AGREEMENT BETWEEN SHANDONG YAOHUA MEDICAL INSTRUMENT CORPORATION AND GUIDED THERAPEUTICS, INC. CONFIDENTIAL, FINAL 22 JANUARY 2017
Exhibit 10.1
AGREEMENT BETWEEN SHANDONG YAOHUA MEDICAL INSTRUMENT
CORPORATION AND GUIDED THERAPEUTICS, INC.
CONFIDENTIAL, FINAL 22 JANUARY 2017
This
agreement is dated 22 January, 2017 and is between Guided
Therapeutics, Inc., a Georgia, United States of America corporation
(“GTI”), located at 0000 Xxxxxxxxx Xxxxxxx Xxxx, Xxxxx
X, Xxxxxxxx, XX 00000, XXX and Shandong Yaohua Medical Instrument
Corporation, located at Xx. 0 Xxxxxxxx Xxxxxx, Xxxx-Xxxx
Xxxxxxxxxxx Xxxx, Xxxxx Shandong, People’s Republic of China
(“SMI”).
WHEREAS
GTI has developed a platform technology for the early detection of
disease that leads to cancer;
WHEREAS
GTI’s first non-invasive cancer detection product is the
LuViva® Advanced Cervical Scan device (the
“Device”) and the related disposable cervical guides
(the “Disposables” and, with the Device,
“LuViva). LuViva is in use in Canada, Latin America, Europe,
Turkey, Asia and Africa. GTI owns the worldwide manufacturing,
distribution and intellectual property (“IP”) rights to
LuViva. LuViva is designed to:
A.
Determine the true
likelihood of treatable cervical disease that may lead to cancer in
women aged 16 years and over who have been screened for cervical
cancer and have an abnormal result.
B.
Be used as a
screening tool both in the developed and developing world where the
Papanicolaou test and/or the Human Papillomavirus Virus tests are
not widely available.
WHEREAS
GTI asserts that they have the rights to license the global
manufacturing rights, excepting the Disposable Cervical guides for
the Republic of Turkey, for LuViva, and the distribution rights and
sales rights for LuViva in the Peoples Republic of China, Macau,
Hong Kong and Taiwan (hereinafter collectively referred to as the
“Jurisdictions”);
WHEREAS
SMI is a medical device company in China with an established
distribution and sales capability and has indicated a capability
and willingness to manufacture for the global market, and
distribute and sell LuViva in the Jurisdictions,
WHEREAS
under this agreement between the Parties, SMI is granted exclusive
rights by GTI for global manufacture as the optimum way to achieve
economies in global manufacturing and exclusive commercialization,
both distribution and sales, of LuViva within the Jurisdictions
(“Global Manufacturing License”)
IT IS
HEREBY AGREED AS FOLLOWS between SMI and GTI that SMI is granted
exclusive manufacturing rights, excepting the Disposable Cervical
Guides for the Republic of Turkey, and exclusive distribution
rights and sales rights for LuViva in the Jurisdictions, subject to
the following terms and conditions.
1
1.
Payments by SMI and Transfer of Stock
to SMI:
A.
Payment
Instructions:
1. GTI
shall provide payment instructions to SMI for SMI payments to GTI
within 5 business days of signing this Agreement.
2. SMI
shall provide disbursement instructions to GTI for distribution of
GTI stock within 15 business days of signing of this
Agreement.
3. Both
Parties will undertake to ensure that the payment or disbursement
instructions are mutually satisfactory and compliant with all
applicable regulations.
B.
SMI shall make
payments to GTI based on the following schedule
●
$50,000 due within
15 business days of signing this Agreement
●
$200,000 due on or
before 20 February 2017*
●
$250,000 due on or
before 30 April 2017
●
$250,000 due on or
before 30 July 2017
●
$250,000 due on or
before 30 October 2017
*To be
paid to GTI providing that GTI provides all documents and data,
including manufacturing transfer plan, product production, guidance
documents, product quality standards, relevant patent certificates,
fixed costs of products, personnel data, etc. as reasonably
required by SMI within 10 business days after GTI receives the
initial payment of USD $50,000. During the first quarter of 2017,
GTI and SMI will agree on the plan and schedule for transfer of
manufacturing.
C.
GTI shall issue
shares of its common stock to SMI or as directed by SMI with each
of the five payments equal in value to the amount of the payment
(e.g $50,000, $200,000 or $250,000) within 30 days after receipt of
payments. The number of shares issued will be calculated at the
lesser of the end of day per share price for the average of five
consecutive days preceding the payment or $1.25 per share. The
shares of stock shall be transferred to SMI or as directed by SMI
within 30 days of SMI’s payment.
2.
2017 Orders:
a.
Subject to purchase
orders from SMI to GTI, the schedule of minimum orders for 2017
shown in the table below will be maintained in order to maintain
Jurisdiction sales and distribution rights.
2
|
2017
|
Number of LuViva
Devices
|
Price Per
Device
(by air, CIF
BEIJING; by sea CIF QINGDAO
|
Anticipated
Use
|
|
By 31
March
|
5
|
$13,000
|
-
Chinese FDA Sample (1)
-
Clinical Samples (2)
-
Transfer Manufacturing Sample (1)
- Seed
outside PRC Market (1)
|
|
By 31
December
|
5
|
$13,000
|
- Seed
PRC Commercial Market (4)*
- Sales
outside of PRC (1)
|
*If
Chinese Food and Drug Administration (CFDA) approval is delayed,
then these four device orders can be moved to Q1 2018. If SMI needs
to order single use Cervical Guides or other supplies directly from
GTI instead of manufacturing them in China, the prices shall be
pursuant to the published price list for international distributors
adjusted by a 10% discount. For clinical trials, GTI agrees to
supply 200 Cervical Guides at no cost.
b.
If additional
orders are placed by SMI to GTI prior to SMI having established its
own manufacturing facility, the devices will be priced as
follows:
|
Quantity
|
Price (by air,
CIF BEIJING; by sea CIF QINGDAO)
|
|
11
– 20
|
$12,500
|
|
21
– 40
|
$12,000
|
|
41 and
greater
|
International
distributor list price
|
3.
Minimum Sales:
People’s Republic of China (Beginning first full calendar
year following CFDA approval). It is expected that full or partial
manufacturing will occur in China, so that minimum orders will not
necessarily occur, unless agreed by both parties. Notwithstanding
the foregoing, SMI will be responsible for minimum royalty payments
based on the minimum sales of LuViva products as shown in the Table
below.
|
Full year
following CFDA Approval
|
Number of
machines placed or sold
|
Number of tests
per day
|
Days per
week
|
Weeks per
year
|
|
1
|
500
|
30
|
5
|
48
|
|
2
|
1000
|
30
|
5
|
48
|
|
3
|
2000
|
30
|
5
|
48
|
4.
Cost of CFDA
Approval: SMI shall underwrite the entire cost of securing
approval of LuViva with Chinese FDA.
3
5.
Manufacturing:
a.
SMI, shall arrange,
at its sole cost, for a manufacturer in China to build tooling to
support manufacture.
b.
The price payable by GTI for each Device and each packet of
Disposables supplied by the manufacturer for resale by GTI outside
of the Territories will be no higher than the then current internal
costs to GTI for manufacturing the Device and the then current
price paid by GTI to its current supplier of
Disposables.
c.
In the event that this is not possible, the Parties agree to
discuss the following options:
a.
SMI retains the
right to manufacture for China, Hong Kong, Macau and Taiwan, where
SMI has distribution and sales rights.
b.
SMI elects to
manufacture just the Cervical Guides which is anticipated to be
able to be at a lower price in China
c.
SMI buys the
devices and Cervical Guides, or just the devices from
GTI
d.
Other options that may be identified and available to find a
mutually satisfactory solution.
If SMI
fails to achieve manufacturing capabilities for either the Devices
and Disposables in accordance with ISO 13485 for medical devices by
24 months after the date hereof, SMI shall no longer have any
rights to manufacture, distribute or sell LuViva.
6.
Technical Assistance for
Manufacturing and Sales:
a.
Both GTI and SMI
recognize the need for technical assistance to set up manufacturing
and to establish sales protocols and marketing materials. To that
end, both parties pledge cooperation in helping to establish the
manufacturing and sales in China.
b.
GTI shall provide
the Curricula Vitae or Resume (personal data) of the inventor of
the LuViva technology to SMI
c.
SMI shall send over
its manufacturing expert to GTI at SMI’s expense to learn the
manufacturing process. GTI will be responsible for all in-country
(US) expenses.
d.
GTI shall send over
its technical expert within 10 days of a request or as soon as
reasonably possible from SMI to SMI at GTI’s expense to
assist with the establishment of the manufacturing and sales
protocols in China. SMI will be responsible for all in-country
(China) expenses.
e.
GTI shall provide
technical support and training for product upgrades consistent with
the technical support provided to other international distributors
of LuViva.
7.
Royalties:
a.
For each single-use
Cervical Guide chip sold by SMI in the Jurisdictions, SMI shall
transfer funds to the Escrow Agent at a rate of $1.90 per xxxx.xx
the amount equaling the number of chips sold. Funds shall be
transferred monthly.
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b.
The Parties agree
to reassess these royalty amounts at the end of the second year of
commercial sales in China to determine if an adjustment to the
royalty amounts, up or down, is warranted. Any adjustments to the
royalty amounts must be mutually agreeable.
8.
Commercialization:
If within 18 months of this License’s Effective Date, SMI
fails to achieve commercialization of LuViva (as defined below) in
China. SMI shall no longer have any rights to manufacture,
distribute or sell LuViva.
Commercialization
of LuViva is defined as SMI achieving all of the
following:
a.
Filing an
application with the CFDA for approval of LuViva
b.
Any assembly or
manufacture of the Device or Disposables that begins in
China
c.
Purchase of at
least 10 Devices and associated Disposables for clinical
evaluations and regulatory use and or sales in the Jurisdictions,
according to the schedule described in Section 2.
above.
9.
Best Efforts: The
Rights described herein must be maintained by diligent development
and commercial efforts. SMI agrees to use its best efforts to
maximize the royalty payments contemplated herein. Both parties
agree to conduct quarterly reviews to xxxx progress and agree on
forecasts for orders.
10.
Breach or Failure to
Perform: Under the following circumstances, SMI shall
forfeit this License and shall no longer have any rights to
manufacture, distribute or sell LuViva in the Jurisdictions if SMI
is unable to cure in a timely manner:
a.
A material breach
of any of SMI’s obligations set forth in this
section.
b.
Failure to achieve
CFDA approval within 30 months from the date of this
agreement.
In the
event of Breach or Failure to Perform,
c.
GTI shall provide
written notification of the breach or failure to
perform.
d.
SMI shall be given
a 45 day period in which to cure the breach or failure to
perform.
e.
If the breach or
failure to perform is not cured, SMI shall return to GTI, at
SMI’s cost, all samples, data, hardware, software, regulatory
documents, bench and clinical test results and all other
information pertaining to LuViva in the Jurisdictions
11.
Notices and
Communications: All notices and other communications
required by this Agreement will be effective upon deposit in the
mail, postage prepaid and addressed to the parties at their
respective addresses set forth below until such notice that a
different person or address shall have been
designated:
5
If to
SMI:
Xx. 0
Xxxxxxxx Xxxxxx, Xxxx-Xxxx Xxxxxxxxxxx Xxxx, Xxxxx
Shandong,
People’s
Republic of China
If to
GTI:
0000
Xxxxxxxxx Xxxxxxx Xxxx, Xxxxx X,
Xxxxxxxx, XX 00000,
XXX
12.
Relationship of
Parties: The Parties to this Agreement are and shall remain
independent contractors and nothing herein shall be construed to
create a partnership, agency or joint venture between the parties.
Each party shall be responsible for wages, hours and conditions of
employment of its personnel during the term of, and under this
Agreement.
13.
Dispute Resolution:
In the event a dispute arises out of or in connection with this
Agreement, the parties will attempt to resolve the dispute through
friendly consultation. If the dispute is not resolved within a
reasonable period then any or all outstanding issues may be
submitted to mediation in accordance within any statutory rules of
mediation. If mediation is not successful in resolving he entire
dispute or is unavailable, any outstanding issues will be submitted
to final and binding arbitration in accordance with the laws of the
State of Georgia, United States of America. The arbitrator’s
award will be final, and judgment may be entered upon it by any
Court having jurisdiction within the State of Georgia, United
States of America. Each party shall choose one (1) arbitrator
and the two (2) chosen arbitrators shall select a third arbitrator,
who shall be the Chairman of the Arbitration Panel. As soon
as the mediation process has been unsuccessful, either party may
select an arbitrator by sending the name of the arbitrator, in
writing, to the other party. The party receiving the name of
the said arbitrator shall, within fifteen (15) days of receipt,
select their arbitrator and shall send their selection, in writing,
to the other party. Should that party fail to select their
arbitrator within fifteen (15) days of receipt of the name of the
first party’s arbitrator, the initial party may seek Court
appointment of the receiving party’s arbitrator and the
latter shall be responsible for the initial party’s
reasonable attorney’s fees and costs in connection with the
Court appointment. If the two (2) appointed arbitrators fail
to select the third arbitrator within thirty (30) days from
the appointment of the second arbitrator, either party, or the
parties jointly, may seek Court appointment of the third
arbitrator.
14.
Applicable Law: All
questions concerning the validity, operation, interpretation and
construction of this Agreement will be governed by and determined
in accordance with the laws of the State of Georgia, United States
of America.
15.
Waivers of Breach:
No waiver by either Party of any breach of any provision shall
constitute a waiver of any other breach of that provision or any
other provision hereof.
6
16.
Warrants and
Representations: Each Party represents and warrants that the
terms of this Agreement are not inconsistent with any other
contractual or legal obligations it may have or with the policies
of any institution or company with which such Party is
associated.
17.
Interpretation: The
Parties have participated jointly in the negotiation and drafting
of this Agreement. In the event of an ambiguity or question of
intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden
of proof shall arise favoring or disfavoring any Party by virtue of
the authorship of any the provisions of this
agreement.
18.
Assignment: SMI may
not assign this Agreement in whole or in part, other than
manufacturing, without GTI’s consent, that shall not be
unreasonably be withheld. SMI may outsource all or parts of the
manufacturing at their discretion, provided that SMI is able to
maintain and verify that the quality of the manufacturing maintains
CFDA, ISO 14485 and other regulatory standards that GTI may rely
upon in sourcing LuViva.
19.
Effective
Agreement: This Agreement may be signed by the parties via
facsimile or electronic signatures. This Agreement will constitute
an effective Agreement when signed by both Parties.
20.
Entire Agreement:
This Agreement, sets forth the entire agreement and understanding
between the parties as to the subject matter hereof and merges all
prior discussions between them; and neither party shall be bound by
any conditions, definitions, warranties, understandings or
representations with respect to such subject matter other than as
expressly provided herein. This Agreement may not be modified or
altered except in writing by an instrument duly executed by
authorized officers of both parties.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their duly authorized officers as
of the 22 day of
January, 2017.
|
|
GTI
/s/ Xxxx
Xxxxxxxxxx
Xxxx Xxxxxxxxxx
Chief Executive Officer, Guided Therapeutics Inc.
SMI
/s/ Xxxxxx
Xx
Xxxxxx Xx
Chairman, Shandong Yaohua Medical Instrument
Corporation
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