**EXHIBIT10.38**

 

**PRODUCT DISTRIBUTIONAGREEMENT**

 

THIS PRODUCT DISTRIBUTION AGREEMENT (the “Agreement”) is entered intoand effective on this day, November 28, 2002 (the “Effective Date”), by andbetween R2 Technology, Inc., a Delaware corporation having a principal place ofbusiness at 1195 Fremont Ave., Sunnyvale, California 94087 (“R2”), and VitalImages, Inc., organized under the laws of Minnesota, having a principal placeof business at 3300 Fernbrook Lane N., Suite 200, Plymouth, Minnesota 55447(“VTAL”).

 

**RECITALS**

 

A.                                   R2is engaged in the business of developing, manufacturing, distributing, andselling computer aided detection (“CAD” as further defined below) software andhardware.

 

B.                                     VTALis engaged in the business of developing, distributing and selling VTALWorkstations (as hereafter defined).

 

C.                                     Theparties desire that R2 customize its Lung Nodule CAD Application (as definedbelow) and related software such that it will operate with the VTAL Workstation(“R2 Products” as further defined below).

 

D.                                    Theparties further desire that VTAL distribute the R2 Products in conjunction withthe VTAL Workstation, either: (i) installed on, and as a component of the VTALWorkstation; or (ii) on a stand-alone basis, to VTAL Installed Base Sites (asdefined below) solely for use with the VTAL Workstation, in accordance with theterms and conditions of this Agreement.

 

NOW, THEREFORE, in consideration of the mutual promises containedherein, the parties agree as follows:

 

# **1.**                                      DEFINITIONS

 

## 1.1                                 “ASP”means average sales price as more fully described in Section 8.5.

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## 1.2                                 “CAD”means computer aided detection and similar automated disease detectionssystems.

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## 1.3                                 “ConfidentialInformation” has the meaning set forth in Section 13.1

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## 1.4                                 “Customer”means an end user customer to whom VTAL or its distributors, sells the R2Product.

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## 1.5                                 “EuropeDate” means the later of: (a) the date on which R2 is able to meet CEcertification requirements and produce a “Declaration of Conformance” for theR2 Product; or (b) the completion of the milestones in the Development Planwith respect to the R2 Product that will be distributed in Europe.

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## 1.6                                 “IntellectualProperty Rights” means any and all current and future trade secrets,technical know-how, copyrights, moral rights, patents, patent applications(including any substitutions,

 

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## extensions,reissues, renewals, divisions, continuations, or continuations-in-part), andany and all other worldwide intellectual property rights.

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## 1.7                                 “LungNodule CAD Application” means R2’s proprietary lung nodule CAD software,including Updates, Upgrades and New Features made available by R2 during theterm of this Agreement, and all related documentation.

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## 1.8                                 “NewFeatures” means significant improvements or enhancements, other thanUpdates and/or Upgrades, to the operating system, application software orhardware component of the Lung Nodule CAD Application or R2 Product, as thecontext requires, if any.

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## 1.9                                 “MaintenanceProgram” means the maintenance and support arrangement between VTAL (or itsSubdistributors) and a Customer, as more fully described in Section 3.3.

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## 1.10                           “Minimum”means the minimum number of Lung Nodule CAD Application units that VTAL willpurchase each Quarter in accordance with Sections 8.2 and 8.4.

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## 1.11                           “Quarter”means each three-month period beginning with the first day of the first monthfollowing the Europe Date; by way of non-limiting example, if the Europe Dateis February 15, 2003, the first 3-month period would run from March 1, 2003 toMay 31, 2003.

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## 1.12                           “R2Installed Base Sites” means those persons or entities identified on aseparate document delivered by R2 to VTAL quarterly, as may be accuratelyupdated by R2 from time to time, who are located in the United States andEurope and are in possession of R2 products (other than demonstrationunits).  Notwithstanding anything to thecontrary, R2 Installed Base Sites shall include up to twenty (20) entitiesidentified by R2 within sixty (60) days of the Effective Date who work with R2in an advisory or other similar capacity, but who may not have actuallypurchased R2 products.

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## 1.13                           “R2Product” means the (i) Lung Nodule CAD Application configured by R2 for useby with the VTAL Workstation, as reflected in the Specifications; (ii) visualizationsoftware applications; (iii) all other supporting software applications(including bug fixes made pursuant to Section 3.4, Updates, Upgrades and NewFeatures to the foregoing (i), (ii) and (iii) made available by R2 during theterm of this Agreement); and (iv) all related documentation.

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## 1.14                           “R2Showcase” means the combination of R2’s proprietary workstation and relatedproducts which incorporate the Lung Nodule CAD Application, as more fullydescribed in Section 2.8.

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## 1.15                           “Server”has the meaning set forth in Section 3.6.

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## 1.16                           “Specifications”means the functional and technical standards of the Lung Nodule CAD Applicationas well as the compatibility standards for the R2 Products to loosely integrateand operate with the VTAL Workstation, developed pursuant to Section 2.1below.  The parties understand that theSpecifications with respect to the performance in sensitivity and specificityof the R2 Product delivered by R2 to VTAL will be the same as those for theLung Nodule CAD Application used by R2 in the R2 Showcase.

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## 1.17                           “Territory”means those countries, regions or geographical markets identified on Exhibit B.

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## 1.18                           “Trademarks”with respect to a party means the trademarks, service marks, logos and otherproprietary marks that such party may adopt from time to time.

 

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## 1.19                           “Updates”means software bug fixes and corrections that ensure functionality of the LungNodule CAD Application or R2 Product, as the context requires, that arereleased by R2 for field use, if any. Updates do not include improvements or enhancement to the operatingsystem, applications software, or hardware and do not include new softwarefeatures.

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## 1.20                           “Upgrades”means a release or version of the Lung Nodule CAD Application or R2 Product, asthe context requires, that contains new CAD detection improvements includingalgorithm and performance enhancements, limited to an increase in sensitivityand/or a decrease in marker rate, if any. For example: improvement in the algorithm through reduced falsepositives.  Upgrades do not include newsoftware features or new hardware.

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## 1.21                           “USDate” means the later of : (a) the date on which R2 obtains FDA approvalfor the Lung Nodule CAD Application pursuant to Section 7.1, below, or (ii) thecompletion of the milestones in the Development Plan with respect to the R2Product that will be distributed in the United States.

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## 1.22                           “VTALInstalled Base Sites” means those persons or entities identified on aseparate document delivered by VTAL to R2 quarterly, as may be accuratelyupdated by VTAL from time to time, who are in possession of one (1) or moreVTAL Workstation(s) (other than demonstration units).

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## 1.23                           “VTALWorkstation” means any VTAL workstation and the components thereof, includingwithout limitation the Vitrea brand workstation, consisting of hardware,display devices and Vitrea and other software applications.

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## 1.24                           “WarrantyPeriod” means a period of one (1) year after delivery and installation ofthe R2 Product at a Customer location.

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In addition to the foregoing, terms such as “sale”, “purchase”,“distribute” and variants and synonyms thereof, when used with reference tosoftware herein, are used for convenience only and refer to transactionsinvolving the grant of a software license for the R2 Product.

 

# **2.**                                      DEVELOPMENT

 

## 2.1                                 DevelopmentEfforts.  The parties will developand implement a plan to define and test the Specifications and to address othercompatibility issues of the R2 Product with the VTAL Workstation (the “DevelopmentPlan”).  The parties will use theirbest efforts to complete and attach the Development Plan to this Agreement asExhibit A within fourteen (14) days of the Effective Date.  The parties may amend the Development Planas they mutually agree in writing to reflect changes in theSpecifications.  The parties acknowledgeand agree that the development efforts are dependent on mutual cooperation andperformance of each party’s obligations set forth in the Development Plan.

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## 2.2                                 ProgressMeetings.  The parties will conductmeetings each calendar quarter and keep each other reasonably informed withrespect to progress under the Development Plan and other significant changes,modifications, revisions, or updates that are being planned for theirrespective products.

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## 2.3                                 DICOMStandard.  Whenever possible, thestandard of communication for images and the corresponding CAD results betweenthe CAD component of the R2 Products and the VTAL Workstation shall be theDigital Imaging and Communications in Medicine (“DICOM”) Standard when suchstandard supports the classes and services required.  VTAL agrees that the DICOM header in each acquisition devicecontained in the VTAL Workstation shall contain a unique

 

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## identifierfor each such acquisition device.  Theparties shall meet periodically to discuss such changes, modifications,revisions, or updates, and shall provide each other with such information andassistance as may be necessary or useful and commercially reasonable to enablecompatibility and interoperability between future versions of the R2 Productand the VTAL Workstation.  Such changesand modifications may include, but are not limited to:

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### (a)                                  theaddition or deletion of services supported,

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### (b)                                 changesto the information contained in the DICOM fields of DICOM headers, includingthe use of required fields,

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### (c)                                  changesto the image processing used to create DICOM for presentation images.

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## 2.4                                 ValidationTesting.  Each party shall providecommercially reasonable levels of resources necessary to validate DICOMconnectivity and verify clinical usability after each Update, Upgrade or NewFeature, if any.

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## 2.5                                 Developmentand Test Data.  The development andtesting data provided by VTAL to R2, or generated by R2 under this Agreement,together with any and all other cases, training databases and other relatedmaterials provided to R2 by VTAL (“Test Data”) will remain the property ofVTAL.  VTAL agrees to remove all personallyidentifiable patient information on any Test Data before delivery to R2.  VTAL hereby grants to R2 a non-exclusive,royalty-free, perpetual, irrevocable, non-transferable (subject to Section15.1) license to use the Test Data:  (i)internally for R2’s business and development purposes; and (ii) in aggregateform, as necessary for the purpose of obtaining the regulatory approvalsdescribed in Section 7.  All Test Dataprovided by VTAL to R2 hereunder will be deemed “Confidential Information” ofR2, subject to the obligations of Section 13.2, except for purposes of (ii)above.

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## 2.6                                 Restrictions.  Unless otherwise stated in the DevelopmentPlan, neither party is entitled to receive any source code, algorithms,designs, or similar source materials from the other party.  With respect to the other party’s productsand Confidential Information provided hereunder, neither party shall: (a)reverse engineer, decompile, disassemble, or otherwise attempt to derive anysource code, algorithms, ideas, process, technique, know how, technology, orother underlying content therefrom; or (b) copy, alter, modify, or createderivative works of any portion or component thereof; or (c) assist any thirdparty, or allow or permit any third party within its control, to do any of theforegoing.

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## 2.7                                 Ownership.

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### (a)                                  Asbetween VTAL and R2, R2 will own, and hereby retains, all right, title, andinterest in and to the Lung Nodule CAD Application and the R2 Product, and anyimprovements, enhancements, interface components, and/or derivative worksthereof, and all Intellectual Property Rights relating thereto.  At R2’s request, VTAL will assign or causeto be assigned to R2 all right, title, interest in and to the foregoingmaterials and Intellectual Property Rights therein, and VTAL shall reasonablyassist and cooperate with R2 in prosecuting, maintaining, filing for,enforcing, and otherwise protecting R2’s rights and interests therein.  Any and all registerable and patentabledesigns relating to the Lung Nodule CAD Application and/or the R2 Product, andthe right to apply for protection therefore, shall belong exclusively to R2.

 

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(b)                                 Asbetween R2 and VTAL, VTAL will own, and hereby retains, all right, title, andinterest in and to the VTAL Workstation and any modifications, improvements,enhancements, interface components, and/or derivative works thereof, and allIntellectual Property Rights relating thereto. At VTAL’s request, R2 will assign or cause to be assigned to VTAL allright, title and interest in and to the foregoing materials and IntellectualProperty Rights therein, and R2 shall reasonably assist and cooperate with VTALin prosecuting, maintaining, filing for, enforcing, and otherwise protectingVTAL’s rights and interests therein. Any and all registerable or patentable designs relating to the VTALWorkstation, and the right to apply for protection therefore, shall belongexclusively to VTAL.  The partiesacknowledge that R2 has been given, under the terms and conditions to beimposed upon VTAL customers, third party beneficiary rights to enforcement itsIntellectual Property Rights with respect to Customers.  The parties agree, however, that (i) R2shall not exercise such rights so long as VTAL acts to protect such R2 Rightswith at least the same degree of care and diligence it uses to protect its ownrights of similar type and value, and in any event with at least reasonablecare and diligence and (ii) R2 shall exercise such rights at its own cost andexpense.

 

## 2.8                                 R2Showcase Product.

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### (a)                                  VTALacknowledges that R2 is in the process of developing its own workstationproduct that will incorporate the Lung Nodule CAD Application (when available)and that will be branded with the R2 Trademarks (“R2 Showcase”).  The R2 Showcase is inclusive of theworkstation, all accompanying non-CAD related software, and the Lung Nodule CADApplication, whether such components are sold at the same time orseparately.  Subject to Section 4.1, R2reserves the right, by itself or with third parties, to develop, market,promote, sell, and distribute the Lung Nodule CAD Application, and any futureversions, enhancements, derivative works, or modifications thereof, whetherinside or outside of the Territory.

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### (b)                                 Theparties will work together to coordinate the timing of the release of both theR2 Product and the R2 Showcase. In any case, R2 agrees that it will make the R2Product available to VTAL for use with the VTAL Workstation upon the mutualcompletion by the parties of the milestones set forth in the Development Plan.  Further, VTAL shall not release the R2Product before such date that R2 releases the R2 Showcase.

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### (c)                                  Subjectto Section 4, no provision of this Agreement shall be deemed to restrict eitherparty’s right to exploit any Intellectual Property Rights belonging to that partyin other products or services, including without limitation, in products orservices which may directly or indirectly compete with the other party’sproduct or services, or with the products or services contemplated by thisAgreement.

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## 2.9                                 Costs.  Except as expressly stated herein, eachparty shall bear its own costs and expenses in connection with the developmentactivities contemplated herein.

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# **3.**                                      DISTRIBUTION

 

## 3.1                                 Appointment.  Subject to the terms and conditions herein,R2 hereby authorizes VTAL to distribute the R2 Product within the Territoryeither:  (i) installed on, and as partof the VTAL Workstation; or (ii) to VTAL Installed Base Sites for use solelywith the VTAL Workstation, and

 

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## not on astand-alone basis.  VTAL shall includethe terms and conditions attached as Exhibit G (which may be modified from timeto time by either party subject to the other party’s consent, which consentwill not be unreasonably withheld) with the documentation VTAL provides toCustomers.

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## 3.2                                 Subdistributors.  VTAL’s distributors, resellers and channelpartners that are authorized in writing by VTAL (“Subdistributors”) may alsopurchase the R2 Product directly from R2 for distribution within the Territoryto Customers solely in conjunction with the VTAL Workstation, either as partthereof, or to Customers already owning a VTAL Workstation for use inconnection therewith, and not on a stand-alone basis, and subject to all otherapplicable terms and conditions of this Agreement.  In all events, VTAL shall remain responsible and liable for itsSubdistributors’ compliance with the terms and conditions of this Agreement.

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## 3.3                                 CustomerInstallation, Service and Support. VTAL shall be responsible, at its sole cost and expense, for theinstallation of the R2 Product at the Customer site.  VTAL agrees to provide R2 with quarterly reports (no later thanthe twentieth (20) business day following February 28, May 31, August 31, andNovember 30) stating each Customer’s name, location, contact information anddate of sale.  VTAL shall offer eachCustomer the opportunity to enter into a Maintenance Program through which VTALwill provide, through its own technical personnel, first-level technicalsupport and maintenance to such Customer, in accordance with Exhibit H.  Customers may also opt to receive quarterlynewsletters and participate in a R2 sponsored Lung Nodule CAD user group underthe Maintenance Program.  R2 shallprovide second-level support to VTAL with respect to all Customers free ofcharge during the Warranty Period, and thereafter for Customers in theMaintenance Program as further set forth in Exhibit H.  VTAL hereby acknowledges that R2 shall haveno responsibility or obligation to provide any support services directly toCustomers; however, upon VTAL’s request and in R2’s sole discretion, R2 mayprovide direct support to Customers.  R2shall make available Updates, free of charge, to all Customers during theWarranty Period, and thereafter to Customers participating in a MaintenanceProgram, and VTAL may indicate to its Customers that it will provide Updates,when and if such Updates are made available. However, VTAL shall indicate that warranty and support services do not,and the Maintenance Program does not, include Upgrades or New Features.Upgrades and New Features, if any, are subject to an additional fee, as furtherset forth in Section 8.9.  R2 agrees tomake Updates, Upgrades and New Features for the R2 Product available to VTALwithin the same time frames that R2 makes Updates, Upgrades and New Featuresfor the Lung Nodule CAD Application generally available, if any.

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## 3.4                                 OngoingSupport.  For so long as a Customerhas a software license for the R2 Product, all software “bug fixes” to the R2Product that are released by R2 to correct safety and regulatory issues will beprovided by R2 to VTAL free of charge and installed by VTAL on the VTALWorkstation free of charge.

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## 3.5                                 Training.  VTAL shall ensure that its service personnelare sufficiently skilled and knowledgeable about the R2 Product.  R2 shall provide initial training to VTALregarding the use and maintenance of the R2 Product as reasonably necessary,for VTAL to fulfill its service obligations to the Customer.  Such training shall take place at the datesand locations as mutually agreed between the parties.

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## 3.6                                 HardwareProcurement.  VTAL shall purchasedirectly hardware that meets the R2 specifications attached as Exhibit I(as may be modified by R2 from time to time) for use with the R2 Product(“Servers”). ** **The parties shall mutually agree upon vendors of suchServers.  VTAL will

 

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## installthe R2 Product (shipped by R2 in accordance with Section 6) on the Servers atVTAL’s expense.

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# **4.**                                      EXCLUSIVITY

 

## 4.1                                 ByR2.  R2 shall not license orotherwise provide lung nodule CAD technology to any vendors of freestandingworkstations for sale in the United States, Canada or European Union andidentified on Exhibit D (“Workstation Vendors”).  Notwithstanding the foregoing, R2 shall not be restricted fromproviding the lung nodule CAD technology to: (i) any other third partyworkstation vendor not listed in Exhibit D; (ii) any PACS vendor identified onExhibit D that sells workstations in conjunction with PACS (“PACS Vendor”);provided that R2 shall not provide the lung nodule CAD technology to any PACSVendor for use with such vendor’s sale of freestanding workstations; (iii) orto any third party OEM or PACS company that in turn contracts with anyWorkstation Vendor identified on Exhibit D.

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## 4.2                                 ByVTAL.  During the term, VTAL shallnot sell any lung nodule CAD technology in connection with any VTAL product orservices (including the VTAL Workstation), other than the CAD provided by R2.  Further, VTAL shall not: (i) sell the R2Product to any R2 Installed Base Sites located in the United States for aperiod of six (6) months after the US Date; and (ii) sell the R2 Product orVTAL Workstation to any R2 Installed Base Sites located outside the UnitedStates for a period of six (6) months after the Europe Date.

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# **5.**                                      MARKETING

 

## 5.1                                 VTALResponsibilities.  VTAL shall usecommercially reasonable efforts to promote and market the R2 Product.

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## 5.2                                 Materials.  R2 will provide assistance to VTAL in theform of reasonable quantities of promotional and other marketing materials inEnglish and such other languages as may be available from time to time.  VTAL shall be responsible for such othertranslation of promotional materials and other documents required for use of R2Product in the Territory, and in the event of any such translations, VTAL shallcertify to R2 that any such translations have been appropriately verified, if,and only to the extent, such verification is required by a regulatory agency inthe country for which the translation was made.  VTAL shall provide to R2 for review an example of each item ofpromotional, advertising and educational materials and programs and otherliterature relating to the R2 Product that VTAL intends to use to market,promote and sell the R2 Product at least thirty (30) days prior to thecommercial release of such materials or commencement of such programs.  R2 reserves the right to reject anypromotional materials that contain inaccurate claims regarding the R2 Productprovided that if no written notice of rejection is received within the thirty(30) day period following receipt of an item, it shall be deemed approved.

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## 5.3                                 ProductPresentation.  Each party representsand warrants that it will: (a) present the R2 Product fairly to potential Customers;(b) not disparage the other party, the other party’s Trademarks, or theother party’s products or services in any material respect, (c) avoiddeceptive, misleading or unethical business practices, (d) avoid false ormisleading representations with regard to the Lung Nodule CAD Application, theVTAL Workstation or the R2 Product, and (v) avoid soliciting orders forthe R2 Product from any Customer that it knows engages in illegal or deceptivetrade practices.

 

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## 5.4                                 Demonstrationand Training Licenses.  VTAL willprovide R2 with a quarterly listing of the total number, broken down by region,of VTAL direct sales personnel and distributor sales personnel who are sellingthe R2 Product.  R2 will provide copiesof the R2 Product, Updates, Upgrades and New Features for demonstrationpurposes only to each such salesperson. R2 will provide the first five (5) demonstration copies to VTAL free ofcharge.  For the remainder, VTAL agreesto reimburse R2 for the costs to R2 directly attributable to third-partysoftware licenses purchased by R2 in developing the Lung Nodule CADApplication, Updates, Upgrades or New Features.  In addition, R2 will provide free of charge up to two (2) copiesof the R2 Product, Updates, Upgrades and New Features (promptly followingrelease) solely for VTAL’s internal training of its sales personnel.  The total number of copies provided to VTALby R2 for demonstration and training purposes will not exceed a total of onehundred (100) during the first twelve (12) months of this Agreement and willnot exceed a total of two hundred (200) over the term of the Agreement.

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## 5.5                                 Trademarks.  Subject to compliance with the terms of thisAgreement, (a) R2 shall have the right to indicate to the public that theR2 Product has been tested for compatibility, and is being marketed for use,with the VTAL Workstation; (b) VTAL shall have the right to indicate tothe public that the VTAL Workstation has been tested for compatibility and isbeing marketed for use with the R2 Product; and (c) each party shall have theright to use the other party’s Trademarks in connection with performance ofthis Agreement.  VTAL shall not alter orremove any R2 Trademarks applied to, or embedded in the R2 Product.  VTAL shall market and promote the VTALWorkstation as having R2 lung nodule CAD capability and shall use the R2Trademarks on all VTAL Workstation advertising materials that relate to lungnodule CAD technology.  Each party shall submit samples of the other party’sTrademarks prior to their first use for approval by the other party.  Such approval will not limit the otherparty’s obligation to comply with all applicable laws and will not be deemed anendorsement or approval of any of the other party’s advertising content.  Nothing herein shall grant either party anyrights or title to the other party’s Trademarks, and all goodwill associatedwith such party’s Trademarks shall inure solely to the benefit of that party.  Each party reserves the right to reject anyuse of its Trademark by the other party, and the other party shall immediatelydiscontinue use of such Trademark upon notice. Neither party shall challenge, or assist others to challenge, thevalidity of the other party’s Trademarks, and neither party shall register orattempt to register any trademarks, trade names or service marks confusinglysimilar to the other party’s Trademarks.

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## 5.6                                 Packagingand Labeling.  VTAL shall reproduce all copyright and otherproprietary notices contained in the R2 Product on the user interface of theVTAL Workstation.  In addition, exceptfor the addition of information required by applicable laws and regulations inthe Territory, VTAL shall not re-label the R2 Product or any other R2 productssupplied to VTAL by R2 hereunder without the prior written consent of R2.  If applicable law or regulation requiresre-labeling of the R2 Product, VTAL shall so notify R2, and promptly thereafterthe parties shall cooperatively develop labels in compliance with such laws orregulations.

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## 5.7                                 DisplayObligations.  VTAL shall not alter,remove or obfuscate the R2 Trademarks that appear on any visualization ordisplay of the output derived from the R2 Product on any screen, printout,and/or workstation that displays such output. VTAL shall ensure that the VTAL Workstation displays a standard sizeicon which permits the Customer to open the R2 Product.

 

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**6.****                                      ORDERSAND DELIVERY**

 

6.1                                 Forecasts.  To facilitate planning, at the start of eachQuarter, VTAL will provide R2 with a non-binding, ninety (90)-day forecast.

 

## 6.2                                 Shipment/Riskof Loss.  Each shipment of the R2Product will be packaged by R2 and delivered to R2’s designated shipping point(the “Shipping Point”). All freight, insurance, duty, and other shippingexpenses, as well as any special packing expenses, shall be paid by VTAL.  VTAL shall also bear all applicable taxes,tariffs, duties, and similar charges that may be assessed against the R2 Product(s)after delivery to the Shipping Point. All shipments and freight charges will be deemed correct unless R2receives from VTAL, no later than forty-five (45) days after the shipping dateof a given shipment, a written notice specifying the shipment, the purchaseorder number, and the exact nature of the discrepancy between the order andshipment or discrepancy in the freight cost, as applicable.

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## 6.3                                 Inspectionand Return.  VTAL shall promptly,but in no event later than thirty (30) days, after the date of installation ofthe R2 Product at an Installed Base Site, on a Server or on a VTAL Workstation, inform R2 of a defect in the R2Product.  R2 shall replace suchdefective copy with a new copy, free of charge.

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# **7.**                                      GOVERNMENTAL APPROVALS

 

## 7.1                                 RegulatoryApprovals.  With respect to the R2Product, R2, at its expense, will be responsible for obtaining and maintaining,in R2’s name: (a) FDA and other applicable United States regulatory agencyapprovals; (b) ISO9000 certification; (c) CE certification in accordance withthe provisions of Directive 93/42 governing medical devices for the R2 Product;and (d) applicable regulatory approvals in Canada. R2 shall inform VTAL inwriting, no less than frequently than quarterly, as to the status of suchapprovals.  Further, R2 will promptlyinform VTAL if any of the elements which has permitted R2 to obtain theforegoing approvals is not longer valid. To the extent applicable, VTAL will be responsible for obtaining allregulatory agency approvals in the countries in which VTAL (in its solediscretion) distributes the R2 Product within the Territory, as may benecessary for displaying the R2 Product in connection with the VTALWorkstation.  Each respective companywill cover its own costs for regulatory activities.  Each party agrees to execute such instruments, documents andagreements and to give such further written assurances, as may be reasonablynecessary to better realize the intent and understanding of the parties setforth in this Section 7.1.

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## 7.2                                 Registrations,Licenses and Permits.  Except as setforth in Sections 7.1, VTAL, at VTAL ‘s expense, shall obtain allregistrations, licenses, and permits (“Permits”) required to comply with thelaws and regulations for the countries within the Territory where VTAL, in itssole discretion, imports and distributes the R2 Product; provided, however,that VTAL shall promptly notify R2 upon the initiation of any applications forPermits.  VTAL shall provide to R2complete copies of all applications for and issued Permits relating to the R2Product.  To the extent permitted bylaw, all Permits obtained by VTAL in the Territory with respect to the R2Product shall be in the name of R2. Each party agrees to execute such instruments, documents and agreementsand to give such further written assurances, as may be reasonably necessary tobetter realize the intent and understanding of the parties set forth in thisSection 7.2.  

 

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### (a)                                  Uponthe expiration or termination of this Agreement, at R2’s requests, all Permitsrelating to the R2 Product shall be transferred and delivered to, and shallinure to the benefit of R2 or its designee, to the extent that this ispermissible under applicable law, at no cost to R2 other than legitimate feesand charges imposed by local governmental authorities; and VTAL agrees toexecute any documents and render any assistance, at R2’s request and expense,as may be necessary to perfect R2 rights in such Permits.  The parties will split equally (50%) anyother customary and routine fees which are agreed and approved in advance byboth parties.

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## 7.3                                 Healthand Safety Laws and Regulations. Both parties shall monitor the appropriate information sources closelyfor changes in laws and regulations, and other requirements relating to the R2Product or the VTAL Workstation, and shall notify the other party promptly inwriting of any and all such changes of which it becomes aware.  If R2 is required by any regulatory agencyto recall the R2 Product, or if R2 or a regulatory authority initiates a recallof the R2 Product, VTAL shall cooperate with and assist R2 in locating, andretrieving if necessary, recalled R2 Products from Customers.  VTAL shall be responsible for maintainingall records of its sales to Customers in the event of a recall or other qualityrelated issue.  R2 shall bear the costsof all recalls of the R2 Product.  VTALshall bear the costs of all recalls of the VTAL Workstation.

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## 7.4                                 Compliancewith Local Laws.  VTAL agrees tocomply with all local laws and regulations applicable to the distribution ofthe R2 Product in each country within the Territory.

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# **8.**                                      CONSIDERATION

 

## 8.1                                 Pricesfor Lung Nodule CAD Application. VTAL agrees to pay the transfer prices (adjusted per the applicablediscount schedule) set forth in the pricing schedule attached as Exhibit C.

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## 8.2                                 MinimumSales.

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### (a)                                  Beginningon the Europe Date, VTAL shall order and purchase a minimum number of R2Product units each Quarter, during each year of the term of this Agreement(“Minimum”), as follows:

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#### (i)             First 12-month period:                        * unitsper Quarter

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#### (ii)          Second 12-month period:           * units per Quarter

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#### (iii)       Third 12-month period:                      * units perQuarter

####  

### By wayof non-limiting example, during the first Quarter, VTAL shall purchase aminimum of  *  (*) units.  If, by the 59thday, VTAL has purchased  * (*) units,VTAL shall purchase * (*) additional units on day 60 to satisfy the minimum forthat Quarter.  If more than the minimumis purchased in any Quarter, these additional numbers over the Minimum will beapplied towards the Minimum required in the subsequent Quarters.

###  

### (b)                                 OnceVTAL purchases and pays for a total of *  (*) units, the Minimum will nolonger apply.

 

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*            The material has beenomitted pursuant to a request for confidential treatment and the material hasbeen filed separately with the Office of the Secretary of the Securities andExchange Commission.

 

10

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### (c)                                  Duringthe period between the Europe Date and the US Date, VTAL’s Quarterly Minimumwill be decreased by * (*) of the units in Section 8.2(a) above, however, thetotal Minimum will not change.  Rather,the remaining  * (*) of the Minimum fora given Quarter will be deferred and added to the Quarters subsequent to the USDate.  VTAL shall purchase the deferredMinimum during a period of time subsequent to the US Date that is equivalent tothe duration of the period between the Europe Date and the US Date.  By way of non-limiting example, if theperiod between the Europe Date and the US Date was exactly nine (9) months, thenduring those three Quarters, the Minimum would be only * (*) units per Quarter,rather than * (*) units as noted above. However, during the subsequent three (3) Quarters following the US Date,the Minimum would increase to * (*) units in the first Quarter and * (*) unitsper Quarter for the next two Quarters, rather than  * (*) units and  *(*)  respectively as noted above.

###  

### (d)                                 Purchasesby Subdistributors shall apply towards the Minimums set forth herein, as if thepurchases had been by VTAL.

###  

### (e)                                  Notwithstandingthe foregoing terms of this Section 8.2, the Minimum shall not apply to aQuarter, nor shall such Minimum be deferred to a subsequent period, if:  (i) subsequent to the Europe Date, the CEcertification with respect to the R2 Product is revoked or otherwise becomesineffective; (ii) subsequent to the US Date, any FDA approval with respect tothe R2 Product is revoked or otherwise becomes ineffective; (iii) a regulatoryagency, or R2, issues a recall of the R2 Product or VTAL Workstation, as a resultof the R2 Product installed thereon; (iv) VTAL issues a recall of the VTALWorkstation solely attributable to the R2 Product; (v) the ability of VTAL tosell the R2 Product is impaired by any governmental action, riots, war,prolonged shortage of energy, epidemics, fire, flood, hurricane, typhoon,earthquake, or other event of force majeure beyond the reasonable control ofVTAL (“Force Majeure”), or (vi) VTAL becomes subject to any injunction or otherlegal prohibition against the sale of the R2 Product (except one which would becured by obtaining a Permit or other applicable regulatory approvals).

###  

## 8.3                                 Reports.  R2 shall provide a report to VTAL in writingwithin thirty (30) days of the close of each Quarter, containing the totalnumber of R2 Showcase units sold worldwide during such Quarter (excluding beta,demonstration, training and non-CAD enabled units), and the price (exclusive oftransportation, insurance, taxes, duties and the like) paid therefore.

##  

## 8.4                                 Adjustmentof Minimums.  If the total number ofR2 Showcase units sold worldwide in any two (2) Quarter period by R2 and all ofits distributor/channel partners (excluding VTAL) is less than the sum of theQuarterly Minimums for the preceding two (2) Quarters, then VTAL’s QuarterlyMinimums for the subsequent two (2) Quarters will be decreased by the samenumber by which R2 and all of its distributors/channel partners fell shortduring the preceding (2) Quarters.  Byway of non-limiting example, if R2 and all of its distributor/channel partners sell* (*) units, instead of * (*) units during the first two (2) Quartersin the third twelve (12) month period after the Europe Date, then the MinimumVTAL must purchase in the subsequent two (2) Quarters would decrease by a totalof  * (*) units, from * (*) per Quarterto * (*) per Quarter.

##  

## 8.5                                 RevenueShare/Referrals by R2.  R2 may referits existing and potential customers to VTAL and for each such referral that isnot a VTAL Installed Base Site that purchases the R2 Product (“R2 Referral”),VTAL shall reimburse R2 for  * (*) ofthe incentive that R2 pays to its sales

 

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*            The material has beenomitted pursuant to a request for confidential treatment and the material hasbeen filed separately with the Office of the Secretary of the Securities andExchange Commission.

 

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## representativefor such R2 Referral; provided that the total dollar amount paid as anincentive by R2 to its sales representative will not exceed * (*)  per R2 Referral.

##  

## 8.6                                 Adjustmentof Transfer Prices.

##  

### (a)                                  Ifthe ASP for all R2 Showcase units (excluding beta, demonstration, training andnon-CAD enabled units) sold by R2 directly to end-users in any given Quarterfalls below  * (*), then VTAL’s transferprice as set forth in Exhibit C in the subsequent Quarter will be decreased bythe same percentage that the ASP of all such R2 Showcase units falls belowsuch  * figure.  By way of non-limiting example, if the ASPon such R2 Showcase units were * in a given Quarter, then the transfer pricefor the Minimum number of units required to be purchased by VTAL in thesubsequent Quarter would drop by  * (*).

###  

### (b)                                 IfVTAL desires to purchase more than the Minimum during any Quarter in whichVTAL’s transfer price is below *  in theUS and * outside the US, as per the calculation noted above, VTAL must submit asigned purchase order from each Customer for all units above the Minimum thatit purchases in that Quarter in which the transfer price was lowered pursuantto this Section, and VTAL must subsequently verify placement of such units at aCustomer location.  Otherwise, pricesfor additional units beyond the Minimum for which there are no signed purchaseorders will be set at the subsequent Quarter’s transfer prices as calculated inSection 8.5 (a) above. So long as the ASP for all R2 Showcase units is atleast * during a Quarter, the transfer prices noted in Exhibit C will apply forthe next Quarter.  If R2 fails to sellany such R2 Showcase units during a Quarter, the transfer price from the previousQuarter will continue for the subsequent Quarter.

###  

## 8.7                                 Maintenance.  VTAL shall pay R2 a non-refundable, flat feeas set forth in Exhibit C, for each Maintenance Program sold to a Customer, inaccordance with the payment terms set forth in Section 8.10.  VTAL shall not be required to continuemaking payments under this Section 8.7 if the source code to the R2 Product isreleased to VTAL pursuant to the escrow agreement attached as Exhibit F.

##  

## 8.8                                 Audits.  Each party shall have the right, at its ownexpense, to inspect those accounting records of the other party necessary toverify compliance with the terms of this Agreement.  Such inspections shall take place upon not less than fifteen (15)days prior written notice, and during the audited party’s normal businesshours.  The audited party shall promptlypay the difference, plus interest, on any underpayments revealed in theaudit.  Further, if an audit reveals anunderpayment of more than five percent (5%), the audited party shall also paythe cost and expenses related to the audit.

##  

## 8.9                                 Upgradesand New Features.  Upgrades and NewFeatures for the R2 Product, if any, are subject to an additional fee to beagreed in good faith negotiations between the parties; provided that such feeshall not be more than * (*) of the list price for the correlating Upgrade orNew Feature made to the Lung Nodule CAD Application used in the R2 Showcase(exclusive of hardware components).

 

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*            The material has beenomitted pursuant to a request for confidential treatment and the material hasbeen filed separately with the Office of the Secretary of the Securities andExchange Commission.

 

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## 8.10                           Payments.  VTAL shall make all payments due hereunderwithin forty-five (45) days of the date of R2’s invoice.  Any payments that are not timely paid asprovided hereunder shall bear interest at an annual rate equal to one and ahalf percent (1.5%) per month or the maximum amount permitted by law, whicheveris less, calculated from the date the payment was due until the date thepayment is received by R2.  Any failureof VTAL to make timely payment to R2 due hereunder will constitute a materialbreach of this Agreement and VTAL’s payment of such interest on late paymentswill not prevent R2 from exercising any other rights under applicable law.

##  

## 8.11                           Taxes.  All prices specified hereunder do notinclude and are net of any foreign or domestic governmental taxes or charges ofany kind that may be applicable to the sale, licensing, marketing, ordistribution of the R2 Product, including without limitation excise, sales,use, property, license, value-added taxes, withholding or similar taxes,customs or other import duties or other taxes, tariffs or duties, other thantaxes which are imposed solely on the net income of R2.  Any such taxes which are otherwise imposedon payments to R2 shall be the sole responsibility of VTAL.

##  

# **9.**                                      REPORTING AND CUSTOMER COMPLAINTS

 

## 9.1                                 MedicalDevice Reporting.  Pursuant togovernmental medical device reporting regulations (e.g. the FDA’s MedicalDevice Reporting (MDR) Regulations, the European Medical Device VigilanceGuidelines, and any other applicable medical device reporting regulations), theparties may be required to report to the applicable agency information thatreasonably suggests that the products contemplated hereunder may have caused orcontributed to the death or serious injury or has malfunctioned and that thedevice would be likely to cause or contribute to a death or serious injury ifthe malfunction were to recur.  R2 shallbe primarily responsible for evaluating any such reportable incidents thatrelate to the R2 Product, and VTAL shall be primarily responsible forevaluation of any reportable incidents that relate to the VTAL Workstation.Each of R2 and VTAL agree to supply to the other any information relating tosuch reportable incident promptly after becoming aware of it so that each of R2and VTAL can comply with governmental reporting requirements.

##  

## 9.2                                 CustomerComplaints.  VTAL shall promptlyinvestigate, monitor, and notify R2 of all Customer and/or regulatorycomplaints concerning the use of the R2 Product, or the VTAL Workstation(regardless of whether such VTAL Workstation is equipped with the R2 Product)in the Territory.  R2 shall promptlyinvestigate, monitor and notify VTAL of all customer and/or regulatorycomplaints concerning the use of the R2 Showcase.  Each party shall advise the other of all such complaints allegingpatient injury within twenty four (24) hours, and of all other materialcomplaints as promptly as possible but not more than five (5) business daysfollowing the date a party receives such complaint.  In addition, within fifteen (15) calendar days following the dateit receives such complaint, such party shall also provide the other party witha materially complete written report relating thereto.  Any notice to VTAL under this Section shallbe sent via facsimile and email to the attention of the Manager of RegulatoryAffairs and the Senior Director of Operations or to such other address orperson as VTAL may designate, and any notice to R2 under thisSection shall be sent via facsimile and email to the attention of R2’sVice President of Regulatory Affairs or to such other address or person as R2may designate.

 

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# **10.**                               INDEMNITY AND INSURANCE

 

## 10.1                           R2Indemnity.  Subject to Sections 10.2 and 10.5 below, R2 agrees to indemnify and holdharmless VTAL, its officers, directors, employees and agents, from and againstany and all liabilities, damages, losses, costs and expenses attributable toclaims, actions, suits, or other proceedings (“Claims”) brought by a thirdparty alleging:  (a) that the R2Product, as delivered to VTAL, infringes any third party Intellectual PropertyRight; (b) product liability with respect to the R2 Product; (c) that anymaterials provided by R2 to VTAL under Section 5.2 are deceptive ormisleading; or (d) a failure by R2 to comply with applicable law.

##  

## 10.2                           Exclusions.  Notwithstanding the foregoing, R2 will haveno liability for infringement claims arising from:  (a) combination of the R2 Product with other software orproducts not provided or authorized by R2, which claim would have been avoidedif the R2 Product had not been so combined; (b) the modification of the R2Product, in whole or in part, by anyone other than R2 which claim would havebeen avoided if the R2 Product had not been so modified.

##  

## 10.3                           VTALIndemnity.  Subject to Section 10.4and 10.5 below, VTAL agrees to indemnify and hold R2, its officers, directors,employees and agents, from and against any and all liabilities, damages,losses, costs and expenses attributable to Claims brought by a third partyalleging: (a) infringement of any third party Intellectual Property Right by theVTAL Workstation; (b) product liability with respect to the Product to theextent directly attributable to the VTAL Workstation; (c) deceptive ormisleading advertising or sales practices by VTAL or its Subdistributors, otherthan any made in reliance on the content of the materials provided to VTALunder Section 5.2; (d) negligence or misconduct by VTAL, or itsSubdistributors, in connection with the marketing, distribution, or sale of theR2 Product; or (e) a failure by VTAL to comply with applicable law.

##  

## 10.4                           Exclusions.  Notwithstanding the foregoing, VTAL willhave no liability for infringement claims with respect to VTAL Workstations, ifany, arising from:  (a) combination ofthe VTAL Workstations with other software or products not provided or authorizedby VTAL, which claim would have been avoided if the VTAL Workstation had notbeen so combined; or (b) the modification of the VTAL Workstation, in whole orin part, by any party other than VTAL which claim would have been avoided ifthe VTAL Workstation were not so modified.

##  

## 10.5                           Procedure.  The party seeking indemnification,(“Indemnitee”) shall: (a) promptly notify the indemnifying party(“Indemnitor”) in writing of any Claim brought by a third party for which it isseeking indemnification; (b) provide Indemnitor with sole control of thedefense and/or settlement thereof; and (c) provide Indemnitor, atIndemnitor’s request and expense, with reasonable assistance and fullinformation with respect thereto. Indemnitee shall have the right to participate, at its own expense, withcounsel of its own choosing in the defense and/or settlement of such claim,suit or proceeding.  The indemnificationobligations of the parties in this Section 10 shall not apply to amountspaid in settlement of any claim, suit or proceeding if such settlement iseffected without the consent of Indemnitor, which consent shall not beunreasonably withheld or delayed.

##  

## 10.6                           AdditionalRemedy.  If any portion of eitherparty’s products contemplated by this Agreement (the VTAL Workstation and theR2 Product) is held, or in such party’s reasonable opinion is likely to beheld, to infringe or misappropriate a third party’s Intellectual PropertyRight, then such party may at its sole option and expense:  (a) procure for the other party and/orthe

 

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## Customer,as appropriate, the right to continue using such product; (b) replace theproduct with a non-infringing, functionally equivalent product; or (c) ifneither of the foregoing is reasonably practicable, and to the extent theinfringing component restricts a Customer’s ability to continue use of aProduct, terminate this Agreement and refund to Customer and/or the otherparty, as appropriate, the amounts paid for the Product, or the infringingcomponent (by way of non-limiting example, the Lung Nodule CAD Application,) asapplicable, less a reasonable amount for prior use.

 

## 10.7                           EntireLiability.  THE FOREGOING PROVISIONSOF THIS SECTION 10 STATE THE ENTIRE LIABILITY AND OBLIGATIONS OF EACH PARTY,AND EACH PARTY’S EXCLUSIVE REMEDY, WITH RESPECT TO ANY ACTUAL OR ALLEGEDINFRINGEMENT OF OR MISAPPROPRIATION OF ANY INTELLECTUAL PROPERTY RIGHT BY THELUNG NODULE CAD APPLICATION, THE VTAL WORKSTATION, OR THE R2 PRODUCT.

##  

## 10.8                           Insurance.  Each party shall use commercially reasonableefforts to add the other party to its existing insurance policies as anadditional insured; provided that such addition would not materially alter theother terms and conditions of such existing insurance policy.

##  

# **11.**                               WARRANTY

 

## 11.1                           Limited Warranty.  R2 represents and warrants to VTAL that the R2 Product willconform in all material respects to the Specifications during the WarrantyPeriod.

##  

## 11.2                           Warranty Limitations.  The foregoing warranty does not extend to problems or errors inthe R2 Product that result from: (a) Customer’s failure to implement allUpdates which are provided by R2, if any; (b) any use of the R2 Product ina manner for which it was not designed or as not authorized under thisAgreement or under the Customer’s license; (c) negligence on the part ofVTAL or Customer, or their employees, contractors, or consultants; or(d) any use of the R2 Product with other software, hardware or productsnot authorized by R2.  Neitherparty shall have the authority to offer, and neither party shall make, anyrepresentations or give warranties on behalf of the other party.

##  

## 11.3                           Disclaimer.  EXCEPT AS EXPRESSLY STATED IN SECTION 11.1,THE R2 PRODUCT IS PROVIDED “AS IS” WITHOUT WARRANTY OF ANY KIND.  R2 MAKES NO ADDITIONAL WARRANTIES ORCONDITIONS OF ANY KIND, WHETHER, EXPRESS, IMPLIED, STATUTORY, OR OTHERWISE, ANDR2 SPECIFICALLY DISCLAIMS THE IMPLIED WARRANTIES AND CONDITIONS OFMERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NON-INFRINGEMENT WITHRESPECT TO THE LUNG NODULE CAD APPLICATION PROVIDED HEREUNDER, AND WITH RESPECTTO THE USE THEREOF.

##  

# **12.**                               LIMITATION OF LIABILITY

 

Except for each party’s obligations under Section 10, and exceptfor a breach of Sections 2.6 or 13.2 of this Agreement, IN NO EVENT SHALL EITHERPARTY BE LIABLE TO THE OTHER FOR ANY LOST PROFITS, COST OF SUBSTITUTE GOODS, ORANY CONSEQUENTIAL, SPECIAL, INCIDENTAL, OR INDIRECT DAMAGES, HOWEVER CAUSED ANDON ANY THEORY OF LIABILITY, INCLUDING NEGLIGENCE, ARISING OUT OF THIS

 

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AGREEMENT, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGE.  IN NO EVENT SHALL THE TOTAL LIABILITY OFEITHER PARTY EXCEED THE AMOUNTS PAID BY VTAL TO R2 DURING THE TWELVE-MONTHPERIOD PRECEDING THE EVENT GIVING RISE TO THE LIABILITY.  THE FOREGOING LIMITATIONS APPLYNOTWITHSTANDING OF THE FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDYHEREIN.

 

# **13.**                               CONFIDENTIALITY

 

## 13.1                           Definition.  For purposes of this Agreement, “ConfidentialInformation” means information exchanged between R2 and VTAL pursuant tothis Agreement and the performance of the parties’ obligations hereunder,orally (if reduced to writing and delivered to the other party within fifteen(15) days of disclosure) or in writing, if marked to indicate its confidentialnature or if of a type that a reasonable person would expect to be proprietaryand confidential and shall include the terms of this Agreement.  Confidential Information shall not meaninformation which is (a) in the public domain or subsequently enters thepublic domain through no act or omission of the receiving party;(b) subsequently acquired free of any confidentiality obligation by thereceiving party from a third person having, to the receiving party’s knowledge,no obligation of confidentiality to the disclosing party; (c) known to thereceiving party at the time of disclosure, as established by competent proof;or (d) developed independently by or on behalf of the receiving party,without reliance on or use of any Confidential Information of the other.Notwithstanding the above, before either party discloses ConfidentialInformation which includes technical or scientific information, it will informthe other party of the general nature of such information and the other partymay agree or decline to receive such information, or the parties may negotiatea separate agreement covering such information.  Except as to technical or scientific information, which a partyso agrees to receive, neither party shall have any obligations with respect toany technical or scientific information, which it may learn without referenceto the other party’s Confidential Information.

##  

## 13.2                           Obligations.  Neither party shall use the ConfidentialInformation of the other except as permitted or expressly provided under thisAgreement.  In addition, each partyshall hold all Confidential Information of the other in confidence and shallnot publish, disclose or disseminate the same to any other person or entityexcept as specified herein.  Each partymay disclose Confidential Information of the other to its employees andconsultants who are bound by confidentiality obligations at least as protectiveas those stated herein.  Each partyshall take the same measures to preserve the confidentiality of theConfidential Information of the other as it does for its own ConfidentialInformation, but in no event with less than reasonable care.  In addition to the foregoing, either partymay disclose Confidential Information disclosed to it by the other party to theextent such disclosure is required by law, government agency, governmentalregulation, court order or valid discovery request in connection with a legalproceeding, provided that if a party is required to disclose another party’sConfidential Information in connection therewith, it shall provide the otherparty with prior written notice of any such disclosure and a reasonableopportunity to seek confidential treatment or a protective order, ifappropriate.  In the event that suchconfidential treatment or protective order is not obtained, the party requiredto disclose such Confidential Information shall disclose only that portion ofthe Confidential Information which its counsel advises that it is legallyrequired to disclose.  For the avoidanceof doubt, if this Agreement is

 

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## requiredto be filed with any governmental or regulatory agency, the party required tomake such filing shall seek confidential treatment of the terms of thisAgreement, and shall in any event, redact those portions of the Agreement thatits legal counsel advises may be redacted, but still comply with such filingrequirement.

##  

# **14.**                               TERM AND TERMINATION

 

## 14.1                           Term.  This Agreement shall commence on theEffective Date and shall continue in full force for a period of three (3) yearsfrom the Europe Date, unless earlier terminated as set forth in thisSection 14.  The parties may renewthis Agreement for additional one (1) year terms upon mutual writtenagreement.

##  

## 14.2                           Terminationfor Cause.  If either party breachesany of its material obligations hereunder, and such breach is not cured withinthirty (30) days after notice from the other party, the non-breaching partyshall be entitled to terminate this Agreement upon written notice.

##  

## 14.3                           Terminationfor Insolvency.  This Agreement maybe terminated by either party, on notice: (a) upon the institution by theother party of insolvency, receivership or bankruptcy proceedings; or any otherproceedings for the general settlement of all or substantially all of its debts;(b) upon the institution of such proceedings against the other party,which are not dismissed or otherwise resolved in its favor within sixty (60)days thereafter; (c) upon the other party’s making a general assignmentfor the benefit of creditors; or (d) upon the other party’s dissolution orceasing to conduct business as a going concern, or upon taking action todissolve or to cease business as a going concern.

##  

## 14.4                           Terminationfor Ongoing Force Majeure.  If anyof the events described in Subsection 8.2(e) occur and continue for aperiod of in excess of thirty (30) days, either party shall be entitled toterminate this Agreement upon written notice.

##  

## 14.5                           Failureto Obtain Regulatory Approvals. VTAL may terminate this Agreement immediately, with written notice, ifR2, after diligent efforts, fails to obtain FDA approval or CE certificationwith respect to the R2 Product on, or before, September 30, 2004.  R2 may terminate this Agreement,immediately, with written notice, if R2, after diligent efforts, fails toobtain FDA or CE certification with respect to the R2 Product on, or before,the third (3rd) anniversary of the Effective Date.

##  

## 14.6                           Effectof Termination.

##  

### (a)                                  AccruedObligations.  Expiration ortermination of this Agreement for any reason shall not release any party heretofrom any liability which, at the time of such termination, has already accruedto the other party or which is attributable to a period prior to suchtermination nor preclude either party from pursuing any rights and remedies itmay have hereunder or at law or in equity with respect to any breach of thisAgreement.

###  

### (b)                                 Maintenance.  Each party’s maintenance obligations then ineffect will continue in full force and effect with respect to each Customer,until such obligations expire by their terms.

###  

### (c)                                  ContinuedRight to Sell.  Upon termination ofthis Agreement, R2 shall have the right, at its sole option, to purchase all orpart of VTAL’s inventory of the R2 CAD that is not already required to fulfillaccepted Customer purchase orders, at a price equal to the transfer priceinvoiced to VTAL.  If R2 opts not to buyback VTAL’s inventory of the R2 Product, VTAL shall have the right to

 

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### continueto market, distribute, and sell unsold R2 Products in the Territory pursuant tothe terms hereof for an additional period of one hundred eighty (180) daysafter notice of termination of this Agreement.

###  

### (d)                                 Limitationon Liability.  In the event oftermination by either party in accordance with any of the provisions of thisAgreement, neither party shall be liable to the other because of suchtermination, for compensation, reimbursement or damages on account of the lossof prospective profits or anticipated sales or on account of expenditures,investments, leases, inventory or commitments in connection with the businessor goodwill of R2 or VTAL.

###  

### (e)                                  Survival.  The provisions of Sections 1, 2.7, 3.4,7.2(b), 8.10, 9.1, 10.1-10.7, 11.3, 12, 13, 14.6, 15 and any paymentobligations shall survive the expiration or termination of this Agreement forany reason.

###  

# **15.**                               GENERAL

 

## 15.1                           Assignment.  Neither party may assign or transfer thisAgreement or any of its rights and obligation under this Agreement without theprior written consent of the other party, except that either party may assignthis Agreement in the case of a merger, sale of stock or assets or otherreorganization; provided that any permitted assignee agrees in writing to bebound by the terms of this agreement. Subject to the foregoing, this Agreementshall be binding on and inure to the benefit of any permitted assignee.  Any attempted assignment in violation ofthis Section 15.1 shall be void.

##  

## 15.2                           Basisof Bargain.  Each party recognizesand agrees that the warranty disclaimers and liability and remedy limitationsin this Agreement are materially bargained for and that such warrantydisclaimers and liability and remedy limitations have been taken into accountand reflected in determining the consideration to be given by each party toenter into this Agreement.

##  

## 15.3                           CounterpartOriginals.  This Agreement may beexecuted in two (2) or more English language counterparts or duplicateoriginals, all of which shall be regarded as one and the same instrument, andwhich shall be the official and governing version in the interpretation of thisAgreement.

##  

## 15.4                           EntireAgreement.  The terms and conditionsherein contained, including exhibits, constitute the entire agreement betweenthe parties and supersede all previous and contemporaneous agreements andunderstandings, whether oral or written, including the parties’ term sheet,with respect to the subject matter hereof.

##  

## 15.5                           Expenseof Doing Business.  Any and allobligations associated with a party’s business shall remain the sole responsibilityof that party.  Any and all sales andother agreements between a party and its customers are and shall remain thatparty’s exclusive responsibility and shall have no affect on that party’sobligations pursuant to this Agreement. Each party shall bear the entire cost and expense of conducting itsbusiness in accordance with the terms of this Agreement.

##  

## 15.6                           Export.  The parties acknowledge the productscontemplated by this Agreement may be subject to the export control laws andregulations of the United States, and any amendments thereof.  Each party agrees that it will not transfer,deal with, export or re-export such products directly or indirectly, to (i) anycountries that are subject to United States export restrictions, except with

 

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## appropriateUnited States government approvals; (ii) any third party who a party knows orhas reason to know will utilize them in the design, development or productionof nuclear, chemical or biological weapons; or (iii) any third party who hasbeen prohibited from participating in United States export transactions by anyfederal agency of the United States government.

##  

## 15.7                           ForeignCorrupt Practices Act.  Inconformity with the United States Foreign Corrupt Practices Act regardingforeign business practices, R2 and its employees and agent as well as VTAL andits employees and agents shall not directly or indirectly make a payment,promise to pay, or authorize payment, or offer a gift, promise to give orauthorize the gift of anything of value for the purpose of influencing an actor decision (including a decision not to act) of an official of any governmentor governmental agency or for inducing such official to use any influence toaffect any such governmental act or decision.

##  

## 15.8                           GoverningLaw.  This Agreement shall begoverned by the laws of the State of California, without regard to itsconflicts of law provisions.  Theparties expressly exclude application of the United Nations Convention for theInternational Sale of Goods.

##  

## 15.9                           GovernmentalConsent.  VTAL shall be responsiblefor timely filings of this Agreement with any required government entitieswithin the Territory.  If any suchgovernmental entity objects to this Agreement of any provision hereof, the partiesshall have the right to suspend or discontinue distribution of the R2 Productwithin such region or country in the Territory.

##  

## 15.10                     IndependentContractors.  The relationship ofthe parties established by this Agreement is that of independent contractors,and nothing contained in this Agreement should be construed to give eitherparty the power to direct or control the day-to-day activities of theother.  All financial and otherobligations associated with each party’s business are the sole responsibilityof that party.

##  

## 15.11                     InjunctiveRemedies.  Each party acknowledgesthat due to the nature of proprietary information, any breach or threatenedbreach of Sections 2.6, 5.3, or 13 would result in irreparable harm to thenon-breaching party, for which there is no adequate remedy at law, andtherefore, the non-breaching party shall be entitled to apply for injunctive orother equitable relief to restrain such material breach in addition to otherappropriate remedies.

##  

## 15.12                     Modification.  No alteration, amendment, waiver,cancellation or any other change in any term or condition of this Agreementshall be valid or binding on either party unless the same shall have beenmutually assented to in writing by both parties.

##  

## 15.13                     No ImpliedLicenses.  Except for the licensesgranted by the express terms of this Agreement, each party reserves and retainsall right, title, and interest in and to its products, technology, and allIntellectual Property Rights therein and no right or license shall be deemedgranted by implication, estoppel, or otherwise.

##  

## 15.14                     Notices.  Any notice required or permitted to be givenby either party under this Agreement shall be in writing and shall bepersonally delivered or sent by commercial courier service (e.g., DHL), or byregistered or certified mail by the U.S. Postal Service, postage prepaid, or sent by fax or telecopy andconfirmed by first class mail (registered or certified), postage prepaid, tothe other party at the address first shown above or at such other address of whichsuch party gives notice

 

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## hereunder.  If mailed, notices will be deemed effectivefive (5) working days after deposit, postage prepaid, in the mail.

##  

## 15.15                     PartialInvalidity.  If any provision in thisAgreement shall be found or be held to be invalid or unenforceable in anyjurisdiction in which this Agreement is being performed, then the meaning ofsaid provision shall be construed, to the extent feasible, so as to render theprovision enforceable, and if no feasible interpretation would save suchprovision, it shall be severed from the remainder of this Agreement, whichshall remain in full force and effect. In such event, the parties shall negotiate, in good faith, a substitute,valid and enforceable provision which most nearly effects the parties’ intentin entering into this Agreement.

##  

## 15.16                     PressReleases.  The parties agree tocooperate to issue a joint press release, approved in writing by each party,promptly after execution of this Agreement.

##  

## 15.17                     Waiver.  The failure or delay of either party toenforce at any time any of the provisions of this Agreement, or the failure torequire at any time performance by the other party of any of the provisions ofthis Agreement, shall in no way be construed to be a present or future waiverof such provisions, nor in any way affect the right of either party to enforceeach and every such provision thereafter. The express waiver by either party of any provision, condition orrequirement of this Agreement shall not constitute a waiver of any futureobligation to comply with such provision, condition or requirement.

##  

## 15.18                     Non-solicitation.

##  

### (a)                                  Neitherparty shall solicit for employment, as an employee or a self-employedindependent contractor, during the term of this Agreement or within six (6)months thereafter, any person who was employed by or a principal of the otherparty at anytime during the then preceding six (6) month period.

###  

### (b)                                 Forpurposes of this Section 15.17, the term “R2” shall include the R2 and any ofits affiliates and the term “VTAL” shall include the VTAL and any of itsaffiliates.

###  

### (c)                                  Breachof this Section 15.17 shall require the violating party to pay to thenon-violating party, immediately following the retention of a person givingrise to the violation, as liquidated damages and not as a penalty, a sum equalto one hundred percent (100%) of such person’s cash salary or other cashcompensation (including any cash bonuses, awards or incentives) earned duringthe twelve (12) month period ending on the date of such retention (annualizedif such person was employed or otherwise retained by the non-violating partyfor less than twelve (12) months).

###  

Exhibit A:  Development Plan

 

Exhibit B:  [Reserved]

 

Exhibit C:  Pricing

 

Exhibit D:  Workstation and PACSVendors

 

Exhibit E:  Source Code EscrowAgreement

 

Exhibit F:  [Reserved]

 

20

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to besigned by duly authorized officers or representatives as of the date firstabove written.

 
| **R2 Technology, Inc.** |                 | **Vital Images, Inc.** |
|-------------------------|----------------------|------------------------|
|                    |                 |                   |
| By:                     | /s/ Michael S. Klein |                   |   | By: | /s/ Jay D. Miller |   |
| Print Name:             | Micheal S. Klein     |                   |   | Print Name: | Jay D. Miller |   |
| Title:                  | President & CEO  |                   |   | Title: | President & CEO |   |
| Date:                   | January 6, 2003      |                   |   | Date: | January 8, 2003 |   |
|                         |                      |                        |  |  |  |  |  |  |  |  |

 

21

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**EXHIBIT A**

** **

**DEVELOPMENTPLAN**

 

1

----

 

 

**R2Technology, Inc.**

**VitalImages, Inc.**

 

 

**Product Requirements**

**ImageCheckerCT & Vitrea Integration**

 

 

**Final**

 

**Created: 01/06/2003**

 

----

 
| **ImageCheckerCT & Vitrea  Integration Product  Requirements** | Final |
|--------------------------------------------------------------------|-------|

 

**RevisionHistory**

 
| **Date** |   | **Version** |   | **Description**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | **Author** |
|----------|--------|-------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------|
| *        |   | 1.0         |   | Initial  Revision                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   | *          |
|     |   |        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |       |
| *        |   | 1.0         |   | •                  Updated the  system definition based on discussion with Vital Images

•                  Deleted the  elements which are more appropriate for a Software Project Development Plan

•                  Added a  “Positioning” and “Stakeholder & User Descriptions” section                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | *          |
|     |   |        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |       |
| *        |   | 4.0         |   | •                  Changed  Version 1.0 to Draft 4.0 to follow previous sequence

•                  Removed  Section 1.4. References

•                  Removed  Section 2. Positioning.  This is  covered in the Product Distribution Agreement and R2 Business Plan

•                  Removed  section 3.3. Key Stakeholders/User Needs.   This is covered in the Product Distribution Agreement and R2 Business  Plan

•                  Added note to  FEAT14.5 ADSL-5, FEAT14.9 ADSL-10, and FEAT14.11 ADSL-12 that the details  need to be clarified and are TBD

•                  Added  information to Section 4.5 relative to Licensing

•                  Added note to  FEAT14.9 ADSL-10 that the requirement needs to be clarified

•                  Added note to  FEAT14.11 ADSL-12 that the requirement needs to be clarified |   | *          |
|     |   |        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |       |
| *        |   | *           |   | Additions,  corrections, and/or highlighting areas still requiring clarification or  resolution. {Items still unresolved or needing clarification above-and-beyond  those identified herein include:

1.               *

2.               Administrative  Tools

3.               *

4.               *

5.               *

6.               *                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | *          |
|     |   |        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |       |
| *        |   | *           |   | •                  *

•                  Relative to  Licensing: Corrected statement and section number to 3.5

•                  Corrected  FEAT7.2 AOLF-2                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | *          |

 

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*            The material has beenomitted pursuant to a request for confidential treatment and the material hasbeen filed separately with the Office of the Secretary of the Securities andExchange Commission.

 
| Confidential | R2 Technology, Inc.  Vital Images, Inc. |   |
|--------------|-----------------------------------------|--------|

 

ii

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|   |   |   |   | •                  Corrected  FEAT9.2 AOAD-2

•                  Removed  FEAT18.6 ADLM-7

•                  Added  FEAT24.12 through 24.15 in *

•                  Updated  Responsibilities in FEAT26.1 STCM-1

•                  Added FEAT27 *

•                  Updated  Section 7 Documentation |   |   |
|--------|--------|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |   |
| *      |   | *      |   | •                  Resolved all  questions noted in Draft 5.0 and 5.1 via conference call *                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | *      |

 

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iii

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**Tableof Contents**

 
| 1.     | Introduction        |                                            |
|--------|---------------------|-------------------------------------------------|
|   |                |                                            |   |
|   | 1.1                 | Purpose                                         |
|   |                |                                            |   |
|   | 1.2                 | Scope                                           |
|   |                |                                            |   |
|   | 1.3                 | Definitions, Acronyms and  Abbreviations        |
|   |                |                                            |   |
| 2.     | Stakeholder Summary |
|   |                |                                            |   |
|   | 2.1                 | Stakeholder Summary                             |
|   |                |                                            |   |
|   | 2.2                 | User Summary                                    |
|   |                |                                            |   |
| 3.     | Product Overview    |
|   |                |                                            |   |
|   | 3.1                 | Product Perspective                             |
|   |                |                                            |   |
|   | 3.2                 | Modes of data input                             |
|   |                |                                            |   |
|   | 3.3                 | Usage Scenario                                  |
|   |                |                                            |   |
|   | 3.4                 | Cost and Pricing                                |
|   |                |                                            |   |
|   | 3.5                 | Licensing and Installation                      |
|   |                |                                            |   |
| 4.     | Product Features    |
|   |                |                                            |   |
|   | 4.1                 | *                                               |   |
|   |                |                                            |   |
|   |                | 4.1.1                                           | * |
|   |                |                                            |   |
|   |                | 4.1.2                                           | * |
|   |                |                                            |   |
|   |                | 4.1.3                                           | * |
|   |                |                                            |   |
|   | 4.2                 | Application Overview                            |
|   |                |                                            |   |
|   |                | 4.2.1                                           | * |
|   |                |                                            |   |
|   |                | 4.2.2                                           | * |
|   |                |                                            |   |
|   |                | 4.2.3                                           | * |
|   |                |                                            |   |
|   |                | 4.2.4                                           | * |
|   |                |                                            |   |
|   |                | 4.2.5                                           | * |
|   |                |                                            |   |
|   |                | 4.2.6                                           | * |
|   |                |                                            |   |
|   |                | 4.2.7                                           | * |
|   |                |                                            |   |
|   | 4.3                 | Application  Performance and Quality Objectives |

 

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|   |                       | 4.3.1                | *      |
|--------|----------------------------|----------------------|--------|
|   |                       |                 |   |
|   |                       | 4.3.2                | *      |
|   |                       |                 |   |
|   |                       | 4.3.3                | *      |
|   |                       |                 |   |
|   | 4.4                        | *  - Study List      |
|   |                       |                 |   |
|   | 4.5                        | Application Details* |
|   |                       |                 |   |
|   |                       | 4.5.1                | *      |
|   |                       |                 |   |
|   |                       | 4.5.2                | *      |
|   |                       |                 |   |
|   |                       | 4.5.3                | *      |
|   |                       |                 |   |
|   |                       | 4.5.4                | *      |
|   |                       |                 |   |
|   |                       | 4.5.5                | *      |
|   |                       |                 |   |
|   |                       | 4.5.6                | *      |
|   |                       |                 |   |
|   |                       | 4.5.7                | *      |
|   |                       |                 |   |
|   |                       | 4.5.8                | *      |
|   |                       |                 |   |
|   | 4.6                        | *                    |   |
|   |                       |                 |   |
| 5.     | *                          |                 |
|   |                       |                 |   |
|   | 5.1                        | *                    |   |
|   |                       |                 |   |
| 6.     | *                          |                 |
|   |                       |                 |   |
| 7.     | Documentation Requirements |
|   |                       |                 |   |
|   | 71.                        | User Manual          |
|   |                       |                 |   |
|   | 7.2                        | Service Manual       |

 

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v

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**ProductRequirements**

 

# **1.**              Introduction

 

R2’s ImageChecker®CT (ICCT) CAD software is designedfor the detection of clinically significant findings in lung CT studies bymarking suspicious nodules. The CAD algorithm highlights potential areas ofinterest and provides measurement and characterization information on thedetected lesion that can be used to assist in making clinical decisions.However communicating these findings is as important as their identification,with proper display, and presentation of nodules being essential.

 

Vital Images Vitrea® 2 (Vitrea) is an advanced medicalimaging software for diagnostic evaluation of computed tomography (CT) andmagnetic resonance (MR) image data. Vitrea features real-time navigation of 3Dvolume data, permitting the user to create two- and three-dimensional views ofhuman anatomy and to interactively navigate within these images to bettervisualize and understand internal structures and disease conditions.

 

Integration of ImageChecker CT into the Vitrea 2software will enable the radiologists to utilize the power of CAD with theintuitiveness of a 3D workflow.

 

## **1.1****                               Purpose**

 

The purpose of this document is to collect, analyzeand define high-level needs and features of the integrated ICCT-Vitrea product.  It focuses on the capabilities needed by thestakeholders, and the target users, and why these needs exist.  The details of how the integrated productfulfils these needs are detailed in the use-case and supplementaryspecifications.

 

## **1.2****                               Scope ***

 

## **1.3****                               Definitions,Acronyms and Abbreviations**

 
| **Term**           |   | **Definition**                                                                                                                                                                                                                                                                        |
|--------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2D  View           |   | The  display of cross-sectional views from the Chest CT data.  The view is typically a direct rendering  of the scanner-reconstructed images.   This is the view that radiologists use for reporting CT (and other  cross-sectional) studies in the vast majority of cases. |
|               |   |                                                                                                                                                                                                                                                                                  |
| 3D  Nodule Viewer  |   | A  view of a small volume of tissue that is centered about the currently  selected nodule or arbitrary POI.   This view allows a small volume to be explored in 3 dimensions                                                                                                     |
|               |   |                                                                                                                                                                                                                                                                                  |
| Actionability      |   | The  degree to which is lesion is deemed actionable.                                                                                                                                                                                                                                  |
|               |   |                                                                                                                                                                                                                                                                                  |
| Actionable  lesion |   | A  lesion that a radiologist would consider suspicious enough to warrant further  evaluation including additional imaging or biopsy for the patient.                                                                                                                                  |
|               |   |                                                                                                                                                                                                                                                                                  |
| AP  view           |   | A  radiological projection from the front of the patient (Anterior) to the back  of the patient (Posterior)                                                                                                                                                                           |

 

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1

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| CAD                             |   | Computer  Aided (or assisted) Detection                                                                                                                                                                                                                                                               |
|---------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                            |   |                                                                                                                                                                                                                                                                                                  |
| CAD  Finding                    |   | A  POI in a radiological study that is found by the ICCT SVR and presented to  the Study Reporter by the ImageChecker-CT workstation.                                                                                                                                                                 |
|                            |   |                                                                                                                                                                                                                                                                                                  |
| CFR                             |   | Code  of Federal Regulations                                                                                                                                                                                                                                                                          |
|                            |   |                                                                                                                                                                                                                                                                                                  |
| Concurrent  Read                |   | In  CAD radiological systems, the process of reviewing the images and the CAD  findings concurrently                                                                                                                                                                                                  |
|                            |   |                                                                                                                                                                                                                                                                                                  |
| *                               |   | *                                                                                                                                                                                                                                                                                                     |
|                            |   |                                                                                                                                                                                                                                                                                                  |
| DICOM  General Purpose Worklist |   | The  DICOM services and data model associated with providing users (like the  ImageChecker-CT Workstation) with a list of tasks to be performed (like  performing CAD processing on a given patient study).  For details see DICOM Supplement 52 or the DICOM 2001 standard.                     |
|                            |   |                                                                                                                                                                                                                                                                                                  |
| Finding                         |   | A  conspicuous POI in a radiological study that warrants noting in a  radiological report.                                                                                                                                                                                                            |
|                            |   |                                                                                                                                                                                                                                                                                                  |
| HU                              |   | Hounsfield  Unit – the unit of measure that is used to represent the intensity of voxels  generated by CT scanners. The scale assigns intensities based on water being  assign a value of 0, air a value of – 1000 and bone a value of +1000. This is  also known as “CT Number”. |
|                            |   |                                                                                                                                                                                                                                                                                                  |
| ICCT                            |   | ImageChecker  CT                                                                                                                                                                                                                                                                                      |
|                            |   |                                                                                                                                                                                                                                                                                                  |
| *                               |   | *                                                                                                                                                                                                                                                                                                     |
|                            |   |                                                                                                                                                                                                                                                                                                  |
| *                               |   | *                                                                                                                                                                                                                                                                                                     |
|                            |   |                                                                                                                                                                                                                                                                                                  |
| *                               |   | *                                                                                                                                                                                                                                                                                                     |
|                            |   |                                                                                                                                                                                                                                                                                                  |
| *                               |   | *                                                                                                                                                                                                                                                                                                     |
|                            |   |                                                                                                                                                                                                                                                                                                  |
| Marker                          |   | A  graphic used to mark the location and properties of a finding.                                                                                                                                                                                                                                     |

 

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2

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| MSCT              |   | Multi-Slice  Computed Tomography — the term used to refer to the most recent level of CT  technology which allows multiple images to be acquired with each revolution  of the CT gantry.  This is contrasted  with earlier generation CT technology that was essentially limited to one  slice per gantry revolution. This allows examinations to be completed more  quickly than in single slice scanners or allows more images to be acquired in  the same time as single slice scanners |
|-------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|              |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| POI               |   | A  Point of interest in a radiological Study.                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|              |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| Selected  Finding |   | This  is a finding that has been selected by the end user.  Such findings are visually distinguished  from others by the marker used to indicate their location.                                                                                                                                                                                                                                                                                                                                |
|              |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| Stacked  display  |   | Display  2D views, one at a time under user control, in a single viewport.                                                                                                                                                                                                                                                                                                                                                                                                                           |
|              |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| Tiled  display    |   | Display  2D views NxM at time under user control, in an NxM matrix of viewports.  The matrices simulate pages of film.                                                                                                                                                                                                                                                                                                                                                                          |
|              |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| Viewport          |   | A  window on the screen dedicated to the display of a view of a CT Image.  The view may be 2 or 3 dimensional.                                                                                                                                                                                                                                                                                                                                                                                  |

 

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3

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# **2.**              Stakeholder And User Descriptions

 

## **2.1****                               Stakeholder Summary**

 
| **Name** |   | **Represents** |   | **Role** |
|----------|--------|----------------|--------|----------|
| *        |   | *              |   | *        |
|     |   |           |   |     |

 

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4

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## **2.2          User Summary**

 
| **Name**                |   | **Description**                                                                                                                              |
|-------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------|
| Clinical  Administrator |   | This  role makes sure that all necessary patient studies are on the system and  ensures all studies and reports are stored safely after use  |
|                    |   |                                                                                                                                         |
| Study  Reporter         |   | This  role performs the clinical interpretation of the studies with the goal of  creating and editing radiological reports                   |
|                    |   |                                                                                                                                         |
| System  Administrator   |   | This  role performs installation and configuration of the system from a technical  perspective, possibly performing these functions remotely |

 

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5

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# **3.**              Product Overview

 

## **3.1          Product Perspective**

 

The solution will offer an integrated lung noduledetection and presentation solution as an optional add-on module to Vitrea. *

 

 

## **3.2          Modes of data input**

 

The Data source in this context can be any DICOM Imagerepository (such as a PACS archive) or a CT Modality. *

 

*

 

## **3.3          Usage Scenario**

 

*

 

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6

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## **3.4          Cost and Pricing**

 

*

 

## **3.5          Licensing and Installation**

 

*

 

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7

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# **4.             Product Features**

 

## **4.1         ***

 

4.1.1 *

4.1.2 *

4.1.3 *

 

## **4.2          Application Overview ***

 

4.2.1 *

4.2.2 *

4.2.3 *

4.2.4 *

4.2.5 *

4.2.6 *

4.2.7 *

 

## **4.3          Application Performance and QualityObjectives ***

 

4.3.1 *

4.3.2 *

4.3.3 *

 

## **4.4          * - Study List**

 

## **4.5          Application Details ***

 

4.5.1 *

4.5.2 *

4.5.3 *

4.5.4 *

4.5.5 *

4.5.6 *

4.5.7 *

4.5.8 *

 

## **4.6          ***

 

# **5.             ***

 

## **5.1          ***

 

# **6.             ***

 

**

 

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** The next 14 pages havebeen omitted

 

8

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# **7.             Documentation Requirements**

 

## **7.1          User Manual**

 

## *

 

## **7.2          Service Manual**

 

## *

 

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9

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**AppendixA**

*

 

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10

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**EXHIBIT B**

** **

**INTENTIONALLYLEFT BLANK**

 

1

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**EXHIBITC**

 

**PRICELIST**

 

Transfer Price:  The transfer price for R2 Products shall becalculated using the applicable base price for R2 Products (determined bywhether R2 Products are sold to Customers located either inside or outside theU.S. as set forth below), less the Estimated Server Price.

 

For purposes of the foregoing, “Estimated ServerPrice” means the estimated price of a Server, based on the average price forall Servers purchased during the first Quarter after either the Europe Date orthe US Date, whichever occurs first.  Tothe extent the Estimated Server Price is significantly different from theactual Server price, the Estimated Server Price will be adjusted each Quarterbased upon the actual price of Servers in the preceding Quarter.  At the end of each Quarter, if the EstimatedServer Price for all Servers purchased is less than the actual Server price forsuch Quarter, VTAL shall pay the difference in accordance with the paymentterms set forth in Section 8.10.  If theEstimated Server Price is greater than the actual Server price, VTAL will becredited the difference against purchases of R2 Products in the next Quarter.

 
| R2 Products placed in U.S.           |   | *      |
|--------------------------------------|--------|--------|
|                                 |   |   |
| Maintenance  in U.S.                 |   | *      |
|                                 |   |   |
| R2 Products placed outside U.S.      |   | *      |
|                                 |   |   |
| Maintenance  outside U.S.            |   | *      |
|                                 |   |   |
| Suggested Retail Price               |   |   |
|                                 |   |   |
| R2 Products (inside or outside U.S.) |   | *      |
|                                 |   |   |
| Maintenance  inside U.S.             |   | *      |
|                                 |   |   |
| Maintenance  outside U.S.            |   | *      |

 

Notwithstanding the published suggested retail price, VTAL shall besolely responsible for setting the prices of R2 Products and Maintenance to itsCustomers.

 

Volume discounts

 

Cumulative discount:  VTAL willreceive a * discount on units sold beginning with the * unit and an additional* ( *) discount on units sold beginning with the * unit.

 

Quarterly discount:  In anyQuarter, VTAL will receive a  * discountfor units sold beginning with each unit beyond the Quarterly minimum, and anadditional *  (*) discount for unitssold beginning with each unit beyond twice the Quarterly minimum.  By way of non-limiting example, assuming

 

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1

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that the quarterly minimum was * units, VTAL would receive a * discounton units  * sold, and an additional  * discount on units * and greater sold.

 

For the avoidance of doubt, the cumulative discount and the quarterlydiscount are not mutually exclusive.

 

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2

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**EXHIBITD**

 

**WORKSTATIONAND PACS VENDORS**

 

1.               “WorkstationVendors”:

 

•                  *

 

•                  *

 

•                  *

 

•                  *

 

•                  *

 

•                  *

 

2.               “PACS Vendors”:

 

•                  *

 

•                  *

 

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1

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**EXHIBIT E**

** **

**R2 ESCROW AGREEMENT**

** **

This Escrow Agreement is entered into between R2 and VTAL concurrentlywith the Product Distribution Agreement (the “Agreement”), and constitutes anExhibit thereto.  Any capitalized termsnot expressly defined in this Escrow Agreement will have the meanings given tosuch terms in the Agreement.

 

NOW THEREFORE, in consideration of the mutual promises herein, theparties agree as follows:

 

**1.**                                      DEFINITIONS

** **

(a)                                  “EscrowMaterials” means the human readable, source code of the R2 Product,including any corrections, bug fixes, maintenance modifications, customizationsor improvements provided by R2 to VTAL, and associated documentation andmanuals, provided by R2 hereunder.

 

(b)                                 “TriggeringEvent” means an event which will trigger the release of the EscrowMaterials as set forth in Section 3, and which event will trigger the vestingof VTAL’s rights under the license grant in Section 2(a).

 

**2.**                                      LICENSE

** **

(a)                                  LicenseGrant. Subject to the occurrence of a Triggering Event and all other termsand conditions of this Escrow Agreement, R2 hereby grants to VTAL a perpetual,non-exclusive, non-transferable, limited license to use the Escrow Materialsinternally for the sole purpose of supporting Customers of the R2 Product, asof the date of termination or expiration of the Agreement.  VTAL shall not use the Escrow Materials forany other commercial purposes.  VTALacknowledges and agrees that R2 shall not be obligated to provide any supportor maintenance for the Escrow Materials, whatsoever.

 

(b)                                 LicenseRestrictions.  VTAL’s rights in thelicense granted in Section 2 (a) above shall not vest until the occurrence of aTriggering Event.  VTAL shall not, andshall not permit any third party to: (i) modify or create any derivativeworks based on the Escrow Materials or any portion thereof; (ii) time-share orotherwise use the Escrow Materials to operate a service bureau; (iii) use theEscrow Materials anywhere other than at VTAL’s business facilities; (v) reproducethe Escrow Materials other than for archival or back-up purposes; or (vi) usethe Escrow Materials in any way other than as permitted in Section 2(a).

 

(c)                                  EscrowMaterials Security.**** VTAL shall use the Escrow Materials only under carefully controlledconditions, will treat the Escrow Materials with the same security measures asVTAL treats its own most valuable trade secrets (but in no event less than astandard of care typical for the treatment of Escrow Materials).  VTAL shall restrict access to the EscrowMaterials to those employees and third party contractors of VTAL who haveagreed to be bound by a confidentiality obligation at least as protective ofR2’s rights as this Escrow Agreement, and who have a need to access the EscrowMaterials for the purposes allowed in this Escrow Agreement.

 

(d)                                 Ownership.  Except for those limited rights expresslygranted in Section 2(a), R2 and its third party licensors retain all right,title and interest in and to the Escrow Materials, including all

 

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Intellectual Property Rights therein.  VTAL acknowledges that the license grantedpursuant to this Escrow Agreement is not a sale and does not transfer to VTALtitle or ownership of the Escrow Materials, but only a right of limited use forthe purposes stated herein.  ALL RIGHTSNOT EXPRESSLY GRANTED HEREUNDER ARE RESERVED TO R2.

 

**3.**                                      TRIGGERINGEVENT

** **

(a)                                  TheEscrow Materials shall be delivered to VTAL by R2’s designated escrow agent(approved by VTAL), and VTAL’s rights under the license granted in Section 2(a)shall vest only upon a breach by R2, which breach continues uncured for aperiod of forty (45) days from the date VTAL gives written notice to R2, of anymaterial support obligation as set out in the Agreement, which supportobligation requires access to the Escrow Materials in order to befulfilled.  For avoidance of doubt, anyfailure to comply with such support obligations as a result of a Force Majeureshall not be deemed a breach for purposes of this Section 3(a).

 

**4.**                                      TERM ANDTERMINATION

** **

(a)                                  Term.** **This Escrow Agreement willcommence as of the Effective Date and will remain in full force and effectuntil termination or expiration of the Agreement or until otherwise terminatedas set forth below.

 

(b)                                 Terminationfor Cause.  Either party mayterminate this Escrow Materials Agreement immediately if the other party failsto cure a material breach within ten (10) days written notice from thenon-breaching party of such material breach. R2 may terminate this Escrow Agreement immediately, upon notice, if VTALbreaches any provision of Sections 2(b) or 2(c).

 

(c)                                  Effectsof Termination.  Upon termination ofthis Escrow Agreement for any reason: (i) the rights and licenses granted toVTAL hereunder will immediately terminate; (ii) VTAL shall immediately discontinueany use of the Escrow Materials and shall return or destroy all copies of theEscrow Materials; (iii) each party shall promptly return or destroy allConfidential Information of the other party; and (iv) Sections 1, 2(d), 4(c),6, 7 and 8 shall survive.

 

**5.**                                      CONSIDERATION

** **

(a)                                  EscrowFees.  VTAL shall be responsible forall fees charged by the escrow agent for maintaining the Escrow Materials inescrow.

 

(b)                                 Taxes.  All fees specified hereunder do not includeand are net of any taxes or duties of any kind which may be imposed by anygovernmental entity on the transactions contemplated by this Escrow MaterialsAgreement, and VTAL shall be solely responsible for all such taxes or dutiesother than U.S. taxes based solely on R2’s income.

 

**6.**                                      WARRANTY ANDDISCLAIMER

** **

(a)                                  LimitedWarranty.  R2 represents andwarrants to VTAL that the Escrow Material will contain the source code for theR2 Product.

 

(b)                                 Disclaimer.  EXCEPT AS EXPRESSLY SET FORTH IN 6(a) ABOVE,THE ESCROW MATERIALS ARE PROVIDED “AS IS” WITHOUT WARRANTY OF ANY KIND.  R2 MAKES NO WARRANTIES, WHETHER EXPRESS,IMPLIED, STATUTORY OR OTHERWISE WITH RESPECT TO THE ESCROW MATERIALS INCLUDINGTHEIR CONDITION, CONFORMITY TO ANY REPRESENTATION OR DESCRIPTION OR THE EXISTENCEOF ANY LATENT OR PATENT DEFECTS AND R2 SPECIFICALLY

 

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DISCLAIMS ALL IMPLIED WARRANTIES OF MERCHANTABILITY,FITNESS FOR A PARTICULAR PURPOSE, AND NON-INFRINGEMENT.  R2 DOES NOT WARRANT THAT THE ESCROWMATERIALS WILL BE ERROR-FREE OR THAT THE ESCROW MATERIALS WILL OPERATE WITHOUTINTERRUPTIONS.

 

**7.**                                      INDEMNITY

** **

VTAL shall defend, indemnify and hold harmless R2, its affiliates,employees, officers, directors and agents from and against any and all claims,proceedings, actions, costs, expenses, damages and liabilities arising out ofor related to VTAL’s use of the Escrow Material; provided that R2: (i) promptlynotifies VTAL of any claim, action, suit, or other proceeding for which it isseeking indemnification; (ii) provides VTAL with sole control of the defensethereof; and (iii) provides VTAL, at VTAL’ expense and request, withreasonable assistance and full information with respect thereto.  R2 shall have the right to participate, atits own expense, with counsel of its own choosing in the defense and/orsettlement of such claim, suit or proceeding.

 

**8.**                                      LIMITATIONOF LIABILITY

** **

EXCEPT FOR A BREACH OF SECTION 2.2 OR 2.3, AND FOR OBLIGATIONS UNDERSECTION 7, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR INDIRECT,INCIDENTAL, SPECIAL OR OTHER CONSEQUENTIAL DAMAGES, INCLUDING WITHOUTLIMITATION DAMAGES FOR LOSS OF PROFITS, DATA OR USE, INCURRED BY EITHER PARTYOR ANY THIRD PARTY, ARISING OUT OF OR RELATED TO THIS ESCROW MATERIALSAGREEMENT WHETHER IN AN ACTION IN CONTRACT, TORT, OR OTHERWISE, EVEN IF THEOTHER PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.  EXCEPT FOR A BREACH OF SECTION 2.2 OR 2.3,AND FOR OBLIGATIONS UNDER SECTION 7, IN NO EVENT SHALL EITHER PARTY’S TOTALLIABILITYARISING OUT OF OR RELATED TO THIS ESCROW AGREEMENT EXCEED THE LICENSEFEES PAID BY VTAL TO R2 HEREUNDER.  THEPARTIES AGREE THAT THE FOREGOING LIMITATIONS REPRESENT A REASONABLE ALLOCATIONOF RISK UNDER THIS ESCROW AGREEMENT.

 

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**EXHIBITF**

** **

**INTENTIONALLYLEFT BLANK**

 

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**EXHIBITG**

 

**TERMSAND CONDITION**

 

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**VITAL IMAGES, INC.**

**SOFTWARE LICENSE AGREEMENT**

 

THIS SOFTWARE LICENSE AGREEMENT (“License Agreement”) is made as of                                ,200  , by and between Vital Images, Inc., 3300 Fernbrook Lane N.,Suite 200, Plymouth, Minnesota 55447 U.S.A. (“Vital Images”) and                                                                             ,having its principal place of business at                                                                                          (“Licensee”).

 

# **Recitals**

 

A.                                   VitalImages develops and licenses proprietary medical visualization softwareproducts (defined below as the “Products”).

 

B.                                     Licenseedesires to license and use the Products, and Vital Images so agrees, subject tothe terms and conditions of this License Agreement.

 

## **ARTICLE 1: DEFINITIONS**

##  

For purposes of this License Agreement, the following words, terms andphrases shall have the following meanings unless the context otherwiserequires:

 

1.1                                 ConfidentialInformation.  “ConfidentialInformation” shall mean all information disclosed by Vital Images to Licenseeor embodied in the Products, regardless of the form in which it is disclosed,which relates to markets, customers, products, patents, inventions, procedures,methods, designs, strategies, plans, assets, liabilities, prices, costs,revenues, profits, organization, employees, agents, resellers or business ingeneral of Vital Images, or the algorithms, programs, user interfaces andorganization of the Products.

 

1.2                                 Products.  “Products” shall mean only those computersoftware products in object code form as described in Exhibit A and any relateduser documentation as released from time to time by Vital Images, including anylater authorized releases or versions of such software or documentation duringthe term of this License Agreement.

 

## **ARTICLE 2: LICENSE GRANT AND USE**

 

2.1                                 LicenseGrant.  In consideration forLicensee’s payment of the applicable license fee, and subject to the terms ofthis License Agreement, Vital Images hereby grants to Licensee a nonexclusive,non-transferable license (“License”) to use the Products only on one (1)computer of the type described in Exhibit B attached hereto (“DesignatedEquipment”), and only at the site described in Exhibit B (“DesignatedSite”).  Licensee must purchase aLicense for each computer at a Designated Site on which it desires to installand use the Products.  Licensee’s use ofthe Products shall be limited to Licensee’s internal business activities.

 

2.2                                 Restrictionson Use.  Licensee shall not engagein, cause or permit the reverse engineering, disassembly, recompilation,modification or any similar manipulation of the Products, nor may Licenseeloan, lease, distribute, assign or otherwise transfer the Products or copiesthereof, in whole or in part, to any third party.  Licensee may not install, use or access the Products at or fromany location other than a Designated Site, or on any type of computer otherthan the Designated Equipment, without the prior written approval of VitalImages.

 

2.3                                 Copying.  Licensee shall not copy the Products, exceptthat Licensee may make and maintain one (1) copy of the Products for back-upand archival purposes, provided such copy includes all Vital Images copyright,proprietary rights and other notices included on or in the Products.

 
| *January 2002  Version 3.0* | *Vital Images Confidential* |   |
|----------------------------------|-----------------------------|--------|

 

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2.4                                 Ownership.  All right, title and interest in theProducts shall at all times remain the property of Vital Images and itslicensors, subject to the Licenses granted to Licensee under this LicenseAgreement.  Licensee understands andagrees that it takes title only to the media on which the Products are providedto it, but that the Products shall remain the property of, and proprietary to,Vital Images.

 

## **ARTICLE 3: TERMINATION**

 

3.1                                 Termination.

 

(a)                                  Eitherparty may terminate this License Agreement at any time if the other party failsto cure its material breach hereof within thirty (30) days after its receipt ofnotice specifying such breach from the other party.

 

(b)                                 VitalImages may terminate this License Agreement at any time immediately uponLicensee (i) becoming insolvent, (ii) commencing, or having commenced against it(without dismissal within sixty (60) days), any bankruptcy, insolvency,liquidation, reorganization or similar proceeding under any U.S. or foreignlaw, (iii) making an assignment for the benefit of its creditors, (iv)admitting in writing its inability to satisfy its debts in the ordinary courseof business or that its business or financial condition indicates that it ispresently unable to continue as a going concern, or (v) taking an actionresulting in or directed to ceasing, on a permanent basis, its business orrelevant operations; or

 

(c)                                  Licenseemay terminate this License Agreement or any License granted hereunder at anytime by giving written notice to Vital Images.

 

3.2                                 Effectof Termination of a License.  Uponany termination of a License, Licensee shall (a) immediately cease all use ofthe Products licensed pursuant to such License, and (b) certify in writing toVital Images within thirty (30) days after such termination that Licensee haseither destroyed, permanently erased or returned to Vital Images the Productsand all copies thereof licensed pursuant to such License.

 

3.3                                 Effectof Termination of License Agreement. Upon termination of this License Agreement for any reason, all Licensesto the Products granted hereunder shall immediately terminate, and Licenseeshall return to Vital Images all Confidential Information.  Articles 2.4, 5, 6, 7, 8 and 9 shall surviveany termination of this License Agreement.

 

## **ARTICLE 4: ADVERSE REACTIONS; PRODUCT RECALLS**

##  

4.1                                 AdverseEvent Reporting.  Licensee shalladvise Vital Images, by telephone or facsimile, within twenty-four (24) hoursafter it becomes aware of any adverse event from the use of any Product ormalfunction of any Product.  Unlessotherwise required by applicable local laws, Licensee shall advise Vital Imagesof any such adverse event prior to any report or filing being made with theU.S. Food and Drug Administration (“FDA”) or any other comparable regulatorybody elsewhere in the world.

 

4.2                                 ProductRecall; Corrective Action.

 

(a)                                  CorrectiveAction.  If Vital Images believesthat a corrective action with respect to the Products is desirable or requiredby law, or if any governmental agency having jurisdiction (including withoutlimitation, the FDA) shall request or order any corrective action with respectto the Products, including any recall, customer notice, restriction, change,corrective action or market action or any Product change, Vital Images or itsreseller shall promptly notify Licensee. Licensee shall comply with all reasonable directions regarding suchcorrective action, including the return of the Products to Vital Images or areseller at Vital Images’ expense.

 

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(b)                                 Refund.  If any Products are required to be returnedto Vital Images or its resellers pursuant to this Article 4.2 and noreplacement is provided therefor by Vital Images, Vital Images shall refund toLicensee any unearned license fees paid (the amount of the license fee Licenseepaid for the Products, less a reasonable value for use determined by proratingthe license fee paid on a thirty-six (36) month straight line amortizationmethod).

 

## **ARTICLE 5: WARRANTIES; INDEMNIFICATION**

 

5.1                                 LimitedWarranty.  Vital Images warrants toLicensee for one (1) year from the delivery date (the “Warranty Period”), thatthe Products, when properly installed and operated, will substantially performthe functions described in the functional specifications for the Products, ascontained in the applicable written documentation for the Products.  Vital Images shall have no obligation toLicensee or any third party under this Article 5.1 if (a) the Products have notbeen properly installed, used or maintained, whether by Licensee or any thirdparty, in accordance with the Licenses granted hereunder or Vital Images’then-applicable operating manuals; or (b) the Products have been modified inany manner or are used or combined with other computer software programs,hardware or data not supplied by Vital Images and without the prior written consentof Vital Images.

 

5.2                                 ExclusiveRemedy.  Vital Images’ entireliability, and Licensee’s exclusive remedy, for any warranty claim made byLicensee under Article 5.1 above during the Warranty Period shall be for VitalImages, at its option, to either (a) replace any defective media which preventsthe Products from satisfying the limited warranty described in Article 5.1; (b)attempt to correct any material and reproducible errors reported by Licensee;or (c) terminate this License Agreement and refund the license fee paid for theProducts.  Vital Images does not warrantthat the operation of the Products will be uninterrupted or error-free, thatall errors in the Products will be corrected, that the Products will satisfyLicensee’s requirements or that the Products will operate in the combinationswhich Licensee may select for use.

 

5.3                                 LimitedWarranty.  Vital Images warrants toLicensee that the Products, when properly installed and operated, will produceno material errors when processing dates prior to, during and after thecalendar year 2000.  Vital Images shallhave no obligation to Licensee or any third party under this Article 5.3 if (a)the Products have not been properly installed, used or maintained, whether byLicensee or any third party, in accordance with the Licenses granted hereunderor Vital Images’ then-applicable operating manuals; (b) the Products have beenmodified in any manner or are used or combined with other computer softwareprograms, hardware or data; or (c) the material error reported by Licensee isnot reproducible by Vital Images.

 

5.4                                 ExclusiveRemedy.  Vital Images’ entireliability, and Licensee’s exclusive remedy, for any breach of the warranty inArticle 5.3 above shall be for Vital Images, at its option, to either (a)attempt to correct such material and reproductive errors, or (b) terminate theLicense to such Products and refund any unearned license fees paid (the amountof the license fee Licensee paid for the Products, less a reasonable value foruse determined by prorating the license fee paid on a thirty-six (36) monthstraight-line depreciation method) with no further liability to Licensee.  This Article 5.4 states Licensee’s exclusiveremedy, and Vital Images and its licensors’ entire liability for any breach ofthe warranty set forth in Article 5.3.

 

5.5                                 WarrantyDisclaimer.  THE WARRANTIES SETFORTH IN ARTICLES 5.1 AND 5.3 ABOVE ARE EXCLUSIVE AND IN LIEU OF ALL OTHERWARRANTIES, EXPRESS OR IMPLIED, WHICH ARE HEREBY DISCLAIMED AND EXCLUDED BYVITAL IMAGES, INCLUDING WITHOUT LIMITATION ANY WARRANTY OF MERCHANTABILITY,FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OR USE, AND ALL OBLIGATIONSOR LIABILITIES ON THE PART OF VITAL IMAGES FOR DAMAGES ARISING OUT OF OR INCONNECTION WITH THE USE, MAINTENANCE OR PERFORMANCE OF THE PRODUCTS.  Repair or replacement of all or any part ofthe Products does not extend the Warranty Period, which shall begin on thedelivery date.  Vital Images and its thirdparty licensors expressly disclaim any commitment to provide maintenance orsupport of the Products beyond the Warranty Period, in the absence of aLicensee entering into a separate agreement with Vital Images or itsreseller.  Furthermore, the Products arederived from and include

 

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software from third party licensors, who make nowarranty, express or implied, regarding the Products, who disclaim any and allliability for the Products and who will not undertake to provide anyinformation or support regarding the Products.

 

5.6                                 InfringementIndemnity.  Vital Images herebyagrees to indemnify, defend and hold Licensee harmless from any third partysuit, claim or other legal action (“Legal Action”) that alleges the Productsinfringe any United States patent, copyright, or trade secret, including anyaward of damages and costs made against Licensee by a final judgment of a courtof last resort based upon a Legal Action, provided that:  (a) Licensee gives written notice of anyLegal Action to Vital Images within fifteen (15) days of Licensee’s firstknowledge thereof; (b) Vital Images has sole and exclusive control of thedefense of any Legal Action, including the choice and direction of any legalcounsel, and all related settlement negotiations; and (c) Licensee providesVital Images (at Vital Images’ expense for reasonable out-of-pocket expenses)with assistance, information and authority to perform the above.

 

Notwithstanding the foregoing, Vital Images and itslicensors shall have no liability for any Legal Action based on or arising outof:  (a) the failure by Licensee to usea non-infringing version or release of the Products if made available by VitalImages, (b) the combination, operation or use of the Products with software,hardware or data not furnished by Vital Images, if such Legal Action would havebeen avoided by use of the Products without such software, hardware or data, or(c) the use of any Products in a manner for which it was neither designed norcontemplated.

 

In the event that the Products are held or arebelieved by Vital Images to infringe, Vital Images shall, at its option andexpense, (a) modify the infringing Products, (b) obtain for Licensee a licenseto continue using such Products, (c) substitute the Products with othersoftware reasonably suitable to Licensee, or (d) if none of the foregoing arecommercially feasible, terminate the License to such Products and refund anyunearned license fees paid (the amount of the license fee paid for theProducts, less a reasonable value for use determined by prorating the licensefee paid on a thirty-six (36) month straight-line amortization method) with nofurther liability to Licensee.

 

This Article 5.6 states Licensee’s exclusive remedy,and Vital Images’ and its licensors’ entire liability, for any infringementclaim related to the Products or their use.

 

**ARTICLE 6: LIMITATION OF REMEDIES**

 

6.1                                 Delay.  VITAL IMAGES SHALL NOT BE LIABLE FOR ANYLOSS OR DAMAGE CAUSED BY DELAY IN FURNISHING PRODUCTS OR SERVICES OR ANY OTHERPERFORMANCE UNDER THIS LICENSE AGREEMENT.

 

6.2                                 SoleRemedies.  THE SOLE AND EXCLUSIVEREMEDIES FOR BREACH OF ANY AND ALL WARRANTIES AND THE SOLE REMEDIES FOR VITALIMAGES’ LIABILITY OF ANY KIND (INCLUDING LIABILITY FOR NEGLIGENCE OR PRODUCTLIABILITY) WITH RESPECT TO THE PRODUCTS AND SERVICES COVERED BY THIS LICENSEAGREEMENT AND ALL OTHER PERFORMANCE BY VITAL IMAGES UNDER THIS LICENSEAGREEMENT SHALL BE LIMITED TO THE REMEDIES PROVIDED IN ARTICLE 5 OF THISLICENSE AGREEMENT.

 

6.3                                 DamagesLimitation.  VITAL IMAGES SHALL HAVENO LIABILITY OF ANY KIND FOR ANY SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIALLOSS OR DAMAGE, EVEN IF VITAL IMAGES SHALL HAVE BEEN ADVISED OF THE POSSIBILITYOF SUCH POTENTIAL LOSS OR DAMAGE, ANDEVEN IF A REMEDY SET FORTH HEREIN IS FOUND TO HAVE FAILED OF ITS ESSENTIALPURPOSE.  THE DAMAGES LIMITATION SETFORTH IN THIS ARTICLE 6.3 SHALL INCLUDE, BUT NOT BE LIMITED TO, ANYLIABILITY FOR DAMAGES ARISING OUT OF OR RESULTING FROM THE USE, MAINTENANCE ORPERFORMANCE OF THE PRODUCTS, INCLUDING, WITHOUT LIMITATION, THE LOSS ORCORRUPTION OF LICENSEE’S OR ANY THIRD PARTY DATA.  IN NO EVENT SHALL VITAL IMAGES BE LIABLE FOR ANY DAMAGES

 

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IN EXCESS OF THE AGGREGATE AMOUNTS ACTUALLY PAID BYLICENSEE TO VITAL IMAGES UNDER THIS LICENSE AGREEMENT.

 

**ARTICLE 7: CONFIDENTIALITY**

 

7.1                                 ConfidentialInformation.  All ConfidentialInformation shall be deemed confidential and proprietary to Vital Images, andare the sole and exclusive property of Vital Images.  Licensee may use the Confidential Information during the term ofthis License Agreement only as permitted hereunder or as necessary in order touse the Products in accordance with the License(s) granted hereunder.  Licensee shall not disclose or provide anyConfidential Information to any third party and shall take reasonable measuresto prevent any unauthorized disclosure by Licensee’s employees, agents,contractors or consultants during the term hereof including appropriateindividual nondisclosure agreements.

 

7.2                                 Exclusions.  The following information shall not beconsidered Confidential Information under this Article 7:

 

(a)                                  Informationwhich is or becomes in the public domain through no fault or act of Licensee;

 

(b)                                 Informationwhich was independently developed by Licensee without the use or reliance onVital Images’ Confidential Information; or

 

(c)                                  Informationwhich was provided to Licensee by a third party under no duty ofconfidentiality to Vital Images.

 

7.3                                 PermittedDisclosure.  Nothing in Article 7.1shall restrict disclosure by Licensee as required by applicable law,regulation, or the order of any court or administrative agency havingjurisdiction regarding such matters, provided, however, Licensee gives promptnotice thereof to Vital Images prior to such disclosure.

 

7.4                                 Cooperation.  At Vital Images’ request, Licensee shallcooperate fully with Vital Images in any and all legal actions taken by VitalImages to protect its rights in the Products and in the ConfidentialInformation.  Vital Images shall bearall out-of-pocket costs and expenses reasonably incurred by Licensee in thecourse of such cooperation.

 

**ARTICLE 8: ARBITRATION**

 

8.1                                 DisputeResolution.  Except as provided inArticle 8.2 below, Vital Images and Licensee shall each use its best efforts toresolve any dispute between them promptly and without resort to any legalprocess if feasible within thirty (30) days of receipt of a written notice byone party to the other party of the existence of such dispute.  The foregoing requirement in this Article8.1 shall be without prejudice to either party’s right, if applicable, toterminate this License Agreement under Article 3.1 above.

 

8.2                                 LitigationRights Reserved.  If any disputearises with regard to Licensee’s unauthorized use of the Products orunauthorized use or infringement of Confidential Information, Vital Images mayseek any available remedy at law or in equity from a court of competentjurisdiction.

 

8.3                                 Procedurefor Arbitration.  Except as providedin Article 8.2 above, any dispute, claim or controversy arising out of or inconnection with this License Agreement which has not been settled throughnegotiation within a period of thirty (30) days after the date on which eitherparty shall first have notified the other party in writing of the existence ofa dispute shall be settled by final and binding arbitration under thethen-applicable Commercial Arbitration Rules or, if Licensee’s principal placeof business is outside the United States, the International Arbitration Rulesof the American Arbitration Association (“AAA”).  Any such arbitration shall be conducted by three (3) arbitratorsappointed by mutual agreement of the parties or, failing such agreement, inaccordance with said Rules.  At leastone (1) arbitrator shall be an experienced computer software professional, andat least one (1) arbitrator shall be an experienced business attorney

 

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with a background in the licensing and distribution ofcomputer software.  Any such arbitrationshall be conducted in Minneapolis, Minnesota, U.S.A. in the Englishlanguage.  An arbitral award may beenforced in any court of competent jurisdiction.  Notwithstanding any contrary provision in the AAA Rules, the followingadditional procedures and rules shall apply to any such arbitration:

 

(a)                                  Eachparty shall have the right to request from the arbitrators, and the arbitratorsshall order upon good cause shown, reasonable and limited pre-hearingdiscovery, including (i) exchange of witness lists, (ii) depositions under oathof named witnesses at a mutually convenient location, (iii) writteninterrogatories and (iv) document requests.

 

(b)                                 Uponconclusion of the pre-hearing discovery, the arbitrators shall promptly hold ahearing upon the evidence to be adduced by the parties and shall promptly rendera written opinion and award.

 

(c)                                  Thearbitrators may not award or assess punitive damages against either party.

 

(d)                                 Eachparty shall bear its own costs and expenses of the arbitration and one-half(1/2) of the fees and costs of the arbitrators, subject to the power of thearbitrators, in their sole discretion, to award all such reasonable costs,expenses and fees to the prevailing party.

 

**ARTICLE 9: MISCELLANEOUS**

 

9.1                                 Assignment.  Licensee shall not have the right to assignor otherwise transfer its rights or obligations under this License Agreementexcept with the prior written consent of Vital Images, which consent shall notbe unreasonably withheld.  This LicenseAgreement shall be binding on the parties hereto and their respectivesuccessors and permitted assigns.  Anyprohibited assignment shall be null and void.

 

9.2                                 Notices.  Notices permitted or required to be givenhereunder shall be deemed sufficient if given by registered or certified mail,postage prepaid, return receipt requested, by private courier service, or byfacsimile addressed to the respective addresses of the parties as first abovewritten or at such other addresses as the respective parties may designate bylike notice from time to time.  Noticesso given shall be effective upon (a) receipt by the party to which the noticeis given, or (b) on the fifth (5th) day following domestic mailingor the tenth (10th) day following international mailing, as may bethe case, whichever occurs first.

 

9.3                                 Exportsand U.S. Government Rights.  Licenseehereby acknowledges that it will not export or reexport any of the Products ortechnical data (which includes, among other things, any technical informationrelating to the Products, written or otherwise), or any product incorporatingany Products or technical data.  TheProducts are provided with Restricted Rights. Use, duplication or disclosure by the U.S. government is subject torestrictions as set forth in (a) this License Agreement pursuant to DFARs227.7202-3(a); (b) subparagraph (c)(1)(i) of the Rights in Technical Data andComputer Software clause at DFARs 252.227-7013; or (c) the Commercial ComputerSoftware Restricted Rights clause at FAR 52.227-19 subdivision (c)(1) and (2),as applicable.  Contractor/manufactureris Vital Images, Inc., 3100 West Lake Street, Suite 100, Minneapolis, Minnesota55416 U.S.A.

 

9.4                                 EntireAgreement.  This License Agreement,including the Exhibits attached hereto which are incorporated herein,constitutes the entire agreement of the parties with respect to the subjectmatter hereof and supersedes all prior agreements by and between Licensee andVital Images as well as all proposals, oral or written, and all priornegotiations, conversations and discussions between the parties related hereto.

 

9.5                                 Amendment.  This License Agreement may not be modified,amended, rescinded, canceled or waived, in whole or in part, except by writtenamendment signed by both parties hereto.

 

9.6                                 GoverningLaw.  This License Agreement shallbe governed by and interpreted under the laws of the State of Minnesota,U.S.A., excluding (a) its choice of law rules, and (b) the United NationsConvention on the International Sale of Goods.

 

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9.7                                 Severability.  If any provision of this License Agreementis found unenforceable under any of the laws or regulations applicable thereto,such provision terms shall be deemed stricken from this License Agreement, butsuch invalidity or unenforceability shall not invalidate any of the otherprovisions of this License Agreement.

 

9.8                                 Waiver.  No failure by either party to take anyaction or assert any right hereunder shall be deemed to be a waiver of suchright in the event of the continuation or repetition of the circumstancesgiving rise to such right.

 

9.9                                 Attorneys’ Fees.  Subject to Article 8.3, if any action at lawor in equity is necessary to enforce or interpret the terms of this LicenseAgreement, the substantially prevailing party shall be entitled to itsreasonable attorneys’ fees and costs in addition to any other relief such partymay be entitled.

 

9.10                           Counterparts.  This License Agreement may be executed byfacsimile and in two or more counterparts in the English language and each suchcounterpart shall be deemed an original hereof.  In case of any conflict between the English version and anytranslated version of this License Agreement, the English version shall govern.

 

9.11                           FurtherAssurances.  The parties shallperform all such further acts, provide such further documents or writtenassurances, and execute such further documents as are reasonably required ornecessary to carry out the acts and transactions contemplated by this LicenseAgreement.

 

IN WITNESS WHEREOF, the parties have executed thisLicense Agreement by their duly authorized representatives.

 
| VITAL IMAGES, INC. | LICENSEE |
|--------------------|----------|
|               |     |
|               |     |
| By                 |     |   | By |   |   |
|               |     |   |   |   |   |
| Name               |     |   | Name |   |   |
|               |     |   |   |   |   |
| Title              |     |   | Title |   |   |
|                    |          |  |  |  |  |  |  |  |  |  |  |

 

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**VITAL IMAGES, INC.**

**END USER AGREEMENT**

 

**EXHIBIT A**

**PRODUCTS**

 

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**VITAL IMAGES, INC.**

**DEMONSTRATION LICENSE AGREEMENT**

 

**EXHIBIT B**

**DESIGNATED EQUIPMENT AND SITE**

 

**DesignatedEquipment:**

 

 

**DesignatedSite:**

 

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**EXHIBITH**

 

**MAINTENANCEAND SUPPORT**

 

A.                                   First LevelMaintenance.  During the WarrantyPeriod and for so long as a Customer participates in the Maintenance Program,VTAL shall provide telephone, email, on-site emergency support during normalbusiness days and normal business hours (as determined locally by the time-zoneand customs in the country in which the R2 Product is installed).  If the problem reported by a Customer is dueto a misunderstanding of the documentation or improperly functioning hardwareor VTAL Workstation software, VTAL’s shall be solely responsible for resolvingthe problem in accordance with the terms of the Maintenance Program.  If the problem is not due to amisunderstanding of the Documentation or improperly functioning hardware orVTAL Workstation software and its cause cannot be determined by VTAL despitecommercially reasonable efforts to determine the cause, VTAL will attempt toduplicate the problem on its own demonstration unit of the R2 Product.  If VTAL determines that the problem reportedby a Customer is due to an error in the R2 Product that VTAL is unable, usingcommercially reasonable efforts, to resolve, VTAL may notify R2 of such errorin accordance with Section B, below.

 

B.                                     Second LevelMaintenance.  During the WarrantyPeriod and for so long as a Customer participates in the Maintenance Program,R2 shall use commercially reasonable efforts to provide to telephone and emailsupport to VTAL regarding the R2 Product during R2’s normal business hours, andto provide a fix, patch or workaround for errors that VTAL is unable to resolvein accordance with Section A, above. R2, may, in its discretion, provide emergency on-site support toCustomers.

 

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**EXHIBITI**

 

**SERVERSPECIFICATIONS**

 

**Showcase CAD Server PreliminarySpecifications**

 

The following specification is provided as a guideline.  R2 reserves the right to change thespecification listed here at any time.

 

Specifications for the server for the integrated solution shall becompleted as part of the Development Agreement.

 

**Server Hardware for Showcase Product**

 

Standard MicrosoftTM PC compatible platform with dual CPU @ 2.1 GHz ofbetter with a minimum of 1 GB of RAM

 

1 USB port; standard PS/2 keyboard and PS/w style mouse with10/100BaseT Ethernet port

 

1 x 36 GB HD for images and system

 

Peripherals required are standard IDE CD-RW drive and Floppy Disk drivefor 3.5” media

 

Video board supports 24-bit non-interlaced pixel depth with minimum1024 x 768 pixel resolution at 60 Hz minimum with 4 MB video memory

 

•                  Supports 18 inchSVGA color monitor (not included)

 

**Server Software**

 

•                  Red HatTM LinuxTMOperating System

 

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