Document:

Exhibit 10.38

PRODUCT DISTRIBUTION

AGREEMENT

 

THIS PRODUCT DISTRIBUTION AGREEMENT (the “Agreement”) is entered into

and effective on this day, November 28, 2002 (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

(“VTAL”).

RECITALS

A.                                   R2 is engaged in the business of

developing, manufacturing, distributing, and selling computer aided detection

(“CAD” as further defined below) software and hardware.

B.                                     VTAL is engaged in the business of

developing, distributing and selling VTAL Workstations (as hereafter defined).

C.                                     The parties desire that R2 customize its

Lung Nodule CAD Application (as defined below) and related software such that

it will operate with the VTAL Workstation (“R2 Products” as further defined

below).

D.                                    The parties further desire that VTAL

distribute the R2 Products in conjunction with the VTAL Workstation, either:

(i) installed on, and as a component of the VTAL Workstation; or (ii) on a

stand-alone basis, to VTAL Installed Base Sites (as defined below) solely for

use with the VTAL Workstation, 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:

1.     DEFINITIONS

1.1   “ASP” means average sales price as

more fully described in Section 8.5.

1.2   “CAD” means computer aided detection

and similar automated disease detections systems.

1.3   “Confidential Information” has the

meaning set forth in Section 13.1

1.4   “Customer” means an end user customer

to whom VTAL or its distributors, sells the R2 Product.

1.5   “Europe Date” means the later of: (a)

the date on which R2 is able to meet CE certification requirements and produce

a “Declaration of Conformance” for the R2 Product; or (b) the completion of the

milestones in the Development Plan with respect to the R2 Product that will be

distributed in Europe.

1.6   “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.

1.7   “Lung Nodule CAD Application” means

R2’s proprietary lung nodule CAD software, including Updates, Upgrades and New

Features made available by R2 during the term of this Agreement, and all

related documentation.

1.8   “New Features” means significant

improvements or enhancements, other than Updates and/or Upgrades, to the operating

system, application software or hardware component of the Lung Nodule CAD

Application or R2 Product, as the context requires, if any.

1.9   “Maintenance Program” means the

maintenance and support arrangement between VTAL (or its Subdistributors) and a

Customer, as more fully described in Section 3.3.

1.10 “Minimum” means the minimum number of

Lung Nodule CAD Application units that VTAL will purchase each Quarter in

accordance with Sections 8.2 and 8.4.

1.11 “Quarter” means each three-month period

beginning with the first day of the first month following the Europe Date; by

way of non-limiting example, if the Europe Date is February 15, 2003, the first

3-month period would run from March 1, 2003 to May 31, 2003.

1.12 “R2 Installed Base Sites” means those persons

or entities identified on a separate document delivered by R2 to VTAL

quarterly, as may be accurately updated by R2 from time to time, who are

located in the United States and Europe and are in possession of R2 products

(other than demonstration units). 

Notwithstanding anything to the contrary, R2 Installed Base Sites shall

include up to twenty (20) entities identified by R2 within sixty (60) days of

the Effective Date who work with R2 in an advisory or other similar capacity,

but who may not have actually purchased R2 products.

1.13 “R2 Product” means the (i) Lung Nodule

CAD Application configured by R2 for use by with the VTAL Workstation, as

reflected in the Specifications; (ii) visualization software applications;

(iii) all other supporting software applications (including bug fixes made

pursuant to Section 3.4, Updates, Upgrades and New Features to the foregoing

(i), (ii) and (iii) made available by R2 during the term of this Agreement);

and (iv) all related documentation.

1.14 “R2 Showcase” means the combination of

R2’s proprietary workstation and related products which incorporate the Lung

Nodule CAD Application, as more fully described in Section 2.8.

1.15 “Server” has the meaning set forth in

Section 3.6.

1.16 “Specifications” means the functional

and technical standards of the Lung Nodule CAD Application as well as the

compatibility standards for the R2 Products to loosely integrate and operate

with the VTAL Workstation, developed pursuant to Section 2.1 below.  The parties understand that the Specifications

with respect to the performance in sensitivity and specificity of the R2

Product delivered by R2 to VTAL will be the same as those for the Lung Nodule

CAD Application used by R2 in the R2 Showcase.

1.17 “Territory” means those countries, regions

or geographical markets identified on Exhibit B.

 

1.18 “Trademarks” with respect to a party

means the trademarks, service marks, logos and other proprietary marks that

such party may adopt from time to time.

1.19 “Updates” means software bug fixes and

corrections that ensure functionality of the Lung Nodule CAD Application or R2

Product, as the context requires, that are released by R2 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 software features.

1.20 “Upgrades” means a release or version of

the Lung Nodule CAD Application or R2 Product, as the context requires, that

contains new CAD detection improvements including algorithm and performance

enhancements, limited to an increase in sensitivity and/or a decrease in marker

rate, if any.  For example: improvement

in the algorithm through reduced false positives.  Upgrades do not include new software features or new hardware.

1.21 “US Date” means the later of : (a) the

date on which R2 obtains FDA approval for the Lung Nodule CAD Application

pursuant to Section 7.1, below, or (ii) the completion of the milestones in the

Development Plan with respect to the R2 Product that will be distributed in the

United States.

1.22   “VTAL Installed Base Sites” means those

persons or entities identified on a separate document delivered by VTAL to R2

quarterly, as may be accurately updated by VTAL from time to time, who are in

possession of one (1) or more VTAL Workstation(s) (other than demonstration

units).

1.23 “VTAL Workstation” means any VTAL workstation

and the components thereof, including without limitation the Vitrea brand

workstation, consisting of hardware, display devices and Vitrea and other

software applications.

1.24 “Warranty Period” means a period of

one (1) year after delivery and installation of the R2 Product at a Customer

location.

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 Product.

2.     DEVELOPMENT

2.1   Development Efforts.  The parties will develop and implement a

plan to define and test the Specifications and to address other compatibility

issues of the R2 Product with the VTAL Workstation (the “Development Plan”).  The parties will use their best efforts to

complete and attach the Development Plan to this Agreement as Exhibit A within

fourteen (14) days of the Effective Date. 

The parties may amend the Development Plan as they mutually agree in

writing to reflect changes in the Specifications.   The parties acknowledge and agree that the development efforts

are dependent on mutual cooperation and performance of each party’s obligations

set forth in the Development Plan.

2.2   Progress Meetings.  The parties will conduct meetings each

calendar quarter and keep each other reasonably informed with respect to

progress under the Development Plan and other significant changes,

modifications, revisions, or updates that are being planned for their

respective products.

 

2.3   DICOM Standard.  Whenever possible, the standard of

communication for images and the corresponding CAD results between the CAD

component of the R2 Products and the VTAL Workstation shall be the Digital

Imaging and Communications in Medicine (“DICOM”) Standard when such standard

supports the classes and services required. 

VTAL agrees that the DICOM header in each acquisition device contained

in the VTAL Workstation shall contain a unique identifier for each such

acquisition device.  The parties shall

meet periodically to discuss such changes, modifications, revisions, or updates,

and shall provide each other with such information and assistance as may be

necessary or useful and commercially reasonable to enable compatibility and

interoperability between future versions of the R2 Product and the VTAL

Workstation.  Such changes and

modifications may include, but are not limited to:

(a)   the addition or deletion of services

supported,

(b)                                 changes to the information contained in

the DICOM fields of DICOM headers, including the use of required fields,

(c)   changes to the image processing used to

create DICOM  for presentation images.

2.4   Validation Testing.  Each party shall provide commercially

reasonable levels of resources necessary to validate DICOM connectivity and

verify clinical usability after each Update, Upgrade or New Feature, if any.

2.5   Development and Test Data.  The development and testing data provided by

VTAL to R2, or generated by R2 under this Agreement, together with any and all

other cases, training databases and other related materials provided to R2 by

VTAL (“Test Data”) will remain the property of VTAL.  VTAL agrees to remove all personally identifiable patient

information on any Test Data before delivery to R2.  VTAL hereby grants to R2 a non-exclusive, royalty-free,

perpetual, irrevocable, non-transferable (subject to Section 15.1) license to

use the Test Data:  (i) internally for

R2’s business and development purposes; and (ii) in aggregate form, as

necessary for the purpose of obtaining the regulatory approvals described in

Section 7.  All Test Data provided by

VTAL to R2 hereunder will be deemed “Confidential Information” of R2, subject

to the obligations of Section 13.2, except for purposes of (ii) above.

2.6   Restrictions.  Unless otherwise stated in the Development

Plan, neither party is entitled to receive any source code, algorithms,

designs, or similar source materials from the other party.  With respect to the other party’s products

and Confidential Information provided hereunder, neither party shall: (a)

reverse engineer, decompile, disassemble, or otherwise attempt to derive any

source code, algorithms, ideas, process, technique, know how, technology, or

other underlying content therefrom; or (b) copy, alter, modify, or create

derivative works of any portion or component thereof; or (c) assist any third

party, or allow or permit any third party within its control, to do any of the

foregoing.

2.7   Ownership.

(a)   As between VTAL and R2, R2 will own, and

hereby retains, all right, title, and interest in and to the Lung Nodule CAD

Application and the R2 Product, and any improvements, enhancements, interface

components, and/or derivative works thereof, and all Intellectual Property

Rights relating thereto.  At R2’s

request, VTAL will assign or cause to be assigned to R2 all right, title,

interest in and to the foregoing materials and Intellectual Property 

 

Rights therein, and VTAL shall reasonably assist and

cooperate with R2 in prosecuting, maintaining, filing for, enforcing, and

otherwise protecting R2’s rights and interests therein.  Any and all registerable and patentable

designs relating to the Lung Nodule CAD Application and/or the R2 Product, and

the right to apply for protection therefore, shall belong exclusively to R2.

 

(b)           As between R2 and VTAL, VTAL will

own, and hereby retains, all right, title, and interest in and to the VTAL

Workstation and any modifications, improvements, enhancements, interface

components, and/or derivative works thereof, and all Intellectual Property

Rights relating thereto.  At VTAL’s

request, R2 will assign or cause to be assigned to VTAL all right, title and

interest in and to the foregoing materials and Intellectual Property Rights

therein, and R2 shall reasonably assist and cooperate with VTAL in prosecuting,

maintaining, filing for, enforcing, and otherwise protecting VTAL’s rights and

interests therein.  Any and all

registerable or patentable designs relating to the VTAL Workstation, and the

right to apply for protection therefore, shall belong exclusively to VTAL.  The parties acknowledge that R2 has been

given, under the terms and conditions to be imposed upon VTAL customers, third

party beneficiary rights to enforcement its Intellectual Property Rights with

respect to Customers.  The parties

agree, however, that (i) R2 shall not exercise such rights so long as VTAL acts

to protect such R2 Rights with at least the same degree of care and diligence

it uses to protect its own rights of similar type and value, and in any event

with at least reasonable care and diligence and (ii) R2 shall exercise such

rights at its own cost and expense.

2.8   R2 Showcase Product.

(a)   VTAL acknowledges that R2 is in the process

of developing its own workstation product that will incorporate the Lung Nodule

CAD Application (when available) and that will be branded with the R2

Trademarks (“R2 Showcase”).  The

R2 Showcase is inclusive of the workstation, all accompanying non-CAD related

software, and the Lung Nodule CAD Application, whether such components are sold

at the same time or separately.  Subject

to Section 4.1, R2 reserves the right, by itself or with third parties, to

develop, market, promote, sell, and distribute the Lung Nodule CAD Application,

and any future versions, enhancements, derivative works, or modifications

thereof, whether inside or outside of the Territory.

(b)   The parties will work together to coordinate

the timing of the release of both the R2 Product and the R2 Showcase. In any

case, R2 agrees that it will make the R2 Product available to VTAL for use with

the VTAL Workstation upon the mutual completion by the parties of the

milestones set forth in the Development Plan. 

Further, VTAL shall not release the R2 Product before such date that R2

releases the R2 Showcase.

(c)   Subject to Section 4, no provision of this

Agreement shall be deemed to restrict either party’s right to exploit any

Intellectual Property Rights belonging to that party in other products or

services, including without limitation, in products or services which may

directly or indirectly compete with the other party’s product or services, or

with the products or services contemplated by this Agreement.

2.9   Costs.  Except as expressly stated herein, each party shall bear its own

costs and expenses in connection with the development activities contemplated

herein.

 

3.     DISTRIBUTION

3.1   Appointment.  Subject to the terms and conditions herein, R2 hereby authorizes

VTAL to distribute the R2 Product within the Territory either:  (i) installed on, and as part of the VTAL

Workstation; or (ii) to VTAL Installed Base Sites for use solely with the VTAL

Workstation, and not on a stand-alone basis. 

VTAL shall include the terms and conditions attached as Exhibit G (which

may be modified from time to time by either party subject to the other party’s

consent, which consent will not be unreasonably withheld) with the

documentation VTAL provides to Customers.

3.2   Subdistributors.  VTAL’s distributors, resellers and channel

partners that are authorized in writing by VTAL (“Subdistributors”) may also

purchase the R2 Product directly from R2 for distribution within the Territory

to Customers solely in conjunction with the VTAL Workstation, either as part

thereof, or to Customers already owning a VTAL Workstation for use in

connection therewith, and not on a stand-alone basis, and subject to all other

applicable terms and conditions of this Agreement.  In all events, VTAL shall remain responsible and liable for its

Subdistributors’ compliance with the terms and conditions of this Agreement.

3.3     Customer Installation, Service and

Support.  VTAL shall be responsible,

at its sole cost and expense, for the installation of the R2 Product at the

Customer site.  VTAL agrees to provide

R2 with quarterly reports (no later than the twentieth (20) business day

following February 28, May 31, August 31, and November 30) stating each

Customer’s name, location, contact information and date of sale.  VTAL shall offer each Customer the

opportunity to enter into a Maintenance Program through which VTAL will

provide, through its own technical personnel, first-level technical support and

maintenance to such Customer, in accordance with Exhibit H.  Customers may also opt to receive quarterly

newsletters and participate in a R2 sponsored Lung Nodule CAD user group under

the Maintenance Program.  R2 shall

provide second-level support to VTAL with respect to all Customers free of

charge during the Warranty Period, and thereafter for Customers in the

Maintenance Program as further set forth in Exhibit H.  VTAL hereby acknowledges that R2 shall have

no responsibility or obligation to provide any support services directly to

Customers; however, upon VTAL’s request and in R2’s sole discretion, R2 may

provide direct support to Customers.  R2

shall make available Updates, free of charge, to all Customers during the

Warranty Period, and thereafter to Customers participating in a Maintenance

Program, and VTAL may indicate to its Customers that it will provide Updates,

when and if such Updates are made available. 

However, VTAL shall indicate that warranty and support services do not,

and the Maintenance Program does not, include Upgrades or New Features. Upgrades

and New Features, if any, are subject to an additional fee, as further set

forth in Section 8.9.  R2 agrees to make

Updates, Upgrades and New Features for the R2 Product available to VTAL within

the same time frames that R2 makes Updates, Upgrades and New Features for the

Lung Nodule CAD Application generally available, if any.

3.4   Ongoing Support.  For so long as a Customer has a software

license for the R2 Product, all software “bug fixes” to the R2 Product that are

released by R2 to correct safety and regulatory issues will be provided by R2

to VTAL free of charge and installed by VTAL on the VTAL Workstation free of

charge.

3.5   Training.  VTAL shall ensure that its service personnel are sufficiently

skilled and knowledgeable about the R2 Product.  R2 shall provide initial training to VTAL regarding the use and

maintenance of the R2 Product as reasonably necessary, for VTAL to fulfill its

service 

 

obligations to the Customer.  Such training shall take place at the dates and locations as

mutually agreed between the parties.

3.6   Hardware Procurement.  VTAL shall purchase directly hardware that

meets the R2 specifications attached as Exhibit I (as may be modified by

R2 from time to time) for use with the R2 Product (“Servers”).  The

parties shall mutually agree upon vendors of such Servers.  VTAL will install the R2 Product (shipped by

R2 in accordance with Section 6) on the Servers at VTAL’s expense.

4.     EXCLUSIVITY

4.1   By R2.  R2 shall not license or otherwise provide lung nodule CAD

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 the lung nodule CAD

technology to: (i) any other third party workstation vendor not listed in

Exhibit D; (ii) any PACS vendor identified on Exhibit D that sells workstations

in conjunction with PACS (“PACS Vendor”); provided that R2 shall not provide

the lung nodule CAD technology to any PACS Vendor for use with such vendor’s

sale of freestanding workstations; (iii) or to any third party OEM or PACS

company that in turn contracts with any Workstation Vendor identified on

Exhibit D.

4.2   By VTAL.  During the term, VTAL shall not sell any lung nodule CAD

technology in connection with any VTAL product or services (including the VTAL

Workstation), other than the CAD provided by R2.  Further, VTAL shall not: (i) sell the R2 Product to any R2

Installed Base Sites located in the United States for a period of six (6)

months after the US Date; and (ii) sell the R2 Product or VTAL Workstation to

any R2 Installed Base Sites located outside the United States for a period of

six (6) months after the Europe Date.

5.     MARKETING

5.1   VTAL Responsibilities.  VTAL shall use commercially reasonable

efforts to promote and market the R2 Product.

5.2   Materials.   R2 will provide assistance to VTAL in the form of reasonable

quantities of promotional and other marketing materials in English and such

other languages as may be available from time to time.  VTAL shall be responsible for such other

translation of promotional materials and other documents required for use of R2

Product in the Territory, and in the event of any such translations, VTAL shall

certify to R2 that any such translations have been appropriately verified, if,

and only to the extent, such verification is required by a regulatory agency in

the country for which the translation was made.  VTAL 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 Product that VTAL intends to use to market,

promote and sell the R2 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 Product

provided that if no written notice of rejection is received within the thirty

(30) day period following receipt of an item, it shall be deemed approved.

5.3   Product Presentation.  Each party represents and warrants that it

will:  (a) present the R2 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, (d) avoid false or misleading representations with regard to

the Lung Nodule CAD Application, the VTAL Workstation or the R2 Product, and

(v) avoid soliciting orders for the R2 Product from any Customer that it

knows engages in illegal or deceptive trade practices.

5.4   Demonstration and Training Licenses.  VTAL will provide R2 with a quarterly

listing of the total number, broken down by region, of VTAL direct sales

personnel and distributor sales personnel who are selling the R2 Product.  R2 will provide copies of the R2 Product,

Updates, Upgrades and New Features for demonstration purposes only to each such

salesperson.  R2 will provide the first

five (5) demonstration copies to VTAL free of charge.  For the remainder, VTAL agrees to reimburse R2 for the costs to

R2 directly attributable to third-party software licenses purchased by R2 in

developing the Lung Nodule CAD Application, Updates, Upgrades or New

Features.  In addition, R2 will provide

free of charge up to two (2) copies of the R2 Product, Updates, Upgrades and

New Features (promptly following release) solely for VTAL’s internal training

of its sales personnel.  The total

number of copies provided to VTAL by R2 for demonstration and training purposes

will not exceed a total of one hundred (100) during the first twelve (12)

months of this Agreement and will not exceed a total of two hundred (200) over

the term of the Agreement.

5.5   Trademarks.  Subject to compliance with the terms of this Agreement,

(a) R2 shall have the right to indicate to the public that the R2 Product

has been tested for compatibility, and is being marketed for use, with the VTAL

Workstation; (b) VTAL shall have the right to indicate to the public that

the VTAL Workstation has been tested for compatibility and is being marketed

for use with the R2 Product; and (c) each party shall have the right to use the

other party’s Trademarks in connection with performance of this Agreement.  VTAL shall not alter or remove any R2

Trademarks applied to, or embedded in the R2 Product.  VTAL shall market and promote the VTAL Workstation as having R2

lung nodule CAD capability and shall use the R2 Trademarks on all VTAL

Workstation advertising materials that relate to lung nodule CAD

technology.  Each party shall submit samples of the other party’s

Trademarks prior to their first use for approval by the other party.  Such approval will not limit the other

party’s obligation to comply with all applicable laws and will not be deemed an

endorsement or approval of any of the other party’s advertising content.  Nothing herein shall grant either party any

rights or title to the other party’s Trademarks, and all goodwill associated

with such party’s Trademarks shall inure solely to the benefit of that

party.  Each party reserves the right to

reject any use of its Trademark by the other party, and the other party shall

immediately discontinue use of such Trademark upon notice.   Neither party shall challenge, or assist

others to challenge, the validity of the other party’s Trademarks, and neither

party shall register or attempt to register any trademarks, trade names or

service marks confusingly similar to the other party’s Trademarks.

5.6   Packaging and Labeling.  VTAL

shall reproduce all copyright and other proprietary notices contained in the R2

Product on the user interface of the VTAL Workstation.  In addition, except for the addition of

information required by applicable laws and regulations in the Territory, VTAL

shall not re-label the R2 Product or any other R2 products supplied to VTAL by

R2 hereunder without the prior written consent of R2.  If applicable law or regulation requires re-labeling of the R2

Product, VTAL shall so notify R2, and promptly thereafter the parties shall

cooperatively develop labels in compliance with such laws or regulations.

 

5.7   Display Obligations.   VTAL shall not alter, remove or obfuscate

the R2 Trademarks that appear on any visualization or display of the output

derived from the R2 Product on any screen, printout, and/or workstation that

displays such output.  VTAL shall ensure

that the VTAL Workstation displays a standard size icon which permits the

Customer to open the R2 Product.

6.     ORDERS AND DELIVERY

6.1   Forecasts.  To facilitate planning, at the start of each Quarter, VTAL will

provide R2 with a non-binding, ninety (90)-day forecast.

6.2   Shipment/Risk of Loss.  Each shipment of the R2 Product will be

packaged by R2 and delivered to R2’s designated shipping point (the “Shipping

Point”). All freight, insurance, duty, and other shipping expenses, as well as

any special packing expenses, shall be paid by VTAL.  VTAL shall also bear all applicable taxes, tariffs, duties, and

similar charges that may be assessed against the R2 Product(s) after delivery

to the Shipping Point.  All shipments

and freight charges will be deemed correct unless R2 receives from VTAL, no

later than forty-five (45) days after the shipping date of a given shipment, a

written notice specifying the shipment, the purchase order number, and the

exact nature of the discrepancy between the order and shipment or discrepancy

in the freight cost, as applicable.

6.3   Inspection and Return.  VTAL shall promptly, but in no event later

than thirty (30) days, after the date of installation of the R2 Product at an

Installed Base Site, on a  Server or on

a VTAL Workstation, inform R2 of a defect in the R2 Product.  R2 shall replace such defective copy with a

new copy, free of charge.

7.     GOVERNMENTAL APPROVALS

7.1   Regulatory Approvals.  With respect to the R2 Product, R2, at its

expense, will be responsible for obtaining and maintaining, in R2’s name: (a)

FDA and other applicable United States regulatory agency approvals; (b) ISO9000

certification; (c) CE certification in accordance with the provisions of

Directive 93/42 governing medical devices for the R2 Product; and (d)

applicable regulatory approvals in Canada. R2 shall inform VTAL in writing, no

less than frequently than quarterly, as to the status of such approvals.  Further, R2 will promptly inform VTAL if any

of the elements which has permitted R2 to obtain the foregoing approvals is not

longer valid.  To the extent applicable,

VTAL will be responsible for obtaining all regulatory agency approvals in the

countries in which VTAL (in its sole discretion) distributes the R2 Product

within the Territory, as may be necessary for displaying the R2 Product in

connection with the VTAL Workstation. 

Each respective company will cover its own costs for regulatory

activities.  Each party agrees to

execute such instruments, documents and agreements and to give such further

written assurances, as may be reasonably necessary to better realize the intent

and understanding of the parties set forth in this Section 7.1.

7.2   Registrations, Licenses and Permits.

(a)   Except as set forth in Sections 7.1, VTAL, at

VTAL ‘s expense, shall obtain all registrations, licenses, and permits

(“Permits”) required to comply with the laws and regulations for the countries

within the Territory where VTAL, in its sole discretion, imports and

distributes the R2 Product; provided, however, that VTAL shall promptly notify

R2 upon the 

 

initiation of any applications for Permits.  VTAL shall provide to R2 complete copies of

all applications for and issued Permits relating to the R2 Product.  To the extent permitted by law, all Permits

obtained by VTAL in the Territory with respect to the R2 Product shall be in

the name of R2.  Each party agrees to

execute such instruments, documents and agreements and to give such further

written assurances, as may be reasonably necessary to better realize the intent

and understanding of the parties set forth in this Section 7.2.

(b)   Upon the expiration or termination of this

Agreement, at R2’s requests, all Permits relating to the R2 Product shall be

transferred and delivered to, and shall inure to the benefit of R2 or its

designee, to the extent that this is permissible under applicable law, at no

cost to R2 other than legitimate fees and charges imposed by local governmental

authorities; and VTAL agrees to execute any documents and render any

assistance, at R2’s request and expense, as may be necessary to perfect R2

rights in such Permits.   The parties

will split equally (50%) any other customary and routine fees which are agreed

and approved in advance by both parties.

7.3   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 Product or the VTAL Workstation, 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 Product, or if R2 or a regulatory

authority initiates a recall of the R2 Product, VTAL shall cooperate with and

assist R2 in locating, and retrieving if necessary, recalled R2 Products from

Customers.  VTAL shall be responsible

for maintaining all records of its sales to Customers in the event of a recall

or other quality related issue.  R2

shall bear the costs of all recalls of the R2 Product.  VTAL shall bear the costs of all recalls of

the VTAL Workstation.

7.4   Compliance with Local Laws.  VTAL agrees to comply with all local laws

and regulations applicable to the distribution of the R2 Product in each

country within the Territory.

8.     CONSIDERATION

 

8.1   Prices for Lung Nodule CAD Application.  VTAL agrees to pay the transfer prices

(adjusted per the applicable discount schedule) set forth in the pricing

schedule attached as Exhibit C.

8.2   Minimum Sales.

(a)   Beginning on the Europe Date, VTAL shall

order and purchase a minimum number of R2 Product units each Quarter, during

each year of the term of this Agreement (“Minimum”), as follows:

(i)    First 12-month period:         units per Quarter

(ii)   Second 12-month period:    units per Quarter

(iii)  Third 12-month period:       units per Quarter

By way

of non-limiting example, during the first Quarter, VTAL shall purchase a

minimum of          (   ) units. 

If, by the 59th day, VTAL has purchased          (  

) units, VTAL shall purchase       

(   ) additional units on day 60

to satisfy the minimum for that Quarter. 

If more than the minimum is 

 

purchased

in any Quarter, these additional numbers over the Minimum will be applied

towards the Minimum required in the subsequent Quarters.

(b)   Once VTAL purchases and pays for a total

of                       (      ) units, the Minimum will no longer

apply.

(c)   During the period between the Europe Date and

the US Date, VTAL’s Quarterly Minimum will be decreased by                   (    ) of the units in Section 8.2(a) above, however, the total

Minimum will not change.  Rather, the

remaining                 (      ) of the Minimum for a given Quarter

will be deferred and added to the Quarters subsequent to the US Date.  VTAL shall purchase the deferred Minimum

during a period of time subsequent to the US Date that is equivalent to the

duration of the period between the Europe Date and the US Date.  By way of non-limiting example, if the

period between the Europe Date and the US Date was exactly nine (9) months,

then during those three Quarters, the Minimum would be only           (    ) units per Quarter, rather than           (   ) units as

noted above.  However, during the subsequent

three (3) Quarters following the US Date, the Minimum would increase to                (    ) units in the first Quarter and               (   ) units

per Quarter for the next two Quarters, rather than             (   ) units

and             (   ) respectively as noted above.

(d)   Purchases by Subdistributors shall apply

towards the Minimums set forth herein, as if the purchases had been by VTAL.

(e)   Notwithstanding the foregoing terms of this

Section 8.2, the Minimum shall not apply to a Quarter, nor shall such

Minimum be deferred to a subsequent period, if:  (i) subsequent to the Europe Date, the CE certification with

respect to the R2 Product is revoked or otherwise becomes ineffective; (ii)

subsequent to the US Date, any FDA approval with respect to the R2 Product is

revoked or otherwise becomes ineffective; (iii) a regulatory agency, or R2,

issues a recall of the R2 Product or VTAL Workstation, as a result of the R2

Product installed thereon; (iv) VTAL issues a recall of the VTAL Workstation

solely attributable to the R2 Product; (v) the ability of VTAL to sell the R2

Product is 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 VTAL (“Force Majeure”),

or (vi) VTAL becomes subject to any injunction or other legal prohibition

against the sale of the R2 Product (except one which would be cured by

obtaining a Permit or other applicable regulatory approvals).

8.3   Reports.  R2 shall provide a report to VTAL in writing within thirty (30)

days of the close of each Quarter, containing the total number of R2 Showcase

units sold worldwide during such Quarter (excluding beta, demonstration,

training and non-CAD enabled units), and the price (exclusive of

transportation, insurance, taxes, duties and the like) paid therefore.

8.4   Adjustment of Minimums.  If the total number of R2 Showcase units

sold worldwide in any two (2) Quarter period by R2 and all of its distributor/channel

partners (excluding VTAL) is less than the sum of the Quarterly Minimums for

the preceding two (2) Quarters, then VTAL’s Quarterly Minimums for the

subsequent two (2) Quarters will be decreased by the same number by which R2

and all of its distributors/channel partners fell short during the preceding

(2) Quarters.  By way of non-limiting

example, if R2 and all of its distributor/channel partners sell              (   ) units, instead of          

(   ) units during the first two

(2) Quarters in the third twelve (12) month period after the Europe Date, then

the Minimum VTAL must purchase in the subsequent two (2) 

 

Quarters would decrease by a total of          (  

) units, from           (   ) per Quarter to          (   ) per Quarter.

8.5   Revenue Share/Referrals by R2.    R2 may refer its existing and potential

customers to VTAL and for each such referral that is not a VTAL Installed Base

Site that purchases the R2 Product (“R2 Referral”), VTAL shall reimburse R2 for                (       ) of the incentive that R2 pays to its sales representative

for such R2 Referral; provided that the total dollar amount paid as an

incentive by R2 to its sales representative will not exceed                                                  

($            ) per R2 Referral.

8.6   Adjustment of Transfer Prices.

(a)   If the ASP for all R2 Showcase units

(excluding beta, demonstration, training and non-CAD enabled units) sold by R2

directly to end-users in any given Quarter falls below                                  (               ), then VTAL’s transfer price as set forth in

Exhibit C in the subsequent Quarter will be decreased by the same percentage

that the ASP of all such R2 Showcase units falls below such                      figure.  By way of non-limiting example, if the ASP

on such R2 Showcase units were             

in a given Quarter, then the transfer price for the Minimum number of

units required to be purchased by VTAL in the subsequent Quarter would drop by                (      ).

(b)   If VTAL desires to purchase more than the

Minimum during any Quarter in which VTAL’s transfer price is below             in the US and            outside the US, as per the

calculation noted above, VTAL must submit a signed purchase order from each

Customer for all units above the Minimum that it purchases in that Quarter in

which the transfer price was lowered pursuant to this Section, and VTAL must

subsequently verify placement of such units at a Customer location.  Otherwise, prices for additional units

beyond the Minimum for which there are no signed purchase orders will be set at

the subsequent Quarter’s transfer prices as calculated in Section 8.5 (a)

above. So long as the ASP for all R2 Showcase units is at least            during a Quarter, the transfer

prices noted in Exhibit C will apply for the next Quarter.  If R2 fails to sell any such R2 Showcase

units during a Quarter, the transfer price from the previous Quarter will

continue for the subsequent Quarter.

8.7   Maintenance.  VTAL shall pay R2 a non-refundable, flat fee as set forth in

Exhibit C, for each Maintenance Program sold to a Customer, in accordance with

the payment terms set forth in Section 8.10. 

VTAL shall not be required to continue making payments under this Section

8.7 if the source code to the R2 Product is released to VTAL pursuant to the

escrow agreement attached as Exhibit F.

8.8   Audits.  Each party shall have the right, at its own expense, to inspect

those accounting records of the other party necessary to verify compliance with

the terms of this Agreement.  Such

inspections shall take place upon not less than fifteen (15) days prior written

notice, and during the audited party’s normal business hours.  The audited party shall promptly pay the

difference, plus interest, on any underpayments revealed in the audit.  Further, if an audit reveals an underpayment

of more than five percent (5%), the audited party shall also pay the cost and

expenses related to the audit.

8.9   Upgrades and New Features.  Upgrades and New Features for the R2

Product, if any, are subject to an additional fee to be agreed in good faith

negotiations between the parties; provided that such fee shall not be more

than                 (      ) of the list price for the correlating 

 

Upgrade or New Feature made to the Lung Nodule CAD

Application used in the R2 Showcase (exclusive of hardware components).

8.10 Payments.  VTAL shall make all payments due hereunder within forty-five (45)

days of the date of R2’s invoice.  Any

payments that are not timely paid as provided hereunder shall bear interest at

an annual rate equal to one and a half percent (1.5%) 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 by R2.  Any failure of VTAL to make timely payment

to R2 due hereunder will constitute a material breach of this Agreement and

VTAL’s payment of such interest on late payments will not prevent R2 from

exercising any other rights under applicable law.

8.11 Taxes. 

All prices specified hereunder do not include and are net of any foreign

or domestic governmental taxes or charges of any kind that may be applicable to

the sale, licensing, marketing, or distribution of the R2 Product, including

without limitation excise, sales, use, property, license, value-added taxes,

withholding or similar taxes, customs or other import duties or other taxes,

tariffs or duties, other than taxes which are imposed solely on the net income

of R2.  Any such taxes which are

otherwise imposed on payments to R2 shall be the sole responsibility of VTAL.

9.     REPORTING AND CUSTOMER COMPLAINTS

9.1   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 has 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

Product, and VTAL shall be primarily responsible for evaluation of any

reportable incidents that relate to the VTAL Workstation. Each of R2 and VTAL

agree to supply to the other any information relating to such reportable incident

promptly after becoming aware of it so that each of R2 and VTAL can comply with

governmental reporting requirements.

9.2   Customer Complaints.  VTAL shall promptly investigate, monitor,

and notify R2 of all Customer and/or regulatory complaints concerning the use

of the R2 Product, or the VTAL Workstation (regardless of whether such VTAL

Workstation is equipped with the R2 Product) in the Territory.   R2 shall promptly investigate, monitor and

notify VTAL of all customer and/or regulatory complaints concerning the use of

the R2 Showcase.   Each party shall

advise the other of all such complaints alleging patient injury 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.  In addition, within

fifteen (15) calendar days following the date it receives such complaint, such

party shall also provide the other party with a materially complete written

report relating thereto.  Any notice to

VTAL 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 VTAL 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.

 

10.  INDEMNITY AND INSURANCE

10.1 R2 Indemnity.  Subject to Sections 10.2 and

10.5 below, R2 agrees to indemnify and hold harmless VTAL, its officers,

directors, employees and agents, from and against any and all liabilities,

damages, losses, costs and expenses attributable to claims, actions, suits, or

other proceedings (“Claims”) brought by a third party alleging:  (a) that the R2 Product, as delivered to

VTAL, infringes any third party Intellectual Property Right; (b) product

liability with respect to the R2 Product; (c) that any materials provided by R2

to VTAL under Section 5.2 are deceptive or misleading; or (d) a failure by

R2 to comply with applicable law.

10.2 Exclusions.  Notwithstanding the foregoing, R2 will have no liability for

infringement claims arising from: 

(a) combination of the R2 Product with other software or products

not provided or authorized by R2, which claim would have been avoided if the R2

Product had not been so combined; (b) the modification of the R2 Product,

in whole or in part, by anyone other than R2 which claim would have been

avoided if the R2 Product had not been so modified.

10.3 VTAL Indemnity.   Subject to Section 10.4 and 10.5 below,

VTAL agrees to 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)

infringement of any third party Intellectual Property Right by the VTAL

Workstation; (b) product liability with respect to the Product to the extent

directly attributable to the VTAL Workstation; (c) deceptive or misleading

advertising or sales practices by VTAL or its Subdistributors, other than any

made in reliance on the content of the materials provided to VTAL under

Section 5.2; (d) negligence or misconduct by VTAL, or its Subdistributors,

in connection with the marketing, distribution, or sale of the R2 Product; or

(e) a failure by VTAL to comply with applicable law.

10.4 Exclusions.  Notwithstanding the foregoing, VTAL will have no liability for

infringement claims with respect to VTAL Workstations, if any, arising

from:  (a) combination of the VTAL

Workstations with other software or products not provided or authorized by

VTAL, which claim would have been avoided if the VTAL Workstation had not been

so combined; or (b) the modification of the VTAL Workstation, in whole or in

part, by any party other than VTAL which claim would have been avoided if the

VTAL Workstation were not so modified.

10.5 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 10 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.

10.6 Additional Remedy.  If any portion of either party’s products

contemplated by this Agreement (the VTAL Workstation and the R2 Product) is

held, or in such party’s reasonable opinion is likely to be held, to infringe

or misappropriate a third party’s Intellectual Property Right, then such party

may at its sole option and expense: 

(a) procure for the other party and/or the Customer, as

appropriate, the right to continue using such product; (b) replace the product

with a 

 

non-infringing, functionally equivalent product; or

(c) if neither of the foregoing is reasonably practicable, and to the

extent the infringing component restricts a Customer’s ability to continue use

of a Product, terminate this Agreement and refund to Customer and/or the other

party, as appropriate, the amounts paid for the Product, or the infringing

component (by way of non-limiting example, the Lung Nodule CAD Application,) as

applicable, less a reasonable amount for prior use.

10.7 Entire Liability.  THE FOREGOING PROVISIONS OF THIS SECTION 10

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 LUNG NODULE CAD

APPLICATION, THE VTAL WORKSTATION, OR THE R2 PRODUCT.

10.8 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.

11.  WARRANTY

11.1 Limited

Warranty.  R2 represents and warrants to VTAL that the

R2 Product will conform in all material respects to the Specifications during

the Warranty Period.

11.2 Warranty

Limitations.  The foregoing warranty does not extend to

problems or errors in the R2 Product that result from: (a) Customer’s

failure to implement all Updates which are provided by R2, if any; (b) any

use of the R2 Product in a manner for which it was not designed or as not

authorized under this Agreement or under the Customer’s license;

(c) negligence on the part of VTAL or Customer, or their employees,

contractors, or consultants; or (d) any use of the R2 Product with other

software, hardware or products not authorized by R2.  Neither party shall have the authority to offer, and neither

party shall make, any representations or give warranties on behalf of the other

party.

11.3 Disclaimer.  EXCEPT AS EXPRESSLY STATED IN SECTION 11.1, 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 LUNG NODULE CAD APPLICATION

PROVIDED HEREUNDER, AND WITH RESPECT TO THE USE THEREOF.

12.  LIMITATION OF LIABILITY

Except for each party’s obligations under Section 10, and except

for a breach of Sections 2.6 or 13.2 of this Agreement, 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 VTAL 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.

13.  CONFIDENTIALITY

13.1 Definition.  For purposes of this Agreement, “Confidential Information”

means information exchanged between R2 and VTAL pursuant to this Agreement and

the performance of the parties’ obligations hereunder, orally (if reduced to

writing and delivered to the other party within fifteen (15) days of

disclosure) or in writing, if marked to indicate its confidential nature or if

of a type that a reasonable person would expect to be proprietary and

confidential 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.

13.2 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.

14.   TERM AND TERMINATION

14.1 Term. 

This Agreement shall commence on the Effective Date and shall continue

in full force for a period of three (3) years from the Europe Date, unless

earlier terminated as set forth in this Section 14.  The parties may renew this Agreement for

additional one (1) year terms upon mutual written agreement.

14.2 Termination for Cause.  If either party breaches any of its material

obligations hereunder, and such breach is not cured within thirty (30) days

after notice from the other party, the non-breaching party shall be entitled to

terminate this Agreement upon written notice.

14.3 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.

14.4 Termination for Ongoing Force Majeure.  If any of the events described in

Subsection 8.2(e) occur and continue for a period of in excess of thirty

(30) days, either party shall be entitled to terminate this Agreement upon

written notice.

14.5 Failure to Obtain Regulatory Approvals.  VTAL may terminate this Agreement

immediately, with written notice, if R2, after diligent efforts, fails to obtain

FDA approval or CE certification with respect to the R2 Product on, or before,

September 30, 2004.  R2 may terminate

this Agreement, immediately, with written notice, if R2, after diligent

efforts, fails to obtain FDA or CE certification with respect to the R2 Product

on, or before, the third (3rd) anniversary of the Effective Date.

14.6 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.

(b)   Maintenance.  Each party’s maintenance obligations then in effect will continue

in full force and effect with respect to each Customer, until such obligations

expire by their terms.

(c)   Continued Right to Sell.  Upon termination of this Agreement, R2 shall

have the right, at its sole option, to purchase all or part of VTAL’s inventory

of the R2 CAD that is not already required to fulfill accepted Customer

purchase orders, at a price equal to the transfer price invoiced to VTAL.  If R2 opts not to buy back VTAL’s inventory

of the R2 Product, VTAL shall have the right to continue to market, distribute,

and sell unsold R2 Products in the Territory 

 

pursuant to the terms hereof for an additional period

of one hundred eighty (180) days after notice of termination of this Agreement.

(d)   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 VTAL.

(e)   Survival.  The provisions of Sections 1, 2.7, 3.4, 7.2(b), 8.10, 9.1,

10.1-10.7, 11.3, 12, 13, 14.6, 15 and any payment obligations shall survive the

expiration or termination of this Agreement for any reason.

15.  GENERAL

15.1 Assignment.  Neither party may assign or transfer this Agreement or any of its

rights and obligation 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, sale of stock or assets 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 15.1

shall be void.

15.2 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.

15.3 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.

15.4 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.

15.5 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 agreements

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.

15.6 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 (i) any countries that are subject to United States

export restrictions, except with appropriate United States government

approvals; (ii) 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 (iii) any

third party who has been prohibited from participating in United States export

transactions by any federal agency of the United States government.

15.7 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 VTAL 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.

15.8 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.

15.9 Governmental Consent.  VTAL shall be responsible for timely filings

of this Agreement with any required government entities within the

Territory.  If any such governmental

entity objects to this Agreement of any provision hereof, the parties shall

have the right to suspend or discontinue distribution of the R2 Product within

such region or country in the Territory.

15.10       Independent Contractors.  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 that party.

15.11       Injunctive Remedies.  Each party acknowledges that due to the

nature of proprietary information, any breach or threatened breach of Sections

2.6, 5.3, or 13 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.

15.12       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.  

15.13       No Implied Licenses.  Except for the licenses 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.

15.14       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.

 

15.15       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.

15.16       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.

15.17       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.

15.18       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 15.17, the term

“R2” shall include the R2 and any of its affiliates and the term “VTAL” shall

include the VTAL and any of its affiliates.

(c)   Breach of this Section 15.17 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:  Development Plan

Exhibit B:  [Reserved]

Exhibit C:  Pricing

Exhibit D:  Workstation and PACS

Vendors

Exhibit E:  Source Code Escrow

Agreement

Exhibit F:  [Reserved]

 

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/ Michael S. Klein

  	

   

  	

  By:

  	

  /s/ Jay D. Miller

  
	

  Print Name:

  	

  Michael S. Klein

  	

   

  	

  Print Name:

  	

  Jay D. Miller

  
	

  Title:

  	

  President & CEO

  	

   

  	

  Title:

  	

  President & CEO

  
	

  Date:

  	

  1/6/03

  	

   

  	

  Date:

  	

  1/8/03

  
										

EXHIBIT A

DEVELOPMENT

PLAN

(To be

attached within 14 days of Effective Date)

EXHIBIT B

INTENTIONALLY

LEFT BLANK

EXHIBIT

C

PRICE

LIST

Transfer Price:  The transfer

price for R2 Products shall be calculated using the applicable base price for

R2 Products (determined by whether R2 Products are sold to Customers located

either inside or outside the U.S. as set forth below), less the Estimated

Server Price.

                For purposes of

the foregoing, “Estimated Server Price” means the estimated price of a Server,

based on the average price for all Servers purchased during the first Quarter

after either the Europe Date or the US Date, whichever occurs first.  To the extent the Estimated Server Price is

significantly different from the actual Server price, the Estimated Server

Price will be adjusted each Quarter based upon the actual price of Servers in

the preceding Quarter.  At the end of

each Quarter, if the Estimated Server Price for all Servers purchased is less

than the actual Server price for such Quarter, VTAL shall pay the difference in

accordance with the payment terms set forth in Section 8.10.  If the Estimated Server Price is greater

than the actual Server price, VTAL will be credited the difference against

purchases of R2 Products in the next Quarter.

 

 

R2 Products placed

in U.S.

Maintenance in

U.S.

R2 Products placed

outside U.S.

Maintenance

outside U.S.

 

Suggested Retail

Price

R2 Products

(inside or outside U.S.)

Maintenance inside

U.S.

Maintenance

outside U.S.

 

Notwithstanding the

published suggested retail price, VTAL shall be solely responsible for setting

the prices of R2 Products and Maintenance to its Customers.

Volume discounts

Cumulative discount:  VTAL will

receive a               discount on

units sold beginning with the       

unit and an additional           (              ) discount on units sold beginning with the             unit.

Quarterly discount:  In any

Quarter, VTAL will receive a              

discount for units sold beginning with each unit beyond the Quarterly

minimum, and an additional              (          ) discount for units sold beginning with each unit beyond

twice the Quarterly minimum.  By way of

non-limiting example, assuming that the quarterly minimum was        units, VTAL would receive a            discount on units           sold, and an additional         discount on units       and greater sold.

 

For the avoidance of doubt, the cumulative discount and the quarterly

discount are not mutually exclusive.

EXHIBIT

D

WORKSTATION

AND PACS VENDORS

 

 

1.               “Workstation Vendors”:

•

•

•

•

•

•

 

2.               “PACS Vendors”:

•

•

EXHIBIT E

R2 ESCROW AGREEMENT

 

This Escrow Agreement is

entered into between R2 and VTAL concurrently with the Product Distribution

Agreement (the “Agreement”), and constitutes an Exhibit thereto.   Any capitalized terms not expressly defined

in this Escrow Agreement will have the meanings given to such terms in the

Agreement.

 

NOW THEREFORE, in consideration of the mutual promises herein, the

parties agree as follows:

1.             DEFINITIONS

(a)           “Escrow Materials” means the

human readable, source code of the R2 Product, including any corrections, bug

fixes, maintenance modifications, customizations or improvements provided by R2

to VTAL, and associated documentation and manuals, provided by R2 hereunder.

(b)           “Triggering Event” means an

event which will trigger the release of the Escrow Materials as set forth in

Section 3, and which event will trigger the vesting of VTAL’s rights under the

license grant in Section 2(a).

2.             LICENSE

(a)           License Grant. Subject to the

occurrence of a Triggering Event and all other terms and conditions of this

Escrow Agreement, R2 hereby grants to VTAL a perpetual, non-exclusive,

non-transferable, limited license to use the Escrow Materials internally for

the sole purpose of supporting Customers of the R2 Product, as of the date of

termination or expiration of the Agreement.  

VTAL shall not use the Escrow Materials for any other commercial

purposes.  VTAL acknowledges and agrees

that R2 shall not be obligated to provide any support or maintenance for the Escrow

Materials, whatsoever.

(b)           License Restrictions.  VTAL’s rights in the license granted in

Section 2 (a) above shall not vest until the occurrence of a Triggering

Event.  VTAL shall not, and shall not

permit any third party to: (i) modify or create any derivative works based

on the Escrow Materials or any portion thereof; (ii) time-share or otherwise

use the Escrow Materials to operate a service bureau; (iii) use the Escrow

Materials anywhere other than at VTAL’s business facilities; (v) reproduce the Escrow

Materials other than for archival or back-up purposes; or (vi) use the Escrow

Materials in any way other than as permitted in Section 2(a).

(c)           Escrow Materials Security.   VTAL shall use the Escrow Materials only

under carefully controlled conditions, will treat the Escrow Materials with the

same security measures as VTAL treats its own most valuable trade secrets (but

in no event less than a standard of care typical for the treatment of Escrow

Materials).  VTAL shall restrict access

to the Escrow Materials to those employees and third party contractors of VTAL

who have agreed to be bound by a confidentiality obligation at least as

protective of R2’s rights as this Escrow Agreement, and who have a need to

access the Escrow Materials for the purposes allowed in this Escrow Agreement.

(d)           Ownership.  Except for those limited rights expressly

granted in Section 2(a), R2 and its third party licensors retain all right,

title and interest in and to the Escrow Materials, including all 

 

Intellectual Property Rights therein.  VTAL acknowledges that the license granted

pursuant to this Escrow Agreement is not a sale and does not transfer to VTAL

title or ownership of the Escrow Materials, but only a right of limited use for

the purposes stated herein.   ALL RIGHTS

NOT EXPRESSLY GRANTED HEREUNDER ARE RESERVED TO R2.

3.             TRIGGERING EVENT

(a)           The Escrow Materials shall be

delivered to VTAL by R2’s designated escrow agent (approved by VTAL), and

VTAL’s rights under the license granted in Section 2(a) shall vest only upon a

breach by R2, which breach continues uncured for a period of forty (45) days

from the date VTAL gives written notice to R2, of any material support

obligation as set out in the Agreement, which support obligation requires

access to the Escrow Materials in order to be fulfilled.  For avoidance of doubt, any failure to

comply with such support obligations as a result of a Force Majeure shall not

be deemed a breach for purposes of this Section 3(a).

4.             TERM AND TERMINATION

(a)           Term. 

This Escrow Agreement will commence as of the Effective Date

and will remain in full force and effect until termination or expiration of the

Agreement or until otherwise terminated as set forth below.

(b)           Termination for Cause.  Either party may terminate this Escrow Materials

Agreement immediately if the other party fails to cure a material breach within

ten (10) days written notice from the non-breaching party of such material

breach.  R2 may terminate this Escrow

Agreement immediately, upon notice, if VTAL breaches any provision of Sections

2(b) or 2(c).

(c)           Effects of Termination.  Upon termination of this Escrow Agreement

for any reason: (i) the rights and licenses granted to VTAL hereunder will

immediately terminate; (ii) VTAL shall immediately discontinue any use of the

Escrow Materials and shall return or destroy all copies of the Escrow

Materials; (iii) each party shall promptly return or destroy all Confidential

Information of the other party; and (iv) Sections 1, 2(d), 4(c), 6, 7 and 8

shall survive.

5.             CONSIDERATION

(a)           Escrow Fees.  VTAL shall be responsible for all fees

charged by the escrow agent for maintaining the Escrow Materials in escrow.

(b)           Taxes.  All fees specified hereunder do not include

and are net of any taxes or duties of any kind which may be imposed by any

governmental entity on the transactions contemplated by this Escrow Materials

Agreement, and VTAL shall be solely responsible for all such taxes or duties

other than U.S. taxes based solely on R2’s income.

6.             WARRANTY AND DISCLAIMER

(a)           Limited Warranty.  R2 represents and warrants to VTAL that the

Escrow Material will contain the source code for the R2 Product.

(b)           Disclaimer.   EXCEPT AS EXPRESSLY SET FORTH IN 6(a)

ABOVE, THE ESCROW MATERIALS ARE PROVIDED “AS IS” WITHOUT WARRANTY OF ANY

KIND.  R2 MAKES NO WARRANTIES, WHETHER

EXPRESS, IMPLIED, STATUTORY OR OTHERWISE WITH RESPECT TO THE ESCROW MATERIALS

INCLUDING THEIR CONDITION, CONFORMITY TO ANY REPRESENTATION OR DESCRIPTION OR

THE EXISTENCE OF ANY LATENT OR PATENT DEFECTS AND R2 SPECIFICALLY 

 

DISCLAIMS ALL IMPLIED WARRANTIES OF MERCHANTABILITY,

FITNESS FOR A PARTICULAR PURPOSE, AND NON-INFRINGEMENT.  R2 DOES NOT WARRANT THAT THE ESCROW

MATERIALS WILL BE ERROR-FREE OR THAT THE ESCROW MATERIALS WILL OPERATE WITHOUT

INTERRUPTIONS.

7.             INDEMNITY

VTAL shall defend, indemnify and hold harmless R2, its affiliates,

employees, officers, directors and agents from and against any and all claims,

proceedings, actions, costs, expenses, damages and liabilities arising out of

or related to VTAL’s use of the Escrow Material; provided that R2: (i) promptly

notifies VTAL of any claim, action, suit, or other proceeding for which it is

seeking indemnification; (ii) provides VTAL with sole control of the defense

thereof; and (iii) provides VTAL, at VTAL’ expense and request, with

reasonable assistance and full information with respect thereto.  R2 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.

8.             LIMITATION OF LIABILITY

EXCEPT FOR A BREACH OF

SECTION 2.2 OR 2.3, AND FOR OBLIGATIONS UNDER SECTION 7, IN NO EVENT SHALL

EITHER PARTY BE LIABLE TO THE OTHER FOR INDIRECT, INCIDENTAL, SPECIAL OR OTHER

CONSEQUENTIAL DAMAGES, INCLUDING WITHOUT LIMITATION DAMAGES FOR LOSS OF

PROFITS, DATA OR USE, INCURRED BY EITHER PARTY OR ANY THIRD PARTY, ARISING OUT

OF OR RELATED TO THIS ESCROW MATERIALS AGREEMENT WHETHER IN AN ACTION IN

CONTRACT, TORT, OR OTHERWISE, EVEN IF THE OTHER PARTY HAS BEEN ADVISED OF THE

POSSIBILITY OF SUCH DAMAGES.   EXCEPT

FOR A BREACH OF SECTION 2.2 OR 2.3, AND FOR OBLIGATIONS UNDER SECTION 7, IN NO

EVENT SHALL EITHER PARTY’S TOTAL LIABILITYARISING OUT OF OR RELATED TO THIS

ESCROW AGREEMENT EXCEED THE LICENSE FEES PAID BY VTAL TO R2 HEREUNDER.  THE PARTIES AGREE THAT THE FOREGOING

LIMITATIONS REPRESENT A REASONABLE ALLOCATION OF RISK UNDER THIS ESCROW

AGREEMENT.

EXHIBIT F

INTENTIONALLY

LEFT BLANK

EXHIBIT

G

TERMS

AND CONDITION

VITAL IMAGES, INC.

SOFTWARE LICENSE AGREEMENT

 

 

THIS SOFTWARE LICENSE AGREEMENT (“License Agreement”) is made as of

_________________, 200__, by and between Vital Images, Inc., 3300 Fernbrook

Lane N., Suite 200, Plymouth, Minnesota 55447 U.S.A. (“Vital Images”) and

__________________________________________, having its principal place of

business at ___________________________________________________ (“Licensee”).

 

 

RECITALS

 

A.                                   Vital Images develops and licenses

proprietary medical visualization software products (defined below as the

“Products”).

 

B.                                     Licensee desires to license and use the

Products, and Vital Images so agrees, subject to the terms and conditions of

this License Agreement.

 

ARTICLE 1: DEFINITIONS

 

For purposes of this License Agreement, the following words, terms and

phrases shall have the following meanings unless the context otherwise

requires:

 

1.1                                 Confidential Information. 

“Confidential Information” shall mean all information disclosed by Vital

Images to Licensee or embodied in the Products, regardless of the form in which

it is disclosed, which relates to markets, customers, products, patents,

inventions, procedures, methods, designs, strategies, plans, assets,

liabilities, prices, costs, revenues, profits, organization, employees, agents,

resellers or business in general of Vital Images, or the algorithms, programs,

user interfaces and organization of the Products.

 

1.2                                 Products.  “Products”

shall mean only those computer software products in object code form as

described in Exhibit A and any related user documentation as released from time

to time by Vital Images, including any later authorized releases or versions of

such software or documentation during the term of this License Agreement.

 

ARTICLE 2: LICENSE GRANT AND USE

 

2.1                                 License Grant. 

In consideration for Licensee’s payment of the applicable license fee,

and subject to the terms of this License Agreement, Vital Images hereby grants

to Licensee a nonexclusive, non-transferable license (“License”) to use the

Products only on one (1) computer of the type described in Exhibit B 

 

attached hereto (“Designated Equipment”), and only at

the site described in Exhibit B (“Designated Site”).  Licensee must purchase a License for each computer at a

Designated Site on which it desires to install and use the Products.  Licensee’s use of the Products shall be limited

to Licensee’s internal business activities.

 

2.2                                 Restrictions on Use. 

Licensee shall not engage in, cause or permit the reverse engineering,

disassembly, recompilation, modification or any similar manipulation of the

Products, nor may Licensee loan, lease, distribute, assign or otherwise

transfer the Products or copies thereof, in whole or in part, to any third

party.  Licensee may not install, use or

access the Products at or from any location other than a Designated Site, or on

any type of computer other than the Designated Equipment, without the prior

written approval of Vital Images.

 

2.3                                 Copying.  Licensee

shall not copy the Products, except that Licensee may make and maintain one (1)

copy of the Products for back-up and archival purposes, provided such copy

includes all Vital Images copyright, proprietary rights and other notices

included on or in the Products.

 

2.4                                 Ownership.  All right,

title and interest in the Products shall at all times remain the property of

Vital Images and its licensors, subject to the Licenses granted to Licensee

under this License Agreement.  Licensee

understands and agrees that it takes title only to the media on which the

Products are provided to it, but that the Products shall remain the property

of, and proprietary to, Vital Images.

 

ARTICLE 3: TERMINATION

 

3.1           Termination.

 

(a)                                  Either party may terminate this License

Agreement at any time if the other party fails to cure its material breach

hereof within thirty (30) days after its receipt of notice specifying such breach

from the other party.

 

(b)                                 Vital Images may terminate this License

Agreement at any time immediately upon Licensee (i) becoming insolvent, (ii)

commencing, or having commenced against it (without dismissal within sixty (60)

days), any bankruptcy, insolvency, liquidation, reorganization or similar

proceeding under any U.S. or foreign law, (iii) making an assignment for the

benefit of its creditors, (iv) admitting in writing its inability to satisfy

its debts in the ordinary course of business or that its business or financial

condition indicates that it is presently unable to continue as a going concern,

or (v) taking an action resulting in or directed to ceasing, on a permanent

basis, its business or relevant operations; or

 

(c)                                  Licensee may terminate this License

Agreement or any License granted hereunder at any time by giving written notice

to Vital Images.

 

3.2                                 Effect of Termination of a License. 

Upon any termination of a License, Licensee shall (a) immediately cease

all use of the Products licensed pursuant to such License, and (b) certify in

writing to Vital Images within thirty (30) days after such termination that

Licensee has either destroyed, permanently erased or returned to Vital Images

the Products and all copies thereof licensed pursuant to such License.

 

3.3                                 Effect of Termination of License

Agreement.  Upon termination of this License Agreement

for any reason, all Licenses to the Products granted hereunder shall

immediately terminate, and Licensee shall return to Vital Images all Confidential

Information.  Articles 2.4, 5, 6, 7, 8

and 9 shall survive any termination of this License Agreement.

 

ARTICLE 4: ADVERSE REACTIONS; PRODUCT RECALLS

 

4.1                                 Adverse Event Reporting. 

Licensee shall advise Vital Images, by telephone or facsimile, within

twenty-four (24) hours after it becomes aware of any adverse event from the use

of any Product or malfunction of any Product. 

Unless otherwise required by applicable local laws, Licensee shall

advise Vital Images of any such adverse event prior to any report or filing

being made with the U.S. Food and Drug Administration (“FDA”) or any other

comparable regulatory body elsewhere in the world.

 

4.2           Product Recall;

Corrective Action.

 

(a)                                  Corrective Action. 

If Vital Images believes that a corrective action with respect to the

Products is desirable or required by law, or if any governmental agency having

jurisdiction (including without limitation, the FDA) shall request or order any

corrective action with respect to the Products, including any recall, customer notice,

restriction, change, corrective action or market action or any Product change,

Vital Images or its reseller shall promptly notify Licensee.  Licensee shall comply with all reasonable

directions regarding such corrective action, including the return of the

Products to Vital Images or a reseller at Vital Images’ expense.

 

(b)                                 Refund.  If any

Products are required to be returned to Vital Images or its resellers pursuant

to this Article 4.2 and no replacement is provided therefor by Vital Images,

Vital Images shall refund to Licensee any unearned license fees paid (the

amount of the license fee Licensee paid for the Products, less a reasonable

value for use determined by prorating the license fee paid on a thirty-six (36)

month straight line amortization method).

 

ARTICLE 5: WARRANTIES; INDEMNIFICATION

 

5.1                                 Limited Warranty. 

Vital Images warrants to Licensee for one (1) year from the delivery

date (the “Warranty Period”), that the Products, when properly installed and

operated, will substantially perform the functions described in the functional

specifications for the Products, as contained in the applicable written

documentation for the Products.  Vital

Images shall have no obligation to Licensee or any third party under this

Article 5.1 if (a) the Products have not been properly installed, used or

maintained, whether by Licensee or any third party, in accordance with the

Licenses granted hereunder or Vital Images’ then-applicable operating manuals;

or (b) the Products have been modified in any manner or are used or combined

with other computer software programs, hardware or data not supplied by Vital

Images and without the prior written consent of Vital Images.

 

5.2                                 Exclusive Remedy. 

Vital Images’ entire liability, and Licensee’s exclusive remedy, for any

warranty claim made by Licensee under Article 5.1 above during the Warranty

Period shall be for Vital Images, at its option, to either (a) replace any

defective media which prevents the Products from satisfying the limited

warranty described in Article 5.1; (b) attempt to correct any material and

reproducible errors reported by Licensee; or (c) terminate this License

Agreement and refund the license fee paid for the Products.   Vital Images does not warrant that the operation

of the Products will be uninterrupted or error-free, that all errors 

 

in the Products will be corrected, that the Products

will satisfy Licensee’s requirements or that the Products will operate in the

combinations which Licensee may select for use.

 

5.3                                 Limited Warranty. 

Vital Images warrants to Licensee that the Products, when properly

installed and operated, will produce no material errors when processing dates

prior to, during and after the calendar year 2000.  Vital Images shall have no obligation to Licensee or any third

party under this Article 5.3 if (a) the Products have not been properly

installed, used or maintained, whether by Licensee or any third party, in

accordance with the Licenses granted hereunder or Vital Images’ then-applicable

operating manuals; (b) the Products have been modified in any manner or are

used or combined with other computer software programs, hardware or data; or

(c) the material error reported by Licensee is not reproducible by Vital

Images.

 

5.4                                 Exclusive Remedy. 

Vital Images’ entire liability, and Licensee’s exclusive remedy, for any

breach of the warranty in Article 5.3 above shall be for Vital Images, at its

option, to either (a) attempt to correct such material and reproductive errors,

or (b) terminate the License to such Products and refund any unearned license

fees paid (the amount of the license fee Licensee paid for the Products, less a

reasonable value for use determined by prorating the license fee paid on a

thirty-six (36) month straight-line depreciation method) with no further

liability to Licensee.  This Article 5.4

states Licensee’s exclusive remedy, and Vital Images and its licensors’ entire

liability for any breach of the warranty set forth in Article 5.3.

 

5.5                                 Warranty Disclaimer. 

THE WARRANTIES SET FORTH IN ARTICLES 5.1 AND 5.3 ABOVE ARE EXCLUSIVE AND

IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, WHICH ARE HEREBY

DISCLAIMED AND EXCLUDED BY VITAL IMAGES, INCLUDING WITHOUT LIMITATION ANY

WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT

OR USE, AND ALL OBLIGATIONS OR LIABILITIES ON THE PART OF VITAL IMAGES FOR

DAMAGES ARISING OUT OF OR IN CONNECTION WITH THE USE, MAINTENANCE OR

PERFORMANCE OF THE PRODUCTS.  Repair or

replacement of all or any part of the Products does not extend the Warranty

Period, which shall begin on the delivery date.  Vital Images and its third party licensors expressly disclaim any

commitment to provide maintenance or support of the Products beyond the

Warranty Period, in the absence of a Licensee entering into a separate agreement

with Vital Images or its reseller. 

Furthermore, the Products are derived from and include software from

third party licensors, who make no warranty, express or implied, regarding the

Products, who disclaim any and all liability for the Products and who will not

undertake to provide any information or support regarding the Products.

 

5.6                                 Infringement Indemnity. 

Vital Images hereby agrees to indemnify, defend and hold Licensee

harmless from any third party suit, claim or other legal action (“Legal Action”)

that alleges the Products infringe any United States patent, copyright, or

trade secret, including any award of damages and costs made against Licensee by

a final judgment of a court of last resort based upon a Legal Action, provided

that:  (a) Licensee gives written notice

of any Legal Action to Vital Images within fifteen (15) days of Licensee’s

first knowledge thereof; (b) Vital Images has sole and exclusive control of the

defense of any Legal Action, including the choice and direction of any legal

counsel, and all related settlement negotiations; and (c) Licensee provides

Vital Images (at Vital Images’ expense for reasonable out-of-pocket expenses)

with assistance, information and authority to perform the above.

 

Notwithstanding the foregoing, Vital Images and its

licensors shall have no liability for any Legal Action based on or arising out

of:  (a) the failure by Licensee to use

a non-infringing version or release of the Products if made available by Vital Images,

(b) the combination, operation or use of the Products with software, hardware

or data not furnished by Vital Images, if such Legal Action would have been

avoided by use of the Products without such software, hardware or data, or (c)

the use of any Products in a manner for which it was neither designed nor

contemplated.

 

In the event that the Products are held or are

believed by Vital Images to infringe, Vital Images shall, at its option and

expense, (a) modify the infringing Products, (b) obtain for Licensee a license

to continue using such Products, (c) substitute the Products with other

software reasonably suitable to Licensee, or (d) if none of the foregoing are

commercially feasible, terminate the License to such Products and refund any

unearned license fees paid (the amount of the license fee paid for the

Products, less a reasonable value for use determined by prorating the license

fee paid on a thirty-six (36) month straight-line amortization method) with no

further liability to Licensee.

 

This Article 5.6 states Licensee’s exclusive remedy,

and Vital Images’ and its licensors’ entire liability, for any infringement

claim related to the Products or their use.

 

ARTICLE 6: LIMITATION OF REMEDIES

 

6.1                                 Delay.  VITAL IMAGES

SHALL NOT BE LIABLE FOR ANY LOSS OR DAMAGE CAUSED BY DELAY IN FURNISHING

PRODUCTS OR SERVICES OR ANY OTHER PERFORMANCE UNDER THIS LICENSE AGREEMENT.

 

6.2                                 Sole Remedies. 

THE SOLE AND EXCLUSIVE REMEDIES FOR BREACH OF ANY AND ALL WARRANTIES AND

THE SOLE REMEDIES FOR VITAL IMAGES’ LIABILITY OF ANY KIND (INCLUDING LIABILITY

FOR NEGLIGENCE OR PRODUCT LIABILITY) WITH RESPECT TO THE PRODUCTS AND SERVICES

COVERED BY THIS LICENSE AGREEMENT AND ALL OTHER PERFORMANCE BY VITAL IMAGES

UNDER THIS LICENSE AGREEMENT SHALL BE LIMITED TO THE REMEDIES PROVIDED IN

ARTICLE 5 OF THIS LICENSE AGREEMENT.

 

6.3                                 Damages Limitation. 

VITAL IMAGES SHALL HAVE NO LIABILITY OF ANY KIND FOR ANY SPECIAL,

INDIRECT, INCIDENTAL OR CONSEQUENTIAL LOSS OR DAMAGE, EVEN IF VITAL IMAGES

SHALL HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH POTENTIAL LOSS OR DAMAGE, AND EVEN IF A REMEDY SET FORTH HEREIN IS

FOUND TO HAVE FAILED OF ITS ESSENTIAL PURPOSE. 

THE DAMAGES LIMITATION SET FORTH IN THIS ARTICLE 6.3 SHALL INCLUDE, BUT

NOT BE LIMITED TO, ANY LIABILITY FOR DAMAGES ARISING OUT OF OR RESULTING

FROM THE USE, MAINTENANCE OR PERFORMANCE OF THE PRODUCTS, INCLUDING, WITHOUT

LIMITATION, THE LOSS OR CORRUPTION OF LICENSEE’S OR ANY THIRD PARTY DATA.  IN NO EVENT SHALL VITAL IMAGES BE LIABLE FOR

ANY DAMAGES IN EXCESS OF THE AGGREGATE AMOUNTS ACTUALLY PAID BY LICENSEE TO

VITAL IMAGES UNDER THIS LICENSE AGREEMENT.

ARTICLE 7: CONFIDENTIALITY

 

7.1                                 Confidential Information. 

All Confidential Information shall be deemed confidential and

proprietary to Vital Images, and are the sole and exclusive property of Vital

Images.  Licensee may use the

Confidential Information during the term of this License Agreement only as

permitted hereunder or as necessary in order to use the Products in accordance

with the License(s) granted hereunder. 

Licensee shall not disclose or provide any Confidential Information to

any third party and shall take reasonable measures to prevent any unauthorized

disclosure by Licensee’s employees, agents, contractors or consultants during

the term hereof including appropriate individual nondisclosure agreements.

 

7.2                                 Exclusions.  The

following information shall not be considered Confidential Information under

this Article 7:

 

(a)                                  Information which is or becomes in the

public domain through no fault or act of Licensee;

 

(b)                                 Information which was independently

developed by Licensee without the use or reliance on Vital Images’ Confidential

Information; or

 

(c)                                  Information which was provided to

Licensee by a third party under no duty of confidentiality to Vital Images.

 

7.3                                 Permitted Disclosure. 

Nothing in Article 7.1 shall restrict disclosure by Licensee as required

by applicable law, regulation, or the order of any court or administrative

agency having jurisdiction regarding such matters, provided, however, Licensee

gives prompt notice thereof to Vital Images prior to such disclosure.

 

7.4                                 Cooperation. 

At Vital Images’ request, Licensee shall cooperate fully with Vital

Images in any and all legal actions taken by Vital Images to protect its rights

in the Products and in the Confidential Information.  Vital Images shall bear all out-of-pocket costs and expenses

reasonably incurred by Licensee in the course of such cooperation.

 

ARTICLE 8: ARBITRATION

 

8.1                                 Dispute Resolution. 

Except as provided in Article 8.2 below, Vital Images and Licensee shall

each use its best efforts to resolve any dispute between them promptly and

without resort to any legal process if feasible within thirty (30) days of

receipt of a written notice by one party to the other party of the existence of

such dispute.  The foregoing requirement

in this Article 8.1 shall be without prejudice to either party’s right, if

applicable, to terminate this License Agreement under Article 3.1 above.

 

8.2                                 Litigation Rights Reserved. 

If any dispute arises with regard to Licensee’s unauthorized use of the

Products or unauthorized use or infringement of Confidential Information, Vital

Images may seek any available remedy at law or in equity from a court of

competent jurisdiction.

 

8.3                                 Procedure for Arbitration. 

Except as provided in Article 8.2 above, any dispute, claim or

controversy arising out of or in connection with this License Agreement which

has not been settled through negotiation within a period of thirty (30) days

after the date on which either party shall first have notified the other party

in writing of the existence of a dispute shall be settled by final and binding

arbitration under the then-applicable Commercial Arbitration Rules or, if

Licensee’s principal place of business is outside the United States, the

International Arbitration Rules of the American Arbitration Association

(“AAA”).  Any such arbitration shall be

conducted by three (3) arbitrators appointed by mutual agreement of the parties

or, failing such agreement, in accordance with said Rules.  At least one (1) arbitrator shall be an

experienced computer software professional, and at least one (1) arbitrator

shall be an experienced business attorney with a background in the licensing

and distribution of computer software. 

Any such arbitration shall be conducted in Minneapolis, Minnesota, U.S.A.

in the English language.  An arbitral

award may be enforced in any court of competent jurisdiction.  Notwithstanding any contrary provision in

the AAA Rules, the following additional procedures and rules shall apply to any

such arbitration:

 

(a)                                  Each party shall have the right to

request from the arbitrators, and the arbitrators shall order upon good cause

shown, reasonable and limited pre-hearing discovery, including (i) 

 

exchange of witness

lists, (ii) depositions under oath of named witnesses at a mutually convenient

location, (iii) written interrogatories and (iv) document requests.

 

(b)                                 Upon conclusion of the pre-hearing

discovery, the arbitrators shall promptly hold a hearing upon the evidence to

be adduced by the parties and shall promptly render a written opinion and

award.

 

(c)                                  The arbitrators may not award or assess

punitive damages against either party.

 

(d)                                 Each party shall bear its own costs and

expenses of the arbitration and one-half (1/2) of the fees and costs of the

arbitrators, subject to the power of the arbitrators, in their sole discretion,

to award all such reasonable costs, expenses and fees to the prevailing party.

 

ARTICLE 9: MISCELLANEOUS

 

9.1                                 Assignment.  Licensee

shall not have the right to assign or otherwise transfer its rights or

obligations under this License Agreement except with the prior written consent

of Vital Images, which consent shall not be unreasonably withheld.  This License Agreement shall be binding on

the parties hereto and their respective successors and permitted assigns.  Any prohibited assignment shall be null and

void.

 

9.2                                 Notices.  Notices

permitted or required to be given hereunder shall be deemed sufficient if given

by registered or certified mail, postage prepaid, return receipt requested, by

private courier service, or by facsimile addressed to the respective addresses

of the parties as first above written or at such other addresses as the

respective parties may designate by like notice from time to time.  Notices so given shall be effective upon (a)

receipt by the party to which the notice is given, or (b) on the fifth (5th)

day following domestic mailing or the tenth (10th) day following

international mailing, as may be the case, whichever occurs first.

 

9.3                                 Exports and U.S. Government Rights. 

Licensee hereby acknowledges that it will not export or reexport any of

the Products or technical data (which includes, among other things, any

technical information relating to the Products, written or otherwise), or any

product incorporating any Products or technical data.  The Products are provided with Restricted Rights.  Use, duplication or disclosure by the U.S.

government is subject to restrictions as set forth in (a) this License

Agreement pursuant to DFARs 227.7202-3(a); (b) subparagraph (c)(1)(i) of the

Rights in Technical Data and Computer Software clause at DFARs 252.227-7013; or

(c) the Commercial Computer Software Restricted Rights clause at FAR 52.227-19

subdivision (c)(1) and (2), as applicable. 

Contractor/manufacturer is Vital Images, Inc., 3100 West Lake Street,

Suite 100, Minneapolis, Minnesota 55416 U.S.A.

 

9.4                                 Entire Agreement. 

This License Agreement, including the Exhibits attached hereto which are

incorporated herein, constitutes the entire agreement of the parties with

respect to the subject matter hereof and supersedes all prior agreements by and

between Licensee and Vital Images as well as all proposals, oral or written,

and all prior negotiations, conversations and discussions between the parties

related hereto.

 

9.5                                 Amendment.  This License

Agreement may not be modified, amended, rescinded, canceled or waived, in whole

or in part, except by written amendment signed by both parties hereto.

 

9.6                                 Governing Law. 

This License Agreement shall be governed by and interpreted under the

laws of the State of Minnesota, U.S.A., excluding (a) its choice of law rules,

and (b) the United Nations Convention on the International Sale of Goods.

 

9.7                                 Severability. 

If any provision of this License Agreement is found unenforceable under

any of the laws or regulations applicable thereto, such provision terms shall

be deemed stricken from this License Agreement, but such invalidity or

unenforceability shall not invalidate any of the other provisions of this

License Agreement.

 

9.8                                 Waiver.  No failure

by either party to take any action or assert any right hereunder shall be

deemed to be a waiver of such right in the event of the continuation or

repetition of the circumstances giving rise to such right.

 

9.9                                 Attorneys’ Fees. 

Subject to Article 8.3, if any action at law or in equity is necessary

to enforce or interpret the terms of this License Agreement, the substantially

prevailing party shall be entitled to its reasonable attorneys’ fees and costs

in addition to any other relief such party may be entitled.

 

9.10                           Counterparts. 

This License Agreement may be executed by facsimile and in two or more

counterparts in the English language and each such counterpart shall be deemed

an original hereof.  In case of any

conflict between the English version and any translated version of this License

Agreement, the English version shall govern.

 

9.11                           Further Assurances. 

The parties shall perform all such further acts, provide such further

documents or written assurances, and execute such further documents as are

reasonably required or necessary to carry out the acts and transactions

contemplated by this License Agreement.

 

IN WITNESS WHEREOF, the parties have executed this

License Agreement by their duly authorized representatives.

 

	

  VITAL IMAGES, INC.

  	

   

  	

  LICENSEE

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

  By

  	

   

  	

   

  	

  By

  	

   

  
	

   

  	

   

  	

   

  
	

  Name

  	

   

  	

   

  	

  Name

  	

   

  
	

   

  	

   

  	

   

  
	

  Title

  	

   

  	

   

  	

  Title

  	

   

  
									

 

VITAL IMAGES, INC.

END USER AGREEMENT

 

EXHIBIT A

PRODUCTS

VITAL IMAGES, INC.

DEMONSTRATION LICENSE AGREEMENT

 

EXHIBIT B

DESIGNATED EQUIPMENT AND SITE

 

 

Designated

Equipment:

 

 

 

 

Designated

Site:

 

 

EXHIBIT H

MAINTENANCE

AND SUPPORT

 

A.            First

Level Maintenance.  During the Warranty Period and for so long

as a Customer participates in the Maintenance Program, VTAL shall provide

telephone, email, 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 Product is installed).  If the problem reported by a Customer is due to a

misunderstanding of the documentation or improperly functioning hardware or

VTAL Workstation software, VTAL’s shall be solely responsible for resolving the

problem in accordance with the terms of the Maintenance Program.   If the problem is not due to a

misunderstanding of the Documentation or improperly functioning hardware or VTAL

Workstation software and its cause cannot be determined by VTAL despite

commercially reasonable efforts to determine the cause, VTAL will attempt to

duplicate the problem on its own demonstration unit of the R2 Product.  If VTAL determines that the problem reported

by a Customer is due to an error in the R2 Product that VTAL is unable, using

commercially reasonable efforts, to resolve, VTAL 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 Maintenance Program, R2 shall use

commercially reasonable efforts to provide to telephone and email support to

VTAL regarding the R2 Product during R2’s normal business hours, and to provide

a fix, patch or workaround for errors that VTAL is unable to resolve in

accordance with Section A, above.  R2,

may, in its discretion, provide emergency on-site support to Customers.

EXHIBIT I

SERVER SPECIFICATIONS

Showcase

CAD Server Preliminary Specifications

 

The following

specification is provided as a guideline. 

R2 reserves the right to change the specification listed here at any

time.

Specifications for the

server for the integrated solution shall be completed as part of the

Development Agreement

 

Server

Hardware for Showcase product

Standard MicrosoftTM PC compatible platform with dual CPU @

2.1 GHz or better with a minimum of 1 GB of RAM

1USB port; standard PS/2

keyboard and PS/2 style mouse with 10/100BaseT Ethernet port

1 x 36 GB HD for images

and system

Peripherals required are

standard IDE CD-RW drive and Floppy Disk drive for 3/5" media

Video board supports

24-bit non-interlaced pixel depth with minimum 1024 x 768 pixel resolution at

60 Hz minimum with 4 MB video memory

•Supports

18 inch SVGA color monitor (not included)

Server

Software

•Red

HatTM LinuxTM Operating SystemExhibit 10.39

 

EMPLOYMENT AGREEMENT

 

THIS AGREEMENT, made and entered into as of the 9th day of

February, 2002, by and between Vital Images, Inc. (“Company”) and Jay D. Miller

(“Executive”).

 

W I T N E S S E T H :

 

WHEREAS, Company desires to retain the services of Executive for and on

behalf of Company on the terms and subject to the conditions set forth herein.

 

WHEREAS, each of the parties acknowledge that they are receiving good

and valuable consideration for entering into this Employment Agreement and Executive

acknowledges that this Employment Agreement, including the non-disclosure

agreement set forth hereinbelow, was negotiated between the parties hereto and

that Executive received bargained for consideration in the form of benefits

resulting to Executive from the terms and conditions of such employment, in

exchange for entering into this Employment Agreement.

 

NOW, THEREFORE, in consideration of the mutual covenants contained

herein, the sufficiency of which is hereby acknowledged, the parties hereto

agree as follows:

 

ARTICLE I.

 

EMPLOYMENT AND TERM

 

1.1                               EMPLOYMENT.  Upon the terms and subject to the conditions

herein contained, Company hereby employs Executive as President and Chief

Executive Officer, and Executive hereby accepts such employment, subject to the

supervision of the Board of Directors of 

Company.

 

1.2.                            TERM.  This Agreement shall take effect upon the

date first above written, and shall remain in effect until terminated in

accordance with Article IV.  Upon

termination of this Agreement, except as otherwise provided herein, neither the

Company nor Executive shall have any further rights, duties, privileges or

obligations hereunder.

 

ARTICLE II.

 

COMPENSATION

 

2.1                               BASE

SALARY.  In exchange for the

provision of services, Company agrees that it will pay Executive commencing

February 9, 2002 at the rate of $180,000 per year, payable in accordance with

standard pay practices of Company, less any applicable withholdings or

deductions.

 

 

2.2                               BENEFITS.  In addition to the compensation set forth

under Section 2.1, Executive shall be entitled to participate in any of

Company’s standard benefit policies or plans, including its Employee Stock

Purchase Plan, according to their terms. 

Subject to the provisions of Section 4.1(d) of this Agreement, these

policies may be modified or terminated from time to time by Company, but not

retroactively.  The written terms of the

policies shall govern any questions of eligibility, coverage, or duration of

coverage.

 

2.3                               INCENTIVE

COMPENSATION.  As an incentive

to performance, Executive shall be eligible to receive incentive compensation

and/or benefits as follows:

 

a.                                       Executive

shall be eligible to participate in Company’s Management Incentive Plan (the

“Plan”) as it is established annually by the Board of Directors.  Pursuant to the Plan, Executive’s incentive

target for calendar year 2002 shall be fifty percent (50%) of Executive’s base

salary for calendar year 2002. 

Executive’s incentive compensation for calendar year 2002 under the

Plan, if any, will be determined as soon as practical after December 31, 2002,

and will be paid to Executive in a lump sum, less any withholdings or

deductions, on or before March 15, 2003.

 

b.                                      Upon

approval by Company’s Board of Directors, Executive shall be entitled to enter

into Stock Option Agreements, attached hereto as Exhibit A and Exhibit B,

with Company.

 

2.4                               VACATION.  Executive shall initially receive twenty

(20) days of vacation per year.

 

2.5.                            BOARD

OF DIRECTORS.  As soon as

practicable after the date of this Agreement, Executive shall be elected to

Company’s Board of Directors.

 

2.6.                            BUSINESS

EXPENSES.  The Company will

reimburse Executive for all reasonable, ordinary and necessary expenses

incurred by him in the performance of his duties hereunder, provided that

Executive accounts to Company for such expenses in a manner normally prescribed

by Company for reimbursement of expenses. 

Such reimbursement requests must be accompanied by the appropriate

documentation and shall be subject to review by Company’s Chief Financial Officer.

 

ARTICLE III.

 

DUTIES

OF EXECUTIVE

 

3.1                               SERVICES.  Executive shall perform all duties and

obligations charged to Executive by the Board of Directors of Company, as the

same may be determined from time to time. 

The Board shall assure adequate time, resources and authority for

Executive to achieve goals mutually agreed upon by Company and Executive.

 

3.2                               TIME

AND EFFORT.  Executive shall

devote his full time and effort to the business of Company.  Executive shall perform the duties and

obligations required of Executive hereunder in a

 

2

 

competent, efficient and satisfactory manner at such hours and under

such conditions as the performance of such duties and obligations may require.

 

3.3                               ARTICLES

AND BY-LAWS.  Executive

shall act in accordance with so as to abide by the Articles of Incorporation of

Company, the Bylaws of Company and all decisions of the Board of Directors of

Company.

 

3.4                               CONFIDENTIALITY

AND LOYALTY.  Executive

acknowledges that during the course of his employment he has produced and may

produce and have access to material, records, data and information not

generally available to the public (“Confidential Information”) regarding

Company, its customers and affiliates. 

Accordingly, during and subsequent to the termination of this Agreement,

Executive shall hold in confidence and not directly or indirectly disclose,

use, copy or make lists of any such confidential information, except to the

extent authorized in writing by Company, or as required by law or any competent

administrative agency or as otherwise is reasonably necessary or appropriate in

connection with the performance by Executive of his duties pursuant to this

Agreement.  Upon termination of his

employment under this Agreement, Executive shall promptly deliver to Company

(i) all records, manuals, books, documents, letters, reports, data, tables,

calculations and all copies of any of the foregoing which are the property of

Company or which relate in any way to the customers, business, practices or

techniques of Company and (ii) all other property of Company and Confidential

Information which in any of these cases are in his possession or under his

control.  Executive agrees to abide by

Company’s reasonable policies as in effect from time to time, respecting

avoidance of interests conflicting with those of Company.

 

3.5                               WORKS

MADE FOR HIRE.  Executive

acknowledges and agrees that any and all works of authorship by Executive made

pursuant to this Agreement or any prior agreements are within the scope of

services to be provided to Company and shall constitute “works made for hire”

as defined by the Copyright Act of 1976, Title 17 of the United States Code, as

now enacted or hereinafter amended. 

Accordingly, Executive acknowledges and agrees that Company shall be the

sole and exclusive owner of any and all copyright(s) with respect to such works

of authorship and that Executive shall not be entitled to any additional

compensation over and above the compensation set forth herein or otherwise

already received by Executive unless otherwise agreed in writing by

Company.  If any work of authorship

created hereunder or prior hereto is not deemed to be a “work made for hire,”

Executive hereby assigns all right, title and interest therein to Company.

 

3.6                               COMPANY

TO HOLD PROPRIETARY RIGHTS. 

Furthermore, and without limiting the foregoing, Executive acknowledges

and agrees that all proprietary rights including, without limitation, all

patent, trademark, trade secret, copyright and other rights, which may exist in

connection with any and all inventions, ideas, and works created or conceived

by Executive for Company, either before or after the date hereof, shall be the

sole and exclusive property of Company and Executive shall have no further rights

therein and, to the extent necessary, assigns all such rights to Company.  All patent, copyright and other rights in

such inventions, ideas and works shall be the property of Company, who shall

have the sole right to seek patent, copyright, registered design or other

protection in connection therewith. 

Executive shall at Company’s reasonable expense do all things and

execute all such documents as Company may reasonably require to vest in Company

the rights and protection herein described.

 

3

 

3.7                               REMEDIES.  Executive agrees and understands that any

breach of any of the covenants or agreements set forth in this ARTICLE III of

this Agreement will cause Company irreparable harm for which there is no

adequate remedy at law, and, without limiting whatever other rights and

remedies Company may have under this paragraph, Executive consents to the

issuance of an injunction in favor of Company enjoining the breach of any of

the aforesaid covenants or agreements by any court of competent

jurisdiction.  If any or all of the

aforesaid covenants or agreements are held to be unenforceable because of the

scope or duration of such covenant or agreement or the area covered thereby,

the parties agree that the court making such determination shall have the power

to reduce or modify the scope, duration and/or area of such covenant to the

extent that allows the maximum scope, duration and/or area permitted by

applicable law.

 

ARTICLE IV.

 

TERMINATION

 

4.1                               RESIGNATION

OF EXECUTIVE.  Executive may

resign his employment at any time for any reason upon fifteen (15) days advance

written notice to the Board of Directors. 

If Executive resigns his employment without Good Reason (as that term is

defined below), he shall not be entitled to severance pay.  If Executive resigns his employment for Good

Reason, the Company shall pay Executive the severance pay set forth in Section

4.2 below provided Executive agrees to release any claims he may have against

the Company in exchange for the receipt of severance pay.  For purposes of this Agreement, Good Reason

shall mean the occurrence of any of the following events, which the Company has

not cured within thirty (30) days of notice thereof:

 

a.                                       A

material breach of this Agreement by the Company;

 

b.                                      A

material adverse change in Executive’s status or position as an executive

officer of the Company as a result of a material diminution in Executive’s

duties, responsibilities or authority as of the date of this Agreement (except

in connection with the termination of Executive’s employment in accordance with

Section 4.3 hereof);

 

c.                                       A

reduction by the Company of Executive’s Base Salary as the same may be

increased from time to time;

 

d.                                      Without replacement by a plan providing

benefits to Executive equal to or greater than those discontinued or by payment

of cash in lieu of such benefits, the failure by the Company to continue in

effect, within its maximum stated term, any employee benefit plan in which

Executive is participating immediately prior to the date of this Agreement or

the taking of any action by the Company that would adversely affect Executive’s

participation or materially reduce Executive’s benefits under all such plans;

provided, however, that Good Reason shall not include changes, modifications

and terminations of the Company’s standard benefit policies and plans which are

generally applicable to the Company’s officers and employees; or

 

4

 

e.                                       The Company’s requiring Executive to be

based anywhere other than the Minneapolis/St. Paul, Minnesota metropolitan

statistical area, except for required travel on the Company’s business.

 

4.2                               TERMINATION

BY COMPANY.  Company shall have

the right to terminate Executive’s employment without notice and with or

without Cause, as that term is defined below. 

If Company terminates Executive’s employment without Cause, Company

shall pay Executive twelve (12) months of severance pay based on Executive’s

base salary at the time of termination provided Executive agrees to release any

claims he may have against the Company in exchange for the receipt of severance

pay.  Executive’s severance pay, if any,

shall be payable in one lump sum, less any applicable withholdings or deductions,

within ten (10) days after the expiration of any applicable rescission

periods.  If Company terminates

Executive’s employment with Cause, Executive shall not receive severance pay.

 

4.3                               TERMINATION

FOR CAUSE.  Notwithstanding

anything contained in this Agreement to the contrary, Company shall have the

right to terminate the employment of Executive for Cause.  Cause means:

 

a.                                       Executive’s gross misconduct;

 

b.                                      Executive

shall inexcusably violate or willfully refuse to obey the lawful and reasonable

instructions of the Board of Directors of Company; or

 

c.                                       Executive’s conviction (including a plea of nolo

contendere) of willfully engaging in illegal conduct constituting a felony or

gross misdemeanor under federal or state law which is materially and

demonstrably injurious to the Company or which impairs Executive’s ability to

perform substantially his duties for the Company.

 

An act or failure to act will be

considered “gross” or “willful” for this purpose only if done, or omitted to be

done, by Executive in bad faith and without reasonable belief that it was in,

or not opposed to, the best interests of the Company.  Any act, or failure to act, based upon authority given pursuant

to a resolution duly adopted by the Company’s board of directors (or a committee

thereof) or based upon the advice of counsel for the Company will be

conclusively presumed to be done, or omitted to be done, by Executive in good

faith and in the best interests of the Company.  It is also expressly understood that Executive’s attention to

matters not directly related to the business of the Company will not provide a

basis for termination for Cause so long as the Board did not expressly

disapprove in writing of Executive’s engagement in such activities either

before or within a reasonable period of time after the Board knew or could

reasonably have known that Executive engaged in those activities.  Notwithstanding the foregoing, Executive may

not be terminated for Cause unless and until there has been delivered to him a

copy of a resolution duly adopted by the affirmative vote of not less than a

majority of the entire membership of the Board at a meeting of the Board called

and held for the purpose (after reasonable notice to Executive and an

opportunity for him, together with his counsel, to be heard before the Board),

finding that in the good faith opinion of the Board Executive was guilty of the

conduct set forth above in clauses a., b. or c. of this definition and

specifying the particulars thereof in detail.

 

5

 

Where the employment of Executive is terminated pursuant to this

Article IV, Section 4.3 of this Agreement, such termination shall be effective

upon the delivery of notice thereof to Executive.

 

4.4                               SURVIVING

RIGHTS.  Notwithstanding the

termination of Executive’s employment, the parties shall be required to carry

out any provisions hereof which contemplate performance subsequent to such

termination; and such termination shall not affect any liability or other

obligation which shall have accrued prior to such termination, including, but

not limited to, any liability for loss or damage on account of a prior default.

 

4.5                               CHANGE

IN CONTROL BENEFITS.  The Company and Executive shall enter into

an Amended and Restated Change of Control Agreement effective February 9, 2002

which shall set forth the terms and conditions of change of control benefits

payable to Executive.

 

ARTICLE V.

 

GENERAL PROVISIONS

 

5.1                               NOTICES.  All notices, requests, and other

communications shall be in writing and except as otherwise provided herein,

shall be considered to have been delivered if personally delivered or when

deposited in the United States Mail, first class, certified or registered,

postage prepaid, return receipt requested, addressed to the proper party at its

address as set forth below, or to such other address as such party may

hereafter designate by written notice to the other party:

 

	

  a.

  	

  If to Company, to:

  	

  Vital Images, Inc.

  
	

   

  	

   

  	

  3300 Fernbrook Lane N.

  
	

   

  	

   

  	

  Suite 200

  
	

   

  	

   

  	

  Plymouth, MN 

  55447

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

  Attn. Chief Financial Officer

  
	

   

  	

   

  	

   

  
	

  b.

  	

  If to Executive, to:

  	

  Jay D. Miller

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  

 

5.2                               WAIVER,

MODIFICATION OR AMENDMENT.  No

waiver, modification or amendment of any term, condition or provision of this

Agreement shall be valid or of any effect unless made in writing, signed by the

party to be bound or its duly authorized representative and specifying with

particularity the nature and extent of such waiver, modification or

amendment.  Any waiver by any party of

any default of the other shall not effect, or impair any right arising from,

any subsequent default.  Nothing herein

shall limit the rights and remedies of the parties hereto under and pursuant to

this Agreement, except as hereinbefore set forth.

 

5.3                               ENTIRE

AGREEMENT.  This Agreement

contains the entire understanding of the parties hereto in respect of

transactions contemplated hereby and supersedes all prior agreements and

understandings between the parties with respect to such subject matter.

 

6

 

5.4                               INTERPRETATION

AND SEVERANCE.  The provisions

of this Agreement shall be applied and interpreted in a manner consistent with

each other so as to carry out the purposes and intent of the parties hereto,

but if for any reason any provision hereof is determined to be unenforceable or

invalid, such provision or such part thereof as may be unenforceable or invalid

shall be deemed severed from this Agreement and the remaining provisions shall

be carried out with the same force and effect as if the severed provision or

part thereof had not been a part of this Agreement.

 

5.5                               GOVERNING

LAW.  This Agreement shall be

construed and enforced in accordance with the laws of the State of Minnesota.

 

5.6                               ASSIGNMENT.  Executive acknowledges that Executive’s

services are unique and personal. 

Accordingly, Executive may not assign Executive’s rights or delegate

Executive’s duties or obligations under this Agreement.  Company’s rights and obligations under this

Agreement shall inure to the benefit of and shall be binding on Company’s

successors and assigns.

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as

of the day and year first above written.

 

	

   

  	

   

  	

  VITAL IMAGES, INC.

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

  By

  	

  /s/ Douglas M. Pihl

  	

   

  
	

   

  	

   

  	

   

  	

  Douglas M. Pihl

  
	

   

  	

   

  	

   

  	

  Chairman

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

  EXECUTIVE:

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

  /s/ Jay D. Miller

  	

   

  
	

   

  	

   

  	

  Jay D. Miller

  	

   

  

 

7

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