EXHIBIT 10.10
MANUFACTURING AND SUPPLY AGREEMENT
THIS AGREEMENT, dated as of December 26, 2001, is entered into by and
between Spectrum Laboratories, Inc., a Delaware corporation ("SPECTRUM"), and
Xxxxxx Technologies, Inc., a Delaware corporation ("XXXXXX").
RECITALS
WHEREAS, XXXXXX is the owner and/or licensee of proprietary technology and
expertise in the field of animal cell therapy, and intends to market and sell a
line of artificial liver and other devices for use in liver disease therapy and
other therapy applications in biotechnology and medicine; and
WHEREAS, SPECTRUM has special expertise in the design and manufacture of
hollow fiber cartridges and their application, and has designed and manufactures
a specific cartridge with fiber-in-fiber technology (Triac) of the type useful
in XXXXXX'x devices; and
WHEREAS, XXXXXX desire SPECTRUM to manufacture for XXXXXX and supply to
XXXXXX cartridges comprising such membrane geometry to XXXXXX'x specifications,
solely for use in XXXXXX'x liver assist devices, and SPECTRUM is willing to
incorporate design changes and enhancements in the manufacture of such
cartridges for XXXXXX, upon the terms and conditions contained in this
Agreement;
WHEREAS, XXXXXX and SPECTRUM also desire to negotiate in good faith for
SPECTRUM to manufacture for XXXXXX and supply to XXXXXX cartridges comprising
fiber-in-fiber technology for use in animal cell therapy other than liver assist
applications on a case-by-case basis; and SPECTRUM is also willing to
incorporate design changes and enhancements in the manufacture of such devices
upon the terms and conditions contained in this agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants contained herein, the parties hereto agree as follows:
ARTICLE 1. DEFINITIONS.
As used herein, the following terms shall have the meanings set forth
below:
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1.1 "Acceptance Test Procedures" shall mean the written acceptance test
procedures, including testing used to support cGMP validation, pressure and leak
testing, developed by SPECTRUM and approved by XXXXXX pursuant to Article 7, a
copy of which is attached as Appendix C hereto, which shall be conducted by
SPECTRUM prior to transfer of Units to XXXXXX.
1.2 "Affiliate" of any party means a person or other entity that directly,
or indirectly through one or more intermediaries, controls, or is controlled by,
or is under common control with, that party. "Control" of a specified entity
means the direct or indirect possession of the power to direct or cause the
direction of the management and policies of such entity, whether through the
ownership of voting securities, by contract, or otherwise, and in any event
shall include, but is not limited to, ownership of voting securities of such
entity having a majority of the voting power of the voting securities of such
entity.
1.3 "Approved Design Change" shall mean an engineering change described in
a Design Change Request for which SPECTRUM has prepared a Design Change quote
which has been accepted by XXXXXX as provided in Article 6 hereof. All Approved
Design Changes shall be appended to this Agreement as part of the
Specifications.
1.4 "Xxxx of Materials" shall mean a list of components and raw materials
comprising the Unit, organized in a hierarchical order.
1.5 "cGMP" shall mean current Good Manufacturing Practices as defined by
the Food and Drug Administration.
1.6 "Certification" shall mean the written statement provided by SPECTRUM
for each Lot, certifying that such Lot has successfully completed all testing
required pursuant to the Acceptance Test Procedures. Each Certification is to be
issued according to the procedures of Article 7.
1.7 "Confidential Information" shall mean all information disclosed by one
party to the other as a consequence of or through performance under this
Agreement, including but not limited to information relating to Liver-Assist
Cartridges, machinery, materials, research activities and plans, direct cost of
production, business, marketing, drawings, Xxxx of Materials, manufacturing
documents, labels, tools, jigs and fixtures; provided that Confidential
Information shall not include information which:
(i) is already known to the receiving party, as shown by written or other
documentary evidence,
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(ii) is or becomes generally available to the public or part of the public
domain through no fault on the part of the receiving party,
(iii) is obtained by the receiving party from a source, other than the
disclosing party hereunder, which is properly in possession of such
information and is legally entitled to disclose it, or
(iv) is required by law or regulation (e.g., of the FDA) to be disclosed,
but only after notice to the disclosing party, and under obligations
of confidentiality to the extent reasonably possible.
1.8 "Design Change Request" shall mean any written request initiated either
by XXXXXX or SPECTRUM, and delivered to SPECTRUM pursuant to Article 5, for the
modification of some aspect of the Liver-Assist Cartridge.
1.9 "Design Change Quote" shall mean a binding cost estimate for
implementing both engineering and design changes described in the Design Change
Request, plus the per Unit cost attributable to the change(s), delivered by
SPECTRUM to XXXXXX with respect to a Design Change Request.
1.10 "Effective Date" shall be __________, 2001, in confirmation of the
understanding of the parties, and their course of conduct with respect to the
subject matter of this Agreement.
1.11 "Field of Use" shall mean the fields of (a) artificial blood therapy;
and (b) bioprocessing and therapeutic devices. The Field of Use shall include,
without limitation, liver assist systems, artificial gut, bioartificial kidney,
hemodialysis and/or hemofiltration devices, and devices producing biologically
active compounds, including, but not limited to, monoclonal antibodies,
hormones, peptides and vaccines.
1.12 "License Agreement" means the License Agreement between the parties
that is executed substantially contemporaneously with this Agreement.
1.13. "Liver-Assist Cartridge" shall mean a cartridge comprised of hollow
fiber membranes in a fiber-in-fiber geometry and housing, designed and
manufactured according to the terms and provisions of this Agreement for use as
a artificial Liver-Assist module or other application. Such Liver-Assist
Cartridge shall include the TRIAC fiber-in-fiber geometry or such other
cartridge as may be identified and mutually agreed on by the parties, and shall
also include any Approved Design Changes as agreed upon by the parties from time
to time (all Approved Design changes existing on the Effective Date are shown in
Appendix A.).
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1.14 "Liver-Assist System" shall mean a device incorporating a Liver-Assist
Cartridge, for use as an artificial liver in liver disease or other therapy
applications.
1.15 "Lot" shall mean a collection of Units manufactured together and
treated as a single entity for purpose of processing, application of Acceptance
Test Procedures, and sterilization.
1.16 "Net Sales" means the actual cash proceeds received by XXXXXX from the
sale of a Liver Assist System containing a Liver-Assist Cartridge manufactured
for XXXXXX or on behalf of XXXXXX by a third party, less the sum of the
following deductions where applicable: (i) sales taxes, use taxes, value-added
taxes, tariffs, import/export duties or other excise taxes imposed upon sales or
transfers; (ii) transportation, insurance, handling charges; and (iii)
allowances, credits or refunds to customers because of rejections, returns,
damage, outdating or retroactive price adjustments. The sale of Liver Assist
Systems (A) among XXXXXX and its Affiliates or sublicensees, or (B) for
preclinical, clinical or regulatory purposes, shall not be included in Net
Sales. In the event a Liver Assist System is sold in combination with other
components ("Combination Product"), Net Sales, for purposes of royalty payments
on the Combination Product, shall be calculated by multiplying the Net Sales of
the Combination Product by the fraction X/(X+Y), where X is the gross selling
price of the Liver Assist System sold separately (i.e., without the other
components) and Y is the gross selling price of the other components.
1.17 "SPECTRUM Improvements" shall mean ideas, designs, methods,
inventions, improvements and know-how relating to the Triac Liver-Assist
Cartridge, whether patentable or not, which are made, discovered or reduced to
practice by SPECTRUM, its employees, agents, consultants or subcontractors
pursuant to work under this Agreement and made or discovered alone or in
conjunction with others.
1.18 "Quality Assurance (QA) Procedures" shall mean the procedures
contained in the quality assurance documents prepared by SPECTRUM. Such
documents, which are attached as Appendix B hereto, may be amended from time to
time by mutual written agreement by the parties.
1.19 "Research Agreement" means the Research Agreement between the parties
that is executed substantially contemporaneously with this Agreement.
1.20 "Research Program" means the research program as set forth in the
Research Agreement.
1.21 "Specifications" shall mean the complete specifications, both manually
and computer prepared by SPECTRUM or XXXXXX, necessary for use in connection
with the design and manufacture of each Triac Liver-Assist Cartridge, including,
but not limited to, the following:
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(i) Xxxx of Materials;
(ii) engineering drawings;
(iii) equipment lists;
(iv) detailed drawings of SPECTRUM custom manufactured components used in
the systems;
(v) structural details of a cartridge;
(vi) detailed design documents and shop drawings as required for shop
fabrication;
(vii) design engineering calculations and analyses; and
(viii) test data and analyses.
A listing of the complete set of Specifications as of the Effective Date is
attached and incorporated hereto as Appendix A. Any change in or addition to the
Specifications shall be agreed to by the parties in writing (as one or more
Approved Design Changes) and shall become a supplement to Appendix A.
1.22 "Stock Purchase Agreement" means the Stock Purchase Agreement between
the parties that is executed substantially contemporaneously with this
Agreement.
1.23 "Units" shall mean the Liver-Assist Cartridges to be manufactured by
SPECTRUM hereunder.
1.24 "Work Results" shall mean any and all drawings, designs, equipment
lists, specification sheets, data and other documentation, including computer
records, regarding the Liver-Assist Cartridge which are created by employees of
SPECTRUM, or its agents, consultants or subcontractors, either alone or in
conjunction with employees, agents or consultants of XXXXXX.
ARTICLE 2. MANUFACTURE OF UNITS.
2.1 SPECTRUM agrees to manufacture, test, qualify per Specifications and
Quality Assurance Procedures, and deliver to XXXXXX Units qualifying for
Certification by SPECTRUM, as requested by XXXXXX via separate purchase orders.
XXXXXX agrees to pay SPECTRUM for such Units, subject to the terms and
conditions contained in this Agreement.
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2.2 XXXXXX shall provide SPECTRUM with a twelve (12) month rolling forecast
of its anticipated need for Units, beginning ten (10) days following the
signature of the last party to sign this Agreement. This forecast shall be
updated quarterly by XXXXXX. XXXXXX shall provide to SPECTRUM a purchase order
for each Lot, at least three (3) months prior to the desired date of shipment of
such Lot to XXXXXX. SPECTRUM shall be responsible for the procurement of all
materials and components needed for the manufacture of the Units.
2.3 All Units shipped by SPECTRUM to XXXXXX shall conform to the
Specifications in every respect, and shall be manufactured pursuant to current
cGMP standards and QA Procedures. Each Lot shipped to XXXXXX shall first have
passed all testing requirements of the Acceptance Test Procedures, and shall be
subject to good faith determination by SPECTRUM that Certification is fully
appropriate for all Units in such Lot.
2.4 XXXXXX covenants not to manufacture Liver-Assist Cartridges or have
Liver-Assist Cartridges manufactured on its behalf by Third Parties, except in
connection with the Research Program, unless SPECTRUM is unable or unwilling to
supply to XXXXXX Units which meet the requirements of Section 2.3 (as defined
below). If SPECTRUM is unwilling or unable to supply the necessary XXXXXX Units,
then XXXXXX shall have the right to manufacture Liver-Assist Cartridges itself
or to have a third party manufacture Liver-Assist Cartridges on XXXXXX'x behalf,
utilizing Acceptance Test Procedures, Approved Design Changes, Xxxx of
Materials, Confidential Information, SPECTRUM's Improvements, QA Procedures,
Specifications, and/or Work results as may be necessary, in XXXXXX'x sole
discretion, to manufacture such Liver-Assist Cartridges, notwithstanding any
provisions to the contrary which may be contained elsewhere in this Agreement.
In such event, XXXXXX shall have a royalty bearing license under any SPECTRUM
patents, copyrights or other intellectual property to manufacture, use and sell
a cartridge which is the same as or substantially identical to the SPECTRUM
TRIAC cartridge (identified in Appendix A) with respect to the geometry, surface
area, length, and material of the membranes, as well as the number of fibers
contained in the cartridge, said royalty to be paid as specified in Section 3.2.
If XXXXXX sells cartridges which are not the same as or substantially identical
to the SPECTRUM TRIAC cartridge, no royalties shall be due to SPECTRUM. For the
purposes of this Section 2.4,
(a) SPECTRUM will be deemed unwilling to supply Units if it notifies XXXXXX
in writing, pursuant to the notice provisions of Paragraph 16.7, of such
unwillingness.
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(b) SPECTRUM will be deemed unable to supply Units if:
(i) such Units are not delivered within five (5) days of the expected
delivery date;
(ii) if any delivered Units do not meet the requirements of Section 2.3
and, after thirty (30) calendar days notice to SPECTRUM (pursuant to
the provisions of Paragraph 16.7), with both parties working together
in good faith, SPECTRUM has not delivered the number of Units ordered
which meet the requirements of Section 2.3; XXXXXX, in its sole
discretion, then may determine that SPECTRUM will continue to be
unable to supply the number of Units ordered which meet the
Specifications of Section 2.3; or
(iii) the parties, after good faith negotiation, are unable to agree upon a
price for the Units, pursuant to Section 3.1.
(c) In the event that (i) XXXXXX has provided capital for or has otherwise
enabled SPECTRUM to increase its production capacity and (ii) XXXXXX has the
rights described in Section 2.4(a), then XXXXXX also shall have the right to
lease such increased production capacity from SPECTRUM, and shall have the right
of first refusal to purchase SPECTRUM's production facility if SPECTRUM offers
it for sale. Terms of any lease or sale shall be negotiated by the parties in
good faith, with due consideration and credit given to the capital provided by
XXXXXX to SPECTRUM for the purpose of acquiring such increased production
capacity.
2.5 SPECTRUM shall ship all Units F.O.B. from Xxxxxx Xxxxxxxxx, XX 00000.
2.6 At XXXXXX'x expense, SPECTRUM shall arrange for all transportation,
handling, transit insurance, duties, governmental inspections and other
requirements for delivery of the Units in accordance with this Agreement. . From
time to time, XXXXXX may request that SPECTRUM drop-ship Units directly to
customers of XXXXXX, and XXXXXX will pay any costs of transportation, handling,
crating, packaging, transit insurance, duties, governmental inspection and other
requirements for such delivery of the Units to customers in accordance with this
Agreement.
2.7 SPECTRUM shall properly package the Units for protection against damage
or deterioration that may result from shipment and handling
2.8 Unless otherwise agreed in writing between the parties, risk of loss to
all Units shall pass to XXXXXX upon shipment to XXXXXX or its designee, FOB
Xxxxxx Xxxxxxxxx, XX 00000. SPECTRUM shall be responsible for all costs of
insuring the Units prior to delivery. The Parties shall fully cooperate with
each other in acquiring appropriate property insurance protection for the Units
identified to this Agreement.
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2.9 XXXXXX or XXXXXX'x customer shall have the right to reject any Unit
produced by SPECTRUM which does not comply with the Specifications or which fail
to meet SPECTRUM's performance or quality requirements defined in this
Agreement. XXXXXX or XXXXXX'x customer shall notify SPECTRUM in writing of
rejection of any Units which are deficient within five (5) working days after
XXXXXX or XXXXXX'x customer receives such Units for inspection and testing, and
such notice shall identify the reasons for rejection. If XXXXXX or XXXXXX'x
customer fails to notify SPECTRUM of rejection of a Unit within five (5) working
days after receipt, XXXXXX shall be deemed to have accepted the same. In
addition to other remedies, if the Units does not conform to Specifications,
XXXXXX shall return such Units to SPECTRUM, and SPECTRUM shall accept all such
Units for a full refund of the price paid to SPECTRUM.
2.10 The terms and conditions of this Agreement shall govern, control and
take precedence over any conflicting terms on any purchase order, with the
exception of (i) price, and (ii) quantity.
ARTICLE 3. PRICING
3.1 The price of Units sold by SPECTRUM to XXXXXX shall be negotiated in
good faith by the parties, but in any event shall be agreed upon by the parties
in advance in a written purchase order and shall be based upon the direct cost
of production for each specific Unit size.
3.2 Royalties
In the event that XXXXXX exercises its rights under subparagraph 2.4(a)
hereunder, XXXXXX shall pay SPECTRUM a royalty of three percent (3%) of that
portion of Net Sales attributable solely to the Liver-Assist Cartridge. The
portion of Net Sales attributable solely to the Liver-Assist Cartridge shall be
determined by multiplying Net Sales of the Liver-Assist System by the fraction
(A/B), where A is the invoice price of the Liver-Assist Cartridge and B is the
cost of goods sold (including the invoice price of the Liver-Assist Cartridge)
related to the Liver-Assist System.
ARTICLE 4. PAYMENT.
4.1 During the term of this Agreement, XXXXXX agrees to pay SPECTRUM within
30 days following receipt of each Lot of Units ordered by XXXXXX and shipped per
XXXXXX'x specific purchase order instructions.
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4.2 XXXXXX shall pay any royalties under Section 3.2 on a quarterly basis,
with any amounts due during the quarter payable within thirty (30) days of the
close of the applicable quarter.
ARTICLE 5. CHANGES IN DESIGN OR ENGINEERING.
5.1 (a) XXXXXX may, from time to time, submit to SPECTRUM a written Design
Change Request for quote from SPECTRUM. SPECTRUM will promptly evaluate each
such Design Change Request and prepare a Design Change Quote for submission to
XXXXXX for approval. No work shall proceed in implementing the change until an
Approved Design Change is issued by XXXXXX as provided in part (b) to this
Section. At XXXXXX'x option, either manufacture of Units shall be halted until
the design change(s) can be approved and implemented, or SPECTRUM shall continue
to manufacture Units according to existing Specifications (i.e., without the
design change(s)) until the Approved Design Change is issued.
(b) A Design Change Request shall become an Approved Design Change upon
XXXXXX notice to SPECTRUM in writing of its approval of the Design change
Request and Design Change Quote, which approval shall be in XXXXXX'x sole
discretion. Approved Design Changes shall constitute amendments to Exhibit A of
this Agreement.
5.2 (a) Upon receipt of an Approved Design Change, SPECTRUM will proceed
with the design and engineering changes and supporting documentation required to
implement the Approved Design change. SPECTRUM will prepare all documentation
necessary and appropriate to implement the Approved Design Change. such
documentation will, if appropriate, including the following, and shall be
submitted to XXXXXX for approval:
(i) revised Xxxx of Materials;
(ii) new and revised drawings;
(iii) equipment lists;
(iv) detailed drawings of SPECTRUM custom manufactured components used in
the systems;
(v) structural details of module;
(vi) detailed design documents and shop drawings as required for shop or
fabrication;
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(vii) design engineering calculations and analyses; and
(viii) test data and analyses.
Upon XXXXXX approval, such documentation shall become part of the
Specifications.
(b) Promptly upon receipt by SPECTRUM of the written Approval Design Change
from XXXXXX, SPECTRUM will proceed to implement the required changes.
5.3 (a) XXXXXX shall pay SPECTRUM for reasonable expenses incurred and for
services rendered by employees, agents, consultants, subcontractors or suppliers
of SPECTRUM in implementing each Approved Design Change in accordance with the
corresponding Design Change Quote.
(b) SPECTRUM agrees to revise, recalculate, or to restate at its own
expense, any errors in the advice, data, designs, and/or other information
supplied to XXXXXX by SPECTRUM or by any other person authorized to act on
SPECTRUM's behalf hereunder with respect to any activities undertaken pursuant
to Article 5.
ARTICLE 6. QUALITY ASSURANCE.
6.1 It is understood that XXXXXX has selected SPECTRUM to manufacture the
Units in significant part due to SPECTRUM's reputation for membrane production
skills of the highest quality, specifically in the medical device industry.
SPECTRUM represents that it has a thorough understanding of the pertinent
aspects of FDA regulations, specifically as regard to:
(a) compliance with cGMPs;
(b) control of hollow fiber membrane production; and
(c) bio-compatibility of materials.
6.2 SPECTRUM shall implement the Quality Assurance Procedures ("QA
Procedures") as outlined in Appendix B. SPECTRUM recognizes that it is of utmost
importance that the QA Procedures be supportive of cGMP Guidelines and shall
insure that the defined QA Procedures are adhered to in every respect.
6.3 SPECTRUM shall cooperate fully with XXXXXX in all aspects of design and
quality assurance in order to comply with cGMPs and assist XXXXXX in gaining
product approvals from the Food and Drug Administration. For instances in which
more than incidental time and effort would be sought from SPECTRUM, the parties
shall agree in advance as to the extent of effort and the associated cost , to
be evidenced by a purchase order submitted by XXXXXX and accepted by SPECTRUM.
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ARTICLE 7. ACCEPTANCE TEST PROCEDURES AND CONFORMITY TO SPECIFICATIONS.
7.1 SPECTRUM has developed Acceptance Test Procedures to be performed
during and upon completion of each Lot to ensure that each Unit of the Lot
conforms to the Specifications. A copy of the Acceptance Test Procedures is
attached to this Agreement as Appendix C.
7.2 Each Lot completed by SPECTRUM shall be subjected to the Acceptance
Test Procedures, and XXXXXX shall be given an opportunity to observe such
testing procedures and examine all test data. Prior to the shipment of each Lot,
SPECTRUM shall provide XXXXXX with a written certificate for each such Lot
signed by the Quality Assurance Manager or an officer of SPECTRUM, stating that
such Lot has successfully completed the Acceptance Test Procedures. The date of
such certification shall constitute the date of Certification of such Lot.
7.3 SPECTRUM represents that the Acceptance Test Procedures are
sufficiently complete and rigorous and that Certification of a Lot is a reliable
indicator that each Unit of that Lot conforms to all Specifications. Each Unit
of each certified Lot shipped to XXXXXX will conform to all Specifications.
SPECTRUM agrees to refund or credit all payments made to SPECTRUM by XXXXXX for
Units which do not conform to all Specifications.
7.4 SPECTRUM warrants that:
(a) each Unit conforms to the Specifications and is free of defects in
materials and workmanship; and
(b) each Unit was produced according to the QA/Manufacturing Procedures,
and each Lot was subject to, and certified pursuant to, the Acceptance Test
Procedures.
7.5 In the event of any claim by XXXXXX that a Unit does not conform to the
foregoing warranty in any respect which is reported in writing by XXXXXX to
SPECTRUM, SPECTRUM will promptly investigate the claim and consult with XXXXXX
concerning the action to be taken. Both parties shall work together in good
faith to determine whether the claim is proper and should be covered by the
foregoing warranty. Should the parties agree that the claim is covered by the
foregoing warranty, SPECTRUM will promptly refund XXXXXX for the cost of the
Unit.
7.6 In the event the parties cannot agree whether the claim is proper and
should be covered by the foregoing warranty, either party may elect to submit
the issue to arbitration according to the procedures of Article 14.
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ARTICLE 8. TITLE; WARRANTY OF TITLE.
8.1 Title to completed Units, and risk of loss, shall pass to XXXXXX upon
shipment, and SPECTRUM warrants that upon payment, XXXXXX shall have good and
clear title to each Unit, free and clear of any liens or encumbrances at the
time of shipment.
8.2 As provided in Section 9.1, title to all Work Results and SPECTRUM
Improvements generated pursuant to this Agreement or used in connection with the
fabrication and production of the Units shall be exclusively in XXXXXX;
provided, however, that XXXXXX shall use all SPECTRUM Improvements solely for
(i) the development, distribution, sale and manufacture of Liver Assist Systems,
and not for other applications or products in the Field of Use, or (ii) as
otherwise negotiated in good faith by the parties, except to the extent that any
information contained therein is already in the public domain or is known to
XXXXXX independently of work conducted by SPECTRUM pursuant to this Agreement.
All materials and Work Results shall be identified to this Agreement and shall
be segregated by SPECTRUM from other work it may be doing for other parties.
8.3 SPECTRUM shall have the right to use SPECTRUM improvements for the
development, manufacture, sale and/or use of products which are not in direct
competition with XXXXXX Liver Assist Systems or any other XXXXXX product using
fiber-in-fiber technology and licensed from SPECTRUM on a case-by-case basis.
XXXXXX hereby grants to SPECTRUM a royalty-free, exclusive right to use the
SPECTRUM Improvements for these purposes.
ARTICLE 9. PROPRIETARY RIGHTS.
9.1 SPECTRUM acknowledges that XXXXXX is, and shall remain, the owner of
all rights, title and interest in and to: (i) all Work Results and, SPECTRUM
Improvements specifically created to the Liver-Assist Cartridges and any other
products utilizing fiber-in-fiber technology licensed from SPECTRUM, (ii) all
Confidential Information, including, but not limited to, that embodied in any
drawings, designs, prototypes or other documentation provided by XXXXXX to
SPECTRUM hereunder, and (iii) all Specifications (except for the specifications
for the SPECTRUM TRIAC cartridge identified in Appendix A, which specifications
are owned by SPECTRUM). SPECTRUM agrees that it will use such Work Results,
Confidential Information and Specifications (except for the specifications for
the SPECTRUM TRIAC cartridge) only as necessary in performing its duties
hereunder, and not for any other purpose. Upon expiration or termination of this
Agreement, and at the request of XXXXXX, SPECTRUM shall forward to XXXXXX all
items provided by XXXXXX or generated for XXXXXX as Work Results produced by or
for SPECTRUM under this Agreement.
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9.2 SPECTRUM shall promptly inform XXXXXX in writing of any SPECTRUM
Improvements related to the Liver-Assist Cartridge and its manufacture, which
are developed by SPECTRUM during the term of this Agreement, and shall maintain
accurate records thereof. These SPECTRUM Improvements, including any patent
rights therein, shall be the sole property of XXXXXX.
9.3 SPECTRUM agrees to assign and does hereby assign to XXXXXX all rights
to Work Results, including any SPECTRUM Improvements, including the right to
seek and obtain patent, copyright or other protection therefor. SPECTRUM agrees
to execute, or cause to be executed, at XXXXXX'x reasonable request, all
documents, including all patent, copyright or other applications, necessary to
preserve or perfect the rights of XXXXXX in SPECTRUM Improvements of Work
Results. In particular, SPECTRUM agrees to confirm through written employment
agreements, the obligation of all officers and employees to assign to XXXXXX all
rights, title and interest in and to all Work Results and SPECTRUM Improvements.
9.4 (a) Each party acknowledges that during the term of this Agreement, it
may disclose to the other certain Confidential Information. Each party shall
protect the other's Confidential Information as if it was its own during the
term of this Agreement, and for a period of three (3) years following the
expiration or termination of this Agreement. The party receiving Confidential
Information shall not disclose or employ such Confidential Information for its
own benefit or for the benefit of third parties other than as contemplated by
this Agreement. (b) The parties agree that they will not discuss the existence
or subject matter of this Agreement or the business of each other with third
parties except as necessary for the performance of the work under this
Agreement, and that any third party to whom such disclosure is necessary (as
determined by each party) shall have agreed in writing, to be bound by the
provisions of this Section 9.4. Notwithstanding the preceding, no written
agreement will be required for disclosures to government regulatory agencies
regarding the Liver-Assist Cartridge or Liver-Assist System, provided, that
Confidential Information is designated as such in any disclosures to government
regulatory agencies. All drawings and other materials regarding the Liver-Assist
Cartridge which are furnished by SPECTRUM to outside contractors, consultants
and vendors will carry appropriate notification relevant to confidentiality and
to its return to SPECTRUM. SPECTRUM will keep adequate logs of such material
delivered to outside parties for work under this Agreement, and shall be
responsible for recovering said materials. SPECTRUM will be responsible for the
confidentiality of said materials.
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ARTICLE 10. PUBLICITY.
10.1 No use of XXXXXX'x name will be made in advertisements or press
releases made for publication in any media, except as authorized by XXXXXX, or
as required to satisfy any governmental reporting requirements.
10.2 XXXXXX, at its option, is hereby authorized to use SPECTRUM's name to
indicate SPECTRUM as the manufacturer of the Units. However, no additional use
of SPECTRUM's name will be made in advertisements or press releases made for
publication in any media, except as authorized by SPECTRUM, or as required to
satisfy any governmental reporting requirements.
ARTICLE 11. NONCOMPETITION.
11.1 In order to protect XXXXXX'x rights in Work Results, Improvements and
Confidential Information, SPECTRUM agrees that from the Effective Date until the
expiration of twelve (12) months after the date of expiration or termination of
this Agreement, SPECTRUM will not engage, directly or indirectly, in competition
with XXXXXX in the Field of Use. Specifically, but without limitation, SPECTRUM
agrees that it shall not fabricate, use or sell Triac Liver-Assist Cartridges
Notwithstanding this prohibition, SPECTRUM shall continue to have the right to
fabricate, use and sell the SPECTRUM fiber-in-fiber cartridge for any purpose
outside the Field of Use. Furthermore, SPECTRUM shall have the right to continue
to supply existing customers liver assist devices of customer's proprietary
designs under existing supply agreements.
11.2 SPECTRUM acknowledges and agrees that during the clinical evaluation
of the XXXXXX Liver-Assist System XXXXXX reserves the right to develop, make,
purchase and/or evaluate other Liver-Assist technologies from a source other
than SPECTRUM.
ARTICLE 12. INDEMNITY.
12.1 SPECTRUM agrees to indemnify and hold XXXXXX harmless from and against
any expense, loss, damage or judgments, including reasonable attorney's fees,
arising out of or resulting from personal injury or property damage attributable
to a construction defect or failure of SPECTRUM to fulfill its responsibilities
under this Agreement, including claims based on material or workmanship defects,
breach of the confidentiality provisions set forth in Section 9.4, quality
assurance, failure to conform to Specifications, and other matters within the
scope of SPECTRUM's responsibilities hereunder. SPECTRUM represents that it
maintains comprehensive general liability insurance which includes, but is not
limited to, products liability coverage and contractual liability coverage (but
only to the extent covered under the comprehensive general liability insurance)
insuring the indemnity of this Agreement, in an amount of at least
$______________ combined single limit per occurrence for bodily injury and
property damage, and with an aggregate of $___________ for products liability
claims and a general aggregate of $___________.
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12.2 XXXXXX agrees to indemnify and hold SPECTRUM harmless from and against
any expense, loss, damage or judgment, including reasonable attorney's fees,
arising out of or resulting from personal injury, property damage, breach of the
confidentiality provisions set forth in Section 9.4, infringement of
intellectual property rights or performance of any Unit to the extent that any
such cause of action is not attributable to a construction defect or failure of
SPECTRUM to fulfill its responsibilities under this Agreement, including claims
based on material or workmanship defects, quality assurance, failure to conform
to Specifications, and other matters within the scope of SPECTRUM's
responsibilities hereunder or under the License Agreement. XXXXXX represents
that it maintains comprehensive general liability insurance which includes, but
is not limited to, products liability coverage and contractual liability
coverage (but only to the extent covered under the comprehensive general
liability insurance) insuring the indemnity of this Agreement, in an amount of
at least $______________ combined single limit per occurrence for bodily injury
and property damage, and with an aggregate of $_____________ for products
liability claims and a general aggregate of $_________________.
12.3 Each party shall indemnify and hold the other party harmless from any
and all claims, costs or liability for any loss, damage, injuries or loss of
life incurred in the indemnifying party's own performance of activities that are
conducted on the indemnifying party's own premises; provided, however, that such
indemnification shall not apply for any loss, damage, injuries, or loss of life
attributable in whole or in part to the other party's fault or negligence.
12.4 (a) Upon written request by XXXXXX or its designated insurance broker,
SPECTRUM shall deliver to XXXXXX a certificate of insurance describing the
insurance required herein. The insurer shall endeavor to mail to XXXXXX, at a
minimum, thirty (30) days prior written notice of cancellation.
(b) Upon written request by SPECTRUM or its designated insurance broker,
XXXXXX shall deliver to SPECTRUM a certificate of insurance describing the
insurance required herein. The insurer shall endeavor to mail to SPECTRUM, at a
minimum, thirty (30) days prior written notice of cancellation.
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ARTICLE 13. LIMITATION OF LIABILITY.
13.1 Except the parties' confidentiality obligations under Section 9.4 and
as otherwise provided in Article 12, the liability of either party to the other
for any claim arising out of or in connection with this Agreement shall not
exceed the other party's actual damages and in no event shall either party be
liable to the other for consequential damages. XXXXXX shall be entitled to
recover as actual damages the amount of its actual costs of obtaining and
installing replacement parts, components, or complete Units in SPECTRUM fails to
fulfill its warranty obligations under Article 7.
ARTICLE 14. ARBITRATION.
14.1 In the event of any controversy or claim arising out of or relating to
Article 7, the parties shall try to settle those conflicts amicably between
themselves. Should the parties fail to agree, the matter in dispute shall be
settled through arbitration. If a party hereto determines to submit a dispute to
arbitration pursuant to this Article 14, it shall furnish the other party with a
written notice indicating (i) its intent to commence arbitration proceedings
pursuant to this Article 14, (ii) the nature, with reasonable detail, of the
dispute, and (iii) the remedy to be sought.
14.2 The arbitration shall be conducted at a neutral site mutually
agreeable to the parties, provided that it shall be conducted at a neutral site
in or near Bel Air, California if the arbitration is at the request of SPECTRUM,
or at a neutral site in or near Rancho Xxxxxxxxx, California if the arbitration
is at the request of XXXXXX.
14.3 Except as specified herein, the arbitration shall be conducted in
accordance with the rules of the American Arbitration Association. Reasonable
discovery as determined by the arbitrators shall apply to the arbitration
proceeding. The laws of the State of California shall apply.
14.4 A panel of three arbitrators shall be used, with each arbitrator
having appropriate engineering experience and background in the design and
manufacture of medical equipment or devices. No arbitrator may be a current or
former employee, agent, consultant or representative of either party. The panel
of arbitrators shall be selected as follows:
(a) Within twenty one (21) days after the notice of Paragraph 14.1, the
parties shall simultaneously exchange lists identifying seven (7) persons
believed to be acceptable arbitrators, who shall not have been contacted by
either party regarding serving as an arbitrator hereunder.
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(b) If three or fewer names are common to both lists, those persons shall
be contacted to serve as arbitrators. If a panel of three is not designated in
this manner, the parties shall attempt in good faith to agree on the
arbitrators. In the absence of agreement within ten (10) days after the exchange
of lists:
(i) If there were more than three common names, three shall be chosen
randomly from the common names.
(ii) If there were two common names, they shall be selected as arbitrators.
Each party then shall identify one name from the other party's
remaining list, with the third arbitrator selected randomly from the
two identified names.
(iii) If there was one common name, that person shall be selected as an
arbitrator. Each party then shall identify one name from the other
party's list, which shall become the second and third arbitrators
selected.
(iv) If there were no common names, each party shall identify one name from
the other party's list, which shall be the first and second
arbitrators selected. Then each party shall identify one additional
name from the other party's remaining list, with the third arbitrator
chosen randomly from the two identified names.
(c) The parties shall jointly contact the three selected arbitrators to
confirm that each can serve as a neutral arbitrator and conduct the arbitration
expeditiously. The parties shall repeat step (b)(ii) as necessary to fill the
panel of three. If necessary, the parties shall exchange lists of five (5)
additional qualified potential arbitrators from which to select.
14.5 In addition to all other relief provided, the successful party shall
be entitled to an award of all reasonable costs and expenses, including all fees
and expenses of the arbitrators and all out-of-pocket expenses of the successful
party, including attorneys' costs.
14.6 The decision of the panel shall be final and binding and shall be
enforceable at law. Judgement upon the award rendered by the arbitrators may be
entered in any court having jurisdiction thereof.
14.7 Notwithstanding the foregoing, this Article 14 shall not apply to any
breach of either party's confidentiality obligations under Section 9.4 or
preclude any suit for injunctive relief for breach hereunder.
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ARTICLE 15. TERM AND TERMINATION.
15.1 This Agreement shall commence as of the Effective Date first written
above and, unless sooner terminated, shall continue in effect until terminated
pursuant to this Article.
15.2 In the event of a material breach by either party, the nonbreaching
party may terminate this Agreement upon thirty (30) days written notice unless
the breach is cured prior to the expiration of such period.
15.3 Either party may terminate this Agreement for any reason, upon written
notice to the other party as follows:
(a) SPECTRUM may terminate upon 180 days notice to XXXXXX in writing.
(b) XXXXXX may terminate upon 180 days notice to SPECTRUM in writing.
The provisions of Paragraph 15.4 shall apply during the termination notice
period.
15.4 Activities During Termination Notice Period -
(a) XXXXXX shall be entitled to submit additional purchase orders for
manufacture of Units totaling up to fifty percent (50%) of the twelve month
forecast of Paragraph 2.2, and SPECTRUM agrees to fill such orders pursuant to
the terms of this Agreement.
(b) SPECTRUM shall discontinue all procurement and production activity upon
receipt of such termination notice from XXXXXX, other than that required to
fulfill its obligations to XXXXXX under any outstanding purchase orders
previously submitted by XXXXXX and accepted by SPECTRUM or new purchase orders
submitted by XXXXXX pursuant to subparagraph (a).
(c) Products scheduled for delivery during the notice period pursuant to
outstanding purchase orders previously submitted by XXXXXX and accepted by
SPECTRUM, or new purchase orders submitted by XXXXXX pursuant to subparagraph
(a), shall be completed and delivered to XXXXXX as scheduled. XXXXXX shall pay
SPECTRUM for all Units delivered pursuant to the termination provisions of this
Article.
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(d) During the applicable notice period of this Paragraph, XXXXXX shall
have the right to disclose and transfer all information, data, drawings and the
like, as they are contained in the Acceptance Test Procedures, Approved Design
Changes, Xxxx of Materials, Confidential Information, SPECTRUM Improvements, QA
Procedures, Specifications, and/or Work Results to an alternative supplier as
may be necessary, in XXXXXX'x reasonable discretion, for purposes of seeking FDA
approval for such supplier, assisting the supplier in acquiring necessary
equipment, etc.
15.5 In the event that XXXXXX terminates this Agreement due to a decision
to cease marketing and sale of the Liver-Assist System after the first purchase
order has been accepted by SPECTRUM for production of commercial Units (that is,
Units for commercial use as opposed to use in clinical trials), the additional
provisions of this Paragraph shall apply. If, within six (6) months following
termination, a decision is made by XXXXXX to reinstate marketing and sale of the
Liver-Assist System, a new Agreement shall be negotiated and shall continue in
full force and effect from the date the new Agreement is signed by the parties
or otherwise made effective.
15.6 Obligations Under Termination.
XXXXXX also will reimburse SPECTRUM for any expenses incurred due to any
non-cancelable commitments made by SPECTRUM on XXXXXX'x behalf which are based
on firm purchase orders. SPECTRUM shall use its best efforts to minimize such
termination expenses.
15.7 The provisions of Articles 1, 8, 9, 10, 11, 12, 13, 14, 15 and 16, and
Sections 7.3, 7.4, 7.5 shall survive any termination of this Agreement.
Additionally, if XXXXXX terminates the Agreement pursuant to Section 15.3(b),
then the royalty obligation under Section 3.2 shall survive termination of the
Agreement.
ARTICLE 16. MISCELLANEOUS.
16.1 This Agreement shall inure to the benefit of and bind the parties
hereto, any business entity controlling, controlled by or under common control
with the parties, and their respective successors and permitted assigns. It is
specifically agreed, however, that neither party may assign its rights or duties
pursuant to this Agreement without the written consent of the other party;
provided, however, that:
(a) No consent shall be needed for any assignment of all of the business of
XXXXXX to which the subject matter of this Agreement relates; and
(b) No consent shall be needed for any assignment of all of the business of
SPECTRUM to which the subject matter of this Agreement relates.
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16.2 This Agreement shall be interpreted in accordance with the laws of the
State of California, and the parties hereby submit to the jurisdiction of the
courts of that state.
16.3 The parties to this Agreement are independent business entities.
Neither party shall be deemed to be an agent of the other party as a result of
any transaction under or related to this Agreement, and shall not in any way
pledge the other party's credit or incur any obligation on behalf of the other
party.
16.4 The waiver of either party hereto of any right hereunder or of the
failure to perform or of a breach by the other party shall not be deemed a
wavier of any other right hereunder or of any other breach or failure by said
other party whether of a similar nature or otherwise.
16.5 The invalidity or unenforceability of any provision hereof shall in no
way reflect the validity or enforceability of any other provision. Any provision
declared invalid or unenforceable by a court of law shall be deleted and the
remaining terms and conditions of this Agreement shall remain in full force and
effect.
16.6 This instrument, together with the Research Agreement, the License
Agreement and the Stock Purchase Agreement contain the full and entire
understanding between the parties with regard to the subject matter hereof and
supersedes any and all prior negotiations, correspondence, understandings and
agreements whether oral or written between the parties. This Agreement may only
be changed by a subsequent written agreement executed by both parties hereto.
16.7 Any notices required by this Agreement shall be sent by certified mail
postage prepaid, return receipt requested, or by pre-paid courier delivery, and
shall be forwarded to the respective addresses set forth below unless
subsequently changed by written notice to the other party.
For XXXXXX: 00 Xxxxx Xxxxxx Xxxx., #000
Xxxxxxx Xxxxx, XX 00000
Attn: President
For SPECTRUM: SPECTRUM LABORATORIES, INC.
00000 Xxxxxxxxx Xxxxxx
Xxxxxx Xxxxxxxxx, Xxxxxxxxxx 00000-0000
Attn: President
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16.8 Neither party hereto shall be responsible to the other for failure to
perform any of the obligations imposed by this Agreement, provided such failure
shall be occasioned by fire, flood, explosion, lightning, windstorm, earthquake,
subsidence of soil, failure or destruction, in whole or in part, of machinery of
equipment or failure to supply of materials, discontinuity in the supply of
power, governmental interference, civil commotion, riot, war, strikes, labor
disturbance, transportation difficulties, labor shortage, or any cause beyond
the reasonable control of the party in question. It is incumbent upon each party
to inform the other within a reasonable period of time of such an occurrence.
Should performance of any obligation be delayed or prevented because such force
majeure conditions apply, the parties shall consult with each other regarding
the future implementation of the Agreement.
16.9 SPECTRUM and XXXXXX hereby warrant that each carries sufficient
Worker's Compensation insurance to comply with the laws of the State of
California with respect to its employees.
16.10 SPECTRUM and XXXXXX agree that in the performance of the
manufacturing operations hereunder, as well as in the disposal of any waste
material resulting from said operations, it will comply with all applicable
governmental laws, rules, and regulations for protecting health, safety and the
environment. SPECTRUM and XXXXXX agree to cooperate with any governmental
agency(ies) to monitor compliance with such laws, rules and regulations.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their duly authorized representatives.
XXXXXX, INC.
_____Dec. 26______________________, 2001 By: Xxxxx Xxxxx, M.D., PhD
Title: President & CSO
SPECTRUM LABORATORIES, INC.
______Dec. 26________________, 2001 By:F. Xxxxx Xxxxxxxx
Title: President & COO
APPENDIX A - SPECIFICATIONS
APPENDIX B - QUALITY ASSURANCE PROCEDURES
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APPENDIX C - ACCEPTANCE TEST PROCEDURE
APPENDIX D - COMPENSATION SCHEDULE
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