Exhibit 10.28
MANUFACTURING AND SUPPLY AGREEMENT
WITNESSETH, THIS MANUFACTURING AND SUPPLY AGREEMENT (the
"Agreement") entered into effective as of the 22nd day of December, 1999
("Effective Date"), by and between FILTERTEK INC., a Delaware corporation with
an office and principal place of business at 00000 Xxxxx Xxxx, Xxxxxx, XX 00000
("Filtertek"); and HEMASURE INC., a Delaware corporation with an office and
principal place of business at 000 Xxxxx Xxxxx, Xxxxxxxxxxx, XX 00000
("HemaSure"). Filtertek and HemaSure may be referred to hereinafter individually
as a "party" or collectively as the "parties."
WHEREAS, Filtertek desires to manufacture and supply to HemaSure and
HemaSure desires to purchase from Filtertek all of HemaSure's requirements for
the manufacture and supply of Leukoreduction Filters, as defined herein,
pursuant to and in compliance with all of the terms and conditions set forth
herein; and
WHEREAS, Filtertek shall make a capital investment in the
Semi-Automated Cell - Phase 1 and may make capital investments in the
Semi-Automated Cell - Phase 2 and two Automated Cells - Phase 3, as those terms
are defined herein, in exchange for, among other things, HemaSure granting
exclusive manufacturing rights to the Leukoreduction Filters for a period of
time and upon certain conditions as set forth herein.
NOW THEREFORE, in consideration of these premises, the promises and the
mutual agreements herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties agree as
follows:
ARTICLE I
DEFINITIONS
In addition to words and expressions defined elsewhere in this
Agreement, for purposes of this Agreement, the following words and expressions
shall have the meanings hereby assigned to them. For the purpose of the
definitions contained in this Article and defined elsewhere in this Agreement,
the singular shall include the plural and vice-versa.
1. "Products" shall mean the products listed on Attachment A, attached
hereto and hereby incorporated by reference, as amended in a writing
signed by both parties from time to time.
2. "Product Pricing" shall mean the price of each Product as set forth on
Attachment B attached hereto and hereby incorporated by reference, as
amended in a writing signed by both parties from time to time.
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3. "Product Specifications" shall mean the Product specifications as set
forth on Attachment C, attached hereto and hereby incorporated by
reference, as amended in a writing signed by both parties from time to
time, which in all cases, shall be deemed to requirements and standards
included in applicable federal, state and local laws including, without
limitation, the Food, Drug and Cosmetic Act, the Medical Device
Amendments of 1976, the Safe Medical Devices Act of 1990, and similar
foreign laws, rules and regulations, including without limitation, the
European Medical Device Directive.
4. "Agreement Year" shall mean the period commencing on the Effective Date
and ending on December 31, 2000, and following such period, it shall
mean the applicable period of time during the term of this Agreement
and any extension or renewal thereof beginning on January 1 of that
respective Agreement Year and ending on December 31 of that respective
Agreement Year.
5. "Actual Annual Purchases" for any respective Agreement Year shall mean
the amount of each Product actually purchased by HemaSure from
Filtertek as determined by release orders for the Products issued by
HemaSure and accepted by Filtertek during that Agreement Year.
6. "Leukoreduction Filter" shall mean the filters used for pre-storage
reduction of the level of leukocytes in blood to trace levels currently
designated as r\Ls, and any revisions, derivatives, or improvements
thereto.
7. "Operational Date" shall mean the date that a particular Production
Cell is capable of producing a certain amount of units for a defined
period of time and Filtertek has completed the validation for that
particular Production Cell. The Operational Date for the Semi-Automated
Cell - Phase 1 shall be the date upon which the Semi-Automated Cell -
Phase 1 has produced 10,000 units per day for a period of five
continuous days and Filtertek has submitted its validation documents to
HemaSure. The Operational Date for the Semi-Automated Cell - Phase 2
shall be the date upon which the Semi-Automated Cell - Phase 2 has
produced 20,000 units per day for a period of five continuous days and
Filtertek has submitted its validation documents to HemaSure. The
Operational Date for each Automated Cell - Phase 3 shall be the date
upon which the respective Automated Cell - Phase 3 has produced 20,000
units per day for a period of five continuous days and Filtertek has
submitted its validation documents for the respective Automated Cell -
Phase 3 to HemaSure.
8. "Semi-Automated Cell - Phase 1" shall mean the production concept
described and the production equipment and automation set forth in
Attachment D attached hereto and hereby incorporated by reference, as
amended in a writing signed by both parties from time to time.
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9. "Semi-Automated Cell - Phase 2" shall mean the production concept
described and the production equipment, tooling, and automation set
forth in Attachment H attached hereto and hereby incorporated by
reference, as may be amended in a writing signed by both parties from
time to time.
10. "Automated Cell - Phase 3" shall mean the production concept described
and the production equipment, tooling, and automation set forth in
Attachment E attached hereto and hereby incorporated by reference, as
may be amended in a writing signed by both parties from time to time.
11. "Manual System" shall mean the production equipment set forth in
Attachment I (with the exceptions of Steps 1 and 2 as provided in
Section 5(g) of Article II) attached hereto and hereby incorporated by
reference, as may be amended in a writing signed by both parties from
time to time.
12. "HemaSure Materials" shall mean the materials supplied by HemaSure to
Filtertek as set forth in Attachment F attached hereto and hereby
incorporated by reference, as may be amended in a writing signed by
both parties from time to time.
13. "Manufacturing Technology" shall mean those specific proprietary rights
in the molds, drawings, manufacturing processes, know-how, show-how and
technical data related to the manufacturing and production of the
Products set forth and identified on Attachment G attached hereto and
hereby incorporated by reference, as may be amended in a writing signed
by both parties from time to time.
14. "Confidential Information" shall mean such confidential and proprietary
information each party hereto owns and uses in order to conduct its
business to which this Agreement pertains which includes without
limitation confidential and proprietary computer programs, inventions,
discoveries, tools, machines, articles of manufacture, mechanisms,
molds, fixtures, methods, processes, compositions, mixtures, formulae,
designs, techniques of production, manufacture or assembly, know-how,
show how, information which concerns the financial affairs, development
research, marketing practices, marketing plans and strategies, internal
policies and procedures, products, contracts, suppliers, or customer
lists, information with respect to any corporate affairs, and other
information which may or may not rise to the level of a trade secret
under applicable law, but which is not generally in the public domain
(and includes information transferred orally, visually, electronically
or by other means). For Filtertek "Confidential Information" shall
include without limitation the Manufacturing Technology. Confidential
information shall not include: (i) information already known or
independently developed by the receiving party as evidenced by
competent proof; (ii) information in the public domain through no
wrongful act of the receiving party; or (iii) information received by
the receiving party from a third party having a lawful right to
disclose it.
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15. "Annual Production Capacity" shall mean, at the applicable measurement
date, Filtertek's then current annual production capacity for the
Products defined as operating 3 shift(s) per day, 5 days per week, 50
weeks per year, utilizing equipment existing at the time of such
calculation. Filtertek's current Annual Production Capacity for the
Products is set forth in Attachment A. After the Operational Date for
the Semi- Automated Cell - Phase 1, the Annual Production Capacity
shall include without limitation the incremental capacity associated
with the Semi-Automated Cell - Phase 1. After the Operational Date for
the Semi-Automated Cell - Phase 2, the Annual Production Capacity shall
include without limitation the incremental capacity associated with the
Semi-Automated Cell - Phase 2. After the Operational Date for each
Automated Cell - Phase 3, the Annual Production Capacity shall include
without limitation the incremental capacity associated with the
respective operational Automated Cell - Phase 3.
16. "Material Review Board" shall mean any internal board, committee, or
other group of Filtertek employees authorized to review and approve raw
materials used in the Products (excluding, in the case of approval,
with respect to the HemaSure Materials).
17. "American Red Cross" shall mean the American National Red Cross, a
not-for-profit corporation chartered by an act of Congress, and its
parents, subsidiaries, affiliates, permitted assignees, or successors
in interest.
18. "COBE" shall mean COBE Laboratories, Inc., a corporation organized and
existing under the laws of the state of Colorado, and its parents,
subsidiaries, affiliates, permitted assignees, or successors in
interest.
19. "FDA" shall mean the Food and Drug Administration of the United States
of America.
ARTICLE II
SUPPLY ARRANGEMENTS
1. Production of Products. Filtertek shall manufacture and supply the
Products solely in accordance with the Product Specifications supplied by
HemaSure. Although the obligation to fabricate the Products conforming to
Product Specifications belongs exclusively to Filtertek, and the obligation to
designate and thereafter to approve the applicable specifications belongs
exclusively to HemaSure, and without intending to relieve either party of their
respective exclusive obligations, the parties hereto shall provide reasonable
cooperation and assistance to each other to facilitate the fabrication of the
Products. Filtertek shall make no deviations or changes from the Product
Specifications or perform with any waivers from the Material Review Board
without HemaSure's prior approval.
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2. Product Pricing. Product Pricing shall be fixed for the first three
Agreement Years with the exception that Filtertek may increase or decrease the
Product Pricing on account of, and solely to the extent of, raw material price
increases or decreases no more than once per Agreement Year during any
respective Agreement Year, and in any such case, no more than five percent (5%)
of the applicable Product Pricing. Any such Product Pricing increase or decrease
shall not exceed the actual amount of the applicable percentage increase or
decrease in raw material prices included in Product Pricing for that respective
Agreement Year as evidenced by Filtertek's written records, which shall be
provided to HemaSure (it being understood that the applicable percentage
increase or decrease shall relate solely to the raw material components, and not
the full Product Pricing). Any such Product Pricing increase or decrease shall
take effect upon thirty (30) days advance written notice to HemaSure.
(a) In addition, at the end of every Agreement Year Filtertek
shall compare the Actual Annual Purchases of Products by
HemaSure to the quantities that were used to establish the
mutually agreed upon invoiced Product Pricing as provided in
Attachment B for that respective Agreement Year (and shall
promptly provide to HemaSure a detailed, written copy of such
comparison). In the event Actual Annual Purchases of Products
exceed said quantities for that respective Agreement Year,
then Filtertek shall issue a rebate or a credit to HemaSure in
accordance with the quantity pricing set forth on Attachment
B. In the event Actual Annual Purchases are less than said
quantities for that respective Agreement Year, then Filtertek
shall issue a debit to HemaSure in accordance with the
quantity pricing set forth on Attachment B. Filtertek may, in
its sole discretion, waive or reduce any such debit for any
respective Agreement Year. Any such waiver or reduction of a
debit for any respective Agreement Year shall be on a
non-precedential basis without prejudice and Filtertek shall
not be obligated in any of the following Agreement Years to
waive or reduce any future debit.
(b) After the first three Agreement Years, Product Pricing shall
be subject to additional adjustments to account for increases
or decreases in Filtertek's overhead costs that are evidenced
by Filtertek's written records which shall be provided to
HemaSure. Such overhead costs shall include without limitation
costs associated with government mandated benefits, payroll
taxes, electricity and other utilities. At least one hundred
twenty (120) days prior to the commencement of any Agreement
Year, Filtertek shall provide written notice (setting forth
reasonable detail) to HemaSure of projected increases or
decreases to the Product Pricing for the upcoming respective
Agreement Year. The parties hereby agree to negotiate in good
faith and to agree upon Product Pricing for each such
respective Agreement Year and to amend Attachment B each
Agreement Year accordingly. In the event no agreement on
Product Pricing is reached prior to the commencement of any
respective Agreement Year, and for so long as such
disagreement continues or the disagreement shall not have been
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resolved pursuant to Section 12(b) of Article III then
Filtertek may upon thirty (30) days advance written notice to
HemaSure increase Product Pricing by the lesser of (i) the
increase in the Producers Price Index for the previous
respective Agreement Year or (ii) three percent (3%).
(c) The parties will use reasonable efforts to endeavor to develop
cost saving measures applicable to the Products. After
recoupment at a mutually agreed upon rate of any capital
investment made by a party in developing or implementing such
cost saving measures, such savings will be shared on a
fifty/fifty (50/50) basis between the parties in the form of
reduced Product Pricing.
3. Delivery. Each order placed under this Agreement shall be considered
"on-time" if it is received by HemaSure during the period of 3 days prior to and
up until 3 days after the scheduled delivery date which is stated on the release
order issued by HemaSure and accepted by Filtertek. If a delivery is not
expected to be made "on-time," as defined herein, Filtertek shall notify
HemaSure and shall take all reasonable steps at its own cost to expedite
delivery.
4. Supply and Capacity Commitments. HemaSure shall utilize Filtertek as
its exclusive manufacturer and supplier for Leukoreduction Filters throughout
the term of this Agreement such that HemaSure purchases all of its requirements
for the Leukoreduction Filters from Filtertek, subject to HemaSure's rights to
terminate such exclusivity, as provided herein. HemaSure shall purchase at least
the minimum quantity of Leukoreduction Filters from Filtertek as provided in
Section 7 of Article II. Filtertek shall utilize HemaSure as its exclusive buyer
for Leukoreduction Filters and shall use its best efforts to supply all of
HemaSure's requirements. However, Filtertek shall not be obligated to
manufacture and/or sell to HemaSure more than 100% of Filtertek's Annual
Production Capacity for the Products. Filtertek and HemaSure shall notify each
other of any events which may impact their respective abilities to supply and
purchase Products including, without limitation, FDA inspections, labor issues,
facility issues and the like. Filtertek shall maintain a two (2) week inventory
of the Products during the term of this Agreement and any extension or renewal
thereof as determined by reference to purchase orders issued by HemaSure and
accepted by Filtertek.
5. Production Cells.
(a) Semi-Automated Cell - Phase 1. Filtertek shall purchase all
equipment associated with the Semi-Automated Cell - Phase 1
and shall hold sole and exclusive title to the Semi-Automated
Cell - Phase 1 except as provided otherwise herein. The
purchase price of the Semi-Automated Cell - Phase 1 shall not
exceed and is estimated to be Five Hundred Sixty Thousand
Dollars ($560,000). The incremental Annual Production Capacity
of the Semi-Automated Cell - Phase 1 is projected to be
2,400,000 units. The Semi-
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Automated Cell - Phase 1 is projected to be ordered in
December 1999 and estimated to be operational by March 31,
2000.
(b) Semi-Automated Cell - Phase 2. Upon the occurrence of the
following conditions, Filtertek shall purchase all equipment,
tooling, and automation associated with the Semi-Automated
Cell - Phase 2 and shall hold sole and exclusive title to the
Semi-Automated Cell - Phase 2 except as provided otherwise
herein. The purchase price of the Semi-Automated Cell - Phase
2 shall not exceed and is estimated to be Two Million Six
Hundred Seventy Thousand Dollars ($2,670,000) not inclusive of
any Filtertek facility improvements required for the
Semi-Automated Cell - Phase 2. The incremental Annual
Production Capacity of the Semi-Automated Cell - Phase 2 is
projected to be 5,000,000 units. The Semi-Automated Cell -
Phase 2 is projected to be ordered in December 1999 and
estimated to be operational by July 31, 2000. Filtertek shall
purchase the Semi-Automated Cell - Phase 2 upon the occurrence
of the following conditions:
(1) Receipt by Filtertek by December 31, 1999 of a
blanket purchase order from HemaSure for at least
2,000,000 units for Agreement Year (calendar year)
2000; and
(2) Approval of the capital expenditure for the
Semi-Automated Cell - Phase 2 by ESCO Electronics
Corporation (which approval Filtertek reasonably
believes shall be obtained reasonably promptly
following the date hereof).
(c) First Automated Cell - Phase 3. Upon completion of all
automation, the Semi- Automated Cell - Phase 2 shall become
the first Automated Cell - Phase 3. Filtertek shall purchase
all equipment associated with the first Automated Cell - Phase
3 and shall hold sole and exclusive title to the first
Automated Cell - Phase 3 except as provided otherwise herein.
The incremental Annual Production Capacity of the first
Automated Cell - Phase 3 is projected to be 5,000,000 units.
The first Automated Cell - Phase 3 is projected to be ordered
in April 2000 and estimated to be operational by September 30,
2000. HemaSure must provide the HemaSure Materials, including
without limitation, the particle trap layer in roll form, in
order for Filtertek to implement the Automated Cell - Phase 3.
(d) Second Automated Cell - Phase 3. Upon the occurrence of the
following conditions, Filtertek shall purchase all equipment,
tooling, and automation associated with the second Automated
Cell - Phase 3 and shall hold sole and exclusive title to the
second Automated Cell - Phase 3 except as provided otherwise
herein. The purchase price for the second Automated Cell -
Phase 3 shall not exceed and is estimated to be Two Million
Five Hundred Four
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Thousand Dollars ($2,504,000) not inclusive of any Filtertek
facility improvements required for the second Automated Cell -
Phase 3. The incremental Annual Production Capacity of the
second Automated Cell - Phase 3 is projected to be 5,000,000
units. The second Automated Cell - Phase 3 is projected to be
ordered in July 2000 and estimated to be operational by April
30, 2001. Filtertek may elect to purchase the second Automated
Cell - Phase 3 upon the occurrence of the following
conditions:
(1) Receipt by Filtertek by September 30, 2000 of a
blanket purchase order from HemaSure for at least
3,000,000 units for Agreement Year (calendar year)
2001; and
(2) Approval of the capital expenditure for the second
Automated Cell - Phase 3 by ESCO Electronics
Corporation; and
(3) Neither the FDA, HemaSure, Filtertek, the American
Red Cross, COBE, nor any other customer of HemaSure
or end user of the Products has initiated, undertaken
or participated in a material recall associated with
any significant, uncurable technical problem for any
of the Products; and
(4) The FDA has completed its PMI of any incident reports
arising from use of the Products and no such PMI's
are pending; and
(5) No court of competent jurisdiction has ordered
injunctive relief, entered a damages award, or issued
a materially adverse decision against HemaSure
arising out of or in connection with any patent
litigation associated with the Leukoreduction Filters
that prevents HemaSure from selling the Products (and
any such injunctive relief shall not have been
lifted); and
(6) HemaSure has continued and continues to purchase at
least eighty percent (80%), or such other percentage,
if any, that HemaSure is obligated to purchase
hereunder, of Filtertek's Annual Production Capacity
as evidenced by shipments against the blanket
purchase order for Agreement Year 2000; and
(7) Neither party is in material breach of any provision
of this Agreement and any breaches of this Agreement
that have occurred have been cured as provided
herein.
(e) In the event Filtertek elects to not order the Semi-Automated
Cell - Phase 2, the first Automated Cell - Phase 3, and/or the
second Automated Cell - Phase 3, then HemaSure may (i)
manufacture the Products or pursue alternate suppliers for the
Products to meet its requirements and (ii) terminate
Filtertek's rights to exclusivity under this Agreement,
provided that HemaSure shall continue to purchase at least
eighty percent (80%) of Filtertek's Annual Production Capacity
until the termination, expiration, or non-renewal of this
Agreement.
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(f) Remedies for Schedule/Estimate Failure by Filtertek.
(1) Exclusivity. In the event that Filtertek fails to
meet an estimated Operational Date for any particular
Production Cell by three (3) months or more or in the
event that the respective incremental Annual
Production Capacity for any particular Production
Cell is less than ninety percent (90%) of the
estimated capacity as provided herein, then HemaSure
may (i) manufacture the Products or pursue alternate
suppliers for the Products to meet its requirements
and (ii) terminate Filtertek's rights to exclusivity
under this Agreement, provided that HemaSure shall
continue to purchase at least seventy percent (70%)
of Filtertek's Annual Production Capacity until the
termination, expiration, or non-renewal of this
Agreement. For purposes of this subsection only,
Filtertek may elect, at its expense, to run the
Production Cells beyond 5 days per week, 50 weeks per
year in order to achieve at least ninety percent
(90%) of the estimated capacity provided herein.
Further in the event that Filtertek's failure as
described in this subsection causes a material change
in HemaSure's customer order rate as evidenced by
HemaSure's written records which shall be provided to
Filtertek, then HemaSure shall not be obligated to
utilize seventy percent (70%) of Filtertek's Annual
Production Capacity, but rather the parties shall
mutually agree to an equitable level of commitment
from HemaSure to Filtertek's Annual Production
Capacity.
(2) Product Pricing. In the event that Filtertek fails to
meet an estimated Operational Date for any particular
Production Cell as provided herein by two months or
more, then the mutually agreed upon invoiced Product
Pricing as provided in Attachment B and any
rebate/debit calculation provided in Section 2(a) of
this Article II shall be adjusted as if that
particular Production Cell were operational as of the
date that is two (2) months from the estimated
Operational Date.
(3) HemaSure shall neither terminate Filtertek's
exclusivity hereunder nor receive the Product Pricing
consideration described above to the extent any delay
or other failure in Filtertek's performance is caused
by (i) modifications, alterations, or other changes
to the design, manufacturing, or production of the
Products or their packaging by HemaSure or at
HemaSure's request, (ii) HemaSure's failure to supply
the HemaSure Materials including without limitation
supplying the particle trap layer in rolls as
provided herein, (iii) other acts or omissions of
HemaSure, or (iv) events described in the Section 10
of Article III and titled Force Majeure.
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(4) The parties acknowledge and agree that, except in the
case of bad faith or willful misconduct, the remedies
provided in this subsection are the sole and
exclusive remedies for HemaSure in the event of a
failure by Filtertek to meet an estimated Operational
Date or an estimated incremental Annual Production
Capacity for any particular Production Cell.
(g) HemaSure Pilot Production Cell. No sooner than six (6) months
after the Operational Date for the second Automated Cell -
Phase 3 HemaSure may upon written notice to Filtertek request
that the Manual System be relocated to HemaSure's designated
facility for pilot production, prototype production, and
production of low volume specials of the Products by HemaSure.
The Manual System shall not include the presses and support
equipment owned by Filtertek nor the tooling owned by HemaSure
utilized for the molding of inlet and outlet housings (Steps 1
and 2 of Attachment I). Filtertek shall supply inlet and
outlet housings to HemaSure at mutually agreed upon terms.
HemaSure shall pay Filtertek the net book value for the Manual
System and shall pay for the costs or other expenses related
to the removal, packaging, shipping, installation, and
start-up of the Manual System at HemaSure's designated
facility.
(h) If any modifications, alterations or other changes are made to
the Products by HemaSure or at HemaSure's request which result
in modifications, alterations or other changes to the
Semi-Automated Cell - Phase 1, the Semi-Automated Cell - Phase
2, the first Automated Cell - Phase 3, or the second Automated
Cell - Phase 3 (the "Production Cells"); then such
modifications to the Production Cells shall be made at
HemaSure's expense and Filtertek shall have additional time to
perform its obligations hereunder as is reasonable under the
circumstances.
(i) The parties shall meet on a periodic basis to discuss future
capacity increases. Any such future capacity increases shall
be mutually agreed to by both parties.
6. Forecasts to Filtertek. HemaSure shall submit to Filtertek, on a
quarterly basis, good faith, written forecasts setting forth projected purchases
of the Products for the upcoming twelve (12) month period. Forecasts prepared by
HemaSure pursuant to this Section shall be prepared by HemaSure in good faith
and shall represent HemaSure's reasonable expectation of its requirements for
the forecasted period. HemaSure shall not be bound to purchase Products on
account of such forecasts.
7. Ordering. HemaSure shall submit a blanket purchase order by
September 30 of each year setting forth its minimum purchase requirements for
the following Agreement Year. The blanket orders for Agreement Years 2000 and
2001 shall be as set forth in Section 5 of
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this Article II. The blanket orders for all five Agreement Years shall total at
least fifteen million (15,000,000) units.
(a) HemaSure shall submit a release order to Filtertek on a
monthly basis at least 6 weeks in advance of any required
shipment date in said release order in compliance with
HemaSure's most recent forecast. Filtertek and HemaSure shall
keep each other apprised in good faith of their respective
requirements, projections, production capability limitations
and similar matters.
(b) In the event HemaSure fails to purchase pursuant to release
orders the quantity of Products designated in the blanket
order for any respective Agreement Year, then the remaining
number of Products necessary to meet the quantity designated
in the blanket order for that respective Agreement Year shall
be added to the purchase quantity in the blanket order for the
subsequent Agreement Year. In the event that HemaSure fails to
purchase the quantity of Products designated in the blanket
order for the fifth Agreement Year and any purchase quantities
added to that blanket order from previous Agreement Years as
provided herein, then the term of this Agreement shall be
extended for one year during which time HemaSure must purchase
the remaining number of Products as are necessary to meet the
purchase quantities designated in the blanket order for the
fifth Agreement Year and any purchase quantities added to that
blanket order from previous Agreement Years as provided
herein.
8. HemaSure Supplied Materials. HemaSure shall provide Filtertek with a
continuous supply of the HemaSure Materials at no cost to Filtertek such that
Filtertek can produce the Products in quantities sufficient to meet HemaSure's
requirements of submitted and accepted purchase orders. In addition, HemaSure
shall make reasonable efforts to control or eliminate defects in the HemaSure
Materials. Further, HemaSure shall obtain and maintain an FDA validation for the
HemaSure Materials and shall provide Filtertek with advance written notice of
any changes in source, grade or quality of the HemaSure Materials. Filtertek's
failure to supply HemaSure with Products, failure to meet the Operational Date
for any particular Production Cell, or otherwise fail to perform its obligations
hereunder shall not be deemed a breach of this Agreement to the extent such
failure is caused by a lack of such a supply of the HemaSure Materials from
HemaSure. HemaSure shall maintain a two (2) week inventory of the HemaSure
Materials during the term of this Agreement and any extension or renewal thereof
as determined by reference to purchase orders for the Products issued by
HemaSure and accepted by Filtertek.
9. Shipping. All Product shipments shall be EX WORKS (Incoterms 1990),
Filtertek's manufacturing facility. Risk of loss shall pass to HemaSure at such
time as the Products are delivered to the carrier at Filtertek's facilities.
HemaSure shall arrange for a carrier and mode of shipment. Filtertek shall
validate a packaging method to assure that the Products arrive at HemaSure's
designated facility integral and intact. All freight, insurance and
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other shipping expenses shall be borne by HemaSure and HemaSure shall be
responsible for filing any and all freight claims.
10. Acceptance.
(a) Acceptance by HemaSure or the receiving entities specified by
HemaSure of Products delivered by Filtertek hereunder shall be
subject to reasonable inspection and test by HemaSure or such
receiving entities in order to determine that the Products
comply with the Product Specifications; provided, however,
HemaSure shall notify Filtertek in writing of any defects in
any shipment of Products within 30 business days of the date
of delivery at HemaSure's designated manufacturing site. If
HemaSure does not notify Filtertek of any such defects within
such time, the Products shall be deemed accepted.
(b) Filtertek shall validate each new Production Cell and
associated molds and tooling prior to commencement of shipping
any Product to HemaSure from the new Production Cell.
Filtertek shall generate a plan for validation and shall
submit all validation documentation to HemaSure prior to
commencement of shipping any Product to HemaSure from the new
Production Cell. For molds in particular, a CpK > 1.33 for
each cavity for critical dimensions is considered in control
and validated. In addition, Filtertek shall assemble molded
components for validation.
11. Quality Control. Filtertek shall operate and maintain its
manufacturing operations in a sound state of control in compliance with
applicable XXX, XXX, XXX0000 and/or CEEN46001 regulations. HemaSure and its
customers shall have the right, but not the obligation, to conduct periodic
audits of all sites under Filtertek's control involved with manufacturing the
Product. Filtertek shall provide reasonable access to Filtertek's facilities,
employees, specifications, production records, drawings, or other records as
necessary for HemaSure to secure regulatory approvals, respond to regulatory
inquires, investigate and address technical problems and achieve technical
improvements and address customer complaints. HemaSure and its customers shall
provide sixty (60) days written notice of any site audits. Each party agrees to
provide the other party with copies of any written notices related to the
manufacturing, sale, or use of the Products issued by any governmental
regulatory agency promptly after receipt from the governmental regulatory agency
or third party.
12. Payment. Payment terms for all Products purchased pursuant to this
Agreement shall be net 30 days. Filtertek reserves the right to withhold
shipment of Products or to ship Products C.O.D. until full payment is received
for any outstanding amounts.
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13. Limited Warranty.
(a) All Products sold by Filtertek shall be warranted to comply
with the Product Specifications and be free of manufacturing
defects, with the exception of the HemaSure Materials, for a
period of one year after shipment of the Products to HemaSure.
HemaSure warrants that the HemaSure Materials supplied to
Filtertek comply with the Product Specifications and be free
of manufacturing defects. THE FOREGOING WARRANTY IS IN LIEU OF
AND EXCLUDES ALL OTHER WARRANTIES NOT EXPRESSLY SET FORTH
HEREIN, WHETHER EXPRESS OR IMPLIED BY OPERATION OF LAW OR
OTHERWISE INCLUDING, WITHOUT LIMITATION, ANY WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR PARTICULAR PURPOSE. IN NO EVENT
SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR
INCIDENTAL, CONSEQUENTIAL, SPECIAL OR INDIRECT DAMAGES
INCLUDING, WITHOUT LIMITATION, LOST BUSINESS, PROFITS OR
DAMAGES ARISING FROM OR CONNECTED WITH LOSS OF GOODWILL.
NOTHING HEREIN SHALL BE DEEMED TO LIMIT OR RESTRICT THE
RESPECTIVE RIGHTS OR OBLIGATIONS OF THE PARTIES UNDER SECTIONS
2 AND 6(c) OF ARTICLE III WITH RESPECT TO BREACHES OF THE
PRODUCT WARRANTY DESCRIBED HEREIN.
(b) Filtertek's liability under the foregoing warranty to HemaSure
is hereby expressly limited to the repair or replacement of
any Products found to be non- compliant with the Product
Specifications or, at Filtertek's election, to the repayment
of, or crediting HemaSure with, an amount equal to the
purchase price for said Products, except as otherwise
specifically provided herein.
(c) Filtertek shall not be liable for any damages or loss due to
fire, flood, acts of God and other natural calamities,
strikes, lockouts, accidents, riots, insurrections, theft,
arson, vandalism, criminal acts, tampering, abuse,
incompatible applications or other misuse.
(d) Prior to returning any non-compliant Products to Filtertek,
HemaSure shall obtain a return goods authorization number from
Filtertek and return said Products to Filtertek with a
detailed description of the non-compliance and any
accompanying data or samples regarding such non-compliance.
Any claim made by HemaSure under this warranty shall be made
in writing to Filtertek within ninety (90) days of the date
HemaSure discovered or should have discovered with the
exercise of reasonable care such non-compliance.
14. Production Cell Implementation and Validation. Filtertek shall
provide reasonable access to its facilities for HemaSure's employees and
consultants to participate in
902773.3
13
Production Cell implementation and validation processes. HemaSure's employees
and consultants shall not unreasonably interfere with Filtertek's operations and
shall observe all safety and/or work rules of Filtertek. Further, Filtertek may
require HemaSure's employees and consultants to execute confidentiality
agreements to protect Filtertek's Confidential Information.
ARTICLE III
MISCELLANEOUS
1. Intellectual Property. All intellectual property of Filtertek which
shall include, without limitation, any inventions, patents, improvements,
trademarks, service marks, mask works, copyrights, trade secrets, the
Manufacturing Technology, or other proprietary information of any kind shall
remain the sole and exclusive property of Filtertek. Filtertek expressly
reserves its entire right, title and interest in any and all intellectual
property including, without limitation, any inventions, patents, improvements,
know-how, show-how, the Manufacturing Technology, or other proprietary
information of any kind related to the processing, production or manufacturing
of the Products. All intellectual property of HemaSure which shall include,
without limitation, any inventions, patents, improvements, trademarks, service
marks, mask works, copyrights, trade secrets or other proprietary information of
any kind shall remain the sole and exclusive property of HemaSure. HemaSure
expressly reserves its entire right, title and interest in any and all
intellectual property including, without limitation, any inventions, patents,
improvements, know-how, show-how, or other proprietary information of any kind
related to the design and construction of the Products.
2. Indemnification. Filtertek's liability, with the exception of this
indemnification provision, shall be limited pursuant to and in compliance with
the section titled Limited Warranty to the repair or replacement of any Products
or, at Filtertek's election, to the repayment of, or crediting HemaSure with, an
amount equal to the purchase price for said Products. The provisions of this
indemnification section shall survive the termination, expiration, or
non-renewal of this Agreement.
(a) HemaSure represents and warrants to Filtertek that the
Products will not infringe any United States or foreign
patents, trademarks (but only United States trademarks), trade
secrets, copyrights, or other proprietary rights of any kind.
HemaSure shall defend, indemnify and hold Filtertek harmless
from any loss, cost, damage, expense or liability of any kind
including, without limitation, attorneys' fees and court costs
on account of claims or actions brought by third parties
against Filtertek, in each case subject to paragraph (d)
below, whether based in whole or in part, on account of
infringement or alleged infringement related to the Products
of any United States or foreign patents, trademarks, trade
secrets, copyrights, or other proprietary rights of any kind;
provided that
902773.3
14
Filtertek has manufactured the Products in compliance with the
Product Specifications. Without limiting the foregoing, the
indemnification shall specifically include the following
litigation:
(1) COBE BCT, Inc, et al. v. Pall Corporation, Case No.
99-CV-675, currently pending in the U.S. District
Court for the District of Colorado.
(2) Pall Corporation v. HemaSure, et al., Case No.
99-2350 (LDW/VVP), currently pending in the U.S.
District Court for the Eastern District of New York.
(b) Other than as set forth in subparagraph (a) of this section,
HemaSure agrees to indemnify and hold harmless Filtertek and
its directors, officers and employees from and against any and
all losses, costs, damages, fees and expenses arising out of
the development, manufacture or sales of the Product, but only
to the extent such losses, costs, damages, fees, and expenses
were incurred as a result of the negligence, gross negligence,
recklessness, willful misconduct, or bad faith of HemaSure,
provided that HemaSure shall have the right to control the
defense or settlement of any claim for which Filtertek is
entitled to indemnification hereunder. HemaSure shall not be
liable for any litigation costs or expenses incurred by
Filtertek (or its directors, officers or employees) without
HemaSure's prior written consent. Notwithstanding the
foregoing, HemaSure shall not be required to indemnify
Filtertek for matters which HemaSure is indemnified by
Filtertek hereunder.
(c) Filtertek represents and warrants that it does not use any of
its United States or foreign patents, trademarks, or
copyrights of any kind in the manufacture of the Products.
Filtertek agrees to indemnify and hold harmless HemaSure and
its directors, officers and employees from and against any and
all losses, costs, damages, fees, and expense arising out of
the development, manufacture or sales of the Product, but only
to the extent such losses, costs, damages, fees, and expenses
were incurred as a result of the negligence, gross negligence,
recklessness, willful misconduct, or bad faith of Filtertek,
provided that Filtertek shall have the right to control the
defense or settlement of any claim for which HemaSure is
entitled to indemnification hereunder. Filtertek shall not be
liable for any litigation costs or expenses incurred by
HemaSure (or its directors, officers or employees) without
Filtertek's prior written consent. Notwithstanding the
foregoing, Filtertek shall not be required to indemnify
HemaSure for matters which Filtertek is indemnified by
HemaSure hereunder.
(d) A party seeking indemnification hereunder (the "Indemnified
Party") shall provide prompt written notice to the party from
whom indemnification is sought (the "Indemnifying Party") of
any written notice of a claim, action or demand of any kind
from a third party. The Indemnifying Party shall undertake
promptly
902773.3
15
the defense of such claim, action or demand with defense
counsel selected by the Indemnifying Party, but reasonably
satisfactory to Indemnified Party. Notwithstanding any other
provision of this Agreement, the Indemnified Party may at any
time elect to participate in the defense of any claim, action
or demand with counsel of its own choice and at its sole
expense without waiving the Indemnifying Party's obligation to
defend Indemnified Party. The Indemnifying Party shall obtain
the advance written consent of the Indemnified Party (which
consent shall not be unreasonably withheld) prior to settling
any claim, action or demand.
3. Confidentiality. The parties may disclose certain Confidential
Information to each other. The party that discloses Confidential Information
pursuant to this Agreement is referred to herein as the "Disclosing Party" and
the party that receives such Confidential Information is referred to herein as
the "Receiving Party." The terms of this Agreement shall apply to any
Confidential Information that may be disclosed during the term of this Agreement
and any extension or renewal thereof and for a period of three (3) years after
the termination, expiration, or non-renewal of this Agreement for any reason,
with the exception that Confidential Information designated in writing by a
party to be a trade secret shall be protected by this Article for such time as
such Confidential Information remains a trade secret under
applicable law. Such Confidential Information shall be used solely for the
purpose of each party performing its obligations hereunder and not for any other
purpose ("Purpose").
(a) Receiving Party acknowledges that the Confidential Information
is confidential and/or proprietary to Disclosing Party and is
claimed to be valuable, special and unique assets of
Disclosing Party. Accordingly, the parties agree that during
the term of this Agreement and for the respective
post-termination periods set forth herein, Receiving Party
shall:
(1) maintain the Confidential Information in confidence;
and
(2) not use any such Confidential Information received
from Disclosing Party except for the above-stated
Purpose; and
(3) disclose such Confidential Information received from
Disclosing Party only to its employees that have a
need to know such Confidential Information in order
to fulfill the Purpose; and
(4) not disclose any portion of the Confidential
Information received from Disclosing Party to any
third party without the prior written consent of
Disclosing Party, even if such third party is under
similar restriction on disclosure with Disclosing
Party.
(b) Receiving Party agrees to use the same degree of care to
protect the confidentiality of all Confidential Information it
receives as it uses to protect its own Confidential
Information. However, Receiving Party in no event shall use
902773.3
16
less than a reasonable degree of care to protect the
Confidential Information received from Disclosing Party.
(c) If Receiving Party is confronted with legal action to disclose
Confidential Information received under this Agreement,
Receiving Party shall promptly notify Disclosing Party, and
reasonably assist Disclosing Party in obtaining a protective
order requiring that any portion of the Confidential
Information required to be disclosed be used only for the
purpose for which a court issues an order, or for such other
purposes as required by law.
(d) All Confidential Information disclosed under this Agreement
shall remain the property of Disclosing Party. At Disclosing
Party's request, all Confidential Information received by
Receiving Party in tangible form shall be promptly returned or
destroyed.
(e) It is understood and agreed that damages may not be an
adequate remedy for Disclosing Party in the event of a breach
or threatened breach of this subsection (3) and, accordingly,
Receiving Party agrees that Disclosing Party will be entitled
to receive injunctive or other appropriate equitable relief
against Receiving Party and its representatives in the event
of such a breach or threatened breach.
4. Non-Solicitation. During the term of this Agreement and any
extensions or renewals thereof and for a period of one year thereafter, neither
party shall solicit for employment, employ, solicit for another business
relationship or otherwise retain any employee of the other party who is an
employee of the said other party at any time during the term of this Agreement
and any extensions or renewals thereof.
5. No Partnership or Agency. Nothing contained in this Agreement shall
be construed to create a partnership or joint venture among the parties or to
make a party an agent of the other party for any purpose.
6. Additional Representations and Warranties of the Parties.
(a) Each party represents and warrants that it shall obtain,
maintain and preserve any licenses, permits or other
authorizations necessary for the party to conduct its business
in accordance with this Agreement. Both parties shall comply
in all material respects with all of their respective
obligations under applicable federal, state and local laws
including, without limitation, the Food, Drug and Cosmetic
Act, the Medical Device Amendments of 1976, the Safe Medical
Devices Act of 1990, and similar foreign laws, rules and
regulations, including without limitation, the European
Medical Device Directive.
902773.3
17
(b) In addition, each party represents and warrants to the other
party that, as of the date hereof, (i) it has the authority to
execute, deliver, and perform its obligations under this
Agreement, (ii) this Agreement has been duly executed and
delivered by such party and constitutes the legal, valid, and
binding obligation of such party enforceable against such
party in accordance with its terms (except as enforceability
may be limited by bankruptcy, insolvency, or similar laws of
general application from time to time affecting the rights of
creditors generally, or subject to general principles of
equity), (iii) neither the execution or delivery of this
Agreement nor the performance of its obligations hereunder
will conflict with or violate any provision of, or result in
the breach of, any material agreement, note, mortgage, or
indenture to which such party is a party or by which its
assets are bound, and (iv) there are no actions, suits,
proceedings, or investigations pending or threatened in any
court or before any governmental agency or instrumentality
against, by or affecting it or any of its subsidiaries or
their business, operations, or financial condition or any of
their properties or assets, or which would prevent the
carrying out of this Agreement or any of the transactions
contemplated hereby or declare the same unlawful or cause the
rescission thereof.
(c) Each party represents and warrants that it shall maintain the
following insurance coverages in full force and effect
throughout the term of this Agreement and any extension or
renewal thereof.
(i) Commercial General Liability Insurance in an amount of at
least $10,000,000 (Ten Million Dollars) naming the other party as an additional
insured party, Workers' Compensation coverage covering the party's own employees
(but not employees of the other party) with statutory limits for each
jurisdiction where required by the laws of that jurisdiction (including
monopolistic states if any work is to be performed in one or more of them) and
an employers' liability policy with at least a limit of $250,000 per accident
per employee.
(ii) Each party further agrees to maintain not less than
$10,000,000 (Ten Million Dollars) of products liability coverage naming the
other party as an additional insured party. For Filtertek such product liability
policy shall extend to Products manufactured and sold to HemaSure. For HemaSure
such product liability policy shall extend to the design of the Products and to
the HemaSure Materials provided to Filtertek.
(iii) Filtertek agrees to maintain full replacement value "All
Risk" property insurance on all property and equipment of Filtertek used by
Filtertek at Filtertek's facilities under this Agreement, and further said
property insurance shall insure at all times all Products being manufactured and
Filtertek agrees to waive any right of subrogation for loss or damage to any of
Filtertek's property at, on, or in Filtertek's facilities. Filtertek agrees to
obtain, if required in such property insurance, a waiver of subrogation in favor
of HemaSure. Said
902773.3
18
property insurance shall include Business Interruption and Extra Expense
coverage for such losses arising from loss or damage to aforementioned Filtertek
property without expectation of contribution from any such insurance HemaSure
may maintain.
(iv) Each party shall, at its sole expense, keep in force
policies of insurance in the amounts as specified, and as required by statute,
with carriers reasonably satisfactory to the other party. Such insurance shall
be written as primary policy coverage and not as contributing with, or in excess
of, any insurance which the other party shall carry. Certificates of insurance
evidencing all of the above coverages and conditions (types and amounts) shall
be produced upon written request and remain in full force and effect throughout
the term of this Agreement. Each party's certificate(s) of insurance shall
provide for not less than thirty (30) days written notice of cancellation,
non-renewal or reduction to the other party.
7. Term. This Agreement shall commence on the Effective Date and shall
continue for an initial term of five (5) Agreement Years unless extended for an
additional sixth Agreement Year pursuant to Section 7 of Article II. Thereafter,
this Agreement shall renew for additional successive one (1) year renewal terms
until either party terminates this Agreement upon one (1) year advance written
notice to the other party.
8. Termination for Cause. This Agreement may be terminated at any time
immediately upon written notice upon the occurrence of any of the following
events:
(a) by either party in the event the other party materially
breaches any term or provision of this Agreement and such
breach is not cured within 90 days of such party's receipt of
written notice of such breach;
(b) by either party in the event the other party makes an
assignment for the benefit of creditors, or is subject to any
voluntary or involuntary provincial or federal receivership,
insolvency or bankruptcy proceedings, or becomes unable, or
admits in writing its inability, to meet its obligations as
they mature;
(c) by either party in the event the other party makes any
materially false or misleading statement, representation or
claim; with respect to the subject matter of this agreement
and such party ability to perform thereunder;
(d) by either party in the event the other party is dissolved or
liquidated;
(e) by Filtertek in the event HemaSure fails to pay any
indebtedness which is due and payable and which failure is not
remedied within 60 days following notice;
(f) by HemaSure in the event Filtertek fails to supply (i) any
single product shipment within 60 days of its scheduled supply
date as evidenced in a release order issued by HemaSure and
accepted by Filtertek, or (ii) more than fifty
902773.3
19
(50%) percent of product shipments "on-time," as defined
herein, with respect to those shipments' respective scheduled
supply dates as evidenced in release orders issued by HemaSure
and accepted by Filtertek, for any two month period and, in
both cases, for reasons other than those set forth in the
section titled Force Majeure or for reasons other than those
attributable to HemaSure including without limitation
HemaSure's failure to supply the HemaSure Materials; and/or
(g) as otherwise provided in this Agreement.
Without prejudice to any other remedy for breach of this Agreement,
upon termination for cause of this Agreement, neither party shall be released
from the payment of any sum owed to the other party, which sum shall become
immediately due and payable.
9. Rights and Obligations Upon Termination. Upon the termination,
non-renewal, or expiration of this Agreement the following rights and
obligations shall apply.
(a) Notwithstanding the termination of this Agreement each party
shall continue to hold the other party's Confidential
Information in confidence and prevent disclosure to third
parties as provided herein.
(b) Except in the event of a valid termination of this Agreement
by HemaSure under the foregoing subsection (8) (in which case
HemaSure may (but shall not be required) in its sole
discretion, cause Filtertek to sell to HemaSure the system and
cells as provided below), Filtertek may sell to HemaSure and,
if Filtertek deems to do so, HemaSure shall purchase from
Filtertek the Manual System (if not transferred earlier as
provided herein), the Semi-Automated Cell - Phase 1, the
Semi-Automated Cell - Phase 2, the first Automated Cell -
Phase 3, and the second Automated Cell - Phase 3 for the net
book value of the respective Production Cells plus Three
Hundred Thousand Dollars ($300,000) to compensate Filtertek
for costs and expenses associated with discontinuing
production of the Products. In addition, HemaSure shall pay
for the costs and expenses associated with the removal,
packaging, shipping, installation, and start-up of the
Production Cells. Attachment J hereto sets forth the agreed
upon amortization and depreciation schedule for such system
and cells, for the purpose of determining the applicable net
book values thereof.
(c) After the Production Cells are transferred to HemaSure as
provided herein, HemaSure may utilize the Production Cells and
the Manufacturing Technology for production of the Products at
HemaSure's facilities provided HemaSure pays a royalty to
Filtertek of (i) $0.10 per unit for the first four (4) years
after the termination, expiration, or non-renewal of this
Agreement and (ii) $0.07 per unit thereafter, provided,
however, that the Royalty to Filtertek in the event that
902773.3
20
the production cells are transferred to HemaSure following a
termination of this Agreement by HemaSure under the foregoing
subsection (8) shall be $0.05 per unit. HemaSure shall remit
such royalties on a quarterly basis along with a written
report of units produced for that quarter. Filtertek shall
have the right, but not the obligation, to audit HemaSure's
written records associated with production of the Products to
verify the amount of royalties paid.
(d) Filtertek shall provide reasonable and necessary training to
HemaSure or HemaSure's designee at HemaSure's or HemaSure's
designee's facility at HemaSure's expense in the form of up to
two (2) technical personnel at a rate of $65/hour plus travel
expenses and up to one (1) operator at a rate of $40/hour plus
travel expenses with a minimum call-out of one eight hour day
per visit for each such training personnel.
(e) HemaSure shall purchase from Filtertek, Filtertek's inventory
of finished Products manufactured in accordance with
HemaSure's most recent forecast. Further, HemaSure shall
reasonably compensate Filtertek for its work in process, raw
material inventory, and non-cancelable raw material
commitments reasonably made pursuant to and in compliance with
HemaSure's forecasts.
(f) Immediately upon the termination, non-renewal, or expiration
of this Agreement, all sums owed by each party hereto to the
other shall become due and payable immediately upon such
termination, non-renewal, or expiration of this Agreement. All
payments shall be made within thirty (30) days of the
effective date of such termination, non-renewal, or expiration
provided, however, that payments under subsection (c) shall be
made (i) prior to removal of the Production Cells for seventy
percent (70%) of the net book value of the Production Cells
and the balance of thirty percent (30%) made within thirty
(30) days from the date the Production Cells are operational
at HemaSure's facility and (ii) within thirty (30) days of the
effective date of such termination, non- renewal, or
expiration for payments related to Filtertek discontinuing the
production of the Products.
(g) The provisions of this Agreement which are expressed to
survive this Agreement or to apply notwithstanding termination
hereof shall be observed and respected by both parties.
10. Force Majeure. Neither party shall be liable to the other party for
its failure to perform or for delay in the performance of its obligations under
this Agreement to the extent such failure or delay results from causes beyond
its reasonable control, including, without limitation, acts of God, fires,
explosions, wars or other hostilities, insurrections, revolutions, strikes,
labor unrest, earthquakes, floods, epidemics or quarantine restrictions, lack of
materials, unforeseeable governmental restrictions or controls, or
transportation embargoes or
902773.3
21
interruptions; provided, however, that a party must provide written notice to
the other party of such extraordinary circumstances that may prevent or delay
the party's performance hereunder. If a party is prevented from performing its
obligations under this Agreement because of such extraordinary circumstances for
a period of 60 consecutive days, then the other party may terminate this
Agreement upon 30 day's notice to the other party with a further opportunity to
perform until the date of such termination.
11. Contingency Planning. In the event of an occurrence as defined in
the Force Majeure section, Filtertek shall make reasonable efforts to relocate
all or a portion of the Production Cells to other Filtertek manufacturing sites.
It is projected that the Semi-Automated Cell - Phase 1 and the first Automated
Cell - Phase 3 shall be located in Hebron, Illinois. It is projected that the
second Automated Cell - Phase 3 shall be located in either Hebron, Illinois or
Patillas, Puerto Rico. The parties shall mutually agree on the establishment of
multiple manufacturing sites.
12. Governing Law; Jurisdiction.
(a) This Agreement, all transactions executed hereunder, and the
legal relations between the parties shall be governed and
construed solely in accordance with the laws of the State of
New York, without reference to the conflict of laws
principles thereof.
(b) In the event of any dispute or controversy arises between the
parties with respect to this Agreement or a breach hereof,
then the parties shall submit such dispute or controversy to
binding arbitration before the American Arbitration
Association ("AAA") in New York, New York in accordance with
the Commercial Arbitration Rules of AAA. Each party hereby
irrevocably agrees that service of process, summons, notices
or other communications related to the arbitration procedure
shall be deemed served and accepted by the other party if
forwarded in accordance with the Notices section of this
Agreement. The arbitrator shall apportion all costs and
expenses of the arbitration including without limitation the
arbitrator's fees and expenses and the attorneys' fees and
expenses of both parties, between the prevailing and
non-prevailing party as the arbitrator deems fair and
reasonable. The award may be enforced in any court of
competent jurisdiction.
(c) Notwithstanding the foregoing or any other provision of this
Agreement, either party may seek and obtain provisional
equitable, injunctive or other judicial relief from a court of
competent jurisdiction in order to preserve the status quo
pending resolution of disputes or controversies pursuant to
this section. The provisions of this Article III, Section 12
shall survive the termination, expiration, or non- renewal of
this Agreement.
902773.3
22
13. Binding Effect. This Agreement shall be binding upon and be for the
benefit of the parties and their respective successors and permitted assigns.
14. Supremacy. The terms and conditions of this Agreement take
precedence over all purchase orders and all sales confirmations between
Filtertek and HemaSure. To the extent any term in any purchase order or any
sales confirmation conflicts in any manner with any term or condition of this
Agreement, this Agreement shall govern.
15. Severability. If any provision of this Agreement is held by a court
of competent jurisdiction to be invalid, illegal, or unenforceable, then the
remainder of this Agreement shall remain in full force and effect. In the event
any such provision previously held to be invalid, illegal, or unenforceable, is
thereafter held by a court of competent jurisdiction to be valid, legal, or
enforceable, then said provision shall automatically be revived and incorporated
into this Agreement.
16. Waiver. No waiver of any rights or breach of any provision of this
Agreement shall constitute a waiver of any other right or breach of any other
provisions, nor shall it be deemed to be a general waiver of such provision by
the waiving party or to sanction any subsequent breach by the other party.
17. Assignment. Neither party shall assign this Agreement, or any right
or obligation thereunder, to any third party without the prior written consent
of the other party. In the event either party consents to such an assignment by
the other party, then all provisions and obligations of this Agreement shall
apply equally to any assignee with the same force and effect as they apply to
the assignor.
18. Modification. This Agreement may not be altered or modified except
in writing, duly executed by an authorized representative of both parties.
19. Notices. All notices, requests or other communications to any party
shall be sufficient if contained in a written instrument delivered in person,
sent by fax with confirming copy sent by registered or certified mail or sent by
overnight courier, addressed to such party at the address set forth below or
such other address as may be designated in writing:
Filtertek: HemaSure:
Filtertek Inc. HemaSure Inc.
00000 Xxxxx Xxxx 000 Xxxxx Xxxxx
Xxxxxx, XX 00000 Xxxxxxxxxxx, XX 00000
Fax No. 815/000-0000 Xax No. 508/000-0000
Attn: Xxx Xxx Attn: Xxxx X. XxXxxxx
902773.3
23
Any notice sent in compliance with this section shall be effective upon the date
of delivery if delivered in person, upon the date of transmission if sent by
fax, or upon the date following the date the notice is sent by overnight
courier.
20. Public Statements. No party hereto shall use or reference the name
of any other party hereto including without limitation issuing any press
releases or otherwise making any public statement with respect to this Agreement
(unless such press release or statement is required by applicable law,
regulation, or the requirements of any listing agreement with any applicable
stock exchange), without the prior written consent of the other party, which
consent shall not be unreasonably withheld.
21. Facsimile Signatures. Counterpart copies of this Agreement may be
signed by all parties hereto and signature pages exchanged by facsimile. The
parties intend that counterpart copies signed and exchanged as provided in the
preceding sentence shall be fully binding. Counterpart originals of this
Agreement shall be exchanged by U.S. mail or courier service at the earliest
reasonable date following the exchange of signature pages by facsimile.
22. Entire Agreement. This Agreement contains the entire agreement
between the parties with respect to the subject matter of this Agreement and
supersedes all prior arrangements, agreements or understandings with respect to
such matters including without limitation the Supply Agreement between the
parties fully executed on December 10, 1998. No course of performance or prior
dealings nor any custom or usage of trade shall be relevant to supplement or
explain any terms used in this Agreement.
902773.3
24
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed in duplicate originals by their duly authorized representatives as of
the day and year first above written.
FILTERTEK INC.: HEMASURE INC.:
/s/ Xxxxxx X. Xxx /s/ Xxxx X. XxXxxxx III
--------------------------- ---------------------------
Xxxxxx X. Xxx Xxxx X. XxXxxxx III
President President & CEO
902773.3
25
LIST OF ATTACHMENTS
Attachment Name Responsibility to Prepare
---------- ---- -------------------------
Attachment A Product List Filtertek
Attachment B Product Pricing Filtertek
Attachment C Product Specifications HemaSure
Attachment D Semi-Automated Cell - Phase 1 Filtertek
Attachment E Automated Cell - Phase 3 Filtertek
Attachment F HemaSure Materials HemaSure
Attachment G Manufacturing Technology Filtertek
Attachment H Semi-Automated Cell - Phase 2 Filtertek
Attachment I Manual System Filtertek
902773.3
ATTACHMENT A
PRODUCT LIST
1. r\Ls
Annual Production Capacity (Manual System) = 760,000 units
902773.3
ATTACHMENT B
PRODUCT PRICING
Actual Annual Manual S.A.C.(1) S.A.C.(1) A.C.(2)
Purchases System Xxxxx 0 Xxxxx 0 Xxxxx 0
Xx to 500,000 $2.20 $2.20 n/a n/a
500,001 to 750,000 n/a $2.00 n/a n/a
750,001 to 1,000,000 n/a $1.90 n/a n/a
1,000,001 to 1,500,000 n/a $1.80 n/a n/a
1,500,001 to 2,000,000 n/a $1.70 $1.70 $1.60
2,000,001 to 2,500,000 n/a $1.65 $1.65 $1.50
2,500,001 to 3,000,000 n/a n/a $1.50 $1.40
3,000,001 to 4,000,000 n/a n/a $1.40 $1.25
4,000,001 to 5,000,000 n/a n/a $1.30 $1.15
5,000,001 to 7,500,000 n/a n/a $1.20 $1.05
7,500,001 and above n/a n/a $1.10 $0.95
Start-Up Pricing5 n/a $2.20 $1.65 $1.60
1. "S.A.C." - Semi-Automated Cell.
2. "A.C." - Automated Cell.
NOTES:
(1) Product Pricing is firm for the first three years of the
Agreement, except for material price increases/decreases and
as otherwise provided in the Agreement.
(2) Product Pricing assumes HemaSure will provide the HemaSure
Materials including without limitation the particle trap layer
on rolls for processing. If the HemaSure Materials are not
provided on rolls, then the parties will mutually agree upon
increased Product Pricing as provided herein.
902773.3
(3) If the HemaSure Materials provided by HemaSure must be sheet
fed Product Pricing for quantities above 5 million units
annually shall be as reflected in the S.A.C. - Phase 2 column
above.
(4) Product Pricing assumes for the Semi-Automated Cell - Phase 1
Filtertek will achieve cycle rates, staffing, etc. as set
forth in Attachment D and an incremental Annual Production
Capacity of 2,400,000 units. If these assumptions fail, then
the parties will mutually agree upon increased Product Pricing
not to exceed 102% of the established Product Pricing except
(i) if Filtertek's production inefficiencies are due to
HemaSure's failure to supply the HemaSure Materials on a
consistent basis or (ii) if the HemaSure Materials excluding
in this case the particle trap layer are not provided on rolls
for processing, then the increased Product Pricing may exceed
102% of the established Product Pricing.
(5) Product Pricing assumes for the Semi-Automated Cell - Phase 2
Filtertek will achieve cycle rates, staffing, etc. as set
forth in Attachment H and an incremental Annual Production
Capacity of 5,000,000 units. If these assumptions fail, then
the parties will mutually agree upon increased Product Pricing
not to exceed 102% of the established Product Pricing except
(i) if Filtertek's production inefficiencies are due to
HemaSure's failure to supply the HemaSure Materials on a
consistent basis or (ii) if the HemaSure Materials excluding
in this case the particle trap layer are not provided on rolls
for processing, then the increased Product Pricing may exceed
102% of the established Product Pricing.
(6) Product Pricing assumes for the Automated Cell - Phase 3
Filtertek will achieve cycle rates, staffing, etc. as set
forth in Attachment E and an incremental Annual Production
Capacity of 5,000,000 units for each Automated Cell - Phase 3.
If these assumptions fail, then the parties will mutually
agree upon increased Product Pricing not to exceed 102% of the
established Product Pricing except (i) if Filtertek's
production inefficiencies are due to HemaSure's failure to
supply the HemaSure Materials on a consistent basis or (ii) if
the HemaSure Materials including without limitation the
particle trap layer are not provided on rolls for processing,
then the increased Product Pricing may exceed 102% of the
established Product Pricing.
(7) "Start-Up Pricing" shall apply for the first thirty (30) days
after the Operational Date for the Semi-Automated Cell - Phase
1 to account for additional technical support provided by
Filtertek during the start-up and initial operational period.
"Start-Up Pricing"
902773.3
shall apply for the first forty five (45) days after the
Operational Date for the Semi-Automated Cell - Phase 2.
"Start-Up Pricing" shall apply for the first thirty (30) days
after the Operational Date for the second Automated Cell -
Phase 3.
(8) After the respective "Start-Up Pricing" periods, Product
Pricing shall be invoiced at a mutually agreed upon weighted
average blended rate based upon cell production from the
respective Production Cells, HemaSure's forecasts for the
Products, and Filtertek's recovery of its capital investments
subject to the annual rebate/debit calculation provided
herein.
(9) Product Pricing for the Semi-Automated Cell - Phase 1, the
Semi-Automated Cell - Phase 2, and the Automated Cell - Phase
3 does not include packaging.
902773.3
ATTACHMENT C
PRODUCT SPECIFICATIONS
HemaSure's Purchase Specification, Document No. PU H70037, dated 9/21/99, and
titled "HemaSure r\LS Pre-Storage Leukoreduction Filter, Bulk Non-Sterile,
Solvent Bond Ports, Domestic Tubing."
902773.3
ATTACHMENT D
Semi-Automated Cell
Phase 1
(Module Cell A Implementation Concept)
1. Mold Inlet Housing
4 cavity, Hot Runner Tool, Uses 200 Ton Horizontal-30 Sec
Cycle Runs Automatic = No Operator, 480 Pieces per Hour Annual
Capacity = 2,400,000 parts, Customer paid for tooling
2. Mold Outlet Housing
4 cavity, Hot Runner Tool, Uses 200 Ton Horizontal-30 Sec
Cycle Runs Automatic = No Operator, 480 Pieces per Hour Annual
Capacity = 2,400,000 parts, Customer paid for tooling
3. Stake Versapor Vent into Inlet Housing and Test (Module Cell A)
Vent consists of 2 layers of Versapor, R200 and 3000R Versapor
membrane purchased by Filtertek and slit to width Using an
Automated Station, 1 Operator:
Places Inlet Housings into a feeder bowl Automation
Punches and Stakes Vent into Inlet Housing Automation
Wets out Vent with Filtertek Purchased Solvent and
tests Automation Punches FEL Disc into Tested Inlet
Automation ejects Staked/Tested Vent Inlet Housing
Automated Station, 1 Operator,
1000 Parts per Hour, Annual Capacity of 5,000,000
4. Punch and Place Media into Staked/Tested Vent Inlet Housing
Hemasure provides Media in a roll slit to width Filtertek
provides 6 cavity Preco Press, Operator and Air Washer Using
the Preco Press, 1 Operator:
Loads 6 Vent-Staked Inlet Housings into nests
Punches media discs directly into Inlet Housings
using Preco Press Operator removes Inlet Housing with
Media and Air Washes Parts are set aside for future
operation
902773.3
Six cavity punch press, 1 Operator, 36 second cycle 600 Parts
per Hour, Annual Capacity of 3,000,000
5. Weld Particle Trap Media into Outlet Housing - Description of 1 Cell
Hemasure provides Particle Trap Media stamped to size
Filtertek provides 1 cavity Sonic Weld Station Using the
single station Sonic Weld Station, 1 Operator:
Places Molded Outlet Housing into sonic weld nest
Places stamped Particle Trap Media in place
Sonic welds Media to Outlet
Single Station Sonic Weld Station, 1 Operator, 18 second cycle
200 Parts per Hour, Annual Capacity of 1,000,000 Note: 3 Cells
are needed to reach 3,000,000 Annual Capacity
6. Assemble Halves, Weld and Pack
Filtertek provides single station Sonic Weld station Using the
single station Sonic Weld Station, 1 Operator:
Assembles Inlet and Outlet Housings and places into
sonic weld nest Sonic welds Housings and places in a
box
Single Station Sonic Weld Station, 1 Operator, 18 second cycle
200 Parts per Hour, Annual Capacity of 1,000,000 Note: 3 Cells
are needed to reach 3,000,000 Annual Capacity
902773.3
ATTACHMENT E
Automated Cell
Phase 3
(Module Cell D Implementation Concept)
1. Mold Inlet Housing
8 cavity, Hot Runner Tool, Uses 500 Ton Horizontal-30 Sec
Cycle
Runs Automatic = No Operator, 960 Pieces per Hour
Annual Capacity = 4,800,000 parts, Filtertek paid tooling
2. Mold Outlet Housing
8 cavity, Hot Runner Tool, Uses 500 Ton Horizontal-30 Sec Cycle
Runs Automatic = No Operator, 960 Pieces per Hour
Annual Capacity = 4,800,000 parts, Filtertek paid tooling
3. Stake Versapor Vent into Inlet Housing and Test (Module Cell A)
Vent consists of 2 layers of Versapor, R200 and 3000R Versapor
membrane purchased by Filtertek and slit to width Using an
Automated Station, 1 Operator:
Places Inlet Housings into a feeder bowl Automation
Punches and Stakes Vent into Inlet Housing Automation
Wets out Vent with Filtertek Purchased Solvent and
tests Automation Punches FEL Disc into Tested Inlet
Automation ejects Staked/Tested Vent Inlet Housing
Automated Station, 1 Operator,
1,000 Parts per Hour, Annual Capacity of 5,000,000
4. Punch and Place Media into Staked/Tested Vent Inlet Housing (Module
Cell B)
Hemasure provides Media in a roll slit to width Filtertek
provides 6 cavity Die Punch Press and Air Washer Using the Die
Punch Press,
Receives Vent-Staked Inlet Housings into nests
Punches media discs directly into Inlet Housings
using Preco Press
Removes Inlet Housing with Media and Air Washes
Multi cavity punch press, No Operator 1,000 Parts per Hour,
Annual Capacity of 5,000,000
902773.3
5. Weld Particle Trap Media into Outlet Housing (Module Cell D)
Hemasure provides Particle Trap Media on rolls Filtertek
provides automation station, 1 Operator Using the automation
station, 1 Operator:
Automation places Molded Outlet Housing into sonic
weld nest Automation places Partical Trap Media in
place Automation sonic welds Media to Outlet
Automation Station, 1 Operator,
1,000 Parts per Hour, Annual Capacity of 5,000,000
6. Assemble Halves, Weld and Pack (Module Cell C)
Filtertek provides Automated In Line Sonic Weld Station
Assembles Inlet and Outlet Housings and places into
sonic weld nest Sonic welds Housings and ejects final
part
Automated Sonic Weld Station, 1 Operator,
1,000 Parts per Hour, Annual Capacity of 5,000,000
902773.3
ATTACHMENT F
HEMASURE MATERIALS
The following items from HemaSure's Purchase Specification, Document No. PU
H70037, dated 9/21/99, and titled "HemaSure r\LS Pre-Storage Leukoreduction
Filter, Bulk Non-Sterile, Solvent Bond Ports, Domestic Tubing."
. Item 4.3 - FEL Media.
. Item 4.4 - Leuko-Reduction Media.
. Item 4.7 - Particle Trap Stack.
902773.3
ATTACHMENT G
MANUFACTURING TECHNOLOGY
*** CONFIDENTIAL AND PROPRIETARY ***
Manufacturing Technology - HemaSure acknowledges that Filtertek developed the
scale-up capability of the r/ls Leukoreduction filter.
Filtertek acknowledges that HemaSure developed the prototyping and process
feasibility of the r/LS Leukoreduction filter.
902773.3
ATTACHMENT H
Semi-Automated Cell
Phase 2
(Module B&C Implementation Concept)
1. Mold Inlet Housing
8 cavity, Hot Runner Tool, Uses 500 Ton Horizontal-30 Sec Cycle
Runs Automatic = No Operator, 960 Pieces per Hour
Annual Capacity = 4,800,000 parts, Filtertek paid tooling
2. Mold Outlet Housing
8 cavity, Hot Runner Tool, Uses 500 Ton Horizontal-30 Sec Cycle
Runs Automatic = No Operator, 960 Pieces per Hour
Annual Capacity = 4,800,000 parts, Filtertek paid tooling
3. Stake Versapor Vent into Inlet Housing and Test (Module Cell A)
Vent consists of 2 layers of Versapor, R200 and 3000R Versapor
membrane purchased by Filtertek and slit to width Using an
Automated Station, 1 Operator:
Places Inlet Housings into a feeder bowl Automation
Punches and Stakes Vent into Inlet Housing Automation
Wets out Vent with Filtertek Purchased Solvent and
tests Automation Punches FEL Disc into Tested Inlet
Automation ejects Staked/Tested Vent Inlet Housing
Automation Station, 1 Operator,
1,000 Parts per Hour, Annual Capacity of 5,000,000
4. Punch and Place Media into Staked/Tested Vent Inlet Housing (Module Cell B)
Hemasure provides Media in a roll slit to width Filtertek
provides 6 cavity Die Punch Press and Air Washer Using the Die
Punch Press,
Receives Vent-Staked Inlet Housings into nests
Punches media discs directly into Inlet Housings
using Preco Press
Removes Inlet Housing with Media and Air Washes
Multi cavity punch press, No Operator 1,000 Parts per Hour,
Annual Capacity of 5,000,000
902773.3
5. Weld Particle Trap Media into Outlet Housing - Description of 1 Cell
Hemasure provides Particle Trap Media stamped to size
Filtertek provides 1 cavity Sonic Weld Station Using the
single station Sonic Weld Station, 1 Operator:
Places Molded Outlet Housing into sonic weld nest
Places stamped Particle Trap Media in place
Sonic welds Media to Outlet
Single Station Sonic Weld Station, 1 Operator, 18 second cycle
200 Parts per Hour, Annual Capacity of 1,000,000 Note: 5 Cells
are needed to reach 5,000,000 Annual Capacity
6. Assemble Halves, Weld and Pack (Module Cell C)
Filtertek provides Automated In Line Sonic Weld Station
Assembles Inlet and Outlet Housings and places into
sonic weld nest Sonic welds Housings and ejects final
part
Automated Sonic Weld Station, 1 Operator,
1,000 Parts per Hour, Annual Capacity of 5,000,000
902773.3
ATTACHMENT I
Manual System
1. Mold Inlet Housing
4 cavity, Hot Runner Tool, Uses 200 Ton Horizontal-30 Sec
Cycle Runs Automatic = No Operator, 480 Pieces per Hour Annual
Capacity = 2,400,00 parts, Customer paid for tooling
2. Mold Outlet Housing
4 cavity, Hot Runner Tool, Uses 200 Ton Horizontal-30 Sec
Cycle Runs Automatic = No Operator, 480 Pieces per Hour Annual
Capacity = 2,400,000 parts, Customer paid for tooling
3. Stake Versapor Vent into Inlet Housing and Test
Vent consists of 2 layers of Versapor, R200 and 3000R Versapor
membrane purchased by Filtertek and slit to width Using a
Prefabricated Single Station Fixture, 1 Operator:
Advances the two layers of Membrane Places one Inlet
Housing into a nest, and Punches and Stakes Vent into
Inlet Housing Removes Staked Vent Inlet Housing and
places in another nest Wets out Vent with Filtertek
Purchased Solvent and tests Removes Staked/Tested
Vent Inlet Housing and places aside A Pre-Cut FEL
Disc is added to the Tested Inlet
Single Station Fixture, 1 Operator, 23.7 Second Cycle
152 Parts per Hour, Annual Capacity of 760,000
4. Punch and Place Media into Staked/Tested Vent Inlet Housing
Hemasure provides Media in a roll slit to width Filtertek
provides 6 cavity Preco Press, Operator and Air Washer Using
the Preco Press, 1 Operator:
Loads 6 Vent-Staked Inlet Housings into nests
Punches media discs directly into Inlet Housings
using Preco Press Operator removes Inlet Housing with
Media and Air Washes Parts are set aside for future
operation
Six cavity punch press, 1 Operator, 36 second cycle 600 Parts
per Hour, Annual Capacity of 3,000,000
902773.3
5. Weld Particle Trap Media into Outlet Housing
Hemasure provides Particle Trap Media stamped to size
Filtertek provides 1 cavity Sonic Weld Station Using the
single station Sonic Weld Station, 1 Operator:
Places Molded Outlet Housing into sonic weld nest
Places stamped Particle Trap Media in place
Sonic welds Media to Outlet
Single Station Sonic Weld Station, 1 Operator, 18 second cycle
200 Parts per Hour, Annual Capacity of 1,000,000
6. Assemble Halves, Weld and Pack
Filtertek provides single station Sonic Weld Station Using the
single station Sonic Weld Station, 1 Operator:
Assembles Inlet and Outlet Housings and places into
sonic weld nest Sonic welds Housings and places in a
box
Single Station Sonic Weld Station, 1 Operator, 18 second cycle
200 Parts per Hour, Annual Capacity of 1,000,000
902773.3
ATTACHMENT J
"NET BOOK VALUE" DEFINITION
Total Purchases Year 1 Year 2 Year 3 Year 4 Year 5 Year 6
> 15,000,000 units 90% of Filtertek 70% of Filtertek 50% of Filtertek 30% of Filtertek 10% of Filtertek See Notes 5, 6,
Capital Capital Capital Capital Capital and 7 below
Investment Investment Investment Investment Investment
< 15,000,000 units 90% of Filtertek 70% of Filtertek 50% of Filtertek 30% of Filtertek 10% of Filtertek 10% of Filtertek
Capital Capital Capital Capital Capital Capital
Investment plus Investment plus Investment plus Investment plus Investment plus Investment plus
Amortization Amortization Amortization Amortization Amortization Amortization
Rate multiplied Rate multiplied Rate multiplied Rate multiplied Rate multiplied Rate multiplied
by Shortfall by Shortfall by Shortfall by Shortfall by Shortfall by Shortfall
Notes:
1. "Total Purchases" shall mean the total number of units that have been
(i) ordered by HemaSure, (ii) manufactured and shipped by Filtertek,
and (iii) accepted and paid for by HemaSure under the Agreement from
the Effective Date up to and including the effective date of the
termination, expiration, or non-renewal of the Agreement.
2. "Filtertek Capital Investment" shall mean the total of the original
purchase prices for all of the production equipment, tooling, and
automation utilized in the Production Cells (but not including any
facility improvements made by Filtertek) as evidenced by Filtertek's
written records or, in the case of leased Assets, by lessor's written
records which shall be provided to HemaSure.
3. "Amortization Rate" shall mean for Agreement Years 1 through 5 the
difference between the Filtertek Capital Investment and the residual
value from Row 1 of the above chart for the respective Agreement Year
divided by 15,000,000. For Agreement
902773.3
Year 6 the Amortization Rate shall mean the difference between the
Filtertek Capital Investment and the residual value from Row 1 of the
above chart for Agreement Year 5 divided by 15,000,000.
4. "Shortfall" shall mean 15,000,000 units less the Total Purchases of
HemaSure from Filtertek under the Agreement.
5. "Customized Filtertek Capital Investment" shall mean the total of the
original purchase prices for all of the customized production equipment
utilized in the Production Cells including without limitation tooling
and automation (but not including any presses, welders, and facility
improvements made by Filtertek) as evidenced by Filtertek's written
records or, in the case of leased Assets, by lessor's written records
which shall be provided to HemaSure. After Agreement Year 5, the
component of the "Net Book Value" definition associated with tooling,
automation, and other customized production equipment shall be defined
as zero (0).
6. "Non-Customized Filtertek Capital Investment" shall mean the total of
the original purchase prices for all of the non-customized production
equipment utilized in the Production Cells including without limitation
presses and welders (but not including any tooling, automation, and
facility improvements made by Filtertek) as evidenced by Filtertek's
written records or, in the case of leased Assets, by lessors' written
records which shall be provided to HemaSure. After Agreement Year 5,
the component of the "Net Book Value" definition associated with the
Non-Customized Filtertek Capital Investment shall be defined as fifteen
percent (15%) of the original purchase price.
7. After Year 5 of the Agreement and HemaSure Total Purchases are greater
than or equal to 15,000,000 units, then HemaSure shall only be
obligated to purchase the Customized Filtertek Capital Investment and
may, at its option, purchase the Non- Customized Filtertek Capital
Investment as provided in the Agreement provided, however, that in the
event of a termination by HemaSure pursuant to Article III, Section 8
of the Agreement, then HemaSure shall not be obligated to purchase the
Customized Filtertek Capital Investment and in that case may, at its
option, purchase the Customized Filtertek Capital Investment.
Example 1: Filtertek Capital Investment is $5,300,000, HemaSure Total Purchases
are 25,000,000 units, and Agreement terminates in Year 3.
. "Net Book Value" is $2,650,000. [50% of $5,300,000]
-------------------------------
902773.3
Example 2: Filtertek Capital Investment is $5,300,000, HemaSure Total Purchases
are 10,000,000 units, and Agreement terminates in Year 3.
. "Amortization Rate" is $0.177/ unit. [($5,300,000 - $2,650,0000)/15,000,000]
. "Shortfall" is 5,000,000 units. [15,000,000 - 10,000,000]
. "Net Book Value" is $3,535,000. [$2,650,000 + ($0.177 X 5,000,000)]
------------------------------
Example 3: Filtertek Capital Investment is $5,300,000 of which $2,300,000 is
Non-Customized Filtertek Capital Investment, HemaSure Total Purchases are
30,000,000 units, and the Agreement terminates in Year 6.
. "Net Book Value" of the Customized Filtertek Capital Investment is $0.
----------------------------------------------------------------------
. HemaSure may, at its option, purchase the Non-Customized Filtertek
Capital Investment for $345,000.
902773.3
