Collaborative Supply Agreement

EXHIBIT 10.41



COLLABORATIVE SUPPLY AGREEMENT







AASTROM BIOSCIENCES, INC.





MID-STATE PLASTICS

TABLE OF CONTENTS

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Page

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Section 1. Definitions................................................... 2



Section 2. Purchase and Sale............................................. 4



Section 3. Forecasts; Delivery; Shipment................................. 4

(a) Rolling Forecasts........................................ 5

(b) No Limit on Sales........................................ 5

(c) No Liens................................................. 5

(d) Delivery................................................. 5

(e) Shipment................................................. 5

(f) Acceptance Procedures.................................... 6

(g) Lot Testing.............................................. 6



Section 4. Prices........................................................ 7

(a) Cell Cassette Prices..................................... 7

(b) Phase I Collaboration Charge............................. 7

(c) Component Order and Prices............................... 7

(d) Best Diligent Efforts.................................... 7



Section 5. Payment and Collection........................................ 8

(a) Payment.................................................. 8

(b) Deductions from Invoice.................................. 8

(c) Relief for Non-Payment................................... 8



Section 6. Specifications, DMR and Changes............................... 8

(a) Specifications........................................... 8

(b) Establish DMR............................................ 9

(c) Specification and DMR Changes............................ 9

(d) MSP Refusal to Change Specification...................... 9

(e) Other Changes............................................ 9

(f) Returns.................................................. 9



Section 7. MSP's Facilities and Manufacturing Environment................ 9



Section 8. MSP Manufacturing Procedures.................................. 10



Section 9. Collaborative and Other Responsibilities of the Parties....... 11

(a) Overview................................................. 11

(b) Responsibilities of AASTROM.............................. 11

(c) MSP's Collaboration...................................... 12

(d) Other Responsibilities of MSP............................ 12

-i- Section 10. Equipment.................................................... 13

(a) Ownership............................................... 14

(b) Identification Tags..................................... 14

(c) Liens and Insurance..................................... 14

(d) Inspection.............................................. 14

(e) No Modification......................................... 14

(f) Maintenance............................................. 14

(g) Use..................................................... 14



Section 11. Right of Inspection.......................................... 15

(a) Rights of Inspection.................................... 15

(b) Waiver.................................................. 15

(c) Self-Certification...................................... 15

(d) Records; Inspection..................................... 15



Section 12. Warranty; Recalls............................................ 16

(a) Warranty................................................ 16

(b) DISCLAIMER.............................................. 16

(c) No Third-Person Warranty................................ 16

(d) Recalls................................................. 16



Section 13. Limitation of Damages Liability.............................. 17

(a) Third Party Claims Not Related to Manufacturing Defect.. 17

(b) Third Party Claims Related to MSP's Delays.............. 17

(c) Third Party Claims for Product Liability................ 17

(d) AASTROM's Claims - Phase I.............................. 17

(e) AASTROM's Claims - Phase II............................. 17

(f) Willful Wrongdoing...................................... 18

(g) Nature of Damages....................................... 18

(h) Mitigation.............................................. 18

(i) AASTROM's Liabilities................................... 18



Section 14. Indemnity.................................................... 18

(a) AASTROM's General Indemnity............................. 18

(b) MSP's General Indemnity................................. 19

(c) Intellectual Property Warranty.......................... 19

(d) Intellectual Property Indemnity by AASTROM.............. 20

(e) Intellectual Property Indemnity by MSP.................. 20



Section 15. Ownership of Intellectual Property........................... 21

(a) Ownership of Intellectual Property...................... 21

(b) Return of Intellectual Property......................... 21



Section 16. Confidential Information..................................... 21

(a) Title to Confidential Information and Related Documents. 21

(b) Non-Disclosure and Non-Use of Confidential Information.. 21



-ii- (c) Protection of Confidential Information.................. 22



Section 17. Term and Termination......................................... 22

(a) Term of Agreement....................................... 22

(b) Termination Upon Default................................ 22

(c) Termination Upon Insolvency............................. 22

(d) Termination Upon Inability of MSP to Perform............ 22

(e) Effect of Termination................................... 23

(f) Liabilities When No Termination......................... 23

(g) Alternative Purchase of Product......................... 23



Section 18. Preferred Supplier; Alternative Supplier..................... 24

(a) Preferred Supplier...................................... 24

(b) Alternate Suppliers..................................... 24



Section 19. Representations and Warranties............................... 24



Section 20. Force Majeure................................................ 24

(a) Suspension of Performance............................... 24

(b) Cooperation............................................. 25

(c) Allocation of Resources................................. 25



Section 21. MSP Competitiveness; Shared Investment Return................ 25

(a) MSP's Competitiveness................................... 25

(b) Shared Investment Return................................ 25

(1) MSP Capital Investments............................ 25

(2) Recoupment of MSP Capital Investment; Cost Sharing. 25

(3) AASTROM Capital Investments........................ 26



Section 22. Insurance.................................................... 26



Section 23. Similar Products............................................. 26

(a) Continuing Prohibition.................................. 26

(b) Similar Products........................................ 26



Section 24. Governing Law; Dispute Resolution............................ 27

(a) Governing Law........................................... 27

(b) Dispute Resolution...................................... 27



Section 25. Notices...................................................... 28



Section 26. Successors and Assigns; Survival............................. 29



Section 27. Headings..................................................... 29



Section 28. Severability................................................. 29



-iii- Section 29. Amendment and Waiver......................................... 29



Section 30. Counterparts................................................. 30



Section 31. Independent Contractors...................................... 30



Section 32. Entire Agreement............................................. 30



APPENDICES:



I Equipment

II Specifications

III Pricing Schedule for Phase I and II

IV Pro Forma Invoice

V Bill of Materials



-iv-



SUPPLY AGREEMENT





THIS COLLABORATIVE SUPPLY AGREEMENT (this "Agreement") is made effective as of December 16, 1996 (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 Anchor Advanced Products, Inc., Mid-State Plastics Division, a Delaware corporation with offices at U.S. Highway 220 North, Seagrove, North Carolina 27341 ("MSP").



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 AASTROM(TM) Cell Production System, a proprietary medical device for the production of human stem cells (the "AASTROM CPS"), consisting in part of single-use, sterile culture chambers;



WHEREAS, MSP 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 MSP anticipate that the AASTROM CPS will be a Class III medical device requiring Pre-Marketing Approval under FDA regulations and a Class IIb device under regulations of the Medical Device Directives of the European Community (the "EC"); and



WHEREAS, in consideration of MSP's expertise and stated intention to be a cost effective and a capable manufacturer and supplier of Cell Cassettes and Components (as defined herein), AASTROM desires for MSP to be a preferred manufacturer of such Cell Cassettes and Components throughout the Term of this Agreement, and MSP desires to be such supplier for such period; and



WHEREAS, AASTROM and MSP desire for MSP to work with AASTROM to develop and produce Cell Cassettes for the AASTROM CPS.



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 MSP to each other, the receipt and sufficiency of which is hereby acknowledged, AASTROM and MSP, intending to be legally bound, agree as follows:



SECTION 1. DEFINITIONS.

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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

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rules and regulations promulgated thereunder.



(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 (as defined below) and used in

the AASTROM CPS 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).



(d) "Confidential

Information" Confidential Information shall mean any and all

technical and non-technical information, (whether or

not disclosed by AASTROM prior to the Effective Date

under the terms of the Confidentiality Agreement

between the Parties dated December 22, 1993), 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

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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 design, formulation, Specifications (as

defined below), complete manufacturing procedures,

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 MSP. AASTROM

Equipment shall also include any equipment procured by

MSP for manufacture of the Cell Cassettes in accordance

with Section 21(b)(1).



(h) "GMPs" GMPs shall mean the then-current Good Manufacturing

Practices published at 21 CFR Part 820, et seq.

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applicable to a Class III medical device, but only

such GMPs that are applicable to the Cell Cassette or

Components.



(i) "ISO" ISO shall mean the International Standards

Organization.



(j) "Party or "Parties" Party shall mean either AASTROM or MSP, and Parties

shall mean both AASTROM and MSP.



(k) "Phase I" Phase I shall mean the period of time from the

Effective Date until AASTROM has approved the DMR in

writing and has accepted delivery of two consecutive

Shipment Lots.



(l) "Phase II" Phase II shall mean the period of time from the first

day of the month following the month in which Phase I

ends until the end of the Term.





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

Information.



(n) "Requirements" Requirements shall mean the rolling three-month firm

order forecast to be provided by AASTROM under Section

3(a), below, constituting at least sixty percent (60%)

of AASTROM's then-current requirements for Cell

Cassettes during the Term.



(o) "Shipment Lot" Shipment Lot shall initially mean 250 Cell Cassettes.

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 may revise 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 objective criteria,

including, without limitation, design criteria and

formulations, required by AASTROM for the production

of Cell Cassettes and those contained in the DMR.

Specifications shall include without limitation, the

criteria for labeling and packaging, including

graphics, and quality assurance requirements.

Specifications for Cell Cassettes (including, without

limitation, those to be contained in the DMR) are

annexed hereto as Appendix II, as such Specifications

may be changed pursuant to Section 6, below.

Specifications shall not include any subjective

criteria or any criteria with respect to the efficacy

of either the Cell Chamber or the AASTROM CPS with

respect to human cell production.



(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 in

the State of New York and in effect during the Term.



SECTION 2. PURCHASE AND SALE.

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AASTROM shall purchase from MSP at least AASTROM's Requirements of Cell Cassettes, and MSP 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.



SECTION 3. FORECASTS; DELIVERY; SHIPMENT.

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(a) Rolling Forecasts. Each calendar quarter during the Term, AASTROM shall

----------------- provide MSP with a rolling forecast of the anticipated quantity of each model of Cell Cassettes AASTROM intends to purchase from MSP during each quarter of the following twelve-month period. The quantities given for the first three months of each twelve-month rolling forecast shall be firm orders for the immediately succeeding quarter (i.e., a three-month forecast given on January 1st would be deemed firm for the period April 1 - June 30) 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. MSP 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 MSP for labor,



materials, supplies and direct costs (as set forth in Appendix III) expended by MSP 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 three-month firm-order period are for planning purposes only.



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

----------------- or Components to AASTROM to a maximum number of units for any period notwithstanding that AASTROM's Requirements may constitute less than 100% of AASTROM's total requirements; provided that, the volume of Cell Cassettes and

-------- ---- Components ordered is reasonable in the light of forecasted amounts and previous delivery schedules. MSP shall have adequate capacity to meet AASTROM's then- current total firm-order requirements as forecasted pursuant to Section 3(a), above. MSP 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.



(c) No Liens. Except with respect to MSP's purchase money security interest in

-------- Cell Cassettes granted pursuant to Section 5(d), below, MSP will deliver Cell Cassettes to AASTROM free and clear of all liens, claims and encumbrances.



(d) Delivery. MSP 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 MSP's consent. In the event that AASTROM submits a purchase order in excess of its forecasted requirements for said quarter, MSP 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. MSP shall not deliver Cell Cassettes more than ten (10) days prior to scheduled delivery dates without AASTROM's prior consent. MSP 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. In the event of partial failure to deliver, MSP 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. Shipment shall be made by MSP 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 MSP until delivered to the destination specified by AASTROM. AASTROM shall notify MSP within five (5) business days after receipt if there are any shortages or evidence of damage in transit and will cooperate with MSP in any claim for loss or damage in transit that MSP makes against a carrier. The method and route of shipment are at AASTROM's discretion as set forth in its purchase order. MSP will prepay all costs, insurance premiums, freight and other expenses incurred in shipment until delivered to the destination spec ...