Exhibit 10.32
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MANUFACTURING AND DISTRIBUTION AGREEMENT
THIS MANUFACTURING AND DISTRIBUTION AGREEMENT (the "Agreement") is made
and entered into this ___ day of October, 2004, by and between PARADIGM MEDICAL
INDUSTRIES, INC., a Delaware corporation (hereinafter referred to as "Paradigm")
and E-TECHNOLOGIES, INC., an Iowa corporation (hereinafter referred to as
"E-Technologies") (Paradigm and E-Technologies collectively, the "Parties").
WITNESSETH:
WHEREAS, E-Technologies is in the business of developing software and
related technology for specific technical applications including software for
the use in an ultrasonic bio microscope; and
WHEREAS, Paradigm recognizes the value of these technologies and
desires the right to manufacture and distribute certain products utilizing the
technology developed by E-Technologies;
NOW, THEREFORE, in consideration of the mutual promises contained
herein, and for good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the Parties hereto intending to be legally bound,
agree as follows:
SECTION 1
DEFINITIONS
1.1 Confidential Information. Confidential Information as used herein
means all technical information pertaining to the Technology, as defined below,
and the UBM, as defined below, and information relating to customers, marketing
strategies and pricing, guide books, tapes, videos or other matters subject of
this Agreement which are disclosed by the Parties:
1.2 First Commercial Sale. The words "First Commercial Sale" shall mean
the first arms length sale of the UBM to a third party after the approval of the
FDA.
1.3 Human Market. The right to sell UBM units and Technology in the
Territory for use in any human applications.
1.4 Technology. The software and related technology, including
Trademarks, as set forth on Exhibit "A" attached hereto and by reference made a
part hereof. Technology also includes any and all variations of the Technology
currently or hereafter developed.
1.5 Territory. The word "Territory" shall mean all of the countries of
the world.
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1.6 Trademarks. The Technology and all related logos, adaptions and
related marks and commercial symbols.
1.7 UBM. The UBM is an ultrasonic bio microscope and incorporates the
Technology for use in its design and function.
SECTION 2
APPOINTMENT
2.1 Subject to the terms and conditions of this Agreement,
E-Technologies grants to Paradigm during the term of this Agreement, the
exclusive right to manufacture, solicit orders and otherwise market, sell,
distribute and service the Technology and the UBM in the Human Market throughout
the Territory.
2.1 E-Technologies may, at its sole discretion, allow Paradigm to
manufacture the UBM for non-human applications for distribution only through
E-Technologies' channels.
SECTION 3
PAYMENT
3.1 At closing, Paradigm agrees to pay thirty thousand dollars
($30,000) to E-Technologies for non-recurring engineering costs associated with
the development of the Technology and UBM. In the event FDA approval in not
obtained within one year following the closing of this Agreement, Paradigm may,
at its sole election, declare this Agreement null and void, and Paradigm shall
promptly receive a refund from E-Technologies of thirty-thousand dollars
($30,000) as reimbursement for the non-recurring engineering costs, subject to
an offset for services provided and costs incurred by Xxxxxxx Xxxxxxx and
E-Technologies, provided such services and costs shall be approved in advance by
Paradigm.
3.2 Once written confirmation of approval from the FDA is received by
Paradigm, Paradigm agrees to pay an additional one-time fee of forty-five
thousand dollars ($45,000) to E-Technologies.
SECTION 4
ROYALTIES
4.1 Royalties shall be calculated in accordance with the following
schedule:
(a) Paradigm shall pay to E-Technologies the sum of five-thousand
dollars ($5000) for each UBM sold by Paradigm for the first 25 UBM
units sold.
(b) Paradigm shall pay to E-Technologies the sum of four-thousand
dollars ($4000) for each UBM sold by Paradigm after the 25th UBM unit
is sold.
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(c) Notwithstanding the foregoing, Paradigm shall not be required to
pay royalties for any UBM unit sold or distributed to E-Technologies
for use in non-human applications.
4.2 Royalties shall be paid by Paradigm to E-Technologies on a
bi-monthly basis for sales for the previous 60 days using the last day of the
months of January, March, May, July, September and November of each year.
Royalty payments shall be made beginning with the month of the First Commercial
Sale and shall be made not more than thirty (30) days following the end of each
two-month period thereafter. For the purpose of computing the royalties, the
date of sale shall be the date the product is shipped in accordance with
generally accepted accounting principles.
SECTION 5
TERM
5.1 This Agreement is effective from the date hereof and shall continue
for a period of two (2) years following the written receipt of approval by
Paradigm from the FDA. Thereafter, it shall automatically renew for additional
one (1) year periods from the date of written receipt of approval by Paradigm
from the FDA, unless either party terminates it upon thirty (30) days prior
written notice to the other party before the end of any term of this Agreement.
SECTION 6
REPRESENTATIONS, COVENANTS AND WARRANTIES
6.1 Paradigm:
(a) Shall assume responsibility for production and use its best efforts
and devote such time as is necessary to obtain FDA and CE approval for
the UBM and to maintain the knowledge, capital facilities and personnel
necessary to effectively to manufacture and distribute the UBM. A list
of all necessary documents and the corresponding deadlines, if any, is
attached hereto as Exhibit "B";
(b) Shall allow E-Technologies to conduct one annual independent audit
to confirm the sales data on the UBM units sold;
(c) Shall provide E-Technologies a rolling 13-week production schedule
on the UBM units with available-to-ship dates;
(d) Shall provide initial service to third parties, understood to mean
first level technical support on all accounts where the UBM was sold or
distributed by Paradigm;
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(e) Shall agree to sell twenty-five (25) UBM units during the first 12
months after written FDA approval of the UBM is received by Paradigm;
and
(f) Shall use its best efforts to ensure a box failure rate of 5% or
less on all UBM Units sold or distributed to E-Technologies. UBM units
in excess of 5% will be replaced or repaired by Paradigm, at its sole
discretion, at no cost to E-Technologies. Prices quoted to
E-Technologies for the non-human UBM Units are FOB Paradigm's facility
in Salt Lake City, Utah.
6.2 E-Technologies:
(a) Represents and warrants that it is the sole and exclusive owner of
the entire right, title, and interest in and to the Technology,
including trademarks, and that it has the right to grant the rights in
the Human Market to Paradigm contained in this Agreement;
(b) Shall provide technical support to assist in the transition of the
manufacture of UBM to Paradigms facility in Salt Lake City, Utah;
(c) Shall, upon reasonable request from Paradigm, E-Technologies shall
make its staff and departments available for up to 80 hours of
consultation by telephone concerning the initial NRE matters as
relating to the Technology and UBM Units;
(d) Shall provide second level technical support to third parties of up
to 20 hours per quarter on all accounts where the UBM was sold or
distributed by Paradigm;
(e) Agrees that it will transmit all information in its possession
regarding the Technology and UBM to Paradigm as it becomes available.
This information shall, in part, be used by Paradigm to obtain
necessary FDA and CE approval;
(f) Shall make available to Paradigm, prior to the closing, the parts
list and pricing on all components required to produce and manufacture
the UBM;
(g) Shall make Xxxxxxx Xxxxxxx available for support to Paradigm for
assistance with matters concerning the UBM or the Technology. Xxx
Xxxxxxx'x hourly rate for this support shall be $300 an hour; and
(h) Shall provide a 13-week rolling forecast to Paradigm for all
non-human UBMs, provided E-Technologies exercises its option to allow
Paradigm to manufacture the UBM's for non-human applications as set
forth in Section 2.1, and covenants not to cancel and orders for UBM
Units scheduled for shipment within four weeks.
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6.3 Mutual Representations and Warranties. The Parties each represent
and warrant to the other that they have full power and authority to enter into
this Agreement and carry out the transactions contemplated hereby.
SECTION 7
MODIFICATIONS
Although it is anticipated that both parties will collaborate
extensively, any modifications, alterations, improvements or changes (the
"Improvements") on any or all of the Technology or UBM lines executed by solely
by Paradigm or its agents, shall be the sole property of Paradigm and all rights
thereto shall be for the exclusive benefit of Paradigm.
SECTION 8
PROTECTIVE PROVISIONS
Confidential Information related to the UBM and Technologies, which is
disclosed, or which otherwise becomes known to Paradigm or E-Technologies, shall
be used only during the term and for the purposes of this Agreement. At all
times during and after the term hereof, Paradigm and E-Technologies shall
maintain in confidence, and shall take all necessary steps to insure that its
shareholders, directors, agents and employees maintain in confidence, all such
Confidential Information and shall refrain from disclosing any portion thereof
to others. The provisions hereof shall survive any termination of this
Agreement.
SECTION 9
INDEMNIFICATION AND PRODUCT
LIABILITY INSURANCE COVERAGE
9.1 Paradigm agrees to indemnify and defend E-Technologies, and its
successors and assigns, and to hold it harmless from and against all damages,
claims, deficiencies, losses, liabilities, obligations, and expenses (including
reasonable attorney's fees) of every kind and description arising from or
relating to (i) the operation of any UBM manufactured or sold by Paradigm
pursuant to this Agreement; (ii) any misrepresentation or breach of warranty
hereunder by Paradigm; and (iii) other non-fulfillment of any of Paradigm's
obligations under this Agreement.
9.2 E-Technologies agrees to indemnify and defend Paradigm, and its
successors and assigns, and to hold it harmless from and against all damages,
claims, deficiencies, losses, liabilities, obligations, and expenses (including
reasonable attorney's fees) of every kind and description arising from or
relating to (i) any misrepresentation or breach of warranty of the Agreement by
E-Technologies; and (ii) other non-fulfillment of any of E-Technologies
obligations under this Agreement.
9.3 E-Technologies shall not release the Technology to Paradigm until
proof of a minimum of $1,000,000 product liability insurance is provided to
E-Technologies.
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SECTION 10
SUBCONTRACTING AND ASSIGNMENT
This Agreement shall be binding and inure to the benefit of the Parties
hereto. The Parties shall not assign any of their rights nor delegate any of
their obligations under this Agreement to any third Party without the express
written consent of the other Party, which consent will not be unreasonable
withheld.
SECTION 11
NOTICES
All notices permitted or required under this Agreement shall be in
writing and shall be delivered as follows with notice deemed given as indicated
(i) by personal delivery when delivered personally, (ii) by overnight courier
upon written verification of receipt, (iii) by telecopy or facsimile
transmission when confirmed by telecopier or facsimile transmission, or (iv) by
certified or registered mail, return receipt requested, five days after deposit
in the mail addressed as follows:
Paradigm:
0000 Xxxxx 0000 Xxxx
Xxxx Xxxx Xxxx, Xxxx 00000
Attn: Xxxx X. Xxxx, President
and Chief Executive Officer
With a copy to:
Xxxxxxx X. Xxxxxx, Esq.
Mackey Price Xxxxxxxx & Xxxxxx
000 Xxxxxxxx Xxxxx II
00 Xxxx 000 Xxxxx
Xxxx Xxxx Xxxx, Xxxx 00000
E-Tecnologies, Inc.
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___________, Iowa _________
SECTION 12
MISCELLANEOUS
12.1 Independent Contractors. The Parties hereto are independent
contractors and nothing contained in this Agreement shall be construed to create
the relationship of partners, joint ventures, employer-employee or
franchisor-franchisee.
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12.2 Disputes and Arbitration. In the event any controversy or dispute
shall arise between the Parties hereto in connection with, arising from or with
respect to the provisions hereof, the relationship of the Parties hereto, or the
validity of this Agreement or any provision hereof, such dispute or controversy
shall, on the request of either E-Technologies or the Paradigm be submitted for
arbitration to the American Arbitration Association in accordance with its
commercial arbitration rules. The arbitrator will have the power and
jurisdiction to decide such controversy or dispute solely in accordance with the
express provisions of this Agreement. The Parties agree that any claim
determined to be arbitrable hereunder shall result in an award not more than 120
days from the date of the statement of claim filed with the American Arbitration
Association. The award and findings of the arbitrators shall be conclusive and
binding upon all Parties hereto and the judgment upon the award may be entered
in any Court of competent jurisdiction.
12.3 Governing Law. The rights of the Parties and provisions of this
Agreement shall be interpreted and governed in accordance with the laws of State
of Utah.
12.4 Waiver. The failure of either Party to enforce, at any time or for
any period of time, any provision of this Agreement shall not be construed to be
a waiver of such provision or of the right of such Party thereafter to enforce
such provision.
12.5 Amendment. This Agreement may be amended only by a written
instrument signed by each party. Paradigms of both Parties.
12.6 Headings; References. The headings of the Paragraphs hereof are
for convenience of reference only. References to Schedules and Exhibits herein
shall refer to the Schedules and Exhibits attached hereto and by this reference
made a part hereof.
12.7 Entire Agreement. This Agreement and Exhibits contain the entire
agreement and only understanding between the Parties with respect to the subject
matter hereof and supersedes all previous negotiations, agreements and
understandings between the Parties and affiliates of the Parties, in connection
with the subject matter covered herein, whether oral or written, and any
warranty, representation, promise or condition in connection therewith not
incorporated herein shall not be binding upon either Party.
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IN WITNESS WHEREOF, the Parties have respectively signed and sealed
this Agreement as of the day and year first above written.
PARADIGM MEDICAL INDUSTRIES, INC.
/s/Xxxx X. Xxxx
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By: Xxxx X. Xxxx
Its: President and Chief Executive
Officer
E-TECHNOLOGIES, INC.
/s/Xxxxxxx X. Xxxxxxx
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By: Xxxxxxx X. Xxxxxxx
Its: President
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EXHIBIT "A"
Technology
The technology shall be software for use with the Capistrano Laboratories (CLI)
PCI transducer card and associated probes defined in the Capistrano Labs
standard supply agreement exerpt below.
1.0 Definition of the products to be manufactured by CLI
1.0.1 PCI Card
The PCI Card is comprised of a printed circuit card,
electronic components, proprietary firmware, a high-voltage
power and a servo controller collectively used for
controlling and pulsing ultrasound transducers, for
receiving acoustic-related signals from same, and for the
conversion of this information into a potentially useful
form for diagnostic ultrasound imaging. The PCI Card is
compatible with the PC industry's standard 5V PCI-bus
architecture.
1.0.2 Diagnostic imaging Probes (1.1.2.1 - 1.1.2.3, collectively)
and Probe Cable
1.0.2.1 12 MHz Probe
An electromechanical, diagnostic imaging probe that
employs a piezoelectric element (a.k.a.: "transducer")
with a nominal center frequency of 12 MHz. This probe
is detachable from its cable, and the entire mechanism
is hermetically sealed within its external housing.
1.0.2.2 18 MHz Probe
An electromechanical, diagnostic imaging probe that
employs a transducer with a nominal center frequency
of 18 MHz. This probe is detachable from its cable,
and the entire mechanism is hermetically sealed within
its external housing.
1.0.2.3 Water Path Probe
An electromechanical, diagnostic imaging probe capable
of accepting one of several thin-film, high-frequency
transducers via a standard SMC RF connector. This
probe is designed to be used in conjunction with a
small water bath that provides coupling between the
transducer and the tissue target. A water-filled
"nosepiece" may also be fitted to the end of this
transducer and sealed with a thin sheet of film for
adaptation for contact scanning.
1.0.2.4 Probe Cable
A detachable cable used to connect a Probe directly to
the PCI Card.
1.0.3 Thin-film Transducers
A piezoelectric transducer constructed using a thin
piezo-film (e.g., PVDF) and attached to a Water Path Probe
using a standard SMC RF connector. Thin-Film Transducers
are offered in 35MHz and 50MHz and in various diameters and
focus depths.
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1.0.4 Software
Software source code (DLLs) and executable program used in
conjunction with the PCI Card to form diagnostic ultrasound
images on the PC. The executable program supplied as part
of the Software may operate under any one of several
Microsoft Windows Operating Systems. The executable program
is intended to demonstrate the functions of the PCI Card
and is not intended, nor warranted in any way, for medical
use. Customer is expressly prohibited from using the
executable program for medical purposes. Customer is free
to use the DLLs to create application-specific, user-level
software and is responsible for its accuracy and fitness
for the application for which it is used.
The E-Technologies software shall be capable of running on all variations of
Microsoft's Windows XP operating system.
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EXHIBIT "B"
Documents
Product Specification
Engineering Illustrations with Overall Dimensions
Photographs of Product
Test Reports (in conjunction with Paradigm)
Inputs to Product Risk Analysis
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