Distribution Agreement

Whereas:

Supplier manufactures and markets certain products and desires to increase the sales of such products; and,

Whereas:

Distributor has represented that it possesses the necessary expertise and marketing organization to promote and sell such products; and,

Whereas:

Supplier is willing to appoint Distributor and Distributor is willing to accept such appointment as an exclusive distributor of Supplier's products in the Territory;

1.1

 “Products” — those products listed in Exhibit 1 hereto and the applied software and/or any upgrades and/or enhancements of the said products and/or any replacing technology. The Exhibit may be amended by mutual consent of both Parties.

1.2

"Territory" - the area specifically described in Exhibit 2 hereto.

1.3

 “Distributor Price List” — the prices then being quoted by Supplier for sales of Products to its distributors listed in Exhibit 3 hereto as that Exhibit may be amended by mutual consent of both Parties.

1.4

 “Supplier Information” — all information expressly designated by Supplier as confidential, which is directly or indirectly disclosed to Distributor or embodied in Products provided hereunder, regardless of the form in which it is disclosed, relating in any way to Supplier’s markets, customers, products, patents, inventions, procedures, methods, designs, strategies, plans, assets, liabilities, costs, revenues, profits, organization, employees, agents, distributors or business in general.

1.5

 “Quota” — the minimum quantities of Products which Distributor shall be expected to purchase from Supplier in accordance with the terms and conditions of Article 5 of this Agreement and detailed in Exhibit 4 attached hereto.

1.6

 “Advance Order” – Orders provided by the Distributor with signature of the agreement and are to be supplied by the Supplier in the future, as detailed in Exhibit 5 attached hereto.

1.7

 “Trademarks” and “Patents” — Supplier trademarks, tradenames, and patents listed in Exhibit 6 attached hereto and any other trademarks, tradenames and patents that Supplier may require thereafter.

2.1

Scope

Supplier  hereby appoints Distributor and Distributor hereby accepts appointment, as Supplier’s exclusive distributor for the purpose of resale, marketing, distribution and maintenance of the Products during the term of this Agreement with the right to sell or otherwise distribute Products in the Territory under Supplier’s name, logotypes, and trademarks, subject to all the terms and conditions of this Agreement.

2.2

Sales Outside the Territory

Distributor shall not deal with the Products in any territory other than the Territory without the prior written permission from Supplier. Distributor shall not sell or deal with other customers, which Distributor can reasonably know that they might use or re-sell the Products outside the Territory.

2.3

Reserved Sales Rights

Notwithstanding any other provision of this Agreement, Supplier reserves the right to sell, rent or lease Products under the Supplier’s name, logotypes and trademarks directly to any of the customers listed in Exhibit 6, as that Exhibit may be amended by mutual consent of both Parties from time to time.

3.1

Marketing

Distributor shall have the following obligations with respect to the marketing and distribution of Supplier Products:

(a)

 To use its best efforts to further the promotion, marketing, sale and other distribution of Products in the Territory;

(b)

To maintain an adequate and balanced inventory of Products, supplies, and spare parts;

(c)

To promptly respond to all inquiries from customers, including complaints, process all orders, and effect all shipments of Products;

(d)

To diligently investigate all leads with respect to potential customers reffered to it by Supplier;

(e)

To permit Supplier to visit Distributor ’s customers and to visit Distributor’s place of business, subject to prior coordination with the Distributor.

(f)

To maintain throughout the Territory an adequate sales force dedicated, inter alia, to the sale of Products;

(g)

To use its best efforts to participate actively in sales or merchandising programs prepared by Supplier; to participate in all fairs and exhibitions in the Territory where such participation will, in the judgement of both Parties, promote the Products; and to develop and implement sales programs for the promotion of the Products;

(h)

To continue using its existing demonstration WinStation capture system for future demonstrations and to continue using its existing 3 WinStation Review Licenses for demonstration and service purposes (not for sale).

(i)

To furnish Supplier regularly and at least once a year with written reports which will include customer call reports, business trend, make forecasts, activities of competitors in the Territory, and such other information as may be requested, from time to time by Supplier.

3.2

Service

(a)

To carry out all service requirements (warranty period included) of customers for Products sold by Distributor in the Territory. Distributor shall have the following obligations with respect to the service for Supplier Products:

(b)

  To provide and maintain appropriate service and shop facilities in the Territory, as shall be determined by both parties.

(c)

  To comply with any reasonable request from Supplier for minor engineering changes in the Products according to Supplier’s instructions the costs of which shall be born by the Supplier.

(d)

  To maintain throughout the Territory an adequate and competent service force to give service to the Products sold by Distributor;

(e)

To send, on his own account, his personnel to participate in one week application course and one week service course which will be performed by Supplier in the Supplier place of business. Tuition will be borne by Supplier.

(f)

  To maintain spare parts’ stock at a level sufficient to the number of units sold in the Territory.

3.3

Advertising

Distributor shall diligently undertake to advertise the Products in the Territory by mailing, in exhibitions and demonstration sessions. Supplier shall furnish Distributor with reasonable quantity of Supplier’s brochures, in the English language, for use by the Distributor in preparing its own advertising materials.

3.4

Manufacture or Distribution of Competitive Products

Distributor shall not develop in any way, manufacture or distribute any products or items which are directly competitive with the Products nor represent or provide either directly or indirectly marketing services of any sort to any other manufacturer or distributor for any such item; nor enter into other agreement which is conflicting or not consistent with the purpose of this Agreement. The above mentioned undertaking of the Distributor shall not apply to: (i) any of the Distributor’s current products (including but not limited to the products listed in Exhibit 3.4) and/or any update and/or upgrade of same and/or any new products replacing such current Distributor’s products and/or technology. The provision herein allowing Distributor to continue selling his existing competing product listed in Exhibit 3.4 is limited till the end of 2007. Starting beginning of 2008, unless the Parties agreed otherwise in writing, Distributor will cease developing, manufacturing or selling the products outlined in Exhibit 3.4 or any other competing product not supplied by the Distributor.

3.5

Customer Support

Distributor agrees to cooperate with Supplier in dealing with any customer complaints concerning the Products and to take any reasonable action requested by Supplier to resolve such complaints. Distributor also agrees to assist Supplier in arranging for any customer warranty service. On site repairs in the Territory will be performed by Distributor by replacing defective parts complete units with spare parts or units from Distributor’s stock. The defective parts or units will be sent for repair or replacement to Supplier’s maintenance center.

Parts will be repaired or replaced (at Supplier’s discretion) — at no charge if under and during the warranty period, or at the regular price if outside the scope of the warranty defined herein.

3.6

Expenses

Distributor assumes full responsibility for all costs and expenses which it incurs in carrying out its obligations under this Agreement, including but not limited to all rentals, salaries, commissions,

advertising, demonstration, travel and accommodation expenses without the right to reimbursement for any portion thereof from Supplier unless otherwise agreed upon by the Parties and/or stipulated in this Agreement.

3.7

General obligations of Supplier

(a)

Supplier undertakes to supply the products, manufactured with good workmanship and materials between 14 to 30 days of receiving Distributor’s Purchase Order.

(b)

Supplier undertakes to supply Distributor with spare parts currently at supplier’s stock within 10days of receiving Distributor’s purchase order.

(c)

Supplier undertakes to replace any defected products shipped to Distributor, or in case of delivering items not ordered by Distributor and/or not delivered in accordance with the purchase order served by the Distributor to the Supplier. Distributor may further, upon forty five (45) days written notice, return, shipping prepaid, undamaged, unused Products in its original packaging. For all such returns Supplier shall re-pay Distributor the cost of such returned Products as provided in the Distributor’s purchase order and not later than 30 days from Distributor’s request for such refund.

(d)

Supplier shall allow Distributor to check the content of each delivery prior to shipment to conform with the purchase order. Such a check will be performed by Distributor at Supplier’s facility and will be the confirmation for accepting the products. Notwithstanding the abovementioned the conformance check can be done also at the Distributor facilities as long as it will take place 24 hours from shipment arrival, at the Distributor’s facilities.

(e)

Supplier shall provide Distributor with reasonable amount of user manuals, technical materials and related writings published by the Supplier with regard to the Product.

(f)

Supplier shall provide Distributor with a yearly one week application course and one week service course which will be performed by Supplier in the Supplier place of business. Additional training shall be rendered by Supplier to Distributor under the terms and conditions mutually agreed to between the Parties.

3.8

Representations and Warranties of the Supplier

Supplier represents and warrants that: (i) it has full power to grant Distributor the distribution rights as provided under the Agreement, and (ii) it has obtained all necessary governmental approvals and is complying with all other applicable laws and regulations (including, without limitation, federal and state laws and regulations concerning medical devices) in connection with the Products in the United States; and (iii) it is the sole owner and holder of title in and rights to the Products, and no third party approval is required for granting Distributor rights under the Agreement; and (iv) in all respects, the Products do not and shall not infringe upon nor violate any patent, copyright, trade secret, trade name or trademark or other proprietary right of any person not a party to this Agreement; and (v) the Products shall perform in accordance with Supplier’s user documentation; and (vi) the Products sold under the Agreement will perform in accordance with specifications described in user manuals, technical materials and related writings published by Supplier, and further that such Products will achieve any such function.

Supplier’s obligations pursuant to Article 3.8 hereof shall survive termination of this Agreement.

4.1

Purchase Orders

Distributor shall submit purchase orders for the Products to Supplier in writing, telefax or email with the following information (at minimum): an identification of the Products ordered, including model numbers, quantity, requested delivery dates, shipping instructions and shipping address, insurance instructions, insurance agent and insured value.

When sufficient instructions are not furnished by Distributor, Supplier should contact the Distributor for any additional information required by it.

4.2

Acceptance of Orders

All purchase orders from Distributor are subject to acceptance in writing by Supplier at its principal offices, which acceptance shall be delivered by mail, telefax or email within 10 days from delivery. Each purchase order shall be deemed to be an offer by Distributor to purchase the Products pursuant to the term of this Agreement and, when accepted by Supplier as hereinabove provided, shall give rise to a contract under the terms set forth herein to the exclusion of any additional or contrary terms set forth in the purchase order. In any case Supplier will not unreasonably withhold its acceptance.

4.3

Delivery Terms

All deliveries of the Products shall be Free On Board (FOB) at the Supplier’s manufacturing or warehouse facility in Sacramento, CA. Supplier shall have no further responsibility for the Products, and all risk of damage to or loss or delay of the Products shall pass to Distributor upon their delivery at the FOB delivery point to (i) a common carrier or (ii) an agent or any other person specified by Distributor acting on behalf of Distributor. Supplier shall insure each shipment of Products with a reputable insurer for the full invoice of such shipment. Such shipment shall provide for full coverage from the time the Products are delivered at the Free Carrier point until Distributor shall have paid Supplier for such Products in full.

4.4

Transfer of title

Supplier retain title to the Products and reserves all rights with respect to delivered Products permitted by law including, without limitation, the right of recission, repossession, resale, and stoppage in transit until the full amount due from Distributor including any charges, in respect of all delivered Products has been paid. Notwithstanding the above mentioned if a Product’s end-user has paid the full price of such Product to the Distributor, the Distributor shall then be entitled to transfer the title in such Product to such end-user, without derogating from any of Supplier’s rights hereunder with respect to the consideration due to it from the Distributor in connection with such Product according to the terms of this agreement.

4.5

Modification of Orders

No accepted purchase order for custom-made products shall be modified or cancelled except upon a prior written confirmation by Supplier. Distributor’s purchase orders or mutually agreed changed orders shall be subject to all provisions of this Agreement, whether or not the purchase order or change order so states.

In the event Distributor requests modifications in an accepted order Supplier may, in consideration for accepting such change order, require Distributor to pay a change order charge

4.6

Product Changes

Supplier reserves the right, in its sole discretion and without incurring any liability to Distributor, to:

(a)

Alter the specifications for any Product;

(b)

Discontinue the manufacture of any Product;

Supplier will make reasonable efforts to inform Distributor regarding such changes in advance as soon as such information is available. Notwithstanding the above, Supplier shall provide Distributor with prompt written notice of such decisions and shall fill all accepted purchase orders from Distributor for any such altered or discontinued Products.

In cases where the Distributor is already participating in tenders, the old configuration will be kept for units’ intended for these tenders for 30 days. In these cases, Distributor will have to prove his participation by sending the relevant documents

4.7

Forecasts

Distributor agrees to provide Supplier every twelve (12) months, with a twelve (12) months forecast indicating Distributor’s intended purchases of Products during each calendar quarter of such period as well as such other information as Supplier may reasonably request in the format mutually agreed upon by the Parties from time to time. Distributor will inform major changes in plan as soon as such information is available.

5.1

General Requirement

Distributor agrees to purchase and take delivery, during each Supplier fiscal year during the term of this Agreement, of the Quota of Products and spare parts established for such period (divided into four quarters) as specified in Exhibit 4 hereof as to the orders of which Supplier will be obligated to issue acceptance notice. Distributor understands and agrees that the establishment and achievement of every fiscal year Quota is the essence of this Agreement, and that failure by Distributor to satisfy its obligation under this Article 5 shall not constitute a breach by the Distributor of his obligations under this Agreement, but shall entitle Supplier to terminate Distributor’s exclusivity (as detailed in Section 2 hereinabove), subject to a 90 days prior written notice to the Distributor and failure by it to achieve the said Quota within such period of time. .

5.2

Determination of Quota

Distributor’s Quota for the initial term of this Agreement shall be as set forth in Exhibit 4 hereto. The Quota for any succeeding Supplier fiscal year after the term of this Agreement shall be agreed between the Parties at the beginning of each year. If the Parties fail to set a new Quota in any succeeding year, the Quota for such succeeding year will be the same Quota of the last fiscal year Quota mutually agreed upon by Distributor and Supplier pursuant to this Section 5.2.

5.3

Placement of Orders

Distributor agrees to qualify with the orders signed and specified in Exhibit 5.