EXHIBIT
10.38


 


PRODUCT DISTRIBUTION
AGREEMENT


 


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


 


RECITALS


 


A.                                   R2
is engaged in the business of developing, manufacturing, distributing, and
selling computer aided detection (“CAD” as further defined below) software and
hardware.


 


B.                                     VTAL
is engaged in the business of developing, distributing and selling VTAL
Workstations (as hereafter defined).


 


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


 


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


 


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


 


1.                                      DEFINITIONS


 


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


 


1.2                                 “CAD”
means computer aided detection and similar automated disease detections
systems.


 


1.3                                 “Confidential
Information” has the meaning set forth in Section 13.1


 


1.4                                 “Customer”
means an end user customer to whom VTAL or its distributors, sells the R2
Product.


 


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


 


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


 


1

















 


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


 


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


 


1.8                                 “New
Features” means significant improvements or enhancements, other than
Updates and/or Upgrades, to the operating system, application software or
hardware component of the Lung Nodule CAD Application or R2 Product, as the
context requires, if any.


 


1.9                                 “Maintenance
Program” means the maintenance and support arrangement between VTAL (or its
Subdistributors) and a Customer, as more fully described in Section 3.3.


 


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


 


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


 


1.12                           “R2
Installed Base Sites” means those persons or entities identified on a
separate document delivered by R2 to VTAL quarterly, as may be accurately
updated by R2 from time to time, who are located in the United States and
Europe and are in possession of R2 products (other than demonstration
units).  Notwithstanding anything to the
contrary, R2 Installed Base Sites shall include up to twenty (20) entities
identified by R2 within sixty (60) days of the Effective Date who work with R2
in an advisory or other similar capacity, but who may not have actually
purchased R2 products.


 


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


 


1.14                           “R2
Showcase” means the combination of R2’s proprietary workstation and related
products which incorporate the Lung Nodule CAD Application, as more fully
described in Section 2.8.


 


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


 


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


 


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


 


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


 


2

















 


1.19                           “Updates”
means software bug fixes and corrections that ensure functionality of the Lung
Nodule CAD Application or R2 Product, as the context requires, that are
released by R2 for field use, if any. 
Updates do not include improvements or enhancement to the operating
system, applications software, or hardware and do not include new software
features.


 


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


 


1.21                           “US
Date” means the later of : (a) the date on which R2 obtains FDA approval
for the Lung Nodule CAD Application pursuant to Section 7.1, below, or (ii) the
completion of the milestones in the Development Plan with respect to the R2
Product that will be distributed in the United States.


 


1.22                           “VTAL
Installed Base Sites” means those persons or entities identified on a
separate document delivered by VTAL to R2 quarterly, as may be accurately
updated by VTAL from time to time, who are in possession of one (1) or more
VTAL Workstation(s) (other than demonstration units).


 


1.23                           “VTAL
Workstation” means any VTAL workstation and the components thereof, including
without limitation the Vitrea brand workstation, consisting of hardware,
display devices and Vitrea and other software applications.


 


1.24                           “Warranty
Period” means a period of one (1) year after delivery and installation of
the R2 Product at a Customer location.


 


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


 


2.                                      DEVELOPMENT


 


2.1                                 Development
Efforts.  The parties will develop
and implement a plan to define and test the Specifications and to address other
compatibility issues of the R2 Product with the VTAL Workstation (the “Development
Plan”).  The parties will use their
best efforts to complete and attach the Development Plan to this Agreement as
Exhibit A within fourteen (14) days of the Effective Date.  The parties may amend the Development Plan
as they mutually agree in writing to reflect changes in the
Specifications.  The parties acknowledge
and agree that the development efforts are dependent on mutual cooperation and
performance of each party’s obligations set forth in the Development Plan.


 


2.2                                 Progress
Meetings.  The parties will conduct
meetings each calendar quarter and keep each other reasonably informed with
respect to progress under the Development Plan and other significant changes,
modifications, revisions, or updates that are being planned for their
respective products.


 


2.3                                 DICOM
Standard.  Whenever possible, the
standard of communication for images and the corresponding CAD results between
the CAD component of the R2 Products and the VTAL Workstation shall be the
Digital Imaging and Communications in Medicine (“DICOM”) Standard when such
standard supports the classes and services required.  VTAL agrees that the DICOM header in each acquisition device
contained in the VTAL Workstation shall contain a unique


 


3

















 


identifier
for each such acquisition device.  The
parties shall meet periodically to discuss such changes, modifications,
revisions, or updates, and shall provide each other with such information and
assistance as may be necessary or useful and commercially reasonable to enable
compatibility and interoperability between future versions of the R2 Product
and the VTAL Workstation.  Such changes
and modifications may include, but are not limited to:


 


(a)                                  the
addition or deletion of services supported,


 


(b)                                 changes
to the information contained in the DICOM fields of DICOM headers, including
the use of required fields,


 


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


 


2.4                                 Validation
Testing.  Each party shall provide
commercially reasonable levels of resources necessary to validate DICOM
connectivity and verify clinical usability after each Update, Upgrade or New
Feature, if any.


 


2.5                                 Development
and Test Data.  The development and
testing data provided by VTAL to R2, or generated by R2 under this Agreement,
together with any and all other cases, training databases and other related
materials provided to R2 by VTAL (“Test Data”) will remain the property of
VTAL.  VTAL agrees to remove all personally
identifiable 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 Section
15.1) license to use the Test Data:  (i)
internally for R2’s business and development purposes; and (ii) in aggregate
form, as necessary for the purpose of obtaining the regulatory approvals
described in Section 7.  All Test Data
provided by VTAL to R2 hereunder will be deemed “Confidential Information” of
R2, subject to the obligations of Section 13.2, except for purposes of (ii)
above.


 


2.6                                 Restrictions.  Unless otherwise stated in the Development
Plan, 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 products
and Confidential Information provided hereunder, neither party shall: (a)
reverse engineer, decompile, disassemble, or otherwise attempt to derive any
source code, algorithms, ideas, process, technique, know how, technology, or
other underlying content therefrom; or (b) copy, alter, modify, or create
derivative works of any portion or component thereof; or (c) assist any third
party, or allow or permit any third party within its control, to do any of the
foregoing.


 


2.7                                 Ownership.


 


(a)                                  As
between VTAL and R2, R2 will own, and hereby retains, all right, title, and
interest in and to the Lung Nodule CAD Application and the R2 Product, and any
improvements, enhancements, interface components, and/or derivative works
thereof, and all Intellectual Property Rights relating thereto.  At R2’s request, VTAL will assign or cause
to be assigned to R2 all right, title, interest in and to the foregoing
materials and Intellectual Property Rights therein, and VTAL shall reasonably
assist and cooperate with R2 in prosecuting, maintaining, filing for,
enforcing, and otherwise protecting R2’s rights and interests therein.  Any and all registerable and patentable
designs relating to the Lung Nodule CAD Application and/or the R2 Product, and
the right to apply for protection therefore, shall belong exclusively to R2.


 


4

















 


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


 


2.8                                 R2
Showcase Product.


 


(a)                                  VTAL
acknowledges that R2 is in the process of developing its own workstation
product 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 the
workstation, all accompanying non-CAD related software, and the Lung Nodule CAD
Application, whether such components are sold at the same time or
separately.  Subject to Section 4.1, R2
reserves the right, by itself or with third parties, to develop, market,
promote, sell, and distribute the Lung Nodule CAD Application, and any future
versions, enhancements, derivative works, or modifications thereof, whether
inside or outside of the Territory.


 


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


 


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


 


2.9                                 Costs.  Except as expressly stated herein, each
party shall bear its own costs and expenses in connection with the development
activities contemplated herein.


 


3.                                      DISTRIBUTION


 


3.1                                 Appointment.  Subject to the terms and conditions herein,
R2 hereby authorizes VTAL to distribute the R2 Product within the Territory
either:  (i) installed on, and as part
of the VTAL Workstation; or (ii) to VTAL Installed Base Sites for use solely
with the VTAL Workstation, and


 


5

















 


not on a
stand-alone basis.  VTAL shall include
the terms and conditions attached as Exhibit G (which may be modified from time
to time by either party subject to the other party’s consent, which consent
will not be unreasonably withheld) with the documentation VTAL provides to
Customers.


 


3.2                                 Subdistributors.  VTAL’s distributors, resellers and channel
partners that are authorized in writing by VTAL (“Subdistributors”) may also
purchase the R2 Product directly from R2 for distribution within the Territory
to Customers solely in conjunction with the VTAL Workstation, either as part
thereof, or to Customers already owning a VTAL Workstation for use in
connection therewith, and not on a stand-alone basis, and subject to all other
applicable terms and conditions of this Agreement.  In all events, VTAL shall remain responsible and liable for its
Subdistributors’ compliance with the terms and conditions of this Agreement.


 


3.3                                 Customer
Installation, Service and Support. 
VTAL shall be responsible, at its sole cost and expense, for the
installation of the R2 Product at the Customer site.  VTAL agrees to provide R2 with quarterly reports (no later than
the twentieth (20) business day following February 28, May 31, August 31, and
November 30) stating each Customer’s name, location, contact information and
date of sale.  VTAL shall offer each
Customer the opportunity to enter into a Maintenance Program through which VTAL
will provide, through its own technical personnel, first-level technical
support and maintenance to such Customer, in accordance with Exhibit H.  Customers may also opt to receive quarterly
newsletters and participate in a R2 sponsored Lung Nodule CAD user group under
the Maintenance Program.  R2 shall
provide second-level support to VTAL with respect to all Customers free of
charge during the Warranty Period, and thereafter for Customers in the
Maintenance Program as further set forth in Exhibit H.  VTAL hereby acknowledges that R2 shall have
no responsibility or obligation to provide any support services directly to
Customers; however, upon VTAL’s request and in R2’s sole discretion, R2 may
provide direct support to Customers.  R2
shall make available Updates, free of charge, to all Customers during the
Warranty Period, and thereafter to Customers participating in a Maintenance
Program, 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 further
set forth in Section 8.9.  R2 agrees to
make Updates, Upgrades and New Features for the R2 Product available to VTAL
within the same time frames that R2 makes Updates, Upgrades and New Features
for the Lung Nodule CAD Application generally available, if any.


 


3.4                                 Ongoing
Support.  For so long as a Customer
has a software license for the R2 Product, all software “bug fixes” to the R2
Product that are released by R2 to correct safety and regulatory issues will be
provided by R2 to VTAL free of charge and installed by VTAL on the VTAL
Workstation free of charge.


 


3.5                                 Training.  VTAL shall ensure that its service personnel
are sufficiently skilled and knowledgeable about the R2 Product.  R2 shall provide initial training to VTAL
regarding 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 dates
and locations as mutually agreed between the parties.


 


3.6                                 Hardware
Procurement.  VTAL shall purchase
directly 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 such
Servers.  VTAL will


 


6

















 


install
the R2 Product (shipped by R2 in accordance with Section 6) on the Servers at
VTAL’s expense.


 


4.                                      EXCLUSIVITY


 


4.1                                 By
R2.  R2 shall not license or
otherwise provide lung nodule CAD technology to any vendors of freestanding
workstations for sale in the United States, Canada or European Union and
identified on Exhibit D (“Workstation Vendors”).  Notwithstanding the foregoing, R2 shall not be restricted from
providing the lung nodule CAD technology to: (i) any other third party
workstation vendor not listed in Exhibit D; (ii) any PACS vendor identified on
Exhibit D that sells workstations in conjunction with PACS (“PACS Vendor”);
provided that R2 shall not provide the lung nodule CAD technology to any PACS
Vendor for use with such vendor’s sale of freestanding workstations; (iii) or
to any third party OEM or PACS company that in turn contracts with any
Workstation Vendor identified on Exhibit D.


 


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


 


5.                                      MARKETING


 


5.1                                 VTAL
Responsibilities.  VTAL shall use
commercially reasonable efforts to promote and market the R2 Product.


 


5.2                                 Materials.  R2 will provide assistance to VTAL in the
form of reasonable quantities of promotional and other marketing materials in
English and such other languages as may be available from time to time.  VTAL shall be responsible for such other
translation of promotional materials and other documents required for use of R2
Product in the Territory, and in the event of any such translations, VTAL shall
certify to R2 that any such translations have been appropriately verified, if,
and only to the extent, such verification is required by a regulatory agency in
the country for which the translation was made.  VTAL shall provide to R2 for review an example of each item of
promotional, advertising and educational materials and programs and other
literature 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 the
commercial release of such materials or commencement of such programs.  R2 reserves the right to reject any
promotional materials that contain inaccurate claims regarding the R2 Product
provided 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.


 


5.3                                 Product
Presentation.  Each party represents
and 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 the
other party’s products or services in any material respect, (c) avoid
deceptive, misleading or unethical business practices, (d) avoid false or
misleading representations with regard to the Lung Nodule CAD Application, the
VTAL Workstation or the R2 Product, and (v) avoid soliciting orders for
the R2 Product from any Customer that it knows engages in illegal or deceptive
trade practices.


 


7

















 


5.4                                 Demonstration
and Training Licenses.  VTAL will
provide R2 with a quarterly listing of the total number, broken down by region,
of VTAL direct sales personnel and distributor sales personnel who are selling
the R2 Product.  R2 will provide copies
of the R2 Product, Updates, Upgrades and New Features for demonstration
purposes only to each such salesperson. 
R2 will provide the first five (5) demonstration copies to VTAL free of
charge.  For the remainder, VTAL agrees
to reimburse R2 for the costs to R2 directly attributable to third-party
software licenses purchased by R2 in developing the Lung Nodule CAD
Application, Updates, Upgrades or New Features.  In addition, R2 will provide free of charge up to two (2) copies
of the R2 Product, Updates, Upgrades and New Features (promptly following
release) solely for VTAL’s internal training of its sales personnel.  The total number of copies provided to VTAL
by R2 for demonstration and training purposes will not exceed a total of one
hundred (100) during the first twelve (12) months of this Agreement and will
not exceed a total of two hundred (200) over the term of the Agreement.


 


5.5                                 Trademarks.  Subject to compliance with the terms of this
Agreement, (a) R2 shall have the right to indicate to the public that the
R2 Product has been tested for compatibility, and is being marketed for use,
with the VTAL Workstation; (b) VTAL shall have the right to indicate to
the public that the VTAL Workstation has been tested for compatibility and is
being marketed for use with the R2 Product; and (c) each party shall have the
right to use the other party’s Trademarks in connection with performance of
this Agreement.  VTAL shall not alter or
remove any R2 Trademarks applied to, or embedded in the R2 Product.  VTAL shall market and promote the VTAL
Workstation as having R2 lung nodule CAD capability and shall use the R2
Trademarks on all VTAL Workstation advertising materials that relate to lung
nodule CAD technology.  Each party shall submit samples of the other party’s
Trademarks prior to their first use for approval by the other party.  Such approval will not limit the other
party’s obligation to comply with all applicable laws and will not be deemed an
endorsement or approval of any of the other party’s advertising content.  Nothing herein shall grant either party any
rights or title to the other party’s Trademarks, and all goodwill associated
with such party’s Trademarks shall inure solely to the benefit of that party.  Each party reserves the right to reject any
use of its Trademark by the other party, and the other party shall immediately
discontinue use of such Trademark upon notice. 
Neither party shall challenge, or assist others to challenge, the
validity of the other party’s Trademarks, and neither party shall register or
attempt to register any trademarks, trade names or service marks confusingly
similar to the other party’s Trademarks.


 


5.6                                 Packaging
and Labeling.  VTAL shall reproduce all copyright and other
proprietary notices contained in the R2 Product on the user interface of the
VTAL Workstation.  In addition, except
for the addition of information required by applicable laws and regulations in
the Territory, VTAL shall not re-label the R2 Product or any other R2 products
supplied to VTAL by R2 hereunder without the prior written consent of R2.  If applicable law or regulation requires
re-labeling of the R2 Product, VTAL shall so notify R2, and promptly thereafter
the parties shall cooperatively develop labels in compliance with such laws or
regulations.


 


5.7                                 Display
Obligations.  VTAL shall not alter,
remove or obfuscate the R2 Trademarks that appear on any visualization or
display 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 size
icon which permits the Customer to open the R2 Product.


 


8

















 


6.                                      ORDERS
AND DELIVERY


 


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


 


6.2                                 Shipment/Risk
of Loss.  Each shipment of the R2
Product will be packaged by R2 and delivered to R2’s designated shipping point
(the “Shipping Point”). All freight, insurance, duty, and other shipping
expenses, 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 R2
receives from VTAL, no later than forty-five (45) days after the shipping date
of a given shipment, a written notice specifying the shipment, the purchase
order number, and the exact nature of the discrepancy between the order and
shipment or discrepancy in the freight cost, as applicable.


 


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


 


7.                                      GOVERNMENTAL APPROVALS


 


7.1                                 Regulatory
Approvals.  With respect to the R2
Product, R2, at its expense, will be responsible for obtaining and maintaining,
in R2’s name: (a) FDA and other applicable United States regulatory agency
approvals; (b) ISO9000 certification; (c) CE certification in accordance with
the provisions of Directive 93/42 governing medical devices for the R2 Product;
and (d) applicable regulatory approvals in Canada. R2 shall inform VTAL in
writing, no less than frequently than quarterly, as to the status of such
approvals.  Further, R2 will promptly
inform VTAL if any of the elements which has permitted R2 to obtain the
foregoing approvals is not longer valid. 
To the extent applicable, VTAL will be responsible for obtaining all
regulatory agency approvals in the countries in which VTAL (in its sole
discretion) distributes the R2 Product within the Territory, as may be
necessary for displaying the R2 Product in connection with the VTAL
Workstation.  Each respective company
will cover its own costs for regulatory activities.  Each party agrees to execute such instruments, documents and
agreements and to give such further written assurances, as may be reasonably
necessary to better realize the intent and understanding of the parties set
forth in this Section 7.1.


 


7.2                                 Registrations,
Licenses and Permits.  Except as set
forth in Sections 7.1, VTAL, at VTAL ‘s expense, shall obtain all
registrations, licenses, and permits (“Permits”) required to comply with the
laws and regulations for the countries within the Territory where VTAL, in its
sole discretion, imports and distributes the R2 Product; provided, however,
that VTAL shall promptly notify R2 upon the initiation of any applications for
Permits.  VTAL shall provide to R2
complete copies of all applications for and issued Permits relating to the R2
Product.  To the extent permitted by
law, all Permits obtained by VTAL in the Territory with respect to the R2
Product shall be in the name of R2. 
Each party agrees to execute such instruments, documents and agreements
and to give such further written assurances, as may be reasonably necessary to
better realize the intent and understanding of the parties set forth in this
Section 7.2.  


 


9

















 


(a)                                  Upon
the expiration or termination of this Agreement, at R2’s requests, all Permits
relating to the R2 Product shall be transferred and delivered to, and shall
inure to the benefit of R2 or its designee, to the extent that this is
permissible under applicable law, at no cost to R2 other than legitimate fees
and charges imposed by local governmental authorities; and VTAL agrees to
execute 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%) any
other customary and routine fees which are agreed and approved in advance by
both parties.


 


7.3                                 Health
and Safety Laws and Regulations. 
Both parties shall monitor the appropriate information sources closely
for changes in laws and regulations, and other requirements relating to the R2
Product or the VTAL Workstation, and shall notify the other party promptly in
writing of any and all such changes of which it becomes aware.  If R2 is required by any regulatory agency
to recall the R2 Product, or if R2 or a regulatory authority initiates a recall
of the R2 Product, VTAL shall cooperate with and assist R2 in locating, and
retrieving if necessary, recalled R2 Products from Customers.  VTAL shall be responsible for maintaining
all records of its sales to Customers in the event of a recall or other quality
related issue.  R2 shall bear the costs
of all recalls of the R2 Product.  VTAL
shall bear the costs of all recalls of the VTAL Workstation.


 


7.4                                 Compliance
with Local Laws.  VTAL agrees to
comply with all local laws and regulations applicable to the distribution of
the R2 Product in each country within the Territory.


 


8.                                      CONSIDERATION


 


8.1                                 Prices
for Lung Nodule CAD Application. 
VTAL agrees to pay the transfer prices (adjusted per the applicable
discount schedule) set forth in the pricing schedule attached as Exhibit C.


 


8.2                                 Minimum
Sales.


 


(a)                                  Beginning
on the Europe Date, VTAL shall order and purchase a minimum number of R2
Product units each Quarter, during each year of the term of this Agreement
(“Minimum”), as follows:


 


(i)             First 12-month period:
                        * units
per Quarter


 


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


 


(iii)       Third 12-month period:                      * units per
Quarter


 


By way
of non-limiting example, during the first Quarter, VTAL shall purchase a
minimum of  *  (*) units.  If, by the 59th
day, VTAL has purchased  * (*) units,
VTAL shall purchase * (*) additional units on day 60 to satisfy the minimum for
that Quarter.  If more than the minimum
is purchased in any Quarter, these additional numbers over the Minimum will be
applied towards the Minimum required in the subsequent Quarters.


 


(b)                                 Once
VTAL purchases and pays for a total of 
*  (*) units, the Minimum will no
longer apply.


 












*            The material has been
omitted pursuant to a request for confidential treatment and the material has
been filed separately with the Office of the Secretary of the Securities and
Exchange Commission.


 


10

















 


(c)                                  During
the period between the Europe Date and the US Date, VTAL’s Quarterly Minimum
will be decreased by * (*) of the units in Section 8.2(a) above, however, the
total Minimum will not change.  Rather,
the remaining  * (*) of the Minimum for
a given Quarter will be deferred and added to the Quarters subsequent to the US
Date.  VTAL shall purchase the deferred
Minimum during a period of time subsequent to the US Date that is equivalent to
the duration of the period between the Europe Date and the US Date.  By way of non-limiting example, if the
period between the Europe Date and the US Date was exactly nine (9) months, then
during 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 * (*) units
per Quarter for the next two Quarters, rather than  * (*) units and  *
(*)  respectively as noted above.


 


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


 


(e)                                  Notwithstanding
the foregoing terms of this Section 8.2, the Minimum shall not apply to a
Quarter, nor shall such Minimum be deferred to a subsequent period, if:  (i) subsequent to the Europe Date, the CE
certification with respect to the R2 Product is revoked or otherwise becomes
ineffective; (ii) subsequent to the US Date, any FDA approval with respect to
the R2 Product is revoked or otherwise becomes ineffective; (iii) a regulatory
agency, or R2, issues a recall of the R2 Product or VTAL Workstation, as a result
of the R2 Product installed thereon; (iv) VTAL issues a recall of the VTAL
Workstation solely attributable to the R2 Product; (v) the ability of VTAL to
sell 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 of
VTAL (“Force Majeure”), or (vi) VTAL becomes subject to any injunction or other
legal prohibition against the sale of the R2 Product (except one which would be
cured by obtaining a Permit or other applicable regulatory approvals).


 


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


 


8.4                                 Adjustment
of Minimums.  If the total number of
R2 Showcase units sold worldwide in any two (2) Quarter period by R2 and all of
its distributor/channel partners (excluding VTAL) is less than the sum of the
Quarterly Minimums for the preceding two (2) Quarters, then VTAL’s Quarterly
Minimums for the subsequent two (2) Quarters will be decreased by the same
number by which R2 and all of its distributors/channel partners fell short
during the preceding (2) Quarters.  By
way of non-limiting example, if R2 and all of its distributor/channel partners sell
* (*) units, instead of * (*) units during the first two (2) Quarters
in the third twelve (12) month period after the Europe Date, then the Minimum
VTAL must purchase in the subsequent two (2) Quarters would decrease by a total
of  * (*) units, from * (*) per Quarter
to * (*) per Quarter.


 


8.5                                 Revenue
Share/Referrals by R2.  R2 may refer
its existing and potential customers to VTAL and for each such referral that is
not a VTAL Installed Base Site that purchases the R2 Product (“R2 Referral”),
VTAL shall reimburse R2 for  * (*) of
the incentive that R2 pays to its sales


 












*            The material has been
omitted pursuant to a request for confidential treatment and the material has
been filed separately with the Office of the Secretary of the Securities and
Exchange Commission.


 


11

















 


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


 


8.6                                 Adjustment
of Transfer Prices.


 


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


 


(b)                                 If
VTAL desires to purchase more than the Minimum during any Quarter in which
VTAL’s transfer price is below *  in the
US and * outside the US, as per the calculation noted above, VTAL must submit a
signed purchase order from each Customer for all units above the Minimum that
it purchases in that Quarter in which the transfer price was lowered pursuant
to this Section, and VTAL must subsequently verify placement of such units at a
Customer location.  Otherwise, prices
for additional units beyond the Minimum for which there are no signed purchase
orders will be set at the subsequent Quarter’s transfer prices as calculated in
Section 8.5 (a) above. So long as the ASP for all R2 Showcase units is at
least * during a Quarter, the transfer prices noted in Exhibit C will apply for
the next Quarter.  If R2 fails to sell
any such R2 Showcase units during a Quarter, the transfer price from the previous
Quarter will continue for the subsequent Quarter.


 


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


 


8.8                                 Audits.  Each party shall have the right, at its own
expense, to inspect those accounting records of the other party necessary to
verify 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 business
hours.  The audited party shall promptly
pay the difference, plus interest, on any underpayments revealed in the
audit.  Further, if an audit reveals an
underpayment of more than five percent (5%), the audited party shall also pay
the cost and expenses related to the audit.


 


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


 












*            The material has been
omitted pursuant to a request for confidential treatment and the material has
been filed separately with the Office of the Secretary of the Securities and
Exchange Commission.


 


12

















 


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


 


8.11                           Taxes.  All prices specified hereunder do not
include and are net of any foreign or domestic governmental taxes or charges of
any kind that may be applicable to the sale, licensing, marketing, or
distribution 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 than
taxes which are imposed solely on the net income of R2.  Any such taxes which are otherwise imposed
on payments to R2 shall be the sole responsibility of VTAL.


 


9.                                      REPORTING AND CUSTOMER COMPLAINTS


 


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


 


9.2                                 Customer
Complaints.  VTAL shall promptly
investigate, monitor, and notify R2 of all Customer and/or regulatory
complaints 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 promptly
investigate, monitor and notify VTAL of all customer and/or regulatory
complaints concerning the use of the R2 Showcase.  Each party shall advise the other of all such complaints alleging
patient injury within twenty four (24) hours, and of all other material
complaints as promptly as possible but not more than five (5) business days
following the date a party receives such complaint.  In addition, within fifteen (15) calendar days following the date
it receives such complaint, such party shall also provide the other party with
a materially complete written report relating thereto.  Any notice to VTAL under this Section shall
be sent via facsimile and email to the attention of the Manager of Regulatory
Affairs and the Senior Director of Operations or to such other address or
person as VTAL may designate, and any notice to R2 under this
Section shall be sent via facsimile and email to the attention of R2’s
Vice President of Regulatory Affairs or to such other address or person as R2
may designate.


 


13

















 


10.                               INDEMNITY AND INSURANCE


 


10.1                           R2
Indemnity.  Subject to Sections 10.2 and 10.5 below, R2 agrees to indemnify and hold
harmless VTAL, its officers, directors, employees and agents, from and against
any and all liabilities, damages, losses, costs and expenses attributable to
claims, actions, suits, or other proceedings (“Claims”) brought by a third
party alleging:  (a) that the R2
Product, as delivered to VTAL, infringes any third party Intellectual Property
Right; (b) product liability with respect to the R2 Product; (c) that any
materials provided by R2 to VTAL under Section 5.2 are deceptive or
misleading; or (d) a failure by R2 to comply with applicable law.


 


10.2                           Exclusions.  Notwithstanding the foregoing, R2 will have
no liability for infringement claims arising from:  (a) combination of the R2 Product with other software or
products not provided or authorized by R2, which claim would have been avoided
if the R2 Product had not been so combined; (b) the modification of the R2
Product, in whole or in part, by anyone other than R2 which claim would have
been avoided if the R2 Product had not been so modified.


 


10.3                           VTAL
Indemnity.  Subject to Section 10.4
and 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 party
alleging: (a) infringement of any third party Intellectual Property Right by the
VTAL Workstation; (b) product liability with respect to the Product to the
extent directly attributable to the VTAL Workstation; (c) deceptive or
misleading advertising or sales practices by VTAL or its Subdistributors, other
than any made in reliance on the content of the materials provided to VTAL
under Section 5.2; (d) negligence or misconduct by VTAL, or its
Subdistributors, in connection with the marketing, distribution, or sale of the
R2 Product; or (e) a failure by VTAL to comply with applicable law.


 


10.4                           Exclusions.  Notwithstanding the foregoing, VTAL will
have no liability for infringement claims with respect to VTAL Workstations, if
any, arising from:  (a) combination of
the VTAL Workstations with other software or products not provided or authorized
by VTAL, which claim would have been avoided if the VTAL Workstation had not
been so combined; or (b) the modification of the VTAL Workstation, in whole or
in part, by any party other than VTAL which claim would have been avoided if
the 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 is
seeking indemnification; (b) provide Indemnitor with sole control of the
defense and/or settlement thereof; and (c) provide Indemnitor, at
Indemnitor’s request and expense, with reasonable assistance and full
information with respect thereto. 
Indemnitee shall have the right to participate, at its own expense, with
counsel of its own choosing in the defense and/or settlement of such claim,
suit or proceeding.  The indemnification
obligations of the parties in this Section 10 shall not apply to amounts
paid in settlement of any claim, suit or proceeding if such settlement is
effected without the consent of Indemnitor, which consent shall not be
unreasonably withheld or delayed.


 


10.6                           Additional
Remedy.  If any portion of either
party’s products contemplated by this Agreement (the VTAL Workstation and the
R2 Product) is held, or in such party’s reasonable opinion is likely to be
held, to infringe or misappropriate a third party’s Intellectual Property
Right, then such party may at its sole option and expense:  (a) procure for the other party and/or
the


 


14

















 


Customer,
as appropriate, the right to continue using such product; (b) replace the
product with a non-infringing, functionally equivalent product; or (c) if
neither of the foregoing is reasonably practicable, and to the extent the
infringing component restricts a Customer’s ability to continue use of a
Product, terminate this Agreement and refund to Customer and/or the other
party, as appropriate, the amounts paid for the Product, or the infringing
component (by way of non-limiting example, the Lung Nodule CAD Application,) as
applicable, less a reasonable amount for prior use.


 


10.7                           Entire
Liability.  THE FOREGOING PROVISIONS
OF THIS SECTION 10 STATE THE ENTIRE LIABILITY AND OBLIGATIONS OF EACH PARTY,
AND EACH PARTY’S EXCLUSIVE REMEDY, WITH RESPECT TO ANY ACTUAL OR ALLEGED
INFRINGEMENT OF OR MISAPPROPRIATION OF ANY INTELLECTUAL PROPERTY RIGHT BY THE
LUNG NODULE CAD APPLICATION, THE VTAL WORKSTATION, OR THE R2 PRODUCT.


 


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


 


11.                               WARRANTY


 


11.1                           Limited Warranty.  R2 represents and warrants to VTAL that the R2 Product will
conform in all material respects to the Specifications during the Warranty
Period.


 


11.2                           Warranty Limitations.  The foregoing warranty does not extend to problems or errors in
the R2 Product that result from: (a) Customer’s failure to implement all
Updates which are provided by R2, if any; (b) any use of the R2 Product in
a manner for which it was not designed or as not authorized under this
Agreement or under the Customer’s license; (c) negligence on the part of
VTAL or Customer, or their employees, contractors, or consultants; or
(d) any use of the R2 Product with other software, hardware or products
not authorized by R2.  Neither
party shall have the authority to offer, and neither party shall make, any
representations 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 OR
CONDITIONS OF ANY KIND, WHETHER, EXPRESS, IMPLIED, STATUTORY, OR OTHERWISE, AND
R2 SPECIFICALLY DISCLAIMS THE IMPLIED WARRANTIES AND CONDITIONS OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NON-INFRINGEMENT WITH
RESPECT TO THE LUNG NODULE CAD APPLICATION PROVIDED HEREUNDER, AND WITH RESPECT
TO THE USE THEREOF.


 


12.                               LIMITATION OF LIABILITY


 


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


 


15

















 


AGREEMENT, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGE.  IN NO EVENT SHALL THE TOTAL LIABILITY OF
EITHER PARTY EXCEED THE AMOUNTS PAID BY VTAL TO R2 DURING THE TWELVE-MONTH
PERIOD PRECEDING THE EVENT GIVING RISE TO THE LIABILITY.  THE FOREGOING LIMITATIONS APPLY
NOTWITHSTANDING OF THE FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY
HEREIN.


 


13.                               CONFIDENTIALITY


 


13.1                           Definition.  For purposes of this Agreement, “Confidential
Information” means information exchanged between R2 and VTAL pursuant to
this 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 confidential
nature or if of a type that a reasonable person would expect to be proprietary
and confidential and shall include the terms of this Agreement.  Confidential Information shall not mean
information which is (a) in the public domain or subsequently enters the
public domain through no act or omission of the receiving party;
(b) subsequently acquired free of any confidentiality obligation by the
receiving party from a third person having, to the receiving party’s knowledge,
no obligation of confidentiality to the disclosing party; (c) known to the
receiving 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 Confidential
Information which includes technical or scientific information, it will inform
the other party of the general nature of such information and the other party
may agree or decline to receive such information, or the parties may negotiate
a separate agreement covering such information.  Except as to technical or scientific information, which a party
so agrees to receive, neither party shall have any obligations with respect to
any technical or scientific information, which it may learn without reference
to the other party’s Confidential Information.


 


13.2                           Obligations.  Neither party shall use the Confidential
Information of the other except as permitted or expressly provided under this
Agreement.  In addition, each party
shall hold all Confidential Information of the other in confidence and shall
not publish, disclose or disseminate the same to any other person or entity
except as specified herein.  Each party
may disclose Confidential Information of the other to its employees and
consultants who are bound by confidentiality obligations at least as protective
as those stated herein.  Each party
shall take the same measures to preserve the confidentiality of the
Confidential Information of the other as it does for its own Confidential
Information, but in no event with less than reasonable care.  In addition to the foregoing, either party
may disclose Confidential Information disclosed to it by the other party to the
extent such disclosure is required by law, government agency, governmental
regulation, court order or valid discovery request in connection with a legal
proceeding, provided that if a party is required to disclose another party’s
Confidential Information in connection therewith, it shall provide the other
party with prior written notice of any such disclosure and a reasonable
opportunity to seek confidential treatment or a protective order, if
appropriate.  In the event that such
confidential treatment or protective order is not obtained, the party required
to disclose such Confidential Information shall disclose only that portion of
the Confidential Information which its counsel advises that it is legally
required to disclose.  For the avoidance
of doubt, if this Agreement is


 


16

















 


required
to be filed with any governmental or regulatory agency, the party required to
make such filing shall seek confidential treatment of the terms of this
Agreement, and shall in any event, redact those portions of the Agreement that
its legal counsel advises may be redacted, but still comply with such filing
requirement.


 


14.                               TERM AND TERMINATION


 


14.1                           Term.  This Agreement shall commence on the
Effective Date and shall continue in full force for a period of three (3) years
from the Europe Date, unless earlier terminated as set forth in this
Section 14.  The parties may renew
this Agreement for additional one (1) year terms upon mutual written
agreement.


 


14.2                           Termination
for Cause.  If either party breaches
any of its material obligations hereunder, and such breach is not cured within
thirty (30) days after notice from the other party, the non-breaching party
shall be entitled to terminate this Agreement upon written notice.


 


14.3                           Termination
for Insolvency.  This Agreement may
be terminated by either party, on notice: (a) upon the institution by the
other party of insolvency, receivership or bankruptcy proceedings; or any other
proceedings 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 assignment
for the benefit of creditors; or (d) upon the other party’s dissolution or
ceasing to conduct business as a going concern, or upon taking action to
dissolve or to cease business as a going concern.


 


14.4                           Termination
for Ongoing Force Majeure.  If any
of the events described in Subsection 8.2(e) occur and continue for a
period of in excess of thirty (30) days, either party shall be entitled to
terminate this Agreement upon written notice.


 


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


 


14.6                           Effect
of Termination.


 


(a)                                  Accrued
Obligations.  Expiration or
termination of this Agreement for any reason shall not release any party hereto
from any liability which, at the time of such termination, has already accrued
to the other party or which is attributable to a period prior to such
termination nor preclude either party from pursuing any rights and remedies it
may have hereunder or at law or in equity with respect to any breach of this
Agreement.


 


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


 


(c)                                  Continued
Right to Sell.  Upon termination of
this Agreement, R2 shall have the right, at its sole option, to purchase all or
part of VTAL’s inventory of the R2 CAD that is not already required to fulfill
accepted Customer purchase orders, at a price equal to the transfer price
invoiced to VTAL.  If R2 opts not to buy
back VTAL’s inventory of the R2 Product, VTAL shall have the right to


 


17

















 


continue
to market, distribute, and sell unsold R2 Products in the Territory pursuant to
the terms hereof for an additional period of one hundred eighty (180) days
after notice of termination of this Agreement.


 


(d)                                 Limitation
on Liability.  In the event of
termination by either party in accordance with any of the provisions of this
Agreement, neither party shall be liable to the other because of such
termination, for compensation, reimbursement or damages on account of the loss
of prospective profits or anticipated sales or on account of expenditures,
investments, leases, inventory or commitments in connection with the business
or 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 payment
obligations shall survive the expiration or termination of this Agreement for
any reason.


 


15.                               GENERAL


 


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


 


15.2                           Basis
of Bargain.  Each party recognizes
and agrees that the warranty disclaimers and liability and remedy limitations
in this Agreement are materially bargained for and that such warranty
disclaimers and liability and remedy limitations have been taken into account
and reflected in determining the consideration to be given by each party to
enter into this Agreement.


 


15.3                           Counterpart
Originals.  This Agreement may be
executed in two (2) or more English language counterparts or duplicate
originals, all of which shall be regarded as one and the same instrument, and
which shall be the official and governing version in the interpretation of this
Agreement.


 


15.4                           Entire
Agreement.  The terms and conditions
herein contained, including exhibits, constitute the entire agreement between
the parties and supersede all previous and contemporaneous agreements and
understandings, whether oral or written, including the parties’ term sheet,
with respect to the subject matter hereof.


 


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


 


15.6                           Export.  The parties acknowledge the products
contemplated by this Agreement may be subject to the export control laws and
regulations 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) any
countries that are subject to United States export restrictions, except with


 


18

















 


appropriate
United States government approvals; (ii) any third party who a party knows or
has reason to know will utilize them in the design, development or production
of nuclear, chemical or biological weapons; or (iii) any third party who has
been prohibited from participating in United States export transactions by any
federal agency of the United States government.


 


15.7                           Foreign
Corrupt Practices Act.  In
conformity with the United States Foreign Corrupt Practices Act regarding
foreign business practices, R2 and its employees and agent as well as VTAL and
its employees and agents shall not directly or indirectly make a payment,
promise to pay, or authorize payment, or offer a gift, promise to give or
authorize the gift of anything of value for the purpose of influencing an act
or decision (including a decision not to act) of an official of any government
or governmental agency or for inducing such official to use any influence to
affect any such governmental act or decision.


 


15.8                           Governing
Law.  This Agreement shall be
governed by the laws of the State of California, without regard to its
conflicts of law provisions.  The
parties expressly exclude application of the United Nations Convention for the
International Sale of Goods.


 


15.9                           Governmental
Consent.  VTAL shall be responsible
for timely filings of this Agreement with any required government entities
within the Territory.  If any such
governmental entity objects to this Agreement of any provision hereof, the parties
shall have the right to suspend or discontinue distribution of the R2 Product
within such region or country in the Territory.


 


15.10                     Independent
Contractors.  The relationship of
the parties established by this Agreement is that of independent contractors,
and nothing contained in this Agreement should be construed to give either
party the power to direct or control the day-to-day activities of the
other.  All financial and other
obligations associated with each party’s business are the sole responsibility
of that party.


 


15.11                     Injunctive
Remedies.  Each party acknowledges
that due to the nature of proprietary information, any breach or threatened
breach of Sections 2.6, 5.3, or 13 would result in irreparable harm to the
non-breaching party, for which there is no adequate remedy at law, and
therefore, the non-breaching party shall be entitled to apply for injunctive or
other equitable relief to restrain such material breach in addition to other
appropriate remedies.


 


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


 


15.13                     No Implied
Licenses.  Except for the licenses
granted by the express terms of this Agreement, each party reserves and retains
all right, title, and interest in and to its products, technology, and all
Intellectual Property Rights therein and no right or license shall be deemed
granted by implication, estoppel, or otherwise.


 


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


 


19

















 


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


 


15.15                     Partial
Invalidity.  If any provision in this
Agreement shall be found or be held to be invalid or unenforceable in any
jurisdiction in which this Agreement is being performed, then the meaning of
said provision shall be construed, to the extent feasible, so as to render the
provision enforceable, and if no feasible interpretation would save such
provision, it shall be severed from the remainder of this Agreement, which
shall 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’ intent
in entering into this Agreement.


 


15.16                     Press
Releases.  The parties agree to
cooperate 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 to
enforce at any time any of the provisions of this Agreement, or the failure to
require at any time performance by the other party of any of the provisions of
this Agreement, shall in no way be construed to be a present or future waiver
of such provisions, nor in any way affect the right of either party to enforce
each and every such provision thereafter. 
The express waiver by either party of any provision, condition or
requirement of this Agreement shall not constitute a waiver of any future
obligation to comply with such provision, condition or requirement.


 


15.18                     Non-solicitation.


 


(a)                                  Neither
party shall solicit for employment, as an employee or a self-employed
independent contractor, during the term of this Agreement or within six (6)
months thereafter, any person who was employed by or a principal of the other
party at anytime during the then preceding six (6) month period.


 


(b)                                 For
purposes of this Section 15.17, the term “R2” shall include the R2 and any of
its affiliates and the term “VTAL” shall include the VTAL and any of its
affiliates.


 


(c)                                  Breach
of this Section 15.17 shall require the violating party to pay to the
non-violating party, immediately following the retention of a person giving
rise to the violation, as liquidated damages and not as a penalty, a sum equal
to one hundred percent (100%) of such person’s cash salary or other cash
compensation (including any cash bonuses, awards or incentives) earned during
the twelve (12) month period ending on the date of such retention (annualized
if such person was employed or otherwise retained by the non-violating party
for less than twelve (12) months).


 


Exhibit A:  Development Plan


 


Exhibit B:  [Reserved]


 


Exhibit C:  Pricing


 


Exhibit D:  Workstation and PACS
Vendors


 


Exhibit E:  Source Code Escrow
Agreement


 


Exhibit F:  [Reserved]


 


20

















 


IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by duly authorized officers or representatives as of the date first
above 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

















 


EXHIBIT A


 


DEVELOPMENT
PLAN


 


1

















 


 


R2
Technology, Inc.


Vital
Images, Inc.


 


 


Product Requirements


ImageCheckerCT & Vitrea Integration


 


 


Final


 


Created: 01/06/2003


 

















 


	
  ImageCheckerCT & Vitrea
  Integration Product

  Requirements

  	
  Final

  



 


Revision
History


 


	
  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

  	
   

  	
  *

  



 












*            The material has been
omitted pursuant to a request for confidential treatment and the material has
been filed separately with the Office of the Secretary of the Securities and
Exchange Commission.


 


	
  Confidential

  	
  R2 Technology, Inc.

  Vital Images, Inc.

  	
   

  



 


ii

















 


	
   

  	
   

  	
   

  	
   

  	
  •                  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 *

  	
   

  	
  *

  



 












*            The material has been
omitted pursuant to a request for confidential treatment and the material has
been filed separately with the Office of the Secretary of the Securities and
Exchange Commission.


 


iii

















 


Table
of 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

  



 












*            The material has been omitted
pursuant to a request for confidential treatment and the material has been
filed separately with the Office of the Secretary of the Securities and
Exchange Commission.


 


iv

















 


	
   

  	
   

  	
  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

  



 












*            The material has been
omitted pursuant to a request for confidential treatment and the material has
been filed separately with the Office of the Secretary of the Securities and
Exchange Commission.


 


v

















 


Product
Requirements


 


1.              Introduction


 


R2’s ImageChecker®CT (ICCT) CAD software is designed
for the detection of clinically significant findings in lung CT studies by
marking suspicious nodules. The CAD algorithm highlights potential areas of
interest and provides measurement and characterization information on the
detected 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 medical
imaging software for diagnostic evaluation of computed tomography (CT) and
magnetic resonance (MR) image data. Vitrea features real-time navigation of 3D
volume data, permitting the user to create two- and three-dimensional views of
human anatomy and to interactively navigate within these images to better
visualize and understand internal structures and disease conditions.


 


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


 


1.1                               Purpose


 


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


 


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)

  



 












*            The material has been
omitted pursuant to a request for confidential treatment and the material has
been filed separately with the Office of the Secretary of the Securities and
Exchange Commission.


 


1

















 


	
  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.

  



 












*            The material has been
omitted pursuant to a request for confidential treatment and the material has
been filed separately with the Office of the Secretary of the Securities and
Exchange Commission.


 


2

















 


	
  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.

  



 












*            The material has been
omitted pursuant to a request for confidential treatment and the material has
been filed separately with the Office of the Secretary of the Securities and
Exchange Commission.


 


3

















 


2.              Stakeholder And User Descriptions


 


2.1                               Stakeholder Summary


 


	
  Name

  	
   

  	
  Represents

  	
   

  	
  Role

  
	
  *

  	
   

  	
  *

  	
   

  	
  *

  
	
   

  	
   

  	
   

  	
   

  	
   

  



 












*            The material has been
omitted pursuant to a request for confidential treatment and the material has
been filed separately with the Office of the Secretary of the Securities and
Exchange Commission.


 


4

















 


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

  



 












*            The material has been
omitted pursuant to a request for confidential treatment and the material has
been filed separately with the Office of the Secretary of the Securities and
Exchange Commission.


 


5

















 


3.              Product Overview


 


3.1          Product Perspective


 


The solution will offer an integrated lung nodule
detection 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 Image
repository (such as a PACS archive) or a CT Modality. *


 


*


 


3.3          Usage Scenario


 


*


 












*            The material has been
omitted pursuant to a request for confidential treatment and the material has
been filed separately with the Office of the Secretary of the Securities and
Exchange Commission.


 


6

















 


3.4          Cost and Pricing


 


*


 


3.5          Licensing and Installation


 


*


 












*            The material has been
omitted pursuant to a request for confidential treatment and the material has
been filed separately with the Office of the Secretary of the Securities and
Exchange Commission.


 


7

















 


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 *


 


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.             *


 


**


 












*            The material has been
omitted pursuant to a request for confidential treatment and the material has
been filed separately with the Office of the Secretary of the Securities and
Exchange Commission.


 


** The next 14 pages have
been omitted


 


8

















 


7.             Documentation Requirements


 


7.1          User Manual


 


*


 


7.2          Service Manual


 


*


 












*            The material has been
omitted pursuant to a request for confidential treatment and the material has
been filed separately with the Office of the Secretary of the Securities and
Exchange Commission.


 


9

















 


Appendix
A


*


 












*            The material has been
omitted pursuant to a request for confidential treatment and the material has
been filed separately with the Office of the Secretary of the Securities and
Exchange Commission.


 


10

















 


EXHIBIT B


 


INTENTIONALLY
LEFT BLANK


 


1

















 


EXHIBIT
C


 


PRICE
LIST


 


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


 


For purposes of the foregoing, “Estimated Server
Price” means the estimated price of a Server, based on the average price for
all Servers purchased during the first Quarter after either the Europe Date or
the US Date, whichever occurs first.  To
the extent the Estimated Server Price is significantly different from the
actual Server price, the Estimated Server Price will be adjusted each Quarter
based upon the actual price of Servers in the preceding Quarter.  At the end of each Quarter, if the Estimated
Server Price for all Servers purchased is less than the actual Server price for
such Quarter, VTAL shall pay the difference in accordance with the payment
terms set forth in Section 8.10.  If the
Estimated Server Price is greater than the actual Server price, VTAL will be
credited 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 be
solely responsible for setting the prices of R2 Products and Maintenance to its
Customers.


 


Volume discounts


 


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


 


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


 












*                 The material has
been omitted pursuant to a request for confidential treatment and the material
has been filed separately with the Office of the Secretary of the Securities
and Exchange Commission.


 


1

















 


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


 


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


 












*                 The material has
been omitted pursuant to a request for confidential treatment and the material
has been filed separately with the Office of the Secretary of the Securities
and Exchange Commission.


 


2

















 


EXHIBIT
D


 


WORKSTATION
AND PACS VENDORS


 


1.               “Workstation
Vendors”:


 


•                  *


 


•                  *


 


•                  *


 


•                  *


 


•                  *


 


•                  *


 


2.               “PACS Vendors”:


 


•                  *


 


•                  *


 












*                 The material has
been omitted pursuant to a request for confidential treatment and the material
has been filed separately with the Office of the Secretary of the Securities
and Exchange Commission.


 


1

















 


EXHIBIT E


 


R2 ESCROW AGREEMENT


 


This Escrow Agreement is entered into between R2 and VTAL concurrently
with the Product Distribution Agreement (the “Agreement”), and constitutes an
Exhibit thereto.  Any capitalized terms
not expressly defined in this Escrow Agreement will have the meanings given to
such terms in the Agreement.


 


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


 


1.                                      DEFINITIONS


 


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


 


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


 


2.                                      LICENSE


 


(a)                                  License
Grant. Subject to the occurrence of a Triggering Event and all other terms
and conditions of this Escrow Agreement, R2 hereby grants to VTAL a perpetual,
non-exclusive, non-transferable, limited license to use the Escrow Materials
internally for the sole purpose of supporting Customers of the R2 Product, as
of the date of termination or expiration of the Agreement.  VTAL shall not use the Escrow Materials for
any other commercial purposes.  VTAL
acknowledges and agrees that R2 shall not be obligated to provide any support
or maintenance for the Escrow Materials, whatsoever.


 


(b)                                 License
Restrictions.  VTAL’s rights in the
license granted in Section 2 (a) above shall not vest until the occurrence of a
Triggering Event.  VTAL shall not, and
shall not permit any third party to: (i) modify or create any derivative
works based on the Escrow Materials or any portion thereof; (ii) time-share or
otherwise use the Escrow Materials to operate a service bureau; (iii) use the
Escrow Materials anywhere other than at VTAL’s business facilities; (v) reproduce
the Escrow Materials other than for archival or back-up purposes; or (vi) use
the Escrow Materials in any way other than as permitted in Section 2(a).


 


(c)                                  Escrow
Materials Security.   VTAL shall use the Escrow Materials only under carefully controlled
conditions, will treat the Escrow Materials with the same security measures as
VTAL treats its own most valuable trade secrets (but in no event less than a
standard of care typical for the treatment of Escrow Materials).  VTAL shall restrict access to the Escrow
Materials to those employees and third party contractors of VTAL who have
agreed to be bound by a confidentiality obligation at least as protective of
R2’s rights as this Escrow Agreement, and who have a need to access the Escrow
Materials for the purposes allowed in this Escrow Agreement.


 


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


 

















 


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


 


3.                                      TRIGGERING
EVENT


 


(a)                                  The
Escrow 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 a
period of forty (45) days from the date VTAL gives written notice to R2, of any
material support obligation as set out in the Agreement, which support
obligation requires access to the Escrow Materials in order to be
fulfilled.  For avoidance of doubt, any
failure to comply with such support obligations as a result of a Force Majeure
shall not be deemed a breach for purposes of this Section 3(a).


 


4.                                      TERM AND
TERMINATION


 


(a)                                  Term.  This Escrow Agreement will
commence as of the Effective Date and will remain in full force and effect
until termination or expiration of the Agreement or until otherwise terminated
as set forth below.


 


(b)                                 Termination
for Cause.  Either party may
terminate this Escrow Materials Agreement immediately if the other party fails
to cure a material breach within ten (10) days written notice from the
non-breaching party of such material breach. 
R2 may terminate this Escrow Agreement immediately, upon notice, if VTAL
breaches any provision of Sections 2(b) or 2(c).


 


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


 


5.                                      CONSIDERATION


 


(a)                                  Escrow
Fees.  VTAL shall be responsible for
all fees charged by the escrow agent for maintaining the Escrow Materials in
escrow.


 


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


 


6.                                      WARRANTY AND
DISCLAIMER


 


(a)                                  Limited
Warranty.  R2 represents and
warrants to VTAL that the Escrow Material will contain the source code for the
R2 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 INCLUDING
THEIR CONDITION, CONFORMITY TO ANY REPRESENTATION OR DESCRIPTION OR THE EXISTENCE
OF ANY LATENT OR PATENT DEFECTS AND R2 SPECIFICALLY


 


2

















 


DISCLAIMS ALL IMPLIED WARRANTIES OF MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE, AND NON-INFRINGEMENT.  R2 DOES NOT WARRANT THAT THE ESCROW
MATERIALS WILL BE ERROR-FREE OR THAT THE ESCROW MATERIALS WILL OPERATE WITHOUT
INTERRUPTIONS.


 


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 of
or related to VTAL’s use of the Escrow Material; provided that R2: (i) promptly
notifies VTAL of any claim, action, suit, or other proceeding for which it is
seeking indemnification; (ii) provides VTAL with sole control of the defense
thereof; and (iii) provides VTAL, at VTAL’ expense and request, with
reasonable assistance and full information with respect thereto.  R2 shall have the right to participate, at
its own expense, with counsel of its own choosing in the defense and/or
settlement of such claim, suit or proceeding.


 


8.                                      LIMITATION
OF LIABILITY


 


EXCEPT FOR A BREACH OF SECTION 2.2 OR 2.3, AND FOR OBLIGATIONS UNDER
SECTION 7, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR INDIRECT,
INCIDENTAL, SPECIAL OR OTHER CONSEQUENTIAL DAMAGES, INCLUDING WITHOUT
LIMITATION DAMAGES FOR LOSS OF PROFITS, DATA OR USE, INCURRED BY EITHER PARTY
OR ANY THIRD PARTY, ARISING OUT OF OR RELATED TO THIS ESCROW MATERIALS
AGREEMENT WHETHER IN AN ACTION IN CONTRACT, TORT, OR OTHERWISE, EVEN IF THE
OTHER 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 TOTAL
LIABILITYARISING OUT OF OR RELATED TO THIS ESCROW AGREEMENT EXCEED THE LICENSE
FEES PAID BY VTAL TO R2 HEREUNDER.  THE
PARTIES AGREE THAT THE FOREGOING LIMITATIONS REPRESENT A REASONABLE ALLOCATION
OF RISK UNDER THIS ESCROW AGREEMENT.


 


3

















 


EXHIBIT
F


 


INTENTIONALLY
LEFT BLANK


 

















 


EXHIBIT
G


 


TERMS
AND CONDITION


 

















 


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.                                   Vital
Images develops and licenses proprietary medical visualization software
products (defined below as the “Products”).


 


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


 


ARTICLE 1: DEFINITIONS


 


For purposes of this License Agreement, the following words, terms and
phrases shall have the following meanings unless the context otherwise
requires:


 


1.1                                 Confidential
Information.  “Confidential
Information” shall mean all information disclosed by Vital Images to Licensee
or 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 in
general of Vital Images, or the algorithms, programs, user interfaces and
organization of the Products.


 


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


 


ARTICLE 2: LICENSE GRANT AND USE


 


2.1                                 License
Grant.  In consideration for
Licensee’s payment of the applicable license fee, and subject to the terms of
this 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 (“Designated
Equipment”), and only at the site described in Exhibit B (“Designated
Site”).  Licensee must purchase a
License for each computer at a Designated Site on which it desires to install
and use the Products.  Licensee’s use of
the Products shall be limited to Licensee’s internal business activities.


 


2.2                                 Restrictions
on Use.  Licensee shall not engage
in, cause or permit the reverse engineering, disassembly, recompilation,
modification or any similar manipulation of the Products, nor may Licensee
loan, lease, distribute, assign or otherwise transfer the Products or copies
thereof, in whole or in part, to any third party.  Licensee may not install, use or access the Products at or from
any location other than a Designated Site, or on any type of computer other
than the Designated Equipment, without the prior written approval of Vital
Images.


 


2.3                                 Copying.  Licensee shall not copy the Products, except
that Licensee may make and maintain one (1) copy of the Products for back-up
and 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

  	
   

  



 


1

















 


2.4                                 Ownership.  All right, title and interest in the
Products shall at all times remain the property of Vital Images and its
licensors, subject to the Licenses granted to Licensee under this License
Agreement.  Licensee understands and
agrees that it takes title only to the media on which the Products are provided
to it, but that the Products shall remain the property of, and proprietary to,
Vital Images.


 


ARTICLE 3: TERMINATION


 


3.1                                 Termination.


 


(a)                                  Either
party may terminate this License Agreement at any time if the other party fails
to cure its material breach hereof within thirty (30) days after its receipt of
notice specifying such breach from the other party.


 


(b)                                 Vital
Images may terminate this License Agreement at any time immediately upon
Licensee (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 foreign
law, (iii) making an assignment for the benefit of its creditors, (iv)
admitting in writing its inability to satisfy its debts in the ordinary course
of business or that its business or financial condition indicates that it is
presently unable to continue as a going concern, or (v) taking an action
resulting in or directed to ceasing, on a permanent basis, its business or
relevant operations; or


 


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


 


3.2                                 Effect
of Termination of a License.  Upon
any termination of a License, Licensee shall (a) immediately cease all use of
the Products licensed pursuant to such License, and (b) certify in writing to
Vital Images within thirty (30) days after such termination that Licensee has
either destroyed, permanently erased or returned to Vital Images the Products
and all copies thereof licensed pursuant to such License.


 


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


 


ARTICLE 4: ADVERSE REACTIONS; PRODUCT RECALLS


 


4.1                                 Adverse
Event Reporting.  Licensee shall
advise Vital Images, by telephone or facsimile, within twenty-four (24) hours
after it becomes aware of any adverse event from the use of any Product or
malfunction of any Product.  Unless
otherwise required by applicable local laws, Licensee shall advise Vital Images
of any such adverse event prior to any report or filing being made with the
U.S. Food and Drug Administration (“FDA”) or any other comparable regulatory
body elsewhere in the world.


 


4.2                                 Product
Recall; Corrective Action.


 


(a)                                  Corrective
Action.  If Vital Images believes
that a corrective action with respect to the Products is desirable or required
by law, or if any governmental agency having jurisdiction (including without
limitation, the FDA) shall request or order any corrective action with respect
to the Products, including any recall, customer notice, restriction, change,
corrective action or market action or any Product change, Vital Images or its
reseller shall promptly notify Licensee. 
Licensee shall comply with all reasonable directions regarding such
corrective action, including the return of the Products to Vital Images or a
reseller at Vital Images’ expense.


 


2

















 


(b)                                 Refund.  If any Products are required to be returned
to Vital Images or its resellers pursuant to this Article 4.2 and no
replacement is provided therefor by Vital Images, Vital Images shall refund to
Licensee any unearned license fees paid (the amount of the license fee Licensee
paid for the Products, less a reasonable value for use determined by prorating
the license fee paid on a thirty-six (36) month straight line amortization
method).


 


ARTICLE 5: WARRANTIES; INDEMNIFICATION


 


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


 


5.2                                 Exclusive
Remedy.  Vital Images’ entire
liability, and Licensee’s exclusive remedy, for any warranty claim made by
Licensee under Article 5.1 above during the Warranty Period shall be for Vital
Images, at its option, to either (a) replace any defective media which prevents
the 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 the
Products.  Vital Images does not warrant
that the operation of the Products will be uninterrupted or error-free, that
all errors in the Products will be corrected, that the Products will satisfy
Licensee’s requirements or that the Products will operate in the combinations
which Licensee may select for use.


 


5.3                                 Limited
Warranty.  Vital Images warrants to
Licensee that the Products, when properly installed and operated, will produce
no material errors when processing dates prior to, during and after the
calendar year 2000.  Vital Images shall
have 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 by
Licensee or any third party, in accordance with the Licenses granted hereunder
or Vital Images’ then-applicable operating manuals; (b) the Products have been
modified in any manner or are used or combined with other computer software
programs, hardware or data; or (c) the material error reported by Licensee is
not reproducible by Vital Images.


 


5.4                                 Exclusive
Remedy.  Vital Images’ entire
liability, and Licensee’s exclusive remedy, for any breach of the warranty in
Article 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 the
License to such Products and refund any unearned license fees paid (the amount
of the license fee Licensee paid for the Products, less a reasonable value for
use determined by prorating the license fee paid on a thirty-six (36) month
straight-line depreciation method) with no further liability to Licensee.  This Article 5.4 states Licensee’s exclusive
remedy, and Vital Images and its licensors’ entire liability for any breach of
the warranty set forth in Article 5.3.


 


5.5                                 Warranty
Disclaimer.  THE WARRANTIES SET
FORTH IN ARTICLES 5.1 AND 5.3 ABOVE ARE EXCLUSIVE AND IN LIEU OF ALL OTHER
WARRANTIES, EXPRESS OR IMPLIED, WHICH ARE HEREBY DISCLAIMED AND EXCLUDED BY
VITAL IMAGES, INCLUDING WITHOUT LIMITATION ANY WARRANTY OF MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OR USE, AND ALL OBLIGATIONS
OR LIABILITIES ON THE PART OF VITAL IMAGES FOR DAMAGES ARISING OUT OF OR IN
CONNECTION WITH THE USE, MAINTENANCE OR PERFORMANCE OF THE PRODUCTS.  Repair or replacement of all or any part of
the Products does not extend the Warranty Period, which shall begin on the
delivery date.  Vital Images and its third
party licensors expressly disclaim any commitment to provide maintenance or
support of the Products beyond the Warranty Period, in the absence of a
Licensee entering into a separate agreement with Vital Images or its
reseller.  Furthermore, the Products are
derived from and include


 


3

















 


software from third party licensors, who make no
warranty, express or implied, regarding the Products, who disclaim any and all
liability for the Products and who will not undertake to provide any
information or support regarding the Products.


 


5.6                                 Infringement
Indemnity.  Vital Images hereby
agrees to indemnify, defend and hold Licensee harmless from any third party
suit, claim or other legal action (“Legal Action”) that alleges the Products
infringe any United States patent, copyright, or trade secret, including any
award of damages and costs made against Licensee by a final judgment of a court
of last resort based upon a Legal Action, provided that:  (a) Licensee gives written notice of any
Legal Action to Vital Images within fifteen (15) days of Licensee’s first
knowledge thereof; (b) Vital Images has sole and exclusive control of the
defense of any Legal Action, including the choice and direction of any legal
counsel, and all related settlement negotiations; and (c) Licensee provides
Vital 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 its
licensors shall have no liability for any Legal Action based on or arising out
of:  (a) the failure by Licensee to use
a non-infringing version or release of the Products if made available by Vital
Images, (b) the combination, operation or use of the Products with software,
hardware or data not furnished by Vital Images, if such Legal Action would have
been 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 nor
contemplated.


 


In the event that the Products are held or are
believed by Vital Images to infringe, Vital Images shall, at its option and
expense, (a) modify the infringing Products, (b) obtain for Licensee a license
to continue using such Products, (c) substitute the Products with other
software reasonably suitable to Licensee, or (d) if none of the foregoing are
commercially feasible, terminate the License to such Products and refund any
unearned license fees paid (the amount of the license fee paid for the
Products, less a reasonable value for use determined by prorating the license
fee paid on a thirty-six (36) month straight-line amortization method) with no
further liability to Licensee.


 


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


 


ARTICLE 6: LIMITATION OF REMEDIES


 


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


 


6.2                                 Sole
Remedies.  THE SOLE AND EXCLUSIVE
REMEDIES FOR BREACH OF ANY AND ALL WARRANTIES AND THE SOLE REMEDIES FOR VITAL
IMAGES’ LIABILITY OF ANY KIND (INCLUDING LIABILITY FOR NEGLIGENCE OR PRODUCT
LIABILITY) WITH RESPECT TO THE PRODUCTS AND SERVICES COVERED BY THIS LICENSE
AGREEMENT AND ALL OTHER PERFORMANCE BY VITAL IMAGES UNDER THIS LICENSE
AGREEMENT SHALL BE LIMITED TO THE REMEDIES PROVIDED IN ARTICLE 5 OF THIS
LICENSE AGREEMENT.


 


6.3                                 Damages
Limitation.  VITAL IMAGES SHALL HAVE
NO LIABILITY OF ANY KIND FOR ANY SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL
LOSS OR DAMAGE, EVEN IF VITAL IMAGES SHALL HAVE BEEN ADVISED OF THE POSSIBILITY
OF SUCH POTENTIAL LOSS OR DAMAGE, AND
EVEN IF A REMEDY SET FORTH HEREIN IS FOUND TO HAVE FAILED OF ITS ESSENTIAL
PURPOSE.  THE DAMAGES LIMITATION SET
FORTH IN THIS ARTICLE 6.3 SHALL INCLUDE, BUT NOT BE LIMITED TO, ANY
LIABILITY FOR DAMAGES ARISING OUT OF OR RESULTING FROM THE USE, MAINTENANCE OR
PERFORMANCE OF THE PRODUCTS, INCLUDING, WITHOUT LIMITATION, THE LOSS OR
CORRUPTION OF LICENSEE’S OR ANY THIRD PARTY DATA.  IN NO EVENT SHALL VITAL IMAGES BE LIABLE FOR ANY DAMAGES


 


4

















 


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


 


ARTICLE 7: CONFIDENTIALITY


 


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


 


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


 


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


 


(b)                                 Information
which was independently developed by Licensee without the use or reliance on
Vital Images’ Confidential Information; or


 


(c)                                  Information
which was provided to Licensee by a third party under no duty of
confidentiality to Vital Images.


 


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


 


7.4                                 Cooperation.  At Vital Images’ request, Licensee shall
cooperate fully with Vital Images in any and all legal actions taken by Vital
Images to protect its rights in the Products and in the Confidential
Information.  Vital Images shall bear
all out-of-pocket costs and expenses reasonably incurred by Licensee in the
course of such cooperation.


 


ARTICLE 8: ARBITRATION


 


8.1                                 Dispute
Resolution.  Except as provided in
Article 8.2 below, Vital Images and Licensee shall each use its best efforts to
resolve any dispute between them promptly and without resort to any legal
process if feasible within thirty (30) days of receipt of a written notice by
one party to the other party of the existence of such dispute.  The foregoing requirement in this Article
8.1 shall be without prejudice to either party’s right, if applicable, to
terminate this License Agreement under Article 3.1 above.


 


8.2                                 Litigation
Rights Reserved.  If any dispute
arises with regard to Licensee’s unauthorized use of the Products or
unauthorized use or infringement of Confidential Information, Vital Images may
seek any available remedy at law or in equity from a court of competent
jurisdiction.


 


8.3                                 Procedure
for Arbitration.  Except as provided
in Article 8.2 above, any dispute, claim or controversy arising out of or in
connection with this License Agreement which has not been settled through
negotiation within a period of thirty (30) days after the date on which either
party shall first have notified the other party in writing of the existence of
a dispute shall be settled by final and binding arbitration under the
then-applicable Commercial Arbitration Rules or, if Licensee’s principal place
of business is outside the United States, the International Arbitration Rules
of the American Arbitration Association (“AAA”).  Any such arbitration shall be conducted by three (3) arbitrators
appointed by mutual agreement of the parties or, failing such agreement, in
accordance with said Rules.  At least
one (1) arbitrator shall be an experienced computer software professional, and
at least one (1) arbitrator shall be an experienced business attorney


 


5

















 


with a background in the licensing and distribution of
computer software.  Any such arbitration
shall be conducted in Minneapolis, Minnesota, U.S.A. in the English
language.  An arbitral award may be
enforced in any court of competent jurisdiction.  Notwithstanding any contrary provision in the AAA Rules, the following
additional procedures and rules shall apply to any such arbitration:


 


(a)                                  Each
party shall have the right to request from the arbitrators, and the arbitrators
shall order upon good cause shown, reasonable and limited pre-hearing
discovery, including (i) exchange of witness lists, (ii) depositions under oath
of named witnesses at a mutually convenient location, (iii) written
interrogatories and (iv) document requests.


 


(b)                                 Upon
conclusion of the pre-hearing discovery, the arbitrators shall promptly hold a
hearing upon the evidence to be adduced by the parties and shall promptly render
a written opinion and award.


 


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


 


(d)                                 Each
party 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 the
arbitrators, 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 assign
or otherwise transfer its rights or obligations under this License Agreement
except with the prior written consent of Vital Images, which consent shall not
be unreasonably withheld.  This License
Agreement shall be binding on the parties hereto and their respective
successors and permitted assigns.  Any
prohibited assignment shall be null and void.


 


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


 


9.3                                 Exports
and U.S. Government Rights.  Licensee
hereby acknowledges that it will not export or reexport any of the Products or
technical data (which includes, among other things, any technical information
relating to the Products, written or otherwise), or any product incorporating
any Products or technical data.  The
Products are provided with Restricted Rights. 
Use, duplication or disclosure by the U.S. government is subject to
restrictions as set forth in (a) this License Agreement pursuant to DFARs
227.7202-3(a); (b) subparagraph (c)(1)(i) of the Rights in Technical Data and
Computer Software clause at DFARs 252.227-7013; or (c) the Commercial Computer
Software Restricted Rights clause at FAR 52.227-19 subdivision (c)(1) and (2),
as applicable.  Contractor/manufacturer
is Vital Images, Inc., 3100 West Lake Street, Suite 100, Minneapolis, Minnesota
55416 U.S.A.


 


9.4                                 Entire
Agreement.  This License Agreement,
including the Exhibits attached hereto which are incorporated herein,
constitutes the entire agreement of the parties with respect to the subject
matter hereof and supersedes all prior agreements by and between Licensee and
Vital Images as well as all proposals, oral or written, and all prior
negotiations, 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 written
amendment signed by both parties hereto.


 


9.6                                 Governing
Law.  This License Agreement shall
be 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 Nations
Convention on the International Sale of Goods.


 


6

















 


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


 


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


 


9.9                                 Attorneys’ Fees.  Subject to Article 8.3, if any action at law
or in equity is necessary to enforce or interpret the terms of this License
Agreement, the substantially prevailing party shall be entitled to its
reasonable attorneys’ fees and costs in addition to any other relief such party
may be entitled.


 


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


 


9.11                           Further
Assurances.  The parties shall
perform all such further acts, provide such further documents or written
assurances, and execute such further documents as are reasonably required or
necessary to carry out the acts and transactions contemplated by this License
Agreement.


 


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


 


	
  VITAL IMAGES, INC.

  	
  LICENSEE

  
	
   

  	
   

  
	
   

  	
   

  
	
  By 

  	
   

  	
   

  	
  By 

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name 

  	
   

  	
   

  	
  Name 

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title 

  	
   

  	
   

  	
  Title 

  	
   

  	
   

  
												



 


7

















 


VITAL IMAGES, INC.


END USER AGREEMENT


 


EXHIBIT A


PRODUCTS


 


8

















 


VITAL IMAGES, INC.


DEMONSTRATION LICENSE AGREEMENT


 


EXHIBIT B


DESIGNATED EQUIPMENT AND SITE


 


Designated
Equipment:


 


 


Designated
Site:


 


9

















 


EXHIBIT
H


 


MAINTENANCE
AND SUPPORT


 


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


 


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


 

















 


EXHIBIT
I


 


SERVER
SPECIFICATIONS


 


Showcase CAD Server Preliminary
Specifications


 


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


 


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


 


Server Hardware for Showcase Product


 


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


 


1 USB port; standard PS/2 keyboard and PS/w style mouse with
10/100BaseT Ethernet port


 


1 x 36 GB HD for images and system


 


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


 


Video board supports 24-bit non-interlaced pixel depth with minimum
1024 x 768 pixel resolution at 60 Hz minimum with 4 MB video memory


 


•                  Supports 18 inch
SVGA color monitor (not included)


 


Server Software


 


•                  Red HatTM LinuxTM
Operating System