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                                                                   EXHIBIT 10.12

[CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS AGREEMENT HAVE
       BEEN REDACTED AND HAVE BEEN SEPARATELY FILED WITH THE COMMISSION.]

                                   AGREEMENT

Effective as of May 5, 2000 ("Effective Date"), THE BOARD OF TRUSTEES OF THE
LELAND STANFORD JUNIOR UNIVERSITY, a body having corporate powers under the laws
of the State of California ("STANFORD"), and Xenogen Corporation, a California
corporation, having a principal place of business at 860 Atlantic Avenue,
Alameda, CA  94501 ("LICENSEE"), agree as follows:

1.   BACKGROUND
---------------

1.1  STANFORD has an assignment of the invention entitled "Using Light to Detect
     and Track Pathogens in Living Hosts", from the laboratory of Dr.
     Christopher Contag ("Invention[s]"), as described in Stanford Docket S94-
     044, and any Licensed Patent(s), as hereinafter defined, which may issue to
     such Invention(s).

1.2  STANFORD desires to have the Invention(s) perfected and marketed at the
     earliest possible time in order that products resulting therefrom may be
     available for public use and benefit.

1.3  LICENSEE desires a license under said Invention(s), Licensed Materials and
     Licensed Patent(s) to develop, make, have made, use, import, offer for sale
     and sell Licensed Product(s) in the Licensed Field of Use, and/or to
     sublicense said Invention(s), Licensed Materials and Licensed Patent(s) in
     the Licensed Field of Use.

1.4  LICENSEE and STANFORD have a prior agreement and amendments to the prior
     agreement for Invention(s), Licensed Materials and Licensed Patent(s).  The
     parties acknowledge that pursuant to the prior agreement, (i) LICENSEE has
     paid to STANFORD a noncreditable, nonrefundable license issue royalty of
     *** Dollars (***), and (ii) LICENSEE has paid to STANFORD *** for
     reimbursement of past patent expenses.  The prior agreement and amendments
     are superseded by this Agreement.

1.5  The Invention(s) was made in the course of research supported by one or
     more of the following: the American Foundation for AIDS Research, the
     National Institutes of Health, The United States Public Health Service, and
     the Office of Naval Research.

2.   DEFINITIONS
----------------

2.1  "Licensed Patent(s)" means any (i) U.S. patent application Serial Number
     270,631 filed July 1, 1994 (issued on July 22, 1997 as U.S. Patent Number
     5,650,135), (ii) all divisions, substitutions, and continuations in whole
     or part of any of the preceding,  (iii) all foreign patent applications
     corresponding to or claiming priority from (including International
     Application Number PCT/US95/15040 and all national applications claiming
     priority therefrom), and (iv) all U.S. and foreign patents issuing on any
     of the preceding, including patents of addition, reexaminations, reissues
     and extensions.

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2.2  "Licensed Materials" means those biological materials listed in Exhibit A,
     and such other agreed materials as STANFORD may provide to LICENSEE during
     the term of this Agreement, which shall be added to Exhibit A.

2.3  "Licensed Product(s)" means any product or part thereof in the Licensed
     Field of Use, the manufacture, use, or sale of which:

          (a)  Is covered by a valid claim of an issued, unexpired Licensed
               Patent(s) directed to the Invention(s). A claim of an issued,
               unexpired Licensed Patent(s) shall be presumed to be valid unless
               and until it has been held to be invalid or unenforceable by a
               final judgment of a court of competent jurisdiction from which no
               appeal can be or is taken or is disclaimed, or rejected or found
               invalid or unenforceable in a reissue application or re-
               examination proceeding or otherwise;

          (b)  Is covered by any claim being prosecuted in a pending application
               directed to the Invention(s); or

          (c)  Incorporates any of the Licensed Materials.

2.4  "Net Sales" means the gross revenue derived by LICENSEE from Licensed
     Product(s), less the following items but only insofar as they actually
     pertain to the disposition of such Licensed Product(s) by LICENSEE, are
     included in such gross revenue, and are separately billed:

          (a)  Import, export, excise and sales taxes, and custom duties;

          (b)  Costs of insurance, packing, and transportation from the place of
               manufacture to the customer's premises or point of installation;

          (c)  Costs of installation at the place of use; and

          (d)  Credit for returns, allowances, or trades.

2.5  "Licensed Field of Use" means all uses.

2.6  "Licensed Territory" means worldwide.

2.7  "Exclusive" means that, subject to Article 4, STANFORD shall not grant
     further licenses in the Licensed Territory in the Licensed Field of Use.

3.   GRANT
----------

3.1  STANFORD hereby grants and LICENSEE hereby accepts an Exclusive license
     under the Licensed Patents and Licensed Materials to make, have made,
     import, use, lease, sell and offer for sale and otherwise commercialize and
     exploit Licensed Products in the Licensed Territory, and practice any
     method process or procedure within the Licensed Patents in the Licensed
     Territory.

3.2  Said license is Exclusive, including the right to sublicense pursuant to
     Article 13, in the Licensed Field of Use for a term commencing as of July
     1, 1997 and ending on the expiration of the last to expire of the Licensed
     Patent(s).

3.3  STANFORD shall have the right to practice the Invention(s) and use the
     Technology for its own bona fide research, including sponsored research and
     collaborations.  STANFORD shall have the right to publish any information
     included in Licensed Materials and Licensed Patent(s).

3.4  Not withstanding Section 3.1 above, the license granted to XENOGEN for
     those Licensed Materials which are ***, shall be non-exclusive.  This
     Section 3.4 shall have no effect on the Exclusive License granted herein
     for (i) the Licensed Patents and (ii) all Licensed Materials and/or
     Licensed Product(s) other than the ***.

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4.   GOVERNMENT RIGHTS
----------------------

This Agreement is subject to all of the terms and conditions of Title 35 United
States Code Sections 200 through 204, including an obligation that Licensed
Product(s) sold or produced in the United States be "manufactured substantially
in the United States," and LICENSEE agrees to take all reasonable action
necessary on its part as licensee to enable STANFORD to satisfy its obligation
thereunder, relating to Invention(s), provided that STANFORD has provided
LICENSEE with written notice of each such obligation STANFORD must meet and a
description of each act LICENSEE must take to comply with such obligation.

5.   DILIGENCE
--------------

5.1  As an inducement to STANFORD to enter into this Agreement, LICENSEE agrees
     to use all reasonable efforts and diligence to sublicense the Licensed
     Patent(s) and/or to proceed with the development, manufacture, and sale or
     lease of Licensed Product(s).  LICENSEE further agrees to diligently
     develop markets for the Licensed Patent(s) and/or Licensed Product(s).
     LICENSEE agrees that STANFORD may terminate this Agreement if, prior to
     July 1, 2000, LICENSEE has neither sublicensed the Licensed Patent(s) nor
     made a Licensed Product(s) available for commercial sale.  LICENSEE further
     agrees that STANFORD may terminate this Agreement if, for any period of one
     (1) full year after first sublicense or commercial sale, LICENSEE has
     neither maintained at least one sublicense in force nor sold any Licensed
     Product(s).

5.2  Progress Report - On or before September 1 of each year until LICENSEE
     ---------------
     markets a Licensed Product(s) or grants a sublicense under the Licensed
     Patent(s), LICENSEE shall make a written annual report to STANFORD covering
     the preceding year ending June 30, regarding the progress of LICENSEE
     toward commercial use of Licensed Product(s) or sublicensing of Licensed
     Patent(s).  Such report shall include, as a minimum, information sufficient
     to enable STANFORD to satisfy reporting requirements of the U.S. Government
     and for STANFORD to ascertain progress by LICENSEE toward meeting the
     diligence requirements of this Article 5.

5.3  In the event that LICENSEE fails to make available for commercial sale a
     Licensed Product based on a particular Licensed Material listed in Exhibit
     A for any period of one (1) full year after July 1, 2000, STANFORD may
     convert the Exclusive License granted to LICENSEE solely with respect to
     that particular Licensed Material (hereinafter, the "Uncommercialized
     Material") to a non-exclusive license, provided that STANFORD gives
     LICENSEE written notice of such intent and LICENSEE fails to commercialize
     the Uncommercialized Material within ninety (90) days of such notice.
     STANFORD agrees that nothing in this Section 5.3 shall have any effect on
     the Exclusive License granted to LICENSEE under any Licensed Material(s) or
     Licensed Product(s) other than the Uncommercialized Material.  STANFORD
     further agrees that nothing in this Section 5.3 shall have any effect on
     the Exclusive License granted to LICENSEE under the Licensed Patent(s) in
     Article 3 herein.

6.   ROYALTIES
--------------

6.1  Beginning July 1, 2000, and each July 1 thereafter, LICENSEE shall pay to
     STANFORD a yearly royalty of ***.  Said yearly royalty payments are
     nonrefundable, but they are creditable against earned royalties to the
     extent provided in Paragraph 6.4.

6.2  In addition, LICENSEE shall pay STANFORD earned royalties of *** of Net
     Sales.

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6.3  In the event that a Licensed Product is sold in combination with or
     containing one or more products or components, then Net Sales on the
     combination product shall be calculated using one of the following methods:

          (a)  By multiplying the net selling price of the combination product
               by the fraction A/A+B, where A is the gross selling price, during
               the royalty-paying period being considered, of the Licensed
               Product sold separately, and B is the gross selling price, during
               the royalty period in question, of the other products or
               components sold separately; or

          (b)  In the event that no such separate sales are made of the Licensed
               Product, Net Sales on the combination product for royalty
               determination shall be as reasonably allocated between such
               Licensed Product and the other active products or components,
               based on their relative importance and proprietary protection, as
               agreed by the parties. If the parties fail to reach agreement
               such allocation shall be submitted to binding arbitration.

6.4  Creditable payments under this Agreement shall be an offset to LICENSEE
     against up to *** of each earned royalty payment which LICENSEE would be
     required to pay pursuant to Paragraph 6.2 until the entire credit is
     exhausted.

6.5  If this Agreement is not terminated in accordance with other provisions
     hereof, LICENSEE's obligation to pay royalties hereunder shall continue for
     so long as LICENSEE, by its activities would, but for the license granted
     herein, infringe a valid claim of an unexpired Licensed Patent(s) of
     STANFORD covering said activity.

6.6  The royalty on sales in currencies other than U.S. Dollars shall be
     calculated using the appropriate foreign exchange rate for such currency
     quoted by the Bank of America (San Francisco) foreign exchange desk, on the
     close of business on the last banking day of each calendar quarter.
     Royalty payments to STANFORD shall be in U.S. Dollars.  All non-U.S. taxes
     related to royalty payments shall be paid by LICENSEE and are not
     deductible from the payments due STANFORD.

7.   ROYALTY REPORTS, PAYMENTS, AND ACCOUNTING
----------------------------------------------

7.1  Quarterly Earned Royalty Payment and Report - Beginning with the first sale
     -------------------------------------------
     of a Licensed Product(s) or the first sublicense, LICENSEE shall make
     written reports (even if there are no sales or sublicenses) and earned
     royalty payments to STANFORD within thirty (30) days after the end of each
     calendar quarter.  This report shall state the number, description, and
     aggregate Net Sales of Licensed Product(s) during such completed calendar
     quarter, and resulting calculation pursuant to Paragraph 6.2 of earned
     royalty payment due STANFORD for such completed calendar quarter.  The
     report shall also state the number and description of, and fees due under,
     sublicenses issued by Xenogen during such completed calendar quarter, and
     resulting calculation pursuant to Paragraph 13.5 of earned royalty payment
     due STANFORD for such completed calendar quarter.  Concurrent with the
     making of each such report, LICENSEE shall include payment due STANFORD of
     royalties for the calendar quarter covered by such report.

7.2  Accounting - LICENSEE agrees to keep and maintain records for a period of
     ----------
     three (3) years showing the sublicenses granted and the manufacture, sale,
     use, and other

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     disposition of products sold or otherwise disposed of under the license
     herein granted. Such records will include general ledger records showing
     cash receipts and expenses, and records which include production records,
     customers, serial numbers, and related information in sufficient detail to
     enable the royalties payable hereunder by LICENSEE to be determined.
     LICENSEE further agrees to permit its books and records to be examined by
     STANFORD from time to time to the extent necessary to verify reports
     provided for in Paragraph 7.1. Such examination is to be made by STANFORD
     or its designee, at the expense of STANFORD, except in the event that the
     results of the audit reveal an underreporting of royalties due STANFORD of
     five percent (5%) or more, then the audit costs shall be paid by LICENSEE.

8.   NEGATION OF WARRANTIES
---------------------------
8.1  Nothing in this Agreement is or shall be construed as:

          (a)  A warranty or representation by STANFORD as to the validity or
               scope of any Licensed Patent(s);

          (b)  A warranty or representation that anything made, used, sold, or
               otherwise disposed of under any license granted in this Agreement
               is or will be free from infringement of patents, copyrights, and
               other rights of third parties;

          (c)  An obligation to bring or prosecute actions or suits against
               third parties for infringement, except to the extent and in the
               circumstances described in Article 12;

          (d)  Granting by implication, estoppel, or otherwise any licenses or
               rights under patents or other rights of STANFORD or other persons
               other than Licensed Patent(s), regardless of whether such patents
               or other rights are dominant or subordinate to any Licensed
               Patent(s); or

          (e)  An obligation to furnish any technology or technological
               information.

8.2  Except as expressly set forth in this Agreement, STANFORD MAKES NO
     REPRESENTATIONS AND EXTENDS NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR
     IMPLIED.  THERE ARE NO EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY OR
     FITNESS FOR A PARTICULAR PURPOSE, OR THAT THE USE OF THE LICENSED
     PRODUCT(S) WILL NOT INFRINGE ANY PATENT, COPYRIGHT, TRADEMARK, OR OTHER
     RIGHTS OR ANY OTHER EXPRESS OR IMPLIED WARRANTIES.

8.3  LICENSEE agrees that nothing in this Agreement grants LICENSEE any express
     or implied license or right under or to U.S. Patent 4,656,134
     "Amplification of Eucaryotic Genes" or any patent application corresponding
     thereto.

9.   INDEMNITY
--------------

9.1  LICENSEE agrees to indemnify, hold harmless, and defend STANFORD, Stanford
     Hospital and Clinics and Stanford Health Services and their respective
     trustees, officers, employees, students, and agents against any and all
     claims for death, illness, personal injury, property damage, and improper
     business practices arising out of the manufacture, use, sale, or other
     disposition of Invention(s), Licensed Patent(s), Licensed Product(s), or
     Licensed Materials by LICENSEE or sublicensee(s), or their customers.

9.2  STANFORD shall not be liable for any indirect, special, consequential or
     other damages whatsoever, whether grounded in tort (including negligence),
     strict liability, contract or

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     otherwise. STANFORD shall not have any responsibilities or liabilities
     whatsoever with respect to Licensed Products(s).

9.3  LICENSEE shall at all times comply, through insurance or self-insurance,
     with all statutory workers' compensation and employers' liability
     requirements covering any and all employees with respect to activities
     performed under this Agreement.

9.4  In addition to the foregoing, LICENSEE shall maintain, during the term of
     this Agreement, Comprehensive General Liability Insurance, including
     Products Liability Insurance, with reputable and financially secure
     insurance carrier(s) to cover the activities of LICENSEE and its
     sublicensee(s).  Commencing with the introduction of Licensed Product(s)
     into humans for any purpose, including clinical trials, such insurance
     shall provide minimum limits of liability of Five Million Dollars
     ($5,000,000) and shall include STANFORD, Stanford University Hospital,
     their trustees, directors, officers, employees, students, and agents as
     additional insureds.  Such insurance shall be written to cover claims
     incurred, discovered, manifested, or made during or after the expiration of
     this Agreement.  At STANFORD's request, LICENSEE shall furnish a
     Certificate of Insurance evidencing primary coverage and requiring thirty
     (30) days prior written notice of cancellation or material change to
     STANFORD.  LICENSEE shall advise STANFORD, in writing, that it maintains
     excess liability coverage (following form) over primary insurance for at
     least the minimum limits set forth above.  All such insurance of LICENSEE
     shall be primary coverage; insurance of STANFORD or Stanford Health
     Services shall be excess and noncontributory.

10.  MARKING
------------

10.1 Prior to the issuance of any patents on any Licensed Products, LICENSEE
     agrees to mark all Licensed Products (or their containers or labels)
     covered by such patents and made, sold, or otherwise disposed of by
     LICENSEE under the license granted in this Agreement with the words "Patent
     Pending," and following the issuance of one or more patents, with the
     numbers of such patent(s).

10.2 STANFORD agrees to provide LICENSEE with notice of all STANFORD patent
     applications filed (and all STANFORD patents issuing) on any Licensed
     Products based on Licensed Materials listed in Exhibit A within 30 days of
     (i) the filing of such patent applications, and (ii) issuance of such
     patents. No such notice is required from STANFORD to LICENSEE for patents
     and patent applications that are included in the Licensed Patent(s).

11.  STANFORD NAMES AND MARKS
-----------------------------

Except in connection with the identification of the source of Invention(s),
Licensed Patent(s) and Licensed Products(s), LICENSEE agrees not to identify
STANFORD in any promotional advertising or other promotional materials to be
disseminated to the public or any portion thereof or to use the name of any
STANFORD faculty member, employee, or student or any trademark, service mark,
trade name, or symbol of STANFORD or the Stanford Health Services, or that is
associated with either of them, without STANFORD's prior written consent.
Notwithstanding the above, LICENSEE may use in any manner it deems fit the
name(s) of STANFORD faculty members or employees who are inventors on the
Inventions, Licensed Patents and/or Licensed Products, and who are employees of
or have a consulting agreement with LICENSEE ("Affiliates"), provided that
LICENSEE obtains the voluntary consent of the Affiliates for such

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use. STANFORD agrees that the names of the Affiliates and Affiliates' connection
with STANFORD will appear in disclosure documents required by securities laws,
and in other regulatory and administrative filings in the ordinary course of
LICENSEE'S business. Any use of STANFORD's name shall be limited to statements
of fact and shall not imply endorsement of LICENSEE's products or services.

12.  PATENT PROTECTION AND INFRINGEMENT
---------------------------------------

12.1 LICENSEE shall have the primary responsibility for the prosecution, filing
     and maintenance of all Licensed Patents, including the conduct of all
     interference, opposition, nullity and revocation proceedings, using counsel
     of its choice; provided, however, that STANFORD shall have reasonable
     opportunity to advise and consult with LICENSEE on such matters and may
     instruct LICENSEE to take such action as STANFORD reasonably believes
     necessary to protect the Licensed Patent(s).  Should LICENSEE elect to
     abandon any patent or patent application in any country, it shall give
     timely notice to STANFORD, who may continue prosecution or maintenance, at
     its sole expense and LICENSEE shall have not further rights with respect to
     such patent application or patent in such country.  In the event that a
     conflict arises with respect to patent counsel selected by LICENSEE,
     STANFORD may, with just cause and after consulting with LICENSEE, select
     new patent counsel reasonably acceptable to LICENSEE.

12.2 Payment of all reasonable fees and costs relating to the filing,
     prosecution and maintenance of all patent applications and patents within
     the Licensed Patent(s), including interference and/or opposition, nullity
     and revocation proceedings, shall be the responsibility of LICENSEE.
     STANFORD shall direct the patent counsel to send invoices for such fees and
     costs directly to LICENSEE with a copy to STANFORD, and LICENSEE shall pay
     such patent counsel directly amounts due.

12.3 STANFORD shall promptly inform LICENSEE of any suspected infringement of
     any Licensed Patent by a third party and any declaratory judgment filed
     with respect to any Licensed Patent.  LICENSEE shall have the initial right
     but not the obligation, at its expense, to initiate and control any
     proceeding relating to any infringement by a third party of any Licensed
     Patents, any declaratory action alleging invalidity or noninfringement of
     any Licensed Patents, or any interference, opposition, nullity or
     revocation proceeding relating to any Licensed Patents ("a Protective
     Action").  In pursuing any such Protective Action, LICENSEE shall provide
     STANFORD with material information related to the Protective Action, and
     shall have the right, but not the obligation, to join STANFORD as a party
     to the Protective Action, at LICENSEE's expense.  STANFORD shall have the
     right to participate in the Protective Action with its own counsel at its
     own expense.  If LICENSEE brings a Protective Action it may  enter into a
     settlement, consent judgment or other voluntary final disposition of such
     Protective Action, at its sole option, and any damages recovered by a
     Protective Action shall be used first to reimburse LICENSEE for the costs
     (including attorney's and expert fees) of such Protective Action actually
     paid by LICENSEE, and the remainder, if any, shall be retained by LICENSEE,
     except LICENSEE shall pay STANFORD two percent (2%) of said remainder,
     provided, if STANFORD joins in any Protective Action at its inception and
     shares equally in the costs (including attorney's and expert fees) incurred
     in its

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     conduct, in the event of any recovery each party shall be reimbursed for
     its expenses incurred in such Protective Action and STANFORD and LICENSEE
     shall equally share any remainder.

12.4 If LICENSEE, or its sublicensee pursuant to Section 13.6, decides not to
     bring a Protective Action after LICENSEE receives notice from STANFORD
     pursuant to Section 12.3, LICENSEE shall inform STANFORD and STANFORD may
     institute a Protective Action.  In such event, STANFORD shall control such
     Protective Action, including any settlement, consent judgment or other
     voluntary final disposition thereof at its sole option, and shall bear the
     entire cost of such Protective Action and shall be entitled to retain the
     entire amount of any recovery or settlement.  STANFORD may, at its expense,
     join LICENSEE as a party to such a Protective Action and LICENSEE shall
     cooperate reasonably with STANFORD in any such Protective Action, at
     STANFORD's expense.

12.5 Should either party commence a Protective Action under this Section 12 and
     thereafter elect to abandon the same, it shall give timely notice to the
     other party who may continue prosecution of such Protective Action;
     provided, however, that the sharing of past and future expenses and any
     recovery in such Protective Action shall be as mutually agreed by the
     parties.

12.6 In any Protective Action under this Section 12, the other party hereto
     shall, at the request and expense of the party initiating such Protective
     Action, cooperate in all respects and, to the extent possible, have its
     employees testify when requested and make available relevant records,
     papers, information, samples and the like.

13.  SUBLICENSE(S)
------------------

13.1 LICENSEE may grant sublicense(s) during the Exclusive period.  LICENSEE
     may sublicense all or a portion of the rights granted to it pursuant to
     this Agreement, subject to the conditions of this Article 13.  A "Patent
     Sublicense" means a sublicense which grants all or a portion of the rights
     under the Licensed Patent(s) to practice any method, process or procedure
     claimed therein in all or a part of the Licensed Territory.  It is
     understood that a Patent Sublicense shall not grant any rights to lease,
     sublicense, sell, offer for sale, or otherwise commercially dispose of any
     Licensed Products in any part of the Licensed Territory.  A "Products
     Sublicense" means a sublicense which grants all or a portion of the rights
     to lease, sell, offer for sale and otherwise commercially exploit Licensed
     Products in all or a part of the Licensed Territory.  It is understood that
     a Products Sublicense may also include rights under the Licensed Patent(s).

13.2 If LICENSEE is unable or unwilling to serve or develop a potential market
     or market territory for which there is a willing sublicensee(s), LICENSEE
     will, at STANFORD's request, negotiate in good faith a sublicense(s)
     hereunder.

13.3 Any sublicense(s) granted by LICENSEE under this Agreement shall be
     subject and subordinate to terms and conditions of this Agreement, except:

          (a)  Sublicense terms and conditions shall reflect that any
               sublicensee(s) shall not further sublicense without the written
               consent of STANFORD, which consent shall not be unreasonably
               withheld; and

          (b)  The earned royalty rate specified in the sublicense(s) may be at
               higher rates

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               than the rates in this Agreement

     Such sublicense(s) (including, without limitation, any non-exclusive
     sublicenses) shall remain in effect in the event of any termination of this
     Agreement, provided that upon request by STANFORD, such sublicensee agrees
     in writing to be bound by the applicable terms of this Agreement.  All
     Products Sublicenses shall expressly include the provisions of Articles 7,
     8, and 9 for the benefit of STANFORD.  All Patent Sublicenses granted to
     commercial or for-profit entities shall expressly include the provisions of
     Articles 8 and 9 for the benefit of STANFORD.

13.4 LICENSEE agrees to provide STANFORD a copy of any sublicense granted
     pursuant to this Article 13.

13.5 LICENSEE will pay to STANFORD *** of all non-equity payments received by
     LICENSEE from its sublicensee(s) for the grant of a sublicense to practice
     the Licensed Patent(s), excluding those made under consulting or service
     agreements.  In addition, LICENSEE shall pay to STANFORD *** of all earned
     royalty income received by LICENSEE from each sublicense from the sale of
     Licensed Product(s); provided however, that LICENSEE shall pay to STANFORD
     no less than *** and no more than *** of such royalty income.

13.6 With the prior written consent of LICENSEE, and the prior written consent
     of STANFORD, which shall not be unreasonably withheld, a sublicensee may
     bring a Protective Action, subject to the provisions of Section 12.3.

14.  TERMINATION
----------------

14.1 LICENSEE may terminate this Agreement by giving STANFORD notice in writing
     at least thirty (30) days in advance of the effective date of termination
     selected by LICENSEE.

14.2 STANFORD may terminate this Agreement if LICENSEE:

          (a)  Is in default in payment of royalty or providing of reports;

          (b)  Is in breach of any provision hereof; or

          (c)  Provides any false report;

     and LICENSEE fails to remedy any such default, breach, or false report
     within thirty (30) days after written notice thereof by STANFORD.

14.3 In the event of any termination of this Agreement, LICENSEE shall provide
     for the transfer to STANFORD of all obligations accrued or accruable after
     such termination in any active sublicense(s) issued pursuant to Section 13.
     Such obligations shall include the payment of any royalties specified in
     such sublicense(s) that have accrued after termination of this Agreement.

14.4 Surviving any termination are:

          (a)  LICENSEE's obligation to pay royalties accrued or accruable;

          (b)  Any cause of action or claim of LICENSEE or STANFORD, accrued or
               to accrue, because of any breach or default by the other party;
               and

          (c)  The provisions of Articles 7, 8, 9, 16 and 20, Sections 13.3,
               14.3, and 14.4 and any other provisions that by their nature are
               intended to survive.

15.  ASSIGNMENT
---------------

Neither party may assign this Agreement or any part hereof without the express
written consent of the other, which consent shall not be unreasonably withheld;
provided, however, LICENSEE

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may assign this Agreement or any portion hereof to an affiliate or to a
successor of all or substantially all its business relating to the Licensed
Patent(s) without the written consent of STANFORD and shall provide STANFORD
notice of any such assignment.

16.  ARBITRATION
----------------

16.1 Any controversy arising under or related to this Agreement, and any
     disputed claim by either party against the other under this Agreement
     excluding any dispute relating to patent validity or infringement arising
     under this Agreement, shall be settled by arbitration in accordance with
     the Licensing Agreement Arbitration Rules of the American Arbitration
     Association.

16.2 Upon request by either party, arbitration will be by a third party
     arbitrator mutually agreed upon in writing by LICENSEE and STANFORD within
     thirty (30) days of such arbitration request.  Judgment upon the award
     rendered by the arbitrator shall be final and nonappealable and may be
     entered in any court having jurisdiction thereof.

16.3 The parties shall be entitled to discovery in like manner as if the
     arbitration were a civil suit in the California Superior Court.  The
     Arbitrator may limit the scope, time and/or issues involved in discovery.

16.4 Any arbitration shall be held at Stanford, California, unless the parties
     hereto mutually agree in writing to another place.

17.  NOTICES
------------

All notices under this Agreement shall be deemed to have been fully given when
done in writing and deposited in the United States mail, registered or
certified, and addressed as follows:

               To STANFORD:   Office of Technology Licensing
                              Stanford University
                              900 Welch Road, Suite 350
                              Palo Alto, CA 94304-1850

                              Attention:  Director

               To LICENSEE:   Xenogen Corporation
                              860 Atlantic Avenue
                              Alameda, CA 94501

                              Attention:  President

Either party may change its address upon written notice to the other party.

18.  WAIVER
-----------

None of the terms of this Agreement can be waived except by the written consent
of the party waiving compliance.

19.  APPLICABLE LAW
-------------------

This Agreement shall be governed by the laws of the State of California
applicable to agreements negotiated, executed and performed wholly within
California.

*** Confidential treatment requested

                                      -10-
<PAGE>

20.  CONFIDENTIALITY
--------------------

STANFORD shall maintain this Agreement and the reports and any information
provided by LICENSEE to STANFORD pursuant to Articles 5, 7 and 13 in confidence
and shall be treated with at least the same degree of care as used to maintain
secrecy of STANFORD's other confidential information.  STANFORD may, however,
disclose to third parties total annual royalty payments and general statistical
information regarding payments made hereunder in the context of disclosing
statistical information pertaining to the performance of the STANFORD Office of
Technology Licensing.

21.  Entire Agreement
---------------------

This Agreement constitutes the entire agreement between LICENSEE and STANFORD
and supersedes all prior communications, understandings and agreements with
respect to the subject matter of this Agreement.  This Agreement may not be
amended except with a written agreement signed by LICENSEE and STANFORD.

*** Confidential treatment requested

                                      -11-
<PAGE>

          IN WITNESS WHEREOF, the parties hereto have executed this Agreement in
duplicate originals by their duly authorized officers or representatives.

          THE BOARD OF TRUSTEES OF THE LELAND
          STANFORD JUNIOR UNIVERSITY

          Signature /s/ Katharine Ku
                   --------------------------
          Name  Katharine Ku
              -------------------------------
          Title Director
               ------------------------------
          Date  Technology License
              -------------------------------

          LICENSEE

          Signature /s/ David W. Carter
                   --------------------------
          Name      David W. Carter
              -------------------------------
          Title     Chairman and Co-CEO
               ------------------------------
          Date
              -------------------------------

Exhibit A:  Licensed Materials

*** Confidential treatment requested

                                      -12-
<PAGE>

                                   Exhibit A

                                      ***

*** Confidential treatment requested

                                      -13-<PAGE>

         [CONFIDENTIAL TREATMENT REQUESTED. CERTAIN PORTIONS OF THIS
    AGREEMENT HAVE BEEN REDACTED AND SEPARATELY FILED WITH THE COMMISSION]

                                                                   EXHIBIT 10.15

                         COMMERCIAL LICENSE AGREEMENT

     This Agreement (the "Agreement") effective as of July 12, 2000 (the
"Effective Date") is made by and between Xenogen Corporation, having a principal
place of business at 860 Atlantic Avenue, Alameda, California 94501 ("Xenogen")
and IRM, LLC, a Delaware Corporation, ("IRM"), having a principal place of
business at Sofia House, 48 Church Street, Hamilton, Bermuda.

                                  BACKGROUND

     A.   Xenogen has expertise in the development and detection of living
cells, organisms and transgenic animals that have the property of
bioluminescence, and owns or has rights to intellectual property relating
thereto.

     B.   IRM wishes to obtain a non-exclusive commercial license to the Xenogen
Technology for use in the Field at the Authorized Sites (capitalized terms
defined below).

     NOW, therefore, the parties agree as follows:

1.   Definitions.
     -----------

     "Xenogen Monitoring Technology" means (i) U.S. Patent No. 5,650,135; (ii)
all divisions, substitutions, continuations, and continuation-in-part
applications of (i); (iii) all foreign counterparts of any of the preceding; and
(iv) all patents issuing on any of the preceding, including reissues,
reexaminations and extensions; which patents and applications have been licensed
to Xenogen pursuant to that certain exclusive license agreement between Xenogen
and The Board of Trustees of the Leland Stanford Junior University ("Stanford")
effective July 1, 1997.

     "Xenogen Technology" means (i) all patents and patent applications owned or
controlled by Xenogen that relate to the practice of in vivo imaging; (ii) all
divisions, substitutions, continuations, and continuation-in-part applications
of (i); (iii) all foreign counterparts of any of the preceding; (iv) all patents
issuing on any of the preceding, including reissues, reexaminations and
extensions; and (v) all future patents and patent applications relating to the
practice of in vivo imaging, Xenogen Technology includes the Xenogen Monitoring
Technology.

     "Field" means the activities specified in Exhibit A attached hereto.

     "Authorized Site(s)" means the physical location(s) specified in Exhibit B
attached hereto.

     "Affiliate" means Novartis Pharmaceuticals Corporation ("Novartis") or any
corporation, firm, partnership or other legal entity which, directly or
indirectly, controls, is controlled by or is under common control by or with
Novartis. For the purposes of this definition, "control" shall mean the direct
or indirect ownership of more than 50% of the outstanding voting securities or
capital stock of such entity or any other comparable equity or ownership
interest.

     "System" means an imaging system as specified in Exhibit C attached hereto.
<PAGE>

     "Permitted Users" shall mean IRM, Novartis, Novartis Research Foundation,
the Novartis Institute for Functional Genomics Inc., the Friedrich Miescher
Institute and all Novartis Affiliates.

     "Commercial Use License" means a license by Xenogen granting rights to any
for-profit entity to use the Xenogen Monitoring Technology for commercial drug-
development (e.g., compound screening and/or target validation) purposes. It is
agreed that the following types of licenses do not constitute a Commercial Use
License: (i) an evaluation license granted for the purpose of evaluating
Xenogen's technology and/or Bioware(TM) organisms, such as the September 1998
agreement between the parties executed by Novartis Pharmaceuticals Corporation
on September 18, 1998, and by Xenogen on September 25, 1998; (ii) a strain
development or modification agreement, whereby a third party is licensed to use
the Xenogen Monitoring Technology to develop new Bioware(TM) organisms or
improve existing Bioware(TM) organisms, without rights to use such Bioware(TM)
organisms for its own or contract research drug development purposes; and (iii)
a distribution agreement, whereby a third party is granted rights to use the
Xenogen Monitoring Technology in connection with the distribution certain
Xenogen Bioware(TM) organisms or animals to third parties, without rights to use
such Bioware(TM) organisms or animals for its own or contract research drug
development purposes.

2.   License Grant.
     -------------

     2.1    License. Xenogen hereby grants to IRM and Permitted Users, a
            -------
non-exclusive, non-transferable license, without right to grant or authorize any
sublicenses, to use the Xenogen Technology solely in the Field solely at the
Authorized Sites.

     2.2    No Implied Rights; Retained Rights. Only the License granted
            ----------------------------------
pursuant to the express terms of this Agreement shall be of any legal force or
effect. No other license rights shall be granted or created by implication,
estoppel or otherwise. Xenogen reserves the right to license the Xenogen
Technology to others, and to use the Xenogen Technology for its own purposes.

     2.3    No Warranty. IRM ACKNOWLEDGES THAT NEITHER XENOGEN NOR STANFORD MAKE
            -----------
ANY REPRESENTATIONS OR EXTEND ANY WARRANTIES OF ANY KIND, WHETHER EXPRESS OR
IMPLIED, WITH RESPECT TO THE XENOGEN TECHNOLOGY, INCLUDING WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR THAT THE USE OF THE
XENOGEN TECHNOLOGY WILL NOT INFRINGE THE INTELLECTUAL PROPERTY RIGHTS OF THIRD
PARTIES.

3.   Light-Emitting Organisms.
     ------------------------

     3.1    Source. IRM and Permitted Users may develop or otherwise acquire
            ------
from any source, light-emitting organisms for use in the practice of the
License.

     3.2   Existing Xenogen Bioware(TM) Organisms. IRM and Permitted Users may
           ------------------------------------
license or purchase from Xenogen any Bioware(TM) organisms that Xenogen has
available for third party licensing or purchase, respectively, at the then
current list price for such Bioware(TM) organisms; ***

*** CONFIDENTIAL TREATMENT REQUESTED

                                       2
<PAGE>

     3.3   Custom Xenogen Bioware(TM) Organisms. The parties may agree to have
           ----------------------------------
Xenogen develop custom Bioware(TM) organisms for IRM or Permitted Users on terms
and conditions to be negotiated in good faith.

4.   CCD Imaging System
     ------------------

     4.1   Available Systems. Xenogen shall offer for sale or lease to IRM and
           -----------------
Permitted Users the Systems specified in Exhibit C, on terms and conditions to
be agreed upon by the parties.

     4.2   Lease. IRM and Permitted Users may lease either of the Systems
           -----
specified in Exhibit C at a cost of * * * per month per System. The lease price
includes on-site installation and the cost of service reasonably necessary to
maintain the leased System in proper operating condition.

     4.3   Purchase. IRM and permitted Users may purchase either of the Systems
           --------
specified in Exhibit C at a per-System cost of * * * (Hamamatsu) or * * *
(IVIS(TM)). The purchase cost of each System includes on-site installation and
one year of service and maintenance at no additional charge.

     4.4   Hardware Upgrades. Xenogen shall notify IRM or Permitted Users if
           -----------------
additional hardware with enhanced functionality for in vivo imaging ("Hardware
Upgrade") becomes available from Xenogen. At IRM's or Permitted Users' option,
the parties shall then negotiate in good faith the terms on which such a
Hardware Upgrade could be made available to IRM or Permitted Users. * * *

     4.5   Service Agreement. Xenogen will make available to IRM and Permitted
           -----------------
Users a service agreement on terms consistent with industry norms (including
standard FTE labor and parts charges and travel expenses) to provide for the
service and maintenance of any System(s) purchased by IRM or Permitted Users
after expiration of the one year free service. Service will be initiated at
IRM's or Permitted Users' request, on terms and conditions to be agreed upon by
the parties.

     4.6   Software License. Contingent upon the lease or purchase of at least
           ----------------
one System by IRM or Permitted Users, Xenogen shall grant to IRM and Permitted
Users a nonexclusive, nontransferable license to use and display the Software
with the Equipment and with up to five (5) additional desktop computers (per
System leased or purchased) used for analysis of data obtained using the System
at the Authorized Sites for the duration of this Agreement.

     4.7   Software Upgrades. Xenogen will provide to IRM and Permitted Users,
           -----------------
without charge, any upgrades to the Software ("Software Upgrades") that Xenogen
makes available to third parties.

     4.8   New Software. If Xenogen makes available to third parties any new
           ------------
software suitable for use with in vivo imaging ("New Software"), Xenogen shall
make the New Software available to IRM and Permitted Users on terms and
conditions at least as favorable as the terms and conditions agreed to by any
commercial entity that has in place a Commercial Use License to the

* * *  CONFIDENTIAL TREATMENT REQUESTED

                                       3
<PAGE>

Xenogen Monitoring Technology, for similar quantities of New Software within six
(6) months of when the New Software becomes available to IRM and Permitted
Users.

     4.9   Acknowledgment. The copyright of the Software is and shall remain
           --------------
owned by Xenogen, and IRM and Permitted Users agree that they will not, without
Xenogen's prior written consent, directly or indirectly, modify, make derivative
works of, or make any copies of the Software, except those copies necessary to
run the software pursuant to Section 4.6 herein. IRM and Permitted Users further
agree that they shall not, directly or indirectly, attempt to reverse engineer
or decompile the Software or otherwise derive source code from the Software.

     4.10  Limited Warranty. Xenogen warrants that any System leased or
           ----------------
purchased from Xenogen by Novartis will include all components necessary for
conducting in vivo imaging experiments.

     4.11  Disclaimer of All Other Warranties. XENOGEN'S LIMITED WARRANTY SET
           ----------------------------------
FORTH IN SECTION 4.10 IS THE EXCLUSIVE WARRANTY, AND XENOGEN MAKES NO OTHER
WARRANTIES (EXPRESS, IMPLIED, STATUTORY OR OTHERWISE) WITH RESPECT TO THE SYSTEM
TRANSFERRED HEREUNDER, AND SPECIFICALLY DISCLAIMS ANY AND ALL IMPLIED WARRANTIES
OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, AND ALL WARRANTIES OF
NONINFRINGEMENT OF THIRD PARTY INTELLECTUAL PROPERTY RIGHTS.

5.   Consideration. In consideration for the License provided to IRM herein, IRM
     -------------
shall pay to Xenogen by wire transfer to an account designated by Xenogen a fee
("Fee") of two (2) million U.S. dollars (U.S.$2,000,000.00) per year for each
of three (3) years. Such payments will be due within fifteen (15) business days
of each yearly anniversary of the Effective Date. The first payment shall be
due within fifteen (15) business days of the Effective Date.

6.   Ownership of Intellectual Property. IRM and Permitted Users agree that all
     ----------------------------------
intellectual property rights relating to the Xenogen Monitoring Technology, the
System(s) and their uses are and shall be owned or controlled exclusively by
Xenogen. Xenogen agrees that all invention(s) made by IRM or the Permitted Users
in connection with the License granted hereunder that relate to subject matter
other than the Xenogen Monitoring Technology, the System, or their uses shall be
owned exclusively by IRM or Novartis.

7.   Confidentiality.
     ---------------

     7.1   Confidential Information. Except as expressly provided herein, the
           ------------------------
parties agree that, for the term of this Agreement and for three (3) years
thereafter, the receiving party shall protect from disclosure and shall not use
for any purpose except for the purposes contemplated by this Agreement, any
information identified as confidential ("Confidential Information") furnished to
it by the disclosing party hereto. The receiving party shall use the same
standard of care in safeguarding the disclosing party's information as the
receiving party uses for its own similarly sensitive information. Confidential
Information shall not include information which the receiving party shows:

           (a)   was already known to the receiving party, other than under an
obligation of confidentiality, at the time of disclosure;

                                       4
<PAGE>

           (b)   was generally available to the public or otherwise part of the
public domain at the time of its disclosure to the receiving party;

           (c)   became generally available to the public or otherwise part of
the public domain after its disclosure and other than through any act or
omission of the receiving party in breach of this Agreement;

           (d)   was subsequently lawfully disclosed to the receiving party by a
person other than a party hereto; or

           (e)   was approved for release by written authorization of the
disclosing party.

     7.2   Permitted Use and Disclosures. Each party hereto may use or disclose
           -----------------------------
information disclosed to it by the other party to the extent such use or
disclosure is reasonably necessary in complying with applicable law, legal
process or governmental regulations, or exercising its rights hereunder,
provided that if a party is required to make any such disclosure of another
party's Confidential Information, it will give reasonable advance notice to the
latter party of such disclosure and will use its best efforts to secure
confidential treatment of such information prior to its disclosure (whether
through protective order or otherwise).

     7.3   Confidential Terms. Except as expressly provided herein, each party
           ------------------
agrees not to disclose any terms of this Agreement to any third party without
the consent of the other party; provided, disclosures may be made to actual or
prospective corporate partners or investors, or to a party's accountants,
attorneys and other professional advisors. Any disclosures made to actual or
prospective corporate partners or investors, or to a party's accountants,
attorneys and other professional advisors, shall be limited to statements of
fact and shall not imply endorsement of the other party's products or services.

8.   Press Release. Xenogen may make a press release in the form attached as
     -------------
Exhibit D to announce the execution of this Agreement; thereafter, Xenogen and
IRM may each disclose to third parties the information contained in such press
release without the need for further approval by the other party. Other press
releases of any kind by either party will be released only after both parties
have agreed in writing to the contents of the press releases.

9.   Warranties and Indemnification
     ------------------------------

     9.1   Warranty of Right to Grant License. Xenogen warrants that as of the
           ----------------------------------
Effective Date, (a) it has the legal right to grant the License herein, and (b)
the grant of the License does not conflict with, violate, or constitute a breach
or default under any contract or other obligation of Xenogen.

     9.2   Warranty of Full Disclosure. Xenogen warrants that as of the
           ---------------------------
Effective Date, all non-cumulative material, prior art references and
information that Xenogen is aware of and that could adversely affect Xenogen's
pending patent applications and issued patents relating to the Xenogen
Monitoring Technology are presently before the United States Patent and
Trademark Office (USPTO).

     9.3   Indemnification. (a) IRM agrees to indemnify, defend and hold Xenogen
           ---------------
and its directors, officers, employees and agents and The Trustees of the Leland
Stanford Junior

                                       5
<PAGE>

University, Stanford Health Services and their respective trustees, officers,
employees, students and agents (the "Xenogen Indemnitee(s)") harmless from and
against any and all liabilities, claims, demands, expenses (including, without
limitation, reasonable attorneys and professional fees and other costs of
litigation), losses or causes of action (each, a "Xenogen Liability") that may
be brought against the Xenogen Indemnitee(s) by reason or arising out of or
relating in any way to (i) IRM's or Permitted Users' possession and use of the
System, whether based on negligence, product liability or otherwise, (ii) the
exercise of any right granted to IRM or Permitted Users pursuant to this
Agreement, or (iii) any material breach of this Agreement by IRM or Permitted
Users, except to the extent, in each case, that such Xenogen Liability is caused
by the negligence or willful misconduct by Xenogen as determined by a court of
competent jurisdiction. Notwithstanding the above, neither IRM nor any Permitted
User shall enter into any settlement or other agreement which makes any
admission of negligence or wrongdoing on the part of any Xenogen Indemnitee or
that relates to the validity or enforceability of any patents owned by Xenogen
without the prior written consent of Xenogen, which consent shall not be
unreasonably withheld. (b) Xenogen agrees to defend, indemnify and hold IRM, the
Permitted Users and its directors, officers, employees, agents and assigns (the
"IRM Indemnitee(s)") harmless against any and all liabilities, claims, demands,
expenses (including, without limitation, reasonable attorney's and professional
fees and other costs of litigation), losses or causes of action (each, an " IRM
Liability") that may be brought against the IRM Indemnitee(s) by reason or
arising out of or relating in any way to any negligent act or willful misconduct
on the part of Xenogen, except to the extent that such IRM Liability is caused
by the negligence or willful misconduct by IRM or Permitted Users as determined
by a court of competent jurisdiction. Notwithstanding the above, Xenogen shall
not enter into any settlement or other agreement which makes any admission of
negligence or wrongdoing on the part of any IRM Indemnitee(s). The party seeking
indemnification under this Section shall immediately notify the other party, in
writing, of any claim or proceeding brought against it for which it seeks
indemnification hereunder.

10.  Term and Termination
     --------------------

     10.1   Term. This Agreement will commence on the Effective Date and unless
            ----
terminated earlier as provided in this Article 10, will terminate three (3)
years after the Effective Date.

     10.2   Term Extension. Prior to the *** anniversary of the Effective Date,
            --------------
unless earlier terminated, IRM, Permitted Users or an assignee under Section
11.2 herein may extend the Term for up to *** additional years by paying to
Xenogen a fee of *** U.S. dollars (U.S. ***) per year of extension.

     10.3   Permissive Termination. IRM may terminate this Agreement upon thirty
            ----------------------
(30) days written notice to Xenogen for (i) failure of the Xenogen Monitoring
Technology, as confirmed by at least one peer-reviewed publication by a
disinterested party, (ii) a final judgment of invalidity of all Relevant Patent
Claims (as defined below) under the Xenogen Monitoring Technology, (iii) a final
adverse resolution of infringement of third party intellectual property rights,
or (iv) an assignment by Xenogen to a major pharmaceutical company pursuant to
Section 11.2 herein. A Relevant Patent Claim is a claim under the Xenogen
Monitoring Technology that would be infringed by IRM or Permitted Users but for
the License granted herein. IRM may also terminate this Agreement after two
years, and annually thereafter, for any reason with 60 days written notice prior
to the annual anniversary date of this Agreement.

*** CONFIDENTIAL TREATMENT REQUESTED

                                       6
<PAGE>

     10.4  Termination for Cause. Either party may terminate this Agreement in
           ---------------------
the event the other party has materially breached or defaulted in the
performance of any of its obligations hereunder, and such default has continued
for thirty (30) days after written notice thereof was provided to the breaching
party by the nonbreaching party. Any termination shall become effective at the
end of such thirty (30) day period unless the breaching party has cured any such
breach or default prior to the expiration of such period. Notwithstanding the
above, in the case of a failure to pay any amount due hereunder the period for
cure of any such default following notice thereof shall be ten (10) days and,
unless payment is made within such period, the termination shall become
effective at the end of such period.

     10.5  Automatic Termination. This Agreement shall terminate automatically
           ---------------------
and without further notice to the other party in the event that either party
shall make any unauthorized assignment for the benefit of creditors, file any
petition under the bankruptcy or insolvency laws of any jurisdiction, have or
suffer a receiver or trustee to be appointed for its business or property, or be
adjudicated a bankrupt or an insolvent.

     10.6  Effect of Termination.
           ---------------------

           (a) Accrued Rights and Obligations. Termination of this Agreement for
               ------------------------------
any reason shall not release any party hereto from any liability which, at the
time of such termination, has already accrued to the other party or which is
attributable to a period prior to such termination nor preclude either party
from pursuing any rights and remedies it may have hereunder or at law or in
equity with respect to any breach of this Agreement.

           (b) Return of Confidential Information and Leased Systems. Upon any
               -----------------------------------------------------
termination or expiration of this Agreement, IRM and Permitted Users and Xenogen
shall promptly return to the other party all Confidential Information received
from the other party (except one copy which may be retained for legal archival
purposes), IRM and Permitted Users shall return to Xenogen all leased Systems,
including all Equipment and Software leased to IRM and Permitted Users under any
lease agreement within thirty (30) days of the termination of this Agreement.
The System(s) shall be shipped to Xenogen's facility at the address set forth in
Section 11.5. IRM or Permitted Users shall pay all shipping and freight charges,
and shall assume the risk of loss during shipment. Xenogen agrees that in the
event of any loss or damage to the leased System(s), IRM's or Permitted Users'
liability for such loss or damage shall not exceed the lower of the amortized or
market values of the leased System(s) at the time of damage or loss.

           (c) Licenses. The licenses granted hereunder shall terminate upon the
               --------
termination of this Agreement,

     10.7  Survival. Sections 2.3, 4.11, 10.6 and 10.7; and Articles 6,7, 9 and
           --------
11 of this Agreement shall survive the expiration or termination of this
Agreement for any reason,

11.  Miscellaneous
     -------------

     11.l  Governing Law; Venue. This Agreement and any dispute, including
           --------------------
without limitation any arbitration, arising from the performance or breach
hereof shall be governed by and construed and enforced in accordance with the
laws of the state of California, without reference to conflicts of laws
principles. The exclusive venue of any dispute arising out of or in connection
with
<PAGE>

the performance or breach of this Agreement shall be the California state courts
or U.S. district court located in Alameda County, California.

     11.2   Assignment. IRM may not transfer or assign this Agreement or any of
            ----------
IRM's rights hereunder without the written consent of Xenogen, which consent
shall not be unreasonably withheld; the foregoing notwithstanding, IRM may
assign this Agreement to Novartis or any Novartis Affiliate. Xenogen may assign
this Agreement or its rights hereunder. This Agreement shall be binding upon and
inure to the benefit of the parties and their permitted successors and assigns.

     11.3   Waiver. No waiver of any rights, shall be effective unless consented
            ------
to in writing by the party to be charged and the waiver of any breach or default
shall not constitute a waiver of any other right hereunder or any subsequent
breach or default.

     11.4   Severability. In the event that any provision of this Agreement is
            ------------
determined to be invalid or unenforceable by a court of competent jurisdiction,
the remainder of the Agreement shall remain in full force and effect without
said provision.

     11.5   Notices. All notices, requests and other communications hereunder
            -------
shall be in writing and shall be personally delivered or sent by telecopy or
other electronic facsimile transmission or by registered or certified mail,
return receipt requested, postage prepaid, in each case to the respective
address specified below, or such other address as may be specified in writing to
the other parties hereto:

     IRM:      IRM, LLC
               P.O. Box HM 2899
               Hamilton HMLX, Bermuda

     Xenogen:  Xenogen Corporation
               860 Atlantic Avenue
               Alameda, CA 94501
               Attn: President

     11.6   Independent Contractors. Both parties are independent contractors
            -----------------------
under this Agreement. Nothing contained in this Agreement is intended nor is to
be construed so as to constitute Xenogen or Novartis as partners or joint
venturers with respect to this Agreement. Neither party shall have any express
or implied right or authority to assume or create any obligations on behalf of
or in the name of the other party or to bind the other party to any other
contract, agreement, or undertaking with any third party.

     11.7   Use of Name. Neither IRM nor Permitted Users shall use the name or
            -----------
trademarks of Xenogen or Stanford without the prior written consent of Xenogen
or Stanford, respectively. Xenogen shall not use the name or trademarks of IRM
or the Permitted Users without prior written consent, respectively.

     11.8   Compliance with Laws. In exercising their rights under this license,
            --------------------
the parties shall fully comply in all material respects with the requirements of
any and all applicable laws, regulations, rules and orders of any governmental
body having jurisdiction over the exercise of rights under this Agreement.
<PAGE>

     11.9   LIMITATION OF LIABILITY. NEITHER PARTY SHALL BE LIABLE TO THE OTHER
            -----------------------
FOR ANY SPECIAL, CONSEQUENTIAL, INCIDENTAL OR INDIRECT DAMAGES, INCLUDING,
WITHOUT LIMITATION, ANY LOSS OF USE, REVENUE OR PROFIT, ARISING OUT OF THIS
AGREEMENT, THE EXECUTION OF THE LICENSE, OR ANY BREACH OR DEFAULT UNDER THIS
AGREEMENT, HOWEVER CAUSED, UNDER ANY THEORY OF LIABILITY.

     11.10  "Most Favored Licensee". Xenogen agrees that it will not grant, to
            -----------------------
any commercial entity, a Commercial Use License with no milestone, royalty or
per-use fees, to use the Xenogen Technology for All Fields, for a per-year
license fee which is less than the per-year license fee paid by IRM under this
Agreement. In the event that Xenogen does grant such a license to any other
commercial entity, Xenogen will refund or credit IRM the difference. This
clause shall not apply to any settlements for past infringement.

     11.11  Entire Agreement: Amendment. This Agreement, together with its
            ---------------------------
Exhibits, constitutes the entire and exclusive Agreement between the parties
with respect to the subject matter hereof and supersedes and cancels all
previous discussions, agreements, commitments and writings in respect thereof.
No amendment or addition to this Agreement shall be effective unless reduced to
writing and executed by the authorized representatives of the parties.

<TABLE>
<S>                                                 <C>
IRM, LLC                                            XENOGEN CORPORATION

Signature:  /s/ J. Reinhardt                        Signature: /s/ David W. Carter
           -------------------------------------    -------------------------------
Printed Name: Dr. J. Reinhardt  Dr. B. Aebischer    Printed Name: David W. Carter
              -----------------------------------                 -----------------
Title:        President         Secretary           Title:        Chairman
        -----------------------------------------          ------------------------
Date:         7/25/2000                             Date:    7/10/00
      -------------------------------------------          ------------------------
</TABLE>

Exhibit A: Field
Exhibit B: Authorized Site
Exhibit C: CCD Imaging System
Exhibit D: Press Release

<PAGE>

                                    EXHIBIT A

                                      Field
                                      -----

Drug discovery, lead compound development, pre-clinical evaluation & development
(including efficacy and safety assessment, such as toxicology), and clinical
research & development for all targets, diseases and indications.
<PAGE>

                                    EXHIBIT B

                                Authorized Sites
                                ----------------

All Novartis sites:
The sites of all Novartis Affiliates
The Novartis Research Foundation entities including, but not limited to:
        The Novartis Institute for Functional Genomics, and
        The Friedrich Miescher Institute.
<PAGE>

                                    EXHIBIT C

    CCD Imaging Systems Available for Sale or Lease to IRM or Permitted Users
    -------------------------------------------------------------------------

Hardware
--------

     Hamamatsu 2400 Imagine System
     -----------------------------

        .   Hamamatsu intensified CCD camera
        .   Hamamatsu (Argus) Image Processor
        .   Nikkor(R) 50 mm f 1.2 lens
        .   Hamamatsu specimen chamber
        .   Macintosh(R) control computer with high-resolution monitor

     Xenogen IVIS(TM) Imaging System
     -------------------------------

        .   Roper LN- 1300EB cooled CCD camera (or equivalent)
        .   Navitar 50 mm f 0.95 lens (or equivalent)
        .   Xenogen specimen chamber
        .   Windows 98(R) control computer with high-resolution monitor

     Software
     --------
        LivingImage(TM) Image processing and data analysis software

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