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Exhibit 10.20
March 18, 2003
Dr. Jack L. Herz
Dr. Ara Chutjian
Dr. Murray Darrach
FemtoTrace, Inc.
Gentlemen:
This
letter sets forth the agreement ("Agreement") of JMAR
Technologies,
Inc. ("JMAR") and FemtoTrace, Inc.
("FemtoTrace") regarding the design,
manufacture and delivery by JMAR of certain
prototype versions of the READ
Analytical Instrument for the Trace
Analysis and Detection of Organic
Pollutants, Explosives, Nerve and Blister
Agents, Illicit Drugs and Other
Contraband ("READ Analytical
Instrument").
This Agreement shall be performed in phases
as provided below.
1. Alpha and Beta
Units
a) In order to expedite commencement of the work provided for
under
this
Agreement, upon execution of this Agreement JMAR shall commence
work
on the
initial design tasks for the two Alpha units, up to the point
of
incurring
a total of $50,000 in burdened labor. Unless and until
FemtoTrace
shall have delivered written authorization to JMAR to proceed
with the
balance of the work specified under the Agreement, JMAR shall
not
incur
costs in excess of $50,000 and FemtoTrace shall not be obligated
to
pay any
costs in excess of $50,000.
b) The first phase of this Agreement shall involve the design,
manufacture and delivery of two (2) Alpha versions of the READ
Analytical
Instrument. The specifications of the Alpha units are attached
hereto as
Exhibit
A.
c) The second phase of this Agreement shall involve the design,
manufacture and delivery of two (2) Beta versions of the READ
Analytical
Instrument. Following completion of acceptance testing for the
Alpha units
as
provided in Section 5 below, there shall be a period of 60 days
during
which the
parties will discuss and agree upon the final specifications of
the Beta
units, the timeline and tasks related to the assembly and
delivery
of the Beta units and the designs and other modifications
required
to be made to the Beta units. Unless FemtoTrace has exercised
its
right
under Section 9(b) to terminate this Agreement, after the
parties
have
reached agreement on the final specifications, timeline, tasks,
designs
and other modifications for the Beta units and related matters,
JMAR shall
be obligated to design, manufacture and deliver the two (2)
Beta units
in accordance with those final specifications and other agreed
upon terms
and FemtoTrace shall be obligated to
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purchase
those units on the terms set forth herein. If the parties are
unable to
reach agreement on the final specifications, timeline, tasks,
designs
and other modifications required for the Beta units, then JMAR
shall have
no obligation to design, manufacture or deliver the Beta units.
Each of
the parties shall bear its own costs in negotiating and
preparing
this
Agreement, as well as in discussing and agreeing upon the final
specifications of the Beta units, the timeline and tasks related to
the
assembly
and delivery of the Beta units.
d) Prior to the delivery of the two Alpha units, JMAR shall
also
provide
FemtoTrace with a recommended schedule of spare parts and
options
to
purchase such spare parts and an optional service contract.
2. Price
a) This
Agreement will be a fixed price, best efforts level of
performance contract. The total contract price will be
$1,016,780 subject to adjustment for good cause as provided in
this Agreement.
b) The
contract price for the delivery of two (2) Alpha units of
the READ Analytical Instrument shall be $598,047 subject to
change only under Section 8(b) below. The methodology for
calculating the contract price for the Alpha units is set
forth on Exhibit B-1 hereto.
c) The
contract price for the delivery of two (2) Beta units of
the READ Analytical Instrument shall be $418,733 subject to
adjustment during the 60 day period after acceptance of the
Alpha units by taking into account all agreed upon changes to
the design, scope of work and changes in materials. The
contract price for the two Beta units shall include the time
budgeted by JMAR for evaluation of the performance of the
Alpha units after delivery and the final design of the Beta
units. The methodology for calculating the contract price for
the Beta units is set forth on Exhibit B-1 hereto.
d) JMAR
will permit representatives designated by FemtoTrace,
upon reasonable notice and during normal business hours, at
FemtoTrace's expense to (a) visit JMAR's Systems Division and
inspect the activities being performed in connection with the
design and manufacture of the Alpha and Beta units, and (b)
examine the financial and other business records of JMAR's
Systems Division to confirm the costs and prices for the Alpha
and Beta units, as well any adjustments to the pricing
required by the Agreement (unless such examination is not
permitted by federal, state or local law or by contract) and
make copies thereof or extracts therefrom.
2
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3. Payment Schedule
FemtoTrace shall pay the contract price for the Alpha and Beta
units
in
accordance with the schedule set forth on Exhibit C hereto.
4. Schedule of Work
a) The
tasks to be performed by JMAR related to the design,
manufacturing and assembly of the Alpha units, are listed on
Exhibit D-1 hereto.
b) A
recommended timeline with specific tasks related to the
design and assembly of the Alpha units is attached hereto as
Exhibit D-2. The JMAR Program Man