Document:

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                                                                   Exhibit 10.11

                              AMENDED AND RESTATED
                              DISTRIBUTOR AGREEMENT

                                     between

                               R2 TECHNOLOGY, INC.

                                       and

                        GENERAL ELECTRIC MEDICAL SYSTEMS,
                     A DIVISION OF GENERAL ELECTRIC COMPANY

                            As of September 27, 2000

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

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

                                    RECITALS

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

                                       2

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

                           2.4.1    Purchase of Prototype.  GEMS shall
                                    ---------------------
purchase twenty (20) units of the R2 Product for the pilot customer accounts no
later than December 31, 2000; provided, however, that the obligation to purchase
such units shall be contingent upon the R2 Product being in a prototype phase
acceptable for pilot customer applications (regardless of whether the portion of
the GEMS Product being developed by GEMS is in a completed form acceptable for
pilot customer applications), and if this does not occur prior to December 31,
2000, then GEMS shall not have any obligation to purchase any such units. GEMS,
at its option, may purchase additional units of the R2 Product for the pilot
customer accounts, at the same GEMS Price as the initial twenty, subject to R2's
consent, such consent not to be unreasonably withheld.

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

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

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

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

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

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

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

                                       5

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

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

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

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

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

                                       6

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

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

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

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

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

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

                                       7

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

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

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

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

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

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

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

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

                  4.2      [Intentionally Omitted.]

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

                                       9

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

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

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

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

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

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

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

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

                                       10

<PAGE>

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

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

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

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

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

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

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

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

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

                                       11

<PAGE>

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

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

         9.       LICENSE.
                  -------

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

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

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

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

                                       12

<PAGE>

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

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

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

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

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

                  10.1     R2 hereby represents to GEMS as follows:

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

                                       13

<PAGE>

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

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

                                       14

<PAGE>

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

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

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

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

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

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

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

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

                                       15

<PAGE>

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

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

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

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

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

                                       16

<PAGE>

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

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

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

                  12.1 For purposes of this Agreement, "Confidential
Information" shall mean information exchanged between R2 and GEMS pursuant to
this Agreement and the performance of the parties' obligations hereunder, orally
(if reduced to writing and delivered to the other party within fifteen (15) days
of disclosure) or in writing, if marked to indicate its confidential nature or
if of a type that a reasonable person would expect to be proprietary and
confidential. Neither party shall use the Confidential Information of the other
except in connection with the performance of its obligations under this
Agreement. In addition, each party shall hold all Confidential Information of
the other in confidence and shall not publish, disclose or disseminate the same
to any other person or entity except as specified herein. Each party may
disclose Confidential Information of the other to its employees and consultants
who will be bound by this Agreement. Each party agrees to take the same measures
to preserve the confidentiality of the Confidential Information of the other as
it does for its own Confidential Information.

                  12.2 The confidentiality and non-use obligations shall not
apply to Confidential Information which is (a) in the public domain or
subsequently enters the public domain through no act of the receiving party; (b)
subsequently acquired by the receiving party from a third person having, to the
receiving party's knowledge, no obligation of confidentiality; (c) known to the
receiving party at the time of disclosure, as established by competent proof; or
(d) developed independently by or on behalf of the receiving party, without
reliance on or use of any Confidential Information of the other. In addition to
the foregoing, either party may use or disclose Confidential Information
disclosed to it by the other party to the extent such use or disclosure is
required by law, government agency, governmental regulation, court order or
valid discovery request in connection with a legal proceeding, provided that if
a party is required to disclose another party's Confidential Information, it
shall provide the other party with prior written notice of any such disclosure
and a reasonable opportunity to seek confidential treatment or a protective
order, if appropriate. In the event that such confidential treatment or
protective order is not obtained, the party required to disclose such
Confidential Information shall disclose only that portion of the Confidential
Information which its counsel advises that it is legally required to disclose.

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

                                       17

<PAGE>

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

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

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

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

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

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

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

                                       18

<PAGE>

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

                  14.3     [Intentionally Omitted]

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

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

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

                                       19

<PAGE>

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

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

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

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

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

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

                                       20

<PAGE>

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

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

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

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

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

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

                                       21

<PAGE>

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

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

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

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

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

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

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

                  15.2     [Intentionally Omitted]

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

                                       22

<PAGE>

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

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

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

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

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

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

                                       23

<PAGE>

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

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

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

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

                                       24

<PAGE>

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

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

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

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

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

                                       25

<PAGE>

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

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

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

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

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

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

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

                                       26

<PAGE>

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

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

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

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

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

                  18.7 Partial Invalidity. If any section, paragraph, provision,
                       -------------------
or clause in this Agreement shall be found or be held to be invalid or
unenforceable in any jurisdiction in which this Agreement is being performed,
the remainder of this Agreement shall be valid and enforceable and the parties
shall negotiate, in good faith, a substitute, valid and enforceable provision
which most nearly effects the parties' intent in entering into this Agreement.

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

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

                                       27

<PAGE>

                  18.10 Waiver. The failure of either party to enforce at any
                        -------
time the provisions of this Agreement, or the failure to require at any time
performance by the other party of any of the provisions of this Agreement, shall
in no way be constituted to be a present or future waiver of such provisions,
nor in any way affect the validity of either party to enforce each and every
such provision thereafter. The express waiver by either party of any provision,
condition or requirement of this Agreement shall not constitute a waiver of any
future obligation to comply with such provision, condition or requirement.

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

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

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

                                       28

<PAGE>

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

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

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

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

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

                                       29

<PAGE>

                                    Exhibit A

                             R2 PRODUCTS AND PRICING

Pricing

1.       The GEMS Price shall be:

         a.       * * * for the first 20 prototype pilot units of the R2
Product purchased pursuant to Section 2.4.1 under this Agreement and any other
pilot units purchased pursuant to Section 2.4.1;

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

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

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

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

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

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

                                       1

<PAGE>

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

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

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

Material
--------

         310-00-XXX  DMPU System

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

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

                                       2

<PAGE>

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

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

Overhead
--------

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

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

Sub-total Overhead                                                         * * *

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

Total Overhead                                                             * * *

Total Product Cost: * * *
</TABLE>

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

----------

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

                                       3

<PAGE>

                                    Exhibit B

                            R2 SOFTWARE AND HARDWARE

Software
--------

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

Hardware
--------

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

                                       1

<PAGE>

                                    Exhibit C

                                                           Confidential Document

                           SOFTWARE LICENSE AGREEMENT

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

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

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

1.       Definitions

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

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

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

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

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

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

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

2.       Grant of License

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

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

<PAGE>

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

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

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

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

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

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

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

         (e) modify the Software; or

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

3.       License Fee

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

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

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

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

OR

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

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

4.       Limited Warranty and Limitation of Liability

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

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

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

                                       2

<PAGE>

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

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

5.       Confidential Information

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

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

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

                                       3

<PAGE>

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

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

6.       Term and Termination

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

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

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

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

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

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

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

7.       Miscellaneous

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

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

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

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

                                       4

<PAGE>

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

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

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

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

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

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

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

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

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

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

                                       5

<PAGE>

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

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

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

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

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

</TABLE>

<PAGE>

                                    Exhibit D
                                    GEMS SDRS
                               [95 pages omitted]
                                     * * *

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

<PAGE>

                                    Exhibit E
                                 R2'S US PATENTS

* * *

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

<PAGE>

                                    Exhibit F
                               REGULATORY MATTERS

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

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

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

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

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

<PAGE>

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

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

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

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

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

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

                                       2

<PAGE>

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

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

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

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

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

                                       3

<PAGE>

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

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

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

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

                                       4

<PAGE>

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

                                       5<PAGE>
                                                                   Exhibit 10.12

               OEM SOFTWARE DEVELOPMENT AND DISTRIBUTION AGREEMENT

                                     between

                              EASTMAN KODAK COMPANY

                                       and

                               R2 TECHNOLOGY, INC.

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

<PAGE>

                               [TABLE OF CONTENTS]

<TABLE>
<S>                                                                            <C>
1.   DEFINITIONS ............................................................  1
  1.1.     Confidential Information .........................................  1
  1.2.     Developed Software ...............................................  1
  1.3.     Documentation ....................................................  1
  1.4.     End User .........................................................  1
  1.5.     Functional Specifications ........................................  2
  1.6.     Joint Inventions .................................................  2
  1.7.     Kodak ............................................................  2
  1.8.     Kodak Product ....................................................  2
  1.9.     Kodak Proprietary Software .......................................  2
  1.10.    Supplier Software ................................................  2
2.   SCOPE OF AGREEMENT .....................................................  2
3.   SOFTWARE DEVELOPMENT ...................................................  3
  3.1.     Overview .........................................................  3
  3.2.     Change Orders ....................................................  3
  3.3.     Project Schedule .................................................  3
  3.4.     Kodak Equipment ..................................................  3
4.   PAYMENT AND REPORTING ..................................................  4
  4.1.     Currency .........................................................  4
  4.2.     Payments to Supplier .............................................  4
  4.3.     Auditing .........................................................  4
  4.4.     Interest .........................................................  4
5.   COPYRIGHTS AND TRADEMARKS ..............................................  5
  5.1.     Copyrights .......................................................  5
  5.2.     Trademark and Copyright Notices ..................................  5
6.   MAINTENANCE, SUPPORT, MODIFICATIONS, AND NEW SUPPLIER SOFTWARE .........  5
  6.1.     Maintenance and Support ..........................................  5
  6.2.     Supplier Modifications ...........................................  6
  6.3.     New Supplier Software ............................................  6
7.   PERSONNEL ..............................................................  7
  7.1.     Project Managers .................................................  7
  7.2.     Authority of Project Managers ....................................  7
  7.3.     Staffing .........................................................  7
  7.4.     Project Manager's Meetings and Reports ...........................  7
8.   EXPENSES ...............................................................  7
9.   INVOICES AND TAXES .....................................................  7
  9.1.     Invoices .........................................................  7
  9.2.     Taxes ............................................................  8
10.  TRAINING AND DOCUMENTATION .............................................  8
  10.1.    Training .........................................................  8
  10.2.    Documentation ....................................................  8
11.  TITLE / OWNERSHIP INTERESTS AND EXCLUSIVITY ............................  8
  11.1.    Supplier Software ................................................  8
  11.2.    Kodak Proprietary Software .......................................  8
  11.3.    Supplier Inventions ..............................................  8
</TABLE>

<PAGE>

<TABLE>
<S>                                                                                    <C>
  11.4.   Kodak Proprietary Inventions ..............................................   9
  11.5.   Joint Inventions ..........................................................   9
  11.6.   Developed Software ........................................................   9
12.  LICENSE GRANT AND EXCLUSIVITY ..................................................   9
13.  DISTRIBUTION ...................................................................  10
  13.1.   End User License Agreement ................................................  10
  13.2.   Export Licenses ...........................................................  10
  13.3.   Supplier Distribution Channel .............................................  10
  13.4.   FDA and other Regulatory Approvals ........................................  11
14.  WARRANTY .......................................................................  11
  14.1.   Warranty of Performance ...................................................  11
  14.2.   Warranty of Title .........................................................  12
  14.3.   Defense and Indemnification of Kodak. .....................................  12
  14.4.   Defense and Indemnification of Supplier ...................................  13
  14.5.   Indemnification Procedures. ...............................................  15
  14.6.   Representations and Warranties by and between Supplier and Kodak. .........  15
  14.7.   WARRANTY LIMITATIONS ......................................................  15
15.  LIMITATION OF LIABILITY ........................................................  16
  15.1.   Indirect, Consequential and Special Damages ...............................  16
  15.2.   Supplier's Liability ......................................................  16
  15.3.   Kodak's Liability .........................................................  16
16.  INSURANCE ......................................................................  17
17.  CONFIDENTIAL INFORMATION .......................................................  17
  17.1.   Protection of Confidential Information ....................................  17
  17.2.   Permitted Use and Disclosures. ............................................  18
  17.3.   Confidential Terms. .......................................................  18
  17.4.   Right to Injunctive Relief ................................................  18
18.  TERM, TERMINATION, AND DEFAULT .................................................  18
  18.1.   Term ......................................................................  18
  18.2.   Termination For Cause .....................................................  18
  18.3.   Default On Notice .........................................................  18
  18.4.   Immediate Termination for Default .........................................  19
  18.5.   Effect of Termination By Kodak For Default due to Insolvency of Supplier ..  19
19.  DISPUTE RESOLUTION PROCEDURE ...................................................  19
20.  ADDITIONAL PROVISIONS ..........................................................  20
  20.1.   Negotiations ..............................................................  20
  20.2.   Independent Contractor ....................................................  20
  20.3.   Additional Supply Rights ..................................................  20
  20.4.   Additional Developed Software .............................................  20
  20.5.   Survival ..................................................................  20
  20.6.   Publicity .................................................................  20
  20.7.   Governing Law .............................................................  21
  20.8.   Amendment .................................................................  21
  20.9.   Entire Agreement ..........................................................  21
  20.10.  Successors and Assigns ....................................................  21
  20.11.  Counterparts ..............................................................  21
</TABLE>

<PAGE>

<TABLE>
<S>                                                                           <C>
  20.12.  Assignment ......................................................   21
  20.13.  Notices .........................................................   22
  20.14.  Force Majeure ...................................................   22
  20.15.  Remedies ........................................................   22
  20.16.  Non-Waiver ......................................................   22
  20.17.  Severability ....................................................   22
  20.18.  Section Headings ................................................   23
ATTACHMENT A - STATEMENT OF WORK ..........................................   24
ATTACHMENT B - SUPPLIER SOFTWARE ..........................................   30
ATTACHMENT C - ESCROW AGREEMENT ...........................................   31
ATTACHMENT D - SUPPLIER COPYRIGHT NOTICE AND KODAK COPYRIGHT NOTICE .......   35
ATTACHMENT E - KODAK TRAVEL POLICY ........................................   36
ATTACHMENT F - SAMPLE KODAK END USER LICENSE AGREEMENT ....................   39
</TABLE>

<PAGE>

THIS AGREEMENT MADE this _13th_ day of _October_, 2000, by and between

Eastman Kodak Company, a New Jersey corporation, with its principal place of
business at 343 State Street, Rochester, New York 14650 ("Kodak"), and R2
Technology, Inc., with its principal place of business at 325 Distel Circle, Los
Altos, CA 94022 ("Supplier").

WHEREAS, Kodak and Supplier entered into a non-binding Memorandum of
Understanding on July 27, 2000 for the purpose of stating their joint intentions
to create a strategic alliance for developing, selling and servicing various
computer-aided detection ("CAD") products intended for the medical imaging
market.

WHEREAS, Kodak and Supplier now want to enter into a binding relationship to
develop the first two projects under this OEM Software Development and
Distribution Agreement: new CAD algorithms for lung nodule detection in Computer
Radiography ("CR") and digital radiography ("DR") applications for integration
into Kodak digital capture and PACS ("Picture Archiving and Communication
Systems") and CAD algorithms for breast cancer detection integrated into Kodak's
digital mammography systems.

THEREFORE, the parties agree as follows:

1.   DEFINITIONS

   1.1. Confidential Information

"Confidential Information" shall mean, subject to the provisions of Article 17
hereof, any proprietary or confidential information or material in tangible form
disclosed hereunder that is (i) marked as "Confidential" at the time it is
delivered to the receiving party or its employees or agents or contractors under
this Agreement or in contemplation thereof; and/or (ii) disclosed orally and is
confirmed in writing as being Confidential Information within 30 days after
initial disclosure.

   1.2. Developed Software

"Developed Software" means the software to be developed by Supplier and licensed
by Supplier to Kodak under this Agreement, including all object code. Developed
Software also includes any derivations, improvements, enhancements or
translations of the Developed Software as mutually agreed to by the parties.

   1.3. Documentation

"Documentation" means the hard copy and digital versions of all documentation
required by Kodak in order to perform its obligations under this Agreement. The
complete listing of Documentation is attached hereto as part of Attachment A,
which list is subject to change by mutual agreement of the parties. For purposes
of clarity, Documentation shall include translations of Documentation as agreed
to by the parties.

   1.4. End User

        "End User" means end user customers of Kodak, which shall not include,
without limitation, Kodak distributors or other third parties acting on Kodak's
behalf.

                                       1

<PAGE>

     1.5.  Functional Specifications

"Functional Specifications" means the detailed specifications for the Developed
Software, which specifications are attached to this Agreement as part of
Attachment A and may be amended from time to time by mutual agreement of the
parties. The parties hereby agree and understand that the Functional
Specifications may be modified from time to time by mutual agreement of the
parties.

     1.6.  Joint Inventions

"Joint Inventions" mean inventions, improvements, discoveries and know how
jointly conceived or developed by Supplier and Kodak relating to and made using
or comprising Supplier and/or Kodak product during the term of the Agreement.

     1.7.  Kodak

"Kodak" means Eastman Kodak Company and any of its subsidiaries in which Kodak
owns or controls, directly or indirectly, more than fifty percent (50%) of the
stock eligible to vote for the election of directors.

     1.8.  Kodak Product

"Kodak Product" means the product, product family, or components of products
(more particularly described in the Statement of Work attached at Attachment A)
that will include or incorporate the Supplier Software and the Developed
Software. Additional Attachments of Statements of Work (A-1, A-2, etc.) will be
created for additional Kodak products that will include or incorporate Supplier
Software and/or Developed Software.

     1.9.  Kodak Proprietary Software

"Kodak Proprietary Software" means software (and associated documentation) of
Kodak, to be considered for use in Developed Software, and if incorporated into
the Developed Software will be supplied only to Kodak unless licensed to
Supplier under the terms of a software license with rights to distribute to
third parties.

     1.10. Supplier Software

"Supplier Software" means software (and associated documentation) of Supplier
described in Attachment B and licensed to Kodak for use only in the Developed
Software created under the terms of this Agreement unless otherwise specified in
Attachment B or an amendment thereto.

2.     SCOPE OF AGREEMENT

Subject to the terms of this Agreement, Supplier will perform the development
work described in Attachment A and grant a license to Kodak for the Developed
Software and Supplier Software (described in Attachment B) under the license
terms set forth in Article 12 herein. Supplier and Kodak agree to enter into an
escrow agreement ("Escrow Agreement") for all Developed Software per the form
attached as Attachment C, with an escrow holder mutually acceptable to Supplier
and Kodak.

                                       2

<PAGE>

3.     SOFTWARE DEVELOPMENT

     3.1.   Overview

Supplier will use commercially reasonable efforts to develop the Developed
Software for Kodak, including object code and Documentation, required to meet
the Functional Specifications (the "Development Project").

     3.2.   Change Orders

The Functional Specifications, costs, schedules, and other matters affecting the
Development Project may be changed only by the written agreement of Kodak and
Supplier, in accordance with the following Change Order procedure. When so
changed, the changes will be deemed to be incorporated in this Agreement as an
amendment to the applicable Attachment. This Change Order procedure is to be
used to control the technical configuration of the software through
specification documents, as well as to control costs and schedules.

Either party may request a change. No change will be effective until it has been
recorded on a fully executed Change Order form as set forth in Attachment A.
Neither party will be liable for work performed by the other party prior to such
work being authorized by a completed Change Order form. Change Order forms must
be signed by the Project Managers of Kodak and Supplier, or their designee.

     3.3.   Project Schedule

          3.3.1. Milestones

The Development Project is divided into milestones ("Milestones"). Supplier will
use commercially reasonable efforts to deliver specified Milestones on specific
due dates ("Milestone Due Dates").

For each Milestone, Kodak will have a period of time (the "Acceptance Period")
after receipt of all Deliverables for that Milestone, in which to review,
perform acceptance tests, and accept or reject the Deliverables. Where a time
period is provided after Kodak's rejection of a Deliverable during which
Supplier may make corrections so that the Deliverable is acceptable, that period
is referred to as the "Correction Period".

A description of each Milestone, with applicable Milestone Due Date,
Deliverables, acceptance tests, Acceptance Period, and Correction Period is set
forth in Attachment A.

          3.3.2. Delivery

Supplier will use commercially reasonable efforts to deliver the Deliverables on
or before the appropriate Milestone Due Date.

          3.3.3. Review, Testing and Acceptance of Deliverables

Kodak will timely review, test, and accept the Deliverables as provided in
Attachment A.

     3.4.   Kodak Equipment

Kodak will timely provide, at no charge to Supplier, reasonable access to the
equipment specified in Attachment A for Supplier's use in the performance of its
obligations under this Agreement. Kodak may,

                                       3

<PAGE>

at its option, change the configuration of the equipment from time to time
provided that the change does not unreasonably hinder Supplier's ability to
timely carry out any remaining obligations under this Agreement including the
incurring of additional cost or time to complete its obligations. Kodak will be
responsible for maintenance of the equipment while it is being used by Supplier,
except that Supplier will reimburse Kodak for the costs of any maintenance or
repairs to the equipment solely resulting from the grossly negligent or
intentionally wrongful acts of Supplier. Upon Supplier no longer requiring use
of the equipment or upon termination or expiration of this Agreement for any
reason, Supplier will return equipment in Supplier's possession to Kodak upon
Kodak's request. Kodak will arrange for and pay for all transportation to and
from Supplier's facility for the equipment.

4.     PAYMENT AND REPORTING

     4.1.   Currency

All payments and fees shall be in U.S. funds.

     4.2.   Payments to Supplier

          4.2.1.   License Fees

Kodak will pay Supplier the License Fees in Attachment A. Within thirty (30)
days after the close of each calendar quarter, Kodak shall (a) provide to
Supplier a report (in a format to be agreed between Kodak and Supplier) setting
out the calculation of payments due to Supplier in respect of that quarter; and
(b) make payment to Supplier of the applicable fees in accordance with such
report. Payments and reports are to be sent to the attention of Doris Pon at the
Supplier address in the beginning of this Agreement or other address as Supplier
may designate by written notice. Kodak shall provide to Supplier a report for
the quarter regardless of whether any amounts are payable for the quarter. Any
amounts due to Supplier shall be paid by bank wire transfer to the following
account:

Citibank, NYC
ABA #021000089
FBO: Morgan Stanley & Co., Inc.
Account #38890774
For further credit to:
R2 Technology, Inc.
Account #14-78809

     4.3.   Auditing

During the Term and for two (2) years thereafter, each party agrees to keep all
usual and proper records and books of account and all usual and proper entries
relating to calculation of payments or credits to the other party. Each party
shall have the right, at its own expense, upon fourteen (14) business days'
written notice to the other party and during normal business hours (and, in any
event, not more than once in any twelve month period), to inspect and audit the
records of the other party for the purpose of verifying any reports,
information, payments or credits due to the other under this Agreement. Any such
audit may be conducted by a firm of independent certified public accountants
mutually chosen by Kodak and Supplier. In the event of any shortfall in payment
or credit is found which exceeds five percent (5%) of the total due for the
reporting period audited, the other party shall be reimbursed for the reasonable
fees of the accountants conducting the audit. Any overpayment or underpayment
exceeding five percent (5%), or credit shall be made good between the parties
within 14 days of the audit
report.

     4.4.   Interest

                                       4

<PAGE>

For any unpaid or late payment by Kodak under this Agreement, Supplier shall be
entitled to charge interest at the rate of two percent (2%) per annum above the
U.S. prime lending rate from the date such payment was due.

5.     COPYRIGHTS AND TRADEMARKS

     5.1.   Copyrights

Supplier warrants that it is the copyright owner of the Supplier Software or has
the authority to enter into and perform this Agreement and to grant licenses to
Kodak for the Supplier Software in conformance with the terms of this Agreement.
Supplier agrees to cooperate with Kodak in obtaining any copyright or other
statutory protections for the Supplier Software and Developed Software
reasonably in each country in which they are sold, distributed or sublicensed by
Kodak. Supplier shall retain ownership to the Supplier Software and Developed
Software, including all corrections, modifications and enhancements made by
Supplier, and any regulatory filings, and trademarks, trade names related
thereto.

     5.2.   Trademark and Copyright Notices

Kodak agrees to use efforts at least as stringent as those Kodak uses to
maintain its own trademarks and copyrights to maintain and respect the trademark
and copyright notices used by Supplier in connection with Kodak advertisement,
distribution and sublicensing of the Kodak Products. Copyright notices placed by
Kodak on the Kodak Products shall read as listed in Attachment D, which may be
amended from time to time by Supplier. Kodak agrees to include one of the
copyright notices (as selected in writing by Supplier) listed on Attachment D on
start-up screens in Kodak Product. If Supplier's copyright notice is amended by
Supplier, Kodak will include the new copyright notice in the next software
release.

6.     MAINTENANCE, SUPPORT, MODIFICATIONS, AND NEW SUPPLIER SOFTWARE

     6.1.   Maintenance and Support

Supplier will provide to Kodak ongoing Maintenance and Support (as defined
below) for the Supplier Software and the Developed Software for up to 40 hours
per month at no cost to Kodak. The parties agree and understand that such 40
hours are the total number of hours Supplier will provide at no cost to Kodak
for all Developed Software and Supplier Software contemplated by and licensed
under this Agreement. In the event Kodak requests Maintenance and Support (as
defined below) in excess of 40 hours per month, such additional hours will be
invoiced to Kodak at the rate of $50.00 per hour.

"Maintenance and Support" means correction of errors and telephone and e-mail
consulting services as follows: Kodak is provided with three paths for
escalating issues concerning the Supplier Software and the Developed Software to
Supplier:

          6.1.1.   Escalation Email Support:

Email confirmation same day, response within 24 hours, during Supplier's
operational hours (8AM - 5PM Pacific Time) and excluding predetermined holidays
and weekends;

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<PAGE>

         6.1.2. Direct Access (Phone Support):

Telephone support availability for designated Kodak contact to designated
Supplier Support Lead [to be defined/discussed], so no need for confirmation;
response within 8 hours, during Supplier's operational hours and excluding
predetermined holidays and weekends. and

         6.1.3. Priority Callback Support:

Automatically invoked during all off-hours for critical issues only,
confirmation within 4 hours and response within 24 hours.

Notwithstanding the foregoing, Kodak will reimburse reasonable travel expenses
for on-site support requested by Kodak.

         6.2. Supplier Modifications

Supplier agrees to provide promptly to Kodak without charge (i) any
modifications to the Supplier Software and revisions to the Documentation to
reflect the modifications, insofar as such are provided to Supplier's other
customers without charge and; (ii) any derivative works, whether marketed under
the same name or not, which provide substantially the same functionality,
insofar as such are provided to Supplier's other customers without charge. Such
modifications shall include both modifications made by Supplier pursuant to
Section 6.1 and Article 14 (Warranty). During the term of this Agreement
Supplier may develop new programs and related documentation that would provide
new functional capability for the Supplier Software. Should such new software
and documentation be made available generally to other similarly situated
Supplier customers, Supplier shall offer to license such software and
documentation to Kodak on terms and conditions no less favorable than those
terms and conditions, when considered in the aggregate, offered to any other of
Supplier's similarly situated customers. A similarly situated customer shall
mean a customer of Supplier ordering similar products at similar volumes under
similar terms and conditions as provided for herein.

         6.3. New Supplier Software

Supplier will give Kodak the right of first notice for new Computer Aided
Detection ("CAD") applications developed solely by Supplier during the period of
exclusivity provided for in Section 11.6 and Article 12 for Developed Software.
Supplier agrees not to secure partnerships and/or license agreements until sixty
(60) days after the first day of notice by Supplier to Kodak with respect to a
particular CAD application. During those sixty (60) days Supplier and Kodak will
use their best efforts to discuss/negotiate the rights to such CAD application.
If Kodak elects to not participate in a particular CAD application, or in the
event the parties cannot reach agreement within the sixty (60) day period on
mutually agreeable terms for Kodak to, Supplier shall be free to exploit such
CAD application, either by itself or with any third party.

Kodak will have equal access, as those given to similarly situated third
parties, to negotiate non-exclusive rights to all CAD applications and upgrades
that R2 has provided exclusively to other customers. Where it is commercially
feasible, in R2's reasonable determination, the time period for Kodak access
will not exceed 18 months after FDA (or other regulatory agencies) approval of
the application for each such CAD application. Where it is commercially
feasible, in R2's reasonable determination, Kodak and R2 will be able to begin
unique product development and integration efforts prior to and during the
period of exclusivity to other customers.

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<PAGE>

Supplier will continue to invest, at its sole discretion, in Supplier's FDA
approved CR/DR Lung Nodule Product to ensure leading-edge product performance.

7.     PERSONNEL

     7.1. Project Managers

The parties designate the persons named on Attachment A as their respective
Project Managers, to serve in such capacity until the other party is notified in
writing of their replacement. The parties will make the Project Managers
reasonably available to each other on a daily basis for purposes of managing the
project.

     7.2. Authority of Project Managers

The written directions and orders of the Project Manager for a party will be
binding upon such party and may be relied upon by the other party, except that
the Project Managers will have no authority to amend this Agreement.

     7.3. Staffing

Kodak will provide reasonable access to its personnel as is necessary to provide
Supplier with the information needed to perform Supplier's obligations under
this Agreement.

The personnel of both parties, when on the premises of the other party, will
comply with the security and other personnel regulations of the other party.
Either party may require the other party to replace any assigned person who
fails to comply with such regulations.

     7.4. Project Manager's Meetings and Reports

The Project Managers will communicate at least weekly to review the progress of
the Development Project and resolve any difficulties which have arisen.
Supplier's Project Manager will provide written status reports on a periodic
basis, as agreed with the Kodak Project Manager. The parties hereby agree and
understand that such status reports shall be deemed Confidential Information of
R2. From time to time, when invited, the Supplier's Project Manager or designee
will be reasonably available to attend meetings of Kodak's management to discuss
the status of the Development Project.

8.     EXPENSES

Each party will be responsible for its own expenses except as otherwise agreed
in writing. If Kodak has agreed to reimburse Supplier for travel and lodging
expenses, all such expenses must be incurred and documented in accordance with
the travel policies in place for Kodak's own employees, which policy is attached
hereto as Attachment E.

9.     INVOICES AND TAXES

     9.1. Invoices

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<PAGE>

Supplier may issue invoices on the date of Kodak's acceptance of the
Deliverables associated with a Milestone, and all invoices are due and payable
within 45 days after receipt. All payments will be in U.S. funds. In the case of
invoices not submitted in accordance with this Section 9.1, Kodak will pay the
amount not in dispute pursuant to the terms provided above.

     9.2.    Taxes

Kodak will be responsible for payment of any federal, state or local taxes
related to this Agreement, including without limitation sales and use taxes,
taxes based on gross revenues and taxes in lieu thereof, excluding, however,
taxes based on net income, capital, or net worth of Supplier. Taxes must be
separately stated on all invoices. Kodak may provide adequate proof of exemption
from such taxes to Supplier, in which event Licensor will not include such taxes
on any invoice.

10.   TRAINING AND DOCUMENTATION

     10.1.   Training

Supplier will provide training to Kodak's designated personnel as specified on
Attachment A, at no additional cost to Kodak. Kodak will provide training to
Supplier's designated personnel as specified on Attachment A, at no additional
cost to Supplier.

     10.2.   Documentation

Supplier will prepare Documentation for the Developed Software as specified in
Attachment A. Documentation will be prepared in sufficient detail so as to allow
adequately trained technical personnel to operate, maintain and enhance the
Developed Software, and to develop and support end user documentation as
licensed herein.

During the Term, Kodak will have a fully-paid up, non-exclusive rights in all
Documentation concerning the Developed Software (excluding Documentation
exclusively related to the Supplier Software), and may use, reproduce, modify,
and/or produce translations of the Documentation as provided for in Attachment
A.

11.   TITLE / OWNERSHIP INTERESTS AND EXCLUSIVITY

     11.1.   Supplier Software

Supplier and its licensors retain all right, title and interest in the Supplier
Software.

     11.2.   Kodak Proprietary Software

Kodak and its licensors retain all right, title and interest in Kodak
Proprietary Software.

     11.3.   Supplier Inventions

Supplier shall have and retain sole and exclusive, right, title and interest to
all inventions, improvements, discoveries and know-how which are made under and
during the Term of this Agreement by Supplier, its employees or agents acting
under authority from Supplier, without inventive contribution by a Kodak
employee or its agents ("Supplier Inventions"). It is hereby agreed and
understood by the parties that during the Term of this Agreement, Kodak may
notify Supplier in writing that Kodak desires to acquire a license under
Supplier's Inventions. Upon such written notification, the parties agree to
engage in good

                                       8

<PAGE>

faith negotiations. Supplier retains all right, title and interest to the
Supplier Software, including that which may be integrated with the Development
Software.

     11.4.   Kodak Proprietary Inventions

Kodak shall have and retain sole and exclusive right, title and interest to all
inventions, improvements, discoveries and know how which are made during the
term of this Agreement by Kodak, its employees or agents acting under authority
from Kodak, without inventive contribution by a Supplier employee or its agents
("Kodak Inventions"). It is hereby agreed and understood by the parties that
during the term of the definitive agreement, Supplier may notify Kodak in
writing that Supplier desires to acquire a license under Kodak's Inventions.
Upon such written notification, the parties agree to engage in good faith
negotiations. Kodak retains all right, title and interest to the Kodak
Proprietary Software, including that which may in integrated with the Developed
Software.

     11.5.   Joint Inventions

The parties hereby acknowledge and understand that during the Term of and in the
process of participation in the activities arising under this Agreement, the
parties, their employees or agents acting under authority from Supplier and/or
Kodak, may jointly conceive or develop inventions, improvements, discoveries and
know how, resulting in or relating to and made, using or comprising a Supplier
and/or Kodak product ("Joint Inventions"). Each party shall promptly disclose in
writing any such Joint Invention to the other party. Within sixty (60) days of
receipt of such notification, the parties shall meet to determine, in good
faith, which party's products are more closely related to such Joint Invention.
The party determined to have product(s) most closely related to such Joint
Invention shall own all right, title and interest to such Joint Invention
("Owning Party"), and the other party shall assign, and hereby assigns all
right, title and interest in such Joint Invention to such Owning Party (the
"Assigning Party"). Concurrent with such assignment, the Owning Party shall
license, and hereby licenses, to the Assigning Party a worldwide, non-exclusive,
transferable, perpetual, fully-paid-up, royalty-free license under Owning
Party's rights in such Joint Invention to use, reproduce, display, perform,
distribute, modify, create derivative works of, make, have made, market, offer
for sale, sell, import, sub-license, and otherwise commercially exploit such
Joint Invention. The parties hereby agree and understand that for any countries
whose laws require an accounting by the Owning Party to the Assigning Party and
a revenue share from the Owning Party to the Assigning Party (for example,
countries in the European Union), the parties hereby expressly disclaim any and
all such requirements and agree that no such accounting or revenue share is
required.

     11.6.   Developed Software

Supplier will have sole title to the Developed Software, excluding those
portions of, and only to the extent that, the Developed Software incorporates
Kodak Proprietary Software. Subject to the foregoing, the parties hereby agree
and understand that (i) the Developed Software is for the sole and exclusive use
of Kodak for the time period stated in Attachment A, but in no event shall such
exclusive period extend beyond eighteen (18) months after such Developed
Software is first made available by Kodak to its Distributors, Dealers or End
Users; and (ii) the Developed Software, excluding those portions of the
Developed Software which incorporate the Supplier Software, will be licensed to
Kodak.

12.    LICENSE GRANT AND EXCLUSIVITY

Supplier grants to Kodak the worldwide right to reproduce, have reproduced,
display, use, sell, lease, sublicense (with the right to grant and authorize
sublicenses) to Distributors, Dealers, and End Users, market, and distribute or
otherwise transfer the Developed Software (but solely in conjunction with the

                                       9

<PAGE>

Supplier Software and only as contained in or used by a Kodak Product). Each End
User obtaining a sublicense from Kodak, or its Dealers shall receive and execute
(unless a "shrink wrap" license is used, in which case execution will occur upon
the user's acceptance of such license's terms and conditions) prior to such End
Users' receipt of the object code version of the Developed Software an end user
license agreement substantially similar to the end user license agreement
attached hereto as Attachment F ("End User License Agreement").

From the date of commercial availability of the Kodak Product, Kodak will
receive *** Developed Software for which Kodak contributes a Substantial (as
defined below) amount of the research and development funding to Supplier.
"Substantial" means sixty percent (60%) or greater of such research and
development funding. All other Supplier license grants to Kodak for Developed
Software are on a nonexclusive basis.

13.      DISTRIBUTION

     13.1.   End User License Agreement

The End User may use the Developed Software and Supplier Software for the Term
and in the manner provided for in the End User License Agreement furnished by
Kodak with the Kodak Product, provided, in no event shall such End User be
entitled to modify the Developed Software or Supplier Software or create
derivative works thereof. The End User's rights and obligations set forth
therein are independent of this Agreement and will survive the termination of
the relationship between Kodak and Supplier.

     13.2.   Export Licenses

Each party hereby agrees that it will not knowingly export, directly or
indirectly, any United States source technical data acquired from the other
party, or any direct product of that technical data, to any country for which
the United States Government or any agency of that government at the time of
export requires an export license or other governmental approval without first
obtaining that license or approval, when required by applicable United States
law.

Each party agrees that it will not export, directly or indirectly, any Developed
Software created under this Agreement to any country for which the U.S.
Government or any agency thereof at the time of export requires an export
license or other governmental approval, without first obtaining the written
consent to do so.

     13.3.   Supplier Distribution Channel

Supplier agrees, during the Term of this Agreement, that products offered by
Supplier, which Kodak has licensed on a non-exclusive basis, and products that
were originally licensed on an exclusive basis, whose exclusivity term has
expired, will only be made available to *** for the following periods of time:
(i) for Developed Software licensed to Kodak on a non-exclusive basis to be used
in conjunction with a particular Kodak Product, such direct licenses will not be
granted for the lesser of the Term of this Agreement of five (5) years from the
date such Kodak Product was made commercially available to Kodak's Distributors,
Dealers or End Users; and (ii) for Developed Software licensed to Kodak on an
exclusive basis to be used in conjunction with a particular Kodak Product, whose
exclusivity term has expired, such direct licenses will not be

_________________________

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

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<PAGE>

granted for the lesser of the Term of this Agreement or five (5) years from date
at expiration of the exclusivity term for such Kodak Product became available to
customers.

     13.4.   FDA and other Regulatory Approvals

Supplier will use commercially reasonable efforts to obtain FDA and other
applicable regulatory agency approvals for the Developed Software. Kodak will
use commercially reasonable efforts to obtain FDA and other applicable
regulatory agency approvals for the Developed Software integrated into Kodak's
digital capture and/or PAC systems. Each party will support, as commercially
feasible, the other party's efforts in achieving such regulatory approvals.

14.    WARRANTY

     14.1.   Warranty of Performance

Any warranty set forth in this Article 14 shall run directly from Supplier to
Kodak. Kodak hereby agrees and understands that in the event Kodak provides End
Users with any warranty of performance greater than the warranty of performance
set forth below in Sections 14.1.1 through 14.1.4, then Kodak shall bear all
responsibility and cost relating to such greater warranty.

     14.1.1.   Supplier Software

Supplier hereby warrants that the Supplier Software will perform as described in
Supplier's published specifications for a period of one (1) year after the date
of delivery of the Developed Software to be used in conjunction with such
Supplier Software (the "Warranty Period"). Delivery within the United States
shall be FCA Supplier's shipping location. Delivery outside the United States
shall be EXW Supplier's shipping location.

     14.1.2.   Developed Software

Supplier hereby warrants that the Developed Software will perform as described
in the Functional Specifications during the Warranty Period as defined above.

     14.1.3.   Remedy

During the Warranty Period, Supplier will repair or replace, as commercially
reasonable, any defect in the Supplier Software or the Developed Software which
causes the software to not perform in accordance with the applicable
specifications. Supplier will have reasonable access to Supplier's products at a
Kodak site or at a Kodak customer site to perform its warranty obligations.
Supplier will perform its warranty obligations in accordance with the Problem
Assessment Levels and associated time periods listed in Exhibit A-2 of
Attachment A, which will apply to all defects reported by Kodak:

     14.1.4.   Exceptions.

The warranties in Section 14.1 through 14.1.3 shall not apply to Developed
Software and/or Supplier Software that has been modified or altered in any
manner by anyone other than Supplier, or to defects caused (i) through no fault
of Supplier during shipment to or from Kodak; (ii) by the use or operation in an
application or environment other than that intended or recommended by Supplier
in the Documentation; (iii) by service by anyone other than employees of, or
persons approved in writing by, Supplier; (iv) by accident, negligence, misuse,
other than normal electrical stress, or other causes other than normal use as
described in the Documentation; or (v) by storage, usage or handling in any
manner

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<PAGE>

inconsistent with the instructions in the Documentation. Replacement Developed
Software and/or Supplier Software supplied under this warranty shall carry only
the unexpired portion of the original warranty. Supplier shall not be liable for
misbranding with respect to any product labeling or package insert text provided
or used by Kodak, or any translation thereof and Supplier shall not be liable
for any adulteration or failure to meet the Developed Software and/or Supplier
Software Specifications due to handling or packaging of same by Kodak, its
Affiliates, Dealers, Sub distributors or agents.

Without limiting the foregoing, nothing in this Agreement is or shall be
construed as:
An obligation to bring or prosecute actions or suits against third parties for
infringement of any of the intellectual property rights or other proprietary
rights arising under the Developed Software and/or Supplier Software; or
Granting by implication, estoppel, or otherwise any licenses or rights, other
than those rights expressly granted herein, under the intellectual property
rights or other proprietary rights of Supplier.

     14.2.   Warranty of Title

Supplier warrants to Kodak that as of the Effective Date, the Supplier Software
and Developed Software delivered under this Agreement do not infringe the
intellectual property rights of any third party, provided that this warranty
will not apply to the extent of any Kodak Proprietary Software and/or any
written software code specifications or modifications which are incorporated in
the Developed Software at the direction of Kodak. Supplier shall ensure that
each person involved in the creation or development of, or otherwise
contributing to, the Developed Software will be the employees or agents of
Supplier under its sole and exclusive direction and control who were making
their contributions within the scope of their employment at the time of their
contribution, and that each such person shall fully assign all rights to the
Developed Software hereunder to Supplier.

     14.3.   Defense and Indemnification of Kodak

          14.3.1.

Supplier shall indemnify, defend, and hold harmless Kodak, the directors,
officers, and employees of Kodak and the successors and assigns of any of the
foregoing (the "Kodak Indemnitee(s)") from and against all third party claims,
losses, costs, and liabilities (including, without limitation, payment of
reasonable attorneys' fees and other expenses of litigation), and shall pay any
damages (including settlement amounts) finally awarded, with respect to any
claim, suit or proceeding (any of the foregoing, a "Claim") brought by third
party against a Kodak Indemnitee, caused by (a) a material breach by Supplier of
its obligations under this Agreement, or (b) the negligence or willful
misconduct of Supplier, except, in each case, to the extent caused by the
negligence or willful misconduct of a Kodak Indemnitee.

          14.3.2.

Supplier shall defend, or at its option settle, any claims brought against Kodak
by third parties as a result of any infringement by the Developed Software
(except to the extent such claim relates to any Kodak Proprietary Software
and/or any written software code specifications or modifications made to the
Developed Software at the direction of Kodak) and/or Supplier Software of any
U.S. or foreign patent, trademark, trade name, service mark, or copyright
existing under the laws, and shall reimburse Kodak for any judgments, damages,
cost or expenses payable by Kodak to a party bringing such action together with
reasonable attorneys' fees relating thereto. Kodak agrees that Supplier shall be
relieved of its obligations under this Section 14.3.2 unless Kodak notifies
Supplier promptly in writing of and gives Supplier proper and full information
and assistance to settle or defend any such claims. If the Developed Software
and/or

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<PAGE>

Supplier Software, or any part thereof, are, or in the opinion of Supplier
become, the subject of any claim for infringement of such third party patent,
trademark, trade name, service mark, or copyrights, or if it is adjudicatively
determined that the Developed Software and/or Supplier Software, or any part
thereof, infringe any such third party patent, or copyright, then Supplier may,
at its option and expense, either (i) procure for Kodak the right under such
third party patent, trademark, trade name, service mark or copyright to sell or
use, as appropriate, the Developed Software and/or Supplier Software (or in the
case of trademark infringement, substitute a different trademark, trade name or
service mark), or (ii) replace or modify the Developed Software and/or Supplier
Software or parts thereof in Kodak's possession, with other suitable and
reasonably equivalent technology or parts so that the Developed Software and/or
Supplier Software become non-infringing or (iii) if it is not commercially
reasonable to take the actions specified in items (i) or (ii) immediately
preceding, terminate this Agreement with one hundred eighty (180) days written
notice, and refund all previous Development Fees and License Fees paid for such
infringing Developed or Supplier Software by Kodak, except to the extent such
infringement relates to Kodak Proprietary Software and/or any written software
code specifications or modifications made to the Developed Software at the
direction of Kodak

          14.3.3.

Notwithstanding the provisions of Section 14.3.2 above, Supplier assumes no
liability for (i) infringements relating to any assembly, circuit, combination,
method or process in which any of the Developed Software and/or Supplier
Software may be used where the Developed Software (excluding any portion therein
relating to the Kodak Propriety Software) and/or Supplier Software when used
alone would not result in such an infringement; (ii) infringements involving the
modification or servicing of the Developed Software and/or Supplier Software, or
any part thereof, unless such modification or servicing was done or authorized
by Supplier; (iii) any trademark infringements involving any marking or branding
of the Developed Software and/or Supplier Software not applied by Supplier or
involving any marking or branding applied at the request of Kodak or any marking
or branding with the Kodak trademarks; or (iv) the modification of any Developed
Software and/or Supplier Software other than with Supplier's written consent.

The foregoing provisions of this Section 14.3 state the entire liability and
obligations of Supplier, and the exclusive remedy of Kodak and its End User
customers, with respect to any alleged infringement of any patents, copyrights,
trademarks or other intellectual property rights by the Developed Software
and/or Supplier Software or any part thereof.

       14.4.   Defense and Indemnification of Supplier

          14.4.1.

Kodak shall indemnify, defend and hold harmless Supplier, the directors,
officers, and employees of Supplier, and the licensors, successors and assigns
of any of the foregoing (the "Supplier Indemnitee(s)") from and against all
third party claims, losses, costs, and liabilities (including, without
limitation, payment of reasonable attorneys' fees and other expenses of
litigation), and shall pay any damages (including settlement amounts) finally
awarded, with respect to any third party claim, suit or proceeding (any of the
foregoing, also a "Claim") brought by a third party against a Supplier
Indemnitee, caused by (a) a material breach by Kodak of its obligations under
this Agreement; or (b) the negligence or willful misconduct of Kodak, except to
the extent due to the negligence or willful misconduct of a Supplier Indemnitee.

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<PAGE>

          14.4.2.

Kodak shall defend, or at its option settle, any claims brought against Supplier
by third parties as a result of any infringement by any Kodak Proprietary
Software which is incorporated into the Developed Software (as further set forth
in Section 20.1) or as a result of any infringement by any written software code
specifications or modifications made to the Developed Software at the direction
of Kodak (and but for such specifications and/or modifications to the Developed
Software, the Developed Software would not infringe), of any U.S. or foreign
patent, trademark, trade name, service mark, or copyright existing under the
laws, and shall reimburse Supplier for any judgments, damages, cost or expenses
payable by Supplier to a party bringing such action together with reasonable
attorneys' fees relating thereto. Supplier agrees that Kodak shall be relieved
of its obligations under this Section 14.4.2 unless Supplier notifies Kodak
promptly in writing of and gives Kodak proper and full information and
assistance to settle or defend any such claims. If any such Kodak Proprietary
Software, or any part thereof, or any such written software code specifications
or modifications made to the Developed Software at the direction of Kodak are,
or in the opinion of Kodak becomes, the subject of any claim for infringement of
such third party patent, trademark, trade name, service mark, or copyrights, or
if it is adjudicatively determined that such Kodak Proprietary Software, or any
part thereof, or any written software code specifications or modifications made
to the Developed Software at the direction of Kodak infringe any such third
party patent, or copyright, then Kodak may, at its option and expense, either
(i) procure for Supplier the right under such third party patent, trademark,
trade name, service mark or copyright to sell or use, as appropriate, such Kodak
Proprietary Software (or in the case of trademark infringement, substitute a
different trademark, trade name or service mark), or (ii) replace or modify such
Kodak Proprietary Software or parts thereof, or such specifications and/or
modifications made to the Developed Software at the direction of Kodak in
Supplier's possession, with other suitable and reasonably equivalent technology
or parts so that such Kodak Proprietary Software or such specifications and/or
modifications made to the Developed Software at the direction of Kodak becomes
non-infringing or (iii) if it is not commercially reasonable to take the actions
specified in items (i) or (ii) immediately preceding, terminate this Agreement
with ninety (90) days written notice, and, in the event of infringing Kodak
Proprietary Software, refund to Supplier any previous license fees (as set forth
in Section 20.1) paid for such infringing Kodak Proprietary Software, or in the
event of infringing written software code specifications or modifications made
to the Developed Software at the direction of Kodak (and but for such
specifications and/or modifications to the Developed Software, the Developed
Software would not infringe), indemnify Supplier for any resulting damages or
liabilities.

          14.4.3.

Notwithstanding the provisions of Section 14.4.2 above, Kodak assumes no
liability for (i) infringements relating to any assembly, circuit, combination,
method or process in which any of the Kodak Proprietary Software when used alone
would not result in such an infringement; (ii) infringements involving the
modification or servicing of the Kodak Proprietary Software, or any part
thereof, unless such modification or servicing was done or authorized by Kodak;
(iii) any trademark infringements involving any marking or branding of the Kodak
Proprietary Software not applied by Kodak or involving any marking or branding
applied at the request of Supplier or any marking or branding with the Supplier
trademarks; or (iv) the modification of any Kodak Proprietary Software other
than with Kodak's written consent.

          14.4.4.

The foregoing provisions of this Section 14.4 state the entire liability and
obligations of Kodak, and the exclusive remedy of Supplier and its End User
customers, with respect to any alleged infringement of any

                                       14

<PAGE>

patents, copyrights, trademarks or other intellectual property rights by the
Kodak Proprietary Software or any part thereof.

     14.5.   Indemnification Procedures.

An Indemnitee (either a "Kodak Indemnitee" or a "Supplier Indemnitee," each as
defined in Sections 14.3.1 and 14.4.1 respectively) that intends to claim
indemnification under this Article 14 shall promptly notify the other party (the
"Indemnitor") in writing of any claim in respect of which the Indemnitee intends
to claim such indemnification, and the Indemnitor shall have sole control of the
defense and/or settlement thereof, provided that the indemnified party may
participate in any such proceeding with counsel of its choice at its own
expense. The indemnity agreement in this Article 14 shall not apply to amounts
paid in settlement of any Claim if such settlement is effected without the
consent of the Indemnitor, which consent shall not be withheld unreasonably. The
failure to deliver written notice to the Indemnitor within a reasonable time
after the commencement of any such action, if prejudicial to its ability to
defend such action, shall relieve such Indemnitor of any liability to the
Indemnitee under this Article 14 but the omission so to deliver written notice
to the Indemnitor shall not relieve the Indemnitor of any liability that it may
have to any Indemnitee other than under this Article 14. The Indemnitee under
this Article 14, its employees and agents, shall cooperate fully with the
Indemnitor and its legal representatives and provide full information in the
investigation of any Claim covered by this Article 14.

     14.6.   Representations and Warranties by and between Supplier and Kodak

          14.6.1. Warranty to Supplier

Kodak represents and warrants to Supplier that: (i) it is a corporation duly
organized validly existing and in good standing under the laws of the State of
New Jersey; (ii) the execution, delivery and performance of this Agreement have
been duly authorized by all necessary corporate action on the part of Kodak.

          14.6.2. Warranty to Kodak

Supplier represents and warrants to Kodak that: (i) it is a company duly
organized validly existing and in good standing under the laws of the State of
California; (ii) the execution, delivery and performance of this Agreement have
been duly authorized by all necessary corporate action on the part of Supplier;
(iii) to the best of its knowledge it has the right to grant the rights and
licenses granted herein.

     14.7.   WARRANTY LIMITATIONS

EXCEPT FOR THE LIMITED WARRANTY PROVIDED IN SECTION 14.1, 14.2 and 14.6.2 ABOVE,
SUPPLIER GRANTS NO OTHER WARRANTIES OR CONDITIONS, EXPRESS OR IMPLIED, BY
STATUTE, IN ANY COMMUNICATION WITH KODAK OR ITS END USER CUSTOMERS, OR
OTHERWISE, REGARDING THE DEVELOPED SOFTWARE AND/OR SUPPLIER SOFTWARE, AND
SUPPLIER SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTIES OF FITNESS FOR A
PARTICULAR PURPOSE, MERCHANTABILITY, AND NONINFRINGEMENT. SUPPLIER DOES NOT
WARRANT THAT OPERATION OF THE DEVELOPED SOFTWARE AND/OR SUPPLIER SOFTWARE WILL
BE UNINTERRUPTED OR ERROR-FREE. SUPPLIER NEITHER ASSUMES NOR AUTHORIZES ANY
OTHER PERSON TO ASSUME ANY OTHER LIABILITIES ARISING OUT OF OR IN CONNECTION
WITH THE SALE OR USE OF ANY DEVELOPED

                                       15

<PAGE>

SOFTWARE AND/OR SUPPLIER SOFTWARE. ANY OTHER REPRESENTATIONS OR WARRANTIES MADE
BY ANY PERSON OR ENTITY, INCLUDING EMPLOYEES OR REPRESENTATIVES OF SUPPLIER,
THAT ARE INCONSISTENT HEREWITH SHALL BE DISREGARDED AND SHALL NOT BE BINDING
UPON SUPPLIER.

15.    LIMITATION OF LIABILITY

     15.1.  Indirect, Consequential and Special Damages

Except for a breach of a party's confidentiality and nondisclosure obligations,
and except for obligations arising under a party's indemnification obligations
hereunder, neither party will be liable to the other for indirect, incidental,
consequential or special damages even if advised of the possibility of such
damages. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY, ITS
AFFILIATES, ITS DISTRIBUTORS AND/OR ANY OTHER ENTITY FOR COSTS OF PROCUREMENT OF
SUBSTITUTE GOODS, LOST PROFITS, OR ANY OTHER SPECIAL, CONSEQUENTIAL, OR
INCIDENTAL DAMAGES ("INDIRECT DAMAGES"), INCLUDING ANY "INDIRECT DAMAGES" THAT
THE OTHER PARTY HAS AGREED TO INDEMNIFY, DEFEND AND/OR HOLD HARMLESS OF ITS
AFFILIATES, SUBDISTRIBUTORS AND/OR ANY OTHER ENTITY, HOWEVER CAUSED AND ON ANY
THEORY OF LIABILITY ARISING OUT OF THIS AGREEMENT WHETHER BASED IN CONTRACT,
TORT (INCLUDING NEGLIGENCE), OR OTHERWISE. THESE LIMITATIONS SHALL APPLY WHETHER
OR NOT A PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES AND
NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY PROVIDED
HEREIN OR IN THE WARRANTY FOUND IN THE DEVELOPED SOFTWARE AND/OR SUPPLIER
SOFTWARE.

     15.2.  Supplier's Liability

        15.2.1.

Supplier's liability for breach of its confidentiality and nondisclosure
obligations in this Agreement will be limited to proven damages.

        15.2.2.

Supplier's liability for breach of this Agreement (other than as provided in
Section 15.2.1 above) or any alleged product liability claim related to the
Developed Software and/or Supplier Software will be limited to proven damages,
but shall not exceed the lesser of *** or *** the value of the Development Fees
for the Developed Software associated with the Kodak Product to which such claim
relates, whichever is greater.

     15.3.  Kodak's Liability

        15.3.1.

Kodak's liability for breach of its confidentiality and nondisclosure
obligations, or for breach of the license granted herein, will be limited to
proven damages.

_________________________

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

                                       16

<PAGE>

       15.3.2.

Kodak's liability for breach of this Agreement other than as provided in Section
15.3.1 above, arising out of or in connection with this Agreement will be
limited to the Development Fees for the Developed Software associated with the
Kodak Product to which such claim relates.

16.  INSURANCE

Each party shall, at all times during the Term of this Agreement, maintain a
product liability insurance policy with commercially reasonable amounts of
insurance in annual amounts of no less than Five Million U.S. Dollars (U.S. $5
Million) per occurrence, and $5 Million in the aggregate, and each party shall
list the other party and its Affiliates as additional insureds.

Upon request, each party will furnish a certificate or adequate proof of the
foregoing insurance to the other party. Each party's insurance policies will
provide that the other party be notified in writing at least 30 days prior to
cancellation of, or any material change in, such party's insurance policies.
Supplier will either require Supplier subcontractors and employees who may enter
upon Kodak's premises to maintain or be covered by Workers Compensation
insurance (including the Broad Form All States endorsement) as prescribed by law
or the state in which services are performed, Comprehensive General Liability,
and Comprehensive Automobile Liability insurance as described above and to
furnish certificates or adequate proof of such insurance, or provide such
insurance for the subcontractors.

17.  CONFIDENTIAL INFORMATION

    17.1.    Protection of Confidential Information

Except as expressly provided herein, the parties agree for the term of this
Agreement and for five (5) years thereafter, the receiving party shall keep
completely confidential and shall not publish or otherwise disclose except for
the purposes contemplated by this Agreement any Confidential Information
furnished to it by the disclosing party hereto pursuant to this Agreement,
except that to the extent that it can be established by the receiving party by
competent proof that such Confidential Information:

                 (a) was already known to the receiving party, other than under
an obligation of confidentiality, at the time of disclosure;

                 (b) was generally available to the public or otherwise part of
the public domain at the time of its disclosure to the receiving party;

                 (c) became generally available to the public or otherwise part
of the public domain after its disclosure and other than through any act or
omission of the receiving party in breach of this Agreement;

                 (d) was independently developed by the receiving party as
demonstrated by documented evidence prepared contemporaneously with such
independent development; or

                 (e) was subsequently lawfully disclosed to the receiving party
by a person other than a party hereto.

                                       17

<PAGE>

   17.2.    Permitted Use and Disclosures.

Each party hereto may use or disclose information disclosed to it by the other
party to the extent such use or disclosure is reasonably necessary in complying
with applicable governmental regulations or otherwise submitting information to
tax, securities, or other governmental authorities, conducting clinical trials,
or otherwise exercising its rights hereunder, provided that if a party is
required to make any such disclosure of another party's Confidential
Information, other than pursuant to a confidentiality agreement, it will give
reasonable advance notice to the latter party of such disclosure and, except to
the extent inappropriate in the case of patent applications, will use its best
efforts to secure confidential treatment of such information prior to its
disclosure (whether through protective orders or otherwise).

   17.3.    Confidential Terms.

Except as expressly provided herein, each party agrees not to disclose any terms
of this Agreement to any third party without the consent of the other party;
provided, disclosures may be made as required by securities or other applicable
laws, or on a strict need to know basis to actual or prospective investors, or
to a party's accountants, attorneys and other professional advisors.

   17.4.    Right to Injunctive Relief

Because of the unique nature of the Confidential Information, the parties agree
that each party may suffer irreparable harm in the event that the other party
fails to comply with any of its obligations under this Article 17, and that
monetary damages may be inadequate to compensate either party for such breach.
Accordingly, the parties agree that either party will, in addition to any other
remedies available to it at law or in equity, be entitled to seek injunctive
relief to enforce the terms of this Article 17.

18.      TERM, TERMINATION, AND DEFAULT

   18.1.    Term

Unless earlier terminated as provided for in this Section, the term of this
Agreement and the licenses granted by each party hereunder shall be seven (7)
years from the Effective Date, at which time it will terminate ("Initial Term"),
unless extended for an additional two (2) year period by mutual written
agreement thirty (30) days prior to the end of the then-current term ("Renewal
Term"). (As used herein, "Term" refers to the Initial Term and any successive
Renewal Term). Notwithstanding the foregoing, after the seven (7) year Initial
Term has expired either party may terminate the Agreement without cause upon
sixty (60) days prior written notice to the other party.

   18.2.    Termination For Cause

This Agreement may be terminated by either party for Default as set forth in
this Article 18.

   18.3.    Default On Notice

Either party may terminate this Agreement, or at its option suspend performance
of its obligations hereunder, after a material breach by the other party upon
written notice to the defaulting party (hereinafter the "Default Notice")
specifying the Default, unless the other party cures the Default within sixty
(60) days after receipt of the Default Notice.

                                       18

<PAGE>

    18.4.    Immediate Termination for Default

In addition to the Default rights provided in the preceding paragraph, it will
constitute a material breach hereunder permitting either party to immediately
terminate this Agreement if the other party:

 . Fails to pay any sums due hereunder within 30 days of receipt of the Default
  Notice;
 . Commits an irremediable breach of this Agreement, or persistently repeats the
  same remediable breach;
 . Files a petition under the United States Bankruptcy Act or any State
  insolvency law;
 . Has filed against it any petition under the United States Bankruptcy Act or
  any State insolvency law which is not dismissed within ninety (90) days; or
 . Makes an assignment for the benefit of creditors.

  18.5. Effect of Termination By Kodak For Default due to Insolvency of Supplier

Supplier agrees to deposit in escrow with a mutually agreed escrow agent a copy
of the source code and all annotations thereto for any software licensed by
Supplier to Kodak. The escrow agreement shall provide that in the event of
termination of this Agreement for any Insolvency event cited below, the escrowed
source code shall be delivered to Kodak. Kodak is hereby granted a fully-paid,
non-exclusive license, contingent upon such a termination event, to use the
source code when delivered to repair, modify and use such software and to create
derivative works for distribution in object form solely as provided for in the
attached Escrow Agreement.

Insolvency, as used herein, shall mean the voluntary or involuntary proceedings
by or against Supplier instituted in bankruptcy under any insolvency law, or
appointment of a receiver or custodian for Supplier, or proceedings, if
involuntary, shall have not been dismissed within ninety (90) days after the
date of filing, or if Supplier makes an assignment for the benefit of creditors,
or if substantially all if its assets related to this Agreement are seized or
attached and not released within ninety (90) days thereafter, Kodak may
immediately terminate this Agreement effective upon notice of such termination.

19.   DISPUTE RESOLUTION PROCEDURE

If in the opinion of either party, the other party has failed to comply with the
requirements of this Agreement, or to perform its obligations in a satisfactory
manner, then this dispute resolution procedure will be invoked. In order to
expedite the prompt resolution of any disputes which may arise hereunder, both
parties agree that this dispute resolution procedure will be employed prior to
either party availing itself of any legal remedies (except for injunctive relief
and the right to terminate this Agreement for Default as provided herein)
against the other party.

The aggrieved party will provide the other party with a dispute notice, and the
dispute will be referred to the "Initial Level" representatives identified in
Attachment A.

In the event a dispute has not been resolved at the Initial Level, or a
corrective plan of action has not been mutually agreed upon, within 30 calendar
days of the giving of the dispute notice, then either party may escalate the
dispute to the "Final Level" representatives identified in Attachment A by means
of a written notice of escalation to the other party.

The Final Level representatives agree to use all reasonable efforts to meet
within 30 calendar days of such written notice of escalation to resolve the
dispute.

                                       19

<PAGE>

If the dispute has not been resolved, or a corrective plan of action has not
been agreed upon within 60 days of the meeting, or within 90 days of the date of
the notice of escalation to the Final Level, then either party may pursue any
remedy otherwise available to it under law or this Agreement.

20.      ADDITIONAL PROVISIONS

      20.1. Negotiations

The parties hereby agree and understand that in the event that Supplier
incorporates any Kodak Proprietary Software into the Developed Software, then
Supplier will owe no license fees to Kodak for products sold to Kodak; other
uses of such incorporation are subject to negotiation in good faith.

      20.2. Independent Contractor

The relationship of Kodak and Supplier established by this Agreement is that of
independent contractors, and nothing contained in this Agreement shall be
construed to (i) give either party the power to direct or control the day-to-day
activities of the other, (ii) constitute the parties as partners, joint
venturers, co-owners or otherwise as participates in a joint or common
undertaking, or (iii) allow a party to create or assume any obligation on behalf
of the other party for any purpose whatsoever.

      20.3. Additional Supply Rights

For product areas covered during the period of exclusivity (CR/DR Lung Nodules),
Kodak will give Supplier the right of first notice to supply Kodak any proposed
CAD product during the period of exclusivity between Kodak and Supplier.

      20.4. Additional Developed Software

Kodak and Supplier will work together on product planning to expand into
additional profitable CAD applications. Kodak and Supplier agree to have
quarterly technical team and management reviews focusing on roadmaps,
development progress and status of a strategic alliance.

      20.5. Survival

The provisions of Sections 14.3 through 14.5 (but only to the extent such claims
arose from acts or omissions that occurred prior to the expiration or
termination of this Agreement); Section 14.7; Section 20.5; Section 20.7;
Section 20.9; Section 20.18; Article 1; Article 11; Article 15; Article 17 and
Article 19 shall survive the expiration or termination of this Agreement for any
reason. All other rights and obligations of the parties shall cease upon
termination of this Agreement.

      20.6. Publicity

Except as otherwise required by law, neither party shall issue a press release
or make any other public disclosure of the terms of this Agreement without the
prior approval of such press release or public disclosure. Each party shall
submit any such press release or public disclosure to the other party, and the
receiving party shall have ten (10) business days to review and approve any such
press release or public disclosure, which approval shall not be unreasonably
withheld. If the receiving party does not respond in writing within such ten
(10) business day period, the press release or public disclosure shall be
retransmitted by the issuing party to the attention of the President of the
receiving party. If the receiving

                                       20

<PAGE>

party does not respond to such retransmission within five (5) business days the
press release or public disclosure shall be deemed approved.

      20.7.  Governing Law

This Agreement will be governed by and construed in accordance with the
substantive laws of the State of Delaware as applied to agreements entered into
between residents of the State of Delaware.

      20.8.  Amendment

This Agreement may not be amended except by a written amendment executed by
authorized representatives of both parties.

      20.9.  Entire Agreement

This Agreement constitutes the entire agreement of the parties hereto and
supersedes all prior agreements and understandings, whether written or oral, of
the parties with respect to the subject matter of this Agreement.

      20.10. Successors and Assigns

This Agreement will be binding upon, and inure to the benefit of, each of the
parties hereto and its respective successors and assigns.

      20.11. Counterparts

This Agreement may be executed in one or more counterparts, each of which will
be deemed to be an original, and will become effective when one or more
counterparts have been signed by the parties hereto and delivered to the other
parties. Facsimile signatures will be deemed originals for purposes of the
execution of this Agreement.

      20.12. Assignment

Neither party may assign this Agreement without the prior written consent of the
other party; provided, either party may assign this Agreement without the other
party's consent to any party which acquires all or substantially all of that
portion of the business assets of such party to which this Agreement pertains
whether by merger, reorganization, acquisition, sale or otherwise, or to any
parent or subsidiary corporation of such party.

In the event a third party acquires a controlling interest in or otherwise comes
under common control with Supplier, or acquires substantially all of the assets
of Supplier, Supplier or its acquiring party, as the case may be, may convert
Kodak's rights under Agreement to non-exclusive during the remaining Term of
this Agreement upon six months prior written notice, provided that assignee
agrees to supply software support and latest upgrades to the End Users under
terms to be negotiated by such assignee and End Users. Subject to the forgoing,
this Agreement shall be binding upon and inure to the benefit of Supplier and
its successors and assigns.

Upon a change in control [fifty percent (50%) or greater] of Supplier only,
Kodak has the right to terminate this Agreement with the acquiring party within
ninety (90) days of such change in control. If so terminated, the parties shall
then undertake an accounting to determine if there are any outstanding

                                       21

<PAGE>

creditable amounts owed to Kodak by Supplier under this Agreement, and in such
event, Supplier shall reimburse Kodak such amounts within thirty (30) days
following such accounting.

     20.13.  Notices

All notices required or desired to be given hereunder will be in writing and if
not personally delivered, be sent by facsimile (with a copy by ordinary mail) or
by registered or certified mail. If sent by facsimile or personally delivered,
notices will be deemed to have been given on the day when delivered addressed to
the other party at the address shown on the first page of Attachment A. If
mailed by registered or certified mail, notices will be deemed to have been
given when received or when delivery is refused. Either party may from time to
time change the address to which notices to it are to be sent by giving notice
of such change to the other party.

     20.14.  Force Majeure

Neither party will be liable for any damages or penalties for delay in delivery
when such delay is due to the elements, acts of God, acts of civil or military
authority, fires or floods, epidemics, quarantine restrictions, war or riots. If
such delay occurs and persists for more than 90 days, Kodak may upon written
notice to Supplier, terminate this Agreement subject to payment of any amounts
then due.

     20.15.  Remedies

The rights and remedies conferred under this Agreement or by any other
instrument or law will be cumulative and may be exercised singularly or
concurrently.

     20.16.  Non-Waiver

Failure by either party to enforce any term or condition of this Agreement will
not be deemed a waiver of future enforcement of that or any other term or
condition.

     20.17.  Severability

If any term, provision, covenant or condition of this Agreement is held invalid
or unenforceable for any reason, the remainder of the provisions will continue
in full force and effect as if this Agreement had been executed with the invalid
portion thereof eliminated.

                                       22

<PAGE>

     20.18.   Section Headings

The captions used herein are for convenience only, and will not be deemed to
constitute integral provisions of this Agreement.

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of
the day and year first above written.

<TABLE>
<S>                                          <C>
Eastman Kodak Company                        R2 Technology Inc.

By: /s/ J. Michael McQuade                   By: /s/ Michael S. Klein
    -----------------------------------          -------------------------------

Title: GM WW Operations KHI / VP Kodak       Title: President and Chief Executive Officer
       --------------------------------             -------------------------------------

Date: 10/12/00                               Date: 10/11/00
      ---------------------------------            -----------------------------
</TABLE>

                                       23

<PAGE>

                        ATTACHMENT A - STATEMENT OF WORK

THE STATEMENT OF WORK (SOW) FORMAT TO BE USED FOR EACH PROJECT IS BELOW. A SOW
DOES NOT BECOME PART OF THE AGREEMENT UNTIL THE SOW IS SIGNED BY KODAK AND R2.

1.  Addresses for Notices / Telephone and Fax Numbers

         Kodak:
         Eastman Kodak Company
         Attention:  OEM Software Sourcing
         901 Elmgrove Road
         Rochester, NY 14653-5127
         Phone:  716-726-9030
         Fax:  716-726-1557

         Supplier:
         R2 Technology, Inc
         325 Distel Circle
         Los Altos, CA 94022
         Phone: 650-254-8988
         Fax: 650-254-8958

2.  Key Personnel

         a.  Project Managers.  The following persons are designated Project
 Managers

         Project Manager for Kodak:  _______________________________________

         Project Manager for Supplier  _____________________________________

         b.  The following persons are designated the representatives for each
 party for purposes of dispute resolution as described
in the Agreement:

     [Note: The Project Managers should NOT be listed as representatives for
dispute resolution, since the dispute resolution provision will only be invoked
 if the Project Managers are unable to resolve the problem at their level. The
 Initial Level representative should be someone with overall responsibility for
      the success of Project, and other similar projects. The Final Level
representative should be someone at a senior level who had no active involvement
   in the Project, but who has responsibility for the financial consequences
 resulting from the dispute. In Kodak, the Final Representative should normally
 be the business unit general manager, or a key deputy. In a small development
 company, the Final Representative would the CEO, or, if that person is already
 the Initial Level representative, then a member of the board of directors or a
                              major shareholder.]

         For Kodak:
         Initial Level Representative--
         Final Level Representative--

                                       24

<PAGE>

         For Supplier
         Initial Level Representative--
         Final Level Representative--

3.  Scope of Project / Description of Kodak Product

4.  Kodak Supplied Computer System

5.  Functional Specifications

To be further developed at joint R2/EK workshop

    [Note: insert detailed functional specifications here, or attach
                  specifications to Attachment A as an exhibit]

6.  Documentation to be provided by Supplier

  [Note: describe all listings, programmer notes, flow charts, schematics, and
            all operation, maintenance, and technical information to
      be prepared and delivered by Supplier, and the form in which it is to
                  be delivered (hard copy / electronic, etc.)]

7.  Training to be provided by Supplier

      [Note: insert detailed description of the training to be provided by
       Supplier. Specify subject matter, number of instructors, number of
        students, length of time, location, and allocation of expenses.]

8.  Milestone Schedule

      [Note: insert detailed list (from Project Manager) of milestones, or
                attach milestones to Attachment A as an exhibit]

Example:

         Milestone 1
         Description
         Deliverables
         Due Date
         Acceptance Test
         Acceptance Period
         Correction Period

                                       25

<PAGE>

         Milestone 2
         Description
         Deliverables
         Due Date
         Acceptance Test
         Acceptance Period
         Correction Period

9.   Reviews, Test, and Acceptance of Deliverables.

         Upon receipt of all required Deliverables for a Milestone, Kodak will,
         within the Acceptance Period review and, if applicable, test, the
         Deliverables. If Kodak accepts the Deliverables, Kodak will indicate
         its acceptance by written notice to Supplier no later than three
         business days after the end of the Acceptance Period.

         If in Kodak's reasonable judgment the Deliverables fail to meet the
         applicable specifications in any material respect, Kodak will prepare a
         written summary of its objections and deliver it to Supplier within
         three business days after the end of the Acceptance Period. Supplier
         will within the Correction Period use reasonable commercial efforts to
         correct the Deliverables to eliminate the objections noted by Kodak.
         Supplier will deliver the corrected Deliverables to Kodak no later than
         one business day after the end of the Correction Period for Kodak's
         reconsideration for acceptance as provided above. If in Kodak's
         reasonable judgment the Deliverables remain unsatisfactory in any
         material respect then, at Kodak's option, Kodak may grant Supplier one
         or more additional Correction Periods, or Kodak may declare Supplier in
         Default of the Agreement.

10.  Payments to Supplier and Exclusivity

     A.  Project Payments

         Event          Development Fee

         TOTAL

     B.  Payment for Use

     C.  Exclusivity

The undersigned understand and agree to the terms of this Statement of Work:

Customer:                                   Supplier:
Eastman Kodak Company                       R2 Technology Inc.

__________________________                  __________________________
      (Technical Mgr.)                              (title)

__________________________                  __________________________
        (signature)                                (signature)

__________________________                  __________________________

                                       26

<PAGE>

          (date)                              (date)

_________________________
     (Purchasing Mgr.)

__________________________
       (signature)

__________________________
         (date)

                                       27

<PAGE>

                                 Attachment A-1

                                Statement Of Work
             CAD applied to Eastman Kodak Digital Mammography System
             -------------------------------------------------------

1.   Addresses for Notices / Telephone and Fax Numbers

          Kodak:
          Eastman Kodak Company
          Attention: OEM Software Sourcing
          901 Elmgrove Road
          Rochester, NY 14653-5127
          Phone: 716-726-9030
          Fax: 716-726-1557

          Supplier:
          R2 Technology, Inc
          325 Distel Circle
          Los Altos, CA 94022
          Phone: 650-254-7200
          Fax: 650-254-7201

2.   Key Personnel

          a. Project Managers. The following persons are designated Project
          Managers:

          Project Manager for Kodak: Jim Burns
          Project Manager for Supplier: Sandra Stapleton

          b. The following persons are designated the representatives for each
          party for purposes of dispute resolution as described in the
          Agreement:

          For Kodak:
          Initial Level Representative -- Ted Taccardi
          Final Level Representative -- Gary Keyes

          For Supplier
          Initial Level Representative -- Ken Miller
          Final Level Representative -- Mike Klein

3.   Scope of Project / Description of Kodak Product

Kodak Product: R2's Digital Mammography CAD product integrated into Kodak's
-------------
Full-Field Digital Mammography system (FFDM)
Scope:
-----
     o    Kodak and R2 will work jointly to develop the above product.
          o    R2 will have primary responsibility for the performance of CAD
               algorithms.
          o    Kodak and R2 will be jointly responsible for the seamless
               integration of the CAD application into the Kodak system.
          o    Kodak will have overall responsibility for the other elements of
               the project.

<PAGE>

     o    R2 will be responsible for regulatory approvals for the R2 product.
          This will include regulatory approvals in U.S., Canada, Western Europe
          and Japan. Other regions of the world will be included upon mutual
          agreement between R2 and Kodak.
     o    Kodak, with support from R2, will have the primary responsibility for
          obtaining any necessary regulatory approvals pertaining to the display
          of CAD markers on Kodak's review workstation. R2 agrees to provide
          Kodak with required support and information such that marketing
          authorizations can be obtained.
     o    R2 will provide support for definition of final product, leveraging
          R2's knowledge of mammography workflow and CAD.

R2 shall provide the following deliverables to Kodak:
----------------------------------------------------

          1.   Base CAD Application: R2's Digital Mammography computer-aided
               detection (CAD) application software that highlights regions of
               interest with abnormal microcalcification and abnormal mass
               features in Kodak full field digital mammography (FFDM) images.
          2.   Updates: Improvements to the software (e.g. algorithm
               performance, throughput performance, etc.) after the initial
               product release will be available. Kodak will review and approve
               as needed.
          3.   Upgrades: R2 is working on optional features to its base CAD
               application that, when the appropriate regulatory approvals are
               obtained for FFDM CAD, will be available as upgrades. These
               upgrades are expected to include:
               A.   Prominent feature mass marker
               B.   Prominent feature microcalcification marker
          4.   R2 will provide the hardware specifications for the system
               (memory, processors, operating system, network interface, and CAD
               marker display specifications etc.) to meet the throughput
               requirements of Kodak. During development phase, R2 will provide
               computer hardware. During production phase, R2 will provide
               hardware specifications and Kodak will supply hardware to meet
               those specifications.
          5.   Documentation of the algorithm, network appliance interface and
               software implementation. See Section 6 below.
          6.   Algorithm performance results (sensitivity and specificity)
               determined prospectively for Kodak imagery. The results shall be
               provided for a set of images omitted from the training set. The
               deliverable shall be a sensitivity and specificity measurement.
          7.   Verification and validation test cases (image input and CAD
               software output) to verify algorithm when software is integrated
               into the Kodak system. These images shall be selected by the
               supplier from the test set and or training set. On 6 and 7 above,
               the optimal split between training and testing cases is to be
               determined during development.

See Exhibit A-3 for System Diagram.
----------------------------------

4.  Kodak Supplied Materials

Tradeshow/Technical Support: For tradeshows, such as RSNA, Kodak will supply to
R2: NT workstation, 21" portrait Hi-Res monitor, 15" flat panel monitor, mouse
and keypad (all

<PAGE>

equipment to be returned following tradeshow). Note this is the same equipment
to be supplied for the CR/DR CAD display. R2 and Kodak will jointly develop case
studies and examples to use for demonstration purposes.

Kodak will also supply to R2 an NT workstation with an appropriate monitor for
displaying Kodak's FFDM images at R2.

Images supplied to R2 from Kodak: FFDM cases for development, test, and
regulatory approval. It is expected that the number of cases required for the
product development milestones are:
          A.   Minimal training database: 20 normals, 20 mass, and 20
               microcalcification cases
          B.   Training database for initial product release: 100 normals, 100
               mass, 100 microcalcification cases
          C.   Regulatory database: Will be defined based upon FDA submission
               requirements
          D.   Test database: This database will initially be comprised of the
               regulatory database and will be increased over time.

Image Acquisition Information: Kodak will support R2's efforts to understand
Kodak's images in order to optimize R2's CAD application for images acquired
from Kodak's FFDM system. For example, such support may include obtaining
phantom images from Kodak's mammography systems, and/or providing any relevant
acquisition protocol information.

5.   Functional Specifications

       CAD Algorithm Performance: The performance of R2's CAD algorithm on
       Kodak's FFDM images will be comparable to the performance of R2's
       film-based algorithm. R2 and Kodak will establish, in partnership, an
       independent database (images from 4C & 4D above) for testing the
       performance (sensitivity, specificity) of the base algorithm, and any
       enhancements/optional features.

       Throughput: Rapid processing time on average less than 1 minute per
       image.

       Interface to CAD Application: Images will be received by and CAD
       information transmitted from R2's CAD application via a DICOM interface
       (note: until the DICOM CAD object is approved by the DICOM working group,
       the CAD information will be sent via a format mutually agreed to by Kodak
       and R2).

       Service: Configuration, software upgrades, and diagnostics for R2's CAD
       application is performed through a web interface.

6.   Documentation to be provided by Supplier
       See Exhibit A-4 below for example documentation from Supplier's Mammo
Image Checker product. We anticipate that the set for digital mammography will
be at this level, and possibly simpler. Supplier will not supply listings of
algorithm. Exhibit A-4 shows just the cover and table of contents of each
manual. These documents shall be similar to the existing Image Checker
documentation. All documentation, except where noted, may be released to the
customer. Documentation to be provided in English in both hardcopy and digital
form (e.g. Microsoft Work document).
       Documentation:

<PAGE>

          1.   User's Manual describing the functionality of the R2 CAD
               application.
          2.   Service Manual describing how to install, configure, and diagnose
               R2's CAD application.
          3.   Documentation global marketing authorization documents needed to
               support Kodak claims for the R2 CAD application.
          4.   Conformance statement describing the DICOM mechanism and format
               for sending images to the R2 CAD application, and receiving
               images from the R2 CAD application.
          5.   Test cases (image input and CAD software output) to verify R2's
               CAD application is operating correctly when integrated with
               Kodak's FFDM system.
          6.   Engineering specification for interface between CAD network
               appliance and workstation. Details of interface to be mutually
               agreed upon by R2 and Kodak. This documentation shall not be
               released outside Kodak.

7.   Training to be provided by Supplier

Two types of training will be provided by R2:

     1.   Application Training: R2 will provide one training course on R2's CAD
          application to Kodak. This training course will cover the types of
          features marked by R2's CAD application, how to interpret R2's CAD
          markers and any optional features, etc.
     2.   Service Training: R2 will provide one training course on installing,
          configuring, and upgrading R2's CAD application product to Kodak.

8.  Milestone Schedule

          Milestone 1
          Description: Support RSNA Demo
                       -----------------
          Deliverables: R2 to provide CAD marker information for a set of 6 to 8
          digitized hardcopy demonstration cases.
          Due Date: 10/26/2000 with one example by 10/6/2000
          Acceptance Test: Receipt of images and CAD results that can be
          integrated into EK demo workstation.
          Acceptance Period: 1 day
          Correction Period: 2 days

          Milestone 2
          Description: EK to provide phantom images plus limited set of clinical
                       ---------------------------------------------------------
          images from EK digital system to R2
          -----------------------------------
          Deliverables: Phantom images, Flat Field Images (20 - 30 images),
          plus 5-10 clinical cases (if possible).
          Due Date: Target 1/15/2001
          Acceptance Test: Images Delivered.
          Acceptance Period: 1 week
          Correction Period: 2 weeks

          Milestone 3
          Description: Regulatory strategy definition
                       ------------------------------

<PAGE>

          Deliverables: Global submission strategy for the product in the
          defined markets. Specific language for the multiple marketing
          authorizations must be agreed upon between R2 and Kodak. Regulatory
          strategy for CAD claim must be agreed upon, including determination of
          roles in the collection of clinical data. Due Date: 4/01/2001
          Acceptance Test: Strategy plan for obtaining marketing authorizations
          and definition of clinical trial responsibilities.
          Acceptance Period: 1 week
          Correction Period: 2 weeks

          Milestone 4
          Description: First Prototype of CAD Application product
                       -------------------------------------------
          Deliverables: R2 CAD algorithm modified for EK and initial performance
          results predicted.
          Due Date: Target 8/15/2001
          Dependency: Initial set of clinical cases collected by R2 two months
          previously.
          Acceptance Test: Verification and validation of image test set and
          compare against expected results.
          Acceptance Period: 1 week
          Correction Period: 2 weeks

          Milestone 5
          Description: Clinical evaluation of CAD product integrated into EK
                       -----------------------------------------------------
          system
          ------
          Deliverables: 3 clinical trial sites implemented (joint deliverable
          EK/R2) (Build into reader study for FFDM)
          Due Date: 12/15/2001
          Dependency: Complete training database available to R2 by Sept. 15,
          2001.
          Acceptance Test: Sites have integrated FFDM / CAD / workstation system
          Acceptance Period: 1 week
          Correction Period: 1 month

          Milestone 6
          Description: R2 Releases Product (R2 CAD applied to EK system)
                       -------------------------------------------------
          Deliverables: Clinical evaluation complete. Product released by R2 to
          EK. Product for investigational use only in U.S. and for release
          outside of U.S. consistent with local regulations. Verification and
          validation test reports demonstrating that the CAD application
          performs as required.
          Due Date: Target 3/31/2002.
          Acceptance Test: Released Y/N
          Acceptance Period: Immediate
          Correction Period: 1 month

          Milestone 7
          Description: R2 and Kodak File for their respective FDA approvals
                       ----------------------------------------------------
          Deliverables: R2 submits FDA package for CAD application. Kodak
          submits FDA package for any changes to the workstation if needed.
          Due Date: The date that EK received FDA approval for FFDM system
          Acceptance Test: Filed y/n
          Acceptance Period: immediate
          Correction Period: TBD

          Milestone 8
          Description: FDA approval
                       ------------
          Deliverables: Formal notice from FDA
          Due Date: TBD -- expected 3-6 months after filing

<PAGE>

          Acceptance Test: Approval Y/N
          Acceptance Period: immediate
          Correction Period: 3-6 months

          Milestone 9
          Description: EK Launches CAD as Feature on Digital Mammography System
                       --------------------------------------------------------
          Deliverables: Passage of Gate 3
          Due Date: Upon receiving FDA approval
          Acceptance Test: gate passage
          Acceptance Period: immediate
          Correction Period: 3-6 months

9.   Reviews, Test, and Acceptance of Deliverables.
          Upon receipt of all required Deliverables for a Milestone, Kodak will,
          within the Acceptance Period review and, if applicable, test, the
          Deliverables. If Kodak accepts the Deliverables, Kodak will indicate
          its acceptance by written notice to Supplier no later than three
          business days after the end of the Acceptance Period.

          If in Kodak's reasonable judgment the Deliverables fail to meet the
          applicable specifications in any material respect, Kodak will prepare
          a written summary of its objections and deliver it to Supplier within
          three business days after the end of the Acceptance Period. Supplier
          will within the Correction Period use reasonable commercial efforts to
          correct the Deliverables to eliminate the objections noted by Kodak.
          Supplier will deliver the corrected Deliverables to Kodak no later
          than one business day after the end of the Correction Period for
          Kodak's reconsideration for acceptance as provided above. If in
          Kodak's reasonable judgment the Deliverables remain unsatisfactory in
          any material respect then, at Kodak's option, Kodak may grant Supplier
          one or more additional Correction Periods.

10.  Project Payments and Exclusivity

A.   Payments
          Event              Development Fee

          TOTAL              ***

B.   Payment for Use
     The prices for R2's CAD application product are TBD and will be set based
     on market conditions, and pricing for similar R2 product configurations,
     service, and support (as described in section 4.2 in the main agreement).
     Kodak shall have the opportunity to earn the best prices, which will be
     dependent on the volume of licenses purchased over a mutually agreeable
     time period. A falling price schedule, based on volume will apply.

     An example of R2's fee structure for its CAD application product (based on
     the ImageChecker) is as follows:
    --------------------------------------   -----------------------------------
     Product/Feature                         Pricing Model
    --------------------------------------   -----------------------------------
     R2's Base CAD application software      License fee. One "unit" refers to
                                             the license required to process
                                             to process images acquired on one
                                             Kodak FFDM acquisition system.
                                             1-year warranty included.

    --------------------------------------   -----------------------------------
     CAD Application Updates                 Yearly software contract fee
    --------------------------------------   -----------------------------------
     CAD Application Upgrades                Additional license fee
    --------------------------------------   -----------------------------------
     Service                                 TBD, depending on whether R2 or
                                             Kodak provides the hardware, and
                                             whether R2 or Kodak is responsible
    ----------------------------------------------------------------------------

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

<PAGE>

    --------------------------------- ------------------------------------------
                                        for servicing the product.
    --------------------------------- ------------------------------------------
     Training                           TBD.
    --------------------------------- ------------------------------------------

     Any custom development effort required of R2 to integrate the Digital CAD
     application into Kodak's FFDM system will be charged at a price TBD.

The above pricing model reflects R2's current "per unit" license mechanism. An
alternate, "per click" or volume based license mechanism could be implemented to
reduce the complexity of the licensing mechanism, and to allow for pricing based
on volume of cases processed.

Licensing
R2's CAD application product is currently licensed on a "per unit" basis where
one unit corresponds to the to the license required to process images acquired
on one Kodak FFDM acquisition system. With this mechanism, the R2 CAD
application can accept images acquired on more than one FFDM system; however, a
license is required for each FFDM machine sending images to the CAD application.
To support this model for licensing, Kodak must include, in the DICOM image
header, a unique identifier for the FFDM machine, and for each "unit" ordered by
Kodak, R2 would provide a license key to Kodak that would enable one FFDM
machine to connect to one R2 CAD application.

C.   Exclusivity
     Kodak will be free to market and sell this product worldwide on a
     non-exclusive basis. Also, on a non-exclusive basis, Kodak will have equal
     access to all upgrades associated with this basic CAD application.

The undersigned understand and agree to the terms of this agreement:

Customer:                               Supplier:
Eastman Kodak Company                   R2 Technology

         /s/ James E. Burns                  Business Manager, Mammography
-----------------------------------     ----------------------------------------
         (Technical Mgr.)                               (title)

             Jim Burns                            /s/ Sandra Stapletin
-----------------------------------     ----------------------------------------
            (signature)                               (signature)

          October 13, 2000                          October 26, 2001
-----------------------------------     ----------------------------------------
               (date)                                    (date)

         /s/ John Metzger
----------------------------------
         (Purchasing Mgr.)

           John Metzger
----------------------------------
            (signature)

          October 12, 2000
-----------------------------------
               (date)

<PAGE>

                                   Exhibit A-1

                                Change Order Form

     Date

     Change Control Form No.

     Description of change:

     Reason for change:

     Man Hours:

     Impact on Schedule:

     Affect on Cost:

     Accepted

     for Supplier __________date ____   for KODAK _______________date_____

<PAGE>

                                   Exhibit A-2

                            Problem Assessment Levels

     CRITICAL. The end-user experiences real or perceived data loss or
     corruption or an essential part of the system is unusable. Unusable means
     that end-users cannot use an essential part of the system because of its
     design or a defect. Essential parts of the system are those that end-users
     need to use the system effectively. Supplier will immediately apply
     continuous efforts to provide Kodak with a correction as soon as possible.

     SEVERE. The end-users effectiveness is severely compromised for an
     essential part of the system although all essential parts of the system can
     be used. This can be measured by comparison to end-users expectations,
     previous products, previous releases of the same product or quality
     objectives established for the product or system. Effectiveness refers to
     the end-user's productivity and satisfaction with the work process provided
     by the system. Satisfaction with the work process includes concerns such as
     unpleasant or frustrating processes that affect the system's fitness for
     use. Supplier will use all reasonable efforts to provide Kodak with a
     correction to the problem within 72 hours.

     MEDIUM. The end-users effectiveness is compromised, though not severely.
     All essential parts of the system can be used. This classification is
     appropriate for all parts of the system, essential or otherwise. Supplier
     will use all reasonable efforts to provide Kodak with a correction to the
     problem within thirty (30) calendar days.

     LOW. The end-user can circumvent the problem and use the system with only
     slight inconvenience. Supplier will use all reasonable efforts to provide
     Kodak with a correction to the problem within sixty (60) calendar days, or
     at the next scheduled maintenance release, as agreed by the Project
     Managers.

<PAGE>

                                  Exhibit A-3

R2's Digital Mammography CAD application is intended to operate on a standalone
PC, connected to the network:

                                                              Kodak's
      Kodak's FDDM                                          Review/PACS
   Acquisition System              DICOM MG                 Workstation
 [GRAPHIC REMOVED HERE]     [GRAPHIC REMOVED HERE]     [GRAPHIC REMOVED HERE]

                                    R2 CAD
                              Application Product
                            [GRAPHIC REMOVED HERE]

        DICOM MG                                            CAD Results
 [GRAPHIC REMOVED HERE]                                [GRAPHIC REMOVED HERE]

<PAGE>

                                  Exhibit A-4

                      Example Documents from ImageChecker

               (Same as provided in Attachment A-2, Exhibit A-4)

<PAGE>

                                 Attachment A-2

                               Statement Of Work
         CAD applied to Eastman Kodak Digital Capture (CR & DR) Systems
         --------------------------------------------------------------
                             (Lung Nodule Detection)

1.  Addresses for Notices / Telephone and Fax Numbers

       Kodak:
       Eastman Kodak Company
       Attention: OEM Software Sourcing
       901 Elmgrove Road
       Rochester, NY 14653-5127
       Phone: 716-726-9030
       Fax: 716-726-1557

       Supplier:
       R2 Technology, Inc
       325 Distel Circle
       Los Altos, CA 94022
       Phone: 650-254-7200
       Fax: 650-254-7201

2.  Key Personnel

       a. Project Managers.  The following persons are designated Project
       Managers

       Project Manager for Kodak: Jim Burns
       Project Manager for Supplier: Jimmy Roehrig

       b. The following persons are designated the representatives for each
       party for purposes of dispute resolution as described in the Agreement:

       For Kodak:
       Initial Level Representative -- Ted Taccardi
       Final Level Representative -- Gary Keyes

       For Supplier
       Initial Level Representative -- Ken Miller
       Final Level Representative -- Mike Klein

3.  Scope of Project / Description of Kodak Product
Kodak Product: R2 CAD algorithms integrated into Kodak's CR and DR Digital
--------------
Capture Systems

<PAGE>

Scope:
------
     o    Kodak and R2 will work jointly to develop the above product
           o    R2 will have primary responsibility for the performance of CAD
                algorithms.
           o    Kodak and R2 will be jointly responsible for the seamless
                integration of the CAD application into the Kodak system.
           o    Kodak will have overall responsibility for the other elements of
                the project.
     o    R2 will be responsible for regulatory approvals for the R2 product.
          This will include regulatory approvals in U.S., Canada, Western Europe
          and Japan. Other regions of the world will be included upon mutual
          agreement between R2 and Kodak.
     o    Kodak, with support from R2, will have the primary responsibility for
          obtaining any necessary regulatory approvals pertaining to the display
          of CAD markers on Kodak's review workstation. R2 agrees to provide
          Kodak with required support and information such that marketing
          authorizations can be obtained.
     o    R2 will provide support for definition of final product, leveraging
          R2's knowledge of CAD and workflow, e.g., hanging protocols,
          diagnostic workstation functionality, style of CAD markers, etc.

R2 shall provide the following deliverables to Kodak:
-----------------------------------------------------

     1.   A lung cancer computer aided detection (CAD) algorithm that
          automatically detects abnormal lung nodules in Kodak CR & DR images.
          The CAD algorithm shall run on a network appliance type device. The
          interface between the network appliance and the diagnostic workstation
          shall be determined between the two design teams. This interface
          definition shall include the method for tuning algorithm sensitivity
          and specificity.
     2.   Documentation of the algorithm, network appliance interface and
          software implementation.
          See Section 6 below.
     3.   Specification of recommended hardware platform, including processor,
          memory, disk space, network interface, operating system, etc., to meet
          the throughput requirements of Kodak. (The supplier shall provide this
          specification; Kodak shall use this specification to provide the
          hardware for product systems. The supplier shall provide hardware
          platforms for all development and clinical trial systems.)
     4.   Algorithm performance characterization data (sensitivity and
          specificity) determined prospectively for Kodak CR & DR imagery. This
          characterization shall be performed on a set of images omitted from
          the training set. The deliverable shall be in the form of an ROC curve
          for the test set and an ROC curve for the training set.
     5.   Verification and validation test cases (image input and CAD software
          output) to verify algorithm when software is integrated into the Kodak
          system. These images shall be selected by the supplier from the test
          set and or training set.
          On 4 and 5 above, the optimal split between training and testing cases
          is to be determined during development.
     6.   Support for algorithm performance validation, software implementation
          verification, final product definition / system integration. This
          support shall include recommendations for methods of comparing the
          incremental benefit of CAD using CR and DR imagery.

See Exhibit A-3 for System Diagram.
----------------------------------

<PAGE>

4.  Kodak Supplied Materials

Hardware/software supplied to R2 from Kodak: For RSNA-2000 Demo (to be returned
after Demo): NT workstation, 21" portrait Hi-Res monitor, 15" flat panel
monitor, mouse and keypad (This is the same equipment to be used for Digital
Mammography as well)

Images supplied to R2 from Kodak:
       CR
       Training Set:  Kodak CR images of known normal cases, minimum of 100
                        expected.
                      Kodak CR images with known Non-Calcified Nodules (NCN)
                        with locations, minimum of 100 expected.
       Test Set:      Kodak CR images of known normal cases, minimum of 100
                        expected.
                      Kodak CR images with known NCN with locations, minimum of
                      100 expected.

       DR
       Training Set:  Kodak DR images of known normal cases, minimum of 50
                        expected.
                      Kodak DR images with known NCN with locations, minimum of
                        50 expected.
       Test Set:      Kodak DR images of known normal cases, minimum of 50
                        expected.
                      Kodak DR images with known NCN with locations, minimum of
                        50 expected.

5.  Functional Specifications

-----------------------------------------------------
a)       Overall sensitivity = * * *%
b)       False marks/image * * *
c)       Specificity * * *%
-----------------------------------------------------
-----------------------------------------------------
Processing time can be ~ 1 minute per image
-----------------------------------------------------
-----------------------------------------------------
CAD Markers displayed could be at * * * thresholds,
but this may have regulatory implications

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

ALGORITHM ACCEPTANCE: Kodak shall "sequester" a set of test images in order to
independently verify the sensitivity and specificity performance of the software
version of the algorithm on a separate set of independent test images.

6.  Documentation to be provided by Supplier

See Exhibit A-4 below for example documentation from Supplier's Mammo Image
Checker product. We anticipate that the set for digital chest will be at this
level, and possibly simpler. Supplier will not supply listings of algorithm.
Exhibit A-4 shows just the cover and table of contents of each manual. These
documents shall be similar to the existing Image Checker documentation. All
documentation, except where noted, may be released to the customer.
Documentation to be provided in English in both hardcopy and digital form (e.g.
Microsoft Word document). Shown are the following:

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

<PAGE>

         1.   A Release Note, which is occasionally created when there is some
              change that doesn't require a complete new set of documentation.
         2.   The Algorithm Description, which is very high level and intended
              to educate the doctor on what is being marked, and potential
              shortcomings.
         3.   The System Installation Manual.
         4.   System Service Manual.
         5.   Processor User Manual.
         6.   Engineering specification for interface between CAD network
              appliance and workstation. Details of interface to be mutually
              agreed upon by R2 and Kodak. This documentation shall not be
              released outside Kodak.

7.  Training to be provided by Supplier
Two types of training will be provided by R2:

    1.   Application Training:  R2 will provide training on R2's CAD
         application.  This training course will cover the types of features
         marked by R2's CAD application, how to interpret R2's CAD markers and
         any optional features, etc.
    2.   Service Training:  R2 will provide training on installing,
         configuring, and upgrading R2's CAD application product.

8.  Milestone Schedule

         Milestone 1
         Description: Support RSNA Demo
                      -----------------
         Deliverables: R2 to provide * * * example Film Digitized images with
         CAD results. Images shall be in raw format with specification of
         width, height and bit depth CAD results shall be an ASCII file.
         Due Date:  * * * with one example image with CAD results in the format
         to be provided for RSNA by * * *.
         Acceptance Test:  Receipt of images and CAD results that can be
         integrated into EK demo workstation.
         Acceptance Period:  1 day
         Correction Period:  2 days

         Milestone 2
         Description: Final system assembly and test
                      ------------------------------
         Deliverables: CAD network appliance for communication test which
         receive images from a Kodak system and transmit results to a Kodak
         system.
         Due Date: * * *
         Acceptance Test:  Transmit images successfully; transmit results
         successfully between network appliance and Kodak system.
         Acceptance Period:  1 week
         Correction Period:  2 weeks

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

<PAGE>

         Milestone 3
         Description: Regulatory strategy definition
                      ------------------------------
         Deliverables: Global submission strategy for the product in the
         defined markets. Specific language for the multiple marketing
         authorizations must be agreed upon between R2 and Kodak. Regulatory
         strategy for CAD claim (510K for Image Processing tool or PMA for CAD
         claim) must be agreed upon, including determination of roles in the
         collection of clinical data.
         Due Date: * * *
         Acceptance Test:  Strategy plan for obtaining marketing authorizations
         (510K or PMA) and definition of clinical trial responsibilities.
         Acceptance Period:  1 week
         Correction Period:  2 weeks

         Milestone 4
         Description: CAD system prototype available for pre-clinical trial
                      -----------------------------------------------------
         Deliverables: CAD network appliance which will accept images from
         Kodak system and provide results to a Kodak system. This system will
         be placed in a clinical environment for testing purposes prior to the
         clinical trial. R2 shall provide the hardware and software. (This will
         allow the start of acquiring data to be published.)
         Due Date: * * *
         Acceptance Test:  Verification and validation of image test set and
         compare against expected results, and demonstrate  performance
         adequate for initial pre-clinical testing.
         Acceptance Period:  1 week
         Correction Period:  2 weeks (TBD)

         Milestone 5
         Description: FDA clinical unit
                      -----------------
         Deliverables: CAD network appliance which will accept images from
         Kodak system and provide results to a Kodak system. This system will
         be placed in a clinical environment for FDA clinical trials. (This
         assumes 510K route.) R2 shall provide the hardware and software.
         Due Date:  * * *
         Acceptance Test:  Verification and validation of image test set and
         compare against expected results. Verification and validation test
         reports demonstrating that the CAD application performs as required.

         Acceptance Period:  1 week
         Correction Period:  2 weeks (TBD)

         Milestone 6
         Description: Conduct clinical study (data collection, analysis, report)
                      ----------------------------------------------------------
         Deliverables: FDA submittal for 510K
         Due Date:  * * *
         Acceptance Test:  FDA submission
         Acceptance Period:  Immediate
         Correction Period:  2 weeks (TBD)

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

<PAGE>

         Milestone 7
         Description: Product availability
                      --------------------
         Deliverables: FDA approval and product available
         Due Date:  ***
         Acceptance Test:  FDA approval letter
         Acceptance Period:  Immediate
         Correction Period:  N/A

9.   Reviews, Test, and Acceptance of Deliverables.
         Upon receipt of all required Deliverables for a Milestone, Kodak will,
         within the Acceptance Period review and, if applicable, test, the
         Deliverables. If Kodak accepts the Deliverables, Kodak will indicate
         its acceptance by written notice to Supplier no later than three
         business days after the end of the Acceptance Period.

         If in Kodak's reasonable judgment the Deliverables fail to meet the
         applicable specifications in any material respect, Kodak will prepare a
         written summary of its objections and deliver it to Supplier within
         three business days after the end of the Acceptance Period. Supplier
         will within the Correction Period use reasonable commercial efforts to
         correct the Deliverables to eliminate the objections noted by Kodak.
         Supplier will deliver the corrected Deliverables to Kodak no later than
         one business day after the end of the Correction Period for Kodak's
         reconsideration for acceptance as provided above. If in Kodak's
         reasonable judgment the Deliverables remain unsatisfactory in any
         material respect then, at Kodak's option, Kodak may grant Supplier one
         or more additional Correction Periods, or Kodak may declare Supplier in
         Default of the Agreement.

10.  Project Payments and Exclusivity
     A.  Payments
         Timing            Event            Development Fee
         ------            -----            ---------------
         * * *             Milestone 1               $400K
         * * *             Milestone 2               $400K
         * * *             Milestone 3               $400K
         * * *             Milestone 4               $400K
         * * *             Milestone 5               $400K
         * * *             Milestone 6               $400K
         * * *             Milestone 7               $400K

         TOTAL                                 ______$2.8M____

         Note: Payments to be made at the end of the quarter, upon satisfaction
         of defined milestone. Exception is the 4th quarter, 2000 payment, which
         will occur upon approval of overall agreement and completion of
         milestone 1.

o    Payment for Use
The licensing fee for this application will be established to allow Kodak to
earn a * * *% gross margin. Also, Kodak will receive a credit of * * *% of the
agreed to license fee until the aggregate

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

<PAGE>

total of credits equals the total Development Fees paid by Kodak (section 4.2,
in the Main Agreement, further describes the payment and credit terms).

Definition of Terms:
-------------------
o    "Fair Market License" = the fee the End Customer pays for this application
     and upgrades (jointly determined by R2 and Kodak)
o    "Kodak License Fee to R2" = fee Kodak pays R2 for application license,
     prior to applying credits, used in calculation to ensure Kodak a * * *%
     gross margin
o    "Cost of Goods" = (Kodak License Fee to R2) + (Kodak's Install & Warranty
     costs) + (Unique Required Hardware costs)
o    "Unique Required Hardware" = Kodak's costs to integrate the CAD application
     software into the Kodak system. This includes any hardware solely required
     for the CAD application.
o    "Gross Margin" = (Fair Market License) - (Cost of Goods)

Approach to Calculate "Kodak License Fee to R2":
------------------------------------------------
     o    Set gross margin as a percent of revenue to * * *%
     o    Gross Margin = * * *% x (Fair Market License)
     o    Cost of Goods = (Fair Market License) - * * * x (Fair Market License)
     o    Kodak License Fee to R2 = (Cost of Goods) - (Kodak's I & W) -
            (Unique Required Hardware)

Example (for clarification):
----------------------------
Assume: Fair Market License = $* * *, Install & Warranty = $* * *, Unique
Hardware = $* * * Cost of Goods = $* * * - * * *($* * *) = $* * *
Kodak License Fee to R2 = $* * * - $* * * - $* * * = $* * *

When the * * *% credit is applied, Kodak would pay $* * * for the Kodak License
Fee to R2 until the development fees were paid back.

In the event Kodak's gross margin is less than * * *%, the license fee shall be
adjusted so that Kodak bears * * * and R2 * * * of the difference between actual
gross margin and the ideal * * *%. Product upgrades will follow the same
approach as described above (note: bug fixes provided at no additional cost).

o    Exclusivity
     Kodak shall have the worldwide exclusive right to market and sell this
     product until 18 months after the date that the FDA has approved it for
     commercial sale and internal EK commercialization processes are complete.
     Thereafter, Kodak will be free to market and sell this product worldwide on
     a non-exclusive basis.

The undersigned understand and agree to the terms of this agreement:

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

<PAGE>

Customer:                                         Supplier:
Eastman Kodak Company

       /s/ Jim Burns                                    /s/ Jimmy Roehrig
------------------------------                    ------------------------------
        (signature)                                        (signature)

       James E. Burns                                     Jimmy Roehrig
------------------------------                    ------------------------------
      (Technical Mgr.)                                (Chief Science Officer)

      October 13, 2000                                   October 26, 2000
------------------------------                    ------------------------------
           (date)                                             (date)

     /s/ John S. Metzger
------------------------------
        (signature)

       John S. Metzger
------------------------------
      (Purchasing Mgr.)

      October 12, 2000
------------------------------
          (date)

<PAGE>

                                   Exhibit A-1

                                Change Order Form

      [Note: Insert copy of change order form to be used for this project]

         Date

         Change Control Form No.

         Description of change:

         Reason for change:

         Man Hours:

         Impact on Schedule:

         Affect on Cost:

         Accepted

         for Supplier   __________date  ____for KODAK  _______________date_____

                                       28

<PAGE>

                                   Exhibit A-2

                            Problem Assessment Levels

         Critical: The end-user experiences real or perceived data loss or
         --------
         corruption or an essential part of the system is unusable for the
         end-user. Unusable means that end-users cannot use an essential part of
         the system because of its design or a defect. Essential parts of the
         system are those that end-users need to use the system effectively.
         Supplier will immediately apply continuous efforts to provide Kodak
         with a correction as soon as possible.

         Severe: The end-users effectiveness is severely compromised for an
         ------
         essential part of the system although all essential parts of the system
         can be used. This can be measured by comparison to end-users
         expectations, previous products, previous releases of the same product
         or quality objectives established for the product or system.
         Effectiveness refers to the end-user's productivity and satisfaction
         with the work process provided by the system. Satisfaction with the
         work process includes concerns such as unpleasant or frustrating
         processes that affect the system's fitness for use. Supplier will use
         all reasonable efforts to provide Kodak with a correction to the
         problem within 72 hours.

         Medium: The end-users effectiveness is compromised, though not
         ------
         severely. All essential parts of the system can be used. This
         classification is appropriate for all parts of the system, essential or
         otherwise. Supplier will use all reasonable efforts to provide Kodak
         with a correction to the problem within thirty (30) calendar days.

         Low: The end-user can circumvent the problem and use the system with
         ---
         only slight inconvenience. Supplier will use all reasonable efforts to
         provide Kodak with a correction to the problem within sixty (60)
         calendar days, or at the next scheduled maintenance release, as agreed
         by the Project Managers.

                                       29

<PAGE>

                                   Exhibit A-3

                                 System Diagram

                             [GRAPHIC APPEARS HERE]

                                       30

<PAGE>

                                   Exhibit A-4

                       Example Documents from ImageChecker

                                  RELEASE NOTES

                                       For

                           The ImageChecker(R) System

                             M1000-SL Processor Unit

                              Software Version 2.2

                          [LOGO OF R2 TECHNOLOGY, INC.]

R2 Technology, Inc.                                         P/N 381-80-009 Rev A
325 Distel Circle                                                      June 2000
Los Altos, CA 94022, USA

                                       31

<PAGE>

1.   INTRODUCTION

               This document describes new features and changes to the
               ImageChecker M1000-SL Processor Unit (formerly known as the
               Lumisys Processor Unit) to reflect changes for Software V 2.2.

2.   CHANGES FOR THE LUMISYS PROCESSOR UNIT

     2.1. ALGORITHMS

          The ImageChecker algorithm has maintained its high sensitivity for
          malignant Microcalcification clusters (98%). There is a substantial
          improvement between release V2.0 and V2.2 for Masses, with the system
          now marking 86% of all malignant Masses giving an overall sensitivity
          of 90%.

          The V2.2 release provides a minor reduction in marks per case for
          microcalcification and mass cancer cases (5%) but a substantial
          reduction in marks per case for Normals (20%). Given the overwhelming
          preponderance of normal cases in standard screening cases, the 20%
          reduction in marks per case seen would also translate into an
          approximately 20% reduction in marks overall with an improvement in
          sensitivity for marking true cancers.

     2.2. NEW TITLE FOR LUMISYS PROCESSOR UNIT

          To accommodate expansion of the R2 ImageChecker M1000 product line,
          the Processor Unit (i.e., Lumisys) has been re-named the M1000-SL (for
          Single Case Load) Processor Unit. As such, the accompanying user
          manual is now titled the "M1000-SL Processor Unit User Manual."

     2.3. UPDATED GRAPHIC USER INTERFACE (GUI)

          The Main Screen on the Touch-Sensitive Screen (i.e., the GUI) has been
          updated with a new look; see Appendix I. Also, the selected Film
          Selection Buttons now turn green once they are activated (they did not
          change color before). An important addition to the Main Screen is the
          ALERT Button (see below). Several other Screens have been slightly
          modified.

     2.4. NEW ALERT BUTTON AND SYSTEM ALERT MESSAGES

          A new ALERT Button appears on the Main Screen of the Touch-Sensitive
          Screen (GUI); see Appendix II. If the System needs attention, this
          ALERT Button activates and changes color. Press the ALERT Button to
          see a System Alert Message that includes instructions on what you need
          to do. See Appendix III to learn about System Alert Messages.

     2.5. REVISION TO SHUTDOWN PROCEDURE

          Previously, the System showed it had completed shutdown with the
          wording "done" on the Touch-Sensitive Screen (GUI). Now you will see
          the wording "Power down". Do not turn power off until you see this new
          wording. (This change is reflected in the User Manual.)

                                       32

<PAGE>

     2.6. CHANGES TO DOCUMENTATION OR ADDED DOCUMENTATION

          In addition to the previously noted changes, here are some other
          revisions to text in the User Manual.

          2.6.1. REVISED WARNINGS: Radiological Interpretation

          The text for two Warnings (for Radiological Interpretation) has been
          revised:

Revised Warning #1

          NEW Text: The device marks calcification features with triangles and
          --------
          mass features with asterisks. These features may not represent cancer,
          and the user must still use her or his interpretative skills on items
          marked by the device.

          Old Text: The device marks many things which do not represent cancer,
          --------
          and the user must still use her or his interpretative skills on items
          marked by the device.

Revised Warning #2

          NEW Text: The device is more sensitive for the detection of
          --------
          microcalcifications (98%) than masses (86%), that is, it will miss
          about 2% of microcalcifications and 14% of masses.

          OLD Text: The device is more sensitive for the detection of
          --------
          microcalcifications (97.8%) than masses (79.3%), that is, it will miss
          about 2% of microcalcifications and 20% of masses.

          2.6.2. REVISED TEXT: Brief Device Description

          A bulleted line of text for the Brief Device Description has been
          revised:

          NEW Text:
          --------

          o    Dense regions and dense regions with radiating lines (i.e.,
               regions suggestive of masses or architectural distortions).

          OLD Text:
          --------

          o    Dense regions with radiating lines (i.e., regions suggestive of
               masses or architectural distortions).

          2.6.3. NEW APPENDIX

          A new Appendix (IV) has been added to the M1000-SL User Manual that
          lists all the current manuals available for the ImageChecker M1000
          System; the appendices have been re-numbered to accommodate this
          change.

                                       33

<PAGE>

APPENDIX I:  Updated Main Screen on the Touch-Sensitive Screen

Shown below is the updated Main Screen for the M1000-SL Processor Unit. The Main
Screen remains basically the same except for these changes:

o    There is a new ALERT Button (see Appendix II for more information).

o    The LAT Film Selection Buttons (and slots for accompanying Mini Pix) have
     been deleted. You can run the LAT films in the MLO slots.

o    Film Selection Buttons that are selected and activated look "pushed in" and
     have green lettering on them. De-selected Film Selection Buttons look
     "raised" and have black lettering on them.

o    The STOP and START Buttons have been slightly re-designed.

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

                             [GRAPHIC APPEARS HERE]

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

Figure 1:  Updated Main Screen with new ALERT Button.

                                       34

<PAGE>

                       This page intentionally left blank.

                                       35

<PAGE>

APPENDIX II:  The ALERT Button

If the ImageChecker System itself needs attention, the ALERT Button (Figure 2)
on the Main Screen activates and turns yellow; refer to table below. Press the
ALERT Button to see a black pop-up message with a specific System Alert Message
(see example in Appendix III). When you see a System Alert Message, follow the
simple instructions that appear on the pop-up message, take the necessary action
and/or call your R2 service representative (if instructed to do so). To clear
the System Alert Message, press the "OK" button on it. Most System Alerts can be
resolved by you, the user. See Appendix III for a list of System Alert Messages.

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

                             [GRAPHIC APPEARS HERE]

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

Figure 2: The ALERT Button

--------------------------------------------------------------------------------
         When ALERT Button                     What It MeansWhat to do
          looks like this
--------------------------------------------------------------------------------

       [GRAPHIC APPEARS HERE]         No Alert

                                      There are no errors and the ALERT Button
       Button looks "faded"           is inactive. You do not need to do
                                      anything.

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

       [GRAPHIC APPEARS HERE]         System Alert

                                      ALERT Button activates and the entire
      Entire Button is yellow.

                                      Press the ALERT Button to see a System
                                      Alert Message on the Main Screen. To
                                      resolve the System Alert, take the
                                      required action instructed in the System
                                      Alert Message and/or call your R2 service
                                      representative (if instructed to do so).
                                      To clear the System Alert Message, press
                                      the "OK" button on it.

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

                                       36

<PAGE>

                       This page intentionally left blank.

                                       37

<PAGE>

APPENDIX III: System Alert Messages

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

                             [GRAPHIC APPEARS HERE]

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

Figure 3:  An example of a System Alert Message on the Main Screen.

Refer to table below for a list of System Alert Messages, what they mean, and
how to resolve them. After following instructions on the System Alert Message,
press the "OK" button to clear the message.

--------------------------------------------------------------------------------
     System Alert Message                  What it meansWhat to do
--------------------------------------------------------------------------------

"Diagnostic tests failed"             Internal self-test has failed.

                                      Call your R2 service representative.

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

"Preventive maintenance is            Maintenance is required.
required"
                                      Call your R2 service representative.

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

"Restart system (to run self-test)"   System needs to be power cycled every week
to run the self-test.

                                      Power cycle the system on a weekly basis
                                      (see page 55 in User Manual).

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

"Run test films (to test system       Test Films need to be run every week.
performance)"

                                      Run Test Films on a weekly basis (see page
                                      49 in User Manual).

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

"Re-run test films (to verify system  Test Films failed.
performance)"
                                      Test Films have failed and need to be
                                      re-run (see page 49 in User Manual). If,
                                      after several attempts, the films still
                                      fail, call your R2 service representative.

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

                                       38

<PAGE>

                       This page intentionally left blank.

                                       39

<PAGE>

                        The ImageChecker(R) M1000 System

                                    ALGORITHM
                                   DESCRIPTION

                              [GRAPHIC APPEARS HERE]

                           [LOGO OF R2 TECHNOLOGY, INC.]

R2 Technology, Inc.                                         P/N 390-00-093 Rev F
325 Distel Circle                                                      June 2000
Los Altos, CA 94022   USA

                                       40

<PAGE>

For Clinical Understanding Only

This document is intended to provide you with an understanding of the
ImageChecker's search algorithms. It assumes that you already have a working
knowledge of the ImageChecker M1000 System and its components. Refer to the
RADX(TM) 614A-Display Unit User Manual or the Mammolux(TM) 680-Display Unit User
Manual for operational instructions (for reference purposes, step-by-step
instructions for reading cases are included in the back of this manual).

Technical Support
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

If you need assistance, contact your R2 service representative or call R2
Technical Support at:

     Within the US:       1 (888) 472 7877
     Elsewhere:           1 (650) 254 8988

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

For assistance in Europe, contact:

     R2 Technology, Inc.
     Hervensebaan 15
     5232 JL 's-Hertogenbosch
     The Netherlands
     Tel:   +31 (0) 73 6 443 882
     Fax:   +31 (0) 73 6 443 769

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

For assistance in Japan, contact:

     Sales Dept.
     Meditec Corporation
     3-14, Kudan-Minami 2-Chome
     Chiyoda-ku, Tokyo 102-0074
     Japan
     Tel:   +81-3-5275-7257
     Fax:   +81-3-5275-7263

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

Copyright(C)2000 R2 Technology, Inc. All rights reserved.

This document cannot be reproduced in part or whole without the expressed
written consent of R2 Technology. R2 Technology reserves the right to revise
this manual and to make changes in the content.

ImageChecker is a registered trademark of R2 Technology, Inc. Other trademarks
are property of their respective owners, and are hereby acknowledged.

                                       41

<PAGE>

Contents
--------------------------------------------------------------------------------

Exhibit A-4 ........................................................        2
    APPENDIX II: The ALERT button ..................................        7
    APPENDIX III: System Alert Messages ............................        9
Exhibit A-5 ........................................................       27
Training Procedure in Mammo: .......................................       27

APPLICATIONS PROTOCOL ..............................................       28

Day One ............................................................       30
Day Two ............................................................       30
Document Purpose ...................................................       32

                                       42

<PAGE>

                        The ImageChecker(R) M1000 System

                               INSTALLATION MANUAL

                             [GRAPHIC APPEARS HERE]

                          [LOGO OF R2 TECHNOLOGY, INC.]

R2 Technology, Inc.                                           P/N 390-00-198 VD1
325 Distel Circle                                                      July 2000
Los Altos, CA 94022  USA

                                       43

<PAGE>

Technical Support

[!]    Warning: Customers should not attempt to repair the ImageChecker System.
       -------
       Only R2-trained and authorized Service personnel are qualified to install
       or repair the system.

[!]    Important: All persons servicing the ImageChecker System must have
       ---------
       completed an R2 training course.

--------------------------------------------------------------------------------
If you need further assistance, call R2 Technical Support, at:
       Within the US:     1 (888) 472 7877
       Elsewhere:        +1 (650) 254-8992
       Service Fax:       1 (650) 526-1599
In Europe, contact:
       R2 Technology, Inc.,
       Hervensebaan 15, 5232  JL 's-Hertogenbosch,
       The Netherlands
       Tel:                   + 31 (0) 73 6 443 882
       Fax:                   + 31 (0) 73 6 443 769
--------------------------------------------------------------------------------

Copyright(C)2000 R2 Technology, Inc. All rights reserved.

This document cannot be reproduced in part or whole without the expressed
written consent of R2 Technology. R2 Technology reserves the right to revise
this manual and to make changes in the content.

ImageChecker is a registered trademark of R2 Technology, Inc. Other trademarks
are property of their respective owners, and are hereby acknowledged.

                                       44

<PAGE>

Contents

INTRODUCTION ............................................................      5

Purpose of this Manual ..................................................      6

Topics Covered in this Manual ...........................................      7

Precautions and Important Notes .........................................      8

Facilities Requirements .................................................     10

MECHANICAL INSTALLATION .................................................     11

The Packing List ........................................................     12

Unpacking the Crates ....................................................     13
Checking for Transport Damage ...........................................     13

Unpacking the Processor Unit ............................................     15
Unpacking the Processor Unit (M1000-SL System) ..........................     15
 Unpacking the M1000-SL Processor Unit Crate ............................     15
 Unpacking the Lumisys M1000-SL Scanner Crate ...........................     16
Unpacking the Processor Unit (M1000-CL System) ..........................     17
 Unpacking the M1000-CL System (in Cart) ................................     17
 Unpacking the Canon M1000-CL System (modular version, no Cart) .........     18

Unpacking the Display Unit ..............................................     20
 Returning or Storing the Crates ........................................     22

Cabling the Components ..................................................     23

Installing the Optional Uninterruptible Power Supply (UPS) ..............     25

Installing the Display Unit .............................................     26
Installing the RADX 614A-Display Unit ...................................     26
Installing the Mammolux 680-Display Unit ................................     32

Installing the Processor Unit (with Scanner) ............................     35
Installing the M1000-SL Processor Unit ..................................     35
Installing the M1000-CL Processor Unit ..................................     37
 Installing the M1000-CL System (in Cart) ................................    37
 Installing the M1000-CL System (modular version, no Cart) ...............    38

Positioning the Equipment ...............................................     40

Installing and Configuring the Optional Printer .........................     41
Installing the Printer ..................................................     41
Setting the IP Address for the Printer ..................................     42
Specifying the Customer's Name on Printout ..............................     43

Configuring the Software ................................................     44

ELECTRICAL VERIFICATION .................................................     45

Verifying Installation of the ImageChecker M1000 System .................     46
Processor Unit Start-up .................................................     46
Display Unit Start-up ...................................................     48

System Verification Testing .............................................     49
Testing the M1000-SL System .............................................     49
Testing the M1000-CL System .............................................     54

Testing the Printer (Processor Unit) ....................................     57

Testing the Printer (Display Unit) ......................................     59

APPENDIX I:  POWER AND DATA FLOW BLOCK DIAGRAMS .........................     61

                                       45

<PAGE>

APPENDIX II:  SYSTEM SPECIFICATIONS .....................................     68

APPENDIX III:  INSTALLATION COMPLETION FORM .............................     70

INDEX ...................................................................     77

                                       46

<PAGE>

                       The ImageChecker(R) M1000-CL System

                                 SERVICE MANUAL

                             [GRAPHIC APPEARS HERE]

                           [LOGO R2 TECHNOLOGY, INC.]

R2 Technology, Inc.                                            P/N 390-00-247 VA
325 Distel Circle                                                      June 2000
Los Altos, CA 94022 USA

                                       47

<PAGE>

Technical Support

[!]   Warning:  Customers should not attempt to repair the ImageChecker M1000-CL
      -------
      System. Only R2-trained and authorized Service personnel are qualified to
      install or repair the system.

[!]   Important:  All persons servicing the ImageChecker M1000-CL System must
      ---------
      have completed an R2 training course.

--------------------------------------------------------------------------------
If you need further assistance, call R2 Technical Support, at:
    Within the US:    1 (888) 472 7877
    Elsewhere:       +1 (650) 254-8988
    Service Fax:      1 (650) 526-1599
In Europe, contact:
    R2 Technology, Inc.,
    Hervensebaan 15
    5232 JL 's-Hertogenbosch
    The Netherlands
    Tel:           + 31 (0) 73 6 443 882
    Fax:           + 31 (0) 73 6 443 769
--------------------------------------------------------------------------------

Copyright(C)2000 R2 Technology, Inc. All rights reserved.

This document cannot be reproduced in part or whole without the expressed
written consent of R2 Technology. R2 Technology reserves the right to revise
this manual and to make changes in the content.

ImageChecker is a registered trademark of R2 Technology, Inc. Other trademarks
are property of their respective owners, and are hereby acknowledged.

                                       48

<PAGE>

Contents

INTRODUCTION ............................................................      7

Purpose of this Manual ..................................................      8

Note About the Display Unit .............................................      9

Topics Covered in this Manual ...........................................     10

System Overview .........................................................     11
What is the ImageChecker M1000 System? ..................................     11
How does the ImageChecker M1000-CL System work? .........................     11

Warnings and Important Notes ............................................     13
ImageChecker M1000-CL System ............................................     13
Canon Scanner ...........................................................     15

THEORY OF OPERATION .....................................................     17

ImageChecker M1000 Continuous Loader System Description .................     18
Capabilities of the M1000-CL System .....................................     19

Functional Overview of Major Components .................................     20
The M1000-CL Canon Scanner ..............................................     20
The Power Switch ........................................................     21
The Touch-Sensitive Screen ..............................................     21
The MENU Arrow ..........................................................     23
The Computer tower ......................................................     23
The UPS .................................................................     24

DATA AND POWER FLOW BLOCK DIAGRAMS ......................................     25

M1000-CL Data and Signal Flow ...........................................     26
M1000-CL Power Flow .....................................................     28

USER INTERFACE ..........................................................     31

Map of Maintenance Screens ..............................................     32
  Maintenance Screens and Their Functions ...............................     33

Accessing the Maintenance Screens .......................................     37

SOFTWARE CONFIGURATION ..................................................     39

Purpose of Configuration Tools ..........................................     40
Uses ....................................................................     40
r2cfg script ............................................................     41

Configuring a Processor Unit Computer: Sample ...........................     43

Configuring a Display Unit Computer: Sample .............................     49

Setting the Time Zone 54 Entering Values Incorrectly ....................     55

Configuring the System ..................................................     56
Setting hostname and IP address .........................................     56
Creating a site network configuration disk ..............................     57
Using the site network configuration disk ...............................     59
Saving the system configuration .........................................     60
Restoring the system configuration ......................................     60

                                       49

<PAGE>

Site Configuration Tables for Various PU-DU Configurations ..............     62

PREVENTATIVE MAINTENANCE ................................................     67

Performing the PM Procedure .............................................     68

PM Checks and Adjustments for the Canon Scanner .........................     69
Calibration .............................................................     69
Getting into Serviceman Mode ............................................     70
Checking the CAL Image ..................................................     73
Checking the SHADE Data .................................................     75
Checking the FLARE Data .................................................     76
Checking the LAMP Control ...............................................     77
Checking the CCD Output .................................................     78
Checking the Memory .....................................................     80
Disconnecting from the Scanner (Leaving Serviceman Mode) ................     81

PM Measures: Other System Components ....................................     82
Processor Unit ..........................................................     82
Display Unit ............................................................     82
System ..................................................................     84
Run 3 tests .............................................................     84
Monitor Test Results ....................................................     87
Check cables ............................................................     87
Optional Printer ........................................................     87
Updating the Date of the Last PM Procedure for Processor Unit Gui .......     89

FIELD REPLACEABLE PARTS .................................................     90

Canon Film Scanner Spare Parts ..........................................     91
General .................................................................     91
Electrical ..............................................................     92
M1000-CL Spare Parts ....................................................     93
Position of Components ..................................................     95

TROUBLESHOOTING .........................................................     97

Service Policies and Procedures .........................................     98

Your Role as Field Service Representative ...............................     98
On-Site Service Procedure ...............................................     98
Diagnosing and Repairing the System .....................................     99
Before You Leave the Site ...............................................    100

Retrieving Service Metrics Data .........................................    101

Performing a Power Cycle ("Rebooting" the System) .......................    103

Systemwide Problems .....................................................    105
Image Transfer ..........................................................    105
Image Transfer Problems:  Error Messages shown on the Processor Unit ....    105
Image Transfer Error Codes ..............................................    106
Line Power ..............................................................    107
Uninterruptible Power Supply ............................................    109
Description .............................................................    109
Troubleshooting .........................................................    111

Canon Scanner ...........................................................    114
System Alert Messages ...................................................    114
Utility: Accessing the Scanner in the Cart ..............................    116
Troubleshooting .........................................................    117
Error Codes and Processing ..............................................    122
Error Messages and Recovery Methods .....................................    122

                                       50

<PAGE>

Examples of Troubleshooting When Error Messages Appear ..................    135

Film Problems ...........................................................    135
Correcting System and Film-Related Problems .............................    136

Troubleshooting: Other System Components ................................    139
Display Unit ............................................................    139
Start-Up Problems .......................................................    140
   Barcode Reader Problems and Adjustment ...............................    141
Malfunctioning Display Unit Belts .......................................    142
Checking the Brush Contacts .............................................    144
Limit Switch Circuit ....................................................    144
Static Tension ..........................................................    145
Mini Monitor Issues .....................................................    146
Repairing an Open Display Unit (Connected to a Power Supply) ............    151
Repairing an Open Display Unit (Disconnected From a Power Supply) .......    153
Removing a Film (During a Power Outage) .................................    156
Retrieving films dropped into the Display Unit ..........................    157
Processor Unit ..........................................................    157
Start-up Errors .........................................................    158
Calibrating the Touch-Sensitive Screen Video ............................    158
Dial-Up .................................................................    159
Printer .................................................................    159
Printer Problems: Error Messages shown on the Processor Unit ............    160
Printer Problems: Error Messages shown on the Display Unit ..............    160
Printer Error Codes .....................................................    161

CANON SCANNER REPLACEMENT PROCEDURE .....................................    163

Replacing the Hardware ..................................................    164

Testing the Scanner .....................................................    169

APPENDIX A:  IMAGECHECKER M1000 SYSTEM SPECIFICATIONS ...................    171

APPENDIX B: CANON SCANNER SCHEMATICS ....................................    173

                                       51

<PAGE>

                           The ImageChecker(R) System

                             M1000-CL PROCESSOR UNIT

                                   USER MANUAL

                              (Cart Configuration)

                              [GRAPHIC APPEARS HERE]

                          [LOGO OF R2 TECHNOLOGY, INC.]

R2 Technology, Inc.                                            P/N 390-00-249 VA
325 Distel Circle                                                       May 2000
Los Altos, CA, 94022, USA                                                ENGLISH

                                       52

<PAGE>

Technical Support

Do not attempt to repair the ImageChecker System. Only authorized R2 Technology
personnel are qualified to install or repair the System.

--------------------------------------------------------------------------------
   1.      Use the Troubleshooting Guide below to correct a problem.

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

--------------------------------------------------------------------------------
   2.      If you need further assistance, contact your R2 service
           representative or call R2 Technology at:

--------------------------------------------------------------------------------
           Within the US:                       1 (888) 472 7877
--------------------------------------------------------------------------------
           Elsewhere:                           1 (650) 254 8988
--------------------------------------------------------------------------------
           For assistance in Europe, contact:
--------------------------------------------------------------------------------
           R2 Technology, Inc.
           Hervensebaan 15
           5232 JL `s-Hertogenbosch
           The Netherlands
--------------------------------------------------------------------------------
           Tel:                                 +31 (0) 73 6 443 882
           Fax:                                 +31 (0) 73 6 443 769
--------------------------------------------------------------------------------

Copyright(C)2000 R2 Technology, Inc.  All rights reserved.

This document cannot be reproduced in part or whole without the expressed
written consent of R2 Technology. R2 Technology reserves the right to revise
this manual and to make changes in the content.

ImageChecker is a registered trademark of R2 Technology, Inc. Other trademarks
are property of their respective owners, and are hereby acknowledged.

                                       53

<PAGE>

Chapter 1 Introduction ..................................................      5
           Indications for Use ..........................................      5
           Brief Device Description .....................................      5
           Warnings .....................................................      6
           Precautions ..................................................      7
           Equipment Supplied ...........................................      8
Chapter 2 Quick Guide To Scanning Films .................................      9
Chapter 3 System Description ............................................     11
           Major Components of the M1000-CL Processor Unit .............      12
            Overview ....................................................     12
            The Continuous Loader Scanner ...............................     12
            The Input Tray ..............................................     13
            The Protective Cover (Interlock) ............................     14
            The Output Tray .............................................     14
            The Control Panel (with hidden operator controls) ...........     15
            The Power Switch ............................................     15
            The Touch-Sensitive Screen ..................................     16
            The MENU Arrow ..............................................     17
            Film Orientation Button .....................................     18
           Other Cart Components ........................................     19
Chapter 4 Preparing for Operation .......................................     21
          How to Use the Separator Sheets with pre-printed R2 ID
           Numbers ......................................................     21
Chapter 5 Scanning Mammograms ...........................................     23
          Selecting Films for Scanning ..................................     23
          Scanning Patient Films Step-by-Step ...........................     24
            The Scanning Process ........................................     29
          Adding a New Case to the Stack of Films .......................     30
Chapter 6 Other Features and Options ....................................     31
            Alert Messages ..............................................     31
            System Alert Messages .......................................     32
          The ALERT Button ..............................................     33
          Running Films in Manual Mode ..................................     35
Chapter 7 Printing (optional feature) ...................................     39
          Changing the Printing Default .................................     39
          Printing a Case Per Page ......................................     40
          Printing a Film Per Page ......................................     41
Chapter 8 Maintenance ...................................................     43
          Troubleshooting Guide .........................................     43
            User-Intervention Errors ....................................     43
            Image Transfer Error Messages ...............................     49
            Checking Test Film Results ..................................     50

                                       54

<PAGE>

          Troubleshooting Guide for the Optional Printer ................     51
              Printer Troubleshooting ...................................     51
              Printer Error Messages ....................................     52
          Cleaning the M1000-CL Processor Unit ..........................     53
          Cleaning the Suction Pads on the Scanner ......................     54
          Cleaning the Diffuser of the Scanner ..........................     55
APPENDIX I:   Glossary ..................................................     57
APPENDIX II:  Weekly System Verification ................................     59
          Test Procedures ...............................................     59
APPENDIX III:Power Down, Power Up, Power Cycle The System ...............     63
APPENDIX IV:  List of ImageChecker M1000 System Manuals .................     65
APPENDIX V:   The ImageChecker M1000 System Specification ...............     67
APPENDIX VI:  Table of International Symbols ............................     71
APPENDIX VII: Product Labeling ..........................................     73

                                       55

<PAGE>

                                   Exhibit A-5
                          Training Proceedure in Mammo:

                                       56

<PAGE>

APPLICATIONS PROTOCOL
The ImageChecker

Ensuring customer satisfaction through proper system utilization is the
objective of applications conducted for the ImageChecker. Applications
instrucion for R2 Technology, Inc., consistent among all specialists and
delivered in a professional format, remains integral to this process.

SCHEDULING APPLICATIONS

Once the ImageChecker is installed in the clinical facility, instruction for its
use is required. Scheduling of applications is conducted by Janice Chinn,
Manager of Clinical Applications, from the corporate office of R2 Technology in
Los Altos, CA. She may be reached at:

R2 Corporate office:   888.427.7877 on M-F 8:30-5, Pacific Standard Time
Pager 24 hour:         888.548.2427
Cell Phone:            510.612.2587
Home Phone:            510.582.2587

Please call the cell phone or home phone if there is no pager response within 30
minutes.

                                       57

<PAGE>

APPLICATIONS PROCEDURE

Contact with the Clinical Site for Scheduling Confirmation

The Applications Specialist is to confirm the applications dates and time of
arrival by telephoning the contact person provided by the sales manager or sales
representative. The contact person should be informed and/or asked the
following:

     1.   Discuss the agenda for the two day applications so staff scheduling
          may occur prior to applications.
     2.   Confirm that the modem line has been installed and connected to the
          ImagChecker.
     3.   Ask who will participate in training and the number of individuals
          involved so you may prepare accordingly. The participants will include
          mammography technologists and radiologists, and may further involve
          ancillary staff such as film library personnel and/or technologist's
          aids.
     4.   State that 2 persons need to be designated for advanced training in
          quality control, system maintenance and troubleshooting.
     5.   Review the procedure for awarding 2.0 credits of continuing education
          to Mammography Technologists based on participation for those directly
          involved with use of the ImageChecker.
     6.   Indicate that a checklist is utilized during the instruction and it
          will be reviewed with the supervisory personnel at the conclusion of
          the 2 day session.

                                       58

<PAGE>

Sequential Steps for Applications

The following is the recommended format for the 2 day training session.
Flexibility in the schedule must always be considered to meet the customer's
needs, based on each site's situation. The objective is to provide comprehensive
instruction; enforcing a prescribed agenda is not the intent.

APPLICATIONS AGENDA

--------------------------------------------------------------------------------
                                     Day One
--------------------------------------------------------------------------------
7:30 AM                         Continental breakfast
                                Inspection of system prior to applications
--------------------------------------------------------------------------------
8 AM - 10AM                     Applications instruction to first1/2of
                                Mammography Technologists
--------------------------------------------------------------------------------
10AM - 12 Noon                  Applications instruction to second1/2of
                                Mammography Technologists
--------------------------------------------------------------------------------
1PM - 5PM                       Normal screening schedule. Observe and assist
                                with efficient workflow patterns, additional
                                troubleshooting
                                ------------------------------------------------
                                Continue with physician training; allow 30 -60
                                minutes per session to include algorithm
                                instruction, R2 image review, and shadowing of
                                film reading
--------------------------------------------------------------------------------
                                     Day Two
--------------------------------------------------------------------------------
8AM - 12 Noon                   Normal screening schedule. Observe and assist
                                with efficient workflow patterns, additional
                                troubleshooting
                                ------------------------------------------------
                                Continue with physician training; allow 30 -60
                                minutes per session to include algorithm
                                instruction, R2 image review, and shadowing of
                                film reading
--------------------------------------------------------------------------------
11:30 AM                        Provide lunch for staff
--------------------------------------------------------------------------------
1PM - 5PM                       Conduct advanced training with designated
                                technical staff members - recommended minimum of
                                2 persons - reserve 1 to 2 hours
                                ------------------------------------------------
                                Continue with physician training as needed
--------------------------------------------------------------------------------

                                       59

<PAGE>

During applications any service issues are to be directed to the dealer service
personnel. If a dealer was not involved with the installation, R2 service may be
contacted at 888.427.7877.

If the sales representative is not on site during applications, contact her or
him with an update regarding the progress of applications.

RULES TO LIVE BY FOR AN APPLICATIONS SPECIALIST

1.   Proper business attire is mandatory.

2.   Punctuality is a MUST. You should arrive at the site AHEAD of schedule,
     present yourself to the receptionist and remain in the waiting area until
     your contact comes to meet you.

3.   Your are a guest in the customer's facility. Never ask to go into the
     procedure area without first meeting your contact.

4.   Offer your handshake FIRST to the contact person, SMILE and introduce
     yourself. First Impressions mean EVERYTHING!!

5.   Enthusiasm about the product you represent is the basis for representing R2
     Technology, Inc. It is contagious to those you encounter.

                                       60

<PAGE>

DOCUMENTATION

Documentation is a necessary element of all tracking mechanisms and is integral
to applications. For each applications event, please complete the following.

--------------------------------------------------------------------------------
     Document                               Purpose
--------------------------------------------------------------------------------
Applications Report                Documents training event.
--------------------------------------------------------------------------------
Sign-In Form                       Lists training participants; provide a copy
                                   to supervisory personnel
--------------------------------------------------------------------------------
Check List (submit original)       Complete training progress; copy provided to
                                   supervisory personnel after discussion
--------------------------------------------------------------------------------
Expense Report                     Records expenses with receipt verification
--------------------------------------------------------------------------------

Once completed, please submit via Priority Mail to :

Debra Saunders

                                       61

<PAGE>

                 PREPARATORY LIST FOR IMAGECHECKER APPLICATIONS

Items needed for Applications

Clinical Images of Demonstration Cases
Applications Information
         Operator's Manuals
         Algorithm Description
         Gray Booklet

Forms
         Applications Report
         Sign-In Form
         Checklist (original should be shipped with system) - carry copy

Handouts Provided to Training Participants

Purple Folders
         Highlight Sheets
         Brochure

                                       62

<PAGE>

                        ATTACHMENT B - SUPPLIER SOFTWARE

"Supplier Software" means the following software products in object code form:
      R2 CR/DR CAD Software for Lung Nodule Detection
      R2 Digital Mammography CAD Software

Restrictions.

Without in any way limiting or altering the terms of Article 12, Kodak hereby
agrees and understands that (i) Kodak may copy the Supplier Software only as
necessary to exercise its rights under the license granted in this Agreement,
and to make backup and archive copies of the Supplier Software and Kodak may not
otherwise copy the Supplier Software; (ii) any copy of the Supplier Software or
any portion thereof, including but not limited to copies sublicensed to third
parties, must include all copyright and other proprietary rights notices which
appear on the original; and (iii) Kodak may not reverse engineer, decompile, or
otherwise derive the source code for the Supplier Software.

Distribution of Supplier Software

Kodak may distribute the Supplier Software solely in conjunction with the
Developed Software and with the Kodak Products under the same terms and
conditions as it licenses its own software of a similar nature; provided, in no
event shall any party be given the right, expressed or implied, to modify such
Supplier Software or make derivative works thereof, and provided Kodak pays to
Supplier the license fees associated therewith.

                                       63

<PAGE>

                         ATTACHMENT C - ESCROW AGREEMENT

         THIS AGREEMENT, effective _______, 19__, is made by and between R2
Technology, Inc. ("LICENSOR" herein) and Eastman Kodak Company ("Kodak") and
___________ ("ESCROW AGENT" herein):

A.       Kodak develops and licenses software;

B.       LICENSOR owns and sells computer software designed for use in
         conjunction with computer hardware;

C.       LICENSOR and Kodak have entered into an agreement ("Agreement ") dated
         whereby Kodak may distribute certain computer software owned by
         LICENSOR.

D.       Under the terms of the Agreement LICENSOR is responsible for developing
         software and providing technical support to Kodak.

E.       Kodak and LICENSOR wish to ensure that LICENSOR continues to develop
         software for Kodak and that users of LICENSOR's software continue to
         receive technical support in the event LICENSOR fails to fulfill its
         support obligations as set forth in the Agreement.

F.       ESCROW AGENT is an independent party and will act as a conduit to Kodak
         of LICENSOR's software in the event LICENSOR fails to fulfill its
         technical support obligations.

         NOW, THEREFORE, the parties agree as follows:

1.0      PRODUCT
         -------

         The products governed by this Agreement are computer software
         program(s) titled described in Attachment A attached hereto and made a
         part hereof ("Product") owned by LICENSOR or provided to LICENSOR under
         a valid sublicense from the owner. For purposes of this Agreement only,
         the Product includes machine readable program source code, instructions
         for generating each object code version of the Product, all reference
         and use manuals and aids, and all program design documents necessary to
         provide technical support for the Product.

2.0      ESCROW OF PRODUCT
         -----------------

2.1      Within thirty (30) days of the effective date of this Agreement,
         LICENSOR agrees to deliver to ESCROW AGENT in a sealed envelope or
         container a copy of the Product. Throughout the term of the escrow,
         LICENSOR shall ensure that the copy of the Product which is in the
         custody of the ESCROW AGENT shall be the most current version of the
         Product as it may be updated, enhanced, modified or revised by LICENSOR
         from time to time. Failure of LICENSOR to provide ESCROW AGENT with
         updated versions of the Product within 60 days of the release of such
         versions shall be grounds for termination of escrow and distribution of
         the Product as set forth herein.

2.2      ESCROW AGENT agrees to accept deposit of the Product and to act as its
         custodian until this agreement is terminated. ESCROW AGENT shall
         establish under the control of a designated

                                       64

<PAGE>

         escrow officer a secure receptacle for the storage of the Product
         provided to it by LICENSOR. ESCROW AGENT shall not permit any party
         access to the items therein except as may be necessary to perform its
         functions as ESCROW AGENT or as may be otherwise provided herein. In no
         event are any copies to be made of any items deposited with ESCROW
         AGENT except as specifically provided herein.

3.0      RELEASE OF ESCROW HOLDINGS
         --------------------------

3.1      Subject to Paragraphs 3.2, 3.3 and 3.4 below, the occurrence of any of
         the bankruptcy events described in Section 18.5 of the OEM Software
         Development and Distribution Agreement shall cause ESCROW AGENT to
         release and distribute in accordance with Paragraph 3.4 below the items
         deposited with it; provided however, LICENSOR shall have thirty (30)
         working days after receipt by LICENSOR of written notice of said
         occurrence to cure such occurrence.

3.2      In the event Kodak notifies the ESCROW AGENT in writing of LICENSOR's
         failure of cure under Paragraph 3.1 above, ESCROW AGENT shall so notify
         LICENSOR in writing and shall provided, upon ESCROW AGENT's receipt of
         same, a copy of Kodak's notice sent to ESCROW AGENT. Unless LICENSOR
         has provided Contrary Instructions to ESCROW AGENT within seven (7)
         days of LICENSOR's receipt of a copy of Kodak's notice, ESCROW AGENT
         shall deliver the items deposited with it then in escrow to Kodak
         within the next five (5) business days.

3.3      "Contrary Instructions" for the purposes of this escrow agreement means
         a notarized affidavit executed by an officer of LICENSOR stating that
         the failure of support has not occurred, or has been cured.

3.4      Upon receipt of such Contrary Instructions, ESCROW AGENT shall not
         release the items deposited with it then in escrow, but shall continue
         to store the items deposited with it until otherwise directed by Kodak
         and LICENSOR jointly, or until resolution by a court of competent
         jurisdiction

3.3      ESCROW AGENT shall make copies of all items deposited with it under
         this Agreement and distribute a complete set of those copies to Kodak.
         LICENSOR shall be liable for any copying and distribution costs
         incurred but as between Kodak and ESCROW AGENT, Kodak agrees to
         promptly reimburse ESCROW AGENT for any such costs incurred.

3.4      The Escrow Agreement shall terminate upon expiration or termination of
         the OEM Software Development and Distribution Agreement or upon release
         of the items deposited to Kodak.

3.5      Kodak and LICENSOR may terminate the escrow by mutual written
         agreement. ESCROW AGENT reserves the right to resign as escrow holder
         upon thirty (30) days prior written notice to Kodak and LICENSOR. Upon
         termination of escrow, if ESCROW AGENT has not distributed the items
         deposited with it, ESCROW AGENT shall return all items deposited to
         LICENSOR, except if ESCROW AGENT resigns as escrow holder the items
         then on deposit shall be delivered to a substitute escrow holder or
         designated third party mutually agreeable to LICENSOR and Kodak.

4.0      WARRANTY AND INDEMNITY
         ----------------------

                                       65

<PAGE>

4.1      LICENSOR warrants that it owns the Product, and all portions thereof or
         has a valid sublicense from the owner, and that it shall deposit with
         ESCROW AGENT under this Agreement and that it has full power to allow
         the deposit, copying, release and distribution of those Products as set
         forth herein.

4.2      LICENSOR warrants that the Product it shall deposit with ESCROW AGENT
         under this Agreement does not infringe or violate any patent,
         copyright, trademark, trade secret or other property right of any third
         party.

4.3      LICENSOR agrees to indemnify and save Kodak and ESCROW AGENT, jointly
         and severally, entirely harmless from and against nay and all loss,
         cost, claim, damage, settlement or judgment, including any expenses or
         reasonable attorneys' fees arising out of or in any way related to any
         breach or alleged breach of any of the above warranties.

5.0      FEES
         ----

5.1      In consideration for performing its function as escrow holder, ESCROW
         AGENT shall be compensated as follows:

                  $________- Acceptance Fee (including first year's holding fee)

                  $________ - Yearly hold - open fee

         Both LICENSOR and Kodak shall pay fifty percent of the above fees.

5.2      The above fees are for ESCROW AGENT's ordinary services as escrow
         holder. In the event ESCROW AGENT is required to perform any additional
         or extraordinary services as a result of being escrow holder, including
         intervention in any litigation or proceeding, ESCROW AGENT shall
         receive reasonable additional compensation for such services and be
         reimbursed for costs incurred, including reasonable attorneys' fees.
         Kodak and LICENSOR agree, jointly and severally, to pay such sums to
         ESCROW AGENT. As between Kodak and LICENSOR, the prevailing party in
         any litigation or proceeding shall be entitled to recover all costs,
         expenses and attorneys' fees incurred in addition to any other relief
         which may be granted.

6.0      MISCELLANEOUS PROVISIONS
         ------------------------

6.1      ESCROW AGENT shall not be liable for the failure of any of the
         conditions of the escrow, for damage caused by the exercise of its
         discretion, or for any other reason, except its negligence.

6.2      This Agreement shall be governed by and construed in accordance with
         the laws of the State of Delaware.

6.3      This Agreement may be modified only by a writing executed by all
         parties.

                                       66

<PAGE>

AGREED TO:

R2 TECHNOLOGY INC.                      EASTMAN KODAK COMPANY

By /s/ Michael S. Klein                 By /s/ J. Michael McQuade
  ------------------------------          --------------------------------------
         Signature                                 Signature

Name   Michael S. Klein                 Name J. Michael McQuade
    ----------------------------             -----------------------------------
        (Type or Print)                         (Type or Print)

Title  President and CEO                Title Gen Manager, WW Ops KHI / VP Kodak
     ---------------------------             -----------------------------------

Date   10/11/00                         Date  10/11/00
    ----------------------------             -----------------------------------

ESCROW AGENT

By
  ------------------------------
       Signature

Name
    ----------------------------
       (Type or Print)

Title
     ---------------------------

Date
    ----------------------------

                                       67

<PAGE>

ATTACHMENT D - SUPPLIER COPYRIGHT NOTICE AND KODAK COPYRIGHT NOTICE

SUPPLIER COPYRIGHT NOTICE:

     Copyright

          This software is copyrighted by R2 Technology, Inc. with all rights
          reserved. Under the copyright laws, this software cannot be reproduced
          in any form without the prior written permission of R2 Technology,
          Inc. No patent liability is assumed, however, with respect to the use
          of the information contained herein.

     (C) 2000 by R2 Technology, Inc.  All rights reserved

KODAK COPYRIGHT NOTICE:

(C) Eastman Kodak Company, 2000, All Rights Reserved.

                                       68

<PAGE>

                       ATTACHMENT E - KODAK TRAVEL POLICY

1.   Corporate Travel Policy

     All Company travelers are required to:

     o    Arrange all business travel (including group travel) through the
          designated travel agency. This service should only be used for
          business travel.

     o    Use the Kodak designated preferred airline, hotel, and vehicle rental
          options offered by that agency.

     o    Use the designated corporate charge card which ensures optimum cash
          management and consolidated data collection for negotiation leverage.
          It may also provide the traveler with additional insurance coverage
          where applicable. Employees who travel at least twice a year must
          obtain a corporate charge card.

     o    Corporate charge cardholders are expected to charge all business
          travel related expenses to the corporate charge card whenever
          possible.

     o    Corporate charge card holders must keep their corporate charge card
          account up to date, i.e., not over 30 days. Occasionally, accounts may
          become past due as a result of timing and must be brought current when
          reimbursement is received.

     Failure by an individual to keep their corporate charge card account
     current places unnecessary financial risk on Kodak. It can also lead to
     suspension or cancellation of charge card privileges which can impair an
     employee's ability to perform on the job and may, therefore, negatively
     affect work performance. Past due accounts can lead to disciplinary action,
     up to and including termination from the Company. See Section VII.-Appendix
     V Corrective Guidelines on Past Due Corporate Charge Card Accounts.

     The use of preferred suppliers enables Kodak to leverage corporate volume
     purchases for use in contract negotiation. The results include favorable
     contracts, financial agreements, and other benefits for Kodak's businesses
     and functions.

     Corporate Officer Exemption for Travel Arrangements Personal or leisure
     travel reservations through the designated travel agency is restricted to
     elected corporate officers and their associates. This exemption is not in
     violation of corporate policy, and reflects the need for elected corporate
     officers to gain time efficiencies when traveling both personally and
     professionally.

2.   Principles

     Travel and entertainment must be consistent with the needs of the business.

     The Company will reimburse employees for reasonable and necessary expenses
     actually incurred. The Company's intent is that the employee should neither
     lose nor gain financially as a result of business travel. Items of a
     personal nature are not reimbursable.

     Employees must:

     o    Conduct Company business with integrity, in compliance with applicable
          laws, and in a manner that excludes considerations of personal
          advantage herein.

     o    Exercise good judgment and travel on Company business in a
          cost-efficient manner.

     o    Exercise good safety judgment while traveling on Company business and
          conduct themselves as safely as they would while at their own work
          sites.

     o    Safeguard Company information and assets while traveling and avoid
          compromising that security.

     o    Comply with the Business Conduct Guide and Corporate Business Ethics
          Policy.

3.   Compliance

     It is the responsibility of each employee to:

     o    Understand and comply with this Corporate Travel Policy to ensure
          reimbursement for business-related travel and entertainment expenses.

          Business units/functions have the authority to not reimburse travelers
          for expenses incurred outside of this policy. Expense reports are
          subject to review and final approval by the Controller or Financial
          Planning Director for the business unit.

     o    Manage and control business travel and entertainment costs.

     o    Adhere to the policy and procedures defined herein.

     o    Accurately document expense reports, with appropriate receipts when
          required, and submit them in a timely manner consistent with expense
          reporting guidelines. Expenses over three months old will not be
          reimbursed.

     o    Ensure business travel and entertainment expenses are appropriate and
          consistent with business needs.

     It is the responsibility of expense report approver to:

     o    Ensure that employees understand the travel policy, the business
          purpose for the trip, and the need to exercise good judgment while
          traveling.

     o    Review expense reports for appropriateness and correctness.

     o    Review and promptly approve for reimbursement all reasonable and
          necessary expenses incurred by employees conducting business on behalf
          of the Company.

     Business units/functions are also responsible for the communication of
     these policies to their employees.

                                       69

<PAGE>

             ATTACHMENT F - SAMPLE KODAK END USER LICENSE AGREEMENT

EASTMAN KODAK COMPANY
SOFTWARE LICENSE AGREEMENT

Read the following terms and conditions carefully before using the enclosed
Software. Use of the Software within this package indicates your acceptance of
these terms and conditions. If you do not agree with them, you should promptly
return the Software to your dealer.

LICENSE

1. Grant of License. Eastman Kodak Company ("Kodak") grants you a license to use
one copy of the enclosed software program(s) (the "Software") subject to the
license restrictions set forth below.

2. Restrictions on Use. You may use the Software on one or more computers, as
long as the Software is used only with Kodak Health Imaging products. For each
computer, you may copy the Software as necessary to enable you to use the
Software as described above.

3. Transfer of the Software. You may permanently transfer the Software to
another party if the other party agrees to accept the terms and conditions of
this license and you retain no copies of the Software.

4. Copyright. The Software is owned by Kodak or its suppliers and protected by
copyright laws and international treaties. You may not copy the Software other
than as expressly provided in this license. You may not reverse engineer,
decompile, or disassemble the Software.

5. Term. This license is effective until terminated. You may terminate it at any
time by destroying the Software together with all copies in any form. It will
also terminate if you fail to comply with any term or condition of this
Agreement. You agree upon such termination to destroy the Software together with
all copies in any form.

LIMITED WARRANTY

For a period of one (1) year after the date of delivery of the Software to you,
as evidenced by a copy of your purchase receipt, Kodak warrants (i) the Software
will perform substantially in accordance with the accompanying written
materials, and (ii) the media on which the Software is

                                       70

<PAGE>

furnished will be free from defects in materials and workmanship under normal
use.

Kodak does not warrant that the functions contained in the Software will meet
your requirements or that the operation of the Software will be uninterrupted or
error free. You assume responsibility for operation of the Software to achieve
your intended results, and for the installation, use, and results obtained from
the Software.

Subject to any applicable legislation which prohibits the following exclusions,
KODAK MAKES NO OTHER WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED,
INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE. Some states and countries, including England and Australia, do not
allow the exclusion of implied warranties, or have legislation that imposes
certain statutory warranties that cannot be excluded, so the above exclusion may
not apply to you. This warranty gives you specific legal rights and you may also
have other rights.

LIMITATIONS OF REMEDIES

Subject to any applicable legislation which prohibits the following limitations,
Kodak's entire liability and your exclusive remedy shall be, at Kodak's option
either (a) the repair or replacement of the Software or any media not meeting
Kodak's "Limited Warranty" that is returned to Kodak or your dealer with a copy
of your receipt, or (b) the return of the price you paid for the Software,
provided you have proof of the purchase price you paid. These remedies are not
available if failure of the Software or media is the result of misuse, abuse, or
a failure to follow the operating instructions in the accompanying written
materials.

IN NO EVENT WILL KODAK OR ITS SUPPLIERS OR DEALERS BE LIABLE TO YOU FOR ANY
INCIDENTAL OR CONSEQUENTIAL DAMAGES, INCLUDING ANY LOST PROFITS, LOST SAVINGS,
OR OTHER DAMAGES ARISING OUT OF THE USE OR INABILITY TO USE THE SOFTWARE EVEN IF
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. Some states and countries, including
England and Australia, do not allow the limitation or exclusion of liability for
incidental or consequential damages, or have legislation which restricts the
limitation or exclusion of liability, so the above limitation may not apply to
you.

GENERAL

If the Software was purchased in the United States, this Agreement is governed
by the laws of the State of New York.

                                       71

<PAGE>

If purchased outside the United States, this Agreement is governed by the laws
of the country in which it was purchased.

U.S. GOVERNMENT RESTRICTED RIGHTS

The SOFTWARE and documentation are provided with RESTRICTED RIGHTS. Use,
duplication, or disclosure by the Government is subject to restrictions as set
forth in subdivision (b)(3)(ii) of The Rights in Technical Data and Computer
Software clause 252.227-7013. Contractor / manufacturer is Eastman Kodak
Company, 343 State Street, Rochester, New York, 14650.

EUROPEAN UNION PROVISIONS

If this Software is used within a country of the European Union, nothing in this
Agreement shall be construed as restricting any rights available under the
European Community Software Directive (91/250/EEC).

                                       72

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