Document:

Exhibit 10.4
Vital Health Technologies, Inc.
Form 10-KSB
File No. 000-15243

                  COLLATERAL PATENT ASSIGNMENT

THIS COLLATERAL PATENT ASSIGNMENT (this "Assignment"), made as of
the 13th day of August 1998, by and between (Assignor") Vital
Heart Systems, Inc. a Minnesota corporation and Aurora Capital
Management, L.L.C a Minnesota Limited Liability Company
(Assignee).

                           WITNESSETH:

WHEREAS, Assignor and Assignee are parties to a certain Note and
Security Agreement, dated August 13, 1998 (together with any and
all amendments now or hereafter made thereto, hereinafter called
the "Loan Agreement" which provides for (1) Assignee from time to
time to extend Credit to or for the account of Assignor and (2)
the grant by Assignor to Assignee of a security interest in
certain of Assignor's assets, including, without limitation its
U.S. patents; and

WHEREAS. Assignee has required, as a condition to advancing loans
to Assignor under the Loan Agreement that Assignor execute and
deliver to Assignee this Assignment;

NOW THEREFORE, consideration of the premises, set forth herein
and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Assignor agrees as
follows:

     1. Incorporation of Loan Agreement. The Loan Agreement and
the terms and provisions thereof are hereby incorporated herein
'in their entirety by this reference. Terms used herein that are
not defined in this Agreement shall have the meanings ascribed to
them in the Loan Agreement.

     2. Collateral Assignment of Patents. To secure the complete
and timely satisfaction of all of the Obligations (as defined in
the Loan Agreement and hereinafter called the "Obligations"),
Assignor hereby grants conveys and assigns to Assignee, as and by
way of a first mortgage and security interest having priority
over all other security interests, with power of sale, to the
extent permitted by law, upon the occurrence and during the
continuation of an Event of Default (as defined in the Loan
Agreement and hereinafter called an "Event of Default") all of
Assignor's right, title, and interest in and to all of its now
owned or existing and filed and hereafter acquired or arising and
filed:

     1.   Patents and patent applications (hereinafter called the
          "Patents") (including. without limitation. the inventions and
          improvements described and claims therein) listed on Schedule A
          attached hereto, (hereinafter called Patents);

     2.   The reissues, divisions, continuations, renewals,
          extensions, continuations-in-part and improvements thereof;

     3.   All income, royalties, damages, and payments now and
          hereafter due and/or payable under and with respect thereto,
          including, (without limitation) damages and payments for past or
          future infringements thereof;

     4.   The right to sue and recover for past, present, and future
          infringements thereof;

     5.   All rights corresponding thereto and throughout the world; and

     6.   All other proceeds and products of the foregoing, including
          (without limitation) any rights pursuant to its agreements with
          any other party relating thereto.

                     				      E-32
<PAGE>

The items referred to in items 1 through 6 are hereinafter called
the "Patent Rights.''

     3. Restrictions on Future Agreements. Assignor agrees that,
until the Obligations are satisfied in full and the Loan
Agreement is terminated, and except as may otherwise be provided
in the Loan Agreement, Assignor shall not without Assignee's
prior written consent:

     1.   enter into any agreement (for example, a license
          agreement) that is inconsistent with Assignor's
          obligations under this Assignment; or
     2.   take any action or permit any action to be taken by
          others subject to its control,  including licensees, or
          fail to take any action (excluding nonpayment of U.S.
          maintenance fees on Patents which are not necessary or
          useful in the operation of Assignor's business or
          operations) if doing so or not doing so would impair
          the validity or enforcement of the Patent Rights.

     4. Covenants and Warranties. Assignor represents, warrants,
and covenants that:

     1.   The Patents are subsisting, have not been adjudged
          invalid or unenforceable in whole or in part, and are
          not currently being challenged in any way;

     2.   None of the Patents has lapsed or expired;

     3.   No claim has been made that the use of any of the
          Patents in the conduct of Assignor's business
          constitutes an infringement of any senior or dominate
          U.S. patent or other intellectual property right;

     4.   Assignor owns the entire right, title, and interest in
          and to each of the Patents free and clear of any liens
          and encumbrances of every kind and nature, except for
          the rights granted by Assignor pursuant to this
          Agreement; and

     5.   Assignor shall continue to use, until the obligations
          shall have been satisfied in full and the Loan
          Agreement shall have been terminated, proper statutory
          notice in connection with its exercise of the Patents.

     5. New Patents and Licenses. If before the Obligations are
satisfied in full, Assignor obtains rights to any new patentable
inventions, Patents or patent applications, or any reissue,
division, continuation, renewal, extension, or continuation-in-
part of any Patent or any improvement on any Patent, the
provisions of Section 2 above shall automatically apply thereto
and Assignor shall give to Assignee written notice thereof.
Assignor hereby authorizes Assignee to modify this Assignment by
amending Schedule A to include such rights.

     6. Royalties; Terms. Assignor hereby agrees that the use by
Assignee of the Patent Rights shall be worldwide and without any
liability for royalties or other related charges from Assignee to
Assignor. The term of the assignments granted herein shall extend
until the earlier of (1) the expiration of all Patent Rights or
(2) payment in full of the Obligations and termination of the
Loan Agreement.

     7. Grant of License to Assignor. Assignee hereby grants to
Assignor the royalty-free, exclusive, nontransferable right and
license to make, have made, use, and sell the inventions
disclosed and claimed in the Patents for Assignor's own benefit
and account and for none other. Such right and license shall be
exercisable by Assignor only until the occurrence of an Event of
Default. Except as otherwise permitted by Loan Agreement,
Assignor agrees not to sell or assign its interest in, or grant
any sublicense under, the right and license granted to Assignor
in this Section without the prior written consent of Assignee.

     8. Assignee's Right to Inspect.   Subject to existing
agreements with respect to the confidentiality of certain aspects
of the Patent Rights, Assignee shall have the right at any
reasonable time and from time to time, to inspect Assignor's
premises and to examine Assignor's books, records, and
operations.

     9. Termination of Assignee's Security Interest. This
Assignment is made for collateral purposes only. Upon payment in
full of the Obligations and termination of the Loan Agreement,
all remaining right title, and interest in and to the Patent

                  				      E-33
<PAGE>

Rights shall automatically revert to Assignor.  In such event,
Assignee shall execute and deliver to Assignor all termination
statements and other instruments as may be necessary or proper to
terminate Assignee's security interest in and to revest In
Assignor all right, title, and interest in and to the Patent
Rights, subject to any prior disposition thereof that may have
been made by Assignee pursuant hereto or pursuant to the Loan
Agreement

     10. Duties of Assignor. Until the Obligations are satisfied
in full and the Loan Agreement is terminated, Assignor shall:

     1.   Prosecute diligently any patent application included in
          the Patent Rights pending as of the date hereof or
          hereafter filed;

     2.   Make application on unpatented but patentable
          inventions, as appropriate giving due consideration to
          value, importance, cost and opinion of counsel as to
          patentability; and

     3.   Preserve, maintain, and enforce against infringement
          all Patent Rights (other than nonpayment of maintenance
          fees on Patents which are not necessary or useful in
          the conduct of Assignor's business or operations).

Any expenses incurred in connection with such applications shall
be borne by Assignor. Assignor shall not abandon any pending
Patent application or patent without the written consent of
Assignee which, consent shall not be unreasonably withheld.

     11. Assignee's Right to Sue. After the occurrence of an
Event of Default and so long as such Event of Default has not
been waived, and after the provision by Assignee of written
notice to Assignor of Assignee's intention to enforce its rights
and claims in the Patent Rights, Assignee shall have the right,
but shall in no way be obligated, to bring suit and take other
action in its own name to enforce or otherwise protect, preserve,
or realize upon the Patent Rights. If Assignee shall commence any
such suit or take any such action, Assignor shall, at the request
of Assignee, do any and all lawful acts and execute any and all
proper documents required by Assignee in aid of such action.
Assignor shall, upon demand, reimburse and indemnify Assignee for
all costs and expenses incurred by Assignee in the exercise of
its rights under this Section 11.

     12. Waivers. No course of dealing between Assignor and
Assignee, nor any failure to exercise or delay in exercising, on
the part of the Assignee, any right, power, or privilege
hereunder or under the Loan Agreement shall operate as a waiver
thereof. No single or partial exercise of any right, power, or
privilege hereunder or under the Loan Agreement shall preclude
any other or further exercise thereof or the exercise of any
other right, power, or privilege.

     13. Severability.  The provisions of this Assignment are
severable and if any clause or provision shall be held invalid or
unenforceable in whole or in part in any jurisdiction then such
invalidity or unenforceability shall affect only such clause or
provision, or part thereof, in such Jurisdiction, and shall not
in any manner affect such clause or provision in any other
Jurisdiction, or any other clause or provision of this
Assignment.

     14. Modification.  This Assignment cannot be altered,
amended, or modified in any way, except as specifically provided
with respect to the additions referred to in Section 5 hereof or
by a writing signed by the parties hereto.

     15. Cumulative Remedies. All of Assignments rights and
remedies with respect to the Patent Rights, whether established
hereby or by the Loan Agreement, or by any other agreements or by
law, shall be cumulative and may be exercised individually or
concurrently. Assignee shall have, in addition to all other
rights and remedies given it by the terms of this Assignment, all
rights and remedies allowed by law and the rights and remedies of
a secured party under the Uniform Commercial Code as enacted in
any jurisdiction in which the Patent Rights may be enforced.

     16. Power of Attorney. Assignor hereby authorizes Assignee to:

                      				      E-34
<PAGE>

     1.   Make, constitute, and appoint any representative of
          Assignee as Assignee may select, in its sole
          discretion, as Assignor's true and lawful attorney-in-
          fact, with power to endorse Assignor's name on all
          applications. documents, papers, and instruments
          necessary or desirable for Assignee to give effect to
          the provisions of this Assignment and the intent of the
          parties hereto;

     2.   Take any other actions with respect to the Patent
          Rights consistent with this Assignment, as Assignee
          deems in the best interest of Assignee;

     3.   Following the occurrence of an Event of Default, grant
          or issue any exclusive or nonexclusive license under
          the Patent Rights to anyone; or

     4.   Following the occurrence of an Event of Default,
          subject to the terms of any existing license agreement,
          assign, pledge, convey or otherwise transfer title in
          or dispose of the Patent Rights to anyone.

Assignee hereby ratifies all that such attorney shall lawfully do
or cause to be done by virtue hereof. This power of attorney
shall be irrevocable until the Obligations are satisfied in full
and the Loan Agreement is terminated.

     17. Effect on, Loan Agreement Assignor acknowledges and
agrees that this Assessment is not intended to limit or restrict
in any way the rights and remedies of Assignee under the Loan
Agreement but rather is intended to facilitate the exercise of
such rights and remedies.

     18. Binding Effect; Benefits. This Assignment shall be
binding upon Assignor and its respective successors and assigns
and shall inure to the benefit of Assignee, its nominees,
successors, and assigns.

     19. Governing Law. This assignment shall be deemed to have
been executed and delivered in Minnesota, and shall be Governed
by and construed in accordance with the internal laws (as opposed
to conflicts of law provisions) of Minnesota.

     WITNESS the due execution hereof as of the date first above
written.

Vital Heart Systems. Inc.
By:/s/John Mondati
      John Mondati
      Director

Accepted:

Aurora Capital Management, L.L.C.
By : /s/William Kieger

                        				      E-35
<PAGE>Exhibit 10.5
Vital Health Technologies, Inc.
Form 10-KSB
File No. 000-15243

     VITAL HEART SYSTEM, INC. CONVERTIBLE SUBORDINATED NOTE

VITAL HEART SYSTEM, INC., a Minnesota corporation ("VHS"), for
value received hereby promises to pay to Vital Health
Technologies, LLC, a Minnesota Limited Liability Company "VHT" or
"Holder"), or its assigns, the sum of up to Five Hundred Thousand
Dollars ($500,000) or such lesser principal amount as is advanced
by VHT under the terms and conditions of this note, together with
any unpaid interest thereon, as set forth below, shall be due and
payable on the earlier of (i) August 31, 1999 or (ii) when
declared due and payable by the Holder upon the occurrence of an
Event of Default (as defined below).  Payment for all amounts due
hereunder shall be made by mail to the registered address of the
Holder or such other address as Holder may notify VHS in writing.
This Note is issued in connection the transactions described in
the VHT Private Placement Memorandum document issued by VHT dated
September 1, 1998.  The Holder of this Note is entitled to
certain rights and privileges set forth in the Private Placement
Memorandum and as set forth herein.

The following is a statement of the rights of the Holder of this
Note and the conditions to which this Note is subject, and to
which the Holder and VHS agree:

1.   Definitions.  As used in this Note, the following terms
unless the context otherwise requires, have the following
meanings:

*    VHS includes any corporation or other entity, which shall
succeed to or assume the obligation of VHS under this Note.

*    Holder, when the context refers to a holder of this Note,
shall mean any person who shall at the time be the registered
holder of this Note.  The initial Holder is VHT

*    Subordination or derivatives thereof, when used herein means
that this Note and any security interest is junior to the
interest of Aurora Capital Management, LLC which is referred to
herein as Senior Indebtedness.

2.   Loans and Advances.  Holder, at its sole discretion may loan
funds, up to the full amount of $500,000.  Such amount, if any,
may be made in increments.  All such loans shall be referred to
herein as advances.  VHS waives any claim that Holder has
committed to make any advances, it being understood that Holder
has discretion to determine how much if any, funds will be
advanced to VHS.  Any advances under this Note shall bear
interest and maybe due and payable on August 31, 1999, if not
sooner accelerated as provided herein.  Advances under this Note
shall bear interest at the rate of ten percent per annum (10%)
(the "Initial Interest Rate") on the principal of any advances
made under this Note beginning on the date of the first advance
and ending on the date that the principal amount of this Note
becomes due and payable.  In the event that the principal amount
of this note is not paid in full when such amount becomes due and
payable, interest shall continue to accrue at the Initial
Interest Rate plus three percent (3%) on the balance of any
unpaid principal until such balance is paid.  It is agreed that
time is of the essence of this contract.  Upon default in the
payment when due and payable of any principal or interest
hereunder, the holder hereof may, without notice to the
undersigned, declare the Principal Balance and interest accrued
thereon immediately due and payable.  In the event this Note is
not paid when due, the undersigned shall pay all costs of
collecting this Note, including reasonable attorneys fees.
Presentment or other demand for payment notice of dishonor and
protest are expressly waived.  This Note is secured by the all of
the assets of VHS To secure the payment and performance of all of
the obligations of VHS when due, VHS hereby grants VHT a security
interest in all of VHS's assets, including without limitation,
all interest in the following, whether now owned or hereinafter
acquired, and wherever located (collectively the "Collateral"):
all Inventory, Equipment, Accounts Receivable, contracts and
contract rights and general intangibles, including designs,
inventions, licenses, patents, trademarks, trade secrets,
copyrights, and trade dress), and all proceeds thereof, all
product of the foregoing, and all books, records (including
patient histories) and records of VHS.  VHS agrees to execute a
Security Agreement, Patient and copyright the assignments, and
Financing statement(s), and similar documents to effect the

                  				      E-36
<PAGE>

perfection of security interests in the form and substance
acceptable to VHT As used herein, VHS assets shall be construed
as having the broadest meaning possible.

3.   Events of Default.  If any of the events specified in this
Section 3 shall occur (herein individually referred to as an
"Event of Default"), the Holder of the Note may, so long as such
condition exists, declare the entire principal and unpaid accrued
interest hereon immediately due and payable, by notice in writing
to VHS.

*    Default in the payment of the principal or unpaid accrued
interest on this Note when due and payable if such default is not
cured by VHS within five (5) days after the Holder has given VHS
written notice of such default; or

*    The institution by VHS of proceedings to be adjudicated as
bankrupt or insolvent, or the consent by VHS to institution of
bankruptcy or insolvency proceedings against it or the filing by
VHS of a petition or answer or consent seeking reorganization or
release under the federal Bankruptcy Act, or any applicable
federal or state law, or the consent by it to the filing of any
such petition or the appointment of a receiver, liquidation,
assignee, trustee or similar official of VHS, or any substantial
part of its property, or the making by VHS of an assignment for
the benefit of creditors, or taking of corporate action by VHS in
furtherance of any such action;

*    Any declared default of VHS under any Senior Indebtedness
(as defined below) that gives the holder thereof the right to
accelerate such Senior Indebtedness, and such Senior Indebtedness
is in fact accelerated by the holder;

*    VHS falls in good faith on a best efforts basis to
diligently proceed with the business plan described in the
Private Placement Memorandum, dated September 3, 1998 in the sole
reasonable determination of the Holder;

*    VHS falls or is unable to perform the obligations herein,
and in particular the obligations set forth in Section 7.4
hereof.

4.   Subordination.  The indebtedness evidenced by this Note is
hereby expressly subordinated, to the extent and in the manner
hereinafter set forth, in right of payment to the prior payment
in full of all of
VHS's Senior Indebtedness, as hereinafter defined.

4.1  Senior Indebtedness.  As used in this Note, the terms
"Senior Indebtedness" shall mean the principal of and unpaid
accrued interest on all (i) all indebtedness of VHS to Aurora
Capital Management LLC, and any such indebtedness or any
debentures, notes, leases or other evidence of indebtedness
issued in exchange for such Senior Indebtedness, or any
indebtedness arising from the satisfaction of such Senior
Indebtedness by a guarantor or otherwise due under any contract.

4.2  Default on Senior Indebtedness.  If there should occur any
receivership, insolvency, assignment for the benefit of
creditors, bankruptcy, reorganization or arrangements with
creditors (whether or not pursuant to bankruptcy or other
insolvency laws), sale of all or substantially all of the assets,
dissolution, liquidation, or any other marshalling of the assets
and liabilities of VHS, or if this Note shall be declared due and
payable upon the occurrence of an Event of Default with respect
to any Senior Indebtedness, then (i) no amount shall be paid by
VHS in respect of the principal or interest on this Note at the
time outstanding, unless and until the principal of an the
interest on the Senior Indebtedness then outstanding shall be
paid in full and (ii) no claim or proof of claim shall be filed
with VHS by or on behalf of the Holder of this Note that shall
assert any right to receive any payments in respect of the
principal of and interest on this Note, except subject to the
payment in full of the principal of and in trust on all of the
Senior Indebtedness then outstanding.  If there occurs an event
of default that has been declared in writing with respect to any
Senior Indebtedness, or in the instrument under which any Senior
Indebtedness is outstanding, permitting the holder of such Senior
Indebtedness to accelerate the maturity thereof, then, unless and
until such event of default shall have been cured or waived or
shall have ceased to exist, or all Senior Indebtedness shall have
been paid in full, no payment shall be made in respect of the
principal of or interest on this Note, unless within ninety (90)
days after the happening of such Event of Default, the maturity
of such Senior Indebtedness shall not have been accelerated.

                 				      E-37
<PAGE>

4.3. Effect of Subordination.  Subject to the rights, if any, of
the holders of Senior Indebtedness under this Section 4 to
receive cash, securities or other properties otherwise payable or
deliverable to the Holder of this Note, nothing contained in this
Section 4 shall impair, as between VHS and the Holder, the
obligation of VHS, subject to the terms and conditions hereof, to
pay the Holder the principal hereof and interest hereon as and
when the same shall become due and payable, or shall prevent the
Holder of this Note, upon default hereunder, from exercising all
rights, powers and remedies otherwise provided herein or by
applicable law.

4.4.      Subrogation.  Subject to the payment in full of all
Senior Indebtedness and until this Note shall be paid in full,
the Holder shall be subrogated to the rights of the Holders of
Senior Indebtedness, (to the extent of payments or distributions
previously made to such holders of Senior Indebtedness pursuant
to the provisions of Section 4.2 above) to receive payments and
distributions of assets of VHS applicable to the Senior
Indebtedness.  No such payments or distributions applicable to
the Senior Indebtedness shall, as between the Company and its
creditors, other than holders of Senior Indebtedness and the
Holder, be deemed to be a payment by VHS to or on account of this
Note; and for purposes of such subrogation, no payments or
distributions to the Holders of Senior Indebtedness to which the
Holder would be entitled except for the provisions of this
Section 4 shall, as between VHS and its creditors, other than the
holders of Senior Indebtedness and the Holder, be deemed' to be a
payment by VHS to or on account of the Senior Indebtedness.

4.5  Undertaking.  By acceptance of this Note, the Holder agrees
to execute and deliver such documents as may be reasonably
requested from time to time by VHS or the lender of any Senior
Indebtedness in order to implement the foregoing provisions of
this Section 4.

5.   Prepayment.    Prior to August 31, 1999, this Note may not
be prepaid except with the express written consent of the Holder
of the Note.  Subject to the preceding sentence, upon twenty (20)
days prior written notice to the Holder, VHS may at any time
prepay in whole or in part the principal sum plus accrued
interest to date of payment of this Note.

6.   Conversion.

6.1  Voluntary Conversion.  Any Holder of this Note has the right
(but not the obligation) at the Holder's sole option, at any time
prior to payment in full of the principal balance of this Note,
to convert this Note in whole or in part, and accrued interest
thereon, in accordance with the provisions of Section 6.3 hereof,
into fully paid and nonassessable shares of common stock of VHS.
The number of shares of common stock into which this Note may be
converted ("Conversion Shares") shall be determined by dividing
the aggregate principal amount together with all accrued interest
to the date of conversion by the Conversion Price (as defined
below) in effect at the time of such conversion.  The Conversion
Price shall be equal to the thirty (30) day average trading price
of Vital Heart Systems, Inc. common stock, immediately prior to
the effective date of the merger, or $.50/share should the thirty
(30) day average exceed $.50/share based on the post
reorganization of VHS as set forth in the Private Placement
Memorandum dated September 1, 1998.

6.2 Automatic Conversion.  The entire principal amount of this
Note together with accrued interest
shall be automatically converted into shares of common stock at
the Conversion Price upon completion and
satisfaction of all of the following events:

*    Successful completion of a 1 for 60 reverse split of VHS
     common stock;

*    Settlement of all outstanding debts of VHS (excluding any
debt, which in the opinion of VHT counsel is unenforceable by
virtue of applicable statute of limitation and any debt which has
been settled by conversion to common stock of VHS as set forth in
the Private Placement Memorandum of VHT dated September 1, 1998;

*    Completion and filing of all past corporate tax returns and
Securities Exchange or similar reports required by applicable
law; and

*    The establishment of a transfer agent and trading system for
VHS common stock.

                   				      E-38
<PAGE>

In the event that any one or more of the above benchmark events
are not achieved to the sole satisfaction of the Holder, or are
not waived in writing by the Holder, the conversion shall not
automatically take place and this Section 6.2 shall be of no
further force and effect.

6.3  Conversion Procedure

6.3.1     Notice of Conversion pursuant to Section 6.1.  Before
the Holder shall be entitled to convert this Note into shares of
common stock of VHS, the Holder shall surrender this Note at the
office of VHS and shall give written notice to VHS at VHS'
principal office, of the election to convert the same pursuant to
this Section 6, and shall state therein the name or names in
which the certificate or certificates for shares of common stock
are to be issued.  VHS shall, as soon as practicable thereafter,
issue and deliver at such office to the Holder of this Note a
certificate or certificates for the number of shares of common
stock to which the holder of this Note shall be entitled as
aforesaid.  Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of
surrender of this Note, and the person or persons entitled to
receive the shares of common stock issuable upon such conversion
shall be treated for all purposes as the record holder or holders
of such shares of common stock as of such date.

6.3.2     Notice of Conversion Pursuant to Section 6.2.  If this
Note is automatically converted, written notice shall be
delivered to the Holder of this Note at the address last shown on
the records of VHS for the Holder or given by the Holder to VHS
for the purpose of notice or, if no address appears or is given,
at the place where the principal executive office of VHS is
located, notifying the Holder of the conversion to be effected,
specifying the amount of the Note to be converted, the amount of
accrued interest to be converted, the date on which such
conversion will occur and calling upon such Holder to surrender
to VHS, in the manner and at the place designated, the Note.

6.4  Delivery of Stock Certificates.  As promptly as practicable
after the conversion of this Note, VHS shall at its expense issue
and deliver to the Holder of this Note a certificate or
certificates for the full number of shares of common stock
issuable upon such conversion.

6.5.      Mechanics and Effect of Conversion.  No fractional
shares of common stock shall be issued upon conversion of this
Note.  In lieu of VHS issuing any fractional shares to the Holder
upon conversion of this Note, VHS shall pay to the Holder the
amount of outstanding principal and accrued interest, which is
not so converted such payment to be in the form described below.
Upon conversion of this Note pursuant to Section 6.1 above, the
Holder shall surrender this Note, duly endorsed at the principal
office of VHS.  At VHS's expense, VHS shall, as soon as
practicable thereafter, issue and deliver to such Holder at such
principal office a certificate or certificates for the number of
such shares of common stock to which the Holder shall be entitled
upon such conversion (bearing legends as are required by
applicable state and federal securities laws in the reasonable
opinion of counsel to VHS after conferring with counsel for
Holder) together with any other securities and property to which
the Holder is entitled upon such conversion under the terms of
this Note, including a check payable to the Holder for any cash
amounts payable as described above.  In the event of any
conversion of this Note pursuant to Section 6.1 above, such
conversion shall be deemed to have been made immediately prior to
the closing of the issuance of the common stock and on and after
such date, the Holder of this Note entitled to receive the shares
of common stock issuable upon such conversion shall be treated
for all purposes as the ten (10) days after the date of such
conversion, any interest accrued and unpaid or unconverted to and
including the date of such conversion.

7.   Conversion Price Adjustments.

7.1  Adjustments For Stock Splits and Subdivisions.  In the event
VHS should at any time or from time to time after the date of
issuance hereof fix a record date for the effectuation of a split
or subdivision of the outstanding shares of common stock or the
determination of holders of common stock to receive a dividend or
other distribution in additional shares of common stock or other
securities or rights convertible into, or entitling the holder
thereof to receive directly or indirectly, additional shares of
common stock (hereinafter called the Common Stock Equivalents)
without payment of any consideration by such holder for the
additional shares of common stock or the Common Stock Equivalents
(including the additional shares of common stock issuable upon
conversion or exercise thereof), then, as of such record date (or
the date of such dividend distribution, split or subdivision if
no record date is fixed) the Conversion Price of this Note shall
be appropriately adjusted so that the number of shares of common

                   				      E-39
<PAGE>

stock issuable on conversion of this Note shall be in proportion
to such changes in outstanding shares, it being the intent that
such distribution be transparent and equitably adjusted so as to
not affect or dilute Holder's interests.

7.2  Adjustments for Reverse Stock Splits.  If the number of
shares of common stock outstanding at any time after the date
hereof is decreased by a combination of the outstanding shares of
common stock then, following the record date of such combination,
the Conversion Price for this Note shall be appropriately
increased so that the number of shares of common stock issuable
on conversion hereof shall be decreased in proportion to such
decrease in outstanding shares, it being the intent that such
distribution be transparent and equitably adjusted so as to not
affect or dilute Holder's interests.

7.3  Notices of Record Date.  In the event of:

7.3.1     Any taking by VHS of a record of the holders of any
class of securities of VHS for the purpose of determining the
holders thereof who are entitled to receive any dividend (other
than a cash dividend payable out of earned surplus at the same
rate as that of the last such cash dividend theretofore paid) or
other distribution, or any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other
securities, or to receive any other right; or

7.3.2     Any capital reorganization of VHS, any reclassification
or recapitalization of the capital stock of
VHS or any transfer of all of the assets of VHS to any other
person or any consolidation or merger involving VHS; or

7.3.3     Any voluntary or involuntary dissolution, liquidation
or winding-up of VHS, VHS will mail, courier or personally
deliver to the Holder of this Note at least ten (10) days prior
to the earliest date specified therein, a notice specifying:

     7.3.3.1   The date on which any such record is to be taken
     for the purpose of such dividend, distribution or right, and
     the amount and character of such dividend, distribution or
     right; and

     7.3.3.2   The date on which any such reorganization,
     reclassification, transfer, consolidation, merger,
     dissolution, liquidation or winding-up is expected to become
     effective and the record date for determining stockholders
     entitled to vote thereon.

7.4  Reservation Of Stock Issuable Upon Conversion.  VHS shall at
all times reserve and keep available out of its authorized but
unissued shares of common stock for the purpose of effecting the
conversion of the Note such number of its shares of common stock
as shall from time to time be sufficient to effect conversion of
the Note; and if at any time the number of authorized but
unissued shares of common stock shall not be sufficient to effect
the conversion of the entire outstanding principal amount of this
Note and accrued interest, in addition to such other remedies as
shall be available to the Holder of this Note, or pursuant to
applicable law, all of which shall be cumulative, VHS will use
its best efforts to take such corporate action as may, in the
reasonable opinion of VHS counsel, be necessary to increase its
authorized but unissued shares of common stock to such number of
shares as shall be sufficient for such purposes.

8.   Representations and Warranties of VHS.

8.1  Organization.  VHS is a corporation validly existing and in
good standing under the laws of the State of Minnesota with the
corporate power and authority to conduct its business and to own
and lease its properties.

8.2  Power and Authority.  VHS has the power and authority to
execute, deliver, and perform this Agreement and the other
agreements and instruments to be executed and delivered by it in
connection with the transactions contemplated hereby and thereby,
has taken all necessary corporate action to authorize the
execution and delivery of this Agreement and such other
agreements and instruments and the consummation of the
transactions contemplated hereby and thereby.  This Agreement is,
and the other agreements and instruments and instruments to be
executed and delivered by VHS in connection with the transactions
contemplated hereby shall be, the legal, valid, and binding
obligations of VHS, enforceable in accordance with their terms.

                   				      E-40
<PAGE>

8.3  No Conflict.  Neither the execution and delivery of this
Agreement and the other agreements and instruments to be executed
and delivered in connection with the transactions contemplated
hereby or thereby, nor the consummation of the transactions
contemplated hereby or thereby, will violate or conflict with (1)
any federal, state, or local law, regulation, ordinance, zoning
requirement, governmental restriction, order, judgment, or decree
applicable to VHS, (2) any provision of any charter, bylaw or
other governing or organizational instrument of VHS, or (3) any
mortgage indenture, license, instrument, trust, contract,
agreement, or other commitment or arrangement to which VHS is a
party or by which VHS is bound.

8.4  Right and Title to Assets.  VHS has validly and effectively
obtained the right, and or title and license to use, copy,
modify, and distribute the assets of VHS.  The assets of VHS
contain no other programming or materials in which any third
party may claim superior, joint, or common ownership, including
any right or license.  The assets of VHS do not contain
derivative works of any programming or materials not owned in
their entirety by VHS.  No claims have been asserted by any
person or entity to the use of the assets of VHS, and VHS does
not know of any valid basis for any such claim.  The use of the
assets of VHS, such as patents and trademarks, by the VHS does
not infringe on the rights of the person.

8.5  Undisclosed Liabilities.  There are no liabilities or
obligations, secured or unsecured (whether absolute, accrued,
contingent, or otherwise, and whether due or to become due),
except as has been disclosed by VHS.

8.6  Legal Actions.  No action, suit, proceeding, inquiry,
hearing, arbitration, administrative proceeding, or investigation
(collectively, "Litigation") is pending, or, to VHS's best
knowledge, threatened against VHS, its present or former
directors, officers, or employees, affecting, involving, or
relating to the assets of VHS.

8.6  Compliance With Laws.  There is no outstanding or, to VHS's
best knowledge, threatened order, writ, injunction, or decree of
any court, governmental agency, or arbitration tribunal against
VHS affecting, involving, or relating to the business or the
assets of VHS.  VHS is not in violation of any applicable
federal, state, or local law, regulation, ordinance, zoning
requirement, governmental restriction, order, judgment, or decree
affecting, involving or relating to the business or the assets of
VHS except for noncompliance with tax laws and securities
disclosure laws.

8.7  Related-Party Transactions.  VHS is not a party to any
contract, agreement, license, lease, or arrangement with, or any
other commitment to, directly or indirectly: (1) any director;
(2) any corporation, trust, or other entity in which any such
director has a material equity or participating interest; or (3)
or any partnership in which any such director has a partnership
or participating interest, in each case, relating to or involving
the business and the assets of VHS, except, for relationships
with William Kieger, Aurora Capital Management LLC and Vital
Heath Technologies, LLC.  Each such contract, agreement, license,
lease, arrangement and commitment was entered into by VHS in the
ordinary course of business upon terms that are fair and
reasonable to VHS without regard to the status and relationship
of such other parties, and VHS waives any claim to the contrary.

8.8  Disclosure.  No representation, warranty, or statement made
by VHS in this Agreement or in any document or certificate
furnished or to be furnished to Holder pursuant to this Agreement
contains or will contain any untrue statement or omits or will
omit to state any fact necessary to make the statements contained
herein or therein not misleading.  VHS has disclosed to Holder
all facts known or reasonably available to VHS that are material
to the financial condition, operation, or prospects of the
business and the assets of VHS.

8.9  Truth at Closing.  All of the representations, warranties,
and agreements of VHS contained in this Section 8 shall be true
and correct and in full force and effect on and as of the
Effective Date, and on the date of any advance under this
Agreement.

9.   Representations and Warranties of the Holder.

9.1  Organization.  Holder is a limited liability company validly
existing and in good standing under the laws of the State of
Minnesota with the power and authority to conduct its business
and to own and lease its properties and assets.  Holder is duly
qualified or licensed to do business and is in good standing as a

                  				      E-41
<PAGE>

foreign corporation in each state in which the failure to be so
qualified or licensed would have a material adverse effect on its
financial condition or operations.

9.2  Power and Authority.  Holder has the power and authority to
execute, deliver, and perform this Agreement and the other
agreements and instruments to be executed and delivered by it in
connection with the transactions contemplated hereby and thereby,
and Holder has taken all necessary action to authorize the
execution and delivery of this Agreement and such other
agreements and instruments and the consummation of the
transactions contemplated hereby and thereby.  This Agreement is,
and, when such other agreements and instruments are executed and
delivered, the other agreements and instruments to be executed
and delivered by Buyer in connection with the transactions
contemplated hereby and thereby shall be, the legal, valid, and
binding obligation of Buyer, enforceable in accordance with their
terms.

9.3  No Conflict.  Neither the execution and delivery by Holder
of this Agreement and of the other agreements and instruments to
be executed and delivered by Holder in connection with the
transactions contemplated hereby or thereby, nor the consummation
by Holder of the transactions contemplated hereby or thereby will
violate or conflict with (1) any federal, state, or local law,
regulation, ordinance, governmental restriction, order, judgment,
or decree applicable to Holder, or (2) any provision of any
charter, bylaw, or other governing or organizational instrument
of Holder.

10.       Assignment Subject to the restrictions on transfer
described in Section 12 below, the rights and obligations of VHS
and the Holder of this Note shall be binding upon and benefit the
successors, assigns, heirs, administrators and transferees of the
parties.

11.  Waiver and Amendment.  Any provision of this Note may be
amended, waived or modified upon the written consent of VHS and
the Holder of this Note.  VHS waives presentment, notice of
presentment.

12.       Transfer of this Note or Securities Issuable on
Conversion Hereof.  With respect to any offer, sale or other
disposition of this Note or securities into which this Note may
be converted, the Holder will give written notice to VHS prior
thereto, describing briefly the manner thereof, together with a
written opinion of Holder's counsel, to the effect that such
offer, sale or other distribution may be effected without
registration or qualification (under any applicable federal or
state law then in effect).  Promptly upon receiving such written
notice and reasonably satisfactory opinion, if so requested, VHS
as promptly as practicable, shall notify such Holder that such
Holder may sell or otherwise dispose of this Note or such
securities, all in accordance with the terms of the notice
delivered to VHS.  If a determination has been made pursuant to
this Section 12 that the opinion of counsel for the Holder is not
reasonably satisfactory to VHS, VHS shall so notify the Holder
promptly after such determination has been made.  The Note thus
transferred and the certificate representing the securities thus
transferred shall bear a legend as to the applicable restrictions
on transferability in order to ensure compliance with the Act,
unless in the opinion of counsel for VHS such legend is not
required in order to ensure compliance with the Act.  VHS may
issue stop transfer instructions to its transfer agent in
connection with such restrictions.

13.  Treatment of Note.  To the extent permitted by generally
accepted accounting principles, VHS will treat, account and
report the Note as debt and not equity for accounting purposes
and with respect to any returns filed with federal, state or
local tax authorities.

14.       Notices.  Any notice, request or other communication
required or permitted hereunder shall be in writing and shall be
deemed to have been duly given if personally delivered, faxed
with confirming copy by U.S. mail, or if delivered by courier at
the respective addresses of the parties as set forth herein.  Any
party hereto may be by notice so given change its address for
future notice hereunder.  Notice shall conclusively be deemed to
have been given when personally delivered or when deposited or
couriered as set forth hereinabove and shall be deemed to have
been received when delivered.

15.       No Stockholder Rights.  Nothing contained in this Note
shall be construed as conferring upon the Holder or any other
person the right to vote or to consent to or to receive notice as
a stockholder in respect of meetings of stockholders for the
election of directors of VHS or any other matters or any rights
whatsoever as a stockholder of VHS, except VHS shall obtain the
consent of VHT with respect to the following transactions:

                				      E-42
<PAGE>

15.1 Any reorganization, reclassification, transfer, acquisition,
consolidation, merger, dissolution, liquidation or winding-up; or

15.2      Any declaration of any distribution, dividend or other
disposition of any material assets of VHS; or

15.3      Any other event or transaction, which, in the
reasonable opinion of Holder would have a material and adverse
effect on the business of assets of VHS.

16.  Governing Law.  This agreement and Note shall be exclusively
governed by applicable Federal law and the laws of the State of
Minnesota, excluding that body of laws relating to conflict of
laws.  Any action on this agreement and Note shall be exclusively
brought in the courts sitting in Minnesota.  Any dispute related
to this Agreement shall be exclusively venued in the Ramsey
County Minnesota, and the undersigned hereby waives any right to
contest the same, and agrees that said venue is an appropriate
and convenient forum for the resolution of any action on this
Note.

17.       Heading; References.  All headings used herein are used
for convenience only and shall not be used to construe or
interpret this Note.  Except where otherwise indicated, all
references herein to Sections refer to Sections hereof.

In Witness Whereof, VHS has caused this Note to be issued this
1st day of September 1998

VITAL HEART SYSTEMS, INC.

/s/John Mondati
John Mondati, Director

                    				      E-43
<PAGE>

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00020-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00020-of-00352.parquet"}]]