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ARTICLE IDEFINITIONS     For purposes of this Agreement, the following words and phrases shall have the followingrespective meanings:     1.1 “Affiliate” means, with respect to a party, any person, corporation or otherbusiness entity that directly, or indirectly through one or more intermediaries, controls or iscontrolled by, or is under common control with, a party. For this purpose, control of acorporation or other business entity shall mean direct or indirect beneficial ownership of fiftypercent (50%) or more of the voting interest in, or a fifty percent (50%) or greater interest inthe equity of, such corporation or other business entity.     1.2 “Bill of Materials” shall have the meaning assigned to it in Section 6.2.     1.3 “cGMP” means current good manufacturing practices, including without limitationthe FDA’s Quality System Regulations pursuant to Title 21 of the United States Code of FederalRegulations, Part 820, as applicable to the manufacture of a Class 2 medical instrument to gain510(k) approval by the FDA.     1.4 “Design Engineering Phase” shall have the meaning assigned to it in Section 3.1     1.5 “Design Scope Change” shall have the meaning assigned to it in Section 3.9.     1.6 “Engineering Change Orders” or “ECO” shall have the meaning assigned to it inSection 3.10.     1.7 “FDA” means the United States Food and Drug Administration or any successor agencythereof.     1.8 “Gen-Probe Know-How” means any and all Information controlled by Gen-Probe that isboth: (i) disclosed to KMC by Gen-Probe under this Agreement (all such disclosures to be atGen-Probe’s sole discretion); and (ii) proprietary to Gen-Probe at the time of its disclosure toKMC.     1.9 “Gen-Probe Patents” means all Patent Rights controlled by Gen-Probe that arenecessary and/or useful for the work to be performed by KMC under this Agreement.     1.10 “Gen-Probe Technology” means the Gen-Probe Patents and Gen-Probe Know-How.     1.11 “Information” means any data, results, formulas, procedures, processes,unpatented inventions, information, know-how, trade secrets, techniques, methods, development,material, or compositions of matter of any type or kind.
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     1.12 “Instrument” means the automated instrument sometimes referred to by Gen-Probe asthe *TIGRIS*Instrument, for the processing and detection of DNA/RNA probe-based assays intended foruse in diagnostic and blood screening applications, the design of which was commenced by Rela andwill be modified and completed by KMC pursuant to this Agreement. “Instrument” includes futureupgrades, modifications and derivatives.     1.13 “Long-Lead Materials” shall have the meaning assigned to it in Section6.2.     1.14 “MTBF” means mean time between failures of an Instrument. A failure isconsidered to occur when the Instrument fails to operate in a satisfactory manner and/or cannotproduce satisfactory test results, and intervention by the operator is required to return theInstrument to operation.     1.15 “Patent Right” means: (i) an issued and existing letters patent, including anyextensions, supplemental protection certificates, registrations, confirmations, reissues,reexaminations or renewals thereof; (ii) applications, including any provisional applications,converted provisional applications, continuing prosecution applications and continuation,divisional, substitution, or continuation-in-part applications thereof, for any of the foregoing;and (iii) all counterparts to any of the foregoing issued by or filed in any country or otherjurisdiction.     1.16 “Pilot Instruments” shall have the meaning assigned to it in Section 5.1.     1.17 “Pilot Scope Changes” shall have the meaning assigned to it in Section 5.3.     1.18 “Pilot Production Phase” shall have the meaning assigned to it in Section 5.1.     1.19 “Product Requirements Document” or “PRD” means the specifications andother requirements for Instruments, as set forth in Exhibit 7.     1.20 “Production Instruments” shall have the meaning assigned to it in Section 6.1.     1.21 “Production Phase” shall have the meaning assigned to it in Section 6.1.     1.22 “Project Plan” means the tasks and schedules set forth in Exhibit 1 andmodifications, additions, or deletions thereto which are made from time to time hereafter inaccordance with the provisions of Section 3.10.
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     1.23 “Pro-Rated Discount Reimbursement” shall mean the pro-rated total of theaggregate dollar amount of the following discounts provided hereunder by KMC:(a) any discount actually applied pursuant to Section 3.9 during theDesign Engineering Phase;(b) the Transition Phase discount of 33.5% shown on Exhibit2, to the extent actually applied, together with any overrundiscounts actually applied pursuant to Section 4.6 during theTransition Phase; and(c) the Pilot Production Phase discount shown on Exhibit 2,to the extent actually applied.The discounts shall be pro-rated by multiplying the total actual dollar amounts of discountsdetermined as above, by the difference (stated as a percentage) of (1-(Y/100)), where “Y” is thenumber of completed Production Instruments for which Gen-Probe has paid (or pays) KMC the fullTransfer Price.     1.24 “Purchase Order Cancellation Charges” shall mean the aggregate dollar amount ofthe following charges related solely to the cancellation, in connection with a termination of thisAgreement permitted by Article 15, of all outstanding pending Gen-Probe purchase orders andLong-Lead Materials and other parts authorizations issued pursuant to Sections 6.2 and 6.3, at thefollowing rates: (i) non-returnable parts and material in stock, at KMC’s full cost, includinggeneral and administrative overhead; (ii) partially-built Production Instruments, at the TransferPrice rate determined under Section 6.8 times the percentage each such Production Instrument hasbeen completed; (iii) for complete Production Instruments, at the Transfer Price determined underSection 6.8; (iv) KMC labor costs directly and solely related to such termination (including, butnot limited to, working with vendors, packing items for shipment, and production cell tear-down) atKMC’s then full normal and customary rates, including profit; and (v) any other direct costsincurred by KMC as a sole result of such termination (including without limitation vendorcancellation fees or non-cancelable vendor commitments) at the actual cost to KMC.     1.25 “Scope Changes” shall mean Design Scope Changes, Transition Scope Changes and/orPilot Scope Changes.     1.26 “Transition Phase” shall have the meaning assigned to it in Section 4.1.     1.27 “Transition Scope Changes” shall have the meaning assigned to it in Section 4.6.     1.28 “Unrecouped Cost Reduction Service Charges” shall mean all non-recurring expensesrelated solely to cost reduction services by KMC pursuant to Section 6.14 that KMC has actuallyincurred and not recouped pursuant to Section 6.14.     1.29 “Work Statement” shall have the meaning assigned to it in Section 3.10.
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ARTICLE IILICENSE GRANT     Gen-Probe hereby grants to KMC a non-exclusive license, without the right to sublicense, underthe Gen-Probe Technology solely to design, use, make, or have made, Instruments pursuant to theterms of this Agreement. No other rights in the Gen-Probe Technology are granted to KMC.ARTICLE IIIDESIGN ENGINEERING     3.1 Purpose. The purpose of the work described in this Article III (the “DesignEngineering Phase”) is to permit KMC to acquire detailed information about the Instrumentdesign and development effort prior to the Effective Date and to then complete the hardware designeffort (initially in accordance with the Project Plan tasks identified in Exhibit 1),including hardware design services that may be required in connection with integration of softwareand chemistry. The initial goal of the Design Engineering Phase will be to identify and, subjectto the Scope Change provisions of Section 3.10 and the provisions of Section 3.3, to resolve allhardware performance issues in order to achieve an overall MTBF of five hundred (500) hours whilemaintaining existing Instrument functionality. Subject to the Scope Change provisions of Section3.10 and the provisions of Section 3.3, the ultimate goal of KMC’s Design Engineering Phaseactivities will be to enable the Production Instrument to meet Gen-Probe’s final requirements forthe Instrument, to be determined in the course of Instrument development. The parties recognizethat the Project Plan annexed hereto as Exhibit 1 may need to be amended from time to timeand Design Scope Changes may be required in order to improve Instrument functionality and/orreliability and to accomplish the purpose and achieve the goals of the Design Engineering Phase.     3.2 Instrument Requirements. The Instrument requirements, including withoutlimitation the specifications, are set forth in the Product Requirements Document. Gen-Probe shallhave the sole right to amend the PRD, in its sole discretion, during the term of this Agreement.While KMC shall make recommendations throughout this project with regard to the PRD, the finalapproval thereof shall be Gen-Probe’s; provided, however, that such right of approval shall notrelieve KMC of its duty to perform its services hereunder in a workmanlike manner.     3.3 Hardware Design and Verification. KMC will use its best efforts to successfullycomplete all hardware engineering design necessary to achieve the goals of Section 3.1 and the PRD(it being recognized by the parties, however, that despite such best efforts certain goals may notbe achieved). The parties recognize that the Project Plan may need to be amended from time to timeand Design Scope Changes may be required in order to complete hardware engineering design. As partof the Design Engineering Phase, KMC shall be responsible for hardware verification. KMC shall usegood workmanship in performing all Design Engineering Phase activities. KMC shall conduct itsactivities in accordance with the design control sections of cGMP and ISO 9001.
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     3.4 Integration and Validation. Gen-Probe shall perform, directly or throughsubcontractors selected and retained by it, all chemistry work related to the Instrument.Gen-Probe shall also perform, directly or through subcontractors selected and retained by it, allsoftware development related to the Instrument and shall provide KMC with periodic softwareupdates. KMC shall assist Gen-Probe as requested in developing plans for validation of softwarerelated to the Instrument and shall undertake such other software validation activities asspecifically requested by Gen-Probe. Services rendered by KMC in connection with softwarevalidation shall be deemed a Design Scope Change and arranged by the parties pursuant to theprovisions of Section 3.10.     3.5 Coordination. Gen-Probe and KMC will closely cooperate to achieve the goals of theDesign Engineering Phase. The parties will set up a supervisory board to coordinate DesignEngineering Phase activities. The initial representatives of each party to the supervisory boardare as follows: For KMC: Pat McNallen, Frank Palowski, and Real Modore; For Gen-Probe: NiallConway, Walt Bochenko, Graham Lidgard, and Mat Longiaru. The supervisory board will meetquarterly. The supervisory board shall also coordinate Transition Phase and Production Phaseactivities, as set forth below.     3.6 KMC Project Team. KMC shall assign the project team identified on Exhibit3 to the Design Engineering Phase and such team shall be made available for as much time asnecessary to accomplish successful execution of the Design Engineering Phase. Such team personnelshall remain assigned to the project team while employed by KMC unless KMC and Gen-Probe agreeotherwise in writing. In the event of a significant interruption of this phase, KMC shall giveGen-Probe the option of maintaining the availability of KMC’s project team, at Gen-Probe’s expense.The parties recognize that as a result of Design Scope Changes, and other Scope Changes andrelated activities, it may be advisable to change and/or add certain project team personnel for theDesign Engineering Phase. Gen-Probe agrees to not unreasonably withhold its consent to any suchchanges or additions.     3.7 Project Plan; Schedule. KMC will generally execute the Design Engineering Phasein accordance with the Project Plan and will use its best efforts to meet the schedule set forth inthe Project Plan, subject to Design Scope Changes, which currently provides for completion of theDesign Engineering Phase activities no later than May 14, 2001. KMC shall use all reasonablecommercial efforts to carry out the Design Engineering Phase work set forth in Design ScopeChanges. KMC shall provide Gen-Probe with regular periodic reports, no less than every two (2)weeks, stating the current status of the Design Engineering Phase, describing the current status ofthe key components of the Instrument, and updating the Project Plan.     3.8 Payments; Invoices. KMC shall perform the Design Engineering Phase effort on atime and materials basis. KMC shall invoice Gen-Probe monthly. KMC shall bill its DesignEngineering Phase services at the hourly rates set forth on Exhibit 2. Travel expensesincurred by KMC will be invoiced to Gen-Probe at cost. Any third parties retained by KMC shall beinvoiced to Gen-Probe at their actual cost to KMC, plus fifteen percent (15%). The charges invoicedby KMC under this Agreement are sometimes referred to herein as “costs.” Gen-Probe shall pay KMC’sinvoices within thirty (30) days of delivery of each invoice. Gen-Probe shall have the right toreview KMC’s records with regard to all invoiced charges (it being agreed, however, that any suchreview shall not relieve Gen-Probe from its obligation to pay KMC’s
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invoices within thirty (30) days and, further, that payment by Gen-Probe shall not waiveGen-Probe’s right to subsequently contest KMC’s charges).     3.9 Cost Estimate. KMC estimates that the cost of its Design Engineering Phaseservices, for the specific Project Plan tasks initially identified in Exhibit 1, to beapproximately $775,000. KMC shall use all reasonable commercial efforts to keep costs within thisestimate; provided, however, that the parties acknowledge and agree that because this projectentails, among other things, completion of a design and development effort commenced by a thirdparty, which design is presently substantially below the above-mentioned MTBF goal, it may benecessary for: (a) KMC to provide services beyond the specific Project Plan tasks initiallyidentified in Exhibit 1 in order to complete the design and achieve the MTBF goal and othergoals of Gen-Probe to the satisfaction of Gen-Probe; and (b) Gen-Probe to change the specificationsof the Product Requirements Document. All changes and additions to the Design Engineering Phaseservices initially identified in the Project Plan (other than non-material changes or additions tothe Project Plan tasks) shall be agreed upon by the parties pursuant to Section 3.10 as “DesignScope Changes.” KMC shall provide Gen-Probe with regular periodic reports, no less thanmonthly, stating the then-current aggregate costs of the Design Engineering Phase (including DesignScope Changes) and updating KMC’s estimate of the costs to be incurred. If Design EngineeringPhase costs exceed the sum of KMC’s original $775,000 estimate plus the estimated cost of DesignScope Changes (the “Revised Design Estimate”) by more than twenty five percent (25%), KMC’sbilling rates as set forth on Exhibit 2 for KMC Design Engineering Phase charges beyond onehundred twenty five percent (125%) of the Revised Design Estimate shall be discounted by twelve anda half percent (12.5%). If Design Engineering Phase costs are projected to or in fact exceed theRevised Design Estimate by more than thirty five percent (35%), Gen-Probe may, at its option andsole discretion, terminate this Agreement during the Design Engineering Phase. If the excess costsreferred to in the immediately preceding sentence result from KMC’s error or omission in theestimating process Gen-Probe’s sole remedies against KMC shall be Gen-Probe’s right to take theabove cost estimate overrun discounts and Gen-Probe’s right to so terminate this Agreement, and KMCshall have no other liability to Gen-Probe.     3.10 Scope Changes. During any phase of the Project Plan, the parties may byagreement approve Scope Changes and modify the Project Plan in order to achieve the design,transition and production goals of Gen-Probe (as the case may be), changes in the specificationsand other elements of the PRD, Instrument improvement, quality improvement, cost reduction, and/orother changes in the Project Plan tasks initially identified in Exhibit 1, on the followingterms:          (a) Work Statements. During the term of this Agreement, KMC may propose, andGen-Probe may request, Scope Changes by delivering to the other party a proposed “Work Statement.”A “Work Statement” shall mean a proposal of KMC or a purchase order of Gen-Probe, or anotherwritten document labeled as a “Work Statement” that contains the following information: adescription of the services to be performed and deliverables; the estimated cost of such servicesand the proposed payment schedule; the name of the person(s) who will be the points of contactunder the Work Statement for each party; the estimated time schedule for performance and deliveryof the deliverables; whether the proposed deliverables could be incorporated into existing PilotInstruments pursuant to the retrofit provisions of
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Section 5.7, and completion and acceptance criteria. In addition, when applicable, a WorkStatement may include: provisions for written and/or oral progress reports by KMC; detailedfunctional and technical specifications and standards for all services and deliverables, includingquality standards; documentation standards; test plans; provisions for an analysis of the specificeffect of the Scope Change on the schedule, cost of materials, and the Transfer Price of theInstrument.          (b) Agreement on Compensation and Other Terms. Upon receipt of a proposed Work Statement,the parties shall meet and negotiate to agree upon mutually acceptable terms and conditions for anagreed Work Statement. The parties may agree to use one of the following pricing mechanisms, orsuch other pricing mechanism as may be mutually agreed upon: fixed price; time-and-materials (atKMC’s current rates at the time the work is performed); or time and materials subject to fixedceiling (KMC agreeing to use all reasonable effort to complete the specified services and/ordeliverables within the ceiling).          (d) Performance. Upon the parties’ agreement to and execution of a Work Statement, KMCshall use all commercially reasonable efforts to provide the design and development services andother deliverables set forth in the Work Statement in accordance with the time schedule and otherprovisions of the Work Statement. The parties’ agreement to contract for and provide such servicesand deliverables shall be governed by the Work Statement and this Agreement, as applicable.          (e) Modification of Production Specifications and Acceptance Test Procedures. Uponcompletion of any redesign work under a Work Statement, the Instrument specifications shall bemodified accordingly. Within ten (10) working days of the completion of any such redesign work, KMCshall deliver to Gen-Probe KMC’s proposal for changes to the acceptance test procedures.          (f) Engineering Change Orders. Engineering changes suggested by KMC in the ordinarycourse of production shall be distinguished from the redesign work described in subsections (a)through (e), above. The manufacturing quality plan to be prepared by KMC and approved by Gen-Probewill establish a process for prompt evaluation and implementation of engineering changes in thecourse of production through means of Engineering Change Orders (“ECOs”). All ECOs must beapproved by Gen-Probe in writing. It is the intent of the parties that the ECO process be onewhich permits expedited response to the circumstances giving rise to the ECO. Gen-Probe recognizesthat the ECO process may require changes in nonrecurring engineering charges, production schedulesand/or material costs and the Transfer Price of the Instrument.ARTICLE IVTRANSITION PHASE     4.1 Purpose. The purpose of the work described in this Article IV (the“Transition Phase”) will be to establish manufacturing processes and manufacturingfacilities at KMC in order to commence production of the Instrument (initially in accordance withthe Project Plan tasks identified in Exhibit 1). The security of KMC’s manufacturingfacilities shall be adequate
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to protect Gen-Probe’s Confidential Information (as hereinafter defined). KMC shall be responsiblefor the successful completion of all Transition Phase activities in accordance with the terms andsubject to the conditions of this Agreement. The parties recognize that the Project Plan annexedhereto as Exhibit 1 may need to be amended from time to time and Transition Scope Changesmay be required, pursuant to the Scope Change provisions of Section 3.10, in order to accomplishthe purpose and achieve the goals of the Transition Phase. KMC shall use good workmanship inperforming all Transition Phase activities.     4.2 KMC Project Team. KMC shall assign the key members of the project team identifiedon Exhibit 3 to the Transition Phase and such team shall be made available for as much timeas necessary to accomplish successful execution of the Transition Phase. Such key members of theteam shall remain assigned to the project team while employed by KMC unless KMC and Gen-Probe agreeotherwise in writing. In the event of a significant interruption of this project, KMC shall giveGen-Probe the option of maintaining the availability of KMC’s project team, at Gen-Probe’s expense.The parties recognize that as a result of Transition Scope Changes, other Scope Changes, andrelated activities, it may be advisable to change and/or add certain project team personnel for theTransition Phase. Gen-Probe agrees to not unreasonably withhold its consent to any such changes oradditions.     4.3 Project Plan; Schedule. KMC will generally execute all Transition Phaseactivities in accordance with the Project Plan and shall use all reasonable commercial efforts tomeet the schedule set forth in the Project Plan, subject to Transition Scope Changes, whichcurrently provides for completion of Transition Phase activities by July 19, 2001. KMC shall useall reasonable commercial efforts to minimize the time needed to complete the Transition Phase;provided, however, that Scope Changes and changes to the specifications of the PRD, as well asother agreed upon factors, could result in material changes or additions to the Project Plan tasks.After the Transition Phase begins, KMC shall provide Gen-Probe with regular periodic reports, noless than every two (2) weeks, stating the current status of the Transition Phase and updating theProject Plan.     4.4 Payments; Invoices. KMC shall perform the Transition Phase on a time andmaterials basis at the rates set forth on Exhibit 2. Invoice and payment for services andmaterials provided by KMC in the Transition Phase will be handled in the same manner as the DesignEngineering Phase pursuant to Section 3.8. Gen-Probe shall have the right to review KMC’s recordswith regard to all invoiced charges (it being agreed, however, that any such review shall notrelieve Gen-Probe from its obligation to pay KMC’s invoices within thirty (30) days and, further,that payment by Gen-Probe shall not waive Gen-Probe’s right to subsequently contest KMC’s charges).     4.5 Tooling Costs. During the Transition Phase, KMC will acquire tooling forproduction of Instruments as agreed upon by the parties. Gen-Probe shall pay KMC, within thirty(30) days of delivery of invoices for all such tooling actually acquired by KMC, at a rate equal toKMC’s actual cost plus ten percent (10%). Upon payment by Gen-Probe of the cost of such tooling,the tooling and related assembly drawings shall be the sole property of Gen-Probe.     4.6 Cost Estimate. KMC estimates that the cost of its Transition Phase services forthe specific Project Plan tasks initially identified in Exhibit 1 to be approximately$610,000.
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KMC shall use all reasonable commercial efforts to minimize the costs of its Transition Phaseactivities; provided, however, that Scope Changes, changes to the specifications of the PRD, aswell as other agreed upon factors could result in material changes or additions to theabove-referenced specific Project Plan tasks (such changes and additions to the Transition Phaseservices are referred to as “Transition Scope Changes”). KMC shall provide Gen-Probe withregular periodic reports, no less than monthly, stating the then-current aggregate costs of KMC’sTransition Phase activities (including Transition Scope Changes) and updating KMC’s estimate of thecosts to be incurred. KMC’s charges for its Transition Phase services in excess of the sum ofKMC’s original $610,000 cost estimate plus the cost of the Transition Scope Changes (the“Revised Transition Estimate”) shall be allocated between the parties as follows:   Overrun as a % of Revised Transition Estimate Sharing Ratio10% KMC 100%   10.1% - 20% Gen-Probe 90%; KMC 10%20.1% - 30% Gen-Probe 80%; KMC 20%30.1% - 40% Gen-Probe 70%; KMC 30%40.1% - 50% Gen-Probe 60%; KMC 40%     The thirty three and a half percent (33.5%) discount for Transition Phase labor charges, setforth in Exhibit 2, shall be applied in calculating and charging excess Transition Phasecosts for purposes of the sharing ratios set forth above.ARTICLE VPILOT PRODUCTION PHASE     5.1 Purpose. The purpose of the work described in this Article V (the “PilotProduction Phase”) will be to manufacture eight (8) pilot versions of the Instruments (the“Pilot Instruments”) and to prepare to proceed with the manufacture of ProductionInstruments pursuant to Article VI, initially in accordance with the Project Plan tasks identifiedin Exhibit 1. KMC shall be responsible for manufacturing the Pilot Instruments inaccordance with the terms and subject to the conditions of this Agreement. The parties recognizethat the Project Plan annexed hereto as Exhibit 1 may need to be amended from time to timeand Pilot Scope Changes may be required, pursuant to the Scope Change provisions of Section 3.10,in order to accomplish the purpose and achieve the goals of the Pilot Production Phase.     5.2 KMC Project Team. KMC shall assign the key members of the project team identifiedon Exhibit 3 to the Pilot Production Phase and such team shall be made available for asmuch time as necessary to accomplish successful execution of the Pilot Production Phase. Such keymembers shall remain assigned to the project team while employed by KMC unless KMC and Gen-Probeagree otherwise in writing. In the event of a significant interruption of the project, KMC shallgive Gen-Probe the option of maintaining the availability of KMC’s project team, at Gen-Probe’sexpense. The parties recognize that as a result of Pilot Scope Changes, and the other ScopeChanges, and related activities, it may be advisable to change and/or add certain
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project team personnel for the Pilot Production Phase. Gen-Probe agrees to not unreasonablywithhold its consent to any such changes or additions.     5.3 Project Plan; Schedule. KMC will generally execute all Pilot Production Phaseactivities in accordance with the Project Plan tasks initially set forth in Exhibit 1 andshall use all reasonable commercial efforts to meet the schedule set forth in the Project Plan,subject to Pilot Scope Changes, which currently provides for manufacture of Pilot Instruments tobegin February 12, 2001, to be delivered commencing March 16, 2001. As currently scheduled, KMCshall deliver the next three (3) Pilot Instruments to Gen-Probe by April 10, 2001. KMC shall useall reasonable commercial efforts to minimize the time needed to complete the remaining four (4)Pilot Instruments and to meet the schedule set forth in the Project Plan; provided, however, theparties recognize that (a) the timing of production of Pilot Instruments will depend, in part, onKMC’s receipt of parts and components as described in Section 5.4 and that the current Project Planschedule is based on KMC’s receipt of such parts and components not later than November 21, 2000,and (b) Scope Changes, changes to the specifications of the PRD, as well as other agreed uponfactors could result in material changes or additions to the above-referenced specific Project Plantasks and schedule (such changes and additions to the Pilot Production Phase services are referredto as “Pilot Scope Changes”). After production of the Pilot Instruments begins, KMC shallprovide Gen-Probe with regular periodic reports, no less than every two (2) weeks, stating thecurrent status of the Pilot Production Phase and updating the Project Plan.     5.4 Delivery of Parts and Component Systems. Gen-Probe shall deliver to KMC, withoutcharge to KMC, eight (8) sets of the parts and components systems necessary for production of thePilot Instruments. In order for KMC to meet the current milestone dates set forth in the ProjectPlan for the first four (4) Pilot Instruments to be assembled during the Pilot Production Phase, itwill be necessary for Gen-Probe to obtain and supply to KMC, no later than November 21, 2000, allof the parts and component systems necessary for the assembly of four (4) Pilot Instruments. IfGen-Probe is unable to deliver the four (4) parts sets by January 31, 2001, the assembly dates setforth in the Project Plan shall be adjusted to compensate for the delayed delivery. If Gen-Probeis unable to deliver the second group of four (4) parts sets by March 15, 2001, the assembly datesset forth in the Project Plan shall be adjusted to compensate for the delayed delivery.     5.5 Payments; Invoices. KMC shall build the eight (8) Pilot Instruments on a time andmaterials basis. Gen-Probe shall pay KMC for the Pilot Instruments at the labor rates and discountset forth on Exhibit 2 based on the hours of such work actually performed by KMC. Basedupon the current scope of the Project Plan tasks identified in Exhibit 1, and the timelydelivery of all parts and component systems, without charge to KMC, KMC estimates that the cost ofeach Pilot Instrument will be approximately $78,500. The parties recognize that the Project Planmay need to be amended from time to time and Pilot Scope Changes may be required, pursuant to theScope Change provisions of Section 3.10, in order to accomplish the purpose and achieve the goalsof the Pilot Production Phase and that the current cost estimate may change as a result. KMC shalluse all reasonable commercial efforts to manage costs within such estimate. KMC shall provideGen-Probe with regular periodic reports, no less than monthly, stating the then-current projectedcosts of the Pilot Instruments and updating KMC’s estimate of the costs to be incurred. Gen-Probeshall pay KMC’s invoices within thirty (30) days of delivery of invoice. Gen-Probe shall have theright to review KMC’s records with regard to all
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invoiced charges (it being agreed, however, that any such review shall not relieve Gen-Probe fromits obligation to pay KMC’s invoices within thirty days and, further, that payment by Gen-Probeshall not waive Gen-Probe’s right to subsequently contest KMC’s charges).     5.6 Instrument Specifications and Quality Standards. The parties’ objective is thatPilot Instruments will be manufactured to the same FDA QSR configuration control standards asProduction Instruments. KMC shall use good workmanship in performing all Pilot Production Phaseactivities and the Pilot Instruments shall meet the applicable quality and regulatory requirementsof Article VII. The parties acknowledge that the PRD will not have been finalized before KMCbegins to assemble Pilot Instruments pursuant to the terms of this Article V. KMC shall use itsbest efforts to assemble the Pilot Instruments in accordance with the configuration of PR 30, aspreviously prescribed by Rela, together with those additional Design Engineering changes describedin Exhibit 1; *provided*, also, that KMC shall use its best efforts to achieve modificationsthat may be adopted pursuant to the Scope Change provisions of Section 3.10. KMC shall adviseGen-Probe if KMC concludes that any Design Engineering change described in Exhibit 1 or anyScope Change cannot be incorporated into a Pilot Instrument, and in that event Gen-Probe willdecide, in its sole discretion, whether to proceed with assembly of such Pilot Instrument.Gen-Probe may also, at its sole discretion, defer assembly of any Pilot Instrument if Gen-Probeconcludes that such delay is appropriate in order to increase Instrument reliability prior toassembly of any Pilot Instrument. KMC shall develop, subject to Gen-Probe’s review and approval(which approval or rejection shall be in its sole discretion), preliminary acceptance testprocedures (the “Preliminary ATP”) that each Pilot Instrument must pass before shipment byKMC.     5.7 Retrofit. KMC represents, to the best of its knowledge as of the date ofexecution of this Agreement, that the Pilot Instruments, when assembled in accordance with Section5.6, will be capable of being retrofitted once the final PRD and final hardware specifications areapproved. Upon Gen-Probe’s request and at Gen-Probe’s sole option, KMC shall use its best effortsto retrofit any or all Pilot Instruments, on a time and materials basis at KMC’s then standardrate, to meet the requirements of the final PRD and final hardware specifications.ARTICLE VIPRODUCTION PHASE     6.1 Manufacturing. KMC shall be responsible for manufacturing the Instruments orderedby Gen-Probe (the “Production Instruments”) as set forth in the Project Plan and in thisArticle VI (the “Production Phase”).     6.2 Initial Long-Lead Materials. In order to meet its desired production schedule forits initial order of the Production Instruments, Gen-Probe must provide KMC with authorization notlater than January 31, 2001 to purchase those materials that require long lead times to produce(“Long-Lead Materials”) for twenty (20) Production Instruments. The parties shall discussin good faith and determine in writing no later than January 1, 2001 which Production Instrumentmaterials are Long-Lead Materials. Gen-Probe acknowledges that the design and specifications forthe Instrument may not be finalized by January 31, 2001 and, accordingly, some of the orderedLong-Lead Materials may not be useable for Production Instruments. Gen-
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Probe agrees to bear the full commercial and economic risk that any such Long-Lead Materialsordered by KMC may not be useable. KMC shall place for bid with its vendors, no later than February28, 2001, the order for all other materials (in addition to the Long-Lead Materials specifiedabove) necessary to manufacture the Production Instruments pursuant to the currently outstandingPRD (the Long-Lead Materials and all such other materials are collectively referred to as the “Billof Materials”).     6.3 Forecasts and Purchase Orders. Not later than January 15, 2001, Gen-Probe shallprovide KMC with its initial twelve-month forecast of Gen-Probe’s reasonably anticipatedrequirements for the number of Production Instruments to be delivered by KMC during suchtwelve-month period. Such forecast shall be updated each six months thereafter during the term ofthis Agreement for the then succeeding twelve-month period. KMC shall provide Gen-Probe with adefinitive and final quote for the Bill of Materials (based upon Gen-Probe’s PRD) for 20-unit and100-unit ordering increments by May 14, 2001. Not later than June 4, 2001, Gen-Probe shall deliverto KMC its binding purchase order for the initial six-month period commencing with the delivery ofthe first Production Instrument (currently anticipated to be on or about August 16, 2001) and,subject to the provisions of Section 6.8 below, establishing the schedule for delivery of suchProduction Instruments. Not later than delivery of each forecast after the initial forecast,Gen-Probe shall provide KMC with its purchase order for the six-month period commencing six monthsthereafter.     6.4 Ordering and Payment for Parts. Gen-Probe shall be deemed to authorize KMC topurchase parts comprised within the then current Bill of Materials by delivering its purchaseorders for Production Instruments (such parts being referred to hereafter as the “AuthorizedParts”). Prior to accepting Gen-Probe’s purchase order, (i) KMC will inform Gen-Probe of theestimated cost of the Authorized Parts, (ii) KMC and Gen-Probe shall agree upon the deliveryschedule for the Production Instruments incorporating the Authorized Parts, and (iii) KMC willprovide Gen-Probe with KMC’s schedule for commitment to vendors and receipt of Authorized Parts inconnection with the agreed delivery schedule.          In placing its orders with vendors for Authorized Parts KMC shall use its best efforts toarrange “just in time” delivery of Authorized Parts consistent with the agreed delivery schedule.KMC shall negotiate terms with vendors that provide the most advantageous quantity discounts fromvendors based on each accepted Gen-Probe purchase order. Subject to Gen-Probe’s desires respectingquantity discounts referred to in the immediately preceding sentence and in the provisions ofSection 6.11 hereof, KMC shall also use its best efforts to obtain terms from vendors that permitprospective cancellation of orders for Authorized Parts prior to their delivery to KMC. If thereare trade-offs between quantity discounts and the right to cancel, KMC will notify Gen-Probe andGen-Probe will elect between the alternatives.          KMC shall use its best efforts to reasonably use parts transferred to KMC from ColoradoMEDtech, Inc. in assembling Production Instruments. As Gen-Probe has previously paid ColoradoMEDtech for such parts, the parties will agree on method by which such parts can be tracked andaccounted for when incorporated into Production Instruments.     Nothing contained in this Section 6.4 herein shall modify the provisions of Section 6.11 ofthis Agreement (“Transfer Price”).
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     6.4.1 Contemporaneous Payment. If Gen-Probe does not provide either a letter ofcredit, surety bond, or financial guarantee bond pursuant to Sections 6.5 in connection with any ofits purchase orders for Production Instruments, KMC will invoice Gen-Probe for the actual cost ofAuthorized Parts at the time it orders such Authorized Parts from third party vendors. Gen-Probeshall pay such KMC’s invoices within fifteen (15) days of receipt of invoice. If Gen-Probe doesnot pay the invoice within fifteen (15) days of receipt, then, without limiting any other rightsand remedies that may be available to KMC under this Agreement, at law or in equity, KMC will beentitled to cancel the Authorized Parts orders made with third party vendors (it being agreed,however, that Gen-Probe shall not be liable for cancellation charges, if any, imposed bythird-party vendors as a result of such cancellations).     6.4.2 Letter of Credit. If Gen-Probe provides KMC with a letter of credit pursuant toSection 6.5, Gen-Probe will not be required to pay for Authorized Parts until the earlier of (i)delivery of Production Instruments incorporating such parts (by payment of the invoice for suchProduction Instruments pursuant to Section 6.16) or (ii) eleven (11) months from the date KMCordered such Authorized Parts. At Gen-Probe’s sole option, the parties will implement the partsdelivery, billing, and payment terms described in Section 6.4.3 below for use in circumstanceswhere Gen-Probe has provided a letter of credit.     6.4.3 Surety Bond. If Gen-Probe provides KMC with a surety bond or financialguarantee bond pursuant to Section 6.5, then upon KMC’s actual receipt of Authorized Parts fromthird party vendors on a “just in time” basis, but in no event more than sixty (60) days prior tothe scheduled delivery of the Production Instruments incorporating such parts (other than thoseparts set forth in Exhibit 9 annexed hereto) KMC will invoice Gen-Probe for the actual cost of suchAuthorized Parts. As to the parts set forth in Exhibit 9 (“the Exhibit 9 Parts”), KMC will invoiceGen-Probe for the actual cost of such Authorized Parts upon KMC’s actual receipt of AuthorizedParts from third party vendors on a “just in time” basis, but in no event more than one hundredtwenty (120) days prior to the scheduled delivery of the Production Instruments incorporating suchparts. KMC shall use its best efforts to limit the number of Exhibit 9 Parts. To the extent thecost of Exhibit 9 Parts exceeds 20% of the cost of all Production Instrument parts, all on a “perunit” basis, Gen-Probe shall be under no obligation to pay the amount of the actual costs of suchAuthorized Parts that exceed the 20% limitation any earlier than sixty (60) days before thescheduled delivery of the Production Instruments incorporating such parts; provided that if thereare trade-offs between quantity discounts and the number of Exhibit 9 Parts, KMC will notifyGen-Probe and Gen-Probe will elect between the alternatives. Gen-Probe shall pay all invoicesissued by KMC in accordance with this Section 6.4.3 within thirty (30) days of receipt. Gen-Probeshall be entitled to a credit against the invoiced price of delivered Production Instrumentsincorporating such parts (as described in Section 6.16) for amounts paid pursuant to thisparagraph. This Section 6.4.3 shall not determine the liability of the surety on any surety bond,as to which the provisions of section 6.5 shall apply.     6.5 Security. Rather than being obligated to pay for Authorized Parts bycontemporaneous payment in the manner provided for in Section 6.4.1, Gen-Probe shall have the rightto provide KMC, concurrently with the issuance of its purchase order, a firm, irrevocable letter ofcredit from Wells Fargo Bank, N.A., or comparable financial institution (in form,
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amount and substance reasonably satisfactory to KMC), or a surety bond issued by a suretycompany acceptable to KMC (the bond and associated indemnity agreement to be in form and substancereasonably satisfactory to KMC), as security for the costs of such Authorized Parts, plus KMC’shandling charges of fifteen (15%) percent (“together, the “Authorized Parts Charges”). (KMC agreesthat the form of bond attached as Exhibit 8 is generally acceptable to KMC. Such letter ofcredit or surety bond will guarantee payment for the Authorized Parts Charges only and will notprovide coverage for any other aspect of this Agreement. Without in any manner releasing Gen-Probeof its payment obligations under Section 6.4.3 or 6.16, if Gen-Probe has not paid for suchAuthorized Parts (either by payment for Production Instruments incorporating such parts inaccordance with Section 6.16), or directly by payment for such parts themselves) within eleven (11)months of the date that KMC ordered such parts (as ordered or authorized by Gen-Probe), then KMCshall separately invoice Gen-Probe for the cost of the Authorized Parts Charges. If Gen-Probefails to pay such invoice in full, within thirty (30) days of issuance, then upon five (5) dayswritten notice to Gen-Probe KMC shall be entitled to draw upon the letter of credit. If a suretybond is provided as security (rather than a letter of credit), KMC may make a claim against thesurety bond for the amount of the invoice with a copy of the invoice and KMC’s signed statementthat such invoice remain unpaid. The surety may take up to thirty (30) days to verify a claim isvalid after presentation of a claim by KMC. After verification of the validity of the claim, theSurety shall make payment in a period not to exceed thirty (30) days.     6.6 Interest. Failure to make full payment of any KMC invoice within the period setforth in this Agreement shall constitute a material breach of this Agreement by Gen-Probe.Furthermore, KMC may assess Gen-Probe interest at the rate of one (1%) percent per month or themaximum rate allowed by applicable law, whichever is lower, on the past due amount and may recoverits reasonable costs of collection (including attorney’s fees and expenses). For purposes ofclarity, if Gen-Probe fails to timely pay any KMC invoice issued pursuant to Sections 6.4 or 6.16,the subsequent payment for Authorized Part Charges under a letter of credit, surety bond orfinancial guarantee pursuant to Section 6.5 shall not relieve Gen-Probe of its obligation to payKMC the foregoing interest or costs of collection.     6.7 No Waiver / KMC Rights. Nothing contained in Sections 6.4 or 6.5, nor any paymentunder a letter of credit, surety bond, or financial guarantee bond shall release or waive any claimor right of Gen-Probe in any action or proceeding brought after payment in full has been made toKMC to contend that (i) such payment was not in fact due and/or (ii) to seek to recover (on its ownbehalf or on behalf of any party making payment to KMC) the amount of the payment made to KMC, itbeing the intention of the parties to prescribe the unconditional *timing*of payment to KMC and notto waive, release, or extinguish substantive rights of Gen-Probe, the surety, or the financialinstitution, which may be exercised and asserted after such payment has been made. Nothingcontained in Section 6.5, including the payment to KMC under a letter of credit, surety bond orfinancial guarantee bond shall release or waive any claim or right of KMC for timely payment ofinvoices issued pursuant to Sections 6.4 or 6.16. To the extent that KMC has not been paid itsAuthorized Parts Charges in accordance with the terms of Sections 6.4 or 6.5 above, then KMC shallbe entitled to avail itself of all rights and remedies to which it may be entitled under thisAgreement, at law or in equity, including the cancellation of any or all outstanding materialorders and the termination of all work under this Agreement.
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     6.8 Project Plan; Schedule. KMC shall use its best efforts to meet the productionschedule set forth in accepted Gen-Probe’s purchase orders. Within two weeks of KMC’s receipt ofeach of Gen-Probe’s purchase orders, KMC shall inform Gen-Probe whether KMC can meet the proposeddelivery schedule set forth in the purchase order. If KMC informs Gen-Probe that it is unable tomeet such delivery schedule, then the purchase order shall not be binding on either party and KMCshall make a counterproposal to Gen-Probe setting forth a delivery schedule, which schedule shallbe binding upon the parties if accepted by Gen-Probe. The Production Phase shall begin, and KMCshall begin manufacturing the Production Instruments (subject to its receipt of Gen-Probe’spurchase orders and security or payment referred to in Sections 6.5 and 6.6 above), as soon as thePilot Instruments are complete and the manufacturing readiness review has been conducted. KMCshall take all actions necessary to develop, not later than September 1, 2002, the capacity toproduce fifteen (15) Production Instruments per month. KMC shall report to Gen-Probe at leastmonthly on the status of its production capacity, such reports to commence one month after theEffective Date.     6.9 Inventory. Based upon Gen-Probe’s purchase orders for Production Instruments, KMCshall order and maintain sufficient quantities of all materials required for the timely manufactureand supply of Production Instruments ordered by Gen-Probe under such purchase orders.     6.10 Repair Parts. KMC shall manufacture and supply repair parts for the ProductionInstruments as required by Gen-Probe, pursuant to Gen-Probe’s purchase orders for such parts, tosupport Gen-Probe’s United States and overseas field service. KMC and Gen-Probe shall agree upon arepair parts list and a price list by August 30, 2001. Gen-Probe shall provide to KMC separateforecasts and binding purchase orders (together with security substantially as provided for underSection 6.5(in form and substance satisfactory to KMC) to secure payment for same) for such repairparts.     6.11 Transfer Price.          (a) The transfer price for each Production Instrument (the “Transfer Price”) shall be$124,500 per unit, based upon the following assumptions: (1) a commitment by Gen-Probe to orderProduction Instruments in lots of one hundred (100) Production Instruments, which shall enable KMCto order one hundred (100) complete sets of materials for such Production Instruments; (2) a Billof Materials price for each Production Instrument (“BOM Price”) of $89,584 for the purchaseof twenty (20) sets of materials (such BOM Price is primarily based upon the material and pricinginformation provided to KMC by Gen-Probe directly or through Rela) ; and (3) a 93% learning curvereducing the twenty-unit Bill of Materials cost. As set forth in Section 6.3, KMC shall provideGen-Probe the actual BOM Price for the Production Instruments by May 14, 2001.          (b) If the actual BOM Price varies from the $89,584 price in the above paragraph, and/or ifGen-Probe orders Production Instruments in lots of fewer than one-hundred (100) ProductionInstruments, the Transfer Price shall be adjusted in accordance with the range of mark-ups used byKMC in calculating the presently-estimated $124,500 Transfer Price, as set forth in Exhibit5.
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          (c) The labor content portion of the Transfer Price shall be adjusted by KMC for inflation,based on the average combined change in the national Consumer Price Index and Medical ConsumerPrice Index (or comparable indexes if no longer available), no more frequently than annually.          (d) KMC shall use its best efforts to minimize the BOM Price and shall obtain at least twocompeting bids wherever feasible. If, after receipt of vendor bids, the unit price of thosematerials and components currently anticipated to comprise the Bill of Materials and, therefore,used in arriving at the $89,584 estimate, is more than $100,000, Gen-Probe shall have the option topurchase such Bill of Material itself, subject to the following conditions: (i) KMC will notprovide any warranty as to such materials; (ii) KMC will charge Gen-Probe a material handling feeof fifteen percent (15%) of the total value of material purchased by Gen-Probe; and (iii) KMC willreserve the right to reject any non-conforming material received in connection with material ordersplaced directly by Gen-Probe. If, by agreement between Gen-Probe and KMC, the final Bill ofMaterials contains materials and components other than those used to calculate the $89,584estimate, the additional cost of such other materials and components shall not be considered forpurposes of the above $100,000 threshold.     6.12 Delivery. All shipments of Production Instruments and repair parts pursuant tothis Article 6 shall be FOB KMC’s place of manufacture and Gen-Probe shall bear the risk of lossand cost of transportation upon delivery by KMC to a carrier designated by Gen-Probe.     6.13 Binding Orders. Gen-Probe expects to order one-hundred (100) ProductionInstruments from KMC to be shipped during the initial eighteen (18) consecutive months of theProduction Phase and to purchase a total of two-hundred (200) Production Instruments from KMCduring the initial four (4) consecutive years of the Production Phase; provided, however, that abinding obligation on Gen-Probe’s part to purchase Production Instruments from KMC shall be createdonly as and when Gen-Probe issues purchase orders in accordance with terms set forth in thisAgreement, including without limitation Section 6.3.     6.14 Cost Reduction and Redesign Services. If the cost reductions identified by KMCin Exhibit 4 are implemented, then such reductions will be allocated eighty percent (80%)to Gen-Probe and twenty percent (20%) to KMC. Gen-Probe will pay the associated tooling andengineering costs to implement such reductions. KMC and Gen-Probe will share equally in any costreductions in addition to those referred to in Exhibit 4; provided, however, that beforeGen-Probe participates in such additional cost reductions, one hundred percent (100%) of such costreductions shall accrue to KMC’s benefit until KMC fully recoups all non-recurring expenses relatedsolely to such cost reductions.     6.15 Production Instrument Inspection. Before KMC ships any Production Instruments toGen-Probe or its distributors or customers, KMC shall confirm that each such Production Instrumentpasses the requirements of the acceptance test procedures set forth in Section 6.17 (the“ATP”). Gen-Probe shall have the right to be present for any such Production Instrumenttesting. KMC’s good-faith confirmation that a Production Instrument passes the requirements of theATP shall be considered acceptance of such Production Instrument by Gen-Probe for purposes of thisAgreement. Thereafter, any claims respecting such Production Instruments shall be pursuant toKMC’s warranty set forth in Article VIII.
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     6.16 Invoices. KMC shall invoice Gen-Probe for the Production Instruments and repairparts upon KMC’s delivery to Gen-Probe (or its customer) of such Production Instruments or repairparts. Gen-Probe shall pay KMC within thirty (30) days following receipt of Production Instrumentsor repair parts and an invoice that lists each such Production Instrument and repair part togetherwith the price for each such item. The purchase price of any Production Instrument shall bereduced to reflect any applicable credits due Gen-Probe for payments previously made pursuant toSections 6.4 and 6.5 for the Authorized Parts incorporated within such Production Instruments. IfGen-Probe fails to pay a KMC invoice within the foregoing thirty (30) day period, KMC shall beentitled to avail itself of all rights and remedies to which it may be entitled under thisAgreement, at law or in equity, including the cancellation of any or all outstanding materialorders and the termination of all work under this Agreement.     6.17 Instrument Specifications and Quality Standards. The parties acknowledge thatthe specifications for the Instrument have not been finalized by Gen-Probe. When it deemsappropriate, Gen-Probe shall commence validation of the Instrument’s design against itsthen-current specifications. After Gen-Probe is satisfied with the validation of the Instrument’sdesign to such specifications, Gen-Probe shall issue the PRD for Production Instruments. Gen-Probeshall have full control, authority and responsibility for the design of the Instrument, includingduring the Design Engineering Phase, and for the final specifications of the Instrument. Uponfinalization of the PRD, and based on the Instrument capabilities associated therewith, KMC shalldevelop, subject to Gen-Probe’s review and approval (which approval shall be in Gen-Probe’s solediscretion), the acceptance test procedures (the “ATP”) that each Production Instrumentmust pass before shipment by KMC. Subject to all of the terms and conditions of this Agreement(including, without limitation, necessary Scope Changes and issuance of related Work Statements),KMC shall: (i) complete the Instrument design to meet Gen-Probe’s final specifications; (ii)develop the ATP to insure that each Production Instrument meets certain performance criteria to beagreed upon by the parties, reasonably and in good faith, after finalization of the PRD forProduction Instruments; and (iii) manufacture Production Instruments that comply with and pass theentire ATP. The ATP will be summarized in a Gen-Probe Quality Control Specification (“QCS”)document against which each Instrument will have a “Certificate of Release” provided to Gen-Probeupon shipment of each Instrument.     6.18 Manufacturing Inspection. Gen-Probe shall have the right, upon reasonable priornotice, to inspect all phases of the Instrument manufacturing activities, during normal businesshours, in order to verify KMC’s compliance with production specifications and regulatory standards.KMC agrees to give Gen-Probe access, during normal working hours and upon reasonable prior notice,to such records as are reasonably necessary to confirm KMC’s compliance with its manufacturingobligations hereunder including quality control records, test records, manufacturing records anddesign records, and to permit Gen-Probe to review and copy such records. All such records shall beheld by Gen-Probe in accordance with the terms of the confidentiality provisions of Article XIII.     6.19 Production Delays. In the event that KMC production activities under a purchaseorder issued by Gen-Probe are substantially interrupted and /or delayed due to Gen-Probe decisionsor actions, for a continuous period in excess of thirty (30) days, then KMC reserves the right topass on to Gen-Probe a production delay charge. Such charge shall be limited to reimbursement ofactual expenditures by KMC for labor or materials associated with the
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purchase order then in effect, and which such expenditures cannot be avoided. KMC will use allreasonable efforts to minimize such charges, by reallocating internal resources and by negotiatingalternative arrangements with outside suppliers.ARTICLE VIIREGULATORY COMPLIANCE     KMC will manufacture the Production Instruments, Pilot Instruments and repair parts inaccordance with each and every applicable requirement of the: (a) Federal Food, Drug and CosmeticsAct, as amended, including without limitation, the then current Quality Systems Regulations(“QSR”) as established by the United States Food and Drug Administration in accordance withcGMPs covering devices regulated by each FDA Center governing the intended use of theInstrument, i.e., blood screening and diagnostic testing; (b) Canadian CSA Standards; (c)applicable standards of the Underwriters Laboratories; (d) international electrical safetyapproval, meeting the IEC-1010 Medical Electrical Equipment Standards; and (e) European CEStandards for which KMC will secure the “CE” mark on the Instrument. KMC shall maintain a changecontrol process that meets the requirements of the Center for Biologics Evaluation and Research ofthe FDA for all services performed by KMC under this Agreement. (This process shall include arequirement for prior approval by Gen-Probe of all changes or improvements to theInstrument.) Gen-Probe will use its best efforts, with the assistance of KMC, to obtain historicalchange control documentation from Colorado MEDtech/Rela for all Instrument-related servicesperformed by Colorado MEDtech/Rela for Gen-Probe and KMC shall integrate such documentation, whensuch documentation is obtained, KMC will incorporate such information into its change controlprocess documentation and the Instrument Design History File. The parties recognize that theincorporation of such documentation by KMC is a Scope Change and will result in additional costs,and the parties will provide for such services by KMC pursuant to the issuance of an agreed uponWork Statement pursuant to the provisions of Section 3.10. KMC shall retain all necessarydocuments, including without limitation device history records, device master records and othermanufacturing quality records, in accordance with any applicable QSR including, without limitation,cGMP regulations. At the end of the retention period and subject to payment in full of all KMCinvoices, KMC shall send all such records to Gen-Probe. KMC shall make Gen-Probe aware, within two(2) weeks of KMC becoming aware, of any known issues believed to require regulatory attention oneither KMC’s or Gen-Probe’s part.ARTICLE VIIIWARRANTY AND SERVICE     8.1 Warranty and Service. KMC warrants that the Production Instruments and PilotInstruments manufactured by it will be free, under normal use and maintenance, from defects inmaterial and workmanship for a period of twelve (12) months following installation at Gen-Probe’scustomer or eighteen (18) months following delivery, whichever is earlier (the “WarrantyPeriod”). (If delay in delivery of any Instrument results solely from action or inaction ofGen-Probe, then the 18-month warranty period for such Instrument shall commence on the scheduleddelivery date or on completion of the Instrument by KMC, whichever is later.) Any
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materials provided by or on behalf of Gen-Probe as customer-furnished material shall be excludedfrom the warranty provided by KMC under this Section 8.1. As Gen-Probe’s sole and exclusive remedyfor any defects in KMC manufactured Instruments (provided, however, that nothing contained in thissentence shall affect Gen-Probe’s right of indemnity as to third party claims pursuant to Section9.1), KMC shall, at its option (subject to the reasonable requirements of Gen-Probe’s customers asto which KMC has been given notice), reimburse Gen-Probe for the cost of field service (subject toKMC’s right to approve such field service costs, pursuant to a standard policy or on an individualbasis, before field service is provided), provide factory service of such defective Instrument(without charge to Gen-Probe), or replace the defective Instrument (without charge to Gen-Probe);provided, however, that KMC must be notified in writing by Gen-Probe of the defect within theWarranty Period. As set forth in Section 6.10, KMC shall sell to Gen-Probe an inventory of repairparts to be used by Gen-Probe in performing field service on Instruments. During the TransitionPhase, Gen-Probe and KMC shall establish mutually agreed-upon factory service programs, for serviceboth during the Warranty Period and thereafter     **8.2****WARRANTY LIMITATIONS****. OTHER THAN AS EXPRESSLY PROVIDED IN THIS AGREEMENT, NEITHERPARTY MAKES ANY GUARANTEE OR WARRANTY WHATSOEVER, AND THE WARRANTY SET FORTH IN THIS ARTICLE VIIIIS IN LIEU OF ALL OTHER WARRANTIES BY KMC, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OFMERCHANTABILITY OR FITNESS FOR PARTICULAR PURPOSE.**     8.3 Limitation of Liability/Damages. Except as to rights of indemnity under ArticleIX, in no event will either party be liable to the other in contract, tort or otherwise for anylost profits, or special, incidental or consequential damages, regardless of whether such party hasbeen advised of the possibility of such damages. KMC’s liability to Gen-Probe on any claims ofany kind (including negligence) for any loss or damage arising out of, or connected with, orresulting from this Agreement or the performance of breach hereof shall not in the aggregate,exceed the total amount of insurance coverage available for such claims under insurance maintainedby KMC; provided, however, that if insurance coverage is not available for the full amount of anysuch claims, then and in such event, KMC’s liability for all such claims, or portions thereof, inthe aggregate, shall not exceed the amount provided by KMC’s insurance plus the total amount paidto KMC hereunder by Gen-Probe for services and Instruments. Nothing contained in the immediatelypreceding sentence shall limit KMC’s liability to Gen-Probe pursuant to the indemnity provisions ofSection 9.1(ii).ARTICLE IXINDEMNITY     9.1 Indemnification by KMC. KMC shall indemnify and save Gen-Probe, its affiliatedentities and their respective officers, directors, employees and agents (collectively, the“Gen-Probe Indemnitees”), harmless from any and all claims, actions, losses, damages,liabilities, costs and expenses (including reasonable attorneys’ fees and disbursements) incurredby the Gen-Probe Indemnitees as a result of: (i) any breach by KMC of the provisions of
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Sections 10.1 and 12.1; or (ii) any injury to persons or damage to property caused by anyProduction Instrument or Pilot Instrument manufactured, sold or serviced by KMC to or for Gen-Probeor Gen-Probe’s customers, where the injury or damage is a direct result of KMC’s negligence,failure to manufacture such Instrument in accordance with Gen-Probe’s specifications, or failure tocomply with the requirements of Article VII.     9.2 Indemnification by Gen-Probe. Gen-Probe shall indemnify and save KMC, itsaffiliated entities and their respective officers, directors, employees and agents (collectively,the “KMC Indemnitees”), harmless from any and all claims, actions, losses, damages,liabilities, costs and expenses (including reasonable attorneys’ fees and disbursements) incurredby the KMC Indemnitees as a result of: (i) any breach by Gen-Probe of the provisions of Sections10.1, 10.2 or 12.1; or (ii) any injury to persons or damage to property arising out of or in anyway connected with the Instruments, Gen-Probe’s acts or omissions, or the services provided by KMCpursuant to this Agreement (other than where the cause of the claim, action, loss, damage,liability, cost and/or expenses results from a cause identified in Section 9.1 hereof); or (iii)without limiting the provisions of subsection (i) above, any claims, actions or proceedings broughtby or on behalf of Colorado MedTECH or Rela or their Affiliates to the extent any such claims,actions or proceedings result from, arise out of, relate to, or are in connection with thisAgreement.     9.3 Indemnification Procedures. The parties shall promptly notify each other of anyclaims or suits with respect to which indemnification is sought. The party requestingindemnification shall permit the indemnifying party to assume the defense, at the indemnifyingparty’s sole expense, of such claims or suits giving rise to the request. The requesting partyshall cooperate with the indemnifying party in such defense when reasonably requested to do so. Nosettlement or compromise shall be binding on a party to this Agreement without such party’s priorwritten consent, such consent not to be unreasonably withheld. Costs, expenses, and/or feesincurred by a party and as to which that party has a right of indemnity hereunder shall beperiodically reimbursed to the indemnified party by the indemnifying party as they are incurred.ARTICLE XREPRESENTATIONS AND WARRANTIES     10.1 Mutual Representations and Warranties. Each of KMC and Gen-Probe represents andwarrants to the other that its execution, delivery and performance of this Agreement (a) has beenduly authorized and represents its legal, valid and binding obligation, enforceable in accordancewith its terms; and (b) does not result in a breach of or constitute (with or without notice orlapse of time or both) a default under any contract or arrangement to which it is a party.     10.2 Additional Representations and Warranties of Gen-Probe. Gen-Probe furtherrepresents and warrants to KMC that, as of the Effective Date: (i) to the best of Gen-Probe’sbelief, the execution, delivery and performance of this Agreement does not in any way contraveneany obligation to, or rights of Colorado MEDtech/Rela or any of its affiliates, under anyagreements or otherwise; and (ii) if and to the extent the Instrument or Production Instrumentincorporates any proprietary or confidential information of Rela or Colorado
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MEDtech, Gen-Probe, together with its designees (including, for the purposes of this provision,KMC) has the unrestricted right to incorporate and use such information in the Instruments andProduction Instruments.ARTICLE XIOWNERSHIP     11.1 Design Ownership. Subject to its payment of all sums due to KMC hereunder and toSection 11.2, Gen-Probe shall solely own the right to any and all technology, discoveries,inventions or processes, whether patentable or not, that are first reduced to practice by KMC inits performance of this Agreement. Subject to its payment of all sums due to KMC hereunder and toSection 11.2, Gen-Probe and KMC shall jointly own the rights to any and all technology,discoveries, inventions or processes, whether patentable or not, that are first conceived, but notreduced to practice, by KMC in its performance of this Agreement.     11.2 Production Processes Ownership. Subject to its payment of all sums due to KMChereunder, Gen-Probe shall jointly own with KMC any production process technology first conceivedor first reduced to practice by KMC in its performance of this Agreement if that production processtechnology has any substantial use other than in the manufacture of the Instrument. For theavoidance of doubt and subject to Gen-Probe’s payment of all sums due KMC hereunder and pursuant toSection 11.1, Gen-Probe shall own any production process technology first conceived or firstreduced to practice by KMC in its performance of this Agreement if that production processtechnology does not have any substantial use other than in the manufacture of the Instrument.ARTICLE XIIINFRINGEMENT     12.1 Claims by Third Parties. KMC and Gen-Probe shall each use its best efforts tonot, with actual knowledge, incorporate into any Instrument any proprietary or confidentialtechnical information of any third party. Each party shall be obligated to promptly notify theother party of any claims or circumstances concerning infringements, misappropriations, imitationsor unauthorized possession, knowledge or use of technology used in the design or manufacturingprocess for the Instrument.     12.2 Defense. Gen-Probe shall have the sole right to defend, at its sole cost andexpense (subject to the indemnification provisions of Article 9), any and all claims that anyInstrument infringes or misappropriates any third party’s intellectual property rights. IfGen-Probe elects not to defend such claim, or if it fails to assume the defense within ninety (90)days of receiving written notice of such claim, then KMC shall have the right, at its sole cost andexpense, to defend such claim.     12.3 Enforcement. If either party becomes aware of any actual or threatenedinfringement or misappropriation of Gen-Probe Technology, that party shall promptly notify the
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other party of such infringement or misappropriation. Gen-Probe shall have the sole right, at itssole cost and expense, to enforce the Gen-Probe Technology.ARTICLE XIIICONFIDENTIALITY     13.1 Confidentiality Obligations. During the term of this Agreement and thereafter,each party: (i) shall treat as confidential all Confidential Information provided to the receivingparty by the disclosing party, (ii) shall not use such Confidential Information except as expresslypermitted under the terms of this Agreement or otherwise authorized in writing by the disclosingparty, (iii) shall implement reasonable procedures to prohibit the disclosure, unauthorizedduplication, misuse or removal of such Confidential Information, and (iv) shall not disclose suchConfidential Information to any third party unless it is necessary to fulfill one or moreobligations expressly required by this Agreement, and provided that such third party agrees inwriting to be bound by terms of confidentiality at least equivalent to those set forth in thisArticle XIII. Without limiting the foregoing, each of the parties shall use at least the sameprocedures and degree of care to prevent the disclosure of Confidential Information as its uses toprevent the disclosure of its own confidential information of like importance, and shall in anyevent use no less than reasonable procedures and a reasonable degree of care. For purposes of thisArticle XIII, “Confidential Information” means any and all non-public and proprietaryinformation that is specifically designated as such and that is disclosed by either party to theother (including, without limitation, pricing information) in any form in connection with thisAgreement and that, if orally disclosed, shall be identified in writing within thirty (30) days ofsuch disclosure.     13.2 Permitted Disclosure. The obligations set forth in Section 13.1 shall not applyto any information to the extent it can be established by the receiving party that suchinformation:          (a) was generally known and available to the public domain at the time it was disclosed, orbecomes generally known and available to the public domain through no fault of the receiver;          (b) was known to the receiver at the time of disclosure as shown by the written records inexistence at the time of disclosure, or was independently developed by the receiving party or itsAffiliates without benefit of Confidential Information;          (c) is disclosed with the prior written approval of the disclosing party;          (d) becomes known to the receiving party from a third party without breach of this Agreementby the receiving party and in a manner that is otherwise not in violation of the disclosing party’srights; or          (e) is disclosed by the receiving party pursuant to the order or requirement of a court,administrative agency, or other governmental body; provided, however, that the receiving partyshall provide reasonable advance notice to enable the disclosing party, with the cooperation of thereceiving party, to seek a protective order, confidential treatment order, or otherwise prevent orrestrict such disclosure.
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     13.3 Agreement and Terms Confidential. Unless otherwise agreed to in writing or asnecessary to comply with a valid legal order of a court of law or agency of competent jurisdiction,both the existence and terms of this Agreement shall be deemed Confidential Information. If eitherparty is required by the United States Securities Exchange Commission (or other similar State ornon-United States governmental agency) to disclose this Agreement or any of its terms, such partyshall consult with the other party, and give due consideration to such party’s comments regardingwhich terms the disclosing party may make the subject of a confidential treatment request.ARTICLE XIVLIMITED GUARANTEE BY EFW, INC.     If, (1) during the Initial 4 Years (as hereinafter defined) KMC becomes insolvent orundergoes a change of control that results in its (or its successors) inability to perform itsobligations under this Agreement with respect to the manufacture and service of ProductionInstruments under this Agreement; (2) for the period of not less than six (6) months prior to suchinsolvency or change of control, all world-wide requirements for Production Instruments were beingsupplied by KMC and Gen-Probe does not have an existing second source supplier for the ProductionInstruments; and (3) KMC fails to provide Gen-Probe with at least nine (9) months priorwritten notice of such insolvency or change or control (the date of any such notice is herebyreferred to herein as the “Notification Date”), then, and only in such event, EFW, Inc. (“EFW”),the indirect parent of KMC, guarantees to Gen-Probe the due and timely performance of all of KMC’sobligations hereunder until the earlier of (a) the manufacture of the Production Instrument forGen-Probe is transferred to a new manufacturer selected by or reasonably satisfactory to Gen-Probe,(b) the date six months after the Notification Date, or (c) the end of the Initial 4 Years. Theperiod between the Notification Date and the date determined in accordance with the precedingsentence is referred to herein as the “Guarantee Period.” During the Guarantee Period, EFW shallalso assist Gen-Probe in the transition of manufacturing of the Production Instruments to the newmanufacturer. EFW shall bear or pay all reasonable out-of-pocket costs associated with thetransfer of manufacturing during the Guarantee Period. EFW’s guarantee shall only be for thosespecific items set forth above and will not provide coverage for any other aspect of thisAgreement.ARTICLE XVTERM AND TERMINATION     15.1 Term. Unless terminated earlier pursuant to the terms of Sections 15.2, 15.3,15.4 or 15.5, the term of this Agreement shall commence on the Effective Date and continue untilthe later of (a) the date four (4) years after the date of the delivery by KMC of the firstProduction Instrument (the “Initial 4 Years”) or (b) the date of the delivery by KMC of the 200thProduction Instrument hereunder. If Gen-Probe does not purchase at least 100 Instruments during theInitial 4 Years, then KMC will have the right to terminate this Agreement on nine (9) monthswritten
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notice to Gen-Probe. If Gen-Probe purchases at least 200 Production Instruments during the Initial4 Years, then Gen-Probe will have the right to extend the term for up to five (5) additionalperiods of one (1) year each, subject to agreement by the parties to minimum irrevocable purchasecommitments not later than one year prior to the expiration of the then-existing term, suchagreement not to be unreasonably withheld by KMC.     15.2 Termination for Material Breach. Upon any material breach of this Agreement byeither party, the non-breaching party may terminate this Agreement upon forty-five (45) dayswritten notice to the breaching party (such forty-five (45) day period shall, for the purposes ofthis Section 15.2, be fourteen (14) business days with respect to the failure to timely pay anyinvoice hereunder). Such termination notice shall become effective at the end of the forty-five(45) day period unless (a) within such period the breaching party cures such breach to thereasonable satisfaction of the non-breaching party, or (b) if the non-breaching party is KMC, andfollowing the issuance of a termination notice by KMC, Gen-Probe issues a notice of terminationpursuant to Sections 15.3, 15.4 or 15.5, then, in such event, the above forty-five (45) day cureperiod shall end not later than one day prior to the effective termination date under said Section15.3, 15.4 or 15.5 (as the case may be). Without limiting such other rights or remedies that maybe available to KMC as a result of Gen-Probe’s breach, upon the date of termination by KMChereunder Gen-Probe shall pay to KMC the total of the Purchase Order Cancellation Charges,Pro-Rated Discount Reimbursement and the Unrecouped Cost Reduction Service Charges.     15.3 Termination In Favor of Lower-Cost Manufacturer. If Gen-Probe obtains an offerby a qualified third party unaffiliated with Gen-Probe (the “Third Party Manufacturer”) to produceProduction Instruments at a transfer price that is at least fifteen percent (15%) less than theTransfer Price then being charged by KMC (the “Offered Transfer Price”), on terms and conditionswhich are otherwise substantially the same as those set forth in this Agreement (a “Third PartyAgreement”), Gen-Probe shall have the right, not more frequently than annually, to request that KMCmeet such offer. If KMC does not agree in writing to meet such offer within thirty (30) days afterreceipt of written notice of such offer from Gen-Probe (together with a copy of the proposed ThirdParty Agreement), then Gen-Probe shall have the right to terminate this Agreement within thirty(30) days thereafter, provided Gen-Probe enters into the Third Party Agreement (at the OfferedTransfer Price) with such Third Party Manufacturer during such thirty (30) day period. If KMCagrees in writing within the initial thirty (30 ) day period provided above to meet the OfferedTransfer Price, then such price shall become the new Transfer Price on all purchase orders issuedby Gen-Probe thereafter. If Gen-Probe terminates this Agreement pursuant to this Section 15.3,then Gen-Probe shall pay KMC within thirty (30) days of such termination the total of the PurchaseOrder Cancellation Charges and the Unrecouped Cost Reduction Service Charges; provided, however, ifsuch termination occurs after the purchase of 200 Production Instruments from KMC, then Gen-Probeshall only pay the Purchase Order Cancellation Charges to KMC. Gen-Probe shall have no otherliability to KMC for such termination under this Section 15.3.     15.4 Termination of Instrument Manufacturing. Gen-Probe shall have the right topermanently cease the development and/or production of the Instrument and Production Instrument,and in connection therewith terminate this Agreement upon thirty (30) days written notice to KMC.If Gen-Probe terminates this Agreement pursuant to this Section 15.4, then Gen-Probe shall pay KMCwithin thirty (30) days of such termination the total of the Purchase
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Order Cancellation Charges and the Unrecouped Cost Reduction Service Charges. If Gen-Probe resumesthe manufacture of the Instrument or Production Instrument within 1 year thereafter or the balanceof the Initial 4 Years, whichever is later, with a manufacturer other than KMC (including itself),then Gen-Probe shall pay to KMC the Pro-Rated Discount Reimbursement within thirty (30) days ofsuch resumption. Gen-Probe shall have no other liability to KMC for such termination under thisSection 15.4.     15.5 Termination for Convenience. Gen-Probe shall have the right to terminate thisAgreement for its convenience (e.g., for any reason other than those referred to in Sections 15.2,15.3, and 15.4) upon thirty (30) days written notice to KMC. If Gen-Probe terminates thisAgreement for its convenience pursuant to this Section 15.5, then Gen-Probe shall pay KMC withinthirty (30) days of such termination the total of the Purchase Order Cancellation Charges, thePro-Rated Discount Reimbursement, and the Unrecouped Cost Reduction Service Charges. Gen-Probeshall have no other liability to KMC for such termination under this Section 15.5.     15.6 Rights Upon Termination. Notwithstanding anything contained in this Agreement tothe contrary, termination of this Agreement shall not relieve the parties of their respectiveobligations or liability to the other accrued hereunder prior to the effective date of termination,including, without limitation, under Sections 6.3, 6.4, 6.5, 6.6, 6.16, 15.3, 16.3, 16.6, 16.8, and16.11 through 16.17 (inclusive) and Articles I, VIII, IX, XI, XIII, and XIV).ARTICLE XVIGENERAL     16.1 Gen-Probe Representative On-Site. Gen-Probe, at its own cost and expense, shallhave the right to have a reasonable number of its own employees on location at KMC’s facilities ona full-time or part-time basis, at Gen-Probe’s election, to interact with the KMC personnelinvolved in the performance of KMC’s obligations under this Agreement. KMC shall make available tosuch Gen-Probe personnel a shared office, and reasonable office support and facilities (includingwithout limitation telephone, e-mail access, and facsimile facilities). KMC shall cooperate withsuch Gen-Probe personnel and provide them with reasonable working access to KMC’s work performedunder this Agreement, including without limitation to production work areas and facilities. KMCshall not be liable for any injury to or death of Gen-Probe’s employees, or damage to, or loss ofsuch employees’ property, unless such injury, death, damage or loss to property is attributable toKMC’s negligence. Gen-Probe shall at all times remain responsible for the acts and omissions ofits employees.     16.2 Non-competition. Without Gen-Probe’s consent (which consent shall not beunreasonably withheld), during the term of this Agreement KMC will not enter into any newagreements to design, manufacture, supply or service any instrument that includes DNA probe testingfor infectious disease or cancer for any person or entity other than Gen-Probe. The foregoingrestriction shall not apply to DNA probe instruments that are the subject of existing contracts (orrenewals or extensions thereof) under which KMC is presently providing design, manufacturing,supply or service activities; provided, however, that a complete list of the companies for whichKMC presently performs such work is set forth in Exhibit 6.
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     16.3 Insurance. Each of Gen-Probe and KMC shall secure and maintain, during the termof this Agreement and for a period of five (5) years thereafter, adequate general liability,property damage and product liability insurance with coverage of at least $1,000,000 for eachoccurrence and $2,000,000 in the aggregate.     16.4 Schedule. Gen-Probe acknowledges and agrees that in addition to the otherfactors set forth in this Agreement, KMC’s undertakings hereunder with respect to variousschedules, goals and tasks referred to herein are also subject to the timely performance andcooperation of Gen-Probe.     16.5 Disclosure of Financial Information. KMC and Gen-Probe shall each provide uponthe request of the other party reasonable financial information periodically throughout the term ofthis Agreement; provided, however, that in lieu of disclosing such financial information to KMC,Gen-Probe shall have the right to provide KMC with adequate and appropriate security that isreasonably acceptable to KMC for the due and timely performance of Gen-Probe’s financialobligations to KMC under this Agreement. Such financial information shall be treated by theparties as Confidential Information in accordance with the terms of Article VIII.     16.6 Governing Law; Dispute Resolution. This Agreement shall be construed andenforced in accordance with the laws of the State of California, without giving effect to itsprinciples of conflicts of law. Any dispute or claim arising out of or in connection with thisAgreement shall be resolved as follows: (i) for a period of thirty (30) days after a party receivesfrom the other party written notice of a dispute, the respective appropriate officers of theparties shall negotiate in good faith in an effort to resolve the dispute, and (ii) if the disputehas not been resolved at the close of such thirty (30) day period, the matter will be finallysettled by arbitration under the rules then in effect of the American Arbitration Association. IfKMC commences any such arbitration proceedings, arbitration shall occur at San Diego, Californiaand if Gen-Probe commences any such arbitration proceedings, arbitration shall occur at New York,New York.     16.7 Independent Contractors. Gen-Probe and KMC shall be independent contractors andshall not be deemed to be partners, joint venturers or each other’s agents or employees, andneither party shall have the right to act on behalf of the other except as is expressly set forthin this Agreement.     16.8 Entire Agreement. This Agreement (together with its exhibits) sets forth theentire agreement and understanding between the parties and supersedes all previous agreements,promises, representations, understandings, and negotiations, whether written or oral between theparties with respect to the subject matter hereof, including, without limitation, the Memorandum ofUnderstanding dated as of October 20, 2000, Gen-Probe’s Request for Proposal, and KMC’s proposal.There shall be no amendments or modifications to this Agreement, except by a written documentsigned by both parties. Any terms or conditions contained on a purchase order or any otherdocuments issued by Gen-Probe or KMC which are in addition to or contrary to the terms andconditions of this Agreement shall be of no force and effect unless both of the parties expresslyagree in a signed writing that such terms and conditions shall apply to (and to the extentnecessary, modify) the terms of this Agreement.
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     16.9 Assignment. This Agreement shall not be assigned by either party without theprior written consent of the other party, except as part of a sale or transfer, by way of merger orotherwise, of all or substantially all of the business or assets of such party to which thisAgreement relates, and provided further that the assignee agrees to be bound in writing by all theterms of this Agreement, and the assignor agrees to remain responsible for the obligations of theassignee pursuant to the terms set forth herein. Any purported assignment in violation of thisSection 16.9 shall be void.     16.10 Binding Upon Successors and Assigns. Subject to the provisions of Section 16.9,this Agreement shall be binding upon and inure to the benefit of successors in interest and assignsof Gen-Probe and KMC.     16.11 Severability. If any provision of this Agreement is finally held to be invalid,illegal or unenforceable by a court or agency of competent jurisdiction, that provision shall besevered or shall be modified by the parties so as to be legally enforceable (and to the extentmodified, it shall be modified so as to reflect, to the extent possible, the intent of the parties)and the validity, legality and enforceability of the remaining provisions shall not be affected orimpaired in any way.     16.12 No Waiver. Any delay in enforcing a party’s rights under this Agreement or anywaiver as to a particular default or other matter shall not constitute a waiver of a party’s rightto the future enforcement of its rights under this Agreement.     16.13 Attorneys’ Fees. In the event of a dispute under this Agreement between theparties, or in the event of any default, the party prevailing in the resolution of any such disputeor default shall be entitled to recover, in an arbitration proceeding pursuant to Section 16.6, itsreasonable attorneys’ fees and disbursements. For the sake of clarity, in the event that KMC filesan action to collect on a claim against any letter of credit or surety bond provided under Section6.5, and KMC prevails in such action, then KMC shall be entitled to recover its reasonableattorney’s fees in connection with such action from Gen-Probe.     16.14 Notices. Any notice required or permitted by this Agreement to be given toeither party shall be in writing and shall be deemed given when delivered personally with a signedreceipt, by confirmed telecopy to a fax number designated in writing by the party to whom notice isgiven, or by registered, recorded or certified mail, return receipt requested, and addressed to theparty to whom such notice is directed, at:   If to Gen-Probe: President and CEO  Gen-Probe Incorporated  10210 Genetic Center Drive  San Diego, California  92121-1589  Telephone: (858) 410-8000  Fax: (858) 410-8625
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   with a copy to: General Counsel  Gen-Probe Incorporated  10210 Genetic Center Drive  San Diego, California  92121-1589  Telephone: (858) 410-8000  Fax: (858) 410-8625   If to KMC: President  KMC Systems, Inc.  220 Daniel Webster Highway  Merrimack, New Hampshire  03054-4844  Telephone: (603) 880-7746  Fax: (603) 594-7022   with copies to: Ira Schreger, Esq.  Goodwin Proctor LLP  599 Lexington Avenue  New York, New York  10022  Telephone:  (212) 813-8863  Fax:  (212) 355-3333     General Counsel  EFW, Inc.  4700 Marine Creek Parkway  Post Office Box 136969  Ft. Worth, Texas 76136-6969  Telephone:  (817) 234-6600  Fax:  (817) 234-6768or at such other address or telecopy number as such party to whom notice is directed may designateto the other party in writing.     16.15 Force Majeure. If the performance of this Agreement or any obligationshereunder is prevented, restricted or interfered with by reason of fire or other casualty oraccident, strikes or labor disputes, war or other violence, any law, order, proclamation,ordinance, demand or requirement of any government agency, or any other act or condition beyond thecontrol of the parties hereto (“Force Majeure”), the party so affected, upon giving prompt noticeto the other party shall be excused from such performance (other than the obligation to pay moneyhereunder) during such prevention, restriction or interference. If the Force Majeure continues formore than ninety (90) days, then the other party may, on thirty (30) days written notice to theaffected party, terminate this Agreement, subject to the right of the affected party to precludesuch termination by compensating the other party for its reasonable costs incurred as a result ofthe delay due to the Force Majeure. The parties agree that in the event of a termination underthis Section 16.15 by either party, KMC’s reasonable costs will include the Purchase OrderCancellation Charges.
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     16.16 No Right of Publicity. Except as otherwise provided herein, no right, expressor implied, is granted by this Agreement to either party to use in any manner the name of Gen-Probeor KMC or any other trade name or trademark of the other party in connection with the performanceof this Agreement.     16.17 Counterparts. This Agreement shall be fully executed in two (2) originalcounterparts, each of which shall be deemed an original.
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     IN WITNESS WHEREOF, authorized officers of each of Gen-Probe Incorporated and KMC Systems,Inc. have executed this Agreement as of the date first set forth above.       **GEN-PROBE INCORPORATED** **KMC SYSTEMS, INC.**       By: /s/ Henry L. Nordhoff By: /s/ Patrick W. McNallen         Henry L. Nordhoff President and Chief Executive Officer   Patrick W. McNallen President       Date: October 23, 2001 Date: November 19, 2001           The undersigned, EFW, Inc. is a party to theforegoing agreement solely with respect to theprovisions of Article XIV.           **EFW, INC.**           By: /s/                  Date: September __, 2001
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EXHIBITS TO