Document:

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                                                                    Exhibit 10.5

================================================================================
                                LICENSE AGREEMENT
================================================================================

                                     Between

                               SANDIA CORPORATION

                                       and

                               R2 TECHNOLOGY, INC.

                               LICENSE NUMBER ***

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

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

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

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                                TABLE OF CONTENTS

                                                                        Page No.
                                                                        --------

ARTICLE I DEFINITIONS ......................................................   2

ARTICLE II License .........................................................   2

ARTICLE III Technical Assistance and R2's Commitments ......................   3

ARTICLE IV Royalty and Payments ............................................   3

ARTICLE V Statements, Reports and Payments .................................   4

ARTICLE VI Government Rights ...............................................   5

ARTICLE VII Confidentiality ................................................   5

ARTICLE VIII Duration and Termination ......................................   6

ARTICLE IX Warranty, Liability and Indemnification .........................   7

ARTICLE X General Provisions ...............................................   8

ARTICLE XI Government Sponsorship ..........................................   9

ARTICLE XII Assignment .....................................................  10

ARTICLE XIII Export Control ................................................  10

ARTICLE XIV Controlling Law ................................................  10

ARTICLE XV Execution .......................................................  11

EXHIBIT A ..................................................................  12

EXHIBIT B ..................................................................  13

EXHIBIT C ..................................................................  14

EXHIBIT D ..................................................................  15

                                       i

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                                LICENSE AGREEMENT
                                -----------------

         This License Agreement is by and between Sandia Corporation ("Sandia"),
a corporation whose principal place of business is located in Albuquerque, New
Mexico and R2 Technology, Inc. ("R2"), a corporation whose principal place of
business is located in Mountain View, California.

WITNESSETH THAT:

         WHEREAS, Sandia manages and operates a federally-owned facility known
as Sandia National Laboratories for the United States Department of Energy
("DOE") under contract * * *;

         WHEREAS, Sandia has developed and acquired, and may further develop and
acquire, Sandia Software (as defined herein), and Sandia is, and may further
become, the assignee of Sandia Patent (as defined herein);

         WHEREAS, Sandia desires to license Sandia Software and Sandia Patent in
support of technology transfer to United States industries to enhance United
States' competitiveness;

         WHEREAS, Sandia has requested a waiver from DOE for Sandia Patent and
permission to assert copyright for Sandia Software, and under the terms of the
waiver and permission, the United States Government reserves nonexclusive
licenses in Sandia Patent and Sandia Software;

         WHEREAS, the United States Government is neither a party to nor assumes
any liability for activities of Sandia in connection with this License
Agreement;

         WHEREAS, at the time of conception of the invention comprising Sandia
Patent, Sandia was operated by American Telephone & Telegraph Company ("AT&T")
under Contract No. * * * with the DOE under which AT&T reserved nonexclusive
licenses in Sandia Patent.

         WHEREAS, R2 desires to obtain from Sandia, and Sandia is willing to
make available to R2, a license under Sandia Software and Sandia Patent to make,
have made, sell, lease and transfer Licensed Product and R2 Software in
accordance with the terms and conditions set forth herein, including the payment
of moneys; and

         NOW, THEREFORE, in consideration of the agreements of the respective
Parties hereto, and for the faithful performance of this License Agreement, it
is hereby agreed as follows:

__________

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

                                       1

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                                    ARTICLE I

                                   DEFINITIONS

     1.1 "Sandia" and "R2" shall have the meanings set forth above, and each may
be referred to herein as a "Party" or, collectively, as "Parties" to this
License Agreement.

     1.2 "Field of Agreement" shall mean the field of medical imaging.

     1.3 "Sandia Patent" shall mean the United States patent application set
forth in EXHIBIT A, which is incorporated by reference hereto and made a part
hereof, including and any United States patent derived therefrom including and
any division, continuation, continuation-in-part, or reissue thereof.

     1.4 "Sandia Software" shall mean all technical information and data,
whether patented or unpatented, identified in EXHIBIT B, which has been or may
be developed by Sandia prior to the effective date of this License Agreement;
provided, however, that such technical information and data shall not include
information acquired from third parties subject to confidentiality restrictions
preventing disclosure hereunder or requiring accounting to such third parties.

     1.5 "Licensed Product" shall mean any product which is, or is produced by a
process which operates under one or more claims of Sandia Patent.

     1.6 "Net Sales Price" shall mean in respect of Licensed Product sold,
leased or transferred in normal arm's length commercial transactions between R2
and its customers, the Net Sales Price shall mean the gross sales price of
Licensed Product charged to R2 customers without any deductions other than the
following relating to such transactions where applicable: (1) prompt payment and
other trade discounts, (2) allowances for return of defective shipments, (3)
transportation and packing charges, and (4) sales and excise taxes, to the
extent that such items are separately stated in invoices or appear as items of
allowance in the records of R2.

     1.7 "Government" shall mean the United States of America and agencies
thereof.

     1.8 "Derivative Work" shall mean any work which is based on one or more
pre-existing works, as defined at 17 U.S.C. (S)101.

     1.9 "R2 Software" shall mean Derivative Works of Sandia Software produced
by or on behalf of R2.

                                   ARTICLE II

                                     LICENSE

     2.1 Subject to the terms and conditions of this License Agreement, Sandia
hereby grants R2 a paid up, worldwide, nontransferable, nonexclusive right and
license for R2 to prepare and reproduce R2 Software, to distribute copies of R2
Software and to perform and display R2 Software publicly and to permit others to
do so.

                                       2

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     2.2 Subject to the terms and conditions of this License Agreement, Sandia
hereby grants R2 a worldwide, nontransferable, nonexclusive right and license
for R2 in the Field of Agreement to make and have made Licensed Product under
one or more claims of Sandia Patent; and to use, sell, lease or transfer
Licensed Product; and for R2's customers to use Licensed Product sold, leased or
transferred by R2 for which royalties have been paid hereunder to Sandia.

     2.3 R2 is authorized to make a limited number of copies of portions of
Sandia Software as reasonably necessary ito carry out R2's operations hereunder.

     2.4 Express or implied rights and licenses outside the scope of this
Article II are expressly excluded.

                                   ARTICLE III

                    TECHNICAL ASSISTANCE AND R2'S COMMITMENTS

     3.1 Sandia shall promptly make available Sandia Software to R2 within
thirty (30) days of execution of this License Agreement by both Parties.

     3.2 Upon request by R2, Sandia, without unduly interfering with its other
requirements of its engineers and scientists involved in developing and using
Sandia Software, shall make available to R2 up to * * * hours of technical
assistance at Sandia facilities at a charge of * * * per hour during the first
*** months of this License Agreement, to expedite R2's use of Sandia Software.
The scope of such Sandia technical assistance is set forth in EXHIBIT C. Payment
for such assistance will be made in advance in * * * hour increments for the
number of hours of assistance reasonably estimated to be needed.

                                   ARTICLE IV

                              ROYALTY AND PAYMENTS

     4.1 In initial consideration for the rights and licenses granted by Sandia
in Article II, R2 agrees to pay Sandia * * * as an upfront license fee upon
execution of this License Agreement.

     4.2 In consideration of the rights and licenses granted by Sandia in
Paragraph 2.1, R2 agrees to pay to Sandia the sum of * * * payable in eight (8)
equal quarterly payments of *** commencing on July 1, 1995.

     4.3 In consideration of the rights and licenses granted by Sandia in
Paragraph 2.2, R2 hereby agrees to pay to Sandia a royalty fee as set forth in
EXHIBIT D for each Licensed Product, made, sold, leased or transferred by R2
within the United States during the term of this License Agreement.

__________

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

                                      3

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                                   ARTICLE V

                        STATEMENTS, REPORTS AND PAYMENTS

     5.1 For the purpose of computing royalties hereunder, a Licensed Product
shall be considered sold, leased or transferred, when billed out, when shipped
out, or when paid for, whichever shall first occur.

     5.2 R2 shall render to Sandia by January 31 and July 31 of each year a
royalty statement reporting the number of Licensed Products it made, sold,
leased or transferred within the United States during the preceding semiannual
accounting period beginning respectively on the preceding July 1 or January 1.
The statement shall give all information necessary for the determination of
royalties payable hereunder. R2 shall accompany each such statement with the
payment of all royalties due Sandia, computed in accordance with Article IV. If
for any semiannual accounting period no royalty payment shall be due, R2 shall
submit a written statement to that effect.

     5.3 R2 shall keep true and accurate records in such manner and detail as to
permit the verification of all royalties paid and payable under this License
Agreement. Such records shall be made available during ordinary business hours
for inspection at R2's ordinary place of business by authorized representatives
of Sandia. R2 shall be obligated to retain such records for at least five (5)
years after the report to which such records pertain is rendered to Sandia.

     5.4 All royalties payable by R2 hereunder shall be paid to Sandia at its
address specified in Article X hereof in United States of America dollars in the
total amounts provided for in this License Agreement. Any taxes, assessments, or
charges assessed or imposed by an entity or government other than by the
government of the United States of America or any state or local government in
the United States of America, which Sandia or R2 or any other party shall be
required to pay with respect to such royalty shall be borne by R2.

     5.5 The rate of exchange to be used in calculating royalties payable by R2
for an accounting period shall be the rate of exchange published by the Wall
Street Journal on the last business day of such accounting period.

     5.6 Without excusing prompt payment of royalties due, any and all royalties
left unpaid, after the above-mentioned payment date in Paragraph 5.2 of this
Article V, shall bear interest at the prime rate in effect at the First Security
Bank of Albuquerque, New Mexico, on the date that the payment of said royalties
becomes due plus three (3) percentage points.

     5.7 R2 will provide to Sandia on July 31 of each year after Food and Drug
Administration approval a report on "analysis of local orientation of edges for
stellate lesion detection in mammograms" technology. The report, in memo form,
will include information on the economic impact of the technology on R2.
Examples include but are not limited to: dollar and percentage change in sales
and number of jobs created or eliminated, changes in efficiency of operations,
changes in R2's competitive position in the industry, and how the Sandia
technology and Licensed Product compares with similar domestic and international
technologies and products.

                                       4

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                                   ARTICLE VI

                                GOVERNMENT RIGHTS

     6.1 R2 will not pay royalty on Licensed Product sold for the benefit of any
Government contract, or for any Licensed Product sold to the Government
(pursuant to the Government's nonexclusive reserved license).

     6.2 In transactions involving the Government, Licensed Product and R2, R2
must maintain true and accurate records that the Government received a discount
equal to or greater than the amount of royalty that R2 would have paid had the
Government not been involved. Any transaction with the Government shall be
reported by providing: (a) identification of the Government agency involved, (b)
identification of the Government contract number, and (c) a description of R2's
lost royalty amount due to the transaction with the Government.

                                  ARTICLE VII

                                 CONFIDENTIALITY

     7.1 R2 shall treat as confidential all Sandia Software which has been or
may hereafter be made available to R2, directly or indirectly, by Sandia and not
disclose Sandia Software to any third party.

     7.2 R2's obligations of confidentiality and nondisclosure of Sandia
Software under this License Agreement shall continue for * * * from the
effective date of this License Agreement, regardless of the termination of any
right and license granted under Article II for any reason.

     7.3 Nothing contained herein shall in any way restrict or impair R2's right
to use, disclose or otherwise deal with any technical information which

     (a) is or becomes generally available to the public through no wrongful act
of R2;

     (b) was in the possession of R2 or others prior to the time Sandia Software
was acquired by R2 from Sandia and was not acquired, directly or indirectly,
from Sandia or from others under an obligation of confidentiality; or

     (c) is independently made available as a matter of right to R2 by a third
party without obligations of secrecy, provided such third party did not acquire
such information, data, and knowledge directly or indirectly from Sandia.

__________

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

                                       5

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     7.4  For the purposes of the provisions of Article 7.3 hereof, a specific
aspect of technical information shall not be deemed to be generally available to
the public or in the possession of R2 merely because the specific aspect is
embraced by general disclosures generally available to the public or in the
possession of the receiving party, but only if such specific aspect and its
principle of operation is generally available to the public or in the possession
of R2 prior to disclosure thereof by Sandia hereunder.

     7.5  R2 hereto shall not make known or cause to be made known to any third
party any correlation, identity, similarity or relationship between Sandia
Software received hereunder and information, data or knowledge available to the
receiving party from any other source.

                                  ARTICLE VIII

                            Duration and Termination

     8.1  The rights and licenses granted to R2 under Paragraph 2.2 and the
obligation to pay royalty under Paragraph 4.3 shall continue until January 1,
2015, or until the expiration of Sandia Patent, whichever occurs first, unless
earlier terminated as specified in Article VIII hereof. Except for R2's rights
and licenses granted under Paragraph 2.2, all other provisions relating to R2
and intended to survive the date set forth in Paragraph 8. 1 and the expiration
of Sandia Patent and any such early termination shall so survive.

     8.2  If this License Agreement is terminated by either Party prior to
payment by R2 of the last payment provided for under Paragraph 4.2, R2 shall
have no further right and license under Article II and shall have no further
rights to receive or possess Sandia Software and receive technical assistance as
specified in this License Agreement, and shall immediately return to Sandia all
drawings, data, memoranda, and information in written or physical form relating
to Sandia Software whether prepared by R2 or Sandia, including all copies
thereof. However, R2 shall be permitted to have one archival copy of Sandia
Software received hereunder retained by independent legal counsel of R2, and
such copy shall not be accessed by R2 unless a dispute arises between Sandia and
R2 regarding Sandia Software and then shall only be used for the resolution of
such dispute.

     8.3  Sandia may terminate the right and license granted by Paragraph 2.2,
if R2 shall at any time default in the payment of any monies or the making of
any statement hereunder, or shall commit any breach of this License Agreement,
or shall make any false statement and shall fail to remedy any such default,
breach or statement within sixty (60) days after written notice thereof is given
by Sandia.

     8.4  Sandia may terminate the right and license granted by Paragraph 2.2 if
the combined royalties for any two consecutive semiannual accounting periods
hereunder, each commencing more than one (1) year after the effective date of
the United States Food and Drug Administration authorization to market the
Licensed Product in the United States, are less than * * * by giving R2 a
written notice of its election to do so, specifying an effective date of

_____________________

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

                                       6

<PAGE>

termination not less than sixty (60) days from the date of such notice. If
before the specified effective date of termination, R2 pays Sandia the
difference between * * * and the combined royalties actually paid, Sandia will
withdraw such election of its right to terminate the License Agreement.

     8.5  Sandia may terminate the right and license granted by Paragraph 2.2
and the technical assistance specified in Paragraph 3.2 by giving written notice
to R2 in the event R2 experiences any of the following events: dissolution,
insolvency, filing of a voluntary petition in bankruptcy, adjudication as a
bankrupt pursuant to an involuntary petition, appointment by a court of a
temporary or permanent receiver, trustee or custodian for its business, or an
assignment for the benefit of creditors, and such termination will become
effective immediately upon the giving of such notice.

     8.6  Sandia may terminate the right and license granted by Paragraph 2.2 by
giving written notice to R2 in the event R2 has not made commercially available
at least one Licensed Product within one (1) year of United States Food and Drug
Administration authorization to market the Licensed Product within the United
States. Such termination will become effective immediately upon the giving of
such notice.

     8.7  R2 may, after one year from the effective date of this License
Agreement, terminate the right and license granted it by Article II by giving
Sandia ninety (90) days written notice of its election to do so.

                                   ARTICLE IX

                     Warranty, Liability and Indemnification

     9.1  Sandia warrants that it owns the Sandia Patent, has the right to
assert copyright in Sandia Software and has the right to grant the rights and
licenses in Article II.

     9.2  Sandia makes no warranty, express or implied, as to the accuracy or
utility of any Sandia Software or that the use of any Sandia Software or Sandia
Patent will not infringe any United States or foreign patent or copyright.
Sandia Software and Sandia Patent are made available hereunder to R2 on an
"AS-IS" basis. To the best of Sandia's knowledge, no valid patent or copyright
exists in the United States of America which would be infringed by either the
Sandia Software or a product made in accordance with the Sandia Patent.

          EXCEPT FOR THE WARRANTIES EXPRESSLY PROVIDED HEREIN, ALL WARRANTIES,
          EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO THE IMPLIED
          WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE,
          ARE EXCLUDED HEREUNDER.
________________________________________________________________________________

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

                                       7

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     9.3  Sandia and the Government, and their agents, officers and employees
shall not be liable for any loss, damage, injury or other casualty of whatsoever
kind, or by whomsoever caused, to the person or property of anyone, including
R2, arising out of or resulting from the license granted to R2 herein or the
accuracy and validity of Sandia Software, or from any system in the Field of
Agreement or component thereof made, used, sold, leased or transferred by R2 and
R2 agrees for itself, its successors and assigns, to defend, indemnify and hold
Sandia and the Government, harmless from and against all claims, demands,
liabilities, suits or actions (including all reasonable expenses and attorney's
fees incurred by or imposed on R2 in connection therewith) for such loss,
damage, injury or other casualty.

     9.4  Except as provided in Article 9. 1, Sandia makes no warranty or
guarantee in respect of the validity of Sandia Patent.

     9.5  Sandia shall retain the sole right to bring litigation for
infringement of Sandia Patent. R2 shall promptly bring to Sandia's attention any
information of which R2 is aware of relating to third party infringement of
Sandia Patent. R2 shall notify Sandia, in writing, that a competitor of R2 is
conducting operations which infringe a claim included in Sandia Patent. If
within one (1) year thereafter Sandia fails to institute legal action against
such competitor for infringement of said claim, or in the alternative, fails to
license such competitor under Sandia Patent, Sandia agrees that the royalty due
from R2 under Article IV and EXHIBIT D shall be calculated as if such competitor
had been licensed by Sandia.

     9.6  Sandia and the Government shall not be responsible or have any
liability whatsoever for any infringement by R2 of any third party patent or
copyright relating to Licensed Product.

                                   ARTICLE X

                               General Provisions

     10.1 R2 shall not, without the express written consent of Sandia, make any
verbal or written statements or perform any act indicating that Sandia endorses
or approves, or has endorsed or approved, any Licensed Product. Specifically, R2
shall not, without the express written consent of Sandia, associate or in any
way connect any name or trademark of Sandia with any Licensed Product. However,
R2 can indicate that Licensed Product is manufactured, sold, leased or used
under a license granted by Sandia.

     10.2 Any notice with respect to this License Agreement shall be deemed
given on the date when sent by facsimile transmission with receipt of
confirmation of when mailed by Registered Mail addressed to the Party to be
notified at its address set forth below or such other address as is designated
by writing:

          For Sandia:

          Statements and Notices:

          Sandia Corporation

                                       8

<PAGE>

          Attention: Licensing Coordinator, Org. 4200
          Mail stop 1380
          P.O. Box 5800
          Albuquerque, NM 87185-1380
          Telephone: (505) 271-7828
          Facsimile: (505) 271-7867

          For Payments:

          Sandia Corporation
          Attention: Assistant Treasurer, Org. 10602
          Mail stop 0189
          P.O. Box 5800
          Albuquerque, NM 87185-0189

          For R2:

          R2 Technology, Inc.
          Attention: S. P. Bob Wang, President
          480 San Antonio Road
          Mountain View, CA 94040
          Phone: (415) 917-0310
          Facsimile: (415) 917-0314

     10.3 The waiver of a breach of this License Agreement or the failure of
Sandia or R2 to exercise any right under this License Agreement shall in no
event constitute a waiver as to any other breach, whether similar or dissimilar
in nature, or prevent the exercise of any right under this License Agreement.

     10.4 R2 agrees to affix appropriate statutory patent markings to all
materials included in Licensed Product made hereunder and covered by issued and
unexposed claims of Sandia Patent and otherwise to modify such notice as Sandia
may from time to time direct in conformity with the patent statutes.

     10.5 The Index and Headings used in this License Agreement are for
reference purposes only and shall not be used in the interpretation of this
License Agreement.

     10.6 R2 agrees that all License Products sold within the United States of
America shall be manufactured substantially within the United States of America.

                                   ARTICLE XI

                             Government Sponsorship

     11.1 The Government has been granted for itself and others acting on its
behalf a paid-up, nonexclusive, irrevocable worldwide license in Sandia Software
to reproduce, prepare

                                       9

<PAGE>

derivative works, and perform publicly and display publicly. Beginning * * *
years after (date permission to assert copyright is first obtained) the
Government is granted for itself and others acting on its behalf a paid-up,
nonexclusive, irrevocable worldwide license in Sandia Software to reproduce,
prepare derivative works, distribute copies to the public, perform publicly and
display publicly, and to permit other to do so.

          NEITHER THE GOVERNMENT NOR THE DOE, NOR ANY OF THEIR EMPLOYEES, MAKES
          ANY WARRANTY, EXPRESS OR IMPLIED, OR ASSUMES ANY LEGAL LIABILITY OR
          RESPONSIBILITY FOR THE ACCURACY, COMPLETENESS, OR USEFULNESS OF ANY
          INFORMATION, APPARATUS, PRODUCT, OR PROCESS DISCLOSED, OR REPRESENTS
          THAT IS USE WOULD NOT INFRINGE PRIVATELY OWNED RIGHTS.

                                  ARTICLE XII

                                   Assignment

     12.1 R2 shall not assign this License Agreement or any right granted nor
delegate any duties under this License Agreement without the prior written
consent of Sandia. However, R2 may assign this License Agreement to a successor
in substantially all of the business of R2 relating to the subject matter of
this License Agreement.

     12.2 Sandia may assign or otherwise transfer this License Agreement or any
rights hereunder to any third party.

                                  ARTICLE XIII

                                 Export Control

     13.1 R2 shall abide by the export control regulations of the United States
Department of Commerce and other United States governmental regulations relating
to the export of Licensed Product. Failure to obtain an export control license
or other authority from the Government may result in criminal liability under
U.S. laws.

                                  ARTICLE XIV

                                 Controlling Law

     14.1 This License Agreement is made in Albuquerque, New Mexico, U.S.A., and
shall be governed by and construed in accordance with the laws of the State of
New Mexico. The Parties agree to the exclusive jurisdiction of the courts of the
State of New Mexico or the United States District Court for the State of New
Mexico.

________________

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

                                       10

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                                   ARTICLE XV

                                    EXECUTION

     15.1 The making, execution and delivery of this License Agreement by Sandia
and R2 have been induced by no representation, statements, warranties, or other
agreements other than those herein expressed. This License Agreement embodies
the entire understanding of the parties and merges any previous agreements or
understandings, written or oral, in effect between such parties relating to the
subject matter thereof, including the Secrecy Agreement between Sandia and R2.
This License Agreement may be amended or modified only by an instrument of equal
formality signed by duly authorized officers of the respective Parties.

IN CONSIDERATION OF THE FOREGOING TERMS AND CONDITIONS, R2, Inc. and Sandia
Corporation have caused this License Agreement to be executed in duplicate by
their duly authorized representatives. This License Agreement will be effective
on the last day and year written below.

                               SANDIA CORPORATION:

                               By:      /s/ Paul Robinson
                                        ---------------------------
                                        C. Paul Robinson

                               Title:   Vice President of Laboratory Development

                               Date:    March 28, 1995
                                        ----------------------------------------

                               R2 CORPORATION:

                               By:      /s/ S.P. Bob Wang
                                        ---------------------------

                               Title:   President
                                        ---------

                               Date:    March 22, 1995
                                        ----------------------------------------

THIS LICENSE AGREEMENT DOES NOT BIND OR OBLIGATE EITHER PARTY IN ANY MANNER
UNLESS DULY EXECUTED BY AN AUTHORIZED REPRESENTATIVE OF BOTH PARTIES.

                                       11

<PAGE>

                                    EXHIBIT A
                                    ---------

Sandia Patent* * * Patent Application No. * * *
-------------

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

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

                                       12

<PAGE>

                                    EXHIBIT B
                                    ---------

***

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

                                       13

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                                    EXHIBIT C
                                    ---------

Scope of Technical Assistance
-----------------------------

Assistance from Sandia National Laboratories is anticipated in the following
activities:

     1.   Porting of the existing code to R2.

     2.   Installation questions regarding Khoros.

     3.   Explanation of the code--some advice, consulting regarding some detail
          code questions.

     4.   Comparing performance of the ported code at R2 to existing code at
          Sandia.

It is anticipated that the amount of time needed will be eighty (80) hours, for
which will be paid in advance in increments of twenty (20) hours until the tasks
are complete.

                                       14

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                                    EXHIBIT D
                                    ---------

1.   * * * per Licensed Product if R2 is the only licensee to Sandia Software
     and Sandia Patent; or

2.   * * * per Licensed Product if only one other commercial license to Sandia
     Software and Sandia Patent is granted by Sandia in the Field of Agreement;
     or

3.   * * * per Licensed Product if two or more commercial licenses to Sandia
     Software and Sandia Patent is granted by Sandia in the Field of Agreement.

----------

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

                                       15<PAGE>

                                                                    EXHIBIT 10.6

                               LICENSE AGREEMENT I
                               -------------------

        This Agreement ("Agreement"), dated December 23, 1996, between ARCH
Development Corporation, an Illinois not-for-profit corporation ("ARCH"), and R2
Technology, Inc., a California corporation ("Licensee").

                               Purpose and Intent
                               ------------------

        ARCH and Licensee entered into a Co-Exclusive License Agreement dated
September 1, 1993 ("Co-Exclusive License") under which ARCH licensed to Licensee
certain patents and patent applications for use in a defined field. ARCH holds
rights to additional patents and patent applications useful in the same field
which Licensee desires to obtain rights to or commercialization. Therefore the
parties agree as follows.

                                    Agreement
                                    ---------

        1.   Definitions. The following capitalized terms used in this Agreement
             -----------
shall mean.

             A. "Affiliate" means, as to any person or entity, any other person
or entity which directly or indirectly controls, is controlled by or is under
common control with such person or entity. Control shall mean the right to
control, or actual control of, management of such other entity, whether by
ownership of voting securities, by agreement, or otherwise.

             B. "Copyrights" means the copyrights for the Software.

             C. "Effective Date" means the date first above written.

             D. "Field" means computer aided diagnosis of diseases or disorders
in humans.

             E. "Gross Revenue" means all revenue received by the Licensee and
its Affiliates from the distribution of products which incorporate or utilize
Licensed Patents, Copyrights, Software or Technical information. Gross Revenue
shall include all revenue received from licensing of Software pursuant to
Paragraph 2.C below. Gross Revenue shall not include revenue earned by the
Licensee and its Affiliates from the provision of services of any type,
including, by way of example, consulting services, customized application or
implementation support, installation, maintenance, technical support or warranty
service.

             F. "Inventors" means the persons listed as inventors on the
Licensed Patents.

             G. "Group I Patents" mean the patents and patent applications
listed on Schedule A, including all divisions, continuations,
continuations-in-part, and any valid patents which may issue therefrom and any
reissues, renewals, substitutions, or extensions of or to any such patents or
patent applications. "Group II Patents" and "Group III Patents" mean the patents
and patent applications listed respectively on Schedules B and C, including all
divisions,

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

                                      1

<PAGE>

continuations, continuations-in-part, foreign counterparts, and any valid
patents which may issue therefrom and any reissues, renewals,. substitutions, or
extensions of or to any such patents or patent applications. Group I, Group II
and Group III Patents shall not include any applications and any patents issuing
from applications filed in countries (i) that Licensee elected not to file in
pursuant to Paragraph 6.A. and (ii) where Licensee's rights are terminated under
Paragraph 6.D.

     H.  "Licensed Patents" means the Group I, Group II and Group III Patents.

     I.  "Net Revenue" means Gross Revenue less the following amounts directly
related to such revenue: (a) customary trade, quantity or cash discounts and
rebates actually allowed and taken; (b) amounts repaid or credited to customers
on account of rejections or returns of products subject to royalty hereunder;
and (c) freight and other transportation costs, including insurance charges,
bond duties, tariffs, sales and excise taxes and other governmental charges
based directly on sales, turnover or delivery of such products and actually paid
or allowed by the Licensee and its Affiliates or any Sublicensee. Net Revenue
shall be determined in accordance with generally accepted accounting principles
consistently applied.

     J.  "Product" means any product covered by at least one Valid Claim
contained in a Licensed Patent or a product made by a process, method or
technique covered by at least one Valid Claim in a Licensed Patent or methods-of
using any product covered by at least one Valid Claim contained in a Licensed
Patent.

     K.  "Royalties" means all amounts payable under Paragraph 3.A.(2) of this
Agreement.

     L.  "Software" means the computer programs listed and described on Schedule
D attached hereto, maintenance releases and bug fixes.

     M.  "Sublicensee" means any person, company or other entity granted a
sublicense by Licensee under Paragraphs 2.B. or 2.C. below, as the case may be,
including Affiliates of the Sublicensee.

     N.  "Sublicense" means a license agreement entered into by Licensee with a
Sublicensee under Paragraphs 2.B. or 2.C. below, as the case may be.

     O.  "System" means any saleable system or unit containing or consisting of
a Product.

     P.  "Territory" means the entire world.

     Q.  "Technical Information" means any and all technical information,
know-how, data, processes, methods, protocols and procedures relating to the
Licensed Patents in the possession of ARCH as of the date of this Agreement
which is considered confidential within the meaning of Paragraph 9.A. of this
Agreement.

     R.  "University" means the University of Chicago.

                                       2

<PAGE>

                S.   "Valid Claim" means an issued claim of any unexpired patent
or claim of any pending patent application which has not been held
unenforceable, unpatentable or invalid by a decision of a court or governmental
body of competent jurisdiction, in a ruling that is unappealable or unappealed
within the time allowed for appeal; which has not been rendered unenforceable
through disclaimer or otherwise; and which has not been lost through an
interference proceeding or failure to pay a maintenance fee. Notwithstanding the
foregoing, a claim of a pending patent application shall cease to be a Valid
Claim if no patent has issued on such claim on or prior to the fifth (5th)
anniversary of the date of filing of such application provided that such claim
shall once again become a Valid Claim on the issue date of a patent that
subsequently issues and includes such claim.

        2.      GRANT OF LICENSE AND RESERVATION OF RESEARCH RIGHTS
                ---------------------------------------------------

                A.   Grant. ARCH hereby grants to Licensee and its Affiliates:
                     -----

                     (1)   An exclusive license to use the Technical Information
to make, have made, use, import, offer to sell and sell products within the
Field and within the Territory;

                     (2)   A non-exclusive license under Group I Patents to
make, have made, use, import, offer to sell and sell Products within the Field
and within the United States; and

                     (3)   A non-exclusive license under the Group II and Group
III Patents to make, have made, use, import, offer to sell and sell Products
within the Field and within the Territory; and

                     (4)   An exclusive license under the Copyrights to use,
copy, modify, prepare derivative works and compilations, distribute, perform and
display publicly the Software in the Territory.

                B.   Sublicense. ARCH hereby grants to Licensee and its
                     ----------
Affiliates a non-exclusive right to grant to third parties sublicenses under the
Group I, Group II and Group III Patents on terms consistent with the terms of
this Agreement.

        All Sublicenses shall provide that the Sublicensee may not grant
further Sublicenses to third parties, except to Affiliates of the Sublicensee.
For each Sublicense granted by Licensee to make or have made Products, Licensee
shall pay to ARCH fifty percent (50%) of all compensation paid by a Sublicensee
to Licensee, including any payments made by a third party to Licensee on behalf
of a Sublicensee. For all other sublicenses, the license revenue, including any
payments made by a third party on behalf of a Sublicensee, shall be treated as
Gross Revenue. Payments shall be made (or assigned as relevant) to ARCH within
thirty (30) days of receipt by Licensee. For this purpose compensation includes
all fees, running royalties, minimum royalties, milestone payments and other
cash payments of any kind and any in kind payments or equity amounts taken in
lieu of cash. It is the intent and agreement of the parties that ARCH will be
paid fifty percent (50%) of any kind of compensation paid by a Sublicensee for
rights granted to such Sublicensee under this Agreement without regard to how
the compensation is structured, denominated or paid.

                                       3

<PAGE>

          C.   Software Sublicense. Licensee shall have the exclusive right
               -------------------
under the Copyrights to grant sublicenses to third parties on terms consistent
with the terms of this Agreement. All revenues received by Licensee from
Software Sublicenses shall be treated as Gross Revenue.

          D.   Sublicensee's Rights upon Termination of this Agreement.
               -------------------------------------------------------

               Each Sublicense under Paragraph 2.B. shall state that if this
Agreement terminates for any reason, except expiration pursuant to Paragraph
11.A., the Sublicensee shall automatically terminate effective the same date
without the necessity of any notice from ARCH to the Sublicensee." In each case,
ARCH agrees to negotiate in good faith for a period of ninety (90) days
following the termination of this Agreement with each Sublicensee for a license
directly from ARCH granting the Sublicensee substantially the same rights as
those contained in the Sublicense with Licensee. If no agreement is reached
within the ninety (90) days, ARCH shall have no further obligation to the
Sublicensee.

          E.   Data Access. ARCH agrees to deliver copies of Technical
               -----------
Information within thirty (30) days after the execution of this Agreement.

          F.   Reservation of Rights. ARCH reserves for itself and the
               ---------------------
University the worldwide right to use the Technical Information and to practice
the inventions claimed in the Licensed Patents to make, have made, use, import,
offer to sell and sell Products within the Field for all educational and
research purposes it may choose in its own discretion and without any payment
therefore. In addition, the inventions claimed in the Licensed Patents were made
with the use of funds from the United States government. Therefore, there is
reserved from the rights granted hereunder the worldwide right of the United
States government to use the Technical Information and to practice or have
practiced the inventions claimed in the Licensed Patents to make, have made,
use, import, offer to sell and sell Products in any field or use for its own
purposes in such manner as it deems fit without any payment therefore.

          G.   U.S. Laws. Any right granted in this Agreement greater than that
               ---------
permitted under Public Law 96-517 or Public Law 98-620 shall be subject to
modification as may be required to conform to the provisions of those laws.

          H.   Other Rights. ARCH has previously granted to Toshiba Corporation
               ------------
licenses and other rights with respect to certain of the Technical Information
and the Group I, Group II and Group III Patents, and the rights granted in
Paragraphs 2.A. and 2.B. of this Agreement are subject to all of the terms and
conditions of those licenses and other rights.

          I.   ARCH Covenant. Notwithstanding the non-exclusive nature of the
               -------------
license granted in Paragraphs 2.A.(2) and 2.A.(3) and the reservations made in
Paragraphs 2.F. and 2.H. above, ARCH hereby agrees, during the term of this
Agreement, not to grant licenses tinder the Licensed Patents to other third
parties.

          J.   Exclusive License Option. ARCH shall notify Licensee in writing
               ------------------------
in the event of termination of any prior license under any of the Licensed
Patents. For a period of sixty (60) days from the date of such notice, Licensee
shall have the right to negotiate with ARCH for an exclusive license under such
Licensed Patents, on terms to be agreed upon by ARCH and

                                       4

<PAGE>

Licensee. If ARCH and Licensee cannot agree upon the terms of an exclusive
license within the sixty-day period, ARCH shall have the right to grant a
non-exclusive license under such Licensed Patents to one other party. Upon the
execution of an exclusive license under such Licensed Patents, Licensee shall
pay ARCH an exclusive license fee, as set forth in Paragraph 3.C. below.

     3.   Royalties and Other Payments
          ----------------------------

          A.   License Payment and Running Royalties. For the license granted in
               -------------------------------------
Paragraph 2.A. of this Agreement, Licensee shall pay ARCH (1) the sum of * * *
within thirty (30) days following the earlier of an initial public offering of
Licensee's stock or any financing arrangement providing funding to Licensee of
at least ten million U.S. Dollars (U.S. $10,000,000); (2) combined with the
royalty obligations of Licensee under License Agreement II executed concurrently
herewith between ARCH and Licensee relating to Group IV Patents as defined
therein, a running royalty equal to one percent (1%) of Net Revenue received by
Licensee and its Affiliates until the expiration of the last to expire of the
Group I, Group II, Group III and Group IV Patents as defined in this Agreement
and License Agreement II.

          B.   Calculation of Royalties. Royalties shall be payable in U.S.
               ------------------------
currency within forty-five (45) days after the end of each calendar quarter for
the term specified in Paragraph 11.A. below, beginning with the calendar quarter
in which the first commercial sale of a Product occurs. Each payment shall be
accompanied by a statement showing Net Revenue for each country in the Territory
and calculation of the Royalties due. There shall be deducted from all such
payments taxes required to be withheld by any governmental authority and
Licensee shall provide copies of the receipt for such taxes to ARCH along with
each Royalty payment. Any necessary conversion of currency into United States
dollars shall be made at the applicable rate of exchange of Citibank, N.A., in
New York, New York, on the last day of the calendar quarter for which the
Royalty is paid.

          C.   Exclusive License Payment. Immediately upon execution of an
               -------------------------
exclusive license under the Licensed Patents pursuant to Paragraph 2.J. above,
Licensee shall pay to ARCH an exclusive license fee of * * *, which shall be
non-refundable under any and all circumstances. Licensee's failure to pay the
exclusive license fee within five days after execution of an exclusive license
agreement will render such exclusive license void and of no force or effect.

          D.   Records. Licensee shall, and shall cause its Sublicensees and
               -------
Affiliates of either, to keep full and accurate books and records in sufficient
detail so that sums due ARCH hereunder can be properly calculated. Such books
and records shall be maintained for at least three (3) years after the Royalty
reporting period(s) to which they relate. During the term hereof and for three
(3) calendar year thereafter, Licensee shall permit, and shall cause its
Sublicensees and Affiliates of either to permit, accountants designated by ARCH,
to whom Licensee has no reasonable objection, to examine its books and records
for the purpose of verifying the accuracy of the written statements submitted by
Licensee and sums paid or payable. ARCH may conduct

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

                                       5

<PAGE>

such examination no more than once in any calendar year. After completion of any
such examination, ARCH shall promptly notify Licensee in writing of any proposed
modification to Licensee's statement of sums due and payable. If Licensee
accepts such modification, or if the parties agree on other modifications, one
party shall promptly pay or credit the other in accordance with such resolution.
Such examination shall be made at the expense of ARCH, except that if such
examination discloses a discrepancy of * * * or more in the amount of
Royalties and other payments due ARCH, then Licensee shall reimburse ARCH for
the cost of such examination and pay the amount due with interest from the date
at which such amount was due as provided in Paragraph 3.B. hereof.

        E. Overdue Payments. Payments due to ARCH under this Agreement shall, if
           ----------------
not paid when due under the terms of this Agreement, bear simple interest at the
lower of the prime rate of interest (as published by Citibank, N.A. on the date
such payment is due) plus * * * or the highest rate permitted by law, calculated
on the basis of a 360-day year for the number of days actually elapsed,
beginning on the due date and ending on the day prior to the day on which
payment is made in full. Interest accruing under this Paragraph shall be due to
ARCH on demand or upon payment of past due amounts, whichever is sooner. The
accrual or receipt by ARCH of interest under this Paragraph shall not constitute
a waiver by ARCH of any right it may otherwise have to declare a default under
this Agreement or to terminate this Agreement.

        F. Single Royalty Payment. Royalties shall be payable only once with
           ----------------------
respect to sales or leases of a single System regardless of the number of Group
I, Group II, Group III and Group IV Patents that cover the System. ARCH is aware
the Licensee has entered into a sublicense with Toshiba Corporation under the
foreign counterparts of the Group I Patents. In the event Licensee makes royalty
payments to Toshiba Corporation on Systems that Licensee sells or leases under
that sublicense, no further royalty will be due from Licensee to ARCH on Net
Revenues derived from such sales or leases. However, in each quarterly,
statement provided pursuant to Paragraph 3.B. above, Licensee will identify the
Net Revenue derived from such sales or leases on which it has made royalty
payments to Toshiba Corporation.

   4.   Warrants. On the Effective Date Licensee shall issue to ARCH warrants
        --------
giving ARCH the right, but not the obligation, to purchase thirty seven thousand
five hundred (37,500) shares of common stock having voting rights at a price of
four dollars U.S. ($4 U.S.) per share. The warrants shall vest at the rate of
seven thousand five hundred (7,500) per year, with the warrants to purchase the
first 7,500 shares vesting on the Effective Date and the remaining warrants
vesting in equal amounts on the first, second, third and fourth anniversaries of
this Agreement provided this Agreement has not terminated by those
anniversaries. The warrants may be exercised at any time after vesting and shall
expire ten (10) years after the Effective Date.

   5.   Unrestricted Gift. Within thirty (30) days of the Effective Date and on
        -----------------
the first, second, third and fourth anniversaries of this Agreement, Licensee
shall make an unrestricted gift in the amount of thirty thousand dollars U.S.
($30,000 U.S.) to University provided this Agreement has not terminated by those
anniversaries.

____________________

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

                                       6

<PAGE>

     6.   Prosecution and Maintenance of Patents: Patent Costs
          ----------------------------------------------------

          A. Prosecution and Maintenance. ARCH shall be solely liable for the
             ---------------------------
preparation, filing, prosecution and response maintenance of the Group I
Patents. ARCH shall cause its patent counsel to provide Licensee with a list of
the countries in which it has filed and/or intends to file applications. Such
list shall be provided to Licensee at least sixty (60) days prior to the
expiration of one (1) year from the corresponding United states priority date to
allow Licensee to suggest that additional countries be added to the list or that
one or more countries be deleted from the list. ARCH agrees to file applications
in the additional countries requested by Licensee unless it otherwise notifies
Licensee under Paragraph 6.B. Licensee agrees to cooperate, and agrees to cause
its Sublicensees and Affiliates of either to cooperate, with ARCH in the
preparation, filing, prosecution and maintenance of the Group I Patents by
disclosing such information as may be necessary for the same and by promptly
executing such documents as ARCH may reasonably request in connection therewith.
Licensee and its Sublicensees and Affiliates of either shall bear their own
costs in connection with their cooperation with ARCH under this Paragraph. ARCH
will provide Licensee copies of all material documents received or prepared by
ARCH in the prosecution and maintenance of the Group I Patents. ARCH shall
provide copies in a timely manner to allow Licensee an opportunity to comment
and request changes in ARCH's documents. ARCH agrees to include all reasonable
comments of Licensee.

          B. Licensee's Rights to Prosecute and Maintain Patents. ARCH shall
             ---------------------------------------------------
notify Licensee in writing of any country(ies) where it either previously
declared its intention to file under Paragraph 6.A. and subsequently decided not
to file in such country(ies) or previously filed and decided to abandon the
patent application or issued patent. Similarly, ARCH shall notify Licensee in
writing of any country(ies) where it has the right to file, prosecute or
maintain Group II and Group III Patents and has decided to abandon the patent
application or issued patent. All such notices shall be given so as to allow
Licensee a reasonable time within which to file in countries where ARCH either
does not intend to file or is not going to continue the prosecution or
maintenance of the application or patent, whichever is relevant. In all cases
where Licensee elects to file, Licensee shall file, prosecute and maintain the
applications and patents in ARCH's name and at Licensee's expense. In the case
of Group I Patents, such patents shall be included in the definition of Group I
Patents, for all purposes of this Agreement. In the cases of Group II or Group
III Patents where Licensee elects to file, Licensee shall receive an exclusive
license under such patents within the Field for the country(ies) involved.

          C. Patent Costs. Licensee agrees to pay all necessary and reasonable
             ------------
third party fees and expenses incurred by ARCH in obtaining and maintaining the
Group 1, Group II and Group III Patents in Canada, France, Germany, Japan,
Netherlands, United Kingdom and the United States, including those incurred by
ARCH prior to the date of this Agreement but not including any fees and expenses
already paid for by Toshiba. Payment for fees and expenses incurred after the
date of this Agreement shall be invoiced to Licensee on a monthly basis and
Licensee agrees to pay such invoices within thirty (30) days of receipt.
Documentation received from the third party vendors to support the amounts
invoiced shall be included with each invoice. Licensee may raise any objections
to such amounts invoiced within the thirty (30) day time period for payment
provided Licensee has not preapproved such amount.

                                       7

<PAGE>

         D.   Failure to Pay Patent Costs. If Licensee declines or fails to make
              ---------------------------
advance payments or pay or reimburse ARCH for all or any portion of the patent
fees and expenses (including maintenance fees) as required by, Paragraph 6.C.
for any application or patent, Licensee's rights with respect to all such
applications and patents for which Licensee fails to make advance payments or
does not reimburse ARCH shall terminate effective sixty (60) days after written
notice from ARCH requesting such payment, unless payment in full is made within
such time. Such notice can be sent by ARCH at any time after the expiration of
the thirty (30) days provided in Paragraph 6.C. for payment of invoices if
Licensee has not objected to the amount invoiced or in the case of advance
payments, any time after the date fifteen (15) days before the payment must be
made by ARCH to a third party.

     7.  Due Diligence and Milestones.
         ----------------------------

         A.   Commercialization Plans. Licensee shall provide ARCH with its
              -----------------------
strategic and detailed plans for the commercialization of the Licensed Products.
Such plans shall include research and development plans, product milestones and
related timetable schedules, government or regulatory timetables and sales and
marketing plans. Licensee will update these plans at least on an annual basis.

         B.   Progress Report. Licensee will provide ARCH with Licensee's
              ---------------
quarterly report to stockholders beginning with the quarter ended September 30,
1996. Such report will include the Company's financial performance for the
quarter and will also cover significant developments that have occurred.
Licensee agrees to immediately notify ARCH in writing when commercial products
are first sold and when Licensee's obligation to begin making running Royalty
payments begins.

         C.   Licensee shall commence marketing and distribution of products
which incorporate or utilize Licensed Patents, Copyrights, Software or Technical
Information within three (3) years of the Effective Date. If Licensee fails to
commence marketing and distribution of such products within three (3) years of
the Effective Date, ARCH shall have the right to terminate this Agreement upon
sixty (60) days written notice, provided, however, that if Licensee is utilizing
its best efforts to obtain regulatory approval and commercialize such products
ARCH may, in its sole discretion, extend this Agreement for an additional period
of time.

     8.  All Patents; No Other Warranties; Indemnification; Insurance
         ------------------------------------------------------------

         A.   All Patents. ARCH represents and warrants that it shall not assert
              -----------
any existing patents or patents that issue from patent applications pending as
of the Effective Date against Licensee , its Sublicensees or its customers based
upon Licensee's or its Sublicensee's manufacture, use, importation, offer for
sale or sale of Products.

         B.   Disclaimer of Warranties. Except as provided in Paragraph B.A.,
              ------------------------
ARCH makes no representations or warranties of any kind, express or implied,
with respect to the invention(s) claimed in the Licensed Patents or with respect
to the Licensed Patents themselves or regarding the Technical Information,
including but not limited to, any representations or warranties about (i) the
validity, scope or enforceability of any of the Licensed Patents; (ii) the

                                       8

<PAGE>

accuracy, safety or usefulness for any purpose of any information provided by
ARCH to Licensee, its Sublicensees or Affiliates of either, with respect to the
invention(s) claimed in the Licensed Patents or with respect to the Licensed
Patents themselves or regarding the Technical Information, and any products
developed from or covered by them; (iii) whether the practice of any claim
contained in any of the Licensed Patents will or might infringe a patent or
other intellectual property right owned or licensed by a third party; (iv) the
patentability of any invention claimed in the Licensed Patents; or (v) the
accuracy, safety, or usefulness for any purpose of any product or process made
or carried out in accordance with or through the use of the Licensed Patents or
the Technical Information.

        C.  Indemnification. Licensee agrees, and agrees to cause its
            ---------------
Sublicensees and Affiliates of either, to indemnify, defend and hold harmless
ARCH, its Affiliates and all trustees, directors, officers, employees, fellows
and agents of any of the foregoing (including ARCH and its Affiliates, each an
"Indemnified Person") from and against any and all claims, demands, loss,
damage, penalty, cost or expense (including attorneys' and witnesses, fees and
costs) of any kind or nature, arising from the development, production, use,
sale or other disposition of Products or the Technical Information, and all
activities associated therewith by Licensee, its Sublicensees or Affiliates of
either, or any use of information provided by ARCH to Licensee, its
Sublicensees; or Affiliates of either. Licensee agrees and agrees to cause each
of its Sublicenses and Affiliates of either to agree not to sue any Indemnified
Person in connection with the development, production, use, sale or other
disposition of Products or the use of Technical Information, and all activities
associated therewith. ARCH shall be entitled to participate at its option and
expense through counsel of its own selection, and may join in any legal actions
related to any such claims, demands, losses, damages, costs, expenses and
penalties. Licensee, its Sublicensees and Affiliates of either, shall not enter
into any settlement affecting any rights or obligations of any Indemnified
Person or which includes an express or implied admission of liability,
negligence or wrongdoing by any Indemnified Person, without the prior written
consent of such Indemnified Person.

        D.  Assumption of Risk. The entire risk as to the performance, safety
            ------------------
and efficacy of any invention claimed in the Licensed Patents or of any Products
or the Technical Information, is assumed by Licensee's, its Sublicensees' and
Affiliates' of either, provided that such assumption of the risk shall not apply
to the intentional misconduct or gross negligence by Indemnified Persons.
Indemnified Persons shall not, except for their intentional misconduct or gross
negligence, be responsible or liable for any injury, loss, or damage of any
kind, including but not limited to direct, indirect, special, incidental or
consequential damages or lost profits to Licensee, any Sublicensee, Affiliates
of either or customers or any of the foregoing, or for any such injury, loss or
damage to any other individual or entity, regardless of legal theory based on
the development, manufacture, use, sale or other disposition of Products or the
Technical Information, and all activities associated therewith. The above
limitations on liability apply even though the Indemnified Person may have been
advised of the possibility of such injury, loss or damage. Licensee shall not,
and shall require all Sublicensees and Affiliates of either to not, make any
agreements, statements, representations or warranties or accept any liabilities
or responsibilities whatsoever with regard to any person or entity which are
inconsistent with this Paragraph.

                                       9

<PAGE>

         E. Insurance. Licensee agrees and agrees to cause its Sublicensees and
            ---------
Affiliates of either to list ARCH and its Affiliates, at Licensee's, its
Sublicensees' or Affiliates', of either of them, expense, whichever is relevant,
as additional named insureds under each liability policy that Licensee, its
Sublicensees and Affiliates of either shall have or shall obtain that includes
any coverage of claims relating to the Products, the Licensed Patents, or the
inventions claimed in the Licensed Patents. At ARCH's request, Licensee will
supply ARCH from time to time with copies of each such policy, and will notify
ARCH in writing at least 30 days prior to any termination of or change in
coverage under any such policies.

     9.  Confidentiality.
         ---------------

         A. Confidentiality, Publications and Data Access. All information
            ---------------------------------------------
submitted by one party to the other concerning the Products, the Licensed
Patents, the invention(s) claimed in the Licensed Patents, and the Technical
Information shall be considered as confidential ("Confidential Information") and
shall be utilized only pursuant to the licenses granted hereunder. During the
term of this Agreement and for a period of ten (10) years thereafter, neither
party shall disclose to any third party any Confidential Information received
from the other party without the specific written consent of such party.
Provided that Licensee may disclose Confidential Information belonging to ARCH
to potential sublicensees for the purpose of evaluating their interest in
entering into a Sublicense but only after entering into a confidentiality
agreement on the same terms as those contained in this Paragraph. The foregoing
shall not apply where Confidential Information a) was or becomes public through
no fault of the receiving party, b) was, at the time of receipt, already in the
possession of the receiving party as evidenced by its written records, c) was
obtained from a third party legally entitled to use and disclose the same, or d)
is required by law to be disclosed to a governmental agency.

         B. Publications. ARCH shall provide to Licensee copies of any proposed
            ------------
written publication by ARCH containing any Confidential Information and, to the
extent ARCH is aware of them, proposed publications containing any Confidential
Information by the Inventor(s). Licensee agree to provide copies of any proposed
written publication of Licensee, its Sublicensees and Affiliates of either of
them to ARCH. The parties shall provide copies of such proposed written
publications at least ninety (90) days in advance of publication in order to
protect potentially patentable subject matter. The receiving party may request,
and the disclosing party agrees, that publication will be withheld for an
additional thirty (30) days, if required, to obtain patent protection. The
receiving party may object to such proposed publication or disclosure on the
grounds that the publication contains Confidential Information of the objecting
party. At the request of the objecting party, Confidential Information of such
party shall be deleted from the publication.

     10. Infringement. In the event of an infringement of a Licensed Patent the
         ------------
following shall apply:

         A. Notice. Each party shall give the other written notice if one of
            ------
any Licensed Patent. Upon notice of any such infringement, the parties shall
promptly consult with one another with a view toward reaching agreement on a
course of action to be pursued.

                                       10

<PAGE>

          B.   Licensee's Right to Bring Infringement Action.
               ---------------------------------------------

               (1)  If a third party infringes any patent included in the
Licensed Patents within the Field, Licensee shall have the right to institute
and prosecute an action or proceeding to abate such infringement and to resolve
such matter by settlement or otherwise. Licensee agrees to notify ARCH of its
intention to bring an action or proceeding prior to filing the same and in
sufficient time to allow ARCH the opportunity to discuss with Licensee the
choice of counsel for such matter. Licensee agrees to hire counsel reasonably
acceptable to ARCH. Licensee shall keep ARCH timely informed of material
developments in the prosecution or settlement of such action or proceeding.
Licensee shall be responsible for all costs and expenses of any action or
proceeding against infringers which Licensee initiates. ARCH shall cooperate
fully by joining as a party plaintiff if required to do so by law to maintain
such action or proceeding and by executing and making available such documents
as Licensee may reasonably request. Licensee agrees to promptly reimburse ARCH
for its reasonable third party out-of-pocket fees and expenses incurred in
joining an action or proceeding or cooperating with Licensee. ARCH may be
represented by counsel in any such legal proceedings, at ARCH's own expense,
subject to reimbursement under Paragraph 10.B.(3), acting in an advisory but not
controlling capacity.

               (2)  The prosecution, settlement, or abandonment of any action or
proceeding under Paragraph O.B.(1) shall be at Licensee's reasonable discretion
provided that Licensee shall not have any right to surrender any of ARCH's
rights to the Licensed Patents or to grant any infringer any rights to the
Licensed Patents.

               (3)  Except as provided herein, all amounts of every kind and
nature recovered from an action or proceeding of infringement by Licensee shall
belong to Licensee. If the amounts recovered by Licensee exceed Licensee's
reasonable third party out-of-pocket fees and expenses, Licensee shall reimburse
ARCH for ARCH's reasonable out-of-pocket fees and expenses incurred in hiring
its own counsel. After deduction of the fees and expenses of both parties to
this Agreement, any remaining amounts recovered shall be considered Net Revenue
under this Agreement and subject to Royalty payments in accordance with
Paragraph 3.

          C.   ARCH's Right to Bring Infringement Action. If a third party
               -----------------------------------------
infringes any patent included in the Licensed Patents within the Field which
ARCH wishes to prosecute, ARCH shall first notify Licensee in writing and
request that Licensee bring an action or proceeding against the infringing third
party. If Licensee declines or fails to bring such an action or proceeding
within ninety (90) of receipt of the notice, ARCH shall have the right, at its
discretion, to institute and prosecute an action or proceeding to abate such
infringement and to resolve such matter by settlement or otherwise. Licensee
shall cooperate fully by joining as a party plaintiff if required to do so by
law to maintain such action and by executing and making available such documents
as ARCH may reasonably request. If the amounts recovered by ARCH exceed its
reasonable out-of-pocket fees and expenses, ARCH agrees to pay Licensee for its
and its Sublicensees' reasonable out-of-pocket third party expenses incurred by
it in cooperating in the action or proceeding. Except as specifically provided
in this Paragraph, ARCH shall have the right to retain all amounts recovered of
every kind and nature. Amounts recovered by ARCH shall not be considered Net
Revenue under this Agreement and shall not give rise to Royalty payments under
Paragraph 3.

                                       11

<PAGE>

     11.  Termination
          -----------

          A.   Term. Unless terminated earlier pursuant to Paragraphs 11.B or
               ----
11.C, this Agreement shall terminate on the later of (i) the expiration of the
royalty obligations under Article 3 hereto and (ii) the day the Licensee ceases
to use the licenses granted in Article 2.

          B.   ARCH's Right to Terminate. ARCH shall have the right to terminate
               -------------------------
this Agreement as follows, in addition to all other available remedies:

               (1)  If Licensee fails to make any Royalty or other payment when
due, this Agreement shall terminate effective sixty (60) days after ARCH's
written notice to Licensee to such effect, unless Licensee makes such payment
within the sixty (60) days.

               (2)  If Licensee fails to observe any other material obligation
of this Agreement, this Agreement shall terminate effective sixty (60) days
after ARCH's written notice to Licensee describing such failure, unless Licensee
cures such failure within the sixty (60) days.

               (3)  If Licensee shall have filed by or against it a petition
under any bankruptcy or insolvency law and such petition is not dismissed within
sixty (60) days of its filing, or if Licensee makes an assignment of all or
substantially all of its assets for the benefit of its creditors ARCH may
terminate this Agreement by written notice effective as of the (i) date of
filing by Licensee of any such petition, (ii) date of any such assignment to
creditors, or (iii) end of the sixty (60) days if a petition is filed against it
and not dismissed by such time, whichever is applicable.

               (4)  If Licensee shall be dissolved, liquidated or otherwise
ceases to exist, other than for reasons specified in Paragraph 11.B.(3) above,
this Agreement shall automatically terminate as of (i) the date articles of
dissolution or a similar document is filed on behalf of Licensee with the
appropriate government authority or (ii) the date of establishment of a
liquidating trust or other arrangement for the winding up of the affairs of
Licensee.

          C.   Licensee's Right to Terminate. Licensee may terminate this
               -----------------------------
Agreement at any time by giving ARCH sixty (60) days prior written notice.

          D.   Survival. All causes of action accruing to either party under
               --------
this Agreement shall survive termination for any reason, as well as (1)
Licensee's obligation under Paragraphs 3.A and 6.C to pay Royalties and Patent
Costs accrued prior to the date of termination and which were not paid or
payable before termination, along with Licensee's obligation to report Net
Revenue and to keep records as set forth in Paragraphs 3.B and 3.D and (2)
Paragraphs 8 and 9.

     12.  Arbitration.
          -----------

          A.   Panel. If the parties cannot satisfactorily settle any claim,
               -----
disagreement or controversy arising out of or related to this Agreement or its
interpretation, performance, nonperformance, breach or their respective rights
and obligations hereunder, such disagreement shall, at the request of either
party, be settled by arbitration as follows. All such disputes shall be referred
to an arbitration panel comprised of three persons, one to be selected by each
party

                                       12

<PAGE>

hereto and the third selected by the first two. The arbitrators shall be persons
involved in and familiar with the licensing and technology transfer field and
not affiliated with either party. Each party shall select an arbitrator within
twenty (20) days of request for arbitration by either party. The first two
arbitrators shall select the third member of the panel within fifteen (15) days
after their selection. The arbitration shall be held as soon as is reasonably
possible after selection of the arbitration panel. The proceedings shall be held
in an informal manner as reasonably determined by the arbitrators. Except for
the right of appeal as set forth in subparagraph b below, the parties shall be
bound by a decision of the arbitration panel with respect to the matter in
dispute. All proceedings of the arbitration panel shall be held in Wilmington,
Delaware. The panel's costs and fees shall be borne by the party bringing the
action. The arbitrators shall presume that all claims of all Licensed Patents
are valid and enforceable, and shall not have the power to assess the validity
or enforceability of the Licensed Patents.

          B.   Appeals. There shall be no appeal from an arbitration panel's
               -------
unanimous decision. In the event of a majority decision by the arbitration
panel, a, dissatisfied party may appeal the panel's decision to the American
Arbitration Association (AAA) for an independent binding decision. All appeals
shall be heard in Wilmington, Delaware. The dissatisfied party must make such an
appeal within thirty (30) days after receipt of the arbitration panel's decision
and if it loses the appeal must bear the parties, expenses and costs for such
appeal. The AAA is hereby authorized to make arrangements for such arbitration,
to be held under the procedures provided by its arbitration rules. Judgment upon
any award rendered by all or a majority of the appeal arbitrators or a unanimous
judgment of the initial panel, may be entered in any court in any country having
jurisdiction, after any and all applicable appeal periods have passed.

     13.  Advertising
          -----------

     Each party agrees not to use (and Licensee agrees to prohibit its
Affiliates and sublicensees from using) the name of the other party (and,
Licensee agrees not to use, the names of the University and the Inventors under
the Licensed Patents) in any commercial activity, marketing, advertising or
sales brochures except with the prior written consent of the other party, which
such consent may be granted or withheld in such party's sole and complete
discretion, provided that,

          (a)  with the prior written consent of ARCH not unreasonably withheld
or delayed, Licensee may disclose to the banks, commercial finance institutions
or prospective investors from which Licensee may attempt to obtain debt or
equity financing (i) the names of ARCH, the University and the Inventor(s) under
the Licensed Patents, (ii) the identities of ARCH, the University and the
Inventor(s) under the Licensed Patents and their respective connections to, and
ownership interests in, the Licensed Patents, and (iii) the identity of the
Inventor under the Licensed Patents as a founder and scientific advisor to
Licensee in advertising and sales materials; and

          (b)  with the prior written consent of Licensee-not unreasonably
withheld or delayed, ARCH or its Affiliates may disclose (i) the name of
Licensee and (ii) the existence of this Agreement.

     14.  Termination of Co-Exclusive License.
          -----------------------------------

          Simultaneously, with execution of this Agreement by both parties, the
Co-Exclusive License Agreement of September 1, 1993 is terminated.

                                       13

<PAGE>

          15.  Miscellaneous
               -------------

               A.   United States Manufacture. Licensee agrees that any Products
                    -------------------------
that are sold in the United States of America will be manufactured substantially
in the United States of America as required by 35 United States Code Section
204.

               B.   Export Regulations. To the extent that the United States
                    ------------------
Export Control Regulations are applicable, neither Licensee nor ARCH shall,
without having first fully complied with such regulations, (i) knowingly
transfer, directly or indirectly, any unpublished technical data obtained or to
be obtained from the other party hereto to a destination outside the United
States, or (ii) knowingly ship, directly or indirectly, any product produced
using such unpublished technical data to any destination outside the United
States.

               C.   Entire Agreement, Amendment, Waiver. This Agreement and
                    -----------------------------------
License Agreement II together with the Schedules attached constitute the entire
agreement between the parties regarding the subject matter hereof, and
supersedes all prior written or oral agreements or understandings (express or
implied) between them concerning the same subject matter. This Agreement may not
be amended or modified except in a writing signed by duly authorized
representatives of each party. No waiver of any default hereunder by either
party or any failure to enforce any rights hereunder shall be deemed to
constitute a waiver of any subsequent default with respect to the same or any
other provision hereof.

               D.   Notice. Any notice required or otherwise made pursuant to
                    ------
this Agreement shall be in writing, sent by registered or certified mail
properly addressed, or by facsimile with confirmed answer-back, to the other
party at the address set forth below or at such other address as may be
designated by written notice to the other party. Notice shall be deemed
effective three (3) business days following the date of sending such notice if
by mail, on the day following deposit with an overnight courier, if sent by
overnight courier, or upon confirmed answer-back if by facsimile.

If to ARCH:         ARCH Development Corporation
                    1115-25 East 58th Street
                    Chicago, Illinois 60637
                    Attention: President

If to Licensee:     R2 Technology, Inc.
                    730 Distel Drive
                    Los Altos, California 94022
                    Attention:

               E.   Assignment. This Agreement shall be binding on the parties
                    ----------
hereto and upon their respective successors and assigns. Either party may at any
time, upon written notice to the other party, assign or delegate to a successor
to all or substantially all of its business any of its rights and obligations
hereunder, provided that, any such assignment or delegation shall in no

                                       14

<PAGE>

event relieve either party of its primary responsibility f or the same. Except
as provided in the preceding sentence, Licensee may not assign or delegate any
right or obligation hereunder without the prior written consent of ARCH, which
consent shall not be unreasonably withheld, and any attempted assignment or
deletion in violation thereof shall be void. ARCH may assign this Agreement at
any time to any third party on written notice to Licensee. In such event, the
assignee shall be substituted for ARCH as a party hereto, and ARCH shall no
longer be bound hereby.

          F.   Governing Law. The interpretation and performance of this
               -------------
Agreement shall be governed by the laws of the State of California applicable to
contracts made and to be fully performed in that state.

          G.   The University. This Agreement is entered into by ARCH in its own
               --------------
private capacity and not on behalf of the University, nor as its contractor or
agent. It is understood and agreed that the University is not a party to this
Agreement and is not liable for nor assumes any responsibility or obligation
under this Agreement, and is not liable for any action or lack thereof by ARCH.

     IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
executed by their respective duly authorized officers or representatives on the
date first above written.

ARCH Development Corporation              R2 Technology, Inc.

By: /s/                                   By : /s/ James W. Pell
    ------------------------------             -------------------------------
    Its: CEO                                   Its: CEO

                                       15

<PAGE>

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                                   SCHEDULE A
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  UCH#    PAT/APPLN.#    ISSUE/FILING    INVENTOR                TITLE
                             DATE
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                                       16

<PAGE>

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                                   SCHEDULE B
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    UCH#      PAT/APPLN.#         ISSUE/FILING DATE             INVENTOR TITLE
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                                       17

<PAGE>
                                   SCHEDULE C
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UCH#         PAT/APPLN.#              ISSUE/FILING DATE          INVENTOR TITLE
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  ***
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***Certain information on this page has been omitted and filed separately with
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                                       18

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