EXHIBIT 10.12
COLLABORATIVE PRODUCT DEVELOPMENT AGREEMENT
(Instrument)
TABLE OF CONTENTS
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Page
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1. Responsibilities of Aastrom.............................................. 2
1.1 Project Management................................................. 2
1.2 Specifications..................................................... 2
2. Responsibilities of SeaMED............................................... 2
2.1 Design Collaboration............................................... 2
2.2 Delivery of Preproduction Units.................................... 3
2.3 Maintenance of Adequate Facilities and Manufacturing Practices..... 4
2.4 No Subcontracting.................................................. 5
2.5 Inventory and Insurance............................................ 5
2.6 Transit............................................................ 5
2.7 Financial Condition................................................ 5
3. Acceptance Procedures.................................................... 5
4. Compensation............................................................. 6
5. Warranties............................................................... 6
5.1 SeaMED's Warranty.................................................. 6
5.2 Limitation on Liability............................................ 6
5.3 Disclaimer of Warranties........................................... 7
5.4 Aastrom's Warranty................................................. 7
6. Phase II Manufacture..................................................... 7
6.1 Manufacturing Agreement............................................ 7
6.2 Phase II Manufacturing Drawings and Process........................ 9
6.3 Transition Cooperation............................................. 9
6.4 Compensation....................................................... 9
7. Records; Inspection...................................................... 9
8. Indemnification.......................................................... 9
8.1 By SeaMED.......................................................... 9
8.2 By Aastrom......................................................... 10
8.3 Patent Infringement................................................ 10
8.4 Control of Action.................................................. 10
8.5 Insurance.......................................................... 10
9. Exclusivity.............................................................. 11
9.1 Continuing Prohibition............................................. 11
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9.2 No Similar Product................................................ 11
9.3 No Use of Aastrom's Proprietary Information....................... 11
10. Proprietary Information.................................................. 12
10.1 Aastrom's Property; Use of Property by SeaMED..................... 12
10.2 Inventions........................................................ 12
10.3 Nondisclosure..................................................... 12
10.4 Confidentiality................................................... 12
11. Term..................................................................... 13
12. Default and Termination.................................................. 13
12.1 Breach............................................................ 13
12.2 Remedy............................................................ 14
13. Miscellaneous............................................................ 14
13.1 Independent Contractors........................................... 14
13.2 Causes Beyond Control............................................. 14
13.3 Successors and Assigns............................................ 14
13.4 Applicable Law.................................................... 15
13.5 Severability...................................................... 15
13.6 Entire Agreement; Modification and Waiver......................... 15
13.7 Counterparts...................................................... 15
13.8 Dispute Resolution................................................ 15
13.9 Notices........................................................... 15
EXHIBITS
A General Description of the System and the Instrument
B Specifications and Functional Requirements for the Instrument
C Time and Quantity Schedule - Preproduction Units
C1 Pricing for Precommercial Units
D Manufacturing Drawings for the Instrument
E Compensation Schedule for Design Work and Manufacturing
Preproduction Units
F Summary of Manufacturing Agreement for Phase II
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COLLABORATIVE PRODUCT DEVELOPMENT AGREEMENT
(Instrument)
This Collaborative Product Development Agreement (the "Agreement") is
entered into as of May 10, 1994, by and between Aastrom Biosciences, Inc., a
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Michigan corporation ("Aastrom"), and SeaMED Corporation, a Delaware corporation
("SeaMED").
▇. ▇▇▇▇▇▇▇ is in the final stages of research and development for a
proprietary Cell Expansion System which is used for stem cell growth (the
"System"). The System includes an instrument or instruments (the "Instrument")
and a disposable biochamber cartridge. Aastrom has completed a working
prototype model of the System; and Aastrom now needs to complete the design of
the Instrument and to obtain (i) pre-production models defined as pre-revision
Rev. A specification units (hereinafter called "preproduction units") of the
Instrument for laboratory and clinical evaluation, and (ii) pre-commercial
models, defined as units made once the release occurs for Rev. A specification
units (hereinafter called "precommercial units") of the Instrument for
laboratory and clinical evaluation. Attached hereto as Exhibit A is a general
description of the System, including the Instrument.
B. SeaMED has expertise and experience in the development and manufacture
of medical instruments which are somewhat similar to the Instrument, and SeaMED
is prepared to collaborate with Aastrom for completing the necessary design work
on the Instrument to enable SeaMED to produce preproduction units and
precommercial units of the Instrument for laboratory and clinical evaluation as
outlined in the SeaMED Project Plan, Drawing Number 908180, draft dated 2-2-94.
C. As further described in this Agreement, (i) the design and manufacture
of preproduction units and precommercial units of the Instrument shall be
referred to as Phase I, and (ii) the subsequent manufacture of commercial units
(defined as any unit that is sold) of the Instrument shall be referred to as
Phase II.
D. Pursuant to the terms of this Agreement, during Phase I SeaMED shall
(i) collaborate with and assist Aastrom to design the preproduction units and
precommercial units of the Instrument, and (ii) manufacture the preproduction
units and precommercial units of the Instrument. At least six months prior to
the expected commencement of Phase II, Aastrom and SeaMED shall pursue good
faith negotiations for entering into a Manufacturing Agreement for SeaMED to
manufacture the commercial units of the Instrument, as further described in
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Section 6 of this Agreement. Because of foreign governmental approval
requirements, it is possible that there still will be some preproduction units
and precommercial units being made during Phase I, while at the same time there
will be some commercial units being made during Phase II.
▇. ▇▇▇▇▇▇▇ has contracted with ▇▇▇▇▇▇▇ Design Group, and Aastrom may also
contract with other design specialists for assistance with specified aspects of
the System and/or Instrument (collectively called the "Other Design
Contractors").
AGREEMENT
NOW, THEREFORE, the parties hereby agree as follows:
1. Responsibilities of Aastrom.
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1.1 Project Management. Aastrom shall be responsible for overall
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project management relating to the development of the Instrument.
1.2 Specifications. Aastrom shall collaborate with SeaMED and the
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Other Design Contractors on completing the design work for the Instrument. With
assistance from SeaMED as more fully described in Section 2 below, Aastrom shall
develop the final specifications and functional requirements for the
preproduction units and precommercial units (including applicable test criteria)
(the "Specifications"). Upon completion of the Specifications, Aastrom shall
promptly provide SeaMED with a copy of the Specifications, and the
Specifications shall be incorporated herein as Exhibit B hereto.
2. Responsibilities of SeaMED.
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2.1 Design Collaboration. SeaMED shall collaborate with Aastrom
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and the Other Design Contractors on completing the design work for the
Instrument. The time schedule for completing such design work shall be as set
forth in Exhibit C. Without limiting the foregoing, SeaMED shall:
(a) Assist Aastrom with respect to planning for all
manufacturing issues that are likely to arise in connection with the design work
and development of the Instrument, including issues relating to the Phase I and
Phase II manufacturing process development and validation, component sourcing,
and the creation of Device Master record documentation requirements;
(b) Review the Instrument software design and documentation,
and provide third party quality assurance, including specification review, code
audits, verification and validation testing, to ensure to the best of
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SeaMED's ability that they are in compliance with all applicable guidelines of
the U.S. Food and Drug Administration;
(c) Assist Aastrom to establish a reliability goal for the Instrument,
calculate the reliability of the preproduction units and precommercial units at
certain established review points during the design and development of the
Instrument, and perform demonstration tests on pilot production units produced
by SeaMED; and
(d) Determine all necessary requirements for certification of the
Instrument by UL, CSA, IEC, TUV and EC, and to review the design of the
Instrument at various key points during the product development stage to
determine compliance with such requirements, and coordinate the testing of the
Instrument for compliance with such requirements and the submission of the
Instrument for certification by each of such entities.
(e) Prepare working drawings for manufacturing and testing the
preproduction units and the precommercial units of the Instrument, including
without limitation, (i) specifications for component parts to be acquired from
specified vendors, (ii) drawings and specifications for component parts, (iii)
test and acceptance procedures and criteria, (iv) subassembly specifications,
drawings and requirements, (v) costed ▇▇▇▇ of materials, and (vi) product
specific manufacturing procedures, device master record, routing and processes
(collectively called the "Manufacturing Drawings"), which Manufacturing Drawings
shall be subject to the prior written approval of Aastrom, shall be owned by
Aastrom, and shall ultimately be incorporated herein as Exhibit D. If said
manufacturing drawings reference general policies and procedures of SeaMED, such
as SeaMED's Quality System, then such general policies and procedures shall
remain the property of SeaMED, but Aastrom shall be given a copy of the same.
As modifications are made from time to time to the Manufacturing Drawings by
mutual agreement, SeaMED shall furnish to Aastrom an updated copy thereof.
(f) To the extent required for submittal to the U.S. Food and Drug
Administration ("FDA") (or comparable foreign agencies) for Aastrom's IDE and/or
PMA (or comparable foreign approvals), prepare a detailed description of
SeaMED's manufacturing methods, processes, procedures and facility applicable to
Aastrom's Instrument.
2.2 Delivery of Preproduction Units. Following Aastrom's approval of the
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Manufacturing Drawings prepared by SeaMED, in accordance with the time and
quantity schedule specified in Exhibit C attached hereto, and the pricing
specified in Exhibit E, SeaMED shall manufacture and deliver to Aastrom at its
Ann Arbor, Michigan facility, a number of the preproduction units of the
Instrument, in compliance with the Specifications and the Manufacturing
Drawings,
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for use in clinical tests of the System. The exact number of said preproduction
units, and any variations thereof, shall be as specified by Aastrom in a
purchase order, subject to SeaMED's reasonable approval, which approval will not
be withheld unreasonably. As Aastrom's clinical tests of the System proceed,
and depending on the outcome of those tests, Aastrom may place purchase orders
for additional units of the preproduction unit; and SeaMED shall manufacture and
sell said additional preproduction units on the same terms and conditions as set
forth herein. Provided, however, the maximum number of preproduction units
shall be as specified in Exhibit C.
2.2.1 Delivery of Precommercial Units. Once Aastrom has released
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for manufacture the Rev. A specifications for the precommercial units, SeaMED
shall manufacture and deliver to Aastrom at its Ann Arbor, Michigan facility, a
number of the precommercial units of the Instrument, in compliance with the Rev.
A Specifications and the related manufacturing Drawings, for use in clinical
tests of the System. The exact number of said precommercial units shall be
specified by Aastrom in a purchase order, subject to SeaMED's reasonable
approval, which approval will not be withheld unreasonably. The purchase and
sale of the precommercial units shall be in accordance with the terms specified
on Exhibit C-1 attached hereto. Delivery of precommercial units will be within
twenty (20) weeks after SeaMED receives a firm purchase order for the specified
number of units. A specific schedule will be determined at the time of the
purchase order placement.
2.3 Maintenance of Adequate Facilities and Manufacturing
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Practices. SeaMED shall maintain adequate personnel and facilities to perform
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its obligations under this Agreement. SeaMED shall assemble all of the
preproduction units and precommercial units in an environment where good
manufacturing practices are followed. Inasmuch as SeaMED's FDA facility
registration and inspection record are extremely important to Aastrom's ability
to obtain prompt FDA approval for Aastrom's System, SeaMED hereby agrees to use
its best efforts to maintain in good standing all appropriate FDA facility
registrations and inspection records. SeaMED shall immediately report to
Aastrom in writing any adverse events, circumstances, or potential problems
relating to SeaMED's FDA registrations and inspections that could adversely
effect Aastrom's product or the System approval. SeaMed shall furnish to
Aastrom a copy of the FDA facility registrations and inspection reports
applicable as of the date of this Agreement, plus each subsequent FDA
registration or inspection report during the term of this Agreement. SeaMED
shall allow Aastrom and its agent to review and inspect SeaMED's facilities, and
FDA compliance files, and correspondence to and from the FDA regarding
inspections, registrations, and audits that pertain directly to Aastrom's
product or the System's regulatory submission. SeaMED will inform Aastrom of
any negative findings regarding other products (although the product and company
will remain confidential) or processes that may have an impact on
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Aastrom's product or regulatory submission. To the extent that European
Economic Community standards apply to SeaMED's facility and manufacturing
practices for units to be used in Europe, SeaMED will also comply with said
standards.
2.4 No Subcontracting. No part of SeaMED's obligations under
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this Agreement shall be subcontracted by SeaMED that would impact Aastrom's PMA
approval, without the prior written approval of Aastrom.
2.5 Inventory and Insurance. All inventory of components and
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materials purchased by SeaMED to make the Instrument shall be owned by SeaMED
and shall be insured against risk of loss by SeaMED. Any components and
materials purchased by Aastrom and delivered to SeaMED for SeaMED to use to make
the Products shall be covered by SeaMED's insurance policy for risk of loss
while said items remain in SeaMED's facility, with Aastrom being the loss payee
therefor.
2.6 Transit. SeaMED shall arrange for shipment of the Instrument by
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a common carrier approved by Aastrom, to a destination specified by Aastrom.
Title and risk of loss to the Instrument shall pass from SeaMED to Aastrom when
the Instruments are delivered to a common carrier for shipment to Aastrom's
designation.
2.7 Financial Condition. Each party shall furnish to the other
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party a copy of the party's quarterly financial statements and a copy of the
party's annual financial statements, within forty-five (45) days after each
quarter-end and ninety (90) days after the party's fiscal year-end. Each party
shall give written notification to the other party of any material adverse
financial condition affecting the party, including without limitation: (i) the
filing of a significant lawsuit against the party, (ii) the lack of cash funds
available to pay all obligations of the party as they become due, (iii) the lack
of resources available to enable the party to fully and promptly perform its
obligations under this Agreement on schedule, or (iv) any other condition which
may jeopardize or impair the full and prompt performance by the party of its
obligations under this Agreement. Said notification shall be given within five
(5) days after the occurrence or realization of said adverse condition.
3. Acceptance Procedures. Delivery of each of the preproduction units
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and precommercial units shall be deemed accepted by Aastrom unless SeaMED is
notified in writing of Aastrom's rejection of such delivery within thirty (30)
days after the delivery date due to a failure thereof to comply with the
Specifications and/or the Manufacturing Drawings, including the test criteria.
In the event SeaMED receives such notice, SeaMED shall diligently attempt to
promptly resolve any such failure, and to deliver a unit which conforms to the
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Specifications and the Manufacturing Drawings. In the event SeaMED cannot
resolve any such failure and deliver a unit that conforms to the Specifications
and the Manufacturing Drawings within thirty (30) days of receipt of such
notice, Aastrom may terminate this Agreement pursuant to Section 12 below.
4. Compensation. Aastrom shall compensate SeaMED for SeaMED's
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design work and preproduction unit manufacture on a "time and materials" basis,
as further described on Exhibit ▇. ▇▇▇▇▇▇▇ shall compensate SeaMED for the
precommercial units manufactured pursuant to the maximum pricing formula as
specified in Exhibit C-1 attached hereto, subject to the definitions and pricing
schedule considerations in Section 4.1 of Exhibit F attached hereto. SeaMED
shall submit to Aastrom a monthly invoice for said design work, and SeaMED shall
invoice for units manufactured upon shipment of the units, and each invoice
shall be accompanied by such supporting details as Aastrom may reasonably
request. Aastrom shall pay said invoice within thirty (30) days after the
invoice and supporting details are received by Aastrom.
5. Warranties.
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5.1 SeaMED's Warranty. SeaMED warrants that each of the units
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(i) shall be manufactured in full compliance with the Specifications and the
Manufacturing Drawings, (ii) shall be free from defects in material and
workmanship, and (iii) shall be free from defects in design as to those specific
elements for which SeaMED was primarily responsible for the design. As to
elements of the unit for which SeaMED was not primarily responsible for the
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design, SeaMED is not making any warranty as to design. SeaMED further warrants
that the manufacture, assembly and delivery of the units hereunder shall be (i)
in compliance with all applicable federal, state and local laws, rules,
regulations and executive orders, including without limitation, all of the
employee compensation, health and safety and environmental laws applicable to
SeaMED's facility, and all U.S. customs laws and regulations, and U.S. Food and
Drug Administration ("FDA") regulations, and applicable foreign regulations, and
(ii) performed in a professional, workmanlike manner in accordance with
prevailing industry standards. SeaMED understands that Aastrom may sell the
units to hospital customers or other users. SeaMED agrees that the foregoing
warranties are for the benefit of Aastrom and any ultimate end-user of the
units.
5.2 Limitation on Liability. SeaMED shall either repair or
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replace or provide to Aastrom full credit for the purchase price of any unit
which is defective due to SeaMED's failure to comply with the foregoing
warranty. Any such warranty repairs or replacements shall be completed within
thirty (30) days after the date on which any defective unit is delivered to
SeaMED. All shipping and other costs incurred in connection with the repair or
replacement of any
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defective unit shall be borne by and for the account of SeaMED. Except as
specified in Section 8, SeaMED shall have no liability to Aastrom for any
consequential damages or loss, including but not limited to loss of profits or
goodwill, additional expenses incurred, or other damages.
5.3 Disclaimer of Warranties.
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EXCEPT FOR THE WARRANTIES SET FORTH IN THIS SECTION, SEAMED DISCLAIMS ANY
AND ALL WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY IMPLIED WARRANTY OF
MERCHANTABILITY OR ANY IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR
PURPOSE.
5.4 Aastrom's Warranty. Aastrom warrants that all elements of
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the Instrument units for which SeaMED was not primarily responsible for the
design shall be free from defects in design.
6. Phase II Manufacture.
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6.1 Manufacturing Agreement. Subject to satisfying the
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prerequisites listed below, Aastrom and SeaMED will enter into a Manufacturing
Agreement for Phase II manufacture of commercial units of the Instrument in
accordance with the terms set forth in Exhibit F attached hereto. At the option
and discretion of Aastrom, Aastrom may waive any one or more of said
prerequisites. Said prerequisites are:
(a) SeaMED has performed its obligations during Phase I in a
diligent, prompt and effective manner, to the reasonable satisfaction of
Aastrom, without any defaults by SeaMED.
(b) SeaMED has manufactured the preproduction units and
precommercial units of the Instrument during Phase I in full compliance with the
Manufacturing Drawings and the Specifications, and SeaMED has delivered the
quantities of same on a timely schedule as ordered, and SeaMED has complied
fully with its obligations under this Agreement.
(c) SeaMED has successfully controlled the costs to manufacture
the preproduction units and precommercial units, on a reasonable and cost
effective basis.
(d) SeaMED has adequate facilities, equipment, personnel,
governmental approvals, and manufacturing capacity to manufacture the quantities
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of the commercial units of the Instruments needed by Aastrom during Phase II;
and SeaMED shall furnish to Aastrom reasonable evidence to verify the same.
(e) SeaMED's facility has received all necessary approvals from
the FDA and from the European Community (or other necessary foreign agencies) to
manufacture the commercial units of the Instrument.
(f) SeaMED's financial condition is sound and stable, such that
there are no reasonable doubts as to SeaMED's financial ability to remain in
business and perform its obligations contemplated under the Manufacturing
Agreement, and SeaMED shall furnish to Aastrom reasonable evidence to verify the
same.
(g) SeaMED is able and willing to manufacture the commercial
units of the Instrument on a cost effective and efficient basis, on a timely
production schedule, and on a high quality basis, pursuant to mutually approved
pricing and delivery schedules, all in accordance with the Manufacturing
Agreement, and SeaMED shall furnish to Aastrom reasonable evidence to verify the
same.
(h) SeaMED maintains the insurance coverage as specified in the
Manufacturing Agreement and SeaMED shall furnish to Aastrom reasonable evidence
to verify the same.
(i) Aastrom is satisfied with the results of its clinical trials
and the market potential for the Instrument, such that Aastrom is prepared to
proceed with Phase II and the manufacture and sale of commercial units.
(j) SeaMED approves any modifications to the Phase II
Manufacturing Drawings for the Instrument which Aastrom determines to be needed.
(k) SeaMED approves the quantities and delivery schedule
determined by Aastrom to be needed to meet the market needs for the commercial
units of the Instrument.
If Aastrom concludes that the foregoing prerequisites are satisfied,
then Aastrom and SeaMED will enter into a Manufacturing Agreement in accordance
with the terms set forth in Exhibit F. Provided however, SeaMED may decline to
enter into such a Manufacturing Agreement only if one or more of the following
circumstances occurs:
(l) Aastrom has defaulted on its obligations under this
Agreement.
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6.2 Phase II Manufacturing Drawings and Process. At least six (6)
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months prior to the expected commencement of Phase II, (i) SeaMED shall prepare
and deliver to Aastrom any recommended revisions to the Manufacturing Drawings
for the Instrument that may be needed for efficient and cost-effective
manufacturing and testing of the commercial units of the Instrument, and (ii)
SeaMED shall prepare and deliver to Aastrom a complete and detailed written
package of documents which fully describes the manufacturing process for the
manufacturing and testing of the commercial units of the Instrument, including
without limitation, all items referenced in Sections 2.1(e) as the Manufacturing
Drawings and 2.1(f). The foregoing shall hereinafter collectively be referred
to as the "Phase II Manufacturing Drawings and Process." As modifications are
made from time to time to said Phase II Manufacturing Drawings and Process by
mutual agreement, SeaMED shall furnish to Aastrom an updated copy thereof.
6.3 Transition Cooperation. If this Agreement is terminated,
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SeaMED shall provide to Aastrom, or its designee, all necessary Instrument
information, documentation, equipment lists, material lists, traceable
recordings, tooling, suppliers, Phase II Manufacturing Drawings and Process, and
description of manufacturing methods and processes (including device master
list) required by governmental agencies, to enable the continued manufacture of
the Instrument.
6.4 Compensation. If this Agreement is terminated by SeaMED,
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then the transition services specified in Sections 6.2 and 6.3 shall be provided
by SeaMED, without charge to Aastrom. If Aastrom terminates this Agreement,
then Aastrom shall compensate SeaMED for SeaMED's transition services specified
in Section 6.2 and 6.3 above in accordance with the Compensation Schedule
attached hereto as Exhibit E.
7. Records; Inspection. SeaMED shall keep accurate and complete
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records with respect to its design work and manufacture of the Instrument
preproduction units and precommercial units, including all records of time
worked and other costs. At Aastrom's request, SeaMED shall allow Aastrom or its
designee to inspect and audit such records to verify actual costs and
reasonableness of allocation methodologies. Additionally, at Aastrom's request,
SeaMED shall allow Aastrom to inspect the facility where the Instrument units
are manufactured.
8. Indemnification.
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8.1 By SeaMED. SeaMED shall indemnify, defend and hold harmless
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Aastrom and its officers, directors, employees and agents for any loss, claim,
cost or damage arising out of any claim or action for bodily injury based on the
use of any Instrument preproduction units and precommercial units to the extent
such loss, claim, cost or damage results, directly or indirectly, (i) from a
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breach by SeaMED of its warranties as set forth in this Agreement, or (ii) from
any negligent, willful or intentional acts by SeaMED.
8.2 By Aastrom. Aastrom shall indemnify, defend and hold harmless
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SeaMED and its officers, directors, employees and agents for any loss, claim,
cost or damage arising out of any claim or action for bodily injury based on the
use of any Instrument preproduction units and precommercial units to the extent
such loss, claim, cost or damage does not result from SeaMED's acts described in
Section 8.1 above, but rather results, directly or indirectly, (i) from the
negligent, willful or intentional acts of Aastrom or its agents (other than
SeaMED), (ii) from a breach by Aastrom of its warranties with respect to the
Instrument preproduction unit, or (iii) from any product liability claim related
to or arising out of the Instrument preproduction units and precommercial units,
other than those claims described in Section 8.1 above.
8.3 Patent Infringement. Aastrom shall indemnify and hold SeaMED
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harmless from any loss, damage, or cost (including reasonable attorneys' fees
and expenses) arising from any claim that the Instrument or its operation
infringes a United States patent, trademark, copyright, or other proprietary
right, including trade secrets. SeaMED shall indemnify and hold Aastrom harmless
from any loss, damage, or cost (including reasonable attorneys' fees and
expenses) arising from any claim that SeaMED's manufacturing processes or
methods infringes a United States patent or other proprietary right, including
trade secrets.
8.4 Control of Action. In the event any lawsuit for which indemnity
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is applicable, Aastrom will control the defense and selection of defense
counsel, and SeaMED will be entitled to participate therein by selecting co-
counsel reasonably satisfactory to Aastrom. Aastrom shall have the right to
direct and control such defense, to settle any dispute, and SeaMED shall be
responsible for payment of any settlement to which SeaMED has consented, such
consent not to be unreasonably withheld. In conducting the defense and
negotiating any settlement, Aastrom's counsel shall give due consideration to
suggestions of SeaMED's co-counsel.
8.5 Insurance. SeaMED agrees to provide and maintain at its sole
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expense comprehensive general liability insurance, including product liability
insurance, covering worldwide sales, covering bodily injury and property damage
to third parties for accidents or injuries arising out of the use of the
Instrument preproduction units and precommercial units manufactured by SeaMED.
Said insurance shall have a combined single limit of $2 million per occurrence,
as a total limit of liability for any one occurrence with respect to bodily
injury and property damage, with a deductible of no higher than $25,000, and
with no aggregate annual limit. SeaMED will furnish to Aastrom certificates of
insurance evidencing that such insurance is in effect, and that Aastrom is named
as an additional insured
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party thereunder. Such certificates shall provide that in the event such
insurance should be materially adversely changed or terminated for any reason,
the insurance company will give Aastrom thirty (30) days' prior written notice
of such change or termination.
9. Exclusivity.
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9.1 Continuing Prohibition. At all times both during and after
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the term of this Agreement, SeaMED shall not make or sell, or enable others to
make or sell, the Instrument, excepting only for making and selling the
Instrument for Aastrom. Similarly, at all times SeaMED shall not use, or enable
others to use, any of Aastrom's proprietary information as further described in
Section 10 below.
9.2 No Similar Product. (a) During the term of this Agreement,
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and during the term of any similar manufacturing agreement between SeaMED and
Aastrom, and for a period of three (3) years thereafter, SeaMED shall not
participate in the design or development by any party other than Aastrom of any
cell expansion system which uses any technologies which are similar to one or
more of the significant proprietary technologies utilized by the Instrument;
provided, however, SeaMED may continue to perform its existing customer
agreements which are in place as of the date hereof, and SeaMED may manufacture
products that have cell culture applications so long as said products are not
competitive with Aastrom's Instrument and so long as said products do not use
substantially identical subassemblies; (b) During the term of this Agreement,
and during the term of any manufacturing agreement between SeaMED and Aastrom,
SeaMED shall not manufacture, assemble, produce, ship or in any other way make
available for use or distribution, by any party other than Aastrom, any cell
expansion system which uses any technologies which are similar to one or more of
the significant proprietary technologies utilized by the Instrument.
9.3 No Use of Aastrom's Proprietary Information. Even after the
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three (3) years specified in Section 9.2(a) above, SeaMED shall not thereafter
render any services or make or sell any product for any other party which
services or products use or arise out of technology developed or owned by
Aastrom or developed by SeaMED on behalf of Aastrom. Such methods or systems
shall include, without limitation, those presently in the course of development
by Aastrom and those which shall be developed by SeaMED and/or Aastrom and/or
the Other Design Contractors in furtherance of this Agreement. SeaMED
acknowledges and agrees that Aastrom has a legitimate business purpose in
precluding SeaMED from divulging or otherwise using any and all information
derived by SeaMED in the course of performing this Agreement, and that Aastrom
intends to use the Instrument and related methods and systems for its own
business purpose and competitive advantage in the marketplace.
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10. Proprietary Information.
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10.1 Aastrom's Property; Use of Property by SeaMED. SeaMED
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recognizes the proprietary interest of Aastrom in the techniques, designs,
specifications, drawings and other technical data now existing or developed
during the term of this Agreement relating to the System. SeaMED acknowledges
and agrees that such techniques, designs, specifications, drawings and technical
data relating to the System, whether developed by SeaMED alone, in conjunction
with others, or otherwise, shall be and is the property of Aastrom. SeaMED
shall cooperate fully in communicating to Aastrom or its agents the property
described above. SeaMED hereby waives any and all right, title and interest in
and to such proprietary information. SeaMED shall have the right to use any
technology, information, samples, documents and other proprietary information of
Aastrom provided in connection with the collaboration described herein solely
and exclusively for the purpose of conducting such development and design
efforts related to the Instrument and manufacturing the System for Aastrom and
for no other purpose.
10.2 Inventions. As to any improvement to the Instrument, any
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component thereof or any disposable used in connection therewith, which is made
by SeaMED's employees or agents in the course of SeaMED's work for Aastrom, or
as a result thereof, which improvement constitutes a patentable invention,
SeaMED hereby agrees to promptly disclose the same to Aastrom, and SeaMED hereby
agrees to assign to Aastrom, and SeaMED hereby agrees to cause the
inventor/employee to assign to Aastrom, all ownership rights in the invention;
and SeaMED shall cause said inventor/employee to sign appropriate patent
applications prepared at the expense of Aastrom.
10.3 Nondisclosure. SeaMED acknowledges and agrees that Aastrom
-------------
is entitled to prevent Aastrom's competitors from obtaining and utilizing
Aastrom's trade secrets. SeaMED agrees during the term hereof and thereafter to
hold Aastrom's trade secrets and other confidential or proprietary information
in strictest confidence and not to use them for purposes other than performance
hereunder, and not to disclose them or allow them to be disclosed, directly or
indirectly, to any other person or entity, other than to persons engaged by
SeaMED for the purpose of performance hereunder, without Aastrom's prior written
consent. SeaMED acknowledges the confidential nature of its relationship with
Aastrom and of any information relating to the Instrument, Aastrom, or its
distributors, agents, clients or customers which SeaMED may obtain during the
term hereof. SeaMED also agrees to place any persons to whom said information is
disclosed for purposes of performance hereunder under a legal obligation to
treat such information as strictly confidential.
10.4 Confidentiality. The provisions and arrangements made
---------------
under this Agreement are confidential between parties. Each party shall protect
12
confidential information in the same manner it protects its own confidential
materials. Neither party shall make any reference to this Agreement or any
provision hereof in any publicly disseminated literature, printed matter, or
other publicity issued by or for it, except (i) as required by law, (ii) in
connection with a public or private offer or sale of securities, a business
collaboration or transaction, or a governmental or industry regulatory
communication, or (iii) in a fashion and at a time mutually agreed upon by both
parties after the execution of this Agreement. After Aastrom has sold an
Instrument in the ordinary course of business, SeaMED may add Aastrom to
SeaMED's list of customers and may show external product photographs for
marketing purposes.
11. Term. The term of this Agreement shall commence on the date
----
first written above and shall continue in full force and effect until terminated
as set forth herein. Either party may terminate this Agreement without cause
upon at least six (6) months' prior written notice. Upon any termination of
this Agreement, (i) both parties shall fully perform all of their obligations
accruing up through the date of termination and (ii) SeaMED will immediately
return to Aastrom all tools and tooling, components, work-in-process,
preproduction units, and any other items which have been or will be paid for by
Aastrom, plus any information, Manufacturing Drawings, description of
manufacturing methods and processes required by governmental agencies, and all
other items related to the Instrument. Additionally, to the extent applicable,
the obligations under Sections 5, 7, 8, 9, 10 and 13 shall survive any
termination of this Agreement for a period of ten (10) years after the
termination of this Agreement.
12. Default and Termination.
-----------------------
12.1 Breach. The occurrence of any one or more of the
------
following events shall constitute an event of default hereunder, and upon the
expiration of any applicable time period for a cure, shall constitute a breach
of this Agreement, giving rise to the rights identified in Section 12.2 hereof:
(a) If Aastrom shall default hereunder in the payment of funds
when due and such default continues for a period of thirty (30) days after
written notice thereof;
(b) Subject to subsections (d) and (e) below, if either party
fails to faithfully perform or observe any agreement or condition to be
performed by such party (including without limitation, the delivery obligations
set forth on Exhibit C), and if such default continues for a period of thirty
(30) days after written notice thereof, specifying the nature of such default;
(c) If any proceeding is commenced by or for either party under
any of the bankruptcy laws, or if either party is adjudged insolvent by any
court,
13
makes an assignment for the benefit of creditors, or enters into a general
extension agreement with creditors;
(d) If SeaMED shall breach its obligation to timely repair any
defective Instrument preproduction unit pursuant to Section 3; or
(e) If SeaMED shall breach its obligations of exclusivity or
confidentiality set forth in Sections 9 or 10 hereof.
12.2 Remedy. In addition to all rights and remedies provided
------
under law, the nondefaulting party shall have the right, in the event of
default, to terminate this Agreement and any obligations imposed on such
nondefaulting party hereunder, provided, however, that, to the extent
applicable, the obligations under Sections 5, 7, 8, 9, 10 and 13 shall survive
any termination of this Agreement.
13. Miscellaneous.
-------------
13.1 Independent Contractors. The relationship between Aastrom
-----------------------
and SeaMED hereunder shall be that of independent contractors, and nothing in
this Agreement shall be deemed to constitute a joint venture, partnership,
agency or employer/employee arrangement between the parties. Neither party
shall have any authority or power to bind the other party or to contract in the
name of, or make any representations or warranties, express or implied, on
behalf of the other party, or otherwise create any liability against the other
party in any way for any purpose.
13.2 Causes Beyond Control. The parties hereto shall not be
---------------------
responsible for any loss or breach due to delay in delivery or performance
hereunder caused by governmental regulations, controls or directions, outbreak
of a state of emergency, hostilities, civil commotion, riots, epidemics, acts of
God, other natural casualties, fires, strikes, walkouts or other similar cause
or causes beyond the control of the parties. In the event that any party shall
be delayed in, or prevented from, performing its obligations under this
Agreement as a result of any of the foregoing, such party shall promptly notify
the other party of such delay or cessation in performance. In the event that
such party is unable to resume performance hereunder within sixty (60) days of
the date on which its performance was suspended, the other party shall have the
right to terminate this Agreement upon ten (10) days prior written notice.
13.3 Successors and Assigns. The rights and remedies of Aastrom
----------------------
under this Agreement shall inure to the benefit of the successors, assigns and
transferees of Aastrom. SeaMED shall have no right to assign, transfer or
otherwise dispose of its rights under this Agreement or to assign the burdens
hereof, without the prior written consent of Aastrom.
14
13.4 Applicable Law. The construction of this Agreement, and the
--------------
rights and liabilities of the parties hereto, shall be governed by the laws of
the State of Michigan.
13.5 Severability. Each term, condition or provision of this
------------
Agreement shall be viewed as separate and distinct, and in the event that any
such term, condition or provision shall be held by a court of competent
jurisdiction to be invalid, the remaining provisions shall continue in full
force and effect.
13.6 Entire Agreement; Modification and Waiver. This Agreement
-----------------------------------------
contains the entire agreement and understanding between the parties and
supersedes all prior agreements and understandings between them relating to the
subject matter hereof. This Agreement may not be amended or modified except by
an instrument in writing, signed by duly authorized representatives of both
parties. The waiver, express or implied, by any party of any right hereunder or
of any failure to perform or breach hereof by any other party shall not be
deemed to constitute a waiver of any other right hereunder or of any claim in
respect of any other failure to perform or breach.
13.7 Counterparts. This Agreement may be executed in
------------
counterparts all of which together shall constitute one and the same instrument.
13.8 Dispute Resolution. Any controversy or claim arising out of
------------------
or relating to this Agreement, or the breach or interpretation hereof, shall be
resolved through good faith negotiation between the principals of the parties
hereto. Any controversy or claim not resolved by mutual agreement shall be
submitted to binding arbitration in Ann Arbor, Michigan, in accordance with the
rules of the American Arbitration Association ("AAA") as then in effect; and
judgment upon the award rendered in such arbitration shall be final and may be
entered in any court having jurisdiction thereof. Notice of the demand for
arbitration shall be filed in writing with the other party to this Agreement and
with the AAA. In no event shall the demand for arbitration be made after the
date when institution of legal or equitable proceedings based on such claim,
dispute or other matter in question would be barred by the applicable statute of
limitations. This agreement to arbitrate shall be specifically enforceable
under the prevailing arbitration law. The party most prevailing in said
arbitration, as determined by the arbitrator based upon the parties' respective
claims and positions, shall be entitled to recover from the non-prevailing party
all attorneys' fees and other costs incurred in connection with the arbitration
proceeding.
13.9 Notices. All notices and other communications permitted or
-------
required under this Agreement shall be in writing and shall be deemed to have
been given when received at the addresses set forth on the signature page
hereof, or at such other address as may be specified by one party in writing to
the other.
15
Said written notice may be given by mail, telecopy, rush delivery service,
personal delivery or any other means.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
AASTROM:
AASTROM BIOSCIENCES, INC.
a Michigan corporation
By:/s/ R. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
--------------------------------
Name: R. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Ph.D.
---------------------------
Title: President and CEO
----------------------------
P. O. ▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: R. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Ph.D.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
SEAMED:
SEAMED CORPORATION,
a Delaware corporation
By: /s/ W. ▇▇▇▇▇▇ ▇▇▇▇
-------------------------------
Name: W. ▇▇▇▇▇▇ ▇▇▇▇
Title: President/CEO
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: W. ▇▇▇▇▇▇ ▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
16
EXHIBITS
A General Description of the System and the Instrument
B Specifications and Functional Requirements for the Instrument
C Time and Quantity Schedule - Preproduction Units
C-1 Pricing for Precommercial Units
D Manufacturing Drawings for the Instrument
E Compensation Schedule for Design Work and Manufacturing
Preproduction Units
F Summary of Manufacturing Agreement for Phase II
17
EXHIBIT A
General Description of the System and the Instrument
1.1 The Aastrom Cell Expansion System represents technology for the ex vivo
growth and expansion of human stem and hematopoietic progenitor cells. The
system is intended to provide cells in sufficient volume and with the
necessary characteristics to complete a bone marrow transplantation or a
nadir prevention/rescue resulting from therapies such as high dose
chemotherapy or radiation. These cells are grown from a small starting
population of cells normally obtained from the bone marrow or peripheral
blood. The use of Cell Expansion System provides for production of cells
that can be infused to augment recovery of a compromised hematopoietic
system.
1.2 The Cell Expansion System consists of (1) a disposable biochamber cartridge
where the growth and expansion of cells takes place, (2) a biochamber
incubation unit and companion monitor module that controls the biological
and physical environment during the expansion process, (3) an
inoculation/harvest unit that facilitates the initial filling and
inoculation of cells as well as the final harvest of cells at the
completion of the expansion process, (4) growth medium as required by the
cell culture (to which specified growth factors and glutamine are added),
(5) harvest reagents which facilitate the removal of the expanded cells
from the biochamber, (6) a system rack will be available to conveniently
integrate multiple biochamber incubation units with the monitor module.
1.2.1. The disposal biochamber cartridge (DBC) contains the medium
contact components for the incubation period and provides a
functionally closed environment in which the cell expansion can
occur. The cartridge is provided fully assembled in a sterile
package.
In addition to a cell growth chamber, the medium contact
components include a reservoir for medium supply, a pump
mechanism for delivery of the medium to the growth chamber,
valves to facilitate filling and harvesting, a reservoir for the
collection of waste medium exiting the growth chamber, and a
reservoir for the collection of harvested cells.
The cartridge also includes a gas chamber which is supplied with
a controlled mixture of gases for pH stability and oxygenation of
the growth chamber through a gas permeable, hydrophobic membrane
that separates the two ▇▇▇▇▇▇▇▇.
1
The cartridge also includes a provision for heat transfer to the
growth chamber and away from the medium supply reservoir to
facilitate temperature control.
A biochamber key containing a non-volatile memory device is
attached to the DBC at the beginning of use and accessed by the
system electronics during the cell expansion process to record
pertinent data. The key is detached after cell harvest, and
archived as part of the patient specific cell expansion record.
1.2.2. The biochamber incubation unit (BIU) provides the biological and
physical environment to support the cell growth process. The
biochamber cartridge is inserted into the BIU after inoculation
is complete. The BIU controls: the flow of medium to the growth
chamber; the temperature of the growth medium supply compartment;
the temperature of the growth chamber compartment; and the
concentration and flow rate of gases delivered to the gas
chamber. The BIU also monitors the density of cells in the
growth chamber and various safety/alarm parameters to assure that
the cell expansion process is proceeding as expected.
The unit receives commands from keys on its front panel and
communicates with the operator through a central BIU monitor
module (BIUMM). An integral BIU display also provides
information to the operator. Up to twelve biochamber incubation
units can be connected to the monitor module. Each BIU has its
own micro processor based control system and operates
independently of the monitor module. As such, it will continue
to function in the event of failure of the monitor module.
1.2.3. The inoculation/harvest unit (IHU) performs the initial filling
of the biochamber cartridge with growth medium (supplemented with
growth factors) and the inoculation of cells. The same unit also
performs the removal of the cells from the growth chamber at the
completion of the cell expansion process. The system design
provides for the appropriate level of sterility assurance during
the inoculation and harvest procedures.
1.2.3.1 During initial set up and fill, the operator loads the
biochamber cartridge into the IHU, connects the medium
supply (supplemented with growth factors) to the
cartridge and transfer the medium to the internal
reservoir. The operator is prompted to
2
manually inject the cells into the cartridge at the
appropriate time. The process then continues under
software control until the cartridge is ready to be
placed in the biochamber incubation unit for cell
expansion.
1.2.3.2. At the completion of the expansion process, the
operator loads the biochamber back into the IHU,
attaches the harvest reagents, and harvesting of the
expanded cells proceeds under software control. At the
completion of the harvest process, the expanded cell
product is contained in a single bag to facilitate
washing and preparation for direct infusion or
cryopreservation.
1.2.4. The standard growth medium for the expansion of hematopoietic
cells will be distributed as a separate item in packaging that
will facilitate the addition of growth factors and glutamine
followed by sterile connection to the biochamber cartridge just
prior to use.
1.2.5. The harvest reagents needed for the process will be distributed
as separate items in packaging that will facilitate an aseptic
connection to the biochamber cartridge for cell harvest.
1.2.6. The system rack conveniently integrates several BIUs and a
monitor module. The rack organizes connections to the facility
and the inter connections between the various modules.
The Instrument consists of the components described in paragraphs 1.2.2
(BIU), 1.2.3 (IHU), and 1.2.6 (Rack).
3
EXHIBIT B
Functional Requirements and Specifications for the Instrument
(to be added per Section 1.2)
See generally Exhibit A. See also the SeaMED Project Plan, Drawing Number
908180, draft dated 2-2-94, which is incorporated herein. Additional functional
requirements and specifications for the Instrument will be added by Aastrom
during the course of the work.
EXHIBIT C
Time and Quantity Schedule --
Preproduction Units
Completion
Time Schedule: Date
------------- ---------
Reliability prediction *
Preliminary review with UL, CSA, TUV *
Release of printed circuit board *
Release of electro-mechanical subsystems
and enclosures *
Delivery of pre-production Units
10 Biochamber Incubation Units *
20 Biochamber Incubation Units *
20 Biochamber Incubation Units *
15 Inoculation/Harvest Units *
15 Monitors *
Software validation testing complete *
Delivery of system racks
Maximum
Pre-production Units
Ouantity (Schedule E Pricing)
-------- --------------------
Biochamber incubation units 75
Biochamber incubation unit monitor modules 35
Inoculation harvest units 35
Rack 35
SeaMED hereby agrees to perform the tasks and to manufacture and deliver
the units as specified above.
*CONFIDENTIAL PORTION REDACTED AND FILED
SEPARATELY WITH THE COMMISSION
EXHIBIT C-1
Pricing for Precommercial Units/1/
Material Cost Actual Cost xx
Material Burden * xx
Outpatient Services Actual Cost xx
Direct Labor, Assembly & Testing * per direct hour of labor xx
-----
Subtotal: xxxx
Other Manufacturing * of the above subtotal x
-----
Total Cost: xxxx
---
Total Price * x Total Cost xxxxx
*
______________
/1/ Subject to pricing methodology definitions and consideration for pricing
schedule specified in Exhibit F, Section 4.1.
*CONFIDENTIAL PORTION REDACTED AND FILED
SEPARATELY WITH THE COMMISSION
EXHIBIT D
Manufacturing Drawings for the Instrument
(to be added per Section 2.1(e))
EXHIBIT E
COMPENSATION SCHEDULE FOR DESIGN WORK
AND MANUFACTURING PREPRODUCTION UNITS
1. Aastrom shall compensate SeaMED for SeaMED's design work and
manufacturing work for the preproduction units on a "time and materials" basis.
Engineering time will be billed at the rate of * per hour. Technician and
drafting time will be billed at * per hour. Materials will be billed at the
actual costs to SeaMED. SeaMED shall submit to Aastrom a monthly invoice for
said design work and manufacturing work performed and the materials used,
together with such supporting details as Aastrom may reasonably request. Aastrom
shall pay said invoice within thirty (30) days after the invoice and supporting
details are received by Aastrom. Aastrom will have full audit rights as to the
costs charged by SeaMED.
2. SeaMED shall prepare and deliver to Aastrom a budget estimate for all
of SeaMED's work, which budget shall be subject to the review and approval by
Aastrom. On a monthly basis, SeaMED shall review with Aastrom any variations
between the budget and the actual costs. On a periodic basis, SeaMED will review
with Aastrom any recommended revisions to the budget which may be appropriate
for responding to any changing circumstances, to best meet the needs of Aastrom,
and to keep costs under control. All work by SeaMED shall be performed and
charged within the limits of the budget approved by Aastrom, as said budget may
be revised from time to time with Aastrom's Approval.
*CONFIDENTIAL PORTION REDACTED AND FILED
SEPARATELY WITH THE COMMISSION
EXHIBIT F
Summary of Manufacturing Agreement for Phase II
1. Specifications. Based upon the design work referenced in the
--------------
Collaborative Product Development Agreement (the "Collaborative Agreement") and
the Specifications and the Phase II Manufacturing Drawings and Process
referenced in the Collaborative Agreement (collectively called the
"Specifications and Drawings"), SeaMED shall manufacture and sell to Aastrom so
many of the Instruments as Aastrom may order, with each Instrument being
manufactured in accordance with the Specifications and Drawings. SeaMED shall
manufacture the Instruments in conformity with then current applicable Good
Manufacturing Practices (as described in Title 21 of the U.S. Code of Federal
Regulations, Part 820), and any other applicable standards (UL, CSA, IEC and
TUV) for manufacturing of the Instrument. SeaMED shall maintain its
manufacturing facility, equipment and procedures so as to obtain and comply with
ISO 9002 certification in accordance with the EC Medical Directives, and shall
apply the EC ▇▇▇▇ to the devices intended for the European market.
2. Forecast of Orders. (to come later)
------------------
3. Schedule to Fill Orders. (to come later)
-----------------------
4. Price.
-----
4.1 Initial Purchase Price. The following formula schedule is used to
----------------------
calculate the maximum initial purchase price for the Instrument.
Cost Components Alternative Annual Sales Volumes
--------------- --------------------------------
A B C
0-$1m $1m-$5m greater than $5m
----- ------- ----------------
Material Cost Actual Cost Actual Cost Actual Cost
Material Burden * * *
Outplant Services Actual Cost Actual Cost Actual Cost
Direct Labor, Assembly */direct */direct */direct
and Testing (includes labor hour labor hour labor hour
Direct Labor Rate and
Direct Labor Overhead)
Standard direct labor hours * * *
as of determined on Column A
volume
Other Manufacturing * * *
General and Administrative * * *
Profit from Operations * * *
Definitions used in the foregoing pricing methodology for the Aastrom
Instruments are as follows:
Annual Sales Volume - Amount shipped in a 12 month period beginning
-------------------
*CONFIDENTIAL PORTION REDACTED
AND FILED SEPARATELY WITH THE COMMISSION
with the first shipment.
Material Costs - Cost of raw material and purchased components.
--------------
Material Burden - Actual costs allocated in accordance with GAAP and
---------------
associated with procurement, receiving inspection, stores handling,
shop floor control, quality assurance, quality engineering, and
facilities costs.
Outplant Services - Cost of outplant operations such as board
-----------------
stuffing, machining or plating.
Direct Labor, Assembly and Testing - Hours of time required to
----------------------------------
assemble and test all levels of the product.
Direct Labor Rate - Cost associated with one hour of direct labor at
-----------------
* hour, for Column A quantity pricing.
Direct Labor Overhead - Actual costs allocated to direct labor in
---------------------
accordance with GAAP associated with production, customer support,
operations management, facilities, manufacturing engineering, quality
assurance & quality engineering (at * hour for Column A quantity
pricing).
Other Manufacturing Costs - Actual costs incurred for warranty,
-------------------------
variances and inventory obsolescence. The percentage expressed is a
percentage of the four cost categories.
Gen & Admin - Cost for G & A departments, (Finance, Marketing and
-----------
Executive). The percentage expressed is a percentage of the purchase
price.
Profit from Operations - SeaMED's normal profit margin (defined as net
----------------------
income before taxes). The percentage expressed is a percentage of the
purchase price.
Considerations for pricing schedule:
(a) Material burden, other manufacturing, general and administration, and
profit form operations rates are not to exceed rates at the level
noted above, for the term of the Agreement.
(b) The volume criteria applies to total system purchases rather than
being applied on a per Instrument basis; except the Assembly and Test
percent decrease, which does apply on a per Instrument basis.
(c) These scheduled rates will be viewed as a ceiling (or capped price).
It is the intention of both parties to move to a "fixed price" which
will be negotiated, but will not exceed the "formula" or schedule.
(d) Aastrom has the full, open right to audit all costs and calculations
associated with the rates, including cost allocations.
(e) SeaMED has the "good faith" obligation to obtain and provide the
lowest possible price for materials.
Prior to the parties signing the Manufacturing Agreement, SeaMED shall prepare
and deliver to Aastrom an itemized schedule of the direct costs for the number
of units of the Instrument which Aastrom estimates will be purchased during the
next six months. Once said price is mutually approved by Aastrom and SeaMED, it
shall serve as a ceiling purchase price until changed pursuant to Section 4.2.
4.2 Price Adjustments. No more frequently than once in any six (6)
-----------------
*CONFIDENTIAL PORTION REDACTED
AND FILED SEPARATELY WITH THE COMMISSION
month period, either SeaMED or Aastrom may request a change in the purchase
price based upon the pricing formula set forth in Section 4.1, to accommodate
increased or decreased costs of manufacture, or increase or decrease in the
number of units manufactured. Such request and change shall be based upon
demonstrated increased or decreased costs of components or labor for the units
manufactured and to be manufactured. If any costs of components or labor
decrease during the term of this Agreement, or if the number of units
manufactured is materially greater than the estimated number used for
establishing the previous price, then SeaMED shall reduce the purchase price to
reflect such changes. Similarly, if the costs of components or labor increase,
or the number of units manufactured is materially less than the estimated number
used for establishing the previous price, then SeaMED and Aastrom shall increase
the price to reflect such changes. Any such price adjustments shall take effect
sixty (60) days after agreement by the parties and shall be appended hereto as
an additional exhibit.
5. Payment Terms. Aastrom shall pay SeaMED the invoiced price in U.S.
-------------
dollars for each shipment of Instruments within thirty (30) days after the later
of (i) the date the invoice is received by Aastrom, or (ii) the date the
shipment of Instruments is made by SeaMED. Unless otherwise specified or
required by law, all prices will be quoted and billed exclusive of federal,
state, or local excise, sales, or other similar taxes. Although the parties do
not expect any such taxes, if any such taxes are payable, they will appear as an
additional item on the invoices.
6. Shipment and Risk of Loss. SeaMED shall deliver the Instrument FOB
-------------------------
Bothell, Washington, for shipment to Aastrom's premises in Ann Arbor, Michigan,
or to such other address as specified by Aastrom. Title and risk of loss shall
pass to Aastrom upon SeaMed's delivery of the Instrument to a licensed carrier
approved by Aastrom for shipment of the Instrument to Aastrom.
7. Inspection. Promptly after Aastrom receives a shipment of the
----------
Instruments, Aastrom shall inspect the Instruments to verify that they have been
manufactured in accordance with the required Specifications and Drawings.
Aastrom shall give prompt notice to SeaMED of any non-conforming Instrument, and
SeaMED shall take all necessary actions to remedy and correct any non-conforming
Instrument. Aastrom shall be entitled to delay payment for any non-conforming
Instrument until it is fully corrected. If an instrument is found later to be
non-conforming to the required Specifications and Drawings, the fact that
Aastrom did not discover the non-conformance earlier shall not impair Aastrom's
warranty rights under Section 9 below.
8. Manufacturing Process. SeaMED shall furnish to Aastrom copies of the
---------------------
documentation which fully describes in detail the manufacturing and testing
processes, methods and techniques used to manufacture and test the Instrument,
including without limitation, all items referenced in Section 6.3 of the
Collaborative Product Development Agreement. As changes or improvements are
contemplated in said manufacturing, the documentation describing the changes and
improvements will be furnished to Aastrom for approval prior to implementation.
SeaMED acknowledges that the Cell Expansion System is a PMA device and that
changes to the manufacturing and testing process may require submission to FDA
and FDA approval prior to implementation. Aastrom shall have the non-exclusive,
royalty-free right to utilize (and to permit Aastrom's other suppliers to
utilize) all of said manufacturing and testing processes, methods and techniques
to manufacture and test the Instrument, irrespective of whether they were
developed by Aastrom or SeaMED.
9. Warranty.
--------
9.1 Manufacturer's Warranty. SeaMED warrants that the Instrument (i)
-----------------------
shall be manufactured in full compliance with the Specifications and Drawings,
(ii) shall be free from defects in material and workmanship, and (iii) shall be
free from defects in design as to those specific elements for which SeaMED was
primarily responsible for the design, as specified in the Project Plan, as
amended, as referenced in the Collaborative Agreement. As to the elements of the
instrument for which SeaMED was not primarily responsible for the design, SeaMED
makes no warranty as to design. SeaMED further warrants that the manufacture,
assembly and delivery of the Instrument hereunder shall be in compliance with
(a) all applicable federal, state and local laws, rules, regulations and
executive orders, including without limitation, all of the employee
compensation, health and safety and environmental laws applicable to SeaMED's
facility, and all U.S. customs laws and regulations, and applicable regulations
of the U.S. Food & Drug Administration ("FDA") and the European Community and
Japanese equivalent of the FDA; and (b) performed in a professional, workmanlike
manner in accordance with prevailing industry standards. SeaMED understands that
Aastrom may sell the Instrument to hospital customers or other users. SeaMED
agrees that the foregoing warranties are for the benefit of Aastrom and any
ultimate end-user of the Instrument.
9.2 Limitation on Liability. SeaMED shall either repair or replace or
-----------------------
provide to Aastrom full credit for the purchase price of any Instrument which is
defective due to SeaMED's failure to comply with the foregoing warranty. Any
such repair, replacement or credit shall be made within thirty (30) days after
SeaMED takes receipt of the defective Instrument. All shipping and other costs
incurred in connection with the repair or replacement of any defective
Instrument shall be borne by and for the account of SeaMED. Except as specified
in Section 11, SeaMED shall have no liability to Aastrom for any consequential
damages or loss, including but not limited to loss of profits or goodwill,
additional expenses incurred, or other damages.
9.3 Disclaimer of Warranties. EXCEPT FOR THE WARRANTIES SET FORTH IN
------------------------
SECTION 9.1, SEAMED DISCLAIMS ANY AND ALL WARRANTIES, EXPRESS OR IMPLIED,
INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY OR ANY IMPLIED WARRANTY OF
FITNESS FOR A PARTICULAR PURPOSE.
9.4 Aastrom's Warranty. Aastrom warrants that all elements of the
------------------
Instrument for which SeaMED was not primarily responsible for the design shall
be free from defects in design.
10. Records; Inspection. SeaMED shall keep full and complete records
-------------------
with respect to its manufacture of the Instrument, including all records of
costs and purchase price adjustments. At Aastrom's request, SeaMED shall allow
Aastrom or its designee to inspect and audit such records. Additionally, at
Aastrom's request, SeaMED shall allow Aastrom to inspect the facility where the
Instruments are manufactured, and to inspect any work in progress on the
Instruments, for quality control purposes. Further, at Aastrom's request, SeaMED
shall make available to Aastrom or its designee all information as Aastrom may
reasonably request relating to the purchase of components and to the
manufacture, assembly and shipment of the Instrument, and to the performance by
SeaMED of its obligations hereunder.
11. Indemnification. Same as Section 8 in the Collaborative
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Agreement--applicable to the Instrument.
12. Obligation to Maintain Insurance. SeaMED agrees to provide and
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maintain at its sole expense comprehensive general liability insurance,
including product liability insurance, covering bodily injury and property
damage to third parties for accidents or injuries arising out of the use of the
Instruments manufactured by SeaMED. Said insurance shall have a combined single
limit of * per occurrence, as a total limit of liability for any one
occurrence with respect to bodily injury and property damage, with a deductible
of no higher than $25,000, and with no aggregate annual limit. SeaMED will
furnish to Aastrom certificates of insurance evidencing that such insurance is
in effect, and that Aastrom is named as an additional insured party thereunder.
Such certificates shall provide that in the event such insurance should be
materially adversely changed or terminated for any reason, the insurance company
will give Aastrom thirty (30) days' prior written notice of such change or
termination.
13. Exclusivity. Same as Section 9 of the Collaborative Agreement.
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Aastrom may establish a "second source" manufacturer.
14. Proprietary Information. Same as Section 10 of the Collaborative
-----------------------
*CONFIDENTIAL PORTION REDACTED
AND FILED SEPARATELY WITH THE COMMISSION
Agreement.
15. Term. The term of this Manufacturing Agreement shall continue for
----
an initial term ending three years after the date of shipment by SeaMED of the
first commercial unit of the Instrument. The term of this Agreement shall be
renewed automatically after the initial term for an indefinite continuous term
unless SeaMED gives a 24-month written notice not to renew, or unless Aastrom
gives a six-month written notice not to renew. The renewed term of this
Agreement may be terminated at any time by SeaMED giving a 24-month written
notice of termination, or by Aastrom giving a six-month written notice of
termination.
16. Default and Termination. Same as Section 12 of the Collaborative
-----------------------
Agreement.
17. Miscellaneous. Same as Section 13 of the Collaborative Agreement.
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18. Other.
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a. Maintenance of Manufacturing Facilities, same as Section 2.3
of Collaborative Agreement and last two sentences in Section 1 above.
b. Records; Inspection, same as Section 7 of Collaborative
Agreement.