agents or third parties, in cooperation with VARIAN under this Agreement

                                    COMPUMED, INC.

     This Evaluation and Development Agreement ("Agreement") is entered into on
     November 21, 1996 ("Effective Date"), between Varian Associates, Inc.,
     through its Imaging Products business, located at 3075 Hansen Way, Palo
     Alto, California 94304 (collectively "VARIAN") and CompuMed, Inc. having
     its principal place of business at 1230 Rosecrans Avenue, Suite 1000,
     Manhattan Beach, CA 90266 ("COMPANY").

     WHEREAS, VARIAN is in the business of developing and manufacturing x-ray
     imaging systems incorporating a large-area amorphous silicon sensor array
     for use primarily in the medical field and has developed an evaluation and
     demonstration system currently designated as VIP-540X/ARM;

     WHEREAS, COMPANY is a medical systems company and has technical knowledge
     and expertise that is valuable in evaluating and testing the performance of
     x-ray imaging systems; and

     WHEREAS, VARIAN and COMPANY desire to enter into an agreement to evaluate
     and test the performance characteristics of the VIP-540X/ARM to further its
     development by VARIAN, as well as to allow for interface development by

     NOW, THEREFORE, in consideration of the mutual covenants set forth in this
     Agreement, VARIAN and COMPANY agree as follows:

                               SECTION 1 - DEFINITIONS

     1.1  "Imaging System" means VARIAN's prototype large-area amorphous silicon
     sensor x-ray imaging development system designated as the VIP-540X/ARM.

     1.2  "Clinical Use" means use involving: (i) the direct observation of
     patients; (ii) the diagnoses of disease or other conditions in humans or
     other animals; or (iii) the cure, mitigation, therapy, treatment, treatment
     planning, or prevention of disease in humans or other animals to affect the
     structure or function thereof.

     1.3  "Non-Commercial Use" means activities by a Party that are unrelated to
     the marketing or sale of products or services.

     1.4  "Party" and "Parties" mean VARIAN and/or COMPANY, singly or

     1.5  "Test(s)" and "Testing" means all activities performed by COMPANY, its
     agents or third parties, in cooperation with VARIAN under this Agreement
     relating to the evaluation, characterization, testing and/or development of
     the Imaging System.  The Test to be tentatively performed are described in
     Exhibit B.

     1.6  "Test Results" means all data and information, including, without
     limitation, any notes, records, logs, designs, drawings,
     methods,procedures, apparatus, hardware and any modification and/or
     improvement thereof resulting from or related to the Tests.

                           SECTION 2 - TERMS AND CONDITIONS

     2.1  Evaluation and Testing

     VARIAN shall transfer and deliver to COMPANY a total of 1 Imaging System,
     as describe in Exhibit A, for the purpose of conducting Tests during the
     term of this Agreement.  COMPANY will notify VARIAN as to the location(s)
     where the Testing of the Imaging System is to be conducted.  COMPANY shall
     not transfer and/or deliver the Imaging System to a third party without the
     prior written approval of VARIAN, and any such transfer must be accompanied
     by a written agreement obligating such third party to terms that are
     substantially similar to those set forth herein.

     VARIAN agrees to maintain the Imaging System in an operable condition by
     providing service as needed, to COMPANY during the term of this Agreement
     and to support the Testing and evaluation activities being conducted by

     COMPANY shall Test all functions and features of the Imaging System at no
     cost to VARIAN, and shall provide the personnel, technical equipment and
     resources necessary to generate the Test Results.  COMPANY shall not permit
     any third party to participate in conducting any of the Tests without the
     prior written approval of VARIAN.

     COMPANY agrees to provide VARIAN a written report describing the Tests and
     summarizing the Test Results, as well as provide evaluations and
     conclusions on at least a quarterly calendar basis, and to make
     recommendations to modify or improve the Imaging System as it deems
     appropriate.  VARIAN will review all reports submitted by COMPANY relating
     to the Tests and, at its sole discretion, will provide comments thereon.

     COMPANY agrees to cooperate with VARIAN in carrying out and evaluating the
     Tests and shall comply fully with the terms of this Agreement.  VARIAN and
     COMPANY will meet on a "as needed" basis.

                             SECTION 3 - CONFIDENTIALITY

     3.1  Confidentiality

     The Imaging System and Test Results shall be considered the confidential
     and proprietary property of VARIAN.  COMPANY  agrees to treat the Imaging
     System and Test Results as confidential under this Agreement and to protect
     the Imaging System and Test Results against public disclosure to the same
     extent that it protects its own proprietary information of like nature. 
     COMPANY may use Test Results only for purposes of analyzing and processing
     the performance characteristics of the Imaging System, and shall not
     publish, sell, or make available the Test Results, or any portion thereof,
     without first obtaining the express written permission of VARIAN.  Any
     transfer of the Imaging System by Company to a third party shall require
     the express assumption of the obligations of this Section 3 by such third

     3.2  Exclusions
     The provisions of confidentiality of this Section shall not apply to any
     portion of the Test Results which: (a) corresponds in substance to that
     developed by COMPANY prior to its receipt of or access to the same,
     directly or indirectly, from VARIAN; (b) at the time of disclosure is, or
     thereafter becomes, through no act or failure to act on COMPANY'S part,
     generally known on a non-confidential basis in the x-ray tube industry; or
     (c) which corresponds in substance to information heretofore or hereafter
     furnished to COMPANY by others as a matter of right without restriction on

     3.3  Public Announcements/News Releases. Neither Party shall issue any news
     release, public announcement, advertisement, or any other form of publicity
     concerning the Imaging System or this Agreement without obtaining the prior
     written approval from the other Party.


     COMPANY agrees that VARIAN shall own and retain exclusive title and all
     rights to all technology, inventions, processes, systems, methods
     copyrights, and other intellectual property, whether patentable or
     unpatentable, which is: (a) a modification, improvement, additions or
     derivative work of the Imaging System: and/or (b) developed solely or
     jointly from the conception or efforts of VARIAN employees or obligated

                         SECTION 5 - WARRANTY AND DISCLAIMER

     VARIAN warrants that it has the right to transfer title to the Imaging
     System.  VARIAN makes no other warranty of any kind with respect to the
     Imaging System, and disclaims any implied warranties of merchantability or
     fitness for any particular purpose.  THE IMAGING SYSTEM IS PROVIDED "AS

                                SECTION 6 - LIABILITY

     6.1  Indemnification

     Each Party (the "Indemnifying Party") shall indemnify and hold harmless the
     other Party (the "Indemnified Party"), and its officers, directors, agents
     and employees, from any and all liabilities, claims, demands, damages,
     settlements, losses and expenses (including attorneys' fees and costs)
     incurred in connection with any claim against the Indemnified Party based
     on any action or omission of the Indemnifying Party or its officers,
     directors, agents or employees related to the obligations of the
     Indemnifying Party under this Agreement.

     6.2  Consequential Damages


                           SECTION 7 - TERM AND TERMINATION

     This Agreement shall have a term of one (1) year commencing on the
     Effective Date as set forth above, and the Parties may extend the term for
     an additional six (6) months by written agreement.  This Agreement may be
     terminated by either Party only for cause after providing at least thirty
     (30) days prior written notice to the breaching Party.  Such breaching
     Party shall be given an opportunity to cure the breach within said thirty
     (30) day period before the termination is effective.

     In the event of termination due to breach by COMPANY: (i) the Tests and
     related activities shall be promptly discontinued; (ii) COMPANY shall
     discontinue using the Imaging System for the remaining term of the
     Agreement; (iii) all Test Results and related proprietary information,
     including any copies thereof, shall be promptly delivered to VARIAN; and
     (iv) no refund shall be owed to COMPANY.

     In the event of termination due to breach by VARIAN: (i) the Tests and all
     related activities shall be promptly discontinued; (ii) the Imaging System
     shall be returned to VARIAN; and (iii) VARIAN will refund the fee paid by
     COMPANY pursuant to Paragraph 2.2.

     Each Party may retain a single copy of the Test Results completed prior to
     termination, subject to the confidentiality provisions of Section 3. 
     Neither Party shall be responsible nor liable to the other Party for any
     costs associated with termination.  Upon completion of the Test and/or
     expiration of the Agreement, the obligations of the Parties shall cease and
     COMPANY may freely dispose of the Imaging System, subject to the surviving
     terms of this Agreement.  The provisions of Sections 3, 4, 5, 6 and 10
     shall survive the termination of the Agreement.

                         SECTION 8 - NOTICES AND INSTRUCTIONS

     All notices and instructions given by either Party under this Agreement to
     the other shall be writing through each Party's authorized
     representative(s).  Any such notice or instruction shall be delivered in
     person, by courier, overnight mail or facsimile to the address of the
     representative designated by the Party.  The date of service of notice or
     instruction shall be that date on which the said notice or instruction is

          For VARIAN:                        For CompuMed, Inc.:

          Varian Associates, Inc.            CompuMed, Inc.
          Imaging Products                   1230 Rosecrans Ave., Suite 1000
          3075 Hansen Way, M/S K-313         Manhattan Beach, CA 90266
          Palo Alto, CA 94304                Attn.: Rod Raynovich
          Fax: (415) 855-7336                Fax: (310) 536-6128

                       SECTION 9 - RELATIONSHIP OF THE PARTIES

     COMPANY shall perform the Tests hereunder as in independent contractor,
     retaining complete control over its personnel and operations, and
     conforming to all statutory requirements with respect to said employees, as
     well as providing all appropriate employee benefits.

                              SECTION 10 - GOVERNING LAW

     The terms and conditions of this Agreement shall be construed and governed
     by the substantive and procedural laws of the State of California.

                            SECTION 11 - ENTIRE AGREEMENT

     This Agreement and the other instruments and agreements referred to in this
     Agreement constitute the entire understanding of the Parties and supersede
     all other agreements and understandings between them relating to the
     subject matter of this Agreement.  All Exhibits to this Agreement shall be
     considered incorporated into and a part of this Agreement.  In the event of
     any conflict between the terms of an Exhibit and the terms of the
     provisions of this Agreement, the terms of the provision of this Agreement
     shall prevail.

     This Agreement has been executed by duly authorized representatives of the
     Parties and has an Effective Date as indicated above.

     Varian Imaging Products

     By: /s/ David L. Gilblom                 By: /s/ James Linesch 
	-----------------------------	         ----------------------------
     Name:  David L. Gilblom                 Name:  James Linesch
     Title:  General Manager                 Title:  V.P., Chief Financial

     Date:  12/10/96                         Date:  11/21/96

                             ADDENDUM TO A.R.M. AGREEMENT

          1.   Varian will grant exclusive worldwide marketing rights
               to CompuMed for the use of Varian amorphous silicon
               technology in the assessment of appendicular* bone
               mineral density, and computer-assisted arthritis
               detection, for a period of 3 years from the date of
               this agreement, with an option for a 2 year extension
               based on mutually satisfactory sales targets.  CompuMed
               must have placed combined total orders with Varian for
               at least $250,000 in amorphous silicon panels on or
               before December 31,1998 to maintain these exclusive

          2.   Varian will make available to CompuMed a second
               amorphous silicon panel (w/electronics) at no
               additional charge for use at CompuMed's UMASS Medical
               Center testing facility.

          3.   Varian agrees to provide CompuMed with 4x5" amorphous
               silicon panel assemblies and display circuitry (not to
               include correction circuitry) at a price not to exceed
               $3,000-$4,000 each, and 8x10" with similar electronics
               not to exceed $9,000 to $13,000 each.  Due to custom
               development and low volumes, pricing for the first 50
               panels will be as follows: up to $5,500 each for the
               4x5" amorphous silicon panel assemblies and display
               circuitry (not to include correction circuitry), and
               8x10" with similar electronics up to $15,000 each.  The
               order must consist of 75% or greater 4x5" panels for
               the first 50.

          4.   To maintain the exclusive marketing rights described
               above (in paragraph #1), CompuMed must place an order
               for 100 panels committing to a delivery schedule of 25
               panels per quarter, with delivery starting by 2nd
               quarter 1998, 200 panels per year with quarterly
               shipments starting 2nd quarter 1999, and 300 panels per
               year with quarterly shipments starting 2nd quarter

          5.   This agreement is based on CompuMed being able to
               arrange satisfactory lease financing for the A.R.M.

          6.   CompuMed and Varian will work together to create
               mutually satisfactory press releases that describe the
               strategic relationship of CompuMed and Varian in
               developing what are hoped to be the first amorphous
               silicon detector-based bone densitometers, and
               automated arthritis detection devices.

          * "Appendicular" is defined for this agreement as legs, ankles and
     feet, and arms, wrists and hands.

      /s/ David  L. Gilblom 	12/10/96      /s/ James Linesch       11/21/96
     -----------------------------------     ---------------------------------
     For Varian Imaging Products  Date:      For CompuMed, Inc.          Date: 

Basic Info X:

Name: agents or third parties, in cooperation with VARIAN under this Agreement
Type: under this Agreement
Date: Dec. 19, 1996
State: Delaware

Other info:


  • November 21 , 1996
  • December
  • 2nd quarter 1998
  • 2nd quarter 1999
  • 2nd quarter 2000


  • CompuMed , Inc.
  • Varian Associates , Inc. CompuMed
  • UMASS Medical Center


  • Manhattan Beach
  • Palo Alto
  • California
  • V.P.


  • $ 250,000
  • $ 3,000- $ 4,000
  • $ 9,000
  • $ 13,000
  • $ 5,500
  • $ 15,000


  • Rod Raynovich
  • David L. Gilblom
  • James Linesch
  • Varian


  • 75 %