SUPPLY AGREEMENT AASTROM BIOSCIENCES, INC.

 

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                                                                   EXHIBIT 10.77

 

                                SUPPLY AGREEMENT

 

                                     BETWEEN

 

                            AASTROM BIOSCIENCES, INC.

 

                                        AND

 

                              MOLL INDUSTRIES, INC.

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                                SUPPLY AGREEMENT

 

      THIS SUPPLY AGREEMENT (this "Agreement") is made effective as of February

28, 2004 (the "Effective Date") by and between Aastrom Biosciences, Inc., a

Michigan corporation with principal offices at Domino's Farms, Lobby L, Ann

Arbor, Michigan 48106 ("AASTROM") and Moll Industries, Inc., a Delaware

corporation with offices at 13455 Noel Rd., Suite 1420, Dallas, TX 75240 37086

("MOLL").

 

                              W I T N E S S E T H:

 

      WHEREAS, AASTROM is developing medical devices to implement proprietary

cell production processes for cellular therapy procedures;

 

      WHEREAS, such development work has led to the development by AASTROM of

the AastromReplicell System(R), a proprietary medical device for the production

of human stem cells (the "AastromReplicell System"), consisting in part of

single-use, sterile culture chambers;

 

      WHEREAS, MOLL has expertise and experience in plastic injection molding,

in general, and in the production and assembly of plastic parts for products

that are classified as medical devices under the regulations of the U.S. Food

and Drug Administration (the "FDA"), in particular;

 

      WHEREAS, AASTROM and MOLL were parties to the Prior Agreement (as defined

below) under which MOLL manufactured and supplied Cell Cassettes (as defined

below) and Components (as defined below) to AASTROM that were manufactured in

accordance with the Specifications (as defined below);

 

      WHEREAS, in consideration of MOLL's expertise and stated intention to be a

cost effective and a capable manufacturer and supplier of Cell Cassettes and

Components, AASTROM desires for MOLL to be a manufacturer of such Cell Cassettes

and Components throughout the Term of this Agreement, and MOLL desires to be

such supplier for such period.

 

      NOW, THEREFORE, in consideration of these premises and the mutual

undertakings hereinafter set forth, and for other good and valuable

consideration given by AASTROM and MOLL to each other, the receipt and

sufficiency of which is hereby acknowledged, AASTROM and MOLL, intending to be

legally bound, agree as follows:

 

SECTION 1. DEFINITIONS.

 

      The terms set forth below when used with capital letters shall have the

meanings set forth below. Other terms are defined in the Sections of this

Agreement pertinent to their definitions.

 

(a)    "The Act"                The Act shall mean the Federal Food, Drug and

                               Cosmetics Act, 21 U.S.C. 301, et seq. (1938), as

                              amended, and the rules and regulations promulgated

                              thereunder.

 

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(b)    "Cell Cassette(s)"       Cell Cassette shall mean a single-use, sterile

                              cell culture chamber consisting of plastic

                              injection molded and other parts made, assembled

                              and encased in a plastic injection molded cassette

                              manufactured in accordance with the DMR and as

                              more particularly described in the Specifications

                              and used in the AastromReplicell System or similar

                              products made by or for AASTROM, and all

                              improvements and modifications to Components

                              thereof that are intended to replace the then

                               current Components.

 

(c)    "Component(s)"           Component shall mean any component part of a Cell

                              Cassette (e.g., the individual injection molded

                              pieces, bioreactor assembly or fluid pathway

                              tubing assembly) as more particularly described in

                              the Specifications.

 

(d)    "Confidential

      Information"             Confidential Information shall mean any and all

                               technical and non-technical information,

                              (including information disclosed by AASTROM under

                              the terms of the Confidentiality Agreement between

                              the Parties dated December 22, 1993 or in

                              furtherance of the Prior Agreement), data,

                              techniques, manufacturing procedures, know-how,

                              discoveries, inventions, trade secrets,

                               improvements or innovations that are maintained as

                              proprietary and confidential by the Party owning

                              or controlling the same; but Confidential

                              Information shall not include information that (i)

                              the Recipient can clearly demonstrate to have been

                              in its possession at the time Confidential

                              Information is disclosed to it, provided that,

                              such information is not known by the Recipient to

                              be subject to another confidentiality agreement

                              with, or under other obligation of secrecy to, the

                              Disclosing Party or another party, or (ii) becomes

                              generally available to the public other than as a

                              result of a disclosure by the Recipient, its

                               agents or employees, or (iii) becomes available to

                              the Recipient on a non-confidential basis from a

                              source other than the Disclosing Party, provided

                              that, the Recipient does not know, or have reason

                              to know, that such source is bound by a

                              confidentiality agreement with, or other

                              obligation of secrecy to the Disclosing Party or

                              another party, or (iv) the Recipient can clearly

                              demonstrate to have developed itself independent

                              of the Confidential Information, or (v) the

                               Disclosing Party consents in writing may be

                              disclosed by the Recipient.

 

(e)    "Disclosing Party"       Disclosing Party shall mean the Party disclosing

                              Confidential Information.

 

(f)    "DMR"                    DMR shall mean the Device Master Record for the

                              Cell Cassette consisting of a compilation of

                              records containing the procedures and

                              specifications for a finished device including the

                              complete

 

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                              manufacturing procedures and specification with

                              the necessary quality assurance requirements and

                              labeling and packaging requirements.

 

(g)    "Equipment"              Equipment shall mean the molds and other equipment

                              listed on Appendix I, annexed hereto, and

                              categorized as being provided either by AASTROM or

                              by MOLL. AASTROM Equipment shall also include any

                              equipment procured by MOLL for manufacture of the

                               Cell Cassettes in accordance with Section

                              21(b)(1).

 

(h)    "cGMPs"                  cGMPs shall mean the then-current Good

                              Manufacturing Practices (QSR) set out in 21 CFR

                               Part 820, et seq. applicable to a Class III

                              medical device that -- --- govern the methods used

                              in, and the facilities and controls used for the

                              design, manufacturing, packaging, labeling,

                              storage, installation, and servicing of all

                              finished devices intended for human use.

 

(i)    "Initial Term"           Initial Term shall have the meaning set forth in

                              Section 17.

 

(j)    "ISO"                    ISO (the International Standards Organization) is

                              a worldwide federation of national standards

                              bodies (ISO member bodies).

 

(k)    "Party or "Parties"      Party shall mean either AASTROM or MOLL, and

                              Parties shall mean both AASTROM and MOLL.

 

(l)    "Prior Agreement"        Prior Agreement shall mean that certain

                               Collaborative Supply Agreement dated December 16,

                              1996 between the Parties.

 

(m)    "Recipient"              Recipient shall mean the Party receiving

                              Confidential Information.

 

(n)    "Requirements"           Requirements shall mean the rolling four-month

                              firm forecast to be provided by AASTROM under

                              Section 3(a), below, of AASTROM's then-current

                              requirements for Cell Cassettes during the Term.

 

(o)    "Shipment Lot"           On a quarterly basis, concurrently with the

                              provision by AASTROM of its rolling twelve-month

                              forecast, the Parties shall mutually review and by

                              mutual written consent will specify the number of

                              Cell Cassettes that constitute a Shipment Lot, for

                              the purchase order to be submitted by AASTROM

                               during such quarter, considering volume

                              requirements and anticipated delivery schedules.

                              The mutually agreed upon quantity constituting the

                               Shipment Lot shall be reflected in each purchase

                              order submitted by AASTROM.

 

(p)    "Specifications"         Specifications shall mean the written

                              specifications for the manufacture of Cell

                               Cassettes and Components (including without

                              limitation the criteria for labeling and

                              packaging, including

 

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                               graphics, and quality assurance requirements)

                              annexed hereto as Appendix II, as such

                              Specifications may be changed pursuant to Section

                              6, below.

 

(q)    "Term"                   Term shall mean the period of time from the

                              Effective Date until the date upon which this

                              Agreement expires or is earlier terminated

                              pursuant to Section 17, below.

 

(r)    "UCC"                    UCC means the Uniform Commercial Code as enacted

                              by the State of New York and in effect during the

                              Term.

 

SECTION 2. PURCHASE AND SALE.

 

      AASTROM shall purchase from MOLL AASTROM's Requirements of Cell Cassettes,

and MOLL shall manufacture, assemble and sell to AASTROM all of AASTROM's

purchase orders for Cell Cassettes and Components, subject to the terms and

conditions of this Agreement including, without limitation, AASTROM's rights to

terminate this Agreement in whole or in part pursuant to Sections 6 or 17,

below, and its rights to utilize alternate suppliers of Cell Cassettes and

Components pursuant to Sections 3(b), 4(d), 17 or 18 below.

 

SECTION 3. FORECASTS; DELIVERY; SHIPMENT.

 

(a) Rolling Forecasts. At the beginning of each calendar quarter during the

Term, AASTROM shall provide MOLL with a rolling forecast of the anticipated

quantity of each model of Cell Cassettes AASTROM intends to purchase from MOLL

during each month of the following twelve-month period. The quantities given for

the first four months of each twelve-month rolling forecast shall be firm orders

for the immediately succeeding four months (i.e., a forecast given on January

1st would be deemed firm for the period May 1 - August 31) and AASTROM shall

issue its purchase order therefor and note on such purchase order the number of

units it will require for lot testing in accordance with Section 3(g), the

method of shipment and AASTROM destination for delivery, the scheduled delivery

date and the required documentation to be included with the Shipment Lot. MOLL

shall have no obligation to purchase materials or supplies without a purchase

order from AASTROM except as is necessary to meet AASTROM's forecasted

requirements. AASTROM shall pay MOLL for labor, materials, supplies and direct

costs (as set forth in Appendix III) expended by MOLL to fill purchase orders by

AASTROM for Cell Cassettes in the event that they are not used to fulfill such

purchase orders. Quantities forecasted beyond the four-month firm-order period

are for planning purposes only.

 

(b) No Limit on Sales. MOLL has no right to limit its sales of Cell Cassettes or

Components to AASTROM to a maximum number of units for any period; provided

that, the volume of Cell Cassettes and Components ordered is reasonable in the

light of forecasted amounts and previous delivery schedules. MOLL shall have

adequate capacity to meet AASTROM's then-current total firm-order requirements

as forecasted pursuant to Section 3(a), above. MOLL will take all steps to put

in place additional adequate capacity, if needed, to meet AASTROM's future

requirements as forecasted by AASTROM in accordance with Section 3(a), above;

provided that, the Parties shall cooperate to afford a reasonable transition to

the availability of such additional capacity. Notwithstanding any other

provision of this Agreement (specifically including Sections 2 and

 

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18), if MOLL is unable to meet AASTROM's requirements for Cell Cassettes

(including any request for an increase in production by AASTROM at any time

during the Term of this Agreement), AASTROM may thereafter utilize one or more

third party manufacturers for all or a portion of AASTROM's requirements for

Cell Cassettes. Furthermore, even if Moll is unable to produce entire Cell

Cassettes, Moll shall be obligated to supply components to AASTROM's Alternate

Supplier.

 

(c) No Liens. MOLL will deliver Cell Cassettes to AASTROM free and clear of all

liens, claims and encumbrances.

 

(d) Delivery. MOLL shall deliver Cell Cassettes, and upon AASTROM's request, any

certifications, manufacturing records and test reports as are required for

AASTROM to accept or reject Cell Cassettes under this Section 3, pursuant to

delivery schedules in AASTROM's purchase orders; provided, that, such schedules

are reasonable in light of forecasted amounts and previous delivery schedules.

Delivery schedules in AASTROM's purchase orders shall not be less than fifteen

(15) days after the date of submission by AASTROM of the purchase order without

MOLL's consent. In the event that AASTROM submits a purchase order in excess of

its forecasted requirements for said quarter, MOLL agrees to employ good faith

efforts to supply such larger quantity of Cell Cassettes within such a

reasonable period of time, as the Parties shall mutually agree. MOLL shall not

deliver Cell Cassettes more than ten (10) days prior to scheduled delivery dates

without AASTROM's prior consent. MOLL shall not be responsible for failure to

meet agreed-upon delivery dates if due to reasons of force Majeure as set forth

in Section 20, below or if delays are caused by Aastrom-specified

material/component suppliers or service providers outside of Moll's control.. In

the event of partial failure to deliver, MOLL will have the right to receive

payment pro rata for Cell Cassettes in fact delivered and not rejected by

AASTROM under Section 3(f), below.

 

(e) Shipment. MOLL shall make shipment to AASTROM's designated U.S. locations,

in accordance with AASTROM's purchase orders, F.O.B. destination. Risk of loss

or damage in transit shall remain with MOLL until delivered to the destination

specified by AASTROM. AASTROM shall notify MOLL within five (5) business days

after receipt if there are any shortages or evidence of damage in transit and

will cooperate with MOLL in any claim for loss or damage in transit that MOLL

makes against a carrier. The method and route of shipment are at AASTROM's

discretion as set forth in its purchase order. MOLL will prepay all costs,

insurance premiums, freight and other expenses incurred in shipment until

delivered to the destination specified by AASTROM and such shipping costs shall

be reimbursed by AASTROM at MOLL's cost without mark-up. If AASTROM defaults in

payment for Cell Cassettes, MOLL may suspend further shipments; however,

continuation of shipments does not constitute a waiver of such default.

 

(f) Acceptance Procedures. Delivery of each Cell Cassette unit shall be deemed

accepted by AASTROM unless MOLL is notified in writing of AASTROM's rejection of

such delivery within ninety (90) days after the delivery date (the "Acceptance

Period") due to non-conformance with the Specifications. In such case, AASTROM

shall provide MOLL with a written notice of rejection setting forth in detail

the reason for rejection and return the rejected Shipment Lot, or portion

thereof, to MOLL at MOLL's expense for repair or replacement. Upon receipt of

AASTROM's notice of rejection and return of such Shipment Lot of part thereof,

 

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MOLL shall (i) within ten (10) business days thereafter, provide AASTROM with a

root-cause analysis and suggested corrective/preventative actions; and (ii)

diligently replace the nonconforming Shipment Lot or part thereof by delivery of

non-defective conforming units within a reasonable time (not to exceed thirty

(30) calendar days after notification) and endeavor to resolve the issues

related to the rejection. MOLL shall credit against the purchase price of Cell

Cassettes and Components, AASTROM's out of pocket costs of testing, including,

without limitation, destructive testing of failed Shipment Lots. AASTROM shall

invoice MOLL for such costs, which shall be subject to reasonable audit by MOLL

or its representative. MOLL reserves the right, at MOLL's expense, to have one

or more representatives present at any inspection conducted by AASTROM and to

verify the results of any such inspection and rejection of Shipment Lots. MOLL

shall have the right to use conforming units or parts therefrom as replacement

units provided that such units or parts therefrom are in conformance with

Specifications. In the event MOLL cannot resolve all nonconformities and deliver

conforming replacement Cell Cassettes as required herein MOLL shall issue to

AASTROM a credit for the price of each unit rejected and AASTROM may pursue its

remedies pursuant to this Agreement, including but not limited to Section 17,

below. AASTROM shall pay for repair or replacement for defective Cell Cassettes

(or shall not receive a credit therefor) only to the extent that rejection is

due to a defective component supplied directly by AASTROM. In the event that

MOLL's delivery of Cell Cassettes fails to conform to the quantity specified in

AASTROM's purchase order, AASTROM may, but shall not be obligated to, accept

such partial shipment and MOLL shall deliver any shortfall in delivery quantity

within five (5) calendar days. Notwithstanding the foregoing, AASTROM agrees to

accept partial shipments from MOLL provided that the quantity delivered is at

least ninety percent (90%) of the quantity specified in AASTROM's purchase

order, but only if AASTROM may readily use such partial shipment for its

intended purposes, and AASTROM also agrees to use commercially reasonable

efforts to accept partial shipments of quantities of less than ninety percent

(90%) of the quantity specified in AASTROM's purchase order, but only if AASTROM

may readily use such partial shipment for its intended purpose(s). Any

acceptance of partial shipments by AASTROM shall not be deemed to waive

AASTROM's remedies under Section 17(d) and AASTROM shall be entitled to a

payment credit reflecting the extent of such unit shortfall under a partial

shipment. In the event MOLL fails to deliver any shortfall in quantity within

such five (5) day period, AASTROM may pursue its remedies pursuant to this

Agreement.

 

(g) Lot Testing. During the Acceptance Period, AASTROM shall have the right, but

not the obligation, to conduct lot testing on a statistically significant number

of units from each Shipment Lot. At the time of submission of AASTROM's purchase

orders in accordance with Section 3(a), AASTROM shall note on such purchase

order the number of units it requires for lot testing. Notwithstanding Section

4(a), MOLL agrees to provide such testing units to AASTROM at MOLL's cost to

manufacture such units (without mark-up) provided that the number of units

requested does not exceed 10% of the number of units ordered, and provided

further that any units provided by MOLL for lot testing shall not be resold by

AASTROM. Any lot testing conducted by AASTROM pursuant to this Section shall not

be deemed to relieve MOLL of any of its warranties or obligations hereunder.

 

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SECTION 4. PRICES.

 

(a) Cell Cassette Prices. Prices for Cell Cassettes purchased during the Term

shall be determined as shown in Appendix III, hereto. Prices are exclusive of

all taxes of any nature imposed by any governmental authority, except taxes

imposed on the income or profits of MOLL. All such taxes shall be for AASTROM's

account, whether or not collected, advanced or paid by MOLL, and shall be paid

by AASTROM, without mark-up, upon MOLL's invoice, unless AASTROM timely provides

proper tax exemption documents.

 

(b) Component Order and Prices. From time to time throughout the Term, AASTROM

may submit to MOLL purchase orders for Components and MOLL shall manufacture and

sell to AASTROM such Components in accordance with the terms of this Agreement

for the manufacture of Cell Cassettes, as they may be applicable, excepting only

the provisions of Sections 3(a) with regard to references to AASTROM's

obligation to forecast and purchase its specific Requirements from MOLL. Prices

for any Components purchased by AASTROM during the Term shall be quoted

separately by MOLL at the time of order with such quoted price not to exceed

MOLL's actual manufacturing costs to produce such Components, multiplied by the

applicable Mark-Up Rates (as set forth in Appendix III) then in effect for the

forecasted annual volume of Cell Cassettes to be purchased by AASTROM.

 

(c) Best Diligent Efforts. At all times during the Term of this Agreement, MOLL

shall use its best diligent efforts to manufacture Cell Cassettes, procure

components and perform other services as provided in this Agreement at the

lowest cost reasonably practicable. Furthermore, subject to Section 21 below, it

is the explicit understanding of the parties that MOLL will, on a proactive

basis and at no additional cost to AASTROM, seek out additional methods and

means that will lead to reduced costs, quality improvements and increased

efficiency with regard to the manufacture of Cell Cassettes. AASTROM will

reasonably cooperate with MOLL on such cost saving efforts.

 

(d) Cost Competitive. If AASTROM reasonably believes that MOLL is not remaining

cost competitive, AASTROM may obtain a quote from another qualified supplier to

manufacture the Cell Cassettes (AASTROM will provide MOLL with the source and

supporting information for the price quote for MOLL's review). If such a quote

is ten percent (10%) or more lower than MOLL's price under this Agreement, MOLL

shall either reduce the price to the quoted price within a reasonable time

period (not to exceed sixty (60) days) or AASTROM may thereafter utilize one or

more third party manufacturers for all or a portion of AASTROM's Requirements

for Cell Cassettes (notwithstanding the provisions of Sections 2 and 18). In

order to be considered "qualified", an alternate supplier must be an

established, viable medical contract manufacturer with a multi-year track record

of good performance with respect to FDA regulations, cGMP's, and ISO

certification and must guarantee the new lower price throughout the period

covered by this contract. Aastrom will be limited to a maximum of two of these

competitive price challenge events during the period covered by this contract

and must have placed orders for at least 150 cassettes/month for six consecutive

months before initiating the first competitive price challenge.

 

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SECTION 5. PAYMENT AND COLLECTION.

 

(a) Payment. AASTROM shall pay MOLL the full amount of the purchase price of

Cell Cassettes upon the due date set forth on MOLL's invoice; provided, however

invoices for Cell Cassettes rightfully rejected by AASTROM shall not be due

unless and until repair or replacement units are provided by MOLL. With respect

to Cell Cassettes and Components, terms of payment shall be net 30 days from the

date of delivery by MOLL pursuant to Section 3, above, and the submission by

MOLL of an itemized invoice in the form attached hereto in Appendix IV including

the purchase price for such Cell Cassettes calculated in accordance with

Appendix III, together with such supporting documents as AASTROM may reasonably

request. Accounts unpaid beyond their due date will bear interest at 1% per

month on the unpaid balance. If payment by AASTROM is improperly withheld and

MOLL retains an agency and/or attorneys to collect amounts overdue, all

collection costs, including without limitation, reasonable attorneys' fees,

shall be payable by AASTROM.

 

(b) Deductions from Invoice. AASTROM will promptly notify MOLL of any disputed

invoice. It is the intention of the Parties that disputed invoices will be

settled by the Parties in good faith negotiations prior to the invoice due date.

However, unless MOLL issues a credit memo, or unless AASTROM rightfully rejects

Cell Cassettes or notifies MOLL of its acceptance of a partial shipment pursuant

to Section 3(f), AASTROM shall make full payment of MOLL invoices for accepted

Cell Cassettes without deduction and regardless of any claim, counterclaim or

setoff AASTROM may have against MOLL, except as such setoff may otherwise be

permitted under Appendix III, Section 3(f) or Section 12(d). Any such claim,

counterclaim or setoff shall be resolved exclusively as a separate matter

pursuant to Section 24, below.

 

(c) Relief for Non-Payment. In the event payment for Cell Cassettes becomes past

due, MOLL will have the option, in addition to any other rights it may have

under the UCC or otherwise, in its sole, absolute discretion, to cancel or delay

shipment or orders of AASTROM previously accepted, to declare all sums owing

from AASTROM to be immediately due and payable, and to cancel credit previously

extended.

 

SECTION 6. SPECIFICATIONS, DMR AND CHANGES.

 

(a) Specifications. MOLL shall manufacture and assemble Cell Cassettes to the

then-current Specifications and no part of MOLL's responsibility may be

subcontracted without the prior written consent of AASTROM.

 

(b) Establish DMR. As further described in Section 9, MOLL shall prepare and

maintain a DMR covering the manufacture of the Cell Cassettes from the

Specifications, other requirements and technical information to be provided by

AASTROM, and manufacturing and quality processes and procedures established by

MOLL. AASTROM shall review and approve the DMR to assure that it accurately

reflects the Specifications.

 

(c) Specification and DMR Changes. Notwithstanding any provision of this

Agreement to the contrary, MOLL shall not have the right to change the

Specifications without the prior written consent of AASTROM. If AASTROM desires

to change the Specifications or any part of the DMR, AASTROM shall submit the

proposed change to MOLL, setting forth a detailed

 

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description and drawings thereof. Subject to Section 6(d), the Parties shall

work in good faith as expeditiously as is reasonable to reach a determination on

the effect that such change will have, if any, on quantities, quality criteria,

price and delivery dates.

 

(d) Implementation of Specifications Changes. If AASTROM proposes a change to

the Specifications and if such change is currently able to be manufactured, then

MOLL will either (i) implement such change into its manufacture of the Cell

Cassettes and/or Components, with an appropriate increase or decrease to the

price thereof based upon the effect of such change, or (ii) refuse to implement

such change, in which case AASTROM shall have the right, without liability, in

accordance with Section 17(b), below, to terminate this Agreement on a

prospective basis for all Requirements incorporating the changed Specifications

that have not yet been submitted on purchase orders. The Parties will cooperate

to implement changes to Specifications in an orderly manner and to afford MOLL a

reasonable transition time to the extent necessary to effect such Specification

changes.

 

(e) Other Changes. AASTROM may cancel or change quantities or delivery dates

under any purchase order upon terms that make MOLL whole for its costs in

respect of materials and work-in-process as set forth in Section 3(a).

 

(f) Returns. Except as expressly provided in this Agreement including, without

limitation, as provided in Sections 3(f) and 12(a), below, in no case may Cell

Cassettes be returned to MOLL without first obtaining MOLL's written consent

which will not be unreasonably withheld.

 

SECTION 7. MOLL'S FACILITIES AND MANUFACTURING ENVIRONMENT.

 

      With respect to its manufacturing facilities and assembly obligations

applicable to the production of Cell Cassettes, MOLL shall:

 

(a) be registered with the FDA as a Medical Device Establishment to the extent

required by the Act. As such, MOLL will maintain facility registrations and

inspection records required by the FDA;

 

(b) have and maintain a Class 100,000 certified assembly area operating at less

than 20,000 particulate-count and arrange for annual certification to be

conducted by an independent testing service. A routine monitoring plan, to

include at least monthly testing, will also be established and performed by MOLL

(the foregoing routine monitoring plan shall be subject to AASTROM's approval,

which approval shall not be unreasonably withheld);

 

(c) maintain adequate personnel and facilities, including but not limited to

sufficient engineering support and assembly resources to support the manufacture

of Cell Cassettes ordered by AASTROM. MOLL will provide AASTROM annually with a

project plan to meet AASTROM's forecast Requirements and AASTROM will provide

timely comments thereon;

 

(d) manufacture and assemble all of the Cell Cassettes in compliance with GMPs

as required by the Act; provided that, AASTROM, as the owner of the DMR, shall

have the responsibility for approving the DMR and any changes thereto as

established by MOLL in accordance with Section 9, below;

 

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(e) shall be certified under an acceptable international quality management

system (e.g., ISO 13485 or 13488) and at all times during this Agreement shall

maintain their quality management system certification;

 

(f) together with the Equipment to be provided by AASTROM, provide and maintain

adequate manufacturing Equipment to perform its obligations under Section 6 of

this Agreement;

 

(g) have and maintain adequate procedures for procurement, acceptance, supplier

quality audits and material control of all component parts to be used or

incorporated in Cell Cassettes;

 

(h) report to AASTROM in writing any known adverse events, circumstances or

potential problems relating to MOLL's FDA registration or its EC certifications

referred to in Section 7(e), above;

 

(i) allow AASTROM and its agents, at their own cost and risk, to review and

inspect MOLL's facilities, FDA compliance files and correspondence to and from

the FDA and notified bodies applicable to this Agreement; and

 

(j) maintain files of all Cell Cassette-related complaints received by MOLL from

AASTROM and conduct failure investigations, including establishing written

records with conclusions and corrective measures, for all such Cell Cassettes

complaints involving a failure to meet Specifications.

 

SECTION 8. MOLL MANUFACTURING PROCEDURES.

 

      MOLL's obligation to manufacture Cell Cassettes shall be to deliver Cell

Cassettes as described in Section 6(a), above and in accordance with the DMR.

Without expanding or diminishing that obligation, and for purposes of

illustration only, it is contemplated by the Parties that such obligation shall

encompass:

 

(a) injection molding and processing the main Components of the bioreactor

device for the Cell Cassette including any sonic or RF welding and vacuum plasma

surface treatment operations;

 

(b) assembling the aforesaid bioreactor devices utilizing fixtures provided by

AASTROM, or alternative fixtures as developed;

 

(c) injection molding components of the Cell Cassette fluid pathway tubing

assembly;

 

(d) assembly of the fluid pathway tubing assembly;

 

(e) injection molding non-fluid contact enclosure components for the Cell

Cassette using molds supplied by AASTROM;

 

(f) procuring the waste reservoir and media supply enclosure from an

AASTROM-approved source;

 

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(g) assembling the enclosure, the waste reservoir and media supply enclosure,

the bioreactor and the fluid pathway tubing assembly described in Sections 8(d),

(e), (b), (c), and (f) above, respectively;

 

(h) performing testing in accordance with the DMR;

 

(i) validating Cell Cassettes to the applicable sterilization assurance level;

and

 

(j) performing on-going vendor audits and validation procedures, as required by

GMPs, and conducting a reasonable incoming inspection of purchased components

for compliance with Specifications.

 

SECTION 9. OTHER RESPONSIBILITIES.

 

(a) Other Responsibilities of MOLL. In connection with MOLL's manufacturing and

assembly obligations under this Agreement, MOLL shall:

 

      (1) prepare and maintain the DMR in accordance with the then-current

manufacturing Specifications and the criteria for testing the Cell Cassette, all

to be provided by AASTROM. Manufacturing documentation shall be owned by AASTROM

and shall consist of: (i) the DMR documentation; (ii) documentation of

Specifications and drawings for Cell Cassette parts to be provided by MOLL or

acquired by MOLL from approved vendors; (iii) test and acceptance procedures and

criteria documentation; (iv) subassembly specifications, drawings and

requirements documentation; (v) manufacturing instructions and procedures

documentation; and (vi) quality instructions and procedures documentation;

 

      (2) prepare the DMR as set forth in Section 6(b), above, and maintain the

DMR in accordance with a documented change management system reasonably

acceptable to AASTROM which system shall include the approval of all Cell

Cassette manufacturing changes by AASTROM prior to implementation by MOLL. The

foregoing change management system documentation shall also include the history

of all changes including validation and/or rationale and shall be owned by

AASTROM;

 

      (3) shall conduct or subcontract the required processing and laboratory

testing as required by AAMI TIR 27:2001 for quarterly dose audits to maintain

the approved sterilization validation of the cell cassettes.

 

      (4) to the extent required for submittal by AASTROM to the FDA or other

regulatory authorities in connection with the Cell Cassette, prepare a detailed

description of MOLL's manufacturing methods, processes, procedures and facility

applicable to the manufacture and testing of the Cell Cassette as requested by

AASTROM;

 

      (5) provide engineering and other support for validation of the Cell

Cassette manufacturing process, for sterility assurance, and for completing

changes to the Cell Cassette design or manufacturing processes. AASTROM may

request such engineering and other support by submitting a written statement of

work executed by a designated AASTROM representative. MOLL shall respond to the

request within one week from receipt of the request, and shall prepare a

proposal to complete the work. AASTROM shall issue its written authorization to

 

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complete the proposed work. Any changes to be implemented in connection with the

work shall be completed in accordance with Section 6. AASTROM has the right to

review the implementation of any changes performed by MOLL, and has the right to

reject any such implementation of changes that AASTROM deems to be detrimental

to the quality of the product;

 

      (6) use reasonable efforts to train AASTROM's technical representatives at

MOLL's facilities, at AASTROM's request and expense from time to time during the

Term in all applicable procedures for manufacture of the Cell Cassettes. Such

representatives shall sign reasonable non-disclosure agreements in accordance

with Section 16(b) consistent with the terms of this Agreement to protect MOLL's

Confidential Information. AASTROM and such representatives shall also comply

with all of MOLL's reasonable regulations with regard to access by visitors

during such training sessions and MOLL reserves the right to deny access to its

facilities by non-AASTROM employees provided that such access shall not be

unreasonably withheld;

 

      (7) develop a quality measurement system acceptable to AASTROM and report

in a manner reasonably satisfactory to AASTROM on a monthly basis with regard to

MOLL's progress. This system shall include, at a minimum, (i) metrics on the

percent of non-conforming Cell Cassettes, including trending data; (ii) the

percentage of the top five defects; and (iii) a FRACAS (Failure Report Analysis

and Corrective Action System) detailing the root-cause analysis, corrective

actions taken, and proof of implementation; and

 

      (8) perform periodic onsite audits of suppliers of components, assemblies,

or services to Moll for manufacture of Cell Cassettes where such supplier is

deemed to be of substantial importance, such as due to being a sole source

supplier, or providing a critical component or service, or providing a complex

component or assembly. Each on-site audit will be scheduled as required, but not

less than annually. Appendix V specifies the current list of suppliers requiring

on-site audit, which can be revised from time to time by mutual agreement

between the two parties.

 

(b) New Products. From time to time during the Term, AASTROM may provide written

notification to MOLL of AASTROM's desire to have MOLL manufacture a product

other than the Cell Cassette or its Components. Following such notification, the

parties shall negotiate in good faith and attempt to reach mutual agreement on

the terms and conditions governing the manufacture and supply of such new

product, including development obligations, pricing and supply terms.

 

SECTION 10. EQUIPMENT.

 

(a) Ownership. The Parties acknowledge that the Equipment is the sole and

exclusive property of the Party indicated on Appendix I as such Appendix may be

augmented by mutual agreement of the Parties from time to time. Equipment shall

be located at the premises of MOLL in SeaGrove, North Carolina or other

facilities of MOLL as the Parties may agree. Except for the sole purpose of

performing maintenance, MOLL shall relocate none of the Equipment owned by

AASTROM without the prior written consent of AASTROM. It is understood that

AASTROM shall have the right to remove the Equipment it owns from MOLL's

facilities at any time upon

 

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reasonable notice to MOLL, except that if such removal shall impede MOLL's

performance under this Agreement, MOLL shall so notify AASTROM and such

Equipment shall not be removed until the condition of such impedance shall no

longer pertain. Notwithstanding the foregoing, in the event that MOLL suspends

MOLL's performance by reason of force Majeure or default, AASTROM shall be

entitled to remove its Equipment to enable AASTROM to continue to manufacture

Cell Cassettes. Upon removal of its Equipment, AASTROM shall pay MOLL its

reasonable costs of disassembly and freight to a location of AASTROM's choice.

AASTROM shall return such Equipment to MOLL's facilities upon MOLL's

demonstration (to the extent it can reasonably do so without the use of such

Equipment) to AASTROM's reasonable satisfaction of MOLL's capability to resume

manufacture of the Cell Cassettes. Equipment added to Appendix I shall be owned

by the Party that paid for it or in accordance with Section 21(b), as

applicable. Upon expiration or earlier termination of this Agreement, and the

payment by AASTROM of all outstanding invoices, MOLL shall, within thirty (30)

days thereafter, return all of AASTROM's Equipment to AASTROM's facilities (or

other location designated by AASTROM in writing) with all r