CERTAIN MATERIAL (INDICATED BY AN ASTERISK) HAS BEEN OMITTED FROM THIS DOCUMENT
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED MATERIAL HAS BEEN
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
EXHIBIT 10.27
DEVELOPMENT, LICENSE AND SUPPLY AGREEMENT
This DEVELOPMENT, LICENSE, AND SUPPLY AGREEMENT (the "Agreement") is
entered into as of the 16th day of October, 2000 (the "Effective Date") by and
between GEN-PROBE INCORPORATED, a Delaware corporation having a principal place
of business at 00000 Xxxxxxx Xxxxxx Xxxxx, Xxx Xxxxx, Xxxxxxxxxx 00000
("Gen-Probe"), and KMC SYSTEMS, INC., a Delaware corporation having a principal
place of business at 000 Xxxxxx Xxxxxxx Xxxxxxx, Xxxxxxxxx, Xxx Xxxxxxxxx
("KMC"), with reference to the following:
RECITALS
WHEREAS, Gen-Probe designs, develops and markets medical diagnostic
products;
WHEREAS, KMC is in the business of designing, developing and manufacturing
medical instruments;
WHEREAS, Gen-Probe previously entered into design and manufacturing
agreements with the Rela division of Colorado MEDtech, Inc. ("Rela") to have
Rela design and develop an automated instrument, sometimes referred to as the
"TIGRIS Instrument", for the processing and detection of DNA/RNA probe-based
assays intended for use in diagnostic and blood screening applications;
WHEREAS, as an interim measure in anticipation of the negotiation of this
Agreement, Gen-Probe and KMC executed a Memorandum of Understanding, as of
October 20, 2000, concerning the design and manufacture of the Instrument (as
hereinafter defined); and
WHEREAS, Gen-Probe desires to have KMC complete certain aspects of the
design of the Instrument as set forth in the Project Plan (as hereinafter
defined), as such Project Plan may be modified from time to time hereafter in
accordance with this Agreement, under Gen-Probe's direction and control, and to
thereafter manufacture the Instrument, on a shared basis, all in accordance with
the terms and subject to the conditions set forth below.
NOW, THEREFORE, in consideration of the mutual representations, warranties
and covenants set forth herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto do
hereby agree as follows:
ARTICLE I
DEFINITIONS
For purposes of this Agreement, the following words and phrases shall have
the following respective meanings:
1.1 "Affiliate" means, with respect to a party, any person, corporation or
other business entity that directly, or indirectly through one or more
intermediaries, controls or is controlled by, or is under common control with, a
party. For this purpose, control of a corporation or other business entity shall
mean direct or indirect beneficial ownership of fifty percent (50%) or more of
the voting interest in, or a fifty percent (50%) or greater interest in the
equity of, such corporation or other business entity.
1.2 "Xxxx of Materials" shall have the meaning assigned to it in Section
6.2.
1.3 "cGMP" means current good manufacturing practices, including without
limitation the FDA's Quality System Regulations pursuant to Title 21 of the
United States Code of Federal Regulations, Part 820, as applicable to the
manufacture of a Class 2 medical instrument to gain 510(k) approval by the FDA.
1.4 "Design Engineering Phase" shall have the meaning assigned to it in
Section 3.1
1.5 "Design Scope Change" shall have the meaning assigned to it in Section
3.9.
1.6 "Engineering Change Orders" or "ECO" shall have the meaning assigned
to it in Section 3.10.
1.7 "FDA" means the United States Food and Drug Administration or any
successor agency thereof.
1.8 "Gen-Probe Know-How" means any and all Information controlled by
Gen-Probe that is both: (i) disclosed to KMC by Gen-Probe under this Agreement
(all such disclosures to be at Gen-Probe's sole discretion); and (ii)
proprietary to Gen-Probe at the time of its disclosure to KMC.
1.9 "Gen-Probe Patents" means all Patent Rights controlled by Gen-Probe
that are necessary and/or useful for the work to be performed by KMC under this
Agreement.
1.10 "Gen-Probe Technology" means the Gen-Probe Patents and Gen-Probe
Know-How.
1.11 "Information" means any data, results, formulas, procedures,
processes, unpatented inventions, information, know-how, trade secrets,
techniques, methods, development, material, or compositions of matter of any
type or kind.
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1.12 "Instrument" means the automated instrument sometimes referred to by
Gen-Probe as the TIGRIS Instrument, for the processing and detection of DNA/RNA
probe-based assays intended for use in diagnostic and blood screening
applications, the design of which was commenced by Rela and will be modified and
completed by KMC pursuant to this Agreement. "Instrument" includes future
upgrades, modifications and derivatives.
1.13 "Long-Lead Materials" shall have the meaning assigned to it in
Section 6.2.
1.14 "MTBF" means mean time between failures of an Instrument. A failure
is considered to occur when the Instrument fails to operate in a satisfactory
manner and/or cannot produce satisfactory test results, and intervention by the
operator is required to return the Instrument to operation.
1.15 "Patent Right" means: (i) an issued and existing letters patent,
including any extensions, supplemental protection certificates, registrations,
confirmations, reissues, reexaminations or renewals thereof; (ii) applications,
including any provisional applications, converted provisional applications,
continuing prosecution applications and continuation, divisional, substitution,
or continuation-in-part applications thereof, for any of the foregoing; and
(iii) all counterparts to any of the foregoing issued by or filed in any country
or other jurisdiction.
1.16 "Pilot Instruments" shall have the meaning assigned to it in Section
5.1.
1.17 "Pilot Scope Changes" shall have the meaning assigned to it in
Section 5.3.
1.18 "Pilot Production Phase" shall have the meaning assigned to it in
Section 5.1.
1.19 "Product Requirements Document" or "PRD" means the specifications and
other requirements for Instruments, as set forth in Exhibit 7.
1.20 "Production Instruments" shall have the meaning assigned to it in
Section 6.1.
1.21 "Production Phase" shall have the meaning assigned to it in Section
6.1.
1.22 "Project Plan" means the tasks and schedules set forth in Exhibit 1
and modifications, additions, or deletions thereto which are made from time to
time hereafter in accordance with the provisions of Section 3.10.
3
1.23 "Pro-Rated Discount Reimbursement" shall mean the pro-rated total of
the aggregate dollar amount of the following discounts provided hereunder by
KMC:
(a) any discount actually applied pursuant to Section 3.9 during the
Design Engineering Phase;
(b) the Transition Phase discount of 33.5% shown on Exhibit 2, to
the extent actually applied, together with any overrun discounts
actually applied pursuant to Section 4.6 during the Transition
Phase; and
(c) the Pilot Production Phase discount shown on Exhibit 2, to the
extent actually applied.
The discounts shall be pro-rated by multiplying the total actual dollar amounts
of discounts determined as above, by the difference (stated as a percentage) of
(1-(Y/100)), where "Y" is the number of completed Production Instruments for
which Gen-Probe has paid (or pays) KMC the full Transfer Price.
1.24 "Purchase Order Cancellation Charges" shall mean the aggregate dollar
amount of the following charges related solely to the cancellation, in
connection with a termination of this Agreement permitted by Article 15, of all
outstanding pending Gen-Probe purchase orders and Long-Lead Materials and other
parts authorizations issued pursuant to Sections 6.2 and 6.3, at the following
rates: (i) non-returnable parts and material in stock, at KMC's full cost,
including general and administrative overhead; (ii) partially-built Production
Instruments, at the Transfer Price rate determined under Section 6.8 times the
percentage each such Production Instrument has been completed; (iii) for
complete Production Instruments, at the Transfer Price determined under Section
6.8; (iv) KMC labor costs directly and solely related to such termination
(including, but not limited to, working with vendors, packing items for
shipment, and production cell tear-down) at KMC's then full normal and customary
rates, including profit; and (v) any other direct costs incurred by KMC as a
sole result of such termination (including without limitation vendor
cancellation fees or non-cancelable vendor commitments) at the actual cost to
KMC.
1.25 "Scope Changes" shall mean Design Scope Changes, Transition Scope
Changes and/or Pilot Scope Changes.
1.26 "Transition Phase" shall have the meaning assigned to it in Section
4.1.
1.27 "Transition Scope Changes" shall have the meaning assigned to it in
Section 4.6.
1.28 "Unrecouped Cost Reduction Service Charges" shall mean all
non-recurring expenses related solely to cost reduction services by KMC pursuant
to Section 6.14 that KMC has actually incurred and not recouped pursuant to
Section 6.14.
1.29 "Work Statement" shall have the meaning assigned to it in Section
3.10.
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ARTICLE II
LICENSE GRANT
Gen-Probe hereby grants to KMC a non-exclusive license, without the right
to sublicense, under the Gen-Probe Technology solely to design, use, make, or
have made, Instruments pursuant to the terms of this Agreement. No other rights
in the Gen-Probe Technology are granted to KMC.
ARTICLE III
DESIGN ENGINEERING
3.1 Purpose. The purpose of the work described in this Article III (the
"Design Engineering Phase") is to permit KMC to acquire detailed information
about the Instrument design and development effort prior to the Effective Date
and to then complete the hardware design effort (initially in accordance with
the Project Plan tasks identified in Exhibit 1), including hardware design
services that may be required in connection with integration of software and
chemistry. The initial goal of the Design Engineering Phase will be to identify
and, subject to the Scope Change provisions of Section 3.10 and the provisions
of Section 3.3, to resolve all hardware performance issues in order to achieve
an overall MTBF of [***] while maintaining existing Instrument functionality.
Subject to the Scope Change provisions of Section 3.10 and the provisions of
Section 3.3, the ultimate goal of KMC's Design Engineering Phase activities will
be to enable the Production Instrument to meet Gen-Probe's final requirements
for the Instrument, to be determined in the course of Instrument development.
The parties recognize that the Project Plan annexed hereto as Exhibit 1 may need
to be amended from time to time and Design Scope Changes may be required in
order to improve Instrument functionality and/or reliability and to accomplish
the purpose and achieve the goals of the Design Engineering Phase.
3.2 Instrument Requirements. The Instrument requirements, including
without limitation the specifications, are set forth in the Product Requirements
Document. Gen-Probe shall have the sole right to amend the PRD, in its sole
discretion, during the term of this Agreement. While KMC shall make
recommendations throughout this project with regard to the PRD, the final
approval thereof shall be Gen-Probe's; provided, however, that such right of
approval shall not relieve KMC of its duty to perform its services hereunder in
a workmanlike manner.
3.3 Hardware Design and Verification. KMC will use its best efforts to
successfully complete all hardware engineering design necessary to achieve the
goals of Section 3.1 and the PRD (it being recognized by the parties, however,
that despite such best efforts certain goals may not be achieved). The parties
recognize that the Project Plan may need to be amended from time to time and
Design Scope Changes may be required in order to complete hardware engineering
design. As part of the Design Engineering Phase, KMC shall be responsible for
and accomplish
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hardware verification. KMC shall use good workmanship in performing all Design
Engineering Phase activities. KMC shall conduct its activities in accordance
with the design control sections of cGMP and ISO 9001.
3.4 Integration and Validation. Gen-Probe shall perform, directly or
through subcontractors selected and retained by it, all chemistry work related
to the Instrument. Gen-Probe shall also perform, directly or through
subcontractors selected and retained by it, all software development related to
the Instrument and shall provide KMC with periodic software updates. KMC shall
assist Gen-Probe as requested in developing plans for validation of software
related to the Instrument and shall undertake such other software validation
activities as specifically requested by Gen-Probe. Services rendered by KMC in
connection with software validation shall be deemed a Design Scope Change and
arranged by the parties pursuant to the provisions of Section 3.10.
3.5 Coordination. Gen-Probe and KMC will closely cooperate to achieve the
goals of the Design Engineering Phase. The parties will set up a supervisory
board to coordinate Design Engineering Phase activities. The initial
representatives of each party to the supervisory board are as follows: For KMC:
Xxx XxXxxxxx, Xxxxx Xxxxxxxx, and Real Modore; For Gen-Probe: Xxxxx Xxxxxx, Xxxx
Xxxxxxxx, Xxxxxx Xxxxxxx, and Mat Longiaru. The supervisory board will meet
quarterly. The supervisory board shall also coordinate Transition Phase and
Production Phase activities, as set forth below.
3.6 KMC Project Team. KMC shall assign the project team identified on
Exhibit 3 to the Design Engineering Phase and such team shall be made available
for as much time as necessary to accomplish successful execution of the Design
Engineering Phase. Such team personnel shall remain assigned to the project team
while employed by KMC unless KMC and Gen-Probe agree otherwise in writing. In
the event of a significant interruption of this phase, KMC shall give Gen-Probe
the option of maintaining the availability of KMC's project team, at Gen-Probe's
expense. The parties recognize that as a result of Design Scope Changes, and
other Scope Changes and related activities, it may be advisable to change and/or
add certain project team personnel for the Design Engineering Phase. Gen-Probe
agrees to not unreasonably withhold its consent to any such changes or
additions.
3.7 Project Plan; Schedule. KMC will generally execute the Design
Engineering Phase in accordance with the Project Plan and will use its best
efforts to meet the schedule set forth in the Project Plan, subject to Design
Scope Changes, which currently provides for completion of the Design Engineering
Phase activities no later than [***]. KMC shall use all reasonable commercial
efforts to carry out the Design Engineering Phase work set forth in Design Scope
Changes. KMC shall provide Gen-Probe with regular periodic reports, no less than
every two (2) weeks, stating the current status of the Design Engineering Phase,
describing the current status of the key components of the Instrument, and
updating the Project Plan.
3.8 Payments; Invoices. KMC shall perform the Design Engineering Phase
effort on a time and materials basis. KMC shall invoice Gen-Probe monthly. KMC
shall xxxx its Design Engineering Phase services at the hourly rates set forth
on Exhibit 2. Travel expenses incurred by KMC will be invoiced to Gen-Probe at
cost. Any third parties retained by KMC shall be
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6
invoiced to Gen-Probe at their actual cost to KMC, plus [***]. The charges
invoiced by KMC under this Agreement are sometimes referred to herein as
"costs." Gen-Probe shall pay KMC's invoices within thirty (30) days of delivery
of each invoice. Gen-Probe shall have the right to review KMC's records with
regard to all invoiced charges (it being agreed, however, that any such review
shall not relieve Gen-Probe from its obligation to pay KMC's invoices within
thirty (30) days and, further, that payment by Gen-Probe shall not waive
Gen-Probe's right to subsequently contest KMC's charges).
3.9 Cost Estimate. KMC estimates that the cost of its Design Engineering
Phase services, for the specific Project Plan tasks initially identified in
Exhibit 1, to be approximately [***]. KMC shall use all reasonable commercial
efforts to keep costs within this estimate; provided, however, that the parties
acknowledge and agree that because this project entails, among other things,
completion of a design and development effort commenced by a third party, which
design is presently substantially below the above-mentioned MTBF goal, it may be
necessary for: (a) KMC to provide services beyond the specific Project Plan
tasks initially identified in Exhibit 1 in order to complete the design and
achieve the MTBF goal and other goals of Gen-Probe to the satisfaction of
Gen-Probe; and (b) Gen-Probe to change the specifications of the Product
Requirements Document. All changes and additions to the Design Engineering Phase
services initially identified in the Project Plan (other than non-material
changes or additions to the Project Plan tasks) shall be agreed upon by the
parties pursuant to Section 3.10 as "Design Scope Changes." KMC shall provide
Gen-Probe with regular periodic reports, no less than monthly, stating the
then-current aggregate costs of the Design Engineering Phase (including Design
Scope Changes) and updating KMC's estimate of the costs to be incurred. If
Design Engineering Phase costs exceed the sum of KMC's original [***] estimate
plus the estimated cost of Design Scope Changes (the "Revised Design Estimate")
by more than twenty five percent (25%), [***]. If Design Engineering Phase costs
are projected to or in fact exceed the Revised Design Estimate by more than
[***]. If the excess costs referred to in the immediately preceding sentence
result from KMC's error or omission in the estimating process Gen-Probe's sole
remedies against KMC shall be Gen-Probe's right to take the above cost estimate
overrun discounts and Gen-Probe's right to so terminate this Agreement, and KMC
shall have no other liability to Gen-Probe.
3.10 Scope Changes. During any phase of the Project Plan, the parties may
by agreement approve Scope Changes and modify the Project Plan in order to
achieve the design, transition and production goals of Gen-Probe (as the case
may be), changes in the specifications and other elements of the PRD, Instrument
improvement, quality improvement, cost reduction, and/or other changes in the
Project Plan tasks initially identified in Exhibit 1, on the following terms:
(a) Work Statements. During the term of this Agreement, KMC may
propose, and Gen-Probe may request, Scope Changes by delivering to the other
party a proposed "Work Statement." A "Work Statement" shall mean a proposal of
KMC or a purchase order of
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Gen-Probe, or another written document labeled as a "Work Statement" that
contains the following information: a description of the services to be
performed and deliverables; the estimated cost of such services and the proposed
payment schedule; the name of the person(s) who will be the points of contact
under the Work Statement for each party; the estimated time schedule for
performance and delivery of the deliverables; whether the proposed deliverables
could be incorporated into existing Pilot Instruments pursuant to the retrofit
provisions of Section 5.7, and completion and acceptance criteria. In addition,
when applicable, a Work Statement may include: provisions for written and/or
oral progress reports by KMC; detailed functional and technical specifications
and standards for all services and deliverables, including quality standards;
documentation standards; test plans; provisions for an analysis of the specific
effect of the Scope Change on the schedule, cost of materials, and the Transfer
Price of the Instrument.
(b) Agreement on Compensation and Other Terms. Upon receipt of a
proposed Work Statement, the parties shall meet and negotiate to agree upon
mutually acceptable terms and conditions for an agreed Work Statement. The
parties may agree to use one of the following pricing mechanisms, or such other
pricing mechanism as may be mutually agreed upon: fixed price;
time-and-materials (at KMC's current rates at the time the work is performed);
or time and materials subject to fixed ceiling (KMC agreeing to use all
reasonable effort to complete the specified services and/or deliverables within
the ceiling).
(d) Performance. Upon the parties' agreement to and execution of a
Work Statement, KMC shall use all commercially reasonable efforts to provide the
design and development services and other deliverables set forth in the Work
Statement in accordance with the time schedule and other provisions of the Work
Statement. The parties' agreement to contract for and provide such services and
deliverables shall be governed by the Work Statement and this Agreement, as
applicable.
(e) Modification of Production Specifications and Acceptance Test
Procedures. Upon completion of any redesign work under a Work Statement, the
Instrument specifications shall be modified accordingly. Within ten (10) working
days of the completion of any such redesign work, KMC shall deliver to Gen-Probe
KMC's proposal for changes to the acceptance test procedures.
(f) Engineering Change Orders. Engineering changes suggested by KMC
in the ordinary course of production shall be distinguished from the redesign
work described in subsections (a) through (e), above. The manufacturing quality
plan to be prepared by KMC and approved by Gen-Probe will establish a process
for prompt evaluation and implementation of engineering changes in the course of
production through means of Engineering Change Orders ("ECOs"). All ECOs must be
approved by Gen-Probe in writing. It is the intent of the parties that the ECO
process be one which permits expedited response to the circumstances giving rise
to the ECO. Gen-Probe recognizes that the ECO process may require changes in
nonrecurring engineering charges, production schedules and/or material costs and
the Transfer Price of the Instrument.
8
ARTICLE IV
TRANSITION PHASE
4.1 Purpose. The purpose of the work described in this Article IV (the
"Transition Phase") will be to establish manufacturing processes and
manufacturing facilities at KMC in order to commence production of the
Instrument (initially in accordance with the Project Plan tasks identified in
Exhibit 1). The security of KMC's manufacturing facilities shall be adequate to
protect Gen-Probe's Confidential Information (as hereinafter defined). KMC shall
be responsible for the successful completion of all Transition Phase activities
in accordance with the terms and subject to the conditions of this Agreement.
The parties recognize that the Project Plan annexed hereto as Exhibit 1 may need
to be amended from time to time and Transition Scope Changes may be required,
pursuant to the Scope Change provisions of Section 3.10, in order to accomplish
the purpose and achieve the goals of the Transition Phase. KMC shall use good
workmanship in performing all Transition Phase activities.
4.2 KMC Project Team. KMC shall assign the key members of the project team
identified on Exhibit 3 to the Transition Phase and such team shall be made
available for as much time as necessary to accomplish successful execution of
the Transition Phase. Such key members of the team shall remain assigned to the
project team while employed by KMC unless KMC and Gen-Probe agree otherwise in
writing. In the event of a significant interruption of this project, KMC shall
give Gen-Probe the option of maintaining the availability of KMC's project team,
at Gen-Probe's expense. The parties recognize that as a result of Transition
Scope Changes, other Scope Changes, and related activities, it may be advisable
to change and/or add certain project team personnel for the Transition Phase.
Gen-Probe agrees to not unreasonably withhold its consent to any such changes or
additions.
4.3 Project Plan; Schedule. KMC will generally execute all Transition
Phase activities in accordance with the Project Plan and shall use all
reasonable commercial efforts to meet the schedule set forth in the Project
Plan, subject to Transition Scope Changes, which currently provides for
completion of Transition Phase activities by [***]. KMC shall use all reasonable
commercial efforts to minimize the time needed to complete the Transition Phase;
provided, however, that Scope Changes and changes to the specifications of the
PRD, as well as other agreed upon factors, could result in material changes or
additions to the Project Plan tasks. After the Transition Phase begins, KMC
shall provide Gen-Probe with regular periodic reports, no less than every two
(2) weeks, stating the current status of the Transition Phase and updating the
Project Plan.
4.4 Payments; Invoices. KMC shall perform the Transition Phase on a time
and materials basis at the rates set forth on Exhibit 2. Invoice and payment for
services and materials provided by KMC in the Transition Phase will be handled
in the same manner as the Design Engineering Phase pursuant to Section 3.8.
Gen-Probe shall have the right to review KMC's records with regard to all
invoiced charges (it being agreed, however, that any such review shall not
relieve Gen-Probe from its obligation to pay KMC's invoices within thirty (30)
days and, further, that payment by Gen-Probe shall not waive Gen-Probe's right
to subsequently contest KMC's charges).
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4.5 Tooling Costs. During the Transition Phase, KMC will acquire tooling
for production of Instruments as agreed upon by the parties. Gen-Probe shall pay
KMC, within thirty (30) days of delivery of invoices for all such tooling
actually acquired by KMC, at a rate equal to KMC's actual cost plus [***]. Upon
payment by Gen-Probe of the cost of such tooling, the tooling and related
assembly drawings shall be the sole property of Gen-Probe.
4.6 Cost Estimate. KMC estimates that the cost of its Transition Phase
services for the specific Project Plan tasks initially identified in Exhibit 1
to be approximately [***]. KMC shall use all reasonable commercial efforts to
minimize the costs of its Transition Phase activities; provided, however, that
Scope Changes, changes to the specifications of the PRD, as well as other agreed
upon factors could result in material changes or additions to the
above-referenced specific Project Plan tasks (such changes and additions to the
Transition Phase services are referred to as "Transition Scope Changes"). KMC
shall provide Gen-Probe with regular periodic reports, no less than monthly,
stating the then-current aggregate costs of KMC's Transition Phase activities
(including Transition Scope Changes) and updating KMC's estimate of the costs to
be incurred. KMC's charges for its Transition Phase services in excess of the
sum of KMC's original [***] cost estimate plus the cost of the Transition Scope
Changes (the "Revised Transition Estimate") shall be allocated between the
parties as follows:
Overrun as a % of Revised Transition Estimate Sharing Ratio
--------------------------------------------- -------------
10% [***]
10.1% - 20% [***]
20.1% - 30% [***]
30.1% - 40% [***]
40.1% - 50% [***]
The [***] for Transition Phase labor charges, set forth in Exhibit 2,
shall be applied in calculating and charging excess Transition Phase costs for
purposes of the sharing ratios set forth above.
ARTICLE V
PILOT PRODUCTION PHASE
5.1 Purpose. The purpose of the work described in this Article V (the
"Pilot Production Phase") will be to manufacture eight (8) pilot versions of the
Instruments (the "Pilot Instruments") and to prepare to proceed with the
manufacture of Production Instruments pursuant to Article VI, initially in
accordance with the Project Plan tasks identified in Exhibit 1. KMC shall be
responsible for manufacturing the Pilot Instruments in accordance with the terms
and subject to the conditions of this Agreement. The parties recognize that the
Project Plan annexed hereto as Exhibit 1 may need to be amended from time to
time and Pilot Scope Changes may be required, pursuant to the Scope Change
provisions of Section 3.10, in order to accomplish the purpose and achieve the
goals of the Pilot Production Phase.
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5.2 KMC Project Team. KMC shall assign the key members of the project team
identified on Exhibit 3 to the Pilot Production Phase and such team shall be
made available for as much time as necessary to accomplish successful execution
of the Pilot Production Phase. Such key members shall remain assigned to the
project team while employed by KMC unless KMC and Gen-Probe agree otherwise in
writing. In the event of a significant interruption of the project, KMC shall
give Gen-Probe the option of maintaining the availability of KMC's project team,
at Gen-Probe's expense. The parties recognize that as a result of Pilot Scope
Changes, and the other Scope Changes, and related activities, it may be
advisable to change and/or add certain project team personnel for the Pilot
Production Phase. Gen-Probe agrees to not unreasonably withhold its consent to
any such changes or additions.
5.3 Project Plan; Schedule. KMC will generally execute all Pilot
Production Phase activities in accordance with the Project Plan tasks initially
set forth in Exhibit 1 and shall use all reasonable commercial efforts to meet
the schedule set forth in the Project Plan, subject to Pilot Scope Changes,
which currently provides for manufacture of Pilot Instruments to begin February
12, 2001, to be delivered commencing March 16, 2001. As currently scheduled, KMC
shall deliver the next three (3) Pilot Instruments to Gen-Probe by April 10,
2001. KMC shall use all reasonable commercial efforts to minimize the time
needed to complete the remaining four (4) Pilot Instruments and to meet the
schedule set forth in the Project Plan; provided, however, the parties recognize
that (a) the timing of production of Pilot Instruments will depend, in part, on
KMC's receipt of parts and components as described in Section 5.4 and that the
current Project Plan schedule is based on KMC's receipt of such parts and
components not later than November 21, 2000, and (b) Scope Changes, changes to
the specifications of the PRD, as well as other agreed upon factors could result
in material changes or additions to the above-referenced specific Project Plan
tasks and schedule (such changes and additions to the Pilot Production Phase
services are referred to as "Pilot Scope Changes"). After production of the
Pilot Instruments begins, KMC shall provide Gen-Probe with regular periodic
reports, no less than every two (2) weeks, stating the current status of the
Pilot Production Phase and updating the Project Plan.
5.4 Delivery of Parts and Component Systems. Gen-Probe shall deliver to
KMC, without charge to KMC, eight (8) sets of the parts and components systems
necessary for production of the Pilot Instruments. In order for KMC to meet the
current milestone dates set forth in the Project Plan for the first four (4)
Pilot Instruments to be assembled during the Pilot Production Phase, it will be
necessary for Gen-Probe to obtain and supply to KMC, no later than [***], all of
the parts and component systems necessary for the assembly of four (4) Pilot
Instruments. If Gen-Probe is unable to deliver the four (4) parts sets by [***],
the assembly dates set forth in the Project Plan shall be adjusted to compensate
for the delayed delivery. If Gen-Probe is unable to deliver the second group of
four (4) parts sets by [***], the assembly dates set forth in the Project Plan
shall be adjusted to compensate for the delayed delivery.
5.5 Payments; Invoices. KMC shall build the eight (8) Pilot Instruments on
a time and materials basis. Gen-Probe shall pay KMC for the Pilot Instruments at
the labor rates and discount set forth on Exhibit 2 based on the hours of such
work actually performed by KMC. Based upon the current scope of the Project Plan
tasks identified in Exhibit 1, and the timely delivery of all parts and
component systems, without charge to KMC, KMC estimates that the
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cost of each Pilot Instrument will be approximately [***]. The parties recognize
that the Project Plan may need to be amended from time to time and Pilot Scope
Changes may be required, pursuant to the Scope Change provisions of Section
3.10, in order to accomplish the purpose and achieve the goals of the Pilot
Production Phase and that the current cost estimate may change as a result. KMC
shall use all reasonable commercial efforts to manage costs within such
estimate. KMC shall provide Gen-Probe with regular periodic reports, no less
than monthly, stating the then-current projected costs of the Pilot Instruments
and updating KMC's estimate of the costs to be incurred. Gen-Probe shall pay
KMC's invoices within thirty (30) days of delivery of invoice. Gen-Probe shall
have the right to review KMC's records with regard to all invoiced charges (it
being agreed, however, that any such review shall not relieve Gen-Probe from its
obligation to pay KMC's invoices within thirty days and, further, that payment
by Gen-Probe shall not waive Gen-Probe's right to subsequently contest KMC's
charges).
5.6 Instrument Specifications and Quality Standards. The parties'
objective is that Pilot Instruments will be manufactured to the same FDA QSR
configuration control standards as Production Instruments. KMC shall use good
workmanship in performing all Pilot Production Phase activities and the Pilot
Instruments shall meet the applicable quality and regulatory requirements of
Article VII. The parties acknowledge that the PRD will not have been finalized
before KMC begins to assemble Pilot Instruments pursuant to the terms of this
Article V. KMC shall use its best efforts to assemble the Pilot Instruments in
accordance with the configuration of PR 30, as previously prescribed by Rela,
together with those additional Design Engineering changes described in Exhibit
1; provided, also, that KMC shall use its best efforts to achieve modifications
that may be adopted pursuant to the Scope Change provisions of Section 3.10. KMC
shall advise Gen-Probe if KMC concludes that any Design Engineering change
described in Exhibit 1 or any Scope Change cannot be incorporated into a Pilot
Instrument, and in that event Gen-Probe will decide, in its sole discretion,
whether to proceed with assembly of such Pilot Instrument. Gen-Probe may also,
at its sole discretion, defer assembly of any Pilot Instrument if Gen-Probe
concludes that such delay is appropriate in order to increase Instrument
reliability prior to assembly of any Pilot Instrument. KMC shall develop,
subject to Gen-Probe's review and approval (which approval or rejection shall be
in its sole discretion), preliminary acceptance test procedures (the
"Preliminary ATP") that each Pilot Instrument must pass before shipment by KMC.
5.7 Retrofit. KMC represents, to the best of its knowledge as of the date
of execution of this Agreement, that the Pilot Instruments, when assembled in
accordance with Section 5.6, will be capable of being retrofitted once the final
PRD and final hardware specifications are approved. Upon Gen-Probe's request and
at Gen-Probe's sole option, KMC shall use its best efforts to retrofit any or
all Pilot Instruments, on a time and materials basis at KMC's then standard
rate, to meet the requirements of the final PRD and final hardware
specifications.
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the Commission. Confidential treatment has been requested with respect to the
omitted portions.
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ARTICLE VI
PRODUCTION PHASE
6.1 Manufacturing. KMC shall be responsible for manufacturing the
Instruments ordered by Gen-Probe (the "Production Instruments") as set forth in
the Project Plan and in this Article VI (the "Production Phase").
6.2 Initial Long-Lead Materials. In order to meet its desired production
schedule for its initial order of the Production Instruments, Gen-Probe must
provide KMC with authorization not later than [***] to purchase those materials
that require long lead times to produce ("Long-Lead Materials") for twenty (20)
Production Instruments. The parties shall discuss in good faith and determine in
writing no later than [***] which Production Instrument materials are Long-Lead
Materials. Gen-Probe acknowledges that the design and specifications for the
Instrument may not be finalized by [***] and, accordingly, some of the ordered
Long-Lead Materials may not be useable for Production Instruments. Gen-Probe
agrees to bear the full commercial and economic risk that any such Long-Lead
Materials ordered by KMC may not be useable. KMC shall place for bid with its
vendors, no later than [***], the order for all other materials (in addition to
the Long-Lead Materials specified above) necessary to manufacture the Production
Instruments pursuant to the currently outstanding PRD (the Long-Lead Materials
and all such other materials are collectively referred to as the "Xxxx of
Materials").
6.3 Forecasts and Purchase Orders. Not later than [***], Gen-Probe shall
provide KMC with its initial twelve-month forecast of Gen-Probe's reasonably
anticipated requirements for the number of Production Instruments to be
delivered by KMC during such twelve-month period. Such forecast shall be updated
each six months thereafter during the term of this Agreement for the then
succeeding twelve-month period. KMC shall provide Gen-Probe with a definitive
and final quote for the Xxxx of Materials (based upon Gen-Probe's PRD) for
20-unit and 100-unit ordering increments by [***]. Not later than [***],
Gen-Probe shall deliver to KMC its binding purchase order for the initial
six-month period commencing with the delivery of the first Production Instrument
(currently anticipated to be on or about [***]) and, subject to the provisions
of Section 6.8 below, establishing the schedule for delivery of such Production
Instruments. Not later than delivery of each forecast after the initial
forecast, Gen-Probe shall provide KMC with its purchase order for the six-month
period commencing six months thereafter.
6.4 Ordering and Payment for Parts. Gen-Probe shall be deemed to authorize
KMC to purchase parts comprised within the then current Xxxx of Materials by
delivering its purchase orders for Production Instruments (such parts being
referred to hereafter as the "Authorized Parts"). Prior to accepting Gen-Probe's
purchase order, (i) KMC will inform Gen-Probe of the estimated cost of the
Authorized Parts, (ii) KMC and Gen-Probe shall agree upon the delivery schedule
for the Production Instruments incorporating the Authorized Parts, and (iii) KMC
will provide Gen-Probe with KMC's schedule for commitment to vendors and receipt
of Authorized Parts in connection with the agreed delivery schedule.
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the Commission. Confidential treatment has been requested with respect to the
omitted portions.
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In placing its orders with vendors for Authorized Parts KMC shall
use its best efforts to arrange "just in time" delivery of Authorized Parts
consistent with the agreed delivery schedule. KMC shall negotiate terms with
vendors that provide the most advantageous quantity discounts from vendors based
on each accepted Gen-Probe purchase order. Subject to Gen-Probe's desires
respecting quantity discounts referred to in the immediately preceding sentence
and in the provisions of Section 6.11 hereof, KMC shall also use its best
efforts to obtain terms from vendors that permit prospective cancellation of
orders for Authorized Parts prior to their delivery to KMC. If there are
trade-offs between quantity discounts and the right to cancel, KMC will notify
Gen-Probe and Gen-Probe will elect between the alternatives.
KMC shall use its best efforts to reasonably use parts transferred
to KMC from Colorado MEDtech, Inc. in assembling Production Instruments. As
Gen-Probe has previously paid Colorado MEDtech for such parts, the parties will
agree on method by which such parts can be tracked and accounted for when
incorporated into Production Instruments.
Nothing contained in this Section 6.4 herein shall modify the provisions
of Section 6.11 of this Agreement ("Transfer Price").
6.4.1 Contemporaneous Payment. If Gen-Probe does not provide either a
letter of credit, surety bond, or financial guarantee bond pursuant to Sections
6.5 in connection with any of its purchase orders for Production Instruments,
KMC will invoice Gen-Probe for the actual cost of Authorized Parts at the time
it orders such Authorized Parts from third party vendors. Gen-Probe shall pay
such KMC's invoices within fifteen (15) days of receipt of invoice. If Gen-Probe
does not pay the invoice within fifteen (15) days of receipt, then, without
limiting any other rights and remedies that may be available to KMC under this
Agreement, at law or in equity, KMC will be entitled to cancel the Authorized
Parts orders made with third party vendors (it being agreed, however, that
Gen-Probe shall not be liable for cancellation charges, if any, imposed by
third-party vendors as a result of such cancellations).
6.4.2 Letter of Credit. If Gen-Probe provides KMC with a letter of credit
pursuant to Section 6.5, Gen-Probe will not be required to pay for Authorized
Parts until the earlier of (i) delivery of Production Instruments incorporating
such parts (by payment of the invoice for such Production Instruments pursuant
to Section 6.16) or (ii) eleven (11) months from the date KMC ordered such
Authorized Parts. At Gen-Probe's sole option, the parties will implement the
parts delivery, billing, and payment terms described in Section 6.4.3 below for
use in circumstances where Gen-Probe has provided a letter of credit.
6.4.3 Surety Bond. If Gen-Probe provides KMC with a surety bond or
financial guarantee bond pursuant to Section 6.5, then upon KMC's actual receipt
of Authorized Parts from third party vendors on a "just in time" basis, but in
no event more than sixty (60) days prior to the scheduled delivery of the
Production Instruments incorporating such parts (other than those parts set
forth in Exhibit 9 annexed hereto) KMC will invoice Gen-Probe for the actual
cost of such Authorized Parts. As to the parts set forth in Exhibit 9 ("the
Exhibit 9 Parts"), KMC will invoice Gen-Probe for the actual cost of such
Authorized Parts upon KMC's actual receipt of
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Authorized Parts from third party vendors on a "just in time" basis, but in no
event more than one hundred twenty (120) days prior to the scheduled delivery of
the Production Instruments incorporating such parts. KMC shall use its best
efforts to limit the number of Exhibit 9 Parts. To the extent the cost of
Exhibit 9 Parts exceeds 20% of the cost of all Production Instrument parts, all
on a "per unit" basis, Gen-Probe shall be under no obligation to pay the amount
of the actual costs of such Authorized Parts that exceed the 20% limitation any
earlier than sixty (60) days before the scheduled delivery of the Production
Instruments incorporating such parts; provided that if there are trade-offs
between quantity discounts and the number of Exhibit 9 Parts, KMC will notify
Gen-Probe and Gen-Probe will elect between the alternatives. Gen-Probe shall pay
all invoices issued by KMC in accordance with this Section 6.4.3 within thirty
(30) days of receipt. Gen-Probe shall be entitled to a credit against the
invoiced price of delivered Production Instruments incorporating such parts (as
described in Section 6.16) for amounts paid pursuant to this paragraph. This
Section 6.4.3 shall not determine the liability of the surety on any surety
bond, as to which the provisions of section 6.5 shall apply.
6.5 Security. Rather than being obligated to pay for Authorized Parts by
contemporaneous payment in the manner provided for in Section 6.4.1, Gen-Probe
shall have the right to provide KMC, concurrently with the issuance of its
purchase order, a firm, irrevocable letter of credit from Xxxxx Fargo Bank,
N.A., or comparable financial institution (in form, amount and substance
reasonably satisfactory to KMC), or a surety bond issued by a surety company
acceptable to KMC (the bond and associated indemnity agreement to be in form and
substance reasonably satisfactory to KMC), as security for the costs of such
Authorized Parts, plus KMC's handling charges of fifteen (15%) percent
("together, the "Authorized Parts Charges"). (KMC agrees that the form of bond
attached as Exhibit 8 is generally acceptable to KMC. Such letter of credit or
surety bond will guarantee payment for the Authorized Parts Charges only and
will not provide coverage for any other aspect of this Agreement. Without in any
manner releasing Gen-Probe of its payment obligations under Section 6.4.3 or
6.16, if Gen-Probe has not paid for such Authorized Parts (either by payment for
Production Instruments incorporating such parts in accordance with Section
6.16), or directly by payment for such parts themselves) within eleven (11)
months of the date that KMC ordered such parts (as ordered or authorized by
Gen-Probe), then KMC shall separately invoice Gen-Probe for the cost of the
Authorized Parts Charges. If Gen-Probe fails to pay such invoice in full, within
thirty (30) days of issuance, then upon five (5) days written notice to
Gen-Probe KMC shall be entitled to draw upon the letter of credit. If a surety
bond is provided as security (rather than a letter of credit), KMC may make a
claim against the surety bond for the amount of the invoice with a copy of the
invoice and KMC's signed statement that such invoice remain unpaid. The surety
may take up to thirty (30) days to verify a claim is valid after presentation of
a claim by KMC. After verification of the validity of the claim, the Surety
shall make payment in a period not to exceed thirty (30) days.
6.6 Interest. Failure to make full payment of any KMC invoice within the
period set forth in this Agreement shall constitute a material breach of this
Agreement by Gen-Probe.
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Furthermore, KMC may assess Gen-Probe interest at the rate of one (1%) percent
per month or the maximum rate allowed by applicable law, whichever is lower, on
the past due amount and may recover its reasonable costs of collection
(including attorney's fees and expenses). For purposes of clarity, if Gen-Probe
fails to timely pay any KMC invoice issued pursuant to Sections 6.4 or 6.16, the
subsequent payment for Authorized Part Charges under a letter of credit, surety
bond or financial guarantee pursuant to Section 6.5 shall not relieve Gen-Probe
of its obligation to pay KMC the foregoing interest or costs of collection.
6.7 No Waiver / KMC Rights. Nothing contained in Sections 6.4 or 6.5, nor
any payment under a letter of credit, surety bond, or financial guarantee bond
shall release or waive any claim or right of Gen-Probe in any action or
proceeding brought after payment in full has been made to KMC to contend that
(i) such payment was not in fact due and/or (ii) to seek to recover (on its own
behalf or on behalf of any party making payment to KMC) the amount of the
payment made to KMC, it being the intention of the parties to prescribe the
unconditional timing of payment to KMC and not to waive, release, or extinguish
substantive rights of Gen-Probe, the surety, or the financial institution, which
may be exercised and asserted after such payment has been made. Nothing
contained in Section 6.5, including the payment to KMC under a letter of credit,
surety bond or financial guarantee bond shall release or waive any claim or
right of KMC for timely payment of invoices issued pursuant to Sections 6.4 or
6.16. To the extent that KMC has not been paid its Authorized Parts Charges in
accordance with the terms of Sections 6.4 or 6.5 above, then KMC shall be
entitled to avail itself of all rights and remedies to which it may be entitled
under this Agreement, at law or in equity, including the cancellation of any or
all outstanding material orders and the termination of all work under this
Agreement.
6.8 Project Plan; Schedule. KMC shall use its best efforts to meet the
production schedule set forth in accepted Gen-Probe's purchase orders. Within
two weeks of KMC's receipt of each of Gen-Probe's purchase orders, KMC shall
inform Gen-Probe whether KMC can meet the proposed delivery schedule set forth
in the purchase order. If KMC informs Gen-Probe that it is unable to meet such
delivery schedule, then the purchase order shall not be binding on either party
and KMC shall make a counterproposal to Gen-Probe setting forth a delivery
schedule, which schedule shall be binding upon the parties if accepted by
Gen-Probe. The Production Phase shall begin, and KMC shall begin manufacturing
the Production Instruments (subject to its receipt of Gen-Probe's purchase
orders and security or payment referred to in Sections 6.5 and 6.6 above), as
soon as the Pilot Instruments are complete and the manufacturing readiness
review has been conducted. KMC shall take all actions necessary to develop, not
later than September 1, 2002, the capacity to produce fifteen (15) Production
Instruments per month. KMC shall report to Gen-Probe at least monthly on the
status of its production capacity, such reports to commence one month after the
Effective Date.
6.9 Inventory. Based upon Gen-Probe's purchase orders for Production
Instruments, KMC shall order and maintain sufficient quantities of all materials
required for the timely manufacture and supply of Production Instruments ordered
by Gen-Probe under such purchase orders.
6.10 Repair Parts. KMC shall manufacture and supply repair parts for the
Production Instruments as required by Gen-Probe, pursuant to Gen-Probe's
purchase orders for such parts, to
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support Gen-Probe's United States and overseas field service. KMC and Gen-Probe
shall agree upon a repair parts list and a price list by August 30, 2001.
Gen-Probe shall provide to KMC separate forecasts and binding purchase orders
(together with security substantially as provided for under Section 6.5(in form
and substance satisfactory to KMC) to secure payment for same) for such repair
parts.
6.11 Transfer Price.
(a) The transfer price for each Production Instrument (the "Transfer
Price") shall be [***], based upon the following assumptions: (1) a commitment
by Gen-Probe to order Production Instruments in lots of [***], which shall
enable KMC to order one hundred (100) complete sets of materials for such
Production Instruments; (2) a Xxxx of Materials price for each Production
Instrument ("BOM Price") of [***] (such BOM Price is primarily based upon the
material and pricing information provided to KMC by Gen-Probe directly or
through Rela) ; and (3) a [***]. As set forth in Section 6.3, KMC shall provide
Gen-Probe the actual BOM Price for the Production Instruments by May 14, 2001.
(b) If the actual BOM Price varies from the [***] in the above
paragraph, and/or if Gen-Probe orders Production Instruments in lots of fewer
than one-hundred (100) Production Instruments, the Transfer Price shall be
adjusted in accordance with the range of xxxx-ups used by KMC in calculating the
presently-estimated [***], as set forth in Exhibit 5.
(c) The labor content portion of the Transfer Price shall be
adjusted by KMC for inflation, based on the average combined change in the
national Consumer Price Index and Medical Consumer Price Index (or comparable
indexes if no longer available), no more frequently than annually.
(d) KMC shall use its best efforts to minimize the BOM Price and
shall obtain at least two competing bids wherever feasible. If, after receipt of
vendor bids, the unit price of those materials and components currently
anticipated to comprise the Xxxx of Materials and, therefore, used in arriving
at the [***] estimate, is more than [***], Gen-Probe shall have the option to
purchase such Xxxx of Material itself, subject to the following conditions: (i)
KMC will not provide any warranty as to such materials; (ii) KMC will charge
Gen-Probe a material handling fee of [***] of the total value of material
purchased by Gen-Probe; and (iii) KMC will reserve the right to reject any
non-conforming material received in connection with material orders placed
directly by Gen-Probe. If, by agreement between Gen-Probe and KMC, the final
Xxxx of Materials contains materials and components other than those used to
calculate the [***] estimate, the additional cost of such other materials and
components shall not be considered for purposes of the above [***] threshold.
6.12 Delivery. All shipments of Production Instruments and repair parts
pursuant to this Article 6 shall be FOB KMC's place of manufacture and Gen-Probe
shall bear the risk of loss and cost of transportation upon delivery by KMC to a
carrier designated by Gen-Probe.
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omitted portions.
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6.13 Binding Orders. Gen-Probe expects to order [***] Production
Instruments from KMC to be shipped during the initial [***] consecutive months
of the Production Phase and to purchase a total of [***] Production Instruments
from KMC during the initial four (4) consecutive years of the Production Phase;
provided, however, that a binding obligation on Gen-Probe's part to purchase
Production Instruments from KMC shall be created only as and when Gen-Probe
issues purchase orders in accordance with terms set forth in this Agreement,
including without limitation Section 6.3.
6.14 Cost Reduction and Redesign Services. If the cost reductions
identified by KMC in Exhibit 4 are implemented, then such reductions will be
allocated [***]. Gen-Probe will pay the associated tooling and engineering costs
to implement such reductions. KMC and Gen-Probe will share equally in any cost
reductions in addition to those referred to in Exhibit 4; provided, however,
that before Gen-Probe participates in such additional cost reductions, one
hundred percent (100%) of such cost reductions shall accrue to KMC's benefit
until KMC fully recoups all non-recurring expenses related solely to such cost
reductions.
6.15 Production Instrument Inspection. Before KMC ships any Production
Instruments to Gen-Probe or its distributors or customers, KMC shall confirm
that each such Production Instrument passes the requirements of the acceptance
test procedures set forth in Section 6.17 (the "ATP"). Gen-Probe shall have the
right to be present for any such Production Instrument testing. KMC's good-faith
confirmation that a Production Instrument passes the requirements of the ATP
shall be considered acceptance of such Production Instrument by Gen-Probe for
purposes of this Agreement. Thereafter, any claims respecting such Production
Instruments shall be pursuant to KMC's warranty set forth in Article VIII.
6.16 Invoices. KMC shall invoice Gen-Probe for the Production Instruments
and repair parts upon KMC's delivery to Gen-Probe (or its customer) of such
Production Instruments or repair parts. Gen-Probe shall pay KMC within thirty
(30) days following receipt of Production Instruments or repair parts and an
invoice that lists each such Production Instrument and repair part together with
the price for each such item. The purchase price of any Production Instrument
shall be reduced to reflect any applicable credits due Gen-Probe for payments
previously made pursuant to Sections 6.4 and 6.5 for the Authorized Parts
incorporated within such Production Instruments. If Gen-Probe fails to pay a KMC
invoice within the foregoing thirty (30) day period, KMC shall be entitled to
avail itself of all rights and remedies to which it may be entitled under this
Agreement, at law or in equity, including the cancellation of any or all
outstanding material orders and the termination of all work under this
Agreement.
6.17 Instrument Specifications and Quality Standards. The parties
acknowledge that the specifications for the Instrument have not been finalized
by Gen-Probe. When it deems appropriate, Gen-Probe shall commence validation of
the Instrument's design against its then-current specifications. After Gen-Probe
is satisfied with the validation of the Instrument's design to such
specifications, Gen-Probe shall issue the PRD for Production Instruments.
Gen-Probe shall have full control, authority and responsibility for the design
of the Instrument, including during the Design Engineering Phase, and for the
final specifications of the Instrument. Upon finalization of the PRD, and based
on the Instrument capabilities associated therewith, KMC
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shall develop, subject to Gen-Probe's review and approval (which approval shall
be in Gen-Probe's sole discretion), the acceptance test procedures (the "ATP")
that each Production Instrument must pass before shipment by KMC. Subject to all
of the terms and conditions of this Agreement (including, without limitation,
necessary Scope Changes and issuance of related Work Statements), KMC shall: (i)
complete the Instrument design to meet Gen-Probe's final specifications; (ii)
develop the ATP to insure that each Production Instrument meets certain
performance criteria to be agreed upon by the parties, reasonably and in good
faith, after finalization of the PRD for Production Instruments; and (iii)
manufacture Production Instruments that comply with and pass the entire ATP. The
ATP will be summarized in a Gen-Probe Quality Control Specification ("QCS")
document against which each Instrument will have a "Certificate of Release"
provided to Gen-Probe upon shipment of each Instrument.
6.18 Manufacturing Inspection. Gen-Probe shall have the right, upon
reasonable prior notice, to inspect all phases of the Instrument manufacturing
activities, during normal business hours, in order to verify KMC's compliance
with production specifications and regulatory standards. KMC agrees to give
Gen-Probe access, during normal working hours and upon reasonable prior notice,
to such records as are reasonably necessary to confirm KMC's compliance with its
manufacturing obligations hereunder including quality control records, test
records, manufacturing records and design records, and to permit Gen-Probe to
review and copy such records. All such records shall be held by Gen-Probe in
accordance with the terms of the confidentiality provisions of Article XIII.
6.19 Production Delays. In the event that KMC production activities under
a purchase order issued by Gen-Probe are substantially interrupted and /or
delayed due to Gen-Probe decisions or actions, for a continuous period in excess
of thirty (30) days, then KMC reserves the right to pass on to Gen-Probe a
production delay charge. Such charge shall be limited to reimbursement of actual
expenditures by KMC for labor or materials associated with the purchase order
then in effect, and which such expenditures cannot be avoided. KMC will use all
reasonable efforts to minimize such charges, by reallocating internal resources
and by negotiating alternative arrangements with outside suppliers.
ARTICLE VII
REGULATORY COMPLIANCE
KMC will manufacture the Production Instruments, Pilot Instruments and
repair parts in accordance with each and every applicable requirement of the:
(a) Federal Food, Drug and Cosmetics Act, as amended, including without
limitation, the then current Quality Systems Regulations ("QSR") as established
by the United States Food and Drug Administration in accordance with cGMPs
covering devices regulated by each FDA Center governing the intended use of the
Instrument, i.e., blood screening and diagnostic testing; (b) Canadian CSA
Standards; (c) applicable standards of the Underwriters Laboratories; (d)
international electrical safety approval, meeting the IEC-1010 Medical
Electrical Equipment Standards; and (e) European CE Standards for which KMC will
secure the "CE" xxxx on the Instrument. KMC shall maintain a change control
process that meets the requirements of the Center for Biologics Evaluation and
Research of the FDA for all services performed by KMC under this Agreement.
(This process
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shall include a requirement for prior approval by Gen-Probe of all changes or
improvements to the Instrument.) Gen-Probe will use its best efforts, with the
assistance of KMC, to obtain historical change control documentation from
Colorado MEDtech/Rela for all Instrument-related services performed by Colorado
MEDtech/Rela for Gen-Probe and KMC shall integrate such documentation, when such
documentation is obtained, KMC will incorporate such information into its change
control process documentation and the Instrument Design History File. The
parties recognize that the incorporation of such documentation by KMC is a Scope
Change and will result in additional costs, and the parties will provide for
such services by KMC pursuant to the issuance of an agreed upon Work Statement
pursuant to the provisions of Section 3.10. KMC shall retain all necessary
documents, including without limitation device history records, device master
records and other manufacturing quality records, in accordance with any
applicable QSR including, without limitation, cGMP regulations. At the end of
the retention period and subject to payment in full of all KMC invoices, KMC
shall send all such records to Gen-Probe. KMC shall make Gen-Probe aware, within
two (2) weeks of KMC becoming aware, of any known issues believed to require
regulatory attention on either KMC's or Gen-Probe's part.
ARTICLE VIII
WARRANTY AND SERVICE
8.1 Warranty and Service. KMC warrants that the Production Instruments and
Pilot Instruments manufactured by it will be free, under normal use and
maintenance, from defects in material and workmanship for a period of twelve
(12) months following installation at Gen-Probe's customer or eighteen (18)
months following delivery, whichever is earlier (the "Warranty Period"). (If
delay in delivery of any Instrument results solely from action or inaction of
Gen-Probe, then the 18-month warranty period for such Instrument shall commence
on the scheduled delivery date or on completion of the Instrument by KMC,
whichever is later.) Any materials provided by or on behalf of Gen-Probe as
customer-furnished material shall be excluded from the warranty provided by KMC
under this Section 8.1. As Gen-Probe's sole and exclusive remedy for any defects
in KMC manufactured Instruments (provided, however, that nothing contained in
this sentence shall affect Gen-Probe's right of indemnity as to third party
claims pursuant to Section 9.1), KMC shall, at its option (subject to the
reasonable requirements of Gen-Probe's customers as to which KMC has been given
notice), reimburse Gen-Probe for the cost of field service (subject to KMC's
right to approve such field service costs, pursuant to a standard policy or on
an individual basis, before field service is provided), provide factory service
of such defective Instrument (without charge to Gen-Probe), or replace the
defective Instrument (without charge to Gen-Probe); provided, however, that KMC
must be notified in writing by Gen-Probe of the defect within the Warranty
Period. As set forth in Section 6.10, KMC shall sell to Gen-Probe an inventory
of repair parts to be used by Gen-Probe in performing field service on
Instruments. During the Transition Phase, Gen-Probe and KMC shall establish
mutually agreed-upon factory service programs, for service both during the
Warranty Period and thereafter.
8.2 WARRANTY LIMITATIONS. OTHER THAN AS EXPRESSLY PROVIDED IN THIS
AGREEMENT, NEITHER PARTY MAKES ANY GUARANTEE OR WARRANTY WHATSOEVER, AND THE
WARRANTY SET FORTH IN THIS ARTICLE VIII IS IN LIEU OF ALL OTHER WARRANTIES BY
KMC, EXPRESS OR
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IMPLIED, INCLUDING ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR PARTICULAR
PURPOSE.
8.3 Limitation of Liability/Damages. Except as to rights of indemnity
under Article IX, in no event will either party be liable to the other in
contract, tort or otherwise for any lost profits, or special, incidental or
consequential damages, regardless of whether such party has been advised of the
possibility of such damages. KMC's liability to Gen-Probe on any claims of any
kind (including negligence) for any loss or damage arising out of, or connected
with, or resulting from this Agreement or the performance of breach hereof shall
not in the aggregate, exceed the total amount of insurance coverage available
for such claims under insurance maintained by KMC; provided, however, that if
insurance coverage is not available for the full amount of any such claims, then
and in such event, KMC's liability for all such claims, or portions thereof, in
the aggregate, shall not exceed the amount provided by KMC's insurance plus the
total amount paid to KMC hereunder by Gen-Probe for services and Instruments.
Nothing contained in the immediately preceding sentence shall limit KMC's
liability to Gen-Probe pursuant to the indemnity provisions of Section 9.1(ii).
ARTICLE IX
INDEMNITY
9.1 Indemnification by KMC. KMC shall indemnify and save Gen-Probe, its
affiliated entities and their respective officers, directors, employees and
agents (collectively, the "Gen-Probe Indemnitees"), harmless from any and all
claims, actions, losses, damages, liabilities, costs and expenses (including
reasonable attorneys' fees and disbursements) incurred by the Gen-Probe
Indemnitees as a result of: (i) any breach by KMC of the provisions of Sections
10.1 and 12.1; or (ii) any injury to persons or damage to property caused by any
Production Instrument or Pilot Instrument manufactured, sold or serviced by KMC
to or for Gen-Probe or Gen-Probe's customers, where the injury or damage is a
direct result of KMC's negligence, failure to manufacture such Instrument in
accordance with Gen-Probe's specifications, or failure to comply with the
requirements of Article VII.
9.2 Indemnification by Gen-Probe. Gen-Probe shall indemnify and save KMC,
its affiliated entities and their respective officers, directors, employees and
agents (collectively, the "KMC Indemnitees"), harmless from any and all claims,
actions, losses, damages, liabilities, costs and expenses (including reasonable
attorneys' fees and disbursements) incurred by the KMC Indemnitees as a result
of: (i) any breach by Gen-Probe of the provisions of Sections 10.1, 10.2 or
12.1; or (ii) any injury to persons or damage to property arising out of or in
any way connected with the Instruments, Gen-Probe's acts or omissions, or the
services provided by KMC pursuant to this Agreement (other than where the cause
of the claim, action, loss, damage, liability, cost and/or expenses results from
a cause identified in Section 9.1 hereof); or (iii) without limiting the
provisions of subsection (i) above, any claims, actions or proceedings brought
by or on behalf of [***] to the extent any such
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the Commission. Confidential treatment has been requested with respect to the
omitted portions.
21
claims, actions or proceedings result from, arise out of, relate to, or are in
connection with this Agreement.
9.3 Indemnification Procedures. The parties shall promptly notify each
other of any claims or suits with respect to which indemnification is sought.
The party requesting indemnification shall permit the indemnifying party to
assume the defense, at the indemnifying party's sole expense, of such claims or
suits giving rise to the request. The requesting party shall cooperate with the
indemnifying party in such defense when reasonably requested to do so. No
settlement or compromise shall be binding on a party to this Agreement without
such party's prior written consent, such consent not to be unreasonably
withheld. Costs, expenses, and/or fees incurred by a party and as to which that
party has a right of indemnity hereunder shall be periodically reimbursed to the
indemnified party by the indemnifying party as they are incurred.
ARTICLE X
REPRESENTATIONS AND WARRANTIES
10.1 Mutual Representations and Warranties. Each of KMC and Gen-Probe
represents and warrants to the other that its execution, delivery and
performance of this Agreement (a) has been duly authorized and represents its
legal, valid and binding obligation, enforceable in accordance with its terms;
and (b) does not result in a breach of or constitute (with or without notice or
lapse of time or both) a default under any contract or arrangement to which it
is a party.
10.2 Additional Representations and Warranties of Gen-Probe. Gen-Probe
further represents and warrants to KMC that, as of the Effective Date: (i) to
the best of Gen-Probe's belief, the execution, delivery and performance of this
Agreement does not in any way contravene any obligation to, or rights of
Colorado MEDtech/Rela or any of its affiliates, under any agreements or
otherwise; and (ii) if and to the extent the Instrument or Production Instrument
incorporates any proprietary or confidential information of Rela or Colorado
MEDtech, Gen-Probe, together with its designees (including, for the purposes of
this provision, KMC) has the unrestricted right to incorporate and use such
information in the Instruments and Production Instruments.
ARTICLE XI
OWNERSHIP
11.1 Design Ownership. Subject to its payment of all sums due to KMC
hereunder and to Section 11.2, Gen-Probe shall solely own the right to any and
all technology, discoveries, inventions or processes, whether patentable or not,
that are first reduced to practice by KMC in its performance of this Agreement.
Subject to its payment of all sums due to KMC hereunder and to Section 11.2,
Gen-Probe and KMC shall jointly own the rights to any and all technology,
discoveries, inventions or processes, whether patentable or not, that are first
conceived, but not reduced to practice, by KMC in its performance of this
Agreement.
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11.2 Production Processes Ownership. Subject to its payment of all sums
due to KMC hereunder, Gen-Probe shall jointly own with KMC any production
process technology first conceived or first reduced to practice by KMC in its
performance of this Agreement if that production process technology has any
substantial use other than in the manufacture of the Instrument. For the
avoidance of doubt and subject to Gen-Probe's payment of all sums due KMC
hereunder and pursuant to Section 11.1, Gen-Probe shall own any production
process technology first conceived or first reduced to practice by KMC in its
performance of this Agreement if that production process technology does not
have any substantial use other than in the manufacture of the Instrument.
ARTICLE XII
INFRINGEMENT
12.1 Claims by Third Parties. KMC and Gen-Probe shall each use its best
efforts to not, with actual knowledge, incorporate into any Instrument any
proprietary or confidential technical information of any third party. Each party
shall be obligated to promptly notify the other party of any claims or
circumstances concerning infringements, misappropriations, imitations or
unauthorized possession, knowledge or use of technology used in the design or
manufacturing process for the Instrument.
12.2 Defense. Gen-Probe shall have the sole right to defend, at its sole
cost and expense (subject to the indemnification provisions of Article 9), any
and all claims that any Instrument infringes or misappropriates any third
party's intellectual property rights. If Gen-Probe elects not to defend such
claim, or if it fails to assume the defense within ninety (90) days of receiving
written notice of such claim, then KMC shall have the right, at its sole cost
and expense, to defend such claim.
12.3 Enforcement. If either party becomes aware of any actual or
threatened infringement or misappropriation of Gen-Probe Technology, that party
shall promptly notify the other party of such infringement or misappropriation.
Gen-Probe shall have the sole right, at its sole cost and expense, to enforce
the Gen-Probe Technology.
ARTICLE XIII
CONFIDENTIALITY
13.1 Confidentiality Obligations. During the term of this Agreement and
thereafter, each party: (i) shall treat as confidential all Confidential
Information provided to the receiving party by the disclosing party, (ii) shall
not use such Confidential Information except as expressly permitted under the
terms of this Agreement or otherwise authorized in writing by the disclosing
party, (iii) shall implement reasonable procedures to prohibit the disclosure,
unauthorized duplication, misuse or removal of such Confidential Information,
and (iv) shall not disclose such Confidential Information to any third party
unless it is necessary to fulfill one or more obligations expressly required by
this Agreement, and provided that such third party agrees in writing to be
23
bound by terms of confidentiality at least equivalent to those set forth in this
Article XIII. Without limiting the foregoing, each of the parties shall use at
least the same procedures and degree of care to prevent the disclosure of
Confidential Information as its uses to prevent the disclosure of its own
confidential information of like importance, and shall in any event use no less
than reasonable procedures and a reasonable degree of care. For purposes of this
Article XIII, "Confidential Information" means any and all non-public and
proprietary information that is specifically designated as such and that is
disclosed by either party to the other (including, without limitation, pricing
information) in any form in connection with this Agreement and that, if orally
disclosed, shall be identified in writing within thirty (30) days of such
disclosure.
13.2 Permitted Disclosure. The obligations set forth in Section 13.1 shall
not apply to any information to the extent it can be established by the
receiving party that such information:
(a) was generally known and available to the public domain at the
time it was disclosed, or becomes generally known and available to the public
domain through no fault of the receiver;
(b) was known to the receiver at the time of disclosure as shown by
the written records in existence at the time of disclosure, or was independently
developed by the receiving party or its Affiliates without benefit of
Confidential Information;
(c) is disclosed with the prior written approval of the disclosing
party;
(d) becomes known to the receiving party from a third party without
breach of this Agreement by the receiving party and in a manner that is
otherwise not in violation of the disclosing party's rights; or
(e) is disclosed by the receiving party pursuant to the order or
requirement of a court, administrative agency, or other governmental body;
provided, however, that the receiving party shall provide reasonable advance
notice to enable the disclosing party, with the cooperation of the receiving
party, to seek a protective order, confidential treatment order, or otherwise
prevent or restrict such disclosure.
13.3 Agreement and Terms Confidential. Unless otherwise agreed to in
writing or as necessary to comply with a valid legal order of a court of law or
agency of competent jurisdiction, both the existence and terms of this Agreement
shall be deemed Confidential Information. If either party is required by the
United States Securities Exchange Commission (or other similar State or
non-United States governmental agency) to disclose this Agreement or any of its
terms, such party shall consult with the other party, and give due consideration
to such party's comments regarding which terms the disclosing party may make the
subject of a confidential treatment request.
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ARTICLE XIV
LIMITED GUARANTEE BY EFW, INC.
If, (1) during the Initial 4 Years (as hereinafter defined) KMC becomes
insolvent or undergoes a change of control that results in its (or its
successors) inability to perform its obligations under this Agreement with
respect to the manufacture and service of Production Instruments under this
Agreement; (2) for the period of not less than six (6) months prior to such
insolvency or change of control, all world-wide requirements for Production
Instruments were being supplied by KMC and Gen-Probe does not have an existing
second source supplier for the Production Instruments; and (3) KMC fails to
provide Gen-Probe with at least nine (9) months prior written notice of such
insolvency or change or control (the date of any such notice is hereby referred
to herein as the "Notification Date"), then, and only in such event, EFW, Inc.
("EFW"), the indirect parent of KMC, guarantees to Gen-Probe the due and timely
performance of all of KMC's obligations hereunder until the earlier of (a) the
manufacture of the Production Instrument for Gen-Probe is transferred to a new
manufacturer selected by or reasonably satisfactory to Gen-Probe, (b) the date
six months after the Notification Date, or (c) the end of the Initial 4 Years.
The period between the Notification Date and the date determined in accordance
with the preceding sentence is referred to herein as the "Guarantee Period."
During the Guarantee Period, EFW shall also assist Gen-Probe in the transition
of manufacturing of the Production Instruments to the new manufacturer. EFW
shall bear or pay all reasonable out-of-pocket costs associated with the
transfer of manufacturing during the Guarantee Period. EFW's guarantee shall
only be for those specific items set forth above and will not provide coverage
for any other aspect of this Agreement.
ARTICLE XV
TERM AND TERMINATION
15.1 Term. Unless terminated earlier pursuant to the terms of Sections
15.2, 15.3, 15.4 or 15.5, the term of this Agreement shall commence on the
Effective Date and continue until the later of (a) the date four (4) years after
the date of the delivery by KMC of the first Production Instrument (the "Initial
4 Years") or (b) the date of the delivery by KMC of the [***] Production
Instrument hereunder. If Gen-Probe does not purchase [***] Instruments during
the Initial 4 Years, then KMC will have the right to terminate this Agreement on
nine (9) months written notice to Gen-Probe. If Gen-Probe purchases [***]
Production Instruments during the Initial 4 Years, then Gen-Probe will have the
right to extend the term for up to five (5) additional periods of one (1) year
each, subject to agreement by the parties to minimum irrevocable purchase
commitments not later than one year prior to the expiration of the then-existing
term, such agreement not to be unreasonably withheld by KMC.
15.2 Termination for Material Breach. Upon any material breach of this
Agreement by either party, the non-breaching party may terminate this Agreement
upon forty-five (45) days written notice to the breaching party (such forty-five
(45) day period shall, for the purposes of
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the Commission. Confidential treatment has been requested with respect to the
omitted portions.
25
this Section 15.2, be fourteen (14) business days with respect to the failure to
timely pay any invoice hereunder). Such termination notice shall become
effective at the end of the forty-five (45) day period unless (a) within such
period the breaching party cures such breach to the reasonable satisfaction of
the non-breaching party, or (b) if the non-breaching party is KMC, and following
the issuance of a termination notice by KMC, Gen-Probe issues a notice of
termination pursuant to Sections 15.3, 15.4 or 15.5, then, in such event, the
above forty-five (45) day cure period shall end not later than one day prior to
the effective termination date under said Section 15.3, 15.4 or 15.5 (as the
case may be). Without limiting such other rights or remedies that may be
available to KMC as a result of Gen-Probe's breach, upon the date of termination
by KMC hereunder Gen-Probe shall pay to KMC the total of the Purchase Order
Cancellation Charges, Pro-Rated Discount Reimbursement and the Unrecouped Cost
Reduction Service Charges.
15.3 [***]
15.4 Termination of Instrument Manufacturing. Gen-Probe shall have the
right to permanently cease the development and/or production of the Instrument
and Production Instrument, and in connection therewith terminate this Agreement
upon thirty (30) days written notice to KMC. If Gen-Probe terminates this
Agreement pursuant to this Section 15.4, then Gen-Probe shall pay KMC within
thirty (30) days of such termination the total of the Purchase Order
Cancellation Charges and the Unrecouped Cost Reduction Service Charges. If
Gen-Probe resumes the manufacture of the Instrument or Production Instrument
within 1 year thereafter or the balance of the Initial 4 Years, whichever is
later, with a manufacturer other than KMC (including itself), then Gen-Probe
shall pay to KMC the Pro-Rated Discount Reimbursement within thirty (30) days of
such resumption. Gen-Probe shall have no other liability to KMC for such
termination under this Section 15.4.
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the Commission. Confidential treatment has been requested with respect to the
omitted portions.
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15.5 Termination for Convenience. Gen-Probe shall have the right to
terminate this Agreement for its convenience (e.g., for any reason other than
those referred to in Sections 15.2, 15.3, and 15.4) upon thirty (30) days
written notice to KMC. If Gen-Probe terminates this Agreement for its
convenience pursuant to this Section 15.5, then Gen-Probe shall pay KMC within
thirty (30) days of such termination the total of the Purchase Order
Cancellation Charges, the Pro-Rated Discount Reimbursement, and the Unrecouped
Cost Reduction Service Charges. Gen-Probe shall have no other liability to KMC
for such termination under this Section 15.5.
15.6 Rights Upon Termination. Notwithstanding anything contained in this
Agreement to the contrary, termination of this Agreement shall not relieve the
parties of their respective obligations or liability to the other accrued
hereunder prior to the effective date of termination, including, without
limitation, under Sections 6.3, 6.4, 6.5, 6.6, 6.16, 15.3, 16.3, 16.6, 16.8, and
16.11 through 16.17 (inclusive) and Articles I, VIII, IX, XI, XIII, and XIV).
ARTICLE XVI
GENERAL
16.1 Gen-Probe Representative On-Site. Gen-Probe, at its own cost and
expense, shall have the right to have a reasonable number of its own employees
on location at KMC's facilities on a full-time or part-time basis, at
Gen-Probe's election, to interact with the KMC personnel involved in the
performance of KMC's obligations under this Agreement. KMC shall make available
to such Gen-Probe personnel a shared office, and reasonable office support and
facilities (including without limitation telephone, e-mail access, and facsimile
facilities). KMC shall cooperate with such Gen-Probe personnel and provide them
with reasonable working access to KMC's work performed under this Agreement,
including without limitation to production work areas and facilities. KMC shall
not be liable for any injury to or death of Gen-Probe's employees, or damage to,
or loss of such employees' property, unless such injury, death, damage or loss
to property is attributable to KMC's negligence. Gen-Probe shall at all times
remain responsible for the acts and omissions of its employees.
16.2 Non-competition. Without Gen-Probe's consent (which consent shall not
be unreasonably withheld), during the term of this Agreement KMC will not enter
into any new agreements to design, manufacture, supply or service any instrument
that includes DNA probe testing for infectious disease or cancer for any person
or entity other than Gen-Probe. The foregoing restriction shall not apply to DNA
probe instruments that are the subject of existing contracts (or renewals or
extensions thereof) under which KMC is presently providing design,
manufacturing, supply or service activities; provided, however, that a complete
list of the companies for which KMC presently performs such work is set forth in
Exhibit 6.
16.3 Insurance. Each of Gen-Probe and KMC shall secure and maintain,
during the term of this Agreement and for a period of five (5) years thereafter,
adequate general liability, property damage and product liability insurance with
coverage of at least $1,000,000 for each occurrence and $2,000,000 in the
aggregate.
27
16.4 Schedule. Gen-Probe acknowledges and agrees that in addition to the
other factors set forth in this Agreement, KMC's undertakings hereunder with
respect to various schedules, goals and tasks referred to herein are also
subject to the timely performance and cooperation of Gen-Probe.
16.5 Disclosure of Financial Information. KMC and Gen-Probe shall each
provide upon the request of the other party reasonable financial information
periodically throughout the term of this Agreement; provided, however, that in
lieu of disclosing such financial information to KMC, Gen-Probe shall have the
right to provide KMC with adequate and appropriate security that is reasonably
acceptable to KMC for the due and timely performance of Gen-Probe's financial
obligations to KMC under this Agreement. Such financial information shall be
treated by the parties as Confidential Information in accordance with the terms
of Article VIII.
16.6 Governing Law; Dispute Resolution. This Agreement shall be construed
and enforced in accordance with the laws of the State of California, without
giving effect to its principles of conflicts of law. Any dispute or claim
arising out of or in connection with this Agreement shall be resolved as
follows: (i) for a period of thirty (30) days after a party receives from the
other party written notice of a dispute, the respective appropriate officers of
the parties shall negotiate in good faith in an effort to resolve the dispute,
and (ii) if the dispute has not been resolved at the close of such thirty (30)
day period, the matter will be finally settled by arbitration under the rules
then in effect of the American Arbitration Association. If KMC commences any
such arbitration proceedings, arbitration shall occur at San Diego, California
and if Gen-Probe commences any such arbitration proceedings, arbitration shall
occur at New York, New York.
16.7 Independent Contractors. Gen-Probe and KMC shall be independent
contractors and shall not be deemed to be partners, joint venturers or each
other's agents or employees, and neither party shall have the right to act on
behalf of the other except as is expressly set forth in this Agreement.
16.8 Entire Agreement. This Agreement (together with its exhibits) sets
forth the entire agreement and understanding between the parties and supersedes
all previous agreements, promises, representations, understandings, and
negotiations, whether written or oral between the parties with respect to the
subject matter hereof, including, without limitation, the Memorandum of
Understanding dated as of October 20, 2000, Gen-Probe's Request for Proposal,
and KMC's proposal. There shall be no amendments or modifications to this
Agreement, except by a written document signed by both parties. Any terms or
conditions contained on a purchase order or any other documents issued by
Gen-Probe or KMC which are in addition to or contrary to the terms and
conditions of this Agreement shall be of no force and effect unless both of the
parties expressly agree in a signed writing that such terms and conditions shall
apply to (and to the extent necessary, modify) the terms of this Agreement.
16.9 Assignment. This Agreement shall not be assigned by either party
without the prior written consent of the other party, except as part of a sale
or transfer, by way of merger or otherwise, of all or substantially all of the
business or assets of such party to which this Agreement relates, and provided
further that the assignee agrees to be bound in writing by all the terms of this
Agreement, and the assignor agrees to remain responsible for the obligations of
the
28
assignee pursuant to the terms set forth herein. Any purported assignment in
violation of this Section 16.9 shall be void.
16.10 Binding Upon Successors and Assigns. Subject to the provisions of
Section 16.9, this Agreement shall be binding upon and inure to the benefit of
successors in interest and assigns of Gen-Probe and KMC.
16.11 Severability. If any provision of this Agreement is finally held to
be invalid, illegal or unenforceable by a court or agency of competent
jurisdiction, that provision shall be severed or shall be modified by the
parties so as to be legally enforceable (and to the extent modified, it shall be
modified so as to reflect, to the extent possible, the intent of the parties)
and the validity, legality and enforceability of the remaining provisions shall
not be affected or impaired in any way.
16.12 No Waiver. Any delay in enforcing a party's rights under this
Agreement or any waiver as to a particular default or other matter shall not
constitute a waiver of a party's right to the future enforcement of its rights
under this Agreement.
16.13 Attorneys' Fees. In the event of a dispute under this Agreement
between the parties, or in the event of any default, the party prevailing in the
resolution of any such dispute or default shall be entitled to recover, in an
arbitration proceeding pursuant to Section 16.6, its reasonable attorneys' fees
and disbursements. For the sake of clarity, in the event that KMC files an
action to collect on a claim against any letter of credit or surety bond
provided under Section 6.5, and KMC prevails in such action, then KMC shall be
entitled to recover its reasonable attorney's fees in connection with such
action from Gen-Probe.
16.14 Notices. Any notice required or permitted by this Agreement to be
given to either party shall be in writing and shall be deemed given when
delivered personally with a signed receipt, by confirmed telecopy to a fax
number designated in writing by the party to whom notice is given, or by
registered, recorded or certified mail, return receipt requested, and addressed
to the party to whom such notice is directed, at:
If to Gen-Probe: President and CEO
Gen-Probe Incorporated
00000 Xxxxxxx Xxxxxx Xxxxx
Xxx Xxxxx, Xxxxxxxxxx 00000-0000
Telephone: (000) 000-0000
Fax: (000) 000-0000
with a copy to: General Counsel
Gen-Probe Incorporated
00000 Xxxxxxx Xxxxxx Xxxxx
Xxx Xxxxx, Xxxxxxxxxx 00000-0000
Telephone: (000) 000-0000
Fax: (000) 000-0000
29
If to KMC: President
KMC Systems, Inc.
000 Xxxxxx Xxxxxxx Xxxxxxx
Xxxxxxxxx, Xxx Xxxxxxxxx 00000-0000
Telephone: (000) 000-0000
Fax: (000) 000-0000
with copies to: Xxx Xxxxxxxx, Esq.
Xxxxxxx Xxxxxxx LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
General Counsel
EFW, Inc.
0000 Xxxxxx Xxxxx Xxxxxxx
Post Office Box 136969
Ft. Xxxxx, Xxxxx 00000-0000
Telephone: (000) 000-0000
Fax: (000) 000-0000
or at such other address or telecopy number as such party to whom notice is
directed may designate to the other party in writing.
16.15 Force Majeure. If the performance of this Agreement or any
obligations hereunder is prevented, restricted or interfered with by reason of
fire or other casualty or accident, strikes or labor disputes, war or other
violence, any law, order, proclamation, ordinance, demand or requirement of any
government agency, or any other act or condition beyond the control of the
parties hereto ("Force Majeure"), the party so affected, upon giving prompt
notice to the other party shall be excused from such performance (other than the
obligation to pay money hereunder) during such prevention, restriction or
interference. If the Force Majeure continues for more than ninety (90) days,
then the other party may, on thirty (30) days written notice to the affected
party, terminate this Agreement, subject to the right of the affected party to
preclude such termination by compensating the other party for its reasonable
costs incurred as a result of the delay due to the Force Majeure. The parties
agree that in the event of a termination under this Section 16.15 by either
party, KMC's reasonable costs will include the Purchase Order Cancellation
Charges.
16.16 No Right of Publicity. Except as otherwise provided herein, no
right, express or implied, is granted by this Agreement to either party to use
in any manner the name of Gen-Probe or KMC or any other trade name or trademark
of the other party in connection with the performance of this Agreement.
16.17 Counterparts. This Agreement shall be fully executed in two (2)
original counterparts, each of which shall be deemed an original.
30
IN WITNESS WHEREOF, authorized officers of each of Gen-Probe Incorporated
and KMC Systems, Inc. have executed this Agreement as of the date first set
forth above.
GEN-PROBE INCORPORATED KMC SYSTEMS, INC.
By: /s/ Xxxxx X. Xxxxxxxx By: /s/ Xxxxxxx X. XxXxxxxx
__________________________ __________________________
Xxxxx X. Xxxxxxxx Xxxxxxx X. XxXxxxxx
President and President
Chief Executive Officer
Date: October 23, 2001 Date: November 19, 2001
The undersigned, EFW, Inc. is a party to
the foregoing agreement solely with
respect to the provisions of Article
XIV.
EFW, INC.
By: /s/
__________________________
Date: September __, 2001
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EXHIBITS TO
DEVELOPMENT, LICENSE AND SUPPLY AGREEMENT
BETWEEN GEN-PROBE INCORPORATED AND
KMC SYSTEMS, INC.
Project Plan Exhibit 1
Design Engineering Phase Rates Exhibit 2
KMC Project Team Exhibit 3
Initial Cost Reductions Exhibit 4
Transfer Price Calculation Exhibit 5
KMC's Existing Contractual Partners Exhibit 6
Product Requirements Document Exhibit 7
Form of Financial Guarantee Bond EXHIBIT 8
32
EXHIBIT 1
PROJECT PLAN
[2 Pages of Project Plan
Information Deleted Pursuant
to Confidential Treatment Request]
E-1
EXHIBIT 2
DESIGN ENGINEERING PHASE RATES
[3 Pages of Pricing
Information Deleted
Pursuant to Confidential Treatment
Request]
E-2
EXHIBIT 3
KMC PROJECT TEAM
[***]
*** Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
E-3
EXHIBIT 4
INITIAL COST REDUCTIONS
[***]
E-4
*** Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
EXHIBIT 5
TRANSFER PRICE CALCULATION
[***]
E-5
*** Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
EXHIBIT 6
KMC'S EXISTING CONTRACTUAL PARTNERS
[***]
*** Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
E-6
EXHIBIT 7
PRODUCT REQUIREMENT DOCUMENT
[58 Pages of Technical Information Deleted Pursuant to
Confidential Treatment Request]
E-7
EXHIBIT 8
FORM OF FINANCIAL GUARANTEE BOND
E-8
FINANCIAL GUARANTEE BOND
________________________
KNOW ALL MEN BY THESE PRESENTS:
THAT Gen-Probe Incorporated (hereinafter called "Principal") and SAFECO
Insurance Company of America, a Washington corporation authorized to transact
surety business in the state of California, (hereinafter called "Surety"), as
Surety, are held and firmly bound unto KMC Systems, Inc. (hereinafter called
"Obligee") in the full and just sum of ______________________________ dollars
($______________________), for which payment, well and truly to be made, the
Principal and Surety hereby bind themselves, their successors and assigns,
jointly and severally by these presents.
WHEREAS, the Principal and Obligee have entered into an agreement entitled
________________________________ and dated _______________________________ (the
"Agreement"), which provides, in part, for the development of instruments for
use in diagnostic and blood screening applications and;
WHEREAS, Obligee has incurred or plans to incur certain advance costs for
development, material and handling during development and manufacture of these
instruments and desires security for reimbursement or payment of these costs.
NOW, THEREFORE, the condition of this obligation is such that if the Principal
shall well and truly make all payments when due according to the terms of said
Agreement, then this obligation shall be void, otherwise to remain in full
force and effect.
In the event of failure by the Principal to make payment when due as provided
in said agreement, Obligee shall, within 30 days, certify by written notice to
Surety at its address at _____________________________________________________,
that Principal is in default under the payment terms of the Agreement.
Said Surety may take up to thirty (30) days to verify a claim is valid after
presentation of the claim by the Obligee. After verification of the validity of
the claim the Surety shall make payment to Obligee in a period of time not to
exceed thirty (30) days.
Notwithstanding the provisions of the Agreement, the terms of this bond shall be
from ______________________________ to ____________________________________ and
may be extended by continuation certificate but may also be cancelled prior to
the end of the term as stated above by the Obligee at any time, or by the Surety
by mailing notice of such cancellation to the Principal and Obligee stating
when, not less than 60 days thereafter, such cancellation shall be effective.
However, such cancellation shall not release the Surety from any payments to
Obligee in connection with purchase orders of Principal delivered to Obligee
prior to the effective date of such cancellation.
SUBJECT, HOWEVER, TO THE FOLLOWING CONDITIONS:
1. No right of action shall accrue under this bond to or for the use or benefit
of anyone other than the named Obligee.
2. The aggregate liability of the Surety is limited to the penal amount stated
herein and shall be reduced by any payments made by the Principal or Surety
to Obligee under section 6.5 of the Agreement to the extent of such payments.
Surety's liability under this bond and all continuation certificates issued
in connection herewith shall not be cumulative and shall in no event exceed
the amount as set forth in this bond or any riders or endorsements properly
issued by the Surety as supplements thereto.
3. No modification of the agreement guaranteed by this bond shall be binding on
the Surety or covered by this bond unless such modification has written
approval and acceptance by the Surety.
4. No other obligation for the Principal to the Obligee besides payments as come
due under said agreement, section 6.5, is guaranteed by this bond. Any
payments under said agreement for purchase orders which are delivered by to
Obligee by Principal after the effective date of cancellation of this bond,
will not be covered by this bond, however, claims made based on purchase
orders dated before the effective date of the cancellation of this bond will
be considered and paid if valid.
5. Neither the non-renewal by the Surety nor failure or inability of the
Principal to file a replacement bond in the event of non-renewal or
cancellation shall constitute a loss to the Obligee recoverable under this
bond or any renewal or continuation thereof.
SIGNED AND SEALED THIS____DAY OF______________________________,19__.
Surety: SAFECO Insurance Company of America
By:
------------------------------------
(Attorney-in-fact)
Principal: Gen-Probe Incorporated
By:
------------------------------------
Xxxxx X. Xxxxxxxx, CEO and President
Obligee: KMC Systems, Inc.
By:
------------------------------------
Xxxxxxx X. XxXxxxxx, President
EXHIBIT 9
PARTS SUBJECT TO EARLY PAYMENT PROVISIONS
[2 Pages of Pricing Information Deleted Pursuant to Confidential Treatment
Request]
E-9
