**Exhibit 10.24**

 

**DEVELOPMENT AGREEMENT**

 

THIS DEVELOPMENT AGREEMENT (“Agreement”) is made effective this8th day of January, 2009 (the “Effective Date”),by and between Toshiba Medical Systems Corporation, a Japanese corporation,having its place of business at 1385 Shimoishigami, Otawara-Shi, Tochigi324-8550, Japan (“Toshiba”) and Vital Images, Inc., a Minnesotacorporation having its principal place of business at 5850 Opus Parkway, Suite 300,Minnetonka, Minnesota 55343 USA (“Vital Images”).

 

RECITALS

 

A.        Vital Images is in thebusiness of developing and licensing proprietary medical visualization applicationsoftware products.

 

B.         Toshiba is in the business ofdeveloping and marketing proprietary medical visualization scanners and relatedhardware and software products.

 

C.         Toshiba  and Vital Images desire to collaborate todevelop and commercialize  visualizationapplication software.

 

NOW THEREFORE, in consideration of the terms, covenants, premises andconditions contained herein and for other good and valuable consideration, theparties hereto agree as follows:

 

1.  Definitions

 

## a.          “Affiliate” of a person meansanother person that directly or indirectly controls, is controlled by or isunder common control with the first person and, for this purpose, the term “control”(and the terms “controlling”, “controlled by” and “under common control”) meansthe possession, direct or indirect, of the power to direct or cause thedirection of the management and policies of a person, whether through theownership of voting securities, by contract, or otherwise.

 

## b.          “Agreed Royalties” means the stream ofrunning royalty payments payable by Vital Images to Toshiba in consideration of the grant of the Non-Exclusive License,as determined in accordance with the following provisions. Promptly after thedetermination of the Fair Market Value of the Option Rights, Toshiba and VitalImages shall negotiate in good faith, using the most recent informationavailable which is capable of verification (including the Fair Market Value ofthe Option Rights), with a view to determining the Agreed Royalties, includingthe amount, frequency and duration of the payments.  If Toshiba and Vital Images are unable toagree on the Agreed Royalties within thirty (30) days of the determination of theFair Market Value of the Option Rights, then the Parties shall submit tomediation and, if necessary, arbitration in accordance with the principles andprocedures set forth in the definition of 

 

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## “FairMarket Value of the Option Rights”, which shall apply to the determination ofthe Agreed Royalties, *mutatis mutandis*,provided that the relevant time periods therein shall commence as at the end ofthe 30-day period referred to above.   Inthe event the Fair Market Value of the Option Rights has been determinedthrough mediation or arbitration, the parties agree to appoint, subject totheir availability, the same mediators and arbitrators to determine the AgreedRoyalties as were appointed to determine the Fair Market Value of theOption  Rights.

 

## c.          “Algorithm” means the mathematicalequation underlying the process of identifying structures and calculatingvalues that guides the development of a software application, whether or notpatentable.

 

## d.          “Change in Control” shall mean (i) anymerger, statutory share exchange or consolidation of a party with or into anythird party, that entitles the shareholders of the third party to receive atleast one (1) seat on the board of directors and at least thirty-three andone-third percent (33-1/3%) of the outstanding capital stock of the post-mergercompany (provided, however, that any acquisition merger, statutory shareexchange or consolidation of a party with or into * * *, * * *, and * * * orany of their affiliates  that entitlesany such company of at least thirty-three and one-third percent (33-1/3%) ofthe outstanding capital stock of Vital Images shall be a Change in Control, whether or not such entity alsoreceives a seat on the board of directors of Vital Images; (ii) any thirdparty becoming the holder of a majority of the capital stock of a partyentitled to vote generally for the election of directors; or (iii) thesale, lease, assignment, transfer or other conveyance of all or substantiallyall of the assets of a party in any transaction or series oftransactions by such party.  In case of “Changein Control” of either party, that party shall assure that the acquiring equityshall agree to honor and fullfill the obligation of the party as contained in thisAgreement.

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## e.          “Confidential Information” means, inrelation to any Party, any confidential or proprietary information of suchParty, whether in written, graphic, electronic, oral or physical form,including without limitation, (i) all Intellectual Property of such Party(including without limitation its Background Rights, Foreground Rights andJointly-Owned Foreground Rights), (ii) any Product Development Plan, (iii) theterms of this Agreement, and (iv) the Parties’ discussions in connectionwith any of the foregoing.  The term “ConfidentialInformation” shall not include any information which (1) is or becomesgenerally available to the public or the industry other than as a result of a breach of this Agreement by therecipient Party; (2) becomes available to the recipient Party on anon-confidential basis from a third party which, to the knowledge of therecipient Party (after reasonable inquiry), is not bound by any obligation ofconfidentiality to the disclosing Party in respect of such information; (3) therecipient Party can establish by its written records was already in itspossession on a non-confidential basis prior to disclosure by or on behalf ofthe disclosing Party; (4) the recipient Party can establish by its writtenrecords was 

 

*** * * Confidential Treatment has been requested, the portion indicatedhas been redacted and the redacted portion has been separately filed with theSecurities and Exchange Commission.**

 

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## independentlydeveloped by the recipient Party without the use of any ConfidentialInformation of the disclosing Party; or (5) is the subject of a writtenconsent to disclose by the disclosing Party or otherwise is expresslyacknowledged or agreed in writing by the disclosing party to not be or nolonger be confidential or proprietary information.

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## f.           “Documentation” means user documentation created by VitalImages for use with the Project Software.

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## g.          “Fair Market Value of the Option Rights”means the fair market value of the Option Rights as at the date of occurrence of a Change inControl (but immediately prior, and without giving any effect, to such Change in Control), as determined in accordance withthe following provisions.  Toshiba andVital Images shall negotiate in good faith, using the most recent informationavailable which is capable of verification, with a view to determining the FairMarket Value of the Option Rights.  IfToshiba and Vital Images are unable to agree on the Fair Market Value of theOption Rights within thirty (30) days of the occurrence of a Change in Control or a mutually-agreed upon longerperiod of time (the “Negotiation Period”), Toshiba and Vital Imagesshall attempt to establish the Fair Market Value of the Option Rights bysubmitting, within ten (10) days following the expiration of theNegotiation Period, to non-binding mediation in accordance with the ModelProcedures for the Mediation of Business Disputes promulgated by the Center forPublic Resources (“CPR”) then in effect, except where those proceduresconflict with the terms and conditions of this definition, in which case thisdefinition shall control.  The mediationshall be conducted in the Borough of Manhattan in New York, New York and shallbe attended by senior executives of Toshiba and Vital Images with authority tomake binding decisions with respect to the Fair Market Value of the OptionRights.  The mediator shall beexperienced in mediating intellectual property right disputes and appointedfrom the list of neutrals maintained by CPR. Following their submission to non-binding mediation, Toshiba and VitalImages shall promptly confer in an effort to select a mediator by mutualagreement.  In the absence of such anagreement, the mediator shall be selected from a list generated by CPR witheach of Toshiba and Vital Images having the right to exercise challenges forcause and two (2) peremptory challenges within five (5) days afterreceiving the CPR list.  The mediatorshall confer with Toshiba and Vital Images to design procedures to conclude themediation within no more than twenty (20) days after initiation.  No statements or offers (written, electronic,verbal or otherwise) made by Toshiba and Vital Images during the mediation maybe used by the other in any subsequent arbitration or litigation (other than inrespect of any fraud).  If Toshiba andVital Images are unable to determine the Fair Market Value of the Option Rightsthrough mediation, Toshiba and Vital Images shall, within ten (10) daysfollowing the expiration of the mediation period set forth above, submit theissue of determination of the Fair Market Value of the Option Rights to bindingarbitration pursuant to the Rules of the American Arbitration Associationfor Commercial Arbitration then in effect, except where those rules 

 

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## conflictwith the terms and conditions of this definition, in which case this definitionshall control.  Concurrently with itssubmission to arbitration, each of Toshiba and Vital Images shall (i) selectan arbitrator (each a “Valuing Arbitrator”) who is unaffiliated withsuch Party and experienced in arbitrating intellectual property disputes and (ii) notifythe other in writing of the identity of the arbitrator so selected.  In the event that Toshiba or Vital Imagesshall fail to timely select its Valuing Arbitrator, such Valuing Arbitratorshall be selected by the office of the American Arbitration Association (or anysuccessor thereto) located in the Borough of Manhattan in New York, New York.  The Valuing Arbitrators shall, within twenty(20) days following their selection, select a third arbitrator (the “DecidingArbitrator” and collectively with the Valuing Arbitrators, the “Arbitrators”).  If the Valuing Arbitrators are unable toagree on the Deciding Arbitrator, within such twenty (20)-day period, then theDeciding Arbitrator shall be selected by the office of the American ArbitrationAssociation (or any successor thereto) located in the Borough of Manhattan inNew York, New York.  Each of Toshiba andVital Images shall pay the fees and expenses of the Valuing Arbitrator selectedby it.  The fees and expenses of theDeciding Arbitrator shall be borne equally by Toshiba and Vital Images.  The arbitration hearing shall be conducted inthe Borough of Manhattan in New York, New York and conclude no later than sixty(60) days after the date on which the Deciding Arbitrator is selected.  The Arbitrators shall set a date for thearbitration hearing; make determinations based solely on the documents and otherevidence presented at the arbitration hearing; commit to the rendering of adetermination of the Fair Market Value of the Option Rights within twenty (20)days after the conclusion of the arbitration hearing (the date on which sucharbitration hearing concludes being hereinafter referred to as the “ConclusionDate”) and provide discovery according to the time limits specified herein,giving recognition to the understanding of Toshiba and Vital Images that theycontemplate reasonable discovery, including document demands and depositions,but that such discovery be limited so that the time limits specified herein maybe met without undue difficulty.  In noevent shall the Arbitrators allow either Toshiba or Vital Images to obtain morethan a total of thirty (30) hours of deposition testimony from all witnesses,including both fact and expert witnesses. In the event multiple hearing days are required, they shall be scheduledconsecutively to the greatest extent possible. The Arbitrators shall, within twenty (20) days after the ConclusionDate, render a written opinion (the “Valuation Opinion”) to each ofToshiba and Vital Images setting forth in reasonable detail the Fair MarketValue of the Option Rights and the criteria upon which such value isbased.  The Fair Market Value of theOption Rights established shall be final and binding on Toshiba and VitalImages.  Neither Toshiba nor Vital Imagesmay apply to any court to vacate, modify or appeal the Fair Market Value of theOption Rights as established pursuant to this definition, but may apply to anappropriate court solely for the purpose, if necessary, of enforcing therecognition of the Fair Market Value of the Option Rights as establishedpursuant to this definition. Notwithstanding the foregoing, Toshiba or Vital Images may seek tovacate or modify the Fair 

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## MarketValue of the Option Rights as established pursuant to this definition solely onthe grounds of fraud or miscalculation of figures.

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## h.          “ForegroundRights” means any Patents, Algorithms or other Intellectual Propertyauthored, conceived and/or reduced to practice by Toshiba and/or Vital Imagesemployees or agents during the Term pursuant to this Agreement or any ProductDevelopment Plan.

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## i.           “Intellectual Property” means allforms of intellectual property in any jurisdiction and under any law, whethernow or hereafter existing, including (a) Patents; (b) Algorithms; (c) tradesecrets and other confidential or non-public business information, including,ideas, formulas, compositions, inventor’s notes, discoveries, improvements,concepts, know-how, manufacturing and development information, data resultingor derived from research activities, inventions, invention disclosures,unpatented blue prints, drawings, specifications designs, plans, proposals andtechnical data, business and marketing plans, market surveys, market know-howand customer lists and related information; (d) copyrights, whether or notregistered, and any non-registered copyright to any writings and othercopyrightable works of authorship, including source code, object code,documentation (whether or not released), and databases; (e) integratedcircuit topographies and mask works; (f) features of shape, configuration,pattern or ornament; and (g) registrations of, and applications toregister, any of the foregoing with any governmental entity and any renewals orextensions thereof and all other rights to any of the foregoing, but excludingtrademarks and related rights.

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## j.           “Jointly-Owned Foreground Rights”means any Foreground Rights (including any improvements, modifications orderivative works thereto) authored, conceived and/or reduced to practicejointly by both Toshiba and Vital Images employees or agents in the performanceof a Product Development Plan. Notwithstanding the foregoing, any source codewritten by, on behalf of or with the participation of Vital Images, itsemployees or agents is not a part of Jointly-Owned Foreground Rights,regardless whether such source code is part of Project Software and even ifToshiba employees or agents participate in the creation of such source code.For purposes of clarity, the fact that the development of Foreground Rights byVital Images employees or agents may be funded in whole or in part by Toshibadoes not make such Foreground Rights Jointly-Owned Foreground Rights unlessToshiba employees or agents also authored, conceived and/or reduced to practicesuch Foreground Rights.

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## k.          “Party” means each of Toshiba and Vital Images, and their respectivesuccessors and assigns.

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## l.           “Patents”means inventions, discoveries, patentapplications, patents (including letters patent, industrial designs, andinventor’s certificates), design registrations, invention disclosures, andapplications to register industrial designs, and any and all rights to any ofthe foregoing anywhere in the world, 

 

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## includingany provisionals, substitutions, extensions, supplementary patent certificates,reissues, re-exams, renewals, divisions, continuations, continuations in part,continued prosecution applications, and other similar filings or noticesprovided for under the laws of the United States or of any other country.

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## m.          “Product Development Plan” means a written statement of work withrespect to particular Project Software that is executed by Toshiba and VitalImages in substantially the form of Exhibit B attached hereto.

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## n.          “ProductDevelopment Plan Commencement Date” means, with respect to each ProductDevelopment Plan, the date workis to begin on such Product Development Plan (which shall be noted on suchProduct Development Plan).

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## o.          “Product Roadmap” is defined in Section 3.b.

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## p.           “Project Software” means software orclinical applications developed pursuant to this Agreement, as more fully described in a Product Development Plan.  Project Software may be based on, covered by,incorporate or use Toshiba Background Rights, Toshiba Foreground Rights, VitalImages Background Rights, Vital Images Foreground Rights, or Jointly-OwnedForeground Rights, and such underlying rights are not within the definition of “ProjectSoftware”. Each Product Development Plan will specifically describe the ProjectSoftware to be developed pursuant to such Product Development Plan.

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## q.          “Release of Project Software” meansachievement of Vital Images Milestone 3 (M3), i.e., the completion of testing and fulfillment of release requirements ofProject Software, as more fully described in the Product Development Planapplicable to such Project Software.

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## r.           “Reseller Agreement” means theMarketing and Distribution Agreement between Toshiba and Vital Images dated asof November 21, 2008, and effective as of January 1, 2009, asamended, restated, supplemented, extended, renewed or otherwise modified fromtime to time.

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## s.          “Silent Period” means any period of time during the Term during which no ProductDevelopment Plans are active.

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## t.           “Specifications” means instructions, drawings, technicalspecifications and any other requirements for the Project Software agreedbetween Toshiba and Vital Images.

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## u.           “Third Party Tools” means programming, development, or othertools of third parties that Vital Images desires to use or does use orincorporates in the Project Software or Documentation.

 

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## v.          “Toshiba Background Rights” means anyIntellectual Property authored, conceived and/or reduced to practice by Toshiba(i) prior to the Effective Date, (ii) after the expiration ortermination of this Agreement or (iii) during the Term but which isoutside the scope of the work contemplated by any Product Development Plan.

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## w.         “Toshiba Competitor” means (i) eachof * * *, * * *, and * * * and theirrespective Affiliates and (ii) each of the medical visualization subsidiaries or businesses of the entities insubsection (i), if and when suchsubsidiariesor business is no longer owned by suchentities.

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## x.           “Toshiba Field of Use” means softwareresiding on modality scanner hardware and any related consoles  that is developed, manufactured, promoted,marketed, sold and/or distributed by or on behalf of Toshiba.

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## y.          “Toshiba Foreground Rights” means anyForeground Rights authored, conceived, and/or reduced to practice solely byToshiba’s employees or agents.

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## z.           “Vital Images Background Rights” meansany Intellectual Property authored, conceived and/or reduced to practice byVital Images (i) prior to the Effective Date, (ii) after theexpiration or termination of this Agreement or (iii) during the Term butwhich is outside the scope of the work contemplated by any Product DevelopmentPlan.

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## aa.        “Vital Images Field of Use” meanssoftware for medical visualization that is developed, manufactured, promoted,marketed, sold and/or distributed by or on behalf of Vital Images.

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## bb.        “Vital Images Foreground Rights” meansany Foreground Rights authored, conceived, and/or reduced to practice solely byVital Images’ employees or agents. Notwithstanding the foregoing, any source code written by, on behalf ofor with the participation of Vital Images, its employees or agents is not apart of Vital Images Foreground Rights, regardless whether such source code ispart of Project Software.

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## cc.        “Work Product” means all reports,designs, data, test results, drawings, models, algorithms, instructions,specifications, notes, analysis, memoranda, designs, software, object code,source code, plans, records, hardware, manuals, documents, prototypes, trade secrets, inventions, discoveries,works of authorship, deliverables and other materials and work products createdor made by or on behalf of a Party pursuant to this Agreement.

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2.             Development ofProject Software.

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## a.          Product Development Plans.  Fromtime to time during the Term of this Agreement, Toshiba and Vital Images mayenter into Product Development 

 

*** * * Confidential Treatment has been requested, the portionindicated has been redacted and the redacted portion has been separately filedwith the Securities and Exchange Commission.**

 

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## Planswith respect to Project Software.   Uponthe execution of a Product Development Plan, Vital Images shall begindeveloping the Project Software described in such Product Development Plan inaccordance with the schedule and other terms set forth in such ProductDevelopment Plan and the other terms and conditions set forth in thisAgreement.

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## b.          Changes to Product Development Plans.  TheParties may amend a Product Development Plan at any time by mutual writtenagreement. Any changes or amendments shall be made in accordance with VitalImages’ change control process.

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## c.          Cooperation.  The performance of thedevelopment contemplated hereunder shall be coordinated by the Project Managers(defined in Section 3).  The Partiesagree that the successful completion of any development activities is largelydependent upon the cooperation and the regular exchange of information betweenthe Parties.  The Parties shallfacilitate the development contemplated hereunder through the regular exchangeof information.  Each Party shall informthe other without undue delay about any delays in the performance under anyongoing Product Development Plan or the achievement of any milestones under anyongoing Product Development Plan.

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## d.          Release of Project Software.  UponRelease of Project Software with respect to any Project Software described in aProduct Development Plan (the date of Release of Project Software, the “ReleaseDate”), such Project Software shall become a “Product” (as such termis defined in the Reseller Agreement) and shall be subject to all terms andconditions of the Reseller Agreement. The Parties shall agree upon pricing for the Project Software and shallamend Exhibit E to the Reseller Agreement to reflect the pricing for theProject Software that the parties have agreed upon.  The Product Development Plan shall terminateon the Release Date of the related Project Software.  For purposes of clarity, ownership of ProjectSoftware, including the source code and object code, shall remain with VitalImages (subject to Toshiba’s rights in any Toshiba Background Rights, ToshibaForeground Rights or Jointly-Owned Foreground Rights incorporated therein) andToshiba shall have no rights to reverse engineer or decompile such ProjectSoftware.

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## e.          Toshiba Exclusive Resell Period.  With respect to Project Software that becomesa Product as described above, notwithstanding any provisions to the contrary inany other agreement between the parties, Toshiba shall have the exclusive rightto resell such Product in accordance with the Reseller Agreement, until thedate that is one hundred eighty (180)days after the Release Date (the “Exclusive Period”).  Vital Images agrees that it will not sell,license, sub-license or otherwise transfer or dispose of such Product to anyperson other than Toshiba during the applicable Exclusive Period.

 

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3.           Project Management.

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##   a.        Each Party shall each designate a “Project Manager” for eachProduct Development Plan in effect from time to time who shall be the principalpoint of contact for all matters relating to such Product DevelopmentPlan.  The Project Manager designated bya Party for a Product Development Plan may be changed by written notice to the otherParty.

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##   b.        Toshiba and Vital Imagesagree to develop a “Product Roadmap” that will describe the developmentactivities the parties desire to undertake under this Agreement.  The Product Roadmap shall be revised by theparties every six months and shall describe the Parties’ development andrelease plans relating to this Agreement for the next two years (or until theend of the term of this Agreement, if the remaining term of this Agreement isless than two years at the time of the revision of the Product Roadmap).

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##   c.        Toshibaand Vital Images will meet on an as needed basis, but at least twice annually,at mutually agreed times and places to:

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### (i)            reviewand revise the Product Roadmap;

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### (ii)           reviewthe progress of each ongoing Product Development Plan and discuss necessarychanges to the scope, development schedule or actions to be taken;

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### (iii)          synchronizethe Parties’ product development plans and processes; and

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### (iv)         discussany other matters as agreed upon by the Parties.

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4.           Funding ofDevelopment Costs; Resources Devoted to Development.

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##   a.        Vital Images Resources. VitalImages agrees to devote at least * * *full-time product development engineering personnel (including projectmanagement, scientist/algorithm development engineers, software/clinicaldevelopment engineers, and quality/test engineers) during the term of thisAgreement to workexclusively on activities defined in the Product Development Plans ineffect from time to time and to accelerating clinical application developmentas defined in the Product Roadmap.  Inaddition, Vital Images will assign without limitation the necessary sharedresources to support the validation and testing, alpha/beta testing, clinicalevaluation support, and program and release management defined in the ProductDevelopment Plans in effect from time to time.

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##   b.        ToshibaFunding/Resources.  Toshiba shall pay Vital Images for theefforts expended in each Product Development Plan in effect from time to timeat the rates set forth on Exhibit A (the “Toshiba Funding”).  Toshiba agrees that so long as at least oneProduct Development Plan is in effect, Toshiba Funding will not be less than anamount sufficient to provide funding for the * * * full-time 

 

*** * * Confidential Treatment has beenrequested, the portion indicated has been redacted and the redacted portion hasbeen separately filed with the Securities and Exchange Commission.**

 

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## productdevelopment engineering personnel referred to in Section 4.a. Toshiba willdevote such internal resources and personnel as are reasonably necessary tofulfill Toshiba’s obligations under this Agreement.  Toshiba shall be responsible for managing andfunding clinical evaluation and validation of Project Software and shall enablethe participation of Vital Images’ personnel in such process; provided,however, that Vital Images may also conduct independent clinical evaluation andvalidation.  Clinical evaluation andvalidation for Project Software shall be defined in each Product DevelopmentPlan in effect from time to time.

##   c.        SilentPeriod.  During any Silent Period but not toexceed six (6) months, Toshibawill continue to provide funding to Vital Images, at the rates set forth in Exhibit A,for any Vital Images personnel who, during such Silent Period, are assigned to and actively engagedon projects related to errors reported in any Project Software that has beenreleased prior to such Silent Period pursuant to this Agreement.  In addition, during any Silent Period and alsoafter any expiration of the Term (but not after any termination of the Termunder Section 6(b), (c) or (d)), Toshiba will provide funding for * ** full-time product development engineering personnel for a period, not toexceed six (6) months during andafter the expiration of the Term in order to assist Vital Images to coverreallocation and/or termination costs.

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##   d.        Reporting and Audit Provisions.  Vital Images will implement aproject accounting system to track its spending and time worked, on anemployee-by-employee basis, on (i) each Product Development Plan in effectfrom time to time, or (ii) any other work performed by Vital Imagespersonnel for which Toshiba is required to provide any funding under thisAgreement.  Vital Images will provide toToshiba a periodic report of such spending and time worked in a form andfrequency to be agreed upon by the Parties (the “Spending Reports”).  Toshiba shall have the right, at its cost and expense, to audit theSpending Reports from time to time.  Uponreasonable prior request by Toshiba, Vital Images will permit Toshiba personneland Toshiba’s designated outside accountant to review the Spending Reports andall supporting or related books, records, systems, invoices, receipts and otherdocuments of Vital Images (all of which shall be treated as ConfidentialInformation of Vital Images).  VitalImages shall cooperate reasonably with Toshiba personnel and its accountant inconnection with any such audit.

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5.           Original Works.

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##   a.        Except for Third-Party Tools, all Vital Images’Work Product shall constitute original works under all applicable copyrightlaws.

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##   b.        VitalImages shall obtain in writing all rights, licenses, grants, consents, and/orpermissions necessary to use or incorporate any Third Party Tools.  VitalImages shall further ensure that no fees, payments, royalties, or anyadditional 

 

*** * * Confidential Treatment has beenrequested, the portion indicated has been redacted and the redacted portion hasbeen separately filed with the Securities and Exchange Commission.**

 

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## considerationof any kind will be imposed upon Toshiba by any third party with respect to anysuch Third Party Tools.

 

6.                                       Term and Termination.

 

##   a.                                Term of Agreement.  The “Term”of this Agreement shall begin on the Effective Date and shall, unless terminatedearlier as provided herein, terminate immediately on December 31, 2009, provided that the Agreement shall renew if,at any time during the Term, a new Product Development Plan is agreed to thatwill extend into the next calendar year, in which case this Agreement shallautomatically renew until six (6) months following the end of all activeProduct Development Plans (and the word “Term”, where used herein, shall bedeemed to include such extended period). Upon expiration of the Term or termination of this Agreement, neitherParty shall have any further obligation to the other Party under this Agreement(including, for avoidance of doubt, any obligation of Toshiba to provide anyfurther funding to Vital Images pursuant to the Agreement other than payment ofinvoices for efforts expended by Vital Images prior to the expiration of theTerm or termination of this Agreement); provided, however, that upon suchexpiration or termination (i) eachParty shall return to the other Party any property of such other Party in itspossession including, but not limited to, the other party’s Confidential Informationand any technical documents related to the other party’s Background Rights, (ii) each party shall retain ownershipof its Intellectual Property (subject to the provisions of Sections 7, 8 and 9below), (iii) the provisions of the second sentence of Section 4(c) shallsurvive expiration of this Agreement in accordance with its terms, (iv) Section 4(d) shallsurvive expiration or termination and continue in full force and effect for aperiod of six months, and (v) the provisions of this Section 6 andSections 2(e), 7, 8(a), 8(b) (subject to any duration periods providedtherein), 9, 10 and 11 shall survive expiration or termination and continue infull force and effect; provided that (i) Section 8(b) shall not survivetermination in case this Agreement is terminated by Toshiba in accordance with Section 6(b),(ii) Section 8(a) shall not survive termination in case thisAgreement is terminated by Vital Images in accordance with Section 6(b),and (iii) Sections 8(a) and 8(b) shall not survive theoccurrence of a Change in Control to a Toshiba Competitor in case thisAgreement is terminated by Toshiba in accordance with Section 6(c) dueto the occurrence of such Change in Control during the term of this Agreementor in case Toshiba so requests to Vital Images in writing due to the occurrenceof such Change in Control after the termination or expiration of this Agreement,provided, however, that each Party may continue to develop, manufacture,market, and maintain its then current products within its Field of Use after invalidationof Sections 8(a) and 8(b) hereunder.

 

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##   b.                Termination for Cause.

 

### (i)                                     Material Breach. Either Party shall have the right to terminate this Agreement and any orall ongoing Product Development Plans upon immediate written notice if theother Party is in material breach or default of any of its representations,warranties, covenants, or other obligations set forth in this Agreement or anyProduct Development Plan and such Party fails to cure such breach or defaultwithin thirty (30) calendar days following receipt of written notice of suchbreach.

 

### (ii)                                  Insolvency.  Either Party may, at its soleoption, immediately terminate this Agreement and any or all ongoing ProductDevelopment Plans upon written notice, but without prior advance notice, to theother Party in the event that (A) the other Party is or becomes insolventor is declared bankrupt by a court of competent jurisdiction; (B) avoluntary petition of bankruptcy is filed in any court of competentjurisdiction by such other Party; (C) an involuntary petition forbankruptcy is filed in any court of competent jurisdiction against such otherParty; (D) a receiver or trustee is appointed for such other Party; or (E) thisAgreement is assigned by such other Party for the benefit of creditors.  For purposes of this Agreement, a Party shallbe deemed to be “insolvent” when such Party has ceased to pay its debts in theordinary course of business, cannot pay its debts as they become due, or isinsolvent within the meaning of the federal bankruptcy law.

 

##   c.                 Termination upon Change in Control. Vital Images shall give Toshiba notice of the occurrence of a Change inControl no later than two (2) business days after the occurrence of such Change inControl.  Neither the failure nor delayby Vital Images in giving such notice shall affect any of Toshiba’s rightsunder this Agreement.  Toshiba may terminatethis Agreement and any or all ongoing Product Development Plans upon thirty(30) days written notice to Vital Images in the event of a Change in Control;provided, however, that such notice must be given to Vital Images within thirty(30) days of the date Vital Images gives notice of the occurrence of a Changein Control.

 

##   d.                Termination Without Cause. Either Party shall have the right to terminate this Agreement upon six (6) monthadvance written notice, provided that if at the end of such 6-month noticeperiod there is one or more ongoing Product Development Plans, the noticeperiod will be extended automatically until the Release Date of such ongoingProduct Development Plan (or the last Release Date, if there was more than onesuch ongoing Product Development Plan) and upon such Release Date thisAgreement will then terminate.

 

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7.                                       Ownership of Intellectual Property. Ownership of Intellectual Property shall be as follows:

 

##   a.                                Vital Images shall not acquire any ownershipinterest in any Toshiba Background Rights or Toshiba Foreground Rights as aresult of entering into or performing this Agreement or any Product DevelopmentPlan.  Toshiba shall not acquire anyownership interest in any Vital Images Background Rights, Vital ImagesForeground Rights or Project Software as a result of entering into orperforming this Agreement or any Product Development Plan.  Each Party shall own all IntellectualProperty in any improvements, modifications, or derivative works that areauthored, conceived, and/or reduced to practice solely by such Party’semployees or agents and based upon the other Party’s Background Rights orForeground Rights (subject to the other Party’s ownership of the originalunderlying rights).

 

##   b.                               If and to the extent any Jointly-OwnedForeground Rights are created:

###  

### (i)                                     Each of Toshiba and Vital Images shall havean undivided ownership interest in the Jointly-Owned Foreground Rights, andsuch ownership interest shall survive termination of this Agreement and theReseller Agreement, and neither party shall owe the other any royalty, licensefee or other sum for such ownership rights.

###  

### (ii)                                  The Parties may elect to jointly file forpatent or other Intellectual Property protection with respect to Jointly-OwnedForeground Rights, and shall share the cost of such filing equally.  If either Party chooses not to seek suchprotection, the other Party may proceed at its own expense; provided that thenon-filing party shall provide reasonable assistance in connection with thepreparation and prosecution of such patent application.

###  

### (iii)                               Toshiba grants to Vital Images a worldwide,exclusive (even as against Toshiba), royalty-free license, with respect to theJointly-Owned Foreground Rights, to practice the methods of any Patentsincluded therein, to make, use, offer to sell, sell and import products coveredthereby, and to distribute, perform, display, use, modify, improve and makederivatives works based upon such rights, in each case, within the Vital ImagesField of Use. Vital Images grants to Toshiba a worldwide, exclusive (evenagainst Vital Images), royalty-free license, with respect to the Jointly-OwnedForeground Rights, to practice the methods of any Patents included therein, tomake, use, offer to sell, sell and import products covered thereby, and todistribute, perform, display, use, modify, improve and make derivatives worksbased upon such rights, in each case, within the Toshiba Field of Use.

 

13

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8.                                       Mutual License Grants.

##  

##   a.                                              Vital Images Grant to Toshiba. Vital Images hereby grants and agrees to grant to Toshiba:

###  

### (i)                                     for the Term, a worldwide, non-exclusive androyalty-free license to the Vital Images Background Rights solely for thepurpose of performing under any Product Development Plan; and

 

### (ii)                                  a worldwide, non-exclusive and royalty-freelicense to the Vital Images Foreground Rights solely in the Toshiba Field ofUse.

 

##   b.                                             Toshiba Grant to Vital Images. Toshiba hereby grants and agrees to grant to Vital Images:

###  

### (i)                                     for the Term, a worldwide, non-exclusive androyalty-free license to the Toshiba Background Rights solely for the purpose ofperforming under any Product Development Plan; and

###  

### (ii)                                  a worldwide, non-exclusive and royalty-freelicense to the Toshiba Foreground Rights solely in the Vital Images Field ofUse.

 

##   c.                                                To the extent any Intellectual Property isbased upon, incorporates, or requires intellectualproperty owned (either jointly or in whole) or controlled by a third party andmust be used in connection with a Product Development Plan, the Party providingsuch Intellectual Property to the other party shall obtain any such necessarylicenses or consents from such third party. If such Intellectual Property is used jointly by the Parties, the Parties shall negotiate in good faith with such third partyto obtain any such necessarylicenses or consents from such third party. The Parties acknowledge that the Project Development Plan may not becompleted until any necessary third party licenses or consents are obtained.

 

##   d.                                               Representations and Warranties with Respectto Intellectual Property.  Each Party represents and warrants to theother that it has the legal power to extend the rights granted to the otherwith respect to such Party’s Intellectual Property and that it has not made andwill not make any commitments to others inconsistent with or in derogation ofsuch rights. Each Party represents and warrants to the other that no fees,payments, royalties, or any additional consideration of any kind will beimposed upon the other by any third party with respect to any of such Party’sIntellectual Property.

 

##   e.                                                Notwithstanding anything herein to thecontrary, except as for the representations and warranties contained in Section 8(d),the Parties do not make any representation or warranty of any kind (whetherexpress, implied or otherwise) with respect to any Intellectual Propertylicensed hereunder, including its validity, enforceability, value, reliability,suitability, fitness for use or purpose, or non-infringement of third partyrights.  In no event shall either party’sliability 

 

14

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## hereunder exceed the amountspaid by Toshiba to Vital Images other than liability derived from infringementof third party rights.

 

9.                                       Option Upon Change in Control to a ToshibaCompetitor.

##  

##   a.                                Upon the occurrence of a Change in Control toa Toshiba Competitor, Toshiba shall have the option, in its sole discretion, topurchase Vital Images’ interest in the Jointly-Owned Foreground Rights (the “OptionRights”) and, if Toshiba exercises such option (i) ownership of theOption Rights shall vest solely in Toshiba and the licenses in Section 7(b)(iii) shallterminate upon consummation of such purchase, and (ii) Toshiba may (butshall not be obligated to)  grant(subject to the consent of Vital Images, or its successors, in its discretion)a worldwide, non-exclusive license to Vital Images in the Option Rights topractice the methods of any Patents included therein, to make, use, offer tosell, sell and import products covered thereby, and to distribute, perform,display, use, modify, improve and make derivative works based upon such rights,in each case, solely within the Vital Images Field of Use, in consideration ofwhich license (which shall contain the foregoing terms and other reasonableterms and conditions which are agreed in good faith by the Parties) Toshibashall be entitled to the Agreed Royalties (the “Non-Exclusive License”).  The terms of the Non-Exclusive License maycontain, among other things, the requirement that Vital Images implementreasonable policies and procedures to protect Toshiba’s ConfidentialInformation.  The purchase price for theOption Rights (the “Purchase Price”) shall be equal to the Fair Market Value of the OptionRights.  Within thirty (30) days afterthe determination of the Purchase Price, Toshiba shall elect whether toexercise the option to purchase the Option Rights and whether to grant theNon-Exclusive License, by giving Vital Images written notice of its intent todo so (the “Option Notice”).

##  

##   b.                               As soon as practicable after the delivery ofthe Option Notice but no later than sixty (60) days thereafter, (i) VitalImages shall sell and transfer the Option Rights to Toshiba, free and clear ofany liens or other encumbrances (other than the Non-Exclusive License), andToshiba shall pay the Purchase Price to Vital Images in immediately availableUS dollar-denominated funds, and (ii) if Toshiba and Vital Images haveelected to do so, Toshiba shall grant the Non-Exclusive License to VitalImages, subject to the terms of Section 9(a)(ii), provided that the timeperiod to consummate the foregoing transactions may be extended for such periodof time as is required to obtain any necessary regulatory approvals inconnection therewith (without prejudice to the Parties’ obligations under Section 9(c) below).

##  

##   c.                                Each Party hereto shall, and shall cause itsAffiliates to, use its reasonable commercial efforts to take all actionnecessary or appropriate to consummate the transactions contemplated by this Section 9,including acknowledging, executing and/or delivering, in a timely manner and inform and substance reasonably satisfactory to the other Party, any instrumentsof transfer and all other documents, instruments or assurances as mayreasonably be requested by 

 

15

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## theother Party and making any filings with any governmental authority necessary,appropriate or reasonably requested by the other Party to enable such otherparty to satisfy its obligations or to obtain the benefits of the transactionscontemplated by this Section 9.

 

10.                                 Confidentiality and Use.  AParty shall not disclose to any person or issue any press release or otherwisepublish any Confidential Information of the other Party by any means or in anyform other than any disclosure expressly permitted by this Agreement.  A Party shall not use any Confidential Informationof the other Party for any purpose, including taking measures that would avoidcreating a premature bar to a US or foreign patent application or any other usedetrimental to the other Party, other than any use that is expressly permittedby this Agreement or any use that is necessary for the recipient Party toperform its obligations under this Agreement. Each Party shall employ the same reasonable safeguards in receiving,storing, transmitting, and using proprietary confidential information thatprudent organizations normally exercise with respect to their own property ofsignificant value.  A Party may discloseConfidential Information to (a) its Affiliates and its and their respectivedirectors, officers, employees and professional advisers (“Representatives”)solely on a need to know basis in connection with the purposes of thisAgreement or the Reseller Agreement, provided that each such Representativeagrees to be bound by the terms of this Section or (b) the other Party or suchother Party’s Representatives.  A Partyshall be liable for any breach of this Section by any of itsRepresentatives.  If a Party or any ofits Representatives is required by law or regulation or otherwise becomeslegally compelled (by deposition, interrogatory, request for information ordocuments, subpoena, civil investigative demand, governmental agency action orsimilar process) to disclose any Confidential Information of the other Party toa person not otherwise permitted to receive such Confidential Information,then, any disclosure pursuant thereto shall not breach this Agreement if itcomplies with the provisions in the next two sentences. To the extent legallypermissible, such Party and/or such of its Representatives, as the case may be,shall provide such other Party with prompt written notice of such legalrequirement or compulsion and shall cooperate with such other Party in seekinga protective order or other appropriate remedy. If such protective order or other remedy is not obtained or reasonablyobtainable, or if such other Party waives compliance with the provisionshereof, then the legally compelled Party or Representative, as the case may be,(i) may disclose to the person compelling disclosure only that portion of suchConfidential Information that such Party or Representative is advised byopinion of its legal counsel is legally required to be disclosed and (ii) shallexercise its reasonable commercial efforts to ensure that such ConfidentialInformation so disclosed will be accorded confidential treatment.  A Party may disclose Confidential Informationit determines is necessary or appropriate to disclose in any legal proceedingto enforce its rights against the other Party or defend any claim by the otherParty arising under this Agreement; provided such Party exercises itsreasonable commercial efforts to ensure that such Confidential Information sodisclosed will be accorded confidential treatment. Upon the occurrence of aChange in Control, without limiting Vital Images’ other obligations herein,Toshiba shall have the right to request that Vital Images implement, and uponsuch request Vital Images shall implement promptly, such additional reasonablepolicies and procedures designed to protect Toshiba’s Confidential Informationand any technical information related to 

 

16

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Toshiba Foreground Rightsand Toshiba Background Rights from disclosure to a Toshiba Competitor or itsRepresentatives in a manner reasonably satisfactory to Toshiba.

 

11.                                 Miscellaneous.

##  

##   a.                                Indemnification of Toshiba.  Subjectto Article 8(e), Vital Images hereby agrees to indemnify, defend and holdToshiba and its Affiliates and their respective officers, directors, employees,agents and representatives (collectively, the “Toshiba Indemnified Parties”and, individually, a “Toshiba Indemnified Party”) harmless from andagainst any and all damages, liabilities, losses, claims, judgments, fines,penalties, costs and expenses, including reasonable attorneys fees (“Losses”)sustained or suffered by any such Toshiba Indemnified Party as a result of anybreach of any representation, warranty, covenant or agreement made by VitalImages in this Agreement.  Vital Imagesshall be given written notice of any third party suit, claim or other legalaction for which Vital Images may have indemnification liability hereunder (“VitalImages Legal Action”) within thirty (30) days of Toshiba’s first knowledgethereof, provided, that, the failure of Toshiba to notify Vital Images of anysuch matter within the thirty (30) day period shall not release Vital Images,in whole or in part, from its obligations under this Section 11(a), exceptto the extent Toshiba’s failure to so notify Vital Images materially prejudicesVital Images’ ability to or materially increases Vital Images’ costs to defend against such Vital Images LegalAction.  Vital Images shall have sole andexclusive control of the defense of any Vital Images Legal Action, includingthe choice and direction of any legal counsel. Toshiba may not settle or compromise any Vital Images Legal Actionwithout the written consent of Vital Images unless such settlement orcompromise contains an unconditional release of Vital Images from anyindemnification liability hereunder. Toshiba shall provide all reasonably requested assistance to Vital Images,at Vital Images’ expense.

##  

##   b.                               Indemnification of Vital Images. Subject to Article 8(e), Toshiba hereby agrees to indemnify, defend andhold Vital Images and its Affiliates and their respective officers, directors,employees, agents and representatives (collectively, the “Vital ImagesIndemnified Parties” and, individually, a “Vital Images IndemnifiedParty”) harmless from and against any and all Losses sustained or sufferedby any such Vital Images Indemnified Party as a result of any breach of anyrepresentation, warranty, covenant or agreement made by Toshiba in thisAgreement.  Toshiba shall be givenwritten notice of any third party suit, claim or other legal action for whichToshiba may have indemnification liability hereunder (“Toshiba Legal Action”)within thirty (30) days of Vital Images’ first knowledge thereof, provided,that, the failure of Vital Images to notify Toshiba of any such matter withinthe thirty (30) day period shall not release Toshiba, in whole or in part, fromits obligations under this Section 11(b), except to the extent Vital Images’failure to so notify Toshiba materially prejudices Toshiba’s ability to ormaterially increases Toshiba’s costs to defend against such Toshiba LegalAction.  Toshiba shall have sole andexclusive control of the defense of any Toshiba Legal Action, 

 

17

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## includingthe choice and direction of any legal counsel. Vital Images may not settle or compromise any Toshiba Legal Actionwithout the written consent of Toshiba unless such settlement or compromisecontains an unconditional release of Toshiba from any indemnification liabilityhereunder.  Vital Images shall provideall reasonably requested assistance to Toshiba, at Toshiba’s expense.

##  

##   c.                                No Implied Waivers, Rights Cumulative.  Nofailure or delay on the part of either Party in exercising any right, power,remedy or privilege under this Agreement or provided by statute or at law or inequity or otherwise, including, without limitation, the right or power toterminate this Agreement, shall impair, prejudice or constitute a waiver of anysuch right, power, remedy or privilege or be construed as a waiver of anybreach of this Agreement or as an acquiescence therein, nor shall any single orpartial exercise of any such right, power remedy or privilege preclude anyother or further exercise thereof or the exercise of any other right, power,remedy or privilege.

##  

##   d.                               Relationship of the Parties. Nothing contained in this Agreement is intended or is to be construed tomake the Parties partners, principal-agent, or joint venturers.  Except as expressly provided herein, neitherParty hereto shall have any express or implied right or authority to assume orcreate any obligations on behalf of or in the name of the other Party or tobind the other Party to any contract, agreement or undertaking with any thirdparty.  Each Party is an independentcontractor to the other Party.  Each Partyshall be responsible for its own taxes.

##  

##   e.                                Notices.  Noticespermitted or required to be given hereunder shall be deemed sufficient if givenby registered or certified mail, postage prepaid, return receipt requested, byprivate courier service, or by facsimile addressed to the respective addressesof the parties as first written above or at such other addresses as therespective parties may designate by like notice from time to time. Notices so given shall be effective upon (i) receipt by the party to whichnotice is given, or (ii) on the fifth (5th) day following domestic mailing orthe tenth (10th)day following international mailing, as may be the case, whichever occursfirst.

##  

##   f.                                  Successors and Assigns; Binding Effect.  Theterms and provisions of this Agreement shall inure to the benefit of, and bebinding upon each Party and their respective successors and permittedassigns.  The terms of this Agreement areintended solely for the benefit of the Parties hereto and, except as otherwiseprovided in this Section 11(f), are not intended to confer upon any thirdparty the status of a third party beneficiary. The Toshiba Indemnified Parties and the Vital Images Indemnified Partiesare third party beneficiaries of the provisions of Section 11(a) and Section 11(b),respectively.  Toshiba and Vital Imagesmay amend, restate, supplement, extend, renew or otherwise modify, or cancel orterminate, all or any part of this Agreement and either of them may waive anyprovision of this Agreement, without the consent of any third party.

 

18

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##   g.                               Assignment.  Vital Images may assign all(but not less than all) of its rights, interests and obligations hereunder to athird party in connection with a Change in Control; provided that suchassignment shall not affect Toshiba’s rights to terminate this Agreementpursuant to Section 6(c).nor shall such assignment affect Toshiba’s rights under Section 9.  Except as provided in the foregoing sentence,neither Party may assign or otherwise transfer any of its respective rights andinterests, nor delegate any of its obligations, hereunder, without the priorwritten consent of the other Party in its sole discretion, provided that suchconsent shall not be unreasonably withheld if the proposed assignment is anAffiliate of the assigning Party.  EachParty may sublicense its licensed rights hereunder to its vendors, suppliersand development partners in connection with such Party’s authorized activitiesin its Field of Use, solely for use in accordance with the purpose of thisAgreement but not for any unrelated use by any such party, subject however, inthe case of Vital Images, to the provisions of Section 2(e).  For clarity, nothing in this Agreement shallprevent Vital Images (subject to the provisions of Section 2(e)) fromselling Project Software and/or its other products for which the Intellectual Property licensed to Vital Images hereunder is used to its distributors, resellers, customersand end users, and from licensing end users to use such Project Software and/or its otherproducts for which the IntellectualProperty licensed to Vital Images hereunder is used, nor shall anything in this Agreementprevent Toshiba (subject to the provisions of the Reseller Agreement) fromselling Project Software and/or its other products for which the Intellectual Property licensed to Toshibahereunder is used to itsdistributors, resellers, customers and end users, and from licensing end usersto use such Project Software and/or its other products for which the Intellectual Property licensed to Toshibahereunder is used.  Also for clarity, in the event of anassignment, the licenses in Section 8 shall not include any IntellectualProperty of the acquirer of any Party hereto.

##  

##   h.                               Amendments.  No amendment, modification,waiver, termination or discharge of any provision of this Agreement, norconsent by either Party to any departure therefrom, shall in any event beeffective unless the same shall be in writing specifically identifying thisAgreement and the provision intended to be amended, modified, waived, terminatedor discharged and signed by the Parties, and each amendment, modification,waiver, termination or discharge shall be effective only in the specificinstance and for the specific purpose for which given.  No provision of this Agreement shall bevaried, contradicted or explained by any other agreement, course of dealing orperformance or any other matter not set forth in an agreement in writing andsigned by the parties.

##  

##   i.                                   Arbitration and Governing Law.  ThisAgreement shall be subject to the dispute resolutions set forth in Article 17of the Reseller Agreement and the choice of law provisions set forth in Section 18.7of the Reseller Agreement.

##  

##   j.                                   Severability.  Ifany provision hereof should be held invalid, illegal or unenforceable in anyrespect in any jurisdiction, then, to the fullest extent permitted by law, (a) allother provisions hereof shall remain in full force and 

 

19

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## effectin such jurisdiction and shall be liberally construed in order to carry out theintentions of the parties hereto as nearly as may be possible and (b) suchinvalidity, illegality or unenforceability shall not affect the validity,legality or enforceability of such provision in any other jurisdiction.  To the extent permitted by applicable law,each Party hereby waives any provision of law that would render any provisionhereof prohibited or unenforceable in any respect.

##  

##   k.                                Entire Agreement.  ThisAgreement, together with the applicable provisions of any agreements or otherdocuments expressly referenced herein, constitutes, on and as of the EffectiveDate, the entire agreement of the Parties with respect to the subject matterhereof, and all prior or contemporaneous understandings or agreements, whetherwritten or oral, between the Parties with respect to such subject matter arehereby superseded in their entirety. Toshiba and Vital Images hereby acknowledge that neither Party has beeninduced to enter into this Agreement by any representations or statements, oralor written, not expressly contained herein. This Agreement shall not be deemed to amend or modify any provisions inthe Reseller Agreement.

##  

##   l.                                   Section Headings.  Thesection headings in this Agreement are for convenience only and in no waydefine, limit, extend or interpret the scope of this Agreement or of anyparticular section hereof.

##  

##   m.                             Construction.  ThisAgreement has been reviewed and approved by each of the Parties.  In the event that it should be determinedthat any provision of this Agreement is uncertain or ambiguous, the language inall parts of this Agreement shall be in all cases construed as a wholeaccording to its fair meaning and not strictly construed for nor against anyParty and without regard to which Party may have drafted the language.

##  

##   n.                               Compliancewith Laws.  Each party agreesto comply with the Japanese Foreign Exchange and Foreign Trade Laws, the U.S.Export Administration Regulations and any other applicable export laws and regulations,and neither party shall, directly or indirectly, export or re-export anytechnical information or data, including products or the derivatives ofproducts, to any destination or country restricted or prohibited by such lawsand/or regulations, unless properly authorized by the appropriate governmentalauthorities.

##  

##   o.                               Counterpart Originals.  ThisAgreement may be signed in counterparts, and each counterpart shall be deemedto be an original.

##  

##   p.                               Bankruptcy.  The Parties intend and agreethat the licenses herein shall be considered licenses to “Intellectual Property”pursuant to Section 101 of the U.S. Bankruptcy Code, and that in the eventa Party hereunder enters into bankruptcy, the other Party shall be entitled toexercise its rights under Section 365(n) of the U.S. Bankruptcy Codeto the fullest extent permitted therein.

 

20

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*[Development Agreement Signature Page]*

 

**IN WITNESS WHEREOF,** Toshiba and Vital Imageshave caused this Agreement to be executed by their duly authorizedrepresentatives.

 
| **Vital Images, Inc.**                  | ** **           | **Toshiba Medical Systems Corporation**      |
|----------------------------------------------|----------------------|----------------------------------------------|
| ** **                                   | ** **           | ** **                                   |
| ** **                                   | ** **           | ** **                                   |
| By:                                          | /s/Michael H. Carrel |                                         | By: | /s/Yasuo Nobuta |
| Name and Title: Michael H. Carrel, President |                 | Name & Title: Yasuo Nobuta, General |
| and CEO                                      |                 | Manager of CT Systems                        |
|                                              |                      |                                              |  |  |

 

21

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**EXHIBIT A**

 

**Toshiba Funding**

 

Toshiba Funding shall be provided at the rate of * * * per man-year (** * per man-month) for the period commencing on the Effective Date and termination on December 31,2009 (as may be extended in accordance with Section 6(a)).  If theParties agree to re new the term of this Agreement for an additional year, theParties will adjust the man-year rate for the following year to ensure thatfunding takes into account inflation and employment market conditions;provided, however, that such rate may increase no more than * * * (* * *) eachyear.

 

Unless otherwise stated in a Product Development Plan, the Parties willagree uponthe total Toshiba Funding required for each Product Development Plan andToshiba will pay the amount of such agreedToshiba Funding with respect to each Product Development Plan as follows:

 

* * *% Within * * *

* * *% Within * * *

* * *% Within * * *

[Vital Images issues invoice to Toshiba eachtime]

 

If the scope of any project changes from the originally-agreed uponProduct Development Plan and additional Vital Images resources are required,the Parties will negotiate in good faith to agree on (i) an amendment tosuch Product Development Plan to reflect such project changes and (ii) anamendment to this Exhibit A to reflect the amount and timing of paymentfor such additional resources.  NeitherParty shall have any obligation under this Agreement in respect of the projectchange or additional resources unless and until such amendments are agreed andexecuted by the Parties.  Unutilized resources during the Silent Periodwill be billed monthly and payable net 30 days from the invoice date.

 

*** * *Confidential Treatment has been requested, the portion indicated has beenredacted and the redacted portion has been separately filed with the Securitiesand Exchange Commission.**

 

22

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**EXHIBIT B**

**PRODUCT DEVELOPMENT PLANVITAL IMAGES, INC. & TOSHIBA MEDICAL SYSTEMS CORPORATION**

 

*** * ***

** **

**(*** * *)

**Document Control History**

 
| **Rev** | ** ** | **Date** | ** ** | **Author(s)** | ** ** | **Description of Change** | ** ** | **ECO No.** |
|---------|------------|----------|------------|---------------|------------|---------------------------|------------|-------------|
| A       |       | * * *    |       | * * *         |       | Initial Release           |       |        |

 

*** * *Confidential Treatment has been requested, the portion indicated has beenredacted and the redacted portion has been separately filed with the Securitiesand Exchange Commission.**

 

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### **1.0 Project Purpose**

 

The purpose of this project is to deliver * * *and enhance the features* * *application on the * * *software platform * * *. This would incorporatefeedback from Toshiba’s * * *process and directly from * * *, and improve thequality of * * *.  The project wouldcomprise * * * in * * *for the * * *, a * * * by * * * and * * * by * * * forthe * * *.

 

### **2.0 Goals and Objectives**

 

The following chart contains the goals and objectives for this project.

 

**Goals**

Release* * * by * * *

Provide* * *Software by ** *

Release* * * by * * *

 

# **3.0  Project Overview & Key FeatureDefinition**

 

The scope of the * * *will include the software development and testingof the features described below.  Thedetailed feature specifications will be described in the Product DefinitionStatement (PDS) and will be delivered and iterated upon during the RequirementsPhase.

 

* * *

 

* * *

 

·                  ** *to * * *results (** *)— also * * *as ** *softwareupdate

·                  Combination of * * * into * * *

·                  Display ** *in * * *view

·                  Shortcut forcreating * * * with ** *

·                  ** *for* * *

·                  ** * in * * *protocol

·                  Apply ** *during* * *

·                  Show the ** *ofthe * * *so it can be* * *to the ** * in * * *in * * *and on * * *

 

*Other Quality and Performance Enhancements*

 

·                  ** *improvements for ** *

·                  ** * tools (ability to * * *at any time, * * *)

 

*** * *Confidential Treatment has been requested, the portion indicated has beenredacted and the redacted portion has been separately filed with the Securitiesand Exchange Commission.**

 

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* * *

 

* * **Phase I*

 

·                  Ability to ** *and/or* * * (support ** *)

·                  ** *with * * *tools

·                  ** *of* * * (** *)

·                  ** *layoutsfor * * *using ** *,along with * * *

·                  ** *on* * *

·                  ** *,including * * *

·                  ** *

 

* * *

 

* * **Phase II*

 

·                  ** *and* * *in ** *

·                  ** *

·                  ** *basedon feedback from users

 

* * *

 

·                  ** *viewof * * *

·                  General ** *enhancements

 

## **4.0 Project Organization**

* *

*Project Management*

Both Toshiba and Vital Images have assigned a Project Manager tocoordinate all aspects of the project. The project teams will communicate as appropriate via Video or Telephoneconference on a weekly basis.  Listedbelow are the 2 project managers assigned to this project.

 
| **Roles**        | ** ** | **Company**   | ** ** | **Team Member** |
|------------------|------------|---------------|------------|-----------------|
| Project  Manager |       | Vital  Images |       | * * *           |
| Project  Manager |       | Toshiba       |       | * * *           |

 

 

*Product Development Team & Responsibilities*

A key component of the development activities requires gaining feedbackfrom key Clinical collaborators.  Belowis a table that describes the primary Vital Images interface to these clinicalcollaborators.  It is essential that theVital and Toshiba interfaces keep in regular contact.

 
| **Site** | ** ** | **Collaboration  Activity** | ** ** | **Vital  Contact** | ** ** | **Toshiba  Contact** | ** ** | **Collaborator  Contact** |
|----------|------------|-----------------------------|------------|--------------------|------------|----------------------|------------|---------------------------|
| * * *    |       | * * *                       |       | * * *              |       | * * *                |       | * * *                     |

 

Other members of the project development team including theirroles/responsibilities are:

 

*** * *Confidential Treatment has been requested, the portion indicated has beenredacted and the redacted portion has been separately filed with the Securitiesand Exchange Commission.**

 

25

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| **Roles** | ** ** | **Company**   | ** ** | **Team Member** |
|-----------|------------|---------------|------------|-----------------|
| * * *     |       | Vital  Images |       | * * *           |
| * * *     |       | Vital  Images |       | * * *           |
| * * *     |       | Vital  Images |       | * * *           |
| * * *     |       | Vital  Images |       | * * *           |
| * * *     |       | Vital  Images |       | * * *           |
| * * *     |       | Vital  Images |       | * * *           |
| * * *     |       | Vital  Images |       | * * *           |

 

Toshiba will assign the following resources to the * * *project.

1* * *

1* * *

1* * *

 

## **5.0 Project Plan & Schedule**

##  

## Below is an overview of the schedule and thekey milestones and deliverables for the * * * project:

 
| **Events** | ** ** | **Estimated Date** |
|------------|------------|-------------------------|
| * * *      |       | * * *                   |
| * * *      |       | * * *                   |
| * * *      |       | * * *                   |
| * * *      |       | * * *                   |
| * * *      |       | * * *                   |
| * * *      |       | * * *                   |
| * * *      |       | * * *                   |
| * * *      |       | * * *                   |

##  

## Below is an overview of the schedule and thekey milestones and deliverables for the * * *project:

 
| **Events** | ** ** | **Estimated Date** |
|------------|------------|--------------------|
| * * *      |       | * * *              |
| * * *      |       | * * *              |
| * * *      |       | * * *              |
| * * *      |       | * * *              |
| * * *      |       | * * *              |
| * * *      |       | * * *              |
| * * *      |       | * * *              |

 

*** * * Confidential Treatment has been requested, the portionindicated has been redacted and the redacted portion has been separately filedwith the Securities and Exchange Commission.**

 

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| * * * |   | * * * |
|-------|--------|-------|
| * * * |   | * * * |
| * * * |   | * * * |
| * * * |   | * * * |
| * * * |   | * * * |

 

## **6.0 Evolution/Iteration of Product Development Plan**

At least once per month, the items described in this ProductDevelopment Plan will be reviewed by the Project Managers and will be updatedappropriately.  Any significant changeswill be communicated to both parties and this document will be revised.  In revisions will follow Vital Images ChangeControl Process and will require signature by both parties.

 

## **7.0 ****Toshiba*** * *

Based on theabove milestones, the * * *from Toshiba for this Product Development Plan is agreed upon * * *of which * * * fordevelopment activities completed in 2008 (* * *man months) and * * *fordevelopment activities in 2009 (* * *man months).  These amountsare based on * * *for the duration of the project.

 

The * * *period of the * * *in this Product Development Plan is when the ** *of the * * *.

 

**8.0 ****Miscellaneous**

 

Notwithstanding any provisions of thisAgreement, either party shall not disclose any Confidential Information to theother party in connection with the Product Development Plan set forth in this Exhibit B.In the event that the disclosure to the other party of one party’s ConfidentialInformation is indispensable for performing the Product Development Plan, thedisclosing party shall provide, on non-confidential basis, the summary of suchConfidential Information and obtain the written consent of the receiving partyprior to the disclosure of such Confidential Information to the receivingparty.

 

*** * * Confidential Treatment has been requested, the portionindicated has been redacted and the redacted portion has been separately filedwith the Securities and Exchange Commission.**

 

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