PAGES WHERE CONFIDENTIAL TREATMENT HAS BEEN REQUESTED ARE STAMPED
"CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION." THE APPROPRIATE SECTION HAS BEEN
MARKED "CONFIDENTIAL" AT THE APPROPRIATE PLACE.
STRATEGIC ALLIANCE AGREEMENT
THIS AGREEMENT ("Agreement"), effective as of April 1, 1996, is entered
into by QMED, INC., a company organized and existing under the laws of the State
of Delaware and having its principal office at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ("Qmed") and SMITHKLINE ▇▇▇▇▇▇▇ HEALTHCARE SERVICES, a
division of SMITHKLINE ▇▇▇▇▇▇▇ CORPORATION, a company organized under the laws
of the Commonwealth of Pennsylvania and having its principal office at ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ("SB").
Whereas, Qmed has developed the On-Line Health Management System for
Coronary Artery Disease ("ohms|cad"), a proprietary system which, when used by
appropriate medical personnel, can provide evaluations relating to ambulatory
myocardial ischemia and certain other coronary risk factors for patients with
coronary artery disease ("CAD"), and/or who are being evaluated for such
conditions, and can contribute to the formation by the patients' treating
physicians of appropriate medical management plans for such patients, which
system and services are more fully described in Attachment 1 hereto, and Qmed is
interested in obtaining the assistance of SB in marketing and selling the
ohms|cad service, in obtaining customers and potential customers for such
service, administering certain aspects of the ohms|cad services and the
collection of payments for use of the ohms|cad services;
Whereas, SB is interested in providing marketing, selling and
administrative assistance and support in connection with the ohms|cad system;
Whereas, SB's affiliate, S.R. One, Limited ("▇.▇.▇▇▇"), and Qmed are
entering into a separate agreement pursuant to which S.R. One is making an
equity investment in Qmed in order to provide Qmed with certain operating
capital to fund operations that are expected to occur in connection with this
Agreement as more fully set forth in such separate agreement; and
Whereas, Qmed and SB desire to set forth the terms and conditions on which
they will conduct their strategic alliance (the "Strategic Alliance").
NOW THEREFORE, the parties hereto agree as follows:
1. DESCRIPTION OF STRATEGIC ALLIANCE AND OHMS|CAD SERVICES
SB and Qmed will jointly market and sell the ohms|cad services to persons
and/or entities lawfully engaged in providing medical services outside of the
fee-for-service market, including, but not limited to, health maintenance
organizations ("HMOs"), preferred provider organizations, "at risk" physician
groups, integrated delivery systems that assume risk, and other managed care
organizations (the "Potential Customers") under the terms and conditions
set forth in this Agreement. This Agreement sets forth the responsibilities of
each of SB and Qmed in connection with the marketing of the ohms|cad services to
Potential Customers, the negotiation and administration of contracts entered
into by customers for the provision of the ohms|cad services, and the provision
of the ohms|cad services to such customers, as well as the reimbursement of
costs and compensation each party will receive for its activities hereunder.
2. JOINT STEERING COMMITTEE
2.1 Within thirty (30) days following the execution of this Agreement, the
parties shall establish a Joint Steering Committee ("JSC") which shall consist
of up to two (2) members appointed by each of the parties. Each of the parties
will designate one of its members as a co-chairperson of the JSC. Either party
may, at any time by written notice to the other, replace any of its members of
the JSC without the consent of the other party.
2.2 The JSC shall have overall responsibility for strategic and other
major decisions regarding the Strategic Alliance, including, but not limited to;
(a) review and approval of the marketing and business plan for the Strategic
Alliance; and (b) resolution of any disputes or other matters that cannot be
resolved by the JMC (as defined in Section 3.1 below). Notwithstanding the
foregoing, it is understood and agreed that Qmed shall be responsible for the
actual provision of the ohms|cad services, including the provision of the
results of the ohms|cad monitoring, communication of any ohms|cad
recommendations in connection with such results, and arranging for any
consultations provided in connection with such services, such ohms|cad services
being more fully described in Attachments 1 and 2 hereto.
2.3 The JSC shall meet at least once every six (6) months (or as otherwise
agreed to by the parties), in person or by telephone, to discuss the operation
of the Strategic Alliance and any issues that may be appropriate for discussion
by the JSC. The parties shall mutually agree on the date, place, time and agenda
for JSC meetings. The JSC shall prepare and maintain written minutes or other
suitable written records of the actions taken at and the results of such
meetings.
2.4 Each of SB and Qmed shall have one vote on the JSC and all JSC
decisions will be by unanimous vote of the JSC. In the event that the JSC is not
able to agree on an issue involving a strategic decision, such as how to fund
certain expenses or other costs related to the Strategic Alliance, no action
will be taken on such issue. In the event that the JSC is not able to agree on
an issue involving the marketing of the ohms|cad services, SB shall have the
right, after due discussion of such issue, to determine what action will be
taken with respect to such issue and will inform Qmed in writing of such
decision. In the event that the JSC is not able to agree on an issue which
involves the operation of the ohms|cad system, after due discussion of such
issue, Qmed shall have the right to determine what action will be taken with
respect to such issue and will inform SB in writing of any such decision.
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CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
3. JOINT MARKETING COMMITTEE
3.1 Within thirty (30) days following the execution of this Agreement, the
parties shall establish a Joint Marketing Committee (the "JMC") which shall
consist of up to two members appointed by each of the parties. Each of the
parties will designate one of its members as a co-chairperson of the JMC. Either
party may, at any time by written notice to the other, replace any of its
members of the JMC without the consent of the other party.
3.2 The JMC shall be responsible for all decisions regarding the marketing
and promotion of the ohms|cad services under this Agreement, and for the
administrative activities required in connection with this Agreement including
the following: (a) development of a detailed marketing and business plan for
submission to the JSC; (b) modifying the marketing and business plan as needed
from time to time; (c) monitoring performance against the business and marketing
plans; and (d) such other activities as are reasonably necessary in connection
with the administration of this Agreement. Each party shall use all due
diligence to ensure that all tasks assigned by the JMC are performed in a timely
manner and in accordance with the applicable budget.
3.3 The JMC shall meet at least once each calendar quarter (or as
otherwise agreed to by the parties), in person or by telephone, to discuss the
actual results achieved through the Strategic Alliance compared to the marketing
and business plan and any other matters that may be appropriate for discussion
by the JMC. The parties shall mutually agree on the date, place, time and agenda
for JMC meetings. Each of SB and Qmed will have one vote on the JMC and all
decisions of the JMC will be by unanimous vote of the JMC. Any matters that
cannot be resolved by the JMC will be submitted to the JSC for consideration and
resolution. JMC shall prepare and maintain written minutes or other suitable
written records of the action taken at and the results of such meetings.
4. SERVICES PROVIDED BY THE PARTIES
4.1 Marketing and Selling
4.1.1 SB, with input from Qmed, will be responsible for developing a
prioritized target account list consisting primarily of staff model HMOs and
capitated (i.e., at risk) physician groups located in [CONFIDENTIAL] (the
"Initial Target Accounts"). The target account list will be submitted to the JMC
for review and approval. SB, with input from Qmed, will also identify 2-3 IPA
model HMOs that may be willing to serve as pilot sites for the provision of the
ohms|cad services in such a setting. In these accounts, the use of SBCL testing
sites as monitoring stations will be explored. After the development of the list
of Initial Target
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CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
Accounts, SB, with input from Qmed, will also develop a national target list of
accounts that includes capitated (i.e., at risk) physician groups, staff model
HMOs, and, as appropriate, IPA model HMOs (the "National Target Accounts"). The
expanded list will be reviewed, approved and prioritized by the JMC.
4.1.2 SB will utilize its Integrated Healthcare Division ("IHD")
sales force to market and promote the ohms|cad services to the Initial Target
Accounts and to other customers as determined by SB with input from Qmed. The
IHD sales force will make the initial contacts with such clients to describe the
ohms|cad services and to determine the level of interest in the ohms|cad
services. SB, with input from Qmed, will develop a sales presentation for the
IHD sales force to use. For those potential customers that appear interested in
the ohms|cad services, SB will, where appropriate, arrange for a meeting
involving Qmed personnel to provide the needed technical sales support, and to
inform the potential customer as to the details regarding the operation and use
of the ohms|cad services.
4.1.3 SB will utilize, as appropriate, its pharmaceutical
consultants in [CONFIDENTIAL] (the "Sales Consultants") and in other states as
deemed appropriate to assist the IHD sales force in establishing appropriate
target customer contacts and in promoting the ohms|cad services to such
accounts. In addition, after a customer has executed an agreement to use the
ohms|cad services, the Sales Consultants will, as appropriate, help "pull
through" the use of the ohms|cad services in accounts in which those consultants
are active by providing reminder information regarding the ohms|cad services,
discussing the ohms|cad services with the physician and/or the physician's
staff, and through other appropriate activities.
4.1.4 SB, with input from Qmed, shall be responsible for developing
and producing sales and marketing materials required to carry out the marketing
plan approved by the JMC. SB will provide administrative support services in
coordinating sales and marketing activities, including scheduling SB/Qmed booths
at appropriate symposia.
4.1.5 Qmed, with input from SB, will be responsible for developing a
technical sales presentation to be used with accounts that have indicated to the
IHD sales force that they are interested in the ohms|cad system. Qmed will
develop and train a team of experts on the ohms|cad services that will provide
the technical expertise and rationale for why a Potential Customer should
consider using the ohms|cad services. Qmed will train and place into the
geographic regions in which the target accounts are located one or more
technical experts on the ohms|cad services who can assist accounts with set-up
and implementation. Qmed will submit recommendations as to the number and
locations of such technical experts to the JSC which shall determine the
appropriate number and location of such experts.
4
4.2 Ohms|cad Services
Qmed will be solely responsible for the provision of the ohms|cad
services to Potential Customers who enter into contracts for the provision of
such services (the "Customers"), and/or to physicians and other health care
professionals affiliated with such Customers as may be appropriate. The ohms|cad
services to be provided are described in Attachments 1 and 2 hereto, and,
subject to the agreement entered into by the Customer, generally include (1) the
provision, installation, and maintenance of ohms|cad monitors and related
equipment and software; (2) ohms|cad analysis of data received from patients,
including reviews by the ohms|cad consulting cardiology service of results of
patient monitoring and of recommendations for such patients where such review is
deemed appropriate by an ohms|cad consulting cardiologist, or under a protocol
established for the ohms|cad services; (3) provision of the results of patient
monitoring, and the ohms|cad recommendations to Customers; (4) arranging for
consultations with the ohms|cad consulting cardiology service where appropriate;
(5) provision of a variety of reports to customers; and (6) other operational,
administrative and support services related to the ohms|cad services.
4.3 Contract Administration and Support Services
4.3.1 SB and Qmed shall develop and agree upon the substance and
form of a standard contract template to be executed by customers interested in
utilizing the ohms|cad system (the "Contract Template"). SB shall be responsible
for preliminary negotiations with Potential Customers, including introducing the
Contract Template to such customers. In the event the Contract Template needs to
be customized for such customer, Qmed (which is to provide the ohms|cad service)
and SB will negotiate with the customer to achieve the customization. In the
event that a customer requires significant changes to the contract template,
those changes shall be submitted to the parties or to the JMC for approval. Each
contract for the provision of ohms|cad services must be approved and signed by
Qmed before becoming effective.
4.3.2 SB and Qmed will jointly agree upon their respective
responsibilities with respect to (a) the analysis of historical data regarding
costs and utilization relating to CAD data submitted by a Customer or Potential
Customer to determine the baseline costs against which the performance of the
ohms|cad services will be measured, (b) the assessment of outcomes data and
calculation of the cost savings generated for a Customer in connection with the
ohms|cad system and the portion due for services rendered pursuant to that
Customer's agreement, and (c) reporting the results of such analysis and
assessment to Customers or Potential Customers. Each party shall have access to
all such information.
4.3.3 SB shall be responsible for establishing and maintaining a
separate bank account to hold funds generated through contracts with Customers,
collecting amounts due from Customers, tracking revenues generated through the
Strategic Alliance and expenses reimbursed
5
out of such revenues, distributing funds to SB and/or Qmed in accordance with
this Agreement or as otherwise directed by the JMC or JSC, and other
administrative support services related to these activities as determined from
time to time by the JMC or by agreement of the parties.
4.4 Maintenance of and Access to Customer-Related Data
As part of its provision of services to Customers, Qmed will receive
and, through the ohms|cad system, will generate data regarding patients of
Customers or aggregate data relating to Customers, including baseline
information, the results of monitoring, and certain statistical reports more
fully described in Attachment 2 hereto (the "Customer-Related Data"). Unless
prohibited by applicable law or a contract with a Customer, during the term of
this Agreement SB will have the right to copy, obtain and use all
Customer-Related Data for purposes pertaining to the Strategic Alliance and for
any other purpose agreed to by a Customer, provided that in no event will SB
have access to any of Qmed's proprietary software, treatment algorithms, or
other data (other than Customer-Related Data) within, or utilized by, the
ohms|cad system.
4.5 Ownership of Equipment and Other Property
4.5.1 The parties recognize that ohms|cad technology, equipment,
hardware and software, including all Monitor-One STRx units, communication
modules, software and property used therewith, is and shall remain the property
solely of Qmed, or of Qmed's affiliate, Interactive Heart Management Corp.,
regardless of where such equipment is located, used and/or installed. The
parties recognize that the ohms|cad system is a proprietary system of Qmed and
that the software and algorithms and use thereof are also proprietary, and are
owned by Qmed. The parties further recognize that, in using the ohms|cad system,
information relevant to patients, customers and other matters, will, or may be,
input into and/or generated by the ohms|cad system; any additions and/or changes
to the ohms|cad databases and/or system resulting from its use, and any
information input into or generated by the ohms|cad system, become part of, and
are owned by Qmed; the parties also recognize that some of the information so
input and/or generated may also be Customer-Related Data, which is also owned by
SB, pursuant to paragraph 4.4, but this shall not affect the ownership of the
ohms|cad system and databases, or of the information as it exists as a part of
the ohms|cad system and databases, which shall remain in Qmed. Notwithstanding
the foregoing, in the event that the parties decide to pursue additional
developmental activities as provided for in Section 10.1.1 or Section 10.2
hereof, rights in and ownership of any intellectual property, data and other
property created or developed, pursuant to such activities, shall be determined
in accordance with the agreement or agreements reached pursuant to those
sections.
4.5.2 The parties agree that, unless otherwise provided under a
contract with a Customer or prohibited by applicable law, the Customer-Related
Data shall be owned jointly by SB and Qmed and each of SB and Qmed shall have
the right to independently utilize such data in the manner that each deems
appropriate subject to the provisions of any such contract or
6
applicable law. SB acknowledges that there is information contained in the
ohms|cad database other than the Customer-Related Data to which it has no
ownership rights and that its right to obtain and use the Customer-Related Data
included in the ohms|cad database shall be governed by Section 4.4 above.
4.6 Compliance with Laws
It is understood and agreed that the ohms|cad services will not be
marketed, sold or provided in any state until the parties are satisfied that the
provision of the ohms|cad services in such state would not violate any state
law, rule or regulation.
5. REVENUES GENERATED THROUGH THE STRATEGIC ALLIANCE
All revenues generated from the provision of ohms|cad services to Customers
that enter into agreements for the provision of such services after the date of
the Agreement shall be treated as subject to this Agreement. In addition, as of
the effective date of this Agreement, Qmed is negotiating or has signed
agreements to provide the ohms|cad services to the Potential Customers listed on
Attachment 3 hereto ("Qmed Potential or Existing Customers"). Revenues from all
such Customers (except for the Bakersfield Medical Group) related to the
provision of the ohms|cad services shall be treated as subject to this agreement
and those customers (except for the Bakersfield Medical Group) will be
considered "Customers" for purposes of this Agreement. The parties shall agree
on the appropriate mechanisms to be used to collect, record and account for
revenue from Qmed Potential or Existing Customers. Revenues generated by Qmed
from the provision of ohms|cad services to physicians that provide services on a
fee-for-service basis shall not be subject to this Agreement, provided that Qmed
will not provide ohms|cad services for any such physicians in connection with
such physicians' provision of services to HMOs that are Customers or Potential
Customers of SB and Qmed through the Strategic Alliance.
6. REIMBURSABLE EXPENSES
6.1 General Marketing Costs
The reasonable expenses SB incurs in developing general marketing
and sales materials and programs related to the ohms|cad services, such as in
the development of patient and physician education materials, development of a
physician kickoff program, development of a training program for IHD and Sales
Consultants, certain costs associated with conferences or conventions at which
SB and/or Qmed will promote the ohms|cad services, and professional agency fees
associated with these items ("General Marketing Costs") will be reimbursed out
of revenues received from Customers. Attachment 4 hereto contains a detailed
list of such reimbursable General Marketing Costs. Any such costs not
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CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
included in Attachment 4 hereto will be reimbursed upon the approval of the JMC.
Subject to the limitation set forth in Section 6.2 below, SB will initially
incur these costs and will be reimbursed for such costs as provided herein.
6.2 Client Specific Marketing Materials
The reasonable expenses SB incurs in connection with the printing
and production of marketing materials designed for specific target customers and
other out of pocket expenses incurred in marketing and selling the ohms|cad
services to specific clients ("Client Marketing Costs") will be reimbursed out
of revenues received from Customers. Attachment 4 hereto contains a more
detailed list of such reimbursable Client Marketing Costs. Any such costs not
included in Attachment 4 hereto will be reimbursed upon the approval of the JMC.
SB will initially incur the Client Marketing Costs and will be reimbursed for
such costs as provided herein, provided that SB will not be required to incur
unreimbursed General Marketing Costs, Client Marketing Costs and other
operational costs to be agreed to by Qmed and SB in excess of [CONFIDENTIAL].
6.3 Qmed Operational Costs
The reasonable out-of-pocket expenses incurred by Qmed in providing
the ohms|cad service to customers ("Qmed Operational Costs") will be reimbursed
out of revenues received from Customers. Attachment 4 hereto contains a more
detailed list of such Qmed Operational Costs. Any such costs not included in
Attachment 4 hereto will be reimbursed upon approval of the JMC.
6.4 Contract Administration Costs
Any reasonable out-of-pocket costs (including legal or accounting
costs) incurred by a party in connection with the negotiation of a customer
contract, the administration of the Strategic Alliance, the collection and
distribution of revenues or other activities relating to the Strategic Alliance
("Contract Administration Costs") will be reimbursed out of revenues received
from Customers. In addition, the parties will be reimbursed for the costs of
their personnel (or external personnel hired by them for this purpose) that
perform the accounting and recordkeeping support services required in connection
with the Strategic Alliance. Attachment 4 sets forth the reimbursable Contract
Administration Costs in more detail. Any such costs not included in Attachment 4
hereto will be reimbursed upon approval of the JMC.
8
CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
6.5 Miscellaneous Costs
The JMC may from time to time agree to reimburse other costs
incurred by a party in connection with the Strategic Alliance ("Miscellaneous
Costs") out of revenue received from Customers.
6.6 Submission of Summary of Reimbursable Expenses
On a monthly basis, each of Qmed and SB shall submit to the other a
summary setting forth in detail all costs that it has incurred in the applicable
month that are reimbursable out of revenues received from Customers with such
costs assigned to the Customer on whose behalf such costs were incurred to the
extent such assignment is practicable. Qmed does not believe it is currently
practicable to allocate costs to Customers, but will work with SB to agree upon
a methodology for such allocation to help estimate the profitability of specific
accounts. Each party shall also submit adequate supporting documentation for
such costs and the designation of the type of cost that such expense represents.
In the event that a party submits an expense that does not fall within the
categories of reimbursable expenses established by this Agreement or
subsequently by the JMC or JSC, such party's request for reimbursement shall be
submitted to the JMC for review.
7. PROFITS OR LOSSES
SB and Qmed will share in any profits (i.e., revenues in excess of
reimbursable expenses) or losses (i.e., reimbursable expenses in excess of
revenues generated from the provision of the ohms|cad service under this
Agreement) [CONFIDENTIAL]. While funds received from Customers will initially be
distributed according to the priorities set forth in Section 8 below, at the
expiration or termination of this Agreement, a reconciliation will be made
between costs incurred by each party, the profits or losses allocable to each
party, and the amount of distribution each party has received in order to assure
that the funds received by a party out of the revenues received from Customers
equals the total of that party's' reimbursable expenses plus or minus, as the
case may be, its [CONFIDENTIAL] of such profit or loss.
8. DISTRIBUTION OF FUNDS
8.1 Frequency and Determination of Amount of Distribution
Subject to the provisions of Section 8.4 below and any decision of
the JMC or JSC that provides otherwise, funds generated through the provision of
ohms|cad services to Customers will be distributed on a monthly basis. SB and
Qmed anticipate that contracts with Customers will provide for two types of
payments from such Customers: (1) a monthly per member per month amount intended
as a prepayment of the actual amount earned under a
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CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
Customer's contract (the "Customer Prepayments"); and (2) other payments
designed to pay the balance of the amounts due under a Customer's contract (the
"Other Payments"). The determination of the total amount distributable to each
party each month will be done in two steps based on the type of payment the
funds represent. First, the Customer Prepayments will be allocated for
distribution as set forth in Section 8.2 below. Second, the Other Payments
received from Customers will be allocated for distribution as set forth in
Section 8.3 below.
8.2 Customer Prepayments
8.2.1 Customer Prepayments received during a month will first be
used to reimburse Qmed for the Qmed Operational Costs actually incurred by Qmed
during such month and not previously reimbursed.
8.2.2 In the event that any portion of the Customer Prepayments
received in a month remain after the distribution provided for under Section
8.2.1, such funds will then be distributed to the parties on a pro rata basis
based on the total amount of Qmed Operational Costs, Client Marketing Costs,
Contract Administration Costs, General Marketing Costs and Miscellaneous Costs
(together, hereinafter referred to as the "Reimbursable Expenses") actually
incurred by each party from the effective date of this Agreement through the end
of such month and not yet reimbursed (or scheduled to be reimbursed under
Section 8.2.1 above) out of payments received from Customers.
8.2.3 In the event that any portion of the Customer Prepayments
received in a month remain after the distributions provided for under Sections
8.2.1 and 8.2.2, such funds will then be distributed to the parties
[CONFIDENTIAL].
8.3 Other Payments
8.3.1 Other Payments received during a month will first be used to
reimburse each party for Reimbursable Expenses actually incurred by a party from
the effective date of this Agreement through the end of such month and not yet
reimbursed (or scheduled to be reimbursed under Section 8.2 above) out of
payments received from Customers (the "Cumulative Unreimbursed Expenses"). In
the event that the Other Payments received during a month are less than the
Cumulative Unreimbursed Expenses, such Other Payments will be distributed to the
parties [CONFIDENTIAL] based on their respective portions of the Cumulative
Unreimbursed Expenses.
8.3.2 In the event that the Other Payments received during a month
exceed the Accrued Unreimbursed Expenses, such excess will be distributed to the
parties on a [CONFIDENTIAL].
10
8.4 Retention of Funds for Operational Purposes
The JSC may provide from time to time that funds otherwise
distributable pursuant to this Section 8 not be distributed but retained to fund
ongoing operations of the Strategic Alliance or to fund other costs associated
with the Strategic Alliance not provided for above.
9. REPORTS
SB will prepare and distribute to Qmed on a quarterly basis reports
regarding the activities of the Strategic Alliance in such form and substance as
the parties shall agree.
10. DEVELOPMENTAL ACTIVITIES
10.1 Additional Development of Program
10.1.1 Unless otherwise agreed to by the parties (including any
agreement pursuant to section 10.2 below), Qmed shall be responsible for any
further development or enhancement of the ohms|cad system. In the event that the
parties decide to jointly pursue the further development or enhancement of the
ohms|cad system, SB and Qmed will negotiate a separate agreement setting forth
their respective rights and obligations with respect to developments or
enhancements arising out of such activities. In the event that SB independently
develops, makes, conceives or reduces to practice a potential enhancement to the
ohms|cad system, and if Qmed agrees to incorporate the enhancement into the
ohms|cad system, SB and Qmed shall negotiate a separate agreement setting forth
their respective rights and obligations to such enhancements.
10.1.2 Qmed shall disclose to SB the complete texts of all patent
applications filed by Qmed which relate to the ohms|cad monitor or the ohms|cad
system or services as well as all information received concerning the
institution or possible institution of any interference, opposition,
re-examination, reissue, revocation, nullification or any official proceeding
involving the patent applications. SB shall have the right to review all such
pending applications and other proceedings and make recommendations to Qmed
concerning them and their conduct. Qmed agrees to keep SB promptly and fully
informed of the course of patent prosecution of other proceedings including by
providing SB with copies of substantive communications, search reports and third
party observations submitted to or received from patent offices. SB shall
provide such patent consultation to Qmed at no cost to Qmed. SB shall hold all
information disclosed to it under this section as confidential subject to the
provisions of Section 16.
10.1.3 During the term of this Agreement, SB shall have the right to
assume responsibility for any patent applications filed by Qmed which relate to
the ohms|cad monitor or the ohms|cad system or services or any part of such
patent applications which Qmed intends to abandon or otherwise cause or allow to
be forfeited. Qmed shall give SB reasonable written
11
notice prior to abandonment or other forfeiture of any such patent applications
or any part of such patent applications so as to permit SB to exercise its
rights under this paragraph.
10.1.4 By April 12, 1996, SB shall complete a review of the ohms|cad
system and services to determine whether, in its reasonable good faith judgment,
the manufacture, use and/or sale of the ohms|cad system or services would
infringe the valid patents of a third party and shall also complete a review of
Qmed's Patents to determine, in its reasonable good faith judgment, the likely
scope of any allowable subject matter in the pending Qmed Patents (collectively,
the "Diligence Review"). During the Diligence Review, Qmed shall timely provide
SB with reasonable assistance, including, but not limited to, a response to SB,
to SB patent counsel's letter of March 15, 1996 to Qmed patent counsel; the
provision of complete copies of all Information Disclosure Statements filed or
to be filed in U.S. Patent Application No. 08/414,510 and any substantive
communications sent to, to be sent to or received from the United States Patent
and Trademark Office relating to said application; and access to and provision
of ohms|cad system product and manufacturing information, including information
related to the Monitor-One STRx solid state ambulatory ischemia analyzer device,
which product and manufacturing information is, in SB's opinion, reasonably
necessary for SB to examine during the Diligence Review. If concerns are
identified by SB during the Diligence Review, SB shall notify Qmed by April 19,
1996, identifying such concerns and Qmed shall use reasonable efforts to resolve
such concerns no later than May 1, 1996 and, by such date, shall provide SB with
all information that it has to help resolve such concerns. If such concerns are
not resolved or resolvable to the satisfaction of SB, SB may, by written notice
to Qmed given by May 10, 1996 (1) immediately terminate this agreement upon
written notice to Qmed, or (2) inform Qmed that it believes such concerns are
resolvable by Qmed obtaining a license from one or more third parties, provided
that if such a notice is not given by May 10, 1996, SB will no longer have the
right to terminate this Agreement pursuant to this provision. In the event that
SB provides notice to Qmed that it believes that the concerns are resolvable by
Qmed obtaining one or more licenses from third parties, Qmed shall inform SB by
May 14, 1996 whether or not it will seek such licenses from such third party or
third parties. If Qmed informs SB by such date that it will not seek such
licenses, SB will have the right to terminate this Agreement upon written notice
to Qmed given by May 17, 1996, provided that if such a notice is not given by
May 17, 1996, SB will no longer have the right to terminate this Agreement
pursuant to this provision. In the event that Qmed informs SB that it will seek
licenses from such third party or third parties, Qmed shall promptly commence
negotiations with such third party or third parties for such licenses. If such
negotiations are not completed within forty-five (45) days of May 17, 1996, SB
may terminate this agreement upon written notice to Qmed.
10.2 Utilization of SBCL and DPS Data
During the term of this Agreement, the JSC may elect to attempt to
enhance the services being provided to Customers by combining the data generated
through use of the ohms|cad system (the "ohms|cad Data") with patient data
generated through SmithKline ▇▇▇▇▇▇▇ Clinical Laboratories, Inc. ("SBCL") and/or
Diversified Pharmaceutical Services,
12
CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
Inc. ("Diversified"), affiliates of SB (the "SB Data"). In such case, SB and
Qmed shall negotiate a separate agreement setting forth the terms on which such
enhancements will be undertaken.
11. CHF DISEASE MANAGEMENT PROGRAM
11.1 Development of CHF DM Program
SB is in the process of developing [CONFIDENTIAL] that SB currently
expects to test in pilot sites in the second half of 1996. Qmed believes that
there will be substantial opportunities for SB and Qmed to jointly market the
utilization of the ohms|cad services and SB's [CONFIDENTIAL]. In addition, Qmed
believes that marketing the [CONFIDENTIAL] in connection with the ohms|cad
services will significantly increase the likelihood that a potential customer
will utilize the [CONFIDENTIAL]. SB believes that most potential customers for
the ohms|cad services and the [CONFIDENTIAL] will view them as separate programs
and that marketing the two programs together may not have a significant impact
on the success of the [CONFIDENTIAL]. SB and Qmed have agreed that it would be
appropriate to test the impact of selling the [CONFIDENTIAL] together with the
ohms|cad services in the manner set forth in Section 11.2.
11.2 Qmed's Marketing and Selling the [CONFIDENTIAL]
11.2.1 Qmed and SB will identify and mutually agree on a list of a
minimum of six (6) and up to ten (10) target accounts (the "[CONFIDENTIAL]
Target Accounts") which are expected to be chosen from (a) a list of accounts
which Qmed has provided to SB and with respect to which Qmed has already had
some contact regarding the ohms|cad services and (b) other accounts to be
mutually agreed upon by SB and Qmed. Each of the Target Accounts is expected to
be an individual health plan (i.e., [CONFIDENTIAL]) rather than the headquarters
of a regional or national health plan.
11.2.2 After SB has decided to launch the [CONFIDENTIAL], it will
provide Qmed with marketing and selling information on the [CONFIDENTIAL] (the
"[CONFIDENTIAL] Marketing Date"). For a period of six (6) months thereafter,
Qmed may market and sell the [CONFIDENTIAL] to the [CONFIDENTIAL] Target
Accounts. In the event that a Target Account is interested in pursuing the
[CONFIDENTIAL], Qmed will so inform SB and will arrange for SB to make a
detailed presentation on the [CONFIDENTIAL] to such account.
11.2.3 If, within six (6) months of the joint SB/Qmed presentation
of the [CONFIDENTIAL], SB either (i) receives a verbal commitment, confirmed in
writing, from a [CONFIDENTIAL] Target Account, (ii) enters into a letter of
intent with a [CONFIDENTIAL] Target Account, or (iii) enters into formal
negotiations of a definitive agreement with a [CONFIDENTIAL] Target Account, and
such confirmed verbal commitment, letter of intent or formal negotiations result
in a definitive agreement within six (6) months of the date of such confirmed
verbal commitment, letter of intent or formal negotiations, SB will pay Qmed
[CONFIDENTIAL] of the net profits from the [CONFIDENTIAL] for that account. The
term "net profits" shall mean the revenue received by SB generated from the
provision of the [CONFIDENTIAL] less all reasonable direct expenses incurred by
SB in connection which such program.
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11.2.4 On or before the one year anniversary of the [CONFIDENTIAL]
Marketing Date, the JSC will review the progress Qmed and SB have made in
selling the [CONFIDENTIAL] to the [CONFIDENTIAL] Target Accounts. If a minimum
of fifty percent (50%) of the [CONFIDENTIAL] Target Accounts have entered into
an agreement with SB for SB to provide the [CONFIDENTIAL], or made a verbal
commitment to SB, or entered into a letter to intent with SB to use the
[CONFIDENTIAL], in each case leading to a definitive agreement within the time
frames set forth in paragraph 11.2.3, then SB and Qmed will enter into
discussions regarding additional appropriate target accounts to which Qmed may
market and sell the [CONFIDENTIAL] and the appropriate compensation for Qmed's
marketing and selling efforts.
11.2.5 SB and Qmed agree to discuss ways in which SB may use
existing Qmed competencies (such as case management) in supporting the operation
of the [CONFIDENTIAL] and the appropriate compensation to Qmed for any such
services Qmed provides to SB in connection with the [CONFIDENTIAL].
11.3 Non-Compete Regarding [CONFIDENTIAL]
Qmed agrees that it will not, nor will it permit any of its
affiliates, officers, directors (when acting on behalf of Qmed), or its
representatives or agents to, directly or indirectly, market, sell or otherwise
offer to any person or entity a disease management program for [CONFIDENTIAL],
nor will Qmed, its affiliates, or any of their respective officers, directors
(when acting on behalf of Qmed), or its representatives or agents, directly or
indirectly, discuss or negotiate with another person or entity regarding an
arrangement pursuant to which such person or entity will market, sell or
otherwise offer a disease management program for [CONFIDENTIAL], from the
effective date of this Agreement to the date on which Qmed in no longer
providing marketing services pursuant to Section 11 above or the date on which
the discussions described in Section 11.2.4 have ended.
12. EXCLUSIVITY
12.1 Coronary Artery Disease Programs
12.1.1 Qmed agrees that, until the expiration or termination of this
Agreement pursuant to Sections 17.1 or 17.2, it will work exclusively with SB in
offering the ohms|cad services to persons or entities located in [CONFIDENTIAL]
that are outside of the fee-for-service market, including, but not limited to,
health maintenance organizations ("HMOs"), preferred provider organizations, "at
risk" physician groups, integrated delivery systems that assume risk, and other
managed care organizations (the "Exclusive Market"). In furtherance of this
commitment, Qmed agrees that, during such period, it will not, nor will it
permit any of its affiliates, officers, directors (when acting on behalf of
Qmed), or its representatives or agents to, directly or indirectly, market, sell
or otherwise offer to any person or entity within the Exclusive Market the
ohms|cad services or any disease management program for coronary artery disease,
nor will Qmed, its affiliates, or any of their respective officers, directors
(when acting on behalf of Qmed), or its representatives or agents, directly or
indirectly, discuss or negotiate with another person or entity regarding an
arrangement pursuant to which such person or entity would market, sell or
otherwise offer the ohms|cad services or any disease management program for
coronary artery disease to any person or entity within the Exclusive Market. It
is understood and agreed that this provision is not intended to prohibit Qmed
from marketing the ohms|cad services to Potential Customers that the JMC decides
should be approached by Qmed on its own, provided that the terms of any proposed
arrangement are approved by the JMC and the revenues from any such arrangement
are treated as revenues covered under this Agreement.
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12.1.2 SB agrees that, until the expiration or termination of this
Agreement pursuant to Sections 17.1 or 17.2, it will work exclusively with Qmed
in offering the ohms|cad system to persons or entities located in
[CONFIDENTIAL]. In furtherance of this commitment, SB agrees that, during the
term of this Agreement, it will not, nor will it permit any of its affiliates,
officers, directors (when acting on behalf of SB), or its representatives or
agents to, directly or indirectly, market, sell or otherwise offer to any person
or entity within [CONFIDENTIAL] the ohms|cad system or any disease management
program for coronary artery disease, nor, during such period, will SB, its
affiliates, or any their respective officers, directors (when acting on behalf
of SB), or its representatives or agents, directly or indirectly, negotiate with
another person or entity regarding an arrangement pursuant to which such person
or entity would market, sell or otherwise offer the ohms|cad services or any
disease management program for coronary artery disease to any person or entity
within [CONFIDENTIAL].
12.2 Right of First Negotiation on Disease Management Opportunities
12.2.1 In the event that Qmed decides to seek the assistance of a
third party in connection with the development of any disease management program
(a "DM Program"), or to seek the assistance of a third party in connection with
the marketing, sale or funding of a DM Program, SB shall have the first right to
negotiate with Qmed for the rights to jointly develop such a program and/or to
market and sell such a program. In such event, Qmed shall notify SB in writing
of its interest and will provide SB with substantially all necessary information
required to reasonably enable SB to evaluate its interest in such opportunity.
SB shall have forty-five (45) days from the date it receives all such
information (the "Exercise Period") to inform Qmed, in writing, whether or not
SB wishes to exercise its right to negotiate an agreement with Qmed for such DM
Program. If SB informs Qmed in writing that it is exercising such right, Qmed
will negotiate in good faith with SB for a period of ninety (90) days after
Qmed's receipt of such notice (the "Negotiation Period"). In the event that (1)
SB informs Qmed in writing that it does not wish to exercise its first right to
negotiate with respect to the DM Program, (2) the Exercise Period expires
without any writing response from SB, or (3) SB exercises its right of first
negotiation but such negotiations are not completed within the Negotiation
Period, Qmed may negotiate an arrangement with respect to the DM Program with a
third party, provided that Qmed may not offer to any third party an arrangement
upon terms which, taken as a whole, are substantially more favorable than those
which Qmed offered to SB during the Negotiation Period (if applicable).
12.2.2 In then event that Qmed decides to market or sell the
ohms|cad services to Potential Customers outside of [CONFIDENTIAL], Qmed shall
notify SB in writing and SB shall have the right to market and sell the ohms|cad
services in such market on substantially the same terms as those set forth in
this Agreement. SB shall have forty-five (45) days from the date it receives the
notice from Qmed to inform Qmed in writing of its intent to exercise such option
and negotiate an agreement with Qmed for such territory. If SB informs Qmed in
writing that it is exercising such right, Qmed will negotiate in good faith with
SB for a period of ninety (90) days after Qmed's receipt of such notice (the
"Negotiation Period"). In the event that (1) SB informs Qmed in writing that it
does not wish to exercise its rights with respect to such territory, (2) the
Exercise Period expires without any written response from SB, or (3) SB
exercises its rights but such negotiations are not completed within the
Negotiation Period, Qmed may negotiate an arrangement with respect to such
territory with a third party, provided that Qmed may not offer to any third
party an arrangement upon terms which, taken as a whole, are substantially more
favorable than those Qmed offered to SB during the Negotiation Period (if
applicable).
15
12.3 Intellectual Property Grant
12.3.1 Qmed hereby grants to SB an exclusive, royalty-free license,
limited to the Potential Customers in the United States, Canada or Puerto Rico
(the "Territory"), under U.S. Patent No. 4,679,144 entitled "Cardiac Signal Real
Time Monitor and Method of Analysis" and Method of Analysis" and U.S. Patent
Application Serial No. 08/414,510 entitled "System and Method of Coronary Health
Management" and all foreign patent applications, or any equivalent thereof and
inventor's certificates, including any division, continuation or continuation-in
part thereof or any substitute application therefor, and any patent issuing
thereon, including any reissue, re-examination or extension therefor and any
confirmation patent or registration patent or patent of addition based on any
such patent, owned or controlled by Qmed or later acquired by Qmed and relating
to the management of CAD (the "Patents") and Qmed's confidential know-how
relating thereto to use, offer for sale and sell, for purposes of carrying out
the provisions of this Agreement, all subject matter encompassed within the
scope of the Patents and the confidential know-how subject to the terms and
conditions of this Agreement. The rights to use, offer for sale and sell for
purposes of carrying out the terms of this Agreement shall include all
activities concerning the subject matter of the Patents and the confidential
know-how, which activities would, but for the license herein granted, infringe
an enforceable claim of the Patents.
12.3.2 Qmed hereby grants to SB an exclusive, royalty-free license,
limited to the Potential Customers in the Territory, to use the trademarks and
servicemarks listed on Attachment 5 (the "Marks") for purposes of carrying out
the provisions of this Agreement. SB agrees to maintain Qmed's high standard of
quality for any materials bearing a Qmed trademark or service ▇▇▇▇. If Qmed
brings into question the quality of any materials prepared by SB bearing a Qmed
trademark or service ▇▇▇▇, SB agrees to reasonably resolve any such quality
issue.
12.3.3 Qmed hereby grants to SB an exclusive, royalty-free license,
limited to the Potential Customers in the Territory, to use Qmed's copyrighted
materials for purposes of carrying out the provisions of this Agreement.
16
12.3.4 SB agrees to place appropriate references to patents or
patents pending on all marketing and other literature that it develops
describing any products or service covered by the Patents, as requested by Qmed.
The content, form, location and language of such references shall be in
accordance with the laws and practices of the country where such literature is
used, including, but not limited to, 35 U.S.C. Section 287, to the extent
applicable to such literature.
13. REGULATORY MATTERS
13.1 Qmed shall be responsible for fulfilling and discharging all
obligations under any applicable federal or state law, rule or regulation in
order to obtain and/or maintain the authorization, licensure and/or ability to
market, sell and/or provide the ohms|cad services and/or any portion thereof
(including any product or service utilized in providing the ohms|cad services)
in the U.S., including without limitation, the following:
13.1.1 Obtaining and/or maintaining all federal and/or state
regulatory approvals or licenses necessary for the manufacture, market, sale or
provision of the ohms|cad system or any portion thereof (including any product
or service utilized in providing the ohms|cad services) in the U.S. and the
filing of any applications or notifications required prior to or for the
manufacture, market, sale or provision of the ohms|cad system or any portion
thereof (including any product or service utilized in providing the ohms|cad
services) in the U.S., including any such approvals, filings or notifications
required under the U.S. Federal Food, Drug and Cosmetic Act (the "FD&C Act');
13.1.2 Complying with all rules or regulations regarding good
manufacturing practices applicable to the manufacture of any equipment, software
or other item utilized in connection with the ohms|cad services;
13.1.3 Filing on a timely basis with the U.S. Food and Drug
Administration (the "FDA") all required Medical Device Reports regarding adverse
device events for any equipment, software or other item utilized in connection
with the ohms|cad system for which such reports are required, if any. Qmed will
inform SB of any such adverse device events within 48 hours of such report and
will provide SB with copies of any Medical Device Reports filed with the FDA
with respect to such equipment, software or other item utilized in connection
with the ohms|cad system.
14. REPRESENTATIONS AND WARRANTIES
14.1 Each party warrants and represents to the other that it has the full
right and authority to enter into this Agreement, and that it is not aware of
any impediment that would inhibit its ability to perform its obligations under
this Agreement.
14.2 Qmed warrants that it owns or controls the entire right, title and
interest in the Patents and the know-how.
17
14.3 Qmed represents and warrants that it has no present knowledge that is
unknown to SB from which it can be inferred that either the manufacture or use
of the ohms|cad monitor or the ohms|cad system would infringe upon any patents
or other intellectual property rights of any third party. Qmed makes no warranty
whatsoever that either the offer for sale, sale, manufacture or use of the
ohms|cad monitor or use of the ohms|cad system does not infringe or does not
cause infringement of patent rights owned or controlled by third parties.
14.4 Qmed represents and warrants that, to the best of its knowledge, it
has made any and all regulatory filings or submissions and has secured any and
all licenses or other regulatory approvals necessary or required to manufacture,
market, sell or provide the ohms|cad system or any portion of the ohms|cad
system (including any product or service utilized in providing the ohms|cad
services), including, but not limited to, any required state licensures or
required submissions to and reviews and/or approvals of the FDA.
14.5 Qmed represents and warrants that it has conducted appropriate
validation and other studies of all equipment, software, output of treatment
algorithms, and other items used in connection with the ohms|cad system and that
it has no information concerning such items used in connection with the ohms|cad
system which suggests that there may be material concerns regarding the utility,
accuracy, safety or effectiveness of the ohms|cad system or any such items.
14.6 Qmed represents and warrants that (a) the ohms|cad monitor used in
connection with the ohms|cad system provides and will provide accurate readings
and measurements of S-T segment deviation as, and to the extent, reflected in
the medical literature provided to SB by Qmed when used in accordance with the
monitor's users manual and instructions and with the other directions and
instructions for use of the ohms|cad system, (b) the system Qmed utilizes to
transmit patient information stored in the ohms|cad monitor and the results of
patient monitoring with that monitor to Qmed's ohms|cad system, and to transmit
the results of patient monitoring and Qmed's recommendations based thereon to
the treating physician, transmits and will transmit such information accurately,
(c) the software/treatment algorithm utilized by the Qmed ohms|cad system to
make treatment recommendations based upon the results of the ohms|cad monitoring
and individual patient information produces and will produce recommendations
that are appropriate for patients, whose information is as input into the
ohms|cad system, and that accurately reflect the treatment recommendations and
protocols input into the ohms|cad system, and (d) the ohms|cad system functions
and will function in accordance with the descriptions of such system set forth
in Attachments 1 and 2 hereto, as such documents may be modified in the future.
14.7 Qmed acknowledges that, in entering into this Agreement, SB has
relied or will rely upon information supplied, or that will be supplied, by
Qmed, its agents and/or representatives and represents that all such information
is and will be timely and accurate in all material respects. Qmed further
warrants and represents that, to the best of its knowledge, it has not, up
through and including the date of this Agreement, omitted to furnish SB with any
information known to it concerning the ohms|cad system or any part or portion
thereof or the
18
transactions contemplated by this Agreement, which would be material to SB's
decision to enter into this Agreement and to undertake the commitments and
obligations set forth herein.
14.8 SB acknowledges that, in entering into this Agreement, Qmed has
relied or will rely upon information supplied, or that will be supplied, by SB,
its agents and/or representatives and represents that all such information is
and will be timely and accurate in all material respects. SB further warrants
and represents that, to the best of its knowledge, it has not, up through and
including the date of this Agreement, omitted to furnish Qmed with any
information known to it concerning any part or portion of the transactions
contemplated by this Agreement, which would be material to Qmed's decision to
enter into this Agreement and to undertake the commitments and obligations set
forth herein.
14.9 Qmed has provided SB with copies of certain of its FDA filings,
opinions of its FDA counsel, certain documentation regarding the ohms|cad
system, and other oral and written information and representations regarding the
ohms|cad system and Qmed's interactions with the FDA. In addition, Qmed has
advised SB of certain medical and related literature pertaining to the
functioning, accuracy and/or potential uses of all or parts of the ohms|cad
system, and has provided SB with certain other oral and written information and
representations regarding the functioning, accuracy and/or potential uses of all
or parts of the ohms|cad system. In addition, SB has utilized its own counsel
and/or other personnel to conduct its own investigation and evaluation of the
ohms|cad system, to the extent deemed appropriate by SB. SB has elected to
proceed with the marketing of the ohms|cad services.
15. FORCE MAJEURE
Neither of the parties shall be liable or be in breach of any provision of
this Agreement for any failure or omission on its part to perform any obligation
because of force majeure, including, but not limited to war, riot, fire,
explosion, flood, sabotage, accident or breakdown of machinery; unavailability
of fuel, labor, containers or transportation facilities; accidents of navigation
or breakdown or damages of vessels, or other conveyances for air, land or sea;
other impediments or hindrances to transportation; strike or other labor
disturbances; or any other cause beyond the control of the party; and provided
that such failure or omission resulting from one of the above causes is cured as
soon as practicable after the occurrence of one or more of the above-mentioned.
16. EXCHANGE OF INFORMATION AND CONFIDENTIALITY
16.1 During the term of this Agreement, each party shall promptly inform
the other party of any information that it obtains or develops regarding the
utility and/or safety of the ohms|cad services or any portion thereof. Each
party shall report to the other any information on all serious or unexpected
results related to the utilization of the ohms|cad services or any portion
thereof.
16.2 Each party recognizes that in the performance of this Agreement,
confidential and/or proprietary information belonging to each other concerning
the business and operations
19
of the parties in connection with the transactions contemplated herein has been
or may be disclosed or become known to other parties ("Confidential
Information"). Each party agrees that, during the term of this Agreement and for
a period of four (4) years after termination of this Agreement, it will (a) hold
in confidence any and all Confidential information which belongs to the other
party, and take such precautions with respect to the Confidential Information as
it normally takes with its confidential and/or proprietary information and (b)
not use the Confidential Information for any purpose other than for purposes of
the arrangements or transactions described in this Agreement. This obligation
shall not apply to:
16.2.1 Information that, at the time of disclosure, is in the public
domain;
16.2.2. Information that, after disclosure, is published or
otherwise becomes part of the public domain through no fault of the disclosing
parties;
16.2.3 Information that was in a party's possession or the
possession of an affiliate at the time of disclosure; and
16.2.4 Information that may be received by a party in good faith
from a source other than the other party, which source either has no duty of
nondisclosure to such other party or, if such source does have a duty of
nondisclosure, the receiving party was unaware of or had no reasonable basis for
knowing.
16.3 Each party shall maintain as confidential the terms of this Agreement
and the matters described in this Agreement. Neither party shall announce or
otherwise disclose the existence of this Agreement or the matters described in
this Agreement without the consent of the other party except to the extent such
disclosure is required under applicable law, rules or regulations based upon the
opinion of outside legal counsel. If either party desires to make a public
announcement regarding this Agreement or the terms hereof, such party shall
first submit the contents of such announcement to the other party for their
approval, and such approval shall not be unreasonably withheld.
16.4 Each party shall maintain, however, the right to disclose
Confidential Information in judicial or administrative hearings or proceedings,
but shall endeavor to keep and assist the other party's keeping it confidential
in such hearings or proceedings, including providing assistance in obtaining
confidential treatment under applicable laws, statutes or regulations. If a
party finds it necessary to disclose any such information in any such judicial
or administrative hearing or proceeding, the party shall attempt to disclose
such information "in camera" or subject to "protective order" or on some other
non-public basis.
16.5 Upon termination of this Agreement, the parties shall either return
or certify as to the destruction of each other's written Confidential
Information, provided that the parties shall be entitled to retain one record
copy in their legal departments to determine the extent of their continuing
obligations.
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17. TERM AND TERMINATION
17.1 Term
The term of this Agreement shall be for a period of five (5) years
years from the date first set forth above, provided that, in the event that SB
and Qmed have entered into an agreement or agreements with a Customer or
Customers for the provision of the ohms|cad services for a period of time
extending beyond the term of this Agreement, this Agreement will be regarded as
terminated but will continue in full force and effect, but only to the extent of
providing services to that Customer or Customers until the last of such
agreements expires or is terminated.
17.2 Termination
17.2.1 Default. If either party materially breaches the terms of
this Agreement, the other party may terminate this Agreement upon not less than
sixty (60) days written notice to the breaching party, provided that if the
non-breaching party cures such breach within such sixty (60) day period, the
Agreement will not be terminated at the end of the notice period. In the event
that either party materially breaches a representation or warranty contained in
this Agreement, the other party may terminate this Agreement upon not less than
thirty (30) days written notice to the other party.
17.2.2 Insolvency. Either party may terminate this Agreement if, at
any time, the other party shall file in any court pursuant to any statute of the
United States or of any individual state or foreign country, a petition in
bankruptcy or insolvency or for the appointment of a receiver or trustee of the
party or of its assets, or if the other party shall be served with an
involuntary petition against it, filed in any insolvency proceeding, and such
petition shall not be dismissed within sixty (60) days after the filing thereof,
or if the other party shall propose or be a party to any dissolution or
liquidation or shall cease or terminate its business activities.
17.2.3 Change in Control. The parties agree that if during the term
of this Agreement and prior to its expiration more than fifty percent (50%) or
more of the issued and outstanding shares of SB p.l.c., the parent of SB, or
Qmed is acquired by any single third party, or a group of third parties acting
in concert, the other party shall have the right, but not the obligation, to
terminate this Agreement by providing sixty (60) days written notice to the
other party.
17.2.4 Absence of Profitability. Within sixty (60) days after each
of the second, third, and fourth anniversaries of the effective date of this
Agreement, SB will prepare an accounting of revenues generated from Customer
contracts (calculated on an accrual basis) and the Reimbursable Expenses
incurred by the parties. In the event that the revenues earned during last
quarter of the second year of this Agreement did not exceed the Reimbursable
Expenses incurred
21
during such period by $200,000 or more, either party may terminate the Agreement
upon ninety (90) days written notice to the other party, provided that such
notice must be given within three (3) months of the completion of such
accounting. In the event that the revenues earned during the last quarter of the
third year of this Agreement did not exceed the Reimbursable Expenses incurred
during such period by $225,000 or more, either party may terminate the Agreement
upon ninety (90) days written notice to the other party, provided that such
notice must be given within three (3) months of the completion of such
accounting. In the event that the revenues earned during the last quarter of the
fourth year of this Agreement did not exceed the Reimbursable Expenses incurred
during such period by $250,000 or more, either party may terminate the Agreement
upon ninety (90) days written notice to the other party, provided that such
notice must be given within three (3) months of the completion of such
accounting
17.3 Effect of Termination
17.3.1 Upon expiration or termination of this Agreement for any
reason, each party shall continue to provide services under the terms of this
Agreement to meet commitments to Customers that have entered into contracts for
the ohms|cad services prior to such termination, and the applicable provisions
of this Agreement shall survive for such period as may be necessary to permit
the parties hereto to satisfy their obligations under such Customer contracts
and to account for revenues, expenses, profits and losses relating to such
contracts.
17.3.2 Upon expiration or termination of this Agreement for any
reason, SB shall perform a reconciliation of the revenues, expenses, profits and
losses generated through the Strategic Alliance and the distributions made to
each party with the objective of assuring that each party has been distributed
funds equal to its Reimbursable Expenses plus or minus, as the case may be, its
allocable portion of the profits or losses generated through the Strategic
Alliance. SB shall distribute any funds not distributed to a party at the time
of termination or expiration of this Agreement in a manner designed to achieve
this objective. In the event that, after the distribution of funds in this
fashion, one party has received distributions in excess of the amount of its
Reimbursable Expenses plus or minus, as the case may be, its portion of the
profits or losses generated through the Strategic Alliance, that party will
promptly pay the other party an amount that will achieve this equal distribution
of funds generated through the Strategic Alliance.
17.3.3 The termination of this Agreement shall not affect any rights
or obligations of any party under this Agreement which specifically provide that
they shall survive the termination or expiration of this Agreement.
18. AUDIT PROVISIONS
18.1 Each party shall keep accurate records of the costs it incurs that
are reimbursable under this Agreement. Each party shall have the right to audit
such records of the other party for the purpose of verifying the appropriateness
of the amount of such expenses submitted for
22
reimbursement, provided that such audits shall occur no more frequently than
twice a year. Such audits shall be conducted using an independent accounting
firm acceptable to both parties, except that a party may use its own employees
to audit records that do not contain any confidential information of the other
party which the party performing the audit does not have a right to review. Upon
reasonable prior written notice, a party shall have access during ordinary
business hours to records of the other party necessary to determine the
correctness of any expense submitted for reimbursement. This right to audit
shall continue for a period of one year after the termination of this Agreement.
The costs of any such audit shall be borne by the party requesting such audit.
18.2 SB shall maintain the financial records of the revenues from Customer
contracts, reimbursable expenses, distributions and other matters relating to
the Strategic Alliance and shall provide copies of such records to Qmed upon
request, and shall make those records available for audit by an independent
accounting firm selected by Qmed and acceptable to SB during ordinary business
hours upon reasonable prior written notice from Qmed. Qmed will also have the
right to utilize its own employees to audit records that do not contain any
confidential information of SB which Qmed does not have a right to review. Such
audits shall occur no more frequently than twice a year. The costs of any such
audit shall be borne by the party requesting such audit.
19. INDEMNIFICATION, INSURANCE AND NOTICE
19.1 Indemnification
19.1.1 Qmed agrees to defend, indemnify and hold harmless SB, its
parents, subsidiaries, affiliates, officers, directors, employees, agents, and
representatives from and against any and all liability, losses, damages,
injuries (including wrongful death), claims, causes of action, suits or
proceedings and expenses connected therewith (including reasonable attorneys'
fees) arising out of or relating to the provision or use of the ohms|cad system
or services or any part thereof (including, but not limited to, the equipment,
software, reports, recommendations, consultations and other items or services
used in providing or provided as part of the ohms|cad services) or the
negligence or willful misconduct of Qmed, its parents, subsidiaries, affiliates,
officers, directors, employees, agents, and representatives, except as set forth
in paragraph 19.1.2 below.
19.1.2 SB agrees to defend, indemnify and hold harmless Qmed, its
parents, subsidiaries, affiliates, officers, directors, employees, agents, and
representatives from and against any and all liability, losses, damages, claims,
causes of action, suits or proceedings and expenses connected therewith
(including reasonable attorneys' fees) to the extent caused solely by the
negligence or willful misconduct of SB or any of its parents, subsidiaries,
affiliates, directors, officers, employees, agents or representatives.
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19.2 Insurance
19.2.1 Qmed shall maintain products/professional or other
appropriate liability insurance to cover Qmed's obligations under Section 19.1.1
above, with minimum limits of $20,000,000 for each occurrence or claim and
$20,000,000 annual aggregate in full force and effect from the earlier of the
date the first Customer signs a contract for ohms|cad services covered by this
Agreement or the date Qmed begins to provide ohms|cad services covered by this
Agreement, through the end of this Agreement. Such insurance will include
contractual liability coverage and be written by insurance companies licensed to
do business in New Jersey and possessing an A.M. Best's Rating of "B+" or
better. Qmed currently has insurance coverage of $1,000,000 for each
occurrence or claim and $1,000,000 annual aggregate. Qmed will use its best
efforts to assure that, when it obtains the additional $19,000,000 insurance
coverage required under this provision, that such additional coverage will be
designed to cover activities of Qmed which are covered under Qmed's obligations
under Section 19.1.1 above, and will not cover items arising out of Qmed's other
businesses or out of Qmed's provision of ohms|cad services where such activities
are not covered by this Agreement. In the event Qmed is unable to secure
coverage in the manner described in the prior sentence, Qmed will use its best
efforts to secure total insurance coverage of $25,000,000 for each occurrence
or claim and $25,000,000 annual aggregate.
19.2.2 In the event Qmed's coverage is written on a "claims-made"
basis, Qmed agrees that its insurance policies will include a five year claims
reporting endorsement or "Tail" coverage relating to its performance under this
Agreement.
19.2.3 Qmed shall have SB added as an "additional insured" under the
insurance policy(ies) required under paragraph 19.2.1.
19.2.4 Qmed agrees to furnish SB with a current and valid
certificate of insurance evidencing the extent of its products/professional or
other appropriate liability coverage required under paragraph 19.2.1.
19.3 Notice
The party seeking indemnification shall promptly notify in writing
the other party of any claim asserted against it for which such indemnification
is sought, and shall promptly deliver to the party from whom indemnification is
sought a true copy of any such claim including, but not limited to, a true copy
of any summons or other process, pleading or notice issued in any lawsuit or
other proceeding to assert or enforce such claim. Where acceptance of its
obligation to indemnify is deemed proper by the indemnifying party, said party
reserves the right to control the investigation, trial and defense of such
lawsuit or action (including all negotiations to effect settlement) and any
appeal arising therefrom and to employ or engage attorneys of its own choice.
The party seeking indemnification may, at its own cost,
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participate in such investigation, trial and defense of such lawsuit or action
and any appeal arising therefrom. The party seeking indemnification, its
employees, agents, servants and representatives shall provide full cooperation
to the indemnifying party at all times during the pendency of the claim or
lawsuit, including, without limitation, providing them with all available
information concerning the claim.
19.4 Survival
The provisions of this Section 19 shall survive the termination of this
Agreement.
20. INVESTMENT IN QMED
SB's affiliate, S.R. One, and Qmed are entering into a separate agreement
pursuant to which S.R. One is making an equity investment in Qmed in order to
provide Qmed with certain operating capital to fund the operations that are
expected to occur in connection with this Agreement. While Qmed does not intend
to segregate such funds, Qmed will use its best efforts to assure that the net
proceeds of the investment made by S.R. One in Qmed will be utilized primarily
to fund operating and other expenses incurred by Qmed in support of the
provision of the ohms|cad services pursuant to this Agreement.
21. WAIVER MODIFICATION
Any term or condition of this Agreement may be waived or modified at any
time by the party entitled to the benefit thereof by a written instrument
executed by both parties. No delay or failure on the part of any party in
exercising any rights hereunder and no partial or single exercise thereof, will
constitute a waiver of such rights or of any rights hereunder.
22. HEADINGS
The headings used in this Agreement are intended for guidance only and
shall not be considered part of the written understanding between the parties
hereto.
23. GOVERNING LAW
This Agreement shall be construed and the respective rights of the parties
hereto determined according to substantive laws of the Commonwealth of
Pennsylvania notwithstanding the provisions governing conflict of laws under
such law to the contrary.
24. SEVERANCE
If any one or more of the provisions of this Agreement shall be held to be
invalid, illegal or unenforceable, the validity, legality or enforceability of
the remaining provisions hereof shall not in any way be affected or impaired
thereby. To the extent permitted by applicable law, each party waives any
provision of law which renders any provision hereof invalid, illegal or
unenforceable in any respect. In the event any provision of this Agreement shall
be held to be
25
invalid, illegal or unenforceable, the parties hereto shall use best efforts to
substitute a valid, legal and enforceable provision which, insofar as practical,
implements the purposes hereof.
25. ENTIRE AGREEMENT
This Agreement contains the entire agreement between the parties in
respect of the subject matter hereof and supersedes and cancels all previous
agreements, negotiations, commitments and writings between the parties hereto in
respect of the subject matter hereof and may not be changed or modified in any
manner or released, discharged, abandoned or otherwise terminated unless in
writing and signed by the duly authorized officers or representatives of the
parties.
26. NOTICE
Any notice or request required or permitted to be given in connection with
this Agreement shall be deemed to have been sufficiently given if sent by
pre-paid registered mail or telecopier to the intended recipient at the address
set forth below or such other business address as may have been furnished in
writing by the intended recipient to the sender. The date of mailing or
telecopying shall be deemed to be the effective date on which notice was given,
provided that all telecopies shall contain a provision requiring the intended
recipient to confirm receipt and such telecopy shall not be effective unless
confirmation of its receipt is received within twenty-four (24) hours of its
transmission.
Any notice required to be given to Qmed shall be addressed to:
Qmed, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: President
Notice to SB shall be addressed to:
SmithKline ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Vice President - Disease Management
27. PUBLIC ANNOUNCEMENTS
Any public announcements or similar publicity with respect to this
Agreement or the transactions contemplated herein shall be at such time and in
such manner as SB and Qmed shall agree, provided that nothing herein shall
prevent either party from, upon written notice to and opportunity to review by
the other, making such public announcements as such party's legal obligations
may require.
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28. ASSIGNMENT
This Agreement may not be assigned or transferred by either party without
the prior written consent of the other, provided that SB may assign this
Agreement to a parent, subsidiary or affiliate without the consent of Qmed and
Qmed may assign this Agreement to its wholly-owned subsidiary, Interactive Heart
Management Corp. ("IMHC"). Any assignment by SB to a parent, subsidiary or
affiliate, or by Qmed to IMHC will not relieve SB or Qmed, as the case may be,
of its obligations under this Agreement, including, but not limited to, any such
obligations imposed under Section 19 hereof.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized officers or representatives.
QMED, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇
--------------------------
Title: President
-----------------------
SMITHKLINE ▇▇▇▇▇▇▇ HEALTHCARE SERVICES,
a division of
SMITHKLINE ▇▇▇▇▇▇▇ CORPORATION
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------
Title: President
-----------------------
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ATTACHMENT 1
DESCRIPTION OF OHMS|CAD DISEASE MANAGEMENT PROGRAM
See attached description of the ohms/cad system. The Monitor One STRx
User's Manual, Version 1.3 is not attached but is incorporated by reference.
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ATTACHMENT 2
QMED OHMS|CAD SERVICES
See Attached.
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CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL HAS BEEN
SEPARATELY FILED WITH THE COMMISSION.
ATTACHMENT 3
QMED POTENTIAL AND EXISTING CUSTOMERS
[CONFIDENTIAL]
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ATTACHMENT 4
REIMBURSABLE EXPENSES
A. General Marketing Costs
o Agency Fees: i.e., negotiated hourly rates or commissions, creative fees
associated with individual projects, etc.
o Agency Expenses: Costs associated with a project that are passed through
by the agency. These may include consultant costs, mechanical creation,
comp creation, promotional piece mock-ups, delivery charges, agency
personnel travel expenses, etc.
o Physician ohms|cad launch meetings: Costs of developing and creating
agendas, communications messages and materials, meeting handouts, speaker
slides, other out-of-pocket costs, etc.
o Training Programs: Development and creation of printed and other materials
to train the IHD sales force, SB sales consultants, and Qmed technical
specialists. Convention Activities: Booth development, communications
message creation, panel creation, etc.
B. Client Marketing Costs
o Promotional Material Production and Creation: Production and printing
costs for marketing and other materials.
o MCO Customization: Fees and costs associated with customization of
existing marketing pieces to be used with specific MCO customers.
o Physician launch meetings: "Pass-through" costs associated with individual
physician launch meetings. Examples include slide creation, printing of
meeting materials, physician recruitment telephone calls, speaker
honoraria, meals, speaker travel expenses, meeting management, CME
expenses, etc.
o Advertising: The purchase of advertising, which may be in a variety of
mediums, including print, mail, etc.
o Grants: Cash grants or donations to support plan-specific ohms|cad launch
activities.
o Representative Expenses: Limited to meals and other modest expenditures
that may support ohms|cad pull-through activities. (A specific example
would be a lunch arranged at a capitated physician group for physicians
and office staff to explain the ohms|cad system)
o Convention Activities: Space fees, shipping and drayage, booth set-up,
panel creation and/or printing, receptions or social events, hotel
charges, etc.
o Preparation of Customized MCO Presentations: Printing, photocopying,
reproduction costs for customized account presentations (i.e., creation of
a customized slide presentation with 10 copies reproduced in color at SB
or at an outside vendor such as Kinkos)
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C. Qmed Operational Costs
ohms/cad Direct Costs
Positive Consultant
Cost OHMS Senior Staff
OHMS Supervisor
OHMS Tech salaries
OHMS RN salaries
OHMS Trainers/Field
Payroll Tax Sales
Employee Benefits
Site Visits -- OHMS Managers
Telephone -- ohms|cad
Mail -- ohms|cad
Telephone OHMS Admin.
Amortization of OHMS Equip. and Development costs (actual costs to be agreed
upon by JSC)
Database Development costs & software/hardware site support (actual costs to be
agreed upon by JSC)
Product Liability Insurance
Contract Costs (Legal/Acctg.)
D. Contract Administration Costs
o Legal: All costs associated with the drafting and execution of ohms|cad
contracts.
o Accounting: All costs (including those for personnel used for such
purposes) associated with monitoring and collecting payments from
customers, tracking reimbursable expenses, coordinating expenses with
Qmed, paying SB marketing bills, tracking cost savings, maintaining a bank
account for the funds received from customers, distributing funds pursuant
to this agreement, etc.
E. Miscellaneous Costs
o Travel Expenses: For SB headquarters personnel incurred in conjunction
with an ohms|cad selling or service trip. These include transportation,
room, meals, miscellaneous, and other usual and customary expenses
associated with business travel. SB will only ▇▇▇▇ for costs associated
with an ohms|cad visit. IHD (except for ▇▇▇▇▇ ▇▇▇▇▇ and other
Philadelphia-based IHD management) and SB sales consultant travel expenses
are not considered reimbursable expenses.
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o Other: Additional expenses agreed to be reimbursed by the JMC. These may
include symposia sponsorship, speaking engagements at industry seminars,
and other "market-building" activities not easily attributable to an
individual customer.
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ATTACHMENT 5
TRADEMARKS/SERVICE MARKS
qmed
ohms|cad
Monitor One
Monitor One Strx
34