LETTER OF AGREEMENT
THIS LETTER AGREEMENT is made and entered into as of the 11th day of
September, 1995 by and between MISONIX, INC., a New York Corporation with its
principal offices at 1938 New Highway, Farmingdale, New York 11735 (hereinafter
referred to as "MISONIX") and MEDICAL DEVICE ALLIANCE, INC., ("MDA") a Nevada
Corporation having its principal offices at 3315 East Russell Road, Suite H-193,
Las Vegas, Nevada 89120 (hereinafter referred to as "MDA").
W I T N E S S E T H:
WHEREAS, MISONIX has a business which is, in part, based on the
research, development, and manufacturing of ultrasonic equipment for scientific
and industrial purposes; and
WHEREAS, MDA has a business that has been organized to market and sell,
on a worldwide basis, medical devices specifically designed to improve the
treatment of patients desiring a surgical procedure commonly referred to as
"Liposuction" or "Liposculpturing" (hereinafter referred to as the "Procedure");
and
WHEREAS, MISONIX has already utilized its engineering experience,
ultrasonic technology, and prototype manufacturing capabilities to design and
assemble one or more ultrasonic systems (hereinafter referred to as the
"System") specifically for use in performing the Procedure; and
WHEREAS, MDA has experience in identifying various needs in marketing
and selling to the medical fields on a worldwide basis, especially the
specialties of Plastic and Reconstructive Surgery, Cosmetic Surgery and Surgical
Dermatology; and
WHEREAS, MISONIX desires to continue further technical and application
engineering directed to advanced designs of the System utilizing its patented
technology and, in addition, manufacture the finished product; and
WHEREAS, MDA desires to use its market and selling skills to market the
System on an exclusive worldwide basis.
NOW THEREFORE, in consideration of the premises and promises,
warranties and representations herein contained, the parties hereto agree as
follows:
I. Exclusive Option Period: MISONIX will provide MDA an
exclusive option period to evaluate the System under the
following conditions:
A. Length of exclusive option period to be ninety
(90) calendar days, commencing on September 11,
1995.
B. MISONIX shall deliver to MDA a functional
prototype System, of the latest design, as soon
as possible, but in no case, later than September
24, 1995.
C. MDA will pay MISONIX twenty-five thousand dollars
($25,000.00) upon executing this Letter Agreement
for the Exclusive Option Period.
D. Development funding for the autoclavability (i.e.
sterilization) of the converter and umbilical cable
and the manufacturability of the System will be
provided by MDA. It is estimated at a maximum of
thirty thousand ($30,000.00) per month until the
start of production. A fifteen thousand dollar
($15,000) advance will be made by MDA to MISONIX
against future billings (the "Advance") for the
purpose of assuring that MISONIX will implement the
start of the subject development work as soon as
possible: MISONIX will invoice MDA following the end
of each month for the actual amount expended, which
is to be paid by MDA within ten (10) working days of
invoicing by MISONIX. In this manner, the Advance
will continue to remain with MISONIX, on a
month-to-month basis, as a credit balance in favor of
MDA, until the start of production, when the credit
provisions of the License Agreement (II.D) come into
effect. Estimated time frame will be six months,
subject to suggestions of, and modifications by,
technicians for both parties.
E. MDA will pay MISONIX an additional twenty-five
thousand dollars ($25,000.00) on November 11,
1995, for the last thirty (30) days of the
Exclusive Option Period unless:
1. MDA notifies MISONIX that it is terminating
this Letter of Agreement and thus forgoing
any further rights to market and sell the
System; or
2. MISONIX and MDA have mutually agreed to the
final terms and conditions of the License
Agreement that forgoes the remainder of the
Option Agreement, and is effective when an
executed original of the License Agreement,
is delivered to both parties.
II. License Agreement: The License Agreement between
MISONIX and MDA shall be executed prior to the conclusion of the
ninety (90) day option period and no later than December 11,
1995, and will be good for a period of ten (10) years ending on
December 31, 2005. The basic terms and conditions of the
License Agreement shall be:
A. MDA To Receive:
1. Exclusive worldwide marketing and sales
rights to the System utilizing MISONIX
Ultrasonic Liposuction technology (including
Patent No. 5,419,761; and all improvement
patents and foreign patents now or hereafter
held by MISONIX). MISONIX retains the
rights to ultrasonic technologies for
non-medical applications.
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2. Exclusive rights to utilize MISONIX letter,
dated October 15, 1993, from the U.S. Food
and Drug Administration, which provides for
marketing the System under Section 510(K),
based on substantial equivalence to devices
marketed prior to enactment of the Medical
Device Act of 1976.
3. Access to MISONIX technical support and the
design history of the System.
4. Right to modify specifications to meet
clinical/market needs at MDA's cost.
5. Right of name and logo selection by MDA.
6. Commitment by MISONIX to designate and
supply a dedicated product development team
to work with MDA market development team and
support staffs for successful project
development.
7. First right of license for existing
technology improvements or future medical
technology developed by MISONIX (except for
angioplasty) while the License Agreement is
in force.
B. MISONIX to Receive:
1. A License Fee payment of three hundred
thousand dollars ($300,000.00) upon
execution of the License Agreement.
2. MDA will provide market and application
development, and a clinical and marketing
plan (milestones) to MISONIX. MDA to be
responsible for planning and funding
clinical tests of the System.
3. Upon delivery of five (5) prototype units,
MDA will pay the cost of the Systems which
is four thousand dollars ($4,000.00) per
unit, plus an additional License Fee of one
hundred thousand dollars ($100,000.00).
4. At the start of regular production, or one
year from the date of the License Agreement,
the additional License Fee of one hundred
thousand dollars ($100,000.00) will be paid
by MDA for a total license fee payment of
five hundred thousand dollars ($500,000.00).
5. Furthermore a Royalty Fee of five percent
(5%) will be paid on net sales of the System
and accessories sold.
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6. MDA to grant MISONIX a security interest in
this License Agreement to secure performance
by MDA of its obligations thereunder.
C. Both to Agree:
1. Mutual non-competition clause in Ultrasonic
Assisted Liposuction for the life of this Agreement.
D. Quantity and Price. MISONIX agrees to sell to MDA and
MDA agrees to buy from MISONIX one hundred percent
(100%) of MDA's requirement of the aforesaid
Ultrasonic Assemblies in accordance with the
specifications set forth in Schedule A. Technological
changes and variations from the prototype
specifications shall increase the cost appropriately.
The prices can be increased by MISONIX only under one
of the following circumstances: MISONIX may, with
written notification to MDA, increase the price in
accordance with the rise in the Official Consumer
Price Index (CPI). Such increase in the price in
accordance with the CPI, can be made once each year
during the term of the Agreement, except during the
first year, and whenever the cost of labor and/or raw
material to MISONIX changes substantially, MISONIX may
change the price of the Ultrasonic Units, with a
ninety (90) day advance written notice to MDA, to
reflect such substantially changing and/or raw
material costs. All Ultrasonic Units for MDA will be
manufactured in accordance with the specifications set
forth in Schedule B.
All shipments will be F.O.B. point of origin. MDA will remit
payment within thirty (30) days from the date each invoice is
received by MDA with respect to shipments of Ultrasonic Units.
Credit terms: (a) open account for up to 20 Units at any time
(b) balance by Letter of Credit or fifty percent (50%) cash
payment at time of order. MDA has no obligation to pay for any
shipment of Ultrasonic Units that does not meet the
specifications as set forth in Schedule B and have been
returned to, and accepted by, MISONIX for credit.
E. Delivery. MDA shall submit purchase orders setting
forth the quantities, delivery date and shipping
instructions with respect to each shipment such
purchase order to be received by MISONIX at least
ninety (90) days prior to the stipulated delivery
date. MISONIX shall ship each order to MDA or MDA's
designee to the location specified, as instructed by
MDA.
F. Quality. It is understood and agreed that all
Ultrasonic Units sold to MDA hereunder will meet the
established specifications, as described in the
attached Schedule B, which Schedule may be revised
from time to time by agreement of the parties
hereunder. Furthermore, MISONIX shall be responsible
to adhere to current good manufacturing practice (GMP)
and to all applicable U.S. governmental laws and
regulations, as may be amended from time to time
relating to the manufacture, sale and shipment of
Ultrasonic Units sold hereunder. Cost of future
filings and modifications of units necessitated
thereby to be borne by MDA, which shall receive prior
notice of proposed actions and expenditures and shall
participate in the decision making process.
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G. Quality Assurance. MISONIX will provide MDA with the
test results of all Ultrasonic Units to be shipped to
MDA. Furthermore, MISONIX shall advise MDA of any
changes in the manufacturing process or in materials
which have an impact on the quality or performance of,
or regulatory issues relating to, the Ultrasonic Units
purchase hereunder.
All Ultrasonic Units delivered to MDA shall be subject to
acceptance by MDA's quality assurance staff acting reasonable.
Unless MDA gives MISONIX notice to the contrary within ten
(10) working days after receipt of a shipment of a Product,
such shipment shall be deemed to be accepted by MDA. MDA or
MDA's designee shall have the right to reject any shipment
made to it hereunder which does not meet such quality
assurance specifications when such products are received. In
the event that any such shipment is not approved by MDA
because it does not meet said specification, MDA shall advise
MISONIX in writing and MISONIX agrees to replace such shipment
at its expense including charges incurred by MDA for freight
and customs clearance if application, and resubmit to MDA
within forty-five (45) days. At MISONIX'S option, MDA shall
return any such rejected shipment to MISONIX at MISONIX'S
expense.
H. Taxes. Any and all taxes imposed upon or with respect
to or measured by the sale or delivery by MISONIX to
MDA of Ultrasonic Units in accordance with MDA's
instructions shall be for MDA's account.
I. Force Majeure. MISONIX'S obligations and any delays
in deliveries hereunder or portion thereof, and MDA's
obligations to take delivery hereunder when due, shall
be excused by strikes, riots, war, invasion, acts of
God, fire, explosion, floods, delay of carrier,
shortages or failures in the supply of materials, acts
of government agencies or instrumentality's, judicial
action, delay in constructing manufacturing
facilities, and other contingencies beyond the
reasonable control of the party to be excused. In
such event(s), MISONIX will make reasonable efforts to
fulfill MDA's requirements for and MDA will make
reasonable efforts to take delivery of Ultrasonic
Units as defined herein, If for any of the reasons
set forth above, MISONIX shall be unable to delivery
any of the agreed upon quantities of MISONIX
Ultrasonic Units when due, MISONIX shall immediately
notify MDA of such inability and of the period for
which such inability is expected to continue. In the
event MDA elects to manufacture or have Ultrasonic
Units manufactured by a third party, MDA may use or
release to said third party MISONIX'S confidential
technical information and know-how relating to
Ultrasonic Units under a confidentiality agreement
acceptable to MISONIX, which shall not be unreasonably
withheld, to enable MDA or said third party to
manufacture Ultrasonic Unit for MDA's account.
J. Term. This Agreement shall be effective when signed
by both parties, and shall continue in effect for a
period of ten (10) years. MDA shall have the option
to renew this Agreement for five (5) successive one (1)
year periods on the same terms and conditions, and the
price of Ultrasonic Units to be purchased during each
one (1) year period shall also be determined pursuant
to the terms and conditions of this Agreement. MDA
must notify MISONIX that it intends to
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exercise the option at least sixty (60) days prior to the
expiration of the ten (10) year term of the present
Agreement, and thereafter in each successive year at
least sixty (60) days prior to the expiration of the year
in which the option is being exercised.
K. Termination for Cause. If either party shall at any
time fail to abide by any of the provisions of the
Agreement, the other party shall have the right to
terminate this Agreement on sixty (60) days prior
written notice to the defaulting party specifying the
default complained of, provided, however, if said
defaulting party cures the default complained of
within the said sixty (60) day period, or if a non-
monetary default which reasonably would take more than
60 days to cure and the defaulting party is actively
taking steps to cure the same, the Agreement shall
continue in full force and effect as if no default has
occurred. The right of either party to terminate this
Agreement, as hereinabove provided, shall not be
affected in any way by its waiver of, or its failure
to take action with respect to, any previous default.
This Agreement may also be terminated by the other
party in the event that a petition of bankruptcy is
filed by or against a party and not dismissed within
30 days, or a receiver or trustee is appointed for all
or a part of the property of a party or a party makes
an assignment for the benefit of creditors.
L. Rights of Termination. Any termination of this
Agreement as provided herein shall not relieve either
party of any obligation arising hereunder prior to such
termination.
M. Inability To Supply Full Requirements. In the event
that MISONIX cannot supply one hundred percent (100%)
of MDA's requirement of Ultrasonic Units, after
reasonable prior notice and time to gear up for this,
MDA may either itself manufacture or have a third
party manufacture the amount not supplied by MISONIX
during the period that MISONIX cannot supply the
same. MDA may release to said third party MISONIX'S
confidential information and know-how relating to
Ultrasonic Units under a confidentiality agreement
acceptable to MISONIX which shall not be unreasonably
withheld, to enable the third party to manufacture the
amount of Ultrasonic Units not supplied by MISONIX for
MDA.
N. Purchase Orders. The provisions of this Agreement
shall prevail over any inconsistent statements of
provisions contained in any document related to this
Agreement previously passing between companies. This
Agreement shall supersede and prevail over any other
agreement applicable to the subject matter of this
Agreement between the parties which may be in effect
at the time this Agreement is executed.
O. Limited Warranty and Liability
1. MISONIX warrants that the materials described herein
shall meet the specifications as set forth in
Schedule B, but DOES NOT WARRANT THE SUITABILITY OR
USES WHICH MAY BE MADE OF THE SAME OR THE UNITS TO BE
PRODUCED HEREUNDER.
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2. Except as provided in Paragraph (3) hereafter,
MISONIX shall not be liable for , and MDA assumes
responsibility for, and hereby agrees to
indemnify and hold harmless MISONIX for and
against all costs, expenses and damages
(including reasonable attorney's fees arising
from any claim for personal injury and property
damage resulting from the handling of the
Ultrasonic Units, following MDA's acceptance of
the Ultrasonic Units after it has completed its
testing as provided in Quality Assurance.
3. Except as provided in paragraph (5) hereof, MDA
shall not be liable for, and MISONIX assumes
responsibility for and agrees to indemnify and
save harmless, MDA, for all personal injury and
property damages which occur during MISONIX'S
manufacturing process of Ultrasonic Units or
which Ultrasonic Units are being delivered to MDA
or its designees or for claims based on
violations of Federal, State or local laws or
regulations applicable to employee or
environmental protection in such manufacture or
delivery by MISONIX; e.g., a claim based on
MISONIX'S violations of environmental standards,
standards dealing with providing a safe place to
work, or the transportation of hazardous
materials.
4. Either party, upon learning of the claim or
lawsuit, under Paragraphs (2) or (3) of this
Article, shall notify the other, but MDA's
attorneys shall handle and control such claims or
suits which fall under Paragraph on Limited
Warranty and Liability (2) and MISONIX'S
attorneys shall handle and control such claims or
suits which fall under Paragraph on Limited
Warranty and Liability (3).
5. Notwithstanding the foregoing provisions hereof,
MDA shall secure product liability insurance
coverage covering personal injury and property
damage for the products produced hereunder, at
the full cost and expense of MDA, in an amount of
not less than five million dollars ($5,000,000)
with a deductible of approximately two hundred
thousand dollars ($200,000), covering both
MISONIX and MDA for any and all liability.
P. Arbitration. All disputes between the parties arising
hereunder shall be finally settled by arbitration in
the City of New York, by the American Arbitration
Association, by a board of three arbitrators one of
whom is selected by each party and the third selected
by the two arbitrators, or if they cannot agree, from
the lists of the American Arbitration Association.
Q. Notices. Any notice or request required or permitted
to be given under or in connection with this Agreement
shall be deemed to have been sufficiently given if in
writing and delivered to an officer of such party or
sent by registered airmail, telex or telegram,
prepaid, to the party for which such notice is
intended, at the address set forth for such party
below:
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In the case of MDA: President
Medical Device Alliance, Inc.
3515 East Russell Road
Suite H-393
Las Vegas, Nevada 89120
In the case of MISONIX: President
Misonix, Incorporated
1938 New Highway
Farmingdale, NY 11735
or to such other address for such party as it shall have
therefore furnished in writing to the other party. If sent by
mail, telex or telegram, the date of mailing or transmission
shall be deemed to be the date on which such notice or request
has been given.
R. Assignment. MDA or MISONIX may assign rights under
this Agreement in whole or in part to any of their
respective affiliates or subsidiaries. Upon the other
party's request, the assigning party shall enter into
a separate counterpart agreement with any such
affiliate or subsidiary, it being expressly agreed
that assignor shall remain bound by the obligations
hereof. Such counterpart agreement shall be in the
same form as this Agreement, except for necessary
changes to reflect the extent of the assignment, the
substitution of the affiliate's or subsidiary's name,
the effective date of the assignment and the inclusion
of a new provision enabling the non-assigning party to
terminate such separate counterpart agreement in the
event that the assignee ceases to be an affiliate or
subsidiary of the assigning party. This Agreement
shall not otherwise be assignable by either party
without the prior written consent of the other party.
S. 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 and negotiations between them, and neither
of the parties shall be bound by any conditions,
definitions, warranties, understandings or
representations with respect to such subject matter
other than as expressly provided herein or as duly set
for the on or subsequent to the date hereof in writing
and signed by a proper and duly authorized officer or
representative of the party to be bound thereby.
T. Governing Law. This Agreement shall be construed in
accordance with the laws of the Sate of New York.
U. Confidentiality. After execution of the License
Agreement, MISONIX shall disclose to MDA all technical
information reasonably necessary to use Ultrasonic
Units or their equivalents, and MDA shall hold such
information except as provided in Paragraphs dealing
with Force Majeure and Inability To Supply Full
Requirement of this Agreement. MISONIX shall also
release to MDA all technical information and know-how
which are reasonably necessary to
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manufacture Ultrasonic Units, and MDA may use such
information the manner set forth in the aforementioned
Paragraphs of this License Agreement to manufacture
Ultrasonic Units or to have such devices manufactured by
a third party only as permitted in this License
Agreement. In addition to and not in lieu hereof, the
parties re-affirm the provisions of the confidential
Disclosure Agreement dated 8/11/95 which remains in
effect and is annexed as Schedule C hereto.
Information which is necessary for obtaining or maintaining approval of
Ultrasonic Units or its equivalents by any regulatory agency of any foreign
country shall be an exception to the above confidentiality obligations, but only
to the extent necessary and provided said confidentiality is maintained to the
fullest extent possible by MDA.
IN WITNESS WHEREOF, this Letter Agreement has been entered into as of
the day and year first above written.
Very truly yours,
ACCEPTED AND AGREED:
MISONIX, INCORPORATED MEDICAL DEVICE ALLIANCE, INC.
By: s/Joseph Librizzi By: Donald K. McGhan
----------------- ----------------
Joseph Librizzi Donald K. McGhan
Its: President and CEO Its: Chairman
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SCHEDULE A
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Schedule A
Breakdown of estimated pricing of System components
===============================================================================
Item Price
- -------------------------------------------------------------------------------
For Minimum of 200
or more Units 100 or more Units
------------- -----------------
Generator $ 2,330 $ 2,950
Convertor 1,400 2050
RF Cable 700 700
Tools 50 50
Manuals 20 20
------- -------
Total System Cost $ 4,500* $ 5,770*
* Estimate as of 8/10/95
Tips and Sheaths
5MM Probe 500 750
5MM Sheath 100 150
7MM Probe 500 750
7MM Sheath 100 150
o Costs based upon initial commitment of 200 units
o All prices based upon designs and costs developed as of 9/94
o Costs subject to change as design is finalized
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SCHEDULE B
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Specifications of Ultrasonic system
Generator Model xxxx
================================================================================
Controls and Displays Timer: elapse time with US on resettable
Output power+/-3%
Power Setting
On/Off switch with pilot light
Fault indicator/shut down (possible audible)
Time Totalizer (rear)
- --------------------------------------------------------------------------------
Output Control Adjusts amplitude of power output 0 to 100%
Rear Connector foot switch control
- --------------------------------------------------------------------------------
Horn Frequency 20Khz+/-__ Khz and Output power ultrasonic __ Watts
- --------------------------------------------------------------------------------
Line Voltage Line Selectable Models for World Wide Distribution
100/120/220/240 VAC 48-60 Hz _____VA UL approval
- --------------------------------------------------------------------------------
Mechanical Weight __lbs _____in. L x ___ in. W x ___ in. H
- --------------------------------------------------------------------------------
Temperature Operating 10(degree) C to 40(degree) C
- --------------------------------------------------------------------------------
Tuning Factor Set with Matched converter & probe
- --------------------------------------------------------------------------------
Converter Weight ___ ozs. __ in. max dia. w/o cable Autoclavable*
- ---------
- --------------------------------------------------------------------------------
Probe style Type 7mm>25cm length Weight ___ ozs. Autoclavable*
- -----------
Titanium Type 5mm>25cm length Weight ___ ozs. Autoclavable*
ELI alloy Type 7mm>16cm length Weight ___ ozs. Autoclavable*
Type 5mm>16cm length Weight ___ ozs. Autoclavable*
- --------------------------------------------------------------------------------
Sheath style Type 7mm-25cm__ ozs. 16cm ___ ozs. Autoclavable*
- ------------
Type 5mm-25cm__ ozs. 16cm ___ ozs. Autoclavable*
- --------------------------------------------------------------------------------
Umbilical cable Weight ___ lbs Length 12 Ft. Autoclavable*
- ---------------
- --------------------------------------------------------------------------------
* Autoclavable 200 cycles (500 cycle goal) by Flash sterilizer for 3 minutes
at 270(degree)and 30 PSI or Normal cycle sterilizer for 30 minutes at
250(degree)F and 15 PSI
================================================================================
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