Portions of this Exhibit have been omitted pursuant to a request for
confidential treatment and have been filed separately with the Commission.
EXHIBIT 10.4.49
PRODUCT SUPPLY AGREEMENT
This Agreement dated October 25, 2001, by and between NEOPROBE CORPORATION, a
Delaware corporation, having an office at 000 Xxxxx Xxxxx Xxxxx, Xxxxx 000,
Xxxxxx, Xx 00000 ("Company"), and UMM ELECTRONICS INC., a Delaware Corporation,
having an office at 0000 Xxxxxxxxx Xxxxx, Xxxxxxxxxxxx, Xxxxxxx 00000 ("UMM");
W I T N E S S E T H:
WHEREAS, Company wishes to have UMM manufacture for it the
Product(s) (as hereinafter defined) which are currently being manufactured by a
third party;
WHEREAS, Company wishes to have UMM service and repair the
Product(s) and certain predecessor products;
WHEREAS, UMM is engaged in the business of manufacturing,
servicing and repairing electronic equipment; and
WHEREAS, UMM desires to so manufacture and supply and service
and repair the Product(s) for Company:
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
DEFINITIONS
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1.01 "Affiliate(s)" shall mean with respect to a party any
other corporation controlling, controlled by or under common control with such
party during the term or any extension of this Agreement.
1.02 "Confidential Information" shall mean all information,
data and know-how that concerns the business affairs of a party that is not
known by or generally available to third parties, and which is disclosed by a
party to the other party. Confidential Information may be in tangible or
intangible form, including, without limitation, oral or written disclosures,
ideas, know-how, drawings, graphs, plans, specifications, models, prototypes,
samples, equipment, data, formulas, processes, designs, hardware and software,
and information about marketing, costs and suppliers. All written Confidential
Information shall be prominently identified as such using appropriate legends,
markings, stamps, or other clear and conspicuous written identification that
unambiguously indicates that the information being provided is to be considered
Confidential Information hereunder. A disclosing party shall identify as
Confidential Information only such information as the disclosing party believes
in good faith to be proprietary or competition sensitive. Any information that
is disclosed other than in tangible or other written form shall be considered
Confidential Information but only to the extent that it is identified as
Confidential Information at the time of disclosure and is thereafter summarized
in written form
which clearly and conspicuously identifies it as Confidential Information. The
term Confidential Information shall not mean any information which is previously
known to the receiving party without obligation of confidence, as shown by its
written records, or without breach of this Agreement, is publicly disclosed
either prior or subsequent to receipt by the receiving party of such
Confidential Information, or is subsequently rightfully received by the
receiving party from a third party without obligation of confidence or
disclosure of which is required by subpoena or other legal, administrative, or
arbitral process or by law. The fact that a party chooses to transmit
Confidential Information to the other party hereto via E-mail shall not in any
way release said information from its status as Confidential Information
hereunder.
1.03 "Date of Market Introduction" of a Product shall mean the
date of the receipt and acceptance by Company of a quantity of twenty (20) units
of the Product meeting the specifications of the DMR for said Product.
1.04 "Defective Product" shall mean a Product manufactured by
UMM hereunder that does not function or fails to meet the specifications of the
DMR, or has defects in materials or workmanship.
1.05 "DMR" shall mean the Device Master Record for a Product,
which shall be maintained in compliance with the QSR. The DMR shall include the
specifications, drawings, and manufacturing instructions that enable UMM or a
third party to manufacture the Products including a set of quality control
parameters suitable for use in acceptance testing of the Products, but excluding
applicable software.
1.06 "Engineering Change Notice" or "ECN" shall mean the
controlled change process to effect changes to the Products, processes, or
documentation
1.07 "FDA" shall mean the United States Food and Drug
Administration.
1.08 "Forecast" shall have the meaning set forth in Section
2.04 herein.
1.09 "Forecast Period" shall have the meaning set forth in
Section 2.04 herein.
1.10 "Initial Term" shall have the meaning set forth in
Section 8.01 hereof.
1.11 "NCNR components" shall mean those parts of the Products
orders for which once placed with UMM's suppliers are not cancelable, or that
are not returnable once delivered to UMM without payment of a restocking or
other fee that Company agrees to pay.
1.12 "Product(s)" shall mean the medical device(s) listed in
Schedule 1.12 to this Agreement, as such Schedule may be amended from time to
time through written agreement between the parties, that is the subject of a
DMR(s).
1.13 "Purchase Orders" shall have the meaning set forth in
Section 2.04(b) hereof.
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1.14 "QSR" shall mean the Quality System Regulation (21 CFR
820) promulgated by the FDA, as may be amended from time to time during the term
of this Agreement.
1.15 "Sustaining Engineering" shall mean the design/drafting
services to maintain DMR and associated drawings; the design, analysis and
verification testing of design improvements; the support of process validations
and quality issues of in-house and sub-tier suppliers; or other engineering
services agreed-to in writing by both parties.
ARTICLE II
SUPPLY, SUPPORT AND REPAIR SERVICES
-----------------------------------
2.01 UMM shall manufacture and sell the Products exclusively
to Company at prices established by the parties pursuant to paragraph 3.01 for
Company's exclusive resale or use. During the Initial Term of this Agreement,
Company shall purchase and take delivery of a minimum of (a) * units of the
Model #1017 Product, and (b) * units of the Model #2100 Product, per year. In
the event that Company does not meet the minimum purchase requirements during
any one (1) year period, UMM shall have the right to adjust the purchase price
on all units of the relevant Product(s) purchased by Company during said one (1)
year period to reflect the reduced quantity as far as overhead absorption,
material costs and labor efficiency are concerned and to invoice Company for
such amount as may be agreed between the parties and Company shall pay to UMM
such mutually agreed adjusted price.
2.02 During the term of this Agreement, UMM shall be Company's
sole and exclusive source for the Products, provided that (a) UMM provides an
adequate and timely supply of the Products to Company in accordance with
paragraph 2.04 hereof, and (b) UMM maintains compliance with the QSR and the
quality assurance level agreed upon by the parties.
2.03 UMM represents that it will from and after December 31,
2001, maintain sufficient manufacturing capacity to produce the number of
Products forecast by Company in its Forecasts submitted pursuant to paragraph
2.04 hereof. Company agrees to purchase a minimum quantity of Products as listed
in Schedule 1.11, inclusive of the twenty (20) during the first year after the
Date of Market Introduction.
2.04 (a) In order to facilitate UMM's planning of production,
Company shall submit not later than the 15th day of each month to UMM an
estimate of its requirements for Products (the "Forecast") covering a forward
period of not less than twelve (12) months (the "Forecast Period"). The first
three (3) months shall be binding on Company on a rolling basis advancing
month-by-month and may not be canceled or rescheduled without the prior written
agreement of UMM. The remaining nine (9) months forecast is to be used by UMM
for planning purposes only and shall not be considered to be firm orders,
Company's only obligation with respect thereto being for the cost of any unique
NCNR components having a lead time of more than three (3) months on a rolling
basis advancing month by month. Company shall submit the initial Forecast
promptly after the execution and delivery of this Agreement.
* Portion has been omitted pursuant to a request for confidential treatment and
filed separately with the Commission.
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(b) Company shall place monthly purchase orders ("
Purchase Orders") setting forth the delivery date which shall be a date not
earlier than twelve (12) weeks from the date of the Purchase Order against the
Forecasts under Clause (a) above for the supply of Products; it being agreed and
understood that in the event the UMM discovers that through no fault of UMM a
lead time longer than twelve (12) weeks is required due to the requirements of
one or more of its suppliers that cannot be reduced by UMM on reasonable
commercial terms to enable UMM to meet the lead time of twelve (12) weeks, UMM
shall notify Company in writing and said longer lead time shall prevail. UMM
shall evidence its receipt of each Purchase Order by signing an acknowledgment
copy thereof and returning it to Company within fifteen (15) days after receipt
of such Purchase Order from Company. The sole remedy of Company, at law or in
equity or otherwise, for the failure of UMM to deliver Products on time shall be
to terminate this Agreement or the right of UMM under Section 2.02 hereof to be
the sole source for the Products. Company shall submit the initial Purchase
Order to UMM not later than thirty (30) days after execution of this Agreement.
In case of conflict between the general terms and conditions of a Purchase Order
issued by Company and this Agreement, the terms and conditions of this Agreement
shall take precedence.
2.05 UMM agrees to warehouse and store on Company's behalf all
finished Products in accordance with the terms outlined in Schedule 2.05(a). UMM
shall be entitled to invoice Company for Product(s) on the date UMM receives
written acceptance from the Company of the Certificate of Conformance for the
completed Products and puts the Products into storage. Products stored by UMM
shall be ready to ship, F.O.B. UMM's facility, per the Company's written
instruction, to the Company or its subcontract distributors listed in Schedule
2.05(b).
2.06 If Company desires to accelerate or reduce any of the
deliveries ordered under a Purchase Order or set forth in a binding forecast, it
shall so notify UMM and UMM shall make reasonable efforts to meet the request,
subject to material and capacity availability. Company shall bear and pay any
reasonable extra costs incurred by UMM to meet an accelerated or a reduced
schedule, including, without limitation, the cost to UMM of holding inventory.
In the event that Company instructs UMM to commence purchasing inventory based
upon a forecast (whether binding or not) and prior to the submission of a
Purchase Order, and the delivery date(s) foreseen in such forecast slip not due
to the fault of UMM, UMM shall invoice Company and Company shall bear and pay
the costs incurred by UMM in holding said materials in inventory during said
delay. In the event Company is responsible for providing to UMM packaging
material or other material without which UMM can not deliver the Product(s) to
Company, and UMM is unable to effect timely delivery of the Product(s) because
it has not received said necessary materials, UMM shall be entitled to invoice
Company for the completed Product(s) on the originally scheduled delivery date
plus the costs of UMM holding said Product(s) in inventory during said delay.
2.07 Company agrees to reimburse UMM for the cost of any and
all NCNR components that become obsolete due to changes in the design requested
by Company. UMM agrees to make all reasonable effort(s) to return or sell
obsolete material.
2.08 All Products shall be sold and delivered per paragraphs
2.05 and 4.03. All invoices shall be due and payable net thirty (30) days from
the date of receipt of the invoice.
4
2.09 UMM shall obtain the written approval of Company prior to
making any changes, substitutions, or modifications to the Product(s) or the DMR
in accordance with the Change Notification Protocol, a copy of which has been
provided to Company. Company shall promptly respond to any such request for
approval of changes. It is recognized that UMM may, from time to time, be asked
to implement ECNs. The following delineates the proper procedure:
(a) Company will notify UMM in writing of the proposed
change. This notification should include the documentation of the change to
effectively support UMM's investigation of the impact of this proposal;
(b) Upon receipt of a notice requesting a change, UMM
will review and respond to all cost impacts within a reasonable period of time
not to exceed thirty (30) days;
(c) All cost impacts and material availability issues
will be mutually reviewed and agreed to in writing prior to implementation; and
(d) Emergency ECNs as identified by Company in writing
will be immediately implemented at Company's request. Company will be liable for
all reasonable costs associated with the implementation of emergency ECNs,
except, if the emergency ECN (i) is the result of a defect in the design of the
Product(s) provided by UMM, (ii) is the direct result of a defect in a part or
sub-component from a supplier to UMM, or (iii) is the direct result of a defect
in workmanship by UMM. UMM shall provide for the repair and /or replacement of
defective Products identified in (i), (ii) and (iii) at its cost.
2.10 The Products shall be packaged and labeled in accordance
with Company's specifications. Company shall prepare the artwork necessary for
printing all labels and shall deliver it to UMM as least ten (10) weeks prior to
the scheduled delivery from UMM of the first shipment of Products ordered by
Company.
2.11 From and after sixty (60) days from the date of this
Agreement, UMM shall provide to Company repair service or spare parts for
Products and certain predecessor products, on terms and conditions to be agreed
upon in a separate agreement. The service agreement shall be concluded within
thirty (30) days of this Agreement. Service shall extend to other Company
products as well, and shall not be limited to the Products.
2.12 From and after sixty (60) days from the date of this
Agreement, UMM shall provide to Company Sustaining Engineering services for
Products, on terms and conditions to be agreed upon in a separate agreement. The
Sustaining Engineering agreement shall be concluded within thirty (30) days of
this Agreement.
2.13. UMM warrants, covenants and agrees that (a) it will
maintain an FDA registered facility certified to ISO 9001/EN 46001/ISO 13485,
and (b) the Products will be manufactured and supplied by UMM to Company in
compliance with all applicable laws, ordinances, rules and regulations, whether
local, state or federal, including, but not limited to, the provisions of the
federal Food, Drug and Cosmetic Act, and QSR. UMM will provide documentation
that the UMM facility complies with FDA published guidelines (as defined in 21
CFR 10.90b) and upon request by Company shall demonstrate such compliance.
Company shall have the right upon at least five (5) business days prior notice
in writing to inspect during normal business hours UMM's quality control system,
documentation, receiving, shipping, warehousing, and manufacturing processes and
facilities for the Product(s).
5
ARTICLE III
PRICE FOR PRODUCTS; TERMS OF PAYMENT
3.01 UMM agrees to sell and deliver to Company in accordance
with paragraph 2.04, and Company agrees to purchase Products from UMM, at the
prices listed in Schedule 3.01.
3.02 The price for each Product shall be fixed for a period of
one year from the Date of Market Introduction; provided, however, in the event
of a material increase in the cost of any material component used in the
manufacture of a Product, UMM shall have the right to renegotiate the prices
then in effect. Conversely, if UMM or the Company becomes aware of a material
decrease in the cost of any material component used in the manufacture of a
Product, the Company shall have the right to renegotiate the price then in
effect. Not later than ninety (90) days before the first anniversary of the Date
of Market Introduction and annually thereafter the parties shall meet and
negotiate in good faith the prices for the Products for the ensuing year.
3.03 The prices listed in Schedule 3.01 shall include
manufacturing engineering support (not including reengineering of the
manufacturing process) provided on an "as needed" basis to ECNs and
Non-conforming Material Reports (NMRs) along with Statistical Process Control.
Manufacturing and quality engineers, as appropriate, will perform these
activities.
3.04 (a) UMM shall perform transfer engineering services
required in connection with the transfer of the manufacturing process for the
Products from Company's current supplier to UMM, initial qualification of
sub-tier suppliers and setting up the production line for a fee of $25,200; it
being agreed and understood that said fee (i) assumes that Company's designs,
suppliers and manufacturing processes are mature and capable; and (ii) does not
include any In Circuit Test ("ICT") fixtures and software if Company's present
ICT fixtures and software are incompatible with a new circuit board assembly
supplier, PIM board ICT fixture and software development, or Hi-Pot and Burn-in
station development and equipment cost.
(b) When UMM validates the manufacturing lines, it shall
track first pass yields to understand better the capabilities of Company's
designs, suppliers and manufacturing processes. UMM and Company shall then
evaluate the need for any non-recurring efforts to resolve mutually agreed
quality or yield issues and UMM shall supply those services to Company on a time
and materials basis based on (a) actual hours worked at UMM's then current
billing rate, and (b) direct expenses incurred and paid to third parties plus
fifteen percent (15%), but otherwise excluding any corporate overhead of UMM.
Travel expenses for such incremental efforts will be billed at cost plus 5%.
Travel expenses shall include mileage at the latest rate determined by the
Internal Revenue Service, parking tolls and fares, car rental fees, if required,
air fare, if required, and food and lodging away from the home office. Travel
time will be billed at the individual's then current billing rate. Video
teleconferencing, if utilized, will be billed at $150 per hour for conferences
held within the U.S. and $350 for calls involving parties outside the U.S. UMM
shall invoice Company no more frequently than bi-weekly for its charges
associated with such incremental non-recurring efforts, with payment due from
Company within thirty (30) days from the date of UMM's invoice.
6
3.05 Promptly after execution and delivery of this Agreement,
Company shall pay to UMM:
(a) The amount of One hundred Fifty Thousand Dollars
($150,000.00) to be held by UMM as an initial deposit hereunder (the "Initial
Deposit"). The Initial Deposit shall bear interest at the rate of four percent
(4%) per annum. UMM shall apply the Initial Deposit and accrued interest against
the final invoices rendered by UMM for Products under this Agreement. UMM agrees
to review the necessity for and the amount of the Initial Deposit at least
annually and also following receipt by UMM of payment by Company for the first
two hundred (200) Model 2100 control units manufactured and delivered by UMM
under this Agreement.
(b) An amount to be agreed upon promptly after execution
and delivery of this Agreement to be held by UMM as a revolving deposit
hereunder (the "Revolving Deposit") to cover the cost of material components
that, as agreed to by both parties, UMM purchases to support the manufacture of
Products beyond the first three months in the Forecast Period and for which
delivery cannot be scheduled on a just-in-time basis beyond the first three
months in the Forecast Period. Company and UMM agree to review the necessity for
and amount of the Revolving Deposit at least quarterly and adjust the amount
accordingly to the nearest thousand dollars.
3.06 A late fee of 1 1/2 % per month will be assessed on
invoices not paid by Company within the later of thirty (30) days of the date of
receipt of the original invoice or ten (10) business days from the Company's
receipt of any corrected invoice other than on the amount of said invoices being
contested in good faith.
ARTICLE IV
INSPECTION AND QUALITY CONTROL
4.01 UMM shall, at its discretion, either accept or create an
internal Quality Assurance Plan(s) that is compliant with the Quality Assurance
Plan(s) provided by the Company. The Quality Assurance Plan(s) shall be approved
by the Company.
4.02 Prior to the Date of Market Introduction, UMM shall
perform at Company's expense (as included in the $25,200 transfer engineering
fee provided for in paragraph 3.04) a Process Failure Modes and Effects Analysis
(PFMEA) to verify robustness of the manufacturing process. Process Validation
testing shall be performed at Company's expense (as included in the $25,200
transfer engineering fee provided for in Paragraph 3.04 above) prior to the
start of production to ensure that the equipment and processes operate as
designed. Annual Process Qualifications shall be performed by UMM to verify the
stability of the production process and to look for improvements in the
calibration and test process.
4.03 UMM shall establish and maintain quality records for each
unit of Product(s) produced (identified by serial number) consisting of, at a
minimum, but not limited to:
7
(a) Certificate of Conformance;
(b) Label Certification Sheet; and,
(c) Device History Record.
UMM shall present these quality records to Company for immediate inspection by
Company on completion of the production cycle, and prior to release of Product
into storage per paragraph 2.05. Upon receipt of said records, Company shall
perform an immediate inspection of these quality records, and shall within two
(2) business days, provide written inspection status (Pass/Reject) to by fax
UMM. UMM shall maintain these quality records for a period of time equivalent to
each Product's life cycle, plus five (5) years, or as prescribed by applicable
medical device regulations, whichever is longer.
4.04 Within fifteen (15) days after delivery of Products into
storage per paragraph 2.05, Company shall have the right to conduct its product
audit to include a physical inspection of Products delivered thereof in which
Products will be compared with the specifications and quality control parameters
contained in the Quality Assurance Plan and DMR, and shall inform UMM of the
results of such inspection. In the event such inspection by Company reveals
unacceptable variances from the specifications and quality control parameters
contained in the Quality Assurance Plan and DMR, Company shall notify UMM (which
notice shall specify the manner in which the defective Products fail to meet the
specifications in the DMR), and UMM shall have fifteen (15) days in which to
verify the variances. Upon the earlier of (a) verification by UMM or (b) the
expiration of thirty (30) days from the date of said notice, Company shall have
the right to refuse acceptance of the defective or deficient shipment(s) and to
require, at the option of UMM, that said Products be replaced or corrected free
of charge to the Company. If UMM's inspection results in a finding that the
Products are not defective or deficient, UMM shall immediately notify Company of
the same and shall resubmit the Products for acceptance. In the event that UMM
and Company do not agree on the acceptability of a Product, both parties agree
to conduct joint testing and/or inspection. Failure of Company to complete the
above-mentioned acceptance inspection within said fifteen (15) day period shall
constitute acceptance by Company of the Products, however such acceptance shall
not reduce the Warranty coverage for Products provided in accordance with
Article VII herein.
ARTICLE V
CONFIDENTIAL INFORMATION
5.01 During the term of this Agreement and for a period of
three (3) years after its termination, UMM and Company each agree to hold all
Confidential Information of the other party disclosed to it hereunder in
confidence and not to disclose such Confidential Information of the other party
to any third party, except those who have a need to know such Confidential
Information for purposes of carrying out the terms of this Agreement and are
bound by a similar obligation of confidentiality and non-use, and not to use
such Confidential Information for any purpose other than for the purposes of
this Agreement. Thereafter, the right of one party to use
8
the Confidential Information of the other shall be limited only by the copyright
and patent rights of the other party.
5.02 Each party represents to the other that its employees are
governed by company regulations that prohibit the disclosure of confidential and
proprietary information that may belong to the other party and that such
internal regulations will enable it to comply with all of the items of this
Agreement.
ARTICLE VI
LICENSE FOR USE OF DMR
6.01 Company hereby grants UMM a non-exclusive,
non-assignable, royalty free license to use the DMR to manufacture the Products
during the term of this Agreement. Company hereby further grants UMM a royalty
free non-assignable license (which may not be sub-licensed except to an
Affiliate of UMM) for the use of any manufacturing methods, inventions, or
processes developed by UMM for products other than those that compete with the
Products.
6.02 UMM hereby grants Company a royalty free license for the
use of any manufacturing methods and processes developed by UMM for the Products
for use only in connection with the manufacture of any Company Products.
ARTICLE VII
WARRANTIES AND INDEMNIFICATION
7.01 UMM warrants to Company that all Products to be supplied
hereunder will upon shipment meet the specifications in the DMR and will be free
from defects in materials and workmanship. UMM MAKES NO OTHER WARRANTIES,
WRITTEN, ORAL, OR IMPLIED, INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTIES
OF DESIGN, MERCHANTABILITY OR FITNESS FOR ANY SPECIFIC OR GENERAL PURPOSE. This
limited warranty shall apply for a period of twelve (12) months after the date
of shipment by UMM of the Product from storage at UMM's facilities to the
Company or its subcontract distributors per paragraph 2.05, but in no event
longer than fifteen (15) months from the date of acceptance by the Company of
the Certificate of Conformance for the Product. UMM shall satisfy this warranty
requirement by repairing or replacing, at UMM's option, each Defective Product
returned to it prior to the expiration of the warranty period. Satisfaction of
UMM's warranty shall include the cost of shipping repaired or replaced product,
as appropriate. Major components, assemblies or sub-systems purchased by UMM
from others shall carry the warranty of the manufacturers thereof. To the
maximum extent practical, UMM shall promptly document and return any defective
material under warranty from sub-tier suppliers so that these items can be
repaired or replaced and used in the respective production and/or service units.
9
7.02 UMM shall, conduct a failure analysis as required by US
Food and Drug Administration ("FDA") regulations, i.e. 21 CFR Parts 820.115 and
820.198(b) with respect to Defective Products returned to it under paragraph
7.01. Such analysis shall be conducted promptly upon receipt by UMM of the
subject Defective Product and a results report shall be returned to Company no
later than forty-five (45) days after UMM's receipt of the defective Product.
The cost of such failure analysis shall be borne by UMM if the analysis confirms
that the failure is related to an issue covered by UMM's limited warranty set
forth in Paragraph 7.01 above to the Company or by the Company in the absence of
such confirmation.
7.03 UMM shall be liable for and shall indemnify, defend and
save Company, its shareholders, directors, officers, employees, representatives
and agents ("Company Indemnified Parties") harmless against any and all claims,
suits, proceedings, recoveries, settlements and damages, including, but not
limited to, reasonable attorney and paralegal fees, interest and penalties
("Claims") arising from the death of, or bodily injury to, any person on account
of the use of any Product to the extent caused by UMM's failure to deliver such
Product in accordance with UMM's warranties as provided in this Agreement.
7.04 Company shall be liable for and shall indemnify, defend
and save UMM, its shareholders, directors, officers, employees, representatives
and agents ("UMM Indemnified Parties") harmless from and against any and all
Claims, whether groundless or not, in connection with (a) any and all injuries,
losses, damages, or liability of any kind whatsoever directly or indirectly
attributable to the design of the Products (except to the extent designed by
UMM) or any omission or misstatement in the literature supplied by Company for
use with the Instrument, and (b) the alleged infringement of any patent
(including utility models and registered designs), copyrights or other
intellectual property rights relating to the design of the Products (except to
the extent designed by UMM) and any literature supplied by Company for use with
the Instrument.
7.05 In the event any UMM Indemnified Party or Company
Indemnified Party seeking indemnification hereunder ("Indemnified Party") should
have a Claim hereunder against Company or UMM, as the case may be, hereto
("Indemnifying Party"), which Claim does not involve a Claim being asserted
against or sought to be collected from such Indemnified Party by a third party,
the Indemnified Party shall as promptly as practical send a notice ("Claim
Notice") with respect to such Claim to the Indemnifying Party. Any failure to
give or delay in giving the Claim Notice will not waive any rights of the
Indemnified Party, except to the extent the rights of the Indemnifying Party are
actually prejudiced by such failure or delay. If the Indemnifying Party does not
notify the Indemnified Party within thirty (30) days of receipt of a Claim
Notice that it disputes a Claim, the amount of such Claim shall be conclusively
deemed a liability of the Indemnifying Party hereunder and shall be paid to the
Indemnified Party immediately. If the Indemnifying Party has timely disputed its
liability with respect to such Claim, the Indemnifying Party and the Indemnified
Party will proceed in good faith to negotiate a resolution of such dispute.
7.06 In the event of any Claim by an Indemnified Party
involving a third party, the Indemnified Party shall promptly notify the
Indemnifying Party in writing of said Claim, and, if then determinable, a
reasonable estimate of the amount thereof, which in such party's good faith
opinion, might be sustained in connection with such Claim. In such event, the
Indemnifying
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Party shall have the right, exerciseable by giving written notice to the
Indemnified Party within thirty (30) days after the giving of such notice by the
Indemnified Party, to assume and control the contest and defense or settlement
of such Claim, at its own expense, with counsel of its own choice, which counsel
shall be reasonably satisfactory to the Indemnified Party; provided that the
Indemnifying Party will not agree to any settlement without the written consent
of the Indemnified Party (which consent will not be unreasonably withheld)
unless such settlement (i) requires no more than a monetary payment for which
the Indemnifying Party has irrevocably agreed to indemnify such Indemnified
Party hereunder, and (ii) includes a full, unconditional and complete release of
such Indemnified Party.
7.07 If the Indemnifying Party agrees to defend such Claim,
the Indemnifying Party will have full control of such defense, including any
settlement thereof (subject to the rights of the Indemnified Party as set forth
in the immediately preceding paragraph), and if requested by the Indemnifying
Party, the Indemnified Party agrees to cooperate fully with the Indemnifying
Party and its attorneys with respect to such contest and defense at the expense
of the Indemnifying Party. The Indemnified Party shall have the right to engage
its own counsel and to participate in, but not control, such defense, but the
Indemnified Party shall be solely responsible for all fees and expenses of its
own counsel.
7.08 If the Indemnifying Party does not agree to defend such
Claim or fails to notify the Indemnified Party of its election as herein
provided, the Indemnifying Party agrees to pay the reasonable costs and expenses
of the Indemnified Party, including, without limitation, reasonable attorneys'
and paralegals' fees, interest and penalties incurred in connection with such
contest and defense, monthly, against the receipt of invoices with supporting
documentation and will promptly pay any judgment rendered against or settlement
reached by such Indemnified Party with respect to any such Claim; provided,
however, that the Indemnifying Party will not be liable hereunder for any
settlement made by any Indemnified Party without its prior written consent,
which consent will not be unreasonably withheld. If the Indemnifying Party has
timely disputed its liability with respect to such third party claim, the
Indemnifying Party and the Indemnified Party will proceed in good faith to
negotiate a resolution of such dispute. Failing such resolution, either party
may elect to commence arbitration as set forth in Paragraph 10.08.
ARTICLE VIII
TERM, TERMINATION AND CANCELLATION
8.01 The term of this Agreement shall begin the date hereof
and unless terminated earlier in accordance with paragraph 8.02 shall continue
for three (3) years from the Date of Market Introduction (the "Initial Term").
8.02 After the Initial Term, the term shall automatically be
extended for successive one (1) year periods, provided, however, that this
Agreement may be terminated by UMM or Company upon one hundred and eighty (180)
days prior written notice.
11
8.03 Either UMM or Company may terminate this Agreement for
cause. Cause shall be defined as a material breach or repeated non-material
breaches of this Agreement which are not cured by the breaching party as quickly
as reasonably possible, but in no event longer than sixty (60) days after
receipt of written notice demanding such breaches be cured. Cause shall also
include the following: (a) the failure, cessation, liquidation or dissolution of
the either party's (the "Defaulting Party") business, (b) if the Defaulting
Party makes an assignment for the benefit of creditors, files a petition in
bankruptcy, applies to or petitions any tribunal for the appointment of a
custodian, receiver, intervenor or trustee for such Defaulting Party or a
substantial part of such Defaulting Party's assets; or (c) if the Defaulting
Party shall commence a proceeding under any bankruptcy, rearrangement of debt,
dissolution or liquidation law or statute of any jurisdiction, whether now or
hereafter in effect, or if any such petition or application shall have been
filed or proceeding commenced against the Defaulting Party and the Defaulting
Party shall not have dismissed the same within thirty (30) days, or if such
custodian, receiver, intervenor or trustee shall have been appointed for the
Defaulting Party or such party's properties or assets.
8.04 UMM shall have the right from and after the date two (2)
years from the Date of 'Market Introduction (the "Grace Period") to terminate
this Agreement with respect to a Product upon at least one hundred eighty (180)
days prior notice in writing if during a period of two (2) consecutive quarters
after the end of the Grace Period the average number of said Product ordered by
Company during said two (2) quarters period drops below a rate of seventy-five
(75) units per quarter.
8.05 Company agrees to pay UMM, at the time of termination, an
amount equal to UMM's standard cost for any and all materials in inventory, or
on order for consumption within the Forecast period that is not cancelable or
returnable, and any restocking fees, that were purchased by UMM to manufacture
Products under this Agreement. UMM agrees to use its best efforts to cancel or
return such materials in order to mitigate the total cost to the Company. UMM's
standard cost shall mean the actual purchase price for a component, plus the
material overhead costs of purchasing, receiving, inspecting and warehousing the
component. Any materials paid for by the Company pursuant to this Section 8.05
will be delivered by UMM to the Company.
8.06 Upon termination of this Agreement in accordance with
this Article 8 the DMR and all tooling being used by UMM that has been paid for
by Company shall be transferred to Company; provided that if this Agreement is
terminated by UMM for Cause, the Company first pays UMM any amounts then owing
to UMM under this Agreement. UMM shall provide Company with a listing of such
tooling within sixty (60) days of termination, and Company shall advise UMM
within thirty (30) days of receipt of such listing the disposition of all such
tooling. All costs directly related to the transfer of such tooling shall be
borne by Company.
12
ARTICLE IX
INSURANCE
9.01 During the term of this Agreement, and for a period of
ten (10) years thereafter if on a claims made basis, UMM shall carry and
maintain in force (a) comprehensive general liability insurance with coverage
satisfactory to Company, which is at least of the type usually carried by
prudent developers and manufacturers of products similar to the Product(s) and
which covers risks of the kind customarily insured against by such prudent
developers and manufacturers, (b) products liability insurance in an amount not
less than Ten Million Dollars ($10,000,000) and (c) workers' compensation
insurance as required by law. Upon the execution of this Agreement and at such
other times during its term as Company may request, UMM shall provide Company
with a certificate of insurance evidencing such coverage hereof. The policies
required of UMM pursuant to this Agreement shall provide that they may not be
cancelled or changed without at least thirty (30) days notice to Company from
the company providing such insurance. The insurer utilized by UMM hereunder
shall be an insurance company generally providing insurance of the type required
hereunder and shall be reasonably acceptable to the Company.
ARTICLE X
GENERAL PROVISIONS
10.01 The rights and obligations of Articles 5 (Confidential
Information), 6 (License for use of the DMR), 7 (Warranties and
Indemnification), 8 (Term, Termination and Cancellation), 9 (Insurance) and 10
(General Provisions) shall survive any termination of this Agreement and shall
bind the parties and their legal representatives, successors and assigns.
10.02 Each of the parties hereto shall be excused from the
performance of its obligations hereunder in the event such performance is
prevented by force majeure and such excuse shall continue as long as the
condition constituting such force majeure continues, plus thirty (30) days after
the termination of such condition. For purposes of this Agreement, force majeure
is defined as follows:
Causes reasonably beyond the control of UMM or Company,
including, without limitation, regulations, laws or acts of any government,
destruction of production facilities or material by fire, or failure of public
utilities or common carriers or embargo.
10.03 Company shall obtain and shall own the necessary
governmental registrations and permits for marketing the Product(s) in the
United States. In the event of export of the Product(s) by Company or its
Affiliates, Company or its Affiliates shall obtain and own the necessary
governmental registrations and permits for marketing Product(s) in locations
13
outside the United States. In the event of export of the Product(s) by Company
or its Affiliates or subcontract distributors, Company or its Affiliates or
subcontract distributors shall obtain and own the necessary governmental
registrations and permits for marketing Product(s) in locations outside the
United States.
10.04 In no event shall either party be liable for any
consequential damages under this Agreement.
10.05 Company shall have the right, at its own expense, during
the term of this Agreement and for one (1) year thereafter, to have an
independent public accountant, reasonably acceptable to UMM, examine the
relevant financial books and records of account of UMM during normal business
hours, upon reasonable notice, to determine or verify the amount of any amounts
billed to the Company under Sections 2.04(a), 2.06, 2.07, 3.04, 8.05 or 8.06. If
errors of five percent (5%) or more in Company's favor are discovered as a
result of such examination, UMM shall reimburse Company for the expense of such
examination. As a condition to such examination, the independent public
accountant selected by Company shall execute a written agreement, reasonably
satisfactory in form and substance to UMM, to maintain in confidence all
information obtained during the course of any such examination except for
disclosure to UMM as necessary for the above purpose.
10.06 This Agreement and its appendices embody the entire
understanding and agreement among the parties and supersedes all previous
negotiations, representations, writings and agreements, written or oral, with
respect to the development and sale of Product(s).
10.07 All notices, demands and communications provided for in
this Agreement shall be in writing and shall be deemed effective by a party upon
hand delivery or when mailed, postage prepaid, by registered or certified mail
or when sent by telecopy, to the other party or its copy designee at the
respective addresses listed below, unless and until such address is changed by
giving written notice thereof in like manner.
To Company:
Neoprobe Corporation
000 Xxxxx Xxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xx 00000
Attn: President
Telecopy No.: (000) 000-0000
To UMM:
UMM Electronics Inc.
0000 Xxxxxxxxx Xxxxx
Xxxxxxxxxxxx, XX 00000
Attn: President
Telecopy No.: (000) 000-0000
14
10.08 This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware not including its choice of
law rules. The invalidity or unenforceability of any provision of this Agreement
shall not affect or limit the validity or enforceability of any other provision
hereof. Both parties agree to use their best efforts in a good faith attempt to
settle as promptly as possible any and all disputes arising from this Agreement
or a transaction conducted pursuant to this Agreement; but failing an amicable
settlement, such dispute shall be finally settled by arbitration pursuant to the
Commercial Arbitration Rules of the American Arbitration Association by a single
arbitrator. The arbitration proceedings shall be held in New York, New York. The
judgment of the arbitrator shall be final and binding on both parties and may be
enforced in any court of competent jurisdiction.
10.09 The parties represent and warrant that, upon expiration
of this Agreement, neither party will take any action to impair or diminish the
good will or business of the other party.
10.10 No modification, amendment, extension or waiver of this
Agreement or any provision hereof shall be binding or effective unless in
writing and signed by the President or a Vice President of each of the parties.
Furthermore, it is the intention of the parties that this Agreement be
controlling over additional or different terms of any order, confirmation,
invoice or similar document, even if accepted in writing by both parties.
10.11 All provisions contained in this Agreement shall extend
to and be binding upon the parties and their respective successors and assigns.
Without the prior written consent of the other party, neither party may assign,
transfer or convey any of its rights, duties or interest under this Agreement,
nor shall it delegate any of the obligations or duties required to be kept or
performed by it hereunder; provided, however, that (a) either party ("Assignor")
may, without such consent, assign this Agreement to (i) any of Assignor's
Affiliates (provided, however, such assignment shall not relieve Assignor of any
of its obligations hereunder) or (ii) a successor in interest of Assignor by
merger or operation of law or (iii) a purchaser of all of Assignor's assets
provided such purchaser shall have agreed in writing to perform all of
Assignor's obligations under this Agreement.
10.12 This Agreement may be executed in one or more
counterparts, all of
15
which taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized representatives as of the date
first above written.
NEOPROBE CORPORATION
By: /s/ Xxxxx Xxxx
----------------------------------------
Name: Xxxxx Xxxx
Title: President & CEO
UMM ELECTRONICS INC.
By: /s/ Xxxxxx X. Xxxxx
----------------------------------------
Name: Xxxxxx X. Xxxxx
Title: President
16
SCHEDULE 1.12
PRODUCT(S)
-------------------- ----------------------------------------------------
NEOPROBE MODEL # DESCRIPTION
-------------------- ----------------------------------------------------
1017 14mm Reusable Gamma Detection Probe
-------------------- ----------------------------------------------------
2100 NEO2000(R) Gamma Detection System Console
-------------------- ----------------------------------------------------
2100U NEO2000(R)Gamma Detection System Console Upgrade(1)
-------------------- ----------------------------------------------------
Notes:
1. UMM will provide the capability to upgrade at Company's cost the
Model 2000 NEO2000(R)to a Model 2100 configuration
17
SCHEDULE 2.05
XXXX & HOLD ARRANGEMENTS
Company hereby requests that UMM store Products of the types listed in Schedule
1.11 that have been finished, certified complete, packaged and palletized
subject to the maximum quantities listed herein and paid for by Company. With
respect to Products stored under the terms of this Agreement, Company agrees:
- to accept title to the Product upon delivery by UMM of the Product into
storage;
- upon delivery by UMM of the Product into storage, to accept the risk of
insuring the Product against casualty loss not caused by negligence on the
part of UMM; and,
- acknowledges that from and after the delivery by UMM of Products into
storage, UMM has no further performance obligations with respect to stored
Product beyond the standard product warranty as specified in the Agreement.
Specifically, and not by way of limitation, Company agrees not to hold UMM
responsible for making any upgrades or modifications to stored product that
was previously certified based on changes made to Product Specifications in
the DMR subsequent to the manufacture and certification of such product
without prior written agreement with UMM to upgrade or modify said units;
and,
UMM agrees:
- to store designated Product separately from other incomplete products or
completed products UMM may choose to manufacture that are in excess of
Company's purchase commitments;
- to provide storage facilities that fully comply with storage requirements for
medical devices as specified in ISO9001/EN46002/ISO13485 and U.S. FDA
21C.F.R. Section 820;
- to periodically provide and/or update certain details regarding the facility
in which the Products to be stored: address, type of building construction
[i.e., brick, wooden frame, metal siding], fire protection [i.e., sprinkler
system, proximity to nearest fire department]); and
- to charge Company at a rate of $965 per quarter, which amount Company agrees
to pay; and, not to ship Product that has been stored without written
instruction from an authorized representative of Company.
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SCHEDULE 3.01
PRICE LIST
-------------------- --------------------------------------------------------- ------------ -----------------
NEOPROBE MODEL # DESCRIPTION ANNUAL QTY PRICE
-------------------- --------------------------------------------------------- ------------ -----------------
1017 14mm Reusable Gamma Detection Probe * *
-------------------- --------------------------------------------------------- ------------ -----------------
2100 NEO2000(R)Gamma Detection System Console * *
* *
-------------------- --------------------------------------------------------- ------------ -----------------
2100U NEO2000(R)Gamma Detection System Console Upgrade TBD
-------------------- --------------------------------------------------------- ------------ -----------------
* Portion has been omitted pursuant to a request for confidential treatment and
filed separately with the Commission.
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