Document:

Exhibit 10.2

 

MARKETING AGREEMENT

 

THIS MARKETING AGREEMENT
(the “Agreement”) is entered into and effective on April 21, 2005 (the “Effective
Date”), by and between R2 Technology, Inc., a Delaware corporation having
a principal place of business at 1195 Fremont Ave., Sunnyvale, California 94087
(“R2”), and Vital Images, Inc., organized under the laws of Minnesota,
having a principal place of business at 3300 Fernbrook Lane N., Suite 200,
Plymouth, Minnesota 55447 (“Vital”).

 

RECITALS

 

A.                                   R2 is engaged in the business of
developing, manufacturing, distributing and selling computer aided detection
software and hardware.

 

C.                                     The parties have previously entered into
a Product Distribution Agreement, dated November 28, 2002, as amended (the
“Old Agreement”), to develop and commercialize certain joint applications and
now desire to terminate the Old Agreement in its entirety and replace it with
this Agreement; and

 

D.                                    The parties desire to jointly market and
promote the R2 Lung CAD Product, as defined below, to current and prospective
Vital customers in accordance with the terms and conditions of this Agreement.

 

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

 

DEFINITIONS

 

1.1 “CAD Lung Program” means
an algorithm or computer program that searches a two-dimensional or
three-dimensional image of the human lung and returns specific locations and/or
boundaries of regions in that lung that probably contain diseased tissue.

 

1.2 “Commissionable Transaction”
shall mean any license or other transfer of any right to use a R2 Lung CAD
Product for consideration to an existing or prospective Customer while this
Agreement remains in effect.

 

1.3 “Customer” means a
person or entity in the Territory  that
has acquired a Vital Workstation, including a person or entity that acquires
such Vital Workstation in the same transaction in which rights to an R2 Lung
CAD Product are acquired.

 

1.4 “ImageChecker-Lung Version 2”
means the Upgrade of the R2 Lung CAD Product which will include temporal
comparison functionality and which will search two-dimensional or
three-dimensional images of the human lung through the Vital Nodule Probe.

 

1.5 “Intellectual Property
Rights” means any and all current and future trade secrets, technical know-how,
copyrights, moral rights, patents, patent applications (including any
substitutions, extensions, reissues, renewals, divisions, continuations or
continuations-in-part) and any and all other worldwide intellectual property
rights, whether now known, or hereafter recognized, in any jurisdiction.

 

1.6 “New Features” means
significant improvements or enhancements, other than Updates and/or Upgrades,
to the operating system, application software or hardware component of a R2
Lung CAD Product.

 

1.7 “Product Revenues” means
all revenues generated from the license, provision or sale of all R2 Lung CAD
Products and all R2 Lung CAD Product - related Upgrades, Updates, New Features,
maintenance, support, hardware sales, training and installation.

 

1.8 “Quarter” means each
calendar quarter.

 

 

1.9 “R2 Lung CAD Product”
means any CAD Lung Program that R2 makes commercially available at any time
during the term of this Agreement, including any related documentation,
Updates, Upgrades and New Features.

 

1.10 “Territory” means those
countries, regions or geographical markets identified on Exhibit A.

 

1.11 “Trademarks” with
respect to a party means the trademarks, service marks, logos and other
proprietary marks that such party may own or have the right to license from time
to time.

 

1.12 “Updates” means
software bug fixes and corrections to a R2 Lung CAD Product that R2 makes
generally available for field use, if any. 
Updates do not include improvements or enhancement to the operating
system, applications software or hardware and do not include New Features.

 

1.13 “Upgrades” means a
release or version of a R2 Lung CAD Product that contains significant
improvements to performance or functionality of existing features of a CAD Lung
Program.  Upgrades do not include New Features.

 

1.14 “Vital Nodule Probe”
means a lung visualization program developed by Vital.

 

1.15  “Vital Workstation” means any Vital
workstation and the components thereof, including without limitation the
Vitrea®, Vitrea® 2 or any successor product brand workstation, consisting of
hardware, display devices and software, including Vitrea®, Vitrea® 2 or
successor software applications.

 

1.16 “Warranty Period” means
the period after delivery and installation of the R2 Lung CAD Product at a
Customer location during which R2 agrees to provide maintenance and support of
such Product under warranty to Customers at no additional charge to such
Customers, but such period shall in no event be longer than one (1) year
from such delivery and installation.

 

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

 

2. Marketing

 

2.1 Marketing, Sales and
Appointment.  R2 hereby appoints
Vital, and Vital hereby accepts such appointment, as a non-exclusive marketing,
promotion and sales representative in the Territory for the referral of
Customers to R2 for R2’s sale of the R2 Lung CAD Product to both existing and
prospective Customers.  Vital shall
promote and market the R2 Lung CAD Product to the exclusion of all other CAD
Lung Programs not owned by R2 to existing Customers as well as prospective
Customers in the Territory.   Vital shall
provide R2 detailed contact and product information regarding its Customers and
prospective Customers so that R2 can efficiently market and sell directly to
such existing and prospective Customers. 
The parties shall promote and market the R2 Lung CAD Product as set
forth in Exhibit B.  Vital shall
neither advertise the R2 Lung CAD Product outside of the Territory nor solicit
orders from outside of the Territory without R2’s prior written consent.  Vital shall comply with the applicable
policies and procedures of R2 as in effect from time to time and as
communicated to Vital.

 

2.2 Authority.  R2 shall lead the sale of the R2 Lung CAD
Product to Customers.  Each Customer
shall execute a license agreement directly with R2 for the license of the R2
Lung CAD Product.  Vital’s sole authority
shall be (a) to provide sales leads to R2 for the purpose of R2 soliciting
orders for the R2 Lung CAD Product in the Territory and (b) to perform the
tasks listed in this Agreement or such other tasks as the parties may mutually
agree upon from time to time.  Vital
shall not have the authority to make any commitments or agreements or incur any
liabilities whatsoever on behalf of R2, nor shall R2 be liable for any acts,
omissions to act, contracts, commitments, promises or representations made by
Vital, except as specifically authorized under this Agreement or in writing by
the Chief Executive Officer or Chief Financial Officer of R2.  Unless otherwise mutually agreed upon in
writing by the parties, Vital shall not be responsible for completing any
contract for the R2 Lung CAD Product or for delivering the R2 Lung CAD Product
to any potential customer.

 

 

2.3 Relationship.  Except as may be expressly set forth in Exhibit C
for the provision of first line support, Vital shall conduct all of its
business in Vital’s own name and in a businesslike and professional manner.
Nothing in this Agreement shall be deemed to create an agency, joint venture or
partnership relation between the parties hereto. It is understood and agreed
that R2 and Vital are not, by reason of this Agreement or anything herein
contained, constituted or appointed the agent or representative of the other
party for any purpose whatsoever, nor shall anything herein contained be deemed
or construed as granting to R2 or Vital any right or authority to assume or to
create any obligation or responsibility, express or implied, for, on behalf of,
or in the name of the other party, or to bind Company in any way or manner
whatsoever. The relationship of the parties established by this Agreement is
that of independent contractors, and nothing contained in this Agreement should
be construed to give either party the power to direct or control the day-to-day
activities of the other.  All financial
and other obligations associated with each party’s business are the sole
responsibility of each party.

 

2.4 Materials.  R2 will provide assistance to Vital in the
form of providing reasonable quantities of promotional and other marketing
materials in English and such other languages as may be available from time to
time.  Vital shall be responsible for any
translation of promotional and marketing materials distributed within the
Territory that it produces or has produced (but it has no obligation to so produce),
and in the event that Vital completes any such translations, Vital shall
certify to R2 that any such translations have been appropriately verified, if,
and only to the extent that, such verification is required by a regulatory
agency in the country for which the translation was made.  Vital shall provide to R2 for review an
example of each item of promotional, advertising and educational materials and
programs and other literature relating to the R2 Lung CAD Product that Vital
intends to use to market and promote the R2 Lung CAD Product at least thirty
(30) days prior to the commercial release of such materials or commencement of
such programs.  R2 reserves the right to
reject any promotional materials that contain inaccurate claims regarding the
R2 Lung CAD Product.

 

2.5 Product Presentation.  Each party represents and warrants that it
will: (a) present the R2 Lung CAD Product fairly to potential Customers; (b) not
disparage the other party, the other party’s Trademarks, or the other party’s
products or services in any material respect; (c) avoid deceptive,
misleading or unethical business practices; and (d) avoid false or
misleading representations with regard to the R2 Lung CAD Product.

 

2.6 Trademarks.  Vital recognizes and concedes for all purposes
that all Trademarks affixed to the R2 Lung CAD Product or any accompanying
labels, marketing materials, containers and cartons, whether or not registered,
constitute R2’s exclusive property and cannot be used except in connection with
promoting and marketing the R2 Lung CAD Product.  Subject to the terms and conditions of this
Agreement, R2 hereby grants, and Vital hereby accepts, a non-exclusive,
non-transferable, non-assignable, royalty-free license to use R2’s Trademarks
solely for purposes of marketing the R2 Lung CAD Product in the Territory as
set forth in this Agreement; provided, however, that Vital will provide R2 with
samples of each use of Trademark prior to such use and will refrain from all
uses that R2 informs Vital are detrimental to R2’s investment in such
Trademarks.  Vital agrees to state in
appropriate places on all materials using the Trademarks that the Trademarks
are trademarks of R2 and to include the appropriate trademark symbols. R2
grants no other rights than those expressly granted hereunder, and Vital
acknowledges R2’s exclusive ownership of the Trademarks and the renown of R2’s
Trademarks worldwide. Vital shall promptly inform R2 in writing of any known or
reasonably suspected violation of R2’s trademarks or copyrights.  Vital agrees that any use of R2’s Trademarks,
and all associated goodwill, shall inure to the benefit of R2.  Vital agrees it will not use, register or
otherwise appropriate any name, mark or logo which is similar to or may be
confused with any name, mark or logo licensed by R2 hereunder.

 

2.7 Branding.  In the event that a Customer licenses the
ImageChecker-Lung Version 2 or any successor CAD Lung Program of R2,Vital shall
position an R2 Trademark of R2’s choosing on the launch button of the Vital
Workstation as well as display prominently an R2 Trademark of R2’s choosing on
the screen of the Vital Workstation when appropriate, but the foregoing shall
not require Vital to retrofit or modify any Vital Workstation in a Customer’s
possession prior to the grant of such license.

 

2.8 Customer Installation and
Training.  As between the
parties, R2 shall be responsible for the installation and all training in the
use of the R2 Lung CAD Product at all Customer sites.  R2 may offer one day of customer training
free of charge at the Customer site, at designated training centers or through
online methodologies.

 

 

2.9 
Service and Support.   
As between the parties, R2 will be responsible for providing in-warranty
and after-warranty technical support of the R2 Lung CAD Product in accordance
with its standard support terms ( the “R2 Software Maintenance Program”),
except that Vital will, provide first-level technical support of the R2 Lung
CAD Product to Customers, as part of the R2 Software Maintenance Program as set
forth in Exhibit C.  R2 will provide
second-level maintenance and support to Customers as part of the R2 Software
Maintenance Program free of charge during the Warranty Period and thereafter
for Customers purchasing membership in the R2 Software Maintenance Program, as
further set forth in Exhibit C. 
Vital acknowledges that the support will be provided to Customers free
of charge during the Warranty Period, and R2 will endeavor to require Customers
to commit to at least one year of membership in the R2 Software Maintenance
Program beyond the Warranty Period.  New
Features, if any, may be subject to additional fees to Customers for which
Vital will receive a share of the license revenue during the term of the
Agreement as set forth in this Agreement.

 

2.10 Training.  Vital shall ensure that its service personnel
are sufficiently skilled and knowledgeable about the R2 Lung CAD Product.  R2 shall provide all necessary training to
Vital regarding the use and maintenance of the R2 Lung CAD Product as
reasonably necessary, for Vital to fulfill its service obligations to the
Customers.  Such training shall take
place at the dates and locations as mutually agreed between the parties.

 

2.11 Hardware and Support.  As between the parties, R2 shall provide
the  hardware platforms (“Servers”) to
the Customers for the R2 Lung CAD Product. 
R2 will install the Servers.  R2
will retain any Server installation fees paid by Customers.  Any Server support offered by R2 to its
Customers is not addressed in this Agreement, and Vital shall not be entitled
to share in any revenue derived by R2 from offering and performing hardware
support services.

 

2.12 Product Access.  Beginning with the release of the
ImageChecker-Lung Version 2, R2 Lung CAD Products will be accessed through the
Vital Nodule Probe.

 

2.13 ImageChecker-Lung Version 2
Release and Integration. 
It is the expectation of the parties that R2 will deliver the
ImageChecker-Lung Version 2 to Vital in final form by June 30, 2005.  Vital shall integrate such product with the
Vital Workstation by September 1, 2005, provided that for every day past June 30,
2005 for which R2 is delayed in delivering the ImageChecker-Lung Version 2 to
Vital, Vital’s deadline for integration shall be extended by one (1) day.  R2 agrees to provide reasonable assistance to
Vital in successfully integrating the ImageChecker-Lung Version 2 with the
Vital Workstation.

 

3. EXCLUSIVITY

 

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

 

3.2 By Vital.  Except for as set forth in this Section 3.2,
during the term, Vital shall not promote, market or sell any CAD Lung Program
or any underlying technology in connection with any Vital product or services
(including the Vital Workstation), other than R2 Lung CAD Products.  R2 acknowledges that Vital may sell its Vital
Nodule Probe product (and any other product) to the extent that it is not a CAD
Lung Program or a product with similar features.  Vital shall not agree to the integration of
the Vital Nodule Probe to any third party CAD Lung Program or one developed
internally by Vital, nor shall it agree to permit others to conduct such
integration.  Vital shall not make
publicly available any application programming interfaces that would allow such
integration by a third party.  Vital
agrees that it will not develop or market a temporal comparison product
designed for use with a R2 Lung CAD Product.

 

 

4. GOVERNMENTAL APPROVALS

 

4.1 Health and Safety Laws and
Regulations.  Both parties shall
monitor the appropriate information sources closely for changes in laws and
regulations, and other requirements relating to the R2 Lung CAD Product, and
shall notify the other party promptly in writing of any and all such changes of
which it becomes aware.  If R2 is
required by any regulatory agency to recall the R2 Lung CAD Product, or if R2
or a regulatory authority initiates a recall of the R2 Lung CAD Product, Vital
shall cooperate with and assist R2 in locating, and retrieving if necessary,
recalled R2 Lung CAD Products from Customers.

 

4.2 Compliance with Local Laws.  Each party agrees to comply with all local
laws and regulations applicable to the distribution of their respective
products in each country within the Territory.

 

5. Prices and CONSIDERATION

 

5.1 License fees for the R2 Lung
CAD Products.  R2 shall have sole
and exclusive control over all prices, discounts, allowances, refunds,
development, specifications, delivery, and other terms governing the licensing
of the R2 Lung CAD Product, including, without limitation, the extension of
credit.  Vital agrees that it shall quote
to Customers only the prices and terms of a license for the R2 Lung CAD Product
provided by R2, and Vital shall not alter or change such prices or terms of
license unless otherwise authorized by R2 in writing on a case-by-case basis.  Prices and terms of license quoted by R2 are
subject to change by R2 at any time upon prior written notice.  R2 shall render all invoices directly to the
Customers and shall send notification of all Commissionable Transactions to
Vital at the same time as it makes Commission payments pursuant to Section 5.3.
It is expressly understood by Vital that full responsibility for all contracts
for the R2 Lung CAD Product and collection rests with R2.  All orders for the R2 Lung CAD Product shall
be taken and contracts executed in the name of R2, which shall invoice
Customers and carry accounts in its own name as creditor.  Vital shall have no authority to accept or
receive any payments from Customers for the R2 Lung CAD Product, whether
directly or indirectly, nor any compensation in kind for the R2 Lung CAD
Product, and shall not do so.

 

5.2 Commissions.  R2 shall pay Vital a commission (a “Commission”)
on each Commissionable Transaction as follows:

 

(a) Vital
shall receive a minimum Commission equal to * of the software license
consideration received by R2 (excluding consideration received for support,
hardware sales, training and installation) in respect of each Commissionable
Transaction where Vital employees exclusively recommend the applicable Customer
to R2, but are not Active Participants, as defined below, in the sale or
license by R2 to such Customer; and

 

(b) Vital
shall receive a further commission equal to * of the consideration received by
R2 (excluding support, hardware sales, training and installation) in respect of
each Commissionable Transaction in relation to which Vital actively markets
and  introduces R2 to Customers or
prospective Customers or assists in the sales process of such R2 Lung CAD
Product.  The act of only providing a
list of Customers to R2 shall not qualify Vital for a commission under this
Section 5.2 (b).  If R2 determines that
Vital is not meeting the requirements to earn a commission under this Section
5.2(b), then R2 shall notify Vital of its lack of performance, so that Vital
has the opportunity to earn such commission.

 

Notwithstanding the foregoing,
the consideration payable to Vital for each Commissionable Transaction for
purposes of this Section 5.2 shall be reduced (a) by * per person day of
training for the R2 Lung CAD Product that R2 provides to a Customer free of
charge in accordance with Section 2.8 of this Agreement, and (b) by * per
person day of installation of the R2 Lung CAD Product that R2 provides at a
Customer’s site in accordance with Section 2.8 of this Agreement.

 

5.3 Payment of Commission.  Unless otherwise agreed by the parties,
Commissions with respect to any particular contract signed by a Customer
resulting in a Commissionable Transaction shall be deemed earned at the end of
the calendar month following R2’s receipt of a valid contract or purchase order
from a Customer and payable within thirty (30) days following the calendar
month in which such fees are collected.The payment of Commissions shall be in
U.S. dollars post-conversion and shall be made by check or wire transfer to the
order of Vital.

 

 

5.4 Maintenance Fee Sharing.  In exchange for providing first-level support
of the R2 Lung CAD Product to Customers, Vital will receive * of the R2
Software Maintenance Program fees actually received by R2.  Such amounts shall be payable within thirty
(30) days following the calendar month in which such fees are collected.

 

* Confidential Treatment
Requested

 

 

5.5 Minimum Revenues.

 

(a) Sales
to Customers shall generate for R2 certain specified minimum revenues (the “Applicable
Minimums”) payable to R2, net only of Commissions, on a Quarterly basis from
the Product Revenues as follows:

 

(i) Starting
with the Quarter ending September 30, 2005 and ending with the Quarter
ending March 31, 2006 (the “Initial Period”), the Applicable Minimums
shall be as follows:  Vital shall
generate for R2 Product Revenues per Quarter of * (such Quarterly amount being
the “Guaranteed Minimum”); provided that any Product Revenues that Vital
generates for R2, including Product Revenues related to the LN 1000 version of
the R2 Lung CAD Product,  between the
Effective Date and June 30, 2005 shall count against the Applicable
Minimum for the first Quarter of the Initial Period ; and

 

(ii) Subsequent
to the Initial Period and subject to the provisions of subsection (iii) below,
the Applicable Minimums per Quarter for the remainder of the term of the
Agreement (the “Subsequent Period”) shall be equal to the Applicable Minimum of
the immediately preceding Quarter unless the Product Revenues generated by
Vital for R2 during the preceding Quarter fell below the Applicable Minimum for
that Quarter.  In such event, the
Applicable Minimum for the current Quarter shall be calculated as follows:  the lower of (a) the Applicable Minimum
of the preceding Quarter multiplied by the percent by which the Product
Revenues in the preceding Quarter fell below that Quarter’s Applicable Minimum,
up to a maximum decline in percentage each Quarter of  *; or (b) * times the Product Revenues
generated by R2 during the preceding Quarter through all other sales, marketing
and distribution channels excluding revenues generated from Customers under
this Agreement (the “Non-Vital Product Revenues”).  If during the Subsequent Period, Product
Revenues for a Quarter exceed the original Guaranteed Minimum Amount, then the
Applicable Minimum for the next Quarter will either remain unchanged or, if the
Applicable Minimum for that Quarter had been reduced per the formula set forth
above, then the Applicable Minimum will reset to the Guaranteed Minimum
amount.  Subsequent Quarters will then be
again adjusted as set forth in this subsection (ii) and in subsection (iii) below.

 

(iii) At
the end of every fourth Quarter during the term of this Agreement, the parties
will evaluate Vital’s performance during those past four (4) Quarters and
whether in aggregate Vital has exceeded the Guaranteed Minimums for the past
four (4) Quarters (such aggregate excess amount being the “Aggregate
Excess”) and will set the Guaranteed Minimums for the subsequent four (4) Quarters. 
If Vital has exceeded the total Guaranteed Minimum amount (meaning without
taking into account adjustments to the Applicable Minimums per subsection (ii) above),
for those past four (4) Quarters, in aggregate, then the Applicable
Minimums for the remaining Quarters during the term of this Agreement (the “Remaining
Quarters”) shall be readjusted to equal the value resulting from the following
calculation:  ((Guaranteed
Minimum*Remaining Quarters) – Aggregate Excess)/ (Remaining Quarters).  By way of example only, if, during the first
four (4) Quarters of this Agreement, Vital

 

*
Confidential Treatment Requested

 

 

has
generated Product Revenues of *, the Aggregate Excess equaling, therefore, *,
then the Applicable Minimums (unadjusted per subsection (ii))  for the remaining eight (8) Quarters of
the Agreement shall be * instead of *. 
This figure results from the following calculation: *.  Notwithstanding any of the foregoing, such
readjusted Applicable Minimums may be subsequently reduced after readjustment
under this Section according to Section 5.5(a)(ii), if applicable.

 

(iv) If
the Agreement is terminated prior to the end of any full Quarter, then the
Applicable Minimum for the period between the immediately preceding full Quarter
and the date of termination shall be prorated to reflect the number of days in
such period in relation to the number of days in the full Quarter during which
the Agreement was terminated.

 

(v) If
for any Quarter, Vital has not achieved the Applicable Minimum, then Vital
agrees to pay R2 within thirty (30) days after the end of the applicable
Quarter the difference between the Applicable Minimum and the Product Revenues
actually generated by Vital for such Quarter. 
Vital acknowledges and agrees that this payment is not a penalty, but is
part of the consideration for the grant of the promotion rights and other
benefits granted to Vital under this Agreement relating to the licensing of R2
Lung CAD Products to Customers in the Territory.

 

(vi) If
Product Revenues generated by Vital fall below the Applicable Minimums for two (2) Quarters
in a row, the parties shall meet to evaluate and discuss methods to raise
Product Revenues for the Remaining Quarters.

 

(vii) If
any Product Revenues are not paid to R2 by Customers within six (6) months
of the Customers’ receipt of an invoice from R2, such unpaid Product Revenues
will be subtracted from all other Product Revenues used to meet the Applicable
Minimum for the Quarter to which such unpaid Product Revenues were originally
credited.  Subsequently, if R2 collects
any unpaid Product Revenues that have been subtracted from Product Revenues
used to meet any Applicable Minimum, then such subtracted Product Revenues will
be added to the total amount of Product Revenues received in the Quarter in
which such subtracted Product Revenues are received and shall be used to
calculate the Applicable Minimum for the Quarter in which they are
received.  If any unpaid Product Revenues
that have been subtracted from the Product Revenues are received after the
expiration of this Agreement, such Product Revenues shall be applied against
any payment by Vital towards any Applicable Minimum, and R2 shall refund Vital
the appropriate amount of such Applicable Minimum payment.

 

(b) All
minimum fees owed to R2 from Vital under the Old Agreement, from November 30,
2004 through the Effective Date, shall be cancelled as of the Effective Date
and replaced by the obligations set forth herein.

 

(c) Notwithstanding
the foregoing terms of this Section 5.5, no Applicable Minimum shall apply
to a Quarter, nor shall such Applicable Minimum be deferred to a subsequent
period, if during all or any part of such Quarter: (i) any United States
regulatory

 

* Confidential Treatment
Requested

 

 

agency, or R2, issues a recall
of the R2 Lung CAD Product or Vital Workstation as a result of the R2 Lung CAD
Product installed thereon; (ii) the ability of Vital to market and promote the
R2 Lung CAD Product is significantly impaired by any governmental action, riots,
war, prolonged shortage of energy, epidemics, fire, flood, hurricane, typhoon,
earthquake, or other event of force majeure beyond the reasonable control of
Vital (“Force Majeure”); (iii) if use or sale of the R2 Lung CAD Product is
prohibited or restricted by any injunction or other legal prohibition issued
within the United States (except one which would be cured by obtaining a permit
or other applicable regulatory approvals); (iv) the then available R2 Lung CAD
Product cannot legally be made available on a commercial basis in the United
States or (v) there shall be no R2 Lung CAD Product commercially available for
order and installation in the United States.

 

5.6 Audits.  Vital shall have the right, at its own
expense, to have an independent auditor reasonably acceptable to R2 inspect R2’s
accounting records in order to verify compliance with the terms of this
Agreement.  Such inspections shall take
place not more than once a year upon not less than fifteen (15) days prior
written notice, and during the R2’s normal business hours.  R2 shall promptly pay the difference, plus
interest, on any underpayments revealed in the audit.  Further, if an audit reveals an underpayment
of more than *, R2 shall also pay the cost and expenses related to the audit.

 

5.7 Interest.  Any payments that are not timely paid as
provided hereunder shall bear interest at an annual rate equal to * per month
or the maximum amount permitted by law, whichever is less, calculated from the
date the payment was due until the date the payment is received.

 

5.8 Expenses.  Except as otherwise set forth in this
Agreement, each party shall be responsible for all expenses incurred by it in
connection with the implementation and performance of its duties and
obligations under this Agreement, including, compensation, bonuses and
benefits, if any, for its personnel; costs and expenses associated with
establishing and maintaining its marketing organization and offices;
advertising and promotion expenses; and any and all taxes, fees, duties,
tariffs or charges imposed on it.

 

6. REPORTING AND CUSTOMER
COMPLAINTS

 

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

 

* Confidential Treatment Requested

 

 

6.2 Customer Complaints.  Each party shall advise the other of all
Customer and/or regulatory complaints alleging patient injury attributed to a
R2 Lung CAD Product within twenty four (24) hours, and of all other material
complaints as promptly as possible but not more than five (5) business
days following the date a party receives such complaint.  Except as aforesaid, Vital shall have no
obligation to investigate, monitor and give notifications in respect of
Customer and/or regulatory complaints concerning the R2 Lung CAD Product.  Any notice to Vital under this Section shall
be sent via facsimile and email to the attention of the Manager of Regulatory
Affairs and the Senior Director of Operations or to such other address or
person as Vital may designate, and any notice to R2 under this Section shall
be sent via facsimile and email to the attention of R2’s Vice President of
Regulatory Affairs or to such other address or person as R2 may designate.

 

7. INDEMNITY AND INSURANCE

 

7.1 R2 Indemnity.  Subject to Sections 7.2 and 7.4 below, R2
agrees to defend, indemnify and hold harmless Vital, its officers, directors,
employees and agents, from and against any and all liabilities, damages,
losses, costs and expenses, including reasonable attorneys’ fees, attributable
to claims, actions, suits or other proceedings (“Claims”) brought by a third
party alleging: (a) that the R2 Lung CAD Product, as delivered to Vital,
infringes any third party Intellectual Property Right; (b) product
liability with respect to the R2 Lung CAD Product; (c) that any materials
provided by R2 to Vital under Section 2.4 are deceptive or misleading; or (d) a
failure by R2 to comply with applicable law.

 

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

 

7.3 Vital Indemnity.  Subject to Section 7.4 below, Vital
agrees to defend, indemnify and hold R2, its officers, directors, employees and
agents, from and against any and all liabilities, damages, losses, costs and
expenses attributable to Claims brought by a third party alleging: (a) deceptive
or misleading advertising or sales, marketing or promotional practices by
Vital, or its subcontractors, other than any made in reliance on the content of
the materials provided to Vital under Section 2.4; (b) negligence or
misconduct by Vital, or its subcontractors, in connection with the marketing or
promotion of the R2 Lung CAD Product; or (c) a failure by Vital to comply
with applicable law.

 

7.4 Procedure.  The party seeking indemnification, (“Indemnitee”)
shall: (a) promptly notify the indemnifying party (“Indemnitor”) in writing
of any Claim brought by a third party for which it is seeking indemnification; (b) provide
Indemnitor with sole control of the defense and/or settlement thereof; and (c) provide
Indemnitor, at Indemnitor’s request and expense, with reasonable assistance and
full information with respect thereto. 
Indemnitee shall have the right to participate, at its own expense, with
counsel of its own choosing in the defense and/or settlement of such claim,
suit or proceeding.  The indemnification
obligations of the parties in this Section 7 shall not apply to amounts
paid in settlement of any claim, suit or proceeding if such settlement is
effected without the consent of Indemnitor, which consent shall not be
unreasonably withheld or delayed.

 

7.5 Additional Remedy.  If the R2 Lung CAD Product is held, or in R2’s
reasonable opinion is likely to be held, to infringe or misappropriate a third
party’s Intellectual Property Rights, then R2 may at its sole option and
expense: (a) procure for the Customers the right to continue using the R2
Lung CAD Product; (b) replace the R2 CAD Product with a non-infringing,
functionally-equivalent product; or (c) if neither of the foregoing is
reasonably practicable, terminate the Customer Agreement and this Agreement and
refund to Customer the amounts paid for the R2 Lung CAD Product, less a
reasonable amount for prior use.

 

7.6 Entire Liability.  THE FOREGOING PROVISIONS OF THIS SECTION 7
STATE THE ENTIRE LIABILITY AND OBLIGATIONS OF EACH PARTY, AND EACH PARTY’S
EXCLUSIVE REMEDY, WITH RESPECT TO ANY ACTUAL OR ALLEGED INFRINGEMENT OF OR
MISAPPROPRIATION OF ANY INTELLECTUAL PROPERTY RIGHT BY THE R2 LUNG CAD PRODUCT.

 

 

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

 

8. Ownership

 

8.1 Ownership.  As between Vital and R2, R2 will own, and
hereby retains, all right, title and interest in and to the R2 Lung CAD
Product, and any improvements, enhancements, interface components, and/or
derivative works thereof, and all Intellectual Property Rights relating
thereto.  Any and all registrable and
patentable designs relating to the R2 Lung CAD Product and the right to apply
for protection therefore shall belong exclusively to R2.

 

9. Warranty

 

9.1 Warranty.  All product warranties offered by R2 shall be
made directly to the Customers.

 

9.2 Disclaimer of Warranties.  EXCEPT AS EXPRESSLY STATED IN SECTION 9.1,
THE R2 PRODUCT IS PROVIDED “AS IS,” WITHOUT WARRANTY OF ANY KIND.  R2 MAKES NO ADDITIONAL WARRANTIES OR
CONDITIONS OF ANY KIND, WHETHER, EXPRESS, IMPLIED, STATUTORY, OR OTHERWISE, AND
R2 SPECIFICALLY DISCLAIMS THE IMPLIED WARRANTIES AND CONDITIONS OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NON-INFRINGEMENT WITH
RESPECT TO THE R2 LUNG CAD PRODUCT PROVIDED HEREUNDER, AND WITH RESPECT TO THE
USE THEREOF.

 

10. LIMITATION OF LIABILITY

 

10.1 EXCEPT FOR AMOUNTS PAYABLE PURSUANT
TO A PARTY’S INDEMNIFICATION OBLIGATIONS, AND EXCEPT FOR A BREACH OF SECTION 2.6
OR 11.2, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY LOST
PROFITS, COST OF SUBSTITUTE GOODS, OR ANY CONSEQUENTIAL, SPECIAL, INCIDENTAL,
OR INDIRECT DAMAGES, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY, INCLUDING
NEGLIGENCE, ARISING OUT OF THIS AGREEMENT, EVEN IF ADVISED OF THE POSSIBILITY
OF SUCH DAMAGE.  IN NO EVENT SHALL THE
TOTAL LIABILITY OF EITHER PARTY EXCEED THE AMOUNTS PAID BY VITAL TO R2 DURING
THE TWELVE-MONTH PERIOD PRECEDING THE EVENT GIVING RISE TO THE LIABILITY.  THE FOREGOING LIMITATIONS APPLY
NOTWITHSTANDING OF THE FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY
HEREIN.

 

11. CONFIDENTIALITY

 

11.1 Definition.  For purposes of this Agreement, “Confidential
Information” means information exchanged between R2 and Vital pursuant to this
Agreement and the performance of the parties’ obligations hereunder, orally (if
reduced to writing and delivered to the other party within thirty (30) days of
disclosure) or in writing, if marked to indicate its confidential nature or if
of a type that a reasonable person would expect to be proprietary and
confidential and shall include the terms of this Agreement.  Confidential Information shall not mean information
which is (a) in the public domain or subsequently enters the public domain
through no act or omission of the receiving party; (b) subsequently
acquired free of any confidentiality obligation by the receiving party from a
third person having, to the receiving party’s knowledge, no obligation of
confidentiality to the disclosing party; (c) known to the receiving party
at the time of disclosure, as established by competent proof; or (d) developed
independently by or on behalf of the receiving party, without reliance on or
use of any Confidential Information of the other.  Notwithstanding the above, before either
party discloses Confidential Information which includes technical or scientific
information, it will inform the other party of the general nature of such
information and the other party may agree or decline to receive such
information, or the parties may negotiate a separate agreement covering such
information.  Except as to technical or
scientific information, which a party so agrees to receive, neither party shall
have any obligations with respect to any technical or scientific information,
which it may learn without reference to the other party’s Confidential
Information.

 

 

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

 

12. TERM AND TERMINATION

 

12.1 Term.  This Agreement shall commence on the
Effective Date and shall continue in full force until three (3) years
after the last day of the first full calendar month during which the
Image-Checker-Lung Version 2 is first commercially available , unless earlier
terminated as set forth in this Section 12.  The parties may renew this Agreement for
additional one (1) year terms upon mutual written agreement.

 

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

 

12.3 Termination for Insolvency.  This Agreement may be terminated by either
party, on notice: (a) upon the institution by the other party of
insolvency, receivership or bankruptcy proceedings; or any other proceedings
for the general settlement of all or substantially all of its debts; (b) upon
the institution of such proceedings against the other party, which are not
dismissed or otherwise resolved in its favor within sixty (60) days thereafter;
(c) upon the other party’s making a general assignment for the benefit of
creditors; or (d) upon the other party’s dissolution or ceasing to conduct
business as a going concern, or upon taking action to dissolve or to cease
business as a going concern.

 

12.4 Termination for Ongoing Force
Majeure.  If any of the
events of force majeure described in Section 5.5(c) occur and
continue for a period of in excess of sixty (60) days, either party shall be
entitled to terminate this Agreement upon written notice.

 

12.5 Effect of Termination.

 

(a) Accrued
Obligations.  Expiration or termination
of this Agreement for any reason shall not release any party hereto from any
liability which, at the time of such termination, has already accrued to the
other party or which is attributable to a period prior to such termination nor
preclude either party from pursuing any rights and remedies it may have
hereunder or at law or in equity with respect to any breach of this Agreement.  In addition, so long as Vital continues to
fulfill its obligations under the R2 Software Maintenance Program, if
necessary, beyond the term of this Agreement, R2 shall pay to Vital Commissions
in accordance with Section 5.2 on all Commissionable Transactions that occur
during the term of this Agreement but for which payment from Customers is not
received by R2 until after the expiration or termination of this Agreement, it
being agreed, however, that Vital shall in no event have obligations under the
R2 Software Maintenance Program which extend more than one year beyond the end
of the term of this Agreement.

 

 

(b) Limitation on
Liability.  In the event of termination
by either party in accordance with any of the provisions of this Agreement,
neither party shall be liable to the other because of such termination, for
compensation, reimbursement or damages on account of the loss of prospective
profits or anticipated sales or on account of expenditures, investments,
leases, inventory or commitments in connection with the business or goodwill of
R2 or Vital.

 

(c) Survival.  The provisions of Sections 1, 5.6, 5.7, 5.8,
6.1, 7.1-7.6, 8.1, 9.2, 10.1, 11, 12.5, 13 and 14 and any payment obligations
shall survive the expiration or termination of this Agreement for any reason.

 

13. Termination of old Agreement

 

From the Effective Date and beyond,
this Agreement replaces in its entirety the Old Agreement, and, notwithstanding
any provision therein to the contrary, the parties agree and hereby do
terminate and supersede the Old Agreement.

 

14. GENERAL

 

14.1 Assignment.  Neither party may assign or transfer this
Agreement or any of its rights and obligations under this Agreement without the
prior written consent of the other party, except that either party may assign
this Agreement in the case of a merger, acquisition, change of control, sale of
all or substantially all of the stock or assets of the assigning party or other
reorganization; provided that any permitted assignee agrees in writing to be
bound by the terms of this agreement. 
Subject to the foregoing, this Agreement shall be binding on and inure
to the benefit of any permitted assignee. 
Any attempted assignment in violation of this Section 14.1 shall be
null and void from the beginning.

 

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

 

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

 

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

 

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

 

14.6 Export.  The parties acknowledge the products
contemplated by this Agreement may be subject to the export control laws and
regulations of the United States, and any amendments thereof.  Each party agrees that it will not transfer,
deal with, export or re-export such products directly or indirectly, to (a) any
countries that are subject to United States export restrictions, except with
appropriate United States government approvals; (b) any third party who a
party knows or has reason to know will utilize them in the design, development
or production of nuclear, chemical or biological weapons; or (c) any third
party who has been prohibited from participating in United States export
transactions by any federal agency of the United States government.

 

14.7 Foreign Corrupt Practices Act.  In conformity with the United States Foreign
Corrupt Practices Act regarding foreign business practices, R2 and its
employees and agent as well as Vital and its

 

 

employees and agents shall not
directly or indirectly make a payment, promise to pay, or authorize payment, or
offer a gift, promise to give or authorize the gift of anything of value for
the purpose of influencing an act or decision (including a decision not to act)
of an official of any government or governmental agency or for inducing such
official to use any influence to affect any such governmental act or decision.

 

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

 

14.9 Injunctive Remedies.  Each party acknowledges that due to the
nature of proprietary information, any breach or threatened breach of Sections
2.5 or 11 would result in irreparable harm to the non-breaching party, for
which there is no adequate remedy at law, and therefore, the non-breaching
party shall be entitled to apply for injunctive or other equitable relief to
restrain such material breach in addition to other appropriate remedies.

 

14.10 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.

 

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

 

14.12 Notices.  Any notice required or permitted to be given
by either party under this Agreement shall be in writing and shall be
personally delivered or sent by commercial courier service (e.g., DHL), or by
registered or certified mail by the U.S. Postal Service, postage prepaid, or
sent by fax or telecopy and confirmed by first class mail (registered or
certified), postage prepaid, to the other party at the address first shown
above or at such other address of which such party gives notice hereunder.  If mailed, notices will be deemed effective
five (5) working days after deposit, postage prepaid, in the mail.

 

14.13 Partial Invalidity.  If any provision in this Agreement shall be
found or be held to be invalid or unenforceable in any jurisdiction in which
this Agreement is being performed, then the meaning of said provision shall be
construed, to the extent feasible, so as to render the provision enforceable,
and if no feasible interpretation would save such provision, it shall be
severed from the remainder of this Agreement, which shall remain in full force
and effect.  In such event, the parties
shall negotiate, in good faith, a substitute, valid and enforceable provision
which most nearly effects the parties’ intent in entering into this Agreement.

 

14.14 Press Releases.  The parties agree to cooperate to issue a
joint press release, approved in writing by each party, promptly after
execution of this Agreement.

 

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

 

14.16 Non-solicitation.

 

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

 

(b) For
purposes of this Section 14.16, the term “R2” shall include the R2 and any of
its affiliates and the term “Vital” shall include the Vital and any of its
affiliates.

 

 

(c) Breach of
this Section 14.16 shall require the violating party to pay to the
non-violating party, immediately following the retention of a person giving
rise to the violation, as liquidated damages and not as a penalty, a sum equal
to one hundred percent (100%) of such person’s cash salary or other cash
compensation (including any cash bonuses, awards or incentives) earned during
the twelve (12) month period ending on the date of such retention (annualized
if such person was employed or otherwise retained by the non-violating party
for less than twelve (12) months).

 

	
  Exhibit A:

  	
  Territory

  
	
  Exhibit B:

  	
  Marketing
  and Promotional Obligations

  
	
  Exhibit C:

  	
  Maintenance
  and Support

  
	
  Exhibit D:

  	
  Workstations
  and PACS Vendors

  

 

 

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

 

	
  R2 Technology, Inc.

  	
   

  	
  Vital Images, Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ John D. Pavlidis

  	
   

  	
  By:

  	
  /s/ Jay D. Miller

  
	
   

  	
   

  	
   

  
	
  Print Name:

  	
  John D. Pavlidis

  	
   

  	
  Print Name:

  	
  Jay D. Miller

  
	
   

  	
   

  	
   

  
	
  Title:

  	
  President & CEO

  	
   

  	
  Title:

  	
  President & CEO

  
	
   

  	
   

  	
   

  
	
  Date:

  	
  April 22, 2005

  	
   

  	
  Date:

  	
  April 21, 2005

  
									

 

 

EXHIBIT A

TERRITORY

Worldwide, but
only in jurisdictions for which all applicable government regulatory approval
has been granted.

 

 

EXHIBIT B

MARKETING AND PROMOTIONAL OBLIGATIONS

 

Subject
to the terms and conditions of this Agreement, Vital shall fulfill the
following obligations:

 

1.               Promote the licensing of the R2
Lung CAD Product within the Territory to Customers.

 

2.               Support local field marketing
events and activities, including, without limitation, making introductions to
and arranging meetings with potential Customers on behalf of R2, and to assist
R2 in the preparation and submission of presentations, proposals and quotations
for contracts or orders and in assessing the financial status of Customers and
potential Customers, at the times and in the manner reasonably requested by R2.

 

3.               Attend at its own expense but no
more often than once annually sales representative meetings and training
sessions that are reasonably conducted by R2 from time to time.

 

4.               Not to, without R2’s prior written
approval, alter, enlarge or limit orders, make representations or guarantees
concerning R2’s products, accept the return of, or make any allowance for such
products.

 

5.               Identify potential Customers.

 

6.               Provide to R2 market forecast and
licensing information regarding the R2 Lung CAD Product, as reasonably
requested by R2 from time to time.

 

7.               Assist R2 in demonstrating the R2
Lung CAD Product to Customers and potential Customers.

 

8.               Promote the R2 Lung CAD Product on
the Vital website in a manner to be agreed by the parties.

 

9.               Participate in agreed joint
marketing and promotional activities, including joint advertising, direct mail
or web promotions, where both parties shall share costs appropriately.

 

10.         Permit R2 to participate in the
demonstration of the R2 Lung CAD Product in Vital’s booths at various
exhibitions, including RSNA and HIMS, free of charge.

 

11.         Furnish public Customer information
as is reasonably necessary to enable R2 to supply the R2 Lung CAD Product that
shall meet Customers’ requirements.

 

1

 

EXHIBIT C

MAINTENANCE AND SUPPORT

 

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

 

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

 

2

 

EXHIBIT D

 

WORKSTATION AND PACS VENDORS

 

1.                                       “Workstation Vendors”:

 

•                  *

 

•                  *

 

•                  *

 

•                  *

 

•                  *

 

•                  *

 

2.                                       “PACS Vendors”:

 

•                  *

 

•                  *

 

* Confidential Treatment Requested

 

3Exhibit 10.47

 

BIOSITE INCORPORATED

 

409A NONQUALIFIED DEFERRED
COMPENSATION PLAN

 

 

Table of Contents

 

	
   

  	
  Article 1 -
  Definitions

  	
   

  
	
   

  	
   

  	
   

  
	
  1.1

  	
  Account.

  	
   

  
	
  1.2

  	
  Administrator.

  	
   

  
	
  1.3

  	
  Board.

  	
   

  
	
  1.4

  	
  Bonus.

  	
   

  
	
  1.5

  	
  Code.

  	
   

  
	
  1.6

  	
  Commission.

  	
   

  
	
  1.7

  	
  Compensation.

  	
   

  
	
  1.8

  	
  Deferrals.

  	
   

  
	
  1.9

  	
  Deferral Election.

  	
   

  
	
  1.10

  	
  Disability.

  	
   

  
	
  1.11

  	
  Effective Date.

  	
   

  
	
  1.12

  	
  Eligible Employee.

  	
   

  
	
  1.13

  	
  Employee.

  	
   

  
	
  1.14

  	
  Employer
  Discretionary Contribution.

  	
   

  
	
  1.15

  	
  Investment Fund or
  Funds.

  	
   

  
	
  1.16

  	
  Participant.

  	
   

  
	
  1.17

  	
  Plan Year.

  	
   

  
	
  1.18

  	
  Performance-based
  Compensation.

  	
   

  
	
  1.19

  	
  Retirement.

  	
   

  
	
  1.20

  	
  Salary.

  	
   

  
	
  1.21

  	
  Trust.

  	
   

  
	
  1.22

  	
  Trustee.

  	
   

  
	
  1.23

  	
  Years of Service.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Article 2 -
  Participation

  	
   

  
	
   

  	
   

  	
   

  
	
  2.1

  	
  Commencement of
  Participation.

  	
   

  
	
  2.2

  	
  Loss of Eligible
  Employee Status.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Article 3 -
  Contributions

  	
   

  
	
   

  	
   

  	
   

  
	
  3.1

  	
  Deferrals.

  	
   

  
	
  3.2

  	
  Employer
  Discretionary Contributions.

  	
   

  
	
  3.3

  	
  Time of Contributions.

  	
   

  
	
  3.4

  	
  Form of
  Contributions.

  	
   

  

 

 

	
   

  	
  Article
  4 - Vesting

  	
   

  
	
   

  	
   

  	
   

  
	
  4.1

  	
  Vesting of Deferrals.

  	
   

  
	
  4.2

  	
  Vesting
  of Employer Discretionary Contributions.

  	
   

  
	
  4.3

  	
  Vesting
  in Event of Retirement, Disability, Death or Change in Control.

  	
   

  
	
  4.4

  	
  Change in Control.

  	
   

  
	
  4.5

  	
  Amounts Not Vested.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Article 5
  - Accounts

  	
   

  
	
   

  	
   

  	
   

  
	
  5.1

  	
  Accounts.

  	
   

  
	
  5.2

  	
  Investments, Gains
  and Losses.

  	
   

  
	
  5.3

  	
  Forfeitures.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Article 6 -
  Distributions

  	
   

  
	
   

  	
   

  	
   

  
	
  6.1

  	
  Distribution Election.

  	
   

  
	
  6.2

  	
  Payment
  Options.

  	
   

  
	
  6.3

  	
  Changes to
  Distribution Elections.

  	
   

  
	
  6.4

  	
  Commencement
  of Payment upon Death, Disability or Termination.

  	
   

  
	
  6.5

  	
  Distributions
  to Specified Employee.

  	
   

  
	
  6.6

  	
  Minimum Distribution.

  	
   

  
	
  6.7

  	
  Unforeseeable Emergency

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Article 7 -
  Beneficiaries

  	
   

  
	
   

  	
   

  	
   

  
	
  7.1

  	
  Beneficiaries.

  	
   

  
	
  7.2

  	
  Lost Beneficiary.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Article 8
  - Funding

  	
   

  
	
   

  	
   

  	
   

  
	
  8.1

  	
  Prohibition Against
  Funding.

  	
   

  
	
  8.2

  	
  Deposits in Trust.

  	
   

  
	
  8.3

  	
  Indemnification of
  Trustee.

  	
   

  
	
  8.4

  	
  Withholding
  of Employee Contributions.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Article 9 -
  Claims Administration

  	
   

  
	
   

  	
   

  	
   

  
	
  9.1

  	
  General.

  	
   

  
	
  9.2

  	
  Claims Procedure.

  	
   

  
	
  9.3

  	
  Right
  of Appeal.

  	
   

  
	
  9.4

  	
  Review
  of Appeal.

  	
   

  
	
  9.5

  	
  Designation.

  	
   

  

 

 

	
   

  	
  Article 10 -
  General Provisions

  	
   

  
	
   

  	
   

  	
   

  
	
  10.1

  	
  Administrator.

  	
   

  
	
  10.2

  	
  No
  Assignment.

  	
   

  
	
  10.3

  	
  No Employment Rights.

  	
   

  
	
  10.4

  	
  Incompetence.

  	
   

  
	
  10.5

  	
  Identity.

  	
   

  
	
  10.6

  	
  Other
  Benefits.

  	
   

  
	
  10.7

  	
  No
  Liability.

  	
   

  
	
  10.8

  	
  Expenses.

  	
   

  
	
  10.9

  	
  Insolvency.

  	
   

  
	
  10.10

  	
  Plan Amendment.

  	
   

  
	
  10.11

  	
  Plan Termination.

  	
   

  
	
  10.12

  	
  Employer Determinations.

  	
   

  
	
  10.13

  	
  Construction.

  	
   

  
	
  10.14

  	
  Governing
  Law.

  	
   

  
	
  10.15

  	
  Severability.

  	
   

  
	
  10.16

  	
  Headings.

  	
   

  
	
  10.17

  	
  Terms.

  	
   

  

 

BIOSITE INCORPORATED

409A NONQUALIFIED DEFERRED COMPENSATION PLAN

 

Biosite Incorporated, a Delaware corporation, and its
affiliates and subsidiaries (the “Employer”), hereby adopts this Biosite
Incorporated 409A Nonqualified Deferred Compensation Plan (the “Plan”) for the
benefit of a select group of management or highly compensated employees.  This plan is an unfunded arrangement and is
intended to be exempt from the participation, vesting, funding, and fiduciary
requirements set forth in Title I of the Employee Retirement Income Security
Act of 1974, as amended (ERISA).  It is
intended to comply with Internal Revenue Code Section 409A.  This Plan is effective January 1, 2005.

 

Article 1 - Definitions

 

1.1                               Account.

The bookkeeping account established for each Participant as provided in
section 5.1 hereof.

 

1.2                               Administrator.

An administrative committee appointed by the Board of
Directors.

 

1.3                               Board.

The Board of Directors of the Employer.

 

1.4                               Bonus.

Remuneration which is designated as such by the Employer and which
relates to services performed during an incentive period by an Eligible
Employee, including any pretax elective deferrals from said Bonus to any
Employer sponsored plan that includes amounts deferred under a Deferral
Election or a qualified cash or deferred arrangement under Code Section 401(k)
or cafeteria plan under Code Section 125.

 

1.5                               Code.

The Internal Revenue Code of 1986, as amended.

 

1.6                               Commission.

Remuneration which is designated as such by the Employer and which
relates to services performed during an incentive period by an Eligible
Employee, including any pretax elective deferrals from said Commission to any
Employer sponsored plan that includes amounts deferred under a Deferral
Election or a qualified cash or deferred arrangement under Code Section 401(k)
or cafeteria plan under Code Section 125.

 

1.7                               Compensation.

The Participant’s earned income, including Salary, Bonus, Commission,
and Performance-based Compensation, if any, and other remuneration from the
Employer.

 

1

 

1.8                               Deferrals.

The portion of Compensation that a Participant elects to defer in
accordance with section 3.1 hereof.

 

1.9                               Deferral Election.

The separate written agreement, submitted to the Administrator, by
which an Eligible Employee agrees to participate in the Plan and make Deferrals
thereto.

 

1.10                        Disability.

Provided that such definition does not fail to comply with Code Section 409A(a)(1)(C) and
regulations, a participant shall be considered disabled if the participant is
unable to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or can be expected to last for continuous period of not less than 12
months.

 

1.11                        Effective Date.

January 1, 2005.

 

1.12                        Eligible Employee.

An Employee shall be considered an Eligible Employee if such Employee
is designated as an Eligible Employee by the Administrator

 

1.13                        Employee.

Any person employed by the Employer.

 

1.14                        Employer Discretionary Contribution.

A discretionary contribution made by the Employer to the Trust and that
is credited to one or more Participant’s Accounts in accordance with the terms
of section 3.2 hereof.

 

1.15                        Investment Fund or Funds.

Each investment(s) which serves as a means to measure value, increases
or decreases with respect to a Participant’s Accounts.

 

1.16                        Participant.

An Eligible Employee who is a Participant as provided in Article 2.

 

1.17                        Plan
Year.

The calendar year.

 

1.18                        Performance-based Compensation.

Remuneration which meets the requirements of “performance-based
compensation” as defined by Code Section 409A(a)(4)(B)(iii) and
related regulations, and is designated as such by the Employer and which
relates to services performed during an incentive period by an Eligible
Employee, including any pretax elective deferrals from said Performance-based
Compensation to any Employer sponsored plan that includes amounts deferred
under a Deferral Election or a 

 

2

 

qualified cash or deferred arrangement under Code Section 401(k)
or cafeteria plan under Code Section 125.

 

1.19                        Retirement.

Retirement means the Participant has separated service from the
Employer, and the Participant has completed at least five (5) Years of
Service with the Employer, and a combination of the Participant’s age and Years
of Service equals at least fifty-five (55).

 

1.20                        Salary.

An Eligible Employee’s base salary rate or rates in effect at any time
during a Plan Year, including any pretax elective deferrals from said Salary to
any Employer sponsored plan that includes amounts deferred under a Deferral
Election or a qualified cash or deferred arrangement under Code Section 401(k)
or cafeteria plan under Code Section 125.

 

1.21                        Trust.

The agreement between the Employer and the Trustee under which the
assets of the Plan are held, administered and managed, which shall conform to
the terms of Rev. Proc. 92-64.

 

1.22                        Trustee.

Investors Bank and Trust Company or such other successor that shall
become trustee pursuant to the terms of the Biosite Incorporated 409A
Nonqualified Deferred Compensation Plan.

 

1.23                        Years of Service.

A Participant’s “Years of Service” shall be measured by employment
during a twelve (12) month period commencing with the Participant’s date of
hire and anniversaries thereof.

 

Article 2 - Participation

 

2.1                               Commencement of
Participation.

Each Eligible Employee shall become a Participant at the earlier of the
date on which his or her Deferral Election first becomes effective or the date
on which an Employer Discretionary Contribution is first credited to his or her
Account.

 

2.2                               Loss of Eligible
Employee Status.

 

(a)                                  A
Participant who is no longer an Eligible Employee shall not be permitted to
submit a Deferral Election and all Deferrals for such Participant shall cease
as of the end of the Plan Year in which such Participant is determined to no
longer be an Eligible Employee.

 

(b)                                 Amounts
credited to the Account of a Participant described in subsection (a) shall
continue to be held, pursuant to the terms of the Plan and shall be distributed
as provided in Article 6.

 

3

 

Article 3 - Contributions

 

3.1                               Deferrals.

 

(a)                                  The
Employer shall credit to the Account of a Participant an amount equal to the
amount designated in the Participant’s Deferral Election for that Plan
Year.  Such amounts shall not be made
available to such Participant, except as provided in Article 6, and shall
reduce such Participant’s Compensation from the Employer in accordance with the
provisions of the applicable Deferral Election; provided, however, that all such
amounts shall be subject to the rights of the general creditors of the Employer
as provided in Article 8.

 

(b)                                 Each
Eligible Employee shall deliver a Deferral Election to the Employer before any
Deferrals can become effective.  Such
Deferral Election shall be void with respect to: (i) any Deferral Election
associated with Salary, Bonus or Commission unless submitted before the
beginning of the calendar year during which the amount to be deferred will be
earned, (ii) any Deferral Election associated with Performance-based
Compensation unless submitted at least 6 months prior to the end of the 12
month period over which the services for such Performance-based Compensation are
performed; provided, however, that in the year in which the Plan is first
adopted or an Employee is first eligible to participate, such Deferral Election
shall be filed within thirty (30) days after the date on which the Plan is
adopted or the date on which an Employee is first eligible to participate,
respectively, with respect to Compensation to be earned during the remainder of
the calendar year.

 

(c)                                  The
Deferral Election shall, subject to the limitation set forth in Section 3.1(g),
below, designate the amount of Compensation deferred by each Participant, the
subaccount, if any, as set forth in subsection (e), below, the beneficiary
or beneficiaries of the Participant and such other items as the Administrator
may prescribe.  Such designations shall
remain effective unless amended as provided in subsection (d), below.

 

(d)                                 A
Participant may amend his or her Deferral Election from time to time; provided,
however, that the timing of, and the effective date of any such amendment to
the amount of a Participant’s Deferrals shall comply with the provisions of subsection (b),
above and the provisions of Code Section 409A and the regulations
promulgated thereunder.

 

(e)                                  A
Participant may direct his or her Deferral to be credited to one or more
subaccounts as may be established, as provided in Article 5, by the
Participant at the time of the Deferral Election.

 

(f)                                    The
minimum amount that may be deferred each Plan Year is the greater of one
thousand dollars ($1,000) or one percent (1%) of the Participant’s
Compensation.

 

(g)                                 The
maximum amount that may be deferred each Plan Year is twenty-five percent (25%)
of the Participant’s Salary, one hundred percent (100%) of the Participant’s
Bonus, net of applicable taxes, and one hundred percent (100%) of the
Participant’s Commission, net of applicable taxes.

 

4

 

3.2                               Employer Discretionary Contributions.

The Employer reserves the right to make Employer Discretionary Contributions
to Participants’ Accounts in such amount and in such manner as may be
determined by the Employer.

 

3.3                               Time of Contributions.

 

(a)                                  Deferrals
shall be credited to the Accounts of Participants as soon as administratively
feasible following each payroll period.  The
Employer shall also transmit to the recordkeeper or trust, in the event of
trust usage, at that time any necessary instructions regarding the allocation
of such amounts among the Accounts of Participants.

 

(b)                                 Employer
Discretionary Contributions shall be credited to the Accounts of Participants at
such time as the Employer shall determine. 
The Employer shall also transmit to the recordkeeper or trust, in the
event of trust usage, at that time any necessary instructions regarding the
allocation of such amounts among the Accounts of Participants.

 

3.4                               Form of
Contributions.

All Deferrals and Employer Discretionary Contributions, if any, to the
Trust shall be made in the form of cash or cash equivalents of US currency.

 

Article 4 - Vesting

 

4.1                               Vesting of Deferrals.

A Participant shall have a vested right to the portion of his or her
Account attributable to Deferrals.

 

4.2                               Vesting of Employer
Discretionary Contributions.

A Participant shall have a vested right to the portion of his or her
Account attributable to Employer Discretionary Contribution(s) and any earnings
or losses on the investment of such Employer Discretionary Contribution(s)
according to such vesting schedule as the Employer shall determine at the
time an Employer Discretionary Contribution is made.

 

4.3                               Vesting in Event of
Retirement, Disability, Death or Change in Control.

 

(a)                                  A
Participant who terminates employment due to Retirement shall be fully vested
in the amounts credited to his or her Account.

 

(b)                                 A
Participant who terminates employment due to Disability shall be fully vested
in the amounts credited to his or her Account.

 

(c)                                  A
Participant who terminates employment due to death shall be fully vested in the
amounts credited to his or her Account.

 

(d)                                 Upon
a Change in Control, as defined in Section 4.4, all Participants shall be
fully vested in the amounts credited to their Accounts.

 

5

 

4.4                               Change in Control.

Provided that such definition does not fail to comply with Code Section 409A
and related regulations, a “Change in Control” of the Employer means the first
occurrence of any of the following events:

 

(a)                                  The
date that any one person or persons acting as a group acquires ownership of
Employer stock constituting more than fifty percent (50%) of the total fair
market value or total voting power of the Employer;

 

(b)                                 The
date that any one person or persons acting as a group acquires (or has acquired
during the 12-month period ending on the date of the most recent acquisition by
such person or persons) ownership of the stock of the Employer possessing
thirty-five percent (35%) or more of the total voting power of the stock of the
Employer;

 

(c)                                  The
date that any one person or persons acting as a group acquires assets from the
Employer that have a total gross fair market value equal to or more than forty
percent (40%) of the total gross fair market value of all of the assets of the
Employer immediately prior to such acquisition; or

 

(d)                                 The
date that a majority of members of the Employer’s Board is replaced during any
12-month period by directors whose appointment or election is not endorsed by a
majority of the members of the Board prior to the date of the appointment or
elections.

 

4.5                               Amounts Not Vested.

Any amounts credited to a Participant’s Account that are not vested at
the time of his or her termination of employment with the Employer shall be
forfeited.

 

Article 5 - Accounts

 

5.1                               Accounts.

The Administrator shall establish and maintain a bookkeeping account in
the name of each Participant.  The Administrator
shall also establish subaccounts, as provided in subsection (a) and (b),
below, as elected by the Participant pursuant to Article 3.  A Participant may have a maximum of ten (10) subaccounts
at any time.

 

(a)                                  A
Participant may establish a Retirement Account by so designating in such
Participant’s Deferral election.  Each
Participant’s Retirement Account shall be credited with Deferrals (as specified
in the Participant’s Deferral Election), Employer Discretionary Contributions,
if any (as specified in the Participant’s Deferral Election), and the
Participant’s allocable share of any earnings or losses on the foregoing.  Each Participant’s Account shall be reduced
by any distributions made plus any federal and state tax withholding and any
social security withholding tax as may be required by law.  Distributions from a Retirement Account to a
Specified Employee, as defined in Section 6.5, shall be subject to the
requirements of Section 6.5.

 

6

 

(b)                                 A
Participant may elect to establish one or more In-Service Accounts by
designating in such Participant’s Deferral Election the year in which payment
shall be made at the time the account is initially established.  The minimum initial deferral period for an In-Service
Account shall be three (3) years. 
Each Participant’s In-Service Account shall be credited with Deferrals,
Employer Discretionary Contributions (as specified in the Participant’s
Deferral Election), and the Participant’s allocable share of any deemed
earnings or losses on the foregoing. 
Each Participant’s In-Service Account shall be reduced by any distributions
made plus any federal and state tax withholding and any social security
withholding tax as may be required by law.

 

5.2                               Investments, Gains and
Losses.

 

(a)                                  Trust
assets shall be invested in the discretion of the Trustee.  The Trustee may consider any investment
suggestions received by the Employer or by a Participant with respect to his or
her own Account.

 

(b)                                 The
Administrator shall adjust the amounts credited to each Participant’s Account
to reflect Deferrals, Employer Discretionary Contributions, investment
experience, distributions and any other appropriate adjustments.  Such adjustments shall be made as frequently
as is administratively feasible.

 

(c)                                  A
Participant may direct that his or her Retirement Account and or In-Service Account(s)
established pursuant to Section 5.1 may be valued as if they were invested
in one or more Investment Funds multiples of one percent (1%) of the balance in
an Account.  A Participant may change his
or her selection of Investment Funds no more than six (6) times each Plan
Year.  An election shall be effective as
soon as administratively feasible following the date of the change as indicated
in writing by the Participant.

 

5.3                               Forfeitures.

Any forfeitures from a Participant’s Account shall continue to be held
in the Trust, shall be separately invested as directed by the Administrator and
shall be used to reduce succeeding Employer Discretionary Contributions until
such forfeitures have been entirely so applied. 
If no further Employer Discretionary Contributions will be made, then
such forfeitures shall be returned to the Employer.

 

Article 6 - Distributions

 

6.1                               Distribution Election.

Each Participant shall designate on his or her initial Deferral
Election the form and timing of his or her distribution by indicating the type
of account as described under Section 5.1, and by designating the manner
in which payments shall be made from the choices available under Section 6.2
hereof.  In the event a Participant fails
to make a timely distribution election, distributions shall be made in the
lump-sum form.

 

7

 

6.2                               Payment Options.

 

(a)                                  Retirement
Account payouts shall commence as soon as administratively feasible immediately
after the Participant’s Retirement and are payable in one of the following
forms: (i) in a lump-sum payment; or (ii) in annual installments over
a period of up to ten (10) years (as elected by Participant on a form
provided by the Administrator).

 

(b)                                 In-Service
Account payouts shall begin as soon as administratively feasible following January 1
of the calendar year designated by the Participant, on a properly submitted
Deferral Election and in accordance with the requirements of Code Section 409A,
and are payable in either a lump sum or substantially equal annual installments
over a period of five (5) years (as elected by Participant on a form a
provided by the Administrator).

 

(c)                                  The
amount of the substantially equal payments described in subsections (a) and
(b) above shall be determined by multiplying the Participant’s Retirement
or In-Service Account by a fraction, the denominator of which in the first year
of payment equals the number of years over which benefits are to be paid, and
the numerator of which is one (1).  The
amounts of the payments for each succeeding year shall be determined by
multiplying the Participant’s Retirement or In-Service Account as of the
applicable anniversary of the payout by a fraction, the denominator of which
equals the number of remaining years over which benefits are to be paid, and
the numerator of which is one (1).

 

(d)                                 Payments
under this Section 6.2 are subject to the requirements of Section 6.5.

 

6.3                               Changes to Distribution
Elections.

 

(a)                                  In
the event Participant desires to modify his or her elected form of distribution,
i.e., lump-sum payment or annual installments, Participant’s election to change
must be submitted to the Employer at least twelve (12) months prior to the
distribution commencement date and shall not take effect until twelve (12)
months after the election is made, provided however that any change may not
accelerate benefit payments as provided under Code Section 409A and
related regulations promulgated thereunder.

 

(b)                                 In
the event Participant desires to postpone the distribution commencement date
for his or her Retirement Account or In-Service Accounts, Participant’s election
to postpone said distribution commencement date must be submitted to the
Employer at least twelve (12) months prior to the distribution commencement
date and shall not take effect until twelve (12) months after the election is
made and the new distribution commencement date must be at least five (5) years
subsequent to the date when distributions would otherwise commence.  Moreover, any election to change a
Participant’s distribution commencement date, pursuant to this section, shall
only be permitted to extend the deferral period.

 

8

 

6.4                               Commencement of Payment
upon Death, Disability or Termination.

 

(a)                                  Upon
the death of a Participant, all amounts credited to his or her Account(s) shall
be paid, as soon as administratively feasible, to his or her beneficiary or
beneficiaries, as determined under Article 7 hereof, in a lump sum.

 

(b)                                 Upon
the Disability of a Participant, all amounts credited to his or her Account(s)
shall be paid to the Participant in a lump-sum payment, as soon as
administratively feasible.

 

(c)                                  Upon
the termination of employment of a Participant, all amounts credited to his or
her Account(s) shall be paid to the Participant in a lump-sum payment, as soon
as administratively feasible subject to Section 6.5 below.

 

6.5                               Distributions to
Specified Employee.

 

(a)                                  If
any employee is a “Specified Employee,” as defined in subsection (b) below,
upon a termination of employment for any reason other than Disability or death,
a distribution may not be made before the date which is six (6) months
after the date of separation from service (or, if earlier, the date of death of
the employee).

 

(b)                                 Pursuant
to Code Section 409A, a “Specified Employee” means a key employee (as
defined in Code Section 416(i) without regard to paragraph (5) thereof)
of a corporation any stock in which is publicly traded on an established securities
market or otherwise.

 

6.6                               Minimum Distribution.

Notwithstanding any provision to the contrary, and subject to Section 6.5,
above, if the balance of a Participant’s Account at the time of a termination
due to Retirement is $10,000 or less, then the Participant shall be paid his or
her benefits as a single lump sum as soon as administratively feasible
following said termination.

 

Notwithstanding any provision to the contrary, if the balance of a
Participant’s In-Service subaccount at the time of a scheduled In-Service
Account distribution is $10,000 or less, then the Participant shall be paid his
or her benefits as a single lump sum.

 

6.7                               Unforeseeable Emergency

The Administrator may permit an early distribution of part or all of
any deferred amounts; provided, however, that such distribution shall be made
only if the Administrator, in its sole discretion, determines that the
Participant has experienced an unforeseeable emergency.  An unforeseeable emergency is defined as a
severe financial hardship resulting from an illness or accident of the
Participant, the Participant’s spouse, or a dependent (as defined in Code Section 152(a))
of the Participant, loss of the Participant’s property due to casualty or other
similar extraordinary and unforeseeable circumstances arising as a result of
events beyond the control of the Participant. 
If an unforeseeable emergency is determined to exist, a distribution may
not exceed the amounts necessary to satisfy such emergency plus amounts
necessary to pay taxes

 

9

 

reasonably anticipated as a result of the distribution,
after taking into account the extent to which such hardship is or may be relieved
through reimbursement or compensation by insurance or otherwise or by
liquidation of the Participant’s assets (to the extent the liquidation of such
assets would not itself cause severe financial hardship).

 

Article 7 - Beneficiaries

 

7.1                               Beneficiaries.

Each Participant may from time to time designate one or more persons
(who may be any one or more members of such person’s family or other persons,
administrators, trusts, foundations or other entities) as his or her
beneficiary under the Plan.  Such
designation shall be made on a form prescribed by the Administrator.  Each Participant may at any time and from
time to time, change any previous beneficiary designation, without notice to or
consent of any previously designated beneficiary, by amending his or her
previous designation on a form prescribed by the Administrator.  If the beneficiary does not survive the
Participant (or is otherwise unavailable to receive payment) or if no
beneficiary is validly designated, then the amounts payable under this Plan
shall be paid to the Participant’s estate. 
If more than one person is the beneficiary of a deceased Participant,
each such person shall receive a pro rata share of any death benefit payable
unless otherwise designated on the applicable form.  If a beneficiary who is receiving benefits
dies, all benefits that were payable to such beneficiary shall then be payable
to the estate of that beneficiary.

 

7.2                               Lost Beneficiary.

 

(a)                                  All
Participants and beneficiaries shall have the obligation to keep the
Administrator informed of their current address until such time as all benefits
due have been paid.

 

(b)                                 If
a Participant or beneficiary cannot be located by the Administrator exercising
due diligence, then, in its sole discretion, the Administrator may presume that
the Participant or beneficiary is deceased for purposes of the Plan and all
unpaid amounts (net of due diligence expenses) owed to the Participant or
beneficiary shall be paid accordingly or, if a beneficiary cannot be so
located, then such amounts may be forfeited. 
Any such presumption of death shall be final, conclusive and binding on
all parties.

 

Article 8 - Funding

 

8.1                               Prohibition Against Funding.

Should any investment be acquired in connection with the liabilities
assumed under this Plan, it is expressly understood and agreed that the
Participants and beneficiaries shall not have any right with respect to, or
claim against, such assets nor shall any such purchase be construed to create a
trust of any kind or a fiduciary relationship between the Employer and the
Participants, their beneficiaries or any other person.  Any such assets shall be and remain a part of
the general, unpledged, unrestricted assets of the Employer, subject to the
claims of its general creditors.  It is
the express intention of the parties hereto that this arrangement shall be
unfunded for tax purposes and for purposes of Title I of the ERISA.  Each Participant and beneficiary shall

 

10

 

be required to look to the provisions of this Plan and
to the Employer itself for enforcement of any and all benefits due under this
Plan, and to the extent any such person acquires a right to receive payment
under this Plan, such right shall be no greater than the right of any unsecured
general creditor of the Employer.  The
Employer or the Trust shall be designated the owner and beneficiary of any investment
acquired in connection with its obligation under this Plan.

 

8.2                               Deposits in Trust.

Notwithstanding Section 8.1, or any other provision of this Plan
to the contrary, the Employer may deposit into the Trust any amounts it deems
appropriate to pay the benefits under this Plan.  The amounts so deposited may, but need not, include
all contributions made pursuant to a Deferral Election by a Participant, and any
Employer Discretionary Contributions.

 

8.3                               Indemnification of
Trustee.

 

(a)                                  The
Trustee shall not be liable for the making, retention, or sale of any
investment or reinvestment made by it, as herein provided, nor for any loss to,
or diminution of, the Trust assets, unless due to its own negligence, willful
misconduct or lack of good faith.

 

(b)                                 Such
Trustee shall be indemnified and saved harmless by the Employer from and
against all personal liability to which it may be subject by reason of any act
done or omitted to be done in its official capacity as Trustee in good faith in
the administration of the Plan and Trust, including all expenses reasonably
incurred in its defense in the event the Employer fails to provide such defense
upon the request of the Trustee.  The
Trustee is relieved of all responsibility in connection with its duties
hereunder to the fullest extent permitted by law, short of breach of duty to
the beneficiaries.

 

8.4                               Withholding of Employee
Contributions.

The Administrator is authorized to make any and all necessary
arrangements with the Employer in order to withhold the Participant’s Deferrals
under Section 3.1 hereof from his or her Compensation.  The Administrator shall determine the amount
and timing of such withholding.

 

Article 9 - Claims
Administration

 

9.1                               General.

If a Participant, Beneficiary or his or her representative is denied
all or a portion of an expected Plan benefit for any reason and the
Participant, Beneficiary or his or her representative desires to dispute the decision
of the Administrator, he or she must file a written notification of his or her
claim with the Administrator.

 

9.2                               Claims Procedure.

Upon receipt of any written claim for benefits, the Administrator shall
be notified and shall give due consideration to the claim presented.  If any Participant or Beneficiary claims to
be entitled to benefits under the Plan and the Administrator determines that
the claim should be denied in whole or in part, the Administrator shall, in
writing, notify such claimant within ninety (90) days following receipt of the
claim that the claim has been denied. 
The Administrator may 

 

11

 

extend the period of time for making a determination
with respect to any claim for a period of up to ninety (90) days, provided that
the Administrator determines that such an extension is necessary because of
special circumstances and notifies the claimant, prior to the expiration of the
initial ninety (90) day period, of the circumstances requiring the extension of
time and the date by which the Plan expects to render a decision.  If the claim is denied to any extent by the
Administrator, the Administrator shall furnish the claimant with a written
notice setting forth:

 

(a)                                  the
specific reason or reasons for denial of the claim;

 

(b)                                 a
specific reference to the Plan provisions on which the denial is based;

 

(c)                                  a
description of any additional material or information necessary for the
claimant to perfect the claim and an explanation of why such material or
information is necessary; and

 

(d)                                 an
explanation of the provisions of this Article.

 

9.3                               Right of Appeal.

A claimant who has a claim denied wholly or partially under Section 9.2
may appeal to the Administrator for reconsideration of that claim.  A request for reconsideration under this section must
be filed by written notice within sixty (60) days after receipt by the claimant
of the notice of denial under Section 9.2.

 

9.4                               Review of Appeal.

Upon receipt of an appeal the Administrator shall promptly take action
to give due consideration to the appeal. 
Such consideration may include a hearing of the parties involved, if the
Administrator feels such a hearing is necessary.  In preparing for this appeal the claimant
shall be given the right to review pertinent documents and the right to submit
in writing a statement of issues and comments. 
After consideration of the merits of the appeal the Administrator shall
issue a written decision which shall be binding on all parties.  The decision shall specifically state its
reasons and pertinent Plan provisions on which it relies.  The Administrator’s decision shall be issued
within sixty (60) days after the appeal is filed, except that the Administrator
may extend the period of time for making a determination with respect to any
claim for a period of up to sixty (60) days, provided that the Administrator
determines that such an extension is necessary because of special circumstances
and notifies the claimant, prior to the expiration of the initial sixty (60)
day period, of the circumstances requiring the extension of time and the date
by which the Plan expects to render a decision.

 

9.5                               Designation.

The Administrator may designate any other person of its choosing to
make any determination otherwise required under this Article.  Any person so designated shall have the same
authority and discretion granted to the Administrator hereunder.

 

12

 

Article 10 - General
Provisions

 

10.1                        Administrator.

 

(a)                                  The
Administrator is expressly empowered to limit the amount of compensation that
may be deferred; to deposit amounts into trust in accordance with Section 8.2
hereof; to interpret the Plan, and to determine all questions arising in the
administration, interpretation and application of the Plan; to employ
actuaries, accountants, counsel, and other persons it deems necessary in
connection with the administration of the Plan; to request any information from
the Employer it deems necessary to determine whether the Employer would be
considered insolvent or subject to a proceeding in bankruptcy; and to take all
other necessary and proper actions to fulfill its duties as Administrator.

 

(b)                                 The
Administrator shall not be liable for any actions by it hereunder, unless due
to its own negligence, willful misconduct or lack of good faith.

 

(c)                                  The
Administrator shall be indemnified and saved harmless by the Employer from and
against all personal liability to which it may be subject by reason of any act
done or omitted to be done in its official capacity as Administrator in good
faith in the administration of the Plan and Trust, including all expenses
reasonably incurred in its defense in the event the Employer fails to provide
such defense upon the request of the Administrator.  The Administrator is relieved of all
responsibility in connection with its duties hereunder to the fullest extent
permitted by law, short of breach of duty to the beneficiaries.

 

10.2                        No Assignment.

Benefits or payments under this Plan shall not be subject in any manner
to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance,
attachment, or garnishment by creditors of the Participant or the Participant’s
beneficiary, whether voluntary or involuntary, and any attempt to so
anticipate, alienate, sell, transfer, assign, pledge, encumber, attach or
garnish the same shall not be valid, nor shall any such benefit or payment be
in any way liable for or subject to the debts, contracts, liabilities,
engagement or torts of any Participant or beneficiary, or any other person
entitled to such benefit or payment pursuant to the terms of this Plan, except
to such extent as may be required by law. 
If any Participant or beneficiary or any other person entitled to a
benefit or payment pursuant to the terms of this Plan becomes bankrupt or
attempts to anticipate, alienate, sell, transfer, assign, pledge, encumber,
attach or garnish any benefit or payment under this Plan, in whole or in part,
or if any attempt is made to subject any such benefit or payment, in whole or
in part, to the debts, contracts, liabilities, engagements or torts of the
Participant or beneficiary or any other person entitled to any such benefit or
payment pursuant to the terms of this Plan, then such benefit or payment, in
the discretion of the Administrator, shall cease and terminate with respect to
such Participant or beneficiary, or any other such person.

 

10.3                        No Employment Rights.

Participation in this Plan shall not be construed to confer upon any
Participant the legal right to be retained in the employ of the Employer, or
give a Participant or beneficiary, or any other person, any right to any
payment whatsoever, except to the extent of the benefits provided

 

13

 

for hereunder. 
Each Participant shall remain subject to discharge to the same extent as
if this Plan had never been adopted.

 

10.4                        Incompetence.

If the Administrator determines that any person to whom a benefit is
payable under this Plan is incompetent by reason of physical or mental
disability, the Administrator shall have the power to cause the payments
becoming due to such person to be made to another for his or her benefit
without responsibility of the Administrator or the Employer to see to the
application of such payments.  Any
payment made pursuant to such power shall, as to such payment, operate as a
complete discharge of the Employer, the Administrator and the Trustee.

 

10.5                        Identity.

If, at any time, any doubt exists as to the identity of any person
entitled to any payment hereunder or the amount or time of such payment, the
Administrator shall be entitled to hold such sum until such identity or amount
or time is determined or until an order of a court of competent jurisdiction is
obtained.  The Administrator shall also
be entitled to pay such sum into court in accordance with the appropriate rules of
law.  Any expenses incurred by the
Employer, Administrator, and Trust incident to such proceeding or litigation
shall be charged against the Account of the affected Participant.

 

10.6                        Other Benefits.

The benefits of each Participant or beneficiary hereunder shall be in
addition to any benefits paid or payable to or on account of the Participant or
beneficiary under any other pension, disability, annuity or retirement plan or
policy whatsoever.

 

10.7                        No Liability.

No liability shall attach to or be incurred by any manager of the
Employer, Trustee or any Administrator under or by reason of the terms,
conditions and provisions contained in this Plan, or for the acts or decisions
taken or made thereunder or in connection therewith; and as a condition
precedent to the establishment of this Plan or the receipt of benefits thereunder,
or both, such liability, if any, is expressly waived and released by each
Participant and by any and all persons claiming under or through any
Participant or any other person.  Such
waiver and release shall be conclusively evidenced by any act or participation
in or the acceptance of benefits or the making of any election under this Plan.

 

10.8                        Expenses.

All expenses incurred in the administration of the Plan, whether
incurred by the Employer or the Plan, shall be paid by the Employer.

 

10.9                        Insolvency.

Should the Employer be considered insolvent (as defined by the Trust),
the Employer, through its Board and chief executive officer, shall give
immediate written notice of such to the Administrator of the Plan and the
Trustee.  Upon receipt of such notice,
the Administrator or Trustee shall cease to make any payments to Participants
who were Employees of the Employer or their beneficiaries and shall hold any
and all assets attributable to the Employer for the benefit of the general
creditors of the Employer.

 

14

 

10.10                 Plan Amendment.

 

(a)                                  Right
to Amend.  The Board of the Employer and
any authorized committee by written instrument, shall have the right to amend
the Plan at any time and with respect to any provisions hereof, and all parties
hereto or claiming any interest hereunder shall be bound by such amendment;
provided, however, that no such amendment shall deprive the Participant or any
Beneficiary(s) of any rights accrued hereunder prior to the date of the
amendment, including the right to receive the payment of his or her benefit
upon a benefit entitlement event, or earlier as provided herein.

 

(b)                                 Amendment
Required by Law.  Notwithstanding
anything to the contrary, the Plan may be amended at any time, retroactively if
required, if found necessary, in the opinion of the Board of the Employer, in
order to ensure that the Plan is characterized as a non-tax-qualified plan of
deferred supplemental retirement compensation maintained for members of a
select group of management or highly compensated employees as described under
Code Sections 451 and 409A, ERISA Sections 201(2), 301(a) (3) and 401
and to conform the Plan to the provisions and requirements of any applicable
law (including ERISA) and the Code.

 

10.11                 Plan Termination.

 

(a)                                  Employer’s
Right to Terminate Plan.  Subject to
applicable law, the Board of the Employer reserves the right, at any time, to
terminate the Plan; provided however, that no such termination shall deprive
the Participant or any Beneficiary of a right accrued hereunder prior to the
date of termination and provided that, upon termination, the Participant shall
become fully and immediately vested in his or her Account and such Account
shall be held in the Plan until an appropriate distribution event as provided
by this Plan and Code Section 409A.

 

(b)                                 Termination
of Plan Upon Dissolution.  Subject to
applicable law, the Plan shall terminate automatically upon the dissolution of
the Employer.  No such termination shall
deprive the Participant or Beneficiary(s) of a right accrued hereunder prior to
the date of termination and provided that, upon termination, the Participant
shall become fully and immediately vested in his or her Account and such
Account shall be held in the Plan until an appropriate distribution event as
provided by this Plan and Code Section 409A.

 

(c)                                  Termination
of Plan Due to Change in Control.  The
Employer may decide in its discretion to terminate the Plan in the event a
Change in Control (as defined in Section 4.4) and distribute all
Participants Accounts within twelve (12) months of the effective date of the
Change in Control as allowed by law.  Any
corporation or other business organization that is a successor to the Employer
by reason of a Change in Control shall have the right to become a party to the
Plan by adopting the same by resolution of the entity’s board of directors or
other appropriate governing body.  If
within thirty (30) days from the effective date of the Change in Control such
new entity does not become a party hereto, as above provided, the full amount
of the Participant’s Account shall become immediately distributable to the
Participant.

 

15

 

10.12                 Employer Determinations.

Any determinations, actions or decisions of the Employer (including but
not limited to, Plan amendments and Plan termination) shall be made by the
Board in accordance with its established procedures or by such other
individuals, groups or organizations that have been properly delegated by the
Board to make such determination or decision.

 

10.13                 Construction.

All questions of interpretation, construction or application arising
under or concerning the terms of this Plan shall be decided by the
Administrator, in its sole and final discretion, whose decision shall be final,
binding and conclusive upon all persons.

 

10.14                 Governing Law.

This Plan shall be governed by, construed and administered in
accordance with the applicable provisions of ERISA, and any other applicable
federal law, provided, however, that to the extent not preempted by federal law
this Plan shall be governed by, construed and administered under the laws of
the state of Delaware, other than its laws respecting choice of law.

 

10.15                 Severability.

If any provision of this Plan is held invalid or unenforceable, its
invalidity or unenforceability shall not affect any other provision of this
Plan and this Plan shall be construed and enforced as if such provision had not
been included therein.  If the inclusion
of any Employee (or Employees) as a Participant under this Plan would cause the
Plan to fail to comply with the requirements of sections 201(2), 301(a)(3) and
401(a)(1) of ERISA, or Code Section 409A, then the Plan shall be
severed with respect to such Employee or Employees, who shall be considered to
be participating in a separate arrangement.

 

10.16                 Headings.

The Article headings contained herein are inserted only as a
matter of convenience and for reference and in no way define, limit, enlarge or
describe the scope or intent of this Plan nor in any way shall they affect this
Plan or the construction of any provision thereof.

 

Remainder of page intentionally blank

 

16

 

10.17                 Terms.

Capitalized terms shall have meanings as defined herein.  Singular nouns shall be read as plural,
masculine pronouns shall be read as feminine, and vice versa, as appropriate.

 

IN WITNESS WHEREOF, Biosite Incorporated has caused
this instrument to be executed by its duly authorized officer, effective as of
this                
day of                         ,
20     .

 

	
   

  	
  Biosite Incorporated

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
  ATTEST:

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  
	
  Title:

  	
   

  	
   

  
								

 

17

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