1
MEDICAL DEVICE ALLIANCE INC.
EXHIBIT 10.22
DISTRIBUTION AGREEMENT
BETWEEN
LYSONIX INCORPORATED
AND
FLOWMATRIX CORPORATION
2
DISTRIBUTION AGREEMENT
FLOWMATRIX CORPORATION, a Nevada corporation with its principal offices
located at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇. ▇▇▇▇▇, (hereinafter referred to as
"Supplier"), hereby grants to LYSONIX, INC., a Nevada corporation with its
principal offices located at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
(hereinafter referred to as "Distributor"), the right to distribute and sell
those products set forth in paragraph 1, and Distributor accepts such grant for
the term and on the conditions herein stated (the "Agreement").
1. PRODUCTS COVERED BY THE AGREEMENT
The products covered by the Agreement are those products and
accessories set forth in the separate schedule, initialed by the parties, and
attached to the Agreement as Exhibit "A", together with all modifications,
improvements, and developments pertaining to such products, accessories and
components, all of which are hereinafter referred to as the "Products".
2. NEW PRODUCTS
Supplier may submit to Distributor specifications and, where
feasible, samples of each new product which Supplier intends to manufacture.
Within sixty (60) days after such submission, Distributor may acquire
distribution rights for such new products by advising Supplier in writing that
Distributor is electing to have such new products included within the Products
described in paragraph 1 hereof. A revised Exhibit "A" setting forth the
original products and the new products covered by the Agreement shall be
prepared immediately, initialed by the parties hereto and attached to the
Agreement.
3. TERMS AND RENEWAL
The initial term of the Agreement shall begin September 17, 1997,
and ending on December 31, 1998, unless earlier terminated as provided herein.
The Agreement will be automatically renewed under two additional and separate
renewals, annually, on January 1st of each of the next two subsequent years (the
"Anniversary Date") unless written notice of non-renewal is given by either
party ninety (90) days prior to the Anniversary Date. If such notice of
non-renewal is given, the Agreement shall not be renewed and shall expire and
terminate. Either party may terminate the Agreement "for cause" at any time in
accordance with Paragraph 9 hereto. Upon expiration or termination of the
Agreement, the Distributor shall only have the right to sell Products then in
its possession and inventory.
4. DISTRIBUTOR'S DUTIES
a. Distributor shall purchase from Supplier for its own account
for resale such Products and in such quantities to meet Distributor's sales
demands and to always actively promote and sell the Products;
Page -2-
3
b. Distributor shall submit its order for the Products on its
standard purchase order form, a copy of which is attached hereto as Exhibit "B",
without regard to any terms and conditions which may appear on the reverse of
such standard purchase form, which is blank;
c. Distributor shall promote and sell the Products, subject to
Supplier's standard warranty, as may be amended from time to time by Supplier;
d. Distributor shall provide instructions to its customers in the
use and routine maintenance of the Products and post-sale follow-up with
customers as related to warranty, exchange, information, service or otherwise
and to provide Supplier with feedback on leads provided to Distributor by
Supplier;
e. Distributor shall work with and assist Supplier, using
whenever feasible, the facilities of Distributor, and/or its related companies
and divisions, in the modification and improvement of the Products and the
development of new products;
f. Distributor shall promote and advertise the Products at
important regional and national plastic surgery, cosmetic surgery and/or
aesthetic surgery meetings attended by the Distributor, including the ASPRS
annual trade show;
g. Distributor shall maintain customer service staff, a direct
sales force and sufficient inventory of the Products to meet the needs of the
Distributor's customers;
h. Distributor shall pay for printing of adequate quantities of
brochures for use in sales of the Products and will coordinate with Supplier on
a marketing and sales plan for each year under this Agreement during the fourth
quarter of each preceding year hereunder;
i. Distributor shall name Supplier as an additional insured on
its product liability insurance;
j. Distributor shall not disclose during the term of the
Agreement or for a period of two (2) years thereafter, any trade secrets or
proprietary information obtained from Supplier before or during the term of the
Agreement except to the extent that disclosure is required by law, the
information is otherwise available to the public or the industry, the
information is presently known to the Distributor, or the information is
disclosed to Distributor by a third party who has a lawful right to disclose
same;
k. Distributor shall provide Supplier, or have Distributor's
vendors provide Supplier at Distributor's expense, with adequate labels and
primary and secondary packaging, to meet all purchase orders for the Products
hereunder and shall notify Supplier, in advance and in writing, of any changes
to the labels and primary and secondary packaging for Supplier's GMP and quality
tracking documentation.
l. Distributor to maintain adequate distribution records for the
Products which will be available to Supplier upon written request for Supplier's
tracking documentation.
Page -3-
4
5. SUPPLIER'S DUTIES
a. Supplier shall ship Distributor's orders for the Products, fob
Carpinteria, California, at the prices set forth on Exhibit "A" hereto;
b. Supplier shall work with Distributor to provide Quality
control specifications including testing methods, sampling procedures, and
acceptance levels for the Products set forth in Exhibit "A";
c. Supplier shall give at least ninety (90) days prior written
notice of each increase in price of the Products and honor Distributor's
existing purchase orders at the prices in effect immediately prior to the
effective date of such price increase if such purchase orders as placed ninety
(90) days prior to any announced price increase. Supplier hereby expressly
warrants to Distributor that each such price increase shall be in full
compliance with any and all price control restrictions, if any, imposed by the
federal or any state government during the term of the Agreement and that, in no
case shall any price increase be more than ten percent (10%) of the prices in
effect immediately prior to any such price increase;
d. Supplier shall adequately label the Products on a
"manufactured for" basis and package and deliver the Products to the Supplier,
using references to and trademarks of Supplier as required under regulatory
documentation. Supplier shall remain as the manufacturer of record for the
Products;
e. Supplier shall notify Distributor immediately in writing
should Supplier become aware of any defect or condition which may render any of
the Products in violation of the United States Food, Drug and Cosmetic Act, or
in any way alters the specifications and the quality of the Products;
f. Supplier shall notify Distributor prior to implementing any
design changes in the Products and/or the manufacture, assembly or labeling
process of the Products which could affect the quality of the Products;
g. Supplier shall maintain property and comprehensive insurance
to the levels needed to, in its sole discretion, maintain supplies of the
Products;
h. Supplier shall furnish Distributor, upon written request and
at Distributor's expense, suitable copy and photographs for use by Distributor
in advertising and cataloging.
6. RETURNS AND CREDITS.
All returns shall be sent to Supplier freight and miscellaneous
costs pre-paid, with approve return authorizations by Supplier noted on all
packaging and documentation. At its discretion, Supplier may replace any
returned Products. If replacement of the returned Products is not possible, the
Supplier shall issue credit for returned merchandise according to the schedule
below:
a. Merchandise returned in unused, salable condition (outside
seal intact) within thirty (30) days of delivery: CREDIT @ 80% OF DISTRIBUTOR
NET COST.
Page -4-
5
b. Orders for merchandise accepted by the Supplier and terminated
by the Distributor prior to delivery: CREDIT @ 90% OF DISTRIBUTOR NET COST.
c. Defective merchandise: CREDIT @ 100% OF DISTRIBUTOR NET COST.
d. Merchandise processed in error by Supplier: CREDIT @ 100% OF
DISTRIBUTOR NET COST.
e. Merchandise not suitable for resale: NO CREDIT.
f. Merchandise returned due to changes in product line: CREDIT
AMOUNT DETERMINED BY EACH CIRCUMSTANCE.
7. MINIMUM ORDERS AND PAYMENTS/DELIVERY SCHEDULE
a. Distributor agrees to order a minimum of Five Hundred Thousand
Dollars ($500,000.00) worth of Products under the Agreement from September 17,
1997 through December 31, 1998 (the first year of the Agreement), under
non-revocable purchase orders issued to Supplier on a monthly basis by
Distributor, with subsequent monthly purchase orders to be progressively
increasing in dollar amounts but not to exceed an increase of ten percent (10%)
of the previous month's purchase order dollar value, unless approved in writing
by the Supplier.
b. Upon the execution of the Agreement, Distributor agrees to pay
the Supplier a deposit of Fifty Thousand Dollars ($50,000) to be credited as a
Ten Percent (10%) pre-payment on each of the first year's purchase orders up to
the minimum order specified in Section 7(a) above.
c. Distributor agrees to order a minimum of Six Hundred and
Twenty Five Thousand Dollars ($625,000.00) worth of Products under the Agreement
from January 1, 1999 through December 31, 1999 (the second year of the
Agreement), under non-revocable purchase orders issued to Supplier on a monthly
basis by Distributor, with any subsequent monthly purchase orders not to exceed
an increase of ten percent (10%) of the previous month's purchase order dollar
value, unless approved in writing by the Supplier. Distributor agrees to pay any
invoice balance net 30 days from the date of shipment of the Products by the
Supplier for purchase orders issued during the second year of the Agreement.
d. Distributor agrees to order a minimum of Seven Hundred and
Fifty Thousand Dollars ($750,000.00) worth of Products under the Agreement from
January 1, 2000 through December 31, 2000 (the third year of the Agreement),
under non-revocable purchase orders issued to Supplier on a monthly basis by
Distributor, with any subsequent monthly purchase orders not to exceed an
increase of ten percent (10%) of the previous month's purchase order dollar
value, unless approved in writing by the Supplier. Distributor agrees to pay any
invoice balance net 30 days from the date of shipment of the Products by the
Supplier for purchase orders issued during the third year of the Agreement.
Page -5-
6
e. Timely payment by Distributor to Supplier is of the essence. A
finance charge of 1.5% per month shall be applied on all invoices not paid
within thirty (30) days. Invoices shall be paid without deduction or offset.
Distributor shall pay all costs of collection, including reasonable attorneys'
fees if past due balances are collected by or through an attorney.
f. Distributor agrees that any delivery schedules agreed to by
Supplier shall be construed as estimates and not firm commitments, unless a firm
delivery date is agreed to in writing by Supplier to be provided within five (5)
business days of the receipt of Distributor's purchase order.
8. PATENTS AND TRADEMARKS
a. PATENTS
Supplier shall, in its reasonable discretion, prosecute
diligently each application for United States and foreign patent which is now or
hereafter pending covering some one or more of the Products and, upon issuance,
shall, in its reasonable discretion, diligently prosecute each infringer
thereof. Supplier shall defend, indemnify and hold harmless Distributor from and
against any liability arising out of a claim of patent infringement made with
respect to any of the Products. Supplier agrees to repurchase from Distributor,
at a price equivalent to the full purchase price paid by Distributor, any
quantity of the Products in Distributor's inventory which Products Distributor
reasonably believes it should not or cannot sell, based on an opinion of counsel
of the parties hereto that future sales by Distributor may result in patent
infringement, or because of a decision, whether interlocutory or final, rendered
in any patent infringement action.
b. TRADEMARKS AND TRADE NAMES
Distributor recognizes that Supplier is the owner of the
trademarks and trade names which may be used in the promotion and sale of the
Products and that Distributor has no right or interest in such trademarks and
trade names, except for the trademark TopiFoamTM which is the sole property of
the Distributor.
c. TRADEMARK LICENSE
Supplier hereby grants to Distributor the royalty-free right to
use Supplier's trademarks on the products during the term of the Agreement, it
being understood that Distributor shall discontinue the use of such trademarks
upon the termination of the Agreement and disclaims any rights in the trademarks
other than the said license.
9. TERMINATION
Either party shall have the right to terminate the Agreement, for
cause, on written notice if the other: (a) commits or suffers any act of
bankruptcy or insolvency; or (b) fails to cure any material breach in the
provisions of the Agreement within forty five (45) days after written notice to
the other party hereto of such breach.
Page -6-
7
10. PROCEDURES ON TERMINATION
a. WINDUP
On the termination of the Agreement, for whatever reason,
Supplier shall continue to honor Distributor's orders for the Products up to the
effective date of termination and Distributor shall pay for such products all on
the terms and conditions of the Agreement.
b. REPURCHASE OF INVENTORY
Returns that cannot be replaced or repaired will be credited as
per the Credit Schedule in paragraph 6 above for returned Products.
11. FORCE MAJEURE
The obligations of either party to perform under the Agreement shall be
excused during each period of delay caused by matters such as strikes, shortages
of power or raw material, government orders or acts of God, which are reasonably
beyond the control of the party obligated to perform.
12. CONFIDENTIAL INFORMATION
a. CONFIDENTIALITY
Supplier and Distributor acknowledge and agree that, pursuant to
the Agreement, valuable information of a confidential nature may be disclosed by
Distributor to Supplier or Supplier to Distributor; that such information shall
be retained by either party in confidence; that the transmittal of such
information by Distributor to Supplier or Supplier to Distributor is upon the
expressed condition that the information is to be used solely for the purpose of
effectuating the Agreement; and that Supplier or Distributor shall not, either
during the term of the Agreement or for a period of two (2) years after its
termination, use, publish or disclose or cause anyone else to use, publish or
disclose any confidential information supplied by Supplier or Distributor,
whether purchased by either party or provided free of charge by either party.
Notwithstanding anything in the foregoing, the above restrictions on disclosure
and use shall not apply to any information which Supplier or Distributor can
show by written evidence was known to it at the time of receipt thereof from
Supplier or Distributor or which may subsequently be obtained from sources other
than Distributor or Supplier who are not bound by a confidentiality agreement
with Distributor or Supplier.
b. PAYMENT FOR CONFIDENTIAL INFORMATION
The parties shall mutually agree as to what information, if any,
will be provided to either party and what the cost, if any, will be to either
party for such information. The nonpayment by either party of financial charges
for confidential information is grounds for immediate termination of all such
information.
c. REMEDY
Supplier and Distributor recognize and acknowledge that either
party would not have any adequate remedy at law for the breach of any one or
more of the covenants contained in this paragraph and agree that, in the event
of such breach, Distributor or Supplier may, in addition to the other remedies
which may be available to it, arbitrate in equity to enjoin Supplier or
Distributor from the breach of any of the terms of the Agreement.
Page -7-
8
13. WARRANTIES AND REMEDIES
Products sold to Distributor are warranted only to the extent set
forth below:
a. Neither Distributor nor any other person is authorized to make
any other warranty and Distributor agrees that all of its sales of the Products
will be made in accordance with the warranty set forth below;
b. Supplier warrants that the Product delivered by it will for a
period of ninety (90) days from the date of the delivery from the Distributor to
the customer, be free of defects in material and workmanship;
c. The sole and exclusive remedy under this warranty is limited
to, at the Supplier's option, replacement of the Product for defects in material
and workmanship;
d. LIMITATION OF WARRANTY. THE WARRANTIES SET FORTH HEREIN ARE
EXPRESSLY IN LIEU OF ANY AND ALL OTHER WARRANTIES AND OBLIGATIONS EXPRESS AND
IMPLIED INCLUDING ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE;
e. Distributor expressly acknowledges that it is not entitled to
incidental or consequential damages from Supplier, except for Supplier's
intentional breach of the Agreement, and Supplier will not be liable for same.
14. ASSIGNMENT
The Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns, provided,
however, that neither party shall have the right to transfer or assign its
interest in the Agreement without the prior written authorization of the other
party, which consent shall not be unreasonably withheld; provided, however that,
either party may assign the Agreement to a person who or entity which has
acquired all or substantially all of the stock or assets of the assigning party,
upon written notification to the other party hereto.
15. ARBITRATION
Any controversy or claim arising out of or relating to the
Agreement, or its breach, shall be settled by arbitration, using one arbitrator,
in the city of the source of supply of Products in accordance with the governing
rules of the American Arbitration Association and applying Nevada law. Judgment
upon the award rendered by the arbitrator may be entered into any court of
competent jurisdiction.
16. MISCELLANEOUS
a. NOTICES
Any notice required by the Agreement shall be deemed sufficient
if sent by fax, overnight courier or certified mail, postage prepaid, to the
party to be notified at the address set forth in the initial paragraph of the
Agreement until written notice of a different address is supplied to the other
party.
Page -8-
9
b. ENTIRE AGREEMENT
The Agreement is the entire agreement between the parties hereto,
there being no prior written or oral promises or representations not
incorporated herein. No terms or conditions included in Distributor's purchase
orders or other documents submitted by Distributor shall be of any effect and
shall not be applicable to the ordering or supplying of Products, the terms and
conditions in this Agreement being the only ones applicable.
c. APPLICABLE LAW
The Agreement shall be governed by the laws of the State of
Nevada.
d. AMENDMENTS
No amendments or modifications of the terms of the Agreement
shall be binding on either party unless reduced to writing and signed by an
authorized officer of both parties hereto.
e. EXISTING OBLIGATIONS
Distributor and Supplier represent and warrant that the terms of
the Agreement do not violate any existing obligations or contracts of either
party. Supplier and Distributor shall defend, indemnify and hold harmless
Supplier and Distributor from and against any and all claims, demands, actions
or causes of action which are hereafter made or brought against Distributor or
Supplier and which allege any such violation.
f. NO AGENT
Neither party by reason of the Agreement or otherwise shall be an
agent or legal representative of the other for any purpose whatsoever, and
neither has any authority, either express or implied, to obligate or act for the
other.
g. DESIGN AND DISCONTINUANCE
Supplier reserves the sole right and discretion to change the
design of or discontinue any Product and shall provide written notice to
Distributor any such changes or discontinuances.
17. COUNTERPARTS
For the convenience of the parties hereto, this Agreement may be
executed in one or more counterparts, each of which shall be deemed an original
for all purposes.
SIGNATURES ON NEXT PAGE
Page -9-
10
IN WITNESS WHEREOF, the parties have by their duly authorized
officers, executed the Agreement on the 8th day of October, 1997.
"DISTRIBUTOR"
LYSONIX, INC., a Nevada corporation
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇
------------------------------------
Its: Vice President, Sales & Marketing
"SUPPLIER"
FLOWMATRIX CORPORATION, a Nevada corporation
By: /s/ Miles Hartfeld
--------------------------------
Its: President
Page -10-
11
EXHIBIT A TO DISTRIBUTION AGREEMENT
PRODUCTS AND PRICING
LySonix, Inc. SKU#
5710-30 TopiFoam(TM) foam backed gel dressing
packaged by Supplier:
3 sheets/pack
5 packs/box
2 boxes/case
(30 count/case) Price: $5.00/sheet
5810-01 TopiFoam(TM) foam backed gel dressing
packaged by Supplier
sample sheet Price: $1.25/sheet
Page -11-
12
EXHIBIT B TO DISTRIBUTION AGREEMENT
STANDARD PURCHASE ORDER
NOTHING ON REVERSE
Page -12-