Manufacturing Supply Agreement

Exhibit 10.41

"Confidential Treatment Requested"







MANUFACTURING SUPPLY AGREEMENT



[*] = CERTAIN INFORMATION IN THIS DOCUMENT HAS BEEN OMITTED AND FILED SEPARATELY

WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH

RESPECT TO THE OMITTED PORTIONS.



Exhibit 10.41

"Confidential Treatment Requested"



1. Manufacture, Delivery and Acceptance of Instrument Units............... 1

1.1 Manufacture of Instrument Units.................................. 1

1.2 Specifications, DMR and Changes.................................. 1

1.3 Forecast and Order Schedule...................................... 2

1.4 "*".............................................................. 3

1.5 Shipment and Risk of Loss........................................ 3

1.6 "*".............................................................. 3

1.7 Inspection and Acceptance........................................ 3



2. Continuing Obligations of SeaMED....................................... 4

2.1 Engineering Support.............................................. 4

2.2 Maintenance of Adequate Facilities and Manufacturing Practices... 5

2.3 No Subcontracting................................................ 5

2.4 Inventory and Insurance.......................................... 5

2.5 Aastrom's Equipment.............................................. 5

2.6 Financial Condition.............................................. 5



3. Manufacturing Process, Registration and Compliance..................... 6

3.1 Manufacturing Process............................................ 6

3.2 Registration and Compliance...................................... 6



4. Price and Payment Terms................................................ 6

4.1 Price............................................................ 6

4.2 Price Adjustments................................................ 6

4.3 Payment Terms.................................................... 7



5. Warranties............................................................. 7

5.1 Manufacturer's Warranty.......................................... 7

5.2 Limitation on Liability.......................................... 7

5.3 Aastrom's Warranty............................................... 8

5.4 Disclaimer of Warranties......................................... 8



6. Records; Inspection and FDA Reports.................................... 8

6.1 Records Inspection............................................... 8

6.2 FDA Inspection Reports........................................... 8



7. Indemnification........................................................ 9

7.1 By SeaMED........................................................ 9

7.2 By Aastrom....................................................... 9

7.3 Patent Infringement.............................................. 9

7.4 Control of Action................................................ 9

7.5 Insurance........................................................ 9

i

Exhibit 10.41

"Confidential Treatment Requested"





8. "*" ................................................................. 10

8.1 Continuing Prohibition.......................................... 10

8.2 "*"............................................................. 10

8.3 No Use of Aastrom's Proprietary Information..................... 10



9. Proprietary Information................................................ 10

9.1 Aastrom's Property; Use of Property by SeaMED................... 10

9.2 Inventions...................................................... 11

9.3 Nondisclosure................................................... 11

9.4 Confidentiality................................................. 11



10. Term................................................................... 11



11. Default and Termination............................................... 11

11.1 Breach......................................................... 11

11.2 Remedy......................................................... 12

11.3 Obligations Upon Termination................................... 12



12. Miscellaneous......................................................... 13

12.1 Independent Contractors........................................ 13

12.2 Causes Beyond Control.......................................... 13

12.3 Successors and Assigns......................................... 13

12.4 Applicable Law................................................. 13

12.5 Severability................................................... 13

12.6 Entire Agreement; Modification and Waiver...................... 13

12.7 Counterparts................................................... 13

12.8 Dispute Resolution............................................. 13

12.9 Notices........................................................ 14

EXHIBIT A General Description of the System and the Instrument



EXHIBIT B Specifications for the Instruments



EXHIBIT C Document Change Control Agreement



EXHIBIT D Pricing





Exhibit 10.41

"Confidential Treatment Requested"



INDEX OF DEFINED TERMS



Section

-------

AAA........................................................................ 12.8



Agreement.................................................................. Intro



CPS......................................................... Recital A, Exhibit A



Development Agreement.................................................. Recital A



DMR........................................................................ 1.2(b)



FDA.................................................................. 2.1(d),.5.1



Firm Order Period............................................................. 1.3



Instrument............................................................. Recital A



SeaMED..................................................................... Intro



Specifications............................................................. 1.2(a)



System................................................................. Recital A





Exhibit 10.41

"Confidential Treatment Requested"



MANUFACTURING SUPPLY AGREEMENT



This Manufacturing Supply Agreement (the "Agreement") is entered into as of April 14, 1998, by and between Aastrom Biosciences, Inc., a Michigan corporation ("Aastrom"), and SeaMED Corporation, a Washington corporation ("SeaMED").



A. Aastrom and SeaMED previously entered into a Collaborative Product Development Agreement dated May 10, 1994 (the "Development Agreement"), pursuant to which SeaMED agreed to collaborate with Aastrom to complete the necessary design work for, and produce pre production units of, an instrument or instruments (the "Instrument") for a proprietary Aastrom Cell Production System (CPS) which is used for cell growth (the "System"). Attached hereto as Exhibit

------- A is a general description of the System, including the Instrument. - -



B. Pursuant to the terms of Section 6 of the Development Agreement, the parties agreed to enter into a manufacturing agreement for SeaMED to manufacture commercial units of the Instrument.



C. In accordance with Section 6 of the Development Agreement, the parties are entering into this Agreement to set forth the terms and conditions pursuant to which SeaMED will manufacture commercial units of the Instrument for Aastrom.



D. The terms and conditions of the Development Agreement shall remain in effect until such time as Aastrom issues to SeaMED a purchase order for the production version of the Instruments as set forth in the Specifications and such order has been accepted by SeaMED, with such acceptance not being unreasonably withheld.





NOW, THEREFORE, the parties hereby agree as follows:



1. Manufacture, Delivery and Acceptance of Instrument Units.

--------------------------------------------------------



1.1 Manufacture of Instrument Units. SeaMED shall manufacture and

------------------------------- sell to Aastrom so many of the Instrument units as Aastrom may order, with each Instrument unit being manufactured in accordance with (i) the then-current specifications as set forth in this Agreement; (ii) then current applicable Good Manufacturing Practices (as described in Title 21 of the U.S. Code of Federal Regulations, Part 820); and (iii) any other applicable standards (UL, CSA, IEC and TUV) for manufacturing of the Instrument. SeaMED shall maintain its manufacturing facility, equipment and procedures so as to obtain and comply with EN 46001 certification in accordance with the EC Medical Directives, and shall apply the EC mark to Instrument units intended for the European market.



1.2 Specifications, DMR and Changes.

--------------------------------





(a) Specifications. SeaMED shall manufacture the Instruments in

--------------

accordance with the specifications attached hereto as

Exhibit B

---------





Exhibit 10.41

"Confidential Treatment Requested"





("Specifications") and no part of SeaMED's responsibility may be

subcontracted without the prior written consent of Aastrom.



(b) Establish DMR. SeaMED shall prepare a Device Master Record ("DMR")

-------------

covering the manufacture of the Instruments from the Specifications,

other requirements and technical information to be provided by

Aastrom, and manufacturing quality processes and procedures

established by SeaMED in accordance with SeaMED's Device Master

Record Procedure. "*"



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

-----------------------------

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

the Specifications or DMR except as in accordance with the procedure

set forth in Exhibit C. If a Party desires a change to

Specifications or any part of the DMR, it shall submit a proposed

change in accordance with the procedure set forth in Exhibit C,

setting forth a detailed description and drawings thereof. The

Parties shall work in good faith as expeditiously as is reasonable

to reach a determination whether a change to Specifications will be

made and, if so, when such change will be implemented and the effect

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

price and delivery dates.



1.3 Forecast and Order Schedule. Every month during the term of this

--------------------------- Agreement, Aastrom shall provide SeaMED with a rolling forecast of the anticipated quantity of Instrument units Aastrom intends to purchase each month from SeaMED for the following twelve-month period. The quantities given for the first six months of each twelve-month rolling forecast shall be firm orders (the "Firm Order Period") and Aastrom shall issue its purchase order therefor. Quantities beyond the foregoing Firm Order Period are for planning purposes only. SeaMED shall fulfill all orders submitted by Aastrom, and SeaMED shall have no right to unreasonably limit the number Instruments being added to the Firm Order Period by Aastrom. For example, the forecasted quantity of Instrument units that Aastrom intends to purchase from SeaMED during the period from January through December would contain a Firm Order Period that includes the quantities to be delivered from January through June. In February of that year, Aastrom would finalize the quantity of units to be delivered by SeaMED in July which would become part of the Firm Order Period and SeaMED would have no right to unreasonably limit the quantity of Instrument units being added to the Firm Order Period for Delivery in July. Such update to the forecast will be performed on a monthly basis. Further, SeaMED shall use its best reasonable efforts to accommodate Aastrom requested changes to the forecasted volumes and delivery dates during the Firm Order Period, with such requested changes to be received from Aastrom in writing. In the event that SeaMED determines that economies can be achieved by purchasing materials to meet Aastrom's forecasts beyond those set forth in Aastrom's purchase order, SeaMED may purchase such materials only upon the written approval of Aastrom. SeaMED shall have no obligation to purchase materials without a purchase order from Aastrom except as necessary to meet Aastrom's firm purchase orders or other written authorization





Exhibit 10.41

"Confidential Treatment Requested"





received from Aastrom to procure materials. Aastrom shall pay SeaMED for all materials and direct costs expended by SeaMED to fill Aastrom's firm purchase orders for Instruments in the event that they are not used to fulfill such purchase orders or other written authorization to procure materials.



1.4 "*"



1.5 Shipment and Risk of Loss. SeaMED shall deliver the Instrument

------------------------- units FOB SeaMED's manufacturing facility, for shipment to Aastrom's premises in Ann Arbor, Michigan, or to such other address as specified by Aastrom. Title and risk of loss shall pass to Aastrom upon SeaMED's delivery of the Instrument units to a licensed carrier approved by Aastrom for shipment to Aastrom. At the request of Aastrom, SeaMED shall obtain insurance, acceptable to Aastrom, for each instrument shipment with the cost of such insurance to be paid by SeaMED and invoiced to Aastrom.



1.6 "*"



1.7 Inspection and Acceptance. Promptly after Aastrom receives a

------------------------- shipment of the Instruments "*", Aastrom, or its designee, shall inspect the Instruments to verify that they have been manufactured in accordance with the required Specifications. Delivery of each Instrument unit shall be deemed accepted by Aastrom unless SeaMED is notified in writing of Aastrom's rejection of such delivery within thirty (30) days after the delivery date of the Instrument "*", due to a failure thereof to comply with the Specifications, including the acceptance test criteria. In the event that SeaMED receives such notice, SeaMED shall take all necessary actions to remedy and correct any non- conforming Instrument units. "*" If an Instrument is found later to be non- conforming to the required Specifications, the fact that Aastrom did not discover the non-conformance earlier shall not impair Aastrom's warranty rights under Section 5.1 below.



2. Continuing Obligations of SeaMED.

--------------------------------



2.1 Engineering Support. During the term of this Agreement, SeaMED

-------------------- shall collaborate with Aastrom and any other design contractors designated by Aastrom with regard to engineering support necessary to support the manufacture of the Instruments. Without limiting the foregoing, SeaMED shall:



(a) Assist Aastrom with respect to planning for any manufacturing issues that arise in connection with Instrument, including issues relating to manufacturing process development and validation, component sourcing, and maintenance of DMR documentation requirements;



(b) Assist Aastrom to establish a reliability goal for the Instrument, calculate the reliability of the Instrument units at certain established review points during the design and development of the Instrument, and perform demonstration tests on pilot production units produced by SeaMED;





Exhibit 10.41

"Confidential Treatment Requested"



(c) Maintain working drawings for manufacturing and testing the Instrument units, including without limitation, (i) specifications for component parts to be acquired from specified vendors, (ii) drawings and specifications for component parts, (iii) test and acceptance procedures and criteria, (iv) subassembly specifications, drawings and requirements, (v) costed bill of materials, and (vi) revised Specifications, including product specific manufacturing procedures, DMR, routing and processes which revised Specifications shall be subject to the prior written approval of Aastrom in accordance with Exhibit C;



(d) To the extent required for submittal to the U.S. Food and Drug Administration ("FDA") (or comparable foreign agencies) for Aastrom's IDE and/or PMA (or comparable foreign approvals), prepare a detailed description of SeaMED's manufacturing methods, processes, procedures and facility applicable to Aastrom's Instrument; and



(e) Collaborate with Aastrom on any engineering projects that Aastrom may request. Aastrom shall deliver to SeaMED a written request for such engineering work and SeaMED shall deliver to Aastrom a proposal which, if acceptable to Aastrom, will be authorized by Aastrom prior to the initiation of work by SeaMED. "*"



2.2 Maintenance of Adequate Facilities and Manufacturing Practices

-------------------------------------------------------------- SeaMED shall assemble all of the Instrument units in an environment where current good manufacturing practices are followed. Inasmuch as SeaMED's U.S., European Economic Community and other foreign body facility registration and inspection records are extremely important to Aastrom's ability to obtain prompt regulatory approval for Aastrom's System, SeaMED hereby agrees to use its best efforts to maintain in good standing all appropriate regulatory facility registrations and inspection records stated in Section 3.2 and Section 6.



2.3 No Subcontracting. No part of SeaMED's obligations under this

----------------- Agreement shall be subcontracted by SeaMED without the prior written approval of Aastrom.



2.4 Inventory and Insurance. All inventory of components and

----------------------- materials purchased by SeaMED to make Instrument units shall be owned by SeaMED and shall be insured against risk of loss by SeaMED. Any components and materials purchased by Aastrom and delivered to SeaMED for SeaMED to use to make Instrument units shall be covered by SeaMED's insurance policy for risk of loss while said items remain in SeaMED's facility, with Aastrom being the loss payee therefor.



2.5 Aastrom's Equipment SeaMED shall install, maintain and account

------------------- for all tools, fixtures, molds, dies or other equipment provided or paid for by Aastrom for manufacture of the Instrument at SeaMED's facility and at any of SeaMED's permitted subcontractor facilities. SeaMED hereby acknowledges that Aastrom's equipment is the sole and exclusive property of Aastrom and shall identify and tag such items as Aastrom's equipment. SeaMED shall ensure that such tags are properly placed and maintained on all of Aastrom's equipment and hereby covenants that, during the term of this Agreement:





Exhibit 10.41

"Confidential Treatment Requested"



(i) SeaMED, and any permitted subcontractor of SeaMED using Aastrom's

equipment, shall utilize Aastrom's equipment solely for

manufacturing Aastrom's requirements of the Instrument as

provided hereunder,



(ii) SeaMED shall not encumbe ...