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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
November 3, 1998
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CHROMATICS COLOR SCIENCES INTERNATIONAL, INC.
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(Exact name of registrant as specified in its charter)
New York
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(State or other jurisdiction of incorporation)
0-21168 13-3253392
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(Commission File Number) (IRS Employer Identification Number)
5 East 80th Street, New York, New York 10021
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (212) 717-6544
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Page 1 of 46 pages
Exhibit Index located on page 4
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ITEM 5. OTHER EVENTS
1. On November 3, 1998, Chromatics Color Sciences International, Inc. (the
"Company") executed a renewable four-year medical device manufacturing
agreement under which the contract manufacturer is the exclusive
manufacturer/assembler and packager of two models of the Company's instrument
for noninvasive monitoring of bilirubin infant jaundice for distribution in
the United States (subject to limited volume exceptions with respect to one
model of the instrument). The manufacturer also has a right of first refusal
to match third-party bids to manufacture/assemble and package a third model of
such instrument and a further right of first refusal to match third-party bids
to manufacture/assemble and package the two models referenced above for
distribution outside the United States. In this regard, subject to any failure
of the manufacturer to exercise its right of first refusal to match
third-party bids (thus permitting the Company to use other manufacturers), the
manufacturer is the Company's sole source of supply for the instruments. Under
the agreement, the Company is responsible for providing to the manufacturer,
for assembly and packaging, certain component parts.
The manufacturer is a medical device production contractor and has
advised the Company that it is in compliance with all applicable regulatory
requirements for the contract manufacture of medical devices for U.S. and
European Union distribution, including requirements under the U.S. Food and
Drug Administration's Quality System Regulation, and the requirements
applicable to the manufacture of medical devices for the European Union
(including ISO 9001 and EN46001).
Pursuant to Item 601(b)(10) of Regulation S-K promulgated under the
Securities Act of 1933, the Company is filing the agreement as Exhibit 10.1 to
this report.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits:
+10.1 Manufacturing Agreement entered into by the Company dated as of
November 3, 1998.
99.1 Chromatics Color Sciences International, Inc. Press Release, dated
November 3, 1998.
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+ Confidential treatment has been requested with respect to certain
portions of this exhibit, which have been omitted therefrom and have
been separately filed with the Commission.
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
CHROMATICS COLOR SCIENCES
INTERNATIONAL, INC.
By: /s/ Darby S. Macfarlane
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Name: Darby S. Macfarlane
Title: Chief Executive Officer
Date: November 10, 1998
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EXHIBIT INDEX
Document Page No.
+10.1 Manufacturing Agreement entered into by the
Company dated as of November 3, 1998. 5
99.1 Chromatics Color Sciences International, Inc. Press Release,
dated November 3, 1998. 45
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+ Confidential treatment has been requested with respect to certain
portions of this exhibit, which have been omitted therefrom and have
been separately filed with the Commission.
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Exhibit 10.1
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR
THE INFORMATION REPRESENTED BY AN ASTERISK [*]
HEREIN. THE OMITTED INFORMATION HAS BEEN
SEPARATELY FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION.
CCSI/[*]
Manufacturing Agreement
for Noninvasive Bilirubin Monitoring Devices
Introduction:
THIS MANUFACTURING AGREEMENT and all schedules contained herein or attached
hereto (collectively, the Agreement) is effective this 3rd day of November,
1998 (the "Effective Date") between [*] (hereinafter called "[*]"), and
Chromatics Color Sciences International, Inc., a New York corporation with
headquarters located at 5 East 80th Street, New York, New York (hereinafter
called "CCSI" and together with [*], referred to as the "parties").
Term:
Unless terminated earlier as provided in Section 13 hereof, this Agreement
shall have an initial term (the "Initial Term") which will run from the
Effective Date until four (4) years after the date when [*] has received a
purchase order for production units and the documentation to build the units
has been released for production by CCSI ("Commencement of Production").
Subject to the termination provisions of Section 13 hereof, the Initial Term
shall be automatically renewed, without further notice or action by either
party, for additional and successive terms of one (1) year (the "Renewal
Term(s)") unless either party gives written notice to the other of its
intention not to renew not less than 180 days prior to the end of the Initial
Term or any Renewal Term(s).
Roles and Responsibilities:
Product:
The product (the "Product") is an instrument for noninvasive monitoring of
bilirubin infant jaundice as described in Attachment 1. All rights to the
Product are owned by CCSI as further defined in the Confidentiality Agreement
(hereinafter defined).
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Section 1/Product Design
CCSI is responsible for providing to [*] the Product design, performance and
product specifications (the "Product Specifications"). CCSI will be
responsible for obtaining all U.S. Food and Drug Administration ("FDA") and
other agency approvals, as needed, to distribute the Product.
Section 2/Covenants
Covenants and Duties of CCSI
(a) CCSI hereby agrees to purchase from [*] (i) subject to Section 13
hereof, all of its final assembly and production requirements (other
than the CCSI Equipment (hereinafter defined)) for the distribution in
the United States (the "Exclusive Territory") of the Product
identified in Sections 1 and 2 of Attachment 1; provided, however, [*]
meets mutually agreed upon price, delivery and quality standards and
is otherwise in compliance with this Agreement, and (ii) on a
non-exclusive basis, such amounts of the Product identified in
Sections 1 and 2 of Attachment 1 as CCSI shall order for distribution
outside the Exclusive Territory, provided that [*] will be given the
opportunity to bid for, and a right of first refusal with respect to,
orders for distribution outside the Exclusive Territory, if [*] can
effect such production on equivalent economic terms to third-party
bids offered to CCSI but taking into account VAT, import/export
duties, etc.
(b) Notwithstanding the foregoing, within the Exclusive Territory, after the
first anniversary of the Effective Date of this Agreement, in the
event CCSI should provide [*] with an annual forecast for the Product
identified in Section 2 of Attachment 1 for quantities less than [*],
the parties agree that CCSI may place an order with a U.S. based third
party manufacturer, that is FDA registered and ISO 9000 certified for
orders less than [*] for Product identified in Section 2 of Attachment
1, provided that [*] will be given the opportunity to bid for and a
right of first refusal with respect to, such orders if [*] can effect
such production on equivalent delivery and economic terms to third
party bids offered to CCSI. If [*] declines the right of first
refusal, it will cooperate with CCSI to transition the manufacture of
the Product identified in Section 2 of Attachment 1 to the alternative
manufacturers over a period not to exceed six months and will take
reasonable best efforts to ensure an uninterrupted supply of Products
to meet CCSI's needs during the transition period. If at any time
during the Initial Term or any Renewal Term(s) CCSI's annual forecast
for the Product identified in Section 2 of Attachment 1 is for
quantities of [*] or more, then the terms of Section 2(a) above apply
to [*]'s right to manufacture such Products.
(c) CCSI hereby agrees that [*] may recondition the Products identified in
Section 3 of Attachment 1, and in this regard [*] will be given the
opportunity to bid for, and a right of first refusal with respect to,
effecting such reconditioning of such Products identified in said
Section 3, if [*] can effect such reconditioning on equivalent
delivery and economic terms to third-party bids offered to CCSI taking
into account VAT, import/export duties, etc. For purposes of this
subsection and
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subsection (d) below, "recondition" means bringing Products into
conformance with the Product Specifications consistent with the
Product Regulatory Specifications.
(d) If at any time during the Initial Term or any Renewal Term(s), CCSI
shall receive an offer from a third party for the (i)
assembly/production of the Products for distribution outside the
Exclusive Territory or (ii) reconditioning of the Products identified
in Section 3 of Attachment 1, or (iii) assembly/production of the
Product identified in Section 2 of Attachment 1, subject to the terms
of subsection 2(a) and (b), which offer CCSI shall desire to accept,
CCSI shall promptly deliver to [*] the terms of the third-party offer,
and [*] may, within fifteen (15) days thereafter, notify CCSI of its
election with respect to subsection (i), (ii) or (iii), as the case
may be, on the same economic and delivery terms to CCSI as those set
forth in such offer taking into account VAT, import/export duties,
etc., where applicable. If [*] so elects, the parties shall execute a
contract within fifteen (15) days after such election by [*] on the
third-party economic and delivery terms set forth above with such
further modifications to make such terms economically equivalent to
CCSI taking into account VAT, import/export duties, etc., where
applicable. The parties agree that other than with respect to such
third party economic and/or delivery terms, the terms of this
Agreement shall govern with respect to subsection (i), (ii), or (iii),
as the case may be. In the event that [*] elects to decline the offer
as set forth above, then [*] thereafter waives the right of first
refusal for that particular assembly/production or reconditioning, as
the case may be, and CCSI will use a third-party manufacturer.
(e) CCSI shall, at its own expense, supply all test materials required to
meet [*]'s quality control standards, when reasonably requested by
[*].
(f) CCSI shall render prompt technical support to [*] on a continuing basis
when reasonably requested by [*].
(g) CCSI agrees to provide to [*] on a timely basis, the design and Product
Specifications of the Product, as well as all engineering change
notices with respect to the Product.
Covenants and Duties of [*]
(h) [*] shall manufacture and sell to CCSI all Products which CCSI shall
order by delivery of purchase orders to [*] in the form attached
hereto as Attachment 2. Subject to the next paragraph, if any term or
condition of this Agreement conflicts with any term or condition of an
issued purchase order, this Agreement shall take precedence.
(i) [*] agrees to accept a firm order placed by CCSI which meets the terms
of this Agreement or an agreed upon purchase order, as the case may
be. In the event [*] is unable to meet the terms of the CCSI purchase
order, it shall notify CCSI within five (5) business days with
proposed order modifications. If CCSI does not
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expressly agree in writing to such proposed terms, the terms of this
Agreement shall govern unless such terms and conditions contained in
any purchase order are agreed upon in writing by the parties by
initialing the specific term contained in such purchase order.
(j) To shorten lead-times, [*] will inventory long lead-time items and
materials at CCSI's expense if so requested by CCSI in writing.
(k) [*] understands and agrees that it is providing manufacturing services
hereunder as a customer-transparent contractor of CCSI under CCSI's
name. [*]'s name shall not appear on the Products or any
documentation, except that [*]'s name may appear on serial number
labels, so long as such labels are not visible to CCSI's customers,
and in documents relating to obtaining regulatory approval of the
Product if agreed upon in writing by the parties. Nothing in this
Agreement shall be deemed to grant [*] any right to use CCSI's name
for any purpose other than as expressly provided herein.
(l) [*] shall at all times use commercially reasonable efforts, skill, and
experience to manufacture all Products in strict conformity with all
applicable Product Specifications and all applicable laws, regulatory
requirements and standards, federal, state and local, including, but
not limited to, the Quality System Regulation ("QSR"), 21 C.F.R. Part
820, and all standards, laws, regulations and directives applied to
the manufacture of medical devices in the European Union ("EU")
(including, but not limited to, ISO 9000 Series standards and EN46001)
(the "Product Regulatory Specifications"). [*] shall not make any
change in or deviate in any way from the Product Specifications and
Product Regulatory Specifications except pursuant to an Engineering
Change Order (as hereinafter defined) approved as provided in Section
8 of this Agreement.
(m) [*].
(n) [*] shall manufacture the Products in its plant in [*], unless CCSI
authorizes [*] in writing to manufacture the Products in another plant
location.
(o) Products shall be packaged and labeled in accordance with CCSI's
requirements and specifications, including such requirements and
specifications listed in the Product Specifications.
(p) [*] shall report to CCSI, as soon as possible, all delays related
to the manufacture and/or shipping of the Products to CCSI. CCSI shall
have the right to cancel (without penalty) any order for any untimely
shipped Product in accordance with Section 5 hereof.
(q) [*] represents and warrants to CCSI that: (1) [*] has the right to enter
into this Agreement and the Confidentiality Agreement; (2) all
necessary actions, corporate and otherwise, have been taken to
authorize [*]'s execution and delivery of this Agreement and the
Confidentiality Agreement and the same are the valid and binding
obligation of [*]; (3) all licenses, consents and approvals necessary
for [*]
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to carry out all of the transactions contemplated in this Agreement
and the Confidentiality Agreement have been obtained by [*] including,
but not limited to, registering with the FDA as a device contract
manufacturer; (4) [*] has the experience and technical and physical
capacity to fulfill its obligations under this Agreement; (5) [*] has
and shall pass to CCSI good title to the Products free and clear of
all liens and encumbrances; and (6) no claim or action is pending or
threatened against [*] or, to [*]'s knowledge, against any supplier of
[*] that could adversely affect the ability of [*] to produce the
Products or the right of CCSI or any customer of CCSI to use the
Products for their intended use.
(r) [*] represents that it has and covenants that it will at all times
maintain the available manufacturing capacity to meet CCSI's
production requirements relating to the Products as set forth in the
Rolling Forecast (hereinafter defined) to the extent of 125% of the
volume requirements for the period covered by such Rolling Forecast,
including without limitation, volume production as set forth in the
Pricing Schedules attached as Attachment 3. Notwithstanding the
foregoing, in the event [*] is unable to meet CCSI's volume
requirements (other than due to unavailability of parts that are long
lead time items), or does not accept firm orders as provided in
Section 2(i) hereof, in each case, on three (3) separate occasions in
any eighteen (18) month period (provided that only one of such events
shall count toward such total of three (3) in any three (3) month
period, CCSI may, in its sole discretion, elect to terminate [*]'s
exclusive right to manufacture the Product for the Exclusive
Territory, and accordingly engage other suppliers to be the
non-exclusive supplier of the Product in the Exclusive Territory.
Section 3/Distribution/Warehousing
(a) The Products shall be sold by [*] to CCSI at the prices indicated in
Attachment 3, FOB, [*]. The cost of freight and insurance shall be
paid by CCSI. [*] shall ship the Products via mutually agreed carriers
to CCSI or to CCSI's customers as directed by CCSI. CCSI shall insure
CCSI Equipment (hereinafter defined) and upon passage of title thereto
to CCSI, CCSI Capital Equipment (hereinafter defined), at its expense.
[*] shall insure any such CCSI Capital Equipment purchased by [*] on
behalf of CCSI for the period prior to such passage of title to CCSI
(naming CCSI as loss payee), and [*] shall insure at its expense any
[*] Materials (defined below). [*] shall segregate the Products, CCSI
Equipment, as well as any other CCSI equipment, including CCSI Capital
Equipment, from its own and/or other customers' products, parts or
equipment and shall keep such CCSI Equipment, CCSI Capital Equipment
and the Products at all times free and clear of all encumbrances and
liens attributable to any act or omission or insolvency of [*]. [*]
shall be responsible at its sole cost and expense to ensure that its
facilities contain adequate security to protect the Products, CCSI
Equipment and CCSI Capital Equipment, from damage and/or theft.
(b) CCSI shall be responsible for payment of all export and import duties,
local sales taxes and similar charges with respect to the Products,
subject to the provisions of
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Section 2(a) and (d) with respect to [*]'s right of first refusal for
orders for Products distributed outside the Exclusive Territory.
(c) Title, ownership and risk of loss to the Products shall pass to CCSI
upon shipment of the Products from [*]'s facility in [*] or on receipt
of a written request from CCSI to hold completed and invoiced goods at
[*] for future shipment. [*] shall provide commercially reasonable
storage methods for such completed and invoiced goods.
Section 4/Production Engineering Costs
(a) Prior to Commencement of Production, [*] will complete all tasks related
to implementing production such as building the product structure,
developing documents and drawings related to the Device Master Record
("DMR"), creating assembly procedures and testing approaches,
designing and fabricating test fixtures and assembly jigs, generating
the documentation package from a 3D data base, and complying with all
other Product Regulatory Specifications including FDA and EU
requirements for the production of medical devices for which [*] is
responsible. [*] will provide CCSI with a quote for completing these
items (set forth in Attachment 3) and will not proceed without prior
CCSI written approval.
(b) Following Commencement of Production, [*] will provide all manufacturing
engineering, drafting and documentation required to manufacture the
Product and to conform to applicable Product Regulatory Specifications
including FDA and EU laws and standards including ISO 9000
Regulations. [*] shall maintain its documentation in compliance with
CCSI's requirements and the Product Regulatory Specifications'
requirements.
(c) The [*] price to CCSI indicated in Attachment 3 includes the costs of
all manufacturing engineering necessary to implement production
subsequent to Commencement of Production and, except as noted in
Section 3, all packaging and handling charges.
(d) CCSI will reimburse [*] for all capital equipment/tooling costs
purchased by [*] on behalf of CCSI needed to implement production
(e.g., molds, computers, automatic test equipment) or at CCSI's
discretion CCSI will provide the capital equipment/tooling to [*];
provided, however, [*] obtains CCSI's written approval prior to
purchasing such capital equipment/tooling (collectively, "CCSI Capital
Equipment"). CCSI shall be the sole owner of all such CCSI Capital
Equipment, and [*] will ensure that such equipment and tooling
identifies CCSI as the titled owner of such equipment.
(e) CCSI may from time to time supply to [*] parts for production of the
Products by [*] (the "CCSI Equipment") as agreed by the parties from
time to time. CCSI Equipment shall be supplied by CCSI at its cost and
shipped to [*] for its inspection and production of the Products. CCSI
Equipment will be solely owned by CCSI,
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and [*] shall ensure that the CCSI Equipment is identified by [*] as
being owned by CCSI.
Section 5/Pricing/Volume/Delivery
(a) The Pricing Schedule for different volumes is shown in Attachment 3. [*]
will develop the price based on actual material costs using this
Pricing Schedule and will provide CCSI with a costed copy of the Bill
of Materials and direct labor times and costs used to calculate price
if so requested by CCSI. [*] will sell the Products to CCSI at a price
which depends on forecasted annual volume as set forth in Attachment
3. This price may be adjusted on an annual basis as described below.
(b) Prior to Commencement of Production, CCSI will provide [*] with a twelve
(12) month rolling forecast estimating the number of Products,
according to CCSI's market projections, CCSI anticipates it will
purchase from [*] (the "Rolling Forecast"). CCSI will thereafter
update the Rolling Forecast every three (3) months with respect to the
remaining nine (9) months of such original twelve (12) month period
and for the additional three (3) month period added at the end of the
Rolling Forecast, provided that no change will be made to the portion
of the Rolling Forecast relating to the first ninety (90) days of such
nine- (9) month period. [*] will use this forecast to procure
materials and plan capacity in consultation with CCSI, and with CCSI's
prior consent with respect to any non-cancelable material orders.
(c) CCSI will also provide [*] with a forecast confirmation ninety (90)
days in advance of the first day of the month in which a build is to
take place, for availability/delivery to CCSI by the first day of the
following month (the "Delivery Commitment Date"). CCSI agrees to
accept all Products based on the firm orders accepted per Section 2(i)
hereof and orders within the 90-day window are not subject to change,
provided such Products comply with the Product Specifications and
Product Regulatory Specifications and were manufactured in compliance
with the quality provisions of the Agreement.
(d) [*] will place orders with its suppliers based on these annual
forecasts in order to achieve the best price for CCSI. In the event
that CCSI revises its annual forecasts, cancels orders, or terminates
the Agreement, other than for a reason set forth in Section 13(a)
hereof, then subject to [*]'s reasonable efforts to first utilize same
in manufacturing performed for its other customers, including any
generic parts, CCSI will purchase all inventory of parts,
work-in-process, or any excess inventory reasonably based on annual
forecasts at [*]'s fully loaded costs and will pay all reasonable
charges actually imposed by [*]'s suppliers resulting from
cancellation of purchase orders based on forecasts. [*] will use its
best efforts to return any unused materials and negotiate reduction or
elimination of cancellation or rescheduling fees. [*] will provide
data to document the basis of price changes if requested by CCSI.
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(e) A cost reduction program will be established which will define the
estimated reduction in cost resulting from changes in production
techniques. Savings as a result of capital investment and engineering
by [*] and CCSI will result in a price reduction equivalent to the
direct costs saved. In the event savings are realized by joint
[*]/CCSI investment, the savings will be negotiated and shared based
on the contribution by either party. Any savings will be passed on to
CCSI through an annual adjustment in price.
(f) At least three (3) months prior to the end of the initial year of
production and each subsequent year, both parties agree to negotiate
in good faith regarding pricing for the following year. Pricing will
be based on a minimum annual order quantity.
(g) Changes in pricing based on changes to the Product are discussed in
Section 8 herein.
(h) [*] shall use commercially reasonable efforts to supply any parts,
components or materials (including CCSI Capital Equipment) not
provided by CCSI that meet the Product Specifications, to make
completed Products available, in amounts necessary to satisfy CCSI's
volume requirements as specified in the purchase order, for the
Delivery Commitment Date (other than the CCSI Capital Equipment, the
"[*] Materials"). CCSI acknowledges that in certain situations where
[*] has determined, based on [*]'s material and manufacturing
analysis, that it may not meet the Delivery Commitment Date solely due
to the unavailability of components, [*] will provide CCSI with a new
committed delivery date for the Product, which in no case will be
longer than 30 days from the original Delivery Commitment Date.
(i) In the event that [*] fails to meet the Delivery Commitment Date or any
new committed delivery date as set forth in subparagraph (h) above
(other than with respect to product changes as set forth in Section 8
hereof), CCSI shall be entitled to procure the Product from any other
available source, and [*]'s exclusive right to manufacture the Product
in the Exclusive Territory shall immediately terminate upon notice
thereof from CCSI.
(j) In the event [*] fails to meet the Delivery Commitment Date or any new
committed delivery date as set forth in subparagraph (h) above (other
than with respect to product changes as set forth in Section 8
hereof), CCSI shall be entitled to give [*] written notice of its
intention to terminate this Agreement forthwith; provided, however,
that upon receipt of such notice, [*] shall have thirty (30) days in
which to remedy its failure to meet the Delivery Commitment Date, and
provided further that if during such thirty (30) day period [*] fails
to remedy such failure, CCSI may immediately terminate this Agreement.
Section 6/Cost of Rework or Scrap
[*] will absorb all costs related to scrap or rework resulting from
manufacturing errors, defects, etc. including, but not limited to, rework due
to non-compliance with the Product
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Specifications and Product Regulatory Specifications. CCSI will be charged all
costs related to rework and scrapping of inventory as a result of design changes
initiated by CCSI or to scrapping Product which is within design specifications
but found to be unacceptable by CCSI.
Section 7/Manufacturing/Engineering
Following Commencement of Production, [*] will provide manufacturing
engineering services which are required (i) to ensure that the Product
conforms with [*]'s quality standards and (ii) to support continuing cost and
reliability improvements. [*] shall manufacture the Product in compliance with
the Product Specifications and the Product Regulatory Specifications, and
provide CCSI with documentation necessary to establish such compliance upon
CCSI's request.
Section 8/Product Changes
(a) [*] shall maintain all documents, drawings, specifications, test
procedures, and other necessary records associated with Product design
manufacturing, labeling, packaging, maintenance, service and repair in
the DMR in compliance with the Product Regulatory Specifications
including the FDA's QSR and the EU's Medical Device Directive and ISO
9001 and EN46001 standards, and shall make these DMR documents
immediately available to CCSI on request. All changes to the DMR
documents will be controlled by [*]'s Engineering Change Order ("ECO")
procedures and CCSI will be on the required approval list. CCSI will
control a master document that will list the names and locations of
all the documents, drawings, specifications, test procedures and other
necessary records that compose the entire DMR (including but not
limited to those related to manufacturing, labeling, packaging,
design, software development, safety and effectiveness, maintenance,
service and repair). CCSI will make the master document, including all
revisions thereto, immediately available to [*].
(b) CCSI and [*] anticipate that during the term of the Agreement,
modifications to the Product design will occur. The parties agree to
review any change to the specifications of the Product (a "Product
Specification Change") and determine if such change directly affects
material or labor costs not contemplated in Attachment 3. If such
change impacts these costs, the price of the Product shall be adjusted
accordingly.
(c) Prior to the implementation of any Product Specification Change both
parties will agree on who is responsible for costs arising out of
failures due to the product change. [*] will make no Product
Specification Change without written authorization by CCSI. All
changes to any [*] Operating Procedures, Drawings, Specifications, and
other necessary documents will be controlled by [*]'s ECO procedures
and CCSI will be on the required approval list.
(d) CCSI may from time to time request [*] to incorporate an engineering
change, (an "Engineering Change") into a Product not contemplated in
Attachments 1 or 3.
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Within seven (7) business days of receipt of such request, [*] will
inform CCSI in writing of the earliest possible implementation date
for the proposed Engineering Change, of any increase or decrease in
the price of the Product as a result of such change, and of any effect
on production scheduling or quality assurance ("QA") test coverage. If
CCSI elects to proceed with the change, [*] will prepare an ECO for
approval. [*] shall be required to accept and implement all reasonable
Engineering Changes to the Products.
(e) In support of its ongoing efforts to improve efficiency and reduce the
costs of manufacturing Products, [*] may from time to time suggest
that an Engineering Change be made to a Product by delivering an
"Engineering Change Proposal" to CCSI. Each Engineering Change
Proposal shall be in writing and shall include a description of the
proposed change, a description of any improvements in the Product or
cost reductions which will result from the change, and the effect of
the change, if any, on production scheduling or QA testing. Each
Engineering Change Proposal shall provide detail sufficient to permit
CCSI to evaluate the desirability of such change. CCSI agrees to
consider each Engineering Change Proposal it receives from [*], but
reserves the right to accept or reject each such Proposal in its sole
discretion.
(f) In the event either CCSI or [*] identifies an Engineering Change that
must be implemented for reasons of safety (a "Safety Change"), the
parties agree to cooperate so as to effect such Safety Change as soon
as possible after discovery. Once such a Safety Change is discovered,
the parties agree that no affected Product shall be manufactured or
shipped until such Safety Change has been implemented and such change
receives any necessary regulatory approvals, notwithstanding any delay
in scheduled ship dates. The parties further agree to cooperate in the
implementation of such Safety Change on the Product shipped prior to
discovery of the hazard. In this regard, [*] agrees to manufacture a
field change kit or to implement factory retrofitting, as appropriate,
with CCSI's obtaining any necessary regulatory approvals. CCSI and [*]
shall mutually agree on a case-by-case basis on appropriate charges
for the implementation of a Safety Change prior to implementation.
(g) CCSI and [*] agree to review Engineering Changes, not contemplated in
Attachments 1 or 3, and/or Safety Changes and determine if such change
directly impacts material or labor costs. If such a change is due to
modification of the design and impacts cost, the price of the Product
will be adjusted pursuant to written mutual agreement of the parties.
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Section 9/Warranty
(A) [*] represents and warrants, for a period of eighteen (18) months from
the date of shipment to CCSI or CCSI's designee or customer (the
"Warranty Period"), that all Products supplied in connection with this
Agreement (i) shall be new and unused; (ii) shall be free from defects
in material and workmanship, (iii) shall conform to the Product
Specifications and Product Regulatory Specifications, including
applicable documentation requirements thereunder; and (iv) shall be
manufactured and provided by [*] in accordance and conformity with FDA
and EU requirements, including ISO 9001/EN46001 and the FDA's QSR, and
in compliance with all applicable federal, state or municipal
statutes, laws, rules and regulations, including those relating to the
environment, medical devices, and occupational health and safety.
Without limiting the foregoing, [*] represents and warrants that it
shall comply with all present and future statutes, laws, ordinances,
regulations, directives and standards relating to the manufacture,
assembly, labeling, packaging, maintenance, service and supply of the
Products being provided hereunder, including, without limitation,
those enforced by the FDA and the EU including compliance with future
additions or revisions to the FDA's QSR, the ISO 9000 Series standards
and EN46001 (the "Warranty"). Subject to Sections 13, 15 and 16 below,
and without limiting CCSI's remedies set forth therein, in the event
that any Product or replacement part does not conform as aforesaid,
CCSI's remedy shall be limited to the repair or replacement (at [*]'s
option) of such nonconforming Product or replacement part within a
reasonable period of time not to exceed thirty (30) days. All costs of
replacement, repair, or exchange (excluding reimbursement of incoming
freight charges) of nonconforming Product or replacement parts during
the Warranty Period shall be borne by [*], as set forth in Section 16
hereof. No repairs by an unauthorized third party for Products or
replacement parts covered by the Warranty shall be made without mutual
consent of [*] and CCSI.
(B) Upon written request from CCSI, [*] agrees to provide CCSI or CCSI's
designee (which may include CCSI's distributors and/or end users of
the Product) with replacement parts as required by CCSI to provide
non-warranty repair services or to repair out of warranty Products
should [*] not provide such services. CCSI shall pay for replacement
parts provided for purposes of effecting any such non-warranty repair
services or out of warranty Products. If [*] is authorized by CCSI to
provide non-warranty repair services including, without limitation, to
correct defects in design specified by CCSI, or to repair out of
warranty Products, CCSI will be charged and billed at a labor rate of
$[*] per hour for engineers and $[*] per hour for technicians, plus
material and [*]'s current and auditable material overhead costs
during the Initial Term of this Agreement with respect to the work
covered by this paragraph.
(c) Subject to Section 15 below, [*] warrants that for a period of time
beginning on the date of delivery to CCSI or CCSI's designee or
customer of any replacement parts provided pursuant to this Section 9
and continuing thereafter until the conclusion of the Warranty Period
with respect to the Product in which such part is included, each such
part shall be covered by the Warranty.
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(d) Upon written request from CCSI, [*] may refurbish Products which have
been shipped to or used by CCSI or its customers (the "Used Products")
as required by CCSI. CCSI agrees to pay for such refurbishment on
terms mutually agreed upon by the parties. Such refurbished Used
Products shall then be considered Product subject to all the terms
hereof, including without limitation Section 9 hereof, except that the
period of Warranty for such refurbished Used Product shall be ninety
(90) days from the date of shipment by [*] to CCSI or CCSI's designee
or its customer, as the case may be.
EXCEPT AS EXPRESSLY STATED IN THIS AGREEMENT, [*] DISCLAIMS ALL
WARRANTIES, WHETHER EXPRESS OR IMPLIED, ORAL OR WRITTEN, WITH RESPECT
TO THE PRODUCTS INCLUDING, WITHOUT LIMITATION, ANY WARRANT OF
MERCHANTABLITY, FITNESS FOR A PARTICULAR PURPOSE, OR
NON-INFRINGEMENT.
NEITHER PARTY SHALL IN ANY EVENT BE LIABLE TO THE OTHER FOR ANY LOSS
OF DATA, PROFITS OR USE OF THE PRODUCTS, OR FOR ANY SPECIAL,
INDIRECT, INCIDENTAL, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES
ARISING OUT OF OR IN CONNECTION WITH THE MANUFACTURE, USE OR
PERFORMANCE OF THE PRODUCT.
(e) All Products shall be subjected to quality control inspection and final
release by [*] in accordance and conformance with [*]'s quality
control standards and system and the FDA's QSR, the ISO 9000 Series
standards and EN46001. [*]'s quality control standards shall be
sufficient to ensure that all Products conform to the Product
Specifications and Product Regulatory Specifications. At CCSI's
request, [*] shall provide a copy of its standards to CCSI and shall
in all respects adhere to such standards, and shall deliver a
"Certificate of Conformance" to CCSI for each Product manufactured by
[*] for CCSI. [*] shall permit CCSI to review periodically [*]'s
production and quality control procedures and records subject to
Section 18.
Section 10/Notice
All notices and demands required or permitted to be given or made pursuant to
this Agreement shall be in writing and shall be effective when personally
given or made or when sent by U.S. registered mail or certified mail, postage
prepaid, return receipt requested, addressed as follows:
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If to CCSI: If to [*]:
Darby S. Macfarlane [*]
Chief Executive Officer
5 East 80th Street
New York, N.Y. 10021
Copies to -
Eric M. Lerner, Esq.
Rosenman & Colin LLP
575 Madison Avenue
New York, New York 10022
or to such other address as to which either party may notify the other.
Section 11/Governing Law
This Agreement shall be governed by, and construed and enforced in accordance
with, the laws of the [*] without regard to its principles of conflict of
laws.
Section 12/Liability Insurance
[*] agrees to carry during the Initial Term and any Renewal Term(s), and with
companies acceptable to CCSI, insurance of the kinds and in the amounts listed
below. [*] acknowledges that such insurance will be an umbrella policy which
will include coverage for all of its customers including CCSI.
(i) Worker's Compensation statutory limits in each state in which
[*] is required to provide Worker's Compensation coverage.
(ii) Comprehensive General Liability, including Contractual Liability,
Products and/or Completed operations Liability, and Personal
Injury / Property damage coverage in a combined single limit of
not less than $[*] aggregate with $[*] per occurrence. In
addition, Umbrella Liability with a combined single limit of
not less than $[*].
(iii) Business Interruption of not less than $[*].
Section 13/Termination
(a) This Agreement may be terminated by CCSI if [*]'s manufacturing quality
does not meet mutually acceptable standards. These manufacturing
quality standards will be specified prior to beginning full production
but as a minimum will include [*]'s continuing ISO 9001 Certification
and compliance, and conformance to the Product Specifications and
other Product Regulatory Specifications, including EN46001 and the
FDA'S QSR.
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(b) This Agreement may be terminated prior to the expiration hereof by
either party, if the other party: (i) files a voluntary petition in
bankruptcy, (ii) is adjudicated a bankrupt, (iii) has a receiver
appointed for its property or affairs (unless such receiver is
removed within sixty (60) days from the date of its appointment),
(iv) has involuntary proceedings instituted against it in bankruptcy
(unless such proceedings are dismissed within sixty(60) days after
the date of such institution), or (v) fails to comply in any material
respect with any provision hereof or fails to fulfill any of its
material obligations hereunder (it being agreed that, without
limitation, all obligations hereunder relating to the payment of
money or the compliance with applicable regulatory requirements is
material), in the manner prescribed, which failure shall not be cured
within fifteen (15) business days (or such shorter period as is
specifically provided herein with respect to a particular failure,
occurrence or default) after delivery of written notice to the
breaching party calling for remedy of such breach. Upon the
expiration of such fifteen (15) days (or such shorter period as is
specifically provided herein with respect to a particular failure,
occurrence or default), if the party has not cured the breach, this
Agreement shall automatically terminate without the necessity of any
further notice. If any provision gives any party the right to
terminate this Agreement upon the occurrence or non-occurrence of any
stipulated event(s), such termination shall be effective upon
delivery of written notice to the other party, subject to the
previous sentence.
(c) Subject to Section 5(d) above, upon any termination of this Agreement
and upon CCSI's request, [*] will sell and transfer to CCSI, free and
clear of all liens and encumbrances, all of [*]'s inventory and
work-in-process of Products relating to the manufacture of the
Product. The purchase price for such inventory and work-in-process
shall be [*]'s cost including manufacturing overhead. [*] shall
complete any work in process as if no termination notice was given at
CCSI's written request, unless the reason for termination by [*]
relates to the non-payment of money by CCSI hereunder.
(d) Notwithstanding the foregoing, upon termination of this Agreement,
for any reason, [*] agrees to return to CCSI all copies of the
Product Specifications, Product Regulatory Specifications and related
materials, CCSI Capital Equipment, CCSI Equipment and any other CCSI
equipment within twenty (20) business days of such termination. If
termination occurs, [*] will provide a data package containing all
information updated as of the date of termination. The material shall
include a full drawing package containing all information updated as
of the date of termination in reproducible form and any revisions or
updates, including but not limited to, GSF Autocad files, fabrication
drawings, approved supplier list, test specifications, tooling
specifications and drawings, manufacturing, assembly, labeling,
packaging, maintenance and service instructions (to the extent such
materials are included in the DMR), quality assurance protocols, test
equipment, specifications and drawings and engineering change notice
history, device master files, and device history records, repair
records and any other records or documents relevant to the design,
manufacture, packaging, labeling and servicing/repair of the Product.
Notwithstanding the foregoing, [*] will not be obligated to provide
CCSI
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with [*]'s proprietary policies and procedures for [*]'s proprietary
manufacturing processes and [*]'s software for [*]'s proprietary
manufacturing processes.
(e) In the case of any termination of this Agreement by either party, it
is expressly agreed that no termination indemnity or payment of any
kind shall be due from one party to the other hereunder for loss of
goodwill or profit expectations or otherwise.
Section 14/Terms of Payment
(a) CCSI shall pay [*] for the full amount of each invoice within thirty
(30) days of the invoice date.
(b) Payment shall not constitute acceptance of non-conforming Products;
such non-conforming Products as referenced in Section 9(a) hereof.
(c) Payment shall be made in United States dollars.
Section 15/Indemnifications
(a) CCSI shall indemnify and hold [*] and its affiliates, officers,
directors, shareholders, employees and agents harmless from and
against any claims, demands, actions and suits ("Claims") made or
brought by third parties for any resulting losses (but not lost
profits or sales), liabilities, damages, expenses and costs,
including, without limitation, reasonable attorneys' fees and costs
where the Claim is based on: (a) a breach of any of the warrants,
representations, and/or obligations provided by CCSI herein; (b) any
Claim including, without limitation, a Claim of bodily injury
(including death) or property damage arising out of, or in connection
with, the use, commercialization, marketing, distribution or sale of
any of the Products, other than any Claim arising out of or in
connection with [*]'s regulatory non-compliance, negligence, reckless
conduct, willful misconduct or other breach of obligations hereunder
or (c) any act or omission, whether negligent or otherwise, of CCSI
or its employees or agents, including, but not limited to, Claims of
product liability, other than any Claim arising out of or in
connection with [*]'s regulatory non-compliance, negligence, reckless
conduct, willful misconduct or other breach of obligations hereunder.
[*] shall give CCSI prompt written notice of the assertion of any
such Claim, provided, further, that CCSI shall have the right to
select counsel and control the defense and/or settlement of any such
Claim, subject to the right of [*] to participate in any such action
or proceeding at its own expense with counsel of its own choice and
provided that such settlement provides [*] with a general release and
does not provide for equitable relief against [*]. If CCSI shall fail
to diligently defend any such Claim, [*] shall be entitled to do so
at CCSI's expense with attorneys of its choosing. In such event, [*]
shall not settle or compromise any such Claim without the prior
written consent of CCSI, which consent will not be unreasonably
withheld. Notwithstanding the foregoing, the foregoing indemnity
shall not apply to the extent that any such Losses are due to (1) the
failure of a Product manufactured by [*] meet the Warranty provided
in Section 9 above or (2) [*]'s or its affiliates',
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directors', officers' employees' and agents' regulatory
non-compliance, negligence, reckless conduct, willful misconduct or
other breach of obligations hereunder.
(b) [*] shall indemnify and hold CCSI, each of its customers and each of
CCSI's and its customers respective affiliates, officers, directors,
shareholders, employees and agents harmless from and against any
Claims made or brought by third parties for any resulting losses (but
not lost profits or sales), liabilities, damages, expenses and costs,
including, without limitation, reasonable attorneys' fees and costs
where the Claim is based on: (a) a breach of any of the warrants,
representations, and/or obligations provided by [*] herein; (b) any
Claim including, without limitation, of bodily injury (including
death) or property damage arising out of, or in connection with, the
manufacture of any of the Products (other than as a result of design
defects attributable to CCSI), whether claimed by reason or breach of
warranty, negligence, product defect or otherwise, and regardless of
the form in which any such Claim is made, other than any Claim
arising out of or in connection with CCSI's regulatory
non-compliance, negligence, reckless conduct or willful misconduct or
(c) any act or omission, whether negligent or otherwise, of [*] or
its employees or agents, including, but not limited to, Claims of
product liability other than any Claim arising out of or in
connection with CCSI's regulatory non-compliance, negligence,
reckless conduct or willful misconduct. CCSI shall give [*] prompt
written notice of the assertion of any such Claim, provided, further,
that [*] shall have the right to select counsel and control the
defense and/or settlement of any such Claim, subject to the right of
CCSI to participate in any such action or proceeding at its own
expense with counsel of its own choice and provided that such
settlement provides CCSI with a general release and does not provide
for equitable relief against CCSI. If [*] shall fail to diligently
defend any such Claim, CCSI shall be entitled to do so at [*]'s
expense with attorneys of its choosing. In such event, CCSI shall not
settle or compromise any such Claim without the prior written consent
of [*], which consent will not be unreasonably withheld.
(c) CCSI shall indemnify and hold [*] and its affiliates, officers,
directors, shareholders, employees and agents harmless from and
against any Claim made or brought by a third party for any resulting
losses (but not lost profits or sales), liabilities, damages,
expenses and costs, including, without limitation, reasonable
attorneys' fees and costs where the Claim is that the manufacture,
use, or sale of a Product infringes any intellectual property right
claimed by such third party and relating (1) to CCSI's technology
(technology, know how etc. developed solely by CCSI) or (2) to the
use of CCSI's technology or (3) any technology other than [*]'s
technology. Indemnification shall proceed as provided under Section
15 (f).
(d) [*] shall indemnify and hold CCSI and its affiliates, officers,
directors, shareholders, employees and agents harmless from and
against any Claim made or brought by a third party for any resulting
losses (but not lost profits or sales), liabilities, damages,
expenses and costs, including, without limitation, reasonable
attorneys' fees and costs where the Claim is that the manufacture of
a Product infringes any intellectual property right claimed by such
third party and relating to (1) [*]'s technology (technology, know
how, etc. developed solely by [*]) or (2)
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the use of [*]'s technology. Indemnification shall proceed as
provided under Section 15(f).
(e) In the event that a claim is based partially on an indemnified Claim
described in Sections 15(a), (b), (c) or (d) above and partially on a
non-indemnified Claim, or is based partially on a Claim indemnified
by CCSI pursuant to Sections 15(a) or (c) above and partially on a
Claim indemnified by [*] pursuant to Sections 15(b) or (d) above, any
payments, expenses and costs, including, without limitation,
reasonable attorneys' fees incurred in connection the Claims, are to
be apportioned between the parties in accordance with the degree of
cause attributable to each party.
(f) In the event that either party becomes aware of the possible
infringement or other misuse by a third party of intellectual
property rights of CCSI or [*] incorporated into or used in the
marketing or sales of the Products, such party will promptly notify
the other party. The owner of the right infringed or misused shall
promptly consult with the other party with respect to taking
appropriate action to terminate the infringement or misuse. For
purposes of clarification, CCSI shall be the owner with respect to
CCSI's technology and [*] shall be the owner with respect to [*]'s
technology.
(g) If either CCSI or [*] becomes aware of an infringement allegation
which might give rise to a right or obligation of indemnification
under Section 15 (c) or Section 15 (d) such party shall promptly
notify the other. The party in the role of indemnitor shall control,
bear the full expense of, and retain all proceeds of, the defense
against or settlement of such allegation, unless [*] and CCSI agree
otherwise. The indemnitee shall cooperate in such action if
reasonably requested by the indemnitor. In no event shall the
indemnitor settle or otherwise terminate any allegation in a manner
which might abrogate any obligations, rights or licenses between CCSI
and [*] granted or which might be granted under this Agreement unless
[*] and CCSI agree otherwise. The indemnitee may, in its own
discretion, be represented in the defense or settlement of any such
allegation by counsel of its own choosing at its sole expense.
Section 16/Product Recall or Corrective Action
(a) In the event that CCSI or [*] recalls or takes any corrective action (a
"Corrective Action" (defined below)) with respect to any of the
Products, sold or distributed by CCSI including, without limitation,
because the Products are believed to violate any provision of
applicable law, [*] shall bear all costs and expenses, including
costs and expenses to CCSI and/or [*], of any Corrective Action
related to matters which are caused by [*]'s breach of the Warranty
or other contractual obligations hereunder including, without
limitation, expenses or obligations to third parties, the cost of
notifying customers, costs associated with the shipment of such
recalled or corrected Products from customers to CCSI or [*] and
direct costs related to handling or correcting the Products and any
other related costs (the "Corrective Action Costs"). Similarly, CCSI
shall bear all costs and expenses of any Corrective
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Action related to the incorporation of CCSI technology into the
Products, unless the Product does not conform under [*]'s Warranty in
which case [*] bears such Corrective Action Costs.
(b) Both parties shall maintain complete and accurate records, for such
periods as may be required by applicable law, of all the Products
sold or distributed by them. The parties will cooperate fully with
each other in effecting any Corrective Action with respect to, the
Products, including communications with any purchasers or users.
(c) For purposes of this section, Corrective Action means a field or other
action relative to any of the Products (voluntarily or as required by
the FDA or another authority) or any field or other action including
mandatory notification, repair, replacement and refund, safety alert,
"cease distribution and notification" and mandatory recall action,
voluntary recall, market withdrawal, stock recovery, and "device
removal or correction," as defined or understood under FDA law or
policy (or those of another authority) and other action necessary to
address a product safety or effectiveness problem and any
"enforcement action" (defined for this purpose as any seizure,
injunction, criminal prosecution, civil penalties and any other legal
or administrative action that the FDA or another authority can bring
against CCSI, its Products and/or its officers/employees).
Section 17/Disclosure of Information
[*] and CCSI have entered into a Confidentiality Agreement (the
"Confidentiality Agreement") which agreement is attached hereto as Exhibit A.
All obligations of confidentiality set forth in the Confidentiality Agreement
shall survive the termination or expiration of this Agreement.
Section 18/Regulatory Matters
A. Obligations
[*] Obligations:
(a) [*] represents that it has appropriately registered its facilities,
where the Products will be made, with FDA, including as a medical
device contract manufacturing site under 21 C.F.R. Part 807, Subpart
B, and shall continue to comply with applicable establishment
registration requirements under 21 C.F.R. Part 807, Subpart B. Upon
request, [*] shall promptly provide to CCSI a copy of its initial and
current annual establishment registration forms.
(b) [*] shall comply with all obligations under the Quality System
Regulation, 21 C.F.R. Part 820.
(c) [*] shall comply in all material respects with responsibilities that
it has under its own quality system and other regulatory standard
operating procedures ("SOP") and will cooperate with any
responsibilities it has under the requirements of CCSI's
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quality system and other SOPs, including but not limited to any
responsibilities enumerated in the complaint handling and medical
device reporting ("MDR") SOPs.
(d) [*] shall comply in all material respects with all regulatory
obligations, necessary for marketing the Products in foreign
countries. As part of fulfilling such obligations, [*] represents
that it has and will retain its ISO 9001 Certification and will
maintain a quality system in compliance with the ISO 9000 Series
standards and EN46001 for the duration of this Agreement.
(e) [*] shall comply in all material respects with all additional
regulatory obligations it has as a manufacturer of its own devices
that could adversely effect its obligations relating to its
compliance with the Product Regulatory Specifications.
(f) [*] shall manufacture all Products to comply with all Product
Specifications and Product Regulatory Specifications and will deliver
a "Certificate of Conformance" to CCSI for each Product manufactured
by [*].
(g) [*] shall deliver to CCSI a written report of corrective actions
implemented to correct the regulatory requirements that CCSI notified
[*] were non compliant based on CCSI's September 1998 audit.
CCSI Obligations:
(h) CCSI shall comply in all material respects with its medical device
establishment registration and medical device listing obligations as a
specification developer under 21 C.F.R. Part 807, Subpart B.
(i) CCSI shall be responsible in all material respects for all regulatory
obligations arising under the premarket notification (510(k))
provisions of 21 C.F.R. Part 807, Subpart E.
(j) CCSI shall be responsible in all material respects for developing and
revising product labeling in accordance with the appropriate medical
device labeling provisions of 21 C.F.R. Part 801 and Section 809.10.
(k) CCSI shall be responsible in all material respects for MDR obligations
under 21 C.F.R. Part 803, with [*]'s assistance if specified in CCSI's
MDR SOP.
(l) CCSI shall be responsible in all material respects for medical device
"removal and correction" obligations under 21 C.F.R. Part 806, except
as otherwise specified in Section 16 of this Agreement.
(m) CCSI shall comply in all material respects with all obligations under
the Quality System Regulation, 21 C.F.R. Part 820.
(n) CCSI shall comply in all material respects with all responsibilities it
has under its own quality system and other regulatory SOPs and will
cooperate with any
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responsibilities it has under the requirements of [*]'s quality
systems and other SOPs.
(o) CCSI shall comply in all material respects with its regulatory
obligations, necessary for marketing its Products in foreign
countries.
B. Inspection Reports: [*] shall advise CCSI in writing immediately upon
[*]'s receiving notice from the FDA or other authority that it
intends to perform an inspection of [*]'s facilities. Additionally,
[*] shall provide CCSI with copies of any Forms FDA-483 or
ISO/EN46001 audit observations, follow-up Warning Letters or
analogous letters, close-out reports, and [*]'s responses e.g.,
responses to Forms FDA-483, ISO/EN460001 observations, Warning
Letters or analogous letters, for the portions of inspections
relating specifically to the manufacture of the Products or any
portion of [*]'s facilities where such Products are manufactured.
C. Inspection Rights:
(a) [*] shall permit CCSI or CCSI's designee, from time-to-time, during
normal business hours and upon reasonable notice, to audit [*]'s
facilities in order to confirm that [*] and/or any of its
subcontractors is complying with the terms and conditions of this
Agreement. If CCSI reasonably determines that [*] or any of [*]'s
subcontractors is not complying with the terms and conditions of this
Agreement, CCSI shall give notice of such breach to [*] in accordance
with Section 10 of this Agreement. Additionally, [*] shall permit
CCSI's distributor, during normal business hours and upon reasonable
notice, to inspect all finished Products prior to the Products being
shipped to CCSI's designated location. If the distributor reasonably
determines that the Product is defective in material or workmanship
or in non-conformance with any applicable Product Specifications or
Product Regulatory Specifications, [*] agrees to correct such defect
at its sole cost and expense and within fifteen (15) days of
distributor's notice/report thereof.
(b) [*] shall be entitled to subcontract aspects or items for the
production of the Product at no additional cost (including, without
limitation, any freight, insurance or other shipment expense relating
to transition of production between or among [*] and/or any
subcontractor) to CCSI however, final assembly shall be done by [*].
Any subcontractor used by [*] who receives CCSI confidential
information in the assembly or manufacture of the Product shall
acknowledge in writing, prior to the commencement of its engagement as
a subcontractor, that the provisions of the Confidentiality Agreement
shall apply, mutatis mutandis, to such subcontractor. Notwithstanding
the foregoing however, [*] shall remain responsible for supervising,
and shall remain liable hereunder for, any such subcontractor's
performance of the subcontracted work in accordance with the terms and
conditions of this Agreement and the schedules attached hereto. Without
limiting the foregoing, [*] represents that any subcontractor shall be
in compliance with any applicable Product Regulatory Specifications,
and [*] shall be responsible for any
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Product Regulatory Specifications relative to its subcontractors
including complying with purchasing controls (21 C.F.R. ss. 820.50
and any analogous ISO/EN provision).
(c) [*] shall permit Underwriters Laboratories, Inc. ("UL"), without prior
notice, to inspect [*]'s and/or any of its subcontractors' facilities
for compliance with requirements related to UL certification
qualification marking.
D. Contacts: Each party shall designate an individual within its
organization to be the primary contact regarding regulatory issues.
Such individual can be changed by giving written notice thereof to
the other party. The initial contact for [*] will be [*] and the
initial contact for CCSI will be Darby S. Macfarlane.
Section 19/Compliance with Law
[*] represents that it is, and will remain, in compliance with the Product
Regulatory Specifications and all other applicable federal, state, and local
statutes, laws, regulations, directives, standards and orders.
Section 20/Miscellaneous
Survival: Notwithstanding any right of a party to investigate the affairs of
the other party, each party shall have the right to rely fully upon the
representations and warranties, covenants and agreements of the other party
contained in this Agreement and the Confidentiality Agreement and to pursue
all rights and remedies in connection therewith. The representations,
warranties and covenants of the parties set forth in Sections 2(i), 2(n), the
second sentence of 7, 13(d), 13(e), 14, 15, 16, 17, 18(B), 18(C)(a), 18(C)(b),
and 20 (Specific Performance) shall survive the termination or expiration of
this Agreement.
Status of Parties: The relationship of the parties under this Agreement shall
be and at all times remain one of independent contractors. Neither party is an
employee, agent or legal representative of the other party or shall have any
authority to assume or create obligations on the other party's behalf.
Binding Effect; Assignment: This Agreement shall be binding upon and inure to
the benefit of the parties and their successors and permitted assigns. Neither
this Agreement nor any rights granted hereby may be assigned by either party
without the other party's prior written consent.
Entire Agreement: This Agreement, the Confidentiality Agreement attached
hereto as Exhibit A and the Confidentiality Agreement dated September 16, 1998
between the parties constitute the entire agreement between [*] and CCSI
relating to the subject matter hereof and shall not be amended, altered, or
changed except by a written agreement signed by the parties hereto.
Waivers: No delay or omission on the part of either party to this Agreement in
requiring performance by the other party hereunder, or in exercising any right
hereunder, shall
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operate as a waiver of any provision hereof or of any right or rights
hereunder, and the waiver or omission or delay in requiring performance or
exercising any right hereunder on one occasion shall not be construed as a bar
to or waiver of such performance or right, or of any right or remedy under
this Agreement, on any future occasion.
Force Majeure: [*] shall not be liable, in any respect, for failure to ship,
for any supplier's failure to ship or for delays in transportation nor CCSI
for failure to receive Products where such failure or delay shall have been
due, wholly or in part, to the elements, acts of God, acts of civil or
military authority, fires, floods, epidemics, quarantine restrictions, war,
riots, accidents to machinery, or any other like or different events beyond
the control of the party whose performance is interfered with. In any such
case, prompt written notice shall be given by the affected party to the other
of the existence of such cause and of readiness to resume performance. It is
understood that neither party shall be required to settle a labor dispute
against its will. Notwithstanding the foregoing, if any such delay continues
for a period in excess of one (1) month, the other party shall have the
immediate right to terminate this Agreement, without liability to either
party. Without limitation of any other provisions hereof, failure to meet the
Y2K standard shall not be considered a Force Majeure hereunder.
With respect to any such period of excused nonperformance, this Agreement
automatically shall become and remain nonexclusive until [*] notifies CCSI
that its ability to perform hereunder has been substantially restored, in
which event the exclusivity provisions of this Agreement automatically shall
revert into full force and effect. CCSI shall have the right to obtain the
manufacture of the Product from an alternative source in the interim on a
job-by-job basis only.
Inventions: The subject matter of inventions is covered in Paragraphs 6 and 7
of the Confidentiality Agreement attached hereto as Exhibit A.
Independent Contractor:
CCSI, its employees and agents, are not and shall not act or purport to act as
employees, agents, or representatives of [*], but they are, and shall act as,
independent contractors, maintaining full responsibility and complete control
over all of their employees and operations. CCSI shall have no authority to
represent or bind [*] in any way.
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<PAGE>
[*], its employees and agents, are not and shall not act or purport to act as
employees, agents, or representatives of CCSI, but they are, and shall act as,
independent contractors, maintaining full responsibility and complete control
over all of their employees and operations. [*] shall have no authority to
represent or bind CCSI in any way. Nothing contained herein shall be deemed to
create a partnership, joint venture, or relationship of principal and agent
between the parties hereto or between [*] and CCSI.
Specific Performance: The parties to this Agreement recognize that any breach
of their respective obligations under this Agreement and the Confidentiality
Agreement could result in irreparable injury to the other party. Each party
shall, therefore, be entitled, without restricting such party from other legal
and equitable remedies, to injunctive and other equitable relief to prevent or
restrain the breach of this Agreement, including, without limitation, the
return and delivery of property immediately upon any termination of this
Agreement as provided herein.
Hiring of Other Party's Employees and Officers:
Each party agrees not to hire any of the other party's employees or officers
assigned to perform services under this Agreement, without the prior and
written agreement of the other party, even if the request for hiring is
initiated by the staff member her/himself.
This mutual non-hiring covenant is valid until the first anniversary of the
termination or expiration of this Agreement, as the case may be.
IN WITNESS WHEREOF, authorized representatives of the parties have executed
this Agreement.
[*] Chromatics Color Sciences
International, Inc.
By: /s/ By: /s/ Darby S. Macfarlane
-----------------------
Name: Name: Darby S. Macfarlane
Title: Chief Executive Officer Title: Chief Operating Officer
Date: November 3, 1998 Date: November 3, 1998
23
<PAGE>
Attachment 1
Section 1
This Product includes a TLc-BiliSensor(TM) which is packaged in a durable,
soft carry case, a TLc-Touch(TM) [*] computer and an [*].
The TLc-BiliSensor(TM) is a non-invasive, light weight
Trans-Light-Cutaneous-Bilirubin Monitor. Using [*] flashes a light on the skin
and performs a color measurement to detect the yellow content of the newborn's
skin.
The TLc-Touch(TM) [*] computer features the TLC-Soft(TM) program on a
TLc-Flash Ram card. This Product is used with [*], which [*]. This model
offers 4 AA batteries for the TLc-Sensor(TM) and 2 AA batteries for the
TLc-Touch(TM) [*] or [*]. This model includes labels and shipping/packaging.
Section 2
This Product is a hand-held light weight [*] version of the
TLc-BiliSensor(TM). It has [*]. This Product is used with [*]. This model
includes labels and shipping/packaging.
Section 3
This Product, the TLc-BriefcaseSystem(TM) includes an electrically powered
TLC-BiliSensor(TM), [*]. The [*] features the TLc-Soft(TM) program on the
TLc-SofTest Diskette(TM), and is used with [*]. This model includes labels and
shipping/packaging.
- ---------------------
[*] are not subject to exclusive manufacturing or Exclusive Territory terms
and conditions of this Agreement. Notwithstanding the above the terms of the
Confidentiality Agreement apply to the [*].
<PAGE>
PURCHASE
Attachment 2 ORDER
[ * ]
SHOW OUR ORDER NUMBER ON ALL INVOICES, PACKAGES SHIPPING PAPERS AND
CORRESPONDENCE
PURCHASE ORDER NO. CHANGE ORDER NO. DATES ISSUED PAGE
S
T H T
O I O
P
FOB SHIP [*]
VIA / / YES [ * ] / / NO
<TABLE>
<CAPTION>
LINE QUANTITY U/M P/N / DWG / REV DESCRIPTION DUE DATE UNIT PRICE AMOUNT
<S> <C> <C> <C> <C> <C> <C> <C>
---------- ------
TOTAL
<CAPTION>
<S> <C> <C> <C>
/ / DRAWINGS ENCLOSED / / CONFIRMING ORDER TO:
---------------------- ----------------------------
AUTHORIZED SIGNATURE
</TABLE>
<PAGE>
Attachment 3
Pricing for Section 1 of Attachment 1
Chromatics Color Sciences Inc
<TABLE>
<CAPTION>
Estimated Estimated
Item No.: Description Mat'l Cost Labor Cost Comments
<S> <C> <C> <C> <C>
1 [*] n/a assumed to be supplied by CCSI
2 [*] n/a assumed to be supplied by CCSI
3 [*] [*] build, test & inspect
3a [*] n/a assumed to be supplied by CCSI
3b [*] $[*] per [*]
3c [*] $[*] per [*], -[*] or almond was priced
3d [*] $[*]
3e [*] $[*]
3f [*] $[*]
3g [*] $[*]
3h [*] $[*]
[*] [*] build or assemble, kit, test & inspect
[*] Unknown
5 [*]
5a [*] $[*] [*]
5b [*] [*] Program, verify, label & inspect
5c [*] $[*]
6 [*] n/a
7 [*] n/a Assumed to be supplied by CCSI
8 [*] $[*] [*] Assembly & inspect, there will be a one time charge of
$[*] to [*] for tooling to produce the [*]
9 [*] $[*]
Total: $[*] [*]
<CAPTION>
Material Material O/H Labor Lab O/H Total Margin Transfer Price
<S> <C> <C> <C> <C> <C> <C>
$[*] $[*] $[*] $[*] $[*] $[*] $[*]
</TABLE>
Other Items:
1 The cost to transact an order, including both order entry and shipping
will be a $[*] flat rate.
2 Current FedEx shipping costs, for [*], for all of the US is $[*] overnight,
$[*] next day and $[*] 2nd day.
3 [*] requires [*] days from receipt of order for the 1st delivery.
4 Incoming inspection costs for CCSI supplied materials will be charged at
$[*] per hour, we estimate that the time will be [*] to [*] hours per line
item per lot.
Extended Warranty Cost: The cost of extending the warranty to [*] from [*]'s
[*] warranty period will be [*]% of [*]'s selling/transfer price of each
Product to CCSI.
<PAGE>
Attachment 3
Pricing for Section 2 of Attachment 1
Pricing Method
[*] will use the following method to price [*] Units to CCSI
Calculation of standard cost
- ----------------------------
Actual Material Cost
Plus
Material overhead rate - Currently [*]%
Plus
Labor cost (hours x $[*] (current rate))
Plus
Labor overhead rate - Currently [*]%
Equals
Total Standard Cost
Note for year one only, [*] will bid on smaller quantities and will use a
margin of [*]%
Price depends on volume:
- ------------------------------------------
Units per year Margin
- ------------------------------------------
[*] No bid
[*] [*]%
[*] [*]%
[*] [*]%
Example Example Example
Cost ($) Cost ($)
----------------------------------------------------------------------
Material Cost (key item) [*] [*]
[*]% material overhead* [*] [*]
Labor cost ([*] hours @ $[*]/hr) [*] [*]
[*]% labor overhead* [*] [*]
Standard Cost $[*] $[*]
----------------------------------------------------------------------
Based on our current forecast, we expect our [*] to be [*] next year. These
numbers reflect our current forecast.
Year 2 Forward Price if Standard Price if Standard
Units per year Margin Cost is $[*] Cost is $[*]
- ------------------------------------------------------------------------------
[*] no bid no bid ([*]) no bid ([*])
[*] [*]% [*] [*]
[*] [*]% [*] [*]
[*] [*]% [*] [*]
- ------------------------------------------------------------------------------
Note: Example assumes constant materials cost. [*].
Extended Warranty Cost:
The cost of extending the warranty to [*] from [*]'s [*] warranty period will
be [*]% of [*]'s selling/transfer price of each Product to CCSI.
<PAGE>
Exhibit A
CONFIDENTIALITY AGREEMENT
This Agreement made this 3rd day of November, 1998 is
between Chromatics Color Sciences International, Inc., a New York corporation
("CCSI") and [*] ("[*]").
WHEREAS, CCSI has developed and owns a commercial model
device for the measurement of color (e.g., the measurement of skin color
indicative of bilirubin infant jaundice) and [*] for the measurement of color
and technical, financial and business information relating thereto, all of a
confidential, proprietary and secret nature, those devices, technical,
financial and business information being hereinafter referred to as
"Confidential Information."
WHEREAS, CCSI desires to disclose certain portions of the
Confidential Information to [*] for the purpose of enabling [*] to manufacture
the commercial model device for CCSI and to develop and design for CCSI [*]
based on [*] and other Confidential Information under the terms and conditions
set forth below.
WHEREAS, the parties recognize that [*] in the course of
manufacturing the commercial model device for CCSI and developing and
designing for CCSI [*] may develop further confidential information,
(including improvements to CCSI's proprietary information set forth in Exhibit
C but excluding [*]'s policies and procedures for [*]'s proprietary
<PAGE>
manufacturing processes and [*]'s software for [*]'s proprietary manufacturing
processes, in [*]'s possession prior to the date of this Agreement or
developed by [*] after the date of this Agreement which is not an improvement
on CCSI's proprietary information set forth in Exhibit C), hereinafter
referred to as "Derivative Confidential Information."
WHEREAS, [*] acknowledges the need to preserve the
confidential nature of the Confidential Information and the Derivative
Confidential Information.
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements contained herein, the parties hereto agree as
follows:
1. CCSI shall disclose Confidential Information to [*] in
confidence for the purpose of enabling [*] to manufacture for CCSI the
commercial model device for the measurement of color and to develop and design
for CCSI [*] for the measurement of color. Confidential Information as well as
Derivative Confidential Information may be in tangible or intangible form,
including but not limited to: oral disclosures, written disclosures, ideas,
know-how, drawings, graphs, plans, specifications, models, prototypes,
samples, equipment, data, formulas, processes, designs, hardware and software
and marketing, costs and supplier information. All written Confidential
Information disclosed to [*] by CCSI shall bear the notice "Confidential
Information."
2. Unless excluded by paragraph 5, [*] shall be under an
obligation to maintain in confidence the Confidential Information disclosed by
CCSI to [*] pursuant to this Agreement and the Derivative Confidential
Information developed by [*], as well as the identity of CCSI, its suppliers
and customers, and shall take all precautions
2
<PAGE>
reasonably necessary to prevent any unauthorized disclosure of the
Confidential Information or the Derivative Confidential Information. In the
event [*] finds it necessary to disclose Confidential Information or
Derivative Confidential Information to any of its employees or independent
agent/subcontractor in order to carry out the purpose of this Agreement, [*]
shall first inform the employee or independent agent/subcontractor that the
information is confidential and subject to the obligations of the agreement
[*] has in place with that employee or independent agent/subcontractor (copies
attached as Exhibits A and B).
3. Unless excluded by paragraph 5, [*] shall not use, copy,
duplicate or otherwise replicate any of the Confidential Information disclosed
by CCSI to [*] pursuant to this Agreement or the Derivative Confidential
Information developed by [*], in whole or in part, for any purpose other than
the purpose of this Agreement, without the prior written consent of CCSI, and
upon request shall return all tangible materials provided by CCSI to [*].
4. Nothing contained in this Agreement shall prevent [*]
from making its services available to other companies or other legal entity
who may compete with CCSI, provided that [*] in rendering such services does
not breach paragraphs 2,3,6 or 7 of this Agreement. Should [*] develop,
assemble or manufacture for another company or legal entity any instrument or
system for the measurement of color ("Other Manufacture") [*] shall ensure
that no personnel, documentation, or expertise of [*] or [*]'s subcontractors
used or gained in the performance of work for CCSI (including CCSI's
proprietary information set forth in Exhibit C and improvements thereon but
excluding [*]'s policies and procedures for [*]'s proprietary manufacturing
processes and
3
<PAGE>
[*]'s software for [*]'s proprietary manufacturing processes in [*]'s
possession prior to the date of this Agreement or developed by [*] after the
date of this Agreement which is not an improvement on CCSI's proprietary
information set forth in Exhibit C) will be used in the performance of work on
such Other Manufacture. CCSI acknowledges that [*] may in the future develop,
manufacture and/or sell devices (which are not color measurement systems or
instruments) [*]. CCSI agrees that nothing contained in this Agreement shall
prevent [*] from such development, manufacturing and/or selling activities
provided that [*] does not use CCSI's proprietary technology as defined in
Exhibit C.
5. The obligations of non-use set forth in this Agreement
shall not apply to Confidential Information which (a) was publicly available
at the time of disclosure by CCSI to [*], or became publicly available after
the disclosure by CCSI to [*] through no act or fault of [*], (b) was in [*]'s
possession prior to the time of disclosure by CCSI to [*], otherwise than as a
result of [*]'s breach of any legal obligation, as proven by [*]'s written
records made prior to the time of disclosure by CCSI to [*], or (c) becomes
known to [*] through disclosure by a third party who had possession of that
information prior to the time of disclosure by that third party to [*], as
proven by that third party's written records made prior to the time of
disclosure by that third party to [*] and whose disclosure to [*] is not a
breach directly or indirectly of an obligation of confidentiality owing to
CCSI. The obligations of confidentiality set forth in this Agreement shall not
apply to Confidential Information which (a) was publicly available at the time
of disclosure by CCSI to [*], or became publicly available after the
disclosure by CCSI to [*] through no act or fault of [*] or (b) was in [*]'s
possession
4
<PAGE>
prior to the time of disclosure by CCSI to [*], otherwise than as a result of
[*]'s breach of any legal obligation, as proven by [*]'s written records made
prior to the time of disclosure by CCSI to [*].
6. The obligations of non-use and confidentiality set forth
in this Agreement shall not apply to Derivative Confidential Information which
(a) was publicly available at the time of development by [*] or became
publicly available after the development by [*] through no act or fault of
[*], or (b) was in [*]'s possession prior to the date of this Agreement, as
proven by [*]'s written records made prior to the date of this Agreement.
7. [*] agrees that (1) all right, title and interest in and
to any and all inventions, works of authorship, discoveries, developments and
improvements based upon, derived from, or related to the Confidential
Information disclosed by CCSI to [*] pursuant to this Agreement or the
Derivative Confidential Information made, conceived, reduced to practice or
developed by [*] during the course of its work for CCSI (the "Inventions")
shall be and will remain the property of CCSI and any and all patent
applications, patents, trademarks or copyrights (whether or not considered to
be work for hire) thereon shall be owned exclusively by CCSI and (2) [*]
hereby assigns and agrees to assign to CCSI the entire right, title and
interest in each Invention, agrees to obtain an assignment therefrom each
employee, agent or subcontractor involved and (3) [*] shall assist CCSI, at
CCSI's expense but without additional compensation, to apply for, prosecute,
obtain, perfect, maintain, defend and enforce such patent applications,
patents, trademarks and copyrights and shall execute assignments to CCSI of
all right, title and
5
<PAGE>
interest in and to all such inventions, works of authorship, discoveries,
developments, improvements, patent applications, patents, trademarks and
copyrights.
8. [*] agrees that it has no right, title or interest with
respect to the Confidential Information disclosed by CCSI to [*] pursuant to
this Agreement or the Derivative Confidential Information developed by [*],
and agrees to disclose to CCSI promptly, fully and in writing, any and all
inventions, works of authorship, data, material information, enhancements,
discoveries, developments and improvements based upon, derived from, or
related to the Confidential Information disclosed by CCSI to [*] pursuant to
this Agreement or the Derivative Confidential Information made, conceived,
reduced to practice or developed by [*] or any of its employees,
subcontractors or agents during the course of its work for CCSI.
9. Nothing herein contained shall be construed as a grant by
CCSI to [*] of any license or right, express or implied, with respect to the
Confidential Information disclosed by CCSI to [*] pursuant to this Agreement
or the Derivative Confidential Information developed by [*].
10. In the event that [*] is requested or becomes legally
compelled (by oral questions, interrogatories, requests for information or
documents, subpoena, criminal or civil investigative demand or similar
process) to disclose any Confidential Information or Derivative Confidential
Information (including disclosures to regulatory agencies such as the FDA),
[*] will, to the extent it is aware of such fact, provide CCSI with prompt
written notice of such requirement so that CCSI may seek (with the cooperation
of [*]) a protective order or other appropriate remedy and/or waive compliance
with the provisions of this Agreement. In the event that such protective order
or other remedy is
6
<PAGE>
not obtained, [*] shall furnish only that portion of the Confidential
Information or the Derivative Confidential Information which it is advised by
written opinion of counsel of its choice it is legally required to furnish and
will exercise its reasonable legal efforts to obtain reliable assurance that
confidential treatment will be accorded to the Confidential Information or the
Derivative Confidential Information so furnished.
11. The obligations of confidentiality, non-use and
non-competition set forth in this Agreement may be enforced at any time and
any material violation or threatened violation thereof will cause irreparable
injury and incalculable harm to CCSI and therefore CCSI shall, in addition to
any other rights and remedies which it may have, be entitled to preliminary
and permanent injunctive or other equitable relief without the posting of any
bond.
12. This Agreement and the September 16, 1998
Confidentiality Agreement between the parties constitute the entire
understanding of the parties with respect to the subject matter hereof and
shall not be modified or waived, in whole or in part, except by a written
agreement signed by both parties.
13. The terms and conditions of this Agreement, the
Manufacturing Agreement dated as of November 3, 1998, and the existence of the
discussions between the parties are confidential and shall not be disclosed by
[*], except as may be provided elsewhere in this Agreement, without the
written consent of CCSI.
14. This Agreement shall be construed in accordance with and
governed by the laws of the [*], without reference to its choice of law.
7
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed as of the date first written above.
Chromatics Color Sciences
International, Inc. [*]
By: /s/ Darby S. Macfarlane By: /s/
----------------------- ---
Name: Darby S. Macfarlane Name:
Title: Chief Executive Officer Title: Chief Operating Officer
8
<PAGE>
EXHIBIT A
Print Name:
EMPLOYEE AGREEMENT
In consideration of my employment or the continuance of my employment by [*]
("[*]"), and in addition to any other terms of my employment, I agree as
follows:
1. For the purpose of this Agreement the word "[*]" shall include [*], its
subsidiaries and/or its affiliates in which [*], now or hereafter during the
term of this Agreement, owns more than twenty percent of the stock eligible to
vote for directors, and the assignees and licensees of [*], it subsidiaries
and affiliates.
2. I agree that all information and know-how, whether or not in writing, of a
private, secret or confidential nature concerning [*]'s business affairs,
including, without limitation, its inventions, products, processes, methods,
techniques, formulas, compositions, compounds, projects, developments, plans,
research data, clinical data, financial data, personnel data, computer
programs, and customer and supplier lists are and shall be the property of [*]
and that I will not disclose the same to unauthorized persons or use the same
for any unauthorized purposes without written approval by an officer of [*],
either during or after the term of my employment, until such time as such
information or know-how has become public without fault by me.
3. I agree that all files, letters, memos, reports, records, data, sketches,
drawings, laboratory notebooks, program listings, or other written,
photographic, or other tangible material containing matter of the type set
forth in paragraph 2 above, which shall come into my custody or possession,
shall be and are the exclusive property of [*] to be used by me only in the
performance of [*] duties, and that all such records or copies thereof and all
tangible property of [*] upon termination of my employment and, thereafter,
that I shall not retain any such records or copies thereof or tangible
property.
4. I agree that my obligation not to disclose or to use information, know-how
and records of the type set forth in paragraphs 2 and 3 above, and my
obligation to return records and tangible property, set forth in paragraph 3
above, also extends to such types of information, know-how, records and
tangible property of customers of [*] or suppliers to [*] or other third
parties who may have disclosed or entrusted such to [*] or to me in the course
of business.
5. I agree to assign and do hereby assign to [*] or its designee all my
rights, title, and interest in to all works of authorship and the copyrights
therein created by me solely or jointly with others during the term of my
employment (which shall be regarded as "works for hire" to the extent
permitted by law) and in and to all inventions, improvements, discoveries,
designs or technical developments, whether or not patentable, which I solely
or jointly with others, may conceive or reduce to practice or cause to be
reduced to practice during the term of my employment, and which are created,
conceived or first actually reduced to practice (a) in the utilization by [*]
of my services in a technical or professional capacity in the areas of
research, development, marketing, management, engineering or manufacturing, or
(b) pursuant to any project of which I am a participant or member and that is
either financed or directed by [*], or (c) which relate to any business,
product, method, process, technique, formula, composition, compound, computer
program, material, apparatus, or utilized by [*], or (d) at [*]'s expense, in
whole or in part. I also agree to assign and hereby assign to [*] all such
works of authorship, copyrights, inventions, improvements, discoveries,
designs or technical developments created, conceived or reduced to practice or
caused to be reduced to practice by me, jointly or solely with others, during
any term of my employment by [*] prior to the date of this agreement. All
other works of authorship, copyrights, inventions, improvements, discoveries,
designs or technical development shall remain my property.
6. I agree to promptly and fully disclose to and cooperate with [*] or its
designee, both during and after employment, with respect to the procurement of
copyrights and patents throughout the world for the establishment and
maintenance of [*]'s or its designee's rights and interests in said works of
authorship, copyrights, inventions, improvements, discoveries, designs or
technical developments, and to sign all papers, including without limitation,
copyright applications, patent applications, declarations, oaths, formal
assignments, assignments or priority rights, and
<PAGE>
powers of attorney, which [*] may deem necessary or desirable for the purpose
of vesting [*] or its designee with such rights, the expense thereof to be
borne by [*].
7. Since I am to assign to [*] certain inventions which I may conceive or
first actually reduce to practice after my entering the employ of [*], to
avoid future misunderstandings as to ownership, I have listed below all those
inventions which I own at this time or which were made by me and are owned at
this time by third parties.
8. I agree that I will not during the term of my employment with [*], nor for
a period of one year after the termination of my employment with [*], without
[*]'s prior written consent, engage directly or indirectly in any activity or
employment in competition with [*] in the United States of America or
elsewhere in the world where [*] has established an ongoing business nor in
any activity or employment in which it could be reasonably anticipated that I
would be required or expected to use information, know-how, or records of any
type referred to in paragraphs 2, 3, and 4. This paragraph shall not be
construed to limit in any way my obligations not to use information, know-how,
or records as set forth in paragraphs 2, 3, and 4 after the expiration of the
period of one year after the termination of my employment with [*].
9. I agree that this agreement shall not be construed to limit in any way
"shop rights" or other common law or statutory rights of [*], in or to any
works of authorship, copyrights, inventions, improvements, discoveries,
designs, or technical developments and in or to information, know-how, or
records, which [*] has or may have by virtue of my employments.
10. This agreement supersedes all earlier agreements of the like import and
may not be modified except by written agreement signed by a duly authorized
representative of [*].
11. I understand that this agreement does not constitute a contract of
employment and does not imply that my employment will continue for any
definite period of time.
12. If any portion of this agreement shall be held by a court to be
unenforceable, the remaining provisions shall be unaffected and shall continue
in full force and effect. This agreement shall insure to the benefits of [*],
its successors, and assigns and shall be binding upon my heirs, personal
representatives, successors and assigns and shall survive any termination of
my employment.
Date: Employee:
Witness:
Prior Inventions by Employee:
<PAGE>
EXHIBIT B
[*]
NONDISCLOSURE AGREEMENT
*****************************************************************************
This Agreement made by and between [*], having offices located at [*]
(hereinafter "Discloser"), and ________________ having offices located at
_________________________________________________________________________
(hereinafter "Recipient").
WHEREAS, Discloser has acquired and developed a substantial amount of valuable
Confidential Information, as hereinafter defined, and requires suitable
security and protection therefore, and
WHEREAS, Recipient desires to receive said Confidential Information for the
purpose stated below.
NOW THEREFORE, in consideration of the premises and mutual covenants contained
herein the parties hereto agree as follows:
1. For the purpose of this Agreement, Confidential Information shall mean any
information and data of a confidential nature, including but not limited to
proprietary, technical, developmental, marketing, sales operating,
performance, cost, know-how, business and process information, computer
programming techniques, and all record-bearing media containing or disclosing
such information and techniques which are disclosed pursuant to this
Agreement.
2. Discloser agrees to make known to Recipient, and Recipient agrees to
receive, Confidential Information for the sole purpose of evaluating the same
to determine Recipient's interest in a mutually attractive business
arrangement.
3. All Confidential Information delivered pursuant to this Agreement:
a. shall not be distributed, disclosed, or disseminated in any way or form
by Recipient to anyone except its own employees, who have a reasonable need to
know said Confidential Information;
b. shall be treated by Recipient with the same degree of care to avoid
disclosure to any third party as is used with respect to Recipient's own
information of like importance which is to be kept secret. Recipient shall be
liable for disclosure of Confidential Information of the Discloser only if
such is not used. The burden shall be upon Recipient to show that such care
was used;
c. shall not be used by Recipient for its own purposes, except as otherwise
expressly stated herein, without the express prior written permission of
Discloser;
d. shall remain the property of and be returned to Discloser (along with
all copies thereof) within 30 days of receipt by Recipient of a written request
from Discloser setting forth the Confidential Information to be returned. Such
request shall be made not later than three (3) months after termination of
this Agreement.
4. The obligations of paragraph 3 shall not apply however to any information
which:
a. is already in the public domain or becomes available to the public
through no breach of this Agreement by Recipient;
b. was in Recipient's possession prior to receipt from Discloser as proven
by its written records;
c. is received by Recipient independently from a third party free to
disclose such information to the Recipient;
<PAGE>
[*]Nondisclosure Agreement
Page 2
******************************************************************************
5. Confidential Information shall not be deemed to be in the public domain
merely because individual features, components or combinations thereof are now
or become known to the public.
6. Recipient shall have the right to refuse to accept any information under
this Agreement and nothing herein shall obligate Discloser to disclose to
Recipient any particular information.
7. The parties hereto shall not be obligated to compensate each other for
disclosure of any information under this Agreement and agree that no
warranties of any kind are given with respect to such information, as well as
any use thereof, except as otherwise provided for herein.
8. Recipient shall have no obligation to enter into any further agreement with
Discloser except as Recipient, in its sole judgment, may seem advisable. It is
understood that no patent, copyright, trademark or other proprietary right of
license is granted by this Agreement. The disclosure of Confidential
Information and materials which may accompany the disclosure shall not result
in any obligation to grant Recipient rights therein.
9. This Agreement shall be effective as of the date of the last signature as
written below. It may be terminated with respect to further disclosures upon
thirty (30) days prior notice in writing. This Agreement shall automatically
terminate three (3) years from its effective date. The rights and obligations
accruing prior to termination as set forth herein shall, however, survive the
termination as specified in this Agreement.
10. Discloser warrants and represents that Discloser possesses all necessary
powers, rights and authority to lawfully make the disclosure subject to this
Agreement.
11. This Agreement represents the entire understanding and agreement of the
parties and supersedes all prior communications, agreements and understandings
relating to the subject matter hereof. The provisions of this Agreement may
not be modified, amended, nor waived, except by a written instrument duly
executed by both parties. This Agreement may not be assigned by either party
without the prior written consent of the other. This Agreement is made subject
to and shall be construed under the laws of the state of [*].
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives on dates specified below.
- ------------------------------ -------------------------------
[*] Company Name:
By: __________________________ By:____________________________
Title: _______________________ Title:_________________________
Date: ________________________ Date:__________________________
<PAGE>
EXHIBIT C
1. CCSI's Proprietary color measuring instruments and system for the
non-invasive measurement of bilirubin.
2. CCSI's proprietary computer software in any form (including its
contents, [*], hard copies and printouts) whether stored on magnetic
means, optical means or any other means, e.g., disc, flash ram card, chip.
3. CCSI's proprietary specification of the [*] and their mode of operation.
4. CCSI's proprietary specification of [*].
5. CCSI's proprietary specification [*] and their mode of operation.
6. CCSI's proprietary specifications [*] devices and its mode of operation.
7. CCSI's proprietary color measuring [*] or components from CCSI's supplier.
Provided however, this Exhibit C does not include [*].
<PAGE>
Exhibit 99.1
CHROMATICS ANNOUNCES MANUFACTURING AGREEMENT FOR INFANT BILIRUBIN MONITOR
NEW YORK, November 3, 1998 -- Chromatics Color Sciences International, Inc.
(NASDAQ: CCSI) today announced it has entered into a manufacturing agreement
for the production of the Colormate* TLc-BiliTest* -- the Company's device for
pain-free, non-invasive monitoring of bilirubin (infant jaundice).
Chromatics Chief Executive Officer Darby Macfarlane said, "This is a
tremendous step forward for us in bringing our color technology to the medical
community. We are working to develop other important applications as well."
The Company anticipates that once the monitor is commercially available and
used by the medical community the common practice of drawing blood from
infants to test for bilirubin jaundice could be significantly reduced.
The manufacturing agreement follows a series of successful exhibitions and
presentations of the TLc-Bilitest* at medical conferences around the world
during the past six months. Ms. Macfarlane said, "The response from clinicians
has been very strong. Our intention now is to get the TLc-BiliTest* into their
hands as soon as possible."
The conferences have included:
The Pediatric Academic Society conference in New Orleans, in May.
The SINOMED '98 Exhibition -- the 7th China International Medical Equipment and
Facilities Exhibition in Beijing, in June.
The 22nd Annual International Congress of Pediatrics in Amsterdam, in August.
The National Association of Neonatal Nurses meeting in Cincinnati, in September.
The American Academy of Pediatrics meeting in San Francisco, in mid-October.
The 5th Annual Pediatric Critical Care Medicine Conference, held in Guilin,
China, in late October.
To implement its marketing efforts, the Company has recently opened a medical
marketing, sales and distribution support division in Connecticut and hired
Vice President Sheila Kempf and other qualified sales, marketing and
inservicing staff there. While Chromatics remains in ongoing negotiations to
reach a definitive agreement and continues to move toward the completion of
required due diligence with potential global distributors, the Company
anticipates shipping the newly-manufactured monitors from that office in order
to accommodate the interest already generated at the conferences for the
TLc-BiliTest*.
Both an electronically powered model of the device and a lightweight hand-held
battery operated monitor will be manufactured under FDA QSR as well as ISO
9000 manufacturing regulatory requirements. The Company's new contract
manufacturer is an ISO 9001-certified facility. The System includes a
proprietary calibration standard for each non-invasive measurement taken on an
infant while being measured for hyperbilirubinemia.
The Colormate* TLc-BiliTest* has FDA clearance for commercial use and is the
fist non-invasive bilirubin monitoring device for babies of all races, even
under phototherapy treatment. A study of the device recently published by
Pediatrics, the publication of the American Academy of Pediatrics, found that
the TLc-BiliTest* was effective in diagnosing and tracking jaundice compared to
<PAGE>
current invasive techniques involving taking blood from infants - often
repeatedly.
The study involved 2,441 infants at two hospitals who were repeatedly measured
for bilirubin. The device was found to be effective for a wide variety of
infants. Accuracy was not affected by infant race or weight, or by the use of
phototherapy. The researchers reported, "This instrument used in newborn
nurseries may allow physicians to shorten lengths of stay more safely and
decrease the use of invasive blood tests."
Chromatics Color Sciences is in the business of color science and has
developed technologies and intellectual properties that it believes have
medical applications involving the detection and monitoring of certain
chromogenic diseases or disorders such as bilirubin infant jaundice. The
Company defines chromogenic diseases or disorders as those diagnosed or
monitored by the coloration of the human skin, tissue or fluid being affected.
Medical applications in addition to the detection and monitoring of bilirubin
infant jaundice will require additional clinical trials and FDA clearance. The
Company's technologies and intellectual properties also have other
applications including the scientific color measurement and classification of
human skin, certain color-sensitive consumer products, and in determining the
color compatibility of such skin and product color classification for use in a
variety of industries including the cosmetic, beauty-aid and fashion
industries.
Certain of the matters discussed in this announcement contain forward-looking
statements that involve material risks to and uncertainties in the Company's
business that may cause actual results to differ materially from those
anticipated by the statements made herein. Such risks and uncertainties
include, among other things, the availability of any needed financing, the
Company's ability to implement its long range business plan for various
applications for its technologies, the Company's ability to enter into
agreements with marketing and distribution partners, the impact of
competition, the obtaining and maintaining of regulatory clearances applicable
to applications of the Company's technology, management of growth and other
risks and uncertainties that may be detailed from time to time in the
Company's reports filed with the Securities and Exchange Commission, including
those set forth in its annual report on Form 10-K for the year ended December
31, 1997 and its quarterly report on Form 10Q for the six months ended June
30, 1998.
