Agreement

 

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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.

 

 

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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 Manager may modify this timeline

                  and list of tasks from time to time as necessary after

                  consultation with FemtoTrace, provided, however, that such

                  modifications must be reasonable and necessary and cannot

                  change the agreed delivery dates.

 

            c)      The parties shall agree upon the tasks and timelines for the

                  two Beta units within the 60 day period after acceptance of

                  the Alpha units.

 

            d)     A series of program reviews will be scheduled, including an

                   Initial Program Review (IPR), Preliminary Design Review (PDR),

                  Critical Design Review (CDR) and a Manufacturing Release

                  Review (MRR) for the Alpha units and a CDR and a MRR for the

                  Beta units. Written weekly reports will be provided by JMAR to

                  FemoTrace describing the progress versus schedule, problems

                  and actions to resolve problems. The parties will hold weekly

                  meetings on the status of the program by telephone conference

                  at a regular time and to be agreed by the parties upon

                  execution of this Agreement. The parties will meet in person

                  as reasonably necessary to effectively complete the work.

 

5.     Acceptance Testing

 

            Final acceptance of the Alpha and Beta units by FemtoTrace will

      consist of the satisfactory completion of a mutually agreed upon final

      test procedure and the delivery by JMAR of a report that describes the

      variance of the unit's performance from the product performance

      specification set forth on Exhibit A hereto.

 

            FemtoTrace shall, within 45 days of execution of this Agreement,

      provide to JMAR its acceptance test requirements for Alpha Units. JMAR

      shall, at least 45 days prior to the scheduled delivery of the initial

      Alpha Units, provide FemtoTrace with its proposed written acceptance test

      procedures, subject to FemtoTrace's review and modification prior to

      delivery. With respect to Beta Units, FemtoTrace will provide test

      requirements within 30 days after the parties have reached agreement

      (under Section 6b, below) on Beta specifications, with JMAR to provide its

      proposed test procedure at least 30 days before delivery of the initial

      Beta Units.

 

 

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6.     Delivery Schedule

 

            a)     The two Alpha units will be delivered to FemtoTrace by JMAR

                  not later than seven (7) months following the date of

                  execution of this Agreement by the parties.

 

            b)     Provided the parties have reached agreement on the final

                  specifications, timeline, tasks, designs and other

                   modifications required for the Beta units by the end of the 60

                  day period described in Section 1(b) above and provided

                  FemtoTrace shall not have terminated this Agreement pursuant

                  to Section 9(b), the design and manufacture of the two Beta

                  units will commence not later than 30 days after the parties

                  have reached agreement on said matters, with delivery of the

                  Beta units four months after design and manufacture has

                  commenced.

 

            c)     Upon delivery of the Alpha units, JMAR shall also deliver to

                  FemtoTrace all software, including source code, together with

                  all blueprints, specifications, drawings and instructions,

                  sufficient to replicate a fully functioning Alpha unit in all

                  aspects. Upon delivery of the Beta Units, JMAR shall also

                  deliver to FemtoTrace all software, including source code,

                  together with all blueprints, specifications, drawi