Exhibit 10.20
March 18, 2003
Xx. Xxxx X. Xxxx
Xx. Xxx Xxxxxxxx
Xx. Xxxxxx Xxxxxxx
FemtoTrace, Inc.
Gentlemen:
This letter sets forth the agreement ("Agreement") of JMAR Technologies,
Inc. ("JMAR") and FemtoTrace, Inc. ("FemtoTrace") regarding the design,
manufacture and delivery by JMAR of certain prototype versions of the READ
Analytical Instrument for the Trace Analysis and Detection of Organic
Pollutants, Explosives, Nerve and Blister Agents, Illicit Drugs and Other
Contraband ("READ Analytical Instrument").
This Agreement shall be performed in phases as provided below.
1. Alpha and Beta Units
a) In order to expedite commencement of the work provided for under
this Agreement, upon execution of this Agreement JMAR shall commence work
on the initial design tasks for the two Alpha units, up to the point of
incurring a total of $50,000 in burdened labor. Unless and until
FemtoTrace shall have delivered written authorization to JMAR to proceed
with the balance of the work specified under the Agreement, JMAR shall not
incur costs in excess of $50,000 and FemtoTrace shall not be obligated to
pay any costs in excess of $50,000.
b) The first phase of this Agreement shall involve the design,
manufacture and delivery of two (2) Alpha versions of the READ Analytical
Instrument. The specifications of the Alpha units are attached hereto as
Exhibit A.
c) The second phase of this Agreement shall involve the design,
manufacture and delivery of two (2) Beta versions of the READ Analytical
Instrument. Following completion of acceptance testing for the Alpha units
as provided in Section 5 below, there shall be a period of 60 days during
which the parties will discuss and agree upon the final specifications of
the Beta units, the timeline and tasks related to the assembly and
delivery of the Beta units and the designs and other modifications
required to be made to the Beta units. Unless FemtoTrace has exercised its
right under Section 9(b) to terminate this Agreement, after the parties
have reached agreement on the final specifications, timeline, tasks,
designs and other modifications for the Beta units and related matters,
JMAR shall be obligated to design, manufacture and deliver the two (2)
Beta units in accordance with those final specifications and other agreed
upon terms and FemtoTrace shall be obligated to
purchase those units on the terms set forth herein. If the parties are
unable to reach agreement on the final specifications, timeline, tasks,
designs and other modifications required for the Beta units, then JMAR
shall have no obligation to design, manufacture or deliver the Beta units.
Each of the parties shall bear its own costs in negotiating and preparing
this Agreement, as well as in discussing and agreeing upon the final
specifications of the Beta units, the timeline and tasks related to the
assembly and delivery of the Beta units.
d) Prior to the delivery of the two Alpha units, JMAR shall also
provide FemtoTrace with a recommended schedule of spare parts and options
to purchase such spare parts and an optional service contract.
2. Price
a) This Agreement will be a fixed price, best efforts level of
performance contract. The total contract price will be
$1,016,780 subject to adjustment for good cause as provided in
this Agreement.
b) The contract price for the delivery of two (2) Alpha units of
the READ Analytical Instrument shall be $598,047 subject to
change only under Section 8(b) below. The methodology for
calculating the contract price for the Alpha units is set
forth on Exhibit B-1 hereto.
c) The contract price for the delivery of two (2) Beta units of
the READ Analytical Instrument shall be $418,733 subject to
adjustment during the 60 day period after acceptance of the
Alpha units by taking into account all agreed upon changes to
the design, scope of work and changes in materials. The
contract price for the two Beta units shall include the time
budgeted by JMAR for evaluation of the performance of the
Alpha units after delivery and the final design of the Beta
units. The methodology for calculating the contract price for
the Beta units is set forth on Exhibit B-1 hereto.
d) JMAR will permit representatives designated by FemtoTrace,
upon reasonable notice and during normal business hours, at
FemtoTrace's expense to (a) visit JMAR's Systems Division and
inspect the activities being performed in connection with the
design and manufacture of the Alpha and Beta units, and (b)
examine the financial and other business records of JMAR's
Systems Division to confirm the costs and prices for the Alpha
and Beta units, as well any adjustments to the pricing
required by the Agreement (unless such examination is not
permitted by federal, state or local law or by contract) and
make copies thereof or extracts therefrom.
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3. Payment Schedule
FemtoTrace shall pay the contract price for the Alpha and Beta units
in accordance with the schedule set forth on Exhibit C hereto.
4. Schedule of Work
a) The tasks to be performed by JMAR related to the design,
manufacturing and assembly of the Alpha units, are listed on
Exhibit D-1 hereto.
b) A recommended timeline with specific tasks related to the
design and assembly of the Alpha units is attached hereto as
Exhibit D-2. The JMAR Program Manager may modify this timeline
and list of tasks from time to time as necessary after
consultation with FemtoTrace, provided, however, that such
modifications must be reasonable and necessary and cannot
change the agreed delivery dates.
c) The parties shall agree upon the tasks and timelines for the
two Beta units within the 60 day period after acceptance of
the Alpha units.
d) A series of program reviews will be scheduled, including an
Initial Program Review (IPR), Preliminary Design Review (PDR),
Critical Design Review (CDR) and a Manufacturing Release
Review (MRR) for the Alpha units and a CDR and a MRR for the
Beta units. Written weekly reports will be provided by JMAR to
FemoTrace describing the progress versus schedule, problems
and actions to resolve problems. The parties will hold weekly
meetings on the status of the program by telephone conference
at a regular time and to be agreed by the parties upon
execution of this Agreement. The parties will meet in person
as reasonably necessary to effectively complete the work.
5. Acceptance Testing
Final acceptance of the Alpha and Beta units by FemtoTrace will
consist of the satisfactory completion of a mutually agreed upon final
test procedure and the delivery by JMAR of a report that describes the
variance of the unit's performance from the product performance
specification set forth on Exhibit A hereto.
FemtoTrace shall, within 45 days of execution of this Agreement,
provide to JMAR its acceptance test requirements for Alpha Units. JMAR
shall, at least 45 days prior to the scheduled delivery of the initial
Alpha Units, provide FemtoTrace with its proposed written acceptance test
procedures, subject to FemtoTrace's review and modification prior to
delivery. With respect to Beta Units, FemtoTrace will provide test
requirements within 30 days after the parties have reached agreement
(under Section 6b, below) on Beta specifications, with JMAR to provide its
proposed test procedure at least 30 days before delivery of the initial
Beta Units.
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6. Delivery Schedule
a) The two Alpha units will be delivered to FemtoTrace by JMAR
not later than seven (7) months following the date of
execution of this Agreement by the parties.
b) Provided the parties have reached agreement on the final
specifications, timeline, tasks, designs and other
modifications required for the Beta units by the end of the 60
day period described in Section 1(b) above and provided
FemtoTrace shall not have terminated this Agreement pursuant
to Section 9(b), the design and manufacture of the two Beta
units will commence not later than 30 days after the parties
have reached agreement on said matters, with delivery of the
Beta units four months after design and manufacture has
commenced.
c) Upon delivery of the Alpha units, JMAR shall also deliver to
FemtoTrace all software, including source code, together with
all blueprints, specifications, drawings and instructions,
sufficient to replicate a fully functioning Alpha unit in all
aspects. Upon delivery of the Beta Units, JMAR shall also
deliver to FemtoTrace all software, including source code,
together with all blueprints, specifications, drawings and
instructions, sufficient to replicate a fully functioning Beta
unit in all aspects.
7. Delivery of Additional Alpha or Beta Units
a) Within the 60-day period after acceptance of the initial Alpha
units, the parties will agree on the configuration of any additional Alpha
units that FemtoTrace may order in the future. At any time after
acceptance of the Alpha Units and up to twenty-four (24) months after
execution of this Agreement, upon 45 days advance written notice by
FemtoTrace, and after delivery of the first Alpha units, FemtoTrace may
order additional Alpha units in the agreed upon configuration at a price
based upon the pricing methodology set forth on Exhibit B-2 hereto applied
to that configuration. Any changes to that configuration will result in
changes in the pricing based on re-application of the pricing methodology.
The delivery of such additional Alpha units shall be no longer than 120
days following the order.
b) Within the 60-day period after acceptance of the initial Beta
units, the parties will agree on the configuration of any additional Beta
units that FemtoTrace may order in the future. At any time up to
twenty-four (24) months after execution of this Agreement, upon 45 days
advance written notice by FemtoTrace, and after the delivery of the first
Beta units, FemtoTrace may order additional Beta units in the agreed upon
configuration at a price based upon the pricing methodology set forth on
Exhibit B-2 hereto applied to that configuration. Any changes to that
configuration will result in changes in the pricing based on
re-application of the pricing methodology. The delivery of such additional
Beta units shall be no longer than 120 days following the order.
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c) From time to time, FemtoTrace may request that JMAR perform other
services, such as non-recurring engineering services, or provide other goods
not covered by this Agreement. In such event, the price of such goods or
services shall be based upon the pricing methodology set forth on Exhibit B-2
hereto.
8. List of Components; Cost
a) The pricing of this contract is based upon the specification
by FemtoTrace of various commercially available components and
subsystems. The components to be used in the READ Analytical
Instrument, together with the cost thereof, are listed in
Exhibit E hereto. Also listed on Exhibit E are those
components that will be supplied to JMAR by FemtoTrace.
b) In the event that components other than those listed on
Exhibit E are used in the Alpha or Beta units, or in the event
that the cost of those components have changed, resulting in a
change in the cost of the units, the contract price for the
Alpha or Beta units shall be increased or decreased, as the
case may be, to reflect the change in the cost of the
components. JMAR shall provide written confirmation of any
increased or decreased component costs to FemtoTrace prior to
incurring such changed costs. Labor costs associated with any
component changes will not be charged unless the aggregate of
all component changes under this Agreement results in
substantial and material increased labor. It is agreed that
the contract prices for the Alpha and Beta units already
include sufficient labor allocations to cover customary minor
adjustments to design and components
9. Termination Provisions
(a) FemtoTrace shall have the right to terminate this Agreement upon
the material breach by JMAR in the performance of its obligations under
this Agreement. In order to terminate this Agreement on account of such a
breach by JMAR, FemtoTrace shall deliver written notice of termination of
this Agreement to JMAR and JMAR shall have failed to cure said breach
within 30 days after delivery of said notice.
(b) FemtoTrace shall have the right to terminate this Agreement
within 60 days after its acceptance of the Alpha units if it has not
secured sufficient financing to enable it to fund the second phase of this
Agreement, by delivering a written notice of termination to JMAR
certifying its failure to obtain said financing. If FemtoTrace terminates
this Agreement pursuant to this Section 9(b), then it shall be responsible
to pay JMAR for its reasonable costs in evaluating the performance of the
Alpha units after delivery and in designing the final Beta units. However,
JMAR will not incur such costs prior to funding without prior written
approval of FemtoTrace and no components or materials for the Beta units
will be ordered until FemtoTrace confirms to JMAR that the funding
contingency has been met.
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(c) In the event that the parties have not reached an agreement on
the matters set forth in Section 1(b) before the expiration of 60 days
after acceptance by FemtoTrace of the two Alpha units, either party may
terminate this Agreement by delivery of a notice of termination to the
other party with the termination being effective 10 days after delivery of
said notice.
10. Right to Exclusive Negotiation
Conditioned upon timely and complete performance by JMAR of this
Agreement, FemtoTrace agrees to negotiate exclusively with JMAR, for a
period of up to 60 days beginning not later than the delivery by JMAR of
the Beta units under this Agreement, for the purpose of entering into a
further agreement for the development and manufacture of the production
version of the READ Analytical Instrument. If the parties have reached an
agreement in principle within this period, the period shall be extended an
additional 30 days for the purpose of drafting and negotiating definitive
agreements. The parties understand that these negotiations will be guided,
in part, by the need for FemtoTrace to be able to achieve certain price
points and margins for this business. In arriving at the terms and
conditions of a production supply agreement, JMAR shall be treated as a
contract manufacturer and, as such, the pricing of its manufacturing
services under the production supply agreement shall be based upon the
pricing methodology set forth on Exhibit B-3 hereto. During this exclusive
negotiating period, FemtoTrace will not negotiate for such an agreement
with any other supplier.
11. Intellectual Property Rights
The intellectual property owned by JMAR and FemtoTrace,
respectively, prior to the execution of this Agreement shall not be
affected by this Agreement. All intellectual property of any kind, whether
patents, trademarks, copyrights, trade secrets or other proprietary
materials or information, that is developed in connection with the design
and manufacturing activities performed by JMAR under this Agreement will
be owned by FemtoTrace. All of the work performed by JMAR under this
Agreement will be performed as "work for hire" for FemtoTrace. JMAR will
execute such documents (including assignments, licenses, patent
applications, registrations, etc.) and take any actions required to fully
effectuate FemtoTrace's intellectual property rights under this Agreement;
provided, however, that the costs of preparing and prosecuting patent
applications and other similar actions to protect FemtoTrace's
intellectual property rights shall be borne by FemtoTrace.
JMAR shall retain rights in any intellectual property developed by
JMAR under this Agreement that may be used in the field of semiconductor
equipment applications that are not competitive with FemtoTrace's
products. FemtoTrace will execute an appropriate form of "grant-back"
license to JMAR to enable JMAR to retain such rights.
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Upon delivery of the first Alpha unit under this Agreement and again
upon delivery of the first Beta unit, JMAR and FemtoTrace will conduct
intellectual property reviews to identify all intellectual property of any
kind that has been developed in connection with JMAR's performance of the
Agreement, so that FemtoTrace may take appropriate action to secure its
intellectual property rights.
12. Confidentiality
JMAR agrees to maintain in confidence and not to disclose to any
third party any information or other documentation created in connection
with its performance under this Agreement, including without limitation
any specifications, plans, drawings, trade secrets, software, source code,
manufacturing processes, or inventions. JMAR may disclose confidential
information only to employees or agents who have a need to know the
confidential information for the purpose of performing JMAR's obligations
under this Agreement, and who are bound by an obligation of secrecy,
whether written or oral with respect to such information. JMAR will
instruct its employees, in written form, of their obligations under this
Agreement.
FemtoTrace may, in its sole discretion, seek positive publicity on
certain aspects of the project and JMAR agrees to cooperate reasonably in
these efforts upon the request of FemtoTrace.
JMAR may make such public disclosures regarding the execution of
this Agreement as it deems necessary or appropriate to satisfy its
obligations as an SEC reporting company, provided that no proprietary
information shall be disclosed and, unless a shorter timeframe is required
by law, FemtoTrace shall have been given at least five (5) business days
to review and comment on such proposed disclosures.
13. Other Terms and Conditions
a) Taxes. FemtoTrace shall pay for all sales, use, excise, custom duties,
export fees and/or similar taxes caused by or associated with the sale of
the products contemplated by this Agreement.
b) Shipment. Shipments shall be F.O.B. South Burlington, Vermont.
FemtoTrace shall be responsible for the payment of all shipping and
related expenses unless otherwise agreed to in writing. JMAR shall not be
liable for delay or default in performance when such delay or default
directly or indirectly results from or is contributed to by circumstances
beyond JMAR's control, including, but not limited to, acts of God; war or
national emergency; fire; flood; riot; explosion; any labor dispute,
difficulty or practice, however caused; or the unavailability of necessary
materials despite diligent and timely efforts. The period of any such
delays will extend the time of shipment accordingly.
c) Limited Warranty. JMAR MAKES NO WARRANTIES, EXPRESS OR IMPLIED, OF
MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR
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PURPOSE OR OTHERWISE, AND JMAR HAS NOT AUTHORIZED ANY OTHER PERSON TO MAKE
ANY OTHER REPRESENTATIONS OR WARRANTIES OR OTHERWISE SUBJECT JMAR TO ANY
OTHER LIABILITY IN CONNECTION WITH THE SALE OF THE READ ANALYTICAL
INSTRUMENTS. JMAR'S SOLE AND LIMITED WARRANTY TO FEMTOTRACE IS THAT THE
READ UNITS PROVIDED UNDER THIS CONTRACT WILL BE FREE OF MANUFACTURING OR
WORKMANSHIP DEFECTS ARISING DIRECTLY FROM THE WORK PERFORMED BY JMAR. THE
SOLE REMEDY FOR ANY SUCH DEFECT, FOR A PERIOD OF 180 DAYS FOLLOWING
DELIVERY TO FEMTOTRACE ONLY, WILL BE FOR JMAR, IN ITS DISCRETION, TO
EITHER REPAIR OR REPLACE ANY DEFECTIVE PART OR COMPONENT OF THE READ UNIT.
Components not of JMAR's manufacture are subject to component
manufacturer's standard new product warranties that will be made available
to FemtoTrace to the full extent available to JMAR.
d) Limitation of Liability. JMAR and FemtoTrace shall have no liability to
each other for payment of incidental or consequential damages, including,
but not limited to, damages due to loss of use, loss of production, or
loss of profit or other economic loss as a result of the performance of
this Agreement or use and operation of the product, including, but not
limited to, defective workmanship or materials or any delay, act, error or
omission of JMAR.
e) Insurance and Indemnity. JMAR and FemtoTrace will each maintain
insurance sufficient to cover their own acts and omissions in the
performance of this Agreement. JMAR and FemtoTrace shall each hold
harmless and indemnify the other against any loss, damage, claim,
settlement or judgment arising solely from their own negligence or
misconduct.
Miscellaneous Provisions
a) This Agreement shall be governed by and construed in accordance with
the laws of the State of California.
b) This Agreement constitutes the entire agreement between the parties
hereto relating to the subject matter hereof and supersedes all
prior or contemporaneous negotiations, representations, agreements
and understandings of the parties relating thereto. This Agreement
may be amended or supplemented at any time, but only by written
agreement of the parties.
c) This Agreement may be signed in counterparts and signatures may be
exchanged by facsimile. When both parties have signed and exchanged
facsimile signatures, the Agreement shall be deemed fully executed.
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JMAR TECHNOLOGIES, INC.
By: /s/ XXXXXX X. XXXXXX
Xxxxxx X. Xxxxxx, Chief Executive Officer
FEMTOTRACE, INC.
By: /S/ XXXX X. XXXX
Xx. Xxxx X. Xxxx, Chief Executive Officer
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