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As filed with the Securities and Exchange Commission on April 20, 2004

Registration No. 333-113760



SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


AMENDMENT NO. 1
to
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933


DIGIRAD CORPORATION
(Exact Name of Registrant as Specified in its Charter)

Delaware   3845   33-0145723
(State or Other Jurisdiction of
Incorporation or Organization)
  (Primary Standard Industrial
Classification Code Number)
  (I.R.S. Employer
Identification Number)

13950 Stowe Drive
Poway, California 92064
(858) 726-1600
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)

David M. Sheehan
Chief Executive Officer
Digirad Corporation
13950 Stowe Drive
Poway, California 92064
(858) 726-1600
(Name, address, including zip code, and telephone number, including area code, of agent for service)



Copies to:
John A. de Groot, Esq.
Taylor L. Stevens, Esq.
Kristopher L. Hanson, Esq.
Morrison & Foerster LLP
3811 Valley Centre Drive, Suite 500
San Diego, California 92130
(858) 720-5100
  Vera P. Pardee, Esq.
Vice-President and General Counsel
Digirad Corporation
13950 Stowe Drive
Poway, California 92064
(858) 726-1600
  Charles K. Ruck, Esq.
Scott N. Wolfe, Esq.
B. Shayne Kennedy, Esq.
Latham & Watkins LLP
12636 High Bluff Drive, Suite 300
San Diego, California 92130
(858) 523-5400

Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes effective.


        If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.    o

        If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

        If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

        If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

        If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box.    o


        The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.





EXPLANATORY NOTE

        Digirad Corporation has prepared this Amendment No. 1 to the Registration Statement on Form S-1 (File No. 333-113760) for the purpose of filing with the Securities and Exchange Commission certain exhibits to the Registration Statement and amending Item 14 of the Registration Statement to reflect a change to an exhibit number referenced therein. Amendment No. 1 does not modify any provision of the Prospectus that forms a part of the Registration Statement and accordingly such Prospectus has not been included herein.




PART II—INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution

        The following table sets forth the costs and expenses, other than the underwriting discount, payable by the registrant in connection with the sale of common stock being registered. All amounts are estimates except the Securities and Exchange Commission registration fee and the National Association of Securities Dealers Inc. filing fee.

SEC registration fee   $ 10,928
NASD filing fee     9,125
Nasdaq National Market application fee     5,000
Nasdaq National Market entry fee     95,000
Nasdaq National Market annual fee (prorated for 2004)     *
Accounting fees and expenses     *
Legal fees and expenses     *
Printing and engraving expenses     *
Blue sky fees and expenses     *
Transfer agent and registrar fees and expenses     *
Miscellaneous     *

Total

 

$

120,053

*
To be filed by amendment.


Item 14. Indemnification of Directors and Officers

        As permitted by Section 102 of the Delaware General Corporation Law, we have adopted provisions in our restated certificate of incorporation and restated bylaws, which will become effective following the completion of this offering, that limit or eliminate the personal liability of our directors for a breach of their fiduciary duty of care as a director. The duty of care generally requires that, when acting on behalf of the corporation, directors exercise an informed business judgment based on all material information reasonably available to them. Consequently, a director will not be personally liable to us or our stockholders for monetary damages or breach of fiduciary duty as a director, except for liability for:

        These limitations of liability do not affect the availability of equitable remedies such as injunctive relief or rescission. Our restated certificate of incorporation also authorizes us to indemnify our officers, directors and other agents to the fullest extent permitted under Delaware law.

        As permitted by Section 145 of the Delaware General Corporation Law, our restated bylaws provide that:

II-1


        Our restated certificate of incorporation, attached as Exhibit 3.1 hereto, and our restated bylaws, attached as Exhibit 3.2 hereto, provide for the indemnification provisions described above and elsewhere herein. In addition, we have entered into separate indemnification agreements, a form of which is attached as Exhibit 10.20 hereto, with our directors and officers which may be broader than the specific indemnification provisions contained in the Delaware General Corporation Law. These indemnification agreements require us, among other things, to indemnify our officers and directors against liabilities that may arise by reason of their status or service as directors or officers, other than liabilities arising from willful misconduct. These indemnification agreements also require us to advance any expenses incurred by the directors or officers as a result of any proceeding against them as to which they could be indemnified. In addition, we have purchased a policy of directors' and officers' liability insurance that insures our directors and officers against the cost of defense, settlement or payment of a judgment in some circumstances. These indemnification provisions and the indemnification agreements may be sufficiently broad to permit indemnification of our officers and directors for liabilities, including reimbursement of expenses incurred, arising under the Securities Act.

        Reference is made to the following documents filed as exhibits to this registration statement regarding relevant indemnification provisions described above and elsewhere in this prospectus:

Document

  Exhibit
Number

Form of Underwriting Agreement   1.1
Form of Restated Certificate of Incorporation to be in effect upon the closing of this offering   3.1
Form of Restated Bylaws to be in effect immediately upon the closing of this offering   3.2
Form of Indemnification Agreement   10.20


Item 15. Recent Sales of Unregistered Securities

        The following list sets forth information regarding all securities we have sold since January 2001. All share amounts and per share prices reflect a 1-for-200 reverse stock split that was effected in October 2002 and a 1-for-        reverse stock split to be effected prior to completion of this offering.

(1)
In January, March and April 2001, we issued and sold to investors 9,694 shares of our Series E preferred stock, at a purchase price of $607.20 per share, for aggregate consideration of approximately $5.9 million.

(2)
In January, March, May, July and December 2001, we issued to certain consultants, in connection with and in partial consideration for services rendered to us, warrants to purchase an aggregate of 1,350 shares of our common stock at exercise prices ranging from $200.00 to $608.00 per share. Upon completion of this offering, these warrants will remain exercisable for an aggregate of 1,350 shares of our common stock at exercise prices ranging from $200.00 to $608.00 per share.

(3)
In January and December 2001, we issued to a consulting firm, in connection with and in partial consideration for services rendered to us, warrants to purchase 100 and 25 shares of our common stock, respectively, at an exercise price of $400.00 and $600.00 per share, respectively. Upon completion of this offering, these warrants will remain exercisable for 100 and 25 shares of our common stock, respectively, at an exercise price of $400.00 and $600.00 per share, respectively.

II-2


(4)
In July 2001, we issued to a commercial lender, in connection with and in partial consideration for a loan we received, a warrant to purchase 213 shares of our Series E preferred stock at an exercise price of $607.20 per share. Upon completion of this offering, this warrant will be immediately exercisable for 213 shares of our common stock at an exercise price of $607.20 per share.

(5)
In August 2001, we issued and sold to investors 13,092 shares of our Series F preferred stock, at a purchase price of $650.00 per share, for aggregate consideration of approximately $8.5 million.

(6)
In January 2002, we issued to certain existing investors and a new investor convertible promissory notes bearing 12% interest per annum in connection with a borrowing of an aggregate of approximately $2.0 million from those stockholders and that investor.

(7)
In January 2002, and in connection with the convertible promissory note issuance described in paragraph (3), we issued and sold the parties referred to in paragraph (3) warrants to purchase an aggregate of 790 shares of our common stock for $0.001 per underlying share. Upon the completion of this offering, these warrants will remain exercisable for an aggregate of 790 shares of our common stock at an exercise price of $300.00 per share.

(8)
In April 2002, each of the convertible promissory notes described in paragraph (6) was converted into shares of our Series H preferred stock.

(9)
In April, May and June 2002, we issued shares of our Series G preferred stock to existing investors upon their exchange of 9,611 shares of our Series E preferred stock, for no additional consideration to us. Upon the completion of this offering, the 5,447 shares of our Series E preferred stock outstanding as of December 31, 2003 will convert into 5,447 shares of our common stock.

(10)
In April, May and June 2002, we issued shares of our Series G preferred stock to existing investors upon their exchange of 12,322 shares of our Series F preferred stock, for no additional consideration to us. Upon the completion of this offering, the 770 shares of our Series F preferred stock outstanding as of December 31, 2003 will convert into approximately 824 shares of our common stock.

(11)
In April, May and June 2002, we issued and sold 31,008,401 shares of our Series G preferred stock to existing investors, at a purchase price of $2.00 per share, in exchange for the conversion of outstanding shares of our Series A, Series B, Series C, Series D, Series E and Series F preferred stock having an aggregate liquidation value of approximately $62.0 million.

(12)
Following the issuances of our Series G preferred stock referred to in paragraphs (9), (10) and (11), we issued shares of our common stock to existing investors upon their election to convert 24,191 shares of Series G preferred stock. Upon the completion of this offering, the 30,984,210 shares of Series G preferred stock outstanding as of December 31, 2004 will convert into 30,984,210 shares of our common stock.

(13)
In April, May and June 2002, and concurrently with the conversion of the outstanding shares of our Series A, Series B, Series C, Series D, Series E and Series F preferred stock described in paragraph (11), we issued and sold to investors 12,561,706 shares of our Series H preferred stock, at a purchase price of $1.40 per share, for aggregate consideration of approximately $17.6 million. Upon the completion of this offering, the 12,561,706 shares of our Series H preferred stock outstanding as of December 31, 2003 will convert into 12,561,706 shares of our common stock.

(14)
In March 2002, we issued to two of our consultants, in connection with services rendered to us, warrants to purchase an aggregate of 55 shares of our common stock at an exercise price of $600.00 per share. Upon the completion of this offering, these warrants will remain exercisable for an aggregate of 55 shares of our common stock at an exercise price of $600.00 per share.

II-3


(15)
In November 2002, we issued to a third party consulting firm, in connection with services rendered to us, warrants to purchase an aggregate of 100,000 shares of our common stock at an exercise price of $1.40 per share. Upon the completion of this offering, these warrants will remain exercisable for an aggregate of 100,000 shares of our common stock at an exercise price of $1.40 per share.

(16)
In November 2002, we issued to the two principals of the third party consulting firm described in paragraph (15), in connection with services rendered to us, warrants to purchase an aggregate of 100,000 shares of our common stock at an exercise price of $1.40 per share. Upon the completion of this offering, these warrants will remain exercisable for an aggregate of 100,000 shares of our common stock at an exercise price of $1.40 per share.

(17)
In July 2003, we issued to two of our consultants, in connection with services rendered to us, warrants to purchase an aggregate of 1,500 shares of our common stock at an exercise price of $1.40 per share. Upon the completion of this offering, these warrants will remain exercisable for an aggregate of 1,500 shares of our common stock at an exercise price of $1.40 per share.

(18)
From January 2001 through February 29, 2004, we granted options to purchase 6,950,370 shares of our common stock to employees, directors and consultants under our 1995 Stock Option/Stock Issuance Plan, 1997 Stock Option/Stock Issuance Plan and 1998 Stock Option/Stock Issuance Plan at exercise prices ranging from $0.14 per share to $608.00 per share. Of the options granted, 5,613,055 remain outstanding, 36,800 shares of common stock have been purchased pursuant to exercises of stock options and 1,323,662 shares have been repurchased or terminated and returned to the stock option pool available under our 1995 Stock Option/Stock Issuance Plan, 1997 Stock Option/Stock Issuance Plan and 1998 Stock Option/Stock Issuance Plan.

        The offers, sales, and issuances of the securities described in paragraphs (1), (3) - (13) and (15) were deemed to be exempt from registration under the Securities Act in reliance on Section 4(2) of the Securities Act because the issuance of securities to the recipients did not involve a public offering. The recipients of securities in each such transaction represented their intention to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the share certificates and warrants issued in such transactions. Each of the recipients of securities in the transactions described in paragraphs (1), (3) - (13) and (15) were accredited or sophisticated persons and had adequate access, through employment, business or other relationships, to information about us.

        The offers, sales and issuances of the options and common stock described in paragraphs (2), (14) and (16) - (18) were deemed to be exempt from registration under the Securities Act in reliance on Rule 701 because the transactions were under compensatory benefit plans and contracts relating to compensation as provided under Rule 701. The recipients of such options and common stock were our employees, directors or bona fide consultants and received the securities under our compensatory benefit plans or a contract relating to compensation. Appropriate legends were affixed to the share certificates issued in such transactions. Each of these recipients had adequate access, through employment or other relationships, to information about us.

        There were no underwriters employed in connection with any of the transactions set forth in this Item 15.

II-4



Item 16. Exhibits and Financial Statement Schedules


Exhibit
Numbers

  Exhibit Description
1.1*   Form of Underwriting Agreement.
3.1*   Form of Restated Certificate of Incorporation to be in effect upon the closing of this offering.
3.2*   Form of Restated Bylaws to be in effect upon the closing of this offering.
4.1*   Form of Specimen Stock Certificate.
4.2**   Amended and Restated Investors' Rights Agreement by and among Digirad Corporation and the investors listed on the schedule attached thereto, dated April 23, 2002.
5.1*   Opinion of Morrison & Foerster LLP.
10.1†   License Agreement by and between Digirad Corporation and the Regents of the University of California, dated May 19, 1999, as amended.
10.2†   Software License Agreement by and between Digirad Corporation and Segami Corporation, dated June 16, 1999.
10.3†   License Agreement by and between Digirad Corporation and Cedars-Sinai Health System, dated May 22, 2001.
10.4†   License Agreement by and between Digirad Corporation and Cedars-Sinai Health System, dated April 1, 2003.
10.5†   Development and Supply Agreement by and between Digirad Corporation and a supplier, dated June 18, 1999
10.6†   Loan and Security Agreement by and between Digirad Corporation and Silicon Valley Bank, dated July 31, 2001, as amended.
10.7   Irrevocable Standby Letter of Credit executed by Silicon Valley Bank in favor of Digirad Corporation, dated November 5, 2003.
10.8**   Loan Agreement by and between Digirad Corporation and Gerald G. Loehr Trust, dated September 1, 1993, as amended.
10.9**   Loan Agreement by and between Digirad Corporation and Clinton L. Lingren, dated September 1, 1993, as amended.
10.10**   Loan Agreement by and between Digirad Corporation and Jack F. Butler, dated September 1, 1993, as amended.
10.11   Equipment Lease Agreement by and between Orion Imaging Systems, Inc. and MarCap Corporation, dated October 1, 2000.
10.12   Equipment Lease Agreement by and between Digirad Imaging Solutions, Inc. and MarCap Corporation, dated June 13, 2003.
10.13   Master Equipment Lease Agreement by and between Digirad Imaging Solutions, Inc. and DVI Financial Services, Inc., dated May 24, 2001.
10.14**   Sublease Agreement by and between Digirad Corporation as sublessee and REMEC, Inc. as sublessor, dated November 3, 2003.
10.15*#   1995 Stock Option/Stock Issuance Plan.
10.16*#   1997 Stock Option/Stock Issuance Plan.
10.17#   1998 Stock Option/Stock Issuance Plan, as amended.
10.18*#   2004 Stock Incentive Plan.
10.19*#   2004 Non-Employee Director Option Program.
10.20*#   Form of Indemnification Agreement.
     

II-5


10.21#†   Letter Agreement by and between Digirad Corporation and David M. Sheehan, dated June 11, 2002.
10.22   Loan and Security Agreement by and between Orion Imaging Systems, Inc., Digirad Imaging Systems, Inc. and Heller Healthcare Finance, Inc., dated January 9, 2001, as amended.
10.23*   Master Lease Agreement by and between Digirad Corporation and GE Healthcare Financial Services, dated September 26, 2000.
10.24†   Consulting Agreement by and between Digirad Corporation and McAdams and Whitham Consulting, dated January 6, 2003.
10.25†   Agreement for Services by and between Digirad Imaging Solutions, Inc. and MBR Associates, Inc., dated April 1, 2002.
10.26   Form of Warrant to purchase shares of Series E Preferred Stock by and among Digirad Corporation and the investors listed on the schedule attached thereto.
10.27   Form of Warrant to purchase shares of Series E Preferred Stock by and among Digirad Corporation and the investors listed on the schedule attached thereto.
10.28   Form of Warrant to purchase shares of Common Stock by and among Digirad Corporation and the investors listed on the schedule attached thereto.
10.29**   Warrant to purchase shares of Series E Preferred Stock by and between Digirad Corporation and Silicon Valley Bank, dated July 31, 2001.
10.30†   Amended and Restated Warrant Issuance Agreement by and between Digirad Corporation and McAdams and Whitham Consulting, LLC and Dr. Stephen A. McAdams and John C. Whitham, dated November 13, 2002.
10.31*   Form of Warrant to purchase shares of Common Stock by and among Digirad Corporation and the investors listed on the schedule attached thereto.
10.32†   Form of Warrant to purchase shares of Common Stock by and among Digirad Corporation and the investors listed on the schedule attached thereto.
10.33†   Form of Warrant to purchase shares of Common Stock by and among Digirad Corporation and the investors listed on the schedule attached thereto.
21.1**   Subsidiaries of Digirad Corporation.
23.1**   Consent of Ernst & Young LLP, Independent Auditors.
23.2*   Consent of Morrison & Foerster LLP (included in Exhibit 5.1).
24.1**   Power of Attorney (included on signature page).

*   To be included by amendment.

**

 

Previously filed.

#

 

Indicates management contract or compensatory plan.


 

Application has been made to the Securities and Exchange Commission to seek confidential treatment of certain provisions. Omitted material for which confidential treatment has been requested has been filed separately with the Securities and Exchange Commission.

        No financial statement schedules are provided because the information called for is not required or is shown either in the consolidated financial statements or the notes thereto.

II-6




Item 17. Undertakings.

        The undersigned hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

        Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to the DGCL, our restated certificate of incorporation or our restated bylaws, the underwriting agreement or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by us of expenses incurred or paid by one of our directors, officers, or controlling persons in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered hereunder, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

        We hereby undertake that:

II-7



SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Amendment No. 1 to Registration Statement (No. 333-113769) to be signed on its behalf by the undersigned, thereunto duly authorized in San Diego, California, on this 20th day of April, 2004.

    DIGIRAD CORPORATION

 

 

By:

 

/s/  
DAVID M. SHEEHAN      
    Name:   David M. Sheehan
    Title:   President and Chief Executive Officer

        Pursuant to the requirements of the Securities Act of 1933, as amended, this Amendment No. 1 to Registration Statement (No. 333-113769) has been signed by the following persons in the capacities and on the dates indicated:

Name
  Title
  Date

 

 

 

 

 
/s/  DAVID M. SHEEHAN      
David M. Sheehan
  President, Chief Executive Officer and Director (Principal Executive Officer)   April 20, 2004

/s/  
TODD P. CLYDE      
Todd P. Clyde

 

Chief Financial Officer (Principal Financial and Accounting Officer)

 

April 20, 2004

*

Timothy J. Wollaeger

 

Chairman of the Board of Directors

 

April 20, 2004

*

Raymond V. Dittamore

 

Director

 

April 20, 2004

*

Robert M. Jaffe

 

Director

 

April 20, 2004

*

R. King Nelson

 

Director

 

April 20, 2004

*

Kenneth E. Olson

 

Director

 

April 20, 2004

*

Douglas Reed, M.D.

 

Director

 

April 20, 2004

*By:

 

/s/  
DAVID M. SHEEHAN      
David M. Sheehan
Attorney-in-fact

 

 

 

 

II-8



Index to Exhibits

Exhibit
Numbers

  Exhibit Description
1.1*   Form of Underwriting Agreement.
3.1*   Form of Restated Certificate of Incorporation to be in effect upon the closing of this offering.
3.2*   Form of Restated Bylaws to be in effect upon the closing of this offering.
4.1*   Form of Specimen Stock Certificate.
4.2**   Amended and Restated Investors' Rights Agreement by and among Digirad Corporation and the investors listed on the schedule attached thereto, dated April 23, 2002.
5.1*   Opinion of Morrison & Foerster LLP.
10.1†   License Agreement by and between Digirad Corporation and the Regents of the University of California, dated May 19, 1999, as amended.
10.2†   Software License Agreement by and between Digirad Corporation and Segami Corporation, dated June 16, 1999.
10.3†   License Agreement by and between Digirad Corporation and Cedars-Sinai Health System, dated May 22, 2001.
10.4†   License Agreement by and between Digirad Corporation and Cedars-Sinai Health System, dated April 1, 2003.
10.5†   Development and Supply Agreement by and between Digirad Corporation and a supplier, dated June 18, 1999
10.6†   Loan and Security Agreement by and between Digirad Corporation and Silicon Valley Bank, dated July 31, 2001, as amended.
10.7   Irrevocable Standby Letter of Credit executed by Silicon Valley Bank in favor of Digirad Corporation, dated November 5, 2003.
10.8**   Loan Agreement by and between Digirad Corporation and Gerald G. Loehr Trust, dated September 1, 1993, as amended.
10.9**   Loan Agreement by and between Digirad Corporation and Clinton L. Lingren, dated September 1, 1993, as amended.
10.10**   Loan Agreement by and between Digirad Corporation and Jack F. Butler, dated September 1, 1993, as amended.
10.11   Equipment Lease Agreement by and between Orion Imaging Systems, Inc. and MarCap Corporation, dated October 1, 2000.
10.12   Equipment Lease Agreement by and between Digirad Imaging Solutions, Inc. and MarCap Corporation, dated June 13, 2003.
10.13   Master Equipment Lease Agreement by and between Digirad Imaging Solutions, Inc. and DVI Financial Services, Inc., dated May 24, 2001.
10.14**   Sublease Agreement by and between Digirad Corporation as sublessee and REMEC, Inc. as sublessor, dated November 3, 2003.
10.15*#   1995 Stock Option/Stock Issuance Plan.
10.16*#   1997 Stock Option/Stock Issuance Plan.
10.17#   1998 Stock Option/Stock Issuance Plan, as amended.
10.18*#   2004 Stock Incentive Plan.
10.19*#   2004 Non-Employee Director Option Program.
10.20*#   Form of Indemnification Agreement.
10.21#†   Letter Agreement by and between Digirad Corporation and David M. Sheehan, dated June 11, 2002.
10.22   Loan and Security Agreement by and between Orion Imaging Systems, Inc., Digirad Imaging Systems, Inc. and Heller Healthcare Finance, Inc., dated January 9, 2001, as amended.
     

10.23*   Master Lease Agreement by and between Digirad Corporation and GE Healthcare Financial Services, dated September 26, 2000.
10.24†   Consulting Agreement by and between Digirad Corporation and McAdams and Whitham Consulting, dated January 6, 2003.
10.25†   Agreement for Services by and between Digirad Imaging Solutions, Inc. and MBR Associates, Inc., dated April 1, 2002.
10.26   Form of Warrant to purchase shares of Series E Preferred Stock by and among Digirad Corporation and the investors listed on the schedule attached thereto.
10.27   Form of Warrant to purchase shares of Series E Preferred Stock by and among Digirad Corporation and the investors listed on the schedule attached thereto.
10.28   Form of Warrant to purchase shares of Common Stock by and among Digirad Corporation and the investors listed on the schedule attached thereto.
10.29**   Warrant to purchase shares of Series E Preferred Stock by and between Digirad Corporation and Silicon Valley Bank, dated July 31, 2001.
10.30†   Amended and Restated Warrant Issuance Agreement by and between Digirad Corporation and McAdams and Whitham Consulting, LLC and Dr. Stephen A. McAdams and John C. Whitham, dated November 13, 2002.
10.31*   Form of Warrant to purchase shares of Common Stock by and among Digirad Corporation and the investors listed on the schedule attached thereto.
10.32†   Form of Warrant to purchase shares of Common Stock by and among Digirad Corporation and the investors listed on the schedule attached thereto.
10.33†   Form of Warrant to purchase shares of Common Stock by and among Digirad Corporation and the investors listed on the schedule attached thereto.
21.1**   Subsidiaries of Digirad Corporation.
23.1**   Consent of Ernst & Young LLP, Independent Auditors.
23.2*   Consent of Morrison & Foerster LLP (included in Exhibit 5.1).
24.1**   Power of Attorney (included on signature page).

*   To be included by amendment.

**

 

Previously filed.

#

 

Indicates management contract or compensatory plan.


 

Application has been made to the Securities and Exchange Commission to seek confidential treatment of certain provisions. Omitted material for which confidential treatment has been requested has been filed separately with the Securities and Exchange Commission.



QuickLinks

EXPLANATORY NOTE
PART II—INFORMATION NOT REQUIRED IN PROSPECTUS
SIGNATURES
Index to Exhibits
<Page>

                                                                    EXHIBIT 10.1

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


                                LICENSE AGREEMENT

                                       FOR


                                    DETECTOR


                                     BETWEEN


                               DIGIRAD CORPORATION



                                       AND


                   THE REGENTS OF THE UNIVERSITY OF CALIFORNIA


                                   THROUGH THE


                             ERNEST ORLANDO LAWRENCE
                          BERKELEY NATIONAL LABORATORY



<Page>



                                TABLE OF CONTENTS

1.   BACKGROUND                                                           1

2.   DEFINITIONS                                                          1

3.   LICENSE GRANT                                                        3

4.   LICENSE ISSUE FEE                                                    4

5.   ROYALTIES AND PAYMENTS                                               4

6    PERFORMANCE REQUIREMENTS                                             6

7    PROGRESS AND ROYALTY REPORTS                                         7

8.   BOOKS AND RECORDS                                                    8

9.   LIFE OF THE AGREEMENT                                                8

10.  TERMINATION BY BERKELEY LAB                                          9

11.  TERMINATION BY DIGIRAD                                               9

12.  DISPOSITION OF LICENSED PRODUCTS                                     9

13.  USE OF NAMES AND TRADEMARKS AND NONDISCLOSURE OF AGREEMENT           9

14.  LIMITED WARRANTY                                                    10

15.  PATENT PROSECUTION AND MAINTENANCE                                  11

16.  PATENT INFRINGEMENT                                                 13

17   WAIVER                                                              13

18.  ASSIGNMENT                                                          13

19.  INDEMNIFICATION                                                     13

20.  LATE PAYMENTS                                                       15


<Page>

21.  NOTICES                                                             15

22.  U.S.  MANUFACTURE                                                   15

23.  PATENT MARKING                                                      16

24.  GOVERNMENT APPROVAL OR REGISTRATION                                 16

25.  EXPORT CONTROL LAWS                                                 16

26.  FORCE MAJEURE                                                       16

27   MISCELLANEOUS                                                       16


<Page>

                         LICENSE AGREEMENT
 FOR DETECTOR


This license agreement (the "Agreement") is entered into by The Regents of the
University of California ("The Regents"), Department of Energy
contract-operators of the Ernest Orlando Lawrence Berkeley National Laboratory,
1 Cyclotron Road, Berkeley, CA 94720, (jointly, "Berkeley Lab"), and Digirad
Corporation, ("Digirad") a Delaware corporation, having as its principle place
of business, 9350 Trade Place San Diego, California 92126-6330.

                                  1. BACKGROUND

1.1      A certain invention, *** 
                              *** 
         (the "Invention"), was made under U.S. Department of Energy contract
         *** 
         *** at the University of California, Ernest Orlando Lawrence Berkeley
         National Laboratory by Steven Edward Holland.

1.2      As DOE sponsored development of the Invention, this Agreement and the
         resulting license are subject to overriding obligations to the federal
         government pursuant to the provisions of the applicable law or
         regulations.

1.3      Berkeley Lab wants the Invention developed and used to the fullest
         extent so that the general public enjoys the benefits of the
         government-sponsored research.

1.4      Digirad wants to obtain certain rights from Berkeley Lab for the
         commercial development, manufacture, use, and sale of the Invention.

1.5      Digirad entered into an Option Agreement with Berkeley Lab to license
         the above referenced invention on June 3, 1998.

1.6      Digirad is a "small business firm" as defined at Section 2 of Public
         Law 85-536 (15 U.S.C. 632).

Therefore the parties agree as follows:

                                 2. DEFINITIONS

2.1      "Effective Date" means the date of execution by the last signing party.

2.2      "Field of Use" means the development, production and use ***
                                             ***
                                             ***

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2.3      "Highly Inflationary Currency" means the currency of any economy with a
         cumulative inflation rate of *** or more over the most recent *** , as
         measured by consumer price indices published by the *** 
         ***

2.4      "Licensed Patents" means patent rights to any subject matter claimed in
         or covered by
                                                     ***
                                                     ***
         *** or any corresponding foreign patent application or patent, for
         which Digirad has met the requirements of Section 15.2 herein; any
         division, reexamination, continuation, continuation-in-part (excluding
         new matter contained and claimed in that continuation-in-part), or of
         which such application is a successor; any patents issuing on any of
         the foregoing, and all renewals, reissues and extensions thereof, or
         other equivalents of a renewal, reissues and extension thereof.

2.5      "Licensed Product" means any product, service or process that employs
         or is produced by the practice of any invention claimed in Licensed
         Patents and whose manufacture, use, practice, sale, or lease would
         constitute, but for the license Berkeley Lab grants to Digirad under
         this Agreement, an infringement of any claim in Licensed Patents.

2.6      "Selling Price" for the purpose of computing royalties means the price
         at which Digirad or its sublicensee sells the Licensed Product in an
         arms-length transaction, less the sum of the following deductions that
         are customary and actually taken: ***
                                                     ***
                                                     ***
                                                     ***
         When a Licensed Product is not sold, but is otherwise disposed of, the
         Selling Price of that Licensed Product for the purposes of computing
         royalties is ***
                                                     ***
         *** When such products are not currently being offered for sale by
         Digirad, the Selling Price of a Licensed Product otherwise disposed of,
         for the purpose of computing royalties, is ***
                                                     ***
         *** When such products are not currently sold or offered for sale by
         Digirad or others, then the Selling Price, for the purpose of computing
         royalties, shall be
                                            ***
         *** For sales of Licensed Products to a Joint Venture or Affiliate (as
         defined in Paragraphs 2.7 and 2.8 below) that are provided by Digirad
         to the Joint Venture or Affiliate (directly or indirectly for resale by
         said Joint Venture or Affiliate) at a reduced price from that
         customarily charged to an unrelated third party, then the royalty paid
         to Berkeley Lab will be based on ***
                                                     ***
         *** For sales of Licensed Products to a Joint 

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                                    2 of 17
<Page>

         Venture or Affiliate (as defined in Paragraphs 2.7 and 2.8 below) that
         are provided directly or indirectly by Digirad to the Joint Venture or
         Affiliate as an end user at a reduced price from that customarily
         charged to an unrelated third party, then the royalty paid to Berkeley
         Lab will be based on *** ***

2.7      "Affiliate(s)" of a party means                      ***
                                                     ***
                                                     ***
                                                     ***

2.8      "Joint Venture" means any separate entity established pursuant to an
         agreement between a third party and Digirad to constitute a vehicle for
         a joint venture, which separate entity purchases, sells or acquires
         Licensed Products from Digirad at prices substantially different from
         those at which Digirad would have charged other purchasers that deal at
         arms length with Digirad. If such separate entity is established, then
         Berkeley Lab shall collect from Digirad royalties on the Selling Price
         of Licensed Products by the entity and shall not collect royalties on
         the Selling Price of Licensed Products by Digirad.

                                3. LICENSE GRANT

3.1      Subject to the limitations set forth in this Agreement, Berkeley Lab
         grants to Digirad a nontransferable (subject to Section 18.1), limited
         (by the terms of Sections 3.2 and 3.7) worldwide exclusive,
         royalty-bearing license, under Licensed Patents, only in the Field of
         Use, to develop, make, have made, use, practice, sell, have sold, and
         lease the Licensed Products.

3.2      Any license under this Agreement is subject to the following: (a) DOE's
         royalty-free license for federal government practice only, and (b)
         DOE's option to grant licenses either if reasonable steps to
         commercialize the Invention are not carried out or in order to meet
         federal regulations. Digirad shall use best efforts to commercialize
         Licensed Patents.

3.3      Berkeley Lab also grants to Digirad the right to issue royalty-bearing
         sublicenses only in the Field of Use to make, use, practice and sell
         Licensed Products, so long as Digirad has current exclusive rights in
         the Field of Use.

3.4      Any sublicense Digirad grants must be consistent with all the rights
         and obligations due Berkeley Lab and the United States Government under
         this Agreement, including, without limitation, the obligations under
         Section 3.2 above.

3.5      Digirad shall provide Berkeley Lab with a copy of each sublicense
         issued under this Agreement; collect payment of all royalties due
         Berkeley Lab from sublicensees; and summarize and deliver all reports
         due Berkeley Lab from sublicensees under Article 7 (PROGRESS AND
         ROYALTY REPORTS).

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3.6      If this Agreement terminates for any reason,  ***
                                                     ***

3.7      Berkeley Lab expressly reserves the right to use the Invention and
         associated technology for educational and research purposes subject to
         the limitations of Section 13.2.

                              4. LICENSE ISSUE FEE

4.1      Digirad shall pay Berkeley Lab a license issue fee of ***
                                                     ***
                                                     ***
                                                     ***
                                                     ***
                           ***

4.2      This fee is                        ***

                            5. ROYALTIES AND PAYMENTS

5.1        Digirad shall pay to Berkeley Lab an earned royalty *** 
         *** of the Selling Price of each Licensed Product Digirad sells.

5.2      Under this Agreement a Licensed Product is considered to be sold when
         invoiced, or if not invoiced, when delivered to a third party. But when
         the last patent covering a Licensed Product expires or when the license
         terminates, any shipment made on or before the day of that expiration
         or termination that has not been billed out before is considered as
         sold (and therefore subject to royalty) unless returned to Digirad
         within *** . Berkeley Lab shall credit royalties that Digirad pays on a
         Licensed Product that the customer does not accept or returns.

5.3      For each sublicense, Digirad shall pay Berkeley Lab  ***
                                            ***
                                            ***
                                            ***
                                            ***
                           ***

5.4      Digirad shall pay to Berkeley Lab by *** of each year the difference
         between the earned royalties for that calendar year Digirad has already
         paid to Berkeley Lab and the minimum annual royalty set forth in the
         following schedule. Berkeley Lab shall credit that minimum annual
         royalty paid against the earned royalty due and owing for the calendar
         year in which Digirad made the minimum payment

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<Page>


<Table>
<Caption>
              CALENDAR YEAR                            MINIMUM ANNUAL ROYALTY
              -------------                            ----------------------
              <S>                                      <C>
                  1999                                 $ ***
                  2000                                 $ ***
                  2001                                 $ ***
                  2002 and each year thereafter        $ ***
</Table>


5.5      Digirad shall send payment for royalties accruing to Berkeley Lab ***
         together with its royalty report under paragraph 7.4. Digirad shall be
         entitled to credit ***
                                                     ***
                                                     ***
                           ***

5.6      Digirad shall make checks payable to "The Regents of the University of
         California (Berkeley Lab/L-99-1261.)" Digirad shall pay Berkeley Lab
         only in United States dollars. If a Licensed Product is sold for moneys
         other than United States dollars (not including Highly Inflationary
         Currency), Digirad shall ***
                                                     ***
                                                     ***
                                                     ***
         If a Licensed Product is sold for a Highly Inflationary Currency,
         Digirad shall ***
                                                     ***
                                                     ***
                                                     ***
                  ***

5.7      Digirad may not reduce royalties payable by  ***
                                                     ***
                                                     ***
                  ***

5.8      If Digirad cannot promptly remit any royalties for sales in any country
         where a Licensed Product is sold because of legal restrictions, Digirad
         may deposit in United States funds royalties due Berkeley Lab to
         Berkeley Lab's account in a bank or other depository in that country.
         If Digirad is not permitted to deposit those payments in U.S. funds
         under the laws of that country, Digirad may deposit those payments in
         the local currency to Berkeley Lab's account in a bank or other
         depository in that country.

5.9      If a court of competent jurisdiction and last resort holds invalid any
         patent or any of the patent claims within Licensed Patent in a final
         decision from which no appeal has or can be taken, Digirad's obligation
         to pay royalties based on that patent or claim will cease as of the
         date of that final decision. Digirad, however, shall pay any royalties
         that accrued before that decision or that are based on another patent
         or claim not involved in that decision.

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5.10     Digirad has no duty to pay Berkeley Lab royalties under this Agreement
         on a Licensed Product Digirad sells to the United States Government
         including any United States Government agency. Digirad shall reduce the
         amount charged for a Licensed Product sold to the United States
         Government by an amount equal to the royalty otherwise due Berkeley
         Lab. Such royalty otherwise due Berkeley Lab will count towards the
         minimum annual royalty payments per Section 5.4.

                           6. PERFORMANCE REQUIREMENTS

6.1      Digirad shall proceed with the development, manufacture and sale of
         Licensed Products and shall use diligent commercial efforts to endeavor
         to market them within a reasonable time after the Effective Date in
         quantities sufficient to meet the market demand.

6.2      Digirad shall use diligent commercial efforts to obtain all necessary
         governmental approvals for the manufacture, use and sale of Licensed
         Products.

6.3      Digirad is entitled to exercise prudent and reasonable business
         judgment in meeting its performance requirements under this Agreement.

6.4      If Digirad is unable to perform any of the following, then Berkeley Lab
         may either terminate this Agreement or reduce this limited exclusive
         license to a nonexclusive license:

              6.4.1                  ***
                                     *** or


              6.4.2                  ***
                                     ***
                        ***

         It is the understanding of the parties hereto that any termination of
         the Agreement or reduction of this license to a nonexclusive license as
         a result of Digirad's failure to meet the specifications of Section
         6.4, shall be subject to the *** cure period set forth in Section 10.1
         below.

6.5      If Berkeley Lab grants a non-exclusive license to any other party upon
         royalty rates more favorable than those of this Agreement after
         reducing this license to a non-exclusive license, then ***
                                                     ***
                                                     ***
                           ***

6.6      Digirad and Berkeley Lab by mutual written consent may amend or extend
         the requirements of Sections 6.4.1-6.4.2 at the written request of
         Digirad in response to legitimate business reasons.

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                         7. PROGRESS AND ROYALTY REPORTS

7.1      Beginning June 1, 1999 and *** thereafter, Digirad shall submit to
         Berkeley Lab a progress report covering Digirad's activities related to
         the development and testing of all Licensed Products and the obtaining
         of the governmental approvals necessary for marketing. Digirad shall
         make these progress reports for each Licensed Product until the first
         commercial sale of that Licensed Product occurs anywhere in the world.

7.2      The progress reports Digirad submits under Section 7.1 must include,
         but not be limited to, the following topics:

         7.2.1    summary of work completed related to the requirements of
                  Section 6.4;

         7.2.2    key scientific discoveries;

         7.2.3    summary of work in progress;

         7.2.4    current schedule of anticipated milestones;

         7.2.5    market plans for introduction of Licensed Products; and

         7.2.6    number of full-time equivalent (FTEs) employees or agents
                  working on the development of Licensed Products.

7.3      Digirad shall also report to Berkeley Lab in its immediately subsequent
         royalty report on the date of first commercial sale of each Licensed
         Product in the U.S. and in each other country.

7.4      After the first commercial sale of a Licensed Product anywhere in the
         world, Digirad shall make *** royalty reports to Berkeley Lab on or ***
         *** Each royalty report must cover the most recently completed *** and
         must show:

         7.4.1    the Selling Price of each type of Licensed Product sold by
                  Digirad;

         7.4.2    the number of each type of Licensed Product sold;

         7.4.3    the royalties, in U.S. dollars, payable under this Agreement
                  on those sales;

         7.4.4    the exchange rates used in calculating the royalty due;

         7.4.5    the royalties on government sales that otherwise would have
                  been due under Section 5.10; and

         7.4.6    for each sublicense, if any:

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                                    7 of 17
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                  7.4.6.1    the sublicensee;

                  7.4.6.2  the number, description, and aggregate Selling Prices
                           of Licensed Products that the sublicensee sold or
                           otherwise disposed of;

                  7.4.6.3  the exchange rates used in calculating the royalties
                           due Berkeley Lab from the sublicensee's sales.

7.5      If no sales of Licensed Products have been made during any reporting
         period, Digirad shall make a statement to this effect.

                              8. BOOKS AND RECORDS

8.1      Digirad shall keep books and records accurately showing all Licensed
         Products manufactured, used, or sold under the terms of this Agreement.
         Digirad shall preserve those books and records for at least *** from
         the date of the royalty payment to which they pertain and shall open
         them to inspection by representatives or agents of Berkeley Lab ***
                                                     ***
           ***

8.2      Berkeley Lab shall bear the fees and expenses of Berkeley Lab's
         representatives performing the examination of the books and records.
         But if the representatives discover an error resulting in a deficiency
         in royalties of more than *** of the total royalties due for any year,
         then Digirad shall bear the fees and expenses of these representatives
         and the difference between the earned royalties and the reported
         royalties (which shall be subject to the provisions of Article 20 (LATE
         PAYMENTS)).

                            9. LIFE OF THE AGREEMENT

9.1      Unless otherwise terminated by operation of law or by acts of the
         parties in accordance with the terms of this Agreement, this Agreement
         is in force from the Effective Date and expires concurrently with the
         last-to-expire Licensed Patent.

9.2      Any termination of this Agreement shall not affect the rights and
         obligations set forth in the following Articles:

                  Article 8         Books and Records

                  Article 12        Disposition of Licensed Products on Hand 
                                    upon Termination

                  Article 13        Use of Names and Trademarks and 
                                    Nondisclosure of Agreement

                  Article 14        Limited Warranty

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                  Article 19        Indemnification

                  Article 25        Export Control Laws

9.3      Termination does not affect in any manner any rights of Berkeley Lab or
         Digirad arising under this Agreement before the termination.

                         10. TERMINATION BY BERKELEY LAB

10.1     If Digirad violates or fails to perform any material term of this
         Agreement, then Berkeley Lab may give written notice of such default
         ("Default Notice") to Digirad. If Digirad fails to cure that default
         and provide Berkeley Lab with reasonable evidence of the cure within
         *** of the Default Notice, Berkeley Lab may terminate this Agreement
         and the licenses granted by a second written notice ("Termination
         Notice") to Digirad. If Berkeley Lab sends a Termination Notice to
         Digirad, this Agreement automatically terminates on the effective date
         of the Termination Notice.

                           11. TERMINATION BY DIGIRAD

11.1     Digirad at any time may terminate this Agreement in whole or as to any
         portion of Licensed Patents by giving written notice to Berkeley Lab.
         Digirad's termination of this Agreement will be effective *** after its
         notice. If that termination is without cause within *** years of the
         Effective Date, Digirad shall ***
                                            ***
                  ***

          12. DISPOSITION OF LICENSED PRODUCTS ON HAND UPON TERMINATION

12.1     Within *** of termination of this Agreement for any reason, Digirad
         shall provide Berkeley Lab with a written inventory of all Licensed
         Products in process of manufacture or in stock. Digirad shall make
         diligent efforts to dispose of those Licensed Products within *** of
         termination. The sale of any Licensed Product within *** is subject to
         the terms of this Agreement. Digirad shall cease sales of *** 
         *** after termination.

         13. USE OF NAMES AND TRADEMARKS AND NONDISCLOSURE OF AGREEMENT

13.1     In accordance with California Education Code Section 92000, Digirad
         shall not use in advertising, publicity or other promotional activities
         any name, trade name, trademark, or other designation of the University
         of California, nor shall Digirad so use "Berkeley Lab" (including any
         contraction, abbreviation, or simulation of any of the foregoing)
         without 

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         Berkeley Lab's prior written consent. As the sole exception to the
         above prohibition, Digirad shall give appropriate credit to the
         inventor(s) and Berkeley Lab at scientific symposia, and in technical
         publications in scientific journals where the licensed technology is
         referenced. Berkeley Lab shall not use in advertising, publicity or
         other promotional activities any name, trade name, or other designation
         of Digirad without its prior written consent except as set forth in
         Section 13.2 below.

13.2     Neither party may disclose the terms or existence of this Agreement to
         a third patty without express written permission of the other party,
         except when required under either the California Public Records Act or
         other applicable law or court order or by Berkeley Lab's contracts with
         the DOE or any other Federal or State entity. Notwithstanding the
         foregoing, Berkeley Lab may disclose the existence of this Agreement
         and the extent of the grant in Article 3, but shall not otherwise
         disclose the terms of this Agreement, except to the DOE.

13.3     The Proprietary Information Exchange Agreement between Digirad and the
         Regents of the University of California as Managers of the Lawrence
         Berkeley National Laboratory, as attached hereto as Exhibit A, shall
         remain in effect through the term outlined in the Proprietary
         Information Exchange Agreement.

                              14. LIMITED WARRANTY

14.1     Berkeley Lab warrants to Digirad that it has the lawful right to grant
         this license.

14.2     Except as set forth above, this license and the associated Invention(s)
         are provided WITHOUT WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
         PARTICULAR PURPOSE OR ANY OTHER WARRANTY, EXPRESS OR IMPLIED. BERKELEY
         LAB MAKES NO REPRESENTATION OR WARRANTY THAT LICENSED PRODUCTS WILL NOT
         INFRINGE ANY PATENT OR OTHER PROPRIETARY RIGHT.

14.3     IN NO EVENT WILL BERKELEY LAB OR DIGIRAD BE LIABLE FOR ANY INCIDENTAL,
         SPECIAL OR CONSEQUENTIAL DAMAGES INCURRED BY THE OTHER PARTY HERETO
         RESULTING FROM EXERCISE OF THIS LICENSE OR THE USE OF THE INVENTION(S)
         OR LICENSED PRODUCTS UNDER THIS AGREEMENT. THIS PROVISION, 14.3, DOES
         NOT APPLY TO INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES AWARDED IN A
         JUDGEMENT FOR A THIRD PARTY AGAINST A PARTY OR THE PARTIES HERETO.

14.4     Except as set forth above, nothing in this Agreement may be construed
         as:

         14.4.1   a warranty or representation by Berkeley Lab as to the
                  validity or scope of any of Berkeley Lab's rights in Licensed
                  Patents;


                                    10 of 17
<Page>

         14.4.2   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 of
                  third parties;

         14.4.3   an obligation to bring or prosecute actions or suits against
                  third parties for patent infringement, except as specifically
                  provided for in Article 16 (Patent Infringement);

         14.4.4   a grant by implication, estoppel or otherwise of any license
                  or rights under any patents of Berkeley Lab other than
                  Licensed Patents, regardless of whether such patents are
                  dominant or subordinate to Licensed Patents; or

         14.4.5   an obligation to furnish any know-how not provided in Licensed
                  Patents.

                     15. PATENT PROSECUTION AND MAINTENANCE

15.1     Berkeley Lab shall diligently maintain the United States patents for
         Licensed Patents (including any future patent rights provided for in
         Section 2.4) using counsel of its choice that is reasonably acceptable
         to Digirad. Berkeley Lab shall bear the cost of pre-paring, filing,
         prosecuting and maintaining any United States patent covered by this
         Agreement.

15.2     Berkeley Lab has filed foreign patent applications corresponding to the
         PCT Application referred to in Section 2.4 (namely US 97/20173) as 
         follows:

(a)    European Patent Office (EPO), designating

(i)    ***

(ii)   ***

(iii)  ***

(iv)   ***

(v)    ***

(vi)   ***

(vii)  ***

(viii) ***

(ix)   ***

(x)    ***

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(xi)   ***

(xii)  ***

(b)    ***

Berkeley Lab has no obligation to take action to file or prosecute foreign
patent applications on behalf of Digirad until the following occurs:

         15.2.1   (With the exception of the three countries listed in 15.3
                  below) Digirad makes that request in writing to Berkeley Lab
                  within *** after the Effective Date. The absence of the
                  required notice from Digirad to Berkeley Lab acts as an
                  election not to proceed on protecting foreign rights.

         15.2.2   That notice also identifies the countries Digirad desires.

         15.2.3   Digirad pays Berkeley Lab the foreign license fee as set forth
                  in paragraph 15.4

15.3     Digirad agrees to pay Berkeley Lab *** , upon the day of execution of
         this Agreement, for the foreign patent counterparts to the U.S.
         application for the following countries: ***

15.4     The foreign license fee for each foreign counterpart in addition to
         those listed in Section 15.3 to a United States patent application
         shall be *** for each national filing or for each country designated in
         the PCT filing for entry into the national phase, European Patent
         Convention ("EPC") filing, or similar regional filing.

15.5     Berkeley Lab shall bear the expense of preparing, filing, prosecuting
         and securing all foreign patent applications that Berkeley Lab files at
         Digirad's request (pursuant to 15.2 above). Digirad shall bear the
         expense of ***
                                                     ***
                                                     ***

15.6     Berkeley Lab shall promptly provide Digirad with copies of all relevant
         documentation so that Digirad is informed of the continuing prosecution
         of Licensed Patents and any foreign patent applications Berkeley Lab
         files under Section 15.2. Additionally, Berkeley Lab shall provide
         Digirad a *** *** summarizing the status of the Licensed Patents and
         any foreign patent applications Berkeley Lab files under Section 15.2.
         Digirad shall keep this documentation confidential. Berkeley Lab shall
         use all reasonable efforts to amend any patent application to include
         claims reasonably requested by Digirad to protect the products
         contemplated to be sold under this Agreement.

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                             16. PATENT INFRINGEMENT

16.1     If either party learns of the substantial infringement of any of
         Licensed Patents, the party shall so inform the other party in writing
         and shall provide the other party with reasonable evidence of the
         infringement. During the period and in a jurisdiction where Digirad has
         exclusive rights under this Agreement, ***
                                                     ***
                                                     ***        Both parties 
         shall use their best efforts in cooperation with each other to
         terminate such infringement without litigation.

16.2                                                          ***
                                                              ***
                                                              ***

16.3                                                          ***
                                                              ***
                                                              ***

16.4                                                          ***
                                                              ***
                                                              ***

                                   17. WAIVER

17.1     The waiver of any breach of any term of this Agreement does not waive
         any other breach of that or any other term.

                                 18. ASSIGNMENT

18.1     This Agreement is binding upon and shall inure to the benefit of
         Berkeley Lab, its successors and assigns. Upon written notice to
         Berkeley Lab, Digirad may assign this Agreement to a Digirad wholly
         owned subsidiary or to a purchaser or acquirer of all or substantially
         all of the business or assets of Digirad. Any other attempt by Digirad
         to assign this Agreement is void unless Digirad obtains the prior
         written consent of Berkeley Lab. Berkeley Lab shall not unreasonably
         withhold or delay that consent.

                               19. INDEMNIFICATION

19.1     Digirad shall indemnify, hold harmless and defend Berkeley Lab and the
         U.S. Government and their officers, employees, and agents; the sponsors
         of the research that led to the Invention; and the inventors of the
         patents and patent applications in Licensed Patents against any and all
         claims, suits, losses, damage, costs, fees, and expenses resulting from
         or arising out of exercise of this license or any sublicense. Berkeley
         Lab shall promptly notify Digirad in writing of any claim or suit
         brought against Berkeley Lab in respect of which Berkeley Lab intends
         to invoke the provisions of this Article 19 

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                                    13 of 17
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         (INDEMNIFICATION).                          ***
                                                     ***
                                                     ***


19.2     Digirad, at its sole expense, shall insure its activities in connection
         with the work under this Agreement and obtain and keep in force
         Comprehensive or Commercial Form General Liability Insurance
         (contractual liability and products liability included) or equivalent
         program of self-insurance with limits as follows:

         19.2.1   Each Occurrence                                     $   ***
         19.2.2   Products/Completed Operations Aggregate             $   ***
         19.2.3   Personal and Advertising Injury                     $   ***
         19.2.4   General Aggregate (commercial form only)            $   ***

19.3     The coverages and limits referred to in this Article 19 do not in any
         way limit the liability of Digirad. Digirad shall furnish Berkeley Lab
         with certificates of insurance, including renewals, evidencing
         compliance with all requirements at least *** prior to the first
         commercial sale, use, practice or distribution of a Licensed Product.

         19.3.1   If such insurance is written on a claims-made form, coverage
                  shall provide for a retroactive date of placement on or before
                  the Effective Date.

         19.3.2   Digirad shall maintain the general liability insurance
                  specified during: (a) the period that the Licensed Product is
                  being commercially distributed or sold (other than for the
                  purpose of obtaining regulatory approvals) by Digirad or by a
                  sublicensee or agent of Digirad, and (b) a reasonable period
                  thereafter, but in no event less than five years.

19.4     The insurance coverage of Section 19.2 must:

         19.4.1   Provide for *** advance written notice to Berkeley Lab of any
                  modification of any such coverage and provide immediate notice
                  of cancellation of such coverage.

         19.4.2   Indicate that DOE and "The Regents of the University of
                  California" are endorsed as additional insureds, but only with
                  respect to the subject matter of this Agreement.

         19.4.3   Include a provision that the coverages are primary and do not
                  participate with, nor are excess over, any valid and
                  collectible insurance or program of self-insurance carried or
                  maintained by Berkeley Lab.

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


                                    14 of 17
<Page>

                                20. LATE PAYMENTS

20.1     Excepting issues arising from Section 26.1, if Digirad does not make a
         payment to Berkeley Lab when due, Digirad shall pay to Berkeley Lab ***
                                                     ***
                                                     ***
                  ***

                                   21. NOTICES

21.1     Any payment, notice or other communication this Agreement requires or
         permits either party to give must be in writing to the appropriate
         address given below, or to such other address as one party designates
         by written notice to the other party. The parties deem payment, notice
         or other communication to have been properly given and to be effective
         (a) on the date of delivery if delivered in person; (b) on the fourth
         day after mailing if mailed by first-class mail, postage paid; (c) on
         the second day after delivery to an overnight courier service such as
         Federal Express, if sent by such a service; or (d) upon confirmed
         transmission by telecopier. The parties addresses are as follows:

         For payments to Berkeley Lab:       For all other notices to 
                                             Berkeley Lab:

         Ernest Orlando Lawrence             Ernest Orlando Lawrence
         Berkeley National Laboratory        Berkeley National Laboratory
         Accounting/Financial Management     Technology Transfer Department
         P.O. Box 528                        Mailstop 90-1070
         Berkeley, California 94701          One Cyclotron Road
         Attention: Licensing Accountant     Berkeley, California 94720
         Fax: 510/486-5995                   Attention: Licensing Manager
         Telephone: 510/486-7113             Fax: 510/486-6457
                                             Telephone: 510/486-6467

         In the case of Digirad:

         Digirad Corporation
         9350 Trade Place
         San Diego, California 92126-6334
         Attention:  President
         Fax:  619-549-7714
         Telephone:  619-578-5300

                              22. U.S. MANUFACTURE

22.1     Digirad shall have Licensed Products produced for sale in the United
         States manufactured substantially in the United States so long as
         Digirad has current exclusive rights in the Field of Use.

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


                                    15 of 17
<Page>

                               23. PATENT MARKING

23.1     Digirad shall mark all Licensed Products made, used or sold under this
         Agreement, or their containers, in accordance with the applicable
         patent marking laws.

                     24. GOVERNMENT APPROVAL OR REGISTRATION

24.1     If the law of any nation requires that any governmental agency either
         approve or register this Agreement or any associated transaction,
         Digirad shall assume all legal obligations to do so. Digirad shall
         notify Berkeley Lab if it becomes aware that this Agreement is subject
         to a U.S. or foreign government reporting or approval requirement.
         Digirad shall make all necessary filings and pay all costs, including
         fees, penalties, and all other costs associated with such reporting or
         approval process. Berkeley Lab shall fully cooperate with Digirad, to
         the extent it is able to do so within the law and established Berkeley
         Lab policy, to provide documentation and testimony to obtain such
         approval or registration, at Digirad's sole expense.

                             25. EXPORT CONTROL LAWS

25.1     Digirad shall observe all applicable United States and foreign laws and
         regulations with respect to the transfer of Licensed Products and
         related technical data, including, with-out limitation, the
         International Traffic in Arms Regulations (ITAR) and the Export
         Administration Regulations.

                                26. FORCE MAJEURE

26.1     If a party's performance required under this Agreement is rendered
         impossible or unfeasible due to any catastrophes or other major events
         beyond its reasonable control, including, without limitation, the
         following, the parties are excused from performance, war, riot, and
         insurrection; laws, proclamations, edicts, ordinances or regulations;
         strikes, lockouts or other serious labor disputes; and floods, fires,
         explosions, or other natural disasters. When such events abate, the
         parties' respective obligations under this Agreement must resume.

                                27. MISCELLANEOUS

27.1     The headings of the several sections are inserted for convenience of
         reference only and are not intended to be a part of or to affect the
         meaning or interpretation of this Agreement.

27.2     This Agreement is not binding upon the parties until it is signed below
         on behalf of each party.

27.3     No amendment or modification hereof shall be valid or binding upon the
         parties unless made in writing and signed on behalf of each party.


                                    16 of 17
<Page>

27.4     This Agreement embodies the entire and final understanding of the
         parties on this subject. It supersedes any previous representations,
         agreements, or understandings, whether oral or written.

27.5     If a court of competent jurisdiction holds any provision of this
         Agreement invalid, illegal or unenforceable in any respect, this
         Agreement must be construed as if that invalid or illegal or
         unenforceable provision is severed from the Agreement, provided,
         however, that the parties shall negotiate in good faith substitute
         enforceable provisions that most nearly effect the parties' intent in
         entering into this Agreement.

27.6     This Agreement must be interpreted under California law without regard
         to principles of conflicts of laws.

Berkeley Lab and Digirad execute this Agreement in duplicate originals through
their duly authorized respective officers in one or more counterparts, that
taken together, are but one instrument.

THE REGENTS OF THE UNIVERSITY               DIGIRAD CORPORATION
OF CALIFORNIA, THROUGH THE
ERNEST ORLANDO LAWRENCE
BERKELEY NATIONAL LABORATORY

By    /S/ PIERMARIA T. ODDONE             By       /S/ SCOTT HUENNEKENS   
   -----------------------------             ---------------------------------
                  (signature)                          (signature)

By      PIERMARIA T.  ODDONE              By         SCOTT HUENNEKENS          
   ------------------------------            ---------------------------------
            (Please Print)                            (Please Print)

Title    DEPUTY DIRECTOR                  Title    PERS. & COO                 
      ---------------------------                -----------------------------

Date     MAY 16, 1999                     Date     5-19, 1999       
     ----------------------------              -------------------------------




Approved as to form


         /S/ GLENN R. WOODS                                   
----------------------------------------
GLENN R. WOODS
LAWRENCE BERKELEY NATIONAL LABORATORY


                                    17 of 17
<Page>

                         Exhibit A to License Agreement

                   PROPRIETARY INFORMATION EXCHANGE AGREEMENT

         This AGREEMENT made and entered into as of this 23rd day of April 1,
1999 by and between DIGIRAD, a Delaware corporation, whose address is 9350 Trade
Place, San Diego, California 92126-6334 and The Regents of the University of
California as Managers of the Lawrence Berkeley National Laboratory, whose
address is 1 Cyclotron Road, Berkeley, CA 94720.

         WHEREAS, the parties hereto are undertaking negotiations towards the
development of a license agreement between them, and

         WHEREAS, in furtherance of such license, each undersigned party (the
"Receiving Party") understands that the other party (the "Disclosing Party") has
disclosed or may disclose information relating to the Disclosing Party's
business and/or intellectual property (including, without limitation, chemical
formulas, computer programs, software, technical drawings, names and expertise
of employees and consultants, know-how, formulas processes, ideas, inventions
(whether patentable or not), schematics and other technical business, financial,
customer and product development plans, forecasts, strategies and information,
and any and all information, technical or otherwise related to describing
Digirad's ***
                                            ***
                                            ***
sub-assemblies and related assemblies for use in medical imaging systems and
other applications), information which to the extent previously, presently, or
subsequently disclosed to the Receiving Party is hereinafter referred to as
"Proprietary Information" of the Disclosing Party.

         NOW, THEREFORE, in consideration of the parties' discussions and any
access the Receiving Party may have to Proprietary Information of the Disclosing
Party, the parties agree that any information received by one party from the
other shall be governed by the following terms and conditions:

Definition:

         "Proprietary Information" shall not include information which:

         (a)      was rightfully in possession of or known to the Receiving
Party prior to receiving it from the Disclosing Party; or

         (b)      is or becomes part of the public knowledge or literature by
acts other than those of the Receiving Party and without fault of the receiving
Party; or

         (c)      was rightfully disclosed to the Receiving Party by a third
party provided the Receiving Party complies with restrictions imposed by the
third party; or

         (d)      is transmitted after the expiration of this Agreement; or

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


                                     1 of 4
<Page>

         (e)      is disclosed by the Receiving Party under a valid order
created by a court or government agency, provided that the Receiving Party
provides prior written notice to the Disclosing Party of such obligation and the
opportunity to oppose such disclosure.

         (f)      the Receiving Party develops independently, subsequent to
receipt of Proprietary Information and for which Receiving Party can demonstrate
by written records that independent development occurred without knowledge or
use of Proprietary Information. 

HANDLING OF PROPRIETARY INFORMATION:

         The Receiving Party agrees to (i) hold the Disclosing Party's
Proprietary Information in strict confidence as a fiduciary and to take
reasonable precautions to protect such Proprietary Information and (ii) handle
the Proprietary Information in the same manner that it handles its own
proprietary information of like importance, but with at least reasonable degree
of care, for a period of five (5) years after the date of disclosure.

LIMITATION ON DISCLOSURE:

         The Receiving Party shall not disclose, in whole or in part, such
Proprietary Information to any third party without the prior written consent of
the Disclosing Party for the period that such information is to be handled as
proprietary. The Receiving Party may disclose Proprietary Information only to
those of its employees who would require knowledge of such Proprietary
Information for the purposes contemplated by this Agreement and who is similarly
bound in writing.

LIMITATION OF USE:

         The Receiving Party shall make no use, in whole or in part, of any such
Proprietary Information other than in furtherance of the purpose of this
Agreement without the prior written consent of the Disclosing Party.

         If the purpose of the information exchange is the preparation of a
proposal to the United States Government, Proprietary Information of either
party may be incorporated into the proposal to the United States Government,
provided that the proposal document bears the restrictive legend contained in
Federal Acquisition Regulation 52.215-12 or a substantially similar successor
provision.

TERM:

         This Agreement shall expire one (1) year from the date recited in the
first paragraph of this Agreement. With the exception of information disclosed
in accordance with the provisions of the License Agreement for Detector between
Digirad Corporation and the Regents of the University of California through the
Ernest Orlando Lawrence Berkeley Laboratory, immediately upon a request by the
Disclosing Party at any time (which will be effective if actually received or
three days after mailed first class postage prepaid to the Receiving Party's
address herein), the Receiving Party will turn over to the Disclosing Party all
Proprietary Information of the Disclosing Party and all documents or media
containing any such Proprietary Information and any and all copies or extracts
thereof. The Receiving Party understands that 


                                     2 of 4
<Page>

nothing herein (i) requires the disclosure of any Proprietary Information of the
Disclosing Party, which shall be disclosed if at all solely at the option of the
Disclosing Party (in particular, but without limitation, any disclosure is
subject to compliance with expert control laws and regulations), or (ii)
requires the Disclosing Party to proceed with any proposed transaction or
relationship in connection with which Proprietary Information may be disclosed.
The party's obligations with respect to Proprietary Information disclosed to it
prior to expiration/termination shall survive expiration/termination.

RELATIONSHIP OF PARTIES:

         This Agreement is intended to provide only for the handling and
protection of Proprietary Information exchanged or disclosed hereunder, and
shall not be construed as a Teaming, Joint Venture, Partnership, or other
similar arrangement. Specifically, this Agreement shall not be construed in any
manner to be an obligation to enter into a contract, nor shall it result in any
claim whatsoever for reimbursement of costs.

NO LICENSE:

         Neither the execution of this agreement nor the furnishing of any
Proprietary Information hereunder shall be construed as granting either
expressly, by implication, estoppel or otherwise, any license other than as
expressly set forth herein under any invention, patent, copyright, trade secret,
mask work right, or any other intellectual property right, now or hereafter
owned or controlled by the party furnishing same.

U.S.  GOVERNMENT REGULATIONS:

         A party receiving Proprietary Information shall comply with all
relevant United States Government regulations, including the International
Traffic in Arms Regulations and the Export Administration Act.

MISCELLANEOUS:

         Each party shall perform its respective obligations hereunder without
charge to the other.

         Except to the extent permitted by the License Agreement for Detector
between Digirad Corporation and the Regents of the University of California
through the Ernest Orlando Lawrence Berkeley Laboratory, neither party will
refer to this Agreement or use the other party's name in any form of publicity
or advertising directly or indirectly, without the prior written consent of the
party whose name is proposed for use.

         Except as to a sale of the business to which this Agreement relates or
transfer of the management of the Ernest Orlando Lawrence Berkley Laboratory,
the rights and obligations of each party under this Agreement may not be
assigned or transferred to any person, firm or corporation, without the express
prior written consent of the other party, which consent will not be unreasonably
withheld.

         Neither party makes any representations regarding the accuracy,
completeness, or freedom from defects of the information disclosed, or with
respect to infringement of the rights of others.


                                     3 of 4
<Page>

         The Receiving Party acknowledges and agrees that due to the unique
nature of the Disclosing Party's Proprietary Information, there may be no
adequate remedy at law for any breach of its obligations hereunder, that any
such breach may allow the Receiving Party or third parties to unfairly compete
with the Disclosing Party resulting in irreparable harm to the Disclosing Party,
and therefore, that upon any such breach or any threat thereof, the Disclosing
Party may be entitled to appropriate equitable relief in addition to whatever
remedies it might have at law. The Receiving Party will notify the Disclosing
Party in writing immediately upon the occurrence of any such unauthorized
release or other breach of which it is aware. In the event that any of the
provisions of this Agreement shall be held by a court or other tribunal of
competent jurisdiction to be illegal, invalid or unenforceable, such provisions
shall be limited or eliminated to the minimum extent necessary so that this
Agreement shall otherwise remain in full force and effect.

ENTIRE AGREEMENT:

         This Agreement represents the entire agreement of the parties
pertaining to the subject matter of the Agreement, and supersedes any and all
prior oral discussions and/or written correspondence or agreements between the
parties with respect thereto.

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate original copies by their respective duly authorized
representatives.

DIGIRAD                                  The Regents of the University of 
                                         California Acting as Manager of the 
                                         Lawrence Berkeley Laboratory


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

Name:                                    Name:                            
      ----------------------------             ---------------------------

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

Date:                                    Date:                            
      ----------------------------             ---------------------------


                                     4 of 4
<Page>


                                  AMENDMENT #1
                                       TO
                         LICENSE AGREEMENT FOR DETECTOR

This Amendment (the "Amendment"), effective as of the signing date of the last
party to sign below, is entered into by The Regents of the University of
California ("The Regents"), Department of Energy contract-operators of the
Ernest Orlando Lawrence Berkeley National Laboratory ("LBNL"), 1 Cyclotron Road,
Berkeley, CA 94720, (jointly, "Berkeley Lab"), and Digirad Corporation
("Digirad"), a Delaware corporation having its principal place of business at
9350 Trade Place, San Diego, CA 92126-6330.

         THE PARTIES ENTERED INTO A LICENSE AGREEMENT FOR DETECTOR, REFERENCE
         NUMBER L-90-1261 (THE "AGREEMENT"), EFFECTIVE DATE OF MAY 19, 1999. THE
         PARTIES NOW DESIRE TO AMEND THE AGREEMENT BY EXPANDING THE LICENSE TO
         INCLUDE A NON-EXCLUSIVE FIELD OF USE (AS DEFINED BELOW) PURSUANT TO THE
         TERMS AND CONDITIONS HEREIN. CAPITALIZED TERMS HEREIN SHALL HAVE THE
         MEANING AS SET FORTH IN THE AGREEMENT EXCEPT AS OTHERWISE DEFINED IN
         THIS AMENDMENT.


The parties agree as follows:

1.       Section 2.2 of the Agreement is hereby deleted in its entirety and
         replaced with the following:

         2.2      "Field of Use" and "Non-Exclusive Field of Use":

                  2.2.1    "Field of Use" means the development, production and
                           use of ***
                                                              ***
                                                              ***

                  2.2.2    "Non-Exclusive Field of Use" means the development,
                           production and use of ***
                                                              ***
                                                              ***

2.       Section 2.4 of the Agreement is hereby deleted in its entirety and
         replaced with the following:

         2.4      "Licensed Patents" means patent rights to any subject matter
                  claimed in or covered by any of the following:

                  2.4.1    US Patent Number ***
                                                              ***
                                                              ***

                  2.4.2    Any resulting patent issued in Germany or France
                           arising from European Patent Convention Application
                           ***

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


                                                                            pg 1
<Page>

                                                              ***
                                                              ***

                  2.4.3    Japan Patent Application  ***
                                                              ***
                                                              ***

                  2.4.4    with respect to Sections 2.4.1 to 2.4.3, any
                           division, reexamination, continuation,
                           continuation-in-part (excluding new matter contained
                           and claimed in that continuation-in-part), or of
                           which such application is a successor; any patents
                           issuing on any of the foregoing, and all renewals,
                           reissues and extensions thereof, or other equivalents
                           of a renewal, reissues, and extensions thereof.

3.       Section 3.1 of the Agreement is hereby deleted in its entirety and
         replaced with the following:

         3.1      Subject to the limitations set forth in this Agreement,
                  Berkeley Lab grants to Digirad:

                  3.1.1    a nontransferable (subject to Section 18.1), limited
                           (by the terms of Sections 3.2 and 3.7) worldwide
                           exclusive, royalty-bearing license, under Licensed
                           Patents, only in the Field of Use, to develop, make,
                           have made, use, practice, sell, have sold, and lease
                           the Licensed Products.

                  3.1.2    a nontransferable (subject to Section 18.1),
                           nonexclusive worldwide, royalty-bearing license,
                           under Licensed Patents, only within the Non-Exclusive
                           Field of Use, to develop, make, have made, use,
                           practice, sell, and lease the Licensed Products.

4.       Section 4.1 of the Agreement is hereby deleted in its entirety and
         replaced with the following:

         4.1      As consideration for the licenses granted hereunder:

                  4.1.1    within the Field of Use, Digirad shall pay Berkeley
                           Lab a license issue fee of ***
                                                              ***
                                                              ***

                  4.1.2    within the Non-Exclusive Field of Use, Digirad shall
                           pay Berkeley Lab a license issue fee of ***
                                                              ***
                                                              ***
                                    ***

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


                                                                            pg 2
<Page>

5.       Section 5.1 of the Agreement is hereby deleted in its entirety and
         replaced with the following:

         5.1      Digirad shall pay to Berkeley Lab an earned royalty of:

                  5.1.1    *** of the Selling Price of each Licensed Product
                           Digirad sells within the Field of Use;

                  5.1.2    *** of the Selling Price of each Licensed Product
                           Digirad sells within the Non-Exclusive Field of Use;

6.       Section 5.4 of the Agreement is hereby deleted in its entirety and
         replaced with the following:

         5.4      Digirad shall pay to Berkeley Lab by *** of each year the
                  difference between the earned royalties for that calendar year
                  Digirad has already paid to Berkeley Lab for the Field of Use
                  and Non-Exclusive Field of Use and the minimum annual royalty
                  set forth in the following schedules for the Field of Use and
                  Non-Exclusive Field of Use. Berkeley Lab shall credit that
                  minimum annual royalty paid against the earned royalty due and
                  owing for the calendar year in which Digirad made the minimum
                  payment; provided that the earned royalties and minimum annual
                  royalties for the Field of Use shall be treated separately
                  from and independent of the earned royalties and minimum
                  annual royalties for the Non-Exclusive Field of Use.


<Table>
<Caption>
      ------------------------------------ ----------------------------------- -------------------------------
                 CALENDAR YEAR             MINIMUM ANNUAL ROVALTY FOR FIELD     MINIMUM ANNUAL ROYALTY FOR
                                                         OF USE                  NON-EXCLUSIVE FIELD OF USE
      ------------------------------------ ----------------------------------- -------------------------------
      <S>                                  <C>                                  <C>
                     1999                                 ***                               N/A
      ------------------------------------ ----------------------------------- -------------------------------
                     2000                                 ***                               N/A
      ------------------------------------ ----------------------------------- -------------------------------
                     2001                                 ***                               ***
      ------------------------------------ ----------------------------------- -------------------------------
                     2002                                 ***                               ***
      ------------------------------------ ----------------------------------- -------------------------------
                     2003                                 ***                               ***
      ------------------------------------ ----------------------------------- -------------------------------
                     2004                                 ***                               ***
      ------------------------------------ ----------------------------------- -------------------------------
      2005 and each year thereafter                       ***                               ***
      ------------------------------------ ----------------------------------- -------------------------------
</Table>


7.       Sections 6.4 and 6.5 of the Agreement are hereby deleted in their
         entirety and replaced with the following:

         6.4      If Digirad is unable to perform any of the following, then
                  Berkeley Lab may either terminate this Agreement or reduce the
                  limited exclusive license within the Field of Use to a
                  non-exclusive license within the Field of Use:

                  6.4.1    With regard to the Field of Use:

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


                                                                            pg 3
<Page>

                           6.4.1.1          ***
                                            ***

                           6.4.1.2          ***
                                            ***

                  6.4.2    With regard to the Non-Exclusive Field of Use:

                           6.4.2.1                   ***

                           6.4.2.2                   ***

                           6.4.2.3                   ***

                           6.4.2.4                   ***

                           6.4.2.5                   ***

                           6.4.2.6                   ***
                                                     ***

                  It is the understanding of the parties hereto that any
                  termination of the Agreement or reduction of this license to a
                  non-exclusive license as a result of Digirad's failure to meet
                  the specifications of Section 6.4 shall be subject to the ***
                  day cure period set forth in Section 10.1 below.

         6.5      If Berkeley Lab grants a non-exclusive license to any other
                  party within the Field of Use upon royalty rates more
                  favorable than those of this Agreement after reducing the this
                  license within the Field of Use to a non-exclusive license
                  within the Field of Use, then ***
                                                                       ***
                                                                       ***
                                            ***

8.       The reporting obligations of Section 7 shall apply to both the Field of
         Use and Non-Exclusive Field of Use, separately and independently.
         Beginning *** thereafter, Digirad shall submit to Berkeley Lab a
         progress reports covering Digirad's activities related to the
         development and testing of all Licensed Products within the
         Non-Exclusive Field of Use and obtaining of the government approvals
         necessary for marketing as required pursuant to Section 7.1 ET. SEQ.

9.       Section 11.1 of the Agreement is hereby deleted in its entirety and
         replaced with the following:

         11.1     Digirad at any time may terminate this Agreement in whole or
                  as to any portion of Licensed Patents by giving written notice
                  to Berkeley Lab. Digirad's termination 

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


                                                                            pg 4
<Page>

                  of this Agreement will be effective *** days after its notice.
                  If that termination pertains to the Field of Use and is
                  without cause within *** years of the Effective Date, Digirad
                  shall *** 
                                            *** 

10.      Section 15.2 of the Agreement is hereby deleted in its entirety.

11.      Section 15.5 of the Agreement is hereby deleted in its entirety and
         replaced with the following:

         15.5                                    ***
                                                 ***
                                                 ***

12.      Section 15.6 of the Agreement is hereby deleted in its entirety and
         replaced with the following:

         15.6     Berkeley Lab shall promptly provide Digirad with copies of all
                  relevant documentation so that Digirad is informed of the
                  continuing prosecution of Licensed Patents. Additionally, upon
                  *** Berkeley Lab shall provide Digirad with a report
                  summarizing the status of the Licensed Patents. Digirad shall
                  keep this documentation confidential. Berkeley Lab shall use
                  all reasonable efforts to amend any patent application to
                  include claims reasonably requested by Digirad to protect the
                  products contemplated to be sold under this Agreement.

13.      Digirad acknowledges and agrees that Section 16 applies, other than the
         first sentence of Section 16.1, only to jurisdictions in which Digirad
         has exclusive rights under the Agreement. Thus, except for that first
         sentence of Section 16.1, the entirety of Section 16 will not apply to
         the Licensed Products insofar as they are within the Non-Exclusive
         Field of Use.

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


                                                                            pg 5
<Page>

14.      Except as specifically amended herein, the Agreement is hereby ratified
         and confirmed.

Berkeley Lab and Digirad execute this Agreement in duplicate originals through
their authorized respective officers in one or more counterparts that, taken
together, are but one instrument.


THE REGENTS OF THE UNIVERSITY                 DIGIRAD CORPORATION
OF CALIFORNIA, THROUGH THE     
ERNEST ORLANDO LAWRENCE 
BERKELEY NATIONAL LABORATORY

By   /S/ PIERMARIA ODDONE                     By    /S/ SCOTT HUENNEKENS
  -----------------------------------            ---------------------------
          (Signature)                                    (Signature)

By    PIERMARIA ODDONE                        By    SCOTT HUENNEKENS
  -----------------------------------             --------------------
Title    DEPUTY LABORATORY DIRECTOR           Title    PRESIDENT AND CEO
     --------------------------------                ---------------------
Date    5-24-01                               Date    5-11-01
    ---------------------------------               -----------


Approved as to form


/S/ GLENN R. WOODS                                   
-------------------------------------
GLENN R. WOODS
LAWRENCE BERKELEY NATIONAL LABORATORY


                                                                            pg 6


<Page>


                                                                    EXHIBIT 10.2

                                       *** 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.

                           SOFTWARE LICENSE AGREEMENT

         This Software License Agreement ("Agreement") is entered into under
seal this 16th day of June, 1999 (the "Effective Date") by and between Segami
Corporation, a Maryland corporation having its principal offices at 12624 Golden
Oak Drive, Ellicott City MD 21042 ("Segami"), and Digirad Corporation
("Digirad"), a Delaware corporation having its principal offices at 9350 Trade
Place. San Diego CA 92126.

                             Statement of Intention

         A.       Segami is in the business of the development and sale of
                  software for gamma camera image acquisition, processing and
                  display. Segami's current software is called ***

         B.       Digirad desires to purchase software from Segami for the
                  purpose of gamma camera image acquisition, processing and
                  display which will interface with Digirad's solid state gamma
                  camera.


         C.       Digirad desires to package the *** software and Digirad's
                  hardware for resale as a single product, identifiable only as
                  a Digirad product.


         In consideration of the mutual promises and covenants herein contained,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
under seal as follows:

         1.       DEFINITIONS. For the purposes of this Agreement, the following
terms, when used herein, have the following meaning.

"Base Software"-The existing *** software described in EXHIBIT D hereto in
object and executable code forms, and all updates, enhancements, revisions,
modifications, modules and or sub-modules thereto and all permitted copies,
except that Base Software does not include the Interface Development.
"Interface Development"-The new code written and modifications made to the Base
Software which will allow use of the Base Software with Digirad's current
hardware, in object and executable code forms, and all updates, enhancements,
revisions, modifications, modules and or sub-modules thereto and all permitted
copies.

"Product" - Digirad's solid state gamma camera bundled together with the Base
Software and Interface Development.

         2.       LICENSE TO DIGIRAD. Subject to all the terms of this
Agreement, Segami grants to Digirad a nonexclusive worldwide, fully paid-up
license:

         (a)      to sublicense the Base Software to end-users only in
connection with the sale and use of the Products; any such sublicense shall be
pursuant to a sublicense agreement for Segami's


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                                  Page 1 of 10
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benefit that contains applicable similar restrictions and obligations imposed on
Digirad hereunder.

         (b)      to use, adopt, reproduce, display, perform, test, demonstrate
and distribute the Base Software as necessary to market, sale and distribute the
Products.

         (c)      sublicense to third parties the distribution rights for the
Products and Base Software; any such sublicense shall be pursuant to a
sublicense agreement for Segami 's benefit that contains applicable similar
restrictions and obligations imposed on Digirad hereunder.

The balance of this Section 2 notwithstanding, the license granted to Digirad
shall not include the right to sublicense, sell or distribute the Base Software
independently and separate from the Product, with the understanding that Digirad
may demonstrate the Base Software or distribute demonstration models of the Base
Software, limited in function, for use on systems independent from the Product.

         3.       USE/LICENSE FEES.

                  3.1      USE. Segami hereby grants Digirad the right to
package and bundle the Base Software with the Product, the Interface Development
and Digirad hardware for sale to end-users by Digirad or its subdistributors.

                  3.2      LICENSE FEES. Digirad shall pay a License Fee (the
"License Fee") to Segami, in accordance with the attached Exhibit A, for each
copy of the Base Software distributed to any end-user, unless otherwise agreed
upon in writing by Segami. Payment of the License Fee shall be made by Digirad
and tendered to Segami at the sooner of *** days after customer payment or ***
days after customer installation. Digirad will receive a reasonable number of
demonstration versions of the Base Software including the dongle keys ("Keys")
for using such versions ("Demo Versions") to be used for customer demonstrations
and/or Digirad roadshows (not for sale to customers). Segami shall deliver the
Demo Versions within *** days upon written request from Digirad.

                  3.3      AUDIT. Segami shall have the right to audit the
books, financial accounts and documents of Digirad *** in each calendar year for
which this contract is in force, to verify the number of copies of the Base
Software disseminated by Digirad. Segami shall employ an independent Certified
Public Accountant at its own cost and expense for such audit. Segami shall give
Digirad a minimum of *** days prior written notification of the audit. Digirad
shall not unreasonably withhold its cooperation in the audit.

         4.       INTERFACE DEVELOPMENT.

                  4.1      DEVELOPMENT. Segami agrees to undertake and complete
the code design, programming and testing of the Interface Development. Interface
Development shall be in accordance with the specifications on the attached
Exhibit B (the "Specifications") and the delivery schedule attached hereto as
Exhibit C (the "Delivery Schedule"). Segami shall be


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                                  Page 2 of 10
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responsible for obtaining and maintaining operational status and approvals of
the Base Software and Interface Development (and any new versions or
improvements thereto) under FDA, CE and other regulatory authorities or
agencies. Segami agrees that its conduct in performing its obligations under
this Agreement shall conform in all material respects to all applicable laws and
regulations of the U.S. and foreign governments (and political subdivisions
thereof).

                  4.2      ACCEPTANCE. Digirad will, by written notice, accept
or reject any portion of the Interface Development delivered (individually, the
"Deliverable(s)") within *** days after receipt. Failure to give notice of
acceptance or rejection within that period will constitute acceptance. Digirad
may reject any Deliverable only if the Deliverable fails to meet the
Specifications or, at the fault or failing of that Deliverable alone, the
Product cannot operate in a commercially reasonable manner. If Digirad properly
rejects the Deliverable, Segami will correct the failures properly specified in
the rejection notice within *** days of the rejection notice. When it believes
that it has made the necessary corrections, Segami will again deliver the
Deliverable to Digirad and the acceptance/rejection/correction provisions above
shall be reapplied until the Deliverable is accepted; provided, however, that
upon the *** or any subsequent rejection or if the corrections are not made
within *** days of the initial rejection, Digirad may at its option terminate
this Agreement by immediate written notice unless the Deliverable is accepted
during the notice period.

         5.       COMPENSATION FOR INTERFACE DEVELOPMENT. Digirad shall make
payments to Segami in accordance with the Delivery Schedule. Each payment will
be in U.S. dollars from the United States and will be made no later than ***
days from the occurrence of the event specified in the Delivery Schedule for
which payment is due.

         6.       OWNERSHIP RIGHTS. As between the parties Segami shall retain
all right title and interest, including all patent, copyright, trade secret,
trademark, mask work or other rights, in the Base Software, or any other idea or
product conceived or reduced to form by Segami, its agents or assigns as of the
Effective Date. Digirad shall have all right, title and interest, in the
Interface Development. The parties hereby make any assignments necessary to
accomplish the foregoing ownership provisions.

         7.       SUPPORT/MAINTENANCE.

                  7.1      SUPPORT.  During the term of this Agreement:

                           (1)      Segami shall use its best efforts to respond
within *** days after receipt of written notice of verifiable defects, and
propose a plan for prompt and effective remedy, and shall provide general
guidance concerning the Base Software or Interface Development. Defects shall be
reported in writing via electronic mail or facsimile to Segami at the
telephone/email numbers provided by Segami to Digirad from time to time.

                           (2)      Segami shall inform Digirad promptly of any
changes in the Base Software or delivery schedules.


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                                  Page 3 of 10
<Page>


                           (3)      Subject to the other terms and conditions of
this Agreement, Segami shall use its reasonable best efforts to promptly fill
Digirad's orders for Keys. Promptly following the execution of this Agreement,
Segami shall place *** Keys in escrow. If Segami materially fails to provide a
sufficient number of Keys to Digirad for delivery of Products to end-users,
after *** days written notice to Segami, Digirad shall be entitled to receive
from escrow any or all of the Keys. If Segami fails to provide a sufficient
number of Keys to Digirad for delivery of Products to end-users, after *** days
written notice to Segami, Digirad shall be entitled to a fully executed purchase
order from Segami to the Key manufacturer ("Escrow Materials") authorizing the
Key manufacturer to provide directly to Digirad those Keys reasonably necessary,
in Digirad's sole discretion, for Digirad to sell and install Product. In
support of the foregoing and promptly after execution of this Agreement, Segami
will place in escrow (pursuant to the terms of an escrow agreement in form
mutually acceptable to the parties hereto) the Escrow Materials as they exist at
the date of the Agreement. Segami will update the escrow with any new or
modified Escrow Materials and Keys promptly as it becomes necessary and will
notify Digirad when it does so. *** ***

                           (4)      Segami agrees to provide *** standard
training *** for Digirad personnel. *** shall be given at Digirad's main office
on a schedule reasonably acceptable to Segami but commencing no later than ***
days after Digirad's written request. *** 
                                      ***
***

                           (5)      Segami shall provide free technical support
to Digirad personnel up to *** during the first year, and *** per year after
that. This does not include time spent on developments set forth in Section 4 or
Section 7.1(1). Segami shall provide Digirad with all the user's documentation
in its possession.

                  7.2      MAINTENANCE RELEASES. In the exercise of its sole
discretion and from time to time, Segami may develop and make available
maintenance release for the Base Software at no cost to Digirad. Such
maintenance release shall be patches for the purpose of correcting any
deficiencies in the Base Software which may become apparent to Digirad and
Segami after successful delivery of the Interface Development.

                  7.3      ENHANCEMENTS/UPGRADES. In the exercise of its sole
discretion and from time to time, Segami may develop and make available for sale
through Digirad to end-users, and at an additional license fee to Segami, to be
negotiated in good faith by the Parties, substantially upgraded versions of the
Base Software which incorporate significant functional changes or additions, or
substantially improved performance.

         8.       CONFIDENTIALITY. Each party agrees that all code, inventions
algorithms, know-how and ideas and all other business, technical and financial
information they obtain from the other are confidential information and property
of the disclosing party ("Confidential Information"). Each party shall use
Confidential Information of the other party which is disclosed to it only for
the purposes of this Agreement and shall not disclose such Confidential


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                                  Page 4 of 10
<Page>


Information to-any third party, without the other party's prior written consent,
other than to Segami's subcontractors, subdistributors and employees on a
need-to-know basis. Each party agrees to take measures to protect the
confidentiality of the other party's Confidential Information that, in the
aggregate, are no less protective than those measures it uses to protect the
confidentiality of its own Confidential Information, but at a minimum, each
party shall take reasonable steps to advise their employees, subcontractors and
subdistributors of the confidential nature of the Confidential Information and
of the prohibitions on copying or revealing such Confidential Information
contained herein. The parties each agree to require that the other party's
Confidential Information be kept in a reasonably secure location.
Notwithstanding anything to the contrary contained in this Agreement neither
party shall be obligated to treat as confidential, or otherwise be subject to
the restrictions on use, disclosure or treatment contained in this Agreement for
any information disclosed by the other party (the "Disclosing party") which: (1)
is rightfully known to the recipient prior to its disclosure by the Disclosing
Party; (2) is generally known or easily ascertainable by non-parties of ordinary
skill in computer process design or programming or in the business of the
client; (3) is released by the Disclosing Party to any other person, firm or
entity (including governmental agencies or bureaus) without restrictions; (4) is
independently developed by the recipient without any reliance on Confidential
Information; or (5) is or later becomes publicly available without violation of
this Agreement or may be lawfully obtained by a party from a non-party. Neither
party will be liable to the other for inadvertent or accidental -disclosure of
Confidential Information if the disclosure occurs notwithstanding the party's
exercise of the same level of protection and care that such party customarily
uses in safeguarding its own confidential information.

         Notwithstanding the foregoing, all Confidential Information developed
by Segami, including but not limited to the Interface Development, in connection
with this Agreement shall be deemed Confidential Information of Digirad
disclosed by Digirad to Segami and exceptions (1) and (4) above will not be
applicable thereto.


         9.       EXPORT CONTROL. Each party hereby agrees to comply with all
export laws and restrictions and regulations of the Department of Commerce or
other United States or foreign agency or authority, and not to export, or allow
the export or re-export of any proprietary information or software or any copy
or direct product thereof in violation of any such restrictions, laws or
regulations.

         10.      TERMINATION

                  10.1     TERMINATION BY DIGIRAD. Digirad may terminate this
Agreement if Segami is in material breach of, or default under, this Agreement
and such breach or default is not cured within *** days after Digirad delivers
written notice of such breach or default to Segami.

                  10.2     TERMINATION BY SEGAMI. Segami may terminate this
Agreement if Digirad is in material breach of or default under, this Agreement
and such breach or default is not cured within *** days after written notice to
Digirad. A material breach of and default


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                                  Page 5 of 10
<Page>


under, this Agreement by Digirad shall include, without limitation, the
occurrence of the failure of Digirad to pay any License Fee when due.

                  10.3     SURVIVAL. Sections 5-15 of this Agreement, any
accrued rights to payment, any licenses granted in this Agreement that are
expressly perpetual and any remedies for breach of this Agreement shall survive
termination.

         11.      LIMITATION OF LIABILITY.

                  (a)      Except under Section 8 and the indemnity provisions
of Section 12, neither party nor its affiliates shall, under any circumstances,
be liable to the other party or its affiliates for any claim based upon any
third party claim or for consequential, incidental, indirect, punitive,
exemplary or special damages of any nature whatsoever, or for any damages
arising out of or in connection with any malfunctions, delays, loss of data,
loss of profit, interruption of service or loss of business or anticipatory
profits, even if a party or its affiliates have been apprised of the likelihood
of such damages occurring. 

                  (b)      ***
                           *** 
                           ***

         12.      INDEMNIFICATION

                  (a)      The parties each agree to indemnify, defend and hold
harmless the other from and against any and all amounts, including legal fees
and other out-of-pocket expenses, payable under any judgment, verdict, court
order or settlement for death or bodily injury or the damage to or loss or
destruction of any real or tangible personal property to the extent arising out
of the indemnitor's negligence, gross negligence, or willful misconduct in the
performance of this Agreement.

                  (b)      Segami agrees to indemnify, defend and hold harmless
Digirad, its distributors and end-users from and against any and all amounts,
including legal fees and other out-of-pocket expenses, payable under any
judgment, verdict, court order or settlement to the extent resulting from any
third party allegation that the Base Software or the work performed by Segami
under this Agreement infringes such third party's intellectual property rights,
including, without limitation, patent, copyright or trade secret. Should
Digirad's use of work performed by Segami be determined to have infringed, or if
in Segami's and Digirad's reasonable judgment such use is likely to be
infringing, *** *** ***

                  (c)      Digirad agrees to indemnify, defend and hold harmless
Segami from and against any and all amounts payable under any judgment, verdict,
court order or settlement to the extent resulting from any affiliated third
party allegation that the work performed by Segami under this Agreement
infringes such third party's intellectual property rights to the extent
attributable to software, hardware, data, knowledge or services provided by
Digirad.


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                                  Page 6 of 10
<Page>


                  (d)      The indemnities in this paragraph are contingent
upon: (1) the indemnified party promptly notifying the indemnifying party in
writing of any claim which may give rise to a claim for indemnification
hereunder; (2) the indemnifying party being allowed to control the defense and
settlement of such claim; and (3) the indemnified party cooperating with all
reasonable requests of the indemnifying party (at the indemnifying party'
expense) in defending or settling such claim. The indemnified party shall have
the right, at its option and expense, to participate in the defense of any
action, suitor proceeding relating to such a claim through a counsel of its own
choosing.

         13.      WARRANTIES. Segami warrants that it has and will obtain
agreements with its employees and contractors sufficient to allow it to provide
Digirad with the assignments and licenses to intellectual property rights
contemplated in this Agreement. Segami also warrants that the Base Software and
Interface Development and any part thereof shall meet the Specifications, and
perform in a commercially reasonable manner until the later of (i) *** years
from the final date of delivery on the Delivery Schedule and (ii) with respect
to each product containing the Base Software and/or Interface Development, ***
year from the date of installation of such product by Digirad or its distributor
to an end-user. If Digirad finds that the Products, or part thereof fail to meet
the above warranty, Segami shall, at its option, immediately repair or replace
the Base Software and/or Interface Development or part thereof at its costs and
expenses without prejudice to any other rights and remedies of Digirad under
this Agreement or applicable law. If a Deliverable is rejected, the warranty
will extend accordingly from any adjusted final delivery date. Except for
Section 14, notwithstanding anything to the contrary contained in this
Agreement, Segami makes no other warranties, express or implied, or whether
arising by operation of law, course of performance or dealing, custom, usage in
the trade or profession or otherwise including without limitation implied
warranties of merchantability and fitness for a particular purpose.

         14.      MILLENNIUM WARRANTY.

                  14.1     GENERAL, Other sections of this Agreement
notwithstanding, Segami represents and warrants that for a period of four (4)
years after the Effective Date, the Base Software and the Interface Development
will be able to accurately: (a) process any date-roll event with no adverse
impact on the functionality of the software including without limitation, the
producing of error(s) or abnormal interruption; (b) process date-data
calculations including, without limitation, computation, comparisons,
sequencing, sorts and extracts and return and display date-data in a consistent
manner regardless of the dates used in such date-data whether before, on,
during, or after January 1, 2000; (c) process any date-data computations that
can be expected from the software if used for its intended purpose, regardless
of the date in time on which the processes are actually performed and regardless
of the date-data input, whether before, on, during or after January 1, 2000; (d)
exchange date-data related information with other hardware, firmware or software
with which it interacts, provided that the interacting hardware, firmware or
software is itself capable of exchanging accurate date-data; (e) accept and
respond to four-digit year-date input in a manner that resolves any ambiguities
as to the century in a defined predetermined and appropriate manner; and (f)
store and display date-data in ways that are unambiguous as to the determination
of the century. No date-data shall cause such software to


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                                  Page 7 of 10
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perform an abnormally ending routine or function within the processes or
generate incorrect values or invalid results. For purposes of the foregoing, a
date-rollover event is defined as any transaction between one calendar year and
the following calendar year including, without limitation, any time, date and
day-of-the-week progressions and any regularly scheduled leap events. Date-data
is defined as any data, formula, algorithm, process, input or output, which
includes, calculates or represents a date, day or time, a reference to a date,
day or time, or a representation of a date, day or time.

                  14.2     SPECIAL REMEDIES. In the event of any breach of the
warranties and covenants contained in this section, provided that such breach is
not cured by Segami within *** days following receipt of written notice of such
breach, in addition to other rights and remedies that may be available to
Digirad under this Agreement, Segami shall be responsible for: (a) any costs of
repairing, replacing and/or correcting the affected software; and (b) cover and
other similar damages that are incurred by Digirad as a result of Segami's
breach of this warranty.

         15.      MISCELLANEOUS

                  15.1     BINDING NATURE. This Agreement shall be binding upon
and shall inure to the benefit of the parties to this Agreement and their
respective successors and permitted assigns. Segami shall not have any right or
ability to assign, transfer, or sublicense any obligations or benefit under this
Agreement without the written consent of Digirad, except that Segami may assign
and transfer this Agreement and its rights and obligations hereunder to any
third party who succeeds to substantially all its business or assets.

                  15.2     ENTIRE AGREEMENT. This Agreement constitutes the
entire agreement between the parties and there are no representations,
warranties, covenants, or obligations except as set forth in this Agreement.
This Agreement supersedes all prior or contemporaneous agreements
understandings, negotiations and discussions, written or oral, of the parties to
this Agreement, relating to any transaction contemplated by this Agreement.

                  15.3     SEVERABILITY. Each provision of this Agreement shall
be considered separable and if for any reason any provision or provisions in
this Agreement are determined to be invalid arid contrary to any existing or
future law, that invalidity shall not impair the operation of this Agreement or
affect those portions of this Agreement which are valid.

                  15.4     ARBITRATION. If any dispute or controversy arises
among the parties to this Agreement concerning any provision of this Agreement,
that dispute or controversy shall be submitted for resolution to a board of
arbitration in *** *** *** Such arbitration shall be conducted pursuant to the
rules of the American Arbitration Association (the "AAA") or other governing
rules and *** *** ***


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                  15.5     NO AGENCY. This Agreement shall not be deemed to
constitute the parties hereto as partners, joint venturers, nor shall either
patty hereto be deemed to be an agent of any nature, kind and description
whatsoever of the other.

                  15.6     JURISDICTION AND VENUE. This Agreement shall be
governed, enforced, performed and construed in accordance with the laws of the
State of *** *** Subject to the provisions of Section 15.4 hereof each of the
parties hereto hereby submits to the exclusive jurisdiction of the state and/or
federal courts located within the State of *** for any suit, hearing or other
legal proceeding of every nature, kind and description whatsoever in the event
of any dispute or controversy arising hereunder or relating hereto, or in the
event any ruling, finding or other legal determination is required or desired
hereunder.

                  15.7     ATTORNEYS FEES. In the event that legal proceedings
are commenced in connection with this Agreement or the transactions contemplated
hereby, the party or parties *** *** ***

                  15.8     AMBIGUITY. The parties acknowledge that each party
and its respective counsel have reviewed and revised this Agreement and that the
normal rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the interpretation
of this Agreement or any amendments or exhibits, or schedules hereto.

                  15.9     EXHIBITS. The exhibits attached hereto and each
certificate, schedule, list summary or other document provided or delivered
pursuant to this Agreement or in connection with the transactions contemplated
hereby are incorporated herein by this reference and made a part hereof.

                  15.10    COUNTERPARTS. Provided that all parties hereto
execute a copy of this Agreement, this Agreement may be executed in
counterparts, each of which shall he deemed an original and all of which
together shall constitute one and the same instrument. Executed copies of this
Agreement may be delivered by facsimile transmission or other comparable
electronic means.

                  15.11    VOLUNTARY AGREEMENT. The parties hereto represent
that they have carefully read the foregoing Agreement, understood its terms,
consulted with an attorney of their choice, and voluntarily signed the same as
their own free act with the intent to be legally bound thereby. The terms of
this Agreement are contractual and not a mere recital.

                  15.12    FORCE MAJEURE. Neither party shall be liable to the
other for its failure to perform any of its obligations under this Agreement
during any period in which such performance is delayed due to circumstances
beyond its control, including acts of God or public authorities, was and war
measures, civil unrest, natural disasters or delays in transportation, delivery
or supply.


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                  15.13    NOTICE. All notices under this Agreement shall be in
writing and shall be deemed given when personally delivered or three days after
being sent prepaid certified or registered United States mail to the address of
the party to be noticed as set forth below or such other addresses as such party
last provided to the other by notice:


                           Digirad:         Digirad Corporation
                                            9350 Trade Place
                                            San Diego CA 92126
                                            Attn: President and COO

                           Segami:          Segami Corporation
                                            12624 Golden Oak Drive
                                            Ellicott City MD 21042
                                            Attn: Philippe Briandet Ph.D.

                           Copy to:         Christopher S. Young, Esq.
                                            3440 Ellicott Center Drive
                                            Ste. 203
                                            Ellicott City MD 21043

IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
under seal as of the date first above written.

ATTEST:                                        Digirad Corporation


By:      /s/ ILLEGIBLE                       By:     /s/ Scott Huennekens
   -------------------------------              --------------------------------
Title:        Controller           (SEAL)    Title:    President & COO
      ----------------------------                 -----------------------------


                                             Segami Corporation


By:         /s/ ILLEGIBLE       (Secretary)  By:        /s/ ILLEGIBLE
   -------------------------------                ------------------------------
Title:                             (SEAL)    Title:      President
      ----------------------------                 -----------------------------


                                  Page 10 of 10
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                                    EXHIBIT A
                                PRICING SCHEDULE



                                       ***
                                       ***
                                       ***














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                                      A-1
<Page>







                                       
<Page>


                                    EXHIBIT B



                                       ***
                                       ***
                                       ***
















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--------------------------------------------------------------------------------
Information contained in this document is proprietary to DIGIRAD Corporation and
should not be released outside of the company without written permission of the
company.
--------------------------------------------------------------------------------

                                      B-1
<Page>


                                       ***
                                       ***
                                       ***
















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    Confidential Treatment and filed separately with the Commission.

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should not be released outside of the company without written permission of the
company.
--------------------------------------------------------------------------------

                                      B-2
<Page>


                                       ***
                                       ***
                                       ***
















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Information contained in this document is proprietary to DIGIRAD Corporation and
should not be released outside of the company without written permission of the
company.
--------------------------------------------------------------------------------

                                      B-3
<Page>


                                       ***
                                       ***
                                       ***
















*** Portions of this page have been omitted pursuant to a request for
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--------------------------------------------------------------------------------
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should not be released outside of the company without written permission of the
company.
--------------------------------------------------------------------------------

                                      B-4
<Page>


                                       ***
                                       ***
                                       ***
















*** Portions of this page have been omitted pursuant to a request for
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--------------------------------------------------------------------------------
Information contained in this document is proprietary to DIGIRAD Corporation and
should not be released outside of the company without written permission of the
company.
--------------------------------------------------------------------------------

                                      B-5
<Page>


                                       ***
                                       ***
                                       ***
















*** Portions of this page have been omitted pursuant to a request for
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Information contained in this document is proprietary to DIGIRAD Corporation and
should not be released outside of the company without written permission of the
company.
--------------------------------------------------------------------------------

                                      B-6
<Page>


                                       ***
                                       ***
                                       ***
















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should not be released outside of the company without written permission of the
company.
--------------------------------------------------------------------------------

                                      B-7
<Page>


                                       ***
                                       ***
                                       ***
















*** Portions of this page have been omitted pursuant to a request for
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should not be released outside of the company without written permission of the
company.
--------------------------------------------------------------------------------

                                      B-8
<Page>


                                       ***
                                       ***
                                       ***
















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should not be released outside of the company without written permission of the
company.
--------------------------------------------------------------------------------

                                      B-9
<Page>


                                       ***
                                       ***
                                       ***
















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

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should not be released outside of the company without written permission of the
company.
--------------------------------------------------------------------------------

                                      B-10
<Page>


                                       ***
                                       ***
                                       ***
















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

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should not be released outside of the company without written permission of the
company.
--------------------------------------------------------------------------------

                                      B-11
<Page>


                                    EXHIBIT C
                                DELIVERY SCHEDULE



















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                                      C-1
<Page>


                                    EXHIBIT D
                             SEGAMI'S BASE SOFTWARE



















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

                                      D-1



EXHIBIT 10.3

 

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

 

 

LICENSE AGREEMENT

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 


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

 

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

 

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

 

 

***

 

 

***                                              .

 

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

 

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

 

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

 

1.12         Territory.  “Territory” shall mean                   ***

***

 

.

 

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

 

2.             Grant of License.

 

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

 


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

 

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

 

2.3           Limitations to Grant.

 

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

 

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

 

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

 

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

 

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

 


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

 

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

 

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

 

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

 

5.             Reports and Records.

 

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

 


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

 

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

 

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

***

 

 

***

 

 

***

.

 

 

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

 

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

 

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

 

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

 


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7.             Delivery of Materials; Testing; Governmental Approvals.

 

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

 

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

 

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

 

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

 


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

 

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

 

11.           Confidentiality.

 

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

 

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

 

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

 

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

 


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

 

12.           Representations and Warranties; Limitation on Damages.

 

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

 

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

 

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

 

13.           Indemnification and Insurance.

 

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

 


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

***

 

 

***

 

 

***

.

 

 

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

 

14.           Infringement.

 

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

 

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

***

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

 

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

***
***
***

 


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

 

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

 

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

***

 

 

***

 

.

 

16.           Termination.

 

16.1         Termination                ***                   .  This Agreement may be terminated

***

 

 

***

 

 

***

 

 

 

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

 


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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

12



 

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

 

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

 

 

“CSHS”:

“LICENSEE”:

 

 

CEDARS-SINAI HEALTH SYSTEM
Cedars-Sinai Medical Center
8700 Beverly Boulevard
Los Angeles, CA  90048-1865
Attn:  Senior Vice President & CFO
Facsimile:  (310) 423-0101 

DIGIRAD, INC.

9350 Trade Place
San Diego, California  92126-6334
Attn:  President & CEO
Facsimile:  (858) 549-9789 

 

 

 

 

By:

  /s/ Schlomo Melmed, M.D.

 

By:

  /s/ R. Scott Huennekens  

 

 

Shlomo Melmed, M.D.

 

 

R. Scott Huennekens

 

 

Senior Vice President for
Academic Affairs

 

 

Digirad Corporation

 

 

 

 

 

 

 

By

/s/ Edward M. Prunchunas 

 

 

 

 

 

Edward M. Prunchunas

 

 

 

 

 

Senior Vice President for
Finance & CFO

 

 

 

 

 

13



 

TECHNOLOGY AND SPECIFICATIONS

 

1.             Technology.

 

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

***
***

 

2.             Specifications.

[to be attached]

 


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EXHIBIT A

 



 

FEES, ROYALTIES AND PAYMENT

 

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

***

 

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

 

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

 

  ***

Amount of Royalty per Copy

***

 

  ***

Amount of Royalty per Copy

***

 

  ***

Amount of Royalty per Copy

***

 

 

 

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

 

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

 


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EXHIBIT B

 



 

FEES, ROYALTIES AND PAYMENT

 

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

***
***
***

 

 

4.             Late Payments.                                                  ***

***
***
***

 


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EXHIBIT 10.4

 

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

 

LICENSE AGREEMENT

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

1



 

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

 

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

 

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

 

 

 

***

 

 

 

***

.

 

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

 

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

 

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

 

1.12         Territory.  “Territory” shall mean               ***

 

***

                .

 

 

 

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

 

2.             Grant of License.

 

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

 


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2



 

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

 

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

 

2.3           Limitations to Grant.

 

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

 

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

 

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

 

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

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

 

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

 


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3



 

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

 

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

 

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

 

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

 

5.             Reports and Records.

 

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

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

    ***    .

 


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4



 

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

 

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

 

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

 

***

 

***

 

***

           .

 

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

 

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

 

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

 

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

 


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5



 

7.             Delivery of Materials; Testing; Governmental Approvals.

 

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

 

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

 

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

 

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

 

6



 

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

 

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

 

11.           Confidentiality.

 

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

 

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

 

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

 

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

 


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7



 

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

 

12.           Representations and Warranties; Limitation on Damages.

 

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

 

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

 

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

 

13.           Indemnification and Insurance.

 

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

***

 


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***

 

***

           .

 

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

 

14.           Infringement.

 

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

 

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

***

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

 

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

***
***
***

 

 

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

 


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

 

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

 

 

***

 

 

***

.

 

 

16.           Termination.

 

16.1         Termination                ***                    .  This Agreement may be terminated

***

***

***

 

 

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

 

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

 

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

 


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

 

10



 

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

 

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

 

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

 

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

 

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

 

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

 

11



 

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

 

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

 

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

 

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

 

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

 

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

 

“CSHS”:

“LICENSEE”:

 

 

CEDARS-SINAI HEALTH SYSTEM

DIGIRAD, INC.

Cedars-Sinai Medical Center

 

8700 Beverly Boulevard

9350 Trade Place

Los Angeles, CA 90048-1865

San Diego, California 92126-6334

Attn:  Senior Vice President & CFO

Attn:

David Sheehan,

 

 

President & CEO

Facsimile: (310) 423-0101

Facsimile: (858) 549-9789

 

 

 

 

By:

    /s/ Shlomo Melmed

 

By:

    /s/ David Sheehan

 

 

Shlomo Melmed, M.D.

 

David Sheehan

 

 

Senior Vice President for

 

President & CEO

 

 

Academic Affairs

 

Digirad Corporation

 

 

 

 

 

 

 

By:

    /s/ Edward M. Prunchunas

 

 

 

 

Edward M. Prunchunas

 

 

 

 

Senior Vice President for

 

 

 

 

Finance & CFO

 

 

 

 

12



 

TECHNOLOGY AND SPECIFICATIONS

 

1.  Technology.

 

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

 

2.  Specifications.

 

[to be attached]

 


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

 

EXHIBIT A

 



 

FEES, ROYALTIES AND PAYMENTS

 

1.  Royalties.

 

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

***

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

 

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

 

   ***  

 

 

Amount of Royalty per Copy

***

 

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

***

***

***

 

.

 

 

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

 

 

 

***

 

 

 

***

 

 

***

 

.

 

 

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

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

 


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

 

EXHIBIT B

 



 

FEES, ROYALTIES AND PAYMENTS

 

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

 

 

3.  Late Payments.

 

***

 

 

 

***

 

 

 

***

 


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

 




EXHIBIT 10.5

 

 

*** 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.

 

DEVELOPMENT AND SUPPLY AGREEMENT

 

This Development and Supply Agreement (“Agreement”), is made and entered into as of June 18, 1999, and is effective as of the 18th day of June, 1999 (the “Effective Date”) by and between Digirad Corporation, a Delaware corporation (“Digirad”), and         ***        , a California corporation (“         ***        ”).

 

WITNESSETH

 

WHEREAS,         ***        and Digirad wish to jointly develop certain products and wish to have          ***        supply these products to Digirad.

 

NOW, THEREFORE, in consideration of the mutual covenants hereinafter expressed, the parties agree as follows:

 

1.      DEVELOPMENT OF PRODUCTS

 

(a)                                         ***        .  Digirad and     ***      shall continue to work together to develop and design                                 

***
***
***
***

 

(b)           Definition of Products.  “Products” shall refer to the            ***

 

(c)                                  Reliability.      ***     will warrant the reliability of the product. Product reliability performance will be defined within                      ***                    , but will conform to                                  ***                     .

 

(d)                                 Product Quantity.  “Product Quantity” equals the number of wafers that meet the Product Acceptance criteria specified in Exhibit A. Digirad and      ***      shall work together to develop wafer probe and dicing capabilities for the Products to enable      ***      to deliver      ***     that have passed the criteria defined in Exhibit A.

 

(e)                                  Reporting:        ***      shall provide a written    ***    report to Digirad which identifies the    ***   development objectives, accomplishments against these objectives and a project schedule update.        ***      shall also provide a    ***     WIP (work-in-process inventory) status update and                  ***

 


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for all product and experiments. This report should be sent to the VP Operations and MDE Manager.

 

(f)                                    Product Shipment Times.  Digirad’s orders shall be binding, to the extent set forth in Subsection 2(b); provided, however, Digirad shall be free to increase orders in any time period so long as        ***      is given advance notice of the requested increase in production for a period greater than the Product Shipment Lead Time. The “Product Shipment Lead Time” target is     ***    during the Product’s development phase. Products ordered pursuant to the provisions of Subsection 2(b) below shall be delivered to Digirad on time as specified in Subsection 2(b) and all additional orders shall be delivered to Digirad no later than    ***                          ***                  .

 

(g)                                 Future Product.  The parties will work together in good faith to develop a low-gain avalanche photodiode to be used in coincident imagining applications.

 

2.      SUPPLY OF PRODUCTS

 

(a)                                  Supply Requirements. Pursuant to the terms of this Agreement and    ***                                                          

***

***

 

             ***          .  Prior to the release of the          ***          as noted in Section 2(d),          ***          and Digirad will expand the acceptance requirements in Exhibit A to include quality, customer service and updates to the Product Performance criteria.

 

(b)                                 Product Acceptance Criteria: The product shall meet the acceptance criteria (“Acceptance”) set forth in Appendix A. Such criteria shall include, but not be limited to yield, visual inspection, and       ***     performance, and          ***               ***     and shall be provided to Digirad in writing with each product lot. The criteria set forth in Appendix A represents product acceptance in the product development phase, and will become more comprehensive prior to shipment of the production unit as noted in Section 2(d).

 

(c)                                  Forecasts and other Purchasing Requirements. Digirad shall notify      ***      on a                 ***          of its projected requirements for Products            ***                                                                ***           ***         .  Digirad’s initial purchase order will be placed for a ***                          ***                       basis, Digirad will submit a purchase order for the                                               ***                            ***                             .

 

(d)                                 Initiation of Shipment. Production shipments of         ***      shall begin in           ***        .

 


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2



 

(e)                                  Manufacturing Changes.    ***     shall not make any changes to the manufacturing process or manufacturing location without the prior written approval of Digirad.

 

(f)                                    Conformance to Specifications and Laws.  All Products supplied or delivered to Digirad under this Agreement shall be in compliance with (i) the Performance Specifications and (ii) all proper and accurate marking and label requirements under applicable laws, regulations and statutes. The Products shall (i) comply with all federal, state and local laws, rules and regulations; (ii) not be the subject of any notice directed specifically to      ***      from any court or other competent governmental body with respect to the Products that such Products are in violation of any law, regulation, order, decree or ruling of or restriction imposed by any judicial, governmental or regulatory body or agency; (iii) fully comply with the quality and other relevant specifications required for the Products by the relevant registration and marketing approvals for the Products.  Without limiting any claims or remedies available to Digirad under the terms of this Agreement, or under applicable law,      ***      shall promptly take all actions, legal and otherwise, to seek the replacement of defective or nonconforming Products supplied to Digirad under this Agreement.

 

(g)                                 Title, Risk of Loss and Damage. Title and risk of loss shall             ***                                 ***                               .  Digirad shall give      ***      written notice of any claimed shipping error or non-conformities within            ***        after the date of shipment from      ***      .  Failure of Digirad to give such notice within            ***         shall be deemed a waiver of Digirad’s claim for shortages or incorrect shipments.

 

(h)                                 Price.  Prices for 1999 are detailed on Exhibit B attached hereto.  ***         

***
***
***

 

(i)                                     Payment for Products.      ***      shall invoice Digirad for Digirad’s purchases at the time of each shipment. Such invoices shall be payable           ***               from shipment of Products to Digirad.

 

(j)                                     Technology Transfer and Escrow. In the event that either (i)     ***    has an insolvency event (as defined in 6(b))(ii) files for Bankruptcy, (iii)     ***    fails to produce the number of functional Products ordered by Digirad for more than sixty days (60) in any calendar year, or (iv)     ***    is acquired by or merged into any company with whom Digirad determine in good faith competes in the nuclear medicine imaging market, then Digirad shall receive all rights to the technology used in the Products and all necessary information, data, know how, procedures, schematics, and specifications needed to produce the Products as described in Section 6 (b) (iii).  The parties will take all actions and make all necessary assignment to facilitate such transfer of rights and information.  In order to

 


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

 

3



 

facilitate such a transfer,      ***      shall place all such information with a reputable third party escrow agent pursuant to a mutually acceptable Technology Escrow Agreement within              ***           of the execution of this Agreement.

 

3.      OWNERSHIP

 

(a)

 

***

 

 

***

 

 

***

 

 

 

(b)

 

***

 

 

***

 

 

***

 

 

(c)                                        ***    hereby grants Digirad a royalty free, non-exclusive, non-transferable license of the      ***    Process Technology and any improvements or modifications for internal use only and expressly limited to the specific application field of building                                         ***                                                       .  This License shall be limited to the terms of this Agreement, in accordance with the paragraphs 4 (a), 4 (b), and 6 (a), 6 (b), and 6 (c).    ***    expressly retains for all purposes all rights to the Process Technology utilized at the inception of the Digirad project addressed in this agreement.    ***    expressly retains the rights (including all patent rights, copyrights, trade secrets rights and other intellectual property rights) to Process Technology previously developed and that is developed pursuant to this agreement as set forth in paragraphs 4 (a), 4 (b), and 6 (a), (b), and (c) herein.

 

(d)

 

***

 

 

***

 

 

***

 

4.      EXCLUSIVITY

 

(a)           Noncompete.  Digirad will have exclusive rights to this Technology in the                             ***                      .  The initial period of exclusivity will be for

 

 

***

 

 

***

 

 

***

 

(b)                                 Digirad Commitment.  During the term of this Agreement Digirad shall order at least  ***  of its annual requirements for Products from      ***    .       ***    will help Digirad work with other suppliers by supplying technical information which will allow Digirad meet its contractual commitments which require that Digirad have alternate suppliers capable of supplying all major components. Digirad anticipates that it will give between          ***         of its annual Products orders to

 


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4



 

these other suppliers to ensure that the alternate suppliers are capable of producing Products.       ***    will help to organize a second source for     ***               ***      and will ensure that this second source has the required non-compete clause in their supply agreement.

 

5.      CONFIDENTIALITY.

 

In order to aid in the fulfillment of the development and supply goals of the contract, both Digirad and      ***    are conveying to each other and will in the future convey proprietary corporate information which each party has a significant interest in keeping protected and confidential.  As a result, Digirad and      ***    agree that:

 

(i)  The information furnished by one party shall not be used by the other party for any purpose, except to fulfill the obligations to the other party under this Agreement and such information will be kept confidential by the receiving party and shall not be disclosed to any third party; provided, however, that any such information may be disclosed to a receiving party’s affiliates, officers and employees who need to know such information for the purpose of evaluating a possible collaboration between both parties. The one exception to this requirement is defined in Section 4(b), in which Digirad and      ***       
will disclose process technology to a second source         ***          .

 

(ii)  In addition, no party shall without prior written consent of the other party, disclose to any unaffiliated third persons that discussions or negotiations are taking place concerning a possible collaboration between the parties or any of the terms, conditions, or other facts with respect to any such possible collaboration including the status thereof.

 

(iii) The term “information” as used in the here above paragraphs and the nondisclosure obligations contained in this Agreement do not include information which:

 

1.             is or becomes generally available to the public, other than as a result of a disclosure by a defaulting party;

 

2.             was known by the other party prior to its disclosure by one party;

 

3.             becomes available to a party on a non-confidential basis from a source other than the other party provided that such source is not bound by a confidentiality agreement with the other party;

 

4.             is in the public domain;

 

5.             is developed independently, as evidenced by appropriate documentation, by employees or agents or subcontractors of the receiving party who have not had access to the information;

 

6.             is or becomes available to the receiving party by casual observance or analysis of products in the market; or

 


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5



 

7.             is disclosed pursuant to judicial order, a lawful requirement of governmental agency; or by operation of law, but then only to the extent so ordered; in such case the receiving party will use its best efforts to timely advise the disclosing party prior to disclosure and allow the disclosing party an opportunity to obtain protections preventing the disclosure of the information.

 

(iv)  Information shall remain the exclusive property of the disclosing party. No license whatsoever is implied from this Agreement except the license for non-commercial use as expressly set forth above.

 

(v)  All Information disclosed by either Party to the other party shall be deemed to be confidential unless it is disclosed in written form and stamped by the disclosing party with the words “Non-Confidential Information” or the like at the time of disclosure.

 

(vi)  Each party commits to immediately return all information received from the other party and to destroy or erase any and all copies it may have, either at any time upon simple request or upon termination or expiration of the business relationship between the parties.

 

(vii)  The confidentiality and non-use obligations contained in this Agreement shall survive for       ***      from the date information is disclosed under this Agreement.

 

6.      TERM AND TERMINATION.

 

(a)                                  Term. Unless terminated early as described in this Section 6(b), the contract shall terminate on      ***

***

***

***

 

(b)                                 Early Termination.  This Agreement may be terminated at any time upon the occurrence of any of the following events:

 

(i)  Default.           ***       days following written notice by the performing party to the other party in the event that the other party breaches any material provision of this Agreement and has not cured such breach within such      ***     
  ***  notice period.

 

(ii)  Insolvency.  Immediately upon written notice by either party to the other party upon (i) the insolvency of the other party, or the appointment of a receiver by the other party, or for all or any substantial part of its properties, provided that such receiver is not discharged within          ***       days of his appointment; (ii) the adjudication of the other party as a bankrupt; (iii) the admission by the other party in writing of its inability to pay its debts as they become due; (iv) the execution by the other party of an assignment for the benefit of its creditors, or (v) the filing by the other party of a petition to be adjudged a bankrupt, or a petition or answer admitting the material allegations of a petition

 


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6



 

filed against the other party in any bankruptcy proceeding, or the act of the other. party in instituting or voluntarily being or becoming a party to any other judicial proceeding intended to effect a discharge of the debts of the other party, in whole or in part (an “Insolvency Event”).

 

(iii)  Acquisition.  In the event that       ***    is acquired by or merged into another entity or that more than fifty percent of its voting stock is acquired through one or a series of transactions, then        ***    must give notice to Digirad of the completion of such event.  If        ***    is acquired by or merged into an entity with whom Digirad in good faith determine       ***                        ***                 , Digirad shall have the right to terminate this Agreement at anytime during the     ***   period immediately following its receipt of such notice. In the event Digirad terminates this agreement, pursuant to the preceding sentence, Digirad shall retain exclusive rights to the technology used in the Products and all necessary information, data, know how, procedures, schematics, and specifications needed to produce the Products until       ***         ,
unless the Agreement is earlier terminated by      ***    pursuant to section 6(b) (i) or (ii).  At the end of the term, the right to the technology used in the Product and required information become non-exclusive.

 

(c)                                  Survival. Termination under this Agreement shall not relieve any party of its obligations or liability for breaches of this Agreement incurred prior to or in connection with termination.

 

7.             INDEMNIFICATION

 

(a)                                  Indemnification by    ***     .     ***     will indemnify and hold    ***    harmless against any and all liability, damage, loss, cost or expense (including reasonable attorney fees) (collectively, “Liabilities”) resulting from any third party claims made or suits brought against      ***     (excluding incidental or consequential damages suffered or incurred by     ***     directly as opposed to incidental or consequential damages suffered or incurred by third parties who are, in turn, seeking the same from     ***    , which shall be covered by the indemnity set forth, herein) which arise from     ***     breach of its obligations hereunder, or
     ***     gross negligence or willful misconduct, except to the extent caused by
     ***     gross negligence, willful misconduct or breach of     ***     obligations hereunder.

 

(b)                                 Indemnification by   ***     .     ***     will indemnify and hold    ***    harmless against any and all liability, damage, loss, cost or expense (including reasonable attorney fees) (collectively, “Liabilities”) resulting from any third party claims made or suits brought against      ***     (excluding incidental or consequential damages suffered or incurred by     ***     directly as opposed to incidental or consequential damages suffered or incurred by third parties who are, in turn, seeking the same from     ***    , which shall be covered by the indemnity set forth, herein) which arise from     ***     breach of its obligations hereunder, or      ***     gross negligence or willful misconduct, except to the extent caused by

 


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

 

7



 

     ***     gross negligence, willful misconduct or breach of     ***     obligations hereunder.

 

(c)                                  Costs of Indemnification.  If        ***       expects to seek indemnification from
     ***     under Sections 6(a) or 6(b)  ***  shall promptly give notice to     ***     
     ***   of any such claim or suit threatened, made or filed against  ***  which forms the basis for such claim of indemnification and shall cooperate fully with
           ***        in the defense of all such claims or suits. No settlement or compromise shall be binding on     ***    hereto without   ***   prior written consent.

 

8.             GENERAL PROVISIONS

 

(a)                                  Notices.  Any notices permitted or required by this Agreement shall be sent by telex or telecopy or by certified or registered mail and shall be effective when received if sent and addressed as follows or to such other address as, may be designated by a party in writing:

 

If to       ***       :

 

***

***

***

 

Attention:              ***

Fax Number:          ***

 

If to Digirad:

 

Digirad, Inc.

9350 Trade Place

San Diego, CA 92126

 

Attention:              Scott Huennekens

Fax Number:          (619) 549-7714

 

with a copy to:

 

Brobeck, Phleger & Harrison, LLP

550 West C Street, Suite 1300

San Diego, CA 92101-3532

 

Attention:  Martin Nichols, Esq.

Fax Number: (619) 234-3848

 


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8



 

(b)                                 Entire Agreement; Amendment; Consents  The parties hereto acknowledge that this Agreement sets forth the entire agreement and understanding of the parties and supersedes all prior written or oral agreements or understandings with respect to the subject matter hereof.  No modification or amendment of any of the terms of this Agreement, or any amendments thereto, shall be deemed to be valid unless in writing and signed by all the parties hereto. No course of dealing or usage of trade shall be used to modify the terms and conditions herein.

 

(c)                                  Waiver.  No waiver by either party of any default, right or remedy shall be effective unless in writing, nor shall any such waiver operate as a waiver of any other or the same default, right or remedy on a future occasion.

 

(d)                                 Assignment.  This Agreement shall be binding upon and inure to the benefit of the successors or permitted assigns of each of the parties and may not be assigned or transferred by      ***     without the prior written consent of Digirad, which consent will not be unreasonably withheld.

 

(e)                                  No Third-Party Rights.  No provision of this Agreement shall be deemed or construed in any way to result in the creation of any rights or obligations in any other individual, group, entity or organization not a party to this Agreement.

 

(g)                                 Further Assurance.  Each party hereby agrees to duly execute and deliver, or cause to be duly executed and delivered, such further instruments and do and cause to be done such further acts and things, including, without limitation, the filing of such additional assignments, agreements, documents and instruments, that may be necessary or as the other party hereto may at any time and from time to time reasonably request in connection with this Agreement.

 

(i)                                     Force Majeure Events.  Failure of any party to perform its obligations under this Agreement shall not subject such party to any liability to the other if such failure is caused by acts such as but not limited to acts of God, fire, explosion, flood, drought, war, riot, sabotage, embargo, strikes, compliance with any order or regulation of any government entity acting with color of right promulgated after the dates hereof.  Upon occurrence of an event of force majeure, the party affected shall promptly notify the other in writing, setting forth the details of the occurrence, and making every attempt to resume the performance of its obligations as soon as practicable after the force majeure event ceases.

 

(j)                                     Attorneys’ Fees.  Each party shall bear its own attorney’s fees for the negotiation, execution and performance of this Agreement. In the event it becomes necessary for either party (or any of its affiliates) to institute any action at law or in equity (or in arbitration pursuant to the requirements of this Agreement) against the other party to enforce its rights hereunder, the prevailing party shall be entitled to recover from the non-prevailing party reasonable attorneys’ fees, court costs and expenses relating to such action.

 


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

 

9



 

(k)                                  Arbitration.  The parties hereby agree that the proper venue and forum for all disputes under this Agreement is binding arbitration before a neutral arbitrator mutually acceptable to both parties and such arbitration to be conducted in San Diego California pursuant to the rules of the American Arbitration Association.

 

(1)                                  Governing Law.  The validity, interpretation and effect of this Agreement shall be governed by and construed under the laws of the State of California without regard to principles of conflict of laws.

 

(m)                               Severability.  If any term or provision of this Agreement shall violate any applicable statute, ordinance or rule of law in any jurisdiction in which it is used or otherwise be unenforceable, such provision shall be ineffective to the extent of such violation without invalidating any other provision hereof.

 

(n)                                 Headings, Exhibits. The headings used in this Agreement are for convenience only and are not a part of this Agreement. All exhibits references herein are hereby made a part of this Agreement.

 

(o)                                 Counterparts.  This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same original.

 

(p)                                 Relationship of Parties. The relationship of the parties under this Agreement is that of independent contractors. Nothing contained in this Agreement is intended or is to be construed so as to constitute the parties as partners, joint venturers, or any party as an agent or employee of the other. No party has any express or implied right under this Agreement to assume or create any obligation on behalf of or in the name of any other party, or to bind any other party to any contracts, agreement or undertaking with any third party, and no conduct of the parties shall be deemed to infer such right.

 

(q)                                 Survival: Section 3, Section 5, Section 7 and Section 8 shall survive the termination of this agreement.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

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IN WITNESS WHEREOF, the parties hereto have each caused this Agreement to be executed by their duly-authorized representatives effective as of the date and year set forth above.

 

 

***

 

DIGIRAD CORPORATION

 

 

 

 

By:

***

 

By:

    /s/ Scott Hennekens

 

 

 

 

 

 

***

 

 

 

Scott Hennekens

 

 

 

 

 

Its

***

 

Its

 

President & CEO

 

 

 

[SIGNATURE PAGE TO DEVELOPMENT AND SUPPLY AGREEMENT]

 


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

 

11



 

EXHIBIT A

 

***

***

***

 


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

 

A-1



 

EXHIBIT B

 

***

***

***

 


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

 

B-1




EXHIBIT 10.6

 

*** 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.

 

 

SILICON VALLEY BANK

 

LOAN AND SECURITY AGREEMENT

 

Borrower:

 

Digirad Corporation

Address:

 

9350 Trade Place

 

 

San Diego, CA  92126

 

 

 

Date:

 

July 31, 2001

 

THIS LOAN AND SECURITY AGREEMENT is entered into on the above date between SILICON VALLEY BANK, COMMERCIAL FINANCE DIVISION (“Silicon”), whose address is 3003 Tasman Drive, Santa Clara, California 95054 and the borrower(s) named above (jointly and severally, the “Borrower”), whose chief executive office is located at the above address (“Borrower’s Address”).  The Schedule to this Agreement (the “Schedule”) shall for all purposes be deemed to be a part of this Agreement, and the same is an integral part of this Agreement.  (Definitions of certain terms used in this Agreement are set forth in Section 8 below.)

 

1.             LOANS.

 

1.1          Loans.  Silicon will make loans to Borrower (the “Loans”), in amounts determined by Silicon in its good-faith business judgment, sale discretion, up to the amounts (the “Credit Limit”) shown on the Schedule, provided no Default or Event of Default has occurred and is continuing, and subject to deduction of any Reserves for accrued interest and such other Reserves as Silicon deems proper from time to time in its good faith business judgment.

 

1.2          Interest.  All Loans and all other monetary Obligations shall bear interest at the rate shown on the Schedule, except where expressly set forth to the contrary in this Agreement.  Interest shall be payable monthly, on the last day of the month.  Interest may, in Silicon’s discretion, be charged to Borrower’s loan account, and the same shall thereafter bear interest at the same rate as the other Loans.  Silicon may, in its discretion, charge interest to Borrower’s Deposit Accounts maintained with Silicon.  Regardless of the amount of Obligations that may be outstanding from time to time, Borrower shall pay Silicon minimum monthly interest during the term of this Agreement in the amount set forth on the Schedule (the “Minimum Monthly Interest”).

 

1.3          Overadvances. If at any time or for any reason the total of all outstanding Loans and all other Obligations exceeds the Credit Limit (an “Overadvance”), Borrower shall immediately pay the amount of the excess to Silicon, without notice or demand.  Without limiting Borrower’s obligation to repay to Silicon on demand the amount of any Overadvance, Borrower agrees to pay Silicon interest on the outstanding amount of any Overadvance, on demand, at a rate equal to the interest rate which would otherwise be applicable to the Overadvance, plus an additional 2% per annum.

 



 

Silicon Valley Bank

Loan and Security Agreement

 

1.4          Fees. Borrower shall pay Silicon the fee(s) shown on the Schedule, which are in addition to all interest and other sums payable to Silicon and are not refundable.

 

1.5          Letters of Credit.  [Not Applicable]

 

2.             SECURITY INTEREST.

 

2.1          Security Interest.  To secure the payment and performance of all of the Obligations when due, Borrower hereby grants to Silicon a security interest in all of Borrower’s interest in the following, whether now owned or hereafter acquired, and wherever located:    All Inventory, Equipment, Receivables, and General Intangibles, including, without limitation, all of Borrower’s Deposit Accounts, and all money, and all property now or at any time in the future in Silicon’s possession (including claims and credit balances), and all proceeds (including proceeds of any insurance policies, proceeds of proceeds and claims against third parties), all products and all books and records related to any of the foregoing (all of the foregoing, together with all other property in which Silicon may now or in the future be granted a lien or security interest, is referred to herein, collectively, as the “Collateral”).  Notwithstanding the foregoing, provided that (a) no Default or Event of Default has occurred and is continuing, (b) Borrower completes an initial public offering of equity securities of Borrower that generates net proceeds of at least $535,000,000 (the “IPO”), (c) immediately following the conclusion of the IPO Borrower has minimum cash (or cash equivalents acceptable to Silicon) liquidity maintained at Silicon of not less than $5,000,000 and (d) Borrower executes and delivers to Silicon, on Silicon’s standard form, a Negative Pledge Agreement regarding the Borrower’s Intellectual Property, Silicon agrees to release its liens on and security interests in all of Borrower’s Intellectual Property.  Also notwithstanding the foregoing, the term “Collateral” does not include any license agreements or contract rights (under which Borrower is the licensee, lessee or other similarly situated party) to the extent (i) the granting of a security interest in it would be contrary to applicable law, or (ii) that such rights are nonassignable by their terms (but only to the extent such prohibition is enforceable under applicable law, including, without limitation, Section 9318(4) of the California Uniform Commercial Code) without the consent of the licensor or other party (but only to the extent such consent has not been obtained); nevertheless, the foregoing grant of security interest shall extend to, and the term “Collateral” shall include, any and all proceeds of such license agreements or contract rights to the extent that the assignment or encumbering of such proceeds is not so restricted (including, without limitation, the proceeds of such license agreements or contract rights for which any required consent has been obtained).

 

3.             REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWER.

 

In order to induce Silicon to enter into this Agreement and to make Loans, Borrower represents and warrants to Silicon as follows, and Borrower covenants that the following representations will continue to be true, and that Borrower will at all times comply with all of the following covenants:

 

3.1          Corporate Existence and Authority.  Borrower, if a corporation, is and will continue to be, duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation.  Borrower is and will continue to be qualified and licensed to do business in all jurisdictions in which any failure to do so would have a material adverse effect on

 

2



 

Borrower.  The execution, delivery and performance by Borrower of this Agreement, and all other documents contemplated hereby (i) have been duly and validly authorized, (ii) are enforceable against Borrower in accordance with their terms (except as enforcement may be limited by equitable principles and by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to creditors’ rights generally), and (iii) do not violate Borrower’s articles or certificate of incorporation, or Borrower’s by-laws, or any law or any material agreement or instrument which is binding upon Borrower or its property, and (iv) do not constitute grounds for acceleration of any material indebtedness or obligation under any material agreement or instrument which is binding upon Borrower or its property.

 

3.2          Name; Trade Names and Styles.  The name of Borrower set forth in the heading to this Agreement is its correct name.  Listed on the Schedule are all prior names of Borrower and all of Borrower’s present and prior trade names.  Borrower shall give Silicon 30 days’ prior written notice before changing its name or doing business under any other name.  Borrower has complied, and will in the future comply, with all laws relating to the conduct of business under a fictitious business name.

 

3.3          Place of Business; Location of Collateral.  The address set forth in the heading to this Agreement is Borrower’s chief executive office.  In addition, Borrower has places of business and Collateral is located only at the locations set forth on the Schedule.  Borrower will give Silicon at least 30 days prior written notice before opening any additional place of business, changing its chief executive office, or moving any of the Collateral to a location other than Borrower’s Address or one of the locations set forth on the Schedule.  Notwithstanding the foregoing, Borrower represents and warrants that all of Borrower’s locations outside of California are sales offices only with little or no assets.  Additionally, during the term of this Agreement, Borrower shall not transfer any assets to any subsidiary.

 

3.4          Title to Collateral; Permitted Liens.  Borrower is now, and will at all times in the future be, the sole owner of all the Collateral, except for items of Equipment which are leased by Borrower.  The Collateral now is and will remain free and clear of any and all liens, charges, security interests, encumbrances and adverse claims, except for Permitted Liens.  Silicon now has, and will continue to have, a first-priority perfected and enforceable security interest in all of the Collateral, subject only to the Permitted Liens, and Borrower will at all times defend Silicon and the Collateral against all claims of others.  None of the Collateral now is or will be affixed to any real property in such a manner, or with such intent, as to become a fixture.  Borrower is not and will not become a lessee under any real property lease pursuant to which the lessor may obtain any rights in any of the Collateral and no such lease now prohibits, restrains, impairs or will prohibit, restrain or impair Borrower’s right to remove any Collateral from the leased premises.  Whenever any Collateral is located upon premises in which any third party has an interest (whether as owner, mortgagee, beneficiary under a deed of trust, lien or otherwise), Borrower shall, whenever requested by Silicon, use its best efforts to cause such third party to execute and deliver to Silicon, in form acceptable to Silicon, such waivers and subordinations as Silicon shall specify, so as to ensure that Silicon’s rights in the Collateral are, and will continue to be, superior to the rights of any such third party.  Borrower will keep in full force and effect, and will comply with all the terms of, any lease of real property where any of the Collateral now or in the future may be located.

 

3



 

3.5          Maintenance of Collateral.  Borrower will maintain the Collateral in good working condition, and Borrower will not use the Collateral for any unlawful purpose.  Borrower will immediately advise Silicon in writing of any material loss or damage to the Collateral.

 

3.6          Books and Records. Borrower has maintained and will maintain at Borrower’s Address complete and accurate books and records, comprising an accounting system in accordance with generally accepted accounting principles.

 

3.7          Financial Condition, Statements and Reports. All financial statements now or in the future delivered to Silicon have been, and will be, prepared in conformity with generally accepted accounting principles and now and in the future will completely and accurately reflect the financial condition of Borrower, at the times and for the periods therein stated.  Between the last date covered by any such statement provided to Silicon and the date hereof, there has been no material adverse change in the financial condition or business of Borrower.  Borrower is now and will continue to be solvent.

 

3.8          Tax Returns and Payments; Pension Contributions. Borrower has timely filed, and will timely file, all tax returns and reports required by foreign, federal, state and local law, and Borrower has timely paid, and will timely pay, all foreign, federal, state and local taxes, assessments, deposits and contributions now or in the future owed by Borrower.  Borrower may, however, defer payment of any contested taxes, provided that Borrower (i) in good faith contests Borrower’s obligation to pay the taxes by appropriate proceedings promptly and diligently instituted and conducted, (ii) notifies Silicon in writing of the commencement of, and any material development in, the proceedings, and (iii) posts bonds or takes any other steps required to keep the contested taxes from becoming a lien upon any of the Collateral.  Borrower is unaware of any claims or adjustments proposed for any of Borrower’s prior tax years which could result in additional taxes becoming due and payable by Borrower.  Borrower has paid, and shall continue to pay all amounts necessary to fund all present and future pension, profit sharing and deferred compensation plans in accordance with their terms, and Borrower has not and will not withdraw from participation in, permit partial or complete termination of, or permit the occurrence of any other event with respect to, any such plan which could result in any liability of Borrower, including any liability to the Pension Benefit Guaranty Corporation or its  successors or any other governmental agency.  Borrower shall, at all times, utilize the services of an outside payroll service providing for the automatic deposit of all payroll taxes payable by Borrower.

 

3.9          Compliance with Law.  Borrower has complied, and will comply, in all material respects, with all provisions of all foreign, federal, state and local laws and regulations relating to Borrower, including, but not limited to, those relating to Borrower’s ownership of real or personal property, the conduct and licensing of Borrower’s business, and all environmental matters.

 

3.10        Litigation.  Except as disclosed in the Schedule, there is no claim, suit, litigation, proceeding or investigation pending or (to best of Borrower’s knowledge) threatened by or against or affecting Borrower in any court or, before any governmental agency (or any basis therefor known to Borrower) which may result, either separately or in the aggregate, in any material adverse change in the financial condition or business of Borrower, or in any material impairment in the ability of Borrower to carry on its business in substantially the same manner as

 

4



 

it is now being conducted.  Borrower will promptly inform Silicon in writing of any claim,  proceeding, litigation or investigation in the future threatened or instituted by or against Borrower involving any single claim of $50,000 or more, or involving $100,000 or more in the aggregate.

 

3.11        Use of Proceeds. All proceeds of all Loans shall be used solely for lawful business purposes.  Borrower is not purchasing or carrying any “margin stock” (as defined in Regulation U of the Board of Governors of the Federal Reserve System) and no part of the proceeds of any Loan will.  be used to purchase or carry any “margin stock” or to extend credit to others for the purpose of purchasing or carrying any “margin stock.”

 

4.             RECEIVABLES.

 

4.1          Representations Relating to Receivables.  Borrower represents and warrants to Silicon as follows:  Each Receivable with respect to which Loans are requested by Borrower shall, on the date each Loan is requested and made, (i) represent an undisputed bona fide existing unconditional obligation of the Account Debtor created by the sale, delivery, and acceptance of goods or the rendition of services in the ordinary course of Borrower’s business, and (ii) meet the Minimum Eligibility Requirements set forth in Section 8 below.

 

4.2          Representations Relating to Documents and Legal Compliance.  Borrower represents and warrants to Silicon as follows:  All statements made and all unpaid balances appearing in all invoices, instruments and other documents evidencing the Receivables are and shall be true and correct and all such invoices, instruments and other documents and all of Borrower’s books and records are and shall be genuine and in all respects what they purport to be, and all signatories and endorsers have the capacity to contract.  All sales and other transactions underlying or giving rise to each Receivable shall fully comply with all applicable laws and governmental rules and regulations.  All signatures and endorsements on all documents, instruments, and agreements relating to all Receivables are and shall be genuine, and all such documents, instruments and agreements are and shall be legally enforceable in accordance with their terms.

 

4.3          Schedules and Documents relating to Receivables.  Borrower shall deliver to Silicon transaction reports and loan requests, schedules and assignments of all Receivables, and schedules of collections, all on Silicon’s standard forms; provided, however, that Borrower’s failure to execute and deliver the same shall not affect or limit Silicon’s security interest and other rights in all of Borrower’s Receivables, nor shall Silicon’s failure to advance or lend against a specific Receivable affect or limit Silicon’s security interest and other rights therein.  Loan requests received after 12:00 Noon will not be considered by Silicon until the next Business Day.  Together with each such schedule and assignment, or later if requested by Silicon, Borrower shall furnish Silicon with copies (or, at Silicon’s request, originals) of all contracts, orders, invoices, and other similar documents, and all original shipping instructions, delivery receipts, bills of lading, and other evidence of delivery, for any goods the sale or disposition of which gave rise to such Receivables, and Borrower warrants the genuineness of all of the foregoing.  Borrower shall also furnish to Silicon an aged accounts receivable trial balance in such form and at such intervals as Silicon shall request.  In addition, Borrower shall deliver to Silicon the originals of all instruments, chattel paper, security agreements, guarantees and other

 

5



 

documents and property evidencing or securing any Receivables, immediately upon receipt thereof and in the same form as received, with all necessary indorsements, all of which shall be with recourse.  Borrower shall also provide Silicon with copies of all credit memos within two days after the date issued.

 

4.4          Collection of Receivables.  Borrower shall have the right to collect all Receivables, unless and until a Default or an Event of Default has occurred.  Borrower shall hold all payments on, and proceeds of, Receivables in trust for Silicon, and Borrower shall immediately deliver all such payments and proceeds to Silicon in their original form, duly endorsed in blank, to be applied to the Obligations in such order as Silicon shall determine.  Silicon may, in its discretion, require that all proceeds of Collateral be deposited by Borrower into a lockbox account, or such other “blocked account” as Silicon may specify, pursuant to a blocked account agreement in such form as Silicon may specify.  Silicon or its designee may, at any time, notify Account Debtors that the Receivables have been assigned to Silicon.

 

4.5          Remittance of Proceeds.  All proceeds arising from the disposition of any Collateral shall be delivered, in kind, by Borrower to Silicon in the original form in which received by Borrower not later than the following Business Day after receipt by Borrower, to be applied to the Obligations in such order as Silicon shall determine; provided that, if no Default or Event of Default has occurred, Borrower shall not be obligated to remit to Silicon the proceeds of the sale of worn out or obsolete equipment disposed of by Borrower in good faith in an arm’s length transaction for an aggregate purchase price of $25,000 or less (for all such transactions in any fiscal year).  Borrower agrees that it will not commingle proceeds of Collateral with any of Borrower’s other funds or property, but will hold such proceeds separate and apart from such other funds and property and in an express trust for Silicon.  Nothing in this Section limits the restrictions on disposition of Collateral set forth elsewhere in this Agreement.

 

4.6          Disputes.  Borrower shall notify Silicon promptly of all disputes or claims relating to Receivables.  Borrower shall not forgive (completely or partially), compromise or settle any Receivable for less than payment in full, or agree to do any of the foregoing, except that Borrower may do so, provided that:  (i) Borrower does so in good faith, in a commercially reasonable manner, in the ordinary course of business, and in arm’s length transactions, which are reported to Silicon on the regular reports provided to Silicon; (ii) no Default or Event of Default has occurred and is continuing; and (iii) taking into account all such discounts settlements and forgiveness, the total outstanding Loans will not exceed the Credit Limit.  Silicon may, at any time after the occurrence of an Event of Default, settle or adjust disputes or claims directly with Account Debtors for amounts and upon terms which Silicon considers advisable in its reasonable credit judgment and, in all cases, Silicon shall credit Borrower’s Loan account with only the net amounts received by Silicon in payment of any Receivables.

 

4.7          Returns.  Provided no Event of Default has occurred and is continuing, if any Account Debtor returns any Inventory to Borrower in the ordinary course of its business, Borrower shall promptly determine the reason for such return and promptly issue a credit memorandum to the Account Debtor in the appropriate amount (sending a copy to Silicon).  In the event any attempted return occurs after the occurrence of any Event of Default, Borrower shall (i) hold the returned Inventory in trust for Silicon, (ii) segregate all returned Inventory from all of Borrower’s other property, (iii) conspicuously label the returned Inventory as Silicon’s

 

6



 

property, and (iv) immediately notify Silicon of the return of any Inventory, specifying the reason for such return, the location and condition of the returned Inventory, and on Silicon’s request deliver such returned Inventory to Silicon.

 

4.8          Verification.  Silicon may, from time to time, verify directly with the respective Account Debtors the validity, amount and other matters relating to the Receivables, by means of mail, telephone or otherwise, either in the name of Borrower or Silicon or such other name as Silicon may choose.

 

4.9          No Liability.  Silicon shall not under any circumstances be responsible or liable for any shortage or discrepancy in, damage to, or loss or destruction of, any goods, the sale or other disposition of which gives rise to a Receivable, or for any error, act, omission, or delay of any kind occurring in the settlement, failure to settle, collection or failure to collect any Receivable, or for settling any Receivable in good faith for less than the full amount thereof, nor shall Silicon be deemed to be responsible for any of Borrower’s obligations under any contract or agreement giving rise to a Receivable.  Nothing herein shall, however, relieve Silicon from liability for its own gross negligence or willful misconduct.

 

5.             ADDITIONAL DUTIES OF BORROWER.

 

5.1          Financial and Other Covenants.  Borrower shall at all times comply with the financial and other covenants set forth in the Schedule.

 

5.2          Insurance.  Borrower shall, at all times insure all of the tangible personal property Collateral and carry such other business insurance, with insurers reasonably acceptable to Silicon, in such form and amounts as Silicon may reasonably require, and Borrower shall provide evidence of such insurance to Silicon, so that Silicon is satisfied that such insurance is, at all times, in full force and effect.  All such insurance policies shall name Silicon as an additional loss payee, and shall contain a lenders loss payee endorsement in form reasonably acceptable to Silicon.  Upon receipt of the proceeds of any such insurance, Silicon shall apply such proceeds in reduction of the Obligations as Silicon shall determine in its sole discretion, except that, provided no Default or Event of Default has occurred and is continuing, Silicon shall release to Borrower insurance proceeds with respect to Equipment totaling less than $100,000, which shall be utilized by Borrower for the replacement of the Equipment with respect to which the insurance proceeds were paid.  Silicon may require reasonable assurance that the insurance proceeds so released will be so used.  If Borrower fails to provide or pay for any insurance, Silicon may, but is not obligated to, obtain the same at Borrower’s expense.  Borrower shall promptly deliver to Silicon copies of all reports made to insurance companies.

 

5.3          Reports.  Borrower, at its expense, shall provide Silicon with the written reports set forth in the Schedule, and such other written reports with respect to Borrower (including budgets, sales projections, operating plans and other financial documentation), as Silicon shall from time to time reasonably specify.

 

5.4          Access to Collateral, Books and Records.  At reasonable times, and on one Business Day’s notice, Silicon, or its agents, shall have the right to inspect the Collateral, and the right to audit and copy Borrower’s books and records.  Silicon shall take reasonable steps to keep

 

7



 

confidential all information obtained in any such inspection or audit, but Silicon shall have the right to disclose any such information to its auditors, regulatory agencies, and attorneys, and pursuant to any subpoena or other legal process.  The foregoing inspections and audits shall be at Borrower’s expense and the charge therefor shall be $650 per person per day (or such higher amount as shall represent Silicon’s then current standard charge for the same), plus reasonable out of pocket expenses.  Borrower will not enter into any agreement with any accounting firm, service bureau or third party to store Borrower’s books or records at any location other than Borrower’s Address, without first obtaining Silicon’s written consent, which may be conditioned upon such accounting firm, service bureau or other third party agreeing to give Silicon the same rights with respect to access to books and records and related rights as Silicon has under       this Loan Agreement.

 

5.5          Negative Covenants.  Except as may be permitted in the Schedule, Borrower shall not, without Silicon’s prior written consent, do any of the following:  (i) merge or consolidate with another corporation or entity; (ii) acquire any assets, except in the ordinary course of business; (iii) enter into any other transaction outside the ordinary course of business(except for a public offering of Borrower’s equity securities); (iv) sell or transfer any Collateral, except for the sale of finished Inventory in the ordinary course of Borrower’s business, and except for the sale of obsolete or unneeded Equipment in the ordinary course of business; (v) store any Inventory or other Collateral with any warehouseman or other third party; (vi) sell any Inventory on a sale-or-return, guaranteed sale, consignment, or other contingent basis; (vii) make any loans of any money or other assets; (viii) incur any debts, outside the ordinary course of business, which would have a material, adverse effect on Borrower or on the prospect of repayment of the Obligations; (ix) guarantee or otherwise become liable with respect to the obligations of another party or entity; (x) pay or declare any dividends on Borrower’s stock (except for dividends payable solely in stock of Borrower); (xi) redeem, retire, purchase or otherwise acquire, directly or indirectly, any of Borrower’s stock; (xii) make any change in Borrower’s capital structure which would have a material adverse effect on Borrower or on the prospect of repayment of the Obligations; or (xiii) pay total compensation, including salaries, fees, bonuses, commissions, and all other payments, whether directly or indirectly, in money or otherwise, to Borrower’s executives, officers and directors (or any relative thereof) in an amount in excess of the amount set forth on the Schedule; or (xiv) dissolve or elect to dissolve.  Transactions permitted by the foregoing provisions of this Section are only permitted if no Default or Event of Default would occur as a result of such transaction.

 

5.6          Litigation Cooperation.  Should any third-party suit or proceeding be instituted by or against Silicon with respect to any Collateral or in any manner relating to Borrower, Borrower shall, without expense to Silicon, make available Borrower and its officers, employees and agents and Borrower’s books and records, to the extent that Silicon may deem them reasonably necessary in order to prosecute or defend any such suit or proceeding.

 

5.7          Further Assurances.  Borrower agrees, at its expense, on request by Silicon, to execute all documents and take all actions, as Silicon, may deem reasonably necessary or useful in order to perfect and maintain Silicon’s perfected security interest in the Collateral, and in order to fully consummate the transactions contemplated by this Agreement.

 

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6.             TERM.

 

6.1          Maturity Date.  This Agreement shall continue in effect until the maturity date set forth on the Schedule (the “Maturity Date”), subject to Section 6.3 below.

 

6.2          Early Termination.  This Agreement may be terminated prior to the Maturity Date as follows:  (i) by Borrower, effective three Business Days after written notice of termination is given to Silicon; or (ii) by Silicon at any time after the occurrence of an Event of Default, without notice, effective immediately.  If this Agreement is terminated by Borrower or by Silicon under this Section 6.2, Borrower shall pay to Silicon a termination fee in an amount equal to$5,000 per month for the number of months remaining (including any partial months) until the Maturity Date, Credit Limit, provided that no termination fee shall be charged if the credit facility hereunder is replaced with a new facility from another division of Silicon Valley Bank.  The termination fee shall be due and payable on the effective date of termination and thereafter shall bear interest at a rate equal to the highest rate applicable to any of the Obligations.

 

6.3          Payment of Obligations.  On the Maturity Date or on any earlier effective date of termination, Borrower shall pay and perform in full all Obligations, whether evidenced by installment notes or otherwise, and whether or not all or any part of such Obligations are otherwise then due and payable.  Without limiting the generality of the foregoing, if on the Maturity Date, or on any earlier effective date of termination, there are any outstanding Letters of Credit issued by Silicon or issued by another institution based upon an application, guarantee, indemnity or similar agreement on the part of Silicon, then on such date Borrower shall provide to Silicon cash collateral in an amount equal to the face amount of all such Letters of Credit plus all interest, fees and cost due or to become due in connection therewith, to secure all of the Obligations relating to said Letters of Credit, pursuant to Silicon’s then standard form cash pledge agreement.  Notwithstanding any termination of this Agreement, all of Silicon’s security interests in all of the Collateral and all of the terms and provisions of this Agreement shall continue in full force and effect until all Obligations have been paid and performed in full; provided that, without limiting the fact that Loans are subject to the discretion of Silicon, Silicon may, in its sole discretion, refuse to make any further Loans after termination.  No termination shall in any way affect or impair any right or remedy of Silicon, nor shall any such termination relieve Borrower of any Obligation to Silicon, until all of the Obligations have been paid and performed in full.  Upon payment and performance in full of all the Obligations and termination of this, Agreement, Silicon shall promptly deliver to Borrower termination statements, requests for reconveyances and such other documents as may be required to fully terminate Silicon’s security interests.

 

7.             EVENTS OF DEFAULT AND REMEDIES.

 

7.1          Events of Default.  The occurrence of any of the following events shall constitute an “Event of Default” under  this Agreement, and Borrower shall give Silicon immediate written notice thereof: (a) Any warranty, representation, statement, report or certificate made or delivered to Silicon by Borrower or any of Borrower’s officers, employees or agents, now or in the future, shall be untrue or misleading in a material respect when made; or (b) Borrower shall fail to pay when due any Loan or any interest thereon or any other monetary Obligation; or (c) the total Loans and other Obligations outstanding at any time shall exceed the Credit Limit; or (d) Borrower shall fail to comply with any of the financial covenants set forth in the Schedule or shall fail to perform any other nonmonetary Obligation which by its nature cannot be cured; or

 

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(e) Borrower shall fail to perform any other nonmonetary Obligation, which failure is not cured within10 Business Days after the date due; or (f) any levy, assessment, attachment, seizure, lien or encumbrance (other than a Permitted Lien) is made on all or any part of the Collateral which is not cured within 10 days after the occurrence of the same; or (g) any default or event of default occurs under any obligation secured  by a Permitted Lien, which is not cured within any applicable cure period or waived in writing by the holder of the Permitted Lien; or (h) Borrower breaches any material contract or obligation, which breach has or may reasonably be expected to have a material adverse effect on Borrower’s business or financial condition; or (i) Dissolution, termination of existence, insolvency or business failure of Borrower; or appointment of a receiver, trustee or custodian, for all or any part of the property of, assignment for the benefit of creditors by, or the commencement of any proceeding by Borrower under any reorganization, bankruptcy, insolvency, arrangement, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction, now or in the future in effect; or (j) the commencement of any proceeding against Borrower or any guarantor of any of the Obligations under any reorganization, bankruptcy, insolvency, arrangement, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction, now or in the future in effect, which is not cured by the dismissal thereof within 30 days after the date commenced; or (k) revocation or termination of, or limitation or denial of liability upon, any guaranty of the Obligations or any attempt to do any of the foregoing, or commencement of proceedings by any guarantor of any of the Obligations under any bankruptcy or insolvency law; or (1) revocation or termination of, or limitation or denial of liability upon, any pledge of any certificate of deposit, securities or other property or asset of any kind pledged by any third party to secure any or all of the Obligations, or any attempt to do any of the foregoing, or commencement of proceedings by or against any such third party under any bankruptcy or insolvency law; or (m) Borrower makes any payment on account of any indebtedness or obligation which has been subordinated to the Obligations other than as permitted in the applicable subordination agreement, or if any Person who has subordinated such indebtedness or obligations terminates or in any way limits his subordination agreement; or (n) there shall be a change in the record or beneficial ownership of an aggregate of more than 20% of the outstanding shares of stock of Borrower, in one or more transactions (other than in connection with the IPO, as defined above), compared to the ownership of outstanding shares of stock of Borrower in effect on the date hereof, without the prior written consent of Silicon; or (o) Borrower shall generally not pay its debts as they become due, or Borrower shall conceal, remove or transfer any part of its property, with intent to hinder, delay or defraud its creditors, or make or suffer any transfer of any of its property which may be fraudulent under any bankruptcy, fraudulent conveyance or similar law; or (p) there shall be a material adverse change in Borrower’s business or financial condition; or (q) Silicon, acting in good faith and in a commercially reasonable manner, deems itself insecure because of the occurrence of an event prior to the effective date hereof of which Silicon had no knowledge on the effective date or because of the occurrence of an event on or subsequent to the effective date.  Silicon may cease making any Loans hereunder during any of the above cure periods, and thereafter if an Event of Default has occurred.

 

7.2          Remedies.  Upon the occurrence of any Event of Default, and at any time thereafter, Silicon, at its option, and without notice or demand of any kind (all of which are hereby expressly waived by Borrower), may do any one or more of the following:  (a) Cease

 

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making Loans or otherwise extending credit to Borrower under this Agreement or any other document or agreement; (b) Accelerate and declare all or any part of the Obligations to be immediately due, payable, and  performable, notwithstanding any deferred or installment payments allowed by any instrument evidencing or relating to any Obligation; (c) Take possession of any or all of the Collateral wherever it may be found, and for that purpose Borrower hereby authorizes Silicon without judicial process to enter onto any of Borrower’s premises without interference to search for, take possession of, keep, store, or remove any of the Collateral, and remain on the premises or cause a custodian to remain on the premises in exclusive control thereof, without charge for so long as Silicon deems it reasonably necessary in order to complete the enforcement of its rights under this Agreement or any other agreement; provided, however, that should Silicon seek to take possession of any of the Collateral by Court process, Borrower hereby irrevocably waives:  (i) any bond and any surety or security relating thereto required by any statute, court rule or otherwise as an incident to such possession; (ii) any demand for possession prior to the commencement of any suit or action to recover possession thereof; and (iii) any requirement that Silicon retain possession of, and not dispose of, any such Collateral until after trial or final judgment; (d) Require Borrower to assemble any or all of the Collateral and make it available to Silicon at places designated by Silicon which are reasonably convenient to Silicon and Borrower, and to remove the Collateral to such locations as Silicon may deem advisable; (e) Complete the processing, manufacturing or repair of any Collateral prior to a disposition thereof and, for such purpose and for the purpose of removal, Silicon shall have the right to use Borrower’s premises, vehicles, hoists, lifts, cranes, equipment and all other property without charge; (f) Sell, lease or otherwise dispose of any of the Collateral, in its condition at the time Silicon obtains possession of it or after further manufacturing, processing or repair, at one or more public and/or private sales, in lots or in bulk, for cash, exchange or other property, or on credit, and to adjourn any such sale from time to time without notice other than oral announcement at the time scheduled for sale.  Silicon shall have the right to conduct such disposition on Borrower’s premises without charge, for such time or times as Silicon deems reasonable, or on Silicon’s premises, or elsewhere and the Collateral need not be located at the place of disposition.  Silicon may directly or through any affiliated company purchase or lease any Collateral at any such public disposition, and if permissible under applicable law, at any private disposition.  Any sale or other disposition of Collateral shall not relieve Borrower of any liability Borrower may have if any Collateral is defective as to title or physical condition or otherwise at the time of sale; (g) Demand payment of, and collect any Receivables and General Intangibles comprising Collateral and, in connection therewith, Borrower irrevocably authorizes Silicon to endorse or sign Borrower’s name on all collections, receipts, instruments and other documents, to take possession of and open mail addressed to Borrower and remove therefrom payments made with respect to any item of the Collateral or proceeds thereof, and, in Silicon’s sole discretion, to grant extensions of time to pay, compromise claims and settle’ Receivables and the like for less than face value; (h) Offset against any sums in any of Borrower’s general, special or other Deposit Accounts with Silicon; and (i) Demand and receive possession of any of Borrower’s federal and state income tax returns and the books and records utilized in the preparation thereof or referring thereto.  All reasonable attorneys’ fees, expenses, costs, liabilities and obligations incurred by Silicon with respect to the foregoing shall be added to and become part of the Obligations, shall be due on demand, and shall bear interest at a rate equal to the highest interest rate applicable to any of the Obligations.  Without limiting any of Silicon’s rights and remedies, from and after the occurrence of any Event of Default, the interest rate applicable

 

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to the Obligations shall be increased by an additional four percent per annum

 

7.3          Standards for Determining Commercial Reasonableness.  Borrower and Silicon agree that a sale or other disposition (collectively, “sale”) of any Collateral which complies with the following standards will conclusively be deemed to be commercially reasonable:  (i) Notice of the sale is given to Borrower at least ten (10) days prior to the sale, and, in the case of a public sale, notice of the sale is published at least ten (10) days before the sale in a newspaper of general circulation in the county where the sale is to be conducted; (ii) Notice of the sale describes the collateral in general, non-specific terms; (iii) The sale is conducted at a place designated by Silicon, with or without the Collateral being present; (iv) The sale commences at any time between 8:00 a.m. and 6:00 p.m.; (v) Payment of the purchase price in cash or by cashier’s check or wire transfer is required; (vi) With respect to any sale of any of the Collateral, Silicon may (but is not obligated to) direct any prospective purchaser to ascertain directly from Borrower any and all information concerning the same.  Silicon shall be free to employ other methods of noticing and selling the Collateral, in its discretion, if they are commercially reasonable.

 

7.4          Power of Attorney.  Upon the occurrence of any Event of Default, without limiting Silicon’s other rights and remedies, Borrower grants to Silicon an irrevocable power of attorney coupled with an interest, authorizing and permitting Silicon (acting through any of its employees, attorneys or agents) at any time, at its option, but without obligation, with or without notice to Borrower, and at Borrower’s expense, to do any or all of the following, in Borrower’s name or otherwise, but Silicon agrees to exercise the following powers in a commercially reasonable manner:  (a) Execute on behalf of Borrower any documents that Silicon may, in its sole discretion, deem advisable in order to perfect and maintain Silicon’s security interest in the Collateral, or in order to exercise a right of Borrower or Silicon, or in order to fully consummate all the transactions contemplated under this Agreement, and all other present and future agreements; (b) Execute on behalf of Borrower any document exercising, transferring or assigning any option to purchase, sell or otherwise dispose of or to lease (as lessor or lessee) any real or personal property which is part of Silicon’s Collateral or in which Silicon has an interest; (c) Execute on behalf of Borrower, any invoices relating to any Receivable, any draft against any Account Debtor and any notice to any Account Debtor, any proof of claim in bankruptcy, any Notice of Lien, claim of mechanic’s, materialman’s or other lien, or assignment or satisfaction of mechanic’s, materialman’s or other lien; (d) Take control in any manner of any cash or non-cash items of payment or proceeds of Collateral; endorse the name of Borrower upon any Collateral or documents, evidence of payment or Collateral that may come into Silicon’s possession; (e) Endorse all checks and other forms of remittances received by Silicon; (f) Pay, contest or settle any lien, charge, encumbrance, security interest and adverse claim in or to any of the Collateral, or any judgment based thereon, or otherwise take any action to terminate or discharge the same; (g) Grant extensions of time to pay, compromise claims and settle Receivables and General Intangibles for less than face value and execute all releases and other documents in connection therewith; (h) Pay any sums required on account of Borrower’s taxes or to secure the release of any liens therefor, or both; (i) Settle and adjust, and give releases of, any insurance claim that relates to any of the Collateral and obtain payment therefor; (j) Instruct any third party having custody or control of any books or records belonging to, or relating to, Borrower to give Silicon the same rights of access and other rights with respect thereto as Silicon has under this Agreement; and (k) Take any action or pay any sum required of Borrower pursuant to this

 

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Agreement and any other present or future agreements.  Any and all reasonable sums paid and any and all reasonable costs, expenses, liabilities, obligations and attorneys’ fees incurred by Silicon with respect to the foregoing shall be added to and become part of the Obligations, shall be payable on demand, and shall bear interest at a rate equal to the highest interest rate applicable to any of the Obligations.  In no event shall Silicon’s rights under the foregoing power of attorney or any of Silicon’s other rights under this Agreement be deemed to indicate that Silicon is in control of the business, management or properties of Borrower.

 

7.5          Application of Proceeds.  All proceeds realized as the result of any sale of the Collateral shall be applied by Silicon first to the reasonable costs, expenses, liabilities, obligations and attorneys’ fees incurred by Silicon in the exercise of its rights under this Agreement, second to the interest due upon any of the Obligations, and third to the principal of the Obligations, in such order as Silicon shall determine in its sole discretion.  Any surplus shall be paid to Borrower or other persons legally entitled thereto; Borrower shall remain liable to Silicon for any deficiency.  If, Silicon, in its sole discretion, directly or indirectly enters into a deferred payment or other credit transaction with any purchaser at any sale of Collateral, Silicon shall have the option, exercisable at any time, in its sole discretion, of either reducing the Obligations by the principal amount of purchase price or deferring the reduction of the Obligations until the actual receipt by Silicon of the cash therefor.

 

7.6          Remedies Cumulative.  In addition to the rights and remedies set forth in this Agreement, Silicon shall have all the other rights and remedies accorded a secured party under the California Uniform Commercial Code and under all other applicable laws, and under any other instrument or agreement now or in the future entered into between Silicon and Borrower, and all of such rights and remedies are cumulative and none is exclusive.  Exercise or partial exercise by Silicon of one or more of its rights or remedies shall not be deemed an election, nor bar Silicon from subsequent exercise or partial exercise of any other rights or remedies.  The failure or delay of Silicon to exercise any rights or remedies shall not operate as a waiver thereof, but all rights and remedies shall continue in full force and effect until all of the Obligations have been fully paid and performed.

 

8.             DEFINITIONS.  As used in this Agreement, the following terms have the following meanings:

 

Account Debtor” means the obligor on a Receivable.

 

Affiliate” means, with respect to any Person, a relative, partner, shareholder, director, officer, or employee of such Person, or any parent or subsidiary of such Person, or any Person controlling, controlled by or under common control with such Person.

 

Business Day” means a day on which Silicon is open for business.

 

Code” means the Uniform Commercial Code as adopted and in effect in the State of California from time to time.

 

Collateral” has the meaning set forth in Section 2.1 above.

 

Default” means any event which with notice or passage of time or both, would constitute an

 

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Event of Default.

 

Deposit Account” has the meaning set forth in Section 9105 of the Code.

 

Eligible Inventory” means Inventory which Silicon, in its good-faith business judgment, deems eligible for borrowing, based on such considerations as Silicon may from time to time deem appropriate.  Without limiting the fact that the determination of which Inventory is eligible for borrowing is a matter of Silicon’s discretion, Inventory which does not meet the following requirements will not be deemed to be Eligible Inventory:  Inventory which (i) consists of raw materials and finished goods, in good, new and salable condition which is not perishable, not obsolete or unmerchantable, and is not comprised of work in process, packaging materials or supplies; (ii) meets all applicable governmental standards; (iii) has been manufactured in compliance with the Fair Labor Standards Act; (iv) conforms in all respects to the warranties and representations set forth in this Agreement; (v) is at all times subject to Silicon’s duly perfected, first priority security interest; and (vi) is situated at a one of the locations set forth on the Schedule.

 

Eligible Receivables” means Receivables arising in the ordinary course of Borrower’s business from the sale of goods or rendition of services, which Silicon, in its good-faith business judgment, shall deem eligible for borrowing, based on such considerations as Silicon may from time to time deem appropriate.  Without limiting the fact that the determination of which Receivables are eligible for borrowing is a matter of Silicon’s discretion, the following (the “Minimum Eligibility Requirements”) are the minimum requirements for a Receivable to be an Eligible Receivable:  (i) the Receivable must not be outstanding for more than 90 days from its invoice date, (ii) the Receivable must not represent progress billings, or be due under a fulfillment or requirements contract with the Account Debtor, (iii) the Receivable must not be subject to any contingencies (including Receivables arising from sales on consignment, guaranteed sale or other terms pursuant to which payment by the Account Debtor may be conditional), (iv) the Receivable must not be owing from an Account Debtor with whom Borrower has any dispute (whether or not relating to the particular Receivable), (v) the Receivable must not be owing from an Affiliate of Borrower, (vi) the Receivable must not be owing from an Account Debtor which is subject to any insolvency or bankruptcy proceeding, or whose financial condition is not acceptable to Silicon, or which, fails or goes out of a material portion of its business, (vii) the Receivable must not be owing from the United States or any department, agency or instrumentality thereof (unless there has been compliance, to Silicon’s satisfaction, with the United States Assignment of Claims Act), (viii) the Receivable must not be owing from an Account Debtor located outside the United States or Canada (unless pre-approved by Silicon in its discretion in writing, or backed by a letter of credit satisfactory to Silicon, or  FCIA insured satisfactory to Silicon), (ix) the Receivable must not be owing from an Account Debtor to whom Borrower is or may be liable for goods purchased from such Account Debtor or otherwise.  Receivables owing from one Account Debtor will not be deemed Eligible Receivables to the extent they exceed 25% of the total Receivables outstanding.  In addition, if more than 50% of the Receivables owing from an Account Debtor are outstanding more than 90 days from their invoice date (without regard to unapplied credits) or are otherwise not eligible Receivables, then all Receivables owing from that Account Debtor will be deemed ineligible for borrowing.  Silicon may, from time to time, in its discretion, revise the Minimum Eligibility Requirements, upon written notice to Borrower.

 

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Equipment” means all of Borrower’s present and hereafter acquired machinery, molds, machine tools, motors, furniture, equipment, furnishings, fixtures, trade fixtures, motor vehicles, tools, parts, dyes, jigs, goods and other tangible personal property (other than Inventory) of every kind and description used in Borrower’s operations or owned by Borrower and any interest in any of the foregoing, and all attachments, accessories, accessions, replacements, substitutions, additions or improvements to any of the foregoing, wherever located.

 

Event of Default” means any of the events set forth in Section 7.1 of this Agreement.

 

General Intangibles” means all general intangibles of Borrower, whether now owned or hereafter created or acquired by Borrower, including, without limitation, all chooses in action, causes of action, corporate or other business records, Deposit Accounts, Intellectual Property, security and other deposits, rights in all litigation presently or hereafter pending for any cause or claim (whether in contract, tort or otherwise), and all judgments now or hereafter arising therefrom, all claims of Borrower against Silicon, rights to purchase or sell real or personal property, rights as a licensor or licensee of any kind, royalties, telephone numbers,  proprietary information, purchase orders, and all insurance policies and claims (including without limitation life insurance, key man insurance, credit insurance, liability insurance, property insurance and other insurance), tax refunds and claims, computer programs, discs, tapes and tape files, claims under guaranties, security interests or other security held by or granted to Borrower, all rights to indemnification and all other intangible property of every kind and nature (other than Receivables).  “Intellectual Property” means all inventions, designs, drawings, blueprints, patents, patent applications, trademarks and the goodwill of the business symbolized thereby, names, trade names, trade secrets, goodwill, copyrights, registrations, licenses, franchises, customer lists, rights in all litigation relating thereto and the proceeds of the foregoing.

 

Inventory” means all of Borrower’s now owned and hereafter acquired goods, merchandise or other personal property, wherever located, to be furnished under any contract of service or held for sale or lease (including without limitation all raw materials, work in process, finished goods and goods in transit), and all materials and supplies of every kind, nature and description which are or might be used or consumed in Borrower’s business or used in connection with the manufacture, packing, shipping, advertising, selling or finishing of such goods, merchandise or other personal property, and all warehouse receipts, documents of title and other documents representing any of the foregoing.

 

Obligations” means all present and future Loans, advances, debts, liabilities, obligations, guaranties, covenants, duties and indebtedness at any time owing by Borrower to Silicon, whether evidenced by this Agreement or any note or other instrument or document, whether arising from an extension of credit, opening of a letter of credit, banker’s acceptance, loan, guaranty, indemnification or otherwise, whether direct or indirect (including, without limitation, those acquired by assignment and any participation by Silicon in Borrower’s debts owing to others), absolute or contingent, due or to become due, including, without limitation, all interest, charges, expenses, fees, attorney’s fees, expert witness fees, audit fees, letter of credit fees, collateral monitoring fees, closing fees, facility fees, termination fees, minimum interest charges and any other sums chargeable to Borrower under this Agreement or under

 

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any other present or future instrument or agreement between Borrower and Silicon.

 

Permitted Liens” means the following:  (i) purchase money security interests in specific items of Equipment; (ii) leases of specific items of Equipment; (iii) liens for taxes not yet payable; (iv) additional security interests and liens consented to in writing by Silicon, which consent shall not be unreasonably withheld; (v) security interests being terminated substantially concurrently with this Agreement; (vi) liens of materialmen, mechanics, warehousemen, carriers, or other similar liens arising in the ordinary course of business and securing obligations which are not delinquent; (vii) liens incurred in connection with the extension, renewal or refinancing of the indebtedness secured by liens of the type described above in clauses (i) or (ii) above, provided that any extension, renewal or replacement lien is limited to the property encumbered by the existing lien and the principal amount of the indebtedness being extended, renewed or refinanced does not increase; (viii) Liens in favor of customs and revenue authorities which secure payment of customs duties in connection with the importation of goods.  Silicon will have the right to require, as a condition to its consent under subparagraph (iv) above, that the holder of the additional security interest or lien sign an intercreditor agreement on Silicon’s then standard form, acknowledge that the security interest is subordinate to the security interest in favor of Silicon, and agree not to take any action to enforce its subordinate security interest so long as any Obligations remain outstanding, and that Borrower agree that any uncured default in any obligation secured by the subordinate security interest shall also constitute an Event of Default under this Agreement.

 

Person” means any individual, sole proprietorship, partnership, joint venture, trust, unincorporated organization, association, corporation, government, or any agency or political division thereof, or any other entity.

 

Receivables” means all of Borrower’s now owned and hereafter acquired accounts (whether or not earned by performance), letters of credit, contract rights, chattel paper, instruments, securities, securities accounts, investment property, documents and all other forms of obligations at any time owing to Borrower, all guaranties and other security therefor, all merchandise returned to or repossessed by Borrower, and all rights of stoppage in transit and all other rights or remedies of an unpaid vendor, lienor or secured party.

 

Reserves” means, as of any date of determination, such amounts as Silicon may from time to time establish and revise in good faith reducing the amount of Loans, Letters of Credit and other financial accommodations which would otherwise be available to Borrower under the lending formula(s) provided in the Schedule:  (a) to reflect events, conditions, contingencies or risks which, as determined by Silicon in good faith, do or may affect (i) the Collateral or any other property which is security for the Obligations or its value (including without limitation any increase in delinquencies of Receivables), (ii) the assets, business or prospects of Borrower or any Guarantor, or (iii) the security interests and other rights of Silicon in the Collateral (including the enforceability, perfection and priority thereof); or (b) to reflect Silicon’s good faith belief that any collateral report or financial information furnished by or on behalf of Borrower or any Guarantor to Silicon is or may have been incomplete, inaccurate or misleading in any material respect; or (c) in respect of any state of facts which Silicon determines in good faith constitutes an Event of Default or may, with notice or passage of time or both, constitute an Event of Default.

 

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Other Terms.  All accounting terms used in this Agreement, unless otherwise indicated, shall have the meanings given to such terms in accordance with generally accepted accounting principles, consistently applied.  All other terms contained in this Agreement, unless otherwise indicated, shall have the meanings provided by the Code, to the extent such terms are defined therein.

 

9.             GENERAL PROVISIONS.

 

9.1          Interest Computation.  In computing interest on the Obligations, all checks, and other items of payment received by Silicon (including proceeds of Receivables and payment of the Obligations in full) shall be deemed applied by Silicon on account of the Obligations three Business Days after receipt by Silicon of immediately available funds (except with respect to wire transfers which shall be deemed applied by Silicon on account of the Obligations the same Business Day as deemed received by Silicon), and, for purposes of the foregoing, any such funds received after 12:00 Noon on any day shall be deemed received on the next Business Day.  Silicon shall not, however, be required to credit Borrower’s account for the amount of any item of payment which is unsatisfactory to Silicon in its sole discretion, and Silicon may charge Borrower’s loan account for the amount of any item of payment which is returned to Silicon unpaid.

 

9.2          Application of Payments.  All payments with respect to the Obligations may be applied, and in Silicon’s sole discretion reversed and re-applied, to the Obligations, in such order and manner as Silicon shall determine in its sole discretion.

 

9.3          Charges to Accounts.  Silicon may, in its discretion, require that Borrower pay monetary Obligations in cash to Silicon, or charge them to Borrower’s Loan account, in which event they will bear interest at the same rate applicable to the Loans.  Silicon may also, in its discretion, charge any monetary Obligations to Borrower’s Deposit Accounts maintained with Silicon.

 

9.4          Monthly Accountings.  Silicon shall provide Borrower monthly with an account of advances, charges, expenses and payments made pursuant to this Agreement.  Such account shall be deemed correct, accurate and binding on Borrower and an account stated (except for reverses and reapplications of payments made and corrections of errors discovered by Silicon), unless Borrower notifies Silicon in writing to the contrary within thirty days after each account is rendered, describing the nature of any alleged errors or admissions.

 

9.5          Notices.  All notices to be given under this Agreement shall be in writing and shall be given either personally or by reputable private delivery service or by regular first-class mail, or certified mail return receipt requested, addressed to Silicon or Borrower at the addresses shown in the heading to this Agreement, or at any other address designated in writing by one party to the other party.   Notices to Silicon shall be directed to the Commercial Finance Division, to the attention of the Division Manager or the Division Credit Manager.  All notices shall be deemed to have been given upon delivery in the case of notices personally delivered, or at the expiration of one Business Day following delivery to the private delivery service, or two Business Days following the deposit thereof in the United States mail, with postage prepaid.

 

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9.6          Severability.  Should any provision of this Agreement be held by any court of competent jurisdiction to be void or unenforceable, such defect shall not affect the remainder of this Agreement, which shall continue in full force and effect.

 

9.7          Integration.  This Agreement and such other written agreements, documents and instruments as may be executed in connection herewith are the final, entire and complete agreement between Borrower and Silicon and supersede all prior and contemporaneous negotiations and oral representations and agreements, all of which are merged and integrated in this Agreement.  There are no oral understandings, representations or agreements between the parties which are not set forth in this Agreement or in other written agreements signed by the parties in connection herewith.

 

9.8          Waivers.  The failure of Silicon at any time or times to require Borrower to strictly comply with any of the provisions of this Agreement or any other present or future agreement between Borrower and Silicon shall not waive or diminish any right of Silicon later to demand and receive strict compliance therewith.  Any waiver of any default shall not waive or affect any other default, whether prior or subsequent, and whether or not similar.  None of the provisions of this Agreement or any other agreement now or in the future executed by Borrower and delivered to Silicon shall be deemed to have been waived by any act or knowledge of Silicon or its agents or employees, but only by a specific written waiver signed by an authorized officer of Silicon and delivered to Borrower.  Borrower waives demand, protest, notice of protest and notice of default or dishonor, notice of payment and nonpayment, release, compromise, settlement, extension or renewal of any commercial paper, instrument, account, General Intangible, document  or guaranty at any time held by Silicon on which Borrower is or may in any way be liable, and notice of any action taken by Silicon, unless expressly required by this Agreement.

 

9.9          No Liability for Ordinary Negligence.  Neither Silicon, nor any of its directors, officers, employees, agents, attorneys or any other Person affiliated with or representing Silicon shall be liable for any claims, demands, losses or damages, of any kind whatsoever, made, claimed, incurred or suffered by Borrower or any other party through the ordinary negligence of Silicon, or any of its directors, officers, employees, agents, attorneys or any other Person affiliated with or representing Silicon, but nothing herein shall relieve Silicon from liability for its own gross negligence or willful misconduct.

 

9.10        Amendment.  The terms and provisions of this Agreement may not be waived or amended, except in a writing executed by Borrower and a duly authorized officer of Silicon.

 

9.11        Time of Essence.  Time is of the essence in the performance by Borrower of each and every obligation under this Agreement.

 

9.12        Attorneys Fees and Costs.  Borrower shall reimburse Silicon for all reasonable attorneys’ fees and all filing, recording, search, title insurance, appraisal, audit, and other reasonable costs incurred by Silicon, pursuant to, or in connection with, or relating to this Agreement (whether or not a lawsuit is filed), including, but not limited to, any reasonable attorneys’ fees and costs Silicon incurs in order to do the following:  prepare and negotiate this Agreement and the documents relating to this Agreement; obtain legal advice in connection with

 

18



 

this Agreement or Borrower; enforce, or seek to enforce, any of its rights; prosecute actions against, or defend actions by, Account Debtors; commence, intervene in, or defend any action or proceeding; initiate any complaint to be relieved of the automatic stay in bankruptcy; file or prosecute any probate claim, bankruptcy claim, third-party claim, or other claim; examine, audit, copy, and inspect any of the Collateral or any of Borrower’s books and records; protect, obtain possession of, lease, dispose of, or otherwise enforce Silicon’s security interest in, the Collateral; and otherwise represent Silicon in any litigation relating to Borrower.  In satisfying Borrower’s obligation hereunder to reimburse Silicon for attorneys fees, Borrower may, for convenience, issue checks directly to Silicon’s attorneys Levy, Small & Lallas, but Borrower acknowledges and agrees that Levy, Small & Lallas, is representing only Silicon and not Borrower in connection with this Agreement.  If either Silicon or Borrower files any lawsuit against the other predicated on a breach of this Agreement, the prevailing party in such action shall be entitled to recover its reasonable costs and attorneys’ fees, including (but not limited to) reasonable attorneys’ fees and costs incurred in the enforcement of, execution upon or defense of any order, decree, award or judgment.  All attorneys’ fees and costs to which Silicon may be entitled pursuant to this Paragraph shall immediately become part of Borrower’s Obligations, shall be due on demand, and shall bear interest at a rate equal to the highest interest rate applicable to any of the Obligations.

 

9.13        Benefit of Agreement.  The provisions of this Agreement shall be binding upon and inure to the benefit of the respective successors, assigns, heirs, beneficiaries and representatives of Borrower and Silicon; provided, however, that Borrower may not assign or transfer any of its rights under this Agreement without the prior written consent of Silicon, and any prohibited assignment shall be void.  No consent by Silicon to any assignment shall release Borrower from its liability for the Obligations.

 

9.14        Joint and Several Liability.  If Borrower consists of more than one Person, their liability shall be joint and several, and the compromise of any claim with, or the release of, any Borrower shall not constitute a compromise with, or a release of, any other Borrower.

 

9.15        Limitation of Actions.  Any claim or cause of action by Borrower against Silicon, its directors, officers, employees, agents, accountants or attorneys, based upon, arising from, or relating to this Loan Agreement, or any other present or future document or agreement, or any other transaction contemplated hereby or thereby or relating hereto or thereto, or any other matter, cause or thing whatsoever, occurred, done, omitted or suffered to be done by Silicon, its directors, officers, employees, agents, accountants or attorneys, shall be barred unless asserted by Borrower by the commencement of an action or proceeding in a court of competent jurisdiction by the filing of a complaint within eighteen months after the first act, occurrence or omission upon which such claim or cause of action, or any part thereof, is based, and the service of a  summons and complaint on an officer of Silicon, or on any other person authorized to accept service on behalf of Silicon, within thirty (30) days thereafter.   Borrower agrees that such eighteen month period is a reasonable and sufficient time for Borrower to investigate and act upon any such claim or cause of action.  The eighteen month period provided herein shall not be waived, tolled, or extended except by the written consent of Silicon in its sole discretion.  This provision shall survive any termination of this Loan Agreement or any other present or future agreement.

 

19



 

9.16        Paragraph Headings; Construction.  Paragraph headings are only used in this Agreement for convenience.  Borrower and Silicon acknowledge that the headings may not describe completely the subject matter of the applicable paragraph, and the headings shall not be used in any manner to construe, limit, define or interpret any term or provision of this Agreement.  The term “including”, whenever used in this Agreement, shall mean “including (but not limited to)”.  This Agreement has been fully reviewed and negotiated between the parties and no uncertainty or ambiguity in any term or provision of this Agreement shall be construed strictly against Silicon or Borrower under any rule of construction or otherwise.

 

9.17        Governing Law; Jurisdiction; Venue.  This Agreement and all acts and transactions hereunder and all rights and obligations of Silicon and Borrower shall be governed by the laws of the State of California.  As a material part of the consideration to Silicon to enter into this Agreement, Borrower (i) agrees that all actions and proceedings relating directly or indirectly to this Agreement shall, at Silicon’s option, be litigated in courts located within California, and that the exclusive venue therefor shall be Santa Clara County; (ii) consents to the jurisdiction and venue of any such court and consents to service of process in any such action or proceeding by personal delivery or any other method permitted by law; and (iii) waives any and all rights Borrower may have to object to the jurisdiction of any such court, or to transfer or change the venue of any such action or proceeding.

 

9.18        Mutual Waiver of Jury Trial.  BORROWER AND SILICON EACH HEREBY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN SILICON AND BORROWER, OR ANY CONDUCT, ACTS OR OMISSIONS OF SILICON OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH SILICON OR BORROWER, IN ALL OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.

 

Borrower:

 

 

DIGIRAD CORPORATION

 

 

By

/s/ Illegible

 

 

 

President or Vice President

 

 

 

 

By

/s/ Gary G. Atkinson

 

 

 

Secretary or Ass’t Secretary

 

Silicon:

 

 

 

SILICON VALLEY BANK

 

 

 

 

By

 

 

 

Title

 

 

 

20



 

Form 3/24/99

Version -0-4

 

21



 

SILICON VALLEY BANK

 

Schedule To

 

Loan And Security Agreement

 

Borrower:

 

Digirad Corporation

Address:

 

9350 Trade Place

 

 

San Diego, CA 92126

 

 

 

Date:

 

July 31, 2001

 

This Schedule forms an integral part of the Loan and Security Agreement between Silicon Valley Bank and the above-borrower of even date.

 

1.  CREDIT LIMIT
(Section 1.1):

 

An amount not to exceed the lesser of a total of $4,300,000 at any one time outstanding (the “Maximum Credit Limit”), or the sum of (a) and (b) below:

 

 

 

 

 

(a)           75% (the “Percentage Advance Rate”) of the amount of Borrower’s Eligible Receivables (as defined in Section 8 above), plus

 

 

 

 

 

(b)           an amount not to exceed the lesser of:

 

 

 

 

 

(1)           25% of the value of Borrower’s Eligible Inventory (as defined in Section 8 above), calculated at the lower of cost or market value and determined on a first-in, first-out basis, or

 

 

 

 

 

(2)           50% of the amount of Borrower’s Eligible Receivables (as defined in Section 8 above), or

 

 

 

 

 

(3)           $300,000.

 

 

 

 

 

The foregoing Percentage Advance Rate is typically based on the quality of the Receivables and attendant Dilution as follows:  up to 85% Percentage Advance Rate with 5% Dilution; up to 80% Percentage Advance Rate with Dilution over 5% but less than 10%; up to 75% Percentage Advance Rate when Dilution is over 10% but less than 15%.  If Dilution exceeds 15%, a reserve is established for the dilution factor rounded up to the nearest whole number then multiplied by a factor of up to 75%.

 

 

 

 

 

As used above, “Dilution” means all deductions from Receivables by Account Debtors of Borrower, other than

 



 

Silicon Valley Bank

Loan and Security Agreement

 

 

 

those arising from payment thereof, and includes without limitation deductions arising from advertising and other allowances, credit memos, returns, bad debts, and all other deductions, as determined by Silicon’s audit and for such period as Silicon shall determine.  Changes in the Percentage Advance Rate based on Dilution shall go into effect when Silicon has determined the amount of the Dilution and given written notice to the Borrower of the change in the Percentage Advance Rate.  If, as a result of a decrease in the Percentage Advance Rate, the total Loans and other Obligations exceed the Credit Limit, the Borrower shall pay the excess to Silicon in accordance with the terms of this Agreement.

 

 

 

 

 

Moreover, prior to any increase in the Percentage Advance Rate going into effect, the delinquency rate with respect to the Borrower’s Receivables must be satisfactory to Silicon in its sole discretion.

 

 

 

2.  INTEREST.

 

 

Interest Rate (Section 1.2):

 

 

 

 

A rate equal to the “Prime Rate” in effect from time to time, plus 2.0% per annum.  Interest shall be calculated on the basis of a 360-day year for the actual number of days elapsed.  “Prime Rate” means the rate announced from time to time by Silicon as its “prime rate;” it is a base rate upon which other rates charged by Silicon are based, and it is not necessarily the best rate available at Silicon.The interest rate applicable to the Obligations shall change on each date there is a change in the Prime Rate.

 

 

 

Minimum Monthly  Interest
(Section 1.2):

 

$5,000 per month.

 

 

 

3.  FEES (Section 1.4):

 

 

Loan Fee:

 

$43,000, payable concurrently herewith.

 

 

 

Collateral Monitoring Fee:

 

$500, per month, payable in arrears (prorated for any partial month at the beginning and at termination of this Agreement).

 

 

 

4.  MATURITY DATE
(Section 6.1):

 

One year from the date of this Agreement.

 

 

 

5.  FINANCIAL COVENANTS.
(Section 5.1):

 

Borrower shall comply with each of the following covenant(s).  Compliance shall be determined as of the end of each month, except as otherwise specifically provided below:

 

2



 

Minimum Tangible  Net Worth:

 

Borrower shall maintain, at the Borrower level only and not consolidated with any subsidiaries, a Tangible Net Worth of not less than $6,000,000, plus 25% of the consideration received after the date hereof for the issuance of equity securities of the Borrower; provided, however, for the month of August 2001 only, the 25% will be applicable only to all consideration received in excess of $4,000,000; and

 

 

 

 

 

Borrower shall maintain, on a consolidated basis, a Tangible Net Worth of not less than $5,000,000, plus 25% of the consideration received after the date hereof for the issuance of equity securities of the Borrower; provided, however, for the month of August 2001 only, the 25% will be applicable only to all consideration received in excess of $4,000,000.

 

 

 

Definitions.

 

For purposes of the foregoing financial covenants, the following term shall have the following meaning:

 

 

 

 

 

“Current assets”, “current liabilities” and “liabilities” shall have the meaning ascribed thereto by generally accepted accounting principles.

 

 

 

 

 

“Tangible Net Worth” shall mean the excess of total assets over total liabilities, determined in accordance with generally accepted accounting principles, with the following adjustments:

 

 

 

 

 

(A)  there shall be excluded from assets:  (i) notes, accounts receivable and other obligations owing to Borrower from its officers or other Affiliates, and (ii) all assets which would be classified as intangible assets under generally accepted accounting principles, including without limitation goodwill, licenses, patents, trademarks, trade names, copyrights, capitalized software and organizational costs, licenses and franchises

 

 

 

 

 

(B) there shall be excluded from liabilities:  all indebtedness which is subordinated to the Obligations under a subordination agreement in form specified by Silicon or by language in the instrument evidencing the indebtedness which is acceptable to Silicon in its discretion.

 

 

 

6.  REPORTING.
(Section 5.3):

 

Borrower shall provide Silicon with the following:

 

 

1. Monthly Receivable agings, aged by invoice date, within

 

3



 

 

 

fifteen days after the end of each month. 2. Monthly accounts payable agings, aged by invoice date, and outstanding or held check registers, if any, within fifteen days after the end of each month. 3. Monthly reconciliations of Receivable agings (aged by invoice date), transaction reports, and general ledger, within fifteen days after the end of each month. 4. Monthly perpetual inventory reports for the Inventory valued on a first-in, first-out basis at the lower of cost or market (in accordance with generally accepted accounting principles) or such other inventory reports as are reasonably requested by Silicon, all within fifteen days after the end of each month. 5. Monthly unaudited financial statements, as soon as  available, and in any event within thirty days after the end of each month.

 

 

 

 

 

6. Monthly Compliance Certificates, within thirty days after the end of each month, in such form as Silicon shall reasonably specify, signed by the Chief Financial Officer of Borrower, certifying that as of the end of such month Borrower was in full compliance with all of the terms and conditions of this Agreement, and setting forth calculations showing compliance with the financial covenants set forth in this Agreement and such other information as Silicon shall reasonably request, including, without limitation, a statement that at the end of such month there were no held checks. 7. Quarterly unaudited financial statements, as soon as available, and in any event within forty-five days after the end of each fiscal quarter of Borrower. 8. Annual operating budgets (including income statements, balance sheets and cash flow statements, by month) for the upcoming fiscal year of Borrower within thirty days prior to the end of each fiscal year of Borrower. 9. Annual financial statements, as soon as available, and in any event within 120 days following the end of Borrower’s fiscal year, certified by independent certified public accountants acceptable to Silicon.

 

 

 

7.  COMPENSATION
(Section 5.5):

 

Not applicable.

 

 

 

8.  BORROWER INFORMATION:

 

 

Prior Names of Borrower
(Section 3.2):

 

See Representations and Warranties dated March 14, 2001.

 

 

 

Prior Trade  Names of Borrower

 

See Representations and Warranties dated March 14, 2001.

(Section 3.2):

 

 

 

4



 

Existing Trade  Names of Borrower
(Section 3.2):

 

See Representations and Warranties dated March 14, 2001.

 

 

 

Other Locations  and Addresses
(Section 3.3):

 

See Representations and Warranties dated March 14, 2001.

 

 

 

Material Locations and Addresses
(Section 3.10):

 

None.

 

 

 

9.  OTHER COVENANTS
(Section 5.1):

 

Borrower shall at all times comply with all of the following additional covenants:

 

 

(1)  Banking Relationship.  Borrower shall at all times maintain its primary banking relationship with Silicon.

 

 

 

 

 

(2)  Subordination of Inside Debt.  All present and future indebtedness of Borrower to its officers, directors and shareholders (“Inside Debt”) shall, at all times, be subordinated to the Obligations pursuant to a subordination agreement on Silicon’s standard form.  Borrower represents and warrants that there is no Inside Debt presently outstanding, except for the following:  NONE.  Prior to incurring any Inside Debt in the future, Borrower shall cause the person to whom such Inside Debt will be owed to execute and deliver to Silicon a subordination agreement on Silicon’s standard form.

 

 

 

 

 

(3)  Warrants.  Borrower shall provide Silicon with five-year warrants to purchase 42,490 shares of Series E Preferred Stock of the Borrower, at $3.036 per share, on the terms and conditions in the Warrant to Purchase Stock and related documents being executed concurrently herewith.

 

 

 

 

 

(4)  Future Warrants.  In the event the Maximum Credit Limit (as defined above) increases, Borrower agrees that it shall issue to Silicon additional warrants to purchase stock of Borrower, on Silicon’s standard form with such modifications as are acceptable to Silicon in its sole discretion, for an amount of shares equal to 3% of the increase in the Maximum Credit Limit divided by the initial exercise price of such warrant.  The class of stock and initial exercise price shall be determined at or about the time of such

 

5



 

 

 

proposed increase in the Maximum Credit Limit.

 

 

 

 

 

(5)  Intellectual Property Security Agreement.  Concurrently, Borrower is executing and delivering to Silicon a Collateral Assignment, Patent Mortgage and Security Agreement between Borrower and Silicon (the “Intellectual Property Agreement”).  Borrower shall (i) cause the Intellectual Property Agreement to be recorded in the United States Patent and Trademark Office and (ii) provide evidence of such recordation to Silicon.

 

 

 

 

 

(6)  Landlord Waivers.  Within 30 days after the date hereof, Borrower shall cause the record owners (other than Borrower) of all real property upon which Borrower maintains inventory to execute and deliver to Silicon, on Silicon’s standard form, a landlord waiver containing such other terms and conditions as Silicon may require.

 

 

 

 

 

(7)  Default Notice from Heller Financial.  Within 10 Business Days after the date hereof, Borrower shall cause Heller Financial to amend its financing agreements with Borrower’s subsidiary(ies) (the “Heller Documents”) to require Heller Financial to provide Silicon with written notice of any default under the Heller Documents, and Borrower shall provide Silicon with evidence of such amendment to the Heller Documents.

 

 

Borrower:

Silicon:

 

 

DIGIRAD CORPORATION

SILICON VALLEY BANK

 

 

 

 

By

/s/ Illegible

 

By

 

 

 

President or Vice President

Title

 

 

 

 

 

By

/s/ Gary G. Atkinson

 

 

 

Secretary or Ass’t Secretary

 

 

6



 

COLLATERAL ASSIGNMENT, PATENT MORTGAGE
AND SECURITY AGREEMENT

 

This Collateral Assignment, Patent Mortgage and Security Agreement is made as of July 31, 2001 by and between Digirad Corporation (“Assignor”), and Silicon Valley Bank, a California banking corporation (“Assignee”).

 

RECITALS

 

A.            Assignee has agreed to lend to Assignor certain funds (the “Loans”), pursuant to a Loan and Security Agreement dated July 31, 2001 (the “Loan Agreement”) and Assignor desires to borrow such funds from Assignee.

 

B.            In order to induce Assignee to make the Loans, Assignor has agreed to assign certain intangible property to Assignee for purposes of securing the obligations of Assignor to Assignee.

 

NOW, THEREFORE, THE PARTIES HERETO AGREE AS FOLLOWS:

 

1.             Assignment, Patent Mortgage and Grant of Security Interest.  As collateral security for the prompt and complete payment and performance of all of Assignor’s present or future indebtedness, obligations and liabilities to Assignee, Assignor hereby assigns, transfers, conveys and grants a security interest and mortgage to Assignee, as security, but not as an ownership interest, in and to Assignor’s entire right, title and  interest in, to and under the following (all of which shall collectively be called the “Collateral”):

 

(a)           All of present and future United States registered copyrights and copyright registrations, including, without limitation, the registered copyrights listed in Exhibit A-1 to this Agreement (and including all of the exclusive rights afforded a copyright registrant in the United States under 17 U.S.C.  §106 and any exclusive rights which may in the future arise by act of Congress or otherwise) and all present and future applications for copyright registrations (including applications for copyright registrations of derivative works and compilations) (collectively, the “Registered Copyrights”), and any and all royalties, payments, and other amounts payable to Assignor in connection with the Registered Copyrights, together with all renewals and extensions of the Registered Copyrights, the right to recover for all past, present, and future infringements of the Registered Copyrights, and all computer programs, computer databases, computer program flow diagrams, source codes, object codes and all tangible property embodying or incorporating the Registered Copyrights, and all other rights of every kind whatsoever accruing thereunder or pertaining thereto.

 

(b)           All present and future copyrights which are not registered in the United States Copyright Office (the “Unregistered Copyrights”), whether now owned or hereafter acquired, including without limitation the Unregistered Copyrights listed in Exhibit A-2 to this Agreement, and any and all royalties, payments, and other amounts payable to Assignor in connection with the Unregistered Copyrights, together with all renewals and extensions of the Unregistered Copyrights, the right to recover for all past, present, and future infringements of the Unregistered Copyrights, and all computer programs, computer databases, computer program

 



 

flow diagrams, source codes, object codes and all tangible property embodying or incorporating the Unregistered Copyrights, and all other rights of every kind whatsoever accruing thereunder or pertaining thereto.  The Registered Copyrights and the Unregistered Copyrights collectively are referred to herein as the “Copyrights.”

 

(c)           All right, title and interest in and to any and all present and future license agreements with respect to the Copyrights, including without limitation the license agreements listed in Exhibit A-3 to this Agreement (the “Licenses”).

 

(d)           All present and future accounts, accounts receivable and other rights to payment arising from, in connection with or relating to the Copyrights.

 

(e)           Any and all trade secrets, and any and all intellectual property rights in computer software and computer software products now or hereafter existing, created, acquired or held;

 

(f)            Any and all design rights which may be available to Assignor now or hereafter existing, created, acquired or held;

 

(g)           All patents, patent applications and like protections including, without limitation, improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-part of the same, including without limitation the patents and patent applications set forth on Exhibit B attached hereto (collectively, the “Patents”);

 

(h)           Any trademark and servicemark rights, whether registered or not, applications to register and registrations of the same and like protections, and the entire goodwill of the business of Assignor connected with and symbolized by such trademarks, including without limitation those set forth on Exhibit C attached hereto (collectively, the “Trademarks”)

 

(i)            Any and all claims for damages by way of past, present and future infringements of any of the rights included above, with the right, but not the obligation, to sue for and collect such damages for said use or infringement of the intellectual property rights identified above;

 

(j)            All licenses or other rights to use any of the Copyrights, Patents or Trademarks, and all license fees and royalties arising from such use to the extent permitted by such license or rights;

 

(k)           All amendments, extensions, renewals and extensions of any of the Copyrights, Trademarks or Patents; and

 

(l)            All proceeds and products of the foregoing, including without limitation all payments under insurance or any indemnity or warranty payable in respect of any of the foregoing.

 

THE INTEREST IN THE COLLATERAL BEING ASSIGNED HEREUNDER SHALL NOT BE CONSTRUED AS A CURRENT ASSIGNMENT, BUT AS A CONTINGENT ASSIGNMENT TO SECURE ASSIGNOR’S OBLIGATIONS TO ASSIGNEE UNDER

 

2



 

THE LOAN AGREEMENT.

 

2.             Authorization and Request.  Assignor authorizes and requests that the Register of Copyrights and the Commissioner of Patents and Trademarks record this conditional assignment.

 

3.             Covenants and Warranties.  Assignor represents, warrants, covenants and agrees as follows:

 

(a)           Assignor is now the sole owner of the Collateral, except for non-exclusive licenses granted by Assignor to its customers in the ordinary course of business.

 

(b)           Listed on Exhibits A-1 and A-2 are all copyrights owned by Assignor, in which Assignor has an interest, or which are used in Assignor’s business.

 

(c)           Each employee, agent and/or independent contractor who has participated in the creation of the property constituting the Collateral has either executed an assignment of his or her rights of authorship to Assignor or is an employee of Assignor acting within the scope of his or her employment and was such an employee at the time of said creation.

 

(d)           All of Assignor’s present and future software, computer programs and other works of authorship subject to United States copyright protection, the sale, licensing or other disposition of which results in royalties receivable, license fees receivable, accounts receivable or other sums owing to Assignor (collectively, “Receivables”), have been and shall be registered with the United States Copyright Office prior to the date Assignor requests or accepts any loan from Assignee with respect to such Receivables and prior to the date Assignor includes any such Receivables in any accounts receivable aging, borrowing base report or certificate or other similar report provided to Assignee, and Assignor shall provide to Assignee copies of all such registrations promptly upon the receipt of the same.

 

(e)           Assignor shall undertake all reasonable measures to cause its employees, agents and independent contractors to assign to Assignor all rights of authorship to any copyrighted material in which Assignor has or may subsequently acquire any right or interest.

 

(f)            Performance of this Assignment does not conflict with or result in a breach of any agreement to which Assignor is bound, except to the extent that certain intellectual property agreements prohibit the assignment of the rights thereunder to a third party without the  licensor’s or other party’s consent and this Assignment constitutes an assignment.

 

(g)           During the term of this Agreement, Assignor will not transfer or otherwise encumber any interest in the Collateral, except for non-exclusive licenses granted by Assignor in the ordinary course of business or as set forth in this Assignment;

 

(h)           Each of the Patents is valid and enforceable, and no part of the Collateral has been judged invalid or unenforceable, in whole or in part, and no claim has been made that any part of the Collateral violates the rights of any third party;

 

(i)            Assignor shall promptly advise Assignee of any material adverse change

 

3



 

in the composition of the Collateral, including but not limited to any subsequent ownership right of the Assignor in or to any Trademark, Patent or Copyright not specified in this Assignment;

 

(j)            Assignor shall (i) protect, defend and maintain the validity and enforceability of the Trademarks, Patents and Copyrights, (ii) use its best efforts to detect infringements of the Trademarks, Patents and Copyrights and promptly advise Assignee in writing of material infringements detected and (iii) not allow any Trademarks, Patents, or Copyrights to be abandoned, forfeited or dedicated to the public without the written consent of Assignee, which shall not be unreasonably withheld unless Assignor determines that reasonable business practices suggest that abandonment is appropriate.

 

(k)           Assignor shall promptly register the most recent version of any of Assignor’s Copyrights, if not so already registered, and shall, from time to time, execute and file such other instruments, and take such further actions as Assignee may reasonably request from time to time to perfect or continue the perfection of Assignee’s interest in the Collateral;

 

(l)            This Assignment creates, and in the case of after acquired Collateral, this Assignment will create at the time Assignor first has rights in such after acquired Collateral, in favor of Assignee a valid and perfected first priority security interest in the Collateral in the United States securing the payment and performance of the obligations evidenced by the Loan Agreement upon making the filings referred to in clause (m) below;

 

(m)          To its knowledge, except for, and upon, the filing with the United States Patent and Trademark office with respect to the Patents and Trademarks and the Register of Copyrights with respect to the Copyrights necessary to perfect the security interests and assignment created hereunder and except as has been already made or obtained, no authorization, approval or other action by, and no notice to or filing with, any U.S.  governmental authority or U.S.  regulatory body is required either (i) for the grant by Assignor of the security interest granted hereby or for the execution, delivery or performance of this Assignment by Assignor in the U.S.  or (ii) for the perfection in the United States or the exercise by Assignee of its rights and remedies thereunder;

 

(n)           All information heretofore, herein or hereafter supplied to Assignee by or on behalf of Assignor with respect to the Collateral is accurate and complete in all material respects.

 

(o)           Assignor shall not enter into any agreement that would materially impair or conflict with Assignor’s obligations hereunder without Assignee’s prior written consent, which consent shall not be unreasonably withheld.  Assignor shall not permit the inclusion in any material contract to which it becomes a party of any provisions that could or might in any way prevent the creation of a security interest in Assignor’s rights and interest in any property included within the definition of the Collateral acquired under such contracts, except that certain contracts may contain anti-assignment provisions that could in effect prohibit the creation of a security interest in such contracts.

 

(p)           Upon any executive officer of Assignor obtaining actual knowledge thereof, Assignor will promptly notify Assignee in writing of any event that materially adversely

 

4



 

affects the value of any material Collateral, the ability of Assignor to dispose of any material Collateral or the rights and remedies of Assignee in relation thereto, including the levy of any legal process against any of the Collateral.

 

4.             Assignee’s Rights.  Assignee shall have the right, but not the obligation, to take, at Assignor’s sole expense, any actions that Assignor is required under this Assignment to take but which Assignor fails to take, after fifteen (15) days’ notice to Assignor.  Assignor shall reimburse and indemnify Assignee for all reasonable costs and reasonable expenses incurred in the reasonable exercise of its rights under this Section 4.

 

5.             Inspection Rights.  Assignor hereby grants to Assignee and its employees, representatives and agents the right to visit, during reasonable hours upon prior reasonable written notice to Assignor, and any of Assignor’s plants and facilities that manufacture, install or store products (or that have done so during the prior six-month period) that are sold utilizing any of the Collateral, and to inspect the products and quality control records relating thereto upon reasonable written notice to Assignor and as often as may be reasonably requested, but not more than one (1) in every six (6) months; provided, however, nothing herein shall entitle Assignee access to Assignor’s trade secrets and other proprietary information.

 

6.             Further Assurances; Attorney in Fact.

 

(a)           Upon an Event of Default, on a continuing basis thereafter, Assignor will, subject to any prior licenses, encumbrances and restrictions and prospective licenses, make, execute, acknowledge and deliver, and file and record in the proper filing and recording places in the United States, all such instruments, including, appropriate financing and continuation statements and collateral agreements and filings with the United States Patent and Trademarks Office and the Register of Copyrights, and take all such action as may reasonably be deemed necessary or advisable, or as requested by Assignee, to perfect Assignee’s security interest in all Copyrights, Patents and Trademarks and otherwise to carry out the intent and purposes of this Collateral Assignment, or for assuring and confirming to Assignee the grant or perfection of a security interest in all Collateral.

 

(b)           Upon an Event of Default, Assignor hereby irrevocably appoints Assignee as Assignor’s attorney-in-fact, with full authority in the place and stead of Assignor and in the name of Assignor, Assignee or otherwise, from time to time in Assignee’s discretion, upon Assignor’s failure or inability to do so, to take any action and to execute any instrument which Assignee may deem necessary or advisable to accomplish the purposes of this Collateral Assignment, including:

 

(i)            To modify, in its sole discretion, this Collateral Assignment without first obtaining Assignor’s approval of or signature to such modification by amending Exhibit A-1, Exhibit A-2, Exhibit A-3, Exhibit B and Exhibit C, thereof, as appropriate, to include reference to any right, title or interest in any Copyrights, Patents or Trademarks acquired by Assignor after the execution hereof or to delete any reference to any right, title or interest in any Copyrights, Patents or Trademarks in which Assignor no longer has or claims any right, title or interest; and

 

5



 

(ii)           To file, in its sole discretion, one or more financing or continuation statements and amendments thereto, relative to any of the Collateral without the signature of Assignor where permitted by law.

 

7.             Events of Default.  The occurrence of any of the following shall constitute an Event of Default under the Assignment:

 

(a)           An Event of Default occurs under the Loan Agreement; or

 

(b)           Assignor breaches any warranty or agreement made by Assignor in this Assignment.

 

8.             Remedies.  Upon the occurrence and continuance of an Event of Default, Assignee shall have the right to exercise all the remedies of a secured party under the California Uniform Commercial Code, including without limitation the right to require Assignor to assemble the Collateral and any tangible property in which Assignee has a security interest and to make it available to Assignee at a place designated by Assignee.  Assignee shall have a nonexclusive, royalty free license to use the Copyrights, Patents and Trademarks to the extent reasonably necessary to permit Assignee to exercise its rights and remedies upon the occurrence of an Event of Default.  Assignor will pay any expenses (including reasonable attorney’s fees) incurred by Assignee in connection with the exercise of any of Assignee’s rights hereunder, including without limitation any expense incurred in disposing of the Collateral.  All of Assignee’s rights and remedies with respect to the Collateral shall be cumulative.

 

9.             Indemnity.  Assignor agrees to defend, indemnify and hold harmless Assignee and its officers, employees, and agents against:  (a) all obligations, demands, claims, and liabilities claimed or asserted by any other party in connection with the transactions contemplated by this Agreement, and (b) all losses or expenses in any way suffered, incurred, or paid by Assignee as a result of or in any way arising out of, following or consequential to transactions between Assignee and Assignor, whether under this Assignment or otherwise (including without limitation, reasonable attorneys fees and reasonable expenses), except for losses arising form or out of Assignee’s gross negligence or willful misconduct.

 

10.           Release.  At such time as Assignor shall completely satisfy all of the obligations secured hereunder, Assignee shall execute and deliver to Assignor all assignments and other instruments as may be reasonably necessary or proper to terminate Assignee’s security interest in the Collateral, subject to any disposition of the Collateral which may have been made by Assignee pursuant to this Agreement.  For the purpose of this Agreement, the obligations secured hereunder shall be deemed to continue if Assignor enters into any bankruptcy or similar proceeding at a time when any amount paid to Assignee could be ordered to be repaid as a preference or pursuant to a similar theory, and shall continue until it is finally determined that no such repayment can be ordered.

 

11.           No Waiver.  No course of dealing between Assignor and Assignee, nor any failure to exercise nor any delay in exercising, on the part of Assignee, any right, power, or privilege under this Agreement or under the Loan Agreement or any other agreement, shall operate as a waiver.  No single or partial exercise of any right, power, or privilege under this Agreement or

 

6



 

under the Loan Agreement or any other agreement by Assignee shall preclude any other or further exercise of such right, power, or privilege or the exercise of any other right, power, or privilege by Assignee.

 

12.           Rights Are Cumulative.  All of Assignee’s rights and remedies with respect to the Collateral whether established by this Agreement, the Loan Agreement, or any other documents or agreements, or by law shall be cumulative and may be exercised concurrently or in any order.

 

13.           Course of Dealing.  No course of dealing, nor any failure to exercise, nor any delay in exercising any right, power or privilege hereunder shall operate as a waiver thereof.

 

14.           Attorneys’ Fees.  If any action relating to this Assignment is brought by either party hereto against the other party, the prevailing party shall be entitled to recover reasonable attorneys fees, costs and disbursements.

 

15.           Amendments.  This Assignment may be amended only by a written instrument signed by both parties hereto.  To the extent that any provision of this Agreement conflicts with any provision of the Loan Agreement, the provision giving Assignee greater rights or remedies shall govern, it being understood that the purpose of this Agreement is to add to, and not detract from, the rights granted to Assignee under the Loan Agreement.  This Agreement, the Loan Agreement, and the documents relating thereto comprise the entire agreement of the parties with respect to the matters addressed in this Agreement.

 

16.           Severability.  The provisions of this Agreement are severable.  If any provision of this Agreement is held invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect  only such provision, or part thereof, in such jurisdiction, and shall not in any manner affect such provision or part thereof in any other jurisdiction, or any other provision of this Agreement in any jurisdiction.

 

17.           Counterparts.  This Assignment may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute the same instrument.

 

18.           California Law and Jurisdiction.  This Assignment shall be governed by the laws of the State of California, without regard for choice of law provisions.  Assignor and Assignee consent to the nonexclusive jurisdiction of any state or federal court located in Orange County, California.

 

19.           Confidentiality.  In handling any confidential information, Assignee shall exercise the same degree of care that it exercises with respect to its own proprietary information of the same types to maintain the confidentiality of any non-public information thereby received or received pursuant to this Assignment except that the disclosure of this information may be made (i) to the affiliates of the Assignee, (ii) to prospective transferee or purchasers of an interest in the obligations secured hereby, provided that they have entered into a comparable confidentiality agreement in favor of Assignor and have delivered a copy to Assignor, (iii) as required by law, regulation, rule or order, subpoena judicial order or similar order and (iv) as maybe required in connection with the examination, audit or similar investigation of Assignee.

 

7



 

20.           WAIVER OF RIGHT TO JURY TRIAL.  ASSIGNEE AND ASSIGNOR EACH HEREBY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO:  (I) THIS AGREEMENT; OR (II) ANY OTHER PRESENT OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN ASSIGNEE AND ASSIGNOR; OR (III) ANY CONDUCT, ACTS OR OMISSIONS OF ASSIGNEE OR ASSIGNOR OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH ASSIGNEE OR ASSIGNOR; IN EACH OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.

 

IN WITNESS WHEREOF, the parties hereto have executed this Assignment on the day and year first above written.

 

 

 

 

ASSIGNOR:

 

 

 

 

 

 

 

 

 

DIGIRAD CORPORATION

 

 

 

 

 

 

 

 

 

By:

  /s/ Gary JG Atkinson

 

 

 

 

Title:

  Chief Financial Officer

 

 

 

 

Name (please print):

 

 

 

 

Gary Atkinson

 

 

 

 

Address of Assignor:

 

 

 

 

 

 

 

 

 

9350 Trade Place

 

 

 

 

San Diego, CA 92126

 

 

8



 

STATE OF California

)

 

) ss,

COUNTY OF San Diego

)

 

 

On August 3, 2001, before me, Claudia Perez, Notary Public, personally appeared Gary Atkinson, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

 

Witness my hand and official seal.

 

 

/s/

 

 

(Seal)

 

 

 

 

 

 

Official Seal

 

 

 

 

1



 

EXHIBIT “A-l”

 

REGISTERED COPYRIGHTS

 

REG. DATE

 

REG. DATE

 

COPYRIGHT

 

 

 

 

 

 

 

NONE

 

 

 

2



 

EXHIBIT “A-2”

 

UNREGISTERED COPYRIGHTS

 

 

NONE

 

 

DESCRIPTION OF COPYRIGHTS

 

3



 

EXHIBIT “A-3”

 

DESCRIPTION OF LICENSE AGREEMENTS

 

1.             Software license agreement with Segami Corporation dated June 16, 1999.

 

2.             Licence agreement with Ethicon Endo-Surgery, Inc. dated June 22, 1999.

 

3.             Software products license agreement with Strategic Information Group, Inc. dated December 31, 1998.

 

4.             Software license agreement with Corporate Management Solutions, Inc. dated July 21, 1999.

 

5.             Software license and maintenance agreement with Cadence Design Systems, Inc. dated November 16, 1999.

 

6.             Software products license agreement with QAD, Inc. dated January 6, 1999.

 

4



 

EXHIBIT “B”

 

PATENTS

 

PATENT

 

SERIAL/APPL. NO.

 

FILING DATE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

***

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


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

 

1



 

EXHIBIT “C”

 

TRADEMARKS

 

MARK

 

REG/FILE DATE

 

APP./SERIAL NO.

 

 

 

 

 

Digirad Imaging Solutions

 

March 6, 2001

 

76220818

Agile

 

June 5, 2000

 

76067092

DIGIRAD

 

December 22, 1999

 

75879709

Spectour

 

September 14, 1999

 

75799823

2020tc Imager

 

September 14, 1999

 

75799499

SpectrumPlus

 

November 22, 1996

 

75202359

Notebook Imager

 

 

 

 

Digirad

 

September 6, 1994

 

74569856

Rim

 

 

 

 

Hybrid Heat Sink

 

 

 

 

 

2



 

Silicon Valley Bank

 

Certified Resolution and Incumbency Certificate

 

Borrower:

 

Digirad Corporation,

 

 

a corporation organized under the laws

 

 

of the State of Delaware

 

 

 

Date:

 

July 31, 2001

 

I, the undersigned, Secretary or Assistant Secretary of the above-named borrower, a corporation organized under the laws of the state set forth above, do hereby certify that the following is a full, true and correct copy of resolutions duly and regularly adopted by the Board of Directors of said corporation as required by law, and by the by-laws of said corporation, and that said resolutions are still in full force and effect and have not been in any way modified, repealed, rescinded, amended or revoked.

 

RESOLVED, that this corporation borrow from Silicon Valley Bank (“Silicon”), from time to time, such sum or sums of money as, in the judgment of the officer or officers hereinafter authorized hereby, this corporation may require.

 

RESOLVED FURTHER, that any officer of this corporation be, and he or she is hereby authorized, directed and empowered, in the name of this corporation, to execute and deliver to Silicon, and Silicon is requested to accept, the loan agreements, security agreements, notes, financing statements, and other documents and instruments providing for such loans and evidencing and/or securing such loans, with interest thereon, and said authorized officers are authorized from time to time to execute renewals, extensions and/or amendments of said loan agreements, security agreements, and other documents and instruments.

 

RESOLVED FURTHER, that said authorized officers be and they are hereby authorized, directed and empowered, as security for any and all indebtedness of this corporation to Silicon, whether arising pursuant to this resolution or otherwise, to grant, transfer, pledge, mortgage, assign, or otherwise hypothecate to Silicon, or deed in trust for its benefit, any property of any and every kind, belonging to this corporation, including, but not limited to, any and all real property, accounts, inventory, equipment, general intangibles, instruments, documents, chattel paper, notes, money, deposit accounts, furniture, fixtures, goods, and other property of every kind, and to execute and deliver to Silicon any and all grants, transfers, trust receipts, loan or credit agreements, pledge agreements, mortgages, deeds of trust, financing statements, security agreements and other hypothecation agreements, which said instruments and the note or notes and other instruments referred to in the preceding paragraph may contain such provisions, covenants, recitals and agreements as Silicon may require and said authorized officers may approve, and the execution thereof by said authorized officers shall be conclusive evidence of such approval.

 

RESOLVED FURTHER, that Silicon may conclusively rely upon a certified copy of these

 

1



 

resolutions and a certificate of the Secretary or Ass’t Secretary of this corporation as to the officers of this corporation and their offices and signatures, and continue to conclusively rely on such certified copy of these resolutions and said certificate for all past, present and future transactions until written notice of any change hereto or thereto is given to Silicon by this corporation by certified mail, return receipt requested.

 

RESOLVED FURTHER, that, in connection with the foregoing loans, this corporation shall issue to Silicon five-year warrants to purchase 42,490 shares of Series E Preferred stock of this corporation, at $3.036 per share, on the terms and provisions of Silicon’s standard form Warrant to Purchase Stock and related documents; with such changes therein as Silicon and this corporation shall agree; any officer of this corporation is hereby authorized to execute and deliver such Warrant to Purchase Stock and related documents, and all documents and instruments relating thereto, in such form and containing such additional provisions as said authorized officers may approve, and the execution thereof by said authorized officers shall be conclusive evidence of such approval.

 

2



 

The undersigned further hereby certifies that the following persons are the duly elected and acting officers of the corporation named above as borrower and that the following are their actual signatures:

 

NAMES

 

OFFICE (S)

 

ACTUAL SIGNATURES

 

 

 

 

 

R. Scott Huennekens

 

President and CEO

 

/s/ R. Scott Huennekens

Gary JG Atkinson

 

Vice President and CEO

 

/s/ Gary JG Atkinson

 

 

 

 

 

 

 

 

 

 

 

IN WITNESS WHEREOF, I have hereunto set my hand as such Secretary or Assistant Secretary on the date set forth above.

 

 

Gary JG Atkinson

 

 

Secretary or Assistant Secretary

 

 

3



 

Deposit Account Control Agreement

 

July 31, 2001

 

Merrill Lynch

 

                                             

Boston, MA                                

 

Re:     Digirad Corporation

 

Gentlemen:

 

Digirad Corporation (the “Customer”) has granted to Silicon Valley Bank (the “Lender”) a security interest in, and lien on, all of the following (whether now or hereafter existing or arising) (collectively, the “Collateral”):  All of the Customer’s present and future deposit accounts maintained by the Customer with you (the “Deposit Accounts”), including without limitation all demand, time, savings, passbook and similar accounts, and all present and future cash balances from time to time credited to any of the Deposit Accounts, and all proceeds of any and all of the foregoing.

 

Accordingly, we ask that you confirm your agreement as follows:

 

1.             Customer’s Directions.  Until you have received instructions from the Lender to the contrary, the Customer shall be entitled to present items drawn on and otherwise to withdraw or direct the disposition of funds from the Deposit Accounts; provided, however, that the Customer may not close  any Deposit Account, without the Lender’s prior written consent.

 

2.             Lender’s Rights.  Notwithstanding the foregoing or any separate agreement that the Customer may have with the Lender, the Lender shall be entitled at any time to give you instructions as to the withdrawal or disposition of any funds from time to time credited to any or all of the Deposit Accounts, or as to any other matters relating to the Deposit Accounts or any of the other Collateral, without the Customer’s further consent.  You hereby agree to comply with any such instructions without any further consent from the Customer.  Such instructions may include the giving of stop payment orders for any items being presented to any Deposit Account for payment.  You shall be fully entitled to rely upon such instructions from the Lender, even if such instructions are contrary to any instructions or demands that the Customer may give to you.  The Customer confirms that you are to follow instructions from the Lender even if the result of following such instructions from the Lender is that you dishonor items presented for payment from a Deposit Account.  The Customer further confirms that you shall have no liability to the Customer for wrongful dishonor of any such items in following such instructions from the Lender.  You shall have no duty to inquire or determine whether the Customer’s obligations to the Lender are in default or whether the Lender is entitled, under any separate agreement between the Customer and the Lender, to give any such instructions.  The Customer further agrees to be responsible for your customary charges and to indemnify you from, and to hold you harmless against, any loss, cost or expense that you may sustain or incur in acting upon instructions from the Lender, or which you believe in good faith to be instructions from the Lender.

 

1



 

3.             Waiver of Setoff.  You agree not to exercise any right of recoupment or set-off, or to assert any banker’s lien, security interest or other lien on, against or in any of the Deposit Accounts or other Collateral on account of any credit or other obligation owed to you by the Customer or any other person, or otherwise, provided that you shall have the right, from time to time, to debit the Deposit Accounts for any of your customary charges in maintaining the Deposit Accounts or for reimbursement for the reversal of any provisional credits granted by you to the Deposit Accounts, to the extent, in each case, that the Customer has not separately paid or reimbursed you for any of the foregoing.

 

4.             Statements.  You agree to furnish to the Lender, at its address indicated below, copies of all customary deposit account statements and other information relating to the Deposit Accounts that you send to the Customer.

 

5.             Governing Law; Other Agreements.  This agreement shall be governed by the internal law of the State of California.  You represent and warrant to the Lender that the account agreement between you and the Customer relating to the establishment and general operation of the Deposit Accounts provides that the laws of the State of govern the Deposit Accounts and secured transactions relating thereto, and you agree not to amend that account agreement to provide that the laws of another jurisdiction will so govern.       In addition, you represent and warrant, to the Lender that you have not entered into, and you agree not to enter, into any agreement with any other person by which you are obligated to comply with instructions from that personas to the disposition of funds from any of the Deposit Accounts or other dealings with any of the Collateral.

 

6.             General.  This agreement us sets forth in full all of the representations and agreements of the parties with respect to the subject matter hereof and supersede all prior discussions, oral representations, oral agreements and oral understandings between the parties with respect to the subject matter hereof.  This agreement shall control over any conflicting agreement between you and the Customer.  This agreement may not be modified or amended, nor may any rights hereunder be waived, except in a writing signed by the parties hereto.  In the event of any litigation between the parties based upon, arising out of, or relating to this agreement, the prevailing party shall be entitled to recover its reasonable costs and expenses (including without limitation reasonable attorneys’ fees) from the nonprevailing party.  The parties agree to cooperate fully with each other and take such further actions and execute such further documents from time to time as may be reasonably necessary to carry out the purposes of this agreement.

 

Sincerely yours,

 

Lender:

Customer:

 

 

SILICON VALLEY BANK

DIGIRAD CORPORATION

 

 

 

 

By

 

 

By

/s/ Gary JG Atkinson

 

Title

 

 

Title

Chief Financial Officer

 

 

2



 

Address:

 

 

Address:

9350 Trade Place

 

 

 

 

 

San Diego CA 92126-6334

 

 

Attn:

 

 

 

Attn:

Gary Atkinson

 

 

Accepted and Agreed:

 

MERRILL LYNCH

 

By

 

 

Title

 

 

 

3



 

 

Silicon Valley Bank

Amendment to Loan Documents

 

 

Borrower:

 

Digirad Corporation

 

 

 

Date:

 

March 28, 2002

 

THIS AMENDMENT TO LOAN DOCUMENTS is entered into between Silicon Valley Bank (“Silicon”) and the borrower named above (“Borrower”).

 

The Parties agree to amend the Loan and Security Agreement between them, dated July 31, 2001 (as otherwise amended, if at all, the “Loan Agreement”), as follows, effective as of the date hereof. (Capitalized terms used but not defined in this Amendment shall have the meanings set forth in the Loan Agreement.)

 

1.             Modified Cash Management Sublimit.  Section 1.6 of the Loan Agreement is hereby amended to read as follows:

 

1.6  Cash Management Services and Reserves.  Borrower may use up to

   ***   of Loans available hereunder for Silicon’s Cash Management Services (as defined below), including, merchant services, business credit card, ACH and other services identified in the cash management services agreement related to such service (the “Cash Management Services”) but excluding ACH payroll cash management services. Silicon may, in its sole discretion, reserve against Loans which would otherwise be available hereunder such sums as Silicon shall determine in connection with the Cash Management Services, and Silicon may charge to Borrower’s Loan account, any amounts that may become due or owing to Silicon in connection with the Cash Management Services. Borrower agrees to execute and deliver to Silicon all standard form applications and agreements of Silicon in connection with the Cash Management Services, and, without limiting any of the terms of such applications and agreements, Borrower will pay all standard fees and charges of Silicon in connection with the Cash Management Services. The Cash Management Services shall terminate on the Maturity Date.

 

2.             Modified Credit Limit.  Section 1 of the Schedule to Loan and Security Agreement is hereby amended to read as follows:

 

1.  CREDIT LIMIT

 

 

(Section 1.1):

 

An amount equal to the sum of 1, 2 and 3 below:

 

1



 

 

 

1.  Revolving Loans.  An amount not to exceed the lesser of a total of $4,300,000 at any one time outstanding (the “Maximum Credit Limit”), or the sum of (a) and (b) below:

 

 

 

 

 

(a)  85% (the “Percentage Advance Rate”) of the amount of Borrower’s Eligible Receivables (as defined in Section 8 above), plus

 

 

 

 

 

(b)  an amount not to exceed the lesser of:

 

 

 

 

 

(1)           35% of the value of Borrower’s Eligible Inventory (as defined in Section 8 above), calculated at the lower of cost or market value and determined on a first-in, first-out basis, or

 

 

 

 

 

(2)           50% of the amount of Borrower’s Eligible Receivables (as defined in Section 8 above), or

 

 

 

 

 

(3)           $500,000.

 

 

 

 

 

The foregoing Percentage Advance Rate is typically based on the quality of the Receivables and attendant Dilution as follows: up to 85% Percentage Advance Rate with 5% Dilution; up to 80% Percentage Advance Rate with Dilution over 5% but less than 10%; up to 75% Percentage Advance Rate when Dilution is over 10% but less than 15%. If Dilution exceeds 15%, a reserve is established for the dilution factor rounded up to the nearest whole number then multiplied by a factor of up to 75%.

 

 

 

 

 

As used above, “Dilution” means all deductions from Receivables by Account Debtors of Borrower, other than those arising from payment thereof, and includes without limitation deductions arising from advertising and other allowances, credit memos, returns, bad debts, and all other deductions, as determined by Silicon’s audit and for such period as Silicon shall determine. Changes in the Percentage Advance Rate based on Dilution shall go into effect when Silicon has determined the amount of the Dilution and given written notice to the Borrower of the change in the Percentage Advance Rate. If, as a result of a decrease in the

 

2



 

 

 

Percentage Advance Rate, the total Loans and other Obligations exceed the Credit Limit, the Borrower shall pay the excess to Silicon in accordance with the terms of this Agreement.

 

 

 

 

 

Moreover, prior to any increase in the Percentage Advance Rate going into effect, the delinquency rate with respect to the Borrower’s Receivables must be satisfactory to Silicon in its sole discretion.

 

 

 

 

 

Cash Management
Sublimit

 

 

(Section 1.6):    See Section 1.6 above;

 

 

 

 

 

plus

 

 

 

 

 

2.  Payroll Cash Management Services Loans.  Borrower has executed a cash management services agreement pursuant to which, in part, Borrower may utilize ACH payroll cash management services up to an amount of $350,000 (the “Payroll Cash Management Services Line”).  Upon Silicon’s receipt of an ACH payroll service charge (“Payroll Charge”), if Borrower’s operating account does not have sufficient funds to pay such Payroll Charge and if Silicon is obligated to pay such Payroll Charge, then Silicon will make such payment(s) and any such payments by Silicon shall constitute Obligations under this Agreement. Borrower agrees to execute and deliver to Silicon all standard form applications and agreements of Silicon in connection with the Payroll Cash Management Services Line, and, without limiting any of the terms of such applications and agreements, Borrower will pay all standard fees and charges of Silicon in connection with the Payroll Cash Management Services Line.  The Payroll Cash Management Services Line shall terminate on the Maturity Date;

 

 

 

 

 

plus

 

 

 

 

 

3.  Cash Secured Letter of Credit.  $205,000. Silicon previously issued for the account of Borrower a Standby Letter of Credit in the amount of $205,000 (the “Standby Letter of Credit”), which Standby Letter of Credit is secured by a certificate of deposit

 

3



 

 

 

pledged to Silicon on Silicon’s standard form documentation.

 

 

 

3.             Modified Minimum Tangible Net Worth Financial Covenant.  The Minimum Tangible Net Worth Financial Covenant set forth in Section 5 of the Schedule to Loan and Security Agreement is hereby amended in its entirety to read as follows:

 

 

 

“Minimum Tangible

 

 

Net Worth:

 

Borrower shall maintain, at the Borrower level only and not consolidated with any subsidiaries, a Tangible Net Worth of not less than $500,000, plus 50% of the total consideration received by Borrower after March 1, 2002, in consideration for the issuance by Borrower of its equity securities and subordinated debt securities, effective on the date such consideration is received, plus 50% of Borrower’s year to date net income as of the end of the applicable reporting period.; and

 

 

 

 

 

Borrower shall maintain, on a consolidated basis, a Tangible Net Worth of not less than $1,000,000, plus 50% of the total consideration received by Borrower after March 1, 2002, in consideration for the issuance by Borrower of its equity securities and subordinated debt securities, effective on the date such consideration is received, plus 50% of Borrower’s year to date net income as of the end of the applicable reporting period.”

 

4.             Covenant Regarding Banking Relationship.  Subclause (1) of Section 9 of the Schedule to Loan and Security Agreement is hereby amended to read as follows:

 

“(1)         Banking Relationship. Borrower shall at all times maintain its primary banking relationship with Silicon.  Without limiting the generality of the foregoing, Borrower shall, at all times, maintain not less than  *** of its total cash and investments on deposit with Silicon.

 

5.             Fee.  As consideration for Silicon entering into this Amendment, Borrower shall concurrently pay Silicon a fee in the amount of $7,500, which shall be non-refundable and in addition to all interest and other fees payable to Silicon under the Loan Documents. Silicon is authorized to charge said fee to Borrower’s loan account.

 

6.             Representations True.  Borrower represents and warrants to Silicon that all representations and warranties set forth in the Loan Agreement, as amended hereby, are true and correct.

 


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

 

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7.            General Provisions.  This Amendment, the Loan Agreement, any prior written amendments to the Loan Agreement signed by Silicon and Borrower, and the other written documents and agreements between Silicon and Borrower set forth in full all of the representations and agreements of the parties with respect to the subject matter hereof and supersede all prior discussions, representations, agreements and understandings between the parties with respect to the subject hereof.  Except as herein expressly amended, all of the terms and provisions of the Loan Agreement, and all other documents and agreements between Silicon and Borrower shall continue in full force and effect and the same are hereby ratified and confirmed.

 

 

Borrower:

Silicon:

 

 

DIGIRAD CORPORATION

SILICON VALLEY BANK

 

 

 

 

By

/s/ Illegible

 

By

/s/ Illegible

 

 

President or Vice President

Title

Vice President and Regional Market

 

 

 

 

Manager

 

By

/s/ Illegible

 

 

 

Secretary or Ass’t Secretary

 

 

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Silicon Valley Bank

 

Amendment to Loan Documents

 

 

Borrower:

 

Digirad Corporation

 

 

 

Date:

 

August 29, 2002

 

THIS AMENDMENT TO LOAN TO LOAN DOCUMENTS is entered into between Silicon Valley Bank (“Silicon”) and the borrower named above (“Borrower”).

 

The Parties agree to amend the Loan and Security Agreement between them, dated July 31, 2001 (as otherwise amended, if at all, the “Loan Agreement”), as follows, effective as of the date hereof.  (Capitalized terms used but not defined in this Amendment shall have the meanings set forth in the Loan Agreement.)

 

1.             Modified Definition of Eligible Receivables.  Subclause (i) of the Minimum Eligibility Requirements set forth in the definition of Eligible Receivables in Section 8 of the Loan Agreement is hereby amended to read as follows:

 

(i) the Receivable must not be outstanding for more than 120 days from its invoice date,

 

2.             Modified Credit Limit.  Section 1 of the Schedule to Loan and Security Agreement is hereby amended to read as follows:

 

1.             CREDIT LIMIT

 

 

(Section 1.1):

 

An amount equal to the sum of 1, 2 and 3 below:

 

 

 

 

 

1.  Revolving Loans.  An amount not to exceed the lesser of a total of $5,000,000 at any one time outstanding (the “Maximum Credit Limit”), the sum of (a) and (b) below:

 

 

 

 

 

(a)  85% (the “Percentage Advance Rate”) of the amount of Borrower’s Eligible Receivables (as defined in Section 8 above), plus

 

 

 

 

 

(b)  an amount not to exceed the lesser of:

 

 

 

 

 

(1)   35% of the value of Borrower’s Eligible Inventory (as defined in Section 8 above), calculated at the lower of cost or market value and

 

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Silicon Valley Bank

Amendment to Loan Documents

 

 

 

determined on a first-in, first-out basis, or

 

 

 

 

 

(2)   50% of the amount of Borrower’s Eligible Receivables (as defined in Section 8 above), or

 

 

 

 

 

(3)   $650,000.

 

 

 

 

 

The foregoing Percentage Advance Rate is typically based on the quality of the Receivables and attendant Dilution as follows:  up to 85% Percentage Advance Rate with 5% Dilution; up to 80% Percent Advance Rate with Dilution over 5% but less than 10%; up to 75% Percent Advance Rate when Dilution is over 10% but less than 15%.  If Dilution exceeds 15%, a reserve is established for the dilution factor rounded up to the nearest whole number then multiplied by a factor of up to 75%.

 

 

 

 

 

As used above, “Dilution” means all deductions from Receivables by Account Debtors of Borrower, other than those arising from payment thereof, and includes without limitation deductions arising from advertising and other allowances, credit memos, returns, bad debts, and all other deductions, as determined by Silicon’s audit and for such period as Silicon shall determine.  Changes in the Percentage Advance Rate based on Dilution shall go into effect when Silicon has determined the amount of the Dilution and given written notice to the Borrower of the change in the Percentage Advance Rate.  If, as a result of a decrease in the Percentage Advance Rate, the total Loans and other Obligations exceed the Credit Limit, the Borrower shall pay the excess to Silicon in accordance with the terms of this Agreement.

 

 

 

 

 

Moreover, prior to any increase in the Percentage Advance Rate going into effect, the delinquency rate with respect to the Borrower’s Receivables must be satisfactory to Silicon in its sole discretion.

 

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Cash Management
Sublimit

 

 

Section 1.6):          See Section 1.6 above;

 

 

 

 

 

plus

 

 

 

 

 

2.  Payroll Case Management Services Loans.  Borrower has executed a cash management services agreement pursuant to which in part, Borrower may utilize ACH payroll cash management services up to an amount of $350,000 (the “Payroll Cash Management Services Line”).  Upon Silicon’s receipt of an ACH payroll service charge (“Payroll Charge”), if borrower’s operating account does not have sufficient funds to pay such Payroll Charge and if Silicon is obligated to pay such Payroll Charge, then Silicon will make such payment(s) and any such payments by Silicon shall constitute Obligations under this Agreement.  Borrower agrees to execute and deliver to Silicon all standard form applications and agreements of Silicon in connection with the Payroll Cash Management Services Line, and, without limiting any of the terms of such applications and agreements, Borrower will pay all standard fees and charges of Silicon in connection with the Payroll Cash Management Services Line.  The Payroll Cash Management Services Line shall terminate on the Maturity Date;

 

 

 

 

 

plus

 

 

 

 

 

3.  Cash Secured Letter of Credit.  $205,000.  Silicon previously issued for the account of Borrower a Standby Letter of Credit in the amount of $205,000 (the “Standby Letter of Credit”), which Standby Letter of Credit is secured by a certificate of deposit pledged to Silicon on Silicon’s standard form documentation.

 

3.             Modified Interest Rate.  Section 2 of the Schedule to Loan and Security Agreement is hereby amended to read as follows:

 

2.  INTEREST.

 

Interest Rate (Section 1.2):

 

 

 

 

 

A rate equal to the “Prime Rate” in effect from time to time, plus 1.75% per annum Interest shall be calculated on the basis of a 360-day year for the actua1 number of days

 

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Silicon Valley Bank

Loan and Security Agreement

 

 

 

elapsed.  “Prime Rate” means the rate announced from time to time by Silicon as its “prime rate;” it is a base rate upon which other rates charged by Silicon are based, and it is not necessarily the best rate available at Silicon.