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EXHIBIT 10.14 B
CONFIDENTIAL TREATMENT
SUPPLY AGREEMENT
This Agreement dated as of 1/5/96 (the "Effective Date"), by and
between Boehringer Mannheim Corporation, an Indiana corporation, having a
principal place of business at 9115 Hague Road, Indianapolis, Indiana 46250,
(hereinafter referred to as "BMC"), and SpectRx, Inc., a Delaware corporation,
6025A Unity Drive, Norcross, Georgia, 30071, (hereinafter referred to as "SI");
WITNESSETH:
WHEREAS, BMC and SI have entered into a Development and License Agreement dated
as of December 2, 1994, and
WHEREAS, said Agreement provisions for the establishment of a Supply Agreement
between BMC and SI,
NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties agree as follows:
1.0 DEFINITIONS
1.1 "Instrument(s)" shall mean the instrument for screening diabetes as
described in the "System Specification Document, Magnum Diabetes
Screening Instrument, Project 227" attached hereto (Appendix A) and
incorporated by reference, and known to the parties at the time of
execution of this Agreement.
1.2 "Affiliates(s)" shall mean, with respect to either party, any
corporation, partnership or other business entity that now or in the
future controls, is controlled by, or is under common control with,
such party. "Control" shall mean the direct or indirect ownership of
fifty percent (50%) or more of the voting interest in, or a fifty
percent (50%) or more interest in the income of, such corporation or
other business entity, or such other relationship as, in fact,
constitutes actual control.
1.3 "Manufacturing Documentation" shall mean a package of specifications,
drawings and manufacturing instructions [including detailed training
by SI] which enable SI or a third party to manufacture the Instrument
including, as applicable, software, all software source codes in
printout or magnetic media form, software assembly, linkage and
validation protocols and software validation results, manufacturing
specifications for the Instrument, (service and training information
and a set of quality control parameters suitable for use in acceptance
testing of the Instrument), as well as all preliminary or working
drafts of all such materials, and documentation developed by SI in
order to produce such materials.
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1.4 "Development Services" shall mean the design and development effort by
SI in so far as it is relative to manufacturing equipment,
manufacturing processes, goods and services contracted by SI, and
associated Manufacturing processes and associated Manufacturing
Documentation which may be necessary in order to bring the Instrument
into commercial production.
1.5 "Date of Market Introduction" shall mean the later of (a) the receipt
and acceptance by BMC of [preproduction quantity to be determined]
Instruments meeting the specifications described in Appendix A and
approved by BMC, or (b) the sale and shipment of Instruments to an
end-user by BMC.
2.0 SUPPLY SERVICES
2.1 SI shall manufacture and sell the Instrument exclusively to BMC and
Affiliates for worldwide marketing and selling at prices established
by the parties pursuant to paragraph 3.1. Nothing in this Agreement
shall prevent BMC from manufacturing or having manufactured,
marketing, selling, or otherwise supplying other non- invasive devices
on a world-wide basis.
2.2 During the term of this Agreement SI [or a mutually approved contract
manufacturer] shall be BMC's sole and exclusive source for the
Instrument, provided that (a) SI provides an adequate and timely
supply of the Instrument to BMC in accordance with Purchase Orders
issued by BMC and accepted by SI, (b) SI maintains the quality
assurance level as stated in BMC's Quality Partners Manual and
or as may be otherwise agreed to by the parties, in writing, (c) SI
follows the most current and pertinent Federal Food and Drug
Administration guidelines, meets the requirements of ISO9001:1994,
section 4.4 during development, and be in compliance with Good
Manufacturing Practices as found in 21 CFR 820 prior to production,
and (d) SI's employs reasonably sound cost management practices. SI
warrants that it will apply all reasonable resources to its operation
in order to attain a certification rating [as defined in BMC's Quality
Partners Manual within twenty-four [24] months from the start of
Instrument production for sale by BMC. SI further agrees to make
available to BMC for purchase, spare parts and or replacement/repair
parts for a period of not less than seven [7] years from end of market
sales by BMC.
2.3 SI represents that it has or will have, prior to the date of Market
Introduction at its Norcross, Georgia facility or other manufacturing
facility as may be jointly approved by the parties manufacturing
capacity to produce the Instrument in the following minimum annual
quantities:
Date Units per Annum
---- ---------------
Market Introduction Date BMC's Annual Forecast Volumes, +35%
One year after Market Introduction Date BMC's Annual Forecast Volumes, +50%
NOTE: The quantities stated herein are estimated and are the
result of a review of the current business conditions and other
information available to BMC at the time the estimate is prepared.
BMC shall not be obligated to purchase any Instruments except pursuant
to purchase orders as described in Section 2.5.
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2.4 In order to facilitate SI's planning of production, and to assist SI
in making certain decisions relative to inventory of long lead items,
BMC shall submit to SI a non-binding estimate of its requirements of
Instruments monthly covering a forward period of not less than twelve
(12) months. Upon receipt of BMC's estimate, if SI determines that it
has insufficient capacity to meet the quantities stated in the
estimate, it shall notify BMC within fifteen (15) days of the date of
receipt of BMC's estimate that such condition exists, and will present
recommendations regarding capacity changes to meet BMCs estimate. BMC
shall promptly review SI's notice and schedule a meeting with SI to
review the recommendations and reach agreement on a course of action.
In an effort to reduce lead time, and in accordance with production
forecasts provided by BMC under this Agreement, SI agrees to establish
an inventory level at its facility [financed by BMC for only the first
twelve months of production by SI] of Instrument component parts which
have long lead times. The inventory mix and levels will be reviewed
quarterly by the parties, and the parties, by mutual agreement, may
make changes to the level and the mix. The details of this activity
will be negotiated by the parties and will be contained in the blanket
order for the first year's supply of Instruments. Also included will
be the details of SI's refunding plan employing price discounts on
subsequent purchases of Instruments for said financing by BMC.
2.5 During the term of this Agreement, BMC agrees to purchase the
Instrument exclusively from SI (see Section 2.2). BMC shall issue
purchase orders, containing specific instructions concerning quantity,
delivery schedule, invoicing, etc., from time to time for the supply
of Instruments. The purchase orders described in this Section 2.5
shall constitute the only authorization for SI to ship Instruments to
BMC.
BMC shall have the right to cancel or make changes to said purchase
orders from time to time. SI agrees to use its best efforts to comply
with changes. In the event a change in a purchase order causes a
significant increase or decrease in SI's costs or time for
performance, the parties agree to negotiate in good faith to reach an
agreement on an equitable adjustment in the price and time for
performance and this Agreement [ subsequent purchase order (s)] shall
be supplemented in writing accordingly. BMC agrees to be responsible
for all components purchased by SI in response to said purchase
orders.
Notwithstanding the foregoing, BMC may request and SI shall have the
ability to respond to changes in existing forecast as follows:
Current month +30%
30-60 days +60%
NOTE: The above are considered short term targets and subject to
modification by mutual agreement by the parties. Subject to the
provisions of the previous sentence, the goal is to respond to all
changes in customer demand within 30 days.
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2.6 Prior to releasing the Instrument for production, BMC shall have the
right to purchase (at a price negotiated by the parties) from SI up to
sixteen (16) pre-production units in order to approve the quality
thereof, which approval shall not be unreasonably withheld.
2.7 After BMC has notified SI in writing that the pre-production
Instruments manufactured by SI are approved, the Instrument,
components, manufacturing process, documentation, sources of supply to
SI, etc. shall be frozen. SI shall obtain the written approval of
BMC [which approval shall not be unreasonably withheld] prior to
making any changes, substitutions, or modifications whatsoever to the
Instrument, components, manufacturing process, or Manufacturing
Documentation and shall provide notice and perform activities in
accordance with Change Notification Protocol which is attached as
Appendix B.
2.8 The Instruments shall be supplied and labeled in accordance with
BMC-approved packaging specifications. BMC shall prepare the artwork
necessary for printing the labels and shall deliver it to SI at
mutually agreed upon time intervals prior to the scheduled delivery
from SI of the first shipment ordered by BMC. BMC agrees to
reasonably recognize SI's efforts with respect to producing the
instrument by placing verbiage such as : "Developed by SpectRx, Inc.
for Boehringer Mannheim Corporation". BMC at its sole discretion
shall set the criteria for said labeling.
3.0 PRICE
3.1 The parties to this Agreement - because the Instrument has yet to be
designed and approved - cannot accurately calculate the price of the
Instrument. Until said design and manufacturing process have been
identified and agreed to, the parties - at this point in time - agree
on a formula for calculating the Instrument price.
The price of the Instrument will be established in accordance with
Appendix "C". SI and BMC agree that the volume of instruments
purchased by BMC in a given year influences the manufacturing cost.
Instead of defining minimum purchase volumes, both parties agree, that
using the formula for calculating the price [Appendix "C"], BMC
intends to generate sales of the Instrument in sufficient quantity to
generate over [*]. This applies assuming regular manufacture by SI
and does not include/compensate SI relevant problems, rework, returns,
etc. If BMC fails to meet this requirement, BMC can either a] permit
SI to manufacture and sell the Instrument to third parties, or b]
purchase additional instruments sufficient to meet the sales
requirement [*].
3.2 SI, as long as it is the manufacturer of the device, and then
successor manufacturers, whether they be BMC or other parties arranged
for by BMC pursuant to the Manufacturing License provided for in the
Development and License Agreement, will pay, as a cost of
manufacturing, to GTRC the license fee provided for in SI's patent
license with GTRC.
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
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3.3 In addition, where a revolutionary improvement (herein defined as a
technical improvement which dramatically and radically improves the
Instrument) is generated and implemented which provides a cost
reduction, the savings will be split as follows:
Party generating the idea/improvement = 60% of annual savings;
balance to other party
Both parties generate the idea/improvement Split evenly
between the parties.
3.4 Terms of payment shall be Net 30; except that during the first year of
manufacture of the Instruments, BMC agrees to forward payment within
ten days of receipt of said Instruments and corresponding invoice.
4.0 INSPECTION AND QUALITY CONTROL
4.1 Each shipment of Instruments to BMC shall be accompanied by a
certificate of SI's Quality Control Department indicating that the
Instruments, identified by their serial numbers, contained in the
shipment have passed the quality control parameters developed by SI,
agreed to in writing by BMC and contained in the Manufacturing
Documentation. BMC reserves the right - at such frequency that BMC
feels appropriate and upon providing SI with reasonable notice to
visit SI's facility [or other third party manufacturer of the
Instrument] for the purpose of confirming that SI's quality system and
process is in conformance to agreed upon parameters.
SI shall keep complete reproducible records of all data pertaining to
SI's performance under this Agreement and as it relates to individual
Instruments for the life of the Instrument. BMC agrees to implement
its current warranty card tracking system for the Instruments sold by
BMC pursuant to this Agreement.
4.2 Within one (1) month after receipt of Instruments, BMC may conduct its
own acceptance inspection thereof in which random samples of the
Instruments will be compared with the specifications and Quality
Control Procedures, which are a part of the Manufacturing
Documentation. In the event such inspection by BMC reveals
unacceptable variances from the Quality Control Procedures in the
Manufacturing Documentation, BMC shall promptly notify SI (which
notice shall specify the manner in which the defective Instruments
fail to meet the specifications), and SI shall have thirty (30) days
in which to verify the variances. Upon the earlier of (a)
verification by SI or (b) the expiration of thirty (30) days from the
date of said notice, BMC shall have the right to refuse acceptance of
the defective or deficient lots of Instruments and to require, at the
option of SI, that said lot(s) be immediately replaced or corrected
free of charge. SI reserves the right to cure the defect at BMC or
request return of the Instrument to SI facility. SI maintains an
option to- at its own expense- make a one hundred percent (100%)
inspection of the lots with respect to the defective function.
However said activity shall not delay the shipment of replacement
Instruments to BMC or place BMC in a position of not being capable
responding to the demand of its customers. If SI's inspection results
in a finding that the Instruments are not defective or deficient, SI
shall
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immediately notify BMC of the same and shall resubmit the lots for
acceptance. The remedies of this paragraph accruing to BMC prior to
acceptance of Instruments shall be in lieu of rights accruing under
Article 5 (WARRANTIES), which shall accrue to BMC after acceptance of
Instruments. Failure of BMC to complete the acceptance inspection
with respect to a lot within the one (1) month period shall constitute
acceptance by BMC of the lot.
5.0 WARRANTIES
5.1 SI warrants to BMC that all Instruments to be supplied hereunder will
upon shipment meet the agreed upon specifications, will be free from
defects in materials and workmanship, and will be property packed and
labeled; provided, however, in respect of defects in materials and
workmanship, and in respect of packaging and labeling, should a matter
be covered by the specifications, the specifications will control.
This warranty shall apply for a period of twenty-four (24) months
after the date of shipment by SI, or twelve [12] months from date of
installation with the end user, whichever occurs first. SI shall
satisfy this warranty requirement by repairing or replacing [at no
charge to BMC] each defective Instrument returned to it prior to the
expiration of the warranty period. All repair or replacement in
accordance with this Section 5.1 shall be in accordance the
"Instrument Loaner Program/Customer Service Procedure dated 11/01/95"
attached hereto as Appendix D and incorporated by reference. SI shall
not be liable for loss or damages arising out of misuse of the
Instrument by BMC, its agents or customers.
5.2 After the initial warranty period, SI agrees to replace failed
Instrument bulbs (if any) for a period of five (5) years from the date
of installation. SI shall bill BMC for the cost of the replacement at
SI's cost.
5.3 SI shall conduct a failure analysis as required by U.S. Food and Drug
Administration ("FDA") regulations, i.e. 21 CFR parts 820.115 and
820.198 (b) with respect to defective Instruments returned to it under
paragraph 5.1. Such analysis shall be conducted promptly upon receipt
by SI of the subject Instruments and a results report shall be
returned to BMC no later than forty-five (45) days after SI's receipt
of the defective Instrument(s).
5.4 SI shall be liable for and shall indemnify, defend and hold BMC
harmless against any and all claims, suits, proceedings, recoveries,
and damages, including but not limited to costs and expenses of total
or partial Instrument recall, whether initiated voluntarily by BMC and
agreed to by SI [said agreement shall not be unreasonably withheld],
or at the direction of the FDA, (collectively "Claims") arising out
of, based on, or caused by defects in material, workmanship, but in no
event shall [i] SI be liable for or be required to indemnify BMC for
or hold it harmless from any claims arising in whole or in part from
or based on, or caused by defects or deficiencies in any features of
the Instrument designed by BMC or its affiliates, any component of the
Instrument designed by BMC or the literature supplied by BMC for use
with the Instrument, or claims made by BMC or its agents, [ii] SI be
liable to BMC or any person for any loss or damage to the extent
caused by any misuse of the Instrument or reliance upon the Instrument
in respect of the issuance of any medical opinion, [iii] SI be liable
to
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BMC or any person for any implied warranties for merchantability of
fitness for a particular purpose or any express warranties other than
those provided for in this Agreement. ["Excluded Claims"]. BMC
agrees to incorporate in its documentation to its customers that its
warranty for product liability will not exceed the repair or
replacement of the Instrument or the return of the price thereof. SI
shall promptly notify BMC of any situation which may affect a decision
to recall the Instrument, however, BMC shall have the final authority
to institute a voluntary recall, which authority shall not be
exercised unreasonably. Notwithstanding the foregoing, in no event
shall SI be liable to BMC or any other person for any incidental or
consequential damages arising from or in any way connected with the
purchase or use of product.
Except for excluded claims [as defined herein], SI shall indemnify,
defend and hold BMC harmless from any and all claims, demands, actions
and causes of action against BMC in connection with any and all
injuries, damages or liabilities of any kind whatsoever directly or
indirectly attributed to manufacture of the Instrument or component
deficiencies or defects. This indemnification obligation shall
include, without limiting the generality of the foregoing reasonable
attorney's fees, and other costs or expenses incurred in connection
with the defense or settlement of any and all such claims, demands,
actions or causes of actions.
5.5 SI will indemnify and hold BMC harmless from and against any claims,
actions or demands (including, without limitation, attorney's fees,
interest and penalties) based upon the alleged infringement of any
patent or other intellectual property rights now or hereafter
existing, provided, however SI shall have no such obligation with
respect to Excluded Claims. SI shall have the right to defend at its
expense any suits other than Excluded Claims alleging that the
manufacturing process infringes any patent, copyright or other
intellectual property rights. If action is commenced or a claim is
made against BMC with respect to alleged infringement, BMC shall, if a
claim in respect thereof is to be made against SI under this paragraph
5.5, notify SI in writing of the commencement thereof, in which case
(a) SI shall be entitled to participate therein in the name of BMC and
shall be entitled to assume the defense thereof with counsel who shall
be reasonably satisfactory to BMC, and (b) BMC shall on request of SI
cooperate in the defense of such action. SI shall notify BMC promptly
in writing of its intention not to defend a claimed infringement and
BMC may at its option and expense proceed to defend said infringement.
Further, in response to notification by BMC to SI that said claim or
action is commenced, SI shall promptly initiate efforts to:
1] secure permission to continue the manufacture and supply of
Instruments to BMC, or
2] provide an Instrument which is non-infringing yet still meets
the agreed upon BMC requirement as contained in this
Agreement, or
3] provide BMC with other suitable alternatives which permits BMC
to sustain product support and supply in the marketplace.
5.6 BMC will indemnify and hold SI harmless from any and all claims,
demands, actions or causes of action against SI, in connection with
any and all injuries, losses damages or liability of any kind
whatsoever directly or indirectly attributed to features of the
Instrument designed
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according to BMC's or its Affiliates' instructions or directions or
any omission or misstatement in the literature supplied by BMC for use
with the Instrument. This indemnification obligation shall include,
without limiting the generally of the foregoing, reasonable attorney's
fees and other costs or expenses incurred in connection with the
defense or settlement of any such claim, demand, actions, or causes of
action. Notwithstanding the foregoing, in no event shall BMC be
liable to SI or any other person for any incidental or consequential
damages arising from or in any way connected with the purchase or use
of product.
5.7 BMC & SI agree in conjunction with their obligations under this
Agreement to avoid knowingly designing and/or developing any item that
infringes any patent of a third party. If either party becomes aware
of any such infringement during the course of performing hereunder, it
will notify the other party promptly in writing.
6.0 CONFIDENTIALITY REPRESENTATION CONCERNING EMPLOYEES
6.1 All information identified as confidential and received by one party
from the other under this Agreement shall be subject to the
obligations of confidentiality set out in the Development and License
Agreement between SpectRx, Inc. and BMC.
It is understood that disclosure of any information by one party to
the other under this Agreement shall in no way be considered as a
grant of any right or license to the receiving party to use such
information except for assistance in developing the Instrument and the
evaluation of the Instrument undertaken by BMC during the term of this
option and any extension hereof.
6.2 No news release, advertisement, public announcement, denial or
confirmation of same, of any kind regarding any part of the subject
matter of this agreement shall be made by one party without the prior
written approval of the other party.
6.3 Upon termination or expiration of this Agreement, the parties agree to
promptly return all written or descriptive matter, including but not
limited to drawings, blueprints, descriptions, or other papers,
documents, tapes, or any other media which contains such Confidential
Information which is the property of and or proprietary to the other
party. In the event of a loss of any item containing such
Confidential Information, the party claiming said loss will promptly
notify the other party in writing.
7.0 EMPLOYEES
7.1 Personnel assigned by SI to perform services under this Agreement will
be employees of SI and will not for any purpose be considered
employees or agents of BMC. SI assumes full responsibility for the
actions of such personnel while performing services hereunder and
shall be solely responsible for their supervision, daily direction and
control, payment of salary (including withholding of income taxes and
social security), workers compensation, disability benefits and the
like.
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7.2 Personnel assigned by BMC to perform services under this Agreement
will be employees of BMC and will not for any purpose be considered
employees or agents of SI. BMC assumes full responsibility for the
actions of such personnel while performing services under this
agreement as well as promotion, distribution and any sales activities
with respect to the Instrument and BMC shall be solely responsible for
their daily supervision, daily direction and control, payment of
salary (including withholding of income taxes and social security),
workers compensation, disability benefits and the like.
8.0 CHANGES
8.1 Either party may request, in writing, changes to the work scope or to
the manufacturing or design specifications for the Instrument. The
party receiving the request for the change shall submit within a
reasonable time a report to the other party setting forth its best
judgment as to the probable effect on the supply services and their
costs. Neither party shall proceed with any changes without the prior
written consent of the other.
8.2 Cost reduction activity: The parties agree to adopt and implement TQM
and continues improvement tenets designed to reduce costs, lead times
and improve response times. The parties agree to cooperate in an
ongoing effort designed to reduce the total cost of the Instrument.
Such efforts include but are not limited to: supply route
efficiencies, cycle time reduction, economies of scale, process
improvements (properly approved by the parties), etc. Action may be
initiated by either party, but cannot be implemented without the
approval of the other party. The extent to which cost reduction
benefits are to be shared by the parties shall be the result of good
faith negotiations between the parties. Further, SI shall implement a
continuous improvement process which will enable SI to eliminate waste
and reduce cost.
9.0 TERM, TERMINATION AND CANCELLATION
9.1 Unless terminated pursuant to the terms hereof, the term of this
Agreement shall be coincident with the term of the Development and
License Agreement between BMC and SI dated as of December 2, 1994.
Upon termination of this Agreement, the status of all purchase orders
outstanding at the date of termination shall be reviewed and the
parties shall resolve any termination costs through good faith
negotiations. BMC shall purchase from SI, at SI's cost, any
components purchased by SI in response to purchase order releases
issued by BMC if SI is unable to use or sell such components. The
parties further agree that in the event of termination of this
Agreement, all confidential information, documents, materials, tools,
etc. which are the property of either party shall be promptly
returned to such party.
9.2 Either party may terminate this Agreement by written notice in the
event [i] the other party materially breaches this Agreement and does
not cure such breach with thirty (30) days of written demand for cure;
"material breach" includes, but is not limited to, a breach of
covenants in Section 2.2 of this Agreement, or [ii] by written notice
upon the liquidation or bankruptcy of, or an assignment for the
benefit of creditors of, or a declaration of insolvency by, the other
party. Termination of this Agreement pursuant to this Section 9.2
shall not
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constitute a termination of the Development and License Agreement nor
the Marketing License granted thereunder. In the event of termination
of this Agreement by BMC pursuant to this Section, BMC shall be deemed
to have acquired the Manufacturing License described in the
Development and License Agreement effective upon such termination.
9.3 Notwithstanding the foregoing and as part of risk management
practices, within twenty-four (24) hours of initial production, SI
shall place a complete and updated set of Manufacturing Documentation
and know-how in escrow. Said escrowed documentation and know-how
shall be sufficient such as to maintain BMC as an alternative source
of Instruments capable of supplying the Instruments to meet BMC's
needs.
In the event this Agreement is terminated and BMC retains the
Manufacturing License, or in the event SI cannot manufacture for
ninety [90] days because of an event of force majeure, BMC shall have
full, complete and unrestricted access to [including physical
possession of] the said Manufacturing Documentation residing in
escrow. SI agrees to provide all reasonable resources [including all
tooling] to render BMC fully qualified in all respects to supply
Instruments with the same specifications, and manufacturing criteria
and under the same regulatory and quality standards as if manufactured
by SI. BMC will receive from SI a maximum of five hundred [500] hours
of training and BMC will supply reasonably competent manufacturing and
technical personnel who will be trained by SI to support production of
the Instrument.
10.0 GENERAL PROVISIONS
10.1 The rights and obligations of Articles 5 (WARRANTIES), and 10 (GENERAL
PROVISIONS) shall survive any termination of this Agreement and shall
bind the parties and their legal representatives, successors and
assigns. Neither party may assign this Agreement (except to an
Affiliate) without the consent of the other, which consent shall not
be unreasonably withheld.
10.2 SI and BMC shall do all things necessary to comply with all applicable
Federal, State and local laws, regulations and ordinances, including
but not limited to the Regulations of the United States Department of
Commerce relating to the export of Technical Data, insofar as they
relate to the services to be performed under this Agreement. SI shall
obtain any required government documents and approvals in the event of
SI export of Instruments manufactured for BMC affiliates hereunder and
for any technical data disclosed to SI by BMC. SI will not be the
exporter of record for exports to BMC customers. SI agrees to
maintain or contract with [as provided herein] an FDA approved
facility which is operated in compliance with Good Manufacturing
Practices, to be found in 21 CFR 820. SI will provide documentation
that such facility complies with FDA published guidelines (as defined
in 21 CFR 10.90b) and upon request by BMC demonstrate compliance.
10.3 Each of the parties hereto shall be excused from the performance of
its obligations hereunder in the event such performance is prevented
by force majeure and such excuse shall continue as
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long as the condition constituting such force majeure continues, plus
fifteen (15) days after the termination of such condition. For
purposes of this Agreement, force majeure is defined as follows:
Causes beyond the control of SI or BMC including, without limitation,
regulations, laws or acts of any government, delays by exporting
agency, destruction of production facilities or material by fire, or
failure of public utilities or common carriers or embargo.
10.4 This Agreement, its appendices and the Development and License
Agreement embody the entire understanding and agreement among the
parties and supersede all previous negotiations, representations,
writings and agreements, written or oral, with respect to the
development and sale of the Instrument. This Agreement shall in no
way preclude SI or BMC (or any of their affiliates) from entering into
any agreements in the future which are not specifically limited or
precluded hereunder.
10.5 All notices, demands and communications provided for in this Agreement
shall be in writing and shall be deemed effective by a party upon hand
delivery or when mailed, postage prepaid, by registered or certified
mail, to the other party or its copy designee at the respective
addresses listed below, unless and until such address is changed by
giving written notice thereof in like manner.
To BMC: Boehringer Mannheim Corporation
9115 Hague Road
Indianapolis, IN 46250
Attn: President, Patient Care Systems Division
To SI: SpectRx, Inc.
6025 A Unity Drive
Norcross, Georgia 30071
Attn: Contracts Administration
10.6 Dispute Resolution. (a) The parties shall attempt in good faith to
resolve any dispute arising out of or relating to this agreement
promptly by negotiations between representatives who have authority to
settle the controversy. Either party may give the other party written
notice of any dispute not resolved in the normal course of business.
Within thirty days after delivery of such notice, representatives of
both parties shall meet at a mutually acceptable time and place, and
thereafter as often as they reasonably deem necessary, to exchange
relevant information and to attempt to resolve the dispute. If the
matter has not been resolved within sixty days of the disputing
party's notice, or if the parties fail to meet within thirty days,
either party may initiate mediation of the controversy or claim as
provided in clause (b) of this Section. All negotiations pursuant to
this clause are confidential and shall be treated as compromise and
settlement negotiations for purposes of the Federal Rules of Evidence
and state rules of evidence. (b) If the dispute has not been resolved
by negotiation, the parties shall endeavor to settle the dispute by
mediation, non-binding arbitration, or other appropriate means for a
period of at least sixty days before resorting to litigation. The
procedures specified in this Section 10.6 must be followed before
either party may seek judicial relief;
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provided, however, that a party may seek a preliminary injunction or
other provisional judicial relief if in its judgment such action is
necessary to avoid irreparable damage or to preserve the status quo.
Despite such action, the parties will continue to participate in good
faith in the procedures specified in this Section 10.6. All
applicable statutes of limitation and defenses based upon the passage
of time shall be tolled while the procedures specified in this Section
10.6 are pending, and the parties shall take such action, if any,
required to effectuate such tolling.
10.7 In the case of conflict between the general terms and conditions of a
BMC issued purchase order, or of an SI acceptance of a BMC purchase
order, and this Agreement the terms and conditions of this Agreement
shall take precedence unless otherwise agreed in writing by the
parties.
10.8 SI shall make its records and facilities involved in the performance
of this Agreement available to BMC personnel at reasonable and
mutually convenient times during normal business hours for audit
purposes and shall take any reasonable actions required by BMC to
facilitate such audit.
10.9 SI shall not utilize the exterior design (including the mechanical
design and the industrial design) of the Instrument for any other
purpose (device, application, etc.) without the prior written consent
of BMC. BMC shall pay all costs of the mechanical design and
industrial design, and fifty (50) percent of the nonrecurring tooling
charges up to a maximum of $25,000, actually incurred by SI for the
exterior of the Instrument. BMC acknowledges that SI is under no
restriction for the use of the design of the interior of the
Instrument in any area outside of that licensed exclusively to BMC.
10.10 No modification, amendment, extension or waiver of this Agreement or
any provision hereof shall be binding or effective unless in writing
and signed by duly authorized representative of each of the parties.
10.11 SI agrees that, during the term of the Agreement, it will not enter
into any agreement to develop or manufacture a non-invasive diabetes
detection instrument using the same or similar technology as employed
in the Instrument other than with BMC Affiliate(s).
Further, SI represents and warrants that it is under no obligation,
nor will it assume any obligation, which would in any way interfere
with or be inconsistent with or present a conflict or interest with
the services to be furnished by SI under this Agreement.
10.12 This Agreement shall be construed according to the laws of the State
of Georgia. Venue for any litigation under this Agreement shall be
state court, Gwinnett County, Georgia.
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13
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized representatives.
BOEHRINGER MANNHEIM CORPORATION SPECTRX, INC.
/s/ Kent M. Kost /s/ Mark A. Samuels
- ------------------------------- ------------------------------
Name Kent M. Kost Name Mark A. Samuels
-------------------------- -------------------------
Title Head, Supply Services Title President & CEO
-------------------------- -------------------------
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14
APPENDIX A
1) System Specification Document, Magnum Diabetes Screening Instrument,
Project 227, dated October 18, 1995 (or as revised from time to time
and mutually agreed to by the parties).
15
APPENDIX B
1) Manufacturing Partner Notification/Approval Process dated August 16,
1994.
16
APPENDIX C
Pricing:
In accordance with the provisions of Section 3.0 of this Agreement, the parties
agree that the unit price for the Instrument shall be fixed for twelve [12]
month periods and shall be calculated using the below indicated tabulation
(linear relationship).
Cost of Goods Sold Gross Margin Unit Price
[*] [*] [*]
[*] [*] [*]
[*] [*] [*]
[*] [*] [*]
[*] [*] [*]
[*] [*] [*]
If the Cost of Goods Sold exceeds [*], then SI and BMC will renegotiate the
Gross Margins.
Price for the Instrument shall not exceed [*]
**estimated until the final specifications and manufacturing process/costs are
defined.
Approximately three (3) months prior to the end of the initial (or current)
twelve month period, the parties shall review the Cost of Goods Sold components
(material, labor, and overhead). Upon review the parties shall explore the
impact of the following on the components: learning curve, economies of scale,
labor optimization, material savings and/or increases, alternate sourcing,
inventory financing adjustment recoup, etc., and negotiate the Cost of Goods
Sold amount for the next twelve month period. The above tabulation, adjusted
to reflect inflation in accordance with the following paragraph, will then be
used to calculate the unit price.
The Cost of Goods Sold figures provided for in the above tabulation, and in
turn the corresponding Unit Prices, are subject to adjustment at the end of
each twelve month period (referred to above) for changes in the Producers Price
Index. The Cost of Goods Sold figures in the above tabulation shall be
increased or decreased on the date of each adjustment by an amount equal to the
product obtained by multiplying the Cost of Good Sold figures from the
tabulation by the percentage increase or decrease, if any, in the then
Producers Price Index applicable at the commencement of such twelve month
period. "Producers Price Index" with respect to a particular date means the
most recently published Producers Price Index, by the United States Department
of Labor, Bureau of Labor Statistics. Should publication of such index cease,
such term shall mean such alternate index as the parties shall reasonably
determine most closely approximates said Producers Price Index. As noted
above, if the Cost of Good Sold exceeds [*] (regardless of changes in the
Producers Price Index) then SI and BMC will renegotiate the Gross Margins.
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
17
FOR EXAMPLE PURPOSES ONLY
If the Cost of Good Sold figure agreed to by the parties during Period A
(twelve month period) is [*], the parties will set the Unit Price for the next
twelve month period (Period B) as follows:
1) The parties will negotiate the Cost of Good Sold figure for the next
twelve month period (see second paragraph of this Appendix). For
purposes of this example assume the parties agree on a Cost of Good
Sold figure of [*].
2) The tabulation for Period A shall be adjusted to reflect changes in
the Producer Price Index. For purposes of this example assume the
index rose one percent. The tabulation for Period B would be as
follows:
Cost of Goods Sold Gross Margin Unit Price
-----------------------------------------------------------------------
[*] [*] [*]
[*] [*] [*]
[*] [*] [*]
[*] [*] [*]
[*] [*] [*]
[*] [*] [*]
3) The Cost of Good Sold figure from #1 is applied to the table to
determine the Unit Price for the next twelve months. Based on this
example [*] the Gross margin would be [*] and the Unit Price would be
[*].
[*] Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
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18
APPENDIX D
1) Instrument Loaner Program/Customer Service Procedure dated 11/01/95