Information Product Distribution Agreement

TEXT OMITTED AND FILED SEPARATELY
CONFIDENTIAL TREATMENT REQUESTED
UNDER 17 C.F.R.SECTIONS 200.80(b)(4),
200.83 AND 240.24b-2


EXHIBIT 10.9


PHARSIGHT CORPORATION


INFORMATION PRODUCT DISTRIBUTION AGREEMENT


This Information Product Distribution Agreement (this "Agreement") is made and entered into as of June 25, 1999 (the "Effective Date") by and between Pharsight Corporation, a California corporation, (hereinafter "Pharsight") and Protocare Sciences, Inc., a Delaware corporation (hereinafter "Protocare").


RECITALS


Pharsight is engaged in the sale of software and services relating to clinical trial design and modeling to pharmaceutical and biotechnology companies and desires to have the right to reproduce, use, and distribute as part of its Patient Information Resource (PIR) product a selection of patient therapeutic data collected by Protocare in the diabetes area.


Protocare is the owner of or has appropriate licenses to all US and foreign copyrights and all other intellectual property rights pertaining to the database that is the subject of this Agreement and is willing to grant to Pharsight a non-exclusive right and license to reproduce, use, and distribute that database on the terms and conditions set forth herein.


NOW, THEREFORE, IN CONSIDERATION OF THESE PREMISES, AS WELL AS THE OBLIGATIONS HEREIN MADE AND UNDERTAKEN, THE PARTIES HERETO DO HEREBY AGREE AS FOLLOW, WITH THE CAPITALIZED TERMS HAVING THE MEANING SET FORTH IN EXHIBIT AS:


1. GRANT OF LICENSE.


1.1 LICENSE GRANT. Subject to the payment of royalties as set forth in Section 5, Protocare hereby grants Pharsight a non-exclusive world-wide right and license (a) to reproduce the Database and Documentation and to display, sell, license, and otherwise distribute copies of the Database or portions thereof and the Documentation to Customers, either alone or bundled with other Pharsight products or services; (b) to use the Database and the Documentation for purposes of technical support for Customers; (c) to use a reasonable number of copies of the Database and Documentation for purposes of marketing, training, and demonstrations; (d) to use the Protocare name in connection with the distribution and marketing of the Database and the products derived therefrom; (e) to license Customers to use the data in the Database and to publish summarized and non-patient-specific portions of the data, or derivatives of the data as part of works describing their use of the data and to include the data and derivatives of the data in regulatory submissions, (f) to authorize its distributors to exercise any or all of the rights set forth in (a) through (e) above; (g) to use the Database and Documentation in connection with consulting services provided to Customers and to distribute to such Customers models and other analyses based on the Database; and (h) to modify the Database and the Documentation and to create derivative works of the Database and Documentation, including incorporating the Database or


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Documentation or modifications of either into an internet-based medical query and response system, and to license the use of such system to Customers.


1.2 COPYRIGHT/TRADEMARK NOTICES. All copies of the Database distributed by Pharsight will include appropriate copyright and trademark notices as supplied by Protocare. Pharsight will identify the Database as a product of Protocare on printed promotional materials and web pages that reference the Database and on any packaging it develops.


1.3 CUSTOMER RESTRICTIONS. Customers will be licensed to use the data in the Database and related products, including Database Derivatives, for in-house drug development but will have no right to further distribute the Database or Database Derivatives. The Customer license agreement for products containing the Database or Database Derivatives will authorize use substantially as follows: user is granted a license for the use of this product for drug discovery and clinical development purposes. In the event that Pharsight becomes aware that the Database or Database Derivative licensed by Pharsight to a Customer is being used for post-approval marketing purposes, and such use is not terminated upon notice to the Customer, Pharsight will promptly notify Protocare and the parties will discuss the appropriate actions to take to enforce the use restrictions. If the parties are in disagreement over the actions to take and Pharsight's actions are not effectual in terminating the unauthorized use, Pharsight will pay to Protocare a marketing license fee of [...***...] and Protocare will authorize use of the Database and Database Derivatives by the Customer for post-approval marketing purposes.


1.4 OWNERSHIP. Protocare will retain ownership of the Database and the underlying data. Pharsight and its suppliers will own all right, title, and interest in and to any Database Derivatives, subject to Protocare's ownership of the underlying data and Database. Pharsight will own all right, title, and interest in and to any query or interface or other software developed by or for Pharsight and integrated or bundled with the Database or a Database Derivative. Pharsight may register its own copyright in any derivative works, provided the Database is identified in such registration as an underlying work of Protocare. Pharsight's ownership of any Database Derivative notwithstanding, it may not license or otherwise distribute such Database Derivative except in accordance with the provisions of this Agreement, including the use restriction set forth in Section 1.3.


2. DELIVERY AND ACCEPTANCE


2.1 DELIVERY OF INITIAL DATABASE. Protocare will build the Database in accordance with the specifications in Exhibit B and test it against the Acceptance Criteria in Exhibit C. Protocare will deliver the Database (except for the practice review system (PRS) elements) to Pharsight electronically within six weeks of the Effective Date; the addition of the PRS data elements will be completed within ten weeks after the Effective Date.


2.2 ACCEPTANCE. Pharsight will have thirty (30) working days from receipt of the Database (including the PRS elements) to test for adherence to the Acceptance Criteria and will notify Protocare promptly if the Database fails to conform to such criteria. Protocare will have twenty (20) working days to correct such nonconformity, and upon redelivery Pharsight will again test the Database against the Acceptance Criteria. This process will be repeated (except that each subsequent test period and repair period will be limited to fifteen (15) working days) until Pharsight either provides Protocare with written


---------------- * Confidential treatment requested.


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notice of acceptance of the Database or is deemed to have accepted the Database under the provisions of this section, provided, however, that if the Database fails to meet the Acceptance Criteria on the third delivery, Pharsight shall have the right to terminate this Agreement and receive a full refund of the initial license fee. Pharsight shall be deemed to have accepted the Database if it fails to notify Protocare of any nonconformity therein within thirty (30) working days of delivery (or within fifteen (15) working days of redelivery in the case of nonconformities in the original delivery).


3. PRODUCT DEVELOPMENT AND DISTRIBUTION


3.1 PRODUCT DESCRIPTION. Pharsight will distribute the Database to Customers as part of its PIR product line. Pharsight will make PIR products available to Customers in three forms: (a) distribution of the full Database (Direct Product or PIR-DP); (b) use of the Database as a resource by Pharsight's professional consultants in the course of providing consulting services (Consulting Product or PIR-CP); and (c) use of the Database in an automated, internet-based medical query-response service product (Internet-Product or PIR-IP).


3.2 PRODUCT DEVELOPMENT. For the PIR-DP, Pharsight will distribute the Database either as received from Protocare or with minor changes to improve its usability. For the PIR-CP, Pharsight employees and consultants will utilize information from the Database in developing models that will be delivered to customers. For the PIR-IP, Pharsight will utilize the Database as a resource that is accessed with Pharsight proprietary query software and a customized user interface for answering customer queries. The proprietary search software and user interface are currently under development; Pharsight has targeted the PIR-IP product for release in late 1999.


3.3 PRICING AND PROMOTION. Subject to the other restrictions contained in this Agreement, Pharsight is free to price, promote, and distribute the Database in any manner it deems appropriate. Pharsight will be responsible for all decisions and costs involved in the marketing and distribution of the PIR, including pricing, Customer license terms, promotional materials, packaging, distribution channels, and customer evaluation and training. Pharsight may include material describing the Database on its web site, in promotional materials, and during training and professional presentations. Subject to complying with Section 1.2, Pharsight may repackage, at its own expense, the Database products prior to shipment to Customers and may include in such packaging the Pharsight logo, references to Pharsight's website and other products, and the words to the effect that the product is distributed by Pharsight.


3.4 MARKETING RESTRICTION. Pharsight will not market the PIR product containing the Database to post-approval marketing groups. Protocare reserves all rights not granted to Pharsight hereunder, provided, however, that Protocare agrees that it will not market the Database to clinical development groups. In addition, Protocare agrees that it will not market any web-based drug development and clinical trial query and response system that is competitive with Pharsight's internet query PIR-IP product within the disease types for which Protocare has provided a Database to Pharsight.


3.5 COSTS. Protocare will be fully responsible for all development costs of the Database and any updates, including any royalties or payments due to third-parties. Pharsight will be fully responsible for any and all expenses involved in the development of the proprietary search software and user interface for the PIR-IP product, any other software or other tools it develops to enhance usability of the Database, and distribution of the Database to its customers, including manufacturing, marketing, and shipping expenses.


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4. UPDATES; CUSTOMER SUPPORT


4.1 MID-YEAR UPDATES. Protocare will provide Pharsight with an update for the Database at the half-year point of each year of this Agreement to extend the histories of earlier selected patients by an additional six (6) months.


4.2 RENEWAL UPDATES. Protocare will provide Pharsight with totally refreshed update (i.e., new statistical database extraction) for the Database at each annual renewal. The refreshed Database will be subject to QA testing in accordance with the criteria established by the parties. All copies of the prior year database and its update held by Pharsight must be returned to Protocare upon acceptance of the renewal update.


4.3 CUSTOMER SUPPORT. Pharsight will provide all customer support for the PIR product. Protocare will make a person familiar with the Database available to resolve problems Pharsight may encounter from time to time with the data quality. For each [...***... ] in royalties paid by Pharsight to Protocare (including the initial license fee), Protocare will provide an aggregate of two days of problem resolution assistance without charge; further assistance will be provided as necessary at [...***...] per day, prorated on an hourly basis for usage of less than a full day.


5 PAYMENTS


5.1 INITIAL LICENSE FEE. Pharsight will pay Protocare a license fee of [...***...] upon execution of this Agreement or upon the agreement of the parties on Database fields and Acceptance Criteria, whichever is later; this amount will be credited against actual royalties due with respect to product sales during the initial term of this Agreement. Upon each renewal of this Agreement, Pharsight will pay Protocare a license renewal fee of [...***...], which will be credited against actual royalties due with respect to product sales during the one-year renewal term. In no event may Pharsight license products containing the Database or Database Deriva ...