Exhibit 10.26
AMENDMENT NO.1
TO
CONTRACT BETWEEN
NEW IMAGE INDUSTRIES, INC.
AND
LORAL FAIRCHILD CORP.
FOR
INTRA-ORAL DENTAL X-RAY SYSTEM
This Amendment No. 1 effective the 28th of March 1996 modifies the
Contract, dated the 3rd of March 1995, between New Image Industries, Inc., 2283
Cosmos Court, Carlsbad, CA 92009 (hereinafter called "Buyer") and Loral
Fairchild Corp., Loral Fairchild Imaging Sensors Division, having offices at
1801 McCarthy Blvd., Milpitas, CA 95035 (hereinafter called "Seller"), for
development of a Intra-Oral Dental X-Ray System.
WHEREAS, Buyer desires to have Seller perform the design of the
electronic controller board which previously was the responsibility of Buyer;
WHEREAS, Buyer desires to make certain specification changes to the
requirements for the Intra-Oral Dental X-Ray System; and
WHEREAS, Seller is willing to perform the electronic controller
board design, and incorporate the desired specification changes into the
Intra-Oral Dental X-Ray System.
WHEREAS, Seller and Buyer desire to amend the delivery schedule for
prototype and production units of the Intra-Oral Dental X-Ray System.
NOW, THEREFORE, in consideration of the mutual agreements and the
obligations of the parties hereinafter expressed, Buyer and Seller hereby agree
as follows:
1. The parties agree that the total original contract price is
$28,100,000, consisting of 10,000 units at $2,800 each (as specified in Article
3.1) plus $100,000 for production tooling as provided for in Article 3.4.
2. The parties agree that the original contract requirements under
Article 3.4 is revised as follows:
Article 3.4 was:
"3.4 Buyer will pay Seller $100,000 for production tooling for the
redesigned sensor assembly mechanical housing and the electronic
controller board. Buyer will be responsible for the design of the
electronic controller board and agrees that the design to unit cost
will not exceed two hundred dollars ($200.00). Buyer will deliver the
completed electronic board design to Seller not later than 3 months
after this agreement becomes fully effective.
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Article 3.4 is:
"3.4 Buyer has paid to Seller $100,000 for production tooling for the
redesigned sensor assembly mechanical housing and the production
tooling for the electronic controller board. Effective with the
execution of this agreement No. 1, Seller will be responsible for the
design of the Electronic Controller Board. Seller design of the
Electronic Controller Board is to be completed on or about 28 March
1996.
3.4.1 The Electronic Controller Board shall be designed to New
Image specifications, provided hereto as Attachment "B" to the
Contract, which specifications are approved by both parties and
consist of:
- Digital X-Ray Dynamic Link and Software Specifications,
dated 17 January 1996
- X-Ray Computer Specifications, dated 15 January 1996
- Processing Time Specifications, dated 15 January 1996
3.4.2 Upon completion of the design and development activity,
Seller shall conduct a final design review with Buyer on or about 28
March 1996. Not later than two (2) weeks after the design review
Seller shall furnish one complete set of the Electronic Controller
Board design documentation."
3.4.3 For the effective term of this Contract, the Electronic
Controller Board designed to Buyer's specification will be a product
configuration provided exclusively to Buyer.
3. In consideration for Seller design of the Electronic Controller Board, and
providing a WW Fischer SA sealable cable connector with mating soak cap, the
total firm, fixed price of the Contract is increased by $350,000.00 for non-
recurring engineering and $300.00 per production unit, for a total contract
price increase of $3,350,000.00.
3.a. The Electronic Controller Board non-recurring amount of $350,000.00
shall be amortized over 10,000 units and paid upon delivery of each unit at
a rate of $35.00 per unit.
3.b Buyer agrees that Seller shall retain all intellectual property rights
to the design of the Electronic Controller Board, and shall have exclusive
production rights for the controller board,
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4. As a consequence of the above changes the parties agree to revision of
the following Articles of the initial Contract as follows:
4.a. Article 2, DELIVERABLES AND SCHEDULE, was:
"Seller shall deliver to Buyer ten (10) X-Ray System prototypes not
later than ten (10) weeks after this agreement becomes fully
effective. Buyer shall have four (4) weeks for acceptance testing and
evaluation. Acceptance testing will be in accord with Seller's
specification, Attachment "A", and a mutually agreed acceptance test
procedure. The X-Ray System prototypes will be functional, but not be
in final form, fit and weight. Seller shall commence production not
later than eight months after this Contract becomes fully effective."
Article 2 is revised in two sub-articles to read:
"2.1 Seller shall deliver to Buyer ten (10) X-Ray System
prototypes on or about 1 April 1996 Buyer shall have three (3) weeks for
acceptance testing and evaluation. Acceptance testing will be in accord with
Seller's specifications, Attachment "A", and a mutually agreed acceptance
test procedure. The X-Ray System prototypes will be functional, but not be in
final form, fit and weight. In the event the Buyer acceptance is not
received by Seller within four (4) weeks of receipt of the last prototype,
the prototypes shall be deemed accepted. Seller shall commence production
deliveries in accordance with Article 3.1.
2.2 Seller shall deliver to Buyer two (2) reproducible copies of
I/O software on 230 MB rewriteable optical disks. The software consists of
virtual device drivers (VxDs) developed using VtoolsD-Trademark-(a registered
Trademark of Vireo Software, Inc.), which by license agreement Loral is
authorized to reproduce, incorporate and distribute object code extracted from
the library files of the program into VxDs developed by Loral provided that
Vireo's copyright notice is included. The I/O developed software is to be
delivered concurrently with the delivery of prototype Electronic Controller
Boards (ECB)."
4.b. Article 3.1 was:
"For performance of this contract, including the delivery of 10,000
production units, Buyer shall pay Seller the firm, fixed price of U.S.
$28,000,000.00 Dollars (the "Contract Price") and take delivery of all
production units within 60 months of the date this contract becomes
fully effective."
Article 3.1 is revised to read:
"For performance of this Contract, including the delivery of 10,000
production units, Buyer shall pay Seller the firm, fixed price of U.S.
$31,450,000.00 Dollars (the "Contract Price") (subject to credits and
adjustments provided in this Contract) and take periodic delivery of
production units in accordance with the following schedule requirement:
500 systems Not later than 31 March 1997*
800 systems Not later than 31 March 1998
1000 systems Not later than 31 March 1999
1200 systems Not later than 31 March 2000
1400 systems Not later than 31 March 2001
1800 systems Not later than 31 March 2002
2000 systems Not later than 31 March 2003
1300 systems Not later than 31 March 2004
*Quantity Includes ten (10) prototypes.
Starting in September 1996 Buyer and Seller will agree to a six (6) month
rolling forecast of scheduled monthly deliveries to deliver the units
within the delivery requirements specified above, which will be updated bi-
monthly."
4.c. Article 3.3 was:
"After the $250,000 initial payment, Buyer shall pay Seller US $2,775.00
Dollars for each of the 10,000 X-Ray Systems delivered by Seller to Buyer."
Article 3.3 is revised to read:
"After the $250,000 initial down payment (receipt of which is hereby
acknowledged), and the $100,000 tooling payment (receipt of which is hereby
acknowledged) provided for in Article 3.4, Buyer shall pay Seller US
$3110.00 Dollars for each of the 10,000 X-Ray Systems delivered by Seller
to Buyer."
4.d. Article 3.5, which provided for a option to purchase an additional
10,000 units, is deleted in its entirety.
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4.e. Article 4.2 was:
"Buyer and Seller agree that if Buyer for any reason does not order and
purchase all 10,000 production units provided for in this contract, Seller
shall be entitled to recover and Buyer will pay Seller's non-recurring
costs of $200,000 which will be reduced by a credit of $20 for each
production unit purchased by Buyer."
Article 4.2 is revised to read:
"Buyer and Seller agree that if Buyer for any reason does not order and
purchase all 10,000 production units provided for in this Contract, Seller
shall be entitled to recover and Buyer will pay Seller's non-recurring
costs of $550,000 which will be amortized by a credit of $55.00 for each
production unit purchased by Buyer. In the event of such cancellation,
payment to Seller shall be within thirty (30) days of notification of
cancellation by Buyer to Seller."
4.e. Article 4.3 was:
In addition to the provisions of 4.2 above, in the event Buyer cancels the
initial purchase order of 1,500 units set forth in 4.1 above, Buyer shall
pay Seller its actual costs plus a reasonable profit which in no event
shall exceed a maximum cancellation liability of $1.3 million dollars."
Article 4.3 is revised to read:
"In addition to the provisions of 4.2 above, in the event Buyer cancels the
units set forth in article 3.1 above, Buyer shall pay Seller its actual
costs plus a reasonable profit for work in process, which in no event shall
exceed a maximum cancellation liability of $1.65 million dollars."
4.g. Article 14, PATENTS, is revised in its entirety as follows:
"14.1 Seller shall indemnify and hold Buyer harmless from all damages,
liabilities and costs suffered or incurred by Buyer as a result of any
claim or lawsuit alleging that the sensor assemblies as sold (as
distinguished from repaired) pursuant hereto infringe any United States
Letters patent, and in the event that any such sensor assemblies found to
infringe any United States Letters patent, Seller shall either (1) obtain a
license for Buyer and Buyer's directors, officers, affiliates and customers
to continue to use, sell, and offer for sale the infringing sensor
assemblies, or (2) replace the infringing sensor assemblies with
substantially equivalent non-infringing sensor
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assemblies, or (3) modify the infringing sensor assemblies so as to be
substantially equivalent but non-infringing.
14.2 The provisions of paragraph 14.1 shall not apply if the sensor
assemblies are manufactured in accordance with specifications furnished by
Buyer and are not part of Seller's standard product line.
14.3 Notwithstanding the provisions of 14.2 the provisions of paragraph
14.1 shall apply to sensor assemblies having the same or substantially the
same configuration as the sensor assembly on the effective date of this
Amendment No. 1.
14.4 The provisions of paragraph 14.1 specifically exclude any claim
arising out of or in connection with the design, manufacture or use of the
Electronic Controller Board.
14.5 Seller's indemnity does not apply to any claimed infringement arising
from use of any of the goods in combination with other items not delivered
hereunder where such infringements would not have occurred from the use of
the goods alone. Except as provided in this paragraph, Seller makes no
warranty that the goods will be delivered free from any claims of patent
infringement of any third party."
Except as provided in this Amendment No. 1, all other terms and conditions of
the Contract dated March 3, 1995 shall apply and shall continue in full force
and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment No. 1, in duplicate
originals, as of the last date set forth below.
NEW IMAGE INDUSTRIES LORAL FAIRCHILD IMAGING SENSORS
By: /s/ D.F. Edmunds By: /s/ Bob R. Drew
--------------------------- --------------------------------
Name: Dewey F. Edmunds Name: Bob R. Drew
Title: President Title: Vice President & General Manager
Date: 3/29/96 Date: 3/28/96
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