Exhibit 10.29
DISTRIBUTION AGREEMENT
THIS AGREEMENT is made, as of January 1, 1999 by and between
Equidyne Systems, Inc., a California corporation, having its
principal office at 11696 Sorrento Valley Road, San Diego,
California, 92121 (the "Company"), and PRECISION MEDMARK, INC., a
corporation organized under the laws of the state of Texas,
having its principal offices at 1825 E. Plano Parkway, Suite 180,
Plano, Texas, 75074 ("PMM"). PMM will act as the Marketing
Representative for, and on behalf of EQUIDYNE SYSTEMS, INC.
WITNESSETH:
WHEREAS, the Company is a development stage company which
specializes in the development of medical devices; and
WHEREAS, the Company has various medical devices which have
received clearance for sale by the U.S. Food and Drug
Administration; and
WHEREAS, the Company desires to engage PMM to establish and
manage a network of medical device dealers ("Dealer Network") to
insure adequate sales coverage for the products developed by the
company, and specified herein (the "Product(s)"), within the
United States, and to warehouse finished Product and to ship the
Products to the dealers within the Dealer Network (the
"Dealers"); and
WHEREAS, PMM desires to accept such engagement; and
WHEREAS, the Company and PMM acknowledge and agree that the
ultimate success of the Products, in addition to clinical
acceptance, will depend upon attracting qualified, capable and
successful dealers to distribute the Products; and
WHEREAS, each Dealer will be required to enter into an
agreement with the Company (the "Dealer Agreement"), whereby,
inter alia, the Company will grant the Dealer the right to
distribute the Products within the geographic boundaries
specified therein (the "Territory"), and whereby the Dealer will
agree, inter alia, to purchase and inventory the Products; pay
invoices promptly to the Company within the terms of its Dealer
Agreement; be compliant with all FDA requirements and guidelines;
not make any false or misleading claims about the Company, its
relationship with the company, the Products or any of the
Company's future products; protect the Company's confidential
information; distribute the Products only within the Territory;
and perform the annual quotas established by PMM and the Company
and Dealers.
NOW, THEREFORE, in consideration of the mutual promises and
covenants contained herein, the receipt and sufficiency of which
is hereby acknowledged by the parties, the parties hereby agree
as follows:
1. TERM, DUTIES, AND ACCEPTANCE.
(a) The Company hereby engages PMM, for the term of this
Agreement (the "Term"), to perform sales and Promotional efforts
for the Company and to provide the services more fully described
hereinafter.
(b) PMM hereby agrees to accept such engagement and to
perform sales and promotional efforts for the Company, and
contribute its best skills and services to the Company at all
times.
(c) PMM will use its best efforts to establish a Dealer
Network which will insure adequate sales coverage for the
products within the United States. For purposes of the
Agreement, "adequate sales coverage" means that Products will
actively be sold and promoted through a dealer organization or
other means proposed by PMM and acceptable to the Company, in
each respective state. The Dealer Network will be established
according to a mutually agreed upon plan in writing (the Plan)
between PMM and the Company. Should PMM fail to establish a
Dealer Network in a reasonable amount of time, in accordance with
the Plan, PMM will be subject to termination for Cause as
provided for in Section 4, Subsection (b),(iv). The plan will
be attached to this Agreement as Exhibit A as a counterpart to
this Agreement as provided for in Section 8. Exhibit A may be
modified from time to time as mutually agreed upon in writing by
both parties to this Agreement.
(d) PMM will oversee, supervise, monitor the performance
of, deal with all questions and issues raised by and otherwise
manage the Dealer Network on behalf of the Company.
(e) At the end of the first 6 months following the
consummation of each Dealer Agreement by the Dealer and the
Company, the Company and PMM will establish performance quotas
for each Dealer or alternative distribution method within the
Dealer Network, (the Quota) and a national sales quota for the
United States ("National Sales Quota"). The initial National
Sales Quota is attached to this Agreement as Exhibit B. Such
performance quotas shall be based upon, among other things, the
population within a given territory, prior sales of the products
within such territory, prior sales of the Products within other
territory prior sales, the degree of market penetration within
such territory and other criteria agreed upon by the Company and
PMM. For the Dealers, the initial 6 months term will be subject
to the terms of the Dealer Agreement regarding Interim Quota
(Section 4) and a semi-annual review of the annual Quota as
provided for in the Dealer Agreement (Section 12,
subsection (ix)). PMM will be subject to the terms of Section 4,
Subsection (iii) and Exhibit B to this Agreement regarding
National Quota.
(f) PMM will replace any nonperforming Dealer or
alternative distribution method, if and when necessary, with a
substitute dealer organization or alternative distribution method
within sixty (60) days, as evidenced by an executed Dealer
Agreement with such substitute Dealer or evidence of an
alternative distribution method acceptable to the Company.
(g) PMM will warehouse and manage the Company's inventory
of finished Products, on its own or other suitable property, at
its expense, take all reasonable care to protect the value of
such inventory and ship the Products to the Dealers in accordance
with the terms of the Dealer Agreement. Product will be taken on
consignment, and PMM will at no time assume ownership of the
Company's inventory. PMM will bear all risk of loss of Products
upon delivery to its warehouse while in its care, custody and
control. PMM shall maintain insurance to fully protect the value
of the Company's inventory. PMM will insure that adequate
resources are available to accept orders for, and ship the
Products to, the Dealer Network during normal business hours.
(h) PMM will provide the Company with detailed
recommendations with respect to marketing literature, promotional
items, sales training manuals, videos and activities and clinical
research to support the Company's marketing activities; however,
the cost of such literature, promotional items, sales training
manuals, videos and other clinical research support activities
will be that of the Company, and the Company is not obligated to
act upon any PMM recommendations.
(i) PMM will not make any false or misleading claims about
the Company, its relationship with the Company or any of the
Company's current or future products.
(j) PMM will provide billing services for the Company. PMM
will not, however, receive, disburse or provide account
receivable functions. Accounts receivable will be the
responsibility of the company.
(k) Company agrees to provide one demonstration unit to
each sales representative in the Dealer Network at the rate of
50% off the retail price of the Product. The first demonstration
device will be provided on loan, at no charge, with an initial
order of $2,000.00 or more.
(l) PMM understands and agrees that in order for the
Company to fully develop all Markets available to it, that
pharmaceutical companies shall have the exclusive right to market
and sell pre-filled ampules and empty ampules made available by
pharmaceutical companies in conjunction with specific proprietary
drugs into market areas served by PMM and its Dealer Network.
The Company agrees that, in contracting with the various
pharmaceutical companies, it will include in the standard
contract a clause prohibiting the pharmaceutical companies from
actively marketing individual, standalone injectors to the Market
at large except as required to support the sales of their drug
products. Reorders of additional injectors may be referred to
PMM for distribution to the Dealer Network.
(m) PMM will provide tracking and sales reports, on behalf
of the Company, from the Dealer Network for all of the Company's
Products.
2. PRODUCTS
A description of the Products is attached to this Agreement as
Exhibit C, and a full and complete description of the Products
may be found under the patent numbers listed therein.
3. COMPENSATION
As consideration for services rendered by PMM as described in
Section 1, Subsections (a) - (k), the Company agrees to
compensate PMM a commission (Compensation) in the amount of
Twenty percent (20%) based upon the Company's Net sales out the
door (Net Sales) to the Dealer Network in their respective Market
areas. Net Sales is defined as total sales to the Dealer Network
less returns and shipping expense. This obligation becomes due
and payable within 10 days of receipt of payment for Product from
the Dealer Network.
4. TERM and TERMINATION
(a) Unless sooner terminated pursuant to the provisions of
this Section 4, the term of this agreement shall be a period of
eighteen (18) months, commencing on February 1, 1999 and expiring
July 31, 2000, and for purposes of this Agreement, the first year
of the term of this Agreement shall be the thirteen (13) month
period from January 1, 1999 through January 31, 2000. Unless
otherwise notified in writing six (6) months prior to the
expiration of the Agreement, this Agreement will renew on a
continuous basis for additional one (1) year periods. The
renewal Agreements will be on a nonexclusive basis unless
otherwise negotiated in writing by the parties to this Agreement.
(b) Notwithstanding anything contained herein to the
contrary, the Company shall have the right to terminate this
Agreement hereunder at any time for Cause (as defined hereafter),
upon notice to PMM, without liability or the payment of any fees,
commissions, expenses, penalties or liabilities other than those
already due and payable prior to the date of termination for
Cause, without prejudice to its rights to pursue any other remedy
available to the Company hereunder or at law. Upon written
notice to PMM, PMM shall have 10 business days to cure the
condition to the reasonable satisfaction of the Company under
which they were notified, and at such time as PMM has effected a
cure the Agreement shall continue uninterrupted. For purposes of
this Agreement, "Cause" means the following:
(i) a material breach or violation by PMM, its
management, principals or employees, of any provision of this
Agreement or the failure of PMM to perform the duties or provide
the services described in Section 1;
(ii) actions by an employee or principal of PMM
constituting fraud and/or embezzlement which affects this
Agreement;
(iii) at any time after six months from the Effective
Date of this Agreement, the failure of the Dealer Network to
generate sales of the Products equivalent to eighty (80%) percent
of the National Sales Quota (Quota) in any given 6 month period.
For example, if the Quota during the first year is two million
dollars ($2,000,000), the Quota for 6 months would he one million
dollars ($1,000,000). Eighty percent (80%) times one million
dollars ($1,000,000) equals eight hundred thousand dollars
($800,000) which is the amount of the 6 month Quota. Provided
the Dealer Network achieves this eight hundred thousand dollar
($800,000) Quota level, PMM would be in compliance with this
Agreement. If, however, the Dealer Network does not achieve its
Quota in any 6 month period, the Company would have Cause to
cancel this Agreement.
Should the Company be unable to ship or manufacture Product in
sufficient quantities in any given calendar quarter for PMM or
the several members of the Dealer Network to achieve the Quota,
the Quota shall be equal to the amount of Product actually
shipped to PMM from the Company in that calendar quarter;
(iv) the failure by PMM to arrange for adequate sales
coverage within the United States according to a mutually agreed
upon Plan in writing attached to this Agreement as Exhibit A, as
provided by the terms of Section 1(c);
(v) PMM loses viability as a business entity in the
reasonable judgment of the Company's management.
(c) Notwithstanding anything contained herein to the
contrary, PMM shall have the right to terminate this Agreement
hereunder at any time for Cause (as defined hereafter), upon
notice to the Company, without liability or the payment of any
fees, commissions, expenses or penalties or liability other than
those already due without prejudice to its rights to pursue any
other remedy available to PMM hereunder or at law. Upon written
notice to the Company, the Company shall have 10 business days to
cure the condition under which it was notified and at such time
as the Company has effected a cure, the Agreement shall continue
uninterrupted. For purposes of this Agreement, "Cause" means the
following:
(i) a material breach or violation by the Company,
its management, principals or employees, of any provision of the
Agreement or the failure of the Company to perform the duties or
provide Product for sale into the marketplace;
(ii) actions by an employee or principal of the
Company constituting fraud and/or embezzlement which affects this
Agreement;
(iii) at any time after 6-1-1999, the failure of the
Company to provide a reasonable flow of product to PMM to service
the needs of the Dealer Network;
(iv) The Company loses viability as a business entity
in the reasonable judgment of PMM's management.
5. Nondisclosure of Confidential Information
PMM hereby acknowledges and agrees that the duties and
services to be performed by PMM hereunder are special and unique
and that, by reason of and/or as the result of this Agreement,
PMM will acquire and/or make use of the confidential information
of special and unique nature and value relating to certain
technology, records, secrets, documentation, general information,
financial and other records of and/or with respect to the Company
and/or business of the Company and/or the Products and/or medical
devices developed or in the Process of being developed by the
Company, and other similar matters (all such information,
together with that certain information described herein, being
hereinafter referred to as "Confidential Information"). PMM
further acknowledges and agrees that the Confidential Information
is of great value to the Company and that it is reasonably
necessary to protect the Confidential Information and the
goodwill of the Company. Accordingly, PMM hereby agrees that:
(a) PMM or its representatives will not, at any time
directly or indirectly, except as authorized by the Company:
(i) divulge, for a period of thirty-six (36) months
from the expiration of the Term of this Agreement, to any person,
firm or corporation other than the Company (hereinafter referred
to as, "Third Parties"), or use or authorized any Third Parties
to use, the Confidential Information or any Other information
relating to the business or interests of the Company which knows
or should know is or may be regarded as confidential and valuable
by the Company (whether or not any of the foregoing information
is actually novel or unique or is actually known to others),
except as required by law or government agency, or
(ii) solicit, cause or authorize to be solicited from
Third Parties, directly or indirectly, for or on behalf of itself
or any Third Parties, any business competitive in any way with or
to the business of the Company during the Term of this Agreement;
or
(iii) accept, cause or authorize to be accepted,
directly or indirectly, for or on behalf of itself or the Third
Parties, any business competitive in any way with or to the
business of the Company during the Term of this Agreement; or
(iv) solicit, cause or authorize to be solicited,
directly or indirectly, for employment for or on behalf of itself
or any third Parties, any persons who are or have been employees
of the Company at any time.
6. Indemnification.
(a) PMM will indemnify, defend and hold the Company
harmless from and against any loss, expense, damage, liability or
obligation (including reasonable attorney's fees) suffered,
sustained or incurred by the Company as a result of the breach of
any term, covenant, representation or warranty of or by the
Company contained herein.
(b) The Company will indemnify, defend and hold PMM
harmless from and against any loss, expense, damage, liability or
obligation (including reasonable attorney's fees) suffered,
sustained or incurred by PMM as a result of the breach of any
term, covenant, representation or warranty of or by PMM contained
herein.
7. Interpretation.
This Agreement shall be interpreted as having been fully
negotiated and drafted jointly by both parties, and shall not be
strictly construed against either party.
8. Counterparts.
This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all
of which together shall be deemed to be one and the same
instrument.
9. General Provisions.
PMM may not, at any time, assign the Agreement nor any right
or interest hereunder. Except as otherwise herein provided, this
Agreement shall be binding upon and insure to the benefit of the
parties hereto, PMM'S Successors and Company's successors and
assigns.
10. Notice.
All correspondence should be sent to:
The Company: Marketing Representative:
Equidyne Systems, Inc. Precision MedMark, Inc.
11696 Sorrento Valley Road, 1825 E. Plano Pkwy., Suite 180
Suite J Plano, Texas 75074
San Diego, California 92121
Any correspondence or notice required to be given under this
Agreement shall be deemed given when delivered if delivered, or
when postage is prepaid, to the address shown above or to other
such address as to which addressee shall have given written
notice.
IN WITNESS WHEREOF, the parties hereto have caused this
Dealer Sales Agreement to be executed by their duly authorized
representatives as of the day and year first above written.
THE COMPANY:
By: /s/ Lawrence A. Petersen
------------------------
Its: President
------------------------
PMM:
By: /s/ Illegible 12/17/98
------------------------
Its: President
------------------------
EXHIBIT "A:"
DEALER NETWORK ESTABLISHMENT PLAN
(THE PLAN)
This Exhibit A is an integral part of the Distribution
Agreement between Equidyne Systems, Inc. and Precision MedMark,
Inc. The Plan shall take full effect beginning at the time when
Equidyne Systems has sufficient production capacity of Injex
injectors and disposable ampules to supply the first four (4)
Dealers that are signed up as distributors. This level of
production capacity is defined for purposes of this Agreement as
the ability of Equidyne to ship on request at least 200 injectors
and at least 3,000 ampules. This point of qualification will be
determined by ESI and PMM, and the date will be recorded by both
companies. From this date forward (the Effective Date) the plan
will be in effect as follows:
3 Dealers signed by the end of the first 30 days from the
Effective Date of this Plan. (Excludes Precision BioMedical)
4 additional Dealers signed by the end of the first 60 days
from the Effective Date.
4 additional Dealers signed by the end of the first 90 days
from the Effective Date.
Full coverage of all parts of the United States with "Active"
sales coverage by the end of the third month from the Effective
Date of the Plan.
Both parties hereby agree to the terms of this addendum as
witnessed by signatures below.
/s/ Illegible 12/17/98
------------------------ ------------
Precision MedMark, Inc. Date
/s/ Larry A. Petersen 12/17/98
------------------------ ------------
Equidyne Systems, Inc. Date
EXHIBIT "B"
NATIONAL SALES QUOTA FOR THE UNITED STATES
The Exhibit B is an integral part of the Distribution
Agreement between Equidyne Systems, Inc. (ESI) and Precision
MedMark, Inc. (PMM). It outlines the specific sales performance
minimum requirements on an annual basis that are required in
order for PMM to retain "Exclusive Rights" to sell in the defined
markets.
$2,000,000. First year Net Sales by PMM (from 2-1-1999
through 1-31-2000)
$4,300,000. Second year Net Sales by PMM (from 2-1-2000
through 1-31-2001)
EXHIBIT "C"
EQUIDYNE PRODUCT DESCRIPTION
The Equidyne Systems, Inc. (ESI) product line currently
consists of a complete system for Subcutaneous injection of
injectable medication through the skin. The components of the
system currently include:
Injector Pen (INJEX)
Reset Box
A single use sterile disposable ampule
A transfer adapter cap
Various accessories such as a carrying case
A general description of the Products is shown in the
company color brochure which is attached as a part of this
Exhibit C. The Products are described very specifically under the
US Patent numbers 5,569,189 issued October 29, 1996 and 5,704,911
dated January 6, 1998.
EXHIBIT "D"
MARKETS
PMM shall have the exclusive right to sell, supply and distribute
non pre-filled ampules and needlefree injectors for use or resale
by the following markets. PMM agrees that all other market areas
not specifically included or excluded are excluded from this
Agreement.
Specifically excluded from this Agreement is the Market for
ampules that have been pre-filled by pharmaceutical companies and
for ampules made available by pharmaceutical companies in
conjunction with specific proprietary drugs (Pharmaceutical
Market). The Company agrees that, in contracting with the
various pharmaceutical companies, it will include in the standard
contract a clause prohibiting the pharmaceutical companies from
actively marketing individual, stand-alone injectors to the
Market at large except as required to support the initial sales
of their product. PMM understands that these Pharmaceutical
Market ampules will eventually be sold into its Territory and
that PMM will not be compensated for these sales in any way. PMM
exclusive Markets shall include the following:
1) Hospitals
2) Doctors offices and clinics
3) Home health agencies
PMM understands that Exhibit B may be modified from time to time
to reflect additions to the PMM market.
In matters involving distribution into certain undefined markets
such as, but not limited to, Managed Care groups, Institutional
accounts, Government and Military organizations and facilities,
Nursing Homes, Long Term Care markets, Assisted Living
facilities, Wholesalers, the Diabetic market, Catalog Companies
and other market niches, the Company and PMM will discuss whether
the Company or PMM will make sales to that market. However, the
Company reserves the right at its sole discretion to decide if
PMM or the Company will sell to any of these markets.