EXHIBIT 10.29
"[*]" = omitted, confidential material, which material has been separately
filed with the Securities and Exchange Commission pursuant to a request for
confidential treatment.
[NeoPath, Inc. logo]
EQUIPMENT USER AGREEMENT
WITH
SMITHKLINE ▇▇▇▇▇▇▇ CLINICAL LABORATORIES
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
____________________________________________________________
Section 1. Overview of Agreement
This Agreement is made and entered into by and between
NeoPath, Inc. ("NeoPath") and SmithKline ▇▇▇▇▇▇▇ Clinical
Laboratories ("SBCL"). This Agreement supercedes all prior
agreements between NeoPath and SBCL. This Agreement
includes, and incorporates by this reference NeoPath's
Standard Terms and Conditions, NeoPath's Equipment User
Agreement Supplemental Terms and Conditions, and NeoPath's
AutoPap System Product Insert.
NeoPath agrees to provide SBCL, and SBCL agrees to order
from NeoPath, sufficient AutoPap(R) Primary Screening
Systems ("System") to process 100 percent of SBCL's
internally processed automated Pap smear volume by the end
of the Term. The initial upgrade of all AutoPap QC Systems
to AutoPap Primary Screening Systems at the SBCL St. Louis
and Atlanta sites will be performed immediately, but no
later than September 30, 1998. By [*], NeoPath and SBCL
will agree to a delivery schedule for AutoPap Primary
Screening Systems to be shipped in 1998 and 1999. By [*],
NeoPath and SBCL will agree to a delivery schedule for
Systems to be shipped during the remaining Term.
Section 2. Definitions
The following terms will have the following meanings when
used in this Agreement with initial letters capitalized:
"Anniversary Date" means September 1, 1999, 2000, and 2001.
"Annual Period" means any period of twelve consecutive
calendar months during the Term beginning on September 1,
1998 or any Anniversary Date.
"Base Fee-Per-Slide" or "Base FPS" means the minimum amount
due NeoPath per Pap smear slide processed on a System during
the Term. Unless adjusted, the Base FPS is established as
follows:
Period Base FPS
______ ________
1: September 1, 1998 - August 31, 1999 [*]
2: September 1, 1999 - August 31, 2000 [*]
3: September 1, 2000 - August 31, 2001 [*]
4: September 1, 2001 - August 31, 2002 [*]
"Current Payment" means the national average payment
received by SBCL on a per Pap smear basis for all Pap smear
slides processed between [*].
"Fee-Per-Slide" means the Base FPS or the Adjusted Base
FPS, in either case as the same may be adjusted pursuant to
Section 4 below.
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[*]Confidential treatment requested
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"Quarter" means a calendar quarter (i.e., a period of three
consecutive months commencing with January, April, July or
October).
"Term" means a period of four years commencing September 1,
1998.
"Total Payment" means the national average payment received
by SBCL on a per Pap smear basis for Pap smear slides
processed utilizing the AutoPap System during the twelve
months ending [*].
The parties acknowledge that Total Payment does not
encompass [*]. The Parties agree that if SBCL incorporates
such technology into the Pap smear process, there may be an
increase in the cost of Pap smear slides. To the extent
these increased costs change total payment, the parties
agree to factor such amounts into the Total Payment
calculation.
"System" means any AutoPap System subject to this Agreement.
"No Review" means slides that the AutoPap System designates
as needing no human review. The No Review rate is the
percent of all eligible slides that are so designated.
Section 3. Prior Agreements
The terms of this Agreement also apply to AutoPap Systems
currently installed at SBCL sites in St. Louis and Atlanta
under terms of earlier contracts signed October 5, 1995 and
May 9, 1996 respectively, except that the instrument minimum
volumes of [*] slides processed per year still apply to each
of those instruments.
Section 4. Fee-Per-Slide
Section 4.1 General
The Fee-Per-Slide will be equal to the Base FPS, as the same
may be adjusted pursuant to Section 4.2 or 4.3.
Section 4.2 Adjusted Base FPS
The Base FPS for any Annual Period may be adjusted if the
following formula yields a fee per slide different from the
Base FPS specified for the corresponding period (in no event
is the Adjusted Base FPS less than the initial Base FPS):
Adjusted Base FPS: [*]
Example for first
Anniversary Date: Current Payment assumption = [*]
Total Payment assumption = [*]
Then Adjusted Base FPS for the second Annual Period: [*]
SBCL or NeoPath may exercise such option only by giving
written notice of such exercise within 30 days prior to the
commencement of the applicable Annual Period.
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[*]Confidential treatment requested
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Section 4.3. Workload Reduction Adjustment
Upon NeoPath's delivery of an FDA-approved upgraded System
capability, the Base FPS (or Adjusted Base FPS, as
applicable) will be increased by [*] per Pap smear slide
processed for [*]. Such increase per slide will be payable
with respect to all slides processed after the beginning of
the Quarter following delivery, installation, and full
implementation of the upgrade.
Section 5. Records and Audit
SBCL will keep and maintain accurate records of any and all
payments received for the processing of Pap smear slides.
NeoPath may designate an independent certified public
accountant to audit SBCL's documentation and records as
required to verify any proposed Adjusted Base FPS. Unless
otherwise agreed by the parties, any such audit will be
conducted upon not less than ten (10) business days' advance
written notice to SBCL, during SBCL's normal business hours
and in a manner that does not interfere with SBCL's normal
business operations. The expense of such audit will be
borne by [*]. NeoPath will not conduct any such audit more
than once in any twelve (12)-month period.
Section 6. Exclusivity
During the Term, SBCL agrees to exclusively utilize AutoPap
Systems for all eligible internally processed automated Pap
smear reading needs. By the end of the Term, SBCL agrees to
process 100 percent of eligible internally processed Pap
smear slides at installed sites through the AutoPap System.
Section 7. Other Terms
NeoPath will deliver the AutoPap Systems FOB carrier at the
NeoPath manufacturing facility. [*] will be responsible for
all transportation costs.
Section 8. Additional Systems
If the average number of slides processed per Quarter with
all of the Systems located at any SBCL site during any two
consecutive Quarters exceeds [*] slides per System per
Quarter, then SBCL may order additional Systems as needed to
bring the projected average requirement at such SBCL site
down to approximately [*] slides per System per Quarter.
Unless otherwise agreed upon by the parties, NeoPath will
use its best efforts to deliver such additional System(s)
within [*] days after receipt of SBCL's order for the same,
and the Term with respect to any such System will commence
upon [*] and will end upon [*].
Section 9. Early Termination
If the average number of slides processed per Quarter with
all of the Systems located at any SBCL site during any two
(2) consecutive Quarters is significantly less than [*]
slides per System per Quarter, then NeoPath may terminate
the Term with respect to any Systems located at such SBCL
site; provided that after any such termination, the Systems
remaining at such SBCL site are sufficient to process a
projected average requirement at such SBCL site not greater
than approximately [*] slides per System per Quarter, and
provided that at least one System sufficient to handle the
eligible slides at that site remains on-site.
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[*]Confidential treatment requested
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Section 10. Press Releases
Each party to this agreement will give the other party
reasonable advance notice of, and the opportunity to review,
comment upon and approve, any press release or marketing
materials that the other party may desire to publish with
regard to either the utilization of Systems at SBCL's sites,
or the NeoPath system generally.
Section 11. Accessories
11.1 Each offered AutoPap System includes the following
NeoPath accessories:
Quantity Description
________ ___________
40 AutoPap Slide Trays
1 Operator Manual
1 Start-Up Kit*
* Start-Up Kit will include one package of printer paper
and one roll of Bar Code Labels (5,000 sets of 4 labels
per role)
11.2 The following additional accessories are offered by
NeoPath at the current indicated prices (prices subject
to change):
Description Price
___________ _____
Bar Code Labels [*] (U.S.) per roll
AutoPap Slide Tray [*] (U.S.) per tray
Section 12. Contract Signatures
OFFERED BY: ACCEPTED BY:
NeoPath, Inc. SmithKline ▇▇▇▇▇▇▇ Clinical Laboratories
Signature: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇ Signature: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
____________________________________ ________________________________________
Printed Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Ph.D. Printed Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Title: President, CEO and Chairman Title: President
Date Signed: September 29, 1998 Date Signed: September 29, 1998
___________________________________ ________________________________________
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
________________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
________________________________________
Vice-President/National Medical Director
________________________________________
29 September 98
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