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Exhibit 10.1
Portions of this Exhibit were omitted and have been filed
separately with the Secretary of the Commission
pursuant
to the Company’s application requesting confidential
treatment under Rule 406 of the Securities
Act
SUPPLY AGREEMENT
This
Supply Agreement (“
Agreement ”)
is made and entered into as of the 14th day of September, 2007 (the
“Effective Date”), by and between
Membrana GmbH, a
company organized under the laws of Germany (hereinafter called
“
Membrana ”),
and
Arbios Systems, Inc. a
corporation organized under the laws of Delaware (hereinafter
called “
Arbios ”).
The parties agree as follows:
1.
Definitions. As
used herein the following terms shall have the following
meanings:
“
Affiliate ”
shall mean any person or entity controlling, controlled by or under
common control with the party in question.
“Product” or “Products”
shall
mean Membrana’s products listed on
Exhibit A .
“Specifications” shall
mean the fiber and bundle specifications for the Products set forth
on
Exhibit B as
amended from time to time by Arbios with the reasonable consent of
Membrana. Each party shall bear its own costs with respect to any
developmental activity undertaken to arrive at modified
Specifications. Arbios acknowledges that changes to the
Specifications proposed by it may result in higher
prices.
2.
Purchase Commitments
.
2.1
From
the Sale Date (as defined below) until [***] as further
provided herein (the “
Exclusive Period ”),
Arbios agrees to purchase no less than [***] of its total
commercial requirements for membranes for use in products covered
within a claim of an issued U.S. patent that is owned by or
licensed exclusively to Arbios (as listed on
Exhibit C )
for the treatment of liver failure or sepsis anywhere in the world
(the “
Exclusive Field ”)
from Membrana up to [***] kilometers per year (the “
Requirements Cap ”).
Provided that Arbios shall have ordered at least [***] km
(cumulative) of Product during the Exclusive Period and prior to
[***] of the Sale Date, the Exclusive Period shall be extended for
[***] Provided that Arbios shall have ordered at least [***] km
(incremental) of Product prior to [***] of the Sale Date, the
Exclusive Period shall be extended for [***]. Provided that Arbios
shall have ordered at least [***] km (incremental) of Product prior
to [***] of the Sale Date, the Exclusive Period shall be extended
for [***]. Amounts in excess of the Requirements Cap or for use
outside of the Exclusive Field may be available upon
Membrana’s written approval. If Membrana declines to supply
volumes in excess of the Requirements Cap, Arbios may acquire such
volumes in the Exclusive Field from third parties. Upon the
expiration of the Exclusive Period or upon conversion of this
Agreement to a non-exclusive agreement as expressly permitted by
this Agreement, Arbios may continue to purchase Products from
Membrana until end of the term described in Section 4.1 below,
however, Arbios may also purchase membranes for use in the
Exclusive Field from third parties. If Arbios does not place an
order with Membrana for Products within [***]months of the end of
the Exclusive Period and does not order at least [***] km of
Product within any [***]months period after the end of the
Exclusive Period, Membrana may elect to terminate this Agreement
effective fifteen (15) days following written notice to Arbios of
such desired termination, unless Arbios places an order for at
least [***] km of Product within such notice period for delivery
within thirty (30) days of the order. Commencing in the third year
of the Exclusive Period, Membrana may review Arbios’
purchases over the first [***] months of each year and if it is
reasonably certain that Arbios will not achieve the minimum for
that year, Membrana may provide Arbios with written notice of its
intent to terminate the Exclusive Period for failure to meet the
minimum. If within thirty (30) days of such notice Arbios has not
provided to Membrana reasonable assurances of its ability and
intent to place orders sufficient to maintain exclusivity, Membrana
may on notice to Arbios terminate the Exclusive Period,
however if Arbios shall have met the minimum by the end of that
same year, the Exclusive Period may be reinstated upon mutual
agreement of the parties. Should Membrana terminate the Exclusive
Period early under the immediately preceding provision, Arbios may
at any time within [***]months thereafter terminate this Agreement
on one year's notice to Membrana. Three (3) months before the end
of each calendar year Arbios and Membrana will meet and discuss
previous sales volumes, market trends and share sales forecasts for
the next calendar year and prospective sales development in the
next three (3) years.
Portions of this Exhibit were omitted and have been filed
separately with the Secretary of the Commission
pursuant
to the Company’s application requesting confidential
treatment under Rule 406 of the Securities
Act
2.2
During
the Exclusive Period, Arbios agrees to apportion its orders
and requested delivery dates as much as reasonably possible so
that Arbios purchases approximately one-fourth of its annual
requirements over each three month period. The minimum order
size shall be [***] km of Product.
3.
Third Party Sales
. During
the Exclusive Period, Membrana shall not knowingly commercialize or
supply the Products specified by this Agreement or membranes with
specifications that are substantially similar to the Specifications
hereunder for use in the Exclusive Field to any third party that
will incorporate such membranes into a product whose composition,
method of manufacture or method of use falls within a claim of an
issued U.S. patent that is owned by or licensed exclusively to
Arbios (as listed on
Exhibit C )
anywhere in the world unless such product is licensed by Arbios to
the third party for the relevant use in the relevant jurisdiction.
The patents that are owned by or licensed exclusively to Arbios are
listed on
Exhibit C hereto.
During the term of this Agreement,
Exhibit C may
be updated with newly issued or licensed patents in writing from
time to time by Arbios. In addition, Membrana shall be permitted to
develop and test independently of Arbios, membranes for application
in the Exclusive Field during the Exclusive Period, provided that
in no event and at no time shall any Arbios Confidential
Information or intellectual property be used by Membrana other than
for the purpose of manufacturing and supplying Products for Arbios
hereunder. Each party shall notify the other party of any
potentially infringing products of which it becomes aware. For the
avoidance of doubt, nothing in this Agreement shall restrict either
party’s activities outside the Exclusive Field.
4.
Term; Termination
.
4.1
The
term of this Agreement shall commence upon the Effective Date
and, unless otherwise terminated as provided herein, shall
continue until the sixth anniversary of the Sale Date, where
the “Sale Date” shall be the date of first sale by
Arbios to a third party of a device containing Product for use
in the Exclusive Field or, if earlier, three months following
the date of CE mark approval of such a device for Europe (or
any other similar registration in any other jurisdiction with
population of at least 250 million persons by a regulatory
authority, whichever is given earliest). Arbios shall confirm
the first such sale date or date on which the first such
registration is received to Membrana in writing with the
relevant documents attached. If the Sale Date does not occur
by December 31, 2009, Membrana shall have the right to
terminate this Agreement upon fifteen (15) days written
notice.
4.2
This
Agreement may be terminated by a party hereto on 90
days’ prior written notice if the other party commits a
material breach and does not cure such breach within the
90-day notice period, or on 60 days’ prior written
notice in the event that the other party becomes or is
adjudged insolvent, makes an assignment for the benefit of its
creditors, has a petition filed in bankruptcy for or against
it or goes into liquidation (except for the purposes of a bona
fide amalgamation or other reorganization) or a receiver is
appointed over all or a major part of the property or assets
of that other party and such condition is not removed during
such 60-day notice period.
2
Portions of this Exhibit were omitted and have been filed
separately with the Secretary of the Commission
pursuant
to the Company’s application requesting confidential
treatment under Rule 406 of the Securities
Act
4.3
In
addition to any other remedies available under this Agreement,
Arbios shall be entitled in its sole discretion to either
terminate this Agreement or to convert this Agreement to a
non-exclusive agreement upon sixty (60) days notice given in
writing to Membrana if:
| 4.3.1 |
the
regulatory status of Membrana’s facility is such that
manufacture in accordance with the warranty set forth in Section
11.1.1 and/or in accordance with agreed delivery times is not
possible;
|
| 4.3.2 |
more
than [***] ([***]) consecutive shipments of Product contain in
excess of [***]% of Product that fails to meet the warranty
specified in Section 11.1.1;
|
| 4.3.3 |
Subject
to Section 7 below, Membrana fails to ship at least [***] percent
([***]%) of the quantity of Product to be delivered within any
[***] ([***]) day period as provided in acknowledged purchase
orders any [***] ([***]) times during the term of this
Agreement;
|
| 4.3.4 |
Subject
to Section 7 below, Membrana is late on confirmed shipment dates by
[***] days or more any [***] ([***]) times during the term of this
Agreement provided that Membrana receives a binding purchase order
from Arbios at least twelve (12) weeks before the requested
shipment date and Arbios is in compliance with Section 6.1;
or
|
| 4.3.5 |
Membrana
seeks to excuse performance hereunder due to Force Majeure for a
period of more than ninety (90) days.
|
4.4
In
addition to any other remedies available under this Agreement,
Arbios shall be entitled in its sole discretion to convert
this Agreement to a non-exclusive arrangement upon sixty (60)
days notice given in writing to Membrana if, subject to
Section 7 below Membrana is late on confirmed shipment dates
by [***] days or more [***] ([***]) consecutive times during
the term of this Agreement provided that Membrana receives a
binding purchase order from Arbios at least twelve (12) weeks
before the requested shipment date and Arbios is in compliance
with Section 6.1.
5.
Prices; Delivery Terms
.
5.1
Initial
Product prices for single order volumes of up to [***] km of
Product are set forth on
Exhibit D (the
“
Base Prices ”).
Surcharges may apply for special delivery requests and changes in
bundle configuration or other Specifications. Prices for single
order volumes of greater than [***] km of Product shall be
negotiated between the parties. If, during the term of this
Agreement, changes occur in one or more factors impacting
Membrana’s price calculation, such as costs of materials,
freight, exchange rates, energy and governmental actions, Membrana
shall be entitled to increase the Base Prices accordingly as
follows: (i) if the event giving rise to the price change occurs
between July 1 and December 31, upon the later to occur of sixty
(60) days’ prior written notice to Arbios and the next
January 1; or (ii) if the event giving rise to the price change
occurs between January 1 and June 30, upon the later to occur of
sixty (60) days’ prior written notice to Arbios and such June
30, specifying in reasonable detail the reason for the change in
price; provided that such price increases may only occur [***] per
calendar year and in no event shall the resulting prices exceed the
Base Prices multiplied by [***] ([***]) plus the cumulative
percentage change in the German Consumer Price Index (GCPI) from
the Effective Date to the date of the relevant increase. Arbios
will be deemed to accept any such price increase unless it informs
Membrana in writing within 15 days after receipt of the notice that
it will not pay the higher price, in which case Membrana may elect
to continue to fill orders after the expiration of the required
notice period at the old price or terminate this Agreement as of
the expiration of the required notice period. Neither party shall
be entitled to direct or indirect damages as a result of any such
termination.
3
Portions of this Exhibit were omitted and have been filed
separately with the Secretary of the Commission
pursuant
to the Company’s application requesting confidential
treatment under Rule 406 of the Securities
Act
5.2
Prices
and terms of delivery are FCA Membrana’s manufacturing
facility in Wuppertal, Germany (Incoterms 2000). Title and
risk of loss shall pass to Arbios upon shipment of the
Products.
5.3
Arbios
shall have sixty (60) days to inspect the Products after their
receipt. Arbios shall notify Membrana in writing of any claims
for non-conforming Products within such inspection period.
Arbios shall provide Membrana with a sample of the claimed
non-conforming Product to allow Membrana to test the Product
and determine whether it is non-conforming. If it is
determined by agreement of the parties (or in the absence of
agreement of the parties by a mutually acceptable independent
testing laboratory or consultant whose fees shall be paid by
the non-prevailing party) that the non-conformity is due to
damage to the Product (i) caused by Arbios or its agents or
(ii) which occurs subsequent to delivery of such Product to
the carrier at Membrana’s facility, Membrana shall have
no liability to Arbios with respect thereto. If the
non-conformity is caused by a breach by Membrana of the
warranty set forth in Section 11.1.1 below, Membrana shall at
Membrana’s option, (i) pay Arbios the amount of the
price paid by Arbios for such non-conforming Product, (ii)
offset the amount paid by Arbios for such non-conforming
Product against other amounts then due Membrana hereunder or
(iii) replace such non-conforming Product with conforming
Product at no additional cost to Arbios. Subject to Section
6.2, any claims with respect to non-conforming Product not
made within the 60 day inspection period shall be deemed
waived. Except as set forth in Sections 6.2 and 11.1.3(b)
below, the foregoing shall be Arbios’ sole remedy for
breach of the warranty.
6.
Payment Terms
.
6.1
[***]
percent ([***]%) of the total invoice price is due and payable
within 30 days of receipt of an order confirmation
. Production
on confirmed orders shall commence upon receipt of this first
payment. The remaining [***]% of the invoice price is due and
payable per shipment but based on the effective price for the total
purchase order within 30 days of receipt of the relevant shipment.
For any amounts not paid when due, Membrana may apply interest at a
rate of 1% per month from the date due until the date paid.
Shipments that are shipped to Arbios more than ten days after the
shipment date acknowledged by Membrana upon confirmation of the
relevant purchase order may be accepted by Arbios at its
discretion, subject to a penalty of [***]% of the relevant invoice
price, which penalty shall only apply if Ar
