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EXHIBIT 10.17
 
DEVELOPMENT AGREEMENT
 
THIS DEVELOPMENT AGREEMENT (this “Agreement”) dated as of March 11, 2010 (the
“Effective Date”) is entered into among and between SMART PERSONALIZED MEDICINE,
LLC, a Delaware limited liability company (“SPM”), having a registered office at
203 NE Front Street, Suite 201, Milford, Kent County, DE 1996, QUEST DIAGNOSTICS
INCORPORATED (“QUEST”), having a place of business located at 3 Giralda Farms,
Madison, New Jersey 07940 and HEALTH DISCOVERY CORPORATION, a Georgia
corporation (“HDC”) having a place of business located at 2 East Bryan Street,
Suite 601, Savannah, GA 31401 (each, a “Party,” and collectively, the
“Parties”).
 
RECITALS
 
WHEREAS, SPM is a research and development company in the medical industry which
is working to develop breast cancer tests; and
 
WHEREAS, HDC is the owner of intellectual property, including patents, pending
and issued, and know-how, all relating to support vector machine (“SVM”) and
other learning machine technology, based upon which it has developed, or is
engaged in developing, applications including, inter alia, digital image
analysis, biomarker discovery, and gene- and protein-based diagnostic and
prognostic testing; and
 
WHEREAS, HDC and SPM entered into a License Agreement dated August 22, 2008 (as
amended from time to time, the “HDC License Agreement”) pursuant to which HDC
licensed its intellectual property, hereinafter referred to as the “Licensed
Technology” (as further defined in the HDC License Agreement) to SPM for use in
the Field of Use (as defined in the HDC License Agreement) for development of
breast cancer Product(s)) (the “Development Technology”); and
 
WHEREAS, SPM entered into a Sponsored Research Agreement (the “Sponsored
Research Agreement”) dated May 1, 2009 with The University of Texas, M.D.
Anderson Cancer Center (“MD Anderson”), a member institution of The University
of Texas System, pursuant to which MD Anderson and SPM agreed to undertake a
Research Project (as defined in said Sponsored Research Agreement, relevant
portions of which are attached hereto as Exhibit C) to develop a statistical
database (the “Database”) including clinical and genomic information using gene
expression data, tissue biopsies and related patient historical information of
breast cancer patients, which Database would be exclusively owned by MD
Anderson, but would be available for use by SPM for the development of
Product(s); and
 
WHEREAS, Quest Diagnostics is a provider of reference laboratory diagnostic
services providing diagnostic and/or prognostic technology, know-how and
information to patients and their caregivers; and
 
WHEREAS, concurrently with the execution of this Agreement, SPM, HDC and QUEST
will enter into a license agreement (the “Quest License Agreement”) to
sublicense the Development Technology to QUEST for use in the Field (as that
term is defined herein); and
 
 
 

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WHEREAS, SPM, HDC and QUEST desire to enter into this Agreement to develop
information to be included in the Database, to enable Quest to develop
Product(s) (as defined herein) and to validate such Product(s) for
commercialization.
 
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants herein contained, the Parties hereby agree as follows:
 
ARTICLE 1
 
DEFINITIONS
 
For purposes of this Agreement, the terms defined in this Article 1 shall have
the respective meanings set forth below:
 
1.1           “Affiliate” shall mean, with respect to any Person, any other
Person which directly or indirectly controls, is controlled by, or is under
common control with, such Person. A Person shall be regarded as in control of
another Person if it owns, or directly or indirectly controls, at least thirty
five percent (35%) of the voting stock or other ownership interest of the other
Person, or if it directly or indirectly possesses the power to direct or cause
the direction of the management and policies of the other Person by any means
whatsoever.
 
1.2            “Background IP” shall mean a Party’s solely owned and/or
Controlled (as defined below in Section 1.3) Technology existing prior to the
Effective Date. For purposes of clarification, SPM Background IP shall include,
without limitation, the Development Technology. HDC Background IP shall include
all Technology owned or Controlled by HDC, including the Licensed Patents, to
the extent that they are not licensed to SPM pursuant to the HDC License
Agreement, and QUEST Background IP shall include, without limitation, its
proprietary diagnostic testing methods, processes, SOPs, expertise and
technologies.
 
1.3            “Controlled” in the context of specific Technology shall mean
either having a sole ownership interest in, having a license for, or having the
right to grant licenses or sublicenses to such Technology.
 
1.4            “Database” shall mean the statistical database that is to be
developed in conjunction with the Research Project that is the subject of the
Sponsored Research Agreement.
 
1.5            “Database Development” shall mean the portion of the Program
related to the development of the Database.
 
1.6            “Field” shall mean clinical laboratory services, In Vitro
Diagnostic kits, research use, clinical trials services (including provision of
clinical trial services to customers utilizing Quest Diagnostics’ testing
services for pharma discovery programs) to provide predisposition, early
detection, screening, diagnosis, prognosis, chemoprediction/companion and
recurrence/monitoring applications on all types of samples (e.g. tissue, blood,
serum, etc.) using genomic and/or any other biomarkers related to breast cancer
or the exclusion of breast cancer. For purposes of clarification, the Field
includes, but is not limited to, methods involving immunohistochemistry (“IHC”)
markers, expression, microRNA, digital pathology, pathological features, SNPs
and other methods to be determined but expressly excluding radiologic imaging
applications.
 
 
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1.7            “HDC Development Costs” shall mean any and all costs incurred by
HDC and associated with using the Development Technology and their know-how to
analyze the data in the Database for development of Product(s), as requested by
QUEST.
 
1.8            “Person” shall mean an individual, corporation, partnership,
limited liability company, trust, business trust, association, joint stock
company, joint venture, pool, syndicate, sole proprietorship, unincorporated
organization, governmental authority or any other form of entity not
specifically listed herein.
 
1.9            “Product(s)” shall mean the applications in the Field developed
under the Program using the Development Technology and/or the Database.
 
1.10         “Product Inventions” shall mean Technology which is developed by
the Parties, independently or jointly, as part of the development of the
Product(s) under the Program. The definition of Product(s) Inventions shall not
include Background IP, the Database or Quest Inventions. All Product Inventions
developed by QUEST or HDC under this Agreement shall be the property of SPM but
shall be included in the license grant to QUEST under the Quest License
Agreement for developed Commercialized Product(s) applications on the terms
hereof.
 
1.11         “Program” shall mean the QUEST and SPM development program
described below in Article 3, including Database Development and all Project(s)
relating to the development of each Product.
 
1.12          “Program Period” shall mean the period of time running from
initiation of Database Development to completion of the final Project Plan.
 
1.13         “Project” shall mean a development project which uses the Database
for the development of Product(s). A project plan describing the Project will be
prepared for each Product (the “Project Plan”). Each Project Plan will be
appended to this Agreement as a part of Exhibit A and will be assigned a number
upon its incorporation in the Agreement. Project Plan 1 and Project Plan 2 are
the first and second Project Plans approved by the Parties and are or will be
attached as Exhibit A. The Parties contemplate the potential for the attachment
of additional Project Plans (as Project Plan 3, Project Plan 4, and so forth)
during the course of the Program Period.
 
1.14         “Project Period” for each Product shall mean the period commencing
on the date that Exhibit A with respect to a Project is attached to this
Agreement pursuant to Section 1.12 above and ending on earlier of (i) the date
that the Steering Committee determines that a Product is ready to for
Commercialization or (ii) the date that the Steering Committee determines that a
Product cannot be Commercialized.
 
1.15         “Quest Development Costs” shall mean any and all costs and expenses
associated with and incurred in the analysis of the tissue biopsies provided by
MD Anderson and other data required in the development of the Database and in
the development of Product(s) and shall include the payments made by QUEST to
SPM and HDC under Section 3.6 hereof but shall exclude SPM Development Costs and
HDC Development Costs.
 
 
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1.16         “Quest Inventions” shall mean Technology which is developed by
QUEST, does not incorporate any Background IP of SPM or HDC or the Database, and
is an improvement or modification to QUEST Background IP. Quest Inventions shall
include Products where the underlying Product Invention is non-patentable and
the Steering Committee has decided to publish the proprietary Technology;
provided, however that no amount is owed to MD Anderson with respect to such
Product pursuant to any contractual obligation under the Sponsored Research
Agreement.
 
1.17         “SPM Development Costs” shall mean the costs incurred by SPM to
gain access to the tissue biopsies and related patient histories from MD
Anderson pursuant to the Sponsored Research Agreement.
 
1.18         “SPM Improvements” shall mean Technology with applications for use
in the Field that is developed outside of this Agreement or the Development
Agreement, either by SPM or by a Third Party working with or licensed by SPM as
part of a collaboration with such Third Party, which Technology may be useful to
improve the Products.
 
1.19         “Quest License Agreement” shall mean the license agreement between
SPM, HDC and QUEST executed concurrently with this Agreement. The form of the
Quest License Agreement is attached hereto as Exhibit B.
 
1.20         “Technology” shall mean any patents, patent applications,
provisional patent applications or foreign equivalents, including any patent
extensions, certificates of invention and .applications for certificates of
invention, together with any divisionals, continuations, continuations-in-part,
reissues, renewals, reexaminations or additions thereof, as well as know-how,
discoveries, claims, formulae, processes, methods, techniques, practices, trade
secrets, technologies, specifications, designs, knowledge, data, results,
information, financial and business processes and information, whether or not
patentable.
 
1.21          “Territory” shall mean worldwide.
 
1.22          “Third Party” shall mean any Person other than SPM, QUEST, HDC and
their respective Affiliates.
 
1.23         “Validation Work” shall mean such commercially reasonable and
necessary primary testing associated with the validation of a Product, including
without limitation, gene expression test training and test set(s) and additional
technical and clinical support for final CLIA (Clinical Laboratory Improvement
Amendments) validation, but expressly excluding any filing or approval process
with the U.S. Food & Drug Administration.
 
 
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ARTICLE 2
 
REPRESENTATIONS AND WARRANTIES
 
 2.1            SPM hereby represents and warrants to QUEST and HDC as follows:
 
 2.1.1          Corporate Existence and Power. SPM (a) is a limited liability
company duly organized, validly existing and in good standing under the laws of
the State of Delaware; (b) has the requisite power and authority and the legal
right to own and operate its property and assets, to lease the property and
assets it operates under lease, and to carry on its business as it is now being
conducted and (c) is in compliance with all requirements of applicable law,
except to the extent that any noncompliance would not have a material adverse
effect on the properties, business, financial or other condition of it and would
not materially adversely affect its ability to perform its obligations under
this Agreement.
 
 2.1.2          Authorization and Enforcement of Obligations. SPM (a) has the
requisite power and authority and the legal right to enter into this Agreement
and to perform its obligations hereunder and (b) has taken all necessary
corporate action on its part to authorize the execution and delivery of this
Agreement and the performance of its obligations hereunder. This Agreement has
been duly executed and delivered on behalf of SPM, and constitutes a legal,
valid, binding obligation, enforceable against SPM in accordance with its terms,
except to the extent that such enforcement may be limited by bankruptcy,
insolvency, moratorium or other laws affecting creditors rights generally.
 
 2.1.3          No Consents. All necessary consents, approvals and
authorizations of all governmental authorities and other Persons required to be
obtained by SPM in connection with this Agreement have been obtained.
 
 2.1.4          Rights in Development Technology. SPM Controls the Development
Technology to the extent required to perform its obligations, and grant the
rights granted, hereunder. Except as otherwise set forth in this Agreement, SPM
has not sold, assigned, conveyed, mortgaged, encumbered, transferred or granted
any license or other right to the Development Technology to any Person to
develop, make, have made, use and sell products for use in the Field. SPM will
not sell, assign, convey, mortgage, encumber, transfer or grant any license or
other rights to the Development Technology for use in the Field except as
permitted under the Quest License Agreement.
 
 2.1.5          No Infringement. SPM has no actual knowledge (without any
independent investigation), that the use of the Development Technology or the
granting of a license to practice the Development Technology violates, infringes
or otherwise conflicts or interferes with any patent or any other intellectual
property or proprietary right of any Third Party. To the best of SPM’s
knowledge, no Third Party is currently infringing upon the Development
Technology in the Field.
 
2.2            QUEST hereby represents and warrants to SPM and HDC as follows:
 
 2.2.1          Corporate Existence and Power. QUEST (a) is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware; (b) has the corporate power and authority and the legal right to own
and operate its property and assets, to lease the property and assets it
operates under lease, and to carry on its business as it is now being conducted
and (c) is in compliance with all requirements of applicable law, except to the
extent that any noncompliance would not have a material adverse effect on the
properties, business, financial or other condition of it and would not
materially adversely affect its ability to perform its obligations under this
Agreement.
 
 
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 2.2.2          Authorization and Enforcement of Obligations. QUEST (a) has the
corporate power and authority and the legal right to enter into this Agreement
and to perform its obligations hereunder and (b) has taken all necessary
corporate action on its part to authorize the execution and delivery of this
Agreement and the performance of its obligations hereunder. This Agreement has
been duly executed and delivered on behalf of QUEST, and constitutes a legal,
valid, binding obligation, enforceable against QUEST in accordance with its
terms except to the extent that such enforcement may be limited by bankruptcy,
insolvency, moratorium or other laws affecting creditors rights generally.
 
 2.2.3          No Consents. All necessary consents, approvals and
authorizations of all governmental authorities and other Persons required to be
obtained by QUEST in connection with this Agreement have been obtained.
 
2.3            HDC hereby represents and warrants to QUEST and SPM as follows:
 
 2.3.1          Corporate Existence and Power. HDC (a) is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Georgia; (b) has the requisite power and authority and the legal right to own
and operate its property and assets, to lease the property and assets it
operates under lease, and to carry on its business as it is now being conducted
and (c) is in compliance with all requirements of applicable law, except to the
extent that any noncompliance would not have a material adverse effect on the
properties, business, financial or other condition of it and would not
materially adversely affect its ability to perform its obligations under this
Agreement.
 
 2.3.2          Authorization and Enforcement of Obligations. HDC (a) has the
requisite power and authority and the legal right to enter into this Agreement
and to perform its obligations hereunder and (b) has taken all necessary
corporate action on its part to authorize the execution and delivery of this
Agreement and the performance of its obligations hereunder. This Agreement has
been duly executed and delivered on behalf of HDC, and constitutes a legal,
valid, binding obligation, enforceable against: HDC in accordance with its
terms, except to the extent that such enforcement may be limited by bankruptcy,
insolvency, moratorium or other laws affecting creditors rights.
 
 2.3.3          No Consents. All necessary consents, approvals and
authorizations of all governmental authorities and other Persons required to be
obtained by HDC in connection with this Agreement have been obtained.
 
 
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 2.3.4          Development Technology Applications. HDC has know-how and access
to expertise to be able to apply the Development Technology to the extent
required herein in order to perform its Product(s) development obligations for
QUEST hereunder. Except as otherwise set forth in this Agreement and in the
Quest License Agreement, HDC has not sold, assigned, conveyed, mortgaged,
encumbered, transferred or granted any license or other right under the
Development Technology to any Person to develop, make, have made, use and sell
Product(s) for use in the Field except as indicated in this Agreement. HDC
hereafter will not sell, assign, convey, mortgage, encumber, transfer or grant
any license or other right under the Development Technology to develop
Product(s) for use in the Field or directly or indirectly provide services,
know-how or expertise in the use of the Development Technology in the Field,
except as permitted under this Agreement and under the Quest License Agreement.
 
 2.3.5          No Infringement. To the best of HDC’s knowledge, neither the
rise of the Development Technology nor the granting of a license to practice the
Development Technology violates, infringes or otherwise conflicts or interferes
with any patent or any other intellectual property or proprietary right of any
Third Party. To the best of HDC’s knowledge, no Third Party is currently
infringing upon the Development Technology in the Field.
 
 2.3.6          Notwithstanding Section 9.5 below, nothing in this Agreement
shall be construed to expand or modify the Licensed Technology rights and
obligations of SPM under the HDC License Agreement.
 
ARTICLE 3
 
THE PROGRAM
 
3.1            Development of Database Information: Obligations of SPM:
 
 3.1.1          Upon execution of this Agreement, SPM shall obtain from MD
Anderson and deliver, or cause to be delivered, to QUEST any and all tissue
biopsies available to SPM under the Sponsored Research Agreement and identified
as necessary for proceeding with and pursuing the goals of a specified Project
Plan (the “Database Samples”), expected to be approximately one thousand (1,000)
samples. Project Plan 1 and Project Plan 2 are attached hereto as of the
Effective Date. As additional Project Plans are agreed upon by SPM and QUEST,
SPM will obtain any and all additional Database Samples identified by SPM and
QUEST as being necessary for performance of the applicable Project Plan
 
 3.1.2          Upon delivery of the data generated by QUEST’s laboratory data
development work pursuant to Section 3.2 hereof, SPM will communicate such data
to MD Anderson for use in the development of the Database.
 
 3.1.3          Notwithstanding the foregoing, neither Quest nor HDC shall work
directly with MD Anderson in connection with the development of the Product(s).
The Parties acknowledge that ownership rights to the Database shall remain with
MD Anderson.
 
 3.1.4          SPM shall permit QUEST to access the Database Samples and
Database as necessary to perform its obligations in conjunction with development
of the Database.
 
 
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3.2            Development of Database Information: Obligations of QUEST
 
 3.2.1          Upon receipt of the Database Samples provided by SPM pursuant to
Section 3.1.1 above, QUEST will commence gene expression analysis and any other
work described in the applicable Project Plan to generate the data and
information needed for development of the Database and will deliver such data
and information to SPM in a computer-readable format specified by SPM.
 
 3.2.2          QUEST acknowledges that the Database Samples are to be used
solely for performing its obligations under this Agreement (including Validation
Work) and that no further use of the Database Samples is authorized. Database
Samples that are no longer being utilized in the development of the Database or
Product(s) shall be returned to SPM for return to MD Anderson. In addition, upon
the termination or expiration of this Agreement or the Sponsored Research
Agreement, any remaining Database Samples shall be returned to SPM for return to
MD Anderson.
 
3.3            Development of the Database: Obligations of HDC
 
 3.3.1          HDC shall have no obligations with regard to development of the
Database.
 
 3.3.2          HDC shall have no access to the Database or information
contained in the Database except as set forth in Section 3.6.1.
 
3.4            Development of the Products: Obligations of SPM
 
 3.4.1          SPM shall provide access to the Database as required by QUEST to
perform its obligations related to development of Product(s) and will provide
any other assistance as reasonably requested by QUEST.
 
 3.4.2          Except where otherwise provided in this Agreement, SPM shall be
responsible for any and all SPM Development Costs.
 
 3.4.3          At least one time per year, SPM shall notify the Steering
Committee of any SPM Improvements generated during the previous year and provide
enough information for the Steering Committee to evaluate the utility of such
SPM Improvements to the Products.
 
3.5   Development of the Products: Obligations of QUEST.
 
 3.5.1          QUEST will develop the Product(s) utilizing the Technology:
licensed under the License Agreement and, with the prior written consent of SPM
and HDC, any other Background IP or Technology Controlled by one of the Parties
hereto.
 
 3.5.2          QUEST acknowledges that the Database is to be used solely for
performing its obligations under this Agreement and that no further use of the
Database or the information set forth therein is authorized.
 
 
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 3.5.3          With respect to those Product(s) for which QUEST has issued a
Commercialization Notice to SPM (as set forth in Section 5.3 below), QUEST will
perform Validation Work for each such Product.
 
 3.5.4          QUEST will perform the services set forth in Sections 3.2, and
3.5 (the “Services”) in accordance with all applicable standards, laws, rules
and regulations. All Services shall be performed in accordance with QUEST’s
professional standards.
 
 3.5.5          QUEST shall be responsible for the QUEST Development Costs
relating to the Services and for any and all other costs and expenses relating
to the work to be performed hereunder except for the HDC Development Costs and
the SPM Development Costs.
 
3.6            Development of the Products: Obligations of HDC
 
 3.6.1          HDC will use the Development Technology to analyze the data in
the Database for development and/or validation of Product(s) and will provide
any other assistance as reasonably requested by QUEST. HDC acknowledges that the
Database is to be used solely for performing its obligations under this
Agreement and that no further use of the Database or the information set forth
therein is authorized.
 
 3.6.2          Except where otherwise provided in this Agreement, HDC shall be
responsible for any and all HDC Development Costs.
 
3.7            SPM and HDC Service Charges - Project Plans 1 and 2. In
consideration of the right and opportunity to develop the Product(s) identified
in Project Plan 1 and Project Plan 2 and the right to Commercialize the
Product(s) as set forth herein, QUEST hereby agrees to pay to each of SPM and
HDC an amount equal to Three Hundred Seventy-five Thousand Dollars ($375,000)
(the “Development Fee”). The Development Fee shall be paid to each of HDC and
SPM in nine (9) equal monthly installments of Forty-one Thousand Six Hundred
Sixty-six Dollars (41,666.00), with the first installment payable no later than
March 31, 2010 and subsequent installments payable on the last day of each month
thereafter. No additional amounts shall be due and payable by QUEST to either
SPM or HDC as a Development Fee for Project Plans 1 and 2 hereunder, regardless
of the length of time required for completion of each Project Plan. The amounts
to be paid pursuant to this Section 3.7 are separate and exclusive from any
amounts to be paid by QUEST to SPM and HDC under the Quest License Agreement.
 
3.8            Steering Committee. A steering committee consisting of three (3)
members shall be established for direction and management of the Program. Each
of QUEST, HDC and SPM shall have the right to appoint one (1) member to such
committee. The Steering Committee may meet as frequently as monthly, but shall
meet at least quarterly during the Program Period. The following persons shall
represent the Parties on the Steering Committee and shall serve of the primary
contact for the corresponding Party:
 
For SPM: Richard E. Caruso or his designee
 
For HDC: Stephen D. Barnhill or his designee
 
 
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For QUEST: Nicholas J. Conti or his designee.
 
3.9            Records and Reports.
 
 3.9.1          QUEST shall maintain accurate records of all activities related
to the Project Plan for each Product in accordance with established,
commercially reasonable laboratory practices. SPM and HDC shall have the right,
upon reasonable notice and during reasonable business hours, to inspect and make
copies of such records.
 
 3.9.2          QUEST shall provide SPM and HDC with: (a) quarterly written
reports regarding QUEST’s activities under the Project Plan for each Product,
the results thereof and any Product Inventions arising therefrom; and (b) copies
of all data resulting from activities under the Program. QUEST shall provide
such reports and data within (30) days after the end of each calendar quarter
beginning with the calendar quarter that includes the Effective Date . A final
report shall be provided within thirty (30) days after the expiration or earlier
termination of the Program Period.
 
 3.9.3          In addition to the quarterly reports pursuant to Section 3.9.2
above, QUEST shall provide to SPM and HDC, within ten (10) days of the document
date, copies of all documents filed with any applicable regulatory agency(ies)
having jurisdiction over the Product(s), and any other communications with such
regulatory agency(ies) relating to the Product(s), whether to or from the
agency. QUEST shall also provide copies; of other communications between. QUEST
and any Third Party relating to the Product(s).
 
ARTICLE 4
 
CONFIDENTIALITY
 
4.1            Confidential Information. Except as otherwise provided in Section
4.3 below, during the term of this Agreement, and for a period of ten (10) years
following the expiration or earlier termination hereof, each Party shall
maintain in confidence all information of the other Parties (including without
limitation samples, testing data and feedback regarding test performance, the
Database and all information included in the Database) disclosed after the
Effective Date by another Party and identified as, or acknowledged to be,
confidential (the “Confidential Information”), and shall not use, disclose or
grant the use of the Confidential Information to any Third Party (including
without limitation to MD Anderson except as specifically permitted hereby)
except on a need-to-know basis to those of its own, and its Affiliates’,
sublicensees’ and assignees’, directors, officers, affiliates, employees,
agents, consultants, clinical investigators and contractors, to the extent such
disclosure is reasonably necessary in connection with such Party’s activities as
expressly authorized by this Agreement. To the extent that disclosure is
authorized by this Agreement, prior to disclosure, each Party hereto shall
obtain written agreement of any such Person to hold in confidence and not make
use of the Confidential Information for any purpose other than those permitted
by this Agreement. Each Party shall notify the other Parties promptly upon
discovery of any unauthorized use or disclosure of another Party’s Confidential
Information.
 
 
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4.2            Terms of this Agreement. Except as otherwise provided in Section
4.3 below, no Party shall disclose any terms or conditions of this Agreement to
any Third Party without the prior consent of the other Parties. Notwithstanding
the foregoing, prior to execution of this Agreement, the Parties shall agree
upon the substance of information that can be used to describe the terms of this
transaction, and any Party may disclose such information, as modified by mutual
agreement from time to time, without the other Parties’ consent.
 
4.3            Permitted Disclosures. The confidentiality obligations contained
in Sections 4.1 and 4.2 above shall not apply to the extent that (a) any
receiving Party (the “Recipient”) is required (i) to disclose information by
law, order or regulation of a governmental agency or a court of competent
jurisdiction, or (ii) to disclose information to any governmental agency for
purposes of obtaining approval to test or market a Product, provided in either
case: that the Recipient shall provide written notice thereof to the other
Parties and sufficient opportunity to object to any such disclosure or to
request confidential treatment thereof; or (b) the Recipient can demonstrate
that (i) the disclosed information was public knowledge at the time of such
disclosure to the Recipient, or thereafter became public knowledge, other than
as a result of actions of the Recipient in violation hereof; (ii) the disclosed
information was rightfully known by the Recipient (as shown by its written
records) prior to the date of disclosure to the Recipient by the other Parties
hereunder; (iii) the disclosed information was disclosed to the Recipient on an
unrestricted basis from a source unrelated to any Party to this Agreement and
not under a duty of confidentiality to any other Party; or (iv) the disclosed
information was independently developed by the Recipient without access to or
use of the Confidential Information disclosed by any other Party.
 
 4.3.1          The Parties acknowledge that HDC has certain time-critical
reporting obligations by virtue of its status as a public corporation and agree
to cooperate with HDC in preparation of a press release regarding the execution
and general terms of this Development Agreement and the Quest License Agreement
to be issued concurrently with the Form 8-K report that must be filed by HDC
within four (4) business days of the Effective Date. The Parties agree that no
press release shall mention MD Anderson without the prior written approval of MD
Anderson or otherwise in contravention of the provisions of Section 9.1 of the
Sponsored Research Agreement attached hereto as Exhibit C.
 
4.4            Publication. Subject to the provisions of Sections 4.1 and 4.2
above, QUEST shall have the right to publish the results of its work under the
Project, so long as such publication does not include the Database or any of the
data or information included therein; provided, however, that if the proposed
publication contains proprietary information owned by SPM or HDC, QUEST shall
provide SPM or HDC, as applicable, the opportunity to review any proposed
manuscripts or any other proposed disclosure describing said work thirty (30)
days prior to their submission for publication or other proposed disclosure and
provided further that prior to such publication, SPM will submit such results to
MD Anderson for its approval. If SPM or HDC believes that patentable subject
matter is disclosed in the manuscript or other disclosure and so notifies QUEST,
or if such submission for publication or other disclosure would cause the loss
of significant foreign patent rights, QUEST shall withhold such publication for
a reasonable period of time, not to exceed sixty (60) days, until all applicable
patent filings are completed.
 
 
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4.5            Equitable Relief. Each Party hereby acknowledges that, in the
event of any breach or threatened breach of this Article 9 by the Recipient, the
disclosing Party may suffer irreparable injury for which damages at law may not
be an adequate remedy. Accordingly, without prejudice to any other rights and
remedies otherwise available to the disclosing Party, the disclosing Party shall
be entitled to seek equitable relief, including injunctive relief and specific
performance, for any breach or threatened breach of this Article 4 by the
Recipient, its Affiliates, or any of its or their employees, directors,
officers, members, agents, or representatives.
 
4.6            Non-Use of Names: Confidentiality of Agreement. No Party hereto
shall make any public announcement, issue any press release or publish any study
(collectively, all such communications, “Publication”) concerning the
transactions contemplated herein, or make any Publication which includes the
name of any other Party or any of its Affiliates, or otherwise use the name or
names of any other Party or any of their employees or any adaptation,
abbreviation or derivative of any of them, whether oral or written, related to
the terms, conditions or subject matter of this Agreement, without the prior
written permission of such other Party, except as may be required by (i) law or
(ii) judicial order (and then only following consultation with the other
Parties).
 
4.7            Compliance with Laws: Reporting Obligation with Respect to
Protected Health Information. Each Party shall comply with all Applicable Laws.
“Applicable Laws” are the international, federal, state, and local laws, rules
and regulations that relate to the conduct of the Parties’ business and the
performance by the Parties of their respective obligations under this Agreement.
If a Party or its permitted representatives gain access to protected health
information (“PHI”), as that term is defined under The Health Insurance
Portability and Accountability Act of 1996, that is not required for performance
of this Agreement, each Party shall immediately report to the other Parties any
incidents of access to PHI or any incidents of use, reproduction or disclosure
of PHI of which it or its Permitted Representatives become(s) aware.
 
ARTICLE 5
 
RIGHTS OF FIRST REFUSAL REGARDING
COMMERCIALIZATION OF THE PRODUCT(S) AND OTHER DEVELOPMENT
 
5.1            Commercialization. All Product(s) and Product Inventions
developed under this Agreement are owned by SPM. SPM shall not, nor shall it
attempt to, transfer, assign, sell have sold, lease, offer to sell or lease,
distribute, license, sublicense or otherwise transfer title to or an interest
in, or clinically develop, commercialize or exploit the Product(s) unless it
shall have first complied with the provisions set forth in this Article 5. All
QUEST Inventions are owned by QUEST.
 
5.2            QUEST Rights to Commercialize. The Steering Committee shall
determine if a particular Project has been completed and if the related Product
has been developed and is ready for Validation Work under this Agreement. Upon
such determination, the Steering Committee shall notify SPM, HDC and QUEST of
such determination. Following such notice, QUEST shall have ninety (90) days
(the “Evaluation Period”) to determine if it wishes td i perform Validation Work
and obtain exclusive rights to perform, sell and market such Product
(collectively, “Commercialize”).
 
 
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5.3            Election by QUEST to Commercialize. Should QUEST elect to
Commercialize a particular Product, prior to the end of the Evaluation Period,
QUEST shall submit to SPM and HDC a written notice of its election to
Commercialize the Product (a “Commercialization Notice”). Upon receipt of the
Commercialization Notice, SPM and HDC shall grant to QUEST a Product License for
Commercialization according to the terms of Section 5.2 of the Quest License
Agreement, under which QUEST will have the right to perform all required work,
including the Validation Work, relating to the specified Product, subject to all
relevant provisions of the Quest License Agreement. QUEST shall be responsible
for payment of all costs and expenses relating to such work to Commercialize
such Product (the “Product Costs”). For purposes of clarification, such costs do
not include use of the Database Samples in connection with Validation Work,
which use is covered by the one-time upfront fee for use of the Database Samples
hereunder.
 
5.3.1            Each Commercialization Notice submitted by QUEST will be
associated with a separate Product License
 
5.3.2   Upon grant of the Product License for a specified Product, QUEST will
continue to work with HDC, and will continue to have access to the Database, to
perform the Validation Work.
 
5.4            Failure to Commercialize. If QUEST elects not to Commercialize a
developed Product, it shall notify SPM and HDC in writing (a “Refusal Notice”).
In the event that QUEST issues a Refusal Notice, or fails to issue a
Commercialization Notice or a Refusal Notice for a Product prior to the
expiration of the Evaluation Period, SPM shall have the right but not the
obligation to Commercialize such Product, subject to the terms and conditions of
this Agreement, the Quest License Agreement and the HDC License Agreement.
Should SPM elect not to Commercialize the Product, HDC shall have the right to
Commercialize such Product, subject to the terms and conditions of this
Agreement, the Quest License Agreement and the HDC License Agreement.
 
5.4.1   QUEST and HDC agree to cooperate with any Third Party that may have
entered into a license agreement with SPM to Commercialize such Product.
 
5.4.2   QUEST and SPM agree to cooperate with any Third Party that may have
entered into a license agreement with HDC to Commercialize such Product.
 
5.5            Right of First Refusal on Other SPM Projects. QUEST shall have a
right of first refusal to perform similar services, and obtain similar rights,
for any other project with other academic or research institutions that SPM
pursues to develop applications in the Field (“New SPM Projects”). SPM shall
provide written notice to QUEST of any New SPM Project it is contemplating.
QUEST shall have ninety (90) days to provide written notice to SPM that it
wishes to participate in the New SPM Project (“New Project Negotiation Notice”).
The parties shall have ninety (90) days following the New Project Negotiation
Notice to negotiate in good faith regarding the terms and conditions of QUEST’s
participation in such New SPM Project. If the parties are unable to agree within
this timeframe, or any mutually agreeable extension thereof, SPM shall have the
right to offer the New SPM Project to a Third Party laboratory or other partner;
provided however that prior to execution of any agreement with a Third Party,
SPM permits QUEST to review the terms and conditions of such agreement and to
step into the shoes of such Third Party on the same terms and conditions
negotiated with such Third Party.
 
 
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5.6            Right of First Refusal on Future Project Plans. QUEST shall have
a right of first refusal on all future Project Plans, on the terms set forth in
Section 5.5 above. QUEST has the right to have access through SPM to additional
tissue biopsies and to invest in additional; research over the course of the
Sponsored Research Agreement. In the event that QUEST materially changes the
scope of the Projects beyond the intended breast cancer
recurrence/chemoprediction focus of the Projects as initially attached hereto
and it requires additional samples not included in the Sponsored Research
Agreement, then the parties will negotiate in good faith to secure additional
samples from MD Anderson or another Third Party. SPM , HDC and QUEST shall each
have the right to propose additional markers, platforms, or other work for
inclusion in a Project or as an additional Project, subject to a Development
Fee, as appropriate, to be negotiated in good faith for services to be performed
or costs to be expended in conjunction with such modification or new Project
Plan.
 
5.7            Right of First Refusal on Other MD Anderson-developed Tests. To
the extent permitted under the Sponsored Research Agreement, SPM hereby grants
QUEST a right of first refusal on any applications in the Field using the
Database developed by MD Anderson (ND Anderson-Developed Test”), subject to
Section 6.4 of the Quest License Agreement.
 
ARTICLE 6
 
TERMINATION
 
6.1            Expiration. Subject to the provisions of Sections 6.2 and 6.3
below, this Agreement shall expire on the expiration of the Project Period for
all Projects hereunder, or any New SPM Projects (as defined in the License
Agreement).
 
6.2            Termination by QUEST. After QUEST has performed its obligations
pursuant to Section 3.2, QUEST may terminate this Agreement, in its sole
discretion, upon ninety (90) days prior written notice to SPM.
 
6.3            Termination for Cause. Any Party may terminate this Agreement
upon or after the breach of any material provision of this Agreement by any
other Party if the alleged breaching Party has not cured such breach within
sixty (60) days after notice thereof by the non-breaching Party. For purposes of
clarification, in the event of termination for cause by QUEST before all
installments of the Development Fee shall have been paid, no further
installments shall be due following the date of notice of such termination.
 
 
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6.4            Effect of Expiration or Termination. Upon the expiration or
termination of this Agreement (for any reason), (i) QUEST shall immediately
transfer and deliver to SPM and, as appropriate, HDC, all documents, whether in
paper or electronic form, data, Database Samples and other tissue biopsies, and
all information and data for each Project, regarding work performed hereunder
including, without limitation, all information relating to the Database Samples
and other tissue biopsies, development of the Database and the Product(s), (ii)
QUEST shall have no further rights to Commercialize a Product, and (iii) the
Quest License Agreement shall terminate. Expiration or termination of this
Agreement shall not relieve any of the Parties of any obligation accruing prior
to such expiration or termination, and the provisions of Articles 4, 7 and 9,
and Sections 3.5 and 3.10.2 and this Section 6.5 shall survive the expiration or
termination of this Agreement.
 
ARTICLE 7
 
INDEMNIFICATION
 
7.1            Indemnification. Each Party (an “Indemnifying Party”) shall
defend, indemnify and hold each other Party (an “Indemnified Party”) harmless
from all losses, liabilities, damages and expenses (including reasonable
attorneys’ fees and costs) incurred as a result of any claim, demand, action or
proceeding by any Third Party to the extent resulting from (a) the performance
of (or failure to perform) by the Indemnifying Party of its obligations under
this Agreement or the representations and warranties contained herein; or (b)
the use by the Indemnifying Party of the Background IP or Confidential
Information provided by the Indemnified Party, or the Program Inventions; except
in each case to the extent resulting from the gross negligence or willful
misconduct of the Indemnified Party.
 
7.2            Procedure. If Indemnified Parties seeks indemnification under
this Article 7, the Indemnified Parties promptly shall notify the Indemnifying
Parties of any claim, demand, action or other proceeding for which the
Indemnified Parties intends to claim such indemnification. The Indemnifying
Parties shall have the right to participate in, and, to the extent the
Indemnifying Parties so desires, jointly with any other Indemnifying Party
similarly noticed, to assume the defense thereof with counsel selected by the
Indemnifying Parties; provided, however, that the Indemnified Parties shall have
the right to retain their own counsel; at their sole expense, if representation
of the Indemnified Parties by the counsel retained by the Indemnifying Parties
would be inappropriate due to actual or potential differing interests between
the Indemnified Parties and any other Person represented by such counsel in such
proceedings. The indemnity agreement in this Article 7 shall not apply to
amounts paid in settlement of any loss, liability, damage or expense if such
settlement is effected without the consent of the Indemnifying Parties, which
consent shall not be unreasonably withheld or delayed. The failure to deliver
notice to the Indemnifying Parties within a reasonable time after the notice of
any such claim or demand or commencement of any such action or other proceeding,
if prejudicial to its ability to defend, shall relieve the Indemnifying Parties
of any liability to the Indemnified Parties under this Article 7 with respect
thereto, but the omission so to deliver notice to the Indemnifying Parties will
not relieve it of any liability that it may have to the Indemnified Parties
otherwise than under this Article 7. The Indemnified Parties, its employees and
agents, shall reasonably cooperate with the Indemnifying Parties and their legal
representatives in the investigation and defense of any claim, demand, action or
other proceeding covered by this Article 7.
 
7.3            Insurance. Each Party shall maintain insurance or the
self-insured equivalent with respect to its activities under the Project in such
amount as such Party customarily maintains with respect to its similar research
and development activities. Each Party shall maintain such insurance or
self-insured equivalent for so long as it continues to conduct activities under
the Project, and thereafter for so long as such Party customarily maintains
insurance or self-insured equivalent covering its similar research and
development activities.
 
 
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ARTICLE 8
 
FORCE MAJEURE
 
No Party shall be held liable or responsible to the other Parties nor be deemed
to have defaulted under or breached this Agreement for failure or delay in
fulfilling or performing any term of this Agreement to the extent, and for so
long as, such failure or delay is caused by or results from causes beyond the
reasonable control of the affected Party including but not limited to fire,
floods, embargoes, war, acts of terror, acts of war (whether war be declared or
not), insurrections, riots, civil commotions, strikes, lockouts or other labor
disturbances, acts of God or acts, omissions or delays in acting by any
governmental authority or any other Party.
 
ARTICLE 9
 
MISCELLANEOUS
 
9.1            Notices. Any consent, notice or report required or permitted to
be given or made under this Agreement by one of the Parties hereto to the other
Parties shall be in writing, delivered by any lawful means to such other Parties
at its address indicated below, or to such other address as the addressee shall
have last furnished in writing to the addressor and (except as otherwise
provided in this Agreement) shall be effective upon receipt by the addressee.
 
 
If to SPM:
203 NE Front Street

 
Suite 201

 
Milford, Kent County, DE 1996

 
 
With a copy to:
Richard Caruso

 
795 East Lancaster Ave.

 
Suite 200

 
Villanova, PA 19085

 
Attention: Richard Caruso

 
 
If to HDC:
Health Discovery Corporation

 
2 East Bryan Street, Suite 601

 
Savannah, GA 31401

 
Attn: R. Scott Tobin, President and General Counsel

 
 
With a copy to:
Procopio, Cory, Hargreaves & Savitch LLP

 
530 B Street, Suite 2100

 
San Diego, CA 92101

 
Attn: Eleanor M. Musick, Esq.

 
 
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If to QUEST:
Quest Diagnostics Incorporated

 
1290 Wall Street West

 
Lyndhurst, NJ 07071

 
Attn: General Counsel

 
 
With a copy to:
Quest Diagnostics Incorporated

 
33608 Ortega Highway

 
San Juan Capistrano, CA 92675

 
Attn: Chief Intellectual Property Counsel

 
9.2            Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, without regard to the
conflicts of law principles thereof. The patent laws of the United States shall
be applied to any issue arising under this Agreement concerning the status,
validity, construction, interpretation, or inventorship of any intellectual
property.
 
9.3            Assignment. No Party may assign or otherwise transfer (whether
voluntarily, by operation of law or otherwise) its rights or obligations under
this Agreement without the prior written consent of the other Parties; provided,
however, that each Party may, without such consent, assign this Agreement and
its rights and obligations hereunder in connection with the transfer or sale of
all or substantially all of its business, or in the event of its merger,
consolidation, change in control or similar transaction. Any permitted assignee
shall assume all obligations of its assignor under this Agreement. Any purported
assignment in violation of this Section 9.3 shall be void.
 
9.4            Waivers and Amendments. No change, modification, extension,
termination or waiver of this Agreement, or any of the provisions herein
contained, shall be valid unless made in writing and signed by duly authorized
representatives of the Parties hereto.
 
9.5           Entire Agreement. This Agreement, together with its exhibits
embody the entire agreement between the Parties and supersede any prior
representations, understandings and regarding the subject matter hereof that are
not fully expressed herein.
 
9.6            Severability. Any of the provisions of this Agreement which are
determined to be invalid or unenforceable in any jurisdiction shall be
ineffective to the extent of such invalidity or unenforceability in such
jurisdiction, without rendering invalid or unenforceable the remaining
provisions hereof and without affecting the validity or enforceability of any of
the terms of this Agreement in any other jurisdiction.
 
9.7            Waiver. The waiver by either Party hereto of any right hereunder
or the failure to perform or of a breach by the other Party shall not be deemed
a waiver of any oilier right hereunder or of any other breach or failure by said
other Party whether of a similar nature or otherwise.
 
9.8            Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
 
 
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9.9            Mediation. In the event that a dispute arises between any of the
Parties hereto, the affected Parties shall first discuss and negotiate any
dispute that arises under this Agreement with a view toward settlement and
disposition thereof. Contractual disputes that cannot be resolved by the Parties
shall be submitted to mediation in Wilmington, Delaware. In the event that the
Parties to the dispute are not able to resolve their dispute within ninety (90)
days after the submission of such dispute to mediation, such Parties hereby
consent to the exclusive jurisdiction of the courts of the State of Delaware for
the enforcement of these provisions and the entry of judgment on any award
rendered hereunder. Should the chosen court of the State of Delaware for any
reason lack jurisdiction, any court with jurisdiction shall enforce this
provision and enter judgment on any award. The mediation proceedings, together
with all discoveries made pursuant thereto and statements or documents exchanged
by the Parties to the dispute in connection therewith, shall be kept
confidential and shall only be used by such Parties in connection with the
mediation proceedings. All costs of mediation shall be evenly divided between
the Parties to the mediation, exclusive of each Party’s legal fees, each of
which shall be borne by the party that incurs them.
 
9.10          No Third Party Beneficiaries. No provisions of the Agreement,
express or implied, create, and shall not be construed as creating, any rights
enforceable by any person or entity not a party to the Agreement.
 
[Remainder of page intentionally left blank.]
 
 
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IN WITNESS WHEREOF, the Parties have executed this Agreement effective as of the
Effective Date.
 

 
SMART PERSONALIZED MEDICINE, LLC
         
By:
/s/ Richard E. Caruso Ph.D.
   
Name:
Richard E. Caruso Ph.D.
   
Title:
Chief Executive Officer
         
QUEST DIAGNOSTICS INCORPORATED
         
By:
/s/ Nick Conti
   
Name:
Nick Conti
   
Title:
Vice President
     
Licensing & Strategic Alliances Quest Diagnostics Incorporated
     
 
         
HEALTH DISCOVERY CORPORATION
         
By:
/s/ Stephen D. Barnhill, M.D.
   
Name:
Stephen D. Barnhill, MD
   
Title:
Chief Executive Officer

 
 
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