<PAGE>

                                                                   Exhibit 10.11

                              AMENDED AND RESTATED
                              DISTRIBUTOR AGREEMENT

                                     between

                               R2 TECHNOLOGY, INC.

                                       and

                        GENERAL ELECTRIC MEDICAL SYSTEMS,
                     A DIVISION OF GENERAL ELECTRIC COMPANY

                            As of September 27, 2000

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

<PAGE>

         This AMENDED AND RESTATED DISTRIBUTOR AGREEMENT (this "Agreement") is
entered into effective September 27, 2000 (the "Effective Date"), between R2
Technology, Inc., a Delaware corporation having a principal place of business at
325 Distel Circle, Los Altos, California 94022 ("R2"), and GE Medical Systems, a
division of General Electric Company, a New York corporation, having a principal
place of business at 3000 N. Grandview Boulevard, Waukesha, Wisconsin 53188
("GEMS"). The term GEMS, as used herein, shall include all Affiliates (as
defined below) of GEMS.

                                    RECITALS

         WHEREAS, R2 and GEMS previously have entered into that certain
Distributor Agreement, dated as of May 7, 1998, as amended to date (the
"Original Agreement"), relating to the distribution by GEMS of R2's ImageChecker
hardware and software;

         WHEREAS, R2 and GEMS desire to amend and restate the Original Agreement
as set forth herein;

         WHEREAS, this Agreement provides for a non-exclusive technology
relationship and an exclusive sales and marketing relationship between R2 and
GEMS relating to R2's ImageChecker software and associated hardware for use with
a Digital Based Mammography System (as defined below) which assists radiologists
in the mammographic screening process for the detection of breast cancer.

         NOW, THEREFORE, in consideration of the foregoing recitals and the
agreements and covenants set forth in this Agreement, the adequacy of which is
hereby acknowledged, the parties hereto agree to amend and restate the Original
Agreement as follows:

         1.       DEFINITIONS.
                  -----------

                  1.1 "Affiliate" shall mean, with respect to R2 or GEMS, any
                       ---------
corporation or other entity which is directly or indirectly controlling,
controlled by or under the common control with R2 or GEMS, as applicable. For
the purpose of this Agreement, "control" shall mean the direct or indirect
ownership of fifty percent (50%) or more of the outstanding shares or other
voting rights of the subject entity to elect directors, or if not meeting the
preceding, any entity owned or controlled by or owning or controlling at the
maximum control or ownership right permitted in the jurisdiction where such
entity was formed.

                  1.2 "Availability Date" shall mean the date on which all of
                       -----------------
the following have occurred: (a) final FDA approval of the R2 Product for
commercial use has been obtained the R2 Product meets the mutually agreed
Specifications and (c) the R2 Product is commercially available to GEMS for sale
by GEMS to its customers with the GEMS Product. For purposes of this Section, it
is understood and agreed that such final FDA approval of the R2 Product and
commercial availability of the R2 Product to GEMS shall not be affected by when,
or whether or

<PAGE>

not, GEMS obtains FDA approval of a particular GEMS Product configured for use
with the R2 Product.

                  1.3 "CAD" shall mean computer aided detection.
                       ---

                  1.4 "Change of Control of R2" shall mean: (a) a dissolution or
                       -----------------------
liquidation of R2; (b) a merger or consolidation of R2 with or into another
corporation (or other entity) or corporations (or other entities) in which the
persons and entities who are the stockholders of R2 immediately prior to the
effectiveness of such merger or consolidation, immediately after the
effectiveness of such merger or consolidation, do not own at least fifty percent
(50%) of the then outstanding voting power of the surviving entity or resulting
entity of such merger or consolidation, (other than a merger effected solely for
purposes of the reincorporation of R2); (d) the sale of all or substantially all
of the assets of R2; or (e) any transaction or series of related transactions in
which capital stock (or other equity) of R2 representing in excess of 35% of the
voting power of all then outstanding capital stock of R2 is transferred to a
single corporation, entity, person or to a group of corporations, entities, or
persons acting in concert.

                  1.5 "Computed Radiography System for Mammography" shall mean a
                       -------------------------------------------
mammography system where the original image data is acquired using a
photo-stimulated storage phosphor screen detector or similar technology.

                  1.6 "Digital Based Mammography System" shall mean a digital
                       --------------------------------
based mammography system wherein the original image data is acquired using a
digital array detector, including but not limited to charged-coupled device
(CCD) based, slot scanning devices and direct digital capture devices.

                  1.7 "Exclusivity Period" shall mean the period beginning on
                       ------------------
the Effective Date hereof and ending on the earlier of (a) the one year
anniversary of the Availability Date or (b) the earlier termination of the
exclusivity provisions of this Agreement pursuant to the terms of Article 3
hereof.

                  1.8 "FDA" shall mean the United States Food and Drug
                       ---
Administration.

                  1.9 "Files for Bankruptcy" shall mean, with respect to an
                       --------------------
entity, if any of the following events occurs: such entity (a) becomes the
subject of any proceedings relating to its liquidation, insolvency or for the
appointment of a receiver or similar officer for it, which is not discharged in
its favor with prejudice within thirty (30) days thereafter; (b) makes an
assignment for the benefit of all or substantially all of its creditors, or
enters into an agreement for the recomposition, extension or readjustment of all
or substantially all of its obligations; or (c) files, or has filed against it,
a petition or other document seeking relief under the United States or foreign
bankruptcy laws, which is not discharged with prejudice within thirty (30) days
thereafter.

                  1.10 "Film Based Mammography System" shall mean a film based
                        -----------------------------
mammography system wherein the original image data are acquired on film.



                                       2

<PAGE>

                  1.11 "GEMS Price" shall mean that price for each R2 Product
                        ----------
(as defined below) set forth on Exhibit A, as may be changed according to the
provisions of Article 4 or Exhibit A.

                  1.12 "GEMS Product" shall mean GEMS' Full Field Digital
                        ------------
Based Mammography System.

                  1.13 "Hardware" shall have the meaning set forth in Exhibit B.
                        --------

                  1.14 "Patents" shall mean the patents listed in Exhibit E,
                        -------
which shall be amended from time to time to include patents granted with respect
to the R2 Product.

                  1.15 "Patent Rights" shall mean the following:
                        -------------

                           1.15.1 the Patents and any continuations, divisions
or continuations-in-part of the Patents, and any patent issuing from any of the
foregoing; and

                           1.15.2 any reissues, re-examinations or extensions of
the Patents.

                  1.16 "R2 Product" shall mean R2's ImageChecker Software
                        ----------
(including a Software Copy) and associated Hardware (and any successor product)
configured for use with the GEMS Product, as reflected in the Specifications.

                  1.17 All references in this Agreement to the "sale" "selling,"
"purchasing" or "purchase" of Software or Software Copies shall mean the sale or
purchase of a license to use such Software or Software Copies.

                  1.18 "Software" shall have the meaning set forth in Exhibit B.
                        --------

                  1.19 "Software Copy" shall mean an object code copy of any of
                        -------------
the Software, together with a copy of any user manual or other documentation
customarily supplied therewith to end users by R2, including without limitation,
an English language version of the user's guide and service and installation
manual related to the R2 Product.

                  1.20 "Specifications" shall mean the specifications for the R2
                        --------------
Product, configured for use with the GEMS Product, as set forth in the latest
mutually agreed upon version of the GEMS SDRS document, the initial version of
which is attached hereto as Exhibit D. The final Specifications is subject to
additional discussions and mutual agreement. The expected performance of the R2
Product algorithm is set forth on Exhibit D, which includes the sensitivity and
specificity values of the R2 Product used with the GEMS Product. R2 shall define
the methodology which will be used to demonstrate that the performance of the R2
Product used with the GEMS Product is equivalent to or better than the
performance of the R2 Product used with a Film Based Mammography System.

                  1.21 "Term" shall have the meaning specified in Section 15.1.
                        ----

                  1.22 "Territory" shall mean all countries or other territories
                        ---------
of the world.


                                       3

<PAGE>

                  1.23 "Valid Claim" shall mean any claim of an issued and
                       -------------
unexpired Patent included within the Patent Rights, which has not been held
unenforceable or invalid by a court or other governmental agency of competent
jurisdiction.

         2.       SCOPE OF THE AGREEMENT.
                  ----------------------

                  2.1      Product Covered.  The terms and provisions of this
                           ---------------
Agreement shall be applicable with respect to the R2 Product only, except where
other products are expressly referenced.

                  2.2 Development. GEMS and R2 agree to jointly undertake a
                      ------------
technical collaboration to further develop specifications to define the
interface between the R2 Product and the GEMS Product and the compatibility of
the R2 Product with the GEMS Product.

                  2.3 Purchase and Distribution of Product. GEMS shall purchase
                      -------------------------------------
from R2, and R2 shall sell to GEMS, the R2 Product, and GEMS shall distribute
the R2 Product in the Territory, subject to the terms of this Agreement
(including without limitation, the provisions regarding exclusivity in Article
3).

                  2.4      Purchases of R2 Product.
                           -----------------------

                           2.4.1    Purchase of Prototype.  GEMS shall
                                    ---------------------
purchase * * * units of the R2 Product for the pilot customer accounts no later
than December 31, 2000; provided, however, that the obligation to purchase such
units shall be contingent upon the R2 Product being in a prototype phase
acceptable for pilot customer applications (regardless of whether the portion of
the GEMS Product being developed by GEMS is in a completed form acceptable for
pilot customer applications), and if this does not occur prior to December 31,
2000, then GEMS shall not have any obligation to purchase any such units. GEMS,
at its option, may purchase additional units of the R2 Product for the pilot
customer accounts, at the same GEMS Price as the initial twenty, subject to R2's
consent, such consent not to be unreasonably withheld.

                           2.4.2    Purchases After FDA Approval.  Except as
                                    ----------------------------
provided in Section 2.9, from and after the Availability Date, GEMS may, but
shall not be obligated to, purchase, and R2 shall be obligated to sell to GEMS,
units of the R2 Product at the GEMS Price and on the terms and conditions set
forth herein, unless otherwise mutually agreed by GEMS and R2.

                           2.4.3    Failure to Meet Specifications.  In no event
                                    ------------------------------
shall GEMS have any obligation at any time under any provision hereof to
purchase any units of the R2 Product if the R2 Product does not meet the
mutually agreed Specifications, unless otherwise agreed to in writing by GEMS.

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


                                       4

<PAGE>

                  2.5 Subdistributors. Subject to the provisions of this
                      ----------------
Agreement, GEMS may appoint one or more third parties within any portion of the
Territory to distribute or act as a sales representative for the R2 Products to
end user customers (each a "Subdistributor"). GEMS agrees to terminate a
Subdistributor's right to distribute R2 Products promptly upon becoming aware
that such Subdistributor is selling or otherwise distributing R2 Products,
directly or indirectly, in a manner that is not in accordance in any material
respect with the provisions of this Agreement.

                  2.6 Reservation of Rights; No Rights Beyond the R2 Product.
                      -------------------------------------------------------
Except as expressly provided in this Agreement (including without limitation,
Section 14.4), (a) no right, title, or interest is granted, whether express or
implied, by R2 to GEMS, (b) nothing in this Agreement shall be deemed to grant
to GEMS rights in any products or technology other than the R2 Products, and (c)
no provision of this Agreement shall be deemed to restrict R2's right to exploit
technology, know-how, patents, or any other intellectual property rights
relating to the R2 Products in products other than R2 Products. It is further
understood and agreed that, subject to the provisions of this Agreement
(including without limitation, Section 14.4), R2 may itself, or with or through
third parties, (i) market, sell, or otherwise distribute, directly or
indirectly, R2 Products in Japan, and (ii) distribute products other than the R2
Product in the Territory, either directly or indirectly, for any purpose.
Without limiting the foregoing, such products may comprise hardware and/or
software that is part of the R2 Product provided that such products are not used
with Digital Based Mammography Systems. Following the end of the Exclusivity
Period, R2 may, through itself or through third parties, market, sell, or
otherwise distribute, directly or indirectly, the R2 Product in the Territory.

                  2.7 Independent Contractors. The relationship of GEMS and R2
                      ------------------------
established by this Agreement is that of independent contractors, and nothing
herein shall be construed to (a) give either party the power to direct or
control the day-to-day activities of the other, (b) constitute the parties as
partners, joint venturers, principal and agent, employer and employee,
co-owners, franchisor and franchisee, or otherwise as participants in a joint
undertaking, or (c) allow either party to create or assume any obligation on
behalf of the other party for any purpose whatsoever. Except as otherwise set
forth herein, all financial and other obligations associated with each party's
business are the sole responsibility of such party.

                  2.8      GEMS Cases.
                           ----------

                           2.8.1    Training Cases.  GEMS and R2 acknowledge
                                    --------------
that GEMS has provided to R2 data from one hundred (100) "normal cases" (cases
containing no indication of cancer). In order to assist R2 in developing a
prototype phase of the R2 Product as set forth in Section 2.4.1 and to obtain
regulatory approvals from the FDA and all other governmental and regulatory
approvals in the Territory, GEMS shall provide data no later than September 30,
2000 from a total of 200 "cancer cases" comprised of 100 cases containing an
indication of microcalcification and 100 masses, that will constitute a database
with a repartition in the pathology size corresponding to a screening population
(the "Cancer Cases"). Such screening population shall consist of the following
distribution guidelines: (a) lesions less than 2 cm.--at least 75% of the cases;
(b) lesions between 2 cm. and 3 cm.--no more than 20% of the cases; and (c)
lesions greater than 3 cm.--no more than 5% of the cases. Notwithstanding the



                                       5

<PAGE>

foregoing, GEMS and R2 acknowledge and agree that such distribution percentages
are to be used as guidelines for data collection and that R2 shall have no
remedy against GEMS if such distribution percentages are not met. Such case data
shall be provided by GEMS to R2 as soon as reasonably practicable after it is
available to or captured by GEMS and after appropriate informed consent has been
obtained from all affected subjects. GEMS shall proceed diligently to obtain
such appropriate informed consent.

                           2.8.2    Algorithm.  Prior to GEMS commencing
                                    ---------
discussions with the Institutional Review Board ("IRB"), R2 shall confirm in
writing to GEMS that the R2 Product algorithm can process the PMA (pre-market
approval) cases which are done in feasibility format and that R2 can use them
for the PMA submission. In the event that the FDA does not accept these cases
for R2's FDA submission, then GEMS and R2 shall negotiate in good faith to
determine how to acquire additional cases as outlined in Section 2.8.3.

                           2.8.3    FDA Cases.  Within fifteen (15) days of
                                    ---------
receipt by GEMS of written approval from the IRB, GEMS shall deliver to R2 the
PMA data set, consisting generally of 44 "cancer cases" and 100 "benign cases."
If the FDA requires more than the number of cases referred to above in order to
approve the R2 Product, then GEMS and R2 shall negotiate in good faith to
determine how many more cases need to be accrued, how to obtain them and how to
share the costs thereof.

                           2.8.4    Use and Return of Case Data.  R2 represents,
                                    ---------------------------
warrants and covenants to GEMS that the FDA cases, training cases and test data
provided under this Section 2.8, together with any and all other cases, training
databases and other related materials provided to R2 by GEMS will be used by R2
solely for the testing, development and regulatory approval of the R2 Product
for use with the GEMS Product exclusively, and, upon the request of GEMS will be
promptly returned to GEMS upon the termination of this Agreement or at any time
upon the request of GEMS. Upon the return of such information, R2 will provide
GEMS with a certificate from the president or chief financial officer of R2
certifying that all copies of such information have been returned to GEMS. None
of the information provided by GEMS shall identify any individual patient. All
such information provided to R2 under this Section 2.8 shall be deemed
"Confidential Information" under Section 12. R2 shall keep the training cases
and the FDA cases separate and shall not commingle the data from the two groups
of cases.

                           2.8.5    Test Cases.  After the training database
                                    ----------
requirements outlined in Section 2.8.1 are met, GEMS shall accrue a test
database. Such cases shall be used by R2 solely to evaluate the R2 Product
algorithm. The R2 Product algorithm shall be evaluated with R2 tools.
Representatives of GEMS shall participate in running the algorithm tests at R2's
offices and GEMS shall have the right to access and to receive copies of all
results and analyses of such tests, only for purposes related to this Agreement.
R2 represents, warrants and covenants that the test cases shall not be used by
R2 for any purpose other than such testing prior to the testing and analysis of
the algorithm as discussed above in this Section 2.8.5. If the results of the
testing reflect that the R2 Product is not meeting the Specifications, (a) then
the R2 Product shall not be released, unless otherwise agreed to in writing by
GEMS, and (b) GEMS and R2 shall share equally the test database in two halves:
(i) one half of the cases shall be added to the training database and (ii) the
other one-half of the cases shall remain in the test database. Any remaining



                                       6

<PAGE>

test cases (from subsection (ii) above) shall not be used for testing until the
next planned algorithm evaluation and shall be subject to the conditions of this
Section 2.8.5.

                  2.9 GEMS Products. Although GEMS shall not have any obligation
                      --------------
to purchase any minimum number of units of the R2 Product, GEMS hereby agrees
that from and after the Availability Date until the end of the Exclusivity
Period, GEMS shall include the R2 Product as integrated and packaged together
with at least * * * of the GEMS Products shipped or caused to be shipped by GEMS
(as measured on a quarterly basis); provided, however, that such obligation for
GEMS shall not be applicable during the first ninety (90) days following the
Availability Date; and, provided, further, that GEMS shall have sixty (60) days
after any written notice of default under this Section 2.9 from R2 to remedy any
such default (notwithstanding any other provision of this Agreement). GEMS shall
be relieved of its obligations under this Section 2.9, upon written notice to
R2, (a) if GEMS, acting in good faith, reasonably believes, as established by
contemporaneous written records that the R2 Product infringes a third party's
intellectual property rights, or (b) if, and then to the extent, that R2 is
unable to supply to GEMS or its customers in a sufficient quantity and on a
sufficiently timely basis to allow GEMS to meet such obligations. Upon such GEMS
written notice to R2, R2 has thirty (30) days to contest such alleged
infringement by providing written notice to GEMS. If the parties are not able to
reach agreement on how to remedy such alleged infringement within thirty (30)
days of R2's written notice of contest to GEMS, including without limitation
amending this Agreement, then either party may terminate this Agreement. If GEMS
fails to meet its obligations under this Section 2.9, and such failure is not
remedied within the time period set forth above, then R2 shall have the right,
as its sole and exclusive remedy for such failure, to terminate the exclusivity
provisions of this Agreement.

         3.       EXCLUSIVITY.
                  -----------

                  3.1 Exclusivity Obligations of Each Party. Subject to the
                      --------------------------------------
terms and conditions hereof, including without limitation, Sections 2.6 and 3.6,
during the Exclusivity Period (a) R2 shall not sell, lease, loan, license,
transfer or otherwise provide, or grant any distribution or other rights to
provide, directly or indirectly, the R2 Product to any manufacturer,
distributor, customer or other third party in the Territory (except in Japan
where such rights shall be non-exclusive), and (b) GEMS shall not purchase the
R2 Product from any third party. For the purposes of this Article 3, the R2
Product also shall be deemed to include any similar product configured for use
with any Digital Based Mammography System other than the GEMS Product.

                  3.2 Termination of Exclusivity for Both Parties. In the event
                      --------------------------------------------
the exclusivity provisions are terminated with respect to one party, they also
shall be deemed terminated with respect to the other party and the Exclusivity
Period shall terminate.

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



                                       7

<PAGE>

                  3.3 Termination of Exclusivity Obligations of R2.
                      ---------------------------------------------
Notwithstanding the provisions of Section 3.1, and subject to Section 3.5, the
obligation of R2 to sell the R2 Product exclusively to GEMS shall terminate, and
the Exclusivity Period shall terminate, at the sole option of R2: (a)
immediately upon termination of this Agreement; (b) upon the one (1) year
anniversary of the Availability Date; or (c) upon the election of R2 to
terminate exclusivity pursuant to the provisions of Section 2.9.

                  3.4 Termination of Exclusivity Obligations of GEMS.
                      -----------------------------------------------
Notwithstanding the provisions of Section 3.1, the obligation of GEMS to
purchase the R2 Product exclusively from R2 shall terminate, and the Exclusivity
Period shall terminate, at the sole option of GEMS, (a) immediately upon the
termination of this Agreement; (b) the one (1) year anniversary of the
Availability Date; (c) immediately if R2 is not able to supply R2 Product that
is commercially competitive with regard to cost, quality, delivery or service
taken in the aggregate, provided that if R2 cures such inability within ninety
(90) days after written notice is provided by GEMS to R2, then the exclusivity
provisions shall be reinstated; (d) subject to the provisions below in this
Section 3.4, thirty (30) days after written notice from GEMS to R2 if GEMS,
acting in good faith, reasonably believes, as established by contemporaneous
written records, that the R2 Product infringes the intellectual property rights
of any third party; (e) if GEMS or any of its Affiliates acquires, merges or
consolidates with a third party which supplies a product similar to the R2
Product; (f) if R2 is unable to supply the R2 Product because of a decision to
exit the business, insolvency or any other reason; (g) if R2 Files for
Bankruptcy; or (h) ninety (90) days after GEMS has provided R2 with written
notice of its intention to terminate exclusivity or (i) upon the election of R2
to terminate exclusivity pursuant to the provisions of Section 2.9. Upon GEMS
written notice to R2 pursuant to clause (d) above, R2 has thirty (30) days to
contest such alleged infringement by providing written notice to GEMS. If the
parties are not able to reach agreement on how to remedy such alleged
infringement within thirty (30) days of R2's written notice of contest to GEMS,
including without limitation amending this Agreement, then either party may
terminate this Agreement.

                  3.5 Sale of R2. In the event of a Change of Control of R2, R2
                      -----------
may, at its sole discretion, terminate the right of GEMS to purchase the R2
Product exclusively from R2, in which case the termination of exclusivity, and
the termination of the Exclusivity Period, would occur six (6) months after the
consummation of such Change of Control of R2; provided, however, that GEMS would
retain a non-exclusive right to sell the R2 Product for the Term of this
Agreement, including any extension period if GEMS has provided notice of its
intent to extend the Term in accordance with Section 15.1 prior to the effective
date of the Change of Control of R2. Notwithstanding the foregoing and as a
condition to the termination of exclusivity pursuant to this Section 3.5, prior
to entering into negotiations with any party regarding a Change of Control of
R2, R2 and its controlling shareholders shall first notify GEMS in writing of a
proposed Change of Control of R2, which notification shall not include the name
or identity of the other party or any information deemed confidential of such
other party, and shall negotiate in good faith with GEMS for a period of sixty
(60) days following receipt of such notice by GEMS, regarding a Change of
Control of R2 in which GEMS may acquire control of R2.

                  3.6      Ability to Collaborate with Other Parties, Etc.
                           -----------------------------------------------
Notwithstanding any other provisions of this Agreement, during the Term of this
Agreement, including without limitation,


                                       8

<PAGE>

during the Exclusivity Period, (a) GEMS shall not be prohibited from selling and
distributing any software or hardware products developed by GEMS or its
Affiliates provided that such products are not directly competitive with the R2
Product, including any future version thereof; (b) GEMS shall have the right to
sell and distribute software or hardware products that may operate on the GEMS
systems provided that such products are not directly competitive with the R2
Product, including any future version thereof; (c) GEMS and R2 shall not be
prohibited from sharing their respective technical information with third
parties, subject to the parties' confidentiality agreements, in connection with
the development of software or hardware products that may operate with their
respective systems, whether or not such products may be competitive with the
other's products; and (d) GEMS and R2 shall have the right to develop internally
or to collaborate with third parties in connection with the development of
software or hardware products that may operate with their respective systems,
whether or not such products may be competitive with the other's products;
provided, however, that in no event shall GEMS or R2 enter into an agreement
with any third party, with an effective date prior to the end of the Exclusivity
Period under this Agreement, which grants such third party the right to sell,
purchase, distribute, market or promote CAD products for Digital Based
Mammography Systems prior to the end of such Exclusivity Period. The foregoing
provision shall not prevent either GEMS or R2 from discussing or negotiating
agreements or other relationships with third parties related to such CAD
products in advance of the termination of the exclusivity provisions hereof.

                  3.7 Effect of Termination of Exclusivity. Subject to
                      -------------------------------------
termination pursuant to Article 15, if the Exclusivity Period is terminated
pursuant to this Article 3, the remaining provisions of this Agreement shall
remain in full force and effect and Exhibit A to this Agreement shall
automatically be amended to reflect the most favorable price and discount terms
offered by R2 to any other purchasers or distributors of the R2 Product for
similar volume, terms, conditions and achievement of target license placements
of R2 Products, taken in the aggregate (taking into account all R2 Products
purchased or licenses placed by GEMS) ("Most Favored Customer Pricing").

         4.       PRICING AND PAYMENT.
                  -------------------

                  4.1 Pricing. With respect to each R2 Product purchased by GEMS
                      --------
hereunder, GEMS shall pay to R2 the GEMS Price for each R2 Product sold
hereunder. The GEMS Prices for R2 Products may only be revised as set forth in
Subsections 4.2, 4.3 and 4.4 below. All prices are quoted in United States
currency.

                  4.2      [Intentionally Omitted.]

                  4.3 Audit Right. GEMS shall have the right, upon reasonable
                      ------------
notice to R2, to have a third party independent auditing agency audit (or cause
such representatives or agents to audit) R2's books and records to determine (a)
R2's compliance with the "most favored customer" pricing terms set forth herein,
including without limitation in Section 3.7 and Exhibit A, and (b) R2's actual
manufacturing cost for the Hardware (as defined in Exhibit A) and spare parts.
The results of such audit shall be deemed to be R2 Confidential Information. If
an audit reflects that a lower price should have been charged or should be
charged to GEMS for units of R2 Product, then appropriate adjustments shall be
made to the GEMS Price, including any necessary adjustments for units previously
sold, where applicable. If the Manufacturing


                                       9

<PAGE>

Cost (as defined in Exhibit A) charged to GEMS differs from R2's actual
manufacturing cost by more than ten (10%) percent, then the Parties shall enter
into good faith negotiations to amend the GEMS Price, taking into account the
actual costs incurred by R2. The cost of the audit shall be paid by GEMS, unless
the audit reveals that (i) the GEMS Price charged to GEMS was not in accordance
with the Most Favored Customer Pricing, or (ii) R2's actual manufacturing costs
differ by more than ten percent (10%) from those included in the GEMS Price, in
which case R2 shall pay for the costs of the audit.

                  4.4 Taxes. R2 and GEMS shall negotiate in good faith to
                      ------
determine the extent to which the GEMS Price includes Taxes (as defined below)
and the extent to which GEMS will be obligated to pay Taxes in addition to the
GEMS Price. For purposes of this Section 4.5, "Taxes" shall mean any excise,
sales, use, value added (VAT), and withholding and similar taxes or duties
imposed by any government agency that has jurisdiction over the import, export,
or purchase of the R2 Products (other than taxes on net income of R2 or GEMS).

                  4.5 Payment. All payments shall be made in United States
                      --------
Dollars and are due net sixty (60) days after shipment by R2 of the R2 Product,
unless otherwise mutually agreed to by the parties.

                  4.6 Country of Origin. Invoices issued by R2 shall contain the
                      ------------------
country of origin of the Software (i.e., the country in which the item was
actually developed). R2 warrants and represents that for Software imported by
it, the country of origin on R2's invoice is correct and the Software is marked
conspicuously, legibly, indelibly and permanently in accordance with United
States law. For imported Software and Software produced or licensed within the
United States, R2 warrants and represents that it shall provide, upon request,
information or documentation establishing the country of origin.

         5.       REGULATORY MATTERS.
                  ------------------

                  The provisions of Exhibit F shall govern R2 and GEMS with
respect to regulatory matters and the other matters set forth therein. R2 and
GEMS each hereby agree to be bound by such provisions.

         6.       SOFTWARE LICENSE AGREEMENTS.
                  ---------------------------

                  GEMS acknowledges and agrees that, in cases where the Software
is distributed as a stand-alone item and not integrated into a GEMS Product, it
will use all commercially reasonable efforts to obtain agreement from its R2
Product customers to a commercially reasonable software license agreement (each
a "Software License Agreement"), such as the form provided in Exhibit C (with
such changes as the customer may reasonably request and R2 approves). GEMS shall
distribute Software in such cases only to end user customers who have entered
into a Software License Agreement in respect of such Software, unless R2
otherwise agrees.



                                       10

<PAGE>

         7.       OTHER SUPPLY TERMS.
                  ------------------

                  To the extent not otherwise addressed herein, terms related to
ordering, packaging, shipping, returning the R2 Product and other matters
relating to supply of the R2 Product shall be fixed by GEMS in a manner
consistent with its terms with other suppliers or as otherwise mutually agreed
by GEMS and R2.

         GEMS shall have the right to inspect shipment of R2 Product within 15
calendar days after receipt and shall notify R2 if any R2 Product is found by
GEMS to fail to meet Specifications. GEMS shall return rejected R2 Product to
R2, at GEMS' expense, including full risk of loss or damage to the R2 Product
for the shipment to R2, within a reasonable period of time of discovering the
failure and after first receiving a Return Material Authorization from R2, which
shall not be unreasonably withheld. No later than 15 calendar days after R2's
receipt of rejected R2 Product, R2 shall, at its option and expense if within
the Warranty Period, or at GEMS' option and expense as quoted by R2 outside of
the Warranty Period, either repair or replace said R2 Product. R2 shall bear all
expense and risk of loss or damage to R2 Product for the return shipment to
GEMS. R2 Product not rejected within 15 calendar days after receipt shall be
deemed accepted by GEMS.

         8.       OWNERSHIP OF INTELLECTUAL PROPERTY.
                  ----------------------------------

                  8.1 Ownership of R2 Intellectual Property. Subject to the
                      --------------------------------------
license and ownership rights set forth in this Agreement and the rights of GEMS
to the ownership of each unit of an R2 Product after such unit has been
purchased from R2 by GEMS, sole and exclusive right, title and interest to all
Patents, Software and the R2 Products and all associated intellectual property
rights arising therein shall remain with R2.

                  8.2 Ownership of GEMS Intellectual Property. Sole and
                      ----------------------------------------
exclusive right, title and interest to all GEMS Products and all associated
intellectual property rights arising therein shall remain with GEMS.

                  8.3      Ownership of Inventions and Improvements.
                           ----------------------------------------

                           8.3.1    R2 Inventions.  R2 shall have and retain
                                    -------------
sole and exclusive, right, title and interest to all inventions, improvements,
discoveries and know-how which are made during the term of this Agreement by R2,
its employees or agents acting under authority from R2 working on matters
relating to and made using or comprising the R2 Product or the GEMS Product ("R2
Inventions"). R2 hereby grants to GEMS a non-exclusive, royalty free, perpetual
license (with right to sublicense) to use, execute, reproduce, display, perform,
distribute, modify, create derivative works of, make, have made, market, offer
for sale, sell, import and sub-license and otherwise fully exploit products
incorporating the R2 Inventions (but shall exclude any R2 Inventions that are
not derived from the GEMS Product).

                           8.3.2    GEMS Inventions.  GEMS shall have and retain
                                    ---------------
sole and exclusive right, title and interest to all inventions, improvements,
discoveries and know how which are made during the term of this Agreement by
GEMS, its employees or agents acting under authority from GEMS working on
matters relating to and made using or comprising the R2



                                       11

<PAGE>

Product or the GEMS Product ("GEMS Inventions"). GEMS hereby grants to R2 a
                            -------------------
non-exclusive, royalty free, perpetual license (with right to sublicense) to
use, execute, reproduce, display, perform, distribute, modify, create derivative
works of, make, have made, market, offer for sale, sell, import and sub-license
and otherwise fully exploit products incorporating all GEMS Inventions related
to the R2 Product which are necessary or reasonably useful for the development,
implementation with and/or commercialization of the R2 Product, including
without limitation, the Hardware or Software and all upgrades and updates
thereto (but shall exclude any GEMS Inventions that are not derived from the R2
Product).

                           8.3.3    Joint Inventions. Subject to Section 11.2.3,
                                    ----------------
R2 and GEMS shall have and retain jointly all right, title and interest to all
inventions, improvements, discoveries and know how which are made during the
term of this Agreement jointly by R2 and GEMS, their employees or agents acting
under authority from R2 and GEMS working jointly on matters relating to and made
using or comprising an R2 and GEMS Product ("Joint Inventions"). Consistent with
such joint ownership, each party shall have the unencumbered right to use,
execute, reproduce, display, perform, distribute, modify, create derivative
works of, make, have made, market, offer for sale, sell, import and sub-license
products incorporating such Joint Inventions or to otherwise fully exploit such
Joint Inventions, without any duty to account to the other party. If, pursuant
to the provisions of Section 11.2.3, any Joint Invention becomes owned solely by
one party, such party hereby grants to the other party a non-exclusive, royalty
free, perpetual, irrevocable license (with right to sublicense) to use, execute,
reproduce, display, perform, distribute, modify, create derivative works of,
make, have made, market, offer for sale, sell, import and sub-license products
incorporating such Joint Invention or to otherwise fully exploit such Joint
Invention.

         9.       LICENSE.
                  -------

                  9.1 All Necessary License Rights. Subject to the provisions of
                      -----------------------------
this Agreement, R2 hereby grants to GEMS all license rights to any of R2's
intellectual property necessary to allow GEMS to perform its obligations and
exercise its rights under this Agreement. GEMS shall have a nonexclusive license
to use, sell, offer for sale and import the R2 Products during the Term which,
absent a license would infringe any or all of the Valid Claims and the Patent
Rights. GEMS and R2 acknowledge and agree that the purchase of each unit of an
R2 Product includes a license for a single acquisition device.

                  9.2 Rights upon Bankruptcy, Etc. Except as otherwise set forth
                      ---------------------------
in this Article 8, R2 hereby grants to GEMS a worldwide, perpetual, irrevocable,
royalty-free license to (a) use, execute, reproduce, display, perform,
distribute, modify and create derivative works of the Software and (b) make,
have made, market, offer for sale, sell and import and otherwise commercially
exploit the R2 Product for use in the Territory; provided, that GEMS will not be
able to exercise its rights under this license until and unless R2 Files for
Bankruptcy.

                  9.3      Distribution of Software Copies.  GEMS shall have an
                           -------------------------------
exclusive license to distribute Software Copies to customers of the R2 Product
in the Territory.

                  9.4      No Rights to Reverse Engineer, Etc.  GEMS shall have
                           -----------------------------------
no right to copy the Software or to reverse engineer, disassemble, decompile, or
otherwise attempt to derive the


                                       12

<PAGE>

source code from the Software, except under the circumstances described in
Section 9.6 or to the extent that any third party would be permitted to do so
under applicable law. GEMS shall not remove, alter, cover, or obfuscate any
copyright notices or other proprietary rights notices reasonably placed or
embedded by R2 on or in the Software.

                  9.5 Agreements Re: Existing Licenses. R2 and GEMS have entered
                      ---------------------------------
into agreements with Shih-Ping Bob Wang ("Wang") in connection with that certain
Exclusive License Agreement dated October 1, 1993 between Wang and R2, and with
ARCH Development Corporation ("ARCH") in connection with that certain License
Agreement I dated December 23, 1996, and that certain License Agreement II dated
December 23, 1996, each between ARCH and R2, that provide certain rights to GEMS
in the event that R2 Files for Bankruptcy. R2 represents and warrants that there
are no other licenses for the Patents that GEMS would require in such event to
enable GEMS to (a) use, execute, reproduce, display, perform, distribute, modify
and create derivative works of the Software or (b) make, have made, market,
offer for sale, sell and import the R2 Product for use in any market in the
Territory, except for licenses covering Patents Nos. 5,633,948 and 5,661,820
(the "Kegelmeyer Patents"), which to the best of R2's Knowledge (as defined in
Section 10.1.1) are not necessary, as of the date hereof, to (x) use, execute,
reproduce, display, perform, distribute, modify and create derivative works of
the Software or (y) make, have made, market, offer for sale, sell and import the
R2 Product for use in any market in the Territory. In the event that R2, in its
reasonable discretion, determines that the Kegelmeyer Patents are necessary for
GEMS to exercise the rights set forth in clauses (a) or (b) above, or in the
event the Kegelmeyer Patents are asserted against R2 or GEMS as a result of the
exercise of such rights by GEMS, then R2 shall obtain for GEMS a license to the
Kegelmeyer Patents as required for clauses (a) and (b) above.

                  9.6 Technical Information. In the event that R2 Files for
                      ----------------------
Bankruptcy, R2 shall provide to GEMS all necessary technical information
required for use with the R2 Product that it has not already provided in escrow
pursuant to Section 18.5, and GEMS shall have the unencumbered right to use all
of the technical information so provided or in escrow solely to commercially
exploit the R2 Product pursuant to Section 9.2 or to otherwise exercise it
rights hereunder.

                  9.7 Exclusivity and Term of Each License. Each license granted
                      -------------------------------------
by R2 to GEMS hereunder shall be exclusive (except in Japan where such rights
shall be non-exclusive) until the end of the Term (including any applicable
extension) and shall be non-exclusive thereafter. The term of each license
granted under this Agreement shall be concurrent with the Term, but shall
survive indefinitely and irrevocably with respect to the R2 Product in
accordance herewith marketed and sold prior to termination of this Agreement or
as provided under Section 15.5.

         10.      INTELLECTUAL PROPERTY WARRANTY
                  -------------------------------

                  10.1     R2 hereby represents to GEMS as follows:

                           10.1.1 R2 has license rights to the Patents set forth
in Exhibit E. The Patents cover portions of the Software incorporated into the
R2 Product. As of the date of this Agreement, R2 has received no notice of
infringement from any source. To the best of R2's


                                       13

<PAGE>

Knowledge (as defined below), the Patents are valid and enforceable and together
with any technical information to be provided by R2 to GEMS, represent all
intellectual property rights of R2 necessary for GEMS to perform its obligations
and enjoy its rights under this Agreement. For purposes of this Article 10,
"Knowledge" shall mean the Company's actual knowledge after due and diligent
inquiry of its officers, directors and employees reasonably believed to have
knowledge of the matter in question. GEMS agrees that R2 has the right to
defend, or at its option to settle, and R2 agrees, at its own expense, to defend
or at its option to settle, any claim, suit or proceeding brought against GEMS
or its customers on the issue of infringement of any third party United States
patent, copyright or trademark or the misappropriation of a trade secret by the
R2 Product distributed hereunder or the use thereof, subject to the limitations
hereinafter set forth in this Article 10. R2 shall have sole control of any such
action or settlement negotiations, and R2 agrees to pay any settlement amounts
or final judgment entered against GEMS or its customers on such issue in any
such suit, claim or proceeding defended by R2 (including reasonable attorney
fees, other professional fees, and other costs of litigation or settlement).
GEMS agrees to notify R2 promptly in writing of such claim, suit or proceeding;
provided that the failure to promptly notify R2 shall not relieve R2 of any
obligation under this Agreement except to the extent such failure to provide
prompt notice adversely impairs R2's ability to defend against the claim, suit
or proceeding; provided, that (i) R2 may not consent to imposition of any
obligation or restriction on GEMS in any settlement unless mutually agreed by R2
and GEMS, (ii) R2 shall keep GEMS fully informed and permit GEMS to participate
(at its own expense) as GEMS may reasonably request and (iii) GEMS may, without
affecting its right to indemnity hereunder, defend and settle any such claim,
suit or proceeding if R2 declines to defend against such claim, suit or
proceeding or Files for Bankruptcy. GEMS agrees to give R2 authority to proceed
as contemplated herein, and, at R2's expense, to give R2 information and
assistance to settle and/or defend any such claim, suit or proceeding. If the R2
Product, or any part thereof, are, or in the reasonable opinion of R2 may
become, the subject of any claim, suit or proceeding for infringement of any
patent, copyright or trademark or involves misappropriation of a trade secret,
or if it is adjudicatively determined that the R2 Product, or any part thereof,
infringes any patent, copyright or trademark or involves the misappropriation of
a trade secret, or if the distribution or use of the R2 Product, or any part
thereof, is as a result enjoined, then R2 may, at its option and expense: (a)
procure for GEMS and its customers the right under such patent, copyright,
trademark, or trade secret to distribute or use, as appropriate, the R2 Product
or any part thereof; (b) replace the R2 Product, or any part thereof, with
functionally equivalent products or parts that do not infringe or
misappropriate; (c) suitably modify the R2 Product, or any part thereof; or (d)
if the use of the R2 Product, or any part thereof, is prevented by injunction or
if the foregoing alternatives cannot be accomplished on a commercially
reasonable basis, remove the R2 Product, or any part thereof, discontinue sale
of such R2 Product hereunder without incurring any additional liability to GEMS,
and refund the aggregate payments paid therefor by GEMS.

                           10.1.2 Notwithstanding the provisions of Section
10.1.1, R2 assumes no liability for (a) any infringement claims with respect to
any product in or with which the R2 Product is used if such claims could not
reasonably be brought against the R2 Product standing alone; (b) any trademark
infringement involving any marking, or branding, not applied by R2 or involving
any marking or branding applied at the request of GEMS; or (c) modification of
the R2 Product, causing the infringement or any part thereof, unless such
modification is made by R2 or pursuant to R2's written direction or consent.




                                       14

<PAGE>

                  10.2 THE FOREGOING PROVISIONS OF THIS ARTICLE 10 AND ARTICLE
11 STATE THE ENTIRE LIABILITY AND OBLIGATION OF EACH PARTY AND THE EXCLUSIVE
REMEDY OF THE OTHER PARTY WITH RESPECT TO ANY ALLEGED INFRINGEMENT OF PATENTS,
COPYRIGHTS, TRADEMARKS, OR OTHER INTELLECTUAL PROPERTY RIGHTS BY THE R2 PRODUCT.

         11.      PATENT PROSECUTION AND LITIGATION.
                  ---------------------------------

                  11.1     Maintenance of Current Patents.
                           ------------------------------

                           11.1.1   Maintenance.  As between GEMS and R2, R2
                                    -----------
shall, at its expense, have responsibility for continuation and maintenance of
all Patents in the Territory. In the event that R2 discontinues the maintenance
or continuation of any Patents in the Territory, then R2 shall provide prompt
written notice to GEMS and GEMS may, at its expense, choose to continue and
maintain the same with the cooperation of R2.

                           11.1.2   Extensions.  R2 shall have the right but not
                                    ----------
the obligation (subject to the provisions of Section 6.1.3) to seek extensions
of the terms of Patents in the Territory. If R2 elects not to seek an extension
of the term of a Patent, then R2 shall provide prompt written notice to GEMS
and, at GEMS' request, R2 shall either authorize GEMS to act as R2's agent for
the purpose of making any application for any extensions of the term of such
Patent and provide reasonable assistance therefor to GEMS or shall diligently
seek to obtain such extensions, in either event, at GEMS' expense.

                  11.2     Maintenance of New Patents.
                           --------------------------

                           11.2.1   Filings for R2 Inventions.  As between GEMS
                                    -------------------------
and R2, R2 shall, at its expense, have responsibility for filing, prosecution
and maintenance of all patents for R2 Inventions in the Territory. GEMS shall
have the right to review pending patent applications and make recommendations to
R2 concerning R2 Inventions related to the GEMS Product. R2 will consider in
good faith all reasonable suggestions of GEMS with respect to such pending
applications related to the GEMS Product. R2 agrees to keep GEMS informed of the
course of patent prosecution or other proceedings with respect to such patents
related to the GEMS Product within the Territory. Any such review and
discussions involving GEMS relating to such patent or patent applications shall
be provided by GEMS at no cost to R2. In the event that R2 does not file or
discontinues the prosecution or maintenance of any Patents in the Territory,
then R2 shall provide prompt written notice to GEMS and GEMS may, at its
expense, choose to file or continue the same with the cooperation of R2, and if
such Patents claim an R2 Invention that relates to the GEMS Product, then GEMS
shall own any such Patents thus obtained.

                           11.2.2   Filings for GEMS Inventions.  As between
                                    ---------------------------
GEMS and R2, GEMS shall, at its expense, have responsibility for filing,
prosecution and maintenance of all patents for GEMS Inventions related to the R2
Product in the Territory. R2 shall have the right to review pending patent
applications and make recommendations to GEMS concerning GEMS Inventions related
to the interface or interoperability of the R2 Product with the GEMS Product.
GEMS will consider in good faith all reasonable suggestions of R2 with respect
to such pending


                                       15

<PAGE>

applications related to the R2 Product. GEMS agrees to keep R2 informed of the
course of patent prosecution or other proceedings with respect to such patents
within the Territory related to the R2 Product. Any such review and discussions
involving R2 relating to such patents or patent applications shall be provided
by R2 at no cost to GEMS. In the event that GEMS does not file or discontinues
the prosecution or maintenance of any such patents or patent applications
covering GEMS Inventions related to the R2 Product in the Territory, then GEMS
shall provide prompt written notice to R2 and R2 may, at its expense, choose to
continue the same with the cooperation of GEMS, and if such patents or patents
applications relate to the interoperability or interface of the R2 Product, then
R2 shall own any such patents or patent applications thus obtained.

                           11.2.3   Filings for Joint Inventions.  As between
                                    ----------------------------
GEMS and R2, GEMS and R2 shall jointly, at their joint expense, have
responsibility for filing, prosecution and maintenance of all patents for Joint
Inventions in the Territory. All information disclosed to either party under
this Section 11.2.3 shall be deemed Confidential Information of the disclosing
party. In the event that either party elects not file or discontinues the
prosecution or maintenance of any patents in the Territory, then the other party
may, at its expense, choose to file or continue (and thereby own, subject to the
rights granted to the other party pursuant to Section 8.3.3) the same with the
cooperation of party choosing not to proceed.

                           11.2.4   Extensions.  The parties shall have the
                                    ----------
right but not the obligation to seek extensions of the terms of all patents in
the Territory related to the R2 Product or related to the interoperability or
interface of the GEMS Product with the R2 Product. If requested, a party shall
either authorize the other to act as its agent for the purpose of making any
application for any extensions of the term of patents and provide reasonable
assistance therefor or shall diligently seek to obtain such extensions, in
either event, at the other party's expense.

                  11.3 Third Party Infringement. R2 agrees to use reasonable
                       -------------------------
commercial efforts to enforce its Patent and other intellectual property rights
related to the R2 Product. In the event R2 does not undertake such enforcement,
GEMS will have the right (but not the obligation) to so enforce such rights and
R2 shall give such authority or approvals as may be required for GEMS to do so.
In the event that R2 or GEMS becomes aware of actual or threatened infringement
of a Patent anywhere in the Territory, that party shall promptly notify the
other party in writing. If R2 does not commence, at its own expense, a
particular infringement suit within one hundred eighty (180) days of receipt of
a request by GEMS to do so, then GEMS, after notifying R2 in writing, shall be
entitled to bring such infringement action at its own expense and to include R2
as a nominal party plaintiff. R2 shall keep GEMS reasonably informed of its
activities during the 180-day period. The party conducting such action shall
have full control over its conduct, including settlement thereof subject to the
provisions of this Agreement. In any event, R2 and GEMS shall assist one another
and cooperate in any such litigation at the other's reasonable request without
expense to the requesting party.

                  11.4 Recovery. R2 and GEMS shall recover their respective
                       ---------
actual out-of-pocket expenses, or equitable proportions thereof, associated with
any litigation against infringers undertaken pursuant to Section 11.3 above or
settlement thereof from any resulting recovery made by any party. Seventy-five
percent (75%) of any excess amount of such a


                                       16

<PAGE>

recovery shall be retained by the party (either R2 or GEMS) conducting such
action and twenty-five percent (25%) of any excess amount of such a recovery
shall be paid to the other party.

                  11.5 Status of Activities. The parties shall keep one another
                       ---------------------
informed of the status of their respective activities regarding any litigation
or settlement thereof concerning R2 Product within the Territory, provided
however that no settlement or consent judgment or other voluntary final
disposition of any suit defended or action brought by a party pursuant to this
Article 11 may be entered into without the consent of the other party if such
settlement would require the other party to be subject to an injunction or to
make a monetary payment or would otherwise adversely affect the other party's
rights under this Agreement.

         12.      CONFIDENTIALITY.
                  ---------------

                  12.1 For purposes of this Agreement, "Confidential
Information" shall mean information exchanged between R2 and GEMS 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. Neither party shall use the Confidential Information of the other
except in connection with the performance of its obligations 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 will be bound by this Agreement. Each party agrees to take the same measures
to preserve the confidentiality of the Confidential Information of the other as
it does for its own Confidential Information.

                  12.2 The confidentiality and non-use obligations shall not
apply to Confidential Information which is (a) in the public domain or
subsequently enters the public domain through no act of the receiving party; (b)
subsequently acquired by the receiving party from a third person having, to the
receiving party's knowledge, no obligation of confidentiality; (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. In addition to
the foregoing, either party may use or disclose Confidential Information
disclosed to it by the other party to the extent such use or 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, 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.

                  12.3 Except as specifically provided herein, all Confidential
Information shall remain the sole and exclusive property of the disclosing
party, and this Agreement shall not limit in any way the right of the disclosing
party to enter into agreements with third parties granting rights of any kind to
its Confidential Information.



                                       17

<PAGE>

                  12.4 All Confidential Information of the disclosing party in
the possession of the other, including without limitation any copies, extracts,
summaries, compilations, modifications or abridgments thereof shall be returned
immediately upon expiration or termination of this Agreement, upon request by
the disclosing party. The receiving party's legal counsel may retain one copy of
such Confidential Information in its confidential files for archival purposes
only and each party may keep one copy of such Confidential Information in its
confidential files to the extent necessary to carry out its maintenance and
warranty obligations on the R2 Product or GEMS Product; provided, however, that
in no event shall R2 retain any copies of the information provided by GEMS
pursuant to Section 2.8, unless otherwise agreed in writing by GEMS.

                  12.5 The obligations under Section 12.1 above with respect to
any item of Confidential Information shall survive for a period of three (3)
years from the date of the disclosure of such item of Confidential Information
or until one year after the termination of this Agreement, whichever is later.

         13.      TRADEMARKS AND TRADE NAMES.
                  --------------------------

                  All public disclosure or description of the relationship
between GEMS and R2 shall be in accordance with the documents agreed upon by
GEMS and R2 pursuant to Section 14.13. During the Term, GEMS shall have the
right within the Territory to advertise the R2 Product under the trademarks,
service marks, and trade names that R2 may adopt from time to time ("R2's
Trademarks"). GEMS shall not alter or remove any of R2's Trademarks applied to
the R2 Products. R2 will not alter or remove GEMS's trademarks applied to the
GEMS Products. If the R2 Product is incorporated internally in the GEMS Product,
GEMS shall place the R2 Trademark on the GEMS Product to indicate it contains
the R2 Product. All representations of R2's Trademarks that GEMS intends to use
shall first be submitted to R2 for approval (which shall not be unreasonably
withheld or delayed) of design, color, and other details or shall be exact
copies of those used by R2. Nothing herein shall grant (a) to GEMS any right,
title or interest in R2's Trademarks, or (b) to R2 the right to use GEMS
trademarks or tradenames, or any right, title or interest therein. All uses of
R2's Trademarks by GEMS shall inure to the benefit of R2. At no time during the
Term shall GEMS challenge or assist others to challenge R2's Trademarks or the
registration thereof or attempt to register any trademarks, service marks or
trade names confusingly similar to those of R2.

         14.      ADDITIONAL AGREEMENTS AND COVENANTS OF THE PARTIES.
                  --------------------------------------------------

                  14.1 Sales and Marketing. GEMS shall include the R2 Product in
                       --------------------
its applicable product catalogues. GEMS shall distribute the R2 Product through
its direct sales force or through Subdistributors, at its sole discretion.

                  14.2 Trade Shows. If either party wishes to display an R2
                       ------------
Product at a trade show, the party shall provide advance written notice at least
sixty (60) days prior to the trade show to the other party of its intention to
show the R2 Product at a trade show. Forty-five (45) days prior to the trade
show, the party intending to display the R2 Product at the trade show must
provide the other party with copies of the written materials which are intended
for use at the


                                       18

<PAGE>

trade show for approval by the other party, which approval shall not be
unreasonably withheld. The responding party shall provide comments on the
written materials at least thirty (30) days prior to the trade show and both
parties shall use commercially reasonable efforts to agree upon any changes to
the written materials at least thirty (30) days prior to the trade show.
Notwithstanding the foregoing, once written materials have been approved by both
parties for use at a trade show, the approved written materials may be used at
subsequent trade shows without submitting the written materials for re-approval.

                  14.3     [Intentionally Omitted]

                  14.4     Right of First Notice/Negotiation and Right of First
                           ----------------------------------------------------
Refusal.
--------
                           14.4.1   Computed Radiography System for Mammography.
                                    -------------------------------------------
During the Term, GEMS will have a right of first offer/negotiation with respect
to the distribution of ImageChecker configuration for use with a Computed
Radiography System for Mammography as follows: R2 will provide notice to GEMS in
the event that R2 elects to commercialize the R2 ImageChecker configuration for
use with a Computed Radiography System for Mammography. Prior to commencing
negotiations with a third party, R2 will negotiate in good faith exclusively
with GEMS, for ninety (90) days after R2 sends such notice, to enter into a
distribution agreement for the ImageChecker configuration for use with a
Computed Radiography System for Mammography. If the parties do not enter into a
letter of intent or reach an agreement under this Section 14.4.1 within such
ninety (90) day period, R2 shall have the right to grant rights to and enter
into a distribution agreement for the ImageChecker configuration for use with a
Computed Radiography System for Mammography with third parties with respect to
any or all of the ImageChecker configuration for use with a Computed Radiography
System for Mammography.

                           14.4.2   Additional Configurations.  During the Term
                                    -------------------------
of this Agreement, GEMS will have a right of first notice with respect to the
distribution of an ImageChecker configuration or similar product for use with
digital systems related to use with a MR device or system (only if such
configuration is developed during the Term of this Agreement) as follows: R2
will provide written notice to GEMS, prior to giving notice to any third party,
in the event that R2 elects to commercialize an ImageChecker configuration or
similar product for use with digital systems related to use with a or MR device
or system.

                           14.4.3   Joint Inventions.  During the term of this
                                    ----------------
Agreement, GEMS will have a right of first offer/negotiation and a right of
first refusal with respect to the distribution of Joint Inventions or jointly
developed technology, which is intended for use with a Digital Based Mammography
System as follows: R2 will provide notice to GEMS in the event that R2 elects to
commercialize Joint Inventions or jointly developed technology which is intended
for use with a Digital Based Mammography System. Prior to commencing
negotiations with a third party, R2 will negotiate in good faith exclusively
with GEMS, for ninety (90) days after R2 sends such notice, to enter into a
distribution agreement for Joint Inventions or jointly developed technology
which is intended for use with a Digital Based Mammography System. If the
parties do not enter into a letter of intent or reach an agreement under this
Section 14.4.3 within such ninety (90) day period, R2 shall have the right to
grant rights to and enter into a distribution agreement for Joint Inventions or
jointly developed technology which is intended for use with a Digital Based
Mammography System with third parties with respect to any or all of such Joint
Inventions or



                                       19

<PAGE>

jointly developed technology, provided that prior to entering into any binding
agreement with a third party, R2 shall disclose to GEMS in writing the terms of
the proposed agreement with the third party and, for a period of thirty (30)
days after receipt of such terms by GEMS, GEMS shall have the right to cause R2
to enter into an agreement with GEMS on terms substantially identical to the
proposed terms (including without limitation, any exclusivity terms). The
provisions of this Section 14.4.3 shall not be deemed in any way to affect the
right of GEMS to use and exploit any Joint Inventions as a joint owner thereof
(as provided in Section 8.3.3).

                           14.4.4   Joint Technology.  During the Term and for
                                    ----------------
a period of twelve (12) months after expiration or early termination of this
Agreement, GEMS will have a right of first offer/negotiation with respect to the
distribution of new products produced by R2 incorporating Joint Inventions or
jointly developed technology as follows: R2 will provide notice to GEMS in the
event that R2 elects to commercialize new products incorporating Joint
Inventions or jointly developed technology. Prior to commencing negotiations
with a third party, for a period of ninety (90) days, R2 shall negotiate in good
faith with GEMS to enter into a distribution agreement for any such new products
incorporating Joint Inventions or jointly developed technology. If the parties
do not enter into a letter of intent or reach an agreement under this Section
14.4.4, R2 shall have the right to enter into a distribution agreement for such
inventions with any third party.

                  14.5 Materials. To the extent required for regulatory
                       ----------
compliance, GEMS shall provide to R2 for purposes of review and comment by R2
all general purpose promotional, advertising, and educational materials and
programs, package data sheets, and other literature relating to the R2 Products
at least thirty (30) days prior to the commercial release of such materials or
commencement of such programs.

                  14.6 R2 Product Packaging and Labeling. In addition, except
                       ----------------------------------
for the addition of information required by applicable laws and regulations in
the Territory, GEMS shall not relabel R2 Products supplied to GEMS by R2
hereunder without the prior written consent of R2. In the event that applicable
law or regulation requires relabelling of any R2 Product, GEMS shall so notify
R2, and promptly thereafter the parties shall cooperatively develop labels in
compliance with such laws or regulations. R2 shall not unreasonably withhold any
consent under this Section. The R2 copyright for CAD technology utilized by GEMS
will be recognized on the GEMS user interface.

                  14.7 Access. GEMS shall, at R2's request, use reasonable
                       -------
efforts to allow representatives of R2 to visit purchasers of R2 Products in the
Territory with GEMS personnel. For each of the first twenty (20) R2 Product
pilot installations and the installation of the next twenty-five (25) production
units of the R2 Product, where a FFDM modem connection is functional, GEMS will
provide to R2 weekly log files for a period of three (3) months. Thereafter,
GEMS and R2 will meet quarterly to determine a mutually agreed upon frequency of
delivery of log files.

                  14.8     Monthly Meetings.  During the Term, following the
                           ----------------
Availability Date, GEMS and R2 shall conduct monthly business meetings to review
contract performance. If the parties determine that GEMS is not achieving
minimum sales targets of the R2 Product, then



                                       20

<PAGE>

GEMS and R2, upon mutual agreement, shall negotiate in good faith to determine
ways to improve market segment penetration.

                  14.9     Installation and Training.  GEMS shall be responsible
                           -------------------------
for the installation of all R2 Products at the customer's premises and for
training the customer's personnel to use the R2 Product.

                  14.10 Updates, Upgrades Options to the R2 Product, Eetc. R2
                        --------------------------------------------------
shall provide all R2 Product ordered by GEMS including all updates, upgrades,
enhancements or options to the R2 Product. R2 shall provide GEMS all updates,
upgrades, enhancements and options to the R2 Product that R2 intends to
commercialize as promptly as practicable. All hardware and software "bug fixes"
or similar updates to the R2 Product that are released by R2 for field use shall
be provided to GEMS at no cost. Modifications to correct safety, regulatory or
quality issues, that are mutually agreed to by GEMS and R2 and in accordance
with the latest mutually agreed upon version of the GEMS SDRS document for the
R2 Product will be provided by R2 to GEMS at no cost and installed by GEMS on
the GEMS Products at no cost. GEMS and R2 shall negotiate in good faith
regarding any additional costs, any increase in prices and any related terms
with respect to any other upgrades that significantly enhance performance, such
as sensitivity, specificity, speed or new features. R2 shall not provide updates
nor upgrades to the R2 Product directly to GEMS' end-user customers without
GEMS' prior written consent.

                  14.11 Support. Upon the request of GEMS, R2 shall provide
                        --------
commercially reasonable assistance to customers with technical support and
answer customer questions regarding the use and operation of the R2 Products and
interpretation of accompanying documentation, without any additional charge to
GEMS or GEMS' customers. Upon the request of GEMS, R2 shall assist GEMS' field
service and application personnel regarding the use and operation of the R2
Products, interpretation of accompanying documentation and similar training,
without any additional charge to GEMS or GEMS' customers, including without
limitation conducting two training sessions for GEMS personnel, one session for
GEMS service personnel, such as field engineers and on-line support center
personnel, and the other session for the medical application specialists and
sales personnel. R2 shall provide the trainers and all documentation necessary
for such training sessions. In addition to the initial training sessions
described above, R2 shall provide similar training sessions in connection with
any upgrade to the R2 Product or other significant change to the R2 Product. The
support set forth in this Section 4.11 (other than the specified training
sessions) shall be made available by R2 on a 24-hour, 7 days a week basis.

                  14.12 Information Sharing. R2 shall provide GEMS with notice
                        --------------------
of development areas that R2 is pursuing with respect to updates, upgrades,
enhancements or options to the R2 Product within a reasonable time after R2 has
determined to pursue such development.

                  14.13 Documentation Describing Relationship. GEMS and R2 shall
                        --------------------------------------
use their commercially reasonable efforts to prepare, within thirty (30) days of
the Effective Date, mutually agreed upon documentation to describe the
relationship between GEMS and R2, documentation related to Frequently Asked
Questions, and press releases.


                                       21

<PAGE>

                  14.14 Forecasts. During the Term, following the Availability
                        ----------
Date, GEMS shall provide to R2 by the first day of each calendar quarter a
rolling, non-binding forecast of anticipated purchases of units of the R2
Product for the following thirty (30), sixty (60) and ninety (90) days.

                  14.15 Software Documentation. In addition to the Software
                        -----------------------
documentation included with the Software Copy to be distributed with each R2
Product, the user's guide for the R2 Product will be translated by R2 into
Italian, German, French, Portuguese, Spanish and Japanese, and copies will be
available to GEMS upon reasonable request.

                  14.16 Spare Parts. R2 shall provide to GEMS a mutually agreed
                        ------------
upon stock of service spare parts for the R2 Product, priced at R2's "Standard
Manufacturing Cost." "Standard Manufacturing Cost" shall be based on R2's then
current costs (without mark up) to manufacture the spare parts. R2 shall
maintain a supply of warranty replacement parts for the R2 Product and shall
provide to GEMS such parts until the one-year anniversary of the date of
termination of this Agreement, or until GEMS takes over production of the R2
Product, whichever first occurs. Installation and all other service charges are
the responsibility of GEMS.

                  14.17 Servicing of R2 Product. Subject to the provisions
                        ------------------------
hereof, including without limitation Sections 14.10, 14.11, 14.18, and R2's
obligations related thereto, GEMS shall be responsible for all servicing of the
R2 Product.

                  14.18 Warranty Period. R2 warrants and represents that the R2
                        ----------------
Product, including without limitation, the Software, shall be substantially free
of Errors. R2 shall provide comprehensive maintenance services to GEMS,
including correction of Errors, Updates and Upgrades, repairs to Hardware and
replacement of components comprising the Hardware, at no additional charge for a
period of one (1) year after delivery of the R2 Product to GEMS (the "Warranty
Period"). R2 shall deliver promptly to GEMS any and all documentation and user
manuals reasonably necessary to implement and understand any changes to the R2
Product made as a result of the provisions hereof. For purposes of this Section
14.18, "Error" means a substantial failure of the R2 Product to conform to the
Specifications.

         15.      TERM AND TERMINATION.
                  --------------------

                  15.1 Term. This Agreement shall continue in force and effect
                       -----
from the date hereof until December 31, 2002 (as it may be extended, the
"Term"), unless earlier terminated in accordance with the provisions hereof.
GEMS shall have the option, upon written agreement from R2, to extend the Term
for two years (through December 31, 2004). Thereafter, the Term may be extended
on a year-to-year basis upon mutual consent of GEMS and R2. GEMS shall provide
R2 with notice of its intent to so extend the Term no later than September 30,
2002.

                  15.2     [Intentionally Omitted]

                  15.3 Termination for Cause. If either party materially
                       ----------------------
defaults in its performance or breaches any material term or condition of this
Agreement, then the other party may give written notice to the breaching or
defaulting party that if the breach or default is not cured within thirty (30)
days, the Agreement may be terminated. If such notice is given and the material
breach or default is not cured during such thirty (30) day period, then the
party giving



                                       22

<PAGE>

notice of such breach or default shall thereafter have the right to terminate
this Agreement within twenty (20) days of the end of such 30-day cure period,
such termination to be effective immediately upon giving such notice to the
party in breach or default.

                  15.4 Termination If No FDA Approval. In the event that the
                       -------------------------------
Availability Date does not occur on or prior to March 31, 2001, R2, with the
reasonable assistance of GEMS where requested and where appropriate, will
attempt to resolve, during the ninety-one (91) day period following such date
(the "Remedy Period"), all open issues preventing the granting of FDA approval.
If the Availability Date does not occur prior to the end of the Remedy Period,
GEMS shall have the right, at its sole option, to terminate this Agreement or to
terminate its exclusivity obligations under Section 3.1. If the delay in R2's
obtaining FDA approval for commercial use of the R2 Product is a direct result
of a delay by GEMS in delivery of the FDA Cases or training case data to R2
pursuant to the terms of Section 2.8, then the Remedy Period shall be extended
by the same number of days of such delay caused by GEMS.

                  15.5 Other Termination Events. This Agreement shall also
                       -------------------------
terminate, at GEMS's sole option and discretion, (a) thirty (30) days after
written notice from GEMS to R2 if GEMS, acting in good faith, reasonably
believes that the R2 Product infringes the intellectual property rights of any
third party; (b) if R2 is unable to supply the R2 Product because of a decision
to exit the business, insolvency or any other reason; or (c) R2 Files for
Bankruptcy.

                  15.5 Fulfillment of Orders upon Termination. Upon termination
                       ---------------------------------------
of this Agreement by R2, R2 shall have the right, at its sole option, to require
GEMS to satisfy GEMS's obligations under all outstanding purchase orders that
have been accepted by R2 prior to the effective date of termination. Upon
termination of this Agreement by GEMS, GEMS shall have the right, at its sole
option, to require R2 to satisfy R2's obligations under all outstanding purchase
orders that have been accepted by R2 prior to the effective date of termination.
After the termination of this Agreement, to the extent that GEMS has, or will
have pursuant to the provisions of this Section 15.5, possession of units of the
R2 Product that it has not distributed or sold to third parties, GEMS shall have
the right to continue to market, distribute, and sell R2 Products in the
Territory pursuant to the terms hereof for a period of one hundred eighty (180)
days after termination of this Agreement. Notwithstanding anything herein to the
contrary, in the event that GEMS retains by statute the right to distribute or
sell R2 Products in the Territory to any customer or in any country after
expiration or termination of this Agreement, then the terms and conditions of
this Agreement shall remain in effect as to such customers or countries, as the
case may be, until such activities cease.

                  15.6 Effects of Termination. Termination or expiration of this
                       -----------------------
Agreement shall not relieve either party of obligations incurred prior to the
termination. Subject to the terms hereof, termination of this Agreement for any
reason shall result in termination of any R2 Product Subdistributorship granted
by GEMS.

                  15.7 Survival of Certain Terms. The provisions of Articles 5,
                       --------------------------
8, 10, 11.3, 11.4, 11.5, 12, 16 (only with respect to acts and/or omissions that
occur prior to the date of termination or expiration of this Agreement) and 17
shall survive the termination or expiration of this Agreement for any reason.
All other rights and obligations of the parties shall cease upon termination or
expiration of this Agreement, except as expressly provided herein.



                                       23

<PAGE>

         16.      INDEMNIFICATION.
                  ---------------

                  16.1 Indemnification by GEMS. GEMS agrees to indemnify,
                       ------------------------
defend, and hold R2 and its directors, officers, employees, representatives and
agents harmless from and against any and all third party claims (including those
for personal injury or death), losses, damages, obligations, liabilities and
costs (including reasonable attorneys' and other professional fees and other
costs of litigation) arising out of or attributable to: (a) the operation of the
GEMS Product, including without limitation, any liabilities attributable to a
design defect, malfunction or other failure of the GEMS Product to perform, but
only to the extent that any such liability is not attributable to the operation,
defect, malfunction or failure to operate of the R2 Product; (b) the gross
negligence or willful misconduct of GEMS in connection with this Agreement; or
(c) any breach of this Agreement by GEMS.

                  16.2 Indemnification by R2. R2 agrees to indemnify, defend,
                       ----------------------
and hold GEMS and its directors, officers, employees, representatives and agents
harmless from and against any and all claims (including those for personal
injury or death), losses, damages, obligations, liabilities and costs (including
reasonable attorneys' and other professional fees and other costs of litigation)
arising out of or attributable to: (a) the operation of the R2 Product,
including without limitation, any liabilities attributable to a design defect,
malfunction, the failure of the R2 Product to perform in accordance with
Specifications, or other failure of the R2 Product to perform, but only to the
extent that any such liability is not attributable to the operation, defect,
malfunction or failure to operate of the GEMS Product; (b) the gross negligence
or willful misconduct of R2 in connection with this Agreement; or (c) any breach
of this Agreement by R2.

                  16.3 Indemnification Procedures. In the event that any person
                       ---------------------------
intends to claim indemnification pursuant to Section 16.1 or 16.2 (an
"Indemnitee") it shall promptly notify the indemnifying party (the "Indemnitor")
in writing of such alleged liability, provided that the failure to promptly
notify the Indemnitor shall not relieve the Indemnitor of any obligation under
this Agreement except to the extent such failure to provide prompt notice
adversely impairs the Indemnitor's ability to defend against the claim, suit or
proceeding. The Indemnitor shall have the sole right to control the defense and
settlement thereof, provided, that (a) the Indemnitor may not consent to
imposition of any obligation or restriction on the Indemnitee in any settlement
unless mutually agreed among R2 and GEMS, (b) Indemnitor shall keep Indemnitee
fully informed and permit the Indemnitee to participate (at Indemnitee's
expense) as the Indemnitee may reasonably request and (c) Indemnitee may,
without affecting its right to indemnity hereunder, defend and settle any such
claim, suit or proceeding if Indemnitor declines to defend against such claim,
suit or proceeding or Files for Bankruptcy. The Indemnitees shall cooperate with
the indemnifying party and its legal representatives in the investigation of any
action, claim or liability covered by Section 16.1 or Section 16.2. The
Indemnitee shall not, except at its own cost, voluntarily make any payment or
incur any expense with respect to any claim or suit without the prior written
consent of Indemnitor, which Indemnitor shall not be required to give, provided
that the Indemnitee may, without affecting its right to indemnity hereunder,
defend and settle any such claim, suit or proceeding if the Indemnitor declines
to take responsibility or Files for Bankruptcy.



                                       24

<PAGE>

                  16.4 Limitation. Notwithstanding the provisions of Subsection
                       -----------
16.2 above, R2 assumes no liability for (a) any infringement claims with respect
to any product in or with which the R2 Product is used if such claims could not
reasonably be brought against the R2 Product standing alone; (b) any trademark
infringement involving any marking or branding not applied by R2 or involving
any marking or branding applied at the request of GEMS; (c) the modification of
the R2 Products, causing the infringement or any part thereof, unless such
modification is made by R2 or pursuant to R2's written direction or consent; or
(d) any infringement resulting solely from R2's compliance with GEMS's
specifications. Notwithstanding the provisions of Subsection 16.1 above, GEMS
assumes no liability for (a) any infringement claims with respect to any product
in or with which any of the GEMS Products may be used but not covering the GEMS
Products standing alone; (b) any trademark infringement involving any marking or
branding not applied by GEMS or involving any marking or branding applied at the
request of R2; (c) the modification of the R2 Products, causing the infringement
or any part thereof, if such modification is made by R2 or pursuant to R2's
written direction or consent; or (d) any infringement resulting from GEMS's
compliance with R2's specifications.

                  16.5 Insurance for R2. R2 represents, warrants and covenants
                       -----------------
that, as of the date hereof, R2 has the following insurance: Products/Completed
Operations Liability Insurance in the amount of $1,000,000 combined single limit
per occurrence and in the aggregate with the self-insured retention of $10,000
per occurrence and $50,000 aggregate, and that before the first R2 is shipped to
GEMS, R2 will increase this limit to $5,000,000 combined single limit per
occurrence and in the aggregate with the self-insured retention of $10,000 per
occurrence and $50,000 aggregate (the "Insurance Policy"). During the Term, R2
agrees to maintain the Insurance Policy and to take such steps necessary to
provide for GEMS to be named as an additional insured party under the Insurance
Policy. At GEMS' reasonable request, R2 will deliver to GEMS a certificate of
insurance, a certified copy of the Insurance Policy and evidence of all premium
payments.

         17.      COMPLIANCE WITH LAWS.
                  --------------------

                  17.1 Export Controls. GEMS understands and acknowledges that
                       ----------------
R2 is subject to regulation by agencies of the United States government,
including the U.S. Department of Commerce, which prohibit export or diversion of
certain products and technology to certain countries. Any and all obligations of
R2 to provide products, software, documentation or any media in which any of the
foregoing is contained, as well as any technical assistance, shall be subject in
all respects to R2's compliance with such United States laws and regulations as
shall from time to time govern the license and delivery of technology and
products abroad by persons subject to the jurisdiction of the United States,
including the Export Administration Act of 1979, as amended, any successor
legislation, and the Export Administration Regulations issued by the Department
of Commerce, Bureau of Export Administration. GEMS shall comply with all
applicable United States export control laws and regulations in connection with
the performance of its obligations hereunder.

                  17.2 Government. Each party shall at all times during the term
                       -----------
of the Agreement have in effect all licenses, permits, and authorizations from
all governmental agencies necessary to the performance of its obligations
hereunder, and shall comply with all



                                       25

<PAGE>

applicable laws, rules, and regulations affecting its activities hereunder,
including, without limitation, the United States Foreign Corrupt Practices Act,
as applicable.

                  17.3 Currency Control. In the event that any currency control
                       -----------------
laws come into effect in the Territory which prevent the payment to R2 of any
sums due under this Agreement to be made in United States Dollars, GEMS will
notify R2 as promptly as practicable, and will cooperate with R2 in any
procedure reasonably requested by R2 to give effect to the parties' intent under
this Agreement without incurring unreasonable costs.

         18.      GENERAL PROVISIONS.
                  ------------------

                  18.1 Governing Law. This Agreement shall be governed by and
                       --------------
construed under the laws of the State of New York, U.S.A., without reference to
conflict of laws principles, and shall not be governed by the 1980 U.N.
Convention on Contracts for the International Sale of Goods.

                  18.2     Dispute Resolution.
                           ------------------

                           18.2.1 Negotiation. The parties shall make a good
                                  -------------
faith attempt to resolve any dispute or claim arising out of or related to this
Agreement through negotiation. Within fifteen (15) days after any party gives
notice of a dispute or claim, an officer of each of the parties shall meet and
make a good faith attempt to resolve such dispute or claim.

                           18.2.2 Arbitration. Any dispute or claim arising out
                                  ------------
of or related to this Agreement, or the interpretation, making, performance,
breach, validity, or termination hereof, which has not been resolved by
negotiation or mediation as set forth above, shall be finally settled by binding
arbitration in San Jose, California if the dispute is initiated by GEMS and in
New York, New York if the dispute is initiated by R2, either of which shall be
under the Arbitration Rules of the Center for Public Resources for
Non-Administrative Arbitration for Business Disputes (the "Rules") by a single,
impartial and independent arbitrator appointed in accordance with the Rules. The
arbitrator shall have the power to decide all questions of arbitrability. GEMS
and R2 shall consent to a single, consolidated arbitration of multiple claims.
At the request of either party, the arbitrator will enter an appropriate
protective order to maintain the confidentiality of information produced or
exchanged in the course of the arbitration proceedings. The final judgment of
the arbitrator shall be in the form of a reasoned, written opinion, and shall be
issued within fourteen (14) days of the conclusion of the arbitration
proceeding. Judgment on the award rendered by the arbitrator may be entered in
any court having jurisdiction. The parties may apply to any court of competent
jurisdiction for a temporary restraining order, preliminary injunction, or other
interim or conservatory relief, as necessary, without breach of this arbitration
provision and without any abridgment of the powers of the arbitrator. The
arbitrator shall award to the prevailing party, if any, as determined by the
arbitrator, all of its costs, expenses and fees, including, without limitation,
Center for Public Resources administrative fees, arbitrator fees, travel
expenses, out-of-pocket expenses (including, without limitation, such expenses
as copying, telephone, facsimile, postage, and courier fees), witness fees, and
reasonable attorneys' fees.


                                       26

<PAGE>

                           18.2.3 Limitation on Powers of the Arbitrator, Etc.
                                  --------------------------------------------
The arbitrator shall not in any circumstances have the power or authority to add
to or detract from this Agreement, to find any provision of this Agreement
unconscionable or otherwise unenforceable, or to award any party punitive,
special or consequential damages or any other remedy or damages prohibited by
this Agreement. In no event, whether in arbitration or otherwise, shall either
party be entitled to receive punitive, special or consequential damages or any
other remedy or damages prohibited by this Agreement.

                  18.3 Force Majeure. Neither party shall be liable to the other
                       --------------
for its failure to perform or delay in performing any of its obligations
hereunder during any period in which such performance is delayed by
circumstances beyond its reasonable control including, but not limited to,
failures or delay caused by the other party, acts of God (including without
limitation, flood or earthquake), war, embargo, strike, labor disturbance, riot,
public disorder, catastrophes of fire or explosion, federal state, local or
foreign laws or regulations not existing at the time of execution of this
Agreement, or the intervention of any governmental authority.

                  18.4 Assignment. Neither party may assign or delegate this
                       -----------
Agreement or any of its licenses (except as provided in Section 2.5), rights or
duties under this Agreement without the prior written consent of the other,
except by R2 in connection with a Change of Control of R2 or by GEMS in
connection with a similar transaction involving GEMS.

                  18.5 Source Code and Technical Information Escrow. Within
                       ---------------------------------------------
thirty (30) days of the date hereof, GEMS and R2 shall enter into a source code
and technical information escrow agreement in the standard form of Fort Knox or
another mutually agreed upon independent escrow agent. Such agreement shall
cover R2's Software source codes and technical information relating to the R2
Product, and will be triggered (with a release to GEMS) in the event that R2
Files for Bankruptcy. GEMS shall be the beneficiary of such escrow agreement
provided GEMS agrees to be bound by the escrow agreement. R2 shall bear the
costs of such agreement.

                  18.6 Authority. Each party represents that all corporate
                       ----------
action necessary for the authorization, execution and delivery of this Agreement
by such party and the performance of its obligations hereunder has been taken.

                  18.7 Partial Invalidity. If any section, paragraph, provision,
                       -------------------
or clause in this Agreement shall be found or be held to be invalid or
unenforceable in any jurisdiction in which this Agreement is being performed,
the remainder of this Agreement shall be valid and enforceable and 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.

                  18.8 Counterparts. This Agreement may be executed in
                       -------------
counterparts, which, taken together, shall be regarded as one and the same
instrument.

                  18.9 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.



                                       27

<PAGE>

                  18.10 Waiver. The failure of either party to enforce at any
                        -------
time 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 constituted to be a present or future waiver of such provisions,
nor in any way affect the validity 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.

                  18.11 Entire Agreement. The terms and conditions herein
                        -----------------
contained (including the exhibits hereto) constitute the entire agreement
between the parties and supersede and terminate all previous agreements and
understandings, whether oral or written, between the parties hereto with respect
to the subject matter hereof, including without limitation, the Original
Agreement and any other distribution and related agreements in effect as of the
date hereof.

                  18.12 Section Headings. The section headings contained in this
                        -----------------
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.

                  18.13 Notices. Any notice required or permitted by this
                        --------
Agreement shall be in writing and shall be deemed given if sent by prepaid
registered or certified United States mail, return receipt requested (if
available), overnight mail with a nationally recognized overnight mail courier,
or sent by telex, facsimile or similar communication, and confirmed by such
mail, postage prepaid, addressed to the other party at the address shown at the
beginning of this Agreement or at such other address for which such party gives
notice hereunder. Notices will be deemed given three (3) business days after
deposit in the U.S. Mail, one (1) business day after deposit with an overnight
mail courier, or when confirmation of receipt is obtained if sent by facsimile
or similar communication, as applicable.


                                       28

<PAGE>

         IN WITNESS WHEREOF the parties hereto have executed this Agreement as
of the day and year first above written.
<TABLE>
<CAPTION>
<S>                                                          <C>

R2 TECHNOLOGY, INC.                                         GE MEDICAL SYSTEMS,
                                                            a division of GENERAL ELECTRIC COMPANY


By:      /s/ Michael S. Klein                               By: /s/ Philippe Cochet
   --------------------------------------------------           -------------------------------------------------------

Michael S. Klein                                            Philippe Cochet
-----------------------------------------------------       -----------------------------------------------------------
         (Print Name)                                                  (Print Name)

Title:   President and CEO                                  Title: General Manager Global X-Ray
      --------------------------------------               ------------------------------------------------------------
</TABLE>



                                       29

<PAGE>

                                    Exhibit A

                             R2 PRODUCTS AND PRICING

Pricing

1.       The GEMS Price shall be:

         a.       * * * for the first * * * prototype pilot units of the R2
Product purchased pursuant to Section 2.4.1 under this Agreement and any other
pilot units purchased pursuant to Section 2.4.1;

         b.       For any additional units of the R2 Product purchased prior to
the end of the Exclusivity Period:

                  i.  * * * for the first * * * units of the R2 Product
                      (excluding the pilot units referenced in subsection a.
                      above);

                  ii. If (A) at least * * * units of the R2 Product are
                      purchased within one hundred eighty (180) days of the
                      Availability Date and (B) an aggregate of at least * * *
                      units of the R2 Product (including the units referred to
                      in clause (A) above) are purchased within two hundred
                      seventy (270) days of the Availability Date (excluding in
                      each case the pilot units referenced (in subsection a.
                      above), then the GEMS Price for all subsequent purchases
                      thereafter until the end of the Exclusivity Period shall
                      be * * *. This price is for actual placements of the R2
                      Product with end user customers, and GEMS may not load up
                      its inventory by purchasing units that are not being
                      placed with customers in order to achieve the targets
                      listed above.

                  iii.In the event that the targets set forth in subsection ii
                      above are not met, but GEMS purchases * * * units of the
                      R2 Product (excluding the pilot units referenced in
                      subsection a. above) during the Exclusivity Period, then
                      the GEMS Price for all subsequent purchases thereafter
                      until the end of the Exclusivity Period shall be * * *;

         c. If GEMS purchases * * * or more units of the R2 Product (excluding
the pilot units referenced in subsection a. above) during the Exclusivity
Period, then R2 shall promptly provide to GEMS, upon GEMS' request, * * *
additional units of the R2 Product at no additional charge.

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


                                       1

<PAGE>

         d. For units of the R2 Product purchased after the end of the
Exclusivity Period, GEMS and R2 shall negotiate in good faith a GEMS Price that
shall be between * * * and * * *; provided, however, that in no event shall the
GEMS Price be higher than the most favorable price offered by R2 to any other
purchaser or distributor of the R2 Product for similar volume, terms, conditions
and achievement of target license placements of R2 Products (taking into account
all R2 Products purchased or licenses placed by GEMS);

         in each case above plus R2's Manufacturing Cost (as defined below) for
the Hardware, until such time, if any, as GEMS takes over the manufacturing of
the R2 Product. It is understood and agreed that, pursuant to the terms of R2's
Software License Agreement, each Software License only entitles the end-user to
use the R2 Product and Software with a single full field digital mammography
acquisition device.

2.       (a)      R2's Manufacturing Cost for the Hardware, containing the
components set forth below, is as follows:

Material
--------

         310-00-XXX  DMPU System

         310-00-XXX Computer, Nightshade Digital Mammography Processing Unit
               (DMPU) (w/ all boards, one 9.1 Gb HDD, no mirroring, 512MB
                memory, dual 400MHz P2)                                    * * *
         320-00-XXX  Hard Drive, DMPU Nightshade Golden               (included)
         153-00-019  UPS, Powervar 700VA                                   * * *
         121-00-091-XX     Cable, Serial, Powervar to Nightshade           * * *
         121-00-015-XX     Cable, Ethernet Straight Pinning                * * *
         175-00-043  RJ11 Phone Data Protector                             * * *
         175-00-044  RJ45 Ethernet Data Protector                          * * *
         121-00-028-04 Cable, modem 14 FT.                                 * * *
         XXX-XX-XXX   MergeCOM-3 SW License                                * * *

Total material                                                             * * *
--------------
* * *Certain information on this page has been omitted and filed separately with
the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.



                                       2

<PAGE>

Labor
-----
<TABLE>
<CAPTION>
<S>                                                                      <C>
Anticipated incoming inspection, stocking and kitting labor hours          * * *
Anticipated assembly labor hours                                           * * *
Anticipated final test labor hours                                         * * *
Anticipated packaging and shipping labor hours                             * * *

Total Labor Cost at * * */hr. labor + fringe                               * * *

Overhead
--------

Total quarterly R2 direct inspection, assembly, test and shipment hours         1000

Total quarterly R2 manufacturing cost                                      * * *
Minus direct labor cost                                                    * * *
Total quarterly manufacturing overhead cost                                * * *
Overhead rate per hour equals $375K/1000                                   * * *

Sub-total Overhead                                                         * * *

Manual Translation Expense amortized over 195 units ($50K/195)             * * *

Total Overhead                                                             * * *

Total Product Cost: * * *
</TABLE>

         (b) R2's Manufacturing Cost for other configurations of the Hardware
shall be based on R2's then current costs (without mark up) to manufacture the
Hardware in the design configurations outlined on Exhibit B.

----------

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



                                       3

<PAGE>

                                    Exhibit B

                            R2 SOFTWARE AND HARDWARE

Software
--------

Shall be composed of a DICOM Interface and the ImageChecker(TM) Feature
Detection Code for breast images.

Hardware
--------

Shall be composed of hardware as outlined on Exhibit A or as modified from time
to time by the parties.


                                       1

<PAGE>

                                    Exhibit C

                                                           Confidential Document

                           SOFTWARE LICENSE AGREEMENT

         This Software License Agreement (the "Software License") is entered
into as of ________, 2000 (the "Effective Date") by and between GE Medical
Systems, a division of General Electric Company, a New York corporation, having
a principal place of business at 3000 N. Grandview Boulevard, Waukesha,
Wisconsin 53188, ("GEMS"), and ________________________, a __________________
corporation having a principal place of business at ___________________
("Sublicensee").

         NOW, THEREFORE, it is hereby agreed by the parties as follows:

         In consideration of the mutual promises and upon the terms and
conditions set forth below, the parties agree as follows:

1.       Definitions

1.1 All capitalized terms not defined in this Software License shall have the
meaning given to them in that certain agreement entitled "Amended and Restated
Distributor Agreement," dated as of September __, 2000, by and between R2
Technology, Inc. ("Licensor") and GEMS (the "Agreement").

1.2 "Documentation" means any user instructions, manuals or other materials, and
on-line help files regarding the use of the Software provided by GEMS in
connection with the Software.

1.3 "Equipment" means any computer system, including peripheral equipment or
operating system software so specified in Attachment 1 to this Software License.
[Need to specify equipment]

1.4 "Field of Use" shall mean use of the Software solely in conjunction with the
FFDM Systems listed in Attachment 1 of this Software License.

1.5 "FFDM System" shall mean a full-field digital-based mammography system
provided by GEMS in connection with this Software License.

1.6 "Software" means the computer software programs specified in Attachment 1 of
this Software License.

1.7 "Users" means all end users of the Software licensed to Sublicensee under
this Software License.


2.       Grant of License

2.1 Object Code License Grant. Subject to the terms and conditions of this
Software License, GEMS hereby grants to Sublicensee a perpetual, nonexclusive
and nontransferable license to use, execute, distribute, perform and display the
Software in the Field of Use, and to use the relevant Documentation. For
purposes of clarity, GEMS does not grant Sublicensee the right to modify or
create derivative works of the Software. Sublicensee acknowledges that Licensor
will retain title to the Software and Documentation. Sublicensee acknowledges
and agrees that the license rights hereunder entitle Sublicensee to use the
Software only with a single acquisition device in an FFDM System. Sublicensee
hereby acknowledges that Licensor has reserved all rights to the Software,
Documentation, or any copyrights, patents, or trademarks, embodied or used in
connection therewith, except for the rights expressly granted herein. All rights
of Sublicensee under this Software License, including without limitation this
Section 2.1, shall be subject to the terms and provisions of the Agreement, and
the rights of GEMS and Licensor thereunder.

2.2 Delivery. GEMS shall issue to Sublicensee one machine-readable copy of the
Software loaded on the Equipment or media listed in Attachment 1 of this
Software License and will provide Sublicensee with one copy of the appropriate
Documentation. Sublicensee acknowledges that no copy of the source code of the
Software will be provided to Sublicensee.


<PAGE>

2.3 Copies. Sublicensee may make one machine-readable copy of the Software
solely in connection with creating a backup for the FFDM System and Software and
for no other purpose. Sublicensee shall not make any other copies of the
Software. Sublicensee shall maintain accurate and up-to-date records of the
DICOM number and location of each and every FFDM System that is being used in
conjunction with the Software and shall provide GEMS with such information in
writing at the end of each Calendar Quarter. The permitted backup copy of the
Software will be subject to all terms and conditions of this Software License;
provided, however, that the license rights hereunder entitle Sublicensee to use
the Software only with a single acquisition device in an FFDM System. If
sublicensee makes a backup copy of the Software pursuant to this Section 2.3,
Sublicensee shall reproduce and not efface any and all titles, trademark
symbols, copyright symbols and legends, and other proprietary markings on the
Software.

2.4 Audit Rights. Sublicensee agrees to maintain accurate books and records
which enable the calculation of fees payable hereunder to be verified. Upon ten
(10) days prior written notice to Sublicensee, independent accountants selected
by GEMS, after entering into a confidentiality agreement, may have access to the
books and records of Sublicensee to conduct a review of audit once per calendar
year, for the sole purpose of verifying the accuracy of Sublicensee's payments
and compliance with the Software License. GEMS' failure to audit shall not be
considered a waiver of any objection to the amounts paid by Sublicensee.

2.5 Additional Restrictions. Sublicensee shall not itself, or through any
parent, subsidiary, affiliate, agent or other third party:

         (a) sell, lease, license or sublicense the Software or the
Documentation;

         (b) decompile, disassemble, or reverse engineer the Software, in whole
or in part;

         (c) allow access to the Software by any user other than Sublicensee's
employees;

         (d) write or develop any derivative software or any other software
program based upon the Software or any Confidential Information;

         (e) modify the Software; or

         (f) provide, disclose, divulge or make available to, or permit use of
the Software by any third party without GEMS' prior written consent.

3.       License Fee

3.1 Payment of Fees. [In consideration of the license granted pursuant to
Section 2.1, Sublicensee shall pay GEMS as follows: {Fill in pricing terms if
                                                    -------------------------
they are to be separately identified in this Software License}
-------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

------------------------------------------------------------------------------]]

OR

[[GEMS acknowledges that adequate consideration has been given to GEMS for the
license granted pursuant to Section 2.1, pursuant to the pricing terms agreed to
between the parties.]]

3.2 Taxes. All charges and fees provided for in this Software License are
exclusive of any taxes, duties, or similar charges imposed by any government
Sublicensee shall pay or reimburse GEMS for all federal, state, dominion,
provincial, or local sales, use, personal property, excise or other taxes, fees,
or duties arising out of this Software License (other than taxes on the net
income of GEMS).

4.       Limited Warranty and Limitation of Liability

4.1 Performance. GEMS warrants that the Software will be substantially free from
defects in materials and workmanship for a period of ninety (90) days from the
Effective Date. If during this time period the Software does not perform as
warranted, GEMS shall, at its option, correct the Software or, replace such
Software free of charge. The foregoing are Sublicensee's sole and exclusive
remedies for breach of warranty. The warranty set forth above is made to and for
the benefit of Sublicensee only. The warranty will apply only if:

         (a) the Software has been properly installed and used at all times and
in accordance with the instructions for use; and

         (b) no modification, alteration or addition has been made to the
Software by persons other than GEMS or GEMS' authorized representative.



                                       2

<PAGE>

4.2 Disclaimer. Subject to the foregoing, GEMS and Licensor make no warranties,
whether express, implied, or statutory regarding or relating to the Software or
the Documentation, or any materials or services furnished or provided to
Sublicensee under this Software License. GEMS and LICENSOR HEREBY DISCLAIM ALL
IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE WITH
RESPECT TO THE SOFTWARE, DOCUMENTATION, EQUIPMENT, AND SAID OTHER MATERIALS AND
SERVICES, AND WITH RESPECT TO THE USE OF ANY OF THE FOREGOING.

4.3 Limitation of Liability. IN NO EVENT WILL GEMS OR LICENSOR BE LIABLE FOR ANY
LOSS OF PROFITS, LOSS OF USE, BUSINESS INTERRUPTION, LOSS OF DATA, COST OF COVER
OR INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY KIND IN
CONNECTION WITH OR ARISING OUT OF THE FURNISHING, PERFORMANCE OR USE OF THE
SOFTWARE OR SERVICES PERFORMED HEREUNDER, WHETHER ALLEGED AS A BREACH OF
CONTRACT OR TORTIOUS CONDUCT, INCLUDING NEGLIGENCE, EVEN IF GEMS AND/OR LICENSOR
HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. GEMS' AND LICENSOR'S
LIABILITY UNDER THIS AGREEMENT FOR DAMAGES WILL NOT, IN ANY EVENT, AND UNDER ANY
THEORY, EXCEED THE LICENSE FEE PAID BY SUBLICENSEE TO GEMS UNDER TIES SOFTWARE
LICENSE.

5.       Confidential Information

5.1 Definition. "Confidential Information" means any information disclosed by
                --------------------------
GEMS to Sublicensee, either directly or indirectly, in writing, orally or by
inspection of tangible objects (including without limitation documents,
prototypes, samples, plant and equipment), which is designated as
"Confidential," "Proprietary" or some similar designation. Information
communicated orally will be considered Confidential Information if such
information is confirmed in writing as being Confidential Information within a
reasonable time after the initial disclosure. Confidential Information may also
include information disclosed to Sublicensee by third parties. Confidential
information will not, however, include any information which (i) was publicly
known and made generally available in the public domain prior to the time of
disclosure by GEMS; (ii) becomes publicly known and made generally available
after disclosure by GEMS to Sublicensee through no action or inaction of
Sublicensee; (iii) is already in the possession of Sublicensee at the time of
disclosure by GEMS as shown by Sublicensee's files and records immediately prior
to the time of disclosure; (iv) is obtained by Sublicensee from a third party
without a breach of such third party's obligations of confidentiality, (v) is
independently developed by Sublicensee without use of or reference to GEMS'
Confidential Information, as shown by documents and other competent evidence in
Sublicensee's possession; or (vi) is required by law to be disclosed by
Sublicensee, provided that Sublicensee gives GEMS prompt written notice of such
requirement prior to such disclosure and assistance in obtaining an order
protecting the information from public disclosure. The confidentiality
provisions of this Section 5 shall be in addition to the term of any other
confidentiality agreement between GEMS and Sublicensee.

5.2 Non-Use and Non-Disclosure. Sublicensee agrees not to use any Confidential
Information of GEMS for any purpose except to exercise its rights and perform
its obligations under this Software License. Sublicensee agrees not to disclose
any Confidential Information of GEMS to third parties or to Sublicensee's
employees, except to those employees of Sublicensee with a need to know.
Sublicensee shall reverse engineer, disassemble or decompile any prototypes,
software or other tangible objects which embody GEMS' Confidential Information
and which are provided to Sublicensee hereunder.

5.3 Maintenance of Confidentiality. Sublicensee agrees that it shall take
reasonable measures to protect the secrecy of and avoid disclosure and
unauthorized use of the Confidential Information of GEMS. Without limiting the
foregoing, Sublicense shall take at least those measures that it takes to
protect its own most highly confidential information and shall ensure that its
employees who have access to Confidential Information of GEMS have signed a
non-use and non-disclosure agreement in content similar to the provisions
hereof, prior to any disclosure of Confidential Information to such employees.
Sublicensee shall not make any copies of the Confidential Information of GEMS
unless the same are previously approved in writing by GEMS. Sublicensee shall
reproduce GEMS' and Licensor's proprietary rights notices on any such approved


                                       3

<PAGE>

copies, in the same manner in which such notices were set forth in or on the
original.

5.4 Return of Materials. Upon the termination of this Software License,
Sublicensee shall deliver to GEMS, no later than thirty (30) days from the date
of termination, upon GEMS' request, all of GEMS' Confidential Information that
Sublicensee may have in its possession or control.

6.       Term and Termination

6.1 Term. This Software License will take effect on the Effective Date and will
remain in force until terminated in accordance with this Software License.

6.2 Termination Events. GEMS may, by written notice to Sublicensee, terminate
this Software License if any of the following events ("Termination Events")
occur:

         (a) Sublicensee fails to pay any amount due GEMS within 30 days after
GEMS gives Sublicensee written notice of such nonpayment; or

         (b) Sublicensee is in material breach of any nonmonetary term,
condition or provision of this Software License, which breach, if capable of
being cured, is not cured within 30 days after GEMS gives Sublicensee written
notice of such breach; or

         (c) Sublicense (i) terminates or suspends its business, (ii) becomes
insolvent, admits in writing its inability to pay its debts as they mature,
makes an assignment for the benefit of creditors, or becomes subject to direct
control of a trustee, receiver or similar authority, or (iii) becomes subject to
any bankruptcy or insolvency proceeding under federal or state statutes; or

6.3 If any Termination Event occurs, termination will become effective
immediately or on the date set forth in the written notice of termination.
Termination of this Software License will not affect the provisions regarding
Sublicensee's or GEMS' treatment of Confidential Information, provisions
relating to the payment of amounts due, or provisions limiting or disclaiming
GEMS' and/or Licensor's liability, which provisions will survive termination of
this Software License Agreement.

6.4 Upon request, no later than 30 days after the date of termination or
discontinuance of this Software License for any reason whatsoever, Sublicensee
shall return the Software and all copies, in whole or in part, all Documentation
relating thereto, and any other Confidential Information in its possession that
is in tangible form. Sublicensee shall furnish GEMS with a certificate signed by
an executive officer of Sublicensee verifying that the same has been done.

7.       Miscellaneous

7.1 Third Party Beneficiary. Sublicensee hereby acknowledges and agrees that
Licensor, R2 Technology, Inc., a Delaware corporation having a principal place
of business at 235 Distel Circle, Los Altos, California, a licensor of GEMS, is
a third party beneficiary of this Software License and has all rights accorded
therefor, including without limitation, the right to sue the parties to this
Software License to enforce the term hereof

7.2 Nonassigninent/Binding Agreement. Neither this Software License nor any
rights under this Software License may be assigned or otherwise transferred by
Sublicensee, in whole or in part, whether voluntary or by operation of law,
including by way of sale of assets, merger or consolidation, without the prior
written consent of GEMS, which consent will not be unreasonably withheld.
Subject to the foregoing, this Software License will be binding upon and will
inure to the benefit of the parties and their respective successors and assigns.

7.3 Notices. Any notice required or permitted under the terms of this Software
License or required by law must be in writing and must be (a) delivered in
person, (b) sent by first class registered mail, or air mail, as appropriate, or
(c) sent by overnight air courier, in each case properly posted and fully
prepaid to the appropriate address set forth below. Either party may change its
address for notice by notice to the other party given in accordance with this
Section. Notices will be considered to have been given at the time of actual
delivery in person, three (3) business days after deposit in the mail as set
forth above, or one (1) day after delivery to an overnight air courier service.

7.4 Limitation on Claims. No action arising out of any breach or claimed breach
of this Software License or transactions contemplated by this Software License
may be brought by either party more than one year after the cause of action has
accrued. For purposes of this Software License, a cause of action will be deemed
to have accrued when a party knew or reasonably should have known of the breach
or claimed breach.


                                       4

<PAGE>

7.5 No Warranties. No employee, agent, representative or affiliate of GEMS and
its Licensor has authority to bind GEMS and/or Licensor to any oral
representations or warranty concerning the Software. Any written representation
or warranty not expressly contained in this Software License will not be
enforceable.

7.6 Survival. Articles 4, 5, 6 and 7 and Sections 2.4 and 2.5 shall survive
expiration or termination of this Software License.

7.7 Force Majeure. Neither party will incur any liability to the other party on
account of any loss or damage resulting from any delay or failure to perform all
or any part of this Software License if such delay or failure is caused, in
whole or in part, by events, occurrences, or causes beyond the control and
without negligence of the parties. Such events, occurrences, or causes will
include, without limitation, acts of God, strikes, lockouts, riots, acts of war,
earthquake, fire and explosions, but the inability to meet financial obligations
is expressly excluded.

7.8 Waiver. Any waiver of the provisions of this Software License or of a
party's rights or remedies under this Software License must be in writing to be
effective. Failure, neglect, or delay by a party to enforce the provisions of
this Software License or its rights or remedies at any time, will not be
construed and will not be deemed to be a waiver of such party's rights under
this Software License and will not in any way affect the validity of the whole
or any part of this Software License or prejudice such party's right to take
subsequent action. No exercise or enforcement by either party of any right or
remedy under this Software License will preclude the enforcement by such party
of any other right or remedy under this Software License or that such party is
entitled by law to enforce.

7.9 Severability. If any term, condition, or provision in this Software License
is found to be invalid, unlawful or unenforceable to any extent, the parties
shall endeavor in good faith to agree to such amendments that will preserve, as
far as possible, the intentions expressed in this Software License. If the
parties fail to agree on such an amendment, such invalid term, condition or
provision will be severed from the remaining terms, conditions and provisions,
which will continue to be valid and enforceable to the fullest extent permitted
by law.

7.10 Integration. This Software License (including the Exhibits and any addenda
hereto signed by both parties) contains the entire agreement of the parties with
respect to the subject matter of this Software License and supersedes all
previous communications, representations, understandings and agreements, either
oral or written, between the parties with respect to said subject matter. This
Software License may not be amended, except by a writing signed by both parties.

7.11 Purchase Orders. No terms, provisions or conditions of any purchase order,
acknowledgement or other business form that Sublicensee may use in connection
with the acquisition or licensing of the Software will have any effect on the
rights, duties or obligations of the parties under, or otherwise modify, this
Software License, regardless of any failure of GEMS or Licensor to object to
such terms, provisions or conditions.

7.12 Publicity. Sublicensee acknowledges that GEMS may desire to use its name in
press releases, product brochures and financial reports indicating that
Sublicensee is a Sublicensee of GEMS, and Sublicensee agrees that GEMS may use
its name in such a manner, subject to Sublicensee's consent, which consent will
not be unreasonably withheld.

7.13 Counterparts. This Software License may be executed in counterparts, each
of which so executed will be deemed to be an original and such counterparts
together will constitute one and the same agreement

7.14 Governing Law. This Software License will be interpreted and construed in
accordance with the laws of the State of New York and the United States of
America, without regard to conflict of law principles. The parties hereby
consent to the exclusive jurisdiction of the state and federal courts located in
New York, New York for resolution of any disputes arising out of this Software
License.


                                       5

<PAGE>

         The parties have executed this Software License below to indicate their
acceptance of its terms.
<TABLE>
<CAPTION>

<S>                                                          <C>
"General Electric Medical Systems, a division of General     "Sublicensee"
Electric Company"

By:                                                          By:
    ---------------------------------------------------         ----------------------------------------

Print Name:                                                  Print Name:
            -------------------------------------------                 --------------------------------

Title:                                                       Title:
       ------------------------------------------------            --------------------------------------

</TABLE>




<PAGE>

                                    Exhibit D
                                    GEMS SDRS
                                      * * *

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





<PAGE>

                                    Exhibit E
                                 R2'S US PATENTS

* * *

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



<PAGE>

                                    Exhibit F
                               REGULATORY MATTERS

Approval Efforts by Both Parties. R2 shall submit a supplement (PMA Supplement)
---------------------------------
to its approved application for premarket approval (PMA) under the Federal Food,
Drug, and Cosmetic Act (FD&C Act) with respect to R2 Product used in connection
with the flat panel detector of the GEMS Product. R2 agrees to provide GEMS all
sections of the PMA Supplement prior to submission, excluding sections
pertaining to the R2 Product algorithm. R2 shall provide GEMS seven days to
review and comment on those sections. GEMS agrees to provide R2 with information
in GEMS's possession necessary for approval of the R2 Product, subject to
obtaining the appropriate informed consent and obtaining consent from United
States Army subjects, as needed.

         R2 shall provide GEMS with copies of all substantive written
correspondence to R2 from FDA and to FDA from R2, including copies of all
official correspondence from FDA to R2, regarding the R2 Product PMA Supplement,
excluding information pertaining to the R2 Product algorithm. R2 agrees to
provide GEMS with drafts of all written responses to official FDA correspondence
from R2 to FDA regarding the PMA Supplement, excluding information pertaining to
the R2 Product algorithm. R2 shall provide GEMS seven days to review and comment
on those draft responses to official FDA correspondence prior to submission to
FDA.

         R2 agrees to provide GEMS written authorization to reference the R2 PMA
and/or PMA Supplement for purposes of GEMS submitting its own PMA or PMA
Supplement for display of CAD information on the GEMS Product. GEMS agrees to
file a PMA for display of CAD information on the GEMS Product only if FDA
requires a PMA instead of a PMA Supplement. R2 agrees to assist GEMS in
submitting a PMA or PMA Supplement under the FD&C Act with respect to the GEMS
Product, including R2 Product, after R2 has received premarket approval for the
R2 Product. R2 agrees to provide GEMS with a copy of R2's approved PMA and/or
PMA Supplement, excluding information pertaining to the R2 Product algorithm, to
assist GEMS in the preparation of the GEMS PMA or PMA Supplement. GEMS agrees to
provide R2 all sections of the GEMS PMA or PMA Supplement relating to the R2
Product prior to submission. GEMS shall provide R2 seven days to review and
comment on those sections. R2 agrees to assist GEMS in responding to any
questions FDA may have regarding the R2 Product.

         GEMS shall provide R2 with copies of all substantive written
correspondence to GEMS from FDA and to FDA from GEMS, including copies of all
official correspondence from FDA to GEMS, regarding the GEMS PMA or PMA
Supplement relating to the R2 Product. GEMS agrees to provide R2 with drafts of
all written responses to official FDA correspondence from GEMS to FDA regarding
the GEMS PMA or PMA Supplement relating to the R2 Product. GEMS shall provide R2
seven days to review and comment on those draft responses to official FDA
correspondence prior to submission to FDA.

         R2 agrees to provide GEMS with written authorization to reference the
R2 PMA and/or PMA Supplement for purposes of GEMS submitting its own PMA
Supplement for additional claims about the GEMS Product, including the R2
Product, that are consistent with, and expand


<PAGE>

upon, existing claims for the R2 Product, and for which evidence of safety and
effectiveness already exists. GEMS agrees to provide R2 the opportunity to file
a PMA Supplement for those claims prior to GEMS filing such PMA Supplement. If
R2 decides to file the PMA Supplement for those claims, it must agree to do so
expeditiously. If R2 has not filed the PMA Supplement after 120 days, GEMS may
file the PMA Supplement for those claims.

         GEMS agrees to provide R2 written authorization to reference the GEMS
PMA or PMA Supplement for display of CAD information on the GEMS Product for
purposes of R2 submitting its own PMA Supplement for additional claims about the
GEMS Product, including the R2 Product, that are consistent with, and expand
upon, existing claims for the R2 Product, and for which evidence of safety and
effectiveness already exists. R2 agrees to provide GEMS the opportunity to file
a PMA Supplement for those claims prior to R2 filing such PMA Supplement. If
GEMS decides to file the PMA Supplement for those claims, it must do so
expeditiously. If GEMS has not filed the PMA Supplement after 120 days, R2 may
file the PMA Supplement for those claims.

Quality Compliance. R2 and GEMS shall each comply with their respective Quality
-------------------
Systems which must be compliant with and regularly audited in accordance with 21
C.F.R. Part 820, Quality System Regulation, ISO 9001:1994, the applicable World
Health Organization requirements and any applicable medical device regulations
in the European Community, Japan, Australia, Canada, and South Africa.

         R2 agrees that on-site quality control audits may be made, at GEMS's
expense, by GEMS personnel or by an independent expert quality control auditor
who is selected by GEMS. Such audits will be scheduled at reasonable times and
upon reasonable prior notice to R2, and may be made once a year. Interim audits
based upon a showing of good cause as a result of significant quality issues may
be conducted but may be limited to those aspects of the R2 Quality System
directly related to those quality issues. R2 agrees to furnish, at GEMS's sole
expense, facilities, Quality System records, and assistance reasonably necessary
to facilitate any such audit and ensure the safety and convenience of each
inspection.

     R2 shall notify GEMS within a reasonable period of time (not later than 10
days) if the FDA or another regulatory body with authority over medical devices
contacts R2 to inquire about or investigate the R2 Product. R2 shall notify GEMS
if FDA inspects the R2 facility and shall provide GEMS with copies of FD-482 and
FD-483 if related to the R2 Product. R2 agrees to provide GEMS a draft of any
response that R2 intends to provide to FDA to address issues identified in
FD-483, if related to the R2 Product, prior to submission. R2 shall provide GEMS
two days to review and comment on such drafts. R2 shall provide GEMS with a copy
of the final response to issues identified in FD-483, if related to the R2
Product. R2 shall notify GEMS if it receives a Warning Letter or other adverse
regulatory action including, but not limited to, administrative detention,
import detention, complaint for forfeiture, or complaint for injunction, if
related to the R2 Product. R2 shall provide GEMS with any response R2 prepares
in response to any adverse regulatory action, if related to the R2 Product.

     GEMS shall notify R2 within a reasonable period of time (not later than 10
days) if the FDA or another regulatory body with authority over medical devices
contacts GEMS to inquire about or investigate the R2 Product. GEMS shall notify
R2 if FDA inspects the GEMS facility if such


                                       2

<PAGE>

inspection is related to the R2 Product and shall provide R2 with copies of
FD-482 and FD-483 if related to the R2 Product. GEMS agrees to provide R2 a
draft of any response that GEMS intends to provide to FDA to address issues
relating to the R2 Product identified in FD-483 prior to submission. GEMS shall
provide R2 two days to review and comment on such drafts. GEMS shall provide R2
with a copy of the final response to issues relating to the R2 Product
identified in FD-483. GEMS shall notify R2 if it receives a Warning Letter or
other adverse regulatory action including, but not limited to, administrative
detention, import detention, complaint for forfeiture, or complaint for
injunction relating to the R2 Product. GEMS shall provide R2 with any response
GEMS prepares in response to any adverse regulatory action regarding the R2
Product.

         GEMS shall be responsible for the initial receipt and handling of
potential complaints it receives related to the R2 Product. Upon receipt of such
R2 Product-related complaint information, GEMS shall record the identity of
complainant, including name, address, and telephone number, a description of the
nature of the complaint, and take all reasonable efforts to obtain all other
available information associated with the complaint. GEMS shall promptly provide
all available complaint-related information to R2's quality assurance
department.

         R2 shall be responsible for the initial receipt and handling of
potential complaints it receives related to the R2 Product. Upon receipt of such
R2 Product-related complaint information, R2 shall record the identity of
complainant, including name, address, and telephone number, a description of the
nature of the complaint, and take all reasonable efforts to obtain all other
available information associated with the complaint. R2 shall promptly provide
all available complaint-related information to GEMS's quality assurance
department.

         GEMS and R2 agree to review and evaluate each potential complaint to
determine whether the information reported constitutes a complaint within the
meaning of 21 C.F.R. ss. 820.3(b), and whether it merits investigation. GEMS and
R2 shall confer to determine whether a complaint investigation is required, and
GEMS and R2 shall each establish a record justifying its rationale for not
investigating any complaint. If GEMS and R2 are unable to reach an agreement
regarding whether to conduct an investigation, both parties will discuss the
issue with FDA simultaneously to determine whether an investigation is
warranted. If FDA determines than an investigation is warranted, both parties
will conduct an investigation. If FDA determines that an investigation is not
warranted, neither party will conduct an investigation.

         Where an investigation is warranted, each party shall be responsible
for investigation of the complaint. Such investigation shall be conducted at
each party's expense. GEMS and R2 shall each establish and maintain a program,
as required by 21 C.F.R. ss. 820.198, to ensure that (a) each complaint is
adequately reviewed, evaluated, and maintained; (b) any complaint involving the
possible failure of a device to meet any of its performance specifications is
adequately investigated; and (c) any complaint pertaining to safety is
immediately reviewed, evaluated, and investigated. To the extent that GEMS
requires additional information to enable it to perform the complaint
investigation, GEMS shall notify R2 and R2 shall cooperate fully in assisting
GEMS with the conduct of the investigation, excluding information pertaining to
the R2 product algorithm. To the extent that R2 requires additional information
to enable it to perform the complaint investigation, R2 shall notify GEMS and
GEMS shall cooperate fully in assisting R2 with the conduct of the
investigation.


                                       3

<PAGE>

         GEMS and R2 shall both be responsible for determining whether to
submit, and submitting medical device reports (MDRs) and related information
required under the Medical Device Reporting regulation, 21 C.F.R. Part 803, and
similar reports and information that are required under reporting requirements
of the European Community, Japan, Australia , Canada, and South Africa. Upon
request by GEMS, R2 agrees to provide technical support and documentation to
enable GEMS to make such determinations, and to prepare and submit such reports.
Upon request by R2, GEMS agrees to provide technical support and documentation
to enable R2 to make such determinations, and to prepare and submit such
reports, excluding information pertaining to the R2 product algorithm. If the
parties are unable to reach an agreement regarding whether to submit an MDR,
both parties will discuss the issue with FDA simultaneously to determine whether
submitting an MDR is required. If FDA determines that an MDR is required, both
parties will submit an MDR. If FDA determines that an MDR is not required,
neither party will submit an MDR.

         GEMS and R2 are each authorized hereunder to recall R2 Product,
initiate a market withdrawal, or initiate other corrective action (e.g.,
notification) involving its customers. If GEMS determines that it is appropriate
to undertake a recall, market withdrawal, or other corrective action for any R2
Product, it will promptly notify R2. If R2 determines that it is appropriate to
undertake a recall, market withdrawal, or other corrective action for any R2
Product, it will promptly notify GEMS. If the parties disagree regarding whether
a recall, market withdrawal, or other corrective action is required, both
parties shall discuss the issue with FDA simultaneously to determine whether a
recall, market withdrawal, or other corrective action is required. If FDA
determines that a recall, market withdrawal, or other corrective action is
required, the party whose act or omission, according to FDA, gave rise to the
recall, market withdrawal, or other corrective action (the recalling or
initiating party) shall use its best efforts to promptly correct the problem(s)
that caused the recall, market withdrawal, or other corrective action and shall
be responsible for the recall, market withdrawal, or other corrective action.
The parties agree that the recalling or initiating party shall be the point of
contact for purchasers in the event of a corrective action, and the recalling or
initiating party shall be responsible for all communications with customers. The
recalling or initiating party will maintain complete and accurate records, for
such periods as may be required by applicable law, related to any recall, market
withdrawal, or other corrective action. The recalling or initiating party shall
be responsible for all costs associated with the recall, market withdrawal, or
other corrective action. The recalling or initiating party shall be responsible
for reporting any corrections or removals of R2 Product, as required by 21
C.F.R. Part 806.

Rejection of Products or Parts in Case of Nonconformity. R2 shall test or cause
--------------------------------------------------------
to be tested each R2 Product as defined and specified in the latest version of
the SDRS document (the Specifications) before shipment to GEMS or its designee
for compliance with the Specifications. R2 shall establish and maintain a
program consistent with its Quality System to ensure that any failure of R2
Product or its components to meet performance specifications shall be
investigated. Upon request, R2 shall provide GEMS with a written record of the
investigation together with any conclusions and follow-up.

         GEMS shall have the right to inspect shipment of R2 Product within 15
calendar days after receipt and shall notify R2 if any R2 Product is found by
GEMS to fail to meet Specifications. GEMS shall return rejected R2 Product to
R2, at GEMS's expense, including full


                                       4

<PAGE>

risk of loss or damage to the R2 Product for the shipment to R2, within a
reasonable period of time of discovering the failure and after first receiving a
Return Material Authorization from R2, which shall not be unreasonably withheld.
No later than 15 calendar days after R2's receipt of rejected R2 Product, R2
shall, at its option and expense if within the Warranty Period, or at GEMS's
option and expense as quoted by R2 outside of the Warranty Period, either repair
or replace said R2 Product. R2 shall bear all expense and risk of loss or damage
to R2 Product for the return shipment to GEMS. R2 Product not rejected within 15
calendar days after receipt shall be deemed accepted by GEMS.


                                       5