Exhibit 10.24


 


DEVELOPMENT AGREEMENT


 


THIS DEVELOPMENT AGREEMENT (“Agreement”) is made effective this
8th day of January, 2009 (the “Effective Date”),
by and between Toshiba Medical Systems Corporation, a Japanese corporation,
having its place of business at 1385 Shimoishigami, Otawara-Shi, Tochigi
324-8550, Japan (“Toshiba”) and Vital Images, Inc., a Minnesota
corporation having its principal place of business at 5850 Opus Parkway, Suite 300,
Minnetonka, Minnesota 55343 USA (“Vital Images”).


 


RECITALS


 


A.        Vital Images is in the
business of developing and licensing proprietary medical visualization application
software products.


 


B.         Toshiba is in the business of
developing and marketing proprietary medical visualization scanners and related
hardware and software products.


 


C.         Toshiba  and Vital Images desire to collaborate to
develop and commercialize  visualization
application software.


 


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


 


1.  Definitions


 


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


 


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


 


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


 


c.          “Algorithm” means the mathematical
equation underlying the process of identifying structures and calculating
values that guides the development of a software application, whether or not
patentable.


 


d.          “Change in Control” shall mean (i) any
merger, statutory share exchange or consolidation of a party with or into any
third party, that entitles the shareholders of the third party to receive at
least one (1) seat on the board of directors and at least thirty-three and
one-third percent (33-1/3%) of the outstanding capital stock of the post-merger
company (provided, however, that any acquisition merger, statutory share
exchange or consolidation of a party with or into * * *, * * *, and * * * or
any of their affiliates  that entitles
any such company of at least thirty-three and one-third percent (33-1/3%) of
the outstanding capital stock of Vital Images shall be a Change in Control, whether or not such entity also
receives a seat on the board of directors of Vital Images; (ii) any third
party becoming the holder of a majority of the capital stock of a party
entitled to vote generally for the election of directors; or (iii) the
sale, lease, assignment, transfer or other conveyance of all or substantially
all of the assets of a party in any transaction or series of
transactions by such party.  In case of “Change
in Control” of either party, that party shall assure that the acquiring equity
shall agree to honor and fullfill the obligation of the party as contained in this
Agreement.


 


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


 


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


 


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independently
developed by the recipient Party without the use of any Confidential
Information of the disclosing Party; or (5) is the subject of a written
consent to disclose by the disclosing Party or otherwise is expressly
acknowledged or agreed in writing by the disclosing party to not be or no
longer be confidential or proprietary information.


 


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


 


g.          “Fair Market Value of the Option Rights”
means the fair market value of the Option Rights as at the date of occurrence of a Change in
Control (but immediately prior, and without giving any effect, to such Change in Control), as determined in accordance with
the following provisions.  Toshiba and
Vital Images shall negotiate in good faith, using the most recent information
available which is capable of verification, with a view to determining the Fair
Market Value of the Option Rights.  If
Toshiba and Vital Images are unable to agree on the Fair Market Value of the
Option Rights within thirty (30) days of the occurrence of a Change in Control or a mutually-agreed upon longer
period of time (the “Negotiation Period”), Toshiba and Vital Images
shall attempt to establish the Fair Market Value of the Option Rights by
submitting, within ten (10) days following the expiration of the
Negotiation Period, to non-binding mediation in accordance with the Model
Procedures for the Mediation of Business Disputes promulgated by the Center for
Public Resources (“CPR”) then in effect, except where those procedures
conflict with the terms and conditions of this definition, in which case this
definition shall control.  The mediation
shall be conducted in the Borough of Manhattan in New York, New York and shall
be attended by senior executives of Toshiba and Vital Images with authority to
make binding decisions with respect to the Fair Market Value of the Option
Rights.  The mediator shall be
experienced in mediating intellectual property right disputes and appointed
from the list of neutrals maintained by CPR. 
Following their submission to non-binding mediation, Toshiba and Vital
Images shall promptly confer in an effort to select a mediator by mutual
agreement.  In the absence of such an
agreement, the mediator shall be selected from a list generated by CPR with
each of Toshiba and Vital Images having the right to exercise challenges for
cause and two (2) peremptory challenges within five (5) days after
receiving the CPR list.  The mediator
shall confer with Toshiba and Vital Images to design procedures to conclude the
mediation within no more than twenty (20) days after initiation.  No statements or offers (written, electronic,
verbal or otherwise) made by Toshiba and Vital Images during the mediation may
be used by the other in any subsequent arbitration or litigation (other than in
respect of any fraud).  If Toshiba and
Vital Images are unable to determine the Fair Market Value of the Option Rights
through mediation, Toshiba and Vital Images shall, within ten (10) days
following the expiration of the mediation period set forth above, submit the
issue of determination of the Fair Market Value of the Option Rights to binding
arbitration pursuant to the Rules of the American Arbitration Association
for Commercial Arbitration then in effect, except where those rules 


 


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conflict
with the terms and conditions of this definition, in which case this definition
shall control.  Concurrently with its
submission to arbitration, each of Toshiba and Vital Images shall (i) select
an arbitrator (each a “Valuing Arbitrator”) who is unaffiliated with
such Party and experienced in arbitrating intellectual property disputes and (ii) notify
the other in writing of the identity of the arbitrator so selected.  In the event that Toshiba or Vital Images
shall fail to timely select its Valuing Arbitrator, such Valuing Arbitrator
shall be selected by the office of the American Arbitration Association (or any
successor thereto) located in the Borough of Manhattan in New York, New York.  The Valuing Arbitrators shall, within twenty
(20) days following their selection, select a third arbitrator (the “Deciding
Arbitrator” and collectively with the Valuing Arbitrators, the “Arbitrators”).  If the Valuing Arbitrators are unable to
agree on the Deciding Arbitrator, within such twenty (20)-day period, then the
Deciding Arbitrator shall be selected by the office of the American Arbitration
Association (or any successor thereto) located in the Borough of Manhattan in
New York, New York.  Each of Toshiba and
Vital Images shall pay the fees and expenses of the Valuing Arbitrator selected
by it.  The fees and expenses of the
Deciding Arbitrator shall be borne equally by Toshiba and Vital Images.  The arbitration hearing shall be conducted in
the Borough of Manhattan in New York, New York and conclude no later than sixty
(60) days after the date on which the Deciding Arbitrator is selected.  The Arbitrators shall set a date for the
arbitration hearing; make determinations based solely on the documents and other
evidence presented at the arbitration hearing; commit to the rendering of a
determination of the Fair Market Value of the Option Rights within twenty (20)
days after the conclusion of the arbitration hearing (the date on which such
arbitration hearing concludes being hereinafter referred to as the “Conclusion
Date”) and provide discovery according to the time limits specified herein,
giving recognition to the understanding of Toshiba and Vital Images that they
contemplate reasonable discovery, including document demands and depositions,
but that such discovery be limited so that the time limits specified herein may
be met without undue difficulty.  In no
event shall the Arbitrators allow either Toshiba or Vital Images to obtain more
than a total of thirty (30) hours of deposition testimony from all witnesses,
including both fact and expert witnesses. 
In the event multiple hearing days are required, they shall be scheduled
consecutively to the greatest extent possible. 
The Arbitrators shall, within twenty (20) days after the Conclusion
Date, render a written opinion (the “Valuation Opinion”) to each of
Toshiba and Vital Images setting forth in reasonable detail the Fair Market
Value of the Option Rights and the criteria upon which such value is
based.  The Fair Market Value of the
Option Rights established shall be final and binding on Toshiba and Vital
Images.  Neither Toshiba nor Vital Images
may apply to any court to vacate, modify or appeal the Fair Market Value of the
Option Rights as established pursuant to this definition, but may apply to an
appropriate court solely for the purpose, if necessary, of enforcing the
recognition of the Fair Market Value of the Option Rights as established
pursuant to this definition. 
Notwithstanding the foregoing, Toshiba or Vital Images may seek to
vacate or modify the Fair 


 


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Market
Value of the Option Rights as established pursuant to this definition solely on
the grounds of fraud or miscalculation of figures.


 


h.          “Foreground
Rights” means any Patents, Algorithms or other Intellectual Property
authored, conceived and/or reduced to practice by Toshiba and/or Vital Images
employees or agents during the Term pursuant to this Agreement or any Product
Development Plan.


 


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


 


j.           “Jointly-Owned Foreground Rights”
means any Foreground Rights (including any improvements, modifications or
derivative works thereto) authored, conceived and/or reduced to practice
jointly by both Toshiba and Vital Images employees or agents in the performance
of a Product Development Plan. Notwithstanding the foregoing, any source code
written by, on behalf of or with the participation of Vital Images, its
employees or agents is not a part of Jointly-Owned Foreground Rights,
regardless whether such source code is part of Project Software and even if
Toshiba employees or agents participate in the creation of such source code.
For purposes of clarity, the fact that the development of Foreground Rights by
Vital Images employees or agents may be funded in whole or in part by Toshiba
does not make such Foreground Rights Jointly-Owned Foreground Rights unless
Toshiba employees or agents also authored, conceived and/or reduced to practice
such Foreground Rights.


 


k.          “Party” means each of Toshiba and Vital Images, and their respective
successors and assigns.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


r.           “Reseller Agreement” means the
Marketing and Distribution Agreement between Toshiba and Vital Images dated as
of November 21, 2008, and effective as of January 1, 2009, as
amended, restated, supplemented, extended, renewed or otherwise modified from
time to time.


 


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


 


t.           “Specifications” means instructions, drawings, technical
specifications and any other requirements for the Project Software agreed
between Toshiba and Vital Images.


 


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


 


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


 


w.         “Toshiba Competitor” means (i) each
of * * *, * * *, and * * * and their
respective Affiliates and (ii) each of the medical visualization subsidiaries or businesses of the entities in
subsection (i), if and when such
subsidiaries
or business is no longer owned by such
entities.


 


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


 


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


 


z.           “Vital Images Background Rights” means
any Intellectual Property authored, conceived and/or reduced to practice by
Vital Images (i) prior to the Effective Date, (ii) after the
expiration or termination of this Agreement or (iii) during the Term but
which is outside the scope of the work contemplated by any Product Development
Plan.


 


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


 


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


 


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


 


2.             Development of
Project Software.


 


a.          Product Development Plans.  From
time to time during the Term of this Agreement, Toshiba and Vital Images may
enter into Product Development 


 


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


 


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Plans
with respect to Project Software.   Upon
the execution of a Product Development Plan, Vital Images shall begin
developing the Project Software described in such Product Development Plan in
accordance with the schedule and other terms set forth in such Product
Development Plan and the other terms and conditions set forth in this
Agreement.


 


b.          Changes to Product Development Plans.  The
Parties may amend a Product Development Plan at any time by mutual written
agreement. Any changes or amendments shall be made in accordance with Vital
Images’ change control process.


 


c.          Cooperation.  The performance of the
development contemplated hereunder shall be coordinated by the Project Managers
(defined in Section 3).  The Parties
agree that the successful completion of any development activities is largely
dependent upon the cooperation and the regular exchange of information between
the Parties.  The Parties shall
facilitate the development contemplated hereunder through the regular exchange
of information.  Each Party shall inform
the other without undue delay about any delays in the performance under any
ongoing Product Development Plan or the achievement of any milestones under any
ongoing Product Development Plan.


 


d.          Release of Project Software.  Upon
Release of Project Software with respect to any Project Software described in a
Product Development Plan (the date of Release of Project Software, the “Release
Date”), such Project Software shall become a “Product” (as such term
is defined in the Reseller Agreement) and shall be subject to all terms and
conditions of the Reseller Agreement. 
The Parties shall agree upon pricing for the Project Software and shall
amend Exhibit E to the Reseller Agreement to reflect the pricing for the
Project Software that the parties have agreed upon.  The Product Development Plan shall terminate
on the Release Date of the related Project Software.  For purposes of clarity, ownership of Project
Software, including the source code and object code, shall remain with Vital
Images (subject to Toshiba’s rights in any Toshiba Background Rights, Toshiba
Foreground Rights or Jointly-Owned Foreground Rights incorporated therein) and
Toshiba shall have no rights to reverse engineer or decompile such Project
Software.


 


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


 


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3.           Project Management.


 


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


 


  b.        Toshiba and Vital Images
agree to develop a “Product Roadmap” that will describe the development
activities the parties desire to undertake under this Agreement.  The Product Roadmap shall be revised by the
parties every six months and shall describe the Parties’ development and
release plans relating to this Agreement for the next two years (or until the
end of the term of this Agreement, if the remaining term of this Agreement is
less than two years at the time of the revision of the Product Roadmap).


 


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


 


(i)            review
and revise the Product Roadmap;


 


(ii)           review
the progress of each ongoing Product Development Plan and discuss necessary
changes to the scope, development schedule or actions to be taken;


 


(iii)          synchronize
the Parties’ product development plans and processes; and


 


(iv)         discuss
any other matters as agreed upon by the Parties.


 


4.           Funding of
Development Costs; Resources Devoted to Development.


 


  a.        Vital Images Resources. Vital
Images agrees to devote at least * * *
full-time product development engineering personnel (including project
management, scientist/algorithm development engineers, software/clinical
development engineers, and quality/test engineers) during the term of this
Agreement to work
exclusively on activities defined in the Product Development Plans in
effect from time to time and to accelerating clinical application development
as defined in the Product Roadmap.  In
addition, Vital Images will assign without limitation the necessary shared
resources to support the validation and testing, alpha/beta testing, clinical
evaluation support, and program and release management defined in the Product
Development Plans in effect from time to time.


 


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


 


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


 


9

















 


product
development engineering personnel referred to in Section 4.a. Toshiba will
devote such internal resources and personnel as are reasonably necessary to
fulfill Toshiba’s obligations under this Agreement.  Toshiba shall be responsible for managing and
funding clinical evaluation and validation of Project Software and shall enable
the participation of Vital Images’ personnel in such process; provided,
however, that Vital Images may also conduct independent clinical evaluation and
validation.  Clinical evaluation and
validation for Project Software shall be defined in each Product Development
Plan in effect from time to time.


  c.        Silent
Period.  During any Silent Period but not to
exceed six (6) months, Toshiba
will continue to provide funding to Vital Images, at the rates set forth in Exhibit A,
for any Vital Images personnel who, during such Silent Period, are assigned to and actively engaged
on projects related to errors reported in any Project Software that has been
released prior to such Silent Period pursuant to this Agreement.  In addition, during any Silent Period and also
after any expiration of the Term (but not after any termination of the Term
under Section 6(b), (c) or (d)), Toshiba will provide funding for * *
* full-time product development engineering personnel for a period, not to
exceed six (6) months during and
after the expiration of the Term in order to assist Vital Images to cover
reallocation and/or termination costs.


 


  d.        Reporting and Audit Provisions.  Vital Images will implement a
project accounting system to track its spending and time worked, on an
employee-by-employee basis, on (i) each Product Development Plan in effect
from time to time, or (ii) any other work performed by Vital Images
personnel for which Toshiba is required to provide any funding under this
Agreement.  Vital Images will provide to
Toshiba a periodic report of such spending and time worked in a form and
frequency to be agreed upon by the Parties (the “Spending Reports”).  Toshiba shall have the right, at its cost and expense, to audit the
Spending Reports from time to time.  Upon
reasonable prior request by Toshiba, Vital Images will permit Toshiba personnel
and Toshiba’s designated outside accountant to review the Spending Reports and
all supporting or related books, records, systems, invoices, receipts and other
documents of Vital Images (all of which shall be treated as Confidential
Information of Vital Images).  Vital
Images shall cooperate reasonably with Toshiba personnel and its accountant in
connection with any such audit.


 


5.           Original Works.


 


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


 


  b.        Vital
Images shall obtain in writing all rights, licenses, grants, consents, and/or
permissions necessary to use or incorporate any Third Party Tools.  Vital
Images shall further ensure that no fees, payments, royalties, or any
additional 


 


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


 


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consideration
of any kind will be imposed upon Toshiba by any third party with respect to any
such Third Party Tools.


 


6.                                       Term and Termination.


 


  a.                                Term of Agreement.  The “Term”
of this Agreement shall begin on the Effective Date and shall, unless terminated
earlier as provided herein, terminate immediately on December 31, 2009, provided that the Agreement shall renew if,
at any time during the Term, a new Product Development Plan is agreed to that
will extend into the next calendar year, in which case this Agreement shall
automatically renew until six (6) months following the end of all active
Product Development Plans (and the word “Term”, where used herein, shall be
deemed to include such extended period). 
Upon expiration of the Term or termination of this Agreement, neither
Party shall have any further obligation to the other Party under this Agreement
(including, for avoidance of doubt, any obligation of Toshiba to provide any
further funding to Vital Images pursuant to the Agreement other than payment of
invoices for efforts expended by Vital Images prior to the expiration of the
Term or termination of this Agreement); provided, however, that upon such
expiration or termination (i) each
Party shall return to the other Party any property of such other Party in its
possession including, but not limited to, the other party’s Confidential Information
and any technical documents related to the other party’s Background Rights, (ii) each party shall retain ownership
of its Intellectual Property (subject to the provisions of Sections 7, 8 and 9
below), (iii) the provisions of the second sentence of Section 4(c) shall
survive expiration of this Agreement in accordance with its terms, (iv) Section 4(d) shall
survive expiration or termination and continue in full force and effect for a
period of six months, and (v) the provisions of this Section 6 and
Sections 2(e), 7, 8(a), 8(b) (subject to any duration periods provided
therein), 9, 10 and 11 shall survive expiration or termination and continue in
full force and effect; provided that (i) Section 8(b) shall not survive
termination in case this Agreement is terminated by Toshiba in accordance with Section 6(b),
(ii) Section 8(a) shall not survive termination in case this
Agreement is terminated by Vital Images in accordance with Section 6(b),
and (iii) Sections 8(a) and 8(b) shall not survive the
occurrence of a Change in Control to a Toshiba Competitor in case this
Agreement is terminated by Toshiba in accordance with Section 6(c) due
to the occurrence of such Change in Control during the term of this Agreement
or in case Toshiba so requests to Vital Images in writing due to the occurrence
of such Change in Control after the termination or expiration of this Agreement,
provided, however, that each Party may continue to develop, manufacture,
market, and maintain its then current products within its Field of Use after invalidation
of Sections 8(a) and 8(b) hereunder.


 


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  b.                Termination for Cause.


 


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


 


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


 


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


 


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


 


12

















 


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


 


  a.                                Vital Images shall not acquire any ownership
interest in any Toshiba Background Rights or Toshiba Foreground Rights as a
result of entering into or performing this Agreement or any Product Development
Plan.  Toshiba shall not acquire any
ownership interest in any Vital Images Background Rights, Vital Images
Foreground Rights or Project Software as a result of entering into or
performing this Agreement or any Product Development Plan.  Each Party shall own all Intellectual
Property in any improvements, modifications, or derivative works that are
authored, conceived, and/or reduced to practice solely by such Party’s
employees or agents and based upon the other Party’s Background Rights or
Foreground Rights (subject to the other Party’s ownership of the original
underlying rights).


 


  b.                               If and to the extent any Jointly-Owned
Foreground Rights are created:


 


(i)                                     Each of Toshiba and Vital Images shall have
an undivided ownership interest in the Jointly-Owned Foreground Rights, and
such ownership interest shall survive termination of this Agreement and the
Reseller Agreement, and neither party shall owe the other any royalty, license
fee or other sum for such ownership rights.


 


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


 


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


 


13

















 


8.                                       Mutual License Grants.


 


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


 


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


 


(ii)                                  a worldwide, non-exclusive and royalty-free
license to the Vital Images Foreground Rights solely in the Toshiba Field of
Use.


 


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


 


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


 


(ii)                                  a worldwide, non-exclusive and royalty-free
license to the Toshiba Foreground Rights solely in the Vital Images Field of
Use.


 


  c.                                                To the extent any Intellectual Property is
based upon, incorporates, or requires intellectual
property owned (either jointly or in whole) or controlled by a third party and
must be used in connection with a Product Development Plan, the Party providing
such Intellectual Property to the other party shall obtain any such necessary
licenses or consents from such third party. 
If such Intellectual Property is used jointly by the Parties, the Parties shall negotiate in good faith with such third party
to obtain any such necessary
licenses or consents from such third party. 
The Parties acknowledge that the Project Development Plan may not be
completed until any necessary third party licenses or consents are obtained.


 


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


 


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


 


14

















 


hereunder exceed the amounts
paid by Toshiba to Vital Images other than liability derived from infringement
of third party rights.


 


9.                                       Option Upon Change in Control to a Toshiba
Competitor.


 


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


 


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


 


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


 


15

















 


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


 


10.                                 Confidentiality and Use.  A
Party shall not disclose to any person or issue any press release or otherwise
publish any Confidential Information of the other Party by any means or in any
form other than any disclosure expressly permitted by this Agreement.  A Party shall not use any Confidential Information
of the other Party for any purpose, including taking measures that would avoid
creating a premature bar to a US or foreign patent application or any other use
detrimental to the other Party, other than any use that is expressly permitted
by this Agreement or any use that is necessary for the recipient Party to
perform its obligations under this Agreement. 
Each Party shall employ the same reasonable safeguards in receiving,
storing, transmitting, and using proprietary confidential information that
prudent organizations normally exercise with respect to their own property of
significant value.  A Party may disclose
Confidential Information to (a) its Affiliates and its and their respective
directors, officers, employees and professional advisers (“Representatives”)
solely on a need to know basis in connection with the purposes of this
Agreement or the Reseller Agreement, provided that each such Representative
agrees to be bound by the terms of this Section or (b) the other Party or such
other Party’s Representatives.  A Party
shall be liable for any breach of this Section by any of its
Representatives.  If a Party or any of
its Representatives is required by law or regulation or otherwise becomes
legally compelled (by deposition, interrogatory, request for information or
documents, subpoena, civil investigative demand, governmental agency action or
similar process) to disclose any Confidential Information of the other Party to
a person not otherwise permitted to receive such Confidential Information,
then, any disclosure pursuant thereto shall not breach this Agreement if it
complies with the provisions in the next two sentences. To the extent legally
permissible, such Party and/or such of its Representatives, as the case may be,
shall provide such other Party with prompt written notice of such legal
requirement or compulsion and shall cooperate with such other Party in seeking
a protective order or other appropriate remedy. 
If such protective order or other remedy is not obtained or reasonably
obtainable, or if such other Party waives compliance with the provisions
hereof, then the legally compelled Party or Representative, as the case may be,
(i) may disclose to the person compelling disclosure only that portion of such
Confidential Information that such Party or Representative is advised by
opinion of its legal counsel is legally required to be disclosed and (ii) shall
exercise its reasonable commercial efforts to ensure that such Confidential
Information so disclosed will be accorded confidential treatment.  A Party may disclose Confidential Information
it determines is necessary or appropriate to disclose in any legal proceeding
to enforce its rights against the other Party or defend any claim by the other
Party arising under this Agreement; provided such Party exercises its
reasonable commercial efforts to ensure that such Confidential Information so
disclosed will be accorded confidential treatment. Upon the occurrence of a
Change in Control, without limiting Vital Images’ other obligations herein,
Toshiba shall have the right to request that Vital Images implement, and upon
such request Vital Images shall implement promptly, such additional reasonable
policies and procedures designed to protect Toshiba’s Confidential Information
and any technical information related to 


 


16

















 


Toshiba Foreground Rights
and Toshiba Background Rights from disclosure to a Toshiba Competitor or its
Representatives in a manner reasonably satisfactory to Toshiba.


 


11.                                 Miscellaneous.


 


  a.                                Indemnification of Toshiba.  Subject
to Article 8(e), Vital Images hereby agrees to indemnify, defend and hold
Toshiba and its Affiliates and their respective officers, directors, employees,
agents and representatives (collectively, the “Toshiba Indemnified Parties”
and, individually, a “Toshiba Indemnified Party”) harmless from and
against any and all damages, liabilities, losses, claims, judgments, fines,
penalties, costs and expenses, including reasonable attorneys fees (“Losses”)
sustained or suffered by any such Toshiba Indemnified Party as a result of any
breach of any representation, warranty, covenant or agreement made by Vital
Images in this Agreement.  Vital Images
shall be given written notice of any third party suit, claim or other legal
action for which Vital Images may have indemnification liability hereunder (“Vital
Images Legal Action”) within thirty (30) days of Toshiba’s first knowledge
thereof, provided, that, the failure of Toshiba to notify Vital Images of any
such matter within the thirty (30) day period shall not release Vital Images,
in whole or in part, from its obligations under this Section 11(a), except
to the extent Toshiba’s failure to so notify Vital Images materially prejudices
Vital Images’ ability to or materially increases Vital Images’ costs to defend against such Vital Images Legal
Action.  Vital Images shall have sole and
exclusive control of the defense of any Vital Images Legal Action, including
the choice and direction of any legal counsel. 
Toshiba may not settle or compromise any Vital Images Legal Action
without the written consent of Vital Images unless such settlement or
compromise contains an unconditional release of Vital Images from any
indemnification liability hereunder. 
Toshiba shall provide all reasonably requested assistance to Vital Images,
at Vital Images’ expense.


 


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


 


17

















 


including
the choice and direction of any legal counsel. 
Vital Images may not settle or compromise any Toshiba Legal Action
without the written consent of Toshiba unless such settlement or compromise
contains an unconditional release of Toshiba from any indemnification liability
hereunder.  Vital Images shall provide
all reasonably requested assistance to Toshiba, at Toshiba’s expense.


 


  c.                                No Implied Waivers, Rights Cumulative.  No
failure or delay on the part of either Party in exercising any right, power,
remedy or privilege under this Agreement or provided by statute or at law or in
equity or otherwise, including, without limitation, the right or power to
terminate this Agreement, shall impair, prejudice or constitute a waiver of any
such right, power, remedy or privilege or be construed as a waiver of any
breach of this Agreement or as an acquiescence therein, nor shall any single or
partial exercise of any such right, power remedy or privilege preclude any
other or further exercise thereof or the exercise of any other right, power,
remedy or privilege.


 


  d.                               Relationship of the Parties. 
Nothing contained in this Agreement is intended or is to be construed to
make the Parties partners, principal-agent, or joint venturers.  Except as expressly provided herein, neither
Party hereto shall have any express or implied right or authority to assume or
create any obligations on behalf of or in the name of the other Party or to
bind the other Party to any contract, agreement or undertaking with any third
party.  Each Party is an independent
contractor to the other Party.  Each Party
shall be responsible for its own taxes.


 


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


 


  f.                                  Successors and Assigns; Binding Effect.  The
terms and provisions of this Agreement shall inure to the benefit of, and be
binding upon each Party and their respective successors and permitted
assigns.  The terms of this Agreement are
intended solely for the benefit of the Parties hereto and, except as otherwise
provided in this Section 11(f), are not intended to confer upon any third
party the status of a third party beneficiary. 
The Toshiba Indemnified Parties and the Vital Images Indemnified Parties
are third party beneficiaries of the provisions of Section 11(a) and Section 11(b),
respectively.  Toshiba and Vital Images
may amend, restate, supplement, extend, renew or otherwise modify, or cancel or
terminate, all or any part of this Agreement and either of them may waive any
provision of this Agreement, without the consent of any third party.


 


18

















 


  g.                               Assignment.  Vital Images may assign all
(but not less than all) of its rights, interests and obligations hereunder to a
third party in connection with a Change in Control; provided that such
assignment shall not affect Toshiba’s rights to terminate this Agreement
pursuant to Section 6(c).
nor shall such assignment affect Toshiba’s rights under Section 9.  Except as provided in the foregoing sentence,
neither Party may assign or otherwise transfer any of its respective rights and
interests, nor delegate any of its obligations, hereunder, without the prior
written consent of the other Party in its sole discretion, provided that such
consent shall not be unreasonably withheld if the proposed assignment is an
Affiliate of the assigning Party.  Each
Party may sublicense its licensed rights hereunder to its vendors, suppliers
and development partners in connection with such Party’s authorized activities
in its Field of Use, solely for use in accordance with the purpose of this
Agreement but not for any unrelated use by any such party, subject however, in
the case of Vital Images, to the provisions of Section 2(e).  For clarity, nothing in this Agreement shall
prevent Vital Images (subject to the provisions of Section 2(e)) from
selling Project Software and/or its other products for which the Intellectual Property licensed to Vital Images hereunder is used to its distributors, resellers, customers
and end users, and from licensing end users to use such Project Software and/or its other
products for which the Intellectual
Property licensed to Vital Images hereunder is used, nor shall anything in this Agreement
prevent Toshiba (subject to the provisions of the Reseller Agreement) from
selling Project Software and/or its other products for which the Intellectual Property licensed to Toshiba
hereunder is used to its
distributors, resellers, customers and end users, and from licensing end users
to use such Project Software and/or its other products for which the Intellectual Property licensed to Toshiba
hereunder is used.  Also for clarity, in the event of an
assignment, the licenses in Section 8 shall not include any Intellectual
Property of the acquirer of any Party hereto.


 


  h.                               Amendments.  No amendment, modification,
waiver, termination or discharge of any provision of this Agreement, nor
consent by either Party to any departure therefrom, shall in any event be
effective unless the same shall be in writing specifically identifying this
Agreement and the provision intended to be amended, modified, waived, terminated
or discharged and signed by the Parties, and each amendment, modification,
waiver, termination or discharge shall be effective only in the specific
instance and for the specific purpose for which given.  No provision of this Agreement shall be
varied, contradicted or explained by any other agreement, course of dealing or
performance or any other matter not set forth in an agreement in writing and
signed by the parties.


 


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


 


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


 


19

















 


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


 


  k.                                Entire Agreement.  This
Agreement, together with the applicable provisions of any agreements or other
documents expressly referenced herein, constitutes, on and as of the Effective
Date, the entire agreement of the Parties with respect to the subject matter
hereof, and all prior or contemporaneous understandings or agreements, whether
written or oral, between the Parties with respect to such subject matter are
hereby superseded in their entirety. 
Toshiba and Vital Images hereby acknowledge that neither Party has been
induced to enter into this Agreement by any representations or statements, oral
or written, not expressly contained herein. 
This Agreement shall not be deemed to amend or modify any provisions in
the Reseller Agreement.


 


  l.                                   Section Headings.  The
section headings in this Agreement are for convenience only and in no way
define, limit, extend or interpret the scope of this Agreement or of any
particular section hereof.


 


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


 


  n.                               Compliance
with Laws.  Each party agrees
to comply with the Japanese Foreign Exchange and Foreign Trade Laws, the U.S.
Export Administration Regulations and any other applicable export laws and regulations,
and neither party shall, directly or indirectly, export or re-export any
technical information or data, including products or the derivatives of
products, to any destination or country restricted or prohibited by such laws
and/or regulations, unless properly authorized by the appropriate governmental
authorities.


 


  o.                               Counterpart Originals.  This
Agreement may be signed in counterparts, and each counterpart shall be deemed
to be an original.


 


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


 


20
















 


[Development Agreement Signature Page]


 


IN WITNESS WHEREOF, Toshiba and Vital Images
have caused this Agreement to be executed by their duly authorized
representatives.


 


	
  Vital Images, Inc.

  	
   

  	
  Toshiba Medical Systems Corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/Michael H. Carrel

  	
   

  	
  By:

  	
  /s/Yasuo Nobuta

  
	
  Name and Title: Michael H. Carrel, President

  	
   

  	
  Name & Title: Yasuo Nobuta, General

  
	
  and CEO

  	
   

  	
  Manager of CT Systems

  
					



 


21

















 


EXHIBIT A


 


Toshiba Funding


 


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


 


Unless otherwise stated in a Product Development Plan, the Parties will
agree upon
the total Toshiba Funding required for each Product Development Plan and
Toshiba will pay the amount of such agreed
Toshiba Funding with respect to each Product Development Plan as follows:


 


* * *% Within * * *


* * *% Within * * *


* * *% Within * * *


[Vital Images issues invoice to Toshiba each
time]


 


If the scope of any project changes from the originally-agreed upon
Product Development Plan and additional Vital Images resources are required,
the Parties will negotiate in good faith to agree on (i) an amendment to
such Product Development Plan to reflect such project changes and (ii) an
amendment to this Exhibit A to reflect the amount and timing of payment
for such additional resources.  Neither
Party shall have any obligation under this Agreement in respect of the project
change or additional resources unless and until such amendments are agreed and
executed by the Parties.  Unutilized resources during the Silent Period
will be billed monthly and payable net 30 days from the invoice date.


 


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


 


22

















 


EXHIBIT B


PRODUCT DEVELOPMENT PLAN

VITAL IMAGES, INC. & TOSHIBA MEDICAL SYSTEMS CORPORATION


 


* * *


 


(* * *)


Document Control History


 


	
  Rev

  	
   

  	
  Date

  	
   

  	
  Author(s)

  	
   

  	
  Description of Change

  	
   

  	
  ECO No.

  
	
  A

  	
   

  	
  * * *

  	
   

  	
  * * *

  	
   

  	
  Initial Release

  	
   

  	
   

  



 


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


 


23

















 


1.0 
Project Purpose


 


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


 


2.0 
Goals and Objectives


 


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


 


Goals


Release
* * * by * * *


Provide
* * *Software by *
* *


Release
* * * by * * *


 


3.0  Project Overview & Key Feature
Definition


 


The scope of the * * *will include the software development and testing
of the features described below.  The
detailed feature specifications will be described in the Product Definition
Statement (PDS) and will be delivered and iterated upon during the Requirements
Phase.


 


* * *


 


* * *


 


·                  *
* *
to * * *results (*
* *)
— also * * *as *
* *software
update


·                  Combination of * * * into * * *


·                  Display *
* *
in * * *view


·                  Shortcut for
creating * * * with *
* *


·                  *
* *for
* * *


·                  *
* * in * * *protocol


·                  Apply *
* *during
* * *


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


 


Other Quality and Performance Enhancements


 


·                  *
* *improvements for *
* *


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


 


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


 


24

















 


* * *


 


* * *Phase I


 


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


·                  *
* *
with * * *tools


·                  *
* *of
* * * (*
* *)


·                  *
* *layouts
for * * *using *
* *,
along with * * *


·                  *
* *on
* * *


·                  *
* *,
including * * *


·                  *
* *


 


* * *


 


* * *Phase II


 


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


·                  *
* *


·                  *
* *based
on feedback from users


 


* * *


 


·                  *
* *view
of * * *


·                  General *
* *enhancements


 


4.0 
Project Organization


 


Project Management


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


 


	
  Roles

  	
   

  	
  Company

  	
   

  	
  Team Member

  
	
  Project
  Manager

  	
   

  	
  Vital
  Images

  	
   

  	
  * * *

  
	
  Project
  Manager

  	
   

  	
  Toshiba

  	
   

  	
  * * *

  



 


 


Product Development Team & Responsibilities


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


 


	
  Site

  	
   

  	
  Collaboration
  Activity

  	
   

  	
  Vital
  Contact

  	
   

  	
  Toshiba
  Contact

  	
   

  	
  Collaborator
  Contact

  
	
  * * *

  	
   

  	
  * * *

  	
   

  	
  * * *

  	
   

  	
  * * *

  	
   

  	
  * * *

  



 


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


 


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


 


25

















 


	
  Roles

  	
   

  	
  Company

  	
   

  	
  Team Member

  
	
  * * *

  	
   

  	
  Vital
  Images

  	
   

  	
  * * *

  
	
  * * *

  	
   

  	
  Vital
  Images

  	
   

  	
  * * *

  
	
  * * *

  	
   

  	
  Vital
  Images

  	
   

  	
  * * *

  
	
  * * *

  	
   

  	
  Vital
  Images

  	
   

  	
  * * *

  
	
  * * *

  	
   

  	
  Vital
  Images

  	
   

  	
  * * *

  
	
  * * *

  	
   

  	
  Vital
  Images

  	
   

  	
  * * *

  
	
  * * *

  	
   

  	
  Vital
  Images

  	
   

  	
  * * *

  



 


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


1
* * *


1
* * *


1
* * *


 


5.0 
Project Plan & Schedule


 


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


 


	
  Events

  	
   

  	
  Estimated Date

  
	
  * * *

  	
   

  	
  * * *

  
	
  * * *

  	
   

  	
  * * *

  
	
  * * *

  	
   

  	
  * * *

  
	
  * * *

  	
   

  	
  * * *

  
	
  * * *

  	
   

  	
  * * *

  
	
  * * *

  	
   

  	
  * * *

  
	
  * * *

  	
   

  	
  * * *

  
	
  * * *

  	
   

  	
  * * *

  



 


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


 


	
  Events

  	
   

  	
  Estimated Date

  
	
  * * *

  	
   

  	
  * * *

  
	
  * * *

  	
   

  	
  * * *

  
	
  * * *

  	
   

  	
  * * *

  
	
  * * *

  	
   

  	
  * * *

  
	
  * * *

  	
   

  	
  * * *

  
	
  * * *

  	
   

  	
  * * *

  
	
  * * *

  	
   

  	
  * * *

  



 


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


 


26

















 


	
  * * *

  	
   

  	
  * * *

  
	
  * * *

  	
   

  	
  * * *

  
	
  * * *

  	
   

  	
  * * *

  
	
  * * *

  	
   

  	
  * * *

  
	
  * * *

  	
   

  	
  * * *

  



 


6.0 
Evolution/Iteration of Product Development Plan


At least once per month, the items described in this Product
Development Plan will be reviewed by the Project Managers and will be updated
appropriately.  Any significant changes
will be communicated to both parties and this document will be revised.  In revisions will follow Vital Images Change
Control Process and will require signature by both parties.


 


7.0  Toshiba * * *


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


 


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


 


8.0  Miscellaneous


 


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


 


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


 


27