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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A-2
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
CHROMATICS COLOR SCIENCES INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
New York
(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 __ pages
Exhibit Index located on page 4
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EXPLANATORY NOTE
This Current Report on Form 8-K/A-2 amends and restates in their
entirety the text of Item 7 of the Company's Current Report on
Form 8-K and Exhibit 10.1 thereto filed with
the Securities and Exchange Commission on November 3, 1998.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits:
+10.1 Manufacturing Agreement, by and between the Company and Nova Biomedical
Corporation, dated as of November 3, 1998.
+ 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
---------------------------------
Name: Darby S. Macfarlane
Title: Chief Executive Officer
Date: January 28, 2000
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EXHIBIT INDEX
Document Page No.
+10.1 Manufacturing Agreement, by and between the Company and Nova
Biomedical Corporation, dated as of November 3, 1998. 5
+ 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/NOVA
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 NOVA Biomedical Corporation, a Massachusetts
corporation with headquarters located at 200 Prospect Street, Waltham,
Massachusetts (hereinafter called "NOVA"), 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
NOVA, 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 NOVA 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).
Section 1/Product Design
CCSI is responsible for providing to NOVA 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.
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Section 2/Covenants
Covenants and Duties of CCSI
(a) CCSI hereby agrees to purchase from NOVA (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, NOVA 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 NOVA 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 NOVA 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 NOVA 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 NOVA will be given the opportunity to bid for and a
right of first refusal with respect to, such orders if NOVA can effect
such production on equivalent delivery and economic terms to third party
bids offered to CCSI. If NOVA 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 CCSIs
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 NOVA's right to
manufacture such Products.
(c) CCSI hereby agrees that NOVA may recondition the Products identified
in Section 3 of Attachment 1, and in this regard NOVA 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 NOVA 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 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 NOVA the terms of the third-party offer, and
NOVA 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 NOVA so elects, the parties shall execute a contract
within fifteen (15) days after such election by NOVA 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 NOVA elects to decline the offer as set forth above, then
NOVA thereafter waives the right of first
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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 NOVAs quality control standards, when reasonably requested by NOVA.
(f) CCSI shall render prompt technical support to NOVA on a continuing
basis when reasonably requested by NOVA.
(g) CCSI agrees to provide to NOVA 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 NOVA
(h) NOVA shall manufacture and sell to CCSI all Products which CCSI shall
order by delivery of purchase orders to NOVA 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) NOVA 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 NOVA 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 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, NOVA will inventory long lead-time items and
materials at CCSIs expense if so requested by CCSI in writing.
(k) NOVA understands and agrees that it is providing manufacturing
services hereunder as a customer-transparent contractor of CCSI under
CCSIs name. NOVAs name shall not appear on the Products or any
documentation, except that NOVAs name may appear on serial number
labels, so long as such labels are not visible to CCSIs 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 NOVA any right to use CCSIs name for any purpose
other than as expressly provided herein.
(l) NOVA 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). NOVA 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) In order to maintain the right to exclusive manufacture of the Product
in the Exclusive Territory, NOVA shall at all times provide to CCSI most
favored customer status so as to provide CCSI the best commercial terms
as are provided by NOVA to its other customers (as long as CCSI meets
the same
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customer criteria as such other customers, e.g., size of annual orders)
and without limiting any other of CCSIs rights as expressly set forth
herein.
(n) NOVA shall manufacture the Products in its plant in Waltham,
Massachusetts, unless CCSI authorizes NOVA 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) NOVA 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) NOVA represents and warrants to CCSI that: (1) NOVA has the right to
enter into this Agreement and the Confidentiality Agreement; (2) all
necessary actions, corporate and otherwise, have been taken to authorize
NOVA's execution and delivery of this Agreement and the Confidentiality
Agreement and the same are the valid and binding obligation of NOVA; (3)
all licenses, consents and approvals necessary for NOVA to carry out all
of the transactions contemplated in this Agreement and the
Confidentiality Agreement have been obtained by NOVA including, but not
limited to, registering with the FDA as a device contract manufacturer;
(4) NOVA has the experience and technical and physical capacity to
fulfill its obligations under this Agreement; (5) NOVA 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 NOVA or, to NOVA's knowledge, against any supplier of NOVA that
could adversely affect the ability of NOVA to produce the Products or
the right of CCSI or any customer of CCSI to use the Products for their
intended use.
(r) NOVA 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 NOVA 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 NOVA'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
The Products shall be sold by NOVA to CCSI at the prices indicated in Attachment
3, FOB, Waltham, Massachusetts. The cost of freight and insurance shall be paid
by CCSI. NOVA 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. NOVA shall insure any such CCSI
Capital Equipment purchased by NOVA on behalf of CCSI for the period prior to
such passage of title to CCSI (naming CCSI as loss payee), and NOVA shall insure
at its expense any NOVA Materials (defined below). NOVA 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 NOVA. NOVA 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.
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(a) 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 Section 2(a) and (d) with respect to NOVA's
right of first refusal for orders for Products distributed outside the
Exclusive Territory.
(b) Title, ownership and risk of loss to the Products shall pass to CCSI
upon shipment of the Products from NOVA's facility in Waltham,
Massachusetts or on receipt of a written request from CCSI to hold
completed and invoiced goods at NOVA for future shipment. NOVA shall
provide commercially reasonable storage methods for such completed and
invoiced goods.
Section 4/Production Engineering Costs
Prior to Commencement of Production, NOVA 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 NOVA is
responsible. NOVA will provide CCSI with a quote for completing these items (set
forth in Attachment 3) and will not proceed without prior CCSI written approval.
Following Commencement of Production, NOVA 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. NOVA shall maintain its
documentation in compliance with CCSI's requirements and the Product Regulatory
Specifications' requirements.
The NOVA 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.
CCSI will reimburse NOVA for all capital equipment/tooling costs purchased by
NOVA 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 NOVA; provided, however, NOVA 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 NOVA will ensure that such equipment and tooling identifies CCSI
as the titled owner of such equipment.
(a) CCSI may from time to time supply to NOVA parts for production of the
Products by NOVA (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 NOVA for its inspection and production of the Products. CCSI
Equipment will be solely owned by CCSI, and NOVA shall ensure that the
CCSI Equipment is identified by NOVA as being owned by CCSI.
Section 5/Pricing/Volume/Delivery
The Pricing Schedule for different volumes is shown in Attachment 3. NOVA 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. NOVA will sell
the
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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.
Prior to Commencement of Production, CCSI will provide NOVA with a twelve (12)
month rolling forecast estimating the number of Products, according to CCSI's
market projections, CCSI anticipates it will purchase from NOVA (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. NOVA 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.
CCSI will also provide NOVA 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.
NOVA 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 NOVA'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 NOVA's fully loaded costs and will pay all reasonable charges
actually imposed by NOVA's suppliers resulting from cancellation of purchase
orders based on forecasts. NOVA will use its best efforts to return any unused
materials and negotiate reduction or elimination of cancellation or rescheduling
fees. NOVA will provide data to document the basis of price changes if requested
by CCSI.
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 NOVA and CCSI will result in a
price reduction equivalent to the direct costs saved. In the event savings are
realized by joint NOVA/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.
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.
Changes in pricing based on changes to the Product are discussed in Section 8
herein.
NOVA 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 "NOVA Materials"). CCSI acknowledges that in certain situations where NOVA
has determined, based on NOVA's material and manufacturing analysis, that it may
not meet the Delivery Commitment Date solely due to the unavailability of
components, NOVA 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.
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In the event that NOVA 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 NOVA's
exclusive right to manufacture the Product in the Exclusive Territory shall
immediately terminate upon notice thereof from CCSI.
In the event NOVA 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 NOVA written notice of its intention to terminate this
Agreement forthwith; provided, however, that upon receipt of such notice, NOVA
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
NOVA fails to remedy such failure, CCSI may immediately terminate this
Agreement.
Section 6/Cost of Rework or Scrap
NOVA 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 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, NOVA will provide manufacturing
engineering services which are required (i) to ensure that the Product conforms
with NOVA's quality standards and (ii) to support continuing cost and
reliability improvements. NOVA 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
NOVA 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 NOVA'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 NOVA.
CCSI and NOVA 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.
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. NOVA will make no Product Specification Change
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without written authorization by CCSI. All changes to any NOVA Operating
Procedures, Drawings, Specifications, and other necessary documents will be
controlled by NOVA's ECO procedures and CCSI will be on the required approval
list.
CCSI may from time to time request NOVA to incorporate an engineering change,
(an "Engineering Change") into a Product not contemplated in Attachments 1 or 3.
Within seven (7) business days of receipt of such request, NOVA 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, NOVA
will prepare an ECO for approval. NOVA shall be required to accept and implement
all reasonable Engineering Changes to the Products.
In support of its ongoing efforts to improve efficiency and reduce the costs of
manufacturing Products, NOVA 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 NOVA, but reserves the right to accept or reject each
such Proposal in its sole discretion.
In the event either CCSI or NOVA 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, NOVA agrees to manufacture a
field change kit or to implement factory retrofitting, as appropriate, with
CCSI's obtaining any necessary regulatory approvals. CCSI and NOVA shall
mutually agree on a case-by-case basis on appropriate charges for the
implementation of a Safety Change prior to implementation.
CCSI and NOVA 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.
Section 9/Warranty
NOVA 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 NOVA 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, NOVA 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
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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 NOVA'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 NOVA, 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 NOVA and CCSI.
Upon written request from CCSI, NOVA 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 nonwarranty repair services or
to repair out of warranty Products should NOVA 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 NOVA 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 NOVA's current and
auditable material overhead costs during the Initial Term of this Agreement with
respect to the work covered by this paragraph.
Subject to Section 15 below, NOVA 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.
(a) Upon written request from CCSI, NOVA 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 NOVA to CCSI or CCSI's designee or its
customer, as the case may be.
EXCEPT AS EXPRESSLY STATED IN THIS AGREEMENT, NOVA DISCLAIMS ALL
WARRANTIES, WHETHER EXPRESS OR IMPLIED, ORAL OR WRITTEN, WITH RESPECT
TO THE PRODUCTS INCLUDING, WITHOUT LIMITATION, ANY WARRANT OF
MERCHANTABILITY, 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.
All Products shall be subjected to quality control inspection and final
release by NOVA in accordance and conformance with NOVA's quality control
standards and system and the FDA's QSR, the ISO 9000 Series standards and
EN46001. NOVA'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, NOVA 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 NOVA for
CCSI. NOVA shall permit CCSI to review periodically NOVA's production and
quality control procedures and records subject to Section 18.
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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:
If to CCSI: If to NOVA:
Darby S. Macfarlane John Wallace
Chief Executive Officer COO
5 East 80th Street Nova Biomedical Corporation
New York, N.Y. 10021 200 Prospect Street
Waltham, MA 02254
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 Commonwealth of Massachusetts without regard to its
principles of conflict of laws.
Section 12/Liability Insurance
NOVA 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. NOVA 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
NOVA 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 [*] million.
Section 13/Termination
This Agreement may be terminated by CCSI if NOVA'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 NOVA'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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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.
Subject to Section 5(d) above, upon any termination of this Agreement and upon
CCSI's request, NOVA will sell and transfer to CCSI, free and clear of all liens
and encumbrances, all of NOVA'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 NOVA's cost including manufacturing
overhead. NOVA shall complete any work in process as if no termination notice
was given at CCSI's written request, unless the reason for termination by NOVA
relates to the non-payment of money by CCSI hereunder.
Notwithstanding the foregoing, upon termination of this Agreement, for any
reason, NOVA 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, NOVA 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, NOVA will not be obligated to provide CCSI with NOVA's proprietary
policies and procedures for NOVA's proprietary manufacturing processes and
NOVA's software for NOVA's proprietary manufacturing processes.
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
CCSI shall pay NOVA for the full amount of each invoice within thirty (30) days
of the invoice date.
Payment shall not constitute acceptance of non-conforming Products; such
non-conforming Products as referenced in Section 9(a) hereof.
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Payment shall be made in United States dollars.
Section 15/Indemnifications
CCSI shall indemnify and hold NOVA 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 NOVA'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 NOVA's regulatory non-compliance, negligence, reckless conduct,
willful misconduct or other breach of obligations hereunder. NOVA 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 NOVA to
participate in any such action or proceeding at its own expense with counsel of
its own choice and provided that such settlement provides NOVA with a general
release and does not provide for equitable relief against NOVA. If CCSI shall
fail to diligently defend any such Claim, NOVA shall be entitled to do so at
CCSI's expense with attorneys of its choosing. In such event, NOVA 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 NOVA meet the Warranty
provided in Section 9 above or (2) NOVA's or its affiliates', directors',
officers' employees' and agents' regulatory non-compliance, negligence, reckless
conduct, willful misconduct or other breach of obligations hereunder.
(a) NOVA 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 NOVA 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 NOVA 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 NOVA prompt
written notice of the assertion of any such Claim, provided, further,
that NOVA 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 NOVA shall fail to diligently defend any such Claim,
CCSI shall be entitled to do so at NOVA'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 NOVA, which consent will not
be unreasonably withheld.
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(b) CCSI shall indemnify and hold NOVA 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 NOVA's technology. Indemnification shall
proceed as provided under Section 15 (f).
(c) NOVA 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) NOVA's technology (technology, know how, etc. developed solely by
NOVA) or (2) the use of NOVA's technology. Indemnification shall proceed
as provided under Section 15(f).
(d) 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 NOVA 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.
(e) 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 NOVA 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 NOVA shall be the owner
with respect to NOVA's technology.
(f) If either CCSI or NOVA 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 NOVA 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 NOVA granted or which
might be granted under this Agreement unless NOVA 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
In the event that CCSI or NOVA 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, NOVA shall bear all costs
and expenses, including costs and expenses to CCSI and/or NOVA, of any
Corrective Action related to matters which are caused by NOVA'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
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shipment of such recalled or corrected Products from customers to CCSI or NOVA
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 Action related to the incorporation of CCSI
technology into the Products, unless the Product does not conform under NOVA's
Warranty in which case NOVA bears such Corrective Action Costs.
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.
(a) 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
NOVA 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
NOVA Obligations:
NOVA 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, NOVA shall promptly provide to CCSI a copy of
its initial and current annual establishment registration forms.
(a) NOVA shall comply with all obligations under the Quality System
Regulation, 21 C.F.R. Part 820.
(b) NOVA 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 quality system
and other SOPs, including but not limited to any responsibilities
enumerated in the complaint handling and medical device reporting
("MDR") SOPs.
(c) NOVA shall comply in all material respects with all regulatory
obligations, necessary for marketing the Products in foreign countries.
As part of fulfilling such obligations, NOVA 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.
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(d) NOVA 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.
(e) NOVA 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
NOVA.
(f) NOVA shall deliver to CCSI a written report of corrective actions
implemented to correct the regulatory requirements that CCSI notified
NOVA were non compliant based on CCSI's September 1998 audit.
CCSI Obligations:
(g) 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.
(h) 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.
(i) 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 ss. 809.10.
(j) CCSI shall be responsible in all material respects for MDR
obligations under 21 C.F.R. Part 803, with NOVA's assistance if
specified in CCSI's MDR SOP.
(k) 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.
(l) CCSI shall comply in all material respects with all obligations under
the Quality System Regulation, 21 C.F.R. Part 820.
(m) 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 responsibilities it has under the requirements of
NOVA's quality systems and other SOPs.
(n) CCSI shall comply in all material respects with its regulatory
obligations, necessary for marketing its Products in foreign countries.
A. Inspection Reports: NOVA shall advise CCSI in writing immediately
upon NOVA's receiving notice from the FDA or other authority that it
intends to perform an inspection of NOVA's facilities. Additionally,
NOVA 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 NOVA'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 NOVA's facilities where
such Products are manufactured.
B. Inspection Rights:
NOVA shall permit CCSI or CCSI's designee, from time-to-time, during normal
business hours and upon reasonable notice, to audit NOVA's facilities in order
to confirm that NOVA and/or any of its subcontractors is
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complying with the terms and conditions of this Agreement. If CCSI reasonably
determines that NOVA or any of NOVA's subcontractors is not complying with the
terms and conditions of this Agreement, CCSI shall give notice of such breach to
NOVA in accordance with Section 10 of this Agreement. Additionally, NOVA 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, NOVA
agrees to correct such defect at its sole cost and expense and within fifteen
(15) days of distributor's notice/report thereof.
(a) NOVA 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 NOVA and/or any subcontractor)
to CCSI however, final assembly shall be done by NOVA. Any subcontractor
used by NOVA 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, NOVA 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, NOVA represents that
any subcontractor shall be in compliance with any applicable Product
Regulatory Specifications, and NOVA shall be responsible for any 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).
(b) NOVA shall permit Underwriters Laboratories, Inc. ("UL"), without
prior notice, to inspect NOVA's and/or any of its subcontractors'
facilities for compliance with requirements related to UL certification
qualification marking.
A. 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 NOVA will be Paul MacDonald and
the initial contact for CCSI will be Darby S. Macfarlane.
Section 19/Compliance with Law
NOVA 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.
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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 NOVA 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 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: NOVA 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 NOVA 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 NOVA, 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 NOVA in any way.
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NOVA, 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. NOVA 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 NOVA 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.
Nova Biomedical Corporation Chromatics Color Sciences
International, Inc.
By:_______________________________ By:_______________________________
Name: John Wallace Name: Darby S. Macfarlane
Title: Chief Operating Officer Title: Chief Executive Officer
Date: _____________________________ Date: _____________________________
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Attachment 1
Section 1
This Product includes a TLc-BiliSensor(TM) which is packaged in a durable, soft
carry case, a TLc-Touch(TM) palmtop computer and an RS23 cable.
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) palmtop computer features the TLC-Soft(TM) program on a
TLc-Flash Ram card. This Product is used with the TLc-Lensette(TM) individual
calibration standards, which NOVA is inserting into the [*], but NOVA is [*] the
individual calibration standards. This model offers 4 AA batteries for the
TLc-Sensor(TM) and 2 AA batteries for the TLc- Touch(TM) palmtop 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 [*]. Only the working prototype exists and development of this Product
including all FDA required design controls are to be developed to an FDA cleared
mass-manufactured device. This Product is used with the [*] which NOVA is
inserting into the packing/shipping box, but NOVA [*]. This model includes
labels and shipping/packaging.
Section 3
This Product, the TLc-BriefcaseSystem(TM) includes an electrically powered
TLC-BiliSensor(TM), a TLc-Laptop(TM) 512K computer, a 40 column thermal printer,
and is run on AC power only. The TLc-Laptop(TM) features the TLc-Soft(TM)
program on the TLc-SofTest Diskette(TM), and is used with the TLc-Lensette(TM)
individual calibration standard, which NOVA is inserting into the [*], but NOVA
[*] the individual calibration standards. This model includes labels and
shipping/packaging.
- ---------------------
The calibration standards (TLc-Lensettes(TM)) used to calibrate the
color-measurement instruments described in all Sections of this Attachment 1 [*]
by NOVA, are not included in any Product as defined in this Agreement or
attachments thereto other than the Confidentiality Agreement (but shall
constitute CCSI Equipment as defined in the Agreement), and 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 calibration standards.
19
<PAGE>
PURCHASE
Attachment 2 ORDER
[*]
SHOW OUR ORDER NUMBER ON ALL INVOICES, PACKAGES SHIPPING PAPERS AND
CORRESPONDENCE
<TABLE>
<CAPTION>
PURCHASE ORDER NO. CHANGE ORDER NO. DATES ISSUED PAGE
S
T H T
O I O
P
FOB SHIP Mass. Tax Exempt
VIA / / YES #000-089-100 / / NO
<S> <C> <C> <C> <C> <C> <C> <C>
LINE QUANTITY U/M P/N/DWG/ REV DESCRIPTION DUE DATE UNIT PRICE AMOUNT
TOTAL
/ / 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> <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: $[*] [*]
Material Material O/H Labor Lab O/H Total Margin Transfer Price
$[*] $[*] $[*] $[*] $[*] $[*] $[*]
</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 NOVA 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 NOVA's
[*] warranty period will be [*]% of NOVA's selling/transfer price of each
Product to CCSI.
<PAGE>
Attachment 3
Pricing for Section 2 of Attachment 1
Pricing Method
NOVA 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 $[*] (current rate)) Plus
Labor overhead rate - Currently [*]%
Equals
Total Standard Cost
Note for year one only, NOVA will bid on smaller quantities and will use a
margin of [*]%
Price depends on volume:
Units per year Margin
-------------- ------
[*] No bid
[*] [*]%
[*] [*]%
[*] [*]%
<TABLE>
<CAPTION>
Example Example Example
Cost ($) Cost ($)
-------- --------
<S> <C> <C>
Material Cost (key item) [*] [*]
[*]% material overhead* [*] [*]
Labor cost ([*] hours @ $[*]/hr) [*] [*]
[*]% labor overhead* [*] [*]
Standard Cost $[*] $[*]
------------- ---- ----
</TABLE>
Based on our current forecast, we expect our [*] to be [*] next year. These
numbers reflect our current forecast.
<TABLE>
<CAPTION>
Year 2 Forward Price if Standard Price if Standard
Units per year Margin Cost is $[*] Cost is $[*]
- - -------------- ------ ------------ ------------
<S> <C> <C> <C>
[*] no bid no bid ([*]) no bid ([*])
[*] [*]% [*] [*]
[*] [*]% [*] [*]
[*] [*]% [*] [*]
--- ---- --- ---
</TABLE>
Note: Example assumes constant materials cost. [*].
Extended Warranty Cost:
The cost of extending the warranty to [*] from NOVA's [*] warranty period will
be [*]% of NOVA'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 Nova Biomedical Corp., a Massachusetts corporation ("NOVA").
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 prototype [*] devices 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 NOVA for the purpose of enabling NOVA to manufacture
the commercial model device for CCSI and to develop and design for CCSI
commercial [*] devices based on those prototype devices and other Confidential
Information under the terms and conditions set forth below.
WHEREAS, the parties recognize that NOVA in the course of
manufacturing the commercial model device for CCSI and developing and designing
for CCSI commercial [*] devices may develop further confidential information,
(including
1
<PAGE>
improvements to CCSI's proprietary information set forth in Exhibit C but
excluding NOVA's policies and procedures for NOVA's proprietary manufacturing
processes and NOVA's software for NOVA's proprietary manufacturing processes, in
NOVA's possession prior to the date of this Agreement or developed by NOVA 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, NOVA 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 NOVA in
confidence for the purpose of enabling NOVA to manufacture for CCSI the
commercial model device for the measurement of color and to develop and design
for CCSI commercial [*] devices 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 NOVA by CCSI shall bear the notice "Confidential
Information."
2
<PAGE>
2. Unless excluded by paragraph 5, NOVA shall be under an
obligation to maintain in confidence the Confidential Information disclosed by
CCSI to NOVA pursuant to this Agreement and the Derivative Confidential
Information developed by NOVA, as well as the identity of CCSI, its suppliers
and customers, and shall take all precautions reasonably necessary to prevent
any unauthorized disclosure of the Confidential Information or the Derivative
Confidential Information. In the event NOVA 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, NOVA shall first inform the employee or independent
agent/subcontractor that the information is confidential and subject to the
obligations of the agreement NOVA has in place with that employee or independent
agent/subcontractor (copies attached as Exhibits A and B).
3. Unless excluded by paragraph 5, NOVA shall not use, copy,
duplicate or otherwise replicate any of the Confidential Information disclosed
by CCSI to NOVA pursuant to this Agreement or the Derivative Confidential
Information developed by NOVA, 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 NOVA.
4. Nothing contained in this Agreement shall prevent NOVA from
making its services available to other companies or other legal entity who may
compete with CCSI, provided that NOVA in rendering such services does not breach
paragraphs 2,3,6 or 7 of this Agreement. Should NOVA develop, assemble or
manufacture for another company or legal entity any instrument or system for the
measurement of color
3
<PAGE>
("Other Manufacture") NOVA shall ensure that no personnel, documentation, or
expertise of NOVA or NOVA'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 NOVA's policies and procedures for NOVA's
proprietary manufacturing processes and NOVA's software for NOVA's proprietary
manufacturing processes in NOVA's possession prior to the date of this Agreement
or developed by NOVA 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 NOVA 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 NOVA from such development,
manufacturing and/or selling activities provided that NOVA 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 NOVA, or became publicly available after the
disclosure by CCSI to NOVA through no act or fault of NOVA, (b) was in NOVA's
possession prior to the time of disclosure by CCSI to NOVA, otherwise than as a
result of NOVA's breach of any legal obligation, as proven by NOVA's written
records made prior to the time of disclosure by CCSI to NOVA, or (c) becomes
known to NOVA through disclosure by a third party who had possession of that
information prior to the time of disclosure by that third party to NOVA, as
proven by that third party's written records made prior to the time of
disclosure by that third party to NOVA and whose disclosure to NOVA is not a
breach
4
<PAGE>
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 NOVA, or became publicly available after the disclosure by
CCSI to NOVA through no act or fault of NOVA or (b) was in NOVA's possession
prior to the time of disclosure by CCSI to NOVA, otherwise than as a result of
NOVA's breach of any legal obligation, as proven by NOVA's written records made
prior to the time of disclosure by CCSI to NOVA.
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 NOVA or became publicly
available after the development by NOVA through no act or fault of NOVA, or (b)
was in NOVA's possession prior to the date of this Agreement, as proven by
NOVA's written records made prior to the date of this Agreement.
7. NOVA 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 NOVA pursuant to this Agreement or the
Derivative Confidential Information made, conceived, reduced to practice or
developed by NOVA 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) NOVA 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)
5
<PAGE>
NOVA 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 interest in and to all such
inventions, works of authorship, discoveries, developments, improvements, patent
applications, patents, trademarks and copyrights.
8. NOVA agrees that it has no right, title or interest with
respect to the Confidential Information disclosed by CCSI to NOVA pursuant to
this Agreement or the Derivative Confidential Information developed by NOVA, 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 NOVA pursuant to this
Agreement or the Derivative Confidential Information made, conceived, reduced to
practice or developed by NOVA 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 NOVA of any license or right, express or implied, with respect to the
Confidential Information disclosed by CCSI to NOVA pursuant to this Agreement or
the Derivative Confidential Information developed by NOVA.
10. In the event that NOVA 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), NOVA will, to
the extent it is aware of such fact, provide
6
<PAGE>
CCSI with prompt written notice of such requirement so that CCSI may seek (with
the cooperation of NOVA) 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 not obtained, NOVA 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
NOVA, except as may be provided elsewhere in this Agreement, without the written
consent of CCSI.
7
<PAGE>
14. This Agreement shall be construed in accordance with and
governed by the laws of the Commonwealth of Massachusetts, without reference to
its choice of law.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed as of the date first written above.
Chromatics Color Sciences
International, Inc. NOVA Biomedical Corp.
By: ____________________________ By: _____________________________
Name: Darby S. Macfarlane Name: John Wallace
Title: Chief Executive Officer Title: Chief Operating Officer
8
<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, its source and object codes, 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 calibration and verification
standards and their mode of operation.
4. CCSI's proprietary specification of each [*].
5. CCSI's proprietary specification including [*] and their mode of
operation.
6. CCSI's proprietary specifications of the sensor for the [*] devices and
its mode of operation.
7. CCSI's proprietary color measuring [*] parts or components from CCSI's
supplier.
Provided however, this Exhibit C does not include [*].
1
