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,
2001, 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 October 1, 2001.

 

 

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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                   ***

	
  ***

  	
   

  	
  .

  

 

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 every six (6) months 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           Quarterly Earned Royalty Payment
and Reports.  Licensee shall provide
CSHS with written reports and earned royalty payments within thirty (30) days
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 preceding calendar
quarter, 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
preceding calendar quarter.

 

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

 

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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 one (1) year 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 
ten percent (10%), 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 ninety (90) days 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 of (a) two
percent (2%) over the "prime rate" of interest as published in The
Wall Street Journal from time to time, and (b) the highest rate permitted by
applicable law, from the date such amount was underpaid to the date such
payment is actually paid.

 

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 five
(5) years 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. Licensee shall
indemnify, defend and hold harmless the CSHS Parties 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 by Licensee 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
by Licensee or any third party 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 used by Licensee in accordance with this Agreement),
or (b) any claim that Licensee’s manufacture, use, sale or other disposition of
the Licensed Products infringes or violates any patent, copyright or other
right of any third party, except to the extent such alleged infringement or
violation relates solely to the Technology or Improvements.

 

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 either party 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, the party learning of such facts shall promptly notify the other
party 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.  CSHS shall have the right, but no the
obligation, to take all appropriate action against the infringing party and
CSHS shall pay all costs and expenses (including without limitation CSHS’s
attorneys’ fees and costs of investigation and experts) incurred in connection
with such action.  Licensee, 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 CSHS.  If CSHS declines
to take action, then Licensee shall have the right to take such action.  In the event Licensee does elect to take
action, Licensee shall pay or reimburse CSHS for all costs and expenses
(including without limitation attorneys’ fees and costs of investigation and
experts) incurred by CSHS at either Licensee’s request or as may be required in
order for Licensee to pursue such action. 
Licensee shall obtain the consent of CSHS 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 CSHS shall be
allocated and/or paid within thirty (30) days of receipt thereof as follows:
(a) first to reimburse CSHS (and Licensee, pari passu to the extent that it has
not otherwise been reimbursed for attorneys’ fees, costs and expenses incurred
in connection with participation in the prosecution of such infringement) for
attorneys’ fees and other costs and expenses reasonably incurred in connection
with the prosecution or other efforts to terminate the infringement pursuant to
the terms of this Agreement; and (b) thereafter, the remainder shall be divided
equally between the parties.

 

 

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

 

14.5         Indemnification. CSHS shall
indemnify, defend and hold harmless Licensee 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 Licensee's 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 the later of (a) five
(5) years after such date, or (b) the expiration date of the last to expire of
any patents (if any) included in the Technology, unless sooner terminated
pursuant to Section 17.1 hereof.

 

16.           Termination.

 

16.1         Termination for Impossibility or
Breach.  This Agreement may be
terminated at any time at the option of either party if action by any
governmental authority renders impossible performance under this Agreement by
either party.  In addition, this
Agreement may be terminated by either party if the other party breaches any
material provision hereof (including without limitation any provision requiring
payment by Licensee to CSHS), provided that termination may only take place if
(a) the claiming party has given the breaching party written notice specifying
the respects in which the claiming party claims this Agreement has been
breached and (b) the breaching party fails to remedy such breach within thirty
(30) days after receiving such notice.

 

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 on a quarterly basis within thirty (30) days after the end of each calendar quarter in which a
sale of Licensed Products
occurs.  (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.             Minimum Royalties.  Licensee agrees to pay for a minimum of  *** copies (***) for *** software and the same
minimum number of *** software licensed hereunder during the first year of the
Agreement and  ***  (***) licenses for *** software and the same
minimum number of *** software licensed hereunder for each year thereafter
during the term of the Agreement.  (There is no minimum requirement for *** software.) During the
term of the Agreement, Licensee shall pay to CSHS a minimum royalty (“Minimum
Royalty”) for both the *** and *** software technologies within thirty (30)
days of the end of each calendar quarter. 
During the first year after the First Commercial Release Date, the
Minimum Royalty payable from and after that date shall be *** Dollars ($***)
per calendar quarter for the *** software and the same amount for the ***
software for a total of  *** Dollars
($***).  The Minimum Royalty payable one
year after the First Commercial Release Date shall be ***  Dollars ($***) per calendar quarter for the
*** software and the same amount for the *** software for a total of ***
Dollars ($***).  Each payment of the
Minimum Royalty for each of the two referenced software technologies shall be
credited on an ongoing basis against royalties payable for each particular
software technology pursuant to Paragraph 2 hereof Accordingly, no royalty
shall be payable for a particular software technology (e.g., *** and/or *** as the case may be)
pursuant to Paragraph 2 hereof with respect to any particular calendar quarter
for that software technology unless the aggregate amount of all royalties
pursuant to Paragraph 2 hereof for that software technology through and
including such calendar quarter exceeds the aggregate amount of all Minimum
Royalty payments theretofore made for that particular software technology plus
the Minimum Royalty payment for that software technology in such calendar
quarter.  Sales of *** shall not be
credited towards the minimum required sales of *** and vice versa.

4.             Late Payments.  Any amount payable by Licensee to CSHS which
is not paid within thirty (30) days of the invoice date shall bear interest at
the rate which is the lower of (i) two percent (2%) over the rate of interest
published in The Wall Street Journal as
the “prime rate” as such “prime rate” is in effect from time to time or (ii)
the highest rate permitted by applicable law, from the date such amount was due
to the date such amount is paid. 
Neither the foregoing obligation to pay interest nor the acceptance of
such interest shall in any way constitute any limitation or waiver of any of
the rights or remedies of CSHS resulting from the failure of Licensee to pay in
a timely manner any amount payable by Licensee to CSHS.

 

 

***  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 February 1, 2003.

 

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 every six (6) months 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

 

 

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           Quarterly Earned Royalty Payment
and Reports.  Licensee shall provide
CSHS with written reports and earned royalty payments within thirty (30) days
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 preceding calendar
quarter, 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
preceding calendar quarter.

 

***         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 one (1) year 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 ten percent (10%), 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 ninety (90) days 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 of (a) two percent (2%) over the "prime rate" of interest as
published in The Wall Street Journal
from time to time, and (b) the highest rate permitted by applicable law, from
the date such amount was underpaid to the date such payment is actually paid.

 

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.

 

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 five
(5) years 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

 

 

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.  Licensee shall indemnify, defend and hold
harmless the CSHS Parties 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 by Licensee 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 by Licensee or any
third party 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 used by Licensee in accordance with this Agreement), or (b) any
claim that Licensee’s manufacture, use, sale or other disposition of the
Licensed Products infringes or violates any patent, copyright or other right of
any third party, except to the extent such alleged infringement or violation
relates solely to the Technology or Improvements.

 

 

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 either party 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, the party learning of such facts shall promptly notify the other
party 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.  CSHS shall have the right, but not the
obligation, to take all appropriate action against the infringing party and
CSHS shall pay all costs and expenses (including without limitation CSHS’s
attorneys’ fees and costs of investigation and experts) incurred in connection
with such action.  Licensee, 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 CSHS.  If CSHS declines
to take action, then Licensee shall have the right to take such action.  In the event Licensee does elect to take
action, Licensee shall pay or reimburse CSHS for all costs and expenses
(including without limitation attorneys’ fees and costs of investigation and
experts) incurred by CSHS at either Licensee’s request or as may be required in
order for Licensee to pursue such action. 
Licensee shall obtain the consent of CSHS 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 CSHS shall be
allocated and/or paid within thirty (30) days of receipt thereof as
follows:  (a) first to reimburse CSHS
(and Licensee, pari passu to the extent that it has not otherwise been
reimbursed for attorneys’ fees, costs and expenses incurred in connection with
participation in the prosecution of such infringement) for attorneys’ fees and
other costs and expenses reasonably incurred in connection with the prosecution
or other efforts to terminate the infringement pursuant to the terms of this
Agreement; and (b) thereafter, the remainder shall be divided equally between
the parties.

 

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

 

 

9

 

14.5         Indemnification.  CSHS shall indemnify, defend and hold
harmless Licensee 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
Licensee's 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 the later of (a) five
(5) years after such date, or (b) the expiration date of the last to expire of
any patents (if any) included in the Technology, unless sooner terminated
pursuant to Section 17.1 hereof.

 

16.           Termination.

 

16.1         Termination for Impossibility or
Breach.  This Agreement may be
terminated at any time at the option of either party if action by any
governmental authority renders impossible performance under this Agreement by
either party.  In addition, this Agreement
may be terminated by either party if the other party breaches any material
provision hereof (including without limitation any provision requiring payment
by Licensee to CSHS), provided that termination may only take place if (a) the
claiming party has given the breaching party written notice specifying the
respects in which the claiming party claims this Agreement has been breached
and (b) the breaching party fails to remedy such breach within thirty (30) days
after receiving such notice.

 

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,

 

 

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 on a quarterly basis within thirty (30) days after the end of each
calendar quarter in which a sale of Licensed Products occurs. (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 *** 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                                                 
***

and shall be paid with the other royalty payments due and payable hereunder in
four (4) equal installments of *** per quarter in 2003.

 

 

(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
first four (4) quarterly reports, 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.  Any amount payable by
Licensee to CSHS which is not paid within thirty (30) days of the invoice date
shall bear interest at the rate which is the lower of (i) two percent (2%) over
the rate of interest published in The Wall Street Journal as the “prime
rate” as such “prime rate” is in effect from time to time or (ii) the highest
rate permitted by applicable law, from the date such amount was due to the date
such amount is paid.  Neither the
foregoing obligation to pay interest nor the acceptance of such interest shall
in any way constitute any limitation or waiver of any of the rights or remedies
of CSHS resulting from the failure of Licensee to pay in a timely manner any
amount payable by Licensee to CSHS.

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