EXHIBIT 10.18
CONFIDENTIAL
OPERATING AGREEMENT
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THIS AGREEMENT ("Agreement") is made and entered into as of the effective
date ("Effective Date") set forth below between ENACT Health Management Systems,
having its principal place of business at 000 Xxxxxxxxx Xxxx, Xxxx Xxxx, XX
00000 ("ENACT"), and ALZA Corporation, having its principal place of business at
000 Xxxx Xxxx Xxxx, Xxxx Xxxx, XX 00000 ("ALZA").
RECITALS
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WHEREAS, ENACT is engaged in the business of designing, manufacturing,
selling and providing products and services for health management systems; and
WHEREAS, ALZA wishes to act as a promotional representative for certain
products produced by and services provided by ENACT;
NOW THEREFORE, in consideration of the mutual promises and covenants set
forth below, the parties agree as follows:
AGREEMENT
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1. DEFINITIONS.
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1.1 To "promote" means to encourage purchase of Products and Services
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by Payers and seek access to and reimbursement approval of the Products and
Services by Payers in the Territory as more fully set forth in Section 3.
1.2 "NAMs" shall mean ALZA's National Account Managers.
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1.3 "Territory" means the United States of America and Puerto Rico.
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1.4 "Products" means the ENACT AirWatch products described in Exhibit
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"A".
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1.5 "Payer" means federal (including military and the veterans
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administration), state (including Medicaid), managed care or other third party
payers for health care products and services, including, but not limited to,
health maintenance organizations, preferred provider organizations and managed
insurance accounts.
1.6 "Net Sales" means the net amount invoiced by ENACT or any third
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party for the Products and Services after deducting all reasonable trade and
quantity discounts actually taken, taxes on sales and freight, insurance and
other transportation charges, in each case to the extent added to the sales
price and set forth separately as such in the total amount invoiced.
1.7 "Exempt Sales" means sales of the Products and Services to or
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through pharmaceutical companies and clinical research organizations by ENACT
for
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
one-time clinical or pharmacoeconomic studies; provided, however, that
Exempt Sales shall not include the continuation of the Services for clinical
study subjects beyond the end of such study.
1.8 "Services" means the ENACT AirWatch Central Service and related
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services described in Exhibit "A".
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1.9 An "affiliate" means a corporation or any other entity which
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controls, is controlled by, or is under common control with, the designated
party.
2. APPOINTMENT OF ALZA.
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2.1 Appointment. ENACT hereby appoints ALZA, and ALZA accepts such
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appointment, as an authorized representative of ENACT to promote the Products
and Services to Payers within the Territory subject to the terms and conditions
of this Agreement. Notwithstanding the foregoing, except as otherwise limited
by the rights of ALZA set forth herein, ENACT may market and conduct promotional
and sales efforts either within or without the Territory; provided, however,
that such marketing, promotional and sales efforts in the Territory shall not
relieve ENACT of its obligation to pay commissions to ALZA in accordance with
this Agreement. ALZA will act as the primary contact with Payers in the
Territory with respect to access to and reimbursement approval of Products and
Services and shall manage overall Payer promotional strategy and specific
promotional call plans to implement such strategy in the Territory. ENACT shall
coordinate its activities with ALZA when ENACT or its designated representatives
other than ALZA are contacting any Payer in the Territory.
2.2 Cooperation. Each party hereto shall cooperate with and assist
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the other in promotional and marketing efforts within the Territory; provided,
however, that, except as otherwise expressly provided herein, ALZA shall not
have primary responsibility for any promotional or marketing effort, but shall
assist ENACT with such efforts upon ENACT's reasonable request and subject to
the availability of ALZA's existing resources as determined by ALZA. Whenever
reasonably requested by one party hereto, the other party shall follow up on
correspondence with any Payer relating to the Products and Services within the
Territory, and shall assist in the resolution of commercial or technical issues
which may arise with such Payer.
3. ALZA'S GENERAL DUTIES. ALZA shall use reasonable diligent efforts, on
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a similar basis as ALZA's promotion of its own products to Payers, to: (a)
introduce, promote, solicit and otherwise encourage and seek access to and
reimbursement approval of the Products and Services by Payers in the
Territory; (b) cooperate in implementing lawful and applicable Products and
Services sales programs and policies of ENACT; and (c) except as otherwise
provided in this Agreement, bear the entire cost and expense of conducting all
of its activities under this Agreement. Except as otherwise agreed upon by
ENACT and ALZA, ALZA's scope of promotional responsibility shall not include
direct contact with prescribing physicians or other respiratory care
specialists except to the extent that such persons affect or can influence
decisions regarding product access, formulary approval, reimbursement (both
initial approval and continued approval) and prescribing by Payers.
4. ALZA'S SPECIFIC DUTIES. Without in any way limiting the generality of
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the
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preceding paragraph, ALZA agrees as follows:
4.1 Promotion. ALZA's promotional efforts shall include, but are not
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limited to, direct contacts and visitation with representatives of Payers,
including medical and pharmacy directors, formulary committee members, outcome/
pharmacoeconomic staff, utilization managers, plan administrators and health
plan sales and marketing staff. Notwithstanding anything herein to the
contrary, ALZA's obligations hereunder shall not include direct contacts with
Payers other than the large, influential Payers in the Territory such as those
listed in Exhibit " B." ALZA shall not make any representations, warranties,
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claims or other descriptions with respect to the Products or Services except as
set forth in ENACT's most current written instructional materials and product
warranty as furnished by ENACT to ALZA.
4.2 Maintenance of Reimbursement Approval. In addition to the
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seeking of access to and reimbursement approval of the Products and Services by
Payers, ALZA shall seek to maintain access and reimbursement approval of the
Products and Services by Payers.
4.3 Soliciting Contracts. ALZA shall use reasonable diligent efforts
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(similar to those ALZA would use to promote its own products of similar
commercial potential) to solicit and obtain contracts to purchase the Products
and Services from Payers, as is appropriate. Contracting practices shall be
developed jointly by ALZA and ENACT as set forth in greater detail in Section
5.6 hereof.
4.4 Dedication of NAMs. ALZA agrees to devote the following to
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promoting the Products and Services pursuant to this Agreement: (a) in the
twelve months immediately following the Effective Date, ALZA will devote the
services of its NAMs [*], (b) after the twelfth month through the twenty-fourth
month following the Effective Date, ALZA will devote the services of its NAMs
[*], and (c) thereafter, through termination of this Agreement, ALZA will devote
the services of its NAMs [*]. During the twelve months immediately following the
date of commercial launch of the Products and Services, ALZA agrees to base a
portion of the incentive compensation of each NAM involved in promoting the
Products and Services under this Agreement on such activities, which portion
shall be, in the aggregate, [*]. Thereafter, ALZA agrees to base a portion of
the incentive compensation of each NAM involved in promoting the Products and
Services on such activities, which portion [*].
4.5 Additional Support. Upon ENACT's reasonable request, ALZA shall
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provide ENACT with additional support and assistance in the areas of market
research, convention/conference organization, managed care and other advisory
groups, public relations and clinical protocol review/input (including but not
limited to pharmacoeconomic studies); provided, however, such additional support
shall be subject to the availability of ALZA's existing resources as determined
by ALZA at the
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
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time of such request and shall in no event exceed [*]. Except as otherwise
expressly provided herein, ENACT shall have primary responsibility for the
preparation, development and execution of such projects and any additional
support and assistance provided by ALZA hereunder shall be in the form of
review, comment and other similar assistance. ENACT shall reimburse ALZA for all
reasonable out-of-pocket expenses incurred by ALZA while providing such
additional support and assistance.
4.6 Reports and Meetings. ALZA and ENACT will jointly develop and
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design an overall Payer promotional strategy. ALZA will develop specific
promotional call plans to implement such strategy. Within thirty (30) days of
the end of each quarter, ALZA shall prepare and submit to ENACT a quarterly call
activity report summarizing the account call activities of ALZA's NAMs
hereunder, other activities and efforts conducted by ALZA hereunder and any
material customer feedback received with respect to the Products and Services
during the preceding quarter. ALZA and ENACT, together with ENACT's other
representatives, shall cooperate with each other to formalize a process for
making quarterly forecasts as to the level of expected sales of the Products and
Services. In addition, ALZA shall forward to ENACT information regarding any
significant promotional problems or significant problems with the Products and
Services promptly upon receipt by ALZA. Additionally, ALZA and ENACT shall meet
no less than twice each calendar year, or as may be more frequently agreed upon,
to review and discuss the relationship of the parties and the sales, marketing
and promotional strategies (including the overall Payer promotional strategy)
and efforts of both parties.
4.7 Professional Association Meetings and Trade Conventions. ALZA
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agrees to display the Products and Services at appropriate professional
association meetings, trade conventions and industry symposia in managed
health care attended by ALZA at which ALZA personnel are displaying other
products. At ENACT's expense, ENACT shall provide to ALZA for such events all
printed promotional materials and, as appropriate, display graphics to ALZA's
display specifications. ALZA will be responsible for coordinating, and shall
coordinate, such meeting, convention and symposia plans and schedules with
ENACT. To the extent such events as agreed to by ALZA and ENACT require ALZA
to retain a greater exhibit display space than ALZA would need for products
being displayed by ALZA other than the Products and Services, ALZA and ENACT
shall share the associated costs payable to third parties (including without
limitation display space rental) of such events.
4.8 ENACT Materials. ALZA shall provide ENACT with ALZA's supply
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destination for the ENACT promotional information, marketing literature, forms
and other marketing materials. ALZA shall then be responsible for distributing
and disseminating such information, marketing literature and other materials in
connection with its activities hereunder, and shall notify ENACT when additional
materials are required. ALZA shall not use any ENACT promotional information,
marketing literature, forms or other printed material of any kind, for any
purpose, except as may otherwise be provided herein and except to the extent
ALZA is required to disclose ALZA's promotion of the Products and Services
during the course of its business operations, without obtaining ENACT's prior
written consent for such use.
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
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5. ENACT'S DUTIES, REPRESENTATIONS AND WARRANTIES.
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5.1 Promoting and Marketing Products. Consistent with ALZA's rights
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to promote the Products and Services as set forth in this Agreement, ENACT,
through its own marketing organization or through designated representatives,
shall diligently promote and market the Products and Services throughout the
term of this Agreement. ENACT's promotional and marketing efforts shall
include, without limitation, direct detailing to allergy, pulmonary and other
appropriate prescribing physicians.
5.2 Marketing Plan. ENACT has developed a marketing plan with
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respect to the Products and Services covering the period from the Effective Date
through December 31, 1996, a copy of which is attached hereto as Exhibit "C".
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By November 30 of each year after 1995 during the term of this Agreement, ENACT
and its designated representatives will prepare and present to ALZA a marketing
and business plan for the Products and Services for the following calendar year.
ENACT will seek and consider in good faith ALZA's input in the development of
each such plan.
5.3 Product Marketing. From the Effective Date through the later of
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(a) the date which is 12 months after the date of commercial launch of the
Products and Services, and (b) the date which is 18 months after the Effective
Date, ENACT shall invest a minimum of Two Million Five Hundred Thousand Dollars
($2,500,000) to fund marketing expenses of the Products and Services (which
expenses (i) may include ENACT's marketing personnel and administration
expenses, to the extent such personnel are devoted to marketing the Products and
Services and to the extent such marketing personnel and administration expenses
do not exceed $500,000 and (ii) may not include packaging, packaging development
and clinical outcomes research expenses) consistent with the marketing
activities set forth in the marketing plan attached hereto as Exhibit "C".
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5.4 Reports and Meetings. Within forty-five (45) days of the end of
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each quarter, ENACT shall provide ALZA with a detailed report on direct
detailing and marketing activities undertaken by ENACT and its designated
representatives during the preceding quarter, including, without limitation, the
total number of sales calls and the number of direct details to allergy,
pulmonary and other appropriate prescribing physicians. Such report shall also
include a summary of any material customer feedback received with respect to the
Products and Services during the preceding quarter. Within twenty (20) days of
the end of each month, ENACT shall provide ALZA with a summary report of all
contacts ENACT, acting directly or through its designated representatives, had
with Payers during the preceding calendar month, including, without limitation,
the identity of the Payer contacted and the purpose of the contact. In addition
to fulfilling the mutual reporting and meeting obligations described in Section
4.6 hereof, ENACT shall forward to ALZA information regarding any significant
sales and marketing problems or significant problems with the Products and
Services promptly upon receipt by ENACT.
5.5 Literature and Promotional Materials. ENACT shall furnish ALZA,
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without charge (except as may otherwise be agreed upon), with such quantities as
ALZA may reasonably request of technical, advertising and selling information
and literature concerning the Products and Services and samples of the Products,
which
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ENACT may from time to time produce or have available for trade
circulation. Upon ALZA's reasonable request, ENACT shall cooperate with ALZA to
develop modifications of such information and literature, or packages comprised
of the foregoing and/or samples of Products, for use specifically with
particular Payers to assist ALZA in its promotion of the Products and Services
to such Payers. All ENACT technical, promotional and other literature and sales
samples which are provided to ALZA must be maintained in a commercially
reasonable manner and any unused materials shall be returned to ENACT upon
request. ENACT shall develop and review such information and literature in on-
going consultation with ALZA and shall update such information and literature on
a timely basis and notify ALZA promptly of any such updates.
5.6 Pricing, Terms and Conditions and Warranties. ENACT and ALZA
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shall develop in consultation with each other contract terms relating to the
price and availability of Products and Services for Payers, which terms will
be based on ENACT's general pricing policies, and contracting practices.
Subject to such joint development obligations, ALZA shall have no right or
authority, express or implied, directly or indirectly, to alter, enlarge or
limit ENACT's terms and conditions of sale or the representations or
guarantees expressly contained in ENACT's most current written product
warranty as distributed by ENACT for the applicable Product and ENACT shall be
solely responsible for setting, and may, in its sole discretion and with
prompt notice to ALZA, amend, alter or change, the terms and conditions of
sale and/or the product warranty.
5.7 Training. ENACT shall provide to ALZA training sessions for
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ALZA's NAMs and other sales representatives at locations specified and provided
for by ALZA. Each party shall be responsible for such expenses and costs that
it incurs for such training sessions, including training materials,
transportation costs, facilities, etc.
5.8 Pharmacoeconomic Support. ENACT will provide ALZA, at ENACT's
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expense, pharmacoeconomic and outcomes support in ALZA's promotional efforts
hereunder. Pharmacoeconomic support shall include, without limitation,
development of customized protocols and analysis of Product and Services data,
as requested by Payers. ENACT will allow ALZA to have input into the
development of any pharmacoeconomic studies relating to the Products and
Services and shall provide ALZA with access to the results of any such studies.
5.9 Clinical Studies. ENACT shall be responsible for conducting any
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clinical studies necessary or desirable in connection with the Products and
Services and shall provide ALZA with copies of all clinical publications and
reports promptly as such publications and reports become available.
5.10 Sales Representative in Territory. During the first three years
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and six months of this Agreement, ENACT will engage the services of Xxxx
Pharmaceutical Inc. ("Xxxx"), or some other sales representative with at least
the same capabilities as Xxxx as of the Effective Date, to act as primary sales
representative for the Products and Services in the Territory. ENACT will notify
ALZA promptly of any material change in its relationship and agreements with
Xxxx at any time after the Effective Date. After the first three years and six
months of this Agreement, ENACT and/or its qualified designated representative
shall promote the Products and Services to prescribers in a
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manner consistent with commercial opportunity and practice. ENACT will provide
to ALZA copies of any agreements reached with primary sales representatives for
the Products and Services in the Territory during the term of this Agreement.
5.11 Manufacturing. ENACT represents and warrants that the Products
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will be manufactured in accordance with Good Manufacturing Practices. ENACT
shall maintain a secured source for the manufacture of the Products with
sufficient capacity to meet projected sales forecasts and shall maintain
sufficient inventories of the Products to meet projected sales forecasts.
5.12 Regulatory Compliance. ENACT represents and warrants that ENACT
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has obtained all applicable governmental and regulatory approvals for the
promotion, sale and use of the Products and Services in the Territory and that
ENACT will maintain such approvals and such other approvals as may become
necessary during the term of this Agreement and will comply with all laws and
regulations applicable to the packaging, labelling, use, promotion and sale of
the Product and Services. In furtherance and not in limitation of the
foregoing, ENACT shall prepare all technical, advertising and selling
information and literature concerning the Products and Services in full
compliance with all applicable laws and regulations, including but not limited
to any applicable United States Food and Drug Administration guidelines
concerning promotional materials, and shall be solely responsible for complying
with all applicable pharmacovigilance requirements.
5.13 Provision of Services. Throughout the term of this Agreement,
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ENACT will diligently perform the Services, including, without limitation,
customizing data reports upon the reasonable demand of Payers and prescribers
and providing periodic newsletters to Payers, prescribers and subscribers to the
Services. In addition, ENACT will provide sufficient operational support in
order to meet the foregoing obligations. ENACT will develop a back-up data
storage site for use in providing the Services in the event of an emergency at
the primary data storage site for the Services.
5.14 Distribution and Customer Service. ENACT shall have the sole
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responsibility for Product warehousing and distribution, processing, invoicing
and collection of customer orders for the Products and Services, inventory,
receivables and handling customer service activities, either directly or through
its designated or qualified representatives. ENACT shall maintain a toll-free
customer telephone line available to ENACT's customers during ENACT's regular
business hours.
5.15 Other Assistance. Upon ALZA's reasonable request, ENACT shall
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provide ALZA with such other sales, engineering and technical assistance and
training regarding the Products and Services as may be reasonably necessary to
promote the Products and Services to Payers in the Territory.
6. COMMISSIONS.
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6.1 Accrual and Payment of Commissions.
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(a) Beginning on the Effective Date and continuing until this
Agreement is terminated, ENACT shall pay ALZA a commission equal to [*]
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
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percent [*] of the Net Sales of Products and Services in the Territory,
including any renewals of the Services in the Territory, and, with respect to
the Services, subject to the adjustments set forth below.
(b) Beginning on the Effective Date and continuing until this
Agreement is terminated, ENACT shall pay ALZA a commission on any license fee or
other payments made by third parties to ENACT with respect to the
commercialization of products and/or services which are related to the
measurement and reporting of pulmonary function in connection with respiratory
illness including asthma and chronic obstructive pulmonary disease ("COPD")
which would directly compete with the Products or Services ("Competing Products
and Services") as follows: (i) [*] percent [*] of any payments for engineering,
design and manufacturing services received by ENACT or any of its affiliates
from a third party with respect to any Competing Products and Services; (ii) the
greater of (A) [*] percent [*] of the sales of any Competing Products and
Services by a third party, and (B) twenty-five percent (25%) of all revenues
received by ENACT or any of its affiliates from such third party in respect of
the sales of Competing Products and Services (and not otherwise included in
Section 6.1(b)(i) hereof); and (iii) [*] percent [*] of any up front payments or
special one-time fees received by ENACT or any of its affiliates from such third
party for commercial rights to any Competing Products and Services (and not
otherwise included in Section 6.1(b)(i) hereof).
(c) Commissions due pursuant to this Section 6 shall be paid by
ENACT to ALZA on or before fifteen (15) days after the last day of each
fiscal quarter and in a manner and in amounts that are consistent with the
timing of ENACT's revenue recognition policy, attached hereto as Exhibit
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"D," which shall be in accordance with generally accepted accounting
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principles and which is subject to change by mutual agreement of ENACT and
ALZA. ALZA acknowledges that ENACT will recognize, in conformance with
generally accepted accounting principles, revenue for Services over the
terms of the Services provided. Accompanying each payment of commission
hereunder, ENACT shall also deliver a statement setting forth the
information necessary to calculate Net Sales during the period for which
the commissions are being paid and the calculation of the commissions due
by ENACT for such period. ALZA's sole source of compensation for rendering
services on ENACT's behalf pursuant to this Agreement shall be the
commissions payable under this Agreement. Except as otherwise expressly
provided herein, ALZA shall have no right to receive any other compensation
from ENACT for services rendered as a promotional representative or to
receive reimbursement of any expenses or other costs incurred by ALZA in
connection therewith. ENACT shall not, without ALZA's written consent,
accept consideration for any sale or transfer of Products or Services in
the Territory in a form that would not be reflected in Net Sales.
6.2 Ineligible Sales. Notwithstanding any other provisions of this
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Agreement, ALZA shall not be entitled to receive commissions on the following:
[*];
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
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[*]
[*].
6.3 Commission Adjustments. There shall be deducted by ENACT from
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any future commissions earned by, owed to or later accruing to ALZA, an amount
equal to previously paid commissions (or a portion thereof) received by ALZA for
any canceled Services for which a commission has been paid in advance, but only
if ENACT refunds to the purchaser amounts paid by such purchaser in advance and
only if such cancellation is not a result of ENACT's nonperformance under the
applicable service agreement. This deduction from or charge against any future
commissions shall be made within the three calendar months immediately following
the event giving rise to the need for the deduction from or charge against
present or future commissions. In the event that no commissions are earned by
and payable to ALZA within such three calendar month period, ALZA shall
reimburse ENACT for the full amount of such deduction or charge within thirty
(30) days of the end of such three calendar month period.
6.4 Right of Audit. ENACT shall maintain accurate records of (a)
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marketing expenses incurred in compliance with Section 5.3 hereof, and (b) Net
Sales of Products and Services in the Territory, the dates of sale, the price of
the Products and Services sold, and other information relating to discounts,
cancellations and the like. To ensure compliance with the terms of this
Agreement, ALZA shall have the right to have an inspection and audit of all the
relevant accounting and sales books and records of ENACT conducted by an
independent audit firm reasonably acceptable to both parties, and any such
inspection and audit shall be conducted during regular business hours at
ENACT's offices and in such a manner as not to interfere with ENACT's normal
business activities. ENACT agrees to cooperate fully with any such audit. In
no event shall audits be made hereunder more frequently than every six (6)
months. Such audit firm shall present to ENACT and ALZA a confidential summary
of its conclusions as to what marketing expenses have been incurred by ENACT
and whether commissions paid are sufficient under this Agreement, and such
audit firm shall keep confidential all information disclosed or made available
to it by ENACT in the investigation. If such inspections should disclose any
underreporting of commissions, ENACT shall promptly pay ALZA such amount,
together with interest thereon at the rate of 1-1/2% per month or the highest
interest rate allowed by law, whichever is lower from
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
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the date on which such amount became due, plus the cost of the audit,
including, without limitation, the fee of the independent audit firm. If an
inspection does not disclose any underreporting of commission in excess of
five percent (5%) over the course of the applicable audit period or is
requested solely for purposes of verifying marketing expenses, ALZA shall bear
the cost of the audit.
7. SALES OF PRODUCTS AND SERVICES. ENACT shall accept and reject orders
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for the purchase of the Products and Services at its sole discretion. ENACT
shall not have any obligation to ALZA to accept any purchase order for Products
and Services and shall not have any liability to ALZA for any rejection,
cancellation or other action taken by ENACT with respect to a purchase order;
provided ENACT acts in good faith and in a manner consistent with its other
obligations under this Agreement.
8. PROPRIETARY RIGHTS AND CONFIDENTIAL INFORMATION.
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8.1 Use and Ownership of Proprietary Rights. Ownership and all
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right, title and interest in and to any trademarks, trade names or service marks
relating to the Products and Services are and shall remain vested solely in
ENACT. ENACT grants to ALZA a non-exclusive, limited license to use ENACT's
trademarks, trade names, service marks and logos solely to identify ALZA as a
promotional representative of ENACT in the Territory. ALZA acknowledges the
ownership of ENACT in the trademarks, trade names and service marks and agrees
to use reasonable efforts to preserve ENACT's rights in such proprietary rights.
ALZA acknowledges that ALZA's utilization of such trademarks, trade names and
service marks will not create any right, title or interest in or to such
proprietary rights by ALZA, and shall inure to the benefit of ENACT. ALZA shall
provide to ENACT, at no cost to ENACT, examples of its use of ENACT's
trademarks, trade names, service marks and logos, shall use such proprietary
rights in a manner which conforms with the standards set by ENACT and shall
modify such use if reasonably requested by ENACT. ALZA shall not adopt any
trademarks, trade names or service marks which are confusingly similar to the
trademarks, trade names or service marks used by ENACT to sell or assist in the
sale of its Products and Services.
8.2 Confidentiality of Information. Each party hereto acknowledges
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that, in the course of promoting the Products and Services and performing its
duties under this Agreement, it may obtain information relating to the other
party and the products of the other party which it knows or has reason to know
is of a confidential and/or proprietary nature ("Confidential Information").
Such Confidential Information may include, but is not limited to, minimum
price guidelines, future product releases, trade secrets, know-how,
inventions, techniques, processes, programs, schematics, software source
documents, data, pricing and discount schedules, customer lists, financial
information and sales and marketing plans. Each party hereto shall keep and
hold such Confidential Information in the strictest confidence, and shall not
use such Confidential Information for any purpose, other than as may be
reasonably necessary for the performance of its duties pursuant to this
Agreement, without such other party's prior written consent. No party shall
disclose any Confidential Information to any person or entity, other than to
its employees or consultants who are bound by obligations of confidentiality
at least as stringent as those set forth in this Agreement as may be
reasonably necessary for purposes of performing its duties hereunder, without
such other party's prior written consent. The duty to protect the other
party's
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Confidential Information expires three years from the date of disclosure of
such Confidential Information. The obligations of this paragraph shall survive
the termination of this Agreement.
9. TERM AND TERMINATION.
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9.1 Finite Term. This Agreement is effective as of the Effective
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Date and shall expire and terminate 5 years and 6 months following the Effective
Date, unless renewed by mutual consent of both parties for such further term as
the parties may determine; provided, however, for each month that the launch and
commencement of commercial sales of the Products and Services in the Territory
is delayed after November 1, 1995, the date of termination under this Section
9.1 shall be extended for an additional month.
9.2 ALZA Termination Without Cause. ALZA may terminate this
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Agreement at any time and for any reason, without cause and without penalty and
without compensation of any kind except as expressly set forth herein, effective
270 days after delivery of written notice of termination to ENACT if such notice
is given within three years of the Effective Date of this Agreement; otherwise
such termination shall be effective 180 days after delivery of such notice to
ENACT.
9.3 Immediate Termination for Cause by ENACT. Notwithstanding the
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foregoing, upon the occurrence of any of the following events, ENACT may
terminate this Agreement for cause immediately by giving to ALZA written notice
of such termination:
9.3.1 ALZA materially breaches or defaults in any of the terms or
conditions of this Agreement and such breach or default is not corrected or
rectified to the reasonable satisfaction of ENACT within 90 days following
notice of breach or default from ENACT.
9.3.2 Any general assignment by ALZA for the benefit of
creditors, or admission in writing of its inability to pay its debts as they
become due, or filing of a voluntary petition in bankruptcy, or adjudication
as a bankrupt or insolvent, or filing by ALZA of any petition or answer
seeking for itself any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief from creditors, or filing of any
answer admitting or failing to deny the material allegations of a petition
filed against it for any such relief, or seeking or consenting to or
acquiescing in the appointment of any trustee, receiver or liquidator of
itself or all or substantially all of its properties.
9.4 Immediate Termination for Cause by ALZA. Notwithstanding the
---------------------------------------
foregoing, upon the occurrence of any of the following events, ALZA may
terminate this Agreement immediately by giving ENACT written notice of
termination:
9.4.1 ENACT materially breaches or defaults in any of the
terms or conditions of this Agreement (other than as provided in Section
9.4.2) and such breach or default is not corrected or rectified to the
reasonable satisfaction of ALZA within 90 days following notice of breach or
default from ALZA.
11
9.4.2 ENACT fails to make a payment when due to ALZA under this
Agreement and such failure to pay is not rectified to the reasonable
satisfaction of ALZA within 30 days following notice of failure to pay from
ALZA.
9.4.3 ENACT and its designated representatives do not diligently
promote and market the Product.
9.4.4 Except as otherwise agreed upon by ENACT and ALZA in
writing, ENACT and its designated representative do not achieve, through direct
detailing to allergy, pulmonary and other appropriate prescribing physicians, a
minimum of 30,000 direct details in the Territory each fiscal quarter during the
first three years and six months of this Agreement; provided, however, if the
number of details achieved in a fiscal quarter is between 15,000 and 30,000 in
the Territory, ENACT shall have the immediately following two fiscal quarters to
makeup any deficiency in a given quarter such that the average of all three
quarters is at least 30,000 direct details in the Territory.
9.4.5 Any general assignment by ENACT for the benefit of
creditors, or admission in writing of its inability to pay its debts as they
become due, or filing of a voluntary petition in bankruptcy, or adjudication as
a bankrupt or insolvent, or filing by ENACT of any petition or answer seeking
for itself any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief from creditors, or filing of any
answer admitting or failing to deny the material allegations of a petition
filed against it for any such relief, or seeking or consenting to or
acquiescing in the appointment of any trustee, receiver or liquidator of
itself or all or substantially all of its properties.
9.4.6 ENACT materially defaults under the terms of the Loan
Agreement dated August ___, 1995 between ENACT and ALZA, and such default is not
cured pursuant to the terms of the Loan Agreement.
9.5 Post-Termination Marketing and Other Obligations. Following
------------------------------------------------
notice of intent to terminate pursuant to Sections 9.2, 9.3 or 9.4 of this
Agreement, ENACT shall pay to ALZA, in accordance with the payment periods set
forth in Section 6 hereof, commissions as determined pursuant to Section 6.1 for
such remaining period(s), if any, up to the effective date of termination.
ENACT shall have the right after the effective date of termination of this
Agreement to deal with, and solicit orders from, any and all persons and
entities, including Payers who dealt with ALZA, without any liability of any
kind to ALZA, except as expressly provided herein. ALZA shall, within 30 days
after termination of this Agreement, provide to ENACT a list of all Payers, with
their address, that ALZA contacted in the course of its promotional activities
hereunder.
9.6 Post-Termination Payment. Following termination of this
------------------------
Agreement pursuant to Section 9.1 or termination of this Agreement for cause by
ALZA pursuant to Section 9.4, and until the earlier of (i) the date cumulative
commission payments to ALZA under this Agreement equal $15 million or (ii) the
date on which post-termination commissions paid pursuant to this Section 9.6
shall have been paid for 15 years, ALZA shall be entitled to receive a three
percent 3% commission based
12
upon Net Sales of Products and Services in the Territory, including any
renewals of the Services in the Territory, subject to the payment conditions
and adjustments set forth in Article 6 hereof; provided, however, that in the
event ENACT has offered in writing to ALZA to extend the term of the Agreement
under Section 9.1 for an additional two-year term on the terms set forth in
this Agreement (including, without limitation, the same commission and payment
structure, the same commitment of NAM support at the same level as is required
immediately prior to the time of renewal, and the right to receive the same
post-termination payments at the end of such renewal period), and ALZA has
rejected such an offer, no post-termination payment shall be due under this
Section 9.6. During the term of this post-termination payment, all obligations
of ENACT relating to the payment of commissions hereunder, including without
limitation, Sections 6.1, 6.2, 6.3 and 6.4, shall remain in full force and
effect.
13
10. RIGHT OF FUTURE PRODUCTS AND SERVICES.
-------------------------------------
(a) ALZA shall have the right, during the term of this Agreement,
to promote to Payers any and all improvements and upgrades of the Products and
Services and future ENACT products and services that measure and report
pulmonary function in connection with respiratory illness, including asthma
and COPD, that are developed by or for ENACT, or acquired by ENACT, on the
terms and conditions contained herein. Any such future products and services
shall automatically be included in the definitions of "Products" and
"Services" contained in Sections 1.4 and 1.8, respectively, without being
described on Exhibit A hereto, and without further action on the part of
---------
either party hereto.
(b) ALZA shall have an exclusive right of first negotiation to
promote any new products and services of ENACT (other than products or
services covered by Section 10(a)) to Payers and/or any other customers in the
Territory on terms as appropriate to the commercial opportunity (and ENACT
agrees to negotiate with ALZA in good faith for at least 60 days with respect
thereto, commencing at least six months prior to market launch of the
applicable product and/or service). If the parties do not reach agreement
under the right of first negotiation for any product and/or service, and if
ENACT thereafter determines to offer the right to promote such product and/or
service in the Territory to Payers and/or any other customers on materially
different economic terms than offered to or negotiated with ALZA, then ENACT
shall, prior to offering such terms to another party, offer such new terms to
ALZA and negotiate in good faith with ALZA for at least 30 days to conclude an
agreement on such terms. Notwithstanding the foregoing, if ALZA determines in
its sole discretion that the applicable product and/or service is not of
strategic interest to ALZA, ALZA may waive the foregoing 60-day negotiation
period and/or ALZA's right of first refusal, in whole or in part, in writing.
11. WARRANTY OF NON-INFRINGEMENT. ENACT represents and warrants that, to
----------------------------
ENACT's knowledge after conducting a reasonable investigation, ENACT has
sufficient title and ownership of all patents, trademarks, service marks,
tradenames, copyrights, trade secrets, proprietary rights and processes
necessary for the manufacture, use and sale of the Products and Services and
that the manufacture, use and sale of the Products and Services, will not
infringe on the proprietary rights of any third party.
12. LIMITATION OF REMEDY. Neither party hereto shall have any claim
--------------------
against the other for compensation or otherwise with regard to this Agreement or
the promotional representation created hereby, whether in contract, in tort,
under any warranty or otherwise, either during the term of this Agreement or
after its termination, except as expressly provided herein. The remedies for
commissions on termination set forth in Section 9.6 are exclusive remedies,
and any liability of a party hereto, whether in contract, in tort, under any
warranty or otherwise, with respect to this Agreement, or anything done in
connection with the promotional representation created hereby including, but
not limited to, the performance or breach hereof or the development,
manufacture, acceptance or rejection of orders for, sale and delivery of
Products and Services, shall not, except as expressly provided herein, exceed
or in any way differ from the compensation provided for in this Agreement.
14
13. LIMITATION OF LIABILITY. Except as expressly provided herein, neither
-----------------------
party hereto shall, by reason of the termination of this Agreement or otherwise,
be liable to the other party for any special, incidental or consequential
damages such as, but not limited to, compensation or damages for loss of present
or prospective profits or revenues, loss of actual or anticipated commissions on
sales or anticipated sales, or expenditures, investments or commitments made in
connection with the establishment, development or maintenance of the promotional
representation created by this Agreement or in connection with the performance
of obligations hereunder.
14. INDEMNIFICATION. ENACT shall indemnify, defend and hold ALZA and its
---------------
officers, directors, agents and employees harmless from and against any and all
claims, liabilities, demands, damages, money judgments and costs and expenses
(including reasonable attorneys' fees) of any kind arising from or relating to
the testing, manufacture, marketing, packaging, distribution, storage, handling,
sale or use of Products or Services, including, without limitation, any product
liability claims and any claim against ALZA for patent or trademark infringement
in connection with the promotion of the Products and Services, excepting only
any such claims by a third party that result directly from a breach by ALZA of
its obligations under this Agreement. ALZA shall permit ENACT's attorneys, at
ENACT's discretion and cost, to handle and control the defense of any claims and
suits as to which ALZA may be entitled to indemnity hereunder, and ALZA agrees
not to settle any claims or suits without the prior written consent of ENACT.
ALZA shall indemnify, defend and hold ENACT and its officers, directors, agents
and employees harmless from and against any and all claims, liabilities,
demands, damages, money judgments and costs and expenses (including reasonable
attorneys' fees) of any kind arising from or relating to any claims by a third
party that result directly from ALZA making any misrepresentations with respect
to the Products and Services by contradicting information set forth in written
instructional materials and the product warranty furnished by ENACT to ALZA.
ENACT shall permit ALZA's attorneys, at ALZA's discretion and cost, to handle
and control the defense of any claims and suits as to which ENACT may be
entitled to indemnity hereunder, and ENACT agrees not to settle any claims or
suits without the prior written consent of ALZA.
15. GENERAL PROVISIONS.
------------------
15.1 No Competing Product Representation and Non-Solicitation.
--------------------------------------------------------
Except as otherwise provided in Section 10(a), ALZA shall not, during the term
of this Agreement, engage in the Territory either as the sales or technical
representative or agent in the sale of any products or parts thereof relating
to the measurement and reporting of pulmonary function in connection with
respiratory illness including asthma and COPD and which would directly compete
with any of the Products and Services. During and for a period of two (2)
years following the termination of this Agreement, neither party shall
interfere in any way with the business of the other party. By way of example
and not of limitation, neither party shall during this period solicit or
induce any employee or independent contractor to terminate any employment,
contractual or other relationship established with the other party.
15.2 No Waiver. The failure of either party to enforce at any time or
---------
for any period any of the provisions of this Agreement shall not be construed to
be a waiver of those provisions or of the right of that party thereafter to
enforce each and every
15
provision hereof.
15.3 Return of Property. Promptly upon the termination of this
------------------
Agreement, each party hereto shall turn over to the other party all Confidential
Information and all other information and material, including, without
limitation, all samples, pamphlets, catalogs, booklets and other technical
advertising data and literature concerning such other party and/or its products,
and all copies thereof, in its possession, custody or control; provided,
however, that a party shall be entitled to retain one set of all Confidential
Information for the sole purpose of monitoring such party's obligations under
Section 8.2 hereunder.
15.4 Prohibitions. Neither party hereto shall enter into any
------------
agreement, contract or arrangement with any government or government
representative or with any other person, firm, corporation, entity or enterprise
imposing any legal obligation or liability of any kind on the other party
hereto. Without limiting the generality of the foregoing, neither party hereto
shall sign the other party's name to any commercial paper, contract or other
instrument and neither shall contract any debt or enter into any agreement,
either express or implied, binding such other party to the payment of money
and/or in any other regard.
15.5 Independent Contractor. Each of ENACT and ALZA shall be
----------------------
independent contractors in all matters relating to this Agreement. Neither
party shall be deemed an agent for the other for any purposes and neither shall
have power or authority, whether apparent, actual, ostensible or otherwise, to
bind or commit the other in any way. Neither party hereto or its employees
shall be deemed to be or act as employees of the other party for any purpose,
including, but not limited to, under the meaning or application of any federal,
state or local unemployment insurance laws, social security laws, workers'
compensation or industrial accident laws or under any other laws or regulations
which would or might impute any obligation or liability to the other party
hereto by reason of any employment relationship.
15.6 Notices. All notices which any party to this Agreement may be
-------
required or may wish to give may be given by addressing them to the other party
at the addresses set forth below by: (a) personal delivery, (b) by commercial
overnight courier with written verification of actual receipt, (c) by registered
or certified mail, or (d) by facsimile with receipt confirmed:
If to ALZA: ALZA Corporation
950 Page Mill Road
P.O. Box 10950
Xxxx Xxxx, Xxxxxxxxxx 00000-0000
Attention: Vice President and General Counsel
If to ENACT: Enact Health Management Systems
000 Xxxxxxxxx Xxxx
Xxxx Xxxx, XX 00000
Attention: President
If so mailed or otherwise delivered, such notices shall be deemed and presumed
to have been given on the earlier of the date of actual receipt or three (3)
days after mailing or authorized form of delivery.
16
15.7 Governing Law. This Agreement (and any other documents referred
-------------
to herein) shall in all respects be interpreted, enforced and governed by and
under the laws of the State of California applicable to instruments, persons and
transactions which have legal contacts and relationships solely within the State
of California. The language of this Agreement shall be construed as a whole
according to its fair meaning, and not strictly for or against either of the
parties.
15.8 Binding Arbitration. Any claim, dispute or controversy arising
-------------------
out of or in any way relating to this Agreement or to the promotional
representative relationship created hereby, or the enforcement or alleged
infringement, interference or breach of any related right or obligation of the
parties hereto, shall be submitted to binding arbitration by the American
Arbitration Association in accordance with the commercial rules then in effect
for that Association. The arbitration shall be conducted in San Mateo or Santa
Xxxxx County, California. Notwithstanding this provision and the agreement
between the parties to submit their disputes to binding arbitration, nothing in
this Agreement shall prevent either party from seeking injunctive relief (or any
other provisional remedy) from any court having jurisdiction over the parties
and the subject matter of their dispute. The prevailing party in any such
arbitration or in any action at law or suit in equity relating to this Agreement
shall be paid by the other party a reasonable sum for attorneys' fees and
expenses of such prevailing party.
15.9 Assignment. Neither party shall transfer, pledge or assign this
----------
Agreement or any part hereof, interest herein, obligation hereunder or
commissions or compensation due to it hereunder without obtaining in each
instance the prior written consent of the other; provided, however, that ALZA
may assign its rights to any affiliate of ALZA without the consent of ENACT.
15.10 Integration/Modification/Entire Agreement. This Agreement
-----------------------------------------
constitutes the entire agreement and final understanding of the parties with
respect to the subject matter hereof and supersedes and terminates any and all
prior and/or contemporaneous negotiations, representations, understandings,
discussions, offers and/or agreements between the parties, whether written or
verbal, express or implied, relating in any way to the subject matter hereof.
This Agreement is intended by the parties to be a complete and wholly integrated
expression of their understanding and agreement, and it may not be altered,
amended, modified or otherwise changed in any way except in writing.
17
15.11 Survivability. The provisions of Sections 6.4, 8.2, 9.5, 9.6,
-------------
14, 15.1, 15.3 and this Section 15.11 shall survive the termination for any
reason of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement effective as
of August __, 1995 (the "Effective Date").
ENACT HEALTH MANAGEMENT SYSTEMS ALZA CORPORATION
By: _____________________________ By: ___________________________
Title: __________________________ Title: ___________________________
Date: ___________________________ Date: ___________________________
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
18
EXHIBIT A
---------
[*]
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
EXHIBIT B
---------
[*]
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
EXHIBIT C
---------
[*]
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
EXHIBIT D
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Revenue Recognition
Revenues result primarily from sales of devices and the execution of agreements
to provide tele-monitoring services for customers over a specified time period,
generally one year.
Revenues from device sales are recognized upon shipment of devices to customers,
and revenues from the underlying tele-monitoring services agreements are
recognized on a straight line basis over the terms of the respective agreements.
