CCD Camera Manufacture And Supply Agreement

CONFIDENTIAL TREATMENT REQUESTED. CERTAIN PORTIONS OF THIS AGREEMENT HAVE BEEN REDACTED AND SEPARATELY FILE WITH THE COMMISSION.]


EXHIBIT 10.16

CCD CAMERA MANUFACTURE AND SUPPLY AGREEMENT.

This agreement is made on April 9 th , 2003 (the " Effective Date" ), between Spectral Instruments, Inc., an Arizona corporation with offices located at 420 N Bonita Avenue, Tucson, Arizona 85745 (the " Seller" ), and Xenogen Corporation, a Delaware corporation, with offices located at 860 Atlantic Avenue, Alameda, CA 94501 (the " Buyer" ) (each a " Party," and collectively, the " Parties" ).


Recitals

Seller is a corporation engaged, among other things, in the manufacture and sale of CCD cameras, and it is able and willing to manufacture the products described on Schedule A attached to this Agreement (the " Products" ); and


Buyer, in order to assure a steady and reliable source of supply of the Products, desires to purchase from Seller, and Seller is willing to supply to Buyer, the Products on the terms and conditions described in this Agreement.


Now, therefore, in consideration of the mutual covenants and agreements contained in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are here acknowledged, the Parties agree as follows:


Substantive Provisions


1. Definitions . As used in this Agreement, the following definitions will apply:


(a) " Products" shall mean the CCD camera and other products particularized in Schedule A, attached to and made a part of this Agreement, to be manufactured by Seller for Buyer in accordance with the terms of this Agreement. Products shall also include any and all improvements, changes and modifications that the Parties may make by mutual agreement evidenced in writing during the term of this Agreement, as well as any other CCD Camera manufactured by Seller with similar size and architecture that the Parties agree in writing is a successor product to the Product(s) specified in Schedule A.


(b) " Specifications" shall mean the physical and functional specifications for the Products, as agreed to by Buyer and Seller and stated in Schedule B, attached to, and made a part of, this Agreement. Seller shall not deviate in any way whatever from these specifications without the prior express written consent of Buyer.


Page 1 of 16

(c) " Confidential Information" means any proprietary technical or business information or data related to, or generated in connection with, the performance of this Agreement and which is provided by one Party (the " Disclosing Party" ) to the other Party (the " Receiving Party" ) pursuant to this Agreement. Confidential Information, if disclosed in written form must be marked as " Confidential" at the time of disclosure, or if disclosed orally, must be expressly identified as " Confidential" at the time of oral disclosure, and be confirmed as " Confidential" in a written form that is delivered to the Receiving Party within thirty (30) days of oral disclosure.

2. Agreement to Manufacture . Seller agrees to manufacture in its own factories and sell to Buyer the Products in accordance with the Specifications, and incorporating such changes and improvements in the Products as the Parties mutually determine and agree upon from time to time. The Parties agree that final assembly, testing, inspection and packaging of the Products will at all times be conducted by Seller in its own manufacturing facilities.


3. Exclusivity . Seller shall not enter into any agreement with any third party whereby Seller agrees to sell the Products in Schedule A to a third party on an exclusive basis. In consideration of Buyer' s disclosure hereunder of certain Confidential Information regarding its own product designs and specifications incorporating the Product, as well as the market therefore, Seller agrees not to manufacture or sell to a third party an imaging product that includes a CCD camera, dark box and analysis software intended for imaging/observation of bioluminescent or fluorescent light sources from within living mammals.


4. Purchase Price and Terms .


4.1 Purchases . Seller agrees to manufacture, package, deliver and supply the Products to Buyer in conformance with standard industry manufacturing and business practices, the Specifications, any other tests and specifications agreed-to in writing by Buyer and Seller and in such quantities as ordered by Buyer pursuant to a purchase order submitted to Seller on the Effective Date and each anniversary thereof during the term of this Agreement. Each such purchase order will cover an eighteen (18) month period, specify the specific Product ordered (if more than one Product is listed in Schedule A), desired quantity, delivery dates and addresses (each, a " Purchase Order" ). Buyer agrees that Products will not be used for medical diagnostic or therapeutic purposes such that Seller becomes subject to approval of the U.S. Food and Drug Administration, without Seller' s prior consent.


Page 2 of 16

4.2 Delivery Dates . The requested date for the first delivery under a Purchase Order will not be less than twelve (12) weeks from the date on which the Purchase Order is submitted. Deliveries of Product quantities thereafter will require only an eight (8) week lead time. Within seven (7) days of receipt of each Purchase Order, Seller shall acknowledge its receipt and shall confirm Product delivery dates to Buyer in writing (whether by e-mail, facsimile or other written form). Seller will promptly advise Buyer of any possible variances from such confirmed delivery dates, and, if such variances exceed four (4) weeks, Buyer and Seller will work cooperatively to reduce such variances, although Buyer may cancel that portion of the Purchase Order without penalty or affect on Product prices.

4.3 Shipping . Seller will pack all Products ordered by Buyer for shipment and storage in accordance with Seller' s standard commercial practice and will include all necessary Product documentation. Special packaging requirements will be disclosed by Buyer and agreed to by Seller, at Buyers additional expense, taking into consideration any environmental, economic or other constraints and influences. Risk of loss will pass to Buyer upon delivery to the carrier.

4.4 Records . Seller shall maintain all technical, quality control, shipping and other appropriate documentation and records concerning the Products manufactured, packaged and shipped by Seller pursuant to this Agreement and shall preserve same for a period of at least five (5) years from the date of delivery. Seller shall not destroy any such records without first giving Buyer thirty (30) days prior written notice and an opportunity to take possession of such records. In any case, a copy of the appropriate documentation, as described above, will form part of each shipment of Product to Buyer.

4.5 Price . Seller' s invoice price for each Product purchased by Buyer hereunder will be based upon the Product quantities purchased by Buyer during each eighteen (18) month period beginning with the Effective Date according to the following:


Quantity

Prices (All prices in U.S. Dollars) ***


*** Confidential Treatment Requested.


Page 3 of 16

The foregoing prices are net amounts to Buyer, as delivered to Buyer' s carrier at Seller' s manufacturing plant in Tuscon, Arizona (delivery terms are FCA (Incoterms 2000), with Buyer responsible to contract with the carrier). A change in Specifications may incur additional cost, and Seller will notify Buyer if any such change will affect the foregoing prices, and such changes (both to the Specifications and to the above prices) will be mutually agreed to by the Parties prior to implementation. Prices for additional Products that may be added to Schedule A after the Effective Date and for the Products after the initial 18 month term will be determined by mutual agreement of the Parties and shall be set forth on an addendum hereto.

4.6 Delivery Delays . With at least three (3) months notice, Buyer may delay delivery for not more than: twenty-five percent (25%) of the Product quantity ordered for delivery in the next calendar quarter. With at least six (6) months notice, Buyer may delay delivery for not more than fifty percent (50%) of the Product quantity ordered for delivery in that calendar quarter. Provided that the foregoing delays do not affect the total quantity ordered by Buyer in the then governing Purchase Order and represent a delay of between three (3) and six (6) months, such delivery delays will not affect the prices to be paid by Buyer, but Seller will charge Buyer a delay fee of *** per Product that is so delayed. Product quantities for which Buyer delays delivery for more than six (6) months will incur a delay fee of fifty percent (50%) of the price (pursuant to Section 4.5) for such quantity.


4.7 Delivery Acceleration . Upon no less than three (3) months written notice by Buyer, Seller will accelerate delivery of up to twenty-five percent (25%) of the total quantity ordered by Buyer in the then-governing Purchase Order without additional cost to Buyer. Upon no less than six (6) months written notice by Buyer, Seller will accelerate delivery of up to fifty percent (50%) of the total quantity ordered by Buyer in the then-governing Purchase Order without additional cost to Buyer.

4.8 Cancellation/Addition . Buyer may cancel quantities of Product ordered in the then-governing Purchase Order, but Buyer shall pay Seller a cancellation fee of fifty percent (50%) of the price (pursuant to Section 4.5) for such cancelled quantity. Buyer may order additional Product quantities from Seller through a written purchase order, containing the same information as required in Section 4.1, submitted not less than twelve (12) weeks prior to the (first) requested delivery date. The provisions of Section 4 will apply to such additional orders.


*** Confidential Treatment Requested.

Page 4 of 16

4.9 Payments . Twelve (12) weeks prior to each shipment of Products (in five (5) unit lots to the extent possible), Seller shall invoice Buyer for thirty percent (30%) of the price (pursuant to Section 4.5) for such Product quantity and Buyer will pay such amount no later than eight (8) weeks prior to the scheduled delivery date. Eight (8) weeks prior to each shipment of Products (in five (5) unit lots to the extent possible), Seller shall invoice Buyer for thirty percent (30%) of the price (pursuant to Section 4.5) for such Product quantity and Buyer will pay such amount no later than four (4) weeks prior to the scheduled delivery date. Each of the foregoing invoices will be accompanied by a written certification, signed by an officer of S ...