Document:

EXHIBIT 10.3

 

***
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT (INDICATED BY
ASTERISKS) HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT UNDER 17
C.F.R. SECTIONS 200.80(B)(4), 200.83 AND 230.406.

 

 

LICENSE AGREEMENT

 

THIS LICENSE
AGREEMENT (“Agreement”) is made and entered into as of the 22 day of May,
by and between CEDARS-SINAI HEALTH SYSTEM (“CSHS”), a d/b/a of CEDARS-SINAI
MEDICAL CENTER, a California nonprofit public benefit corporation (“Medical
Center”), and DIGIRAD CORPORATION, a Delaware corporation, (“Licensee”), with
reference to the following facts:

 

A.            CSHS has developed and is the owner
of certain Technology (as such term is hereinafter defined) and has the right
to grant licenses therein.

 

B.            Licensee is desirous of obtaining
from CSHS, and CSHS is willing to grant to Licensee, a non-exclusive license in
and to the Technology and the Improvements (as such term is hereinafter
defined) pursuant to the terms and conditions of this Agreement.

 

NOW,
THEREFORE, in consideration of the premises and the mutual covenants contained
herein, the parties hereby agree as follows:

 

1.             Definitions.  The following terms shall have the following
meanings for purposes of this Agreement:

 

1.1           Affiliates.  “Affiliates” shall mean, with respect to any
person or entity, any other persons or entities that, directly or indirectly,
control, are controlled by or are under common control with such person or
entity.  For this purpose, “control” of
an entity shall include, without limitation, having ownership of fifty-one
percent (51%) or more of the voting shares (or equivalent) of such entity, or
having the right to direct, appoint or remove a majority or more of the members
of the board of directors (or equivalent) of such entity, or having the power
to control the general management of such entity, by contract, law or
otherwise.

 

1.2           Confidential Information.  “Confidential Information” shall mean the
confidential and proprietary information of either party hereto.

 

1.3           CSHS Parties.  “CSHS Parties” shall mean CSHS, the Medical
Center and its officers, directors, employees, representatives and agents, and
each of their respective successors and assigns.

 

1.4           End User.  “End User” shall mean a customer of Licensee
authorized to use a Licensed Product for internal purposes only and not for
further distribution.

 

1.5           First Commercial Release Date.  “First Commercial Release Date” shall mean
the date upon which CSHS and Licensee have reasonably agreed that the
functional performance of the Technology has met the Specifications and on
which Licensee shall have released and made the Licensed Products available to
End Users; provided, however, that the First Commercial Release Date shall occur
on or before          ***           .

 

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1.6           Improvements.  “Improvements” shall mean any computer
software which includes all or any part of, or is based in whole or in part on,
the Technology, including but not limited to translations of the Technology to
other foreign or computer languages, adaptations of the Technology to other
hardware platforms, abridgments, condensations and revisions to the Technology
and software incorporating all or any part of the Technology which may also
include modifications created by Licensee in order to meet good manufacturing practices
and the standards of the United States Food and Drug Administration (“FDA”).

 

1.7           Licensed Products.  “Licensed Products” shall mean any and all
products that incorporate or utilize or are manufactured using any of the
Technology or the Improvements.

 

1.8           Licensed Field of Use.  “Licensed Field of Use” shall mean  ***

	
   

  	
   

  	
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1.9           New Products.  “New Products” shall have the meaning set
forth in Section 4 hereof.

 

1.10         Specifications.  “Specifications” shall mean the
specifications, performance standards and other descriptions of the Technology
set forth on Exhibit A attached hereto.

 

1.11         Technology.  “Technology” shall mean all computer
programming code (in executable form only) and all related documentation and
other written materials pertaining thereto relating to those portions of CSHS’s
software developed by CSHS and more fully described on Exhibit A attached
hereto.

 

1.12         Territory.  “Territory” shall mean                   ***

	
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1.13         Updates.  “Updates” shall mean all updates, upgrades,
revisions and new versions of the software code developed by CSHS which result
from problem corrections of the Technology and Improvements to the Technology.

 

2.             Grant of License.

 

2.1           Grant.  CSHS hereby grants to Licensee a
non-exclusive license (including the right, subject to Section 2.2 hereof, to
grant sublicenses) in the Technology and the Improvements, subject to the other
terms and conditions set forth in this Agreement for the purposes of making,
having made, using and selling Licensed Products in the Territory.  Without limiting the generality of the
foregoing, the license granted hereby shall include the following rights: (a)
the right to use, test, modify, reproduce and develop the Technology with any
associated documentation, to prepare Improvements, to incorporate the
Technology or any Improvement into Licensed Products and to otherwise develop
Licensed Products; (b) the right to make, have made, reproduce, use, market and
distribute Licensed Products to End Users, directly or indirectly, through
Licensee’s distributors and other distribution channels in the

 

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Territory; and (c) the right to
use the Technology or any Improvements in connection with maintenance services
relating to Licensed Products.

 

2.2           Sublicenses.  Licensee shall have the right to grant sublicenses
of the license granted pursuant to Section 2.1 hereof only to its Affiliates of
Licensee and to End Users, provided that each sublicensee must agree in writing
to be bound by and to observe the provisions of Section 2.3, 6, 10, 11, 12.2
and 12.3 of this Agreement.  Licensee
shall submit to CSHS a copy of each sublicense entered into hereunder promptly
after execution thereof.  As used in
this Section 2.2, the term “sublicense” shall include the right of an Affiliate
of Licensee to distribute or sell Licensed Products to End Users, subject to
the provisions of Section 3 hereof. 
However, the term “sublicense” as used in this Section 2.2 shall not
permit any End User to copy, distribute or sell any Licensed Products to other
third parties, which is strictly prohibited hereunder.

 

2.3           Limitations to Grant.

 

(a)           Limited to Licensed Field of Use.  The license granted under Section 2.1 hereof
shall not be construed to confer any rights upon Licensee to any intellectual
property not specifically included in this Agreement, whether by implication,
estoppel or otherwise.  The license
granted under Section 2.1 hereof is limited to the Licensed Field of Use.

 

(b)           Non-Exclusive License.  The license granted under Section 2.1 hereof
is, and shall be, non-exclusive, and CSHS expressly retains the right to grant
other licenses relating to the Technology and any Improvements to any third
party on such terms as CSHS may, in its sole and absolute discretion, deem
appropriate.  CSHS also retains the
right to use the Technology and any Improvements for clinical and research
purposes.

 

(c)           No Modification or Decompilation.  Licensee shall not modify, disassemble,
decompile, reverse engineer, recreate or generate any of the Technology or any
portion or version thereof.  Licensee
shall not attempt any of the foregoing or aid, abet or permit any others to do
so (including, without limitation, any of its Affiliates or any End Users).

 

(d)           Copy Protection.  Licensee, in exercising it rights set forth
in Section 2.1(b) hereof, shall take all actions as CSHS may reasonably request
to ensure that its Affiliates and End Users do not (i) take any of the actions
set forth in Section 2.3(c) hereof, or (ii) duplicate, copy or otherwise
distribute any Licensed Products provided to them.  Licensee shall submit to CSHS a copy of all documentation prepared
by Licensee to meet its obligations under this Section 2.3(d), and Licensee
shall provide CSHS with a written report       
***        
     ***    during the term of this Agreement containing the identity of
all Affiliates holding Licensed Products and End Users, details of all sales of
Licensed Products to such Affiliates and End Users and such other information
as shall be reasonably requested by CSHS.

 

(e)           Limited Rights with Respect to
Code; No Competing Products.  The
license granted under Section 2.1 hereof is limited to the use of the
executable code of the Technology solely in connection with the development of
Licensed Products and Improvements by Licensee, and the performance of maintenance
services relating to Licensed

 

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Products.  Such license shall not include any right to
transfer, license or otherwise dispose of the code of the Technology or any
copies thereof, or to use such code to develop any software or products which
are similar to or competitive with the Technology or any Improvements.

 

(f)            Trademarks; Trade Names of CSHS
and Medical Center.  Nothing
contained or construed to be contained in this Agreement shall constitute the
grant by CSHS of any right, by way of license or otherwise, to Licensee to use
any trademark or trade name of CSHS or the Medical Center without the prior
written consent of CSHS or the Medical Center, which consent may be withheld by
CSHS and the Medical Center in their sole and absolute discretion.  All licenses relating to the Technology and
Improvements conceived or first actually reduced to practice in the performance
of experimental, developmental or research work funded in whole or in part by a
United States governmental agency are subject to the rights, conditions and
limitations imposed by the Patent and Trademark Amendments Act of 1980 (P.L.
96-517), as amended by Title V of P.L. 98-620 (1984), 35 U.S.C. §§200-212, and
accordingly, the non-exclusive license granted hereunder may be held by the
United States Government pursuant to 35 U.S.C. §202(c)(4).  CSHS reserves the right in its sole and
absolute discretion and without any consent from Licensee, to settle any
interference involving the Technology and/or the Improvements by licensing the
Technology and/or the Improvements, by filing a disclaimer or reissue
application or in any other manner, and CSHS shall have the right to file with
any appropriate governmental agency any agreement entered into in connection
therewith.

 

3.             Fees and Royalties.  In consideration for the license granted by
CSHS to Licensee pursuant to Section 2.1 hereof, Licensee shall pay to CSHS the
fees and royalties set forth in Exhibit B attached hereto.  The price established for the Licensed
Product shall not exceed                          ***                                .

 

4.             Updates.  CSHS shall cause the Division of Nuclear
Physics Medicine of the Medical Center to provide Licensee with all Updates
developed during the term of this Agreement. 
Notwithstanding anything to contrary set forth herein, CSHS shall have
no obligation to make available to Licensee any additional products which have
no direct relationship to the Technology (“New Products”).  Licensee shall not have any rights with
respect to any New Products unless it has been granted the same by CSHS
pursuant to a separate license agreement or an amendment to this Agreement,
which separate license agreement or amendment shall contain such license fees,
royalty payments and other terms regarding the New Products as may be
negotiated by the parties.

 

5.             Reports and Records.

 

5.1                   ***        Earned
Royalty Payment and Reports. 
Licensee shall provide CSHS with written reports and earned royalty
payments within         ***        after the end of each calendar quarter
during the term of this Agreement.  Each
written report shall state the number and description of Licensed Products
distributed during the             
***            
    ***    , and the resulting calculation of earned royalty payments due
CSHS covered by such report, all in accordance with the provisions of Exhibit B
attached hereto.  Licensee shall provide
such written reports whether or not any royalties are due to CSHS for the          ***        
         ***        .

 

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5.2           Retention of Records.  Licensee shall keep and maintain complete
and accurate records and documentation concerning sales or other dispositions
of Licensed Products in sufficient detail to enable the royalties payable
hereunder by Licensee to be determined, and Licensee shall retain such records
and documentation for not less than five (5) years from the date of their
creation.

 

5.3           Inspection of Records.  During the tern of this Agreement and for a
period of        ***       thereafter, CSHS and its
representatives and agents shall have the right, upon reasonable notice to
Licensee and during regular business hours, to inspect the records and documentation
required to be retained by Licensee pursuant to Section 5.2 hereof.

 

5.4           Costs of Inspection.  The costs of any inspection pursuant to
Section 5.3 hereof shall be borne by CSHS, unless as a result of such
inspection it is determined that the amounts payable by Licensee to CSHS for
any period are in error by greater than 
*** 
           ***          , in which case the out-of-pocket costs of such
inspection shall be borne by Licensee. 
CSHS shall report the results of any such inspection to Licensee, and
Licensee shall promptly thereafter pay to CSHS the amount of any underpayment,
and the amount of any overpayment shall be credited by CSHS against future
amounts payable by Licensee to CSHS or if no future amounts are payable to CSHS
within            ***         
of the report of the result of such inspection, then the amount of any
overpayment shall be refunded to Licensee. 
In addition, Licensee shall pay interest on the amount of any such
underpayment at a rate which is the lower

	
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6.             Title to the Technology;
Marking; License to Copyright.

 

6.1           Title to the Technology.  Licensee acknowledges that CSHS shall retain
title to the Technology and all Improvements.

 

6.2           Marking.  Licensee shall mark all Licensed Products
(or their containers or labels) which are made, sold or otherwise disposed of
by Licensee under the license granted pursuant to Section 2.1 hereof in such
manner as is intended to protect or preserve CSHS’s rights to the Technology
and the Improvements as is customary in the market for the Licensed Products or
in such a manner as CSHS may designate in writing to Licensee.  Without limiting the generality of the
foregoing, Licensee agrees that all copies of Licensed Products and related
documentation made by Licensee pursuant to the license granted herein shall
include a copyright notice in the following form:  “© 2000 Cedars-Sinai Medical Center.  All rights reserved.” The copyright notice shall be affixed to
all copies or portions thereof in such manner and location as to give
reasonable notice to CSHS’s claim of copyright.

 

6.3           License to Copyright and Patent
(if any).  The license granted under
Section 2.1 hereof includes a license under CSHS’s copyright in the Technology
and any Improvement.  In the event that
the Technology or any Improvement becomes subject to or covered by, the allowed
claims of any patent issued or assigned to CSHS, the license granted to
Licensee hereunder shall be deemed to include a license under such patent to
the extent necessary to permit Licensee to exercise its rights under this
Agreement.

 

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7.             Delivery of Materials; Testing;
Governmental Approvals.

 

7.1           Delivery of Materials.  Upon the execution and delivery of this
Agreement by Licensee, CSHS shall deliver to Licensee one (1) copy of any
relevant documentation, the object code (in executable form only) for the
Technology as it currently exists.  CSHS
and Licensee shall thereafter exchange updates and enhancements to the
Technology no less frequently than once per calendar quarter until the
Technology has conformed to the Specifications.  Thereafter, CSHS shall provide Licensee with relevant
documentation and object code updates for the Technology upon corrections or
improvements of the Technology’s performance characteristics.  The material delivered by CSHS to Licensee
under this Section 7.1 shall contain the object code for the Technology in an
executable form only and suitable for installation and use by Licensee, and
shall include the full set of material comprising the Technology and complete
program maintenance documentation, including all flow charts, schematics and
annotations which constitute the pre-coding detailed design specifications,
test plan with results and all other materials necessary to allow a reasonably
skilled computer programmer or analyst familiar with the Technology to maintain
or support the Technology without the help of any other person or reference to
any other material.  CSHS shall promptly
supplement the object code materials delivered to Licensee under this Section
7.1 with all changes or additions so that the object code materials correspond
fully to the most current version of the Technology during the term of this
Agreement.

 

7.2           Testing.  CSHS and Licensee shall jointly (a) test all
Technology and Improvements for proper operation, and (b) perform any debugging
on Technology and Improvements, and (c) CSHS shall make or suggest any
corrections necessary for Technology and Improvements to achieve performance in
accordance with the Specifications and acceptable commercial standards.

 

7.3           Governmental Approvals.  Notwithstanding anything to the contrary set
forth herein, CSHS shall have no obligation to obtain any domestic or foreign
governmental approvals (including, without limitation, any approvals of the
FDA) with respect to the Technology, Improvements or Licensed Product.  Licensee shall be responsible for seeking and
obtaining any necessary domestic and foreign governmental approvals (including,
without limitation, any and all approvals of the FDA) with respect to the
Licensed Products as Licensee shall deem appropriate.  The failure by Licensee to obtain any governmental approval shall
not be deemed a breach by Licensee of this Agreement.

 

8.             Support.  CSHS shall cause the Division of Nuclear
Physics Medicine of the Medical Center to assist Licensee with the evaluation,
maintenance and support of Licensed Products during the term of this
Agreement.  Such assistance will be
limited to work performed on the original Technology, upgrades, revisions and
new versions of the software code, and providing debugging and technical support
services.  In the event that the
Division is unable to provide the assistance which may be reasonably necessary
to Licensee during the term hereof, CSHS shall have no obligation to provide
such assistance, and representatives of CSHS and Licensee shall meet to discuss
whether or not any modifications of the terms of this Agreement are necessary.

 

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9.             Milestones.  Licensee shall have commenced marketing of
the Licensed Products on or before the First Commercial Release Date.  Further, Licensee shall satisfy the market
demand for the Licensed Products during the term of this Agreement.

 

10.           Compliance with Laws.  Licensee shall conduct all activities
pursuant to this Agreement in an ethical and businesslike manner and in
substantial compliance with all applicable laws, rules and regulations of all
applicable governmental authorities. 
Licensee shall provide to CSHS any data compilations, records, reports
or other information regarding the Technology, the Improvements and/or the
Licensed Products which CSHS may reasonably require for submission to any
governmental authorities in order to comply with any applicable laws, rules or
regulations.

 

11.           Confidentiality.

 

11.1         Obligation.  Each party acknowledges that this Agreement
may require the disclosure by one party to the other party of its Confidential
Information.  Each party shall regard
and preserve the Confidential Information of the other party as secret and
confidential, and during the term of this Agreement and for a period of          ***        thereafter neither party shall publish or disclose any
Confidential Information in any manner without the prior written consent of the
other party.  Notwithstanding the
foregoing, however, the parties agree that Licensee’s obligation under this
Section 11.1 with respect to the code for the Technology or any Improvement (to
the extent they constitute “Confidential Information” hereunder) shall be
unlimited in duration.  Each party shall
use the same level of care to prevent the disclosure of the Confidential
Information of the other party that it exercises in protecting its own
Confidential Information and shall, in any event, take all reasonable
precautions to prevent the disclosure of Confidential Information to any third
party.

 

11.2         Non-Confidential Information.  The following shall not be considered to be
Confidential Information: (a) information which is publicly known or which
becomes publicly known through no fault of the receiving party; (b) information
which is lawfully obtained by the receiving party from a third party (which
third party itself lawfully obtained the Confidential Information and has no
obligation of confidentiality); and (c) information which is in the lawful
possession of the receiving party, as documented by the records of such
receiving party, prior to such information having been initially disclosed by
the disclosing party.

 

11.3         Publicity.  Neither party shall, without the prior
written consent of the other party, disclose to any third party the terms or
conditions of this Agreement unless such disclosure is required under
applicable law or in connection with the legal enforcement of this Agreement.

 

11.4         Injunctive Relief.  Each party acknowledges that in the event of
any breach or default or threatened breach or default by either party of
Section 11.1 or Section 11.3 hereof, the other party may be irreparably damaged
and that it would be extremely difficult and impractical to measure such
damage, so that the remedy of damages at law would be inadequate.  Consequently, each party acknowledges and
agrees that other party, in addition to any other available rights or remedies
and without the necessity of posting any bond or similar

 

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security, shall be entitled to
specific performance, injunctive relief and any other equitable remedy for the
breach or default or threatened breach or default of said Section 11.1 or
Section 11.3, and each party waives any defense that a remedy at law or damages
is adequate.

 

12.           Representations and Warranties;
Limitation on Damages.

 

12.1         Authority.  Each party represents and warrants to the
other party that this Agreement has been duly authorized, executed and
delivered by it and that this Agreement is its binding obligation, enforceable
in accordance with its terms, subject, as to enforcement of remedies, to
applicable bankruptcy, insolvency, moratorium, reorganization or other similar
laws affecting creditors’ rights generally, and to general equitable
principles.

 

12.2         DISCLAIMER.  EXCEPT AS EXPRESSLY SET FORTH IN THIS
AGREEMENT, CSHS MAKES NO REPRESENTATIONS OR WARRANTIES, EITHER EXPRESS OR
IMPLIED (INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTY OF MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE OR ANY EXPRESS OR IMPLIED WARRANTY THAT THE
USE OF THE TECHNOLOGY OR THE MANUFACTURE, USE OR SALE OF ANY OF THE LICENSED
PRODUCTS WILL NOT INFRINGE ANY PATENT, COPYRIGHT OR RIGHT OF ANY THIRD PARTY),
OF ANY KIND OR NATURE WHATSOEVER.

 

12.3         LIMITATION ON DAMAGES.  IN NO EVENT SHALL CSHS BE LIABLE FOR ANY
LOSS OF OR DAMAGE TO REVENUES, PROFITS OR GOODWILL OR OTHER SPECIAL,
INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES OF ANY KIND RESULTING FROM CSHS’S
PERFORMANCE OR FAILURE TO PERFORM ANY OBLIGATIONS UNDER THIS AGREEMENT, OR
RESULTING FROM THE FURNISHING, PERFORMANCE, USE OR LOSS OF USE OF ANY PART OF
THE TECHNOLOGY, IMPROVEMENTS LICENSED PRODUCTS, OR ANY DATA, INFORMATION OR
OTHER PROPERTY OF LICENSEE, INCLUDING, WITHOUT LIMITATION, ANY INTERRUPTION OF
LICENSEE’S BUSINESS, WHETHER RESULTING FROM BREACH OF CONTRACT OR BREACH OF
WARRANTY, EVEN IF LICENSOR HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

 

13.           Indemnification and Insurance.

 

13.1         Indemnification.        ***        shall indemnify, defend and hold harmless            ***             from and against any and all claims, demands,
lawsuits, actions, proceedings, liabilities, losses, damages, fees, costs and
expenses (including, without limitation, attorneys’ fees, and costs of investigation
and experts (whether or not suit is filed)) resulting from or arising out of
(a) the manufacture, use or sale of any of the Licensed Products or the
exercise      ***      of any right granted hereunder,
including, without limitation, any liabilities, losses or damages whatsoever
with respect to death or injury to any individual or damage to any property
arising from the possession, use or operation of any of the Licensed
Products    *** 
                     ***                   in any manner whatsoever
(except to the extent such death, injury or

 

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damage arises
directly from the failure or malfunction of the Technology or Improvements  ***
      ***       in accordance with this Agreement), or (b) any claim
that              ***

	
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13.2         Insurance.  Licensee shall maintain at all times during
and after the term of this Agreement comprehensive general liability insurance,
including product liability insurance, with reputable and financially secure
insurance carriers and having commercially reasonable limits giving due
consideration to the nature and extent of such activities and the risks
inherent therein to cover the activities of Licensee contemplated by this
Agreement.  Any such insurance shall
provide for no cancellation or material alteration except upon at least thirty
(30) days’ prior written notice to CSHS. 
Licensee shall timely provide CSHS with certificates of insurance
evidencing such coverage.

 

14.           Infringement.

 

14.1         Third Party Infringement.  In the event that         ***        learns
of facts which it concludes may constitute an infringement of any of the
Technology or any Improvements by any third party during the term of this
Agreement,                 ***               ***   shall promptly notify       
***        in writing, setting
forth such facts and the basis for its conclusion, and shall include with such
notice any other reasonably available evidence in support thereof.

 

14.2         Procedure.   ***   
shall have the right, but no the obligation, to take all appropriate
action against the infringing party and                      ***

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incurred in connection with such action.    ***   , at its own
expense, shall have the right to participate in, and, to the extent that it may
wish, to jointly assume the prosecution of such action with counsel reasonably
satisfactory to    ***   . 
If    ***   declines to take action, then    ***  
shall have the right to take such action.  In the event *** does elect to take action,     ***  

shall pay or reimburse    ***   for all costs and expenses (including
without limitation attorneys’ fees and costs of investigation and experts)
incurred by                    ***                   request or as may be
required in order for    ***   to pursue such action.           ***     shall obtain the consent of     ***    prior to
settling any such action.

 

14.3         Proceeds.  Any proceeds from any settlement or judgment
of any infringement claim, action, suit or proceeding brought by     ***  
shall be allocated and/or paid within        ***        of
receipt thereof as follows: (a) first to reimburse               ***

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14.4         Nominal Plaintiff.  In the event any infringement action, suit
or proceeding is brought hereunder by     
***      to enforce any rights in
the Technology in the Territory,      
***      shall upon the written
request of         ***        , be named, joined and participate
therein as a nominal plaintiff.

 

14.5         Indemnification.    ***  
shall indemnify, defend and hold harmless
     ***     from and against any and all claims, demands lawsuits,
actions, proceedings, liabilities, losses, damages, fees, costs and expenses
(including, without limitation, attorneys’ fees, and costs of investigation and
experts (whether or not suit is filed)) resulting from or arising out of any
claim that       ***     use of the Technology or Improvements in
accordance with this Agreement infringes or violates any patent, copyright or
other intellectual property rights of any third party.

 

15.           Term.  This Agreement shall become effective on the
date first above written and shall remain in effect until
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16.           Termination.

 

16.1         Termination                ***                   . 
This Agreement may be terminated 

	
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16.2         Effect of Termination or Expiration.  Upon the termination or expiration of the
term of this Agreement, the license granted by CSHS to Licensee pursuant to
Section 2.1 hereof shall terminate. 
Notwithstanding any termination or expiration of the term of this
Agreement, Licensee shall be permitted to sell or otherwise dispose of all
Licensed Products then in inventory and shall have the obligation to pay to
CSHS all amounts which have accrued or shall accrue by reason of the sale of
such Licensed Products.  Licensee shall
not be entitled to any refund of any amounts by reason of any termination or
expiration of the term of this Agreement. 
Notwithstanding anything to the contrary set forth in this Agreement, in
no event shall any rights afforded to End Users pursuant to Section 2.1(b)
terminate as a result of expiration or termination of this Agreement for any
reason.

 

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17.           Assignment.  The rights and obligations of Licensee under
this Agreement shall not be assignable without the prior written consent of
CSHS (which consent may be granted or withheld by CSHS in its sole and absolute
discretion) except in the event of a merger, consolidation or sale of
substantially all of the assets of Licensee. 
In the event of any such merger, consolidation or sale of assets, CSHS
shall have the right to approve or disapprove, on a reasonable basis, the use
of any Licensed Products by the person or entity which is the
successor-in-interest to Licensee.  The
rights and obligations of CSHS hereunder shall be assignable without the prior
written consent of Licensee, upon written notice to Licensee.

 

18.           Notice.  Any notice or other communication hereunder
must be given in writing and either (a) delivered in person, (b) transmitted by
facsimile or telecopy mechanism provided that any notice so given is also
mailed as provided herein, (c) delivered by Federal Express® or similar
commercial delivery service or (d) mailed by certified mail, postage prepaid,
return receipt requested, to the party to which such notice or communication is
to be given at the address set forth on the signature page of this Agreement or
to such other address or to such other person as either party shall have last
designated by such notice to the other party. 
Each such notice or other communication shall be effective (i) when
personally delivered, (ii) if given by telecommunication, when transmitted,
(iii) if given by mail, seven (7) days after such communication is deposited in
the mail and addressed as aforesaid, (iv) if given by Federal Express® or
similar commercial delivery service, three (3) business days after such
communication is deposited with such service using next business day delivery
and addressed as aforesaid, and (v) if given by any other means, when actually
delivered at such address.

 

19.           Arbitration.  Any disagreement or any question of
determination of terms, interpretation, enforceability or validity arising
under or relating to the provisions of this Agreement or the subject matter
hereof shall be settled by binding arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association (“AAA”)
and such arbitration shall be held in Los Angeles, California.  The arbitrability of any such disagreement
or question of determination shall likewise be subject to arbitration.  The parties shall use their best efforts to
cause any such arbitration to be completed as quickly as possible.  The parties shall equally share the costs of
the arbitrator(s), transcripts and any official translator(s).  Any order, award or decision resulting from
any such arbitration shall be final and binding upon the parties and shall be
enforceable in any court of competent jurisdiction.

 

20.           Governing Law.  This Agreement and the legal relations
between the parties shall be governed by and construed in accordance with the
laws of the State of California, except where such are governed exclusively by
federal law.

 

21.           Attorneys’ Fees.  In any arbitration or action between the
parties seeking enforcement of any of the provisions of this Agreement, the
prevailing party in such arbitration or action shall be awarded, in addition to
damages, injunctive or other relief, its reasonable costs and expenses, not
limited to taxable costs, and reasonable attorneys’ fees.

 

22.           Relationship of Parties.  Each party shall conduct all business in its
own name as an independent contractor. 
No joint venture, partnership, employment, agency or similar arrangement
is created between the parties.  Neither
party has the right or power to act for

 

11

 

or on behalf of the other or to
bind the other in any respect, to pledge its credit, to accept any service of
process upon it, or to receive any notices of any nature whatsoever on its
behalf.

 

23.           Severability.  If any provision of this Agreement is
determined to be illegal, invalid or otherwise unenforceable by a court of
competent jurisdiction then, to that extent and within the jurisdiction in
which it is illegal, invalid or unenforceable, it shall be limited, construed
or severed and deleted from this Agreement, and the remaining extent and/or
remaining portions hereof shall survive, remain in full force and effect and
continue to be binding and shall not be affected except insofar as may be
necessary to make sense hereof, and shall be interpreted to give effect to the
intention of the parties insofar as that is possible.

 

24.           Entire Agreement.  This Agreement (including all exhibits
attached hereto which are herein incorporated by this reference) contains the
entire agreement between the parties with respect to the subject matter hereof
and supersedes all previous negotiations, agreements, arrangements and
understandings with respect to the subject matter hereof.

 

25.           Interpretation.  The normal rule of construction that an
agreement shall be interpreted against the drafting party shall not apply to
this Agreement.  In this Agreement,
whenever the context so requires, the masculine, feminine or neuter gender, and
the singular or plural number or tense, shall include the others.

 

26.           Amendment and Waiver.  Neither this Agreement nor any of its
provisions may be amended, changed, modified or waived except in a writing duly
executed by an authorized officer of the party to be bound thereby.

 

27.           Successors and Assigns.  This Agreement shall be binding upon and
shall inure to the benefit of the parties and their respective legal
representatives, successors and permitted assigns.

 

12

 

28.           Counterparts.  This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original, and such
counterparts together shall constitute one agreement.

 

IN WITNESS
WHEREOF, the undersigned have hereunto set their hands as of the day and year
first above written.

 

 

	
  “CSHS”:

  	
  “LICENSEE”:

  
	
   

  	
   

  
	
  CEDARS-SINAI
  HEALTH SYSTEM

  Cedars-Sinai Medical Center

  8700 Beverly Boulevard

  Los Angeles, CA  90048-1865

  Attn:  Senior Vice President & CFO

  Facsimile:  (310) 423-0101  

  	
  DIGIRAD,
  INC.

  

  9350 Trade Place

  San Diego, California  92126-6334

  Attn:  President & CEO

  Facsimile:  (858) 549-9789  

  
	
   

  	
   

  
	
   

  	
   

  
	
  By: 

  	
   
  /s/ Schlomo Melmed, M.D.

  	
   

  	
  By:

  	
   
  /s/ R. Scott Huennekens  

  	
   

  
	
   

  	
  Shlomo
  Melmed, M.D.

  	
   

  	
   

  	
  R. Scott
  Huennekens

  	
   

  
	
   

  	
  Senior Vice
  President for

  Academic Affairs

  	
   

  	
   

  	
  Digirad
  Corporation

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By

  	
  :  /s/ Edward M. Prunchunas  

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Edward M.
  Prunchunas

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Senior Vice
  President for

  Finance & CFO

  	
   

  	
   

  	
   

  	
   

  

 

13

 

TECHNOLOGY AND SPECIFICATIONS

 

1.             Technology.

 

General Description:  All information, data and know-how, whether patentable or
unpatentable, in whatever form or medium, relating to those portions of CSHS’s
software technologies known as:                   ***

***

***

 

2.             Specifications.

[to be
attached]

 

***  Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.

 

EXHIBIT A

 

 

FEES, ROYALTIES AND PAYMENT

 

1.                             Royalties.  Licensee shall pay to CSHS royalties in the
amounts set forth in the following table for each of the Licensed Products sold or otherwise distributed by
Licensee during the term of the
Agreement.  Royalties shall accrue and
be payable            ***

***

 

         ***       .  (For the purposes of this section, the word “sale”
shall mean the date on which the Licensee ships the Licensed Product to the
particular End User.)

 

Royalties for
individual software packages within Technology shall be as follows:

 

	
    ***

  
	
  Amount of Royalty per
  Copy

  
	
  ***

  
	
   

  
	
    ***

  
	
  Amount of Royalty per
  Copy

  
	
  ***

  
	
   

  
	
    ***

  
	
  Amount of Royalty per
  Copy

  
	
  ***

  
	
   

  

 

 

Licensee shall
be responsible for all royalties due hereunder with respect to sales or other
dispositions of Licensed
Products to its Affiliates.  Each
payment of royalties pursuant
hereto shall be accompanied by a statement setting forth (a) the number of Licensed Products sold, and (b)
such additional details as may be necessary for the calculation of the royalty payment.

 

2.             Payments.  All payments by Licensee to CSHS shall be
made in United States Dollars by check and shall be without set-off and free
and clear of and without any
deduction or withholding for or on account of any taxes, duties, levies, imposts or similar fees or
charges.  If any restrictions on the
transfer of currency exist in
any country or other jurisdiction so as to prevent Licensee from making
payments to CSHS in the United States, Licensee shall take all reasonable steps
to obtain a waiver of such
restrictions or otherwise enable Licensee to make such payments, and if
Licensee is unable to do so, Licensee shall make such payments to CSHS to a
bank account or other depository designated by CSHS in such country or
jurisdiction, which payments shall be in the local currency of such country or jurisdiction
unless payment in United States Dollars is permitted.  Any payment by Licensee to CSHS on the basis of sales of Licensed Products in currencies other than Untied States
Dollars shall be calculated using the appropriate foreign exchange rate for
such currency quoted in The Wall
Street Journal for
the close of business of the last banking day of the calendar quarter for which
such payment is being made.

 

***  Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.

 

EXHIBIT B

 

 

FEES, ROYALTIES AND PAYMENT

 

3.                      ***        
Royalties.  Licensee agrees
to pay for a                      ***

***

***

***

 

 

4.             Late Payments.
                                           
     ***

***

***

***

 

***  Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.EXHIBIT
10.4

 

*** CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT
(INDICATED BY ASTERISKS) HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT UNDER 17 C.F.R. SECTIONS 200.80(B)(4), 200.83 AND 230.406.

 

LICENSE AGREEMENT

 

THIS LICENSE AGREEMENT (“Agreement”) is made
and entered into as of the 1st day of April, 2003, by and between
CEDARS-SINAI HEALTH SYSTEM (“CSHS”), a d/b/a of CEDARS-SINAI MEDICAL CENTER, a
California nonprofit public benefit corporation (“Medical Center”), and DIGIRAD
CORPORATION, a Delaware corporation, (“Licensee”), with reference to the
following facts:

 

A.            CSHS
has developed and is the owner of certain Technology (as such term is
hereinafter defined) and has the right to grant licenses therein.

 

B.            Licensee
is desirous of obtaining from CSHS, and CSHS is willing to grant to Licensee, a
non-exclusive license in and to the Technology and the Improvements (as such
term is hereinafter defined) pursuant to the terms and conditions of this
Agreement.

 

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

 

1.             Definitions.  The following terms shall have the following
meanings for purposes of this Agreement:

 

1.1           Affiliates.  “Affiliates” shall mean, with respect to any
person or entity, any other persons or entities that, directly or indirectly,
control, are controlled by or are under common control with such person or
entity.  For this purpose, “control” of
an entity shall include, without limitation, having ownership of fifty-one
percent (51%) or more of the voting shares (or equivalent) of such entity, or
having the right to direct, appoint or remove a majority or more of the members
of the board of directors (or equivalent) of such entity, or having the power
to control the general management of such entity, by contract, law or
otherwise.

 

1.2           Confidential Information.  “Confidential Information” shall mean the
confidential and proprietary information of either party hereto.

 

1.3           CSHS Parties.  “CSHS Parties” shall mean CSHS, the Medical
Center and its officers, directors, employees, representatives and agents, and
each of their respective successors and assigns.

 

1.4           End User.  “End User” shall mean a customer of Licensee
authorized to use a Licensed Product for internal purposes only and not for
further distribution.

 

1.5           First Commercial Release Date.  “First Commercial Release Date” shall mean
the date upon which CSHS and Licensee have reasonably agreed that the
functional performance of the Technology has met the Specifications and on
which Licensee shall have released and made the Licensed Products available to
End Users; provided, however, that the First Commercial Release Date shall
occur on or before           ***        .

 

1

 

1.6           Improvements.  “Improvements” shall mean any computer
software which includes all or any part of, or is based in whole or in part on,
the Technology, including but not limited to translations of the Technology to
other foreign or computer languages, adaptations of the Technology to other
hardware platforms, abridgments, condensations and revisions to the Technology
and software incorporating all or any part of the Technology which may also
include modifications created by Licensee in order to meet good manufacturing
practices and the standards of the United States Food and Drug Administration
(“FDA”).

 

1.7           Licensed Products.  “Licensed Products” shall mean any and all
products that incorporate or utilize or are manufactured using any of the
Technology or the Improvements.

 

1.8           Licensed Field of Use.  “Licensed Field of Use” shall mean  ***

 

	
   

  	
   

  	
  ***

  	
   

  
	
   

  	
   

  	
  ***

  	
  .

  

 

1.9           New Products.  “New Products” shall have the meaning set
forth in Section 4 hereof.

 

1.10         Specifications.  “Specifications” shall mean the
specifications, performance standards and other descriptions of the Technology
set forth on Exhibit A attached hereto.

 

1.11         Technology.  “Technology” shall mean all computer
programming code (in executable form only) and all related documentation and
other written materials pertaining thereto relating to those portions of CSHS’s
software developed by CSHS and more fully described on Exhibit A attached
hereto.

 

1.12         Territory.  “Territory” shall mean               ***

 

	
  ***

  	
                  .

  	
   

  	
   

  

 

1.13         Updates.  “Updates” shall mean all updates, upgrades,
revisions and new versions of the software code developed by CSHS which result
from problem corrections of the Technology and Improvements to the Technology.

 

2.             Grant of License.

 

2.1           Grant.  CSHS hereby grants to Licensee a
non-exclusive license (including the right, subject to Section 2.2 hereof, to
grant sublicenses) in the Technology and the Improvements, subject to the other
terms and conditions set forth in this Agreement for the purposes of making,
having made, using and selling Licensed Products in the Territory.  Without limiting the generality of the
foregoing, the license granted hereby shall include the following rights: (a)
the right to use, test, modify, reproduce and develop the Technology with any
associated documentation, to prepare Improvements, to incorporate the
Technology or any Improvement into Licensed Products and to otherwise develop
Licensed Products; (b) the right to make, have made, reproduce, use, market and
distribute Licensed Products to End Users, directly or indirectly, through
Licensee’s distributors and other distribution channels in the 

 

***         Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.

 

2

 

Territory; and (c) the
right to use the Technology or any Improvements in connection with maintenance
services relating to Licensed Products.

 

2.2           Sublicenses.  Licensee shall have the right to grant
sublicenses of the license granted pursuant to Section 2.1 hereof only to its
Affiliates of Licensee and to End Users, provided that each sublicensee must
agree in writing to be bound by and to observe the provisions of Section 2.3,
6, 10, 11, 12.2 and 12.3 of this Agreement. 
Licensee shall submit to CSHS a copy of each sublicense entered into
hereunder promptly after execution thereof. 
As used in this Section 2.2, the term “sublicense” shall include the
right of an Affiliate of Licensee to distribute or sell Licensed Products to
End Users, subject to the provisions of Section 3 hereof.  However, the term “sublicense” as used in
this Section 2.2 shall not permit any End User to copy, distribute or sell any
Licensed Products to other third parties, which is strictly prohibited
hereunder.

 

2.3           Limitations
to Grant.

 

(a)           Limited to Licensed Field of Use.  The license granted under Section 2.1 hereof
shall not be construed to confer any rights upon Licensee to any intellectual
property not specifically included in this Agreement, whether by implication,
estoppel or otherwise.  The license
granted under Section 2.1 hereof is limited to the Licensed Field of Use.

 

(b)           Non-Exclusive License.  The license granted under Section 2.1 hereof
is, and shall be, non-exclusive, and CSHS expressly retains the right to grant
other licenses relating to the Technology and any Improvements to any third
party on such terms as CSHS may, in its sole and absolute discretion, deem
appropriate.  CSHS also retains the
right to use the Technology and any Improvements for clinical and research
purposes.

 

(c)           No Modification or Decompilation.  Licensee shall not modify, disassemble,
decompile, reverse engineer, recreate or generate any of the Technology or any
portion or version thereof.  Licensee
shall not attempt any of the foregoing or aid, abet or permit any others to do
so (including, without limitation, any of its Affiliates or any End Users).

 

(d)           Copy Protection.  Licensee, in exercising it rights set forth
in Section 2.1(b) hereof, shall take all actions as CSHS may reasonably request
to ensure that its Affiliates and End Users do not (i) take any of the actions
set forth in Section 2.3(c) hereof, or (ii) duplicate, copy or otherwise
distribute any Licensed Products provided to them.  Licensee shall submit to CSHS a copy of all documentation
prepared by Licensee to meet its obligations under this Section 2.3(d), and
Licensee shall provide CSHS with a written report       ***

     ***   
during the term of this Agreement containing the identity of all
Affiliates holding Licensed Products and End Users, details of all sales of
Licensed Products to such Affiliates and End Users and such other information
as shall be reasonably requested by CSHS.

 

(e)           Limited Rights with Respect to
Code; No Competing Products.  The
license granted under Section 2.1 hereof is limited to the use of the
executable code of the Technology solely in connection with the development of
Licensed Products and Improvements by Licensee, and the performance of
maintenance services relating to Licensed

 

***         Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.

 

3

 

Products.  Such license shall not include any right to
transfer, license or otherwise dispose of the code of the Technology or any
copies thereof, or to use such code to develop any software or products which
are similar to or competitive with the Technology or any Improvements.

 

(f)            Trademarks; Trade Names of CSHS
and Medical Center.  Nothing
contained or construed to be contained in this Agreement shall constitute the
grant by CSHS of any right, by way of license or otherwise, to Licensee to use
any trademark or trade name of CSHS or the Medical Center without the prior
written consent of CSHS or the Medical Center, which consent may be withheld by
CSHS and the Medical Center in their sole and absolute discretion.  All licenses relating to the Technology and
Improvements conceived or first actually reduced to practice in the performance
of experimental, developmental or research work funded in whole or in part by a
United States governmental agency are subject to the rights, conditions and
limitations imposed by the Patent and Trademark Amendments Act of 1980 (P.L.
96-517), as amended by Title V of P.L. 98-620 (1984), 35 U.S.C. §§200-212, and
accordingly, the non-exclusive license granted hereunder may be held by the
United States Government pursuant to 35 U.S.C. §202(c)(4).  CSHS reserves the right in its sole and
absolute discretion and without any consent from Licensee, to settle any
interference involving the Technology and/or the Improvements by licensing the
Technology and/or the Improvements, by filing a disclaimer or reissue
application or in any other manner, and CSHS shall have the right to file with
any appropriate governmental agency any agreement entered into in connection
therewith.

 

3.             Fees and Royalties.  In consideration for the license granted by
CSHS to Licensee pursuant to Section 2.1 hereof, Licensee shall pay to CSHS the
fees and royalties set forth in Exhibit B attached hereto.  The price established for the Licensed
Product shall not exceed                                 ***                                     .

 

4.             Updates.  CSHS shall cause the Division of Nuclear
Physics Medicine of the Medical Center to provide Licensee with all Updates
developed during the term of this Agreement. 
Notwithstanding anything to contrary set forth herein, CSHS shall have
no obligation to make available to Licensee any additional products which have
no direct relationship to the Technology (“New Products”).  Licensee shall not have any rights with respect
to any New Products unless it has been granted the same by CSHS pursuant to a
separate license agreement or an amendment to this Agreement, which separate
license agreement or amendment shall contain such license fees, royalty
payments and other terms regarding the New Products as may be negotiated by the
parties.

 

5.             Reports and Records.

 

5.1               ***     Earned Royalty
Payment and Reports.  Licensee shall
provide CSHS with written reports and earned royalty payments within           ***           after the end of each calendar quarter during the term
of this Agreement.  Each written report
shall state the number and description of Licensed Products distributed during
the              ***

    ***   
, and the resulting calculation of earned royalty payments due CSHS
covered by such report, all in accordance with the provisions of Exhibit B
attached hereto.  Licensee shall provide
such written reports whether or not any royalties are due to CSHS for
the          ***

    ***   
..

 

***         Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.

 

4

 

5.2           Retention of Records.  Licensee shall keep and maintain complete
and accurate records and documentation concerning sales or other dispositions
of Licensed Products in sufficient detail to enable the royalties payable
hereunder by Licensee to be determined, and Licensee shall retain such records
and documentation for not less than five (5) years from the date of their
creation.

 

5.3       Inspection of Records.  During the term of this Agreement and for a
period of      ***       thereafter, CSHS and its
representatives and agents shall have the right, upon reasonable notice to
Licensee and during regular business hours, to inspect the records and
documentation required to be retained by Licensee pursuant to Section 5.2
hereof.

 

5.4       Costs of Inspection.  The costs of any inspection pursuant to
Section 5.3 hereof shall be borne by CSHS, unless as a result of such
inspection it is determined that the amounts payable by Licensee to CSHS for
any period are in error by greater than ***
        ***         , in which case the out-of-pocket costs of such inspection
shall be borne by Licensee.  CSHS shall
report the results of any such inspection to Licensee, and Licensee shall
promptly thereafter pay to CSHS the amount of any underpayment, and the amount
of any overpayment shall be credited by CSHS against future amounts payable by
Licensee to CSHS or if no future amounts are payable to CSHS within            ***           of the report of the result of such inspection, then the
amount of any overpayment shall be refunded to Licensee.  In addition, Licensee shall pay interest on
the amount of any such underpayment at a rate which is the lower

 

	
  ***

  	
   

  
	
  ***

  	
   

  
	
  ***

  	
            
  .

  

 

6.             Title to the Technology;
Marking; License to Copyright.

 

6.1           Title to the Technology.  Licensee acknowledges that CSHS shall retain
title to the Technology and all Improvements.

 

6.2           Marking.  Licensee shall mark all Licensed Products
(or their containers or labels) which are made, sold or otherwise disposed of
by Licensee under the license granted pursuant to Section 2.1 hereof in such
manner as is intended to protect or preserve CSHS’s rights to the Technology
and the Improvements as is customary in the market for the Licensed Products or
in such a manner as CSHS may designate in writing to Licensee.  Without limiting the generality of the
foregoing, Licensee agrees that all copies of Licensed Products and related
documentation made by Licensee pursuant to the license granted herein shall
include a copyright notice in the following form:  “© 2002 Cedars-Sinai Medical Center.  All rights reserved.” The copyright notice shall be affixed to
all copies or portions thereof in such manner and location as to give
reasonable notice to CSHS’s claim of copyright.

 

6.3           License to Copyright and Patent
(if any).  The license granted under
Section 2.1 hereof includes a license under CSHS’s copyright in the Technology
and any Improvement.  In the event that
the Technology or any Improvement becomes subject to or covered by, the allowed
claims of any patent issued or assigned to CSHS, the license granted to
Licensee hereunder shall be deemed to include a license under such patent to
the extent necessary to permit Licensee to exercise its rights under this
Agreement.

 

***         Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.

 

5

 

7.             Delivery of Materials; Testing;
Governmental Approvals.

 

7.1           Delivery of Materials.  Upon the execution and delivery of this
Agreement by Licensee, CSHS shall deliver to Licensee one (1) copy of any
relevant documentation, the object code (in executable form only) for the
Technology as it currently exists.  CSHS
and Licensee shall thereafter exchange updates and enhancements to the
Technology no less frequently than once per calendar quarter until the
Technology has conformed to the Specifications.  Thereafter, CSHS shall provide Licensee with relevant
documentation and object code updates for the Technology upon corrections or
improvements of the Technology’s performance characteristics.  The material delivered by CSHS to Licensee
under this Section 7.1 shall contain the object code for the Technology in an
executable form only and suitable for installation and use by Licensee, and
shall include the full set of material comprising the Technology and complete
program maintenance documentation, including all flow charts, schematics and
annotations which constitute the pre-coding detailed design specifications,
test plan with results and all other materials necessary to allow a reasonably
skilled computer programmer or analyst familiar with the Technology to maintain
or support the Technology without the help of any other person or reference to
any other material.  CSHS shall promptly
supplement the object code materials delivered to Licensee under this Section
7.1 with all changes or additions so that the object code materials correspond
fully to the most current version of the Technology during the term of this
Agreement.

 

7.2           Testing.  CSHS and Licensee shall jointly (a) test all
Technology and Improvements for proper operation, and (b) perform any debugging
on Technology and Improvements, and (c) CSHS shall make or suggest any
corrections necessary for Technology and Improvements to achieve performance in
accordance with the Specifications and acceptable commercial standards.

 

7.3           Governmental Approvals.  Notwithstanding anything to the contrary set
forth herein, CSHS shall have no obligation to obtain any domestic or foreign
governmental approvals (including, without limitation, any approvals of the
FDA) with respect to the Technology, Improvements or Licensed Product.  Licensee shall be responsible for seeking
and obtaining any necessary domestic and foreign governmental approvals
(including, without limitation, any and all approvals of the FDA) with respect
to the Licensed Products as Licensee shall deem appropriate.  The failure by Licensee to obtain any
governmental approval shall not be deemed a breach by Licensee of this
Agreement.

 

8.             Support.  CSHS shall cause the Division of Nuclear
Physics Medicine of the Medical Center to assist Licensee with the evaluation,
maintenance and support of Licensed Products during the term of this
Agreement.  Such assistance will be
limited to work performed on the original Technology, upgrades, revisions and
new versions of the software code, and providing debugging and technical
support services.  In the event that the
Division is unable to provide the assistance which may be reasonably necessary
to Licensee during the term hereof, CSHS shall have no obligation to provide
such assistance, and representatives of CSHS and Licensee shall meet to discuss
whether or not any modifications of the terms of this Agreement are necessary.

 

6

 

9.             Milestones.  Licensee shall have commenced marketing of
the Licensed Products on or before the First Commercial Release Date.  Further, Licensee shall satisfy the market
demand for the Licensed Products during the term of this Agreement.

 

10.           Compliance with Laws.  Licensee shall conduct all activities pursuant
to this Agreement in an ethical and businesslike manner and in substantial
compliance with all applicable laws, rules and regulations of all applicable
governmental authorities.  Licensee
shall provide to CSHS any data compilations, records, reports or other
information regarding the Technology, the Improvements and/or the Licensed
Products which CSHS may reasonably require for submission to any governmental
authorities in order to comply with any applicable laws, rules or regulations.

 

11.           Confidentiality.

 

11.1         Obligation.  Each party acknowledges that this Agreement
may require the disclosure by one party to the other party of its Confidential
Information.  Each party shall regard
and preserve the Confidential Information of the other party as secret and
confidential, and during the term of this Agreement and for a period of       ***       thereafter neither party shall publish or disclose any
Confidential Information in any manner without the prior written consent of the
other party.  Notwithstanding the
foregoing, however, the parties agree that Licensee’s obligation under this
Section 11.1 with respect to the code for the Technology or any Improvement (to
the extent they constitute “Confidential Information” hereunder) shall be
unlimited in duration.  Each party shall
use the same level of care to prevent the disclosure of the Confidential
Information of the other party that it exercises in protecting its own
Confidential Information and shall, in any event, take all reasonable
precautions to prevent the disclosure of Confidential Information to any third
party.

 

11.2         Non-Confidential Information.  The following shall not be considered to be
Confidential Information:  (a)
information which is publicly known or which becomes publicly known through no
fault of the receiving party; (b) information which is lawfully obtained by the
receiving party from a third party (which third party itself lawfully obtained
the Confidential Information and has no obligation of confidentiality); and (c)
information which is in the lawful possession of the receiving party, as
documented by the records of such receiving party, prior to such information
having been initially disclosed by the disclosing party.

 

11.3         Publicity.  Neither party shall, without the prior
written consent of the other party, disclose to any third party the terms or
conditions of this Agreement unless such disclosure is required under
applicable law or in connection with the legal enforcement of this Agreement.

 

11.4         Injunctive Relief.  Each party acknowledges that in the event of
any breach or default or threatened breach or default by either party of
Section 11.1 or Section 11.3 hereof, the other party may be irreparably damaged
and that it would be extremely difficult and impractical to measure such damage,
so that the remedy of damages at law would be inadequate.  Consequently, each party acknowledges and
agrees that other party, in addition to any other available rights or remedies
and without the necessity of posting any bond or similar

 

***         Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.

 

7

 

security, shall be
entitled to specific performance, injunctive relief and any other equitable
remedy for the breach or default or threatened breach or default of said
Section 11.1 or Section 11.3, and each party waives any defense that a remedy
at law or damages is adequate.

 

12.           Representations and Warranties;
Limitation on Damages.

 

12.1         Authority.  Each party represents and warrants to the
other party that this Agreement has been duly authorized, executed and
delivered by it and that this Agreement is its binding obligation, enforceable
in accordance with its terms, subject, as to enforcement of remedies, to
applicable bankruptcy, insolvency, moratorium, reorganization or other similar
laws affecting creditors’ rights generally, and to general equitable
principles.

 

12.2         DISCLAIMER.  EXCEPT AS EXPRESSLY SET FORTH IN THIS
AGREEMENT, CSHS MAKES NO REPRESENTATIONS OR WARRANTIES, EITHER EXPRESS OR
IMPLIED (INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTY OF MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE OR ANY EXPRESS OR IMPLIED WARRANTY THAT THE
USE OF THE TECHNOLOGY OR THE MANUFACTURE, USE OR SALE OF ANY OF THE LICENSED
PRODUCTS WILL NOT INFRINGE ANY PATENT, COPYRIGHT OR RIGHT OF ANY THIRD PARTY),
OF ANY KIND OR NATURE WHATSOEVER.

 

12.3         LIMITATION ON DAMAGES.  IN NO EVENT SHALL CSHS BE LIABLE FOR ANY
LOSS OF OR DAMAGE TO REVENUES, PROFITS OR GOODWILL OR OTHER SPECIAL,
INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES OF ANY KIND RESULTING FROM CSHS’S
PERFORMANCE OR FAILURE TO PERFORM ANY OBLIGATIONS UNDER THIS AGREEMENT, OR
RESULTING FROM THE FURNISHING, PERFORMANCE, USE OR LOSS OF USE OF ANY PART OF
THE TECHNOLOGY, IMPROVEMENTS LICENSED PRODUCTS, OR ANY DATA, INFORMATION OR
OTHER PROPERTY OF LICENSEE, INCLUDING, WITHOUT LIMITATION, ANY INTERRUPTION OF
LICENSEE’S BUSINESS, WHETHER RESULTING FROM BREACH OF CONTRACT OR BREACH OF WARRANTY,
EVEN IF LICENSOR HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

 

13.           Indemnification and Insurance.

 

13.1         Indemnification.        ***        shall indemnify, defend and hold harmless                ***               from and against any and all claims, demands,
lawsuits, actions, proceedings, liabilities, losses, damages, fees, costs and
expenses (including, without limitation, attorneys’ fees, and costs of
investigation and experts (whether or not suit is filed)) resulting from or
arising out of (a) the manufacture, use or sale of any of the Licensed Products
or the exercise        ***       of any right granted hereunder,
including, without limitation, any liabilities, losses or damages whatsoever
with respect to death or injury to any individual or damage to any property
arising from the possession, use or operation of any of the Licensed
Products   ***  
                  ***                   in any manner whatsoever
(except to the extent such death, injury or damage arises directly from the
failure or malfunction of the Technology or Improvements   *** 

       ***      in accordance with this Agreement), or (b) any claim
that                  ***

***

 

***         Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.

 

8

 

	
  ***

  	
   

  
	
  ***

  	
            
  .

  

 

13.2         Insurance.  Licensee shall maintain at all times during
and after the term of this Agreement comprehensive general liability insurance,
including product liability insurance, with reputable and financially secure
insurance carriers and having commercially reasonable limits giving due
consideration to the nature and extent of such activities and the risks
inherent therein to cover the activities of Licensee contemplated by this
Agreement.  Any such insurance shall
provide for no cancellation or material alteration except upon at least thirty
(30) days’ prior written notice to CSHS. 
Licensee shall timely provide CSHS with certificates of insurance
evidencing such coverage.

 

14.           Infringement.

 

14.1         Third Party Infringement.  In the event that      ***      learns of
facts which it concludes may constitute an infringement of any of the
Technology or any Improvements by any third party during the term of this
Agreement,                 ***                  
   ***  
shall promptly notify        
***         in writing, setting
forth such facts and the basis for its conclusion, and shall include with such
notice any other reasonably available evidence in support thereof.

 

14.2         Procedure.        ***      have the right, but not the obligation, to take all
appropriate action against the infringing party and                         ***

***

incurred in connection
with such action.     ***     ,
at its own expense, shall have the right to participate in, and, to the extent
that it may wish, to jointly assume the prosecution of such action with counsel
reasonably satisfactory to  ***  . 
If    ***    declines to take action, then                ***    shall have the right to take such action.  In the event    ***    does elect to
take action,      ***    shall pay or reimburse   ***  
for all costs and expenses (including without limitation attorneys’ fees
and costs of investigation and experts) incurred by                             ***                        or as may be required in order for      ***       to pursue such action.     
***      shall obtain the consent
of   ***   prior to settling any such action.

 

14.3         Proceeds.  Any proceeds from any settlement or judgment
of any infringement claim, action, suit or proceeding brought by    ***   
shall be allocated and/or paid within           ***           
receipt thereof as follows:  (a)
first to reimburse            ***

***

***

***

 

 

14.4         Nominal Plaintiff.  In the event any infringement action, suit
or proceeding is brought hereunder by       
***         to enforce any rights
in the Technology in the Territory,      
***       shall upon the written
request of          ***         , be named, joined and participate
therein as a nominal plaintiff.

 

***         Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.

 

9

 

14.5         Indemnification.    ***  
shall indemnify, defend and hold harmless
    ***     from and against any and all claims, demands lawsuits,
actions, proceedings, liabilities, losses, damages, fees, costs and expenses
(including, without limitation, attorneys’ fees, and costs of investigation and
experts (whether or not suit is filed)) resulting from or arising out of any
claim that        ***      use of the Technology or Improvements in
accordance with this Agreement infringes or violates any patent, copyright or
other intellectual property rights of any third party.

 

15.           Term.  This Agreement shall become effective on the
date first above written and shall remain in effect until                                 ***

	
   

  	
   

  	
  ***

  	
   

  
	
   

  	
  ***

  	
  .

  	
   

  

 

16.           Termination.

 

16.1         Termination                ***                    .  This Agreement may be terminated 

***

***

***

 

 

16.2         Effect of Termination or Expiration.  Upon the termination or expiration of the
term of this Agreement, the license granted by CSHS to Licensee pursuant to
Section 2.1 hereof shall terminate. 
Notwithstanding any termination or expiration of the term of this
Agreement, Licensee shall be permitted to sell or otherwise dispose of all
Licensed Products then in inventory and shall have the obligation to pay to
CSHS all amounts which have accrued or shall accrue by reason of the sale of
such Licensed Products.  Licensee shall
not be entitled to any refund of any amounts by reason of any termination or
expiration of the term of this Agreement. 
Notwithstanding anything to the contrary set forth in this Agreement, in
no event shall any rights afforded to End Users pursuant to Section 2.1(b)
terminate as a result of expiration or termination of this Agreement for any
reason.

 

17.           Assignment.  The rights and obligations of Licensee under
this Agreement shall not be assignable without the prior written consent of
CSHS (which consent may be granted or withheld by CSHS in its sole and absolute
discretion) except in the event of a merger, consolidation or sale of
substantially all of the assets of Licensee. 
In the event of any such merger, consolidation or sale of assets, CSHS
shall have the right to approve or disapprove, on a reasonable basis, the use
of any Licensed Products by the person or entity which is the
successor-in-interest to Licensee.  The
rights and obligations of CSHS hereunder shall be assignable without the prior
written consent of Licensee, upon written notice to Licensee.

 

18.           Notice.  Any notice or other communication hereunder
must be given in writing and either (a) delivered in person, (b) transmitted by
facsimile or telecopy mechanism provided that any notice so given is also
mailed as provided herein, (c) delivered by Federal Express® or similar
commercial delivery service or (d) mailed by certified mail, postage prepaid,

 

***         Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.

 

10

 

return receipt requested, to the party to which such
notice or communication is to be given at the address set forth on the
signature page of this Agreement or to such other address or to such other
person as either party shall have last designated by such notice to the other
party.  Each such notice or other communication
shall be effective (i) when personally delivered, (ii) if given by
telecommunication, when transmitted, (iii) if given by mail, seven (7) days
after such communication is deposited in the mail and addressed as aforesaid,
(iv) if given by Federal Express® or similar commercial delivery service, three
(3) business days after such communication is deposited with such service using
next business day delivery and addressed as aforesaid, and (v) if given by any
other means, when actually delivered at such address.

 

19.           Arbitration.  Any disagreement or any question of
determination of terms, interpretation, enforceability or validity arising
under or relating to the provisions of this Agreement or the subject matter
hereof shall be settled by binding arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association (“AAA”)
and such arbitration shall be held in Los Angeles, California.  The arbitrability of any such disagreement
or question of determination shall likewise be subject to arbitration.  The parties shall use their best efforts to
cause any such arbitration to be completed as quickly as possible.  The parties shall equally share the costs of
the arbitrator(s), transcripts and any official translator(s).  Any order, award or decision resulting from
any such arbitration shall be final and binding upon the parties and shall be
enforceable in any court of competent jurisdiction.

 

20.           Governing Law.  This Agreement and the legal relations
between the parties shall be governed by and construed in accordance with the
laws of the State of California, except where such are governed exclusively by
federal law.

 

21.           Attorneys’ Fees.  In any arbitration or action between the
parties seeking enforcement of any of the provisions of this Agreement, the
prevailing party in such arbitration or action shall be awarded, in addition to
damages, injunctive or other relief, its reasonable costs and expenses, not
limited to taxable costs, and reasonable attorneys’ fees.

 

22.           Relationship of Parties.  Each party shall conduct all business in its
own name as an independent contractor. 
No joint venture, partnership, employment, agency or similar arrangement
is created between the parties.  Neither
party has the right or power to act for or on behalf of the other or to bind
the other in any respect, to pledge its credit, to accept any service of
process upon it, or to receive any notices of any nature whatsoever on its
behalf.

 

23.           Severability.  If any provision of this Agreement is determined
to be illegal, invalid or otherwise unenforceable by a court of competent
jurisdiction then, to that extent and within the jurisdiction in which it is
illegal, invalid or unenforceable, it shall be limited, construed or severed
and deleted from this Agreement, and the remaining extent and/or remaining
portions hereof shall survive, remain in full force and effect and continue to
be binding and shall not be affected except insofar as may be necessary to make
sense hereof, and shall be interpreted to give effect to the intention of the
parties insofar as that is possible.

 

11

 

24.           Entire Agreement.  This Agreement (including all exhibits
attached hereto which are herein incorporated by this reference) contains the
entire agreement between the parties with respect to the subject matter hereof
and supersedes all previous negotiations, agreements, arrangements and
understandings with respect to the subject matter hereof.

 

25.           Interpretation.  The normal rule of construction that an
agreement shall be interpreted against the drafting party shall not apply to
this Agreement.  In this Agreement,
whenever the context so requires, the masculine, feminine or neuter gender, and
the singular or plural number or tense, shall include the others.

 

26.           Amendment and Waiver.  Neither this Agreement nor any of its
provisions may be amended, changed, modified or waived except in a writing duly
executed by an authorized officer of the party to be bound thereby.

 

27.           Successors and Assigns.  This Agreement shall be binding upon and
shall inure to the benefit of the parties and their respective legal
representatives, successors and permitted assigns.

 

28.           Counterparts.  This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original, and such
counterparts together, shall constitute one agreement.

 

IN WITNESS WHEREOF, the undersigned have
hereunto set their hands as of the day and year first above written.

 

	
  “CSHS”:

  	
  “LICENSEE”:

  
	
   

  	
   

  
	
  CEDARS-SINAI HEALTH SYSTEM

  	
  DIGIRAD, INC.

  
	
  Cedars-Sinai Medical Center

  	
   

  
	
  8700 Beverly Boulevard

  	
  9350 Trade Place

  
	
  Los Angeles, CA 90048-1865

  	
  San Diego, California 92126-6334

  
	
  Attn:  Senior Vice President
  & CFO

  	
  Attn:

  	
  David Sheehan,

  
	
   

  	
   

  	
  President & CEO

  
	
  Facsimile: (310) 423-0101

  	
  Facsimile: (858) 549-9789

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
      /s/ Shlomo Melmed

  	
   

  	
  By:

  	
      /s/
  David Sheehan

  	
   

  
	
   

  	
  Shlomo Melmed, M.D.

  	
   

  	
  David Sheehan

  	
   

  
	
   

  	
  Senior Vice President for

  	
   

  	
  President & CEO

  	
   

  
	
   

  	
  Academic Affairs

  	
   

  	
  Digirad Corporation

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
      /s/
  Edward M. Prunchunas

  	
   

  	
   

  	 

	
   

  	
  Edward M. Prunchunas

  	
   

  	
   

  	 

	
   

  	
  Senior Vice President for

  	
   

  	
   

  	 

	
   

  	
  Finance
  & CFO

  	
   

  	
   

  	 

								

 

12

 

TECHNOLOGY AND SPECIFICATIONS

 

1.  Technology.

 

General Description:
All information, data and know-how, whether patentable or unpatentable, in
whatever form or medium, relating to those portions of CSHS’s software
technologies known as:                     
***

 

2.  Specifications.

 

[to be attached]

 

***         Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.

 

EXHIBIT A

 

 

FEES, ROYALTIES AND PAYMENTS

 

1.  Royalties.

 

(a)  Sales of     ***     to Third Party
End Users.  Licensee shall pay to
CSHS royalties in the amounts set forth in the following table for the Licensed
Products sold or otherwise distributed by Licensee during the term of the
Agreement.  Royalties shall accrue and
be payable

***

                    ***                   .  (For the purposes of this section, the word “sale” shall mean the
date on which the Licensee ships the Licensed Product to the particular End
User.)

 

Royalties for individual software packages of MoCo and
not sold as a part of a “Cedars Suite” (as such term is defined hereinafter)
shall be as follows:

 

   ***   

 

	
   

  	
  Amount of Royalty per Copy

  ***

  

 

(b)  Sales of                               ***                            . 
The parties have a valid and existing License Agreement for, among other
things, the          ***         technologies dated May 22, 2001 (“          ***           “) pursuant to which Licensee is obliged to pay certain
royalty fees for such technologies. 
Pursuant to an Addendum to the         
***         License, Licensee has
the right to license the                 
***               technologies           ***

***

***

	
  ***

  	
   

  	
  .

  	
   

  

 

(c)  Use of 
***  by Licensee.  The parties acknowledge that Licensee owns
and operates        ***          mobile cameras which are used to
provide services at third party sites. 
Licensee intends to install    ***   on the mobile cameras in the first quarter
of 2003.  The total royalties for
the                                                  ***

 

	
   

  	
   

  	
  ***

  	
   

  
	
   

  	
   

  	
  ***

  	
   

  
	
   

  	
  ***

  	
   

  	
  .

  	
   

  

 

(d)  Royalty Reports.  Licensee shall be responsible for all
royalties due hereunder with respect to sales or other dispositions of Licensed
Products to its Affiliates.  Each
payment of royalties pursuant hereto shall be accompanied by a statement
setting forth (a) the number of Licensed Products sold individually and as a
part of a              ***               , (b) such additional details as may be necessary
for the calculation of the royalty payment and (c) in the       ***

          ***              , a statement confirming the royalty payments made
for the mobile cameras as provided in subparagraph 1(c) above.

 

***         Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.

 

EXHIBIT B

 

 

FEES, ROYALTIES AND PAYMENTS

 

2.  Payments.  All payments by Licensee to CSHS shall be
made in United States Dollars by check and shall be without set-off and free
and clear of and without any deduction or withholding for or on account of any
taxes, duties, levies, imposts or similar fees or charges.  If any restrictions on the transfer of
currency exist in any country or other jurisdiction so as to prevent Licensee
from making payments to CSHS in the United States, Licensee shall take all
reasonable steps to obtain a waiver of such restrictions or otherwise enable
Licensee to make such payments, and if Licensee is unable to do so, Licensee
shall make such payments to CSHS to a bank account or other depository
designated by CSHS in such country or jurisdiction, which payments shall be in
the local currency of such country or jurisdiction unless payment in United
States Dollars is permitted.  Any
payment by Licensee to CSHS on the basis of sales of Licensed Products in
currencies other than Untied States Dollars shall be calculated using the appropriate
foreign exchange rate for such currency quoted in The Wall Street Journal for
the close of business of the last banking day of the calendar quarter for which
such payment is being made.

 

	
   

  	
  3.  Late Payments.

  	
   

  	
  ***

  
	
   

  	
   

  	
   

  	
  ***

  
	
   

  	
   

  	
   

  	
  ***

  

 

***         Portions of this page have been omitted pursuant to a request for
Confidential Treatment and filed separately with the commission.

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