Document:

EXHIBIT 10.25

 

***
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.

 

AGREEMENT FOR
SERVICES

 

THIS AGREEMENT
FOR SERVICES is made and entered into on the 5th day of May, 2003,
but effective for all purposes as of the 1st day of April, 2002 (the “Effective
Date”), by and between DIGIRAD IMAGING SOLUTIONS, INC., a Delaware
corporation (the “Client” or “DIS”), and MBR AND ASSOCIATES, INC., a Florida
corporation (“MBR”).

 

WHEREAS, MBR is a
corporation engaged in the business of providing certain management, financial,
billing, collection, accounting, bookkeeping, regulatory compliance, and other
related consulting financial services for healthcare clients (generally, the
“Services”); and

 

WHEREAS, the Client
is in the healthcare business and has engaged MBR in the past to provide
certain selected Services to the Client, and the Client and MBR are willing to
continue their business relationship on the terms and conditions set forth
herein beginning as of the Effective Date.

 

NOW, THEREFORE, in
consideration of the premises and of the promises and agreements of the parties
set forth below, and for other good and valuable consideration, the parties
agree as follows:

 

1.             SERVICES TO BE RENDERED:

 

A.            As part of the compensation set
forth in section 2.A., MBR agrees to provide billing and collections services,
up to and including the following designated Services to and for the Client:

 

***

***

***

 

B.            In addition, as part of the
compensation set forth in section 2.B., MBR agrees to

 

***

***

***

***

 

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

 

1

 

C.            In addition, as part of the
compensation set forth in section 2.B., MBR agrees to provide the Client with
consultation services in the following areas: 
regulatory compliance (including but not limited to Medicare
compliance), managed care contracting, and credentialing of providers.  All such consulting services shall be
requested at the sole discretion of the Client, in writing and may include
items as listed below:

 

	
   

  	
  (1)

  	
  ***

  
	
   

  	
   

  	
  ***;

  
	
   

  	
   

  	
   

  
	
   

  	
  (2)

  	
  ***

  
	
   

  	
   

  	
  ***

  
	
   

  	
   

  	
  ***

  

 

D.            During the term of this Agreement,
MBR may retain Client’s records in a secure off-site storage facility. Upon
termination or expiration of this Agreement, Client will notify MBR of where to
have its records delivered after the ninety-day collection period. MBR will not
be responsible for these records after delivery to the Client. .

 

2.             COMPENSATION TO MBR:  The Client agrees to pay MBR as follows (all
of which fees may be retained by MBR directly from collections received on
behalf of the Client):

 

A.            For Services under Section 1.A.
above,
(i)                        ***

	
   

  	
   

  	
  ***

  
	
   

  	
   

  	
  ***

  
	
   

  	
   

  	
  ***

  
	
   

  	
   

  	
  ***                             .  Both the Client and MBR will diligently
  work to 

  
	
  further reduce the average        
  ***       , targeting an
  average level of no more than  
  ***   days.  The Client and MBR will review the ***
  progress on a quarter basis and assess areas of improvement. The Client and
  MBR, collectively, will establish a financial objective and   *** 
  minimum threshold, starting April 1, 2004.

  

 

B.            For Services under Section 1.C.
above and anything outside the other services listed in Section
1,                        ***                      ,
listed on Exhibit A and      
***     for other employees, plus reimbursement
of MBR’s direct expenses (including travel, room and board, telephone calls,
courier charges, equipment, and outside consultants) with respect to such
Services. All such services are to be pre-approved, in writing by the Client.

 

C.            Special projects as agreed between
the parties.

 

MBR will
submit monthly or more frequent statements for its Services under this
Agreement. All amounts billed to the Client under this Section 2 are due and
payable by the Client to MBR within    
***    days from the Client’s
scheduled month-end for the Services performed     ***           ***     by MBR since
the prior scheduled month-end, provided that in no event shall payment be due
less than     ***     days from the date the invoice is received. Invoices that are
not paid when due will incur a late charge            ***         (or
part thereof) of the amount due, except that interest shall not accrue on any
amount which is reasonably disputed, provided that all undisputed amounts are
paid.  In the event any refund or
recoupment occurs after MBR has been

 

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

 

2

 

paid for such
Services, Client shall be entitled to a refund of the fees paid for such
Services, which refund shall be credited to next bill or recoupment, not to
exceed       ***      , otherwise, refund is to be repaid to
Client within thirty days of such refund or recoupment.

 

In addition to the foregoing, MBR shall be reimbursed       
                             ***

***

***

***.

 

3.             TERM:  The initial term of this Agreement shall be
for      ***     years from the Effective Date, and thereafter the term shall
automatically renew for consecutive     
***     terms unless       ***      , upon          
***         written notice prior
to the end of the current       ***
      

renewal term, informs          ***        of  
***  intention to terminate the
Agreement at the end of the current term.            ***        
shall have the right to terminate this agreement at anytime, without
cause, upon           ***              days written notice, but no such
notice shall be given prior to      
***        .      ***  
shall have the right to                    
***                              ***
until the actual date of termination, and MBR agrees to remain available to
render such Services for the compensation set forth in Section 2 for up to                 
***                   
after 

after expiration of the      ***    notice period and to cooperate on a
reasonable basis to facilitate a smooth transition of such Services to the
Client or to another person designated by the Client. MBR shall be entitled to
its fees on all Services performed by MBR, including with respect
to                                                                ***                                                                                ***        .

 

After the
termination of this Agreement and the payment of all amounts due MBR,   ***                      ***                  and related nonproprietary software, including,
without limitation,                                                          ***                                                shall be sent to
Client with a back-up tape and printed report. A back-up tape of all                 ***                    relating to this Agreement shall be prepared
and stored in a safe place by MBR on a weekly or more frequent basis.  Client, at its expense, reserves the right
to review and audit
MBR’s                                                       ***                                                                                          

                                                                                                                
***                                                                                        .
Such review and audit shall be at a time mutually agreed upon by both parties,
which agreement shall not be unreasonably withheld.

 

4.             EXPENSES AND LICENSES:  Each party is responsible for obtaining and
maintaining, at its expense, all licenses, permits, or other items necessary to
conduct its business, including all required insurances and bonding.

 

5.             NON-SOLICITATION; NO HIRING:  Both parties agree that during the term of
this Agreement, and for        ***          thereafter, regardless of the reason
for the termination, neither party (or any affiliate of a party) will hire, or
attempt to hire, or solicit for employment, any employee or independent
contractor of the other party used in performing the Services.

 

6.             CONFIDENTIALITY: Both
parties mutually recognize and acknowledge that the clients, services, and
methods of operation are valuable, special, and unique assets of such business.
The parties further recognize and acknowledge that all business information,

 

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Confidential Treatment and filed separately with the commission.

 

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proprietary files, records,
analyses, compilations, studies or opinions, financial statements, customer
lists, lists of business acquaintances, processes, techniques, services,
intellectual property, programming, techniques of application, concepts,
purchasing, accounting, marketing, selling, recording of any activity disclosed
to each other in connection with MBR’s performance under this Agreement are
confidential information. Both parties shall keep in strict secrecy and
confidence all information that each part assimilated or obtained or to which
either party had access during the term of this Agreement for any reason or
purpose without the prior written consent of the other party. These terms and
conditions shall survive the term of this Agreement.

 

Each party
shall keep confidential all information relating to billing and financial
information with respect to the Client and its affiliates, except to the extent
reasonably needed to facilitate the services to be rendered under this
Agreement or as required by law.

 

Each party
shall comply with all applicable federal and state statutes, regulations, and
rules relating to privacy and confidentiality of patient medical information.

 

7.             INSURANCE:  At all times during the term of this
Agreement, MBR shall            
***       obtain, keep in force
and maintain (i) workers’ compensation and (ii) comprehensive or commercial
form general liability insurance and errors and omission (contractual liability
included) in a form and with an insurance carrier satisfactory to Client, with
coverage limits (in the case of the general liability insurance) of at
least       
***                                                                               ***                                                 
..  If the above insurance is
written on a claims-made form, it shall continue for no less than            ***            following termination of this Agreement.  The coverage and limits described above
shall in no way limit any liability of MBR. To the extent available without
significant surcharge, MBR will cause Client to be named as an additional
insured on MBR’s general liability insurance policy. As evidence of MBR’s
coverage, MBR shall furnish to Client certificates of insurance under these
policies prior to the effective date and annually thereafter, which shall
include a provision for at least a        
***            prior written
notice of cancellation or reduction directed to the attention of both Client
and the Compliance Officer.  MBR shall
maintain and provide Client with evidence of a minimum of                       ***                        fidelity bonding for
itself and its employees and Client Personnel involved in the handling of
accounting for the monies of Client. 
The Client shall furnish MBR proof of general liability insurance,
errors and omissions insurance, directors insurance and fidelity bonding.

 

8.             PERSONNEL:  All personnel providing Services hereunder
shall be trained and qualified to perform their applicable duties, and none of
them shall be excluded or suspended from Medicare, Medicaid or any other
governmental payment program. MBR shall notify Client in the event of the
exclusion or suspension of any such personnel whereupon, Client shall have the
options of demanding that the affected person(s) be removed immediately,
whereupon if MBR does not do so within        
***            , Client may
terminate this Agreement upon written notice.

 

9.             BREACH:  If either party commits a material breach of
this Agreement, then the other party may give written notice specifying the
nature of the breach. If the party receiving sh notice does not substantially
remedy such breach within                       ***                        after its receipt of such notice, then the
party who has sent such notice shall have the right immediately to

 

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

 

4

 

terminate this Agreement and/or
to seek appropriate remedies as provided in this Agreement or otherwise.

 

10.           CLIENT’S OBLIGATIONS:

 

A.            The Client agrees to make available
to MBR all records necessary for performing the Services hereunder. The Client
will communicate with MBR, in a timely manner, as reasonably necessary for MBR
to perform the Services hereunder, provided that all such communications
between the parties will be in writing.

 

B.            The Client covenants that
the                          ***

***

***

***

 

C.            The Client agrees to maintain a
checking account reasonably acceptable to MBR to be exclusively for business
purposes and into
which                       ***                                   ***            .

 

D.          The Client agrees that
MBR is its exclusive agent
for                 ***                    ***                  and
that it will provide to
MBR                             ***                                 ***                              . Client agrees to provide the
complete information necessary
to                                                                 ***

***

***

***

 

E.             The Client authorizes MBR to
provide training to the employees of Client, identified by Client, who are
responsible for
                            
                                           ***
                                                         .  Such training will be
                                                  ***                                           
***                                
..  If the Client hires or
replaces staff who require training, the additional training will be billed at
the rate of                   ***                 .

 

F.             The Client agrees that it will not
market, broker, sell, or re-sell MBR’s services to any other person (including,
without limitation, customers or clients of the Client) without MBR’s prior
written consent.

 

11.           CLIENT’S REPRESENTATIONS:  Client represents, warrants, and covenants
that:

 

A.            Client is duly organized and exists
in good standing under the laws of the State of Delaware and is qualified to do
business in each state in which Client is required to be so qualified.

 

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

 

5

 

B.            Neither the execution nor the
consummation of the transactions contemplated by this Agreement will conflict
with or result in a breach of performance required by the provisions for any
other agreement or contract to which the Client is a party.

 

C.            Client has adopted a compliance plan
or plans to insure that Client and Client’s employees abide by all applicable
federal and state statutes, regulations, and rules relating to (i) its
providing or arranging for healthcare services, (ii) its marketing to its
customers and prospective customers, (iii) its billing and collecting for all
such services, and (iv) maintaining the privacy and confidentiality of patient
medical information in its possession.

 

D.            Throughout the term of this
Agreement, Client and Client’s employees shall comply with its compliance plan
or plans and with all applicable federal, state, or local laws governing its
business and professional practice and employees.

 

E.             Throughout the term of this
Agreement, all of Client’s personnel providing information or working with MBR
in connection with the Services hereunder, shall be trained and qualified to
perform their applicable duties.  None
of Client’s personnel shall be excluded or suspended from Medicare, Medicaid or
any other governmental payment programs.

 

F.             None of Client’s employees,
contractors, clients, or customers is, has been, or will be, during the term of
this Agreement, excluded or suspended from Medicare, Medicaid, or any other
governmental payment program. The Client will include in its contracts with all
physicians                                                        ***
   ***  physician representation language that the physicians and any of
their participating personnel in the services under contract, are not excluded
or suspended from Medicare, Medicaid or any other governmental payment
programs.

 

12.           INDEPENDENT CONTRACTOR STATUS:  It is understood and agreed that the
services of MBR have been and will be rendered as an independent contractor and
not as an employee, agent, or representative of Client. In this regard, neither
MBR nor any of its employees or agents shall be deemed for purposes of this
Agreement to be employed by Client for purposes of any tax or contribution
levied by the Federal Social Security Act or any corresponding state law with
respect to employment or compensation for employment, and MBR will file all forms
and pay all taxes and other amounts required of an independent contractor.

 

MBR shall have
complete control over its method of providing services, subject to the
requirements of this Agreement and applicable law.  Client will not exercise direct or implied authority over MBR in
its work nor shall it have supervisory power over MBR or any of its employees
or agents, other than to assure MBR’s adherence to the terms of this Agreement.
Neither party shall have any responsibility for, or liability as a result of,
any action, inaction, error or omission by the other.

 

13.           REVIEWS AND AUDITS: Client shall, upon
reasonable notice and conditions, be allowed to review any and all of the
documentation, procedures and information concerning            ***             and to appoint a third party consultant to
review such     ***    on the premises of MBR, all at Client’s
sole expense.  MBR agrees to cooperate
with any review.  MBR may impose
reasonable standards and restrictions on any such audit and review to insure
the

 

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Confidential Treatment and filed separately with the commission.

 

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privacy or patient medical
information of patients who are not Client’s patients. MBR will review any
reports upon such               
***                 , suggestions
for improvement or otherwise and will exercise good faith in maintaining an
acceptable level of efficiency and accuracy in its                ***                 .  Any and
all information obtained under review shall be kept confidential except as
required to comply with Client’s legal obligations.

 

14.           INDEMNIFICATION:  Each party (the “Indemnifying Party”) hereby
agrees to indemnify and hold the other party, including its directors,
officers, shareholders, employees, and agents (collectively, the “Indemnified
Party”) harmless from and against any losses, claims, damages, or expenses, and
all reasonable costs of prosecution or defense regarding its rights hereunder,
whether in judicial proceedings, including appellate proceedings, or out of
court, including, without limiting the generality of the foregoing, attorneys’
fees and all costs and expenses of litigation (collectively, a “Loss”), arising
from or growing out of a material violation of the terms of this Agreement or
negligent or willful misconduct by the Indemnifying Party.

 

15.           MEDIATION AND ARBITRATION:  It is the intention of all parties that no
dispute under this Agreement or with respect to relationship between parties
will be the subject of any court action or litigation in the local, state, or
federal judicial system. The parties recognize that the problem resolution
processes of mediation and arbitration are appropriate and preferable to
resolve issues between the parties. If any party hereto wishes to resolve an
issue under or relating to this Agreement, then such party must give notice of
a request for mediation to the other parties, which notice shall set forth the
names of not less than three (3) mediators from the panel of JAMS/Endispute or
the American Arbitration Association or other mutually agreed upon alternative
dispute resolution service in Hillsborough County if mediation is commenced by
Digirad or in San Diego County if mediation is commenced by MBR. The party
receiving such notice shall agree upon one or more such mediators with ten (10)
days of receipt of such notice and a mediation will be scheduled as soon as
feasible between the parties and their respective advisors, and the parties and
their advisors will cooperate fully with respect to sharing of information and
attendance at meetings in order to seek resolution.  The parties will share mediation expenses with the party
requesting the mediation, paying one-half of such expense of the mediator fees
and the other party paying the other one-half of such expenses. If resolution
of the matters between the parties cannot be resolved in mediation within
twenty (20) days of the selection of a mediator by the party receiving such notice,
then the matter shall be presented to formal arbitration pursuant to the rules
utilized by the alternative dispute resolution service selected by an
arbitrator from such service’s panel agreed upon by the parties or, if the
parties are unable to agree upon an arbitrator within ten (10) days of the
completion of mediation, by a panel of three (3) arbitrators from such panel
selected by such service’s administrator. Arbitration shall take place in the
venue in which the mediation shall have occurred as soon as possible and the
decision of the arbitrator panel shall be binding upon the parties for all
purposes. The party which does not prevail in such proceeding or in any
judicial proceeding shall pay all reasonable fees and costs, including
attorneys’ and expert witness fees, incurred by the prevailing party relating
to such proceeding, except that the arbitrator shall have discretion to reduce
or eliminate such award of costs and fees if such award would be inequitable or
unreasonable under the circumstances. It is the intention of the parties that
this Agreement shall be construed and interpreted in a fair and equitable
manner based upon the facts and

 

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

 

7

 

circumstances of the parties
taking into account the present intention of the parties to have a fair and
equitable agreement under the terms and conditions set forth in this Agreement.

 

16.           ENFORCEMENT:  Each covenant shall be construed as a covenant independent of any
other covenant or provision of this Agreement or any other Agreement which MBR
and Client may have, and the existence of any claim or cause of action of one
party against the other, whether predicated on this Agreement or otherwise,
shall not constitute a defense to the enforcement of such covenants.

 

17.           TERMINATION:  During the term of this Agreement, MBR may retain Client’s
records in an off-site storage facility. Upon termination or expiration of this
Agreement, Client will notify MBR of where to have its records delivered after
the                   ***                 .  MBR will not be responsible for these records after delivery to
the Client.

 

18.           ADDITIONAL COVENANTS OF MBR:  MBR covenants that it has and will maintain
its expertise, procedures and employee training with respect
to                       ***
                                                                    
***                                                           .  MBR agrees to provide monthly reporting
of                     ***                     , and such other matters
as are requested by the Client on a reasonable basis. MBR will maintain such
insurances with reputable insurance carriers in such amounts and upon terms
that are deemed reasonable and appropriate.

 

19.           COMPLIANCE WITH THE HEALTH INSURANCE PORTABILITY AND
ACCOUNTABILITY ACT OF 1996. 
The parties acknowledge that Client is subject to the Administrative
Simplification requirements of the Health Insurance Portability and
Accountability Act of 1996 and regulations promulgated thereunder (“HIPAA”),
including but not limited to, the Standards for Privacy of Individually
Identifiable Health Information, 45 CFR Parts 160 and 164; and that HIPAA
mandates that Client require MBR to provide for the protection of the privacy
and security of Health Information. Accordingly, MBR shall provide such
protection as required by this Agreement.

 

A.            Definitions. The following terms
shall be defined as follows:

 

(1)                                  “Disclose”
and “Disclosure” mean, with respect to Health Information, the release,
transfer, provision of access to, or divulging in any other manner of Health
Information outside MBR’s internal operations or to other than its employees.

 

(2)                                  “Health
Information” means information that (a) relates to the past, present or future
physical or mental health or condition of an individual; the provision of
health care to an individual; (b) identifies the individual (or for which there
is a reasonable basis for believing that the information can be used to
identify the individual); and (c) is received by MBR from or on behalf of
Client or is created by MBR, or is made accessible to MBR by Client.

 

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Confidential Treatment and filed separately with the commission.

 

8

 

(3)                                  “Privacy
Regulations” means the Standards for Privacy of Covered Individually
Identifiable Health Information, 45 CFR Parts 160 and 164, promulgated under
HIPAA.

 

(4)                                  “Services”
means the services provided by MBR pursuant to this Agreement.

 

(5)                                  “Use”
or “Uses” means, with respect to Health Information, the sharing, employment,
application, utilization, examination or analysis of such Health Information
within MBR’s internal operations.

 

B.            Permitted Uses and Disclosures of
Health Information. MBR is authorized to do the following:

 

(1)                                  Use
and Disclose Health Information as necessary to perform Services for, or on
behalf of Client;

 

(2)                                  Use
Health Information to create aggregated or de-identified information (in
accordance with the requirements of the Privacy Regulations);

 

(3)                                  Use
or Disclose Health Information (including aggregated or de-identified
information) as otherwise directed by Client provided that Client shall not
request MBR to Use or Disclose Health Information in a manner that would not be
permissible if done by Client;

 

(4)                                  Use
and Disclose Health Information as required by law.

 

C.            Other Uses of Health Information.  MBR may use Health Information for the
proper management and administration of MBR or to carry out its legal
responsibilities. MBR may Disclose Health Information for the proper management
and administration of MBR, provided that with respect to any such Disclosure
either (1) the Disclosure is required by law (within the meaning of the Privacy
Regulations) or (2) MBR obtains reasonable assurance from the person to whom
the information is to be Disclosed that such person will hold the information
in confidence and will not Use or further Disclose such information except as
required by law or for the purpose(s) for which it was Disclosed by MBR to such
person, and that such person will notify MBR of any instances of which it is
aware in which the confidentiality of the information has been breached.

 

D.            Adequate Safeguards for Health
Information.  MBR warrants that it
shall implement and maintain appropriate safeguards to prevent the Use or
Disclosure of Health Information in any manner other than as permitted herein
or by law.

 

E.             Mitigation.  MBR agrees to mitigate, to the extent
practicable, any harmful effect that is known to MBR of a Use or Disclosure of
Health Information by MBR in violation of the requirements of this Agreement.

 

9

 

F.             Reporting Non-Permitted Use or
Disclosure.  MBR shall not Use or
Disclose Health Information except as permitted by this Agreement or as
required by law. MBR shall report to Client a Use or Disclosure that is made by
MBR that is not permitted by this Agreement or which MBR becomes aware.

 

G.            Availability of Internal
Practices, Books, and Records.  MBR
agrees to make its internal practices, books and records relating to the Use
and Disclosure of Health Information available to the Secretary of the
Secretary for purposes of determining Client’s compliance with the Privacy
Regulations.

 

H.            Access to and Amendment of Health
Information.  MBR shall, to the
extent Client determines that any Health Information constitutes a “designated
records set” of Client under the Privacy Regulations, (a) make the Health
Information specified by Client available to Client or to the individual(s)
identified by Client as being entitled to access and copy that Health
Information, and (b) make any amendments to Health Information that are
requested by Client.

 

I.              Accounting of Disclosures.  Upon Client’s request, MBR shall provide to
Client an accounting of each Disclosure of Health Information made by MBR as
required by the Privacy Regulations. For each Disclosure that requires an
accounting under this Section 19, MBR shall securely maintain the information
for six (6) years from the date of the Disclosure.

 

J.             Use of Subcontractors and Agents.  MBR shall require each of its agents and
subcontractors that receive Health Information from MBR to comply with this
Section 19 of this Agreement with respect to such Health Information.

 

K.            Privacy Notice.  Client shall notify MBR of any
limitations(s) in Client’s notice of privacy practices to the extent such
limitation(s) may affect MBR’s Use or Disclosure of Health Information.

 

L.             Changes or Restrictions.  Client shall notify MBR of any changes in
permission by an individual to use or disclose Health Information to the extent
such change may affect MBR’s Use or Disclosure of Health Information. Client
shall notify MBR of any restriction to which Client agrees that may affect
MBR’s Use or Disclosure of Health Information.

 

M.           Disposition of Health Information
Upon Termination or Expiration. 
Upon termination or expiration of this Agreement, MBR shall either
return or destroy all Health Information in the possession or control of MBR
and its agents and subcontractors. In such event, MBR shall retain no copies of
such Health Information. However, if MBR determines that neither return nor
destruction of Health Information is feasible, MBR shall notify Client of the
conditions that make return or such destruction infeasible, and may retain
Health Information provided that MBR (1) continues to comply with the
provisions related to the protection of Health Information for as long as it
retains Health Information, and (2) further limits the Uses and Disclosures of
Health Information to those purposes that make the return or destruction of
Health Information infeasible.

 

10

 

N.            Amendments to Comply With Law.  The parties acknowledge that state and
federal laws relating to electronic data security and privacy are rapidly
evolving and that amendment of this Agreement may be required to provide for
procedures to ensure compliance with such developments. The parties
specifically agree to take such actions as is necessary to implement the
standards and requirements of HIPAA and other applicable laws relating to the
security or confidentiality of Health Information.

 

20.           MISCELLANEOUS:

 

A.            This Agreement shall constitute the
entire agreement of the parties and takes the p lace o f t he prior written
agreement between the p arties dated January 3 0, 2 001 (the “ Prior
Agreement”) as of the Effective Date. It may not be changed orally, but only by
agreement in writing signed by both parties.

 

B.            Any notice required or permitted to
be given under this Agreement shall be sufficient if in writing and if sent by
(i) certified or registered mail, return receipt requested, (ii) hand delivery
or overnight courier with proof of delivery, or (iii) facsimile transmission
with confirmation of receipt, to the parties as follows:

 

If to MBR:             4519 George Road, Suite 100

Tampa, Florida
33634

Facsimile No.:
(813) 496-8546

ATTENTION:
Becky Cacciatore, President

 

If to Client:            9350 Trade Place

San Diego,
California 92126-6334

Facsimile No.:
(858) 549-7714

ATTENTION:
PRESIDENT OR CHIEF FINANCIAL OFFICER

 

C.            The rights and obligations of the
parties under this Agreement shall inure to the benefit of and shall be binding
upon their respective heirs, executors, administrators, sublessors and assigns.
No party may assign any of its rights, obligations or interest in this Agreement
without the prior written consent of all parties to this Agreement.

 

D.            This Agreement shall be governed by
the laws of the State of Florida.

 

E.             This Agreement shall be deemed to
have been “executed” when the last party to sign this Agreement has affixed
his, her or its signature at the end of this Agreement.

 

F.             All parties to this Agreement
specifically agree to act in good faith in interpreting this Agreement and in
carrying out their respective duties and obligations hereunder.

 

G.            This Agreement may be executed in
multiple counterparts, each of which shall be considered an original, and all
of which shall constitute but a single agreement notwithstanding that each such
counterpart is executed on a different date.

 

H.            Because each party has participated
fully in the drafting and preparation of this Agreement, the Agreement shall
not be construed more strongly against any party.

 

11

 

I.              Each party to this Agreement
hereby acknowledges and confirms that he, she or it has had an opportunity to
retain independent legal counsel to independently advise that part of the legal
consequences of the Agreement to the party. 
Each party to this Agreement further acknowledges and confirms that each
such party received the strong recommendation by all other parties to the
Agreement that each party should retain separate and independent legal counsel
to advise each party of the legal consequences of the Agreement to that party.

 

J.             All prior negotiations and/or oral
agreements between the parties and/or two or more of the parties hereby are
merged and extinguished into this Agreement.

 

K.            Unless otherwise expressly provided
in this Agreement, all rights, obligations and other terms and conditions
specifically stated in this Agreement shall survive the execution of this
Agreement.

 

L.             If any one or more of the
provisions contained in this Agreement for any reason are held to be invalid,
illegal, or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision hereof and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.

 

IN WITNESS WHEREOF,
the parties hereto have executed this Agreement on the day and year first set
forth above but effective for all purposes as of April 1, 2002.

 

 

	
  MBR AND ASSOCIATES, INC.

  	
  DIGIRAD IMAGING SOLUTIONS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Becky M. Cacciatore

  	
   

  	
  By:

  	
  /s/ Todd P. Clyde

  	
   

  
	
  Name:

  	
  Becky M.
  Cacciatore

  	
  Name:

  	
  Todd P.
  Clyde

  
	
  Title:

  	
  President

  	
  Title:

  	
  CFO

  
								

 

12<Page>

                                                                   EXHIBIT 10.26

THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED BY THE HOLDER HEREOF FOR
ITS OWN ACCOUNT FOR INVESTMENT WITH NO INTENTION OF MAKING OR CAUSING TO BE MADE
A PUBLIC DISTRIBUTION OF ALL OR ANY PORTION THEREOF. SUCH SECURITIES HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS
AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED, EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER SUCH ACT OR PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT.

PS-_____                                                  Warrant to Purchase
                                                     Shares of Preferred Stock
                                                       (Subject to Adjustment)

                               DIGIRAD CORPORATION
                        PREFERRED STOCK PURCHASE WARRANT

                          VOID AFTER SEPTEMBER 29, 2005

         Digirad Corporation, a Delaware corporation (the "Company"), hereby
certifies that, for value received, ________________________ (including any
successors and assigns, "Holder"), is entitled, and subject to the terms set
forth below, to purchase from the Company at any time (A) after the earlier to
occur of (i) the completion of a Qualified Equity Financing (as defined in the
Notes), (ii) ten (10) days prior to the completion of an Acquisition (as defined
in the Notes) or (iii) July 1, 2001, and (B) before the earlier to occur of (i)
5:00 PM Pacific time, on September 29, 2005 (the "Expiration Date"), (ii) the
initial underwritten public offering of the Company's Common Stock or (iii) the
completion of an Acquisition, shares of Preferred Stock of the Company, with the
number of shares and the exercise price of the Warrant to be determined as
follows:

         (a) If the Company completes a Qualified Equity Financing or
Acquisition on or before January 1, 2001, then (i) the exercise price of the
Warrant will be the New Equity Per Share Price or Acquisition Per Share Price,
as the case may be, and (ii) this Warrant will be exercisable into that
aggregate number of New Equity Shares or Acquisition Shares, as the case may be,
equal to (A) ten percent (10%) of the Issue Price of the Note issued to the
Holder divided by (B) the New Equity Per Share Price or the Acquisition Per
Share Price, as the case may be.

         (b) If the Company completes a Qualified Equity Financing or
Acquisition between January 2, 2001 and on or before February 1, 2001, then (i)
the exercise price of the Warrant will be the New Equity Per Share Price or
Acquisition Per Share Price, as the case may be, and (ii) this Warrant will be
exercisable into that aggregate number of New Equity Shares or Acquisition
Shares, as the case may be, equal to (A) twenty percent (20%) of the Issue Price
of the Note issued to the Holder divided by (B) the New Equity Per Share Price
or the Acquisition Per Share Price, as the case may be.

                                       1

<Page>

         (c) If the Company completes a Qualified Equity Financing or
Acquisition between February 2, 2001 and on or before March 1, 2001, then (i)
the exercise price of the Warrant will be the New Equity Per Share Price or
Acquisition Per Share Price, as the case may be, and (ii) this Warrant will be
exercisable into that aggregate number of New Equity Shares or Acquisition
Shares, as the case may be, equal to (A) thirty percent (30%) of the Issue Price
of the Note issued to the Holder divided by (B) the New Equity Per Share Price
or the Acquisition Per Share Price, as the case may be.

         (d) If the Company completes a Qualified Equity Financing or
Acquisition between March 2, 2001 and on or before June 30, 2001, then (i) the
exercise price of the Warrant will be the New Equity Per Share Price or
Acquisition Per Share Price, as the case may be, and (ii) this Warrant will be
exercisable into that aggregate number of New Equity Shares or Acquisition
Shares, as the case may be, equal to (A) forty percent (40%) of the Issue Price
of the Note issued to the Holder divided by (B) the New Equity Per Share Price
or the Acquisition Per Share Price, as the case may be.

         (e) In the event the Company has not completed a Qualified Equity
Financing or Acquisition as of July 1, 2001, then (i) the exercise price of the
Warrant will be $3.036 per share, and (ii) this Warrant will be exercisable into
that aggregate number of the Company's Series E Preferred Stock equal to (A)
forty percent (40%) of the Issue Price of the Note issued to the Holder divided
by (B) $3.036 per share.

         Holder acknowledges that each of the warrant thresholds heretofore
described in sections (a) through (e) are not cumulative and that upon each
increase in the amount of warrants to be issue to Holder, Holder is receiving
the maximum aggregate amount of warrants to which it is entitled. (For example,
if the Company completes a Qualified Equity Financing as of February 4, 2001,
Holder is entitled to a MAXIMUM aggregate of number of New Equity Shares equal
to thirty percent (30%) of the Issue Price of the Note issued to the Holder
divided by the Per Share Price.)

         As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:

         (a)      The term "Company" includes any corporation which shall
succeed to or assume the obligations of the Company hereunder.

         (b) The term "Preferred Stock" shall mean the Preferred Stock of the
Company, and any other securities or property of the Company or of any other
person (corporate or otherwise) which the holder of this Warrant at any time
shall be entitled to receive on the exercise hereof, in lieu of or in addition
to Preferred Stock, or which at any time shall be issuable in exchange for or in
replacement of Preferred Stock.

         (c) The term "Purchase Agreement" shall mean the Convertible Promissory
Note and Warrant Purchase Agreement dated as of the date hereof by and among the
Company, the Holder and the purchasers of the other Warrants.

         (d) The term "Warrant" shall mean one of a series of warrants issued
pursuant to the Purchase Agreement (which warrants together are designated, the
"Warrants").

                                       2

<Page>

         1.       INITIAL EXERCISE DATE; EXPIRATION.  This Warrant may be
exercised at any time within the time periods described in the preamble and
Section 5.3 (the "Exercise Period").

         2.       EXERCISE OF WARRANT; PARTIAL EXERCISE. This Warrant may be
exercised in full by the Holder by surrender of this Warrant, together with
the Holder's duly executed form of subscription attached hereto as SCHEDULE
1, to the Company at its principal office, accompanied by payment, in cash or
by certified or official bank check payable to the order of the Company, of
the aggregate exercise price (as determined above) of the shares of Preferred
Stock to be purchased hereunder. The exercise of this Warrant pursuant to
this Section 2 shall be deemed to have been effected immediately prior to the
close of business on the business day on which this Warrant is surrendered to
the Company as provided in this Section 2, and at such time the person in
whose name any certificate for shares of Preferred Stock shall be issuable
upon such exercise shall be deemed to be the record holder of such Preferred
Stock for all purposes. As soon as practicable after the exercise of this
Warrant, the Company at its expense will cause to be issued in the name of
and delivered to the Holder, or as the Holder may direct, a certificate or
certificates for the number of fully paid and nonassessable full shares of
Preferred Stock to which the Holder shall be entitled on such exercise,
together with cash, in lieu of any fraction of a share, equal to such
fraction of the current market value of one full share of Preferred Stock as
determined in good faith by the Board of Directors, and, if applicable, a new
warrant evidencing the balance of the shares remaining subject to the Warrant.

         3.       NET ISSUANCE.

                  3.1 RIGHT TO CONVERT. In addition to and without limiting the
rights of the Holder under the terms of this Warrant, the Holder shall have the
right to convert this Warrant (the "Conversion Right") into shares of Preferred
Stock as provided in this Section 3 at any time or from time to time during the
Exercise Period. Upon exercise of the Conversion Right with respect to shares
subject to the Warrant (the "Converted Warrant Shares"), the Company shall
deliver to the Holder (without payment by the Holder of any exercise price or
any cash or other consideration) that number of shares of fully paid and
nonassessable Preferred Stock computed using the following formula:

                                    X = Y (A - B)
                                    -------------
                                          A

         Where      X =    the number of shares of Preferred Stock to be
delivered to the holder

                    Y =    the number of Converted Warrant Shares

                    A =    the fair market value of one share of the Company's
Preferred Stock on the Conversion Date (as defined below)

                    B =    the per share exercise price of the Warrant (as
adjusted to the Conversion Date)

No fractional shares shall be issuable upon exercise of the Conversion Right,
and if the number of shares to be issued determined in accordance with the
foregoing formula is other than a whole number, the Company shall pay to the
Holder an amount in cash equal to the fair market value of

                                       3

<Page>

the resulting fractional share on the Conversion Date (as defined below).
Shares issued pursuant to the Conversion Right shall be treated as if they
were issued upon the exercise of the Warrant.

                  3.2 METHOD OF EXERCISE. The Conversion Right may be exercised
by the Holder by the surrender of the Warrant at the principal office of the
Company together with a written statement specifying that the Holder thereby
intends to exercise the Conversion Right and indicating the total number of
shares under the Warrant that the Holder is exercising through the Conversion
Right. Such conversion shall be effective upon receipt by the Company of the
Warrant together with the aforesaid written statement, or on such later date as
is specified therein (the "Conversion Date"). Certificates for the shares
issuable upon exercise of the Conversion Right shall be delivered to the Holder
promptly following the Conversion Date.

                  3.3 DETERMINATION OF FAIR MARKET VALUE. For purposes of this
Section 3, fair market value of a share of Preferred Stock on the Conversion
Date shall mean the fair market value as determined by the Board of Directors of
the Company in good faith.

         4.       LIMIT ON RIGHTS OF THE HOLDER UPON EXERCISE.  The Holder
acknowledges and agrees that upon the exercise of this Warrant in full or in
part, the following provisions shall apply to the rights of the Holder as a
holder of Preferred Stock:

                  4.1 MARKET STAND-OFF AGREEMENT. During the period of duration
specified by the Company and an underwriter of Common Stock or other securities
of the Company, following the effective date of a registration statement of the
Company filed under the Securities Act of 1933, as amended (the "Act), the
Holder or any future transferee will not, to the extent requested by the Company
and such underwriter, directly or indirectly sell, offer to sell, contract to
sell (including, without limitation, any short sale), grant any option to
purchase or otherwise transfer or dispose of (other than to transferees or
donees who agree to be similarly bound) any securities of the Company held by it
at any time during such period except Common Stock included in such
registration; PROVIDED, HOWEVER, that such agreement shall not exceed one
hundred eighty (180) days.

         In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the securities of the Holder or any
future transferee (and the shares or securities of every other person subject to
the foregoing restriction) until the end of such period.

         5.       ADJUSTMENTS TO CONVERSION PRICE. The number and kind of
shares of Preferred Stock (or any shares of stock or other securities which
may be) issuable upon the exercise of this Warrant and the exercise price
hereunder shall be subject to adjustment from time to time upon the happening
of certain events, as follows:

                  5.1 DIVIDENDS, DISTRIBUTIONS, STOCK SPLITS OR COMBINATIONS. If
the Company shall at any time or from time to time after the date hereof make or
issue, or fix a record date for the determination of holders of Preferred Stock
entitled to receive, a dividend or other distribution payable in additional
shares of Common Stock or Preferred Stock (as the case may be), then and in each
such event the exercise price hereunder then in effect shall be decreased as of
the time of such issuance or, in the event such a record date shall have been
fixed, as of the close of business on such record date, by multiplying the
exercise price hereunder then in effect

                                       4

<Page>

by a fraction: (a) the numerator of which shall be the total number of shares
of Common Stock (assuming the conversion of all outstanding securities of the
Company that are convertible into Common Stock and the exercise of all
options to purchase Common Stock or securities that are convertible into
Common Stock) issued and outstanding immediately prior to the time of
issuance or the close of business on such record date; and (b) the
denominator of which shall be the total number of shares of Common Stock
(assuming the conversion of all outstanding securities of the Company that
are convertible into Common Stock and the exercise of all options to purchase
Common Stock or securities that are convertible into Common Stock) issued and
outstanding immediately after the time of issuance or the close of business
on such record date. If the Company shall at any time subdivide the
outstanding shares of Preferred Stock (or any securities into which such
Preferred Stock is convertible), or if the Company shall at any time combine
the outstanding shares of Preferred Stock (or any securities into which such
Preferred Stock is convertible), then the exercise price hereunder
immediately shall be decreased proportionally (in the case of a subdivision)
or increased proportionally (in the case of a combination). Any such
adjustment shall become effective at the close of business on the date the
subdivision or combination becomes effective.

                  5.2 RECLASSIFICATION OR REORGANIZATION. If the Preferred Stock
(or any shares of stock or other securities which may be) issuable upon the
exercise of this Warrant shall be changed into the same or different number of
shares of any class or classes of stock, whether by capital reorganization,
reclassification or otherwise (other than a subdivision or combination of shares
or stock dividend provided for in Section 5.1 above, or a reorganization,
merger, consolidation or sale of assets provided for in Section 5.3 below), then
and in each such event the Holder shall be entitled to receive upon the exercise
of this Warrant the kind and amount of shares of stock and other securities and
property receivable upon such reorganization, reclassification or other change,
to which a holder of the number of shares of Preferred Stock (or any shares of
stock or other securities which may be) issuable upon the exercise of this
Warrant would have received if this Warrant had been exercised immediately prior
to such reorganization, reclassification or other change, all subject to further
adjustment as provided herein.

                  5.3 MERGER, CONSOLIDATION OR SALE OF ASSETS. Subject to the
preamble, in the event of, at any time prior to the Expiration Date, an initial
public offering of securities of the Company registered under the Act, or the
consolidation or merger of the Company with or into another corporation (other
than a merger solely to effect a reincorporation of the Company into another
state), or the sale or other disposition of all or substantially all the
properties and assets of the Company in its entirety to any other person, the
Company shall provide to the Holder ten (10) days advance written notice of such
public offering, consolidation, merger or sale or other disposition of the
Company's assets, and this Warrant shall terminate unless exercised prior to the
date such public offering is declared effective by the Securities and Exchange
Commission or the occurrence of such consolidation, merger or sale or other
disposition of the Company's assets. If at any time or from time to time there
shall be a capital reorganization of the Preferred Stock (other than a
subdivision, combination, reclassification or exchange of shares provided for
elsewhere in this Section 5) of the Company, then as a part of such
reorganization, provision shall be made so that the Holder shall thereafter be
entitled to receive upon the exercise of this Warrant, the number of shares of
stock or other securities or property of the Company, resulting from such
reorganization, to which a holder of the number of shares of Preferred Stock (or
any

                                       5

<Page>

shares of stock or other securities which may be) issuable upon the exercise
of this Warrant would have received if this Warrant had been exercised
immediately prior to such reorganization.

                  5.4 NOTICE OF ADJUSTMENTS AND RECORD DATES. The Company shall
promptly notify the Holder in writing of each adjustment or readjustment of the
exercise price hereunder and the number of shares of Preferred Stock (or any
shares of stock or other securities which may be) issuable upon the exercise of
this Warrant. Such notice shall state the adjustment or readjustment and show in
reasonable detail the facts on which that adjustment or readjustment is based.

         6.       REPLACEMENT OF WARRANTS. On receipt by the Company of
evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Warrant and, in the case of any such loss,
theft or destruction of this Warrant, on delivery of an indemnity agreement
reasonably satisfactory in form and amount to the Company or, in the case of
any such mutilation, on surrender and cancellation of such Warrant, the
Company at its expense will execute and deliver to the Holder, in lieu
thereof, a new Warrant of like tenor.

         7.       NO RIGHTS OR LIABILITY AS A STOCKHOLDER. This Warrant does
not entitle the Holder hereof to any voting rights or other rights as a
stockholder of the Company. No provisions hereof, in the absence of
affirmative action by the Holder to purchase Preferred Stock, and no
enumeration herein of the rights or privileges of the Holder, shall give rise
to any liability of the Holder as a stockholder of the Company.

         8.       MISCELLANEOUS.

                  8.1 TRANSFER OF WARRANT. This Warrant shall not be
transferable or assignable in any manner without the express written consent of
the Company, and any such attempted disposition of this Warrant or any portion
hereof shall be of no force or effect unless such disposition is in compliance
with the Agreement.

                  8.2 TITLES AND SUBTITLES.  The titles and subtitles used
in this Warrant are for convenience only and are not to be considered in
construing or interpreting this Warrant.

                  8.3 NOTICES. Any notice required or permitted under this
Warrant shall be given in writing and in accordance with Section 6.4 of the
Purchase Agreement (for purposes of which, the term "Investor" shall mean Holder
hereunder), except as otherwise expressly provided in this Warrant.

                  8.4 ATTORNEYS' FEES. If any action at law or in equity is
necessary to enforce or interpret the terms of this Warrant, the prevailing
party shall be entitled to reasonable attorneys' fees, costs and disbursements
in addition to any other relief to which such party may be entitled.

                  8.5 AMENDMENTS AND WAIVERS. Any term of this Warrant may be
amended and the observance of any term of this Warrant may be waived (either
generally or in a particular instance and either retroactively or
prospectively), with the written consent of the Company and the holders of
Warrants representing together the right to purchase at least fifty-one percent

                                       6

<Page>

(51%) of all of the Preferred Stock of the Company subject to purchase pursuant
to all of the Warrants and in accordance with the Purchase Agreement. Any
amendment or waiver effected in accordance with this Section 8.5 shall be
binding upon the Holder of this Warrant (and of any securities into which this
Warrant is convertible), each future holder of all such securities, and the
Company.

                  8.6 SEVERABILITY. If one or more provisions of this Warrant
are held to be unenforceable under applicable law, such provision shall be
excluded from this Warrant and the balance of the Warrant shall be interpreted
as if such provision were so excluded and shall be enforceable in accordance
with its terms.

                  8.7 GOVERNING LAW.  This Warrant shall be governed by
and construed and enforced in accordance with the laws of the State of
California, without giving effect to its conflicts of laws principles.

                [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

                                       7

<Page>

                  8.8 COUNTERPARTS. This Warrant may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

Date:  September 29, 2000                            DIGIRAD CORPORATION,
                                                     a Delaware corporation

                                       By:
                                           ---------------------------------
                                           Scott Huennekens
                                           President

ACKNOWLEDGED AND AGREED:

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

By:
   --------------------------------

Title:
      -----------------------------

                           [SIGNATURE PAGE TO WARRANT]

                                       8

<Page>

                                   SCHEDULE 1

                              FORM OF SUBSCRIPTION

                   (To be signed only on exercise of Warrant)

To:      DIGIRAD CORPORATION

         The undersigned, the holder of the Warrant attached hereto, hereby
irrevocably elects to exercise the purchase rights represented by such Warrant
for, and to purchase thereunder, ___________ shares of Preferred Stock of
Digirad Corporation, and herewith makes payment of $______________ therefor, and
requests that the certificates for such shares be issued in the name of, and
delivered to ____________________, whose address is
_____________________________________________________________.

                                       ---------------------------------------
                                       (Signature must conform in all respects
                                       to name of the Holder as specified on
                                       the face of the Warrant)

                                       ---------------------------------------
                                       (Print Name)

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

                                       ---------------------------------------
                                       (Address)

Dated:           ___________________

* Insert here the number of shares as to which the Warrant is being exercised.

<Page>

                                   SCHEDULE I

<Table>
<Caption>

Warrant
Number         Warrantholder                                  Number of Shares
-------        -------------                                  ----------------
<S>            <C>                                            <C>
PS-1           Kingsbury Capital Partners, L.P. III                  9,881

PS-2           Ocean Avenue Investors, LLC - Anacapa Fund I         16,469

PS-3           Vector Late-Stage Equity Fund II (QP), L.P.          12,351

PS-4           Vector Late-Stage Equity Fund II, L.P.                4,117

PS-5           Kingsbury Capital Partners, L.P. IV                  23,057

</Table>

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