Collaborative Supply Agreement - Aastrom Biosciences Inc. and Mid-State Plastics
COLLABORATIVE SUPPLY AGREEMENT
between
AASTROM BIOSCIENCES, INC.
and
MID-STATE PLASTICS
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TABLE OF CONTENTS
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Page
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Section 1. Definitions................................................... 2
Section 2. Purchase and Sale............................................. 4
Section 3. Forecasts; Delivery; Shipment................................. 4
(a) Rolling Forecasts........................................ 5
(b) No Limit on Sales........................................ 5
(c) No Liens................................................. 5
(d) Delivery................................................. 5
(e) Shipment................................................. 5
(f) Acceptance Procedures.................................... 6
(g) Lot Testing.............................................. 6
Section 4. Prices........................................................ 7
(a) Cell Cassette Prices..................................... 7
(b) Phase I Collaboration Charge............................. 7
(c) Component Order and Prices............................... 7
(d) Best Diligent Efforts.................................... 7
Section 5. Payment and Collection........................................ 8
(a) Payment.................................................. 8
(b) Deductions from Invoice.................................. 8
(c) Relief for Non-Payment................................... 8
Section 6. Specifications, DMR and Changes............................... 8
(a) Specifications........................................... 8
(b) Establish DMR............................................ 9
(c) Specification and DMR Changes............................ 9
(d) MSP Refusal to Change Specification...................... 9
(e) Other Changes............................................ 9
(f) Returns.................................................. 9
Section 7. MSP's Facilities and Manufacturing Environment................ 9
Section 8. MSP Manufacturing Procedures.................................. 10
Section 9. Collaborative and Other Responsibilities of the Parties....... 11
(a) Overview................................................. 11
(b) Responsibilities of AASTROM.............................. 11
(c) MSP's Collaboration...................................... 12
(d) Other Responsibilities of MSP............................ 12
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Section 10. Equipment.................................................... 13
(a) Ownership............................................... 14
(b) Identification Tags..................................... 14
(c) Liens and Insurance..................................... 14
(d) Inspection.............................................. 14
(e) No Modification......................................... 14
(f) Maintenance............................................. 14
(g) Use..................................................... 14
Section 11. Right of Inspection.......................................... 15
(a) Rights of Inspection.................................... 15
(b) Waiver.................................................. 15
(c) Self-Certification...................................... 15
(d) Records; Inspection..................................... 15
Section 12. Warranty; Recalls............................................ 16
(a) Warranty................................................ 16
(b) DISCLAIMER.............................................. 16
(c) No Third-Person Warranty................................ 16
(d) Recalls................................................. 16
Section 13. Limitation of Damages Liability.............................. 17
(a) Third Party Claims Not Related to Manufacturing Defect.. 17
(b) Third Party Claims Related to MSP's Delays.............. 17
(c) Third Party Claims for Product Liability................ 17
(d) AASTROM's Claims - Phase I.............................. 17
(e) AASTROM's Claims - Phase II............................. 17
(f) Willful Wrongdoing...................................... 18
(g) Nature of Damages....................................... 18
(h) Mitigation.............................................. 18
(i) AASTROM's Liabilities................................... 18
Section 14. Indemnity.................................................... 18
(a) AASTROM's General Indemnity............................. 18
(b) MSP's General Indemnity................................. 19
(c) Intellectual Property Warranty.......................... 19
(d) Intellectual Property Indemnity by AASTROM.............. 20
(e) Intellectual Property Indemnity by MSP.................. 20
Section 15. Ownership of Intellectual Property........................... 21
(a) Ownership of Intellectual Property...................... 21
(b) Return of Intellectual Property......................... 21
Section 16. Confidential Information..................................... 21
(a) Title to Confidential Information and Related Documents. 21
(b) Non-Disclosure and Non-Use of Confidential Information.. 21
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(c) Protection of Confidential Information.................. 22
Section 17. Term and Termination......................................... 22
(a) Term of Agreement....................................... 22
(b) Termination Upon Default................................ 22
(c) Termination Upon Insolvency............................. 22
(d) Termination Upon Inability of MSP to Perform............ 22
(e) Effect of Termination................................... 23
(f) Liabilities When No Termination......................... 23
(g) Alternative Purchase of Product......................... 23
Section 18. Preferred Supplier; Alternative Supplier..................... 24
(a) Preferred Supplier...................................... 24
(b) Alternate Suppliers..................................... 24
Section 19. Representations and Warranties............................... 24
Section 20. Force Majeure................................................ 24
(a) Suspension of Performance............................... 24
(b) Cooperation............................................. 25
(c) Allocation of Resources................................. 25
Section 21. MSP Competitiveness; Shared Investment Return................ 25
(a) MSP's Competitiveness................................... 25
(b) Shared Investment Return................................ 25
(1) MSP Capital Investments............................ 25
(2) Recoupment of MSP Capital Investment; Cost Sharing. 25
(3) AASTROM Capital Investments........................ 26
Section 22. Insurance.................................................... 26
Section 23. Similar Products............................................. 26
(a) Continuing Prohibition.................................. 26
(b) Similar Products........................................ 26
Section 24. Governing Law; Dispute Resolution............................ 27
(a) Governing Law........................................... 27
(b) Dispute Resolution...................................... 27
Section 25. Notices...................................................... 28
Section 26. Successors and Assigns; Survival............................. 29
Section 27. Headings..................................................... 29
Section 28. Severability................................................. 29
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Section 29. Amendment and Waiver......................................... 29
Section 30. Counterparts................................................. 30
Section 31. Independent Contractors...................................... 30
Section 32. Entire Agreement............................................. 30
APPENDICES:
I Equipment
II Specifications
III Pricing Schedule for Phase I and II
IV Pro Forma Invoice
V Bill of Materials
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COLLABORATIVE
SUPPLY AGREEMENT
THIS COLLABORATIVE SUPPLY AGREEMENT (this "Agreement") is made
effective as of December 16, 1996 (the "Effective Date") by and between Aastrom
Biosciences, Inc., a Michigan corporation with principal offices at Domino's
Farms, Lobby L, Ann Arbor, Michigan 48106 ("AASTROM") and Anchor Advanced
Products, Inc., Mid-State Plastics Division, a Delaware corporation with offices
at U.S. Highway 220 North, Seagrove, North Carolina 27341 ("MSP").
W I T N E S S E T H:
WHEREAS, AASTROM is developing medical devices to implement
proprietary cell production processes for cellular therapy procedures;
WHEREAS, such development work has led to the development by AASTROM
of the AASTROM(TM) Cell Production System, a proprietary medical device for the
production of human stem cells (the "AASTROM CPS"), consisting in part of
single-use, sterile culture chambers;
WHEREAS, MSP has expertise and experience in plastic injection
molding, in general, and in the production and assembly of plastic parts for
products that are classified as medical devices under the regulations of the
U.S. Food and Drug Administration (the "FDA"), in particular;
WHEREAS, AASTROM and MSP anticipate that the AASTROM CPS will be a
Class III medical device requiring Pre-Marketing Approval under FDA regulations
and a Class IIb device under regulations of the Medical Device Directives of the
European Community (the "EC"); and
WHEREAS, in consideration of MSP's expertise and stated intention to
be a cost effective and a capable manufacturer and supplier of Cell Cassettes
and Components (as defined herein), AASTROM desires for MSP to be a preferred
manufacturer of such Cell Cassettes and Components throughout the Term of this
Agreement, and MSP desires to be such supplier for such period; and
WHEREAS, AASTROM and MSP desire for MSP to work with AASTROM to
develop and produce Cell Cassettes for the AASTROM CPS.
NOW, THEREFORE, in consideration of these premises and the mutual
undertakings hereinafter set forth, and for other good and valuable
consideration given by AASTROM and MSP to each other, the receipt and
sufficiency of which is hereby acknowledged, AASTROM and MSP, intending to be
legally bound, agree as follows:
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SECTION 1. DEFINITIONS.
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The terms set forth below when used with capital letters shall have the meanings
set forth below. Other terms are defined in the Sections of this Agreement
pertinent to their definitions.
(a) "the Act" The Act shall mean the Federal Food, Drug and Cosmetics
Act, 21 U.S.C. 301, et seq. (1938), as amended, and the
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rules and regulations promulgated thereunder.
(b) "Cell Cassette(s)" Cell Cassette shall mean a single-use, sterile cell
culture chamber consisting of plastic injection molded
and other parts made, assembled and encased in a
plastic injection molded cassette manufactured in
accordance with the DMR (as defined below) and used in
the AASTROM CPS or similar products made by or for
AASTROM, and all improvements and modifications to
Components thereof that are intended to replace the
then current Components.
(c) "Component(s)" Component shall mean any component part of a Cell
Cassette (e.g., the individual injection molded pieces,
bioreactor assembly or fluid pathway tubing assembly).
(d) "Confidential
Information" Confidential Information shall mean any and all
technical and non-technical information, (whether or
not disclosed by AASTROM prior to the Effective Date
under the terms of the Confidentiality Agreement
between the Parties dated December 22, 1993), data,
techniques, manufacturing procedures, know-how,
discoveries, inventions, trade secrets, improvements or
innovations that are maintained as proprietary and
confidential by the Party owning or controlling the
same; but Confidential Information shall not include
information that (i) the Recipient can clearly
demonstrate to have been in its possession at the time
Confidential Information is disclosed to it, provided
that, such information is not known by the Recipient to
be subject to another confidentiality agreement with,
or under other obligation of secrecy to, the Disclosing
Party or another party, or (ii) becomes generally
available to the public other than as a result of a
disclosure by the Recipient, its agents or employees,
or (iii) becomes available to the Recipient on a non-
confidential basis from a source other than the
Disclosing Party, provided that, the Recipient does not
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know, or have reason to know, that such source is bound
by a confidentiality agreement with, or other
obligation of secrecy to the Disclosing Party or
another party, or (iv) the Recipient can clearly
demonstrate to have developed itself independent of the
Confidential Information, or (v) the Disclosing Party
consents in writing may be disclosed by the Recipient.
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(e) "Disclosing Party" Disclosing Party shall mean the Party disclosing
Confidential Information.
(f) "DMR" DMR shall mean the Device Master Record for the Cell
Cassette consisting of a compilation of records
containing the design, formulation, Specifications (as
defined below), complete manufacturing procedures,
quality assurance requirements and labeling and
packaging requirements.
(g) "Equipment" Equipment shall mean the molds and other equipment
listed on Appendix I, annexed hereto, and categorized
as being provided either by AASTROM or by MSP. AASTROM
Equipment shall also include any equipment procured by
MSP for manufacture of the Cell Cassettes in accordance
with Section 21(b)(1).
(h) "GMPs" GMPs shall mean the then-current Good Manufacturing
Practices published at 21 CFR Part 820, et seq.
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applicable to a Class III medical device, but only
such GMPs that are applicable to the Cell Cassette or
Components.
(i) "ISO" ISO shall mean the International Standards
Organization.
(j) "Party or "Parties" Party shall mean either AASTROM or MSP, and Parties
shall mean both AASTROM and MSP.
(k) "Phase I" Phase I shall mean the period of time from the
Effective Date until AASTROM has approved the DMR in
writing and has accepted delivery of two consecutive
Shipment Lots.
(l) "Phase II" Phase II shall mean the period of time from the first
day of the month following the month in which Phase I
ends until the end of the Term.
(m) "Recipient" Recipient shall mean the Party receiving Confidential
Information.
(n) "Requirements" Requirements shall mean the rolling three-month firm
order forecast to be provided by AASTROM under Section
3(a), below, constituting at least sixty percent (60%)
of AASTROM's then-current requirements for Cell
Cassettes during the Term.
(o) "Shipment Lot" Shipment Lot shall initially mean 250 Cell Cassettes.
On a quarterly basis, concurrently with the provision
by AASTROM of its rolling twelve-month forecast, the
Parties shall mutually review and by mutual written
consent may revise the number of Cell Cassettes that
constitute a Shipment Lot, for the purchase order to
be submitted by AASTROM during such quarter,
considering volume
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requirements and anticipated delivery schedules. The
mutually agreed upon quantity constituting the
Shipment Lot shall be reflected in each purchase order
submitted by AASTROM.
(p) "Specifications" Specifications shall mean the objective criteria,
including, without limitation, design criteria and
formulations, required by AASTROM for the production
of Cell Cassettes and those contained in the DMR.
Specifications shall include without limitation, the
criteria for labeling and packaging, including
graphics, and quality assurance requirements.
Specifications for Cell Cassettes (including, without
limitation, those to be contained in the DMR) are
annexed hereto as Appendix II, as such Specifications
may be changed pursuant to Section 6, below.
Specifications shall not include any subjective
criteria or any criteria with respect to the efficacy
of either the Cell Chamber or the AASTROM CPS with
respect to human cell production.
(q) "Term" Term shall mean the period of time from the Effective
Date until the date upon which this Agreement expires
or is earlier terminated pursuant to Section 17,
below.
(r) "UCC" UCC means the Uniform Commercial Code as enacted in
the State of New York and in effect during the Term.
SECTION 2. PURCHASE AND SALE.
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AASTROM shall purchase from MSP at least AASTROM's Requirements of Cell
Cassettes, and MSP shall manufacture, assemble and sell to AASTROM all of
AASTROM's purchase orders for Cell Cassettes and Components, subject to the
terms and conditions of this Agreement including, without limitation, AASTROM's
rights to terminate this Agreement in whole or in part pursuant to Sections 6 or
17, below.
SECTION 3. FORECASTS; DELIVERY; SHIPMENT.
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(a) Rolling Forecasts. Each calendar quarter during the Term, AASTROM shall
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provide MSP with a rolling forecast of the anticipated quantity of each model of
Cell Cassettes AASTROM intends to purchase from MSP during each quarter of the
following twelve-month period. The quantities given for the first three months
of each twelve-month rolling forecast shall be firm orders for the immediately
succeeding quarter (i.e., a three-month forecast given on January 1st would be
deemed firm for the period April 1 - June 30) and AASTROM shall issue its
purchase order therefor and note on such purchase order the number of units it
will require for lot testing in accordance with Section 3(g), the method of
shipment and AASTROM destination for delivery, the scheduled delivery date and
the required documentation to be included with the Shipment Lot. MSP shall have
no obligation to purchase materials or supplies without a purchase order from
AASTROM except as is necessary to meet AASTROM's forecasted requirements.
AASTROM shall pay MSP for labor,
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materials, supplies and direct costs (as set forth in Appendix III) expended by
MSP to fill purchase orders by AASTROM for Cell Cassettes in the event that they
are not used to fulfill such purchase orders. Quantities forecasted beyond the
three-month firm-order period are for planning purposes only.
(b) No Limit on Sales. MSP has no right to limit its sales of Cell Cassettes
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or Components to AASTROM to a maximum number of units for any period
notwithstanding that AASTROM's Requirements may constitute less than 100% of
AASTROM's total requirements; provided that, the volume of Cell Cassettes and
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Components ordered is reasonable in the light of forecasted amounts and previous
delivery schedules. MSP shall have adequate capacity to meet AASTROM's then-
current total firm-order requirements as forecasted pursuant to Section 3(a),
above. MSP will take all steps to put in place additional adequate capacity, if
needed, to meet AASTROM's future requirements as forecasted by AASTROM in
accordance with Section 3(a), above; provided that, the Parties shall cooperate
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to afford a reasonable transition to the availability of such additional
capacity.
(c) No Liens. Except with respect to MSP's purchase money security interest in
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Cell Cassettes granted pursuant to Section 5(d), below, MSP will deliver Cell
Cassettes to AASTROM free and clear of all liens, claims and encumbrances.
(d) Delivery. MSP shall deliver Cell Cassettes, and upon AASTROM's request,
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any certifications, manufacturing records and test reports as are required for
AASTROM to accept or reject Cell Cassettes under this Section 3, pursuant to
delivery schedules in AASTROM's purchase orders; provided, that, such schedules
are reasonable in light of forecasted amounts and previous delivery schedules.
Delivery schedules in AASTROM's purchase orders shall not be less than fifteen
(15) days after the date of submission by AASTROM of the purchase order without
MSP's consent. In the event that AASTROM submits a purchase order in excess of
its forecasted requirements for said quarter, MSP agrees to employ good faith
efforts to supply such larger quantity of Cell Cassettes within such a
reasonable period of time as the Parties shall mutually agree. MSP shall not
deliver Cell Cassettes more than ten (10) days prior to scheduled delivery dates
without AASTROM's prior consent. MSP shall not be responsible for failure to
meet agreed-upon delivery dates if due to reasons of force majeure as set forth
in Section 20, below. In the event of partial failure to deliver, MSP will have
the right to receive payment pro rata for Cell Cassettes in fact delivered and
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not rejected by AASTROM under Section 3(f), below.
(e) Shipment. Shipment shall be made by MSP to AASTROM's designated U.S.
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locations, in accordance with AASTROM's purchase orders, F.O.B. destination.
Risk of loss or damage in transit shall remain with MSP until delivered to the
destination specified by AASTROM. AASTROM shall notify MSP within five (5)
business days after receipt if there are any shortages or evidence of damage in
transit and will cooperate with MSP in any claim for loss or damage in transit
that MSP makes against a carrier. The method and route of shipment are at
AASTROM's discretion as set forth in its purchase order. MSP will prepay all
costs, insurance premiums, freight and other expenses incurred in shipment until
delivered to the destination specified by AASTROM and such shipping costs shall
be reimbursed by AASTROM at MSP's cost without mark-up. If AASTROM defaults in
payment for Cell
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Cassettes, MSP may suspend further shipments; however, continuation of shipments
does not constitute a waiver of such default.
(f) Acceptance Procedures. Delivery of each Cell Cassette unit shall be deemed
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accepted by AASTROM unless MSP is notified in writing of AASTROM's rejection of
such delivery within forty-five (45) days after the delivery date (the
"Acceptance Period") due to non-conformance with the Specifications. In such
case, AASTROM shall provide MSP with a written notice of rejection setting forth
in detail the reason for rejection and return the rejected Shipment Lot, or
portion thereof, to MSP at MSP's expense for repair or replacement. Upon receipt
of AASTROM's notice of rejection and return of such Shipment Lot of part
thereof, MSP shall (i) within ten (10) business days thereafter, provide AASTROM
with a root-cause analysis and suggested corrective/preventative actions; and
(ii) diligently replace the nonconforming Shipment Lot or part thereof by
delivery of nondefective conforming units within a reasonable time (not to
exceed thirty (30) calendar days after notification) and endeavor to resolve the
issues related to the rejection. MSP shall credit against the purchase price of
Cell Cassettes, AASTROM's out of pocket costs of testing, including, without
limitation, destructive testing of failed Shipment Lots. AASTROM shall invoice
MSP for such costs, which shall be subject to reasonable audit by MSP or its
representative. MSP reserves the right, at MSP's expense, to have one or more
representatives present at any inspection conducted by AASTROM and to verify the
results of any such inspection and rejection of Shipment Lots. MSP shall have
the right to use conforming units or parts therefrom as replacement units
provided that such units or parts therefrom are in conformance with
Specifications. In the event MSP cannot resolve all nonconformities and deliver
conforming replacement Cell Cassettes as required herein MSP shall issue to
AASTROM a credit for the price of each unit rejected and AASTROM may pursue its
remedies pursuant to this Agreement, including but not limited to Section 17,
below. AASTROM shall pay for repair or replacement for defective Cell Cassettes
(or shall not receive a credit therefor) only to the extent that rejection is
due to a defective component supplied directly by AASTROM. In the event that
MSP's delivery of Cell Cassettes fails to conform to the quantity specified in
AASTROM's purchase order, AASTROM may, but shall not be obligated to, accept
such partial shipment and MSP shall deliver any shortfall in delivery quantity
within five (5) calendar days. Notwithstanding the foregoing, AASTROM agrees to
accept partial shipments from MSP provided that the quantity delivered is at
least ninety percent (90%) of the quantity specified in AASTROM's purchase
order, but only if AASTROM may readily use such partial shipment for its
intended purposes, and AASTROM also agrees to use commercially reasonable
efforts to accept partial shipments of quantities of less than ninety percent
(90%) of the quantity specified in AASTROM's purchase order, but only if AASTROM
may readily use such partial shipment for its intended purpose(s). Any
acceptance of partial shipments by AASTROM shall not be deemed to waive
AASTROM's remedies under Section 17(d) and AASTROM shall be entitled to a
payment credit reflecting the extent of such unit shortfall under a partial
shipment. In the event MSP fails to deliver any shortfall in quantity within
such five (5) day period, AASTROM may pursue its remedies pursuant to this
Agreement.
(g) Lot Testing. During the Acceptance Period, AASTROM shall have the right,
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but not the obligation, to conduct lot testing on a statistically significant
number of units from each
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Shipment Lot. At the time of submission of AASTROM's purchase orders in
accordance with Section 3(a), AASTROM shall note on such purchase order the
number of units it requires for lot testing. Notwithstanding Section 4(a), MSP
agrees to provide such testing units to AASTROM at MSP's cost to manufacture
such units (without mark-up) provided that the number of units requested is
reasonable given the number of units ordered, and provided further that any
units provided by MSP for lot testing shall not be resold by AASTROM. Any lot
testing conducted by AASTROM pursuant to this section shall not be deemed to
relieve MSP of any of its warranties or obligations hereunder.
SECTION 4. PRICES.
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(a) Cell Cassette Prices. Prices for Cell Cassettes purchased during Phase I
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and Phase II shall be determined as shown in Appendix III, hereto. Prices are
exclusive of all taxes of any nature imposed by any governmental authority,
except taxes imposed on the income or profits of MSP. All such taxes shall be
for AASTROM's account, whether or not collected, advanced or paid by MSP, and
shall be paid by AASTROM, without mark-up, upon MSP's invoice, unless AASTROM
timely provides proper tax exemption documents.
(b) Phase I Collaboration Charge. In addition to being paid for Cell Cassettes
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ordered by AASTROM during Phase I, AASTROM shall compensate MSP for MSP's
assistance and collaboration, as described in Section 9, below, on the basis set
forth in Appendix III. MSP shall prepare and submit to AASTROM a budget of Phase
I assistance and collaboration costs and expenses for AASTROM's approval. Once
approved, AASTROM may issue purchase orders authorizing the commencement of
collaborative work by MSP. MSP shall submit to AASTROM a monthly invoice
referencing AASTROM's purchase order for assistance and collaboration, together
with such supporting details as AASTROM may reasonably request. Assistance and
collaboration costs shall not exceed the budget approved by AASTROM without
AASTROM's prior written consent. The Parties acknowledge that budgets may need
to be revised to reflect updated cost estimates; however, any changes to
approved budgets will require the Parties' prior written consent.
(c) Component Order and Prices. From time to time throughout the Term, AASTROM
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may submit to MSP purchase orders for Components and MSP shall manufacture and
sell to AASTROM such Components in accordance with the terms of this Agreement
for the manufacture of Cell Cassettes, as they may be applicable, excepting only
the provisions of Sections 3(a) with regard to references to AASTROM's
obligation to forecast and purchase its specific Requirements from MSP. Prices
for any Components purchased by AASTROM during the Term shall be quoted
separately by MSP at the time of order with such quoted price not to exceed
MSP's actual manufacturing costs to produce such Components, multiplied by the
applicable Phase II Mark-Up Rates (as set forth in Section B.3 of Appendix III)
then in effect for the forecasted annual volume of Cell Cassettes to be
purchased by AASTROM.
(d) Best Diligent Efforts. At all times during the Term of this Agreement, MSP
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shall use its best diligent efforts to manufacture Cell Cassettes, procure
components and perform other services as provided in this Agreement at the
lowest cost reasonably practicable.
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Furthermore, subject to Section 21 below, it is the explicit understanding of
the parties that MSP will, on a proactive basis and at no additional cost to
AASTROM, seek out additional methods and means that will lead to reduced costs,
quality improvements and increased efficiency with regard to the manufacture of
Cell Cassettes.
SECTION 5. PAYMENT AND COLLECTION.
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(a) Payment. AASTROM shall pay MSP the full amount of the purchase price of
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Cell Cassettes upon the due date set forth on MSP's invoice; provided, however
invoices for Cell Cassettes rightfully rejected by AASTROM shall not be due
unless and until repair or replacement units are provided by MSP. With respect
to Cell Cassettes and Components, terms of payment shall be net 45 days from the
date of delivery by MSP pursuant to Section 3, above, and the submission by MSP
of an itemized invoice in the form attached hereto in Appendix IV including the
purchase price for such Cell Cassettes calculated in accordance with Appendix
III, together with such supporting documents as AASTROM may reasonably request.
Accounts unpaid beyond their due date will bear interest at a rate, to be
determined by MSP in its sole, absolute discretion, not to exceed the higher of
1 1/2% per month on the unpaid balance or the highest rate legally permissible
in the state of Michigan. If payment by AASTROM is improperly withheld and MSP
retains an agency and/or attorneys to collect amounts overdue, all collection
costs, including without limitation, reasonable attorneys' fees, shall be
payable by AASTROM.
(b) Deductions from Invoice. AASTROM will promptly notify MSP of any disputed
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invoice. It is the intention of the Parties that disputed invoices will be
settled by the Parties in good faith negotiations prior to the invoice due date.
However, unless MSP issues a credit memo, or unless AASTROM rightfully rejects
Cell Cassettes or notifies MSP of its acceptance of a partial shipment pursuant
to Section 3(f), AASTROM shall make full payment of MSP invoices for accepted
Cell Cassettes without deduction and regardless of any claim, counterclaim or
setoff AASTROM may have against MSP, except as such setoff may otherwise be
permitted under Appendix III, Section 3(f) or Section 12(d). Any such claim,
counterclaim or setoff shall be resolved exclusively as a separate matter
pursuant to Section 24, below.
(c) Relief for Non-Payment. In the event payment for Cell Cassettes becomes
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past due, MSP will have the option, in addition to any other rights it may have
under the UCC or otherwise, in its sole, absolute discretion, to cancel or delay
shipment or orders of AASTROM previously accepted, to declare all sums owing
from AASTROM to be immediately due and payable, and to cancel credit previously
extended.
SECTION 6. SPECIFICATIONS, DMR AND CHANGES.
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(a) Specifications. MSP shall manufacture and assemble Cell Cassettes to then-
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current Specifications and no part of MSP's responsibility may be subcontracted
without the prior written consent of AASTROM.
(b) Establish DMR. As further described in Section 9, MSP shall prepare a DMR
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covering the manufacture of the Cell Cassettes from the Specifications, other
requirements and
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technical information to be provided by AASTROM, and manufacturing and
quality processes and procedures established by MSP. AASTROM review and
approve the DMR to assure that it accurately reflects the Specifications.
(c) Specification and DMR Changes. Notwithstanding any provision of this
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Agreement to the contrary, MSP shall not have the right to change the
Specifications without the prior written consent of AASTROM. If a Party desires
a change to Specifications or any part of the DMR, it shall submit a proposed
change, setting forth a detailed description and drawings thereof. Subject to
Section 6(d), the Parties shall work in good faith as expeditiously as is
reasonable to reach a determination whether a change to Specifications will be
made and, if so, when such change will be implemented and the effect that such
change will have, if any, on quantities, quality criteria, price and delivery
dates.
(d) MSP Refusal to Change Specification. If AASTROM proposes a change to
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Specifications that it states is material to the efficacy, safety or reliability
of the Cell Cassette or which AASTROM reasonably demonstrates is necessary for
AASTROM to remain cost competitive, and if such change is currently
manufacturable, then upon the refusal of MSP to implement such change, AASTROM
shall have the right, without liability, in accordance with Section 17(b),
below, to terminate this Agreement on a prospective basis for all Requirements
incorporating the changed Specifications that have not yet been submitted on
purchase orders. The Parties will cooperate to implement changes to
Specifications in an orderly manner and to afford MSP a reasonable transition
time to the extent necessary to effect such Specification changes.
(e) Other Changes. AASTROM may cancel or change quantities or delivery dates
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under any purchase order upon terms that make MSP whole for its costs in
respect of materials and work-in-process as set forth in Section 3(a).
(f) Returns. Except as expressly provided in this Agreement including, without
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limitation, as provided in Sections 3(f) and 12(a), below, in no case may Cell
Cassettes be returned to MSP without first obtaining MSP's written consent
which will not be unreasonably withheld.
SECTION 7. MSP's FACILITIES AND MANUFACTURING ENVIRONMENT. With respect to its
----------------------------------------------
manufacturing facilities and assembly obligations applicable to the production
of Cell Cassettes, MSP shall:
(a) be registered with the FDA as a Medical Device Establishment to the extent
required by the Act. As such, MSP will maintain facility registrations and
inspection records required by the FDA;
(b) have and maintain a Class 100,000 certified assembly area operating at less
than 20,000 particulate-count and arrange for annual certification to be
conducted by an independent testing service. A routine monitoring plan, to
include at least monthly testing, will also be established and performed by MSP
(the foregoing routine monitoring plan shall be subject to AASTROM's approval,
which approval shall not be unreasonably withheld);
-9-
<PAGE>
(c) maintain adequate personnel and facilities, including but not limited to
sufficient engineering support and assembly resources to support the manufacture
of Cell Cassettes ordered by AASTROM. MSP will provide AASTROM annually with a
project plan to meet AASTROM's forecast annual Requirements and AASTROM will
provide timely comments thereon;
(d) manufacture and assemble all of the Cell Cassettes in compliance with GMPs
as required by the Act; provided that, AASTROM, as the owner of the DMR, shall
-------- ----
have the responsibility for approving the DMR and any changes thereto as
established by MSP in accordance with Section 9, below;
(e) achieve EN29002 and EN46002 or EN46001 certification by a notified body by
September 17, 1996, establish, maintain and document a quality system as may be
required as a condition of such certifications;
(f) together with the Equipment to be provided by AASTROM, provide and maintain
adequate manufacturing Equipment to perform its obligations under Section 6 of
this Agreement;
(g) have and maintain adequate procedures for procurement, acceptance, supplier
quality audits and material control of all component parts to be used or
incorporated in Cell Cassettes;
(h) report to AASTROM in writing any known adverse events, circumstances or
potential problems relating to MSP's FDA registration or its EC certifications
referred to in Section 7(e), above;
(i) allow AASTROM and its agents, at their own cost and risk, to review and
inspect MSP's facilities, FDA compliance files and correspondence to and from
the FDA and notified bodies applicable to this Agreement; and
(j) maintain files of all Cell Cassette-related complaints received by MSP from
AASTROM and conduct failure investigations, including establishing written
records with conclusions and corrective measures, for all such Cell Cassettes
complaints involving a failure to meet Specifications.
SECTION 8. MSP MANUFACTURING PROCEDURES. MSP's obligation to manufacture Cell
----------------------------
Cassettes shall be to deliver Cell Cassettes as described in Section 6(a), above
and in accordance with the DMR. Without expanding or diminishing that
obligation, and for purposes of illustration only, it is contemplated by the
Parties that such obligation shall encompass:
(a) injection molding and processing the main Components of the bioreactor
device for the Cell Cassette including any sonic welding and vacuum plasma
surface treatment operations;
(b) assembling the aforesaid bioreactor devices utilizing fixturing provided by
AASTROM, or alternative fixturing as developed;
-10-
<PAGE>
(c) injection molding components of the Cell Cassette fluid pathway tubing
assembly and supplying them to the tubing kit subcontractor;
(d) injection molding non-fluid contact enclosure components for the Cell
Cassette using molds supplied by AASTROM;
(e) procuring the waste reservoir and media supply enclosure from an AASTROM-
approved source;
(f) assembling the enclosure, the waste reservoir and media supply enclosure,
the bioreactor and the fluid pathway tubing assembly described in Sections
8(d), (e), (b) and (c), above, respectively;
(g) providing AASTROM with a proposal for the procurement of components and for
assembly of the fluid pathway tubing assembly and, once approved by AASTROM,
assuming assembly of the fluid pathway tubing assembly;
(h) performing testing in accordance with the DMR;
(i) validating Cell Cassettes to the applicable sterilization assurance level;
and
(j) performing on-going vendor audits and validation procedures, as required by
GMPs, and conducting a reasonable incoming inspection of purchased components
for compliance with Specifications.
SECTION 9. COLLABORATIVE AND OTHER RESPONSIBILITIES OF THE PARTIES.
-------------------------------------------------------
(a) Overview. AASTROM shall be responsible for the establishment and updating
--------
of the design, development, Specifications and regulatory approval, and for the
marketing and sale (collectively, the "Development") of the Cell Cassette and
Components. MSP shall collaborate in that effort as set forth in Section 9(c),
below. MSP shall be responsible for manufacturing the Cell Cassettes and
Components to Specifications and sterilization as provided in Section 6(a)
above, and in accordance with the DMR, including responsibility for
manufacturing, assembly and sterilization procedures.
(b) Responsibilities of AASTROM. AASTROM shall be responsible for establishing
---------------------------
the Specifications and any modifications thereto, obtaining all FDA and foreign
regulatory approvals with respect to the Development and commercialization of
the Cell Cassette and Components, including, without limitation, PMAs and CE
Mark and, except, as expressly assumed by MSP under this Agreement, shall be
responsible for all laws, rules and regulations governing the Development of the
Cell Cassette and Components. AASTROM shall develop final Specifications and
functional requirements for the Cell Cassette including all of its Components
and shall select materials and determine the design, quality assurance
requirements and test criteria in consultation with MSP, design contractors and
other manufacturing subcontractors as AASTROM in its sole, absolute discretion
deems appropriate. AASTROM shall establish all process procedures to perform the
required tissue
-11-
<PAGE>
culture treatment of portions of the Cell Cassette and Components and will
provide MSP with the AASTROM Equipment and with training in areas of AASTROM's
expertise reasonably necessary or proper for MSP to perform its manufacturing
obligations under this Agreement. AASTROM shall perform simulated use tests and
reliability demonstration tests to assist MSP in the proper manufacture of the
Cell Cassette and Components. AASTROM shall have final approval for choosing all
suppliers to MSP of Components used for Cell Cassettes and shall have complete
responsibility (other than for proper assembly into the Cell Cassette) for
Components supplied directly by AASTROM. Suppliers shall generally be chosen
after AASTROM obtains advice from MSP, but AASTROM shall not choose a supplier
that MSP states will materially impede MSP's obligations under this Agreement.
Prices of supplied Components shall be subject to prior written approval by
AASTROM. Notwithstanding the foregoing, nothing in this Section 9 shall be
deemed to relieve MSP of its responsibility under this Agreement to manufacture
the Cell Cassettes and Components to Specifications, and in accordance with the
DMR.
(c) MSP's Collaboration. MSP will collaborate with AASTROM in its Development
-------------------
efforts as set forth in this Section 9(c), but in no event shall MSP be
responsible as a result of such collaboration under this Agreement or otherwise
for the Development, including, without limitation, the efficacy, of the Cell
Cassette. MSP shall, as requested by AASTROM, collaborate with AASTROM and the
other design contractors to assist AASTROM in selecting materials and
determining manufacturing process development for the Cell Cassette.
Notwithstanding the foregoing, MSP shall be responsible only for the
manufacture, assembly and sterilization of the Cell Cassette as provided in
Section 6(a), above, and otherwise upon the terms and conditions of this
Agreement, and not for its Development.
(d) Other Responsibilities of MSP. In connection with MSP's manufacturing and
-----------------------------
assembly obligations under this Agreement, MSP shall:
(1) prepare the DMR in accordance with the then-current manufacturing
Specifications and the criteria for testing the Cell Cassette, all to be
provided by AASTROM. Manufacturing documentation shall be owned by AASTROM and
shall consist of: (i) the DMR documentation; (ii) documentation of
Specifications and drawings for Cell Cassette parts to be provided by MSP or
acquired by MSP from approved vendors; (iii) test and acceptance procedures and
criteria documentation; (iv) subassembly specifications, drawings and
requirements documentation; (v) manufacturing instructions and procedures
documentation; and (vi) quality instructions and procedures documentation;
(2) prepare the DMR as set forth in Section 6(b), above, and maintain the
DMR in accordance with a documented change management system reasonably
acceptable to AASTROM which system shall include the approval of all Cell
Cassette manufacturing changes by AASTROM prior to implementation by MSP. The
foregoing change management system documentation shall also include the history
of all changes including validation and/or rationale and shall be owned by
AASTROM;
(3) prepare a gamma sterilization validation plan, utilizing mutually
agreeable subcontractors, and conduct or subcontract the required laboratory
tests, including product
-12-
<PAGE>
tests and environmental monitoring, to achieve a 10/-6/ sterility assurance
level per ANSI/AAMI SY32-1991 for the Cell Cassette;
(4) to the extent required for submittal by AASTROM to the FDA or other
regulatory authorities in connection with the Cell Cassette, prepare a detailed
description of MSP's manufacturing methods, processes, procedures and facility
applicable to the manufacture and testing of the Cell Cassette as requested by
AASTROM;
(5) establish a finished device packaging plan, utilizing mutually
agreeable subcontractors, conduct packaging validation, and establish final
packaging and shipping specifications based upon functional requirements
provided by AASTROM;
(6) provide engineering and other support for validation of the Cell
Cassette manufacturing process and for sterility validation for each Shipment
Lot;
(7) use reasonable efforts to train AASTROM's technical representatives at
MSP's facilities, at AASTROM's request and expense from time to time during the
Term in all applicable procedures for manufacture of the Cell Cassettes. Such
representatives shall sign reasonable non-disclosure agreements in accordance
with Section 16(b) consistent with the terms of this Agreement to protect MSP's
Confidential Information. AASTROM and such representatives shall also comply
with all of MSP's reasonable regulations with regard to access by visitors
during such training sessions and MSP reserves the right to deny access to its
facilities by non-AASTROM employees provided that such access shall not be
unreasonably withheld; and
(8) develop a quality measurement system acceptable to AASTROM and report
in a manner reasonably satisfactory to AASTROM on a monthly basis with regard to
MSP's progress. This system shall include, at a minimum, (i) metrics on the
percent of non-conforming Cell Cassettes, including trending data; (ii) the
percentage of the top five defects; and (iii) a FRACAS (Failure Report Analysis
and Corrective Action System) detailing the root-cause analysis, corrective
actions taken, and proof of implementation.
SECTION 10. EQUIPMENT.
---------
(a) Ownership. The Parties acknowledge that the Equipment is the sole and
---------
exclusive property of the Party indicated on Appendix I as such Appendix may be
augmented by mutual agreement of the Parties from time to time. Equipment shall
be located at the premises of MSP in Seagrove, North Carolina or other
facilities of MSP as the Parties may agree. Except for the sole purpose of
performing maintenance, none of the Equipment owned by AASTROM shall be
relocated by MSP without the prior written consent of AASTROM. It is understood
that AASTROM shall have the right to remove the Equipment it owns from MSP's
facilities at any time upon reasonable notice to MSP, except that if such
removal shall impede MSP's performance under this Agreement, MSP shall so notify
AASTROM and such Equipment shall not be removed until the condition of such
impedance shall no longer pertain. Notwithstanding the foregoing, in the event
that MSP's performance is suspended by reason of force majeure, AASTROM shall be
entitled to remove its Equipment to enable AASTROM
-13-
<PAGE>
to continue to manufacture Cell Cassettes. Upon removal of its Equipment,
AASTROM shall pay MSP its reasonable costs of disassembly and freight to a
location of AASTROM's choice. AASTROM shall return such Equipment to MSP's
facilities upon MSP's demonstration (to the extent it can reasonably do so
without the use of such Equipment) to AASTROM's reasonable satisfaction of its
capability to resume manufacture of the Cell Cassettes. Equipment added to
Appendix I shall be owned by the Party that paid for it or in accordance with
Section 21(b), as applicable. Upon expiration or earlier termination of this
Agreement, and the payment by AASTROM of all outstanding invoices, MSP shall,
within thirty (30) days thereafter, return all of AASTROM's Equipment to
AASTROM's facilities (or other location designated by AASTROM in writing) with
all reasonable packing, transportation and insurance costs to be paid by
AASTROM.
(b) Identification Tags. Identification tags supplied by AASTROM containing
-------------------
information relating to its ownership of Equipment shall be affixed by MSP and
such tags shall not be removed by MSP without the written approval of AASTROM.
(c) Liens and Insurance. MSP shall not impair the right, title and interest of
-------------------
AASTROM in and to the Equipment it owns, nor shall MSP allow any lien or
encumbrance to be levied upon such Equipment. During the Term, and until
Equipment owned by AASTROM is removed by AASTROM or abandoned, MSP shall carry
and maintain, at its expense, all-risk property insurance covering the Equipment
at full replacement cost.
(d) Inspection. AASTROM shall have the right, at reasonable times during
----------
normal business hours and upon reasonable notice, to inspect its Equipment from
time to time to ensure that it is being maintained in accordance with Section
10(f), below, and utilized in a manner consistent with the provisions of this
Agreement.
(e) No Modification. MSP will not alter or modify AASTROM's Equipment in any
---------------
material way without the prior consent of AASTROM. If AASTROM gives such
consent, any alteration or modification shall become the property of AASTROM.
(f) Maintenance. MSP will conduct day-to-day preventative and operational
-----------
maintenance on all of the Equipment. Such day-to-day maintenance will be
adequate: (i) to maintain the Equipment in good working order and condition,
ordinary wear and tear and casualty excepted; (ii) to meet all expressed
conditions required by manufacturers' written warranties, if any, given with the
Equipment so that such warranties remain in effect for their stated terms;
provided that MSP has received from AASTROM a copy of such warranty; and (iii)
-------- ----
to promote adherence to agreed-upon quality standards as well as the
Specifications and to help minimize unscheduled downtime.
(g) Use. Equipment owned by AASTROM shall be used solely for the benefit of
---
AASTROM to produce Cell Cassettes.
-14-
<PAGE>
SECTION 11. RIGHT OF INSPECTION.
-------------------
(a) Rights of Inspection. In addition to AASTROM's right to inspect Cell
--------------------
Cassettes upon delivery pursuant to Section 3, AASTROM shall have the following
rights of inspection, each such right to be exercised, if at all, at its own
cost and expense:
(1) to inspect, sample and test Cell Cassette work-in-progress and review
process control reports and manufacturing records at MSP's facilities upon at
least three (3) work days' prior notice to MSP and shall consult with MSP if it
believes that its inspection shows MSP is failing to meet its obligations under
this Agreement (in such event the parties will work together toward resolution
of any such failure); and
(2) to inspect, sample and test Cell Cassettes at MSP's facilities after
notice by MSP that a Shipment Lot is ready for shipment to a sterilizer
location. Such inspection must be conducted, if at all, within ten (10) days
after receipt of such notice.
(b) Waiver. AASTROM's right to inspect under this Section 11 and any
------
inspection by AASTROM hereunder, or AASTROM's acceptance of or payment for Cell
Cassettes, shall not be deemed to relieve MSP of any of its obligations under
the terms of this Agreement nor a waiver by AASTROM of its rights to inspect
upon delivery pursuant to Section 3 or with respect to breach of warranty as set
forth in Section 12, below.
(c) Self-Certification. The Parties shall work together toward self-
------------------
certification pursuant to which MSP will conduct in-process controls and
finished device testing in order to augment, and reduce the need for, exercise
by AASTROM of its inspection rights.
(d) Records; Inspection. For at least two years after the expiration or any
-------------------
earlier termination of this Agreement (under Section 17 below), MSP shall retain
accurate and complete records with respect to its work and manufacture of the
Cell Cassettes to the extent necessary to reasonably satisfy all applicable FDA
and EC requirements and to verify the time worked and material and other costs
invoiced to AASTROM. MSP shall make available to AASTROM, cost information that
AASTROM may reasonably request in connection with the establishment of Phase II
pricing in accordance with Appendix III. Upon reasonable notice to MSP, AASTROM
and/or its designated independent auditor may inspect and conduct a reasonable
audit on such records. If MSP does not agree with the results of the audit, then
the dispute shall be resolved pursuant to Section 24, below. Furthermore, if the
results of such audit indicate an overcharge by MSP of ten percent (10%) or more
of AASTROM's applicable purchase price from MSP, MSP shall reimburse AASTROM for
the cost of performing such audit, otherwise the cost of such audit shall be
borne by AASTROM. If such audit shows an overcharge by MSP of AASTROM's
applicable purchase price from MSP, MSP shall, upon its review of said audit,
promptly reimburse AASTROM for such overcharge plus interest at a rate of
11/2%/month since the date of payment by AASTROM of the applicable invoice(s).
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<PAGE>
SECTION 12. WARRANTY; RECALLS.
-----------------
(a) Warranty. MSP warrants to AASTROM that each Cell Cassette and Component
--------
shall comply with the then-current Specifications and shall be free from defects
in material and workmanship and shall be manufactured and assembled in
compliance with the DMR and all United States federal, state and local laws,
rules and regulations and with all applicable EN29002 and EN46002 requirements
(and any amendments thereto and replacements thereof), applicable at the time of
manufacture. For a period of one (1) year after delivery to AASTROM, AASTROM
shall have the right to notify MSP that a Cell Cassette or Component does not
conform to this warranty. Such notice shall set forth in detail the reason for
such non-conformance. AASTROM shall prepare for shipment and return to MSP
allegedly defective Cell Cassette or Component in accordance with MSP's written
directions and at MSP's cost. Upon reasonable verification of noncompliance with
this warranty, MSP shall repair a defective and non-conforming Cell Cassette or
Component or, at its option, replace a defective Cell Cassette or Component with
non-defective, conforming units within thirty (30) days after receipt of notice
from AASTROM of the nonconformance. However, if in MSP's reasonable judgment
such repair or replacement cannot be accomplished within said time, MSP shall
issue to AASTROM a credit for the price of each unit of Cell Cassette or
Component verified as defective. All shipping and other costs incurred in
connection with the repair or replacement of all such nonconforming Cell
Cassette or Component units shall be paid by MSP. The foregoing warranty shall
not apply to the extent that the non-conformance is due to a defective component
supplied by AASTROM or compliance with the Specifications as supplied by
AASTROM. Notwithstanding any statutory or other law to the contrary, it is
understood that the foregoing one (1) year warranty period begins on delivery of
the Cell Cassette or Component to AASTROM regardless as to when a defect in a
Cell Cassette or Component may be discovered.
(b) DISCLAIMER. THE WARRANTY SET FORTH IN SECTION 12(a), ABOVE, IS GIVEN TO
----------
AASTROM ONLY AND IS IN LIEU OF ALL OTHER WARRANTIES, WHETHER EXPRESSED BY
AFFIRMATION, PROMISE, DESCRIPTION, MODEL, SAMPLE OR OTHERWISE. ANY AND ALL OTHER
WARRANTIES, INCLUDING, WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR USE OR PURPOSE, ARE HEREBY
DISCLAIMED. THE REMEDIES SET FORTH IN THIS AGREEMENT SHALL BE AASTROM'S
EXCLUSIVE REMEDIES FOR DEFECTIVE AND NONCONFORMING PRODUCTS.
(c) No Third-Person Warranty. AASTROM will not make any warranty,
------------------------
representation or guaranty to any person, either orally or in writing, in the
name of or on behalf of MSP.
(d) Recalls. From time to time throughout the Term, AASTROM may in its
-------
discretion determine that it is necessary or advisable to recall Cell Cassettes
manufactured by MSP. In such event, if AASTROM reasonably determines that the
number of reported incidence of defective Cell Cassettes is high in relation to
AASTROM's historical incidence rate for defective Cell Cassettes and/or general
medical product industry standards and AASTROM recalls one or more Shipment Lots
due to a failure of such units to meet Specifications during the Warranty
Period, AASTROM shall so notify MSP of the recall and the Parties shall jointly
exchange relevant information and consult on causation of the defective units
prior to
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<PAGE>
implementing the recall. In the event it is determined by the Parties that the
Cell Cassettes were defective due to a failure of such units to meet
Specifications during the Warranty Period, MSP agrees to reimburse AASTROM for
the reasonable direct costs incurred by AASTROM in conjunction with the recall
including the cost of replacing, shipping and testing the units of the Shipment
Lot(s) recalled, whether or not all such units are ultimately determined to have
been defective, by way of a reduction in MSP's applicable mark-up rates (as set
forth on Appendix III) to 15% until the cost of the recall has been recovered by
AASTROM. Any disputes regarding causation of defective units involved in a
recall that cannot be resolved by the Parties will be resolved through
arbitration in accordance with Section 24(b). Furthermore, in the event this
Agreement is terminated for any reason prior to AASTROM recovering the full
amount of its recall costs from MSP, MSP shall promptly pay to AASTROM the
amount of any unreimbursed costs. For the purpose of clarification, it is agreed
that AASTROM shall be solely responsible for determining whether any product
recall, correction or withdrawal is required and for complying with all of the
medical device reporting requirements pursuant to 21 CFR Part 803.
SECTION 13. LIMITATION OF DAMAGES LIABILITY.
-------------------------------
(a) Third Party Claims Not Related to Manufacturing Defect. MSP shall have no
------------------------------------------------------
liability for any damages claimed by a third party if the claim does not arise
from or relate to a manufacturing defect by MSP.
(b) Third Party Claims Related to MSP's Delays. MSP shall have no liability
------------------------------------------
for any damages claimed by a third party arising from or related to MSP's delays
in manufacturing and delivering Cell Cassettes; provided, however, this
limitation of liability shall not apply with respect to any third party which
has a contractual relationship with MSP with respect to claims arising out of
such contract.
(c) Third Party Claims for Product Liability. With respect to a third party's
----------------------------------------
claim for products liability in connection with the manufacture of the Cell
Cassettes or Components, MSP's liability shall not exceed*, in the aggregate
for the Term of this Agreement.
(d) AASTROM's Claims - Phase I. During Phase I, MSP's liability for damages to
--------------------------
AASTROM for any breach of MSP's obligations, warranties or representations under
this Agreement shall not exceed* in the aggregate. Notwithstanding the
foregoing this limitation of liability shall not apply with respect to any
breach of MSP's obligations to maintain and protect AASTROM's Equipment,
Intellectual Property and Confidential Information, or MSP's obligations under
Section 23 hereof regarding similar products.
(e) AASTROM's Claims - Phase II. During Phase II, MSP's liability for
---------------------------
damages to AASTROM for any breaches of MSP's obligations, warranties or
representations under this Agreement shall not exceed: (i) in the event of a
breach which does not result in the termination of this Agreement, an amount
equal to*; or (ii) in the event
----------
* CONFIDENTIAL PORTION REDACTED AND FILED SEPARATELY WITH THE COMMISSION
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<PAGE>
of a breach which does result in the termination of this Agreement, an amount
equal to*.
Notwithstanding the foregoing, the foregoing limitation of liability shall
not apply with respect to any breach of MSP's obligations to maintain and
protect AASTROM's Equipment, Intellectual Property and Confidential Information,
or MSP's obligations under Section 23 hereof regarding similar products.
(f) Willful Wrongdoing. Notwithstanding anything to the contrary contained in
------------------
this Agreement, there shall be no limitation on MSP's liabilities arising from
or related to any criminal activity by MSP or any willful wrongdoing by MSP,
excepting however, the* limitation on liability for third party claims for
product liability as specified in Section 13(c) shall remain applicable, even in
the event of criminal activity or willful wrongdoing by MSP.
(g) Nature of Damages. The damages referenced in this Section 13 include
-----------------
damages of any nature whatsoever including without limitation, direct, indirect,
special, incidental and consequential damages. No Party shall have any liability
for any punitive damages.
(h) Mitigation. The non-breaching Party, as well as the breaching Party, shall
----------
use its best diligent efforts to mitigate the damages caused by the breach.
(i) AASTROM's Liabilities. Except with regard to AASTROM's obligations under
---------------------
Sections 14(a) and (d) and 16, it is agreed that AASTROM's liability to MSP with
regard to any claim for damages that may arise from a breach of any of AASTROM's
obligations, warranties and representations under this Agreement shall not
exceed the purchase price for the Cell Cassettes or Components with respect to
which AASTROM is in breach.
Notwithstanding the foregoing, the foregoing limitation of liability shall
not apply with respect to any breach of AASTROM's obligations with regard to the
Intellectual Property or Confidential Information of MSP, nor shall such
limitations apply in the event of criminal activity or willful wrongdoing by
AASTROM.
SECTION 14. INDEMNITY.
---------
(a) AASTROM's General Indemnity. The Parties acknowledge that AASTROM has
---------------------------
designed, developed and established the Specifications for the Cell Cassette and
Components, and is responsible for the Development (as defined in Section 9,
above). To the extent not covered by MSP's indemnification obligations under
Section 14(b) below, and to the extent MSP's liabilities to third parties exceed
the limitation of damage liabilities specified in Section 13(a), (b) and (c)
hereof, AASTROM will indemnify, hold harmless and defend MSP and its parents and
affiliates and its and their officers, directors, agents, employees and
contractors and their successors and assigns (individually and collectively, the
"MSP
----------
* CONFIDENTIAL PORTION REDACTED AND FILED SEPARATELY WITH THE COMMISSION
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<PAGE>
Indemnitees") from and against any and all loss, liability, cost, damage and
expense, including, without limitation, reasonable attorneys' fees, in
connection with bodily injury, death or otherwise, for claims made by third
parties, including, without limitation, a governmental agency or other entity,
against any of the MSP Indemnitees arising out of or in connection with (1) the
design, manufacture, sale, use, function or operation of the Cell Cassette and
Components or (2) the breach by AASTROM of its covenants, representations or
warranties under this Agreement, or (3) the non-compliance by MSP with GMPs, but
only to the extent that such non-compliance is caused by the failure of AASTROM
to comply with a covenant under this Agreement, or a Specification or written
requirement of AASTROM that is in express direct violation of GMPs. Upon receipt
of a claim indemnified hereunder, MSP shall give AASTROM prompt notice thereof
and shall, at no out-of-pocket expense to MSP, cooperate with AASTROM with
respect to the defense of such matter. MSP shall have the right, without
affecting its indemnity hereunder, to participate in the administration, defense
or settlement of any such matter at its own expense and with counsel of its own
choosing, but AASTROM will control the defense and selection of lead defense
counsel. AASTROM's counsel shall give due consideration to suggestions of MSP's
counsel and AASTROM shall not settle any claim indemnified hereunder unless MSP
is given a full and unconditional release in respect of such matter and any
related matter.
(b) MSP's General Indemnity. MSP will indemnify, hold harmless and defend
-----------------------
AASTROM and its parents and affiliates and its and their officers, directors,
agents, employees and contractors and their successors and assigns (individually
and collectively, the "AASTROM Indemnitees") from and against any and all loss,
liability, cost, damage and expense (collectively, "Losses"), including without
limitation, reasonable attorneys' fees, in connection with any claims made by
third parties, including without limitation, a governmental agency or other
entity, against any of the AASTROM Indemnitees for any product liability claim
arising out of or in connection with the breach of any of MSP's warranties or
obligations hereunder; provided, that notwithstanding anything in this Agreement
to the contrary, MSP's total liability under this Section 14(b) shall not
exceed* dollars, and AASTROM's indemnity set forth in Section 14(a), above,
shall not be affected or limited by Losses that are in excess of MSP's
indemnification obligations under this Section 14(b). Upon the receipt of a
claim of indemnification hereunder, AASTROM shall give MSP prompt notice thereof
and shall, at no out-of-pocket expense to AASTROM, cooperate with MSP with
respect to the defense of such matter. AASTROM shall have the right, without
affecting its indemnity rights hereunder, to participate in the administration,
defense or settlement of any such matter at its own expense and with counsel of
its own choosing, but MSP will control the defense and selection of lead defense
counsel. MSP's counsel shall give due consideration to suggestions of AASTROM's
counsel and MSP shall not settle any claim indemnified hereunder unless AASTROM
is given a full and unconditional release in respect of such matter.
(c) Intellectual Property Warranty.
------------------------------
(1) AASTROM represents and warrants that neither the design nor
Specifications furnished by AASTROM to MSP in connection with this Agreement nor
the manufacture or sale of Cell Cassettes to such design or Specifications or in
conformance with the DMR (but
----------
* CONFIDENTIAL PORTION REDACTED AND FILED SEPARATELY WITH THE COMMISSION
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<PAGE>
excluding any of MSP's manufacturing process or methods that may be incorporated
into any of the foregoing by MSP), will infringe any United States or foreign
patent, trademark, copyright or other intellectual property right of others.
(2) MSP represents and warrants to AASTROM that no manufacturing process or
method employed by MSP to manufacture the Cell Cassettes will infringe any
United States or foreign patent, trademark, copyright or other intellectual
property right of others; provided that, such process or method was developed
by, or originated from, MSP but without regard to whether such process or method
is incorporated in the Specifications or DMR.
(3) Without prejudice to the rights of MSP or AASTROM as set forth in
Sections 14(d) and 14(e) below, respectively, if the manufacture or sale of Cell
Cassettes to such design Specifications or DMR or the manufacturing process or
method, respectively, is held to constitute an infringement of any intellectual
property right of any third party or to result in such wrong, and such
manufacture and sale is enjoined (by temporary, preliminary or permanent
injunction), AASTROM or MSP, as the case may be, at its own expense, shall use
its best diligent efforts to procure for the other party the right to continue
to manufacture and sell Cell Cassettes, as applicable.
(d) Intellectual Property Indemnity by AASTROM. AASTROM will indemnify, hold
------------------------------------------
harmless and defend the MSP Indemnitees from and against any and all
liabilities, costs and expenses, including, without limitation, reasonable
attorneys' fees, with respect to which a claim is made by a third party against
any of the MSP Indemnitees arising out of or in connection with the breach of
AASTROM's warranty and representation set forth in Section 14(c), above. Upon
receipt of a claim indemnified hereunder, MSP shall give AASTROM prompt notice
thereof and shall, at no out-of-pocket expense to MSP, cooperate with AASTROM
with respect to the defense of such matter. MSP shall have the right, without
affecting its indemnity hereunder, to participate in the administration, defense
or settlement of any such matter at its own expense and with counsel of its own
choosing, but AASTROM will control the defense and selection of lead defense
counsel. AASTROM's counsel shall give due consideration to suggestions of MSP's
counsel. AASTROM shall not settle any claim indemnified hereunder unless MSP is
given a full and unconditional release in respect of such matter and any related
matter.
(e) Intellectual Property Indemnity by MSP. MSP will indemnify, hold harmless
--------------------------------------
and defend the AASTROM Indemnitees from and against any and all liabilities,
costs and expenses, including, without limitation, reasonable attorneys fees,
with respect to which claim is made by a third party against any of the AASTROM
Indemnities arising out of or in connection with the breach of MSP's warranty
and representation set forth in Section 14(c), above. Upon receipt of a claim
indemnified hereunder, AASTROM shall give MSP prompt notice thereof and shall,
at no out-of-pocket expense to AASTROM, cooperate with MSP with respect to the
defense of such matter. AASTROM shall have the right, without affecting its
indemnity hereunder, to participate in the administration, defense or settlement
of any such matter at its own expense and with counsel of its own choosing, but
MSP will control the defense and selection of lead defense counsel. MSP's
counsel shall give due consideration to suggestions of AASTROM's counsel. MSP
shall not settle any claim indemnified hereunder unless
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AASTROM is given a full and unconditional release in respect of such matter
and any related matter.
SECTION 15. OWNERSHIP OF INTELLECTUAL PROPERTY.
----------------------------------
(a) Ownership of Intellectual Property. Each Party shall retain and own (vis a
----------------------------------
vis the other Party) all right, title and interest to all copyrightable
material, inventions, trademarks, trade secrets, trade dress or other
intellectual property (collectively, "Intellectual Property") which it now owns.
Notwithstanding the foregoing, AASTROM shall own all Intellectual Property and
documentation generated by MSP in connection with the collaborative development
and manufacture of Cell Cassettes, whether or not such Intellectual Property was
generated prior to or after the Effective Date, except for Intellectual Property
that relates to the molding and fabrication processes performed by MSP and the
know-how in connection therewith. Said documentation to be owned by AASTROM
shall include but not be limited to the Specifications, DMR documentation,
material lists, supplier lists and descriptions of manufacturing methods and
processes for manufacture of the Cell Cassettes (hereinafter, the "AASTROM
Documentation"). Furthermore, notwithstanding anything contained herein, MSP
acknowledges and agrees that the AASTROM Documentation will not embody or
constitute the Intellectual Property of MSP. Nothing in this Agreement shall be
deemed to grant a license to either Party under or with respect to the
Intellectual Property of the other Party.
(b) Return of Intellectual Property. Upon expiration of the Term or upon any
-------------------------------
earlier termination of this Agreement, MSP shall promptly transfer to AASTROM
all AASTROM Documentation and Intellectual Property within MSP's possession or
control, and AASTROM shall promptly transfer to MSP all MSP Intellectual
Property within AASTROM's possession or control. Furthermore, in the event of
any expiration or termination of this Agreement by AASTROM "for cause" pursuant
to Section 17, or by MSP, other than in accordance with Section 17, MSP will
provide AASTROM with full cooperation with regard to the transfer of any know-
how embodied in AASTROM Documentation that is sufficient to allow AASTROM to
manufacture the Cell Cassettes pursuant to this Agreement; provided that, except
-------- ----
for copying, MSP shall bear no expense of any nature in connection
therewith.
SECTION 16. CONFIDENTIAL INFORMATION.
------------------------
(a) Title to Confidential Information and Related Documents. Title to
-------------------------------------------------------
Confidential Information provided by the Disclosing Party to the Recipient shall
be and remain the sole and exclusive property of the Disclosing Party. Recipient
shall return all such Confidential Information, together with all copies
thereof, except for one archive copy, promptly upon the termination of this
Agreement.
(b) Non-Disclosure and Non-Use of Confidential Information. The Recipient
------------------------------------------------------
shall hold all Confidential Information disclosed to it pursuant to this
Agreement in confidence and will use Confidential Information only for the
purpose of performing its obligations under this Agreement and for no other
purpose whatsoever. The Recipient will not disclose Confidential Information to
any third person and will disclose Confidential Information only to such of its
employees as is necessary or reasonably appropriate to the performance of the
Recipient's
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obligations under this Agreement. Recipient shall ensure that its employees and
any permitted subcontractors having access to the Confidential Information of
the Disclosing Party have previously agreed, either as condition of employment
or to obtain the Confidential Information, to be bound by terms and conditions
substantially similar to those found in this Section 16(b) as a condition to
such access. In the event that the Recipient is requested or required by court
or governmental order to disclose any of the Confidential Information, the
Recipient shall provide the Disclosing Party with prompt written notice of such
request or requirement so that the Disclosing Party may seek a protective order
or other appropriate protection. The Recipient will cooperate with Disclosing
Party at the Disclosing Party's expense, to obtain an appropriate protective
order or other reliable assurance that confidential treatment will be accorded
confidential treatment by such court or governmental entity.
(c) Protection of Confidential Information. The Recipient will observe
--------------------------------------
reasonable precautions and procedures to protect and preserve Confidential
Information to the same extent that the Recipient uses with respect to its own
like confidential information.
SECTION 17. TERM AND TERMINATION.
--------------------
(a) Term of Agreement. The Term shall commence upon the Effective Date and
-----------------
continue until its expiration on the seventh anniversary of the Effective Date,
unless earlier terminated as provided in this Agreement.
(b) Termination Upon Default. Except for a failure and the corresponding
------------------------
remedy as expressly specified in Sections 3, 12 and 17(d), if either Party shall
commit a material default in any of the material terms or obligations under this
Agreement, the non-defaulting Party shall have the right to give the defaulting
Party notice specifying with particularity the default and the circumstances
surrounding the default. If the defaulting Party shall fail to cure, the noticed
default within thirty (30) days after receipt of such notice (fifteen business
days with respect to non-payment of amounts owed by AASTROM to MSP under this
Agreement), the non-defaulting Party shall have the right to terminate this
Agreement prospectively by giving the defaulting Party further notice of at
least twenty (20) days prior to the effective date of termination set forth in
such further notice.
(c) Termination Upon Insolvency. Either Party shall have the right to
---------------------------
terminate this Agreement prospectively by notice of at least ten (10) days to
the other Party if the Party receiving such notice has filed a petition in
bankruptcy or insolvency (or if such petition is filed against it and is not
vacated, stayed or bonded within one hundred and twenty (120) days after such
filing), or files a petition or answer seeking reorganization, readjustment or
rearrangement of a substantial part of its business under any law relating to
bankruptcy or leading to bankruptcy or is adjudicated by a competent regulatory
agency to be bankrupt or insolvent, or a receiver is appointed for all or
substantially all of the property of such other Party, or an assignment is made
for the benefit of the creditors of such other Party, or any proceeding are
instituted for the liquidation or winding up of the business of such other
Party.
(d) Termination Upon Inability of MSP to Perform. If, on any three occasions
--------------------------------------------
within a twelve-month period during the Term of this Agreement, one or more
of the following events
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<PAGE>
occur, then AASTROM shall have the right to notify MSP that AASTROM intends to
terminate this Agreement prospectively, specifying an effective date of
termination not less than thirty (30) days after the date of such notice: (i)
more than ten (10%) percent of the Shipment Lots or units of Cell Cassettes
delivered to AASTROM are properly rejected by AASTROM under Section 3(f), above;
(ii) more than 1 of 1,000 Cell Cassettes accepted by AASTROM fail to meet the
warranty set forth in Section 12(a); or (iii) MSP fails to timely deliver a
complete order of Cell Cassettes meeting Specifications. For purposes of this
Section 17(d), the term "timely deliver" shall mean delivery not more than ten
(10) days prior to, nor more than five (5) days after, scheduled delivery dates.
The foregoing right of termination shall be in addition to AASTROM's right to
seek damages available under law subject to the limitations set forth in Section
13.
(e) Effect of Termination. Termination of this Agreement by either Party shall
---------------------
not affect any purchase order submitted by AASTROM to MSP pursuant to the terms
of this Agreement prior to the effective date of termination and the Parties
shall fulfill their obligations under such purchase order or to be undertaken
under this Agreement prior to such termination even if the completion of such
obligations shall be after the effective date of termination. Notwithstanding
the foregoing, upon any termination of this Agreement by AASTROM pursuant to
this Section 17, AASTROM may, in its discretion elect to terminate all in-
process manufacturing of Cell Cassettes by MSP and MSP shall terminate such
manufacturing effective immediately upon notice from AASTROM. Furthermore, upon
the expiration of the Term as specified in Section 17(a), or upon the
termination of this Agreement other than a termination by AASTROM as permitted
by Sections 17(b), (c) or (d), then AASTROM shall purchase, at the price set
forth in this Agreement, all Cell Cassette finished goods, work in process and
unique materials that have been purchased by MSP prior to the effective date of
this Agreement for the manufacture of Cell Cassettes provided that the
quantities of such goods and materials are reasonable in light of AASTROM's
forecasted Requirements and provided that such goods and materials are not
defective (per the Specifications). Without limiting the generality of the
foregoing, to the extent necessary to give effect to the intention of the
Parties expressed therein, the obligations of the Parties under Sections 10
("Equipment"), 11(d) ("Records; Inspection"), 12 ("Warranty; Recalls"), 13
("Limitation of Damages Liability"), 14 ("Indemnity"), 15 ("Ownership of
Intellectual Property"), 16 ("Confidential Information"), 17 ("Term and
Termination"), 18 ("Preferred Supplier; Alternative Supplier"), 19
("Representations and Warranties"), 23 ("Similar Products"), 24 ("Governing Law;
Dispute Resolution"), 25 ("Notices"), 28 ("Severability"), 29 ("Amendment and
Waiver") and 32 ("Entire Agreement") shall survive termination of this Agreement
in accordance with their terms.
(f) Liabilities When No Termination. Notwithstanding the foregoing, in the
-------------------------------
event that MSP is in material breach of any of its warranties or obligations,
and such breach does not allow AASTROM to terminate this Agreement pursuant to
Section 17, then MSP shall be subject to the liabilities and remedies available
at law and by this Agreement for such breach, subject to the limitations set
forth in Section 13.
(g) Alternative Purchase of Product. If MSP is in breach of MSP's obligations
-------------------------------
to make and sell Cell Cassettes or Components as specified in this Agreement,
and such breach does not
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<PAGE>
result in a termination of this Agreement, and if AASTROM has available an
alternative manufacturing source for said Cell Cassettes or Components, then
AASTROM may cancel all or any part of any pending purchase orders (which
purchase orders are within the quantities specified in the 12-month rolling
forecast as specified in Section 3(a) hereof) for which MSP is unable or
unwilling to accept and perform; and AASTROM may have said purchase orders
performed by the alternative manufacturing source; and any damages suffered by
AASTROM as a result of MSP's breach shall still be recoverable against MSP
(subject to the limitations specified in Section 13 hereof).
SECTION 18. PREFERRED SUPPLIER; ALTERNATIVE SUPPLIER.
----------------------------------------
(a) Preferred Supplier. During the Term, AASTROM shall regard MSP as its
------------------
"preferred supplier" for Cell Cassettes and purchase its Requirements from
MSP; provided, however, nothing in this Agreement shall be deemed to
-------- -------
preclude AASTROM from manufacturing the remaining forty (40%) percent of
AASTROM's total requirements for Cell Cassettes by itself or from utilizing
alternate suppliers for such manufacture.
(b) Alternate Suppliers. In the event that AASTROM elects to utilize an
-------------------
alternative supplier for the Cell Cassettes during the Term, MSP shall provide
reasonable cooperation by promptly supplying AASTROM with copies of all AASTROM
Documentation at the reasonable expense of AASTROM; provided, however nothing
-------- -------
in this Section 18(b) shall be deemed to require MSP to provide training or
consultation services to the alternate supplier with regard to the manufacture
of the Cell Cassettes.
SECTION 19. REPRESENTATIONS AND WARRANTIES. MSP and AASTROM each represents
------------------------------
and warrants (1) that each has, respectively, the full right and authority to
enter into this Agreement, and nothing provided in this Agreement will conflict
in any way with any outstanding obligation, contractual or otherwise, of such
Party, and (2) that each shall comply with all United States governmental laws,
rules, regulations and orders applicable to its obligations under this
Agreement.
SECTION 20. FORCE MAJEURE.
-------------
(a) Suspension of Performance. In the event that MSP or AASTROM (other than
-------------------------
with respect to its obligations to pay money to MSP) is rendered unable, wholly
or in part, to carry out its obligations under this Agreement by reasons of acts
of God, industrial disturbances, outbreak of a state of emergency, war,
hostilities, civil commotion, riots, epidemics, fires, earthquakes, floods or
any other cause or causes similar or dissimilar to the foregoing beyond the
reasonable control of the Party claiming benefit of force majeure, upon such
Party's giving notice and reasonably full particulars of such reason to the
other Party within a reasonable time after the occurrence of the cause relied
upon, then the obligations of the Party giving such notice, so far as they are
affected by such reason, shall be suspended during the continuation of any
inability so caused, but no longer, and such cause shall so far as reasonably
possible be remedied with all reasonable dispatch without the necessity of
expending sums (including, without limitation, for overtime labor) not otherwise
required under this Agreement. When the event operating to suspend performance
by either Party
-24-
<PAGE>
shall cease, this Agreement shall continue in full force and effect until
the expiration or earlier termination as provided in this Agreement.
(b) Cooperation. In the event of a force majeure, AASTROM and MSP shall
-----------
communicate and cooperate in seeking to avoid or minimize potential interruption
of supply and to develop mutually acceptable contingency plans in the spirit of
this Agreement. In any event, the time for a Party's performance under this
Agreement shall be extended to the extent reasonably necessary to perform the
suspended obligation.
(c) Allocation of Resources. In the event of a force majeure resulting in a
-----------------------
partial inability of MSP to supply product to its customers, MSP may allocate
resources that have not specifically been earmarked to this Agreement, to all of
its customers in an equitable manner as determined solely by MSP.
Section 21. MSP Competitiveness; Shared Investment Return.
---------------------------------------------
(a) MSP's Competitiveness. The Parties acknowledge that a primary
---------------------
consideration for AASTROM with regard to the selection of MSP as its preferred
supplier was MSP's expertise and stated intention to be a cost-effective and a
capable manufacturer and supplier of Cell Cassettes and Components and that
AASTROM's commercialization strategy is dependent in part upon MSP's stated
intention to use best diligent efforts to remain cost effective and capable.
Thus, MSP will use best diligent efforts to search for methods and means that
will lead to in-plant cost reductions, savings and maintenance and quality
improvement. AASTROM will cooperate with MSP in these efforts.
(b) Shared Investment Return.
------------------------
(1) MSP Capital Investments. If, during the Term, MSP shall invest in an
-----------------------
AASTROM-approved capital project that results in a cost savings in the
production of Cell Cassettes, MSP shall be entitled to retain such cost savings
until MSP has recouped the entire cost of the capital project from Cell
Cassettes purchased by AASTROM. Once MSP recoups such capital expenditure, the
cost savings resulting from implementation of the capital expenditure shall be
shared by the Parties on a 50%:50% basis and MSP shall be deemed to have
assigned to AASTROM sole ownership of the capital property purchased by MSP such
that the capital property shall be AASTROM's Equipment. Throughout the Term,
any such capital property purchased by MSP shall be used by MSP solely for the
manufacture of Cell Cassettes for AASTROM. The method for recoupment of MSP's
capital investments and implementation of cost sharing shall be as set forth in
Section 21(b)(2) below.
(2) Recoupment of MSP Capital Investment; Cost Sharing. Effective on the
--------------------------------------------------
first day of the quarter immediately following the quarter in which a capital
project paid for by MSP is implemented and cost savings first occur, the Base
Cost Assumption (calculated in accordance with Appendix III) shall be
recalculated (RBCA) to reflect the cost savings resulting from implementation of
the capital project. The difference between the original Base Cost Assumption
(OBCA) and RBCA shall be tracked by MSP on future orders of Cell Cassettes and
the entire cost savings shall be allocated to MSP until MSP has recouped the
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<PAGE>
amount MSP expended on the capital project. Thereafter, the cost savings
resulting from implementation of the capital expenditure shall be allocated to
AASTROM and MSP on a 50%:50% basis with regard to all Cell Cassette orders
submitted by AASTROM.
(3) AASTROM Capital Investments. AASTROM shall enjoy all savings that
---------------------------
result from capital projects that are paid for by AASTROM or result from any
changes in Specifications made by AASTROM. In the event that any such cost
savings are implemented, the Base Cost Assumption utilized to calculate
AASTROM's purchase price for Cell Cassettes shall be immediately reduced to
reflect the amount of the cost savings. AASTROM shall also retain all ownership
rights with regard to any capital property purchased by AASTROM which may be
used by MSP in the manufacture of Cell Cassettes for AASTROM.
SECTION 22. INSURANCE.
---------
During the Term, each Party shall procure and maintain at its own cost and
expense, including the cost of premiums and deductibles, a general liability
insurance policy, including product liability (completed operations) insurance,
in an amount not less than* dollars per occurrence,* dollars aggregate bodily
injury, death and property damage liability and commercial umbrella coverage of
at least* dollars each occurrence and annual aggregate. Such insurance shall be
written by a reputable insurance company licensed to do business in the United
States, shall name the other Party as an additional insured, shall contain a
broad form vendor's endorsement. During Term, MSP shall also carry and maintain
in full force and effect all-risk property insurance covering the full
replacement value of AASTROM's Equipment and MSP's building, machinery,
equipment and work-in-process, as well as worker's compensation insurance in the
statutory limits required by the State of North Carolina (or other applicable
jurisdiction). Within ten (10) days after the Effective Date, each Party shall
furnish the other Party with a certificate of insurance confirming the existence
of such insurance and stipulating that the insurer will give the other Party at
least ten (10) days' written notice prior to any cancellation of or material
change in such insurance. The availability of the foregoing insurance coverage
shall in no event be construed to limit or expand the Parties' agreement to
limit liability to one another in accordance with Section 13.
SECTION 23. SIMILAR PRODUCTS.
----------------
(a) Continuing Prohibition. At all times both during and after the Term, MSP
----------------------
shall not make or sell, or enable others to make or sell, the Cell Cassettes
or Components, excepting only for making and selling the Cell Cassettes or
Components for AASTROM.
(b) Similar Products. During the Term, MSP shall not (i) manufacture,
----------------
assemble, produce, ship or in any other way make available for use or
distribution, by any party other than AASTROM, any product or system that is
functionally the same as the Cell Cassette or Components, or (ii) in any way
accept engagement with, or render service to, any individual, firm or
corporation, other than AASTROM, as a consultant, instructor, expert, designer,
manufacturer or producer, or act in any other capacity, which engagement or
rendition of
----------
* CONFIDENTIAL PORTION REDACTED AND FILED SEPARATELY WITH THE COMMISSION
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<PAGE>
services involves the development or production of any product or system that
performs the same function as the Cell Cassette. Furthermore, in the event that
this Agreement is terminated by AASTROM "for cause" under Section 17, the
foregoing prohibitions shall continue until twelve (12) months after the
effective date of such termination. As used herein, a hematopoietic stem cell
expansion product or system does not have the same function as a Cell Cassette
---
if it utilizes distinctly different methods and distinctly different disposable
components than are used for the Cell Cassette.
SECTION 24. GOVERNING LAW; DISPUTE RESOLUTION.
---------------------------------
(a) Governing Law. The construction, interpretation and enforcement of the
-------------
terms, conditions, rights and liabilities set forth in this Agreement shall
be in accordance with the internal laws of the State of New York, excluding
its conflict-of-laws principles.
(b) Dispute Resolution.
------------------
(1) Any controversy or claim arising out of or relating to this Agreement
or the breach thereof, whether common law or statutory, including, without
limitation, claims asserting violations or the antitrust laws, will be settled
exclusively by arbitration in New York, New York if initiated by AASTROM and in
Ann Arbor, Michigan, if initiated by MSP (unless another location is mutually
agreed in writing), using the American Arbitration Association. The arbitration
will be heard before three arbitrators, one to be chosen by AASTROM, one to be
chosen by MSP, and the third to be chosen by those two arbitrators.
(2) The arbitrators will apply the internal law of the State of New York
as set forth in Section 24(a), except that the arbitrators will not have the
power to alter, modify, amend, add to or subtract from any term or provision of
this Agreement. To the extent consistent with the terms of this Agreement, the
arbitrators shall have the power to grant injunctive relief. In all other
respects, the Commercial Rules of the American Arbitration Association will
govern the arbitration. Judgment on the award of the arbitrators may be entered
by any court having jurisdiction to do so, and the parties to this Agreement
hereby irrevocably consent and submit to the personal jurisdiction and venue of
the applicable federal courts having jurisdiction in the district and state in
which the arbitration is to occur, if at all, in accordance with this Section
24(b) (or in the state court in the county and state in which the arbitration is
to occur, if at all, failing jurisdiction of the federal court) in any action or
proceeding for that purpose as well as for any and all other permitted purposes,
including, without limitation, in respect of a Party seeking injunctive relief,
in connection with this Agreement. The Parties hereby irrevocably waive any and
all claims and defenses either might otherwise have in any such action or
proceeding in any of such courts based upon any alleged lack of personal
jurisdiction, improper venue, forum non conveniens or any similar claim or
----- --- ----------
defense.
(3) The failure or refusal of either Party to submit to arbitration as
required by Section 24(b) will constitute a material breach of this Agreement.
If judicial action is commenced in order to compel arbitration, and if
arbitration is in fact compelled, the Party that resisted arbitration will be
required to pay to the other parties all costs and expenses, including,
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without limitation, reasonable attorneys' fees, that they incur in compelling
arbitration. The prevailing Party in arbitration shall be entitled to its
reasonable attorneys' fees and costs of the arbitration proceeding without
regard to the limitations set forth in Section 13. All other fees and charges
of the American Arbitration Association will be borne as the arbitrators will
determine in their award.
(c) Notwithstanding the Parties' agreement to submit to arbitration pursuant to
this Section 24, either Party may petition any court of competent
jurisdiction for injunctive relief in the event of an alleged breach of
Section 15(b) or 16.
SECTION 25. NOTICES.
-------
All notices required to be made hereunder shall be sent to the respective
Parties set forth below by certified mail, return receipt requested or by
facsimile (with confirmation copy by such certified mail):
If to MSP: Mid-State Plastics Division
Anchor Advanced Products, Inc.
Highway 220
P.O. Box 88
Seagrove, North Carolina 27341
Attn.: Executive Vice President and General Manager
Facsimile: 910-873-8272
with a copy to: Piliero Goldstein Jenkins & Hall, LLP
292 Madison Avenue
New York, NY 10017
Attn.: Edward J. Goldstein, Esq.
Facsimile: 212-685-2028
and
If to AASTROM: AASTROM Biosciences, Inc.
P.O. Box 376
Ann Arbor, Michigan 48106
Attn: President and CEO
Facsimile: 313-665-0485
with a copy to: Gray Cary Ware & Freidenrich, P.C.
4365 Executive Drive, Suite 1600
San Diego, CA 92121-2189
Attn.: T. Knox Bell, Esq.
Facsimile: 619-677-1477
AASTROM and MSP may change their respective addresses and facsimile
numbers for notices by a notice given by mail in accordance with this Section
25. Unless
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otherwise shown by documentary evidence, all notices shall be deemed received
upon the earlier of actual receipt or three days after deposit in the U.S. mail,
postage prepaid, or if by facsimile, on the business day next following the day
sent.
SECTION 26. SUCCESSORS AND ASSIGNS; SURVIVAL.
--------------------------------
This Agreement is not intended to benefit any person not a Party hereto or to
give any rights to any such non-party. This Agreement shall inure solely to the
benefit of and be binding upon the Parties hereto and their successors and
permitted assigns. This Agreement shall bind and inure to the benefit of any
successor to a Party by merger or purchase of substantially all of the assets of
the Party. Except to such a successor, neither AASTROM nor MSP may assign this
Agreement in whole or in part without the prior written consent of the other,
which consent shall not be unreasonably withheld. Any assignment or purported
assignment by either party without any such required consent shall be null and
void. The representations, warranties and covenants set forth in this Agreement
shall survive its expiration or earlier termination as expressly provided or as
is necessary to give full effect to the undertakings of the Parties prior to
such expiration or termination.
SECTION 27. HEADINGS.
--------
Headings inserted in this Agreement are for the convenience of the parties and
shall not govern any conclusion or interpretation of this Agreement or any of
its provisions. Nouns and verbs in the singular person or tense shall include
the plural person and tense and vice versa.
---- -----
SECTION 28. SEVERABILITY.
------------
In case any provision or part thereof in this Agreement shall, for any reason,
be held invalid, illegal or unenforceable, such invalidity, illegality or
unenforceability shall not affect any other provision or part thereof, and this
Agreement shall be construed as if such invalid or illegal or unenforceable
provision or part thereof had been reformed so that it would be valid, legal and
enforceable to the maximum extent permitted. Except as otherwise expressly set
forth in this Agreement, neither Party shall have the right to set off all or
any part of the damages it incurs as a result of the other Party's breach of its
obligations in this Agreement against amounts that are owed to such other Party
hereunder.
SECTION 29. AMENDMENT AND WAIVER.
--------------------
This Agreement may be amended or modified only by a written instrument executed
by each Party hereto expressly stating that it is an amendment to the terms of
this Agreement. Without limiting the generality of the foregoing, all sales and
purchases of Cell Cassettes contemplated by this Agreement shall be made solely
pursuant to the terms of this Agreement without consideration of any different
or additional terms of any purchase order or sales acknowledgement or other form
of either Party and any such additional or different terms are hereby objected
to. The failure of a Party at any time or times to require performance of any
provision hereof shall in no manner affect the Party's right at a later time to
enforce the same. No waiver by any Party of the breach of any term contained in
this
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<PAGE>
Agreement, in any one or more instances, shall be deemed to be construed as a
further or continuing waiver of any such breach or of the breach of any other
term of this Agreement, nor shall any such waiver be deemed to be a custom or
practice of the waiving Party. No waiver shall be effective unless in writing,
signed by the Party waiving compliance.
SECTION 30. 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.
SECTION 31. INDEPENDENT CONTRACTORS.
-----------------------
The relationship between the Parties is that of independent contractors and
neither Party shall have the power to bind or obligate the other in any manner,
other than as expressly set forth in this Agreement.
SECTION 32. ENTIRE AGREEMENT.
----------------
This Agreement, including, without limitation, its recitals and Appendices, sets
forth the entire agreement and understanding of the parties in respect of the
subject matter hereof, including, without limitation, the purchase and sale of
Cell Cassettes, and supersedes all prior agreements, arrangements, presentations
and understandings relative to the subject matter hereof, whether written or
oral, express or implied. No oral or written statement, representation,
warranty or promise made prior to or contemporaneously with the execution of
this Agreement shall be binding upon either party with respect to the subject
matter hereof or shall otherwise affect the enforceability of this Agreement in
accordance with its terms.
IN WITNESS WHEREOF, the undersigned have executed and delivered this
Agreement effective on the Effective Date.
ANCHOR ADVANCED PRODUCTS, INC.
By: /s/ FRANCIS OLMSTEAD
--------------------------
Francis Olmstead
President and C.E.O.
AASTROM BIOSCIENCES, INC.
By: /s/ R. DOUGLAS ARMSTRONG, Ph.D.
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R. Douglas Armstrong, Ph.D.
President and C.E.O.
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APPENDIX I
Equipment
I. Cell Cassette-related Manufacturing Equipment To be Provided and owned by
AASTROM
1. Bioreactor Assembly Fixtures
2. Tissue Culture Treatment Process and Equipment Requiring:
208 Volt 3 Flux 60HZ @ 60 AMPS Clean Earth Ground 2" Exhaust Vent
Nitrogen Carbon Dioxide
Nitrous Oxide Helium
3. Ultrasonic Welder - Dukane 700 Watt Ultracom Assembly System or
Equivalent
4. Portable Clean Air Tent (if required)
5. Leak Tester - Industrial Data Systems Sprint LC-P Pressure
Decay Leak Tester Equivalent
6. Sealing equipment for Harvest Bag, Waste Reservoir, and finished
device packaging (if required)
7. UV curable adhesive application and curing equipment
8. Injection Molds
9. Robotic End Arm Tools
10. EMMA Welder and heat sealing station
II. Manufacturing Equipment To Be Provided and owned by MSP:
1. Hand Assembly, Pneumatic Tools, and Dimensional Measurement Equipment
as required by project
2. AutoCad and Pro Engineer workstation(s), either on site or
readily accessible, to meet program objectives
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3. Molding Equipment as Required by Program
(600 ton, 300 ton, and 75 ton molding machines in class 100,000
medical molding facility;
700 ton molding machines in an environment suitable for producing
parts to be moved into a clean room)
4. Robotic pickers for molding machine.
5. Class 100,000 Assembly space as required by the Program
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APPENDIX II
Specifications
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APPENDIX III
Pricing Schedule
For Phase I and II
A. PHASE I PRICING FOR PRODUCTION AND COLLABORATION
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Pricing of Cell Cassettes and Collaboration during Phase I will be based on
total cost of manufacturing as such costs are defined in (S)A.2 of this Appendix
III (hereinafter "Costs") plus manufacturing "Mark-up". Accounting will
summarize Costs at the end of each month and add the applicable Mark-up to
generate an invoice in the form attached hereto as Appendix IV to AASTROM.
AASTROM may at any time review MSP's books, records and supporting documentation
with regard to such costs in accordance with Section 11(d) of the Agreement.
1. MARK-UP
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The manufacturing mark-up on Costs, will be*; provided, however, that in no
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event will MSP add a Mark-up on items supplied by AASTROM at no charge to, MSP;
and provided further that the Mark-up on costs described in item 2(f), below,
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shall be* and there shall be no additional mark-up for costs described in
items 2(h) and 2(j) below. Nor shall there be any mark-up on freight, taxes,
insurance and other similar add-on charges with regard to the items listed below
or for costs billed directly to AASTROM. Finally, in no event will there be
more than one mark-up on any item.
2. COSTS. Costs may include the following and will be determined as follows:
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(a) Material. Accounting will summarize invoiced amounts for all materials
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used for Cell Cassettes. This will include, without limitation, generic
materials, resins, packaging, process gases, custom fabricated components,
assemblies, and devices. Freight-in will be included at invoiced amount.
(b) General Expenses Purchases. Accounting will summarize invoiced amounts
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for all products and services (including invoiced expenses in connection
therewith) purchased solely for the Cell Cassette program, including express
freight charges, if applicable. Purchase orders placed for Cell Cassette
products and services will have a special "X" prefix to indicate to Accounting
to accumulate copies of the invoices.
(c) Travel expenses. MSP employees will complete expense reports for
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normal and customary travel, lodging, meals, and items incidental to the
foregoing in connection with the Cell Cassette program. Expense reports will be
submitted to Accounting accompanied by receipts for all purchases.
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* CONFIDENTIAL PORTION REDACTED AND FILED SEPARATELY WITH THE COMMISSION
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(d) Direct Labor. Direct labor cost will be at an average labor rate for
------------
the employee, calculated each month using a rolling 3-month average. Operators,
lead operators, certified operators, and floor operators will log into the
AASTROM area in a log book while they are working on the Cell Cassette program.
Warehouse, maintenance, tooling and supervision will complete time sheets
indicating hours and activities for the Cell Cassette program. Fringes will be
calculated at* of the total cost of direct labor employed in the manufacture
of Cell Cassettes during the month. At month end, the log will be summarized by
Accounting.
Current direct labor rates, including fringes, are:
$ Cost/Hr.
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Operator, Assembler, Floor Operator *
Inventory Clerk *
Inspector/Auditor/Trainer *
Shipping/Receiving/Truck Driver/
Material Handler. *
Maintenance *
Supervisor *
Tool Maintenance *
(e) Salary Labor. Salaried labor will indicate on their weekly time sheet
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all hours and activities worked on the Cell Cassette program in minimum one-
tenth hour increments. Payroll will forward time sheets with AASTROM hours to
Accounting. At the end of each month, Accounting will total the hours by
employee and charge the base salary plus* for fringes. Current typical
salaries, including fringes, are:
$ Cost/Hr.
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Process Engineer *
Customer Service *
Cost Accountant *
Quality Engineer *
Tooling Engineer *
Plant Manager *
Operations Director *
VP Operations *
VP Engineering *
Division President *
(f) Consulting Fees. Consulting cost will be the invoiced amount including
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expenses. Current cost rates are:
Tom Brady (manufacturing) * plus expenses
Dan Whalan (quality assurance) * plus expenses
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* CONFIDENTIAL PORTION REDACTED AND FILED SEPARATELY WITH THE COMMISSION
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Ms. Trabeau, Bryans
Practical Consulting/Axios
(microbiology/sterility assurance) * plus expenses
CAD design services *
Consulting fees will not be duplicated in item 2(b), above.
(g) Molding Cost. Molding cost will be calculated on an annual budgeted
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rate per machine hour. The rate will be modified depending on the press size
and will not include direct labor. The machine hours used and component
identification for the Cell Cassette program will be recorded in a log book and
summarized at month end by Accounting. Labor will be logged and billed
separately. The current average machine-hour rate is *.
Press Tons $ Cost/Hr.
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75 *
150 *
230 *
300 *
350 *
650 *
(h) Rent. Rent will be charged at the cost of monthly building
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depreciation, insurance, taxes, maintenance and utilities (not including molding
machine utilities) per sq. ft. for the area designated for the Cell Cassette
program only. The rate will be adjusted by MSP annually. The current rental
rate including profit mark-up to MSP and estimated square footage for each area
are:
Area $/sq. ft. per month Current Estimated Sq. Ft.
---- ------------------- -------------------------
Cleanroom * 1,000
Warehouse * 925
(i) Tooling & Fixtures. Upon prior written approval of AASTROM, unique
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tooling and fixtures will be charged at MSP's cost of manufacture or the invoice
amount, as the case may be, including inbound freight if applicable.
(j) Equipment. Items listed in Appendix I as MSP Equipment will not be
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charged either individually or through depreciation to AASTROM. Auto Cad and
Pro Engineer Workstations, also listed in Appendix I, are not charged to
AASTROM. Freight, installation and training for such equipment will not be
charged.
B. PHASE II PRICING
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Prior to the commencement of Phase II, the Parties shall negotiate in good faith
using best diligent efforts to reach a mutual agreement with regard to the
establishment of a fair and
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* CONFIDENTIAL PORTION REDACTED AND FILED SEPARATELY WITH THE COMMISSION
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reasonable purchase price for Cell Cassettes during Phase II in accordance with
the provisions of this Section B.
1. Base Cost Assumption
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As part of Phase I development, and prior to the commencement of Phase II, the
Parties will develop a bill of materials which sets forth the cost to produce a
Cell Cassette on a per unit basis assuming an annual production volume of 1,000
Cell Cassettes, hereafter referred to as the "Base Cost Assumption." Such bill
of materials will be substantially in the form of Appendix V to be attached
hereto (hereinafter, the "Bill of Materials") and the Parties will use best
diligent efforts to mutually agree upon the cost assumptions underlying the Base
Cost Assumption. Such assumptions shall be based upon manufacturing costs
determined in accordance with Generally Accepted Accounting Principles.
2. Adjustment to the Base Cost Assumption
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A primary consideration in AASTROM's decision to select MSP as its preferred
supplier is MSP's stated intention and capability to use its best diligent
efforts to manufacture Cell Cassettes at the lowest reasonable cost. As
manufacturing experience and unit and lot volumes increase, certain
manufacturing cost components are expected to decrease. As part of its
undertaking to use best diligent efforts to capture such decreases, prior to
commencement of Phase II, MSP will meet with AASTROM (and its representatives)
to review, and carry out other activities as necessary to:
(i) establish the Bill of Materials for the Cell Cassette which will
include quantities and costs of purchased materials and labor hours and rates
for molding and assembly operations (see Appendix V);
(ii) identify the cost components that will be impacted by increased
production volumes;
(iii) identify methods of improving manufacturing efficiencies in molding
and assembly operations expected to result in manufacturing yield improvements
from experience and volume increases; and
(iv) identify methods of improving the economies of procuring raw
materials and other third party components, including without limitation, volume
purchasing, and materials handling and procurement methods.
Once the Base Cost Assumption has initially been established, the Parties will
periodically review the assumptions underlying the Base Cost Assumption and
effect appropriate adjustments to the Base Cost Assumption to reflect changes to
the Bill of Materials including the then-current cost of purchased materials and
labor rates. Based upon this review process (hereafter referred to as the "Cost
Review Process"), AASTROM and MSP will also establish the appropriate expected
cost reductions that are achievable by MSP at increased manufacturing volumes
and which MSP shall become responsible for achieving upon reaching an annual
Phase II production volume of* Cell Cassettes. Such cost reductions, as agreed
to by the Parties, will be referred to as MSP's Cost Reduction Commitment and
will include those cost reductions resulting from manufacturing efficiencies
achievable from
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* CONFIDENTIAL PORTION REDACTED AND FILED SEPARATELY WITH THE COMMISSION
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increased manufacturing volume as well as improvements in manufacturing yield as
MSP becomes more proficient in producing Cell Cassettes (hereafter referred to
as "Manufacturing Yield). Upon AASTROM reaching an annual order volume of*
Cell Cassettes, the Parties will agree on MSP's cost Reduction Commitment to be
implemented at an annual order volume of* units. Concurrently with MSP's
efforts to implement cost reductions, AASTROM will endeavor to make design and
manufacturing process changes that will result in additional manufacturing cost
reductions (hereinafter referred to as "AASTROM Cost Reductions"). Such AASTROM
Cost Reductions will be reflected in the Base Cost Assumption. For example,
assuming a* per unit Base Cost Assumption, once AASTROM's annual order
volume reaches* Cell Cassettes, the Base Cost Assumption would be reduced
by MSP's Cost Reduction Commitment of (assuming* as MSP's Cost Reduction
Commitment) reducing the Base Cost Assumption to*. If AASTROM modified the
Specifications to allow for a $20 component to be used in place of a $50
component, the resulting $30 cost savings would further be deducted from the
Base Cost Assumption reducing it to*.
Upon the achievement of an annual production volume of* Cell Cassettes,
the Parties will again diligently undertake a Cost Review Process to determine
subsequent MSP Cost Reduction Commitments at annual production volume increments
of* Cell Cassettes. The Cost Review Process shall not, however, be deemed
to relieve MSP from undertaking to use best diligent efforts to reduce costs
during any intervening periods wherein the parties are reviewing MSP's Cost
Reduction Commitment.
3. Mark-Up, Cell Cassette Purchase Price
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Prior to the commencement of Phase II and not less than 30 days prior to
expiration of each subsequent calendar year during Phase II thereafter, AASTROM
shall advise MSP of its annual forecast of Cell Cassettes needed from MSP for
the following year and MSP will receive a manufacturing Mark-Up to be determined
each year based upon AASTROM's annual forecast and the manufacturing operations
to be undertaken by MSP as follows;
AASTROM Annual Volume Forecast (Units)
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* * * * * *
MSP Manufacturing Operation Mark-Up Rate
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Materials, labor &
overhead - molding * * * * * *
Labor - assembly * * * * * *
MSP Purchased Components * * * * * *
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* CONFIDENTIAL PORTION REDACTED AND FILED SEPARATELY WITH THE COMMISSION
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Cell Cassette Purchase Price - Once the annual percent Mark-Up has been
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determined for the year, the Purchase Price for the Cell Cassettes to be
delivered to AASTROM for that year will be as follows;
* (*) = Purchase Price.
(*) the applicable Mark-Up rates will be based upon AASTROM's annual volume
forecast using the above table. Once AASTROM's annual volume forecast reaches
a* Cell Cassettes increment, the Base Cost Assumption will be reduced by
MSP's Cost Reduction Commitment on all subsequent purchase orders submitted by
AASTROM, as provided in Section B.2 above, and any AASTROM Cost Reductions would
then be additionally deducted.
Such Purchase Price will be used by MSP to invoice AASTROM for Cell Cassettes
delivered under this Agreement during the following year.
Annual Adjustment - Costs - Within 30 days after the expiration of each year
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during Phase II, the actual average MSP manufacturing cost to produce a Cell
Cassette will be compared to the Base Cost Assumption, as adjusted, applicable
during the preceding year. For purposes of this Section B3, the Base Cost
Assumption shall be adjusted to reflect the changes to price of purchased raw
materials and component parts and labor rates. The Base Cost Assumption shall
not be adjusted for increases in cost resulting from activities within MSP's
control, including but not limited to, manufacturing efficiencies and
manufacturing yield. If the actual average unit cost is less than such Base
Cost Assumption, then AASTROM shall be entitled to a credit for the difference
between the Base Cost Assumption, as adjusted, and the actual average unit cost
multiplied by the total number of units purchased by AASTROM during the
preceding year. Such credit will be paid to AASTROM by MSP within 45 days after
AASTROM and MSP have completed the cost review. Alternatively, if the actual
unit cost exceeds the Base Cost Assumption, as adjusted, AASTROM shall only be
obligated to pay MSP for Cell Cassettes it accepted at the Cell Cassette
Purchase Price in effect at the time the Order was submitted by AASTROM. For
purposes of determining the actual manufacturing costs as set forth in this
Section B.3, the provisions of Section A 2(a), 2(d), 2(e), 2(g) and (h) of this
Appendix III shall apply, provided however that increases in those cost rates
will not exceed the amount of any increase in the Producer Price Index over the
applicable period and there shall be no mark-up on costs described in items 2(h)
nor shall there be any mark-up on freight, taxes, insurance, sterility
validation or other similar add-on charges with regard to costs directly billed
to AASTROM or for materials supplied directly by AASTROM.
Annual Adjustment - Mark-Up Rates - At such time as the foregoing annual cost
---------------------------------
adjustment is made, the actual volume of Cell Cassettes ordered by AASTROM
during such year will be compared to the annual forecast for that year. If the
actual volume of Cell Cassettes ordered and not canceled by AASTROM during such
year is less than the forecasted volume on which the Mark-Up rates were
established, MSP may invoice AASTROM for the difference resulting from the use
of lower than actual Mark-Up rates based upon the volume of Cell Cassettes
actually ordered by AASTROM. Similarly, if the forecasted volume of Cell
Cassettes
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* CONFIDENTIAL PORTION REDACTED AND FILED SEPARATELY WITH THE COMMISSION
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purchased by AASTROM is exceeded in any year, MSP will refund AASTROM for the
difference resulting from the use of higher than actual Mark-Up rates based upon
the volume of Cell Cassettes actually ordered by AASTROM.
Additional Manufacturing Development Activities.
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During Phase II, AASTROM may request that MSP provide assistance to AASTROM that
is beyond the scope of this Agreement. In this event, any such costs
preapproved by AASTROM in writing and incurred by MSP will be borne by AASTROM
and paid at rates consistent with Phase I pricing.
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APPENDIX IV
Pro Forma Invoice
MSP Mid-state plastics INVOICE INVOICE PAGE
A Division of ANCHOR ADVANCED ORIGINAL INVOICE _______ ____
PRODUCTS, INC.
P.O. BOX 88 . SEAGROVE, NC 27341 .
TELEPHONE 910-873-7221 DATE
____
SOLD TO: SHIP TO:
CURRENCY
________
CUSTOMER
NO. SHIP VIA ORDER NO. SLS. NO. REFERENCE NO. TERMS
-------- ------------------------------ -------------- ------------- ------------------- ------------------------------
ITEM NO. DESCRIPTION U/M QUANTITY UNIT PRICE AMOUNT
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Description of item delivered to
include Production Lot Number
and Invoice to indicate the
number of items delivered at
cost (in accordance with Section
3 (g)) for Aastrom testing
WEIGHT MISC. CHARGES AMOUNT DUE
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APPENDIX V
Bill of Materials