
Uptime/Downtime. Uptime shall mean any time that the System is not down ("Uptime"). A down System means that a patient cannot be treated due to an actual malfunction of the System and that the System is immediately available for an Accuray service engineer to work on it ("Downtime").

7.2.
Guarantee. Accuray will guarantee that the System shall have an Uptime percentage of at least 95% of normal treatment hours on an annual basis during the Term of this Agreement. Normal treatment hours shall be from 8:00 AM to 5:00 PM local time Monday through Friday (excluding legal holidays). The first 12-month period will start as of the Effective Date of this Agreement.

7.3.
Calculation. Downtime will be calculated from the time a down System call is received by Accuray to the time of repair, counting normal treatment hours. The System will be calculated as up when the System repair has been completed and the System is available for treatment during normal treatment hours, whether or not patients are scheduled for treatment. Scheduled preventive maintenance, System upgrades, and time that the System is unavailable as a result of something beyond Accuray's control, including without limitation (i) Customer's use of the System for purposes other than its intended and authorized purposes, (ii) the negligence of Customer, (iii) the failure of Customer to operate the System in accordance with the User Manuals, (iv) use by untrained operators, (v) e-Stops, power outages or the like or (vi) the negligence of any party other than Accuray, will be calculated as Uptime.

7.4.
Reports. Customer is responsible for recording and reporting Downtime to Accuray. Reports for the previous month's Downtime shall be provided to Accuray on or before the 15th day of each month.

7.5.
Failure to Meet Guarantee. For each year of the term of this Agreement, if Accuray achieves a 12-month uptime average of less than 95%, the Agreement period will be extended one (1) week for every percentage point or fraction thereof below 95%.

8.
Replacement Parts

8.1.
Accuray shall make a commercially reasonable effort to supply at the time of need or stock with Accuray's regional service engineers all tools, equipment, replacement parts and Consumables as would reasonably be required by Accuray to perform the required repairs and return the System to good working order. Accuray shall make a commercially reasonable effort to maintain at its factory or service center(s) a stock of spare parts, including, in particular, long-procurement-lead-time parts.

8.2.
Replacement parts used under this Agreement may be either new manufacture or factory refurbished at Accuray's choice. All replacement parts and assemblies provided will be manufactured in accordance with Accuray's quality system, and any applicable laws and

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9.
Exceptions

9.1.
All obligations of Accuray under this Agreement shall be suspended and/or cease in the event of:

9.1.1.
Damage from fire, accident, abuse, floods, lightning, natural disasters or other calamities commonly defined as "Acts of God".

9.1.2.
The intentional abuse of the System or negligence by Customer.

9.1.3.
System hardware or software alterations not authorized by Accuray including any move of the System from its installation site (other than by or at the express written direction of Accuray).

9.1.4.
Use of the System for other than its intended and authorized purposes, or in a manner not consistent with Accuray's User Manuals, including maintenance of the necessary operating environment and line current conditions, and the failure of Customer to cure such matter within thirty (30) days of actual written notice thereof from Accuray.

9.1.5.
Failure to make payments in accordance with the payment schedule set forth above in Section 2.2.

9.2.
If corrective action or adjustment of the System is performed by Customer's staff at the direction of Accuray, such action or adjustment shall not reduce Accuray's responsibility under this Agreement or liability for the performance of the System.

10.
No Cancellation.    Neither party shall have the right to cancel this Agreement, except as set forth below in Section 11 "Breach."

11.
Breach.    Either party reserves the right to cancel this Agreement by written notice upon the breach of the other. An event of breach may include, but is not limited to, failure to make payment due under this Agreement, failure to provide access as required to execute the services contemplated by this Agreement, failure to perform and log QA, or the filing of notice under bankruptcy or equivalent laws. If the breaching party is unable or unwilling to cure or make a good faith effort to cure such breach within thirty (30) days of actual written notice the other party shall be relieved of all obligations under this Agreement and may terminate. Termination shall not be the terminating party's exclusive remedy, and the terminating party shall retain all other available legal and equitable remedies.

12.
Limitation of Liability and Warranty

12.1.
If it is determined in accordance with applicable law that any fault or neglect of either party, its employees or agents, substantially contributes to damage or injury to third parties, such party shall be responsible in such proportion as reflects its relative fault therefore, and shall hold the other party harmless from any liability or damages arising out of such fault or neglect. Accuray's liability arising under this Agreement shall be limited to an amount not to exceed the payment(s) received by Accuray for the then current Agreement year. In addition, Accuray shall not be liable to Customer in the event that Customer's or any third party's acts or omissions contributed in any way to any loss it sustained or the loss or damage is due to an act of God or other causes beyond its reasonable control. IN NO

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13.
Patient Information.    In performing the services hereunder, Accuray may receive from Customer, or create or receive on behalf of Customer, patient healthcare, billing, or other confidential patient information ("Patient Information"). Patient Information, as the term is used herein, includes all "Protected Health Information," as that term is defined in 45 CFR 164.501. Accuray shall use Patient Information only as necessary to provide the services to Customer as set forth in this Agreement. Accuray shall comply with all laws, rules and regulations relating to the confidentiality of Patient Information, including the applicable provisions of the privacy regulations promulgated pursuant to Health Insurance Portability and Accountability Act of 1996 ("HIPAA").

14.
Assignment.    Neither party may assign this Agreement without the other party's prior written consent, except that Accuray may assign this Agreement, without Customer's consent, to an affiliate or to a successor or acquirer, as the case may be, in connection with a merger or acquisition, or the sale of all or substantially all of Accuray's assets or the sale of that portion of Accuray's business to which this Agreement relates. Subject to the foregoing, this Agreement will bind and inure to the benefit of the parties' permitted successors and assigns.

15.
Disputes and Governing Laws

15.1.
In the event that a dispute arises between Accuray and Customer with respect to any subject matter governed by this Agreement, such dispute shall be settled as follows. If either party shall have any dispute with respect to this Agreement, that party shall provide written notification to the other party in the form of a claim identifying the issue or amount disputed including a detailed reason for the claim. The party against whom the claim is made shall respond in writing to the claim within 30 days from the date of receipt of the claim document. The party filing the claim shall have an additional 30 days after the receipt of the response to either accept the resolution offered by the other party or escalate the matter. If the dispute is not resolved, either party may notify the other in writing of their desire to elevate the claim to the President of Accuray and the Chief Executive Officer of Customer. Each shall negotiate in good faith and use his or her best efforts to resolve such dispute or claim. The location, format, frequency, duration and conclusion of these elevated discussions shall be left to the discretion of the representatives involved. If the negotiations do not lead to resolution of the underlying dispute or claim to the satisfaction of either party involved, then either party may pursue resolution by the courts as follows.

15.2.
All disputes arising out of or relating to this Agreement not otherwise resolved between Accuray and Customer shall be resolved in a court of competent jurisdiction, in Santa Clara County, State of California, and in no other place, provided that, in Accuray's sole discretion, such action may be heard in some other place designated by Accuray (if necessary to acquire jurisdiction over third persons), so that the dispute can be resolved in one action. Customer hereby consents to the jurisdiction of such court or courts and agrees to appear in any such action upon written notice thereof. No action, regardless of form, arising out of, or in any way connected with this Agreement may be brought by Customer more than one (1) year after the cause of action has occurred.

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16.
Notices.    All notices required or permitted under this Agreement will be in writing and delivered in person, by overnight delivery service, or by registered or certified mail, postage prepaid with return receipt requested, and in each instance will be deemed given upon receipt. All communications will be sent to the addresses set forth below or to such other address as may be specified by either party in writing to the other party in accordance with this Section.

To Accuray:

   To Customer:
Accuray Incorporated    
Attention: Chief Financial Officer    
1310 Chesapeake Terrace    
Sunnyvale, CA 94089    
        
with cc to: General Counsel   with cc to:
17.
Waiver.    The waiver of any breach or default of any provision of this Agreement will not constitute a waiver of any other right hereunder or of any subsequent breach or default.

18.
Severability.    If any provision of this Agreement is held invalid or unenforceable by a court of competent jurisdiction, the remaining provisions of the Agreement will remain in full force and effect, and the provision affected will be construed so as to be enforceable to the maximum extent permissible by law.

19.
Force Majeure.    Neither party will be responsible for any failure or delay in its performance under this Agreement (except for the payment of money) due to causes beyond its reasonable control, including, but not limited to, labor disputes, strike, lockout, riot, war, fire, act of God, accident, failure or breakdown of components necessary to order completion; subcontractor, supplier or customer caused delays; inability to obtain or substantial rises in the prices of labor, materials or manufacturing facilities; curtailment of or failure to obtain sufficient electrical or other energy, raw materials or supplies; or compliance with any law, regulation or order, whether valid or invalid.

20.
Amendments.    Any amendment or modification of this Agreement must be made in writing and signed by duly authorized representatives of each party. For Accuray, a duly authorized representative must be any of the following: CEO, CFO, or General Counsel.

21.
Entire Agreement.    This Agreement contains the entire Agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior understandings, representations and warranties, written and oral. If any part of the terms and conditions stated herein are held void or unenforceable, such part will be treated as severable, leaving valid the remainder of the terms and conditions.

22.
Counterparts.    This Agreement may be executed in counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

SIGNATURE PAGE FOLLOWS

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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the Effective Date by their duly authorized representatives. The parties acknowledge and agree that this Agreement does not become effective until it has been signed by all parties indicated below.

ACCURAY INCORPORATED

   CUSTOMER


 
By:   By:
Print Name: Doug Keare
   Print Name:
Title: Vice President of Customer Service
and Technical Support		   Title:
        
Date:
   Date:

 
 
PLEASE MAKE CERTAIN THAT YOU HAVE SELECTED A PAYMENT OPTION IN ACCORDANCE WITH SECTION 2.2, ABOVE.

        The undersigned acknowledges that the terms and conditions of this Agreement meet the policies and procedures of Accuray.

Signed:
   Dated:
  General Counsel, Accuray Incorporated    

SIGNATURE PAGE TO INTERNATIONAL DIAMOND AGREEMENT

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ACCURAY CYBERKNIFE® INTERNATIONAL DIAMOND ELITE SERVICE AGREEMENT

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Exhibit 10.36


ACCURAY CYBERKNIFE® INTERNATIONAL EMERALD ELITE SERVICE AGREEMENT

1.
Scope of Service.    This Emerald Elite Service Agreement ("Agreement") is made by and between ACCURAY INCORPORATED ("Accuray"), a California corporation, located at 1310 Chesapeake Terrace, Sunnyvale, CA 94089, and                                      ("Customer"), located at                                    , for Accuray to provide planned maintenance service when scheduled by Accuray and corrective maintenance service when requested by Customer to maintain the CyberKnife System installed at Customer's site at                                    ("System") so that it performs substantially in accordance with the Specifications (User Manuals and Reference Guides) defined for the System revision as installed and/or upgraded.

1.1.
Effective Date.    This Agreement shall be effective as of demonstration of acceptance testing by Accuray as described in the CyberKnife Quotation and Purchase Agreement dated                                    , 2006 and signed by the parties, or the expiration of any prior service or warranty agreement, if applicable.

1.2.
Definitions:

1.2.1.
Bug Fix means an error correction or minor change in the existing software and/or hardware configuration that is required in order to enable the existing software and/or hardware configuration to perform to the existing functional specification(s).

1.2.2.
Update means a release of the software or a change to the existing hardware containing substantially only error corrections, minor new features, functionality and/or performance improvements, but that would not be required for the existing software and/or hardware configuration to perform to the existing functional specification(s) of that particular product. Such Update would not necessarily replace or extend the life of the existing software and/or hardware configuration of the product. For example, an Update of software would be indicated where the version number is changed by incrementing the numeric digits to the right of the decimal point, e.g., versions 1.1, 1.2, 1.3, and 1.4 would each be Updates of the software.

1.2.3.
Upgrade/Enhancement means a release of the software or a change to the existing hardware containing major new features, functionality and/or performance improvements that would enable the existing software and/or hardware configuration to perform to the level of the next version of the software and/or hardware configuration and designed to replace the older software and/or hardware version of the same product and/or extend the useful life of that product. For example, an Upgrade/Enhancement of software would be indicated where the version number is changed by incrementing the numeric digits to the left of the decimal point, e.g., versions 1.0, 2.0, 3.0, and 4.0 would each be Upgrades/Enhancements of the software.

1.2.4.
New Version/New Product means a release of the software or a change to the hardware that may or may not work with the existing software and/or hardware configuration, but that in its totality requires, in Accuray's sole opinion, enough change to the software and/or hardware configuration to be considered a New Version or New Product.

1.2.5.
Consumables means items that are not necessarily part of the CyberKnife system, but are consumed as part of the operation of the CyberKnife system, for example fiducials.

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2.
Service Period.

2.1.
The Agreement Term shall be for an initial period of four (4) years (years 1, 2, 3, & 4) from the Effective Date of this Agreement, including the warranty year, with an optional fifth year. There is no payment required under this Agreement in the first year ("Year 1" or the "Warranty Year"). Customer may elect to receive an additional optional fifth year (the "Optional Year 5"). Customer may exercise the option for Optional Year 5 by letter sent to Accuray, in accordance with the Notice provision set forth below, at any time up to ten (10) days before the Optional Year 5 commences. If Customer does not exercise the option, there will be no charge to Customer, and Accuray will not provide Emerald coverage for Optional Year 5. If Customer exercises the option, Accuray is obligated to provide Emerald coverage on same terms as the previous Agreement years. Billing will commence on the day following the anniversary of the Effective Date of this Agreement.

2.2.
The Agreement Price shall be one of the following, at Customer's option (indicate preferred option by checking a box, if no selection is made Customer will be billed on an annual basis). The Agreement Price shall cover the Base CyberKnife System, up to two (2) CyRIS Multiplan Systems (including the CyRIS MultiPlan System in the Base CyberKnife System), and up to three (3) CyRIS InView Workstations. If Customer has more than two (2) CyRIS MultiPlan Systems or three (3) CyRIS InView Workstations installed, then an additional charge of $18,750.00 per year per MultiPlan and $6,750.00 per year per InView, as applicable, will be added by Accuray to the Agreement Price set forth below.

o
ANNUAL: $275,000 per year, paid yearly in advance, for years 2, 3, 4 and Optional Year 5.

o
QUARTERLY: $72,000 per quarter, paid at the beginning of each quarter, for years 2, 3, 4 and Optional Year 5.

o
MONTHLY: $25,000 per month, paid at the beginning of each month, for years 2, 3, 4 and Optional Year 5.

3.
Equipment To Be Covered

3.1.
This Agreement is available only for equipment that was purchased directly from Accuray, installed by Accuray engineers and has not been moved from its original installation location or disconnected from its original power supply without written permission or direction from Accuray. This Agreement must immediately commence at the expiration of the factory warranty period or prior service agreement. In the event of lapse of service, Customer shall have the right to reinstate such service by payment of the current service fee for the then-current service period in addition to the reasonable costs for Accuray to inspect, repair, and return the System to the state at which the System would have been had a service agreement been in force continuously since the expiration of the System factory warranty.

4.
Software Maintenance (Bug Fixes and Updates)

4.1.
For the duration of the Agreement Term, Accuray will provide software Updates and Bug Fixes for software that is included as a part of the CyberKnife System. These Updates and Bug Fixes may be transmitted electronically to Customer for subsequent installation by Customer technicians. Corrections of significant complexity, however, may be installed by Accuray service engineers. Software maintenance will be included only for those product features that were originally purchased with the System or subsequently purchased separately by Customer from Accuray or taken under this Agreement as a System Upgrade/Enhancement.

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5.
System Quality Assurance Testing

5.1.
The maintenance and support services provided by Accuray under this Agreement do not include any System Quality Assurance Testing ("QA"). System commissioning and QA are the sole responsibility of Customer, and Customer is advised to perform QA on a regular and ongoing basis. In addition, Customer is required to maintain up-to-date QA logs. If Customer fails to perform the appropriate QA of the System, and to record such QA in the appropriate logs, Accuray, upon giving Notice to Customer in accordance with Section 16 of this Agreement, reserves the right to terminate this Agreement.

5.2.
Prior to performing any scheduled service or preventive maintenance on the System, Accuray will review Customer's QA logs, and if such logs are not up-to-date, Accuray may refuse to service the System. In the event that the requested service is necessary to bring the System to a point where QA can be performed, Accuray will proceed with the service only after Customer signs a written acknowledgement that QA is Customer's sole responsibility and that appropriate QA will be performed prior to conducting any patient treatments.

6.
Service Coverage Period

6.1.
The Service Coverage Period will be the hours of 8:00 AM to 9:00 PM local (to Customer's installation location) time Monday through Saturday (excluding local legal holidays). Customer has the option to request service during non-normal hours, in which case Customer shall pay the overtime premium portion of the non-normal hours worked. (Non-normal hourly rate minus normal hourly rate.) Accuray shall provide Customer with contact points to request service on a 24-hours-a-day, 7-days-a-week ("24/7") basis. Accuray, directly or remotely as the situation requires, either with its own personnel or through contractors, shall initially respond within one (1) hour of receipt of a call for service. The initial response shall include telephone support, including (as applicable) consultations, diagnostic assistance and advice on the use and maintenance of the System. In the event that the service issue cannot be resolved by telephone or other remote response, then Accuray will respond on-site. On-site response times will vary depending upon the level of service required.

6.2.
Customer will promptly notify Accuray, by calling Accuray's Customer Support Line at 1-408-716-4700, of any problem or defect with the System and, at no charge, provide Accuray service engineers access to the System and use of adequate facilities and equipment at mutually agreeable times as necessary for Accuray to perform the service. Customer shall have as many service calls as are reasonably needed to maintain the System so that it performs substantially in accordance with the Specifications during the period of this Agreement.

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7.
Uptime

7.1.
Uptime/Downtime.    Uptime shall mean any time that the System is not down ("Uptime"). A down System means that a patient cannot be treated due to an actual malfunction of the System and that the System is immediately available for an Accuray service engineer to work on it ("Downtime").

7.2.
Guarantee.    Accuray will guarantee that the System shall have an Uptime percentage of at least 95% of normal treatment hours on an annual basis during the Term of this Agreement. Normal treatment hours shall be from 8:00 AM to 5:00 PM local time Monday through Friday (excluding legal holidays). The first 12-month period will start as of the Effective Date of this Agreement.

7.3.
Calculation.    Downtime will be calculated from the time a down System call is received by Accuray to the time of repair, counting normal treatment hours. The System will be calculated as up when the System repair has been completed and the System is available for treatment during normal treatment hours, whether or not patients are scheduled for treatment. Scheduled preventive maintenance, System upgrades, and time that the System is unavailable as a result of something beyond Accuray's control, including without limitation (i) Customer's use of the System for purposes other than its intended and authorized purposes, (ii) the negligence of Customer, (iii) the failure of Customer to operate the System in accordance with the User Manuals, (iv) use by untrained operators, (v) e-Stops, power outages or the like or (vi) the negligence of any party other than Accuray, will be calculated as Uptime.

7.4.
Reports.    Customer is responsible for recording and reporting Downtime to Accuray. Reports for the previous month's Downtime shall be provided to Accuray on or before the 15th day of each month.

7.5.
Failure to Meet Guarantee.    For each year of the term of this Agreement, if Accuray achieves a 12-month uptime average of less than 95%, the Agreement period will be extended one (1) week for every percentage point or fraction thereof below 95%.

8.
Replacement Parts

8.1.
Accuray shall make a commercially reasonable effort to supply at the time of need or stock with Accuray's regional service engineers all tools, equipment, replacement parts and Consumables as would reasonably be required by Accuray to perform the required repairs and return the System to good working order. Accuray shall make a commercially

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9.
Exceptions

9.1.
All obligations of Accuray under this Agreement shall be suspended and/or cease in the event of:

9.1.1.
Damage from fire, accident, abuse, floods, lightning, natural disasters or other calamities commonly defined as "Acts of God".

9.1.2.
The intentional abuse of the System or negligence by Customer.

9.1.3.
System hardware or software alterations not authorized by Accuray including any move of the System from its installation site (other than by or at the express written direction of Accuray).

9.1.4.
Use of the System for other than its intended and authorized purposes, or in a manner not consistent with Accuray's User Manuals, including maintenance of the necessary operating environment and line current conditions, and the failure of Customer to cure such matter within thirty (30) days of actual written notice thereof from Accuray.

9.1.5.
Failure to make payments in accordance with the payment schedule set forth above in Section 2.2.

9.2.
If corrective action or adjustment of the System is performed by Customer's staff at the direction of Accuray, such action or adjustment shall not reduce Accuray's responsibility under this Agreement or liability for the performance of the System.

10.
No Cancellation.    Neither party shall have the right to cancel this Agreement, except as set forth below in Section 11 "Breach."

11.
Breach.    Either party reserves the right to cancel this Agreement by written notice upon the breach of the other. An event of breach may include, but is not limited to, failure to make payment due under this Agreement, failure to provide access as required to execute the services contemplated by this Agreement, failure to perform and log QA, or the filing of notice under bankruptcy or equivalent laws. If the breaching party is unable or unwilling to cure or make a good faith effort to cure such breach within thirty (30) days of actual written notice the other party shall be relieved of all obligations under this Agreement and may terminate. Termination shall not be the terminating party's exclusive remedy, and the terminating party shall retain all other available legal and equitable remedies.

12.
Limitation of Liability and Warranty

    12.1.
    If it is determined in accordance with applicable law that any fault or neglect of either party, its employees or agents, substantially contributes to damage or injury to third parties, such party shall be responsible in such proportion as reflects its relative

5

13.
Patient Information.    In performing the services hereunder, Accuray may receive from Customer, or create or receive on behalf of Customer, patient healthcare, billing, or other confidential patient information ("Patient Information"). Patient Information, as the term is used herein, includes all "Protected Health Information," as that term is defined in 45 CFR 164.501. Accuray shall use Patient Information only as necessary to provide the services to Customer as set forth in this Agreement. Accuray shall comply with all laws, rules and regulations relating to the confidentiality of Patient Information, including the applicable provisions of the privacy regulations promulgated pursuant to Health Insurance Portability and Accountability Act of 1996 ("HIPAA").

14.
Assignment.    Neither party may assign this Agreement without the other party's prior written consent, except that Accuray may assign this Agreement, without Customer's consent, to an affiliate or to a successor or acquirer, as the case may be, in connection with a merger or acquisition, or the sale of all or substantially all of Accuray's assets or the sale of that portion of Accuray's business to which this Agreement relates. Subject to the foregoing, this Agreement will bind and inure to the benefit of the parties' permitted successors and assigns.

15.
Disputes and Governing Laws

15.1.
In the event that a dispute arises between Accuray and Customer with respect to any subject matter governed by this Agreement, such dispute shall be settled as follows. If either party shall have any dispute with respect to this Agreement, that party shall provide written notification to the other party in the form of a claim identifying the issue or amount disputed including a detailed reason for the claim. The party against whom the claim is made shall respond in writing to the claim within 30 days from the date of receipt of the claim document. The party filing the claim shall have an additional 30 days after the receipt of the response to either accept the resolution offered by the other party or escalate the matter. If the dispute is not resolved, either party may notify the other in writing of their desire to elevate the claim to the President of Accuray and the Chief Executive Officer of Customer. Each shall negotiate in good faith and use his or her best efforts to resolve such dispute or claim. The location, format, frequency, duration and conclusion of these elevated discussions shall be left to the discretion of the representatives involved. If the negotiations do not lead to resolution of the underlying dispute or claim to the satisfaction of either party involved, then either party may pursue resolution by the courts as follows.

15.2.
All disputes arising out of or relating to this Agreement not otherwise resolved between Accuray and Customer shall be resolved in a court of competent jurisdiction, in Santa Clara

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16.
Notices.    All notices required or permitted under this Agreement will be in writing and delivered in person, by overnight delivery service, or by registered or certified mail, postage prepaid with return receipt requested, and in each instance will be deemed given upon receipt. All communications will be sent to the addresses set forth below or to such other address as may be specified by either party in writing to the other party in accordance with this Section.

To Accuray:

   To Customer:
Accuray Incorporated    
Attention: Chief Financial Officer    
1310 Chesapeake Terrace    
Sunnyvale, CA 94089    
        
with cc to: General Counsel   with cc to:
17.
Waiver.    The waiver of any breach or default of any provision of this Agreement will not constitute a waiver of any other right hereunder or of any subsequent breach or default.

18.
Severability.    If any provision of this Agreement is held invalid or unenforceable by a court of competent jurisdiction, the remaining provisions of the Agreement will remain in full force and effect, and the provision affected will be construed so as to be enforceable to the maximum extent permissible by law.

19.
Force Majeure.    Neither party will be responsible for any failure or delay in its performance under this Agreement (except for the payment of money) due to causes beyond its reasonable control, including, but not limited to, labor disputes, strike, lockout, riot, war, fire, act of God, accident, failure or breakdown of components necessary to order completion; subcontractor, supplier or customer caused delays; inability to obtain or substantial rises in the prices of labor, materials or manufacturing facilities; curtailment of or failure to obtain sufficient electrical or other energy, raw materials or supplies; or compliance with any law, regulation or order, whether valid or invalid.

20.
Amendments.    Any amendment or modification of this Agreement must be made in writing and signed by duly authorized representatives of each party. For Accuray, a duly authorized representative must be any of the following: CEO, CFO, or General Counsel.

21.
Entire Agreement.    This Agreement contains the entire Agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior understandings, representations and warranties, written and oral. If any part of the terms and conditions stated herein are held void or unenforceable, such part will be treated as severable, leaving valid the remainder of the terms and conditions.

22.
Counterparts.    This Agreement may be executed in counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

SIGNATURE PAGE FOLLOWS

7

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the Effective Date by their duly authorized representatives. The parties acknowledge and agree that this Agreement does not become effective until it has been signed by all parties indicated below.

ACCURAY INCORPORATED

   CUSTOMER


 
By:
   By:
Print Name: Doug Keare   Print Name:
Title: Vice President of Customer Service
and Technical Support		   Title:
        
Date:
   Date:

 
 
PLEASE MAKE CERTAIN THAT YOU HAVE SELECTED A PAYMENT OPTION IN ACCORDANCE WITH SECTION 2.2, ABOVE.

        The undersigned acknowledges that the terms and conditions of this Agreement meet the policies and procedures of Accuray.

Signed:
   Dated:
  General Counsel, Accuray Incorporated    

SIGNATURE PAGE TO INTERNATIONAL EMERALD SERVICE AGREEMENT

8



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ACCURAY CYBERKNIFE® INTERNATIONAL EMERALD ELITE SERVICE AGREEMENT

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Exhibit 10.37


ACCURAY CYBERKNIFE® PLATINUM ELITE SERVICE AGREEMENT

1.
Scope of Service.    This Platinum Elite Service Agreement ("Agreement") is made by and between Accuray Incorporated ("Accuray"), a California corporation, located at 1310 Chesapeake Terrace, Sunnyvale, CA 94089, and                                    ("Customer"), located at                                    , for Accuray to provide planned maintenance service when scheduled by Accuray and corrective maintenance service when requested by Customer to maintain the CyberKnife System installed at Customer's site at                                    ("System") so that it performs substantially in accordance with the Specifications (user Manuals and Reference Guides) defined for the System revision as installed and/or upgraded.

1.1.
Effective Date.    This Agreement shall be effective as of demonstration of acceptance testing by Accuray as described in the CyberKnife Quotation and Purchase Agreement dated                                    , 2005 and signed by the parties, or the expiration of any prior service or warranty agreement, if applicable.

1.2.
Definitions:

1.2.1.
Bug Fix means an error correction or minor change in the existing software and/or hardware configuration that is required in order to enable the existing software and/or hardware configuration to perform to the existing functional specification(s).

1.2.2.
Update means a release of the software or a change to the existing hardware containing substantially only error corrections, minor new features, functionality and/or performance improvements, but that would not be required for the existing software and/or hardware configuration to perform to the existing functional specification(s) of that particular product. Such Update would not necessarily replace or extend the life of the existing software and/or hardware configuration of the product. For example, an Update of software would be indicated where the version number is changed by incrementing the numeric digits to the right of the decimal point, e.g., versions 1.1, 1.2, 1.3, and 1.4 would each be Updates of the software.

1.2.3.
Upgrade/Enhancement means a release of the software or a change to the existing hardware containing major new features, functionality and/or performance improvements that would enable the existing software and/or hardware configuration to perform to the level of the next version of the software and/or hardware configuration and designed to replace the older software and/or hardware version of the same product and/or extend the useful life of that product. For example, an Upgrade/Enhancement of software would be indicated where the version number is changed by incrementing the numeric digits to the left of the decimal point, e.g., versions 1.0, 2.0, 3.0, and 4.0 would each be Upgrades/Enhancements of the software.

1.2.4.
New Version/New Product means a release of the software or a change to the hardware that may or may not work with the existing software and/or hardware configuration, but that in its totality requires, in Accuray's sole opinion, enough change to the software and/or hardware configuration to be considered a New Version or New Product.

1.2.5.
Exclusions means items that are excluded from the definition of Upgrade/Enhancement because of the very nature of the item, as compared to the rest of the components in the system whether in the software and/or hardware configuration, it

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2.
Service Period.

2.1.
The Agreement shall be for an initial period of four (4) years (years 1, 2, 3, & 4) from the Effective Date of this Agreement, including the warranty year, with an optional fifth year. There is no payment required under this Agreement in the first year ("Year 1" or the "Warranty Year"). Customer may elect to receive an additional optional fifth year (the "Optional Year 5") at the price of $425,000 and on terms that are defined below (Section 3.4). Billing will commence on the day following the anniversary of the Effective Date of this Agreement.

2.2.
The Agreement price shall be one of the following, at Customer's option (indicate preferred option):

o
$425,000 per year, paid yearly in advance, for years 2, 3, 4 & Optional Year 5.

o
$110,000 quarterly, paid at the beginning of each quarter, for years 2, 3, 4 & Optional Year 5.

o
$37,000 monthly, paid at the beginning of each month, for years 2, 3, 4 & Optional Year 5.

3.
Product Upgrades/Enhancements

3.1.
This Agreement is available only for equipment that was purchased directly from Accuray, installed by Accuray engineers and has not been moved from its original installation location or disconnected from its original power supply without written permission or direction from Accuray. This Agreement must immediately commence at the expiration of the factory warranty period or prior service agreement. In the event of lapse of service, Customer shall have the right to reinstate such service by payment of the current service fee for the then-current service period in addition to the reasonable costs for Accuray to inspect, repair, and return the System to the state at which the System would have been had a service agreement been in force continuously since the expiration of the System factory warranty.

3.2.
Accuray's total commitment under the initial four (4) year Agreement is to deliver six (6) Upgrades/Enhancements as follows. No Upgrades/Enhancements will be due under this Agreement during Year 1 (the Warranty Year). For each of the subsequent three (3) years, Customer is entitled to two (2) Upgrades/Enhancements in each year, such that Customer will receive two (2) Upgrades/Enhancements during each of years 2, 3 and 4. Customer may order an available Upgrade/Enhancement during Year 1 (the Warranty Year), or order an additional Upgrade/Enhancement during years 2 or 3, and such Upgrade/Enhancement will be charged against any future Upgrades/Enhancements due Customer under this Agreement. For example, if Customer orders an Upgrade/Enhancement during Year 1

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4.
Software Maintenance (Bug Fixes and Updates)

4.1.
For the duration of this Agreement, Accuray will provide software Updates and Bug Fixes for software that is included as a part of the CyberKnife System. These Updates and Bug Fixes may be transmitted electronically to Customer for subsequent installation by Customer technicians. Corrections of significant complexity, however, may be installed by Accuray service engineers. Software maintenance will be included only for those product features that were originally purchased with the System or subsequently purchased by Customer from Accuray as a System Upgrade/Enhancement.

4.2.
During the service periods, Accuray shall provide Customer with any and all applicable product notices regarding maintenance, support, Upgrades/Enhancements, Updates and Bug Fixes generally circulated by Accuray to Accuray Customers with CyberKnife installations.

4.3.
All such Updates and Bug Fixes, when made by Accuray or according to Accuray instructions or the product notice, shall be considered to be done by and under the direction of Accuray.

5.
System Quality Assurance Testing

5.1.
The maintenance and support services provided by Accuray under this Agreement do not include any System Quality Assurance Testing ("QA"). System commissioning and QA are the sole responsibility of Customer, and Customer is advised to perform QA on a regular and ongoing basis. In addition, Customer is required to maintain up-to-date QA logs. If Customer fails to perform the appropriate QA of the System, and to record such QA in the appropriate logs, Accuray, upon giving Notice to Customer in accordance with Section 11 of this Agreement, reserves the right to terminate this Agreement.

5.2.
Prior to performing any scheduled service or preventive maintenance on the System, Accuray will review Customer's QA logs, and if such logs are not up-to-date, Accuray may refuse to service the System. In the event that the requested service is necessary to bring the System to a point where QA can be performed, Accuray will proceed with the service only after Customer signs a written acknowledgement that QA is Customer's sole responsibility and that appropriate QA will be performed prior to conducting any patient treatments.

6.
Service Coverage Period

6.1.
The Service Coverage Period will be the hours of 8:00 AM to 9:00 PM local time Monday through Saturday (excluding Federal holidays). Customer has the option to request service during non-normal hours, in which case Customer shall pay the overtime premium portion of the non-normal hours worked. (Non-normal hourly rate minus normal hourly rate.) Accuray shall provide Customer with contact points to request service on a 24-hours-a-day, 7-days-a-week ("24/7") basis. Accuray, directly or remotely as the situation requires, either with its own personnel or through contractors, shall initially respond within one (1) hour of receipt of a call for service. The initial response shall include telephone support, including (as applicable) consultations, diagnostic assistance and advice on the use and maintenance of the System.

6.2.
Customer will promptly notify Accuray, by calling Accuray's Customer Support Line at 1-877-668-8667, of any problem or defect with the System and, at no charge, provide Accuray service engineers access to the System and use of adequate facilities and equipment at mutually agreeable times as necessary for Accuray to perform the service. Customer shall have as many service calls as are reasonably needed to maintain the System so that it

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7.
Uptime

7.1.
Uptime/Downtime.    Uptime shall mean any time that the System is not down ("Uptime"). A down System means that a patient cannot be treated due to an actual malfunction of the System and that the System is immediately available for an Accuray service engineer to work on it ("Downtime").

7.2.
Guarantee.    Accuray will guarantee that the System shall have an Uptime percentage of at least 98% of normal treatment hours on an annual basis during the Term of this Agreement. Normal treatment hours shall be from 8:00 AM to 5:00 PM local time Monday through Friday (excluding Federal holidays). The first 12-month period will start as of the Effective Date of this Agreement.

7.3.
Calculation.    Downtime will be calculated from the time a down System call is received by Accuray to the time of repair, counting normal treatment hours. The System will be calculated as up when the System repair has been completed and the System is available for treatment during normal treatment hours, whether or not patients are scheduled for treatment. Scheduled preventive maintenance, System upgrades, and time that the System is unavailable as a result of something beyond Accuray's control, including without limitation (i) Customer's use of the System for purposes other than its intended and authorized purposes, (ii) the negligence of Customer, (iii) the failure of Customer to operate the System in accordance with the User Manuals, (iv) use by untrained operators, (v) e-Stops, power outages or the like or (vi) the negligence of any party other than Accuray, will be calculated as Uptime.

7.4.
Reports.    Customer is responsible for recording and reporting Downtime to Accuray. Reports for the previous month's Downtime shall be provided to Accuray on or before the 15th day of each month.

7.5.
Failure to Meet Guarantee.    For each year of the term of this Agreement, if Accuray achieves a 12-month uptime average of 90-97.9%, the Agreement period will be extended one (1) week for every percentage point or fraction thereof below 98%.

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8.
Replacement Parts

8.1.
Accuray shall make a commercially reasonable effort to supply at the time of need or stock at Customer's facility all tools, equipment, replacement parts and Consumables as would reasonably be required by Accuray to perform the required repairs and return the System to good working order. Accuray shall make a commercially reasonable effort to maintain at its factory or service center(s) a stock of spare parts, including, in particular, long-procurement-lead-time parts.

8.2.
Replacement parts used under this Agreement may be either new manufacture or factory refurbished at Accuray's choice. All replacement parts and assemblies provided will be manufactured in accordance with Accuray's quality system, and any applicable laws and regulations. Parts replaced under this Agreement become the property of Accuray and will be disposed of by Accuray Field Service engineers. Notwithstanding the foregoing, all parts that are considered by local regulation to be "hazardous" or "contaminated" waste, or material that requires "special handling" will be disposed of or retained by Customer at Customer's facility.

9.
Exceptions

9.1.
All obligations of Accuray under this Agreement shall be suspended and/or cease in the event of:

9.1.1.
Damage from fire, accident, abuse, floods, lightning, natural disasters or other calamities commonly defined as "Acts of God".

9.1.2.
The intentional abuse of the System or negligence by Customer.

9.1.3.
System hardware or software alterations not authorized by Accuray including any move of the System from its installation site (other than by or at the express written direction of Accuray).

9.1.4.
Use of the System for other than its intended and authorized purposes, or in a manner not consistent with Accuray's User Manuals, including maintenance of the necessary operating environment and line current conditions, and the failure of Customer to cure such matter within thirty (30) days of actual written notice thereof from Accuray.

9.1.5.
Failure to make payments in accordance with the payment schedule set forth above in Section 2.2.

9.2.
If corrective action or adjustment of the System is performed by Customer's staff at the direction of Accuray, such action or adjustment shall not reduce Accuray's responsibility under this Agreement or liability for the performance of the System.

10.
Cancellation Penalty.    Customer shall have the right to cancel and terminate this Agreement, with or without cause, at any time upon thirty (30) days' prior written notice to Accuray. There shall be no penalty for such cancellation and termination. Notwithstanding the foregoing, if Customer has taken an Upgrade(s)/Enhancement(s) for that year, and the payments made for that year at the time of cancellation are less than the then current list price of the Upgrade(s)/Enhancement(s) accepted, after subtracting the pro rated price for service from any payments made, Customer will be responsible for the difference between the amount actually paid and the list price of the Upgrade(s)/Enhancement(s). Additionally, if Customer has taken an Upgrade/Enhancement in advance against a future year's Upgrade/Enhancement under this Agreement, then Customer shall pay the then current list price for the Upgrade/Enhancement that was taken in advance. Should Customer not pay, then Accuray will remove said Upgrade/Enhancement.

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11.
Breach.    Either party reserves the right to cancel this Agreement by written notice upon the breach of the other. An event of breach may include, but is not limited to, failure to make payment due under this Agreement, failure to provide access as required to execute the services contemplated by this Agreement, failure to perform and log QA, or the filing of notice under Federal bankruptcy laws. If the breaching party is unable or unwilling to cure or make a good faith effort to cure such breach within thirty (30) days of actual written notice the other shall be relieved of all obligations under this Agreement and may terminate. Termination shall not be the terminating party's exclusive remedy, and the terminating party shall retain all other available legal and equitable remedies.

12.
Limitation of Liability and Warranty

12.1.
If it is determined in accordance with applicable law that any fault or neglect of either party, its employees or agents, substantially contributes to damage or injury to third parties, such party shall be responsible in such proportion as reflects its relative fault therefore, and shall hold the other party harmless from any liability or damages arising out of such fault or neglect. Accuray's liability arising under this Agreement shall be limited to an amount not to exceed the payment(s) received by Accuray for the then current Agreement year. In addition, Accuray shall not be liable to Customer in the event that Customer's or any third party's acts or omissions contributed in any way to any loss it sustained or the loss or damage is due to an act of God or other causes beyond its reasonable control. IN NO EVENT WILL ACCURAY BE LIABLE TO CUSTOMER FOR ANY LOST PROFITS, LOST SAVINGS, LOST REVENUES OR DOWNTIME, SPECIAL, INDIRECT, INCIDENTAL DAMAGES OR OTHER CONSEQUENTIAL DAMAGES ARISING OUT OF OR IN CONNECTION WITH THE AGREEMENT OR THE USE OR PERFORMANCE OF THE SYSTEM.

12.2.
This is a service agreement. THERE ARE NO INCLUDED OR IMPLIED ACCURAY WARRANTIES OF PRODUCT FITNESS FOR A PARTICULAR PURPOSE OR MERCHANTABILITY.

13.
Patient Information.    In performing the services hereunder, Accuray may receive from Customer, or create or receive on behalf of Customer, patient healthcare, billing, or other confidential patient information ("Patient Information"). Patient Information, as the term is used herein, includes all "Protected Health Information," as that term is defined in 45 CFR 164.501. Accuray shall use Patient Information only as necessary to provide the services to Customer as set forth in this Agreement. Accuray shall comply with all laws, rules and regulations relating to the confidentiality of Patient Information, including the applicable provisions of the privacy regulations promulgated pursuant to Health Insurance Portability and Accountability Act of 1996 ("HIPAA").

14.
Assignment.    Neither party may assign this Agreement without the other party's prior written consent, except that Accuray may assign this Agreement, without Customer's consent, to an affiliate or to a successor or acquirer, as the case may be, in connection with a merger or acquisition, or the sale of all or substantially all of Accuray's assets or the sale of that portion of Accuray's business to which this Agreement relates. Subject to the foregoing, this Agreement will bind and inure to the benefit of the parties' permitted successors and assigns.

15.
Disputes and Governing Laws

15.1.
In the event that a dispute arises between Accuray and Customer with respect to any subject matter governed by this Agreement, such dispute shall be settled as follows. If either party shall have any dispute with respect to this Agreement, that party shall provide written notification to the other party in the form of a claim identifying the issue or amount disputed including a detailed reason for the claim. The party against whom the claim is

7

16.
Notices.    All notices required or permitted under this Agreement will be in writing and delivered in person, by overnight delivery service, or by registered or certified mail, postage prepaid with return receipt requested, and in each instance will be deemed given upon receipt. All communications will be sent to the addresses set forth below or to such other address as may be specified by either party in writing to the other party in accordance with this Section.

To Accuray:

   To Customer:
Accuray Incorporated    
Attention: Chief Financial Officer    
1310 Chesapeake Terrace    
Sunnyvale, CA 94089    
        
with cc to: General Counsel   with cc to:
17.
Waiver.    The waiver of any breach or default of any provision of this Agreement will not constitute a waiver of any other right hereunder or of any subsequent breach or default.

18.
Severability.    If any provision of this Agreement is held invalid or unenforceable by a court of competent jurisdiction, the remaining provisions of the Agreement will remain in full force and effect, and the provision affected will be construed so as to be enforceable to the maximum extent permissible by law.

19.
Force Majeure.    Neither party will be responsible for any failure or delay in its performance under this Agreement (except for the payment of money) due to causes beyond its reasonable control, including, but not limited to, labor disputes, strike, lockout, riot, war, fire, act of God, accident, failure or breakdown of components necessary to order completion; subcontractor, supplier or customer caused delays; inability to obtain or substantial rises in the prices of labor, materials or manufacturing facilities; curtailment of or failure to obtain sufficient electrical or other energy, raw materials or supplies; or compliance with any law, regulation or order, whether valid or invalid.

20.
Amendments.    Any amendment or modification of this Agreement must be made in writing and signed by duly authorized representatives of each party. For Accuray, a duly authorized representative must be any of the following: CEO, CFO, or General Counsel.

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21.
Entire Agreement.    This Agreement contains the entire Agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior understandings, representations and warranties, written and oral. If any part of the terms and conditions stated herein are held void or unenforceable, such part will be treated as severable, leaving valid the remainder of the terms and conditions.

22.
Counterparts.    This Agreement may be executed in counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

[SIGNATURE PAGE FOLLOWS]

9

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the Effective Date by their duly authorized representatives.

ACCURAY INCORPORATED

   CUSTOMER


 
By:
   By:
Print Name:
   Print Name:
Title:
   Title:
        
Date:
   Date:

 
 
PLEASE MAKE CERTAIN THAT YOU HAVE SELECTED A PAYMENT OPTION IN ACCORDANCE WITH SECTION 2.2, ABOVE.

        The undersigned acknowledges that the terms and conditions of this Agreement meet the policies and procedures of Accuray.

Signed:
   Dated:
  General Counsel, Accuray Incorporated    

SIGNATURE PAGE TO PLATINUM ELITE SERVICE AGREEMENT

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ACCURAY CYBERKNIFE® PLATINUM ELITE SERVICE AGREEMENT

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Exhibit 10.38


ACCURAY CYBERKNIFE® SILVER ELITE SERVICE AGREEMENT

1.
Scope of Service.    This Silver Elite Service Agreement ("Agreement") is made by and between Accuray Incorporated ("Accuray"), a California corporation, located at 1310 Chesapeake Terrace, Sunnyvale, CA 94089, and                                    ("Customer"), located at                                    , for Accuray to provide planned maintenance service when scheduled by Accuray and corrective maintenance service when requested by Customer to maintain the CyberKnife System installed at Customer's site at                                    ("System") so that it performs substantially in accordance with the Specifications (user Manuals and Reference Guides) defined for the System revision as installed and/or upgraded.

1.1.
Effective Date.    This Agreement shall be effective as of demonstration of acceptance testing by Accuray as described in the CyberKnife Quotation and Purchase Agreement dated                                    , 2005 and signed by the parties, or the expiration of any prior service or warranty agreement, if applicable.

1.2.
Definitions:

1.2.1.
Bug Fix means an error correction or minor change in the existing software and/or hardware configuration that is required in order to enable the existing software and/or hardware configuration to perform to the existing functional specification(s).

1.2.2.
Update means a release of the software or a change to the existing hardware containing substantially only error corrections, minor new features, functionality and/or performance improvements, but that would not be required for the existing software and/or hardware configuration to perform to the existing functional specification(s) of that particular product. Such Update would not necessarily replace or extend the life of the existing software and/or hardware configuration of the product. For example, an Update of software would be indicated where the version number is changed by incrementing the numeric digits to the right of the decimal point, e.g., versions 1.1, 1.2, 1.3, and 1.4 would each be Updates of the software.

1.2.3.
Upgrade/Enhancement means a release of the software or a change to the existing hardware containing major new features, functionality and/or performance improvements that would enable the existing software and/or hardware configuration to perform to the level of the next version of the software and/or hardware configuration and designed to replace the older software and/or hardware version of the same product and/or extend the useful life of that product. For example, an Upgrade/Enhancement of software would be indicated where the version number is changed by incrementing the numeric digits to the left of the decimal point, e.g., versions 1.0, 2.0, 3.0, and 4.0 would each be Upgrades/Enhancements of the software.

1.2.4.
New Version/New Product means a release of the software or a change to the hardware that may or may not work with the existing software and/or hardware configuration, but that in its totality requires, in Accuray's sole opinion, enough change to the software and/or hardware configuration to be considered a New Version or New Product.

1.2.5.
Exclusions means items that are excluded from the definition of Upgrade/Enhancement because of the very nature of the item, as compared to the rest of the components in the system whether in the software and/or hardware configuration, it

1

2.
Service Period.

2.1.
The Agreement shall be for an initial period of four (4) years (years 1, 2, 3, & 4) from the Effective Date of this Agreement, including the warranty year, with an optional fifth year. There is no payment required under this Agreement in the first year ("Year 1" or the "Warranty Year"). Customer may elect to receive an additional optional fifth year (the "Optional Year 5") at the price of $260,000 and on terms that are defined below (Section 3.4). Billing will commence on the day following the anniversary of the Effective Date of this Agreement.

2.2.
The Agreement price shall be one of the following, at Customer's option (indicate preferred option):

o
$260,000 per year, paid yearly in advance, for years 2, 3, 4 and Optional Year 5.

o
$68,500 quarterly, paid at the beginning of each quarter, for years 2, 3, 4 and Optional Year 5.

o
$24,000 monthly, paid at the beginning of each month, for years 2, 3, 4 and Optional Year 5.

3.
Equipment to be Covered.    This Agreement is available only for equipment that was purchased directly from Accuray, installed by Accuray engineers and has not been moved from its original installation location or disconnected from its original power supply without written permission or direction from Accuray. The Agreement must immediately commence at the expiration of the factory warranty period or prior service agreement. In the event of lapse of service, Customer shall have the right to reinstate such service by payment of the current service fee for the then-current service period in addition to the reasonable costs for Accuray to inspect, repair, and return the System to the state at which the System would have been had a service agreement been in force continuously since the expiration of the System factory warranty.

4.
Software Maintenance (Bug Fixes and Updates)

4.1.
For the duration of this Agreement, Accuray will provide software Updates and Bug Fixes for software that is included as a part of the CyberKnife System. These Updates and Bug Fixes may be transmitted electronically to Customer for subsequent installation by Customer technicians. Corrections of significant complexity, however, may be installed by Accuray service engineers. Software maintenance will be included only for those product features that were originally purchased with the System or subsequently purchased by Customer from Accuray as a System Upgrade/Enhancement.

4.2.
Customer is not entitled to any Upgrades/Enhancements or New Version/New Products under this Agreement. Customer may purchase Upgrades/Enhancements and New Version/

2

5.
System Quality Assurance Testing

5.1.
The maintenance and support services provided by Accuray under this Agreement do not include any System Quality Assurance Testing ("QA"). System commissioning and QA are the sole responsibility of Customer, and Customer is advised to perform QA on a regular and ongoing basis. In addition, Customer is required to maintain up-to-date QA logs. If Customer fails to perform the appropriate QA of the System, and to record such QA in the appropriate logs, Accuray, upon giving Notice to Customer in accordance with Section 11 of this Agreement, reserves the right to terminate this Agreement.

5.2.
Prior to performing any scheduled service or preventive maintenance on the System, Accuray will review Customer's QA logs, and if such logs are not up-to-date, Accuray may refuse to service the System. In the event that the requested service is necessary to bring the System to a point where QA can be performed, Accuray will proceed with the service only after Customer signs a written acknowledgement that QA is Customer's sole responsibility and that appropriate QA will be performed prior to conducting any patient treatments.

6.
Service Coverage Period

6.1.
The Service Coverage Period will be the hours of 8:00 AM to 9:00 PM local time Monday through Saturday (excluding Federal holidays). Customer has the option to request service during non-normal hours, in which case Customer shall pay the overtime premium portion of the non-normal hours worked. (Non-normal hourly rate minus normal hourly rate.) Accuray shall provide Customer with contact points to request service on a 24-hours-a-day, 7-days-a-week ("24/7") basis. Accuray, directly or remotely as the situation requires, either with its own personnel or through contractors, shall initially respond within one (1) hour of receipt of a call for service. The initial response shall include telephone support, including (as applicable) consultations, diagnostic assistance and advice on the use and maintenance of the System.

6.2.
Customer will promptly notify Accuray, by calling Accuray's Customer Support Line at 1-877-668-8667, of any problem or defect with the System and, at no charge, provide Accuray service engineers access to the System and use of adequate facilities and equipment at mutually agreeable times as necessary for Accuray to perform the service. Customer shall have as many service calls as are reasonably needed to maintain the System so that it performs substantially in accordance with the Specifications during the period of this Agreement.

6.3.
Use of the facility CT scanner may be required for testing purposes and shall be scheduled to allow as expeditious completion of service as is reasonably possible. Facility staff will operate the CT scanner. If service is unreasonably delayed and Accuray service engineers are required to remain on site, Accuray may choose to charge the current hourly service rates for the duration of the delay period.

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7.
Uptime

7.1.
Uptime/Downtime.    Uptime shall mean any time that the System is not down ("Uptime"). A down System means that a patient cannot be treated due to an actual malfunction of the System and that the System is immediately available for an Accuray service engineer to work on it ("Downtime").

7.2.
Guarantee.    Accuray will guarantee that the System shall have an Uptime percentage of at least 98% of normal treatment hours on an annual basis during the Term of this Agreement. Normal treatment hours shall be from 8:00 AM to 5:00 PM local time Monday through Friday (excluding Federal holidays). The first 12-month period will start as of the Effective Date of this Agreement.

7.3.
Calculation.    Downtime will be calculated from the time a down System call is received by Accuray to the time of repair, counting normal treatment hours. The System will be calculated as up when the System repair has been completed and the System is available for treatment during normal treatment hours, whether or not patients are scheduled for treatment. Scheduled preventive maintenance, System upgrades, and time that the System is unavailable as a result of something beyond Accuray's control, including without limitation (i) Customer's use of the System for purposes other than its intended and authorized purposes, (ii) the negligence of Customer, (iii) the failure of Customer to operate the System in accordance with the User Manuals, (iv) use by untrained operators, (v) e-Stops, power outages or the like or (vi) the negligence of any party other than Accuray, will be calculated as Uptime.

7.4.
Reports.    Customer is responsible for recording and reporting Downtime to Accuray. Reports for the previous month's Downtime shall be provided to Accuray on or before the 15th day of each month.

7.5.
Failure to Meet Guarantee.    For each year of the term of this Agreement, if Accuray achieves a 12-month uptime average of 90-97.9%, the Agreement period will be extended one (1) week for every percentage point or fraction thereof below 98%.

8.
Replacement Parts

8.1.
Accuray shall make a commercially reasonable effort to supply at the time of need or stock at Customer's facility all tools, equipment, replacement parts and Consumables as would reasonably be required by Accuray to perform the required repairs and return the System to good working order. Accuray shall make a commercially reasonable effort to maintain at its factory or service center(s) a stock of spare parts, including, in particular, long-procurement-lead-time parts.

8.2.
Replacement parts used under this Agreement may be either new manufacture or factory refurbished at Accuray's choice. All replacement parts and assemblies provided will be manufactured in accordance with Accuray's quality system, and any applicable laws and

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9.
Exceptions

9.1.
All obligations of Accuray under this Agreement shall be suspended and/or cease in the event of:

9.1.1.
Damage from fire, accident, abuse, floods, lightning, natural disasters or other calamities commonly defined as "Acts of God".

9.1.2.
The intentional abuse of the System or negligence by Customer.

9.1.3.
System hardware or software alterations not authorized by Accuray including any move of the System from its installation site (other than by or at the express written direction of Accuray).

9.1.4.
Use of the System for other than its intended and authorized purposes, or in a manner not consistent with Accuray's User Manuals, including maintenance of the necessary operating environment and line current conditions, and the failure of Customer to cure such matter within thirty (30) days of actual written notice thereof from Accuray.

9.1.5.
Failure to make payments in accordance with the payment schedule set forth above in Section 2.2.

9.2.
If corrective action or adjustment of the System is performed by Customer's staff at the direction of Accuray, such action or adjustment shall not reduce Accuray's responsibility under this Agreement or liability for the performance of the System.

10.
Cancellation Penalty.    Customer shall have the right to cancel and terminate this Agreement, with or without cause, at any time upon thirty (30) days' prior written notice to Accuray. There shall be no penalty for such cancellation and termination.

11.
Breach.    Either party reserves the right to cancel this Agreement by written notice upon the breach of the other. An event of breach may include, but is not limited to, failure to make payment due under this Agreement, failure to provide access as required to execute the services contemplated by this Agreement, failure to perform and log QA, or the filing of notice under Federal bankruptcy laws. If the breaching party is unable or unwilling to cure or make a good faith effort to cure such breach within thirty (30) days of actual written notice the other shall be relieved of all obligations under this Agreement and may terminate. Termination shall not be the terminating party's exclusive remedy, and the terminating party shall retain all other available legal and equitable remedies.

12.
Limitation of Liability and Warranty

12.1.
If it is determined in accordance with applicable law that any fault or neglect of either party, its employees or agents, substantially contributes to damage or injury to third parties, such party shall be responsible in such proportion as reflects its relative fault therefore, and shall hold the other party harmless from any liability or damages arising out of such fault or neglect. Accuray's liability arising under this Agreement shall be limited to an amount not to exceed the payment(s) received by Accuray for the then current Agreement year. In addition, Accuray shall not be liable to Customer in the event that Customer's or any third party's acts or omissions contributed in any way to any loss it sustained or the loss or

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13.
Patient Information.    In performing the services hereunder, Accuray may receive from Customer, or create or receive on behalf of Customer, patient healthcare, billing, or other confidential patient information ("Patient Information"). Patient Information, as the term is used herein, includes all "Protected Health Information," as that term is defined in 45 CFR 164.501. Accuray shall use Patient Information only as necessary to provide the services to Customer as set forth in this Agreement. Accuray shall comply with all laws, rules and regulations relating to the confidentiality of Patient Information, including the applicable provisions of the privacy regulations promulgated pursuant to Health Insurance Portability and Accountability Act of 1996 ("HIPAA").

14.
Assignment.    Neither party may assign this Agreement without the other party's prior written consent, except that Accuray may assign this Agreement, without Customer's consent, to an affiliate or to a successor or acquirer, as the case may be, in connection with a merger or acquisition, or the sale of all or substantially all of Accuray's assets or the sale of that portion of Accuray's business to which this Agreement relates. Subject to the foregoing, this Agreement will bind and inure to the benefit of the parties' permitted successors and assigns.

15.
Disputes and Governing Laws

15.1.
In the event that a dispute arises between Accuray and Customer with respect to any subject matter governed by this Agreement, such dispute shall be settled as follows. If either party shall have any dispute with respect to this Agreement, that party shall provide written notification to the other party in the form of a claim identifying the issue or amount disputed including a detailed reason for the claim. The party against whom the claim is made shall respond in writing to the claim within 30 days from the date of receipt of the claim document. The party filing the claim shall have an additional 30 days after the receipt of the response to either accept the resolution offered by the other party or escalate the matter. If the dispute is not resolved, either party may notify the other in writing of their desire to elevate the claim to the President of Accuray and the Chief Executive Officer of Customer. Each shall negotiate in good faith and use his or her best efforts to resolve such dispute or claim. The location, format, frequency, duration and conclusion of these elevated discussions shall be left to the discretion of the representatives involved. If the negotiations do not lead to resolution of the underlying dispute or claim to the satisfaction of either party involved, then either party may pursue resolution by the courts as follows.

15.2.
All disputes arising out of or relating to this Agreement not otherwise resolved between Accuray and Customer shall be resolved in a court of competent jurisdiction, in Santa Clara County, State of California, and in no other place, provided that, in Accuray's sole discretion, such action may be heard in some other place designated by Accuray (if necessary to acquire jurisdiction over third persons), so that the dispute can be resolved in one action. Customer hereby consents to the jurisdiction of such court or courts and agrees to appear in any such action upon written notice thereof. No action, regardless of form, arising out of, or in any way connected with this Agreement may be brought by Customer more than one (1) year after the cause of action has occurred.

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16.
Notices.    All notices required or permitted under this Agreement will be in writing and delivered in person, by overnight delivery service, or by registered or certified mail, postage prepaid with return receipt requested, and in each instance will be deemed given upon receipt. All communications will be sent to the addresses set forth below or to such other address as may be specified by either party in writing to the other party in accordance with this Section.

To Accuray:

   To Customer:
Accuray Incorporated    
Attention: Chief Financial Officer    
1310 Chesapeake Terrace    
Sunnyvale, CA 94089    
        
with cc to: General Counsel    
17.
Waiver.    The waiver of any breach or default of any provision of this Agreement will not constitute a waiver of any other right hereunder or of any subsequent breach or default.

18.
Severability.    If any provision of this Agreement is held invalid or unenforceable by a court of competent jurisdiction, the remaining provisions of the Agreement will remain in full force and effect, and the provision affected will be construed so as to be enforceable to the maximum extent permissible by law.

19.
Force Majeure.    Neither party will be responsible for any failure or delay in its performance under this Agreement (except for the payment of money) due to causes beyond its reasonable control, including, but not limited to, labor disputes, strike, lockout, riot, war, fire, act of God, accident, failure or breakdown of components necessary to order completion; subcontractor, supplier or customer caused delays; inability to obtain or substantial rises in the prices of labor, materials or manufacturing facilities; curtailment of or failure to obtain sufficient electrical or other energy, raw materials or supplies; or compliance with any law, regulation or order, whether valid or invalid.

20.
Amendments.    Any amendment or modification of this Agreement must be made in writing and signed by duly authorized representatives of each party. For Accuray, a duly authorized representative must be any of the following: CEO, CFO, or General Counsel.

21.
Entire Agreement.    This Agreement contains the entire Agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior understandings, representations and warranties, written and oral. If any part of the terms and conditions stated herein are held void or unenforceable, such part will be treated as severable, leaving valid the remainder of the terms and conditions.

22.
Counterparts.    This Agreement may be executed in counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the Effective Date by their duly authorized representatives.

ACCURAY INCORPORATED

   CUSTOMER
By:
   By:
Print Name:
   Print Name:
Title:
   Title:
        
Date:
   Date:

 
 
PLEASE MAKE CERTAIN THAT YOU HAVE SELECTED A PAYMENT OPTION IN ACCORDANCE WITH SECTION 2.2, ABOVE.

        The undersigned acknowledges that the terms and conditions of this Agreement meet the policies and procedures of Accuray.

Signed:
   Dated:
  General Counsel, Accuray Incorporated    

8



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ACCURAY CYBERKNIFE® SILVER ELITE SERVICE AGREEMENT

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Exhibit 10.39


ACCURAY CYBERKNIFE® INTERNATIONAL PLATINUM ELITE SERVICE AGREEMENT

1.
Scope of Service.    This Platinum Elite Service Agreement ("Agreement") is made by and between Accuray Incorporated ("Accuray"), a California corporation, located at 1310 Chesapeake Terrace, Sunnyvale, CA 94089, and                                    ("Customer"), located at                                    , for Accuray to provide planned maintenance service when scheduled by Accuray and corrective maintenance service when requested by Customer to maintain the CyberKnife System installed at Customer's site at                                    ("System") so that it performs substantially in accordance with the Specifications (user Manuals and Reference Guides) defined for the System revision as installed and/or upgraded.

1.1.
Effective Date.    This Agreement shall be effective as of demonstration of acceptance testing by Accuray as described in the CyberKnife Quotation and Purchase Agreement dated                                    , 2005 and signed by the parties, or the expiration of any prior service or warranty agreement, if applicable.

1.2.
Definitions

1.2.1.
Bug Fix.    "Bug Fix" means an error correction or minor change in the existing software and/or hardware configuration that is required in order to enable the existing software and/or hardware configuration to perform to the existing functional specification(s).

1.2.2.
Update.    "Update" means a release of the software or a change to the existing hardware containing substantially only error corrections, minor new features, functionality and/or performance improvements, but that would not be required for the existing software and/or hardware configuration to perform to the existing functional specification(s) of that particular product. Such Update would not necessarily replace or extend the life of the existing software and/or hardware configuration of the product. For example, an Update of software would be indicated where the version number is changed by incrementing the numeric digits to the right of the decimal point, e.g., versions 1.1, 1.2, 1.3, and 1.4 would each be Updates of the software.

1.2.3.
Upgrade/Enhancement.    "Upgrade/Enhancement" means a release of the software or a change to the existing hardware containing major new features, functionality and/or performance improvements that would enable the existing software and/or hardware configuration to perform to the level of the next version of the software and/or hardware configuration and designed to replace the older software and/or hardware version of the same product and/or extend the useful life of that product. For example, an Upgrade/Enhancement of software would be indicated where the version number is changed by incrementing the numeric digits to the left of the decimal point, e.g., versions 1.0, 2.0, 3.0, and 4.0 would each be Upgrade/Enhancement of the software.

1.2.4.
New Version/New Product.    "New Version/New Product" means a release of the software or a change to the hardware that may or may not work with the existing software and/or hardware configuration, but that in its totality requires, in Accuray's sole opinion, enough change to the software and/or hardware configuration to be considered a New Version or New Product.

1.2.5.
Exclusions.    "Exclusions" means items that are excluded from the definition of Upgrade/Enhancement because of the very nature of the item, as compared to the rest of the components in the system whether in the software and/or hardware configuration, it would cost, in Accuray's sole opinion, more than the average current list price of an

1

2.
Service Period.

2.1.
This Agreement shall be for an initial period of four (4) years (years 1, 2, 3, & 4) from the Effective Date of this Agreement, including the warranty year, with an optional fifth year. There is no payment required under this Agreement in the first year ("Year 1" or the "Warranty Year"). Customer may elect to receive an additional optional fifth year ("Optional Year 5") at the price of $425,000 and on terms that are defined below (Section 3.4). Billing will commence on the day following the anniversary of Effective Date of this Agreement.

2.2.
The Agreement price shall be one of the following, at Customer's option (indicate preferred option):

o
$425,000 per year, paid yearly in advance, for years 2, 3, 4 and Optional Year 5.

o
$110,000 quarterly, paid at the beginning of each quarter, for years 2, 3, 4 and Optional Year 5.

o
$37,000 monthly, paid at the beginning of each month, for years 2, 3, 4 and Optional Year 5.

3.
Product Upgrades/Enhancements

3.1.
This Agreement is available only for equipment that was purchased directly from Accuray, installed by Accuray engineers or an authorized Accuray Distributor and has not been moved from its original installation location or disconnected from its original power supply without written permission or direction from Accuray. This Agreement must immediately commence at the expiration of the factory warranty period or prior service agreement. In the event of lapse of service, Customer shall have the right to reinstate such service by payment of the current service fee for the then-current service period in addition to the reasonable costs for Accuray to inspect, repair, and return the System to the state at which the System would have been had a service agreement been in force continuously since the expiration of the System factory warranty.

3.2.
Accuray's total commitment under the initial four (4) year Agreement is to deliver six (6) Upgrades/Enhancements, three (3) software and three (3) hardware or software, as follows. No Upgrades/Enhancements will be due under this Agreement during Year 1 (the Warranty Year). For each of the subsequent three (3) years, Customer is entitled to one (1) software and one (1) hardware or software Upgrade/Enhancement in each year, such that Customer will receive two (2) Upgrades/Enhancements during each of years 2, 3 and 4. Customer may order an available Upgrade/Enhancement during Year 1 (the Warranty Year), or order an additional Upgrade/Enhancement during years 2 or 3, and such Upgrade/Enhancement will be charged against any future Upgrades/Enhancements due Customer under this Agreement. For example, if Customer orders an Upgrade/Enhancement during Year 1

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4.
Software Maintenance (Bug Fixes and Updates)

4.1.
For the duration of this Agreement, Accuray will provide software Updates and Bug Fixes for software that is included as an integral part of the System. These Updates and Bug Fixes may be transmitted electronically to Customer for subsequent installation by Customer technicians. Corrections of significant complexity, however, may be installed for Customer by Accuray Service Engineers (which shall include an authorized Accuray Distributor). Software maintenance will be included only for those product features that were originally purchased

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5.
System Quality Assurance Testing

5.1.
The maintenance and support services provided by Accuray under this Agreement do not include any System Quality Assurance Testing ("QA"). System commissioning and QA are the sole responsibility of Customer, and Customer is advised to perform QA on a regular and ongoing basis. In addition, Customer is required to maintain up-to-date QA logs. If Customer fails to perform the appropriate QA of the System, and to record such QA in the appropriate logs, Accuray, upon giving Notice to Customer in accordance with Section 11 of this Agreement, reserves the right to terminate this Agreement.

5.2.
Prior to performing any scheduled service or preventive maintenance on the System, Accuray will review Customer's QA logs, and if such logs are not up-to-date, Accuray may refuse to service the System. In the event that the requested service is necessary to bring the System to a point where QA can be performed, Accuray will proceed with the service only after Customer signs a written acknowledgement that QA is Customer's sole responsibility and that appropriate QA will be performed prior to conducting any patient treatments.

6.
Service Coverage Period

6.1.
The Service Coverage Period will be the hours of 8:00 AM to 9:00 PM local (to Customer's installation location) time Monday through Saturday (excluding local legal holidays). Customer has the option to request service during non-normal hours, in which case Customer shall pay the overtime premium portion of the non-normal hours worked. (Non-normal hourly rate minus normal hourly rate.) Accuray shall provide Customer with contact points to request service on a 24-hours-a-day, 7-days-a-week ("24/7") basis. Accuray, directly or remotely as the situation requires, either with its own personnel or through an authorized Accuray Distributor or contractor, shall initially respond within one (1) hour of receipt of a call for service. The initial response shall include telephone support, including (as applicable) consultations, diagnostic assistance and advice on the use and maintenance of the System. As necessary, Accuray Service Engineers will respond on-site within twenty-four (24) hours of the initial telephonic response.

6.2.
Customer will promptly notify Accuray, by calling Accuray's Customer Support Line at 1-408-716-4700, of any problem or defect with the System and, at no charge, provide Accuray Service Engineers access to the System and use of adequate facilities and equipment at mutually agreeable times as necessary for Accuray Service Engineers to perform the service. Customer shall have as many service calls as are reasonably needed to maintain the System so that it performs substantially in accordance with the Specifications during the period of this Agreement.

6.3.
Use of the facility CT scanner may be required for testing purposes and shall be scheduled to allow as expeditious completion of service as is reasonably possible. Facility staff will operate the CT scanner. If service is unreasonably delayed and Accuray Service Engineers are required to remain on site, Accuray may choose to charge the current hourly service rates for the duration of the delay period.

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7.
Uptime

7.1.
Uptime/Downtime.    Uptime shall mean any time that the System is not down ("Uptime"). A down System means that a patient cannot be treated due to an actual malfunction of the System and that the System is immediately available for an Accuray service engineer to work on it ("Downtime").

7.2.
Guarantee.    Accuray warrants that the System shall have an uptime percentage of at least 95% of normal treatment hours on an annual basis during the Term of this Agreement. Normal treatment hours shall be from 8:00 AM to 5:00 PM local time Monday through Friday (excluding legal holidays). The first 12-month period will start as of the Effective Date of this Agreement.

7.3.
Calculation.    Downtime will be calculated from the time a down system call is received by Accuray to the time of repair, counting normal treatment hours. The System will be calculated as up when the System repair has been completed and the System is available for treatment during normal treatment hours, whether or not patients are scheduled for treatment. Scheduled preventive maintenance, System Upgrades, and time that the System is unavailable as a result of something beyond Accuray's control, including without limitation (i) Customer's use of the System for purposes other than its intended and authorized purposes, (ii) the negligence of Customer, (iii) the failure of Customer to operate the System in accordance with the User Manuals, (iv) use by untrained operators, (v) e-Stops, power outages or the like or (vi) the negligence of any party other than Accuray, will be calculated as Uptime.

7.4.
Reports.    Customer is responsible for recording and reporting Downtime to Accuray. Reports for the previous month's Downtime shall be provided to Accuray on or before the 15th day of each month.

7.5.
Failure to Meet Guarantee.    For each year of the term of this Agreement, if Accuray achieves a 12-month uptime average of less than 95%, the Agreement period will be extended one (1) week for every percentage point or fraction thereof below 95%.

8.
Replacement Parts

8.1.
Accuray shall make a commercially reasonable effort to supply at the time of need or stock at Customer's facility all tools, equipment, replacement parts and Consumables as would reasonably be required by Accuray to perform the required repairs and return the System to good working order. Accuray shall make a commercially reasonable effort to maintain at its factory or service center(s) a stock of spare parts, including, in particular, long-procurement-lead-time parts.

8.2.
Replacement parts used under this Agreement may be either new manufacture or factory refurbished at Accuray's choice. All replacement parts and assemblies provided will be

5

9.
Exceptions.

9.1.
All obligations of Accuray under this Agreement shall be suspended and/or cease in the event of:

9.1.1.
Damage from fire, accident, abuse, floods, lightning, natural disasters or other calamities commonly defined as "Acts of God".

9.1.2.
The intentional abuse of the System or negligence by Customer.

9.1.3.
System hardware or software alterations not authorized by Accuray including any move of the System from its installation site (other than by or at the express written direction of Accuray).

9.1.4.
Use of the System for other than its intended and authorized purposes, or in a manner not consistent with Accuray's User Manuals, including maintenance of the necessary operating environment and line current conditions, and the failure of Customer to cure such matter within thirty (30) days of actual written notice thereof from Accuray.

9.1.5.
Failure to make payments in accordance with the payment schedule set forth above on Page 2, Section 2.2.

9.2.
If corrective action or adjustment of the System is performed by Customer's staff at the direction of Accuray, such action or adjustment shall not reduce Accuray's responsibility under this Agreement or liability for the performance of the System.

10.
No Cancellation.    Neither party shall have the right to cancel this Agreement, except as set forth below in Section 11 "Breach."

11.
Breach.    Either party reserves the right to cancel this Agreement by written notice upon the breach of the other. An event of breach may include, but is not limited to, failure to make payment due under this Agreement, failure to provide access as required to execute the services contemplated by this Agreement, failure to perform and log QA, or the filing of notice under Federal bankruptcy laws. If the breaching party is unable or unwilling to cure or make a good faith effort to cure such breach within thirty (30) days of actual written notice the non-breaching party shall be relieved of all obligations under this Agreement and may terminate. Termination shall not be the terminating party's exclusive remedy, and the terminating party shall retain all other available legal and equitable remedies.

12.
Limitation of Liability and Warranty

12.1.
If it is determined in accordance with applicable law that any fault or neglect of either party, its employees or agents, substantially contributes to damage or injury to third parties, such party shall be responsible in such proportion as reflects its relative fault therefore, and shall hold the other party harmless from any liability or damages arising out of such fault or neglect. Accuray's liability arising under this Agreement shall be limited to an amount not to exceed the payment(s) received by Accuray for the then current Agreement year. In addition, Accuray shall not be liable to Customer in the event that Customer's or any third party's acts or omissions contributed in any way to any loss it sustained or the loss or damage is due to an act of God or other causes beyond its reasonable control. IN NO EVENT WILL ACCURAY BE LIABLE TO CUSTOMER FOR ANY LOST PROFITS, LOST SAVINGS, LOST

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13.
Assignment.    Neither party may assign this Agreement without the other party's prior written consent, except that Accuray may assign this Agreement, without Customer's consent, to an affiliate or to a successor or acquirer, as the case may be, in connection with a merger or acquisition, or the sale of all or substantially all of Accuray's assets or the sale of that portion of Accuray's business to which this Agreement relates. Subject to the foregoing, this Agreement will bind and inure to the benefit of the parties' permitted successors and assigns.

14.
Dispute and Governing Laws

14.1.
Process.    In the event that a dispute arises between Accuray and Customer with respect to any subject matter governed by this Agreement, such dispute shall be settled as follows. If either party shall have any dispute with respect to this Agreement, that party shall provide written notification to the other party in the form of a claim identifying the issue or amount disputed including a detailed reason for the claim. The party against whom the claim is made shall respond in writing to the claim within 30 days from the date of receipt of the claim document. The party filing the claim shall have an additional 30 days after the receipt of the response to either accept the resolution offered by the other party or escalate the matter. If the dispute is not resolved, either party may notify the other in writing of their desire to elevate the claim to the highest management of Accuray and of Customer. Each shall negotiate in good faith and use his or her best efforts to resolve such dispute or claim. The location, format, frequency, duration and conclusion of these elevated discussions shall be left to the discretion of the representatives involved. If the negotiations do not lead to resolution of the underlying dispute or claim to the satisfaction of either party involved, then either party may pursue resolution by the courts as follows.

14.2.
Applicable Law.    All disputes arising out of or relating to this Agreement not otherwise resolved between Accuray and Customer shall be resolved in a court of competent jurisdiction, in Santa Clara County, State of California, and in no other place, provided that, in Accuray's sole discretion, such action may be heard in some other place designated by Accuray (if necessary to acquire jurisdiction over third persons), so that the dispute can be resolved in one action. Customer hereby consents to the jurisdiction of such court or courts and agrees to appear in any such action upon written notice thereof. No action, regardless of form, arising out of, or in any way connected with this Agreement may be brought by Customer more than one (1) year after the cause of action has occurred.

15.
Notices.    All notices required or permitted under this Agreement will be in writing and delivered in person, by overnight delivery service, or by registered or certified mail, postage prepaid with return receipt requested, and in each instance will be deemed given upon receipt. All

7

To Accuray:

   To Customer:
Accuray Incorporated    
Attention: Chief Financial Officer    
1310 Chesapeake Terrace    
Sunnyvale, CA 94089    
        
with cc to: General Counsel   with cc to:
16.
Waiver.    The waiver of any breach or default of any provision of this Agreement will not constitute a waiver of any other right hereunder or of any subsequent breach or default.

17.
Severability.    If any provision of this Agreement is held invalid or unenforceable by a court of competent jurisdiction, the remaining provisions of the Agreement will remain in full force and effect, and the provision affected will be construed so as to be enforceable to the maximum extent permissible by law.

18.
Force Majeure.    Neither party will be responsible for any failure or delay in its performance under this Agreement (except for the payment of money) due to causes beyond its reasonable control, including, but not limited to, labor disputes, strike, lockout, riot, war, fire, act of God, accident, failure or breakdown of components necessary to order completion; subcontractor, supplier or customer caused delays; inability to obtain or substantial rises in the prices of labor, materials or manufacturing facilities; curtailment of or failure to obtain sufficient electrical or other energy, raw materials or supplies; or compliance with any law, regulation or order, whether valid or invalid.

19.
Amendments.    Any amendment or modification of this Agreement must be made in writing and signed by duly authorized representatives of each party. For Accuray, a duly authorized representative must be any of the following: CEO, CFO, or General Counsel.

20.
English Language Requirement.    This Agreement is written in the English Language as spoken and interpreted in the United States of America, and such language and interpretation shall be controlling in all respects.

21.
Entire Agreement.    This Agreement contains the entire Agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior understandings, representations and warranties, written and oral. If any part of the terms and conditions stated herein are held void or unenforceable, such part will be treated as severable, leaving valid the remainder of the terms and conditions.

22.
Counterparts.    This Agreement may be executed in counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

8

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the Effective Date by their duly authorized representatives.

ACCURAY INCORPORATED

   DISTRIBUTOR


 
By:
   By:
Print Name:
   Print Name:
Title:
   Title:
Date:
   Date:

 
 
PLEASE MAKE CERTAIN THAT YOU HAVE SELECTED A PAYMENT OPTION IN ACCORDANCE WITH SECTION 2.2, ABOVE.

        The undersigned acknowledges that the terms and conditions of this Agreement meet the policies and procedures of Accuray.

Signed:
   Dated:
  General Counsel, Accuray Inc.    

9



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ACCURAY CYBERKNIFE® INTERNATIONAL PLATINUM ELITE SERVICE AGREEMENT

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Exhibit 10.40


ACCURAY CYBERKNIFE® INTERNATIONAL GOLD ELITE SERVICE AGREEMENT

1.
Scope of Service.    This Gold Elite Service Agreement ("Agreement") is made by and between Accuray Incorporated ("Accuray"), a California corporation, located at 1310 Chesapeake Terrace, Sunnyvale, CA 94089, and                                    ("Customer"), located at                                    , for Accuray to provide planned maintenance service when scheduled by Accuray and corrective maintenance service when requested by Customer to maintain the CyberKnife System installed at Customer's site at                                    ("System") so that it performs substantially in accordance with the Specifications (user Manuals and Reference Guides) defined for the System revision as installed and/or upgraded.

1.1.
Effective Date.    This Agreement shall be effective as of demonstration of acceptance testing by Accuray as described in the CyberKnife Quotation and Purchase Agreement dated                                    , 2005 and signed by the parties, or the expiration of any prior service or warranty agreement, if applicable.

1.2.
Definitions

1.2.1.
Bug Fix.    "Bug Fix" means an error correction or minor change in the existing software and/or hardware configuration that is required in order to enable the existing software and/or hardware configuration to perform to the existing functional specification(s).

1.2.2.
Update.    "Update" means a release of the software or a change to the existing hardware containing substantially only error corrections, minor new features, functionality and/or performance improvements, but that would not be required for the existing software and/or hardware configuration to perform to the existing functional specification(s) of that particular product. Such Update would not necessarily replace or extend the life of the existing software and/or hardware configuration of the product. For example, an Update of software would be indicated where the version number is changed by incrementing the numeric digits to the right of the decimal point, e.g., versions 1.1, 1.2, 1.3, and 1.4 would each be Updates of the software.

1.2.3.
Upgrade/Enhancement.    "Upgrade/Enhancement "means a release of the software or a change to the existing hardware containing major new features, functionality and/or performance improvements that would enable the existing software and/or hardware configuration to perform to the level of the next version of the software and/or hardware configuration and designed to replace the older software and/or hardware version of the same product and/or extend the useful life of that product. For example, an Upgrade/Enhancement of software would be indicated where the version number is changed by incrementing the numeric digits to the left of the decimal point, e.g., versions 1.0, 2.0, 3.0, and 4.0 would each be Upgrade/Enhancement of the software.

1.2.4.
New Version/New Product.    "New Version/New Product" means a release of the software or a change to the hardware that may or may not work with the existing software and/or hardware configuration, but that in its totality requires, in Accuray's sole opinion, enough change to the software and/or hardware configuration to be considered a New Version or New Product.

1.2.5.
Exclusions.    "Exclusions" means items that are excluded from the definition of Upgrade/Enhancement because of the very nature of the item, as compared to the rest of the components in the system whether in the software and/or hardware configuration, it would cost, in Accuray's sole opinion, more than the average current list price of an

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2.
Service Period.

2.1.
This Gold Service Agreement shall be for an initial period of four (4) years (years 1, 2, 3, & 4) from the Effective Date of this Agreement, including the warranty year, with an optional fifth year. There is no payment required under this Agreement in the first year ("Year 1" or the "Warranty Year"). Customer may elect to receive an additional optional fifth year ("Optional Year 5") at the price of $350,000 and on terms that are defined below (Section 3.4). Billing will commence on the day following the anniversary of Effective Date of this Agreement.

2.2.
The Agreement price shall be one of the following, at Customer's option (check option selected):

o
$350,000 per year, paid yearly in advance, for years 2, 3, 4 and Optional Year 5.

o
$91,250 quarterly, paid at the beginning of each quarter, for years 2, 3, 4 and Optional Year 5.

o
$30,750 monthly, paid at the beginning of each month, for years 2, 3, 4 and Optional Year 5.

3.
Product Upgrades/Enhancements

3.1.
This Agreement is available only for equipment that was purchased directly from Accuray, installed by Accuray engineers or an authorized Accuray Distributor and has not been moved from its original installation location or disconnected from its original power supply without written permission or direction from Accuray. This Agreement must immediately commence at the expiration of the factory warranty period or prior service agreement. In the event of lapse of service, Customer shall have the right to reinstate such service by payment of the current service fee for the then-current service period in addition to the reasonable costs for Accuray to inspect, repair, and return the System to the state at which the System would have been had a service agreement been in force continuously since the expiration of the System factory warranty.

3.2.
Accuray's total commitment under the initial four (4) year Agreement is to deliver three (3) software Upgrades/Enhancements as follows. No Upgrades/Enhancements will be due under this Agreement during the Year 1 (the Warranty Year). For each of the subsequent three (3) years, Customer is entitled to one (1) software Upgrade/Enhancement in each year, such that Customer will receive one (1) software Upgrade/Enhancement during each of years 2, 3 and 4. Customer may order an available software Upgrade/Enhancement during the Year 1 (the Warranty Year), or order an additional software Upgrade/Enhancement during years 2 or 3, and such Upgrade/Enhancement will be charged against any future Upgrades/Enhancements due Customer under this Agreement. For example, if Customer orders a software Upgrade/Enhancement during Year 1 (the Warranty Year), Customer is entitled to

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4.
Software Maintenance (Bug Fixes and Updates)

4.1.
For the duration of this Agreement, Accuray will provide software Updates and Bug Fixes for software that is included as an integral part of the System. These Updates and Bug Fixes may be transmitted electronically to Customer for subsequent installation by Customer technicians. Corrections of significant complexity, however, may be installed for Customer by Accuray Service Engineers (which shall include an authorized Accuray Distributor). Software maintenance will be included only for those product features that were originally purchased

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5.
System Quality Assurance Testing

5.1.
The maintenance and support services provided by Accuray under this Agreement do not include any System Quality Assurance Testing ("QA"). System commissioning and QA are the sole responsibility of Customer, and Customer is advised to perform QA on a regular and ongoing basis. In addition, Customer is required to maintain up-to-date QA logs. If Customer fails to perform the appropriate QA of the System, and to record such QA in the appropriate logs, Accuray, upon giving Notice to Customer in accordance with Section 11 of this Agreement, reserves the right to terminate this Agreement.

5.2.
Prior to performing any scheduled service or preventive maintenance on the System, Accuray will review Customer's QA logs, and if such logs are not up-to-date, Accuray may refuse to service the System. In the event that the requested service is necessary to bring the System to a point where QA can be performed, Accuray will proceed with the service only after Customer signs a written acknowledgement that QA is Customer's sole responsibility and that appropriate QA will be performed prior to conducting any patient treatments.

6.
Service Coverage Period

6.1.
The Service Coverage Period will be the hours of 8:00 AM to 9:00 PM local (to Customer's installation location) time Monday through Saturday (excluding local legal holidays). Customer has the option to request service during non-normal hours, in which case Customer shall pay the overtime premium portion of the non-normal hours worked. (Non-normal hourly rate minus normal hourly rate.) Accuray shall provide Customer with contact points to request service on a 24-hours-a-day, 7-days-a-week ("24/7") basis. Accuray, directly or remotely as the situation requires, either with its own personnel or through an authorized Accuray Distributor or contractor, shall initially respond within one (1) hour of receipt of a call for service. The initial response shall include telephone support, including (as applicable) consultations, diagnostic assistance and advice on the use and maintenance of the System. As necessary, Accuray Service Engineers will respond on-site within twenty-four (24) hours of the initial telephonic response.

6.2.
Customer will promptly notify Accuray, by calling Accuray's Customer Support Line at 1-408-716-4700, of any problem or defect with the System and, at no charge, provide Accuray Service Engineers access to the System and use of adequate facilities and equipment at mutually agreeable times as necessary for Accuray Service Engineers to perform the service. Customer shall have as many service calls as are reasonably needed to maintain the System so that it performs substantially in accordance with the Specifications during the period of this Agreement.

6.3.
Use of the facility CT scanner may be required for testing purposes and shall be scheduled to allow as expeditious completion of service as is reasonably possible. Facility staff will operate the CT scanner. If service is unreasonably delayed and Accuray Service Engineers are required to remain on site, Accuray may choose to charge the current hourly service rates for the duration of the delay period.

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7.
Uptime

7.1.
Uptime/Downtime.    Uptime shall mean any time that the System is not down ("Uptime"). A down System means that a patient cannot be treated due to an actual malfunction of the System and that the System is immediately available for an Accuray service engineer to work on it ("Downtime").

7.2.
Guarantee.    Accuray warrants that the System shall have an uptime percentage of at least 95% of normal treatment hours on an annual basis during the Term of this Agreement. Normal treatment hours shall be from 8:00 AM to 5:00 PM local time Monday through Friday (excluding legal holidays). The first 12-month period will start as of the Effective Date of this Agreement.

7.3.
Calculation.    Downtime will be calculated from the time a down system call is received by Accuray to the time of repair, counting normal treatment hours. The System will be calculated as up when the System repair has been completed and the System is available for treatment during normal treatment hours, whether or not patients are scheduled for treatment. Scheduled preventive maintenance, System Upgrades, and time that the System is unavailable as a result of something beyond Accuray's control, including without limitation (i) Customer's use of the System for purposes other than its intended and authorized purposes, (ii) the negligence of Customer, (iii) the failure of Customer to operate the System in accordance with the User Manuals, (iv) use by untrained operators, (v) e-Stops, power outages or the like or (vi) the negligence of any party other than Accuray, will be calculated as Uptime.

7.4.
Reports.    Customer is responsible for recording and reporting Downtime to Accuray. Reports for the previous month's Downtime shall be provided to Accuray on or before the 15th day of each month.

7.5.
Failure to Meet Guarantee.    For each year of the term of this Agreement, if Accuray achieves a 12-month uptime average of less than 95%, the Agreement period will be extended one (1) week for every percentage point or fraction thereof below 95%.

8.
Replacement Parts

8.1.
Accuray shall make a commercially reasonable effort to supply at the time of need or stock at Customer's facility all tools, equipment, replacement parts and Consumables as would reasonably be required by Accuray to perform the required repairs and return the System to good working order. Accuray shall make a commercially reasonable effort to maintain at its factory or service center(s) a stock of spare parts, including, in particular, long-procurement-lead-time parts.

8.2.
Replacement parts used under this Agreement may be either new manufacture or factory refurbished at Accuray's choice. All replacement parts and assemblies provided will be

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9.
Exceptions.

9.1.
All obligations of Accuray under this Agreement shall be suspended and/or cease in the event of:

9.1.1.
Damage from fire, accident, abuse, floods, lightning, natural disasters or other calamities commonly defined as "Acts of God".

9.1.2.
The intentional abuse of the System or negligence by Customer.

9.1.3.
System hardware or software alterations not authorized by Accuray including any move of the System from its installation site (other than by or at the express written direction of Accuray).

9.1.4.
Use of the System for other than its intended and authorized purposes, or in a manner not consistent with Accuray's User Manuals, including maintenance of the necessary operating environment and line current conditions, and the failure of Customer to cure such matter within thirty (30) days of actual written notice thereof from Accuray.

9.1.5.
Failure to make payments in accordance with the payment schedule set forth above on Page 2, Section 2.2.

9.2.
If corrective action or adjustment of the System is performed by Customer's staff at the direction of Accuray, such action or adjustment shall not reduce Accuray's responsibility under this Agreement or liability for the performance of the System.

10.
No Cancellation.    Neither party shall have the right to cancel this Agreement, except as set forth below in Section 11 "Breach."

11.
Breach.    Either party reserves the right to cancel this Agreement by written notice upon the breach of the other. An event of breach may include, but is not limited to, failure to make payment due under this Agreement, failure to provide access as required to execute the services contemplated by this Agreement, failure to perform and log QA, or the filing of notice under Federal bankruptcy laws. If the breaching party is unable or unwilling to cure or make a good faith effort to cure such breach within thirty (30) days of actual written notice the non-breaching party shall be relieved of all obligations under this Agreement and may terminate. Termination shall not be the terminating party's exclusive remedy, and the terminating party shall retain all other available legal and equitable remedies.

12.
Limitation of Liability and Warranty

12.1.
If it is determined in accordance with applicable law that any fault or neglect of either party, its employees or agents, substantially contributes to damage or injury to third parties, such party shall be responsible in such proportion as reflects its relative fault therefore, and shall hold the other party harmless from any liability or damages arising out of such fault or neglect. Accuray's liability arising under this Agreement shall be limited to an amount not to exceed the payment(s) received by Accuray for the then current Agreement year. In addition, Accuray shall not be liable to Customer in the event that Customer's or any third party's acts or omissions contributed in any way to any loss it sustained or the loss or damage is due to an act of God or other causes beyond its reasonable control. IN NO EVENT WILL ACCURAY BE LIABLE TO CUSTOMER FOR ANY LOST PROFITS, LOST SAVINGS, LOST

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13.
Assignment.    Neither party may assign this Agreement without the other party's prior written consent, except that Accuray may assign this Agreement, without Customer's consent, to an affiliate or to a successor or acquirer, as the case may be, in connection with a merger or acquisition, or the sale of all or substantially all of Accuray's assets or the sale of that portion of Accuray's business to which this Agreement relates. Subject to the foregoing, this Agreement will bind and inure to the benefit of the parties' permitted successors and assigns.

14.
Dispute and Governing Laws

14.1.
Process.    In the event that a dispute arises between Accuray and Customer with respect to any subject matter governed by this Agreement, such dispute shall be settled as follows. If either party shall have any dispute with respect to this Agreement, that party shall provide written notification to the other party in the form of a claim identifying the issue or amount disputed including a detailed reason for the claim. The party against whom the claim is made shall respond in writing to the claim within 30 days from the date of receipt of the claim document. The party filing the claim shall have an additional 30 days after the receipt of the response to either accept the resolution offered by the other party or escalate the matter. If the dispute is not resolved, either party may notify the other in writing of their desire to elevate the claim to the highest management of Accuray and of Customer. Each shall negotiate in good faith and use his or her best efforts to resolve such dispute or claim. The location, format, frequency, duration and conclusion of these elevated discussions shall be left to the discretion of the representatives involved. If the negotiations do not lead to resolution of the underlying dispute or claim to the satisfaction of either party involved, then either party may pursue resolution by the courts as follows.

14.2.
Applicable Law.    All disputes arising out of or relating to this Agreement not otherwise resolved between Accuray and Customer shall be resolved in a court of competent jurisdiction, in Santa Clara County, State of California, and in no other place, provided that, in Accuray's sole discretion, such action may be heard in some other place designated by Accuray (if necessary to acquire jurisdiction over third persons), so that the dispute can be resolved in one action. Customer hereby consents to the jurisdiction of such court or courts and agrees to appear in any such action upon written notice thereof. No action, regardless of form, arising out of, or in any way connected with this Agreement may be brought by Customer more than one (1) year after the cause of action has occurred.

15.
Notices.    All notices required or permitted under this Agreement will be in writing and delivered in person, by overnight delivery service, or by registered or certified mail, postage prepaid with return receipt requested, and in each instance will be deemed given upon receipt. All

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To Accuray:

   To Customer:
Accuray Incorporated    
Attention: Chief Financial Officer    
1310 Chesapeake Terrace    
Sunnyvale, CA 94089    
        
with cc to: General Counsel   with cc to:
16.
Waiver.    The waiver of any breach or default of any provision of this Agreement will not constitute a waiver of any other right hereunder or of any subsequent breach or default.

17.
Severability.    If any provision of this Agreement is held invalid or unenforceable by a court of competent jurisdiction, the remaining provisions of the Agreement will remain in full force and effect, and the provision affected will be construed so as to be enforceable to the maximum extent permissible by law.

18.
Force Majeure.    Neither party will be responsible for any failure or delay in its performance under this Agreement (except for the payment of money) due to causes beyond its reasonable control, including, but not limited to, labor disputes, strike, lockout, riot, war, fire, act of God, accident, failure or breakdown of components necessary to order completion; subcontractor, supplier or customer caused delays; inability to obtain or substantial rises in the prices of labor, materials or manufacturing facilities; curtailment of or failure to obtain sufficient electrical or other energy, raw materials or supplies; or compliance with any law, regulation or order, whether valid or invalid.

19.
Amendments.    Any amendment or modification of this Agreement must be made in writing and signed by duly authorized representatives of each party. For Accuray, a duly authorized representative must be any of the following: CEO, CFO, or General Counsel.

20.
English Language Requirement.    This Agreement is written in the English Language as spoken and interpreted in the United States of America, and such language and interpretation shall be controlling in all respects.

21.
Entire Agreement.    This Agreement contains the entire Agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior understandings, representations and warranties, written and oral. If any part of the terms and conditions stated herein are held void or unenforceable, such part will be treated as severable, leaving valid the remainder of the terms and conditions.

22.
Counterparts.    This Agreement may be executed in counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the Effective Date by their duly authorized representatives.

ACCURAY INCORPORATED

   DISTRIBUTOR
 
By:
   By:
Print Name:
   Print Name:
Title:
   Title:
Date:
   Date:

 
 
PLEASE MAKE CERTAIN THAT YOU HAVE SELECTED A PAYMENT OPTION IN ACCORDANCE WITH SECTION 2.2, ABOVE.

The undersigned acknowledges that the terms and conditions of this Agreement meet the policies and procedures of Accuray.

Signed:
   Dated:
  General Counsel, Accuray Inc.    

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ACCURAY CYBERKNIFE® INTERNATIONAL GOLD ELITE SERVICE AGREEMENT

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Exhibit 10.41


ACCURAY CYBERKNIFE® INTERNATIONAL SILVER ELITE SERVICE AGREEMENT

1.
Scope of Service.    This Silver Elite Service Agreement ("Agreement") is made by and between Accuray Incorporated ("Accuray"), a California corporation, located at 1310 Chesapeake Terrace, Sunnyvale, CA 94089, and                                    ("Customer"), located at                                    , for Accuray to provide planned maintenance service when scheduled by Accuray and corrective maintenance service when requested by Customer to maintain the CyberKnife System installed at Customer's site at                                    ("System") so that it performs substantially in accordance with the Specifications (user Manuals and Reference Guides) defined for the System revision as installed and/or upgraded.

1.1.
Effective Date.    This Agreement shall be effective as of demonstration of acceptance testing by Accuray as described in the CyberKnife Quotation and Purchase Agreement dated                                    , 2005 and signed by the parties, or the expiration of any prior service or warranty agreement, if applicable.

1.2.
Definitions

1.2.1.
Bug Fix.    "Bug Fix" means an error correction or minor change in the existing software and/or hardware configuration that is required in order to enable the existing software and/or hardware configuration to perform to the existing functional specification(s).

1.2.2.
Update.    "Update" means a release of the software or a change to the existing hardware containing substantially only error corrections, minor new features, functionality and/or performance improvements, but that would not be required for the existing software and/or hardware configuration to perform to the existing functional specification(s) of that particular product. Such Update would not necessarily replace or extend the life of the existing software and/or hardware configuration of the product. For example, an Update of software would be indicated where the version number is changed by incrementing the numeric digits to the right of the decimal point, e.g., versions 1.1, 1.2, 1.3, and 1.4 would each be Updates of the software.

1.2.3.
Upgrade/Enhancement. "Upgrade/Enhancement "means a release of the software or a change to the existing hardware containing major new features, functionality and/or performance improvements that would enable the existing software and/or hardware configuration to perform to the level of the next version of the software and/or hardware configuration and designed to replace the older software and/or hardware version of the same product and/or extend the useful life of that product. For example, an Upgrade/Enhancement of software would be indicated where the version number is changed by incrementing the numeric digits to the left of the decimal point, e.g., versions 1.0, 2.0, 3.0, and 4.0 would each be Upgrade/Enhancement of the software.

1.2.4.
New Version/New Product.    "New Version/New Product" means a release of the software or a change to the hardware that may or may not work with the existing software and/or hardware configuration, but that in its totality requires, in Accuray's sole opinion, enough change to the software and/or hardware configuration to be considered a New Version or New Product.

1.2.5.
Exclusions.    "Exclusions" means items that are excluded from the definition of Upgrade/Enhancement because of the very nature of the item, as compared to the rest of the components in the system whether in the software and/or hardware configuration, it would cost, in Accuray's sole opinion, more than the average current list price of an

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2.
Service Period.

2.1.
This Agreement shall be for an initial period of four (4) years (years 1, 2, 3, & 4) from the Effective Date of this Agreement, including the warranty year, with an optional fifth year. There is no payment required under this Agreement in the first year ("Year 1" or the "Warranty Year"). Customer may elect to receive an additional optional fifth year ("Optional Year 5") at the price of $260,000 and on terms that are defined below (Section 3.4). Billing will commence on the day following the anniversary of Effective Date of this Agreement.

2.2.
The Agreement price shall be one of the following, at Customer's option (indicate preferred option):

o
$260,000 per year, paid yearly in advance, for years 2, 3, 4 and Optional Year 5.

o
$68,500 quarterly, paid at the beginning of each quarter, for years 2, 3, 4 and Optional Year 5.

o
$23,250 monthly, paid at the beginning of each month, for years 2, 3, 4 and Optional Year 5.

3.
Equipment to be Covered

3.1.
This Agreement is available only for equipment that was purchased directly from Accuray, installed by Accuray engineers or an authorized Accuray Distributor and has not been moved from its original installation location or disconnected from its original power supply without written permission or direction from Accuray. This Agreement must immediately commence at the expiration of the factory warranty period or prior service agreement. In the event of lapse of service, Customer shall have the right to reinstate such service by payment of the current service fee for the then-current service period in addition to the reasonable costs for Accuray to inspect, repair, and return the System to the state at which the System would have been had a service agreement been in force continuously since the expiration of the System factory warranty.

4.
Software Maintenance (Bug Fixes and Updates)

4.1.
For the duration of this Agreement, Accuray will provide software Updates and Bug Fixes for software that is included as an integral part of the System. These Updates and Bug Fixes may be transmitted electronically to Customer for subsequent installation by Customer technicians. Corrections of significant complexity, however, may be installed for Customer by Accuray Service Engineers (which shall include an authorized Accuray Distributor). Software maintenance will be included only for those product features that were originally purchased with the System, provided under this Agreement, or subsequently purchased by Customer from Accuray as a System Upgrade/Enhancement.

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5.
System Quality Assurance Testing

5.1.
The maintenance and support services provided by Accuray under this Agreement do not include any System Quality Assurance Testing ("QA"). System commissioning and QA are the sole responsibility of Customer, and Customer is advised to perform QA on a regular and ongoing basis. In addition, Customer is required to maintain up-to-date QA logs. If Customer fails to perform the appropriate QA of the System, and to record such QA in the appropriate logs, Accuray, upon giving Notice to Customer in accordance with Section 11 of this Agreement, reserves the right to terminate this Agreement.

5.2.
Prior to performing any scheduled service or preventive maintenance on the System, Accuray will review Customer's QA logs, and if such logs are not up-to-date, Accuray may refuse to service the System. In the event that the requested service is necessary to bring the System to a point where QA can be performed, Accuray will proceed with the service only after Customer signs a written acknowledgement that QA is Customer's sole responsibility and that appropriate QA will be performed prior to conducting any patient treatments.

6.
Service Coverage Period

6.1.
The Service Coverage Period will be the hours of 8:00 AM to 9:00 PM local (to Customer's installation location) time Monday through Saturday (excluding local legal holidays). Customer has the option to request service during non-normal hours, in which case Customer shall pay the overtime premium portion of the non-normal hours worked. (Non-normal hourly rate minus normal hourly rate.) Accuray shall provide Customer with contact points to request service on a 24-hours-a-day, 7-days-a-week ("24/7") basis. Accuray, directly or remotely as the situation requires, either with its own personnel or through an authorized Accuray Distributor or contractor, shall initially respond within one (1) hour of receipt of a call for service. The initial response shall include telephone support, including (as applicable) consultations, diagnostic assistance and advice on the use and maintenance of the System. As necessary, Accuray Service Engineers will respond on-site within twenty-four (24) hours of the initial telephonic response.

6.2.
Customer will promptly notify Accuray, by calling Accuray's Customer Support Line at 1-408-716-4700, of any problem or defect with the System and, at no charge, provide Accuray Service Engineers access to the System and use of adequate facilities and equipment at mutually agreeable times as necessary for Accuray Service Engineers to perform the service. Customer shall have as many service calls as are reasonably needed to maintain the System so that it performs substantially in accordance with the Specifications during the period of this Agreement.

6.3.
Use of the facility CT scanner may be required for testing purposes and shall be scheduled to allow as expeditious completion of service as is reasonably possible. Facility staff will operate the CT scanner. If service is unreasonably delayed and Accuray Service Engineers are required

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7.
Uptime

7.1.
Uptime/Downtime.    Uptime shall mean any time that the System is not down ("Uptime"). A down System means that a patient cannot be treated due to an actual malfunction of the System and that the System is immediately available for an Accuray service engineer to work on it ("Downtime").

7.2.
Guarantee.    Accuray warrants that the System shall have an uptime percentage of at least 95% of normal treatment hours on an annual basis during the Term of this Agreement. Normal treatment hours shall be from 8:00 AM to 5:00 PM local time Monday through Friday (excluding legal holidays). The first 12-month period will start as of the Effective Date of this Agreement.

7.3.
Calculation.    Downtime will be calculated from the time a down system call is received by Accuray to the time of repair, counting normal treatment hours. The System will be calculated as up when the System repair has been completed and the System is available for treatment during normal treatment hours, whether or not patients are scheduled for treatment. Scheduled preventive maintenance, System Upgrades, and time that the System is unavailable as a result of something beyond Accuray's control, including without limitation (i) Customer's use of the System for purposes other than its intended and authorized purposes, (ii) the negligence of Customer, (iii) the failure of Customer to operate the System in accordance with the User Manuals, (iv) use by untrained operators, (v) e-Stops, power outages or the like or (vi) the negligence of any party other than Accuray, will be calculated as Uptime.

7.4.
Reports.    Customer is responsible for recording and reporting Downtime to Accuray. Reports for the previous month's Downtime shall be provided to Accuray on or before the 15th day of each month.

7.5.
Failure to Meet Guarantee.    For each year of the term of this Agreement, if Accuray achieves a 12-month uptime average of less than 95%, the Agreement period will be extended one (1) week for every percentage point or fraction thereof below 95%.

8.
Replacement Parts

8.1.
Accuray shall make a commercially reasonable effort to supply at the time of need or stock at Customer's facility all tools, equipment, replacement parts and Consumables as would reasonably be required by Accuray to perform the required repairs and return the System to good working order. Accuray shall make a commercially reasonable effort to maintain at its factory or service center(s) a stock of spare parts, including, in particular, long-procurement-lead-time parts.

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9.
Exceptions.

9.1.
All obligations of Accuray under this Agreement shall be suspended and/or cease in the event of:

9.1.1.
Damage from fire, accident, abuse, floods, lightning, natural disasters or other calamities commonly defined as "Acts of God".

9.1.2.
The intentional abuse of the System or negligence by Customer.

9.1.3.
System hardware or software alterations not authorized by Accuray including any move of the System from its installation site (other than by or at the express written direction of Accuray).

9.1.4.
Use of the System for other than its intended and authorized purposes, or in a manner not consistent with Accuray's User Manuals, including maintenance of the necessary operating environment and line current conditions, and the failure of Customer to cure such matter within thirty (30) days of actual written notice thereof from Accuray.

9.1.5.
Failure to make payments in accordance with the payment schedule set forth above on Page 2, Section 2.2.

9.2.
If corrective action or adjustment of the System is performed by Customer's staff at the direction of Accuray, such action or adjustment shall not reduce Accuray's responsibility under this Agreement or liability for the performance of the System.

10.
No Cancellation.    Neither party shall have the right to cancel this Agreement, except as set forth below in Section 11 "Breach."

11.
Breach.    Either party reserves the right to cancel this Agreement by written notice upon the breach of the other. An event of breach may include, but is not limited to, failure to make payment due under this Agreement, failure to provide access as required to execute the services contemplated by this Agreement, failure to perform and log QA, or the filing of notice under Federal bankruptcy laws. If the breaching party is unable or unwilling to cure or make a good faith effort to cure such breach within thirty (30) days of actual written notice the non-breaching party shall be relieved of all obligations under this Agreement and may terminate. Termination shall not be the terminating party's exclusive remedy, and the terminating party shall retain all other available legal and equitable remedies.

12.
Limitation of Liability and Warranty

12.1.
If it is determined in accordance with applicable law that any fault or neglect of either party, its employees or agents, substantially contributes to damage or injury to third parties, such party shall be responsible in such proportion as reflects its relative fault therefore, and shall hold the other party harmless from any liability or damages arising out of such fault or neglect. Accuray's liability arising under this Agreement shall be limited to an amount not to exceed the payment(s) received by Accuray for the then current Agreement year. In addition, Accuray shall not be liable to Customer in the event that Customer's or any third party's acts or omissions contributed in any way to any loss it sustained or the loss or damage is due to an

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13.
Assignment.    Neither party may assign this Agreement without the other party's prior written consent, except that Accuray may assign this Agreement, without Customer's consent, to an affiliate or to a successor or acquirer, as the case may be, in connection with a merger or acquisition, or the sale of all or substantially all of Accuray's assets or the sale of that portion of Accuray's business to which this Agreement relates. Subject to the foregoing, this Agreement will bind and inure to the benefit of the parties' permitted successors and assigns.

14.
Dispute and Governing Laws

14.1.
Process.    In the event that a dispute arises between Accuray and Customer with respect to any subject matter governed by this Agreement, such dispute shall be settled as follows. If either party shall have any dispute with respect to this Agreement, that party shall provide written notification to the other party in the form of a claim identifying the issue or amount disputed including a detailed reason for the claim. The party against whom the claim is made shall respond in writing to the claim within 30 days from the date of receipt of the claim document. The party filing the claim shall have an additional 30 days after the receipt of the response to either accept the resolution offered by the other party or escalate the matter. If the dispute is not resolved, either party may notify the other in writing of their desire to elevate the claim to the highest management of Accuray and of Customer. Each shall negotiate in good faith and use his or her best efforts to resolve such dispute or claim. The location, format, frequency, duration and conclusion of these elevated discussions shall be left to the discretion of the representatives involved. If the negotiations do not lead to resolution of the underlying dispute or claim to the satisfaction of either party involved, then either party may pursue resolution by the courts as follows.

14.2.
Applicable Law.    All disputes arising out of or relating to this Agreement not otherwise resolved between Accuray and Customer shall be resolved in a court of competent jurisdiction, in Santa Clara County, State of California, and in no other place, provided that, in Accuray's sole discretion, such action may be heard in some other place designated by Accuray (if necessary to acquire jurisdiction over third persons), so that the dispute can be resolved in one action. Customer hereby consents to the jurisdiction of such court or courts and agrees to appear in any such action upon written notice thereof. No action, regardless of form, arising out of, or in any way connected with this Agreement may be brought by Customer more than one (1) year after the cause of action has occurred.

15.
Notices.    All notices required or permitted under this Agreement will be in writing and delivered in person, by overnight delivery service, or by registered or certified mail, postage prepaid with return receipt requested, and in each instance will be deemed given upon receipt. All

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To Accuray:

   To Customer:
Accuray Incorporated    
Attention: Chief Financial Officer    
1310 Chesapeake Terrace    
Sunnyvale, CA 94089    
        
with cc to: General Counsel   with cc to:
16.
Waiver.    The waiver of any breach or default of any provision of this Agreement will not constitute a waiver of any other right hereunder or of any subsequent breach or default.

17.
Severability.    If any provision of this Agreement is held invalid or unenforceable by a court of competent jurisdiction, the remaining provisions of the Agreement will remain in full force and effect, and the provision affected will be construed so as to be enforceable to the maximum extent permissible by law.

18.
Force Majeure.    Neither party will be responsible for any failure or delay in its performance under this Agreement (except for the payment of money) due to causes beyond its reasonable control, including, but not limited to, labor disputes, strike, lockout, riot, war, fire, act of God, accident, failure or breakdown of components necessary to order completion; subcontractor, supplier or customer caused delays; inability to obtain or substantial rises in the prices of labor, materials or manufacturing facilities; curtailment of or failure to obtain sufficient electrical or other energy, raw materials or supplies; or compliance with any law, regulation or order, whether valid or invalid.

19.
Amendments.    Any amendment or modification of this Agreement must be made in writing and signed by duly authorized representatives of each party. For Accuray, a duly authorized representative must be any of the following: CEO, CFO, or General Counsel.

20.
English Language Requirement.    This Agreement is written in the English Language as spoken and interpreted in the United States of America, and such language and interpretation shall be controlling in all respects.

21.
Entire Agreement.    This Agreement contains the entire Agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior understandings, representations and warranties, written and oral. If any part of the terms and conditions stated herein are held void or unenforceable, such part will be treated as severable, leaving valid the remainder of the terms and conditions.

22.
Counterparts.    This Agreement may be executed in counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the Effective Date by their duly authorized representatives.

ACCURAY INCORPORATED

   DISTRIBUTOR
By:
   By:
Print Name:
   Print Name:
Title:
   Title:
Date:
   Date:
     
    PLEASE MAKE CERTAIN THAT YOU HAVE SELECTED A PAYMENT OPTION IN ACCORDANCE WITH SECTION 2.2, ABOVE.

        The undersigned acknowledges that the terms and conditions of this Agreement meet the policies and procedures of Accuray.

Signed:
   Dated:
  General Counsel, Accuray Inc.    

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ACCURAY CYBERKNIFE® INTERNATIONAL SILVER ELITE SERVICE AGREEMENT

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Exhibit 10.42


CYBERKNIFE® G4 SHARED OWNERSHIP AGREEMENT

Customer:   Account Number:
                        ("Customer")    

Contact Name:
 
Quote ID:

Address:
 
Revision Number:

 
 
Revision Date:

RSD Contact:
 
Expiration Date:

Only valid for primary customer named above. This CyberKnife Shared Ownership Agreement ("Agreement") is non-transferable and not for export outside the U.S.

A.   Quote
 
   Part Description
   Quantity
   Unit Price
   Line Total
  
1.   CyberKnife Robotic Radiosurgery System (See B below)   1   $ 4,195,000.00   $ 4,195,000.00  
2.   Additional Options Total (See C Below)             $ 0.00  

3.
 
Special Promotion if this Agreement is signed by the Expiration Date. [However, should Customer, at any time prior to installation, decide not to purchase the InView™ Workstation or the MultiPlan™ Workstation, the additional discount will be cancelled.]
 
 
 
 
 
 
 
 
 
4.   Special Q2 2007 RoboCouch™ Patient Positioning System Promotion if Customer purchases the RoboCouch in Section C.1 Below. [ONLY APPLIES IF ROBOCOUCH IS PURCHASED]             ($ 200,000.00 )
                 
 
              Total Due   $ 4,195,000.00  
                 
 

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B.   The Base CyberKnife System—G4 Configuration                                                                              $4,195, 000.00
1.   Robotic Treatment Delivery System
    1.1.   Image-Guidance System
      1.1.1.   Diagnostic X-ray sources
      1.1.2.   In-Floor Amorphous Silicon X-Ray Detectors
    1.2.   600 MU/minute Linear Accelerator (Linac) with secondary collimators
    1.3   Robotic Manipulator
    1.4   Patient Treatment Couch
      1.4.1.   Two (2) CT Overlay Kits included
    1.5   Treatment Delivery Control Console

2.
 
Treatment Planning System
    2.1.   Two (2) MultiPlan™ Treatment Planning Workstations
    2.2.   One (1) InView™ Workstation
    2.3.   CK Remote™ Open Architecture

3.
 
Clinical Application Modules
    3.1.   Synchrony® Respiratory Tracking System
    3.2.   Xsight™ Spine Tracking System

4.
 
Data Management Systems
    4.1.   Patient Archive and Restore System
C.   Additional Options
    o   RoboCouch Patient Positioning System   $800,000.00

 
 
When selecting RoboCouch Patient Positioning System, the Patient Treatment Couch (Section B.1.4) is removed from the Base CyberKnife System and replaced with the RoboCouch Patient Positioning System.

 
 
 
 
Patient Treatment Couch Credit
 
($350,000.00)
    o   MultiPlan Workstation       $125,000.00 each

 
 
 
 
Number of Additional MultiPlan Workstations:
 
MultiPlan Subtotal
 
$0.00

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    o   InView Workstation       $45,000.00 each

 
 
 
 
Number of Additional InView Workstations:
 
InView Subtotal
 
$0.00
               
            Additional Options Total   $0.00
               
D.   Pricing & Inclusions
1.   Pricing        
    1.1   CyberKnife® Robotic Radiosurgery System (from Section A above)       $4,195,000.00
    1.2   Down Payment Options:
Accuray offers the following down payment options. Select one of the following down payment options by marking the box next to the down payment option desired (the "Down Payment"). The Down Payment is due to Accuray in accordance with the applicable dates specified in Section D.2.1 (Down Payment Payments) below.		   o
o
o
o
o
o
o		   $100,000
$250,000
$500,000
$1,000,000
$1.500,000
$2,000,000
$2,500,000
           
    1.3   Remaining System Price (with Additional Options and less Down Payment)        
           

2.
 
Payment Terms
 
 
 
 
    2.1.   Down Payment Payments        
Total Amount of Down Payment
   Amount due upon Customer's signature
   Amount due within 60 days of signature
   Amount due upon delivery of System
   Amount due upon Acceptance
$   100,000   $100,000   N/A   N/A   N/A
$   250,000   $100,000   $150,000   N/A   N/A
$   500,000   $100,000   $400,000   N/A   N/A
$1,000,000   $100,000   $400,000   $   400,000   $100,000
$1,500,000   $100,000   $400,000   $   850,000   $150,000
$2,000,000   $100,000   $400,000   $1,300,000   $200,000
$2,500,000   $100,000   $400,000   $1,750,000   $250,000
    2.2.   Minimum Monthly Payments        
Total Amount of Down Payment
   Minimum Monthly Payment
$100,000   $45,000
$250,000   $43,000
$500,000   $40,000
$1,000,000   $35,000
$1,500,000   $30,000
$2,000,000   $25,000
$2,500,000   $20,000

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    2.3.   Revenue Share Payments        
        All Technical Fees (as defined in Section 2.1 of the Accuray Terms and Conditions set forth below) collected during the Term of this Agreement are split equally (50/50) between Customer and Accuray. The Revenue Share Payments are net of the Minimum Monthly Payments.        
    2.4.   Credit Worthiness        
        Accuray's obligations under this Agreement are subject to approval of Customer's credit worthiness by Accuray or its designees and agents ("Accuray Finance"). Customer understands that interest rates vary depending upon market fluctuations until all financing related documents are fully executed.        

3.
 
Shipping Terms:
 
 
 
 
    3.1.   F.O.B. Destination.        
    3.2.   Anticipated delivery scheduled for             .        

4.
 
Site Preparation and Installation:
 
 
 
 
    4.1.   Site preparation at Customer's expense.        
    4.2.   Installation included at Accuray's expense.        

5.
 
Warranty:
 
 
 
 
    5.1.   1 year warranty includes all parts and labor.        

6.
 
Training:
 
 
 
 
    6.1.   Training provided for up to 5 personnel (e.g. surgeon, radiation oncologist, physicist, radiation therapist). Hotel accommodations and travel costs are not included.        
    6.2.   Additional attendees will be charged according to the then current training price list.        
E.   Contingencies
F.   Preventive Maintenance and Service Contracts

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    First Year (Warranty Year)   No Payment
    Second Year   $460,000.00 per year
    Third Year   $460,000.00 per year
    Fourth Year   $460,000.00 per year
    Fifth Year   $460,000.00 per year
G.   Accuray Terms and Conditions
1.
Definitions; Terms.    "Accuray Products" means all products manufactured by Accuray Incorporated ("Accuray") including, but not limited to, Accuray-produced hardware, software, and firmware. "Accuray Services" means services of Accuray related to the warranty provided herein, but shall not include any services relating to the Diamond Elite Preventive Maintenance and Service Contract between Customer and Accuray, which shall be governed by the terms of the separate Diamond Elite Preventive Maintenance and Service Contract. "Accuray System" means the CyberKnife System provided by Accuray to Customer hereunder, which includes component parts produced by other manufacturers. "Accuray Update" means any update offered by Accuray to any Accuray Product or Accuray System. "Accuray Upgrade" means any upgrade offered by Accuray to any Accuray Product or Accuray System. "Specifications" means the user manuals, reference guides, and configuration documentation provided by Accuray to Customer in writing, as updated from time to time by Accuray. All Accuray Products, Accuray Services, Accuray System, Accuray Upgrades and Accuray Updates (collectively, "Accuray Deliverables") are furnished only on the terms and conditions stated herein. Any different or additional terms contained in Customer's purchase order, or similar documents shall not bind Accuray.

2.
Payments.

2.1.
Under this Agreement, Customer will be responsible for making three types of payments to Accuray: (i) the Down Payment, (ii) Minimum Monthly Payments and (iii) Revenue Share Payments

2.1.1.
Down Payment.    Customer shall pay Accuray a Down Payment in the amount selected by Customer in Section D.1.2 (Down Payment Options) above, which Down Payment shall be due in accordance with the applicable dates specified in Section D.2.1 (Down Payment Payments) above.

2.1.2.
Minimum Monthly Payments.    The Minimum Monthly Payments are certain minimum payments that Customer is required to make to Accuray each month regardless of the amount of revenue that Customer has generated in such month. The amount of Customer's Minimum Monthly Payment is dependent upon the amount of Customer's Down Payment. Customer agrees that the minimum monthly payment amount set forth in Section D.2.2 (Minimum Monthly Payments) above which corresponds to the value of Customer's Down Payment shall constitute the amount of Customer's Minimum Monthly Payment under this Agreement.

2.1.2.1.
Starting with the first (1st) month following the Commencement Date (as defined below), in the event that the Revenue Share payment (as defined below) to be made by Customer to Accuray is not equal to or greater than the amount of Customer's Minimum Monthly Payment, Customer shall make a payment to Accuray in the

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3.
Buyout.    On any anniversary date following one (1) year from the Commencement Date, Accuray will provide an exit strategy (the "Buyout Option") enabling Customer to buy out Accuray's interest in this program including the Accuray Deliverables at the predetermined price and terms available from Accuray, less an amount equal to all Revenue Share Payments made by Customer to Accuray under this Agreement as of the date that Customer exercises its Buyout Option, with sixty (60) days written notice. The amount that Customer must pay to Accuray in order to exercise its Buyout Option (the "Buyout Price") will depend upon the amount of Customer's initial Down Payment to Accuray and the year in which Customer exercises its Buyout Option. Customer acknowledges and agrees that its Buyout Price will correspond to the amount of Customer's Down Payment and the year in which Customer exercises its Buyout Option, less all Revenue Share Payments made by Customer to Accuray under this Agreement as of the date that Customer exercises its Buyout Option.

4.
Funding.    Customer understands that Accuray may obtain outside funding to invest in the Shared Ownership Program and may use the Accuray Deliverables and Customer's Per Patient Payments and other payments as collateral (or the title of the Accuray Deliverables may be transferred to a third party as part of a financing agreement). Customer agrees to provide reasonable information to allow this financing.

5.
Shipment.    Shipments are F.O.B. Destination. Customer shall inspect arriving shipments and report any visible damage or shortages to Accuray within 48 hours after delivery and any concealed damage within 10 days after delivery. If Customer does not report damage in accordance with the previous sentence, Customer shall bear the risk of loss with respect to such damage. For shipments outside the United States, Customer shall procure all necessary permits and licenses for such shipments and for compliance with any government regulations applicable at the destination. Delivery and installation dates set forth in Section D above, or otherwise agreed upon in writing by the parties are approximate. Accuray shall use reasonable efforts to meet all such delivery and installation dates but shall not be liable for delays.

6.
Installation.

6.1.
Installation by Accuray.    Accuray will notify Customer approximately 90 calendar days prior to the scheduled delivery of the Accuray System to coordinate installation details. Installation will be performed by Accuray. Accuray will assemble and test the Accuray System. Operation of the Accuray System by Accuray, as necessary for completion of installation or acceptance tests, is subject to Customer providing adequate radiation shielding protection and other site preparations required for the safety and protection of personnel and the Accuray Deliverables. Upon completion of the installation, Accuray's representatives will demonstrate proper machine operation by performing Accuray's acceptance test procedure. For clarity, Accuray is not responsible for any commissioning of the Accuray System, including, but not limited to, any calibration or radiation surveys. Such commissioning shall be the sole responsibility of Customer.

6.2.
Site Preparation.    Customer will be responsible for having the building, utilities, lighting, ventilation, air conditioning, mounting facilities, all necessary radiation shielding, patient positioning lasers, closed-caption TV system, intercom, and access to the room completed on the estimated delivery date and ready for installation of the Accuray System. Accuray will have no responsibility for any matter affecting or related to the adequacy of architectural design,

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7.
Training.

7.1.
Training.    Accuray will provide training for up to 5 Customer personnel (such personnel, collectively, the "Initial Group"). The Accuray training includes: (i) Technical Training, (ii) 1 Clinical Site Visit, and (iii) 1 on-site training session on the technical use of the Accuray System during first patient treatment, as each is described below. Customer shall be responsible for the travel and living expenses of all personnel sent for training. At the request of Customer, Accuray shall train additional Customer personnel beyond the Initial Group in accordance with Accuray's then current training price list and availability.

7.2.
Training Framework and Restrictions.    Due to logistical considerations, Accuray can only offer 1 Clinical Site Visit and 1 on-site training session during first patient treatment per Customer. As set forth below, Customer shall at a minimum send a Core Group (as defined in Section 7.3.1 below) for Technical Training prior to installation. However, because completion of the Technical Training is a prerequisite to the Clinical Site Visit and because completion of Technical Training and the Clinical Site Visit are prerequisites to the on-site training session during first patient treatment, Accuray strongly recommends that Customer send its entire Initial Group to Technical Training before the Clinical Site Visit. If Customer does not send its entire Initial Group to Technical Training prior to the Clinical Site Visit, then only Customer's Core Group personnel who have completed the Technical Training shall be able to participate in the Clinical Site Visit and subsequent on-site training session during first patient treatment. If Customer does not send its entire Initial Group to Technical Training prior to the Clinical Site Visit, then the remaining members of Customer's Initial Group shall only be eligible for Technical Training and must complete such Technical Training within 60 days of the first patient treatment or the option for such Technical Training shall be deemed waived by Customer.

7.3.
Technical Training

7.3.1.
Technical Training will occur at Accuray's training facility in Sunnyvale, California or such other regional training facility as Accuray may establish. At a minimum, Customer must

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8.
Service and Maintenance.    During the Term of this Agreement, except during the warranty year, as set forth in Section 16 (Warranty) below, the maintenance and repair of the Accuray Deliverables shall be provided pursuant to the terms and conditions of the Diamond Elite Preventive Maintenance and Service Agreement provided separately and Customer hereby agrees to execute such Diamond Elite Preventive Maintenance and Service contract if and when

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9.
Calibration and Local Requirements.

9.1.
Calibration.    Customer shall be solely responsible for all Accuray System commissioning and calibration. The dose rate and integrated dose measured by the accelerator transmission ionization chamber and dosimetry electronics must be calibrated by a qualified radiological physicist prior to use of the Accuray System for patient treatment. Customer shall be responsible for quality assurance testing and calibrating the Accuray System regularly. Customer also shall be responsible for radiation surveys which may be required by applicable law or regulation or which may be necessary to establish that radiation does not exceed safe levels. Accuray has no responsibility for any such commissioning, quality assurance testing, calibration or radiation surveys.

9.2.
Pre-Requisite to First Patient Treatment.    Proper commissioning, calibration and quality assurance testing ("QA") of the Accuray System are necessary prerequisites to the first patient treatment. Accuray has the right to delay the first patient treatment in the event that Customer, in Accuray's sole opinion, does not have sufficient time between installation and first patient treatment to properly commission, calibrate and QA the Accuray System.

9.3.
Local Requirements.    Customer shall be responsible for obtaining all permits and for meeting all requirements relating to state and local codes, registration, regulations and ordinances applicable to Customer's use of the Accuray System. Accuray has no responsibility for compliance by the Accuray Deliverables with such requirements.

10.
Acceptance.    "Acceptance" of the Accuray System shall occur upon the earlier of (i) completion by Accuray of its acceptance test procedure that demonstrates that the Accuray System substantially conforms to the Specifications or (ii) execution of Accuray's acceptance form by Customer. In no event shall Customer or its agents use the Accuray System (or any portion thereof) for any purpose before Acceptance thereof without the express written approval of Accuray. Customer shall indemnify and hold Accuray harmless from any such use.

11.
Commencement Date.    Customer believes that, by the date of Acceptance, it will have identified medically suitable patients to be treated using the Accuray System, and will schedule its first patient treatment as quickly as is possible and medically indicated after the date of Acceptance, after completing appropriate System Commissioning, Quality Assurance Testing and Calibration. The date of this first patient treatment shall be the "Commencement Date."

12.
Customer Obligations.

12.1.
Reporting.    On or before the close of business on the third (3rd) business day of each calendar month following the month that contains the Commencement Date, Customer shall report to Accuray all treatment services performed utilizing the Accuray Deliverables, all amounts billed therefor during the previous month, and all amounts collected during the previous month.

12.2.
Records and Audit.    Upon the request of Accuray, and subject to a Business Associate Agreement, if any, Customer shall provide to Accuray all documentation in its possession supporting calculation of any payment or payments. If and to the extent Accuray reasonably deems it necessary, Customer shall provide patient-by-patient information, redacted only to

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13.
Patient Information.

13.1.
Data Collection.    Customer agrees to collect data (including a CyberKnife treatment log) with respect to patients treated by Customer utilizing the Accuray Deliverables as Accuray may reasonably request in support of regulatory approval applications, clinical studies, and promotion. Accordingly, Accuray may receive from Customer, or create or receive on behalf of Customer, patient healthcare, billing, or other confidential patient information ("Patient Information"). Patient Information, as the term is used herein, includes all "Protected Health Information," as that term is defined in 45 CFR § 164.501.

13.2.
Compliance with HIPAA.    In performing any services hereunder, Accuray may receive from Customer Patient Information Customer shall identify to Accuray in writing all such information when Customer provides such information to Accuray, and Accuray shall use Patient Information so identified by Customer only as necessary to provide the services to Customer as set forth herein. Accuray shall comply with all federal laws, rules and regulations relating to the confidentiality of Patient Information, including the applicable provisions of the privacy regulations promulgated pursuant to Health Insurance Portability and Accountability Act of 1996 ("HIPAA").

13.3.
De-Identified Information.    Customer shall provide Accuray with only de-identified Protected Health Information, in accordance with the requirements of 45 CFR 164.514. Any information provided to or shared with Accuray shall have all identifying patient information removed,

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14.
Insurance.

14.1.
For the Term of this Agreement, Accuray shall, at its sole cost and expense, maintain product liability and property damage insurance covering the Accuray Deliverables with the following minimum coverage: Basic liability and product liability of One Million Dollars ($1,000,000); equipment coverage at replacement value; and a liability umbrella policy of Three Million Dollars ($3,000,000). A certificate evidencing such coverage shall be provided by Accuray to Customer upon request by Customer.

14.2.
Customer shall maintain comprehensive general liability insurance covering its services provided with the Accuray Deliverables and its premises where the Accuray Deliverables are located and shall require that each physician who provides treatment utilizing the Accuray Deliverables, and each other person who performs other medical services on patients referred for treatment with the Accuray Deliverables, shall maintain professional liability insurance, including, but not limited to, malpractice insurance, in such amounts and in such form as is customary for such persons in their respective professional fields as well as in Customer's community. Upon request by Accuray, Customer shall furnish Accuray evidence of such insurance coverage.

15.
Intellectual Property Rights; Indemnity.

15.1.
Indemnity.    Accuray shall at its expense defend any action brought against Customer with respect to a claim by a third party that the design or manufacture of any Accuray Deliverable infringes any valid patent or other intellectual property right of the United States, and shall pay any damages awarded by a court arising from such claim, provided Customer gives Accuray prompt written notice of such claim and full authority, information and assistance in settling or defending such claim.

15.2.
Certain Remedies.    If a court judgment prohibits Customer's continued use of any Accuray Deliverable, or if at any time Accuray determines that any Accuray Deliverable may become subject to a cause of action for infringement, Accuray may at its expense either (i) procure a license to enable Customer to continue using such Accuracy Deliverable, (ii) replace such Accuray Deliverable with a non-infringing Accuray Deliverable, or (iii) remove such Accuray Deliverable and refund a pro-rated portion of the Purchase Price paid by the Customer for such Accuray Deliverable, which portion shall be calculated on a straight-line basis over a 5-year period beginning on the date of Acceptance (i.e., removal of the Accuray Deliverable at the end of the first year after Acceptance would result in a refund of 80% of the Purchase Price). Accuray shall have no liability hereunder with respect to any claims settled by Customer without Accuray's prior written consent.

15.3.
Exclusion.    Accuray excludes from any liability hereunder, and Customer shall indemnify and hold Accuray harmless from and against any expense, loss or liability resulting from claimed infringement of any third party intellectual property rights: (i) arising from the use of an Accuray Deliverable other than in accordance with the Specifications, (ii) based on the combination of equipment, processes, programming applications or materials not furnished by Accuray with the Accuray Deliverables, (iii) arising out of compliance by Accuray with Customer's designs, specifications or instructions, or (iv) damages incurred as a result of Customer's continued use of an Accuray Deliverable after Accuray has recommended in writing that Customer suspend such use. This Section 15 states Accuray's entire liability for

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16.
Warranty.

16.1.
Warranty.    Accuray warrants that (i) the hardware components of the Accuray Deliverables will be free from defects in material and workmanship and (ii) the hardware and software components of the Accuray Deliverables will operate substantially in accordance with the Specifications, in each case for a period of 1 year from the date of Acceptance, but not to exceed 2 years from date of delivery ("Warranty Period"). Any service with respect to Accuray Deliverables provided by Accuray after the Warranty Period shall be provided in accordance with the terms of a Service Contract executed by the parties.

16.2.
Warranty Remedy.    If Customer notifies Accuray during the Warranty Period of a defect in an Accuray Deliverable that causes such deliverable to fail to conform to the foregoing warranty, Accuray shall at its option either repair or replace the defective deliverable, or, if in Accuray's opinion such repair or replacement is not commercially reasonable, Accuray shall refund a pro-rated portion of the price paid by the Customer for such Accuray Deliverable, which portion shall be calculated on a straight-line basis over a 5-year period beginning on the date of Acceptance. This Section 16.2 sets forth Customer's sole and exclusive remedies with respect to a breach of the warranty specified in Section 16.1.

16.3.
Conservation of Materials.    In the interest of conservation of scarce materials, and of efficient utilization of high value parts, the Accuray Deliverables may contain re-manufactured parts. Such parts are subject to the same standards of quality control applied to other parts and are covered by the warranty in this Section 16.

16.4.
Scope of Warranty.    The warranty services described in this Section 16 shall not apply to defects or non-conformities caused by: (i) abuse, accident, misuse or neglect of an Accuray Deliverable; (ii) modification of an Accuray Deliverable (including any software therein) without Accuray's express written authorization; (iii) use in an operating environment other than the operating environment described in the Specifications; or (iv) any component of an Accuray Deliverable that has been superseded by a update made available to Customer without charge by Accuray. In-warranty repair or replaced parts are warranted only for the unexpired portion of the original warranty period.

16.5.
OTHER WARRANTIES.    EXCEPT AS SET FORTH IN THIS SECTION 16, ACCURAY DISCLAIMS ALL EXPRESS OR IMPLIED WARRANTIES INCLUDING BUT NOT LIMITED TO THE WARRANTIES OF MERCHANTABILITY, AND OF FITNESS FOR A PARTICULAR PURPOSE, TITLE, AND NON-INFRINGEMENT.

17.
Mutual Indemnity.    If it is determined by a court in accordance with applicable law that the negligence of a party (the "Responsible Party"), its employees or agents causes damage or injury to a third party, the Responsible Party shall pay the other party for any damages awarded by a court or agreed to by the Responsible Party in a settlement arising from such claims to the extent such damages reflect the Responsible Party's relative fault therefor. Notwithstanding the foregoing, Accuray shall have no responsibility whatsoever for, and Customer shall indemnify and hold Accuray harmless from, all damage or injury to third parties which (i) results from the use, operation or service of any Accuray Deliverable by other than Accuray personnel prior to Acceptance and completion of the radiation survey by Customer, (ii) results from or relates to any use, operation or service of any Accuray Deliverable by a party not authorized to perform such service by Accuray, or (iii) any use by Customer or its agents of an Accuray Deliverable contrary to any written warning or instruction given by Accuray to Customer.

14

18.
Damages.    IN NO EVENT SHALL ACCURAY BE LIABLE FOR INCIDENTAL, CONSEQUENTIAL OR SPECIAL DAMAGES ARISING FROM OR RELATED TO THIS AGREEMENT EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. ACCURAY'S AGGREGATE LIABILITY ARISING FROM OR RELATED TO THIS AGREEMENT SHALL NOT EXCEED THE PAYMENT, LESS ANY APPLICABLE INTEREST, RECEIVED BY ACCURAY FOR THE ACCURAY DELIVERABLE RESULTING IN THE LOSS OR DAMAGE CLAIMED.

19.
Intellectual Property Ownership and License.    Accuray and its licensors retain all intellectual property rights in the Accuray Deliverables. Accuray hereby grants Customer a nonexclusive, non-transferable, royalty-free right to use the software provided in connection with the Accuray Deliverables only in machine readable form and only in combination with the Accuray Deliverable with which such software is provided. No such software shall be copied or decompiled in whole or in part by Customer, and Customer shall not disclose or provide any such software, or any portion thereof, to any third party. All rights in intellectual property not expressly granted hereunder are reserved by the owner of such intellectual property.

20.
Trademarks.    Accuray is the owner of the trademark CyberKnife® and related trademarks in the U.S. and around the world. If Customer wishes to use the CyberKnife or other Accuray trademarks in association with a business name, Accuray requires that Customer execute Accuray's standard royalty-free Trademark License Agreement specifying the requirements for and the nature of the acceptable use. Without the necessary license, Customer is not entitled to use the Accuray marks with a business name or to otherwise use language which would suggest a license with Accuray.

21.
Term.

21.1.
The duration of this Agreement (the "Term") is for the earlier of: (a) five (5) years from the Commencement Date, (b) the effective date upon which Customer exercises its Buyout option in accordance with Section 3 (Buyout), (c) termination of this Agreement in connection with a breach of this Agreement as permitted pursuant to Section 25, or (d) Customer's total Revenue Share Payments to Accuray equal the full amount of the "Remaining System Price" set forth in Section D.1.3 above. At the expiration of the Term, Customer may choose to:

(i)
buyout the Accuray Deliverables in accordance with Section 3 (Buyout),

(ii)
return the Accuray Deliverables to Accuray, or

(iii)
extend the Term of this Agreement if agreed to by Accuray, provided, however, that nothing contained herein shall in any way obligate Accuray to extend the Term of this Agreement at the expiration of such Term.

21.2.
Return of Accuray Deliverables.    In the event that Customer elects to return the Accuray Deliverables to Accuray at the end of the Term, as described in Section 21.1(b) above, Customer acknowledges and agrees that the Down Payment is made in consideration of lower Minimum Monthly Payments and a lower interest rate on the "Remaining System Price" over the Term, and as such Customer is not entitled to any return of the Down Payment. Furthermore, Customer shall pay for the costs of dismantling and shipping the Accuray Deliverables to Accuray. The Accuray Deliverables shall be returned to Accuray in the same condition, less normal wear and tear, as when delivered to Customer. The costs of any repairs or maintenance (other than that assumed by Accuray pursuant the Diamond Elite Service Agreement) required to return the condition of the Accuray Deliverables to an appropriate condition shall be borne by Customer and all such repair or maintenance shall be completed prior to return of the Accuray Deliverables to Accuray.

15

22.
Ownership, Title and Security Interest.

22.1.
Until (i) Accuray has been paid in full for the applicable Buyout price of all Accuray Deliverables provided to Customer, in addition to any and all additional payments due from Customer to Accuray hereunder, in the event that Customer elects to exercise its Buyout option or (ii) Customer's total Revenue Share Payments to Accuray equal the full amount of the "Remaining System Price" set forth in Section D.1.3 above, all Accuray Deliverables are and shall remain the sole exclusive (personal) property of Accuray (or such leasing company or other entity to which Accuray elects to transfer title in connection with the financing of the Accuray Deliverables and the monthly income stream from such items) and at all times be and remain personal property notwithstanding that it or any part of it may be, or hereafter become, in any manner affixed or attached to real property or any building thereon.

22.2.
Customer hereby grants to Accuray and Accuray retains title to all Accuray Deliverables delivered to Customer, and a security interest in all proceeds generated therefrom, for the purpose of securing payment of any and all indebtedness of Customer to Accuray arising out of the placement of the Accuray Deliverables for the purpose of securing payment for such deliverables. Customer authorizes Accuray to file, and shall execute upon Accuray's request, documents and related filings and recordings thereof as necessary for Accuray to perfect the foregoing security interest under the Uniform Commercial Code or any similar domestic or foreign laws and agrees) to help Accuray secure financing from a financing entity using the Accuray Deliverables and Customer's obligations under this Agreement as collateral, it being understood that such financing will not require any obligations from Customer other than those required in this Agreement. Customer shall maintain the Accuray Deliverables in good condition and keep such deliverables free of any liens until payment is made in full. All security interests shall be released once Accuray has received either (i) the full amount of the "Remaining System Price" set forth in Section D.1.3 above if Customer's total Revenue Share Payments to Accuray equal the full amount of the "Remaining System Price" or (ii) the Buyout price for the Accuray Deliverables if Customer elects to exercise its Buyout Option, as well as any and all payments owed hereunder from Customer to Accuray.

23.
Survival.    The parties' obligations under this Agreement shall cease upon expiration of the Term or other termination of this Agreement. Notwithstanding the foregoing, the parties' obligations set forth in Sections 2.3, 2.4 12.1, 12.6, 13, 14, 15, 16.5, 17, 18, 19, 21.2, 21.3, 22, 26, 27, 28, 32, 33, 34, 35 and 36 of this Agreement shall survive such termination.

24.
Breach.    The occurrence of any of the following shall constitute an event of breach hereunder ("Event of Breach"):

24.1.
Default in Payments.    If Customer shall fail to pay all or any portion of any payment, when and as the same shall come due and payable, whether at the due date thereof or by acceleration, or shall fail to make any other payment required by this Agreement, and such failure continues for a period of ten (10) business days after receipt of written notice; or

24.2.
Other Breach.    If either party shall breach or shall be in default under any of the terms and conditions of this Agreement and such breach or default shall not be cured within thirty (30) days after receipt of written notice with respect thereto from the non-breaching party; or

16

25.
Remedies for Breach.    If any Event of Breach shall occur and be continuing, the non-breaching party may, at its option, exercise any one or more of the rights and remedies as follows:

25.1.
Accuray or Customer may terminate this Agreement.

25.2.
Accuray or Customer may take any action at law or in equity to collect any or all amounts then due and thereafter to become due under this Agreement, or to enforce performance and observance of any obligation, agreement or covenant of Accuray or Customer under this Agreement.

25.3.
Accuray may accelerate and declare to be immediately payable the entire balance of all payments and all other amounts due and owing under this Agreement plus the sum of all payments and other amounts reasonably likely, based upon the previous six (6) months' payments, to become payable during the balance of the Term of this Agreement.

25.4.
Accuray may, directly or by its agent, and without notice or liability or legal process, enter upon any premises where the Accuray Deliverables may be located, take possession of and remove the Accuray Deliverables (any damages occasioned by such taking of possession and removal being waived by Customer).

26.
Compliance with Law.    Customer and Accuray shall each do all acts necessary to comply with, and shall cause their respective officers, directors, employees, contractors and agents to comply with, any and all federal, state, and local laws and regulations applicable to each of them. This provision includes but is not limited to legal requirements of privacy of patient-specific records, which is discussed more specifically in Section 13 (Patient Information).

27.
Change of Law with Adverse Circumstances.

27.1.
Change of Law.    As used herein, "Change of Law" shall mean: (i) any new legislation enacted by the federal or any state government; (ii) any third-party payer's or any governmental agency's (including but not limited to the Internal Revenue Service, the Office of the Inspector General of the U.S. Department of Health and Human Services, and comparable state agencies with jurisdiction over the subject matter of this Agreement), passage, issuance or promulgation of any new rule, regulation or guideline or interpretation of an existing law, rule, regulation or guideline; or (iii) any judicial or administrative body's issuance of any order or decree.

27.2.
Adverse Consequences.    As used herein, "Adverse Consequence" shall mean a Change of Law that prohibits, invalidates, renders unenforceable or otherwise materially adversely affects a party's rights or obligations hereunder.

27.3.
Good Faith Revision.    Notwithstanding any other provision of this Agreement, if during the term hereof any Change of Law results in an Adverse Consequence, Customer and Accuray shall make good faith efforts to revise this Agreement in order to avoid or mitigate such Adverse Consequence(s). Where such Change of Law results in any particular provision of this Agreement becoming invalid or unenforceable, the parties agree to first attempt to revise the Agreement so that the remaining provisions shall be enforceable and binding except where

17

28.
Confidentiality.    All drawings, designs, specifications, manuals and software and other non-public information furnished to the Customer by Accuray hereunder shall remain the confidential and proprietary property of Accuray ("Confidential Information"). All such information, except as may be found in the public domain, shall be held in confidence by Customer and shall not be disclosed by Customer to any third parties or used by Customer other than in its operation of the Accuray Deliverables in accordance with the Specifications.

29.
Press Releases.    Accuray and Customer shall each have the right to announce the installation to the press and shall provide copies of any press release to the other party so that they have a reasonable chance to provide input on the announcement.

30.
Cancellations.    All payments made hereunder are non-refundable and no order accepted by Accuray may be canceled by Customer without Accuray's prior written consent. If Customer requests cancellation of any order and Accuray consents to such request, Customer agrees to pay Accuray a charge determined by Accuray to cover the reasonable costs of order processing, handling, re-testing, shipping, storage, repackaging and similar activities incurred by Accuray in connection with such cancellation.

31.
Assignment.    Neither party may assign this Agreement without the other party's prior written consent, except that Accuray may assign this Agreement without Customer's consent to an affiliate and either party may assign this Agreement without the other party's consent to a successor or acquirer in connection with a merger or acquisition, or the sale of all or substantially all of such party's assets or the sale of that portion of such party's business to which this Agreement relates, upon written notice; provided that any party to which Customer proposes assigning this Agreement must meet Accuray's standard creditworthiness requirements. Subject to the foregoing, this Agreement will bind and inure to the benefit of the parties' permitted successors and assigns. Any attempted assignment in violation of this Section 31 shall be null and void.

32.
Dispute Resolution.    Any dispute between Accuray and Customer arising from or related to this Agreement, excluding disputes regarding payment or Customer's unauthorized use or disclosure of Accuray Confidential Information or intellectual property, shall be settled as follows. The party initiating the dispute shall provide written notification to the other party identifying in detail the nature of the dispute. The other party shall respond in writing to the notification within 30 calendar days from the date of receipt of the notification. The party initiating the dispute shall have an additional 30 calendar days after the receipt of the response to either accept the resolution offered by the other party or escalate the matter. If the dispute is not resolved within the foregoing 30-day period, the parties shall escalate the claim to the President of Accuray and the Chief Executive Officer of Customer. Each shall negotiate in good faith and use his or her best efforts to resolve such dispute or claim. If the dispute is not resolved within 15 calendar days after escalation to the President and Chief Executive Officer as described above, then either party may pursue resolution by any means available at law or equity.

33.
Notices.    All notices required or permitted under this Agreement shall be in writing and if delivered in person, effective immediately, if delivered by reputable national or international overnight delivery service, effective 2 business days after deposit with carrier, or if delivered by

18

To Accuray:
   To Customer:
Accuray Incorporated
Attention: Chief Financial Officer
1310 Chesapeake Terrace
Sunnyvale, CA 94089
Copy to: General Counsel		    
34.
Force Majeure.    Neither party will be responsible for any failure or delay in its performance under this Agreement (except for the payment of money) due to causes beyond its reasonable control, including, but not limited to, labor disputes, strike, lockout, riot, war, fire, acts of God, accident, failure or breakdown of components necessary for order completion; subcontractor or supplier caused delays; curtailment of or failure to obtain sufficient electrical or other energy, raw materials or supplies; or compliance with any law, regulation or order, whether valid or invalid.

35.
Governing Law.    The rights and obligations of the parties under this Agreement shall be governed in all respects by the laws of the United States and the State of California without regard to conflicts of laws principles that would require the application of the laws of any other jurisdiction. No action, regardless of form, arising out of or related to any Accuray Deliverable may be brought by Customer more than 1 year after Customer has or should have become aware of the cause of action.

36.
Waiver.    The waiver of any breach or default of any provision of this Agreement will not constitute a waiver of any other right hereunder or of any subsequent breach or default.

37.
Severability.    If any provision of this Agreement is held invalid or unenforceable by a court of competent jurisdiction, the remaining provisions of the Agreement will remain in full force and effect, and the provision affected will be construed so as to be enforceable to the maximum extent permissible by law.

38.
Amendments.    Any amendment or modification of this Agreement must be made in writing and signed by duly authorized representatives of each party. For Accuray, a duly authorized representative must be any of the following: CEO, CFO, or General Counsel.

39.
Counterparts.    This Agreement may be executed in counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

40.
Entire Agreement.    This Agreement contains the entire agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior understandings, representations and warranties, written and oral. In the event of a conflict or inconsistency between the terms stated in a purchase order or other similar document and this Agreement, the terms of this Agreement shall govern.

[SIGNATURE PAGE FOLLOWS]

19

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their officers, thereunto duly authorized. The parties acknowledge and agree that this Agreement does not become effective until it has been signed by all parties indicated below.

ACCURAY INCORPORATED   CUSTOMER

By:                    
 
By:                    

Print Name: Robert E. McNamara                   
 
Print Name:                   

Title: Senior Vice President & Chief Financial Officer  
 
Title:                    

Date:                    
 
Date:                    

The undersigned acknowledges that the terms and conditions of this Agreement meet the policies and procedures of Accuray.

By:                      
Darren J. Milliken
General Counsel

Date:
 
                   

Please make sure that you have signed the Diamond Elite Preventive Maintenance and Service Agreement provided separately. Please attach payment to this signed Agreement and forward to:

Accuray Incorporated
ATTN: Contracts Administration
1310 Chesapeake Terrace
Sunnyvale, CA 94089
T. 408.716.4600
F. 408.716.4620

SIGNATURE PAGE TO ACCURAY CYBERKNIFE G4 SHARED OWNERSHIP AGREEMENT

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Exhibit 10.43

CYBERKNIFE G4 PLACEMENT AGREEMENT

ACCURAY INCORPORATED—[NAME OF INSTITUTION]

        This CyberKnife® G4 Placement Agreement ("Agreement") is made and entered into as of                        , 2006 ("Effective Date") by and between Accuray Incorporated, a California corporation, with offices located at 1310 Chesapeake Terrace, Sunnyvale, California 94089 ("Accuray") and                        , located at                        ("Institution").

RECITALS

        Accuray is the developer and manufacturer of the CyberKnife 4th Generation Robotic Radiosurgery System more fully described in Schedule 1 ("CyberKnife G4" or "Equipment").

        Accuray's mission is to enable full-body radiosurgery using image-guided robotics. We design, develop and sell the CyberKnife G4, an FDA-cleared image-guided robotic radiosurgery system used to provide treatment planning and image-guided stereotactic radiosurgery (or precision radiotherapy) for lesions, tumors and conditions anywhere in the body where radiation treatment is indicated. Radiosurgery combines the proven capability and non-invasive nature of radiation with the precision and effectiveness of conventional surgery, thereby making it possible to non-invasively destroy solid tumors. We believe that the integration of our proprietary image-guidance system with robotic delivery capability establishes the CyberKnife G4 as the next generation of radiosurgery systems.

        Institution wishes to have the use of a CyberKnife G4 in order to have the capability to provide full-body stereotactic radiosurgery/radiotherapy treatments for patients; and,

        Institution and Accuray agree to enter into an agreement to share the cost of acquiring a CyberKnife G4, whereby Accuray is willing to provide the Equipment to Institution and Institution is willing to provide appropriate medical and surgical services utilizing the Equipment on the terms and conditions set forth herein.

        This Agreement proposal shall expire if not signed and received by Accuray by                        , 2006.

AGREEMENT TERMS

For and in consideration of the mutual covenants and agreements contained herein and of other good and valuable consideration, Accuray and Institution, intending to be legally bound, hereby agree as follows:

1.     DELIVERY AND INSTALLATION OF EQUIPMENT

1

2

2.     OWNERSHIP

3.     TRAINING

3

4.     USE OF EQUIPMENT

4

5.     VISITS

6.     SERVICE AND MAINTENANCE

5

6

7

7.     IMPROVEMENTS AND UPGRADES

8


8.     PAYMENT OPTIONS

9

Revenue Share Plans

Select
Plan A
   Plan A
 
   Revenue Share
Institution/Accuray
   Total Payments to Accuray
    50%—50%   50% split on all collections for Term of Agreement

Select
Plan B
   Plan B
 
   Revenue Share
Institution/Accuray
   Total Payments to Accuray
    30%—70%   Up to first $1,500,000
    50%—50%   over $1,500,000, and up to $5,000,000 cumulative
    70%—30%   over $5,000,000 cumulative

10

9.     PAYMENT TERMS

11

10.   TERM AND TERMINATION

12

11.   COMPLIANCE WITH LAW

13

12.   PATIENT INFORMATION

13.   CONFIDENTIALITY

14

14.   NON-COMPETE

15.   INDEMNITY AND INSURANCE

15

16.   WARRANTIES


17.   LIMITATION OF LIABILITY

18.   BREACH AND REMEDIES

16

19.   GENERAL PROVISIONS


To Accuray:   To Institution:

Accuray Incorporated
Attention: Chief Financial Officer
1310 Chesapeake Terrace
Sunnyvale, CA 94089
with cc to: General Counsel
 
 

17

SIGNATURE PAGE FOLLOWS

18

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their officers, thereunto duly authorized, on the Effective Date. The parties acknowledge and agree that this Agreement does not become effective until it has been signed by all parties indicated below.

[NAME OF INSTITUTION]   ACCURAY INCORPORATED

By:
 
 
By:
 
 
   

Name:
 
 
Name:
 
 
   

Title:
 
 
Title:
 
 
   

Date:
 
 
Date:
 
 
   

The undersigned acknowledges that the terms and conditions of this Agreement meet the policies and procedures of Accuray.

Signed:     Dated:  
 
General Counsel, Accuray Incorporated		    

SIGNATURE PAGE TO PLACEMENT AGREEMENT

19

Schedule 1

CyberKnife G4—Placement Equipment

List price of this configuration is $4,145,000

ROBOTIC TREATMENT DELIVERY SYSTEM

20


TREATMENT PLANNING SYSTEM


CLINICAL APPLICATION MODULES

DATA MANAGEMENT SYSTEMS

21

Schedule 2

Best Effort Case Volumes

 
   Basic Service
Case Volumes
   Upgrades
Case Volumes
Year 1   85   110
Year 2   125   150
Year 3   160   200
Year 4   200   240
Year 5   240   275
Subsequent   240   300

22

Schedule 3

Buyout Option

No Buyout for the first five (5) years. Institution can buy out Accuray's interest in this program and the Equipment at end of:

Year
   Buyout Price
5   $ 2,910,000
6   $ 2,530,000
7   $ 2,120,000
8   $ 1,740,000
9   $ 1,370,000
10 and subsequent   $ 950,000

In the event that Institution exercises its Buyout Option, the Buyout Price shall be increased by the depreciated list price on the effective date of the buyout of each upgrade. Hardware upgrades shall be depreciated on a monthly basis (including portions of a month, if applicable) over a five (5) year period, and software upgrades over a three (3) year period.

The Buyout Price is based upon Accuray's list price for the equipment listed in Schedule 1, if additional equipment is added prior to installation, then the Buyout Price for the Equipment shall be adjusted based upon Accuray's list price of that additional equipment at the time of installation.

23



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Exhibit 10.44


Separation Agreement and Release

31 March 2006

John W. Allison

Dear John:

        This Separation Agreement and Release ("Agreement") is made and entered into by and between Accuray, Inc. (which together with its affiliates and its respective shareholders, directors, officers, employees, representatives, predecessors, successors and assigns are collectively referred to as "Employer") and John W. Allison ("Employee").

        Employer and Employee intend by this Agreement to settle all legal rights and obligations arising out of or resulting from the employment relationship and its termination.

        1.     Termination of Employment.

        2.     Separation Benefits.    In consideration for your signing this agreement, you will receive: your Treo communication device; your computer laptop with computer display; six (6) months of Severance Pay, equivalent to $102,500; a Separation Bonus of two (2) weeks salary for every year of service, equivalent to $17,083; a lump sum severance payment of $35,000 and Accuray agrees to pay for the first six (6) months of COBRA coverage, (grossed-up by 35% to cover tax withholdings), equivalent to $9,720. All severance pay will be paid net of all appropriate taxes and withholdings.

        3.     Return of Company Property.    You have returned to the Company all Company property in your possession.

        4.     Maintaining Confidential Information.    You will not disclose any confidential information you acquired while an employee of the Company to any other person or use such information in any manner that is detrimental to the Company's interests. Employee understands and agrees that this Agreement is confidential and agrees, except as required by law, not to disclose its terms or the fact of its execution to any other person or entity without the prior written consent of a duly authorized officer of Employer.

        5.     Cooperation with the Company.    You will cooperate fully with the Company in its defense of or other participation in any administrative, judicial or other proceeding arising from any charge, complaint or other action which has been or may be filed.

        6.     General Release of the Company.    You understand that by agreeing to this release you are agreeing not to sue, or otherwise file any claim against, the Company or any of its employees or other


agents for any reason whatsoever based on anything that has occurred as of the date you sign this agreement.

2

        7.     Severability.    The provisions of this agreement are severable. If any provision is held to be invalid or unenforceable, it shall not affect the validity or enforceability of any other provision.

        8.     Voluntary and Knowing Agreement.    You represent that you have thoroughly read and considered all aspects of this agreement, that you understand all its provisions and that you are voluntarily entering into said agreement.

        9.     Entire Agreement; Amendment.    This agreement sets forth the entire agreement between you and the Company and supersedes any and all prior oral or written agreements or understanding between you and the Company concerning the subject matter. This agreement may not be altered, amended or modified, except by a further written document signed by you and the Company.

        10.   Non-Disclosure, Public Statements.    Employee agrees to keep confidential am not to use or disclose to any third party any confidential or proprietary information pertaining to the business of Employer without the prior written consent of a duly authorized officer of Employer. In the event Employee receives or becomes aware of a subpoena or court order requiring such disclosure. Employee will notify Employer within three (3) business days. Employer and Employee further agree they will refrain from (i) making any critical or derogatory statements or comments concerning Employee or Employer or its business or (ii) taking any other action which would negatively affect Employee's or Employer's reputation or business.

        If the above accurately reflects your understanding, please date and sign the enclosed copy of this letter in the places indicated below and return that copy to Paul A. Vagadori in Human Resources.

 
    
    Respectfully,

 
 
Paul A. Vagadori
Senior Director, Human Resources

Accepted and agreed to on
 
 

14 April 2006
Date
 
8 May 2006
Date

/s/ John Allison
John W. Allison
Encl.
 
/s/ Euan S. Thomson
Euan S. Thomson, Ph.D.
President and CEO
Accuray Incorporated

 
 
8 May 2006
Date

 
 
/s/ Chris Raanes
Chris A. Raanes
Chief Operating Officer
Accuray Incorporated

3


EXHIBIT "A"
ADDENDUM TO SETTLEMENT AGREEMENT AND RELEASE

        This is an Addendum to the Settlement Agreement and Release ("Agreement") entered into between Accuray, Inc. (referred to jointly as "Employer") and John W. Allisoin ("Employee").

        Under the terms of the Parties existing Agreement the Employee releases the Employer from certain claims including but not limited to claims under the Age Discrimination in Employment Act and the Older Worker Benefit Protection Act.

        1.     In return for the Parties Agreement, you are receiving compensation beyond that which you are otherwise entitled to before entering into this Agreement.

        2.     You are advised to consult with an attorney before signing this Addendum or electing to continue to be bound to the Agreement.

        3.     You have twenty-one (21) days from the date you receive this Addendum in which to consider the Agreement including this Addendum.

        4.     You have seven (7) days following the execution of this Addendum to revoke this Addendum and the previous Agreement between the Parties.

        Except as expressly set forth herein, all other terms and conditions of the parties Agreement shall remain in full force and effect. The Agreement and this Addendum set forth all terms and conditions relating to the matters discussed therein and supersede any and all prior agreements and understandings between Employee and Employer concerning the separation of his/her employment from Accuray, Inc.

By my signature below, I acknowledge that I have carefully read and fully understand this Addendum and the Agreement previously issued to me and consent to the terms and conditions set forth in both this Addendum and the Agreement. I further understand and acknowledge that I have seven (7) days from execution of this Addendum to revoke my acceptance of both this Addendum and the previous Agreement I executed.

 
    
    
Dated:   14 April , 2006
   /s/ John Allison
John W. Allison



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Exhibit 21.1


Subsidiaries of the Registrant

Name
   State or Jurisdiction of Organization
Accuray International SARL   Switzerland
Accuray Europe SARL   France
Accuray UK, Ltd.   United Kingdom
Accuray Asia Ltd.   Hong Kong



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Exhibit 23.2


CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

        We have issued our report dated November 7, 2006, accompanying the consolidated financial statements of Accuray Incorporated contained in the Registration Statement and Prospectus. We consent to the use of the aforementioned report in the Registration Statement and Prospectus, and to the use of our name as it appears under the caption "Experts."

/s/ Grant Thornton LLP

San Francisco, California
November 13, 2006



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CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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[LATHAM & WATKINS LLP LETTERHEAD]

November 13, 2006

Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549

Ladies and Gentlemen:

        On behalf of Accuray Incorporated, a California corporation (the "Company"), enclosed herewith for filing under the Securities Act of 1933, as amended (the "Securities Act"), is a Registration Statement on Form S-1 (the "Registration Statement") relating to the initial public offering of the Company's common stock. The Company has paid the registration fee of $24,610 by wire transfer to the account of the Securities and Exchange Commission (the "SEC") at Mellon Bank as permitted by the Rules under the Securities Act.

        In connection with the review of the Registration Statement by the staff of the SEC (the "Staff"), the Company respectfully brings to the Staff's attention that it previously consulted with the Office of the Chief Accountant of the SEC within the Division of Corporation Finance regarding the appropriate GAAP accounting for a transaction which included unspecified, but committed to, upgrade or enhancement elements in a multiple element sale transaction (the "Accounting Treatment"). Between April 5, 2005 and August 25, 2005, the Company and the Office of the Chief Accountant had various discussions regarding the Accounting Treatment. The Company also directs the Staff's attention to the written correspondence regarding the same between the Company and the Office of the Chief Accountant during this period.

        Should the Staff have any comments regarding the enclosed Form S-1 or any of the foregoing, please contact the undersigned at (650) 463-2645 or Jean-Marc Corredor of this firm at (650) 463-3031.

    Very truly yours,

 
 
/s/ LAURA I. BUSHNELL
Laura I. Bushnell
of LATHAM & WATKINS LLP
cc:
Accuray Incorporated
Michael W. Hall, Esq.
Jean-Marc Corredor, Esq.



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[LATHAM & WATKINS LLP LETTERHEAD]