AGREEMENT
AGREEMENT dated as of the 3rd day of December, 2004, as amended on the
22nd day of August, 2006 (this "Agreement"), by and between Scantek Medical,
Inc., a Delaware corporation with an address at 0X Xxxx Xxxxx, Xxxxx Xxxxxx, XX
00000 ("Scantek") and Life Medical Technologies, Inc., a Delaware corporation
with an address at X.X. Xxx 000, Xxxxxxx, XX 00000 ("Life Medical").
WITNESSETH:
WHEREAS, Life Medical desires to obtain an option for the exclusive,
perpetual right to distribute the BreastCare(TM)/BreastAlert(TM) Differential
Temperature Sensor product (the "Product") in the United States; and
WHEREAS, Scantek desires to grant to Life Medical the aforesaid option.
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and for other good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged,
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IT IS AGREED:
1. Recitals. The parties hereby adopt as part of this Agreement each of the
recitals which is set forth above in the WHEREAS clauses, and agree that such
recitals shall be binding upon the parties hereto by way of contract and not
merely by way of recital or inducement and such WHEREAS clauses are hereby
confirmed and ratified as being accurate by each party as to itself.
2. Loan.
A. Simultaneously with the December 3, 2004 execution of this Agreement,
Life Medical shall loan to Scantek the sum of two hundred fifty thousand
($250,000) dollars (the "Loan") pursuant to the terms of a promissory note in
the form annexed hereto and made a part hereof as Exhibit "A" evidencing the
Loan (the "Promissory Note") which Scantek shall execute simultaneously with the
execution of this Agreement.
B. The Promissory Note shall be due and payable on June 5, 2007 (the
"Maturity Date").
3. Clinical Study.
A. Within five (5) days and within sixty (60) days after the date of the
December 3, 2004 execution of this Agreement, Life Medical shall give one
hundred thousand ($100,000) dollars and an additional one hundred thousand
($100,000) dollars, respectively, to Scantek, which funds shall be utilized by
Scantek for the completion of a clinical study consisting of at least two
hundred (200) patients (the "Clinical Study") by Xx. Xxxxxxxx Xxxxxxxx ("Xx.
Xxxxxxxx") or by the doctors or epidemiologist working with Xx. Xxxxxxxx, if Xx.
Xxxxxxxx is not available for any reason.
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B. After the two hundred thousand ($200,000) dollars set forth in
Paragraph "A" of this Article "3" of this Agreement has been utilized by
Scantek, Scantek shall be responsible for all additional costs with respect to
the Clinical Study; provided, however, that if Scantek incurs additional costs
of the Clinical Study beyond the two hundred thousand ($200,000) set forth in
Paragraph "A" of this Article "3" of this Agreement, Life Medical shall pay to
Scantek 50% of such additional costs, up to a maximum payment of twenty-five
thousand ($25,000) dollars in the event that Scantek pays at least fifty
thousand ($50,000) in additional costs, within thirty (30) days after
notification by Scantek that Scantek has paid said additional costs. If, for
example, the Clinical Study costs an additional forty thousand ($40,000) dollars
beyond the two hundred thousand ($200,000) dollars paid by Life Medical pursuant
to Paragraph "A" of this Article "3" of this Agreement, Life Medical shall pay
$20,000 to Scantek.
C. Life Medical shall not be responsible for any costs with respect to the
Clinical Study in excess of the aggregate of two hundred twenty five thousand
($225,000) dollars set forth in Paragraphs "A" and "B" of this Article "3" of
this Agreement.
D. Xx. Xxxxxxxx shall prepare a report with respect to the Clinical Study
(the "Report") for publication in one of the medical journals (the "Medical
Journals") set forth on Exhibit "B" which is annexed hereto and made a part
hereof.
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E. If Xx. Xxxxxxxx is not available for any reason to prepare, complete
and/or submit the Report, then the doctors or epidemiologist working with Xx.
Xxxxxxxx may complete and submit the Report for publication as set forth in
Paragraph "D" of this Article "3" of this Agreement.
4. US Option.
A. Scantek hereby grants Life Medical an option (the "US Option") to enter
into an exclusive distribution agreement (the "Distribution Agreement"),
pursuant to the terms and conditions of and in the form of the distribution
agreement which is annexed hereto and made a part hereof as Exhibit "C", with
Scantek pursuant to which Life Medical shall receive, subject to the terms and
conditions of the Distribution Agreement, an exclusive, perpetual right to
distribute the Product in the United States.
B. The US Option shall be exercisable for a period of ninety (90) days
after Life Medical receives written notice from Scantek pursuant to Paragraph
"C" of Article "11" of this Agreement that the Report has been accepted for
publication by one of the Medical Journals which written notice shall include a
copy of the written notice received by Scantek indicating that the Report has
been accepted for publication; the parties agree that the US Option shall expire
at the end of said ninety (90) day period regardless of whether the Report is
published within said ninety (90) days. Life Medical shall provide Scantek with
written notice pursuant to Paragraph "C" of Article "11" of this Agreement of
its intention to exercise the US Option together with four (4) executed
duplicate originals of the Distribution Agreement (the "Exercise Notice"). If
the four (4) executed duplicate originals of the Distribution Agreement are not
sent with the Exercise Notice, Scantek shall provide Life Medical with written
notice of its failure to include the four (4) executed duplicate originals of
the Distribution Agreement. Life Medical shall have ten (10) business days after
receipt of said written notice in which to send the four (4) executed duplicate
originals of the Distribution Agreement. If the four (4) executed duplicate
originals of the Distribution Agreement are not received by Scantek within said
ten (10) business day period, then the US Option shall not be deemed to have
been exercised. Upon receipt of the Exercise Notice and the four (4) executed
duplicate originals of the Distribution Agreement, Scantek shall execute the
Distribution Agreement and send Life Medical two (2) duplicate originals of
same.
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C. If the Report is not accepted for publication within twenty four (24)
months after the date of submission by Xx. Xxxxxxxx or one of the doctors or the
epidemiologist working with Xx. Xxxxxxxx, if Xx. Xxxxxxxx is unavailable, by any
one of the Medical Journals, then Life Medical thereafter shall have forty-five
(45) days after receipt of written notice from Scantek that the Report has not
been accepted for publication by one of the Medical Journals within which to
provide Scantek with written notice pursuant to Paragraph "C" of Article "11" of
this Agreement of Life Medical's intention to exercise the US Option. If Life
Medical does not provide Scantek with such written notice within the aforesaid
forty-five (45) day period, the US Option and this Agreement shall be terminated
and be null and void and the Loan shall be due and payable pursuant to the terms
of the Promissory Note.
D. If Life Medical exercises the US Option, then: (1) the following shall
be applied to the purchase price set forth in the Distribution Agreement: (a)
the Loan in the amount of two hundred fifty thousand ($250,000) dollars set
forth in Paragraph "A" of Article "2" of this Agreement and (b) the two hundred
thousand ($200,000) dollars set forth in Paragraph "A" of Article "3" of this
Agreement; (2) Life Medical shall deliver the cancelled Promissory Note
evidencing the Loan to Scantek; and (3) Life Medical shall waive any accrued and
unpaid interest due on the Promissory Note.
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5. Ownership Interest in Life Medical.
A. Life Medical shall issue to Scantek such ownership interest in itself
which shall result in Scantek owning fifteen (15%) percent of the capital stock
or equity interest in Life Medical. Life Medical shall have the right to create
two (2) classes of ownership interest, with one such class being non-voting
stock. Life Medical may, in its discretion, issue to Scantek non-voting stock;
provided, however, that Scantek shall receive fifteen (15%) percent of the total
of all voting and non-voting common stock which is issued and outstanding of
Life Medical.
B. Scantek's fifteen (15%) percent ownership interest in Life Medical
shall be a non-voting interest until two (2) years after the date upon which
Life Medical has its securities trading or quoted in the United States or any
foreign country, including, but not limited to, Nasdaq National Market, SmallCap
Market, OTC Bulletin Board, "pink sheets", London Stock Exchange, AIM, Borsa
Italiana SPA, Bourse de Montreal, Bolsa Mexicana de Valores or Tokyo Stock
Exchange (a "Public Company"). If Scantek is issued voting stock in Life
Medical, it agrees not to vote said stock until two (2) years after Life Medical
becomes a Public Company. After said two (2) year period, Scantek's fifteen
(15%) percent interest in Life Medical shall become a voting interest.
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C. Commencing upon the date upon which Life Medical becomes a Public
Company and continuing for a period of two (2) years after said date, Scantek
shall not sell, transfer or otherwise dispose of its ownership interest in Life
Medical; provided, however, that Scantek may sell, transfer or otherwise dispose
of its ownership interest in Life Medical pursuant to a private transaction
pursuant to the Securities Act of 1933, as amended. During the fourteen (14)
months after the end of the aforesaid two (2) year period, Scantek may only
sell, transfer or otherwise dispose of seven and one-half (7.5%) percent of its
ownership interest in Life Medical per month on a cumulative basis. For example,
if Scantek's 15% ownership interest is equal to 100,000 shares of common stock
of Life Medical, Scantek, after said two (2) year period, could sell 7,500
shares per month (determined by multiplying 100,000 by 7.5%); provided, however,
that if, Scantek did not sell any shares for two months, then in the following
month it could sell up to 22,500 shares (determined by multiplying 7,500 by 3).
At the end of the fourteen (14) month period there shall be no restriction on
sales by Scantek.
D. Life Medical shall agree that Scantek's fifteen (15%) percent ownership
interest in Life Medical shall not under any circumstances be diluted,
including, but not limited as set forth in the Distribution Agreement.
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6. Nondisclosure of Confidential Information.
A. As used in this Agreement, "Confidential Information" shall mean oral
or written information which is directly or indirectly presented to Life
Medical, its past, present or future subsidiaries, parents, officers,
consultants, directors, stockholders, affiliates, attorneys, employees, agents
and its and their respective Immediate Families (as defined below; all of the
foregoing are hereinafter collectively referred to as "Agents") by Scantek,
including, but not limited to, information which is developed, conceived or
created by Scantek, or disclosed to Life Medical or its Agents or known by or
conceived or created by Life Medical or its Agents during, or after the
termination of, this Agreement if disclosed to Life Medical or its Agents or
known by or conceived or created by Life Medical or its Agents as a result of
this Agreement, with respect to Scantek, its business or any of its products,
processes, and other services relating thereto relating to the past or present
business or any plans with respect to future business of Scantek, or relating to
the past or present business of a third party or plans with respect to future
business of a third party which are disclosed to Scantek. Confidential
Information includes, but is not limited to, all documentation, hardware and
software relating thereto, and information and data in written, graphic and/or
machine readable form, products, processes and services, whether or not
patentable, trademarkable or copyrightable or otherwise protectable, including,
but not limited to, information with respect to discoveries; know-how; ideas;
computer programs, source codes and object codes; designs; algorithms; processes
and structures; product information; marketing information; price lists; cost
information; product contents and formulae; manufacturing and production
techniques and methods; research and development information; lists of clients
and vendors and other information relating thereto; financial data and
information; business plans and processes; documentation with respect to any of
the foregoing; and any other information of Scantek that Scantek informs Life
Medical or its Agents or Life Medical or its Agents should know, by virtue of
its or their position or the circumstances in which it or they learned such
other information, is to be kept confidential including, but not limited to, any
information acquired by Life Medical or its Agents from any sources prior to the
commencement of this Agreement. Confidential Information also includes similar
information obtained by Scantek in confidence from its vendors, licensors,
licensees, customers and/or clients. Confidential Information may or may not be
labeled as confidential.
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For purposes of this Agreement, "Immediate Families" shall include, but
shall not be limited to, the following: any spouse, parent, spouse of a parent,
mother-in-law, father-in-law, brother-in-law, sister-in-law, child, spouse of a
child, sibling, spouse of a sibling, grandparent, spouse of a grandparent or any
issue or spouse of any of the foregoing. A parent of a specified person shall
include an affiliate controlling such person directly or indirectly through one
or more intermediaries.
B. Except as required in the performance of Life Medical's or its Agents'
obligations pursuant to this Agreement, neither Life Medical nor its Agents
shall, during, or after the termination of, this Agreement, directly or
indirectly, use any Confidential Information or disseminate or disclose any
Confidential Information to any person, firm, corporation, association or other
entity. Life Medical or its Agents shall take all reasonable measures to protect
Confidential Information from any accidental, unauthorized or premature use,
disclosure or destruction. Information shall not be considered Confidential
Information if it: (i) is at the time of disclosure, or thereafter becomes, a
part of the public domain without breach of this Agreement by Life Medical or
its Agents; provided, however, that the act of copyrighting shall not cause or
be construed as causing the copyrighted materials to be in the public domain,
(ii) is disclosed as reasonably required in a proceeding to enforce Life
Medical's rights under this Agreement or (iii) is disclosed as required by court
order or applicable law; provided, however, that if either Life Medical or its
Agents is legally requested or required by court order or applicable law,
including, but not limited to, by oral question, interrogatories, request for
information or documents, subpoenas, civil investigative demand or similar
process to disclose any Confidential Information, Life Medical or its Agents, as
the case may be, shall promptly notify Scantek of such request or requirement so
that Scantek may seek an appropriate protective order; provided further,
however; that if such protective order is not obtained, Life Medical and its
Agents agree to furnish only that portion of the Confidential Information which
they are advised by their respective counsels is legally required.
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C. Upon termination of this Agreement for any reason or at any time upon
request of Scantek, Life Medical and its Agents agree to deliver to Scantek all
materials of any nature which are in Life Medical's or its Agents' possession or
control and which are or contain Confidential Information, Work Product or Work
Products (hereinafter defined), or which are otherwise the property of Scantek
or any vendor, licensor, licensee, customer or client of Scantek, including, but
not limited to writings, designs, documents, records, data, memoranda, tapes and
disks containing software, computer source code listings, routines, file
layouts, record layouts, system design information, models, manuals,
documentation and notes. Life Medical and its Agents shall destroy all written
documentation prepared by them for internal purposes based in whole or in part
on any Confidential Information and such destruction shall be confirmed to
Scantek in writing by Life Medical and/or its Agents.
D. All ideas, inventions, discoveries or improvements, whether patentable
or not, conceived by Life Medical or its Agents (alone or with others) during
the term of this Agreement ("Work Products") shall be the exclusive property of
and assigned to Scantek or as Scantek may direct without compensation to Life
Medical or its Agents. Any records with respect to the foregoing shall be the
sole and exclusive property of Scantek and Life Medical or its Agents shall
surrender possession of such records to Scantek upon termination of this
Agreement. Any Work Product shall be deemed incorporated in the definition of
Confidential Information for all purposes hereunder.
E. Neither Life Medical nor its Agents shall assert any rights with
respect to Scantek, its business, or any of its products, processes and other
services relating thereto, Work Product or any Confidential Information as
having been acquired or known by Life Medical or its Agents prior to the
commencement of this Agreement.
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7. Restrictive Covenant.
A. In order to induce Scantek to enter into this Agreement, Life Medical
agrees on its own behalf and on behalf of its Agents that neither it nor its
Agents shall during the term of this Agreement and, for a period of five (5)
years from the date of termination of this Agreement, (i) manufacture any
Competing Product (as defined below), (ii) directly or indirectly sell or market
any product which competes either directly or indirectly with any product of
Scantek that screens for, or is a detection modality for prostate, cancer,
kidney disease and strokes or any product which is based upon the technology of
temperature differentials ("Competing Products"), or (iii) directly or
indirectly own, manage, participate in the operation or control of, or be
connected as an officer, director, shareholder, partner, consultant, owner,
employee, agent, lender, donor, vendor or otherwise, or have any financial
interest in or aid or assist anyone else in the conduct of any competing entity
which manufactures, distributes or offers for sale Competing Products. Life
Medical further agrees on its own behalf and on behalf of its Agents that
neither it nor its Agents shall during the term of this Agreement and for a
period of five (5) years from the date of termination of this Agreement (i)
personally, or cause others to personally induce or attempt to induce any
employees to terminate their employment with Scantek; (ii) interfere with or
disrupt Scantek's relationship with its suppliers, vendors, customers or
employees; or (iii) solicit or entice any person to leave their employ with
Scantek.
B. Life Medical agrees on its own behalf and on behalf of its Agents that
the duration, scope and geographic area for which the provisions set forth in
Paragraph "A" of this Article "7" of this Agreement are to be effective are
reasonable. If any court of competent jurisdiction determines that any provision
of this Agreement is invalid or unenforceable by reason of such provision
extending the covenants and agreements contained herein for too great a period
of time or over too great a geographical area, or by reason of it being too
extensive in any other respect, such agreement or covenant shall be interpreted
to extend only over the maximum period of time and geographical area, and to the
maximum extent in all other respects, as to which it is valid and enforceable,
all as determined by such court in such action. Any determination that any
provision of this Agreement is invalid or unenforceable, in whole or in part,
shall have no effect on the validity or enforceability of any remaining
provision of this Agreement.
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C. Scantek agrees, on its own behalf and on behalf of its Agents, that
neither it nor its Agents shall during the Term and for a period of five (5)
years from the date of termination of this Agreement (i) personally, or cause
others to personally induce or attempt to induce any employee to terminate their
employment with Life Medical; (ii) interfere with or disrupt Life Medical's
relationship with its suppliers, vendors, customers or employees; or (iii)
solicit or entice any person to leave their employ with Life Medical.
D. Any period of time set forth in this Agreement shall not be construed
to permit either Life Medical or its Agents to engage in any of the prohibited
acts set forth in this Agreement after such period if such acts would otherwise
be prohibited by any applicable statute or legal precedent.
8. Disclosure.
A. Scantek shall, within a reasonable time after the date of the execution
of this Agreement, notify the Securities and Exchange Commission on an
appropriate form and issue a press release with respect to this Agreement.
B. No public disclosure of the terms of this Agreement shall be made by
Life Medical or any of its Agents, without the prior written approval of Scantek
except as may be required by law or by judicial or other compulsory process. If
either Life Medical or its Agents intends to make a disclosure of the terms of
this Agreement as required by law or by judicial or other compulsory process,
Life Medical or its Agents shall notify Scantek as soon as possible and, if
permissible, in advance of any such disclosure.
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9. Life Medical's Representations, Warranties and Covenants. Life Medical
represents, warrants and covenants that:
A. Corporate Status. Life Medical is a corporation with all of the
requisite power and authority to carry on its businesses as presently conducted
in all jurisdictions where presently conducted.
B. Authority. Life Medical has the full right, power and legal capacity to
enter into this Agreement and to consummate the transactions contemplated
hereby. This Agreement constitutes the valid and legally binding obligation of
Life Medical, enforceable in accordance with its terms and conditions. The
execution and delivery of this Agreement by Life Medical and the consummation by
it of the transactions contemplated hereby have been duly approved and
authorized by all necessary action of the Board of Directors of Life Medical,
and no further authorization shall be necessary on the part of Life Medical for
the performance and consummation by Life Medical of the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
in accordance with its terms does not and shall not require approval, consent or
authorization of any third party, including any governmental agency or authority
or any political subdivision thereof.
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C. Ownership. Xxxxxx Xxxxxx is the record, beneficial and equitable owner
of a majority of the capital stock of Life Medical Technologies, Inc.
D. Compliance with the Law and Other Instruments. The business and
operations of Life Medical have been and are being conducted in accordance with
all applicable laws, rules, and regulations of all authorities which affect Life
Medical or its properties, assets, businesses or prospects. The performance of
this Agreement shall not result in any breach of, or constitute a default under,
or result in the imposition of any lien or encumbrance upon any property of Life
Medical or cause an acceleration under any arrangement, agreement or other
instrument to which Life Medical is a party or by which any of its assets are
bound. Life Medical has performed all of its obligations which are required to
be performed by it pursuant to the terms of any such agreement, contract, or
commitment.
E. No Broker. Life Medical has not had any dealings with respect to this
transaction with any business broker, firm or salesman, or any person or
corporation, investment banker or financial advisor who is or shall be entitled
to any broker's or finder's fee or any other commission or similar fee with
respect to the transactions set forth in this Agreement, except for M.F.S.G.,
Inc. ("M.F.S.G."), whose fee shall be paid by Scantek pursuant to a separate
agreement. Life Medical represents that, except for M.F.S.G., it has not dealt
with any person, firm or corporation and agrees to indemnify and hold harmless
Scantek from and against any and all claims for brokerage commissions by any
person, firm or corporation on the basis of any act or statement alleged to have
been made by Life Medical or its Agents.
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F. Right to Distribute. Life Medical shall not grant, directly or
indirectly, to any other person any right to use any right or license to use any
intellectual property with respect to the Product or the Devices.
G. Litigation. There are no legal, administrative, arbitration, or other
proceeding or governmental investigations adversely affecting Life Medical or
its properties, assets or businesses, or with respect to any matter arising out
of the conduct of Life Medical's business pending or to its knowledge
threatened, by or against, any officer or director of Life Medical in connection
with its affairs, whether or not covered by insurance. Neither Life Medical nor
its officers or directors are subject to any order, writ, injunction, or decree
of any court, department, agency, or instrumentality, affecting Life Medical.
H. No Approvals. No approval of any third party including, but not limited
to, any governmental authority is required in connection with the consummation
of the transactions set forth in this Agreement.
I. Survival. The covenants, representations and warranties made by Life
Medical in or in connection with this Agreement shall survive the execution and
delivery of this Agreement and the consummation of the transactions described
herein, it being agreed and understood that each of such covenants,
representations and warranties is of the essence to this Agreement and the same
shall be binding upon Life Medical and inure to Scantek, its successors and
assigns.
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J. Complete Disclosure. Life Medical has no knowledge that any covenant,
representation or warranty of Life Medical which is contained in this Agreement
or in a writing furnished or to be furnished pursuant to this Agreement contains
or shall contain any untrue statement of a material fact, omits or shall omit to
state any material fact which is required to make the statements which are
contained herein or therein, not misleading.
K. Notification of an Event. If, any event occurs or any event known to
Life Medical relating to or affecting Life Medical shall occur as a result of
which (i) any provision of this Article "9" of this Agreement at that time shall
include an untrue statement of a fact, or (ii) this Article "9" of this
Agreement shall omit to state any fact necessary to make the statements herein,
in light of the circumstances under which they were made, not misleading, Life
Medical will immediately notify Scantek pursuant to Paragraph "C" of Article
"11" of this Agreement.
L. No Defense. It shall not be a defense to a suit for damages for any
misrepresentation, or breach of, a covenant, representation or warranty that
Scantek knew or had reason to know that any covenant, representation or warranty
in this Agreement contained untrue statements.
10. Scantek's Representations, Warranties and Covenants. Scantek
represents, warrants and covenants that:
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A. Corporate Status. Scantek is a corporation with all of the requisite
power and authority to carry on its businesses as presently conducted in all
jurisdictions where presently conducted.
B. Authority. Scantek has the full right, power and legal capacity to
enter into this Agreement and to consummate the transactions contemplated
hereby. This Agreement constitutes the valid and legally binding obligation of
Scantek, enforceable in accordance with its terms and conditions. The execution
and delivery of this Agreement by Scantek and the consummation by it of the
transactions contemplated hereby have been duly approved and authorized by all
necessary action of the Board of Directors of Scantek, and no further
authorization shall be necessary on the part of Scantek for the performance and
consummation by Scantek of the transactions contemplated hereby. The execution,
delivery and performance of this Agreement in accordance with its terms does not
and shall not require approval, consent or authorization of any third party,
including any governmental agency or authority or any political subdivision
thereof.
C. Compliance with the Law and Other Instruments. The business and
operations of Scantek have been and are being conducted in accordance with all
applicable laws, rules, and regulations of all authorities which affect Scantek
or its properties, assets, businesses or prospects. The performance of this
Agreement shall not result in any breach of, or constitute a default under, or
result in the imposition of any lien or encumbrance upon any property of Scantek
or cause an acceleration under any arrangement, agreement or other instrument to
which Scantek is a party or by which any of its assets are bound. Scantek has
performed all of its obligations which are required to be performed by it
pursuant to the terms of any such agreement, contract, or commitment.
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D. No Broker. Scantek has not had any dealings with respect to this
transaction with any business broker, firm or salesman, or any person or
corporation, investment banker or financial advisor who is or shall be entitled
to any broker's or finder's fee or any other commission or similar fee with
respect to the transactions set forth in this Agreement, except for M.F.S.G.,
whose fee shall be paid by Scantek pursuant to a separate agreement. Scantek
represents that, except for M.F.S.G., it has not dealt with any person, firm or
corporation and agrees to indemnify and hold harmless Life Medical from and
against any and all claims for brokerage commissions by any person, firm or
corporation, including M.F.S.G., on the basis of any act or statement alleged to
have been made by Scantek or its affiliates or agents.
E. Intellectual Property. Scantek is the sole and exclusive owner of the
Product and the Devices and all intellectual property with respect to the
Product and the Devices and has the sole and exclusive right to license the use
thereof to Life Medical free and clear of any lien, encumbrance or any other
restriction, except as set forth on Exhibit "D". Scantek has no knowledge that
any Product or Device or any of the intellectual property with respect to the
Product or Devices infringes on any trademark, trade name, servicemark,
copyright or patent or any trade secret or other proprietary right of any other
person. Scantek does not know or have any reason to believe that there are any
claims of any third parties with respect to the use of any of the intellectual
property with respect to the Product or the Devices within the United States,
except as set forth on Exhibit "E".
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F. Right to Use. Scantek has not granted and shall not grant, directly or
indirectly, to any other person any right to use any right or license to use any
intellectual property with respect to the Product or the Devices within the
United States.
G. Right to Distribute. Scantek has not granted and shall not, while the
US Option is outstanding, grant, directly or indirectly, to any other person any
right (whether current, future, contingent or otherwise) to sell the Product or
the Devices in or into the United States.
H. Litigation. Except as set forth on Exhibit "E", there are no legal,
administrative, arbitration, or other proceeding or governmental investigations
adversely affecting Scantek or its properties, assets or businesses, or with
respect to any matter arising out of the conduct of Scantek's business pending
or to its knowledge threatened, by or against, any officer or director of
Scantek in connection with its affairs, whether or not covered by insurance.
Except as set forth on Exhibit "E", neither Scantek nor its officers or
directors are subject to any order, writ, injunction, or decree of any court,
department, agency, or instrumentality, affecting Scantek.
I. No Approval. No approval of any third party including, but not limited
to, any governmental authority is required in connection with the consummation
of the transactions set forth in this Agreement.
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J. Survival. The covenants, representations and warranties made by Scantek
in or in connection with this Agreement shall survive the execution and delivery
of this Agreement and the consummation of the transactions described herein, it
being agreed and understood that each of such covenants, representations and
warranties is of the essence to this Agreement and the same shall be binding
upon Scantek and inure to Life Medical, its successors and assignees.
K. Complete Disclosure. Scantek has no knowledge that any covenant,
representation or warranty of Scantek which is contained in this Agreement or in
a writing furnished or to be furnished pursuant to this Agreement contains or
shall contain any untrue statement of a material fact, omits or shall omit to
state any material fact which is required to make the statements which are
contained herein or therein, not misleading.
L. Notification of an Event. If, any event occurs or any event known to
Scantek relating to or affecting Scantek shall occur as a result of which (i)
any provision of this Article "10" of this Agreement at that time shall include
an untrue statement of a fact, or (ii) this Article "10" of this Agreement shall
omit to state any fact necessary to make the statements herein, in light of the
circumstances under which they were made, not misleading, Scantek shall
immediately notify Life Medical pursuant to Paragraph "C" of Article "11" of
this Agreement.
M. No Defense. It shall not be a defense to a suit for damages for any
misrepresentation or breach of a covenant, representation or warranty that Life
Medical knew or had reason to know that any covenant, representation or warranty
in this Agreement contained untrue statements.
20
11. Miscellaneous.
A. Headings. Headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
B. Enforceability. If any provision which is contained in this Agreement
should, for any reason, be held to be invalid or unenforceable in any respect
under the laws of any jurisdiction, such invalidity or unenforceability shall
not affect any other provision of this Agreement and this Agreement shall be
construed as if such invalid or unenforceable provision had not been contained
herein.
C. Notices. Any notice or other communication required or permitted
hereunder shall be sufficiently given if sent by (i) mail by (a) certified mail,
postage prepaid, return receipt requested and (b) first class mail, postage
prepaid (ii) overnight delivery with confirmation of delivery or (iii) facsimile
transmission with an original mailed by first class mail, postage prepaid,
addressed as follows:
To Life Medical: Life Medical Technologies, Inc.
X.X. Xxx 000
Xxxxxxx, XX 00000
Attn: Xx. Xxxxxx Xxxxxx
Fax No.: (000) 000-0000
21
With a copy to: Xxxxxxx, Xxxxxxxxx & Xxxxxxxx, LLP
000 Xxxxxxx Xxxxxxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Attn.: Xxxxx X. Xxxxxxxxx, Esq.
Fax No.: (000) 000-0000
To Scantek: Scantek Medical, Inc.
0X Xxxx Xxxxx
Xxxxx Xxxxxx, XX 00000
Attn: Xx. Xxxxxxxx X. Xxxx
Fax No.: (000) 000-0000
With a copy to: Xxxxx & Fraade, P.C.
000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Attn: Xxxxxxxxx X. Xxxxx, Esq.
Fax No.: (000) 000-0000
or in each case to such other address and facsimile number as shall have last
been furnished by like notice. If all of the methods of notice set forth in this
Paragraph "C" of this Article "11" of this Agreement are impossible for any
reason, notice shall be in writing and personally delivered to the aforesaid
addresses. Each notice or communication shall be deemed to have been given as of
the date so mailed or delivered as the case may be; provided, however, that any
notice sent by facsimile shall be deemed to have been given as of the date so
sent if a copy thereof is also mailed by first class mail on the date sent by
facsimile. If the date of mailing is not the same as the date of sending by
facsimile, then the date of mailing by first class mail shall be deemed to be
the date upon which notice is given; provided further, however, that any notice
sent by overnight delivery shall be deemed to have been given as of the date of
delivery.
22
D. Governing Law; Disputes. This Agreement shall in accordance with
Section 5-1401 of the General Obligations Law of New York in all respects be
construed, governed, applied and enforced under the internal laws of the State
of New York without giving effect to the principles of conflicts of laws and be
deemed to be an agreement entered into in the State of New York and made
pursuant to the laws of the State of New York. The parties agree that they shall
be deemed to have agreed to binding arbitration solely in New York, New York,
with respect to the entire subject matter of any and all disputes relating to or
arising under this Agreement including, but not limited to, the specific matters
or disputes as to which arbitration has been expressly provided for by other
provisions of this Agreement. Any such arbitration shall be by a panel of three
arbitrators and pursuant to the commercial rules then existing of the American
Arbitration Association in the State of New York, County of New York. In all
arbitrations, judgment upon the arbitration award may be entered in any court
having jurisdiction. The parties agree, further, that the prevailing party in
any such arbitration as determined by the arbitrators shall be entitled to such
costs and attorney's fees, if any, in connection with such arbitration as may be
awarded by the arbitrators. In connection with the arbitrators' determination
for the purpose of which party, if any, is the prevailing party, they shall take
into account all of the factors and circumstances including, without limitation,
the relief sought, and by whom, and the relief, if any, awarded, and to whom. In
addition, and notwithstanding the foregoing sentence, a party shall not be
deemed to be the prevailing party in a claim seeking monetary damages, unless
the amount of the arbitration award exceeds the amount offered in a legally
binding writing by the other party by fifteen percent (15%) or more. For
example, if the party initiating arbitration ("A") seeks an award of $100,000
plus costs and expenses, the other party ("B") has offered A $50,000 in a
legally binding written offer prior to the commencement of the arbitration
proceeding, and the arbitration panel awards any amount less than $57,500 to A,
the panel should determine that B has "prevailed". The parties specifically
designate the courts in the City of New York, State of New York as properly
having jurisdiction for any proceeding to confirm and enter judgment upon any
such arbitration award. The parties hereby consent to and submit to personal
jurisdiction over each of them solely by the courts of the State of New York in
any action or proceeding, waive personal service of any and all process and
specifically consent that in any such action or proceeding brought in the courts
of the State of New York, any service of process may be effectuated upon any of
them by certified mail, return receipt requested, in accordance with Paragraph
"C" of this Article "11" of this Agreement.
23
The arbitration panel shall have no power to award non-monetary or
equitable relief of any sort. It shall also have no power to award (i) damages
inconsistent with any applicable agreement between the parties or (ii) punitive
damages or any other damages not measured by the prevailing party's actual
damages; and the parties expressly waive their right to obtain such damages in
arbitration or in any other forum. In no event, even if any other portion of
these provisions is held invalid or unenforceable, shall the arbitration panel
have power to make an award or impose a remedy which could not be made or
imposed by a court deciding the matter in the same jurisdiction.
Discovery shall be permitted in connection with the arbitration only to
the extent, if any, expressly authorized by the arbitration panel upon a showing
of substantial need by the party seeking discovery.
All aspects of the arbitration shall be treated as confidential. The
parties and the arbitration panel may disclose the existence, content or results
of the arbitration only as provided in the rules of the American Arbitration
Association in New York, New York. Before making any such disclosure, a party
shall give written notice to all other parties and shall afford such parties a
reasonable opportunity to protect their interest.
24
E. Expenses. Each party agrees to be responsible for its own legal,
accounting and other advisory fees and expenses incurred in connection with the
transaction contemplated hereunder.
F. Assignment. This Agreement may not be assigned or transferred by Life
Medical.
G. Construction. Each of the parties hereto hereby further acknowledges
and agrees that (i) each has been advised by counsel during the course of
negotiations and (ii) each counsel has had significant input in the development
of this Agreement and (iii) this Agreement shall not, therefore, be construed
more strictly against any party responsible for its drafting regardless of any
presumption or rule requiring construction against the party whose attorney
drafted this Agreement.
H. Entire Agreement. This Agreement and all documents and instruments
referred to herein (i) constitute the entire agreement and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof and thereof, and (ii) are not intended to
confer upon any person other than the parties hereto any rights or remedies
hereunder. Each party hereto agrees that, except for the representations and
warranties contained in this Agreement, neither party makes any other
representations or warranties, and each hereby disclaims any other
representations and warranties made by itself or any of its officers, directors,
employees, agents, financial and legal advisors or other representatives, with
respect to the execution and delivery of this Agreement or the transactions
contemplated hereby, notwithstanding the delivery or disclosure of any
documentation or other information with respect to any one or more of the
foregoing.
25
I. Further Assurances. The parties agree to execute any and all such other
further instruments and documents, and to take any and all such further actions
which are reasonably required to effectuate this Agreement and the intents and
purposes hereof.
J. Binding Agreement. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their heirs, executors, administrators,
personal representatives, successors and assigns.
K. Non-Waiver. Except as otherwise expressly provided herein, no waiver of
any covenant, condition, or provision of this Agreement shall be deemed to have
been made unless expressly in writing and signed by the party against whom such
waiver is charged; and (i) the failure of any party to insist in any one or more
cases upon the performance of any of the provisions, covenants or conditions of
this Agreement or to exercise any option herein contained shall not be construed
as a waiver or relinquishment for the future of any such provisions, covenants
or conditions, (ii) the acceptance of performance of anything required by this
Agreement to be performed with knowledge of the breach or failure of a covenant,
condition or provision hereof shall not be deemed a waiver of such breach or
failure, and (iii) no waiver by any party of one breach by another party shall
be construed as a waiver of any other or subsequent breach.
26
L. Counterparts. This Agreement may be executed simultaneously in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
M. Modifications. This Agreement may not be changed, modified, extended,
terminated or discharged orally, but only by an agreement in writing, which is
signed by all of the parties to this Agreement.
N. Exhibits. All Exhibits annexed or attached to this Agreement are
incorporated into this Agreement by reference thereto and constitute an integral
part of this Agreement.
O. Severability. The provisions of this Agreement shall be deemed
separable. Therefore, if any part of this Agreement is rendered void, invalid or
unenforceable, such rendering shall not affect the validity or enforceability of
the remainder of this Agreement; provided, however, that if the part or parts
which are void, invalid or unenforceable as aforesaid shall substantially impair
the value of this whole Agreement to any party, that party may cancel, and
terminate the Agreement by giving written notice to the other party.
END OF PAGE
27
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
Scantek Medical, Inc.
By: ___________________________________
Xx. Xxxxxxxx X. Xxxx, President
Life Medical Technologies, Inc.
By: ___________________________________
Xxxxxx Xxxxxx, President & CEO
Xxxxxx Xxxxxx hereby agrees to be personally subject to the provisions of
Articles "6", "7" and "11" of this Agreement, including, but not limited to
Paragraph "D" of Article "11" of this Agreement and liable for his personal acts
with respect to such Articles, which shall not include the acts of his Agents
and affiliates. For purposes of Paragraph "C" of Article "11" of this Agreement,
Xxxxxx Xxxxxx'x address and facsimile number are the same as set forth therein
for Life Medical with a copy to the same address and facsimile number as the
copy for Life Medical would be sent.
-------------------------------------
Xxxxxx Xxxxxx
28
EXHIBIT A
PROMISSORY NOTE
29
EXHIBIT B
LIST OF MEDICAL JOURNALS
1. The Journal of Surgical Oncology
2. Surgical Oncology
3. Lancet
30
EXHIBIT C
DISTRIBUTION AGREEMENT
31
EXHIBIT D
LIENS
1. UCC-1 filed by Xxx Xxxxxxx;
2. UCC-1 filed by Canal Jeans Co.;
3. UCC-1s filed by Xxxxxx Xxxxxxx;
4. UCC-1 filed by First Sierra Financial Inc. (obligation has been paid;
UCC-3 has not been filed);
5. UCC-1 filed by Zigmed Inc.;
6. UCC-1 filed by Trinity Xxx.
32
EXHIBIT E
LITIGATION
1. Xxxxx X. Xxxxxx, Xxxxxx X. Xxxxx, PLLC and Xxxxxx X. Xxxxx, individually v.
Scantek Medical, Inc. and Xx. Xxxxxxxx X. Xxxx, Case No. 04-3978 in the United
States District Court for the District of New Jersey. Xx. Xxxxxx is seeking (A)
the distribution rights with respect to the Product in the United States and
Mexico and (B) approximately $286,003 in loans made to Scantek and/or
approximately 6,650,000 shares of common stock, par value $.001 of Scantek
("Common Stock"). Xxxxxx V, Xxxxx, PLLC and Xxxxxx X. Xxxxx are seeking $10,000
and 25,000 shares of Common Stock for legal fees and the costs and expenses of
collection.
Scantek, prior to the service of the lawsuit, had paid $105,000 plus
interest to Xx. Xxxxxx with respect to one of the loans and issued to him
1,650,000 shares of the 6,650,000 shares of Common Stock Xx. Xxxxxx is seeking.
Scantek believes that (A) there is virtually no basis for Xx. Xxxxxx'x claim to
the remaining 5,000,000 shares of Common Stock, and (B) while Xx. Xxxxxx is
entitled to approximately $105,000 in repayment of another loan, Xx. Xxxxxx does
not have a valid cause of action with respect to any of his other claims.
On October 15, 2004, Scantek filed a Motion to Dismiss based upon
insufficiency of service of process and failure to state a claim for which
relief could be granted, for numerous reasons, including, but not limited to,
(A) Scantek had repaid the only loan evidenced by a promissory note made
pursuant to the terms of the Letter of Intent and (B) Scantek had issued
1,650,000 shares to Xx. Xxxxxx. Accordingly, the repayment of the $105,000 loan
makes the claim for the balance of the shares claimed by Xxxxxx moot because
those shares were being held in escrow to secure repayment of the $105,000 loan,
and the issuance of the 1,650,000 shares makes the claim for the $33,000 loan
moot. Xx. Xxxxxx and Xx. Xxxxx requested that Scantek allow them to (A) withdraw
the action in New Jersey and (B) commence the action in New York. In view of the
time and money spent thus far defending the case in New Jersey, Scantek was not
willing to allow Xx. Xxxxxx and Xx. Xxxxx to withdraw the case in New Jersey.
Scantek determined to concede jurisdiction over it in New Jersey, and informed
the Court of its decision. On August 8, 2005, the Court issued a decision with
respect to the remainder of Scantek's Motion to Dismiss. The Court dismissed
many of Xx. Xxxxxx'x claims against Scantek and dismissed the Complaint in its
entirety with respect to Xx. Xxxx for lack of jurisdiction. Scantek intends to
vigorously defend against the remaining claims.
33
On August 22, 2005, Xx. Xxxxxx commenced an action in the Supreme Court of
the State of New York against Xx. Xxxx, Scantek's counsel, Xxxxx & Fraade, P.C.,
the two named partners of Xxxxx & Fraade, P.C. and certain individuals and
entities with which Scantek is engaged in business. Xx. Xxxxxx is seeking the
following damages which he allegedly incurred: (1) compensatory damages in
excess of $10,000,000, (2) punitive damages in excess of $5,000,000 and (3)
3,000,000 shares of Common Stock. Xx. Xxxx and Xxxxx & Fraade, P.C. and its
named partners intend to vigorously defend against these claims for which
Scantek is potentially liable pursuant to its indemnification of Xx. Xxxx and
counsel. Scantek believes that Xxxxxx'x claims in the New York litigations
against Xx. Xxxx, Xxxxx & Fraade, P.C. and the partners of Xxxxx & Fraade, P.C.
have no merit.
2. Carriage House Capital, on May 13, 2004, docketed with the Superior Court of
New Jersey a judgment against Scantek entered on July 17, 2001 in the Superior
Court for the State of Arizona in the amount of $10,000 plus interest from
November 20, 2000 plus attorneys' fees and costs in the amount of $6,401.50. The
Arizona judgment also provides for the issuance of 5,000 shares of Common Stock
for every week commencing November 20, 2000 in which the judgment remains
unsatisfied, which was later postponed to December 10, 2000 pursuant to an
agreement between Scantek and Carriage House Capital. On July 14, 2004, Carriage
House Capital filed a motion to compel delivery of the stock and payment of
attorneys' fees and costs. As of September 16, 2005, Scantek owed Carriage House
570,000 shares of Common Stock. Scantek intends to pay the $10,000 plus interest
to Carriage House Capital, and to negotiate with Carriage House Capital to
reduce the number of shares of Common Stock to be issued to Carriage House
Capital.
34
3. Judgment entered on October 12, 2000 in favor of Tapecon Inc. in the amount
of $14,563.82 with costs in an amount of $230.56. On December 8, 2000, Tapecon
received $8,176.81 towards the payment of the judgment.
4. Judgment entered on June 25, 2004 in favor of Kamal, Scantek's prior
landlord, in the amount of $34,959.94. Scantek has established a payment plan
with Kamal pursuant to which it has already made two payments.
5. Stursberg & Xxxxx and Xxxxxxxxxx & McGerity seek to recover fees in the
aggregate amount of $70,358.49 for legal services allegedly performed from 1997
through 1999. Opposing counsel tried to have the case put on the calendar for
trial and Scantek opposed said action on the basis of incomplete discovery. On
September 30, 2004, the Court ordered the case to be remanded and reassigned to
a non-commercial part. The parties have recently reached an oral agreement with
respect to the payment of the $70,358.49 sought by Stursberg & Xxxxx and
Xxxxxxxxxx & McGerity. Commencing on January 15, 2005, Scantek shall pay $5,000
to Stursberg & Xxxxx and Xxxxxxxxxx & McGerity and on the fifteenth of each
month thereafter, Scantek shall pay Stursberg & Xxxxx and Xxxxxxxxxx & McGerity
$10,000 until the fees have been paid in full. Scantek has made the $5,000
payment due on January 15, 2005 and the $10,000 payments due through June 15,
2005. Accordingly, Scantek has paid approximately 78% of the money owed to
Stursberg & Xxxxx and Xxxxxxxxxx & McGerity and the amount currently owed is
$15,358.49.
After making the May 15, 2005 payment, Scantek requested an extension of thirty
(30) days with respect to the June 15, 2005 payment and subsequent payments.
Scantek had been orally advised by Xxx Xxxxxxxxxx of Stursberg & Xxxxx and
Xxxxxxxxxx & McGerity that the extension would be granted. However, Scantek was
unable to make the next payment on July 15, 2005, and on July 19, 2005,
Stursberg & Xxxxx and Xxxxxxxxxx & McGerity sent it a notice of default with
respect to the June 15, 2005 and July 15, 2005 payments. Although Scantek made
the payment due on June 15, 2005 on August 18, 2005, it has not made the
remaining payments which were due on July 15, 2005 and August 15, 2005.
Stursberg & Xxxxx and Xxxxxxxxxx & McGerity may enter a judgment with the Clerk
of the Court for $70,358.49, less the payments of $55,000 previously made, plus
compounded interest at the rate of 8% per annum from March 15, 1999.
35
PROMISSORY NOTE
$250,000
December 6, 2004
FOR VALUE RECEIVED, Scantek Medical, Inc., a Delaware corporation with an
address at 0X Xxxx Xxxxx, Xxxxx Xxxxxx, XX 00000 (hereinafter referred to as the
"Payor"), agrees to pay to the order of Life Medical Technologies, Inc., a
Delaware corporation with an address at X.X. Xxx 000, Xxxxxxx, XX 00000
(hereinafter referred to as the "Payee"), on the Maturity Date set forth in
Article "2" of this Promissory Note (the "Note"), unless earlier accelerated in
accordance with the terms of this Note, the principal sum of two hundred fifty
thousand ($250,000) dollars, with interest on the aforesaid amount as calculated
in Article "1" of this Note.
1. Interest.
(A) Interest on the unpaid principal balance shall be accrued and
calculated from the date the loan is received by the Payor to and including the
date of repayment at an interest rate equal to eight (8%) percent per annum.
(B) Payment of the accrued and unpaid interest shall be due and payable
upon payment of the principal balance of this Note pursuant to Article "2" of
this Note.
2. Maturity.
Payment of the principal balance of this Note, together with any unpaid
and accrued interest thereon, shall be due and payable in full on June 5, 2007
(the "Maturity Date").
3. Events of Default.
The term "Event of Default" as used herein shall mean the occurrence of
any one or more of these following events:
(A) The failure of the Payor to make payment on the Maturity Date and
after the Payee has given the Payor ten (10) days written notice of such default
pursuant to Paragraph "(C)" of Article "10" of this Note;
(B) The filing by the Payor of a petition in bankruptcy;
(C) The making of an assignment by the Payor for the benefit of its
creditors;
(D) Consent by the Payor to the appointment of, or possession by, a
custodian for itself or for all or substantially all of its property;
(E) The filing of a petition in bankruptcy against the Payor with the
consent of the Payor;
36
(F) The filing of a petition in bankruptcy against the Payor without the
consent of the Payor, and the failure to have such petition dismissed within one
hundred and eighty (180) days from the date upon which such petition is filed;
(G) Notwithstanding the one hundred and eighty (180) day provision in
Paragraph "(F)" of this Article "3"of this Note, on a petition in bankruptcy
filed against Payor, Payor is adjudicated bankrupt; and
(H) The entry by a court of competent jurisdiction of a final
non-appealable order, judgment or decree appointing, without the consent of the
Payor, a receiver, trustee or custodian for the Payor or for all or
substantially all of the property or assets of the Payor.
4. Remedies Upon Default.
Upon the occurrence of an Event of Default and any time thereafter while
such Event of Default is continuing, the entire unpaid principal balance which
is due pursuant to this Note shall, at the Payee's option, be accelerated and
become and be immediately due and payable without presentment, demand, protest
or further notice of any kind, all of which are expressly waived by the Payor,
except as set forth in Paragraph "(A)" of Article "3" of this Note.
5. Non-Exclusive Remedy.
Any remedy that is set forth in this Note is not exclusive of any remedies
that are provided by law.
6. Liability Upon Default.
The liability of the Payor upon default shall be unconditional and shall
not be in any manner affected by any indulgence whatsoever granted or consented
to by the Payee including, but not limited to, any extension of time, renewal,
waiver or other modification.
7. Exercise of Remedy Upon Default.
No failure on the part of the Payee to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right.
8. Collection Costs.
The Payor agrees to pay all reasonable costs of collection, including
reasonable attorney's fees and costs, which may be paid or incurred by the Payee
in connection with the Payee's exercise of its rights or remedies under this
Note.
37
9. Full Recourse.
Anything in this Note to the contrary notwithstanding, the Payor hereunder
shall be liable on this Note for the full amount of the principal and interest
due pursuant to this Note.
10. Miscellaneous.
(A) Headings. Headings contained in this Note are for reference purposes
only and shall not affect in any way the meaning or interpretation of this Note.
(B) Enforceability. If any provision which is contained in this Note
should, for any reason, be held to be invalid or unenforceable in any respect
under the laws of any jurisdiction, such invalidity or unenforceability shall
not affect any other provision of this Note and this Note shall be construed as
if such invalid or unenforceable provision had not been contained herein.
(C) Notices. Any notice or other communication required or permitted
hereunder shall be sufficiently given if sent by (i) mail by (a) certified mail,
postage prepaid, return receipt requested and (b) first class mail, postage
prepaid (ii) overnight delivery with confirmation of delivery or (iii) facsimile
transmission with an original mailed by first class mail, postage prepaid,
addressed as follows:
To the Payee: Life Medical Technologies, Inc.
X.X. Xxx 000
Xxxxxxx, XX 00000
Attn: Xx. Xxxxxx Xxxxxx
Fax No.: (000) 000-0000
With a copy to: Xxxxxxx, Xxxxxxxxx & Xxxxxxxx, LLP
000 Xxxxxxx Xxxxxxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Attn.: Xxxxx X. Xxxxxxxxx, Esq.
Fax No.: (000) 000-0000
To the Payor: Scantek Medical, Inc.
0X Xxxx Xxxxx
Xxxxx Xxxxxx, XX 00000
Attn: Xx. Xxxxxxxx X. Xxxx
Fax No.: (000) 000-0000
With a copy to: Xxxxx & Fraade, P.C.
000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Attn: Xxxxxxxxx X. Xxxxx, Esq.
Fax No.: (000) 000-0000
38
or in each case to such other address and facsimile number as shall have last
been furnished by like notice. If all of the methods of notice set forth in this
Paragraph "(C)" of this Article "10" of this Note are impossible for any reason,
notice shall be in writing and personally delivered to the aforesaid addresses.
Each notice or communication shall be deemed to have been given as of the date
so mailed or delivered as the case may be; provided, however, that any notice
sent by facsimile shall be deemed to have been given as of the date so sent if a
copy thereof is also mailed by first class mail on the date sent by facsimile.
If the date of mailing is not the same as the date of sending by facsimile, then
the date of mailing by first class mail shall be deemed to be the date upon
which notice is given; provided further, however, that any notice sent by
overnight delivery shall be deemed to have been given as of the date of
delivery.
(D) Governing Law; Disputes. This Note shall in all respects be construed,
governed, applied and enforced in accordance with the laws of the State of New
York applicable to contracts made and to be performed therein, without giving
effect to the principles of conflicts of law. The parties hereby consent to and
irrevocably submit to personal jurisdiction over each of them solely by the
courts of the State of New York in any action or proceeding, irrevocably waive
trial by jury and personal service of any and all process and specifically
consent that in any such action or proceeding brought in the courts of the State
of New York, any service of process may be effectuated upon any of them by
certified mail, return receipt requested, in accordance with Paragraph "(C)" of
this Article "10" of this Note.
(E) Assignment. This Note may not be assigned or transferred by the Payee
without the prior written consent of the Payor.
(F) Construction. Each of the parties hereto hereby further acknowledges
and agrees that (i) each has been advised by counsel during the course of
negotiations and (ii) each counsel has had significant input in the development
of this Note and (iii) this Note shall not, therefore, be construed more
strictly against any party responsible for its drafting regardless of any
presumption or rule requiring construction against the party whose attorney
drafted this Note.
(G) Entire Agreement. This Note and all documents and instruments referred
to herein (i) constitute the entire agreement and supersede all prior agreements
and understandings, both written and oral, among the parties with respect to the
subject matter hereof and thereof, and (ii) are not intended to confer upon any
person other than the parties hereto any rights or remedies hereunder.
(H) Further Assurances. The parties agree to execute any and all such
other further instruments and documents, and to take any and all such further
actions which are reasonably required to effectuate this Note and the intents
and purposes hereof.
(I) Binding Agreement. This Note shall be binding upon and inure to the
benefit of the parties hereto and their heirs, executors, administrators,
personal representatives, successors and assigns.
39
(J) Non-Waiver. Except as otherwise expressly provided herein, no waiver
of any covenant, condition, or provision of this Note shall be deemed to have
been made unless expressly in writing and signed by the party against whom such
waiver is charged; and (i) the failure of any party to insist in any one or more
cases upon the performance of any of the provisions, covenants or conditions of
this Note or to exercise any option herein contained shall not be construed as a
waiver or relinquishment for the future of any such provisions, covenants or
conditions, (ii) the acceptance of performance of anything required by this Note
to be performed with knowledge of the breach or failure of a covenant, condition
or provision hereof shall not be deemed a waiver of such breach or failure, and
(iii) no waiver by any party of one breach by another party shall be construed
as a waiver of any other or subsequent breach.
(K) Modifications. This Note may not be changed, modified, extended,
terminated or discharged orally, but only by an agreement in writing, which is
signed by the Payor and the Payee of this Note.
(L) Severability. The provisions of this Note shall be deemed separable.
Therefore, if any part of this Note is rendered void, invalid or unenforceable,
such rendering shall not affect the validity or enforceability of the remainder
of this Note; provided, however, that if the part or parts which are void,
invalid or unenforceable as aforesaid shall substantially impair the value of
this whole Note to any party, that party may cancel, and terminate the Note by
giving written notice to the other party.
IN WITNESS WHEREOF, the Payor has executed this Note as of the 6th day of
December 2004.
SCANTEK MEDICAL, INC.
By: ________________________________
Xx. Xxxxxxxx X. Xxxx, President
40
EXCLUSIVE DISTRIBUTION AGREEMENT
BETWEEN
SCANTEK MEDICAL, INC.
AND
LIFE MEDICAL TECHNOLOGIES, INC.
AGREEMENT dated as of the _____ day of ____________ (this "Agreement"), by
and between Scantek Medical, Inc. a Delaware corporation (the "Manufacturer")
with an address at 0X Xxxx Xxxxx, Xxxxx Xxxxxx, Xxx Xxxxxx 00000, and Life
Medical Technologies, Inc. a Delaware corporation (the "Distributor") with an
address at X.X. Xxx 000, Xxxxxxx, Xxx Xxxx 00000.
WHEREAS, the Manufacturer is the owner of the Intellectual Property (as
hereinafter defined in Paragraph "C" of Article "2" of this Agreement); and
WHEREAS, the Distributor is desirous of obtaining an exclusive right to
directly distribute the Product (as hereinafter defined in Paragraph "G" of
Article "2" of this Agreement) in the Territory (as hereinafter defined in
Paragraph "I" of Article "2" of this Agreement); and
WHEREAS, the Manufacturer is willing to grant to the Distributor an
exclusive right to directly distribute the Product in the Territory upon the
terms and conditions hereinafter set forth.
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NOW, THEREFORE, in consideration of the mutual covenants herein contained
and for other good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged,
IT IS AGREED:
1. Recitals. The parties hereby adopt as part of this Agreement each of the
recitals which is set forth above in the WHEREAS clauses, and agree that such
recitals shall be binding upon the parties hereto by way of contract and not
merely by way of recital or inducement and such WHEREAS clauses are hereby
confirmed and ratified as being accurate by each party as to itself.
2. Certain Definitions. The following terms as used in this Agreement shall,
unless specifically indicated otherwise in this Agreement, have the following
meanings:
A. "Contract Year" shall mean the one year period commencing upon the
first day of the month (the "Commencement Month") after following the exercise
of the US Option (as defined in the Agreement (the "Definitive Agreement") dated
as of the 3rd day of December 2004 by and between the Manufacturer and the
Distributor). Each subsequent Contract Year shall commence upon the annual
anniversary date of the Commencement Month.
B. "Dollars" shall mean United States Dollars.
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C. "Intellectual Property" shall mean all information with respect to the
Product (i) which is the property of the Manufacturer, (ii) which is necessary
for the marketing and use of the Product including quality control
specifications and procedures used in connection therewith and information and
data with respect to the use of the Technology (as defined hereinafter in
Paragraph "H" of this Article "2" of this Agreement) and the Product, and (iii)
utilized by the Manufacturer in obtaining governmental approvals for the sale of
the Product.
"Intellectual Property" shall include, but shall not be limited to, all of
the following in the United States and worldwide (regardless of whether
presently owned or owned by the Manufacturer in the future): (i) the Trademark
(as hereinafter defined in Paragraph "J" of Article "2" of this Agreement) which
is registered in the United States Patent and Trademark Office, (ii)
servicemarks, (iii) trade names, (iv) trade dress, (v) logos, (vi) copyrights,
(vii) rights of authorship, (viii) inventions, (ix) moral rights, (x) Patents
(as hereinafter defined in Paragraph "F" of this Article "2" of this Agreement),
(xi) applications, registrations and renewals in connection with any of the
foregoing, (xii) database rights, (xiii) rights of publicity, privacy and/or
rights to enforce defamation claims, (xiv) rights under unfair competition and
unfair trade practices laws, (xv) other intellectual and industrial property
rights related thereto, and (xvi) all trade secrets, or other proprietary
rights, currently owned or held or to be owned or held in the future by the
Manufacturer, as well as any and all Technology.
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D. "Knowledge" as used in the Distributor's representations, warranties
and covenants shall mean the actual knowledge of the Distributor's officers or
the constructive knowledge of such officers as if they had preformed a proper
due diligence review of the subject matter. E. "Minimum Product Sales" shall
mean the minimum sales of the Product by the Distributor as specified in Article
"10" of this Agreement.
F. "Patents " shall mean the subject of the Letters Patent of the United
States which are described on Exhibit "A", which is annexed hereto and made a
part hereof and which are filed and which in the future shall be filed in the
United States Patent and Trademark Office.
G. "Product" shall mean the BreastCare(TM)/BreastAlert(TM) Differential
Temperature Sensor/Breast Abnormality Indicator device which is described on
Exhibit "B", which is annexed hereto and made a part hereof.
H. "Technology" shall mean all information which is presently or which
shall in the future be the subject of the Letters Patent of the United States
which are described on Exhibit "A", which is annexed hereto and made a part
hereof. Said Technology shall include, but shall not be limited to, certain
technical trade secrets and business know-how regardless of whether presently
owned or owned in the future by the Manufacturer. In addition to patents granted
in the United States, the Technology may in the future be granted patents which
are owned by the Manufacturer in other countries.
I. "Territory" shall mean the United States.
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J. "Trademark" shall mean information which has been the subject of a
registration which is described on Exhibit "C", which is annexed hereto and made
a part hereof and which registration has been filed and which may in the future
be the subject of a registration or registrations to be filed with the United
States Patent and Trademark Office.
3. Exclusivity.
A. Subject to the terms of this Agreement, including, but not limited to,
the Distributor not being in breach of this Agreement, the Manufacturer hereby
grants to the Distributor during the Term (as hereinafter defined in Article
"13" of this Agreement), a non-assignable, non-transferable exclusive right to
distribute and sell the Product within, and only within, the Territory.
B. The Manufacturer hereby grants to the Distributor within, and only
within, the Territory a license pursuant to the terms and conditions of this
Agreement, during the Term, to use, in connection with the sale, marketing and
distribution of the Product, the Intellectual Property, and all applications
therefore now or hereafter owned by the Manufacturer, the right to make
appropriate reference to the Intellectual Property on or in connection with the
Product and any and all packaging materials, print advertisement, pamphlets,
brochures, displays, letterhead or other sales, marketing and distribution
materials used in connection with the Product. No right or license is granted to
the Distributor to make, manufacture or assemble the Product or to use any
Intellectual Property in connection with any manufacturing process, whether
within or outside the Territory. The Distributor shall use the Intellectual
Property solely in connection with the Product manufactured by the Manufacturer.
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C. For a period of eighteen (18) months after the date of the Exercise
Notice given pursuant to the terms of Paragraph "B" of Article "4" of the
Definitive Agreement, the Distributor shall not, directly or indirectly, sell,
market or distribute any product other than the Product, regardless of whether
or not such product competes with the Product.
After said eighteen (18) month period, the Distributor shall not, directly
or indirectly, sell, market or distribute any products which, directly or
indirectly, compete with any product of the Manufacturer that screens for, or is
a detection modality for prostate, cancer, kidney disease and strokes or any
product which is based upon the technology of temperature differentials.
D. The Distributor shall purchase the Product solely from the
Manufacturer.
E. The Product shall be manufactured by the Manufacturer. The Distributor
shall not attempt, directly or indirectly, to manufacture the Product.
F. The Manufacturer shall not, directly or indirectly, sell the Product in
the United States. For the purposes of this Paragraph "F" of this Article "3" of
this Agreement, a sale of the Product made from the United States to a buyer
outside of the United States shall not be deemed as directly or indirectly
selling the Product in the United States. The Manufacturer hereby agrees that
any distribution agreement which it signs with a distributor outside the United
States shall restrict such distributor to a specific territory, and shall
provide that such distributor is prohibited from selling the Product outside of
such specific territory.
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4. Payments For The License. The purchase price for the license shall be one
million six hundred thousand ($1,600,000) dollars which shall be paid and
payable as follows:
A. Four hundred fifty thousand ($450,000) dollars which has previously
been paid to the Manufacturer pursuant to the terms of the Definitive Agreement.
B. The balance of one million one hundred fifty thousand ($1,150,000)
dollars which shall be payable in seven (7) equal monthly installments,
commencing thirty (30) days after the date of the Exercise Notice, provided,
however, that if for any reason the Manufacturer has not repaid any loans made
by the Distributor or any of its affiliates to the Manufacturer (the "Loans"),
including, but not limited to, the Loan (as defined in Paragraph "A" of Article
"2" of the Definitive Agreement), in full to Life Medical, then the unpaid
principal and/or accrued and unpaid interest on the Loans shall be deducted from
the one million one hundred fifty thousand ($1,150,000) due pursuant to this
Paragraph "B" of this Article "4" of this Agreement, and the remainder shall be
payable in seven (7) equal monthly installments; provided, however, that if any
entity affiliated with Xxxxxx Xxxxxx ("Xxxxxx") and/or the Distributor (the
"Entity") raises funds (the "Funds") in connection with the Product, including,
but not limited to, (i) pursuant to an initial or subsequent public offerings of
its securities and/or (ii) through receipt of one or more investments,
including, but not limited to, debt or equity, then the Manufacturer shall
receive upon the receipt by the Entity of the Funds and after a deduction of the
first five hundred thousand ($500,000) dollars of the Funds the lesser of (a)
eighty (80%) percent of the gross Funds raised or (b) the entire balance of the
one million one hundred fifty thousand ($1,150,000) dollars due to the
Manufacturer, subject to a deduction of unpaid principal and/or accrued and
unpaid interest on any Loans which have not been repaid in full pursuant to this
Paragraph "B" of this Article "4" of this Agreement. If the Manufacturer does
not receive said entire balance, then said eighty (80%) percent shall be applied
ratably to the remaining monthly installments. For example, if the Entity has
raised $1,500,000 in equity investments at a time when two (2) monthly
installments have been paid, then the Manufacturer shall receive $800,000
(determined by multiplying $1,000,000 ($1,500,000 minus $500,000) by 80%) and
the Manufacturer shall apply $160,000 (determined by dividing $800,000 by 5 (the
number of unpaid monthly installments)) to reduce each unpaid monthly
installment to $18,571.42 (determined by subtracting $160,000 from $178,571.42
(the amount of each monthly payment to be made by the Distributor (determined by
dividing $1,250,000 by 7)).
47
5. Equity Interest to the Manufacturer.
A. The Distributor shall issue to the Manufacturer, such equity interest
in itself which shall result in the Manufacturer owning fifteen (15%) percent of
the issued and outstanding common stock of the Distributor. The Distributor
shall have the right to create two (2) classes of ownership interest, with one
such class being non-voting stock. The Distributor may, at its discretion, issue
to the Manufacturer non-voting stock; provided, however, that the Manufacturer
shall receive fifteen (15%) percent of the total of all voting and non-voting
common stock of the Distributor issued and outstanding.
B. The Manufacturer's fifteen (15%) percent ownership interest in the
Distributor shall be a non-voting interest until two (2) years after the date
upon which the Distributor has its securities trading or quoted in the United
States or any foreign country, including, but not limited to, Nasdaq National
Market, SmallCap Market, OTC Bulletin Board, "pink sheets", London Stock
Exchange, AIM, Borsa Italiana SPA, Bourse de Montreal, Bolsa Mexicana de Valores
or Tokyo Stock Exchange (a "Public Company"). If the Manufacturer is issued
voting stock in the Distributor, it agrees not to vote said stock until two (2)
years after the Distributor becomes a Public Company. After said two (2) year
period, the Manufacturer's fifteen (15%) percent membership interest in the
Distributor shall become a voting interest.
C. Commencing upon the date upon which the Distributor becomes a Public
Company and continuing for a period of two (2) years after said date, the
Manufacturer shall not sell, transfer or otherwise dispose of its ownership
interest in the Distributor; provided, however, that the Manufacturer may sell,
transfer or otherwise dispose of its ownership interest in the Distributor
pursuant to a private transaction pursuant to the Securities Act of 1933, as
amended. For a period of fourteen (14) months after the end of the aforesaid two
(2) year period, the Manufacturer may only sell, transfer or otherwise dispose
of seven and one-half (7.5%) percent of its initial ownership interest in the
Distributor per month on a cumulative basis. For example, if the Manufacturer's
15% ownership interest is equal to 100,000 shares of common stock of the
Distributor, the Manufacturer, after said two (2) year period, could sell 7,500
shares per month (determined by multiplying 100,000 by 7.5%); provided, however,
that if, the Manufacturer did not sell any shares for two months, then in the
following month it could sell up to 22,500 shares (determined by multiplying
7,500 by 3). At the end of the fourteen (14) month period there shall be no
restriction on sales by the Manufacturer.
48
D. The Distributor agrees that the Manufacturer's fifteen (15%) percent
ownership interest in it shall not under any circumstances be diluted.
Accordingly, the Distributor covenants and agrees that the Manufacturer's shares
(the "Shares") shall be increased to prevent any dilution if the Manufacturer's
fifteen (15%) percent ownership interest would be diluted upon the happening of
any event with respect to the Distributor, including, but not limited to, the
following:
i. The issuance of common stock and the issuance of common stock
upon the conversion or exercise of stock options, warrants or other rights to
acquire shares of common stock of the Distributor (collectively referred to as
the "Distributor's Common Stock");
ii. A recapitalization of the outstanding shares of the
Distributor's Common Stock which has the effect of changing the percentage which
the Shares have in relation to the total number of issued and outstanding shares
of the Distributor's Common Stock;
iii. The issuance of the Distributor's Common Stock as a dividend or
other distribution on any class of stock of the Distributor;
iv. The merger, reorganization or consolidation of the Distributor
with, or into, another entity or entities, regardless of whether or not the
Distributor is the surviving entity.
49
6. Clinical Study.
A. The Manufacturer is involved in a clinical study consisting of at least
two hundred (200) patients (the "Clinical Study") being conducted by Xx.
Xxxxxxxx Xxxxxxxx ("Xx. Xxxxxxxx"), or the doctors or Epidemiologist working
with Xx. Xxxxxxxx. Pursuant to Paragraphs "A" and "B" of Article "3" of the
Definitive Agreement, an aggregate of at least two hundred thousand ($200,000)
dollars and not more than two hundred twenty five thousand ($225,000) dollars
shall be paid by the Distributor towards the completion of the Clinical Study.
B. If the costs of the Clinical Study exceed an aggregate of two hundred
fifty thousand ($250,000) dollars, as set forth in Paragraph "B" of Article "3"
of the Definitive Agreement, the Manufacturer shall bear all costs beyond that
amount, and the Distributor shall not be responsible to pay more than the two
hundred twenty five thousand ($225,000) dollars set forth in Paragraphs "A" and
"B" of Article "3" of the Definitive Agreement.
7. Record Keeping, Reports.
A. Commencing January 1, 2007, the Distributor shall, no later than
forty-five (45) days after the end of each fiscal quarter, furnish the
Manufacturer with a detailed statement, certified to be true and correct by both
its president and treasurer, respectively, or another two executive officers,
(provided, however that the president and the treasurer or such other executive
officers shall not be the same individual) setting forth for each month of said
quarter, all sales of units of the Product made in the Territory, any trade
discounts and allowances, and all credits for returned units of the Product and
other similar adjustments together with copies of documents which support the
detailed statement.
B. The Distributor shall maintain true, complete, and correct books of
account and records of all transactions within the scope of this Agreement, in
accordance with generally accepted accounting principles, to enable the
Manufacturer to ascertain all amounts sold pursuant to this Agreement. The
Manufacturer and/or its duly authorized representatives shall have the right,
during regular business hours, on reasonable notice, for the duration of this
Agreement and for three (3) years thereafter, to examine said books of account
and records and all other documents (including, but not limited to, sales
invoices) and material in the possession or under the control of the Distributor
with respect to this Agreement and its activities pursuant to this Agreement;
and the Manufacturer shall have free and full access thereto for said purposes
and for the purpose of making extracts therefrom. The Manufacturer shall have
the right at such inspection to examine all information pertinent to this
Agreement dating from the commencement date of this Agreement.
50
C. If, upon an examination, it is revealed that there is due and owing by
the Distributor an amount which exceeds, by two (2%) percent or more, the amount
which was paid to the Manufacturer with respect to any Contract Year, then the
entire cost of the examination shall be borne by the Distributor. For example,
if the Manufacturer were paid one million ($1,000,000) dollars, and the audit
reveals that the Distributor owes the Manufacturer an additional forty thousand
($40,000) dollars (or four (4%) percent of the one million ($1,000,000) dollars
which the Manufacturer was paid), the Distributor shall bear the entire cost of
the examination.
8. Payment for Product.
A. The Distributor shall pay the aggregate sum of the Wholesale Price (as
defined in Paragraph "C" of this Article "8" of this Agreement) with respect to
the Product it orders no later than thirty (30) days after delivery of the
shipment.
B. Unless otherwise advised in writing by the Distributor, the
Manufacturer shall ship the units of the Product to the Distributor's principal
place of business. The units of the Product shall be shipped F.O.B. Point of
Origin which means that the Distributor shall obtain title to the Product and be
responsible for the risk of loss, customs clearing, transportation, the cost of
shipment and insurance of the Products and all other costs after the
Manufacturer has delivered the Product to the location from which it shall ship
the Product to the Distributor (the "Point of Origin"). The Distributor
acknowledges that it is responsible for the risk of loss, customs clearing,
transportation, the cost of shipment and insurance of the Products and all other
costs after the Manufacturer has delivered the Product to the Point of Origin.
The Distributor further acknowledges that title to the Product has passed to it
upon delivery of the Product to the Point of Origin.
C. The Distributor shall pay to the Manufacturer the price with respect to
each unit of the Product purchased by the Distributor as hereinafter set forth
in this Paragraph "C" of this Article "8" of this Agreement (the "Wholesale
Price"). The Wholesale Price per Product unit with respect to each order placed
by the Distributor shall be equal to ($*).
* - Deleted due to confidentiality.
51
i. There shall be an increase every twelve months, commencing twelve
months after the first day of the calendar month following the date of the
Exercise Notice (the "Commencement Date"), of the Wholesale Price per Product
unit based upon a Wholesale Price of ($*), by an amount which is equal to the
increase in the cost of living (the "COL Index") from the average for the twelve
months immediately preceding the Commencement Date (the "COL Year") to the
average for the twelve (12) month period immediately preceding the date in the
year on which such Wholesale Price shall be payable (each such year is
hereinafter referred to as the "Determination Year"). In order to determine the
average for the COL Year or for the Determination Year, the cost of living for
each of the twelve months in the COL Year or in the Determination Year, as the
case may be, shall be added and the resultant figure shall be divided by 12. All
cost of living computations shall be based upon the Consumer Price Index for all
Urban Consumers for New York, Northeast New Jersey for "all items" of the Bureau
of Labor Statistics of the United States Department of Labor (the "Index"), or
if, at the time a determination must be made, the Index is no longer published
or issued, such other index as is generally recognized and accepted for similar
determinations. The amount of the increase shall be computed by multiplying the
($*) Wholesale Price by a fraction, the numerator of which is the average cost
of living for the Determination Year and the denominator of which is the average
cost of living for the COL Year. By way of illustration, assume the following:
(i) the average cost of living for the COL Year is one hundred ($100) dollars
and (ii) the average cost of living for the Determination Year is one hundred
and five ($105) dollars. In this example, the Wholesale Price per Product unit
which shall be payable for the year shall be ($*), which is the amount arrived
at by multiplying ($*) by one hundred and five (105%) percent (the ratio of the
average cost of living for the Determination Year to the average cost of living
for the COL Year: one hundred five ($105) dollars divided by one hundred ($100)
dollars).
* - Deleted due to confidentiality.
52
ii. The Wholesale Price as adjusted by Subparagraph "i." of this
Paragraph "C" of this Article "8" of this Agreement shall be reduced by
twenty-five cents ($.25) for each order in excess of five hundred thousand
(500,000) units of the Product.
9. Royalty. Intentionally deleted.
10. Minimum Product Sales.
A. The Distributor shall be required to meet the following minimum sales
requirements commencing on January 1, 2009; (the "Sales Requirement Date":
0-18 months from the Sales Requirement Date $*
19-24 months from the Sales Requirement Date $* for the 6 month period
25-36 months from the Sales Requirement Date $* for the 12 month period
37-48 months from the Sales Requirement Date $* for the 12 month period
After 48 months from the Sales Requirement Date $* (for each subsequent 12
month period)
* - Deleted due to confidentiality.
53
There shall be an increase every twelve months, commencing with the twelve
(12) month period of 61 to 72 months from the Sales Requirement Date of the
Minimum Sales Requirement, by an amount which is equal to the increase in the
cost of living (the "COL Index") from the average for the twelve month period
commencing with the first day of the 49th month from the Sales Requirement Date
and terminating with the last day of the 60th month after the Sales Requirement
Date (the "COL Year") to the average for each twelve (12) month period
immediately preceding the date in the year in which such adjusted Minimum
Product Sales requirement must be met (each such year is hereinafter referred to
as the "Determination Year"). In order to determine the average for the COL Year
or for the Determination Year, the cost of living for each of the twelve months
in the COL Year or in the Determination Year, as the case may be, shall be added
and the resultant figure shall be divided by 12. All cost of living computations
shall be based upon the Consumer Price Index for all Urban Consumers for New
York, Northeast New Jersey for "all items" of the Bureau of Labor Statistics of
the United States Department of Labor (the "Index"), or if, at the time a
determination must be made, the Index is no longer published or issued, such
other index as is generally recognized and accepted for similar determinations.
The amount of the increase shall be computed by multiplying the ($*) Minimum
Product Sales requirement to be met after forty-eight (48) months after the date
of execution of this Agreement by a fraction, the numerator of which is the
average cost of living for the Determination Year and the denominator of which
is the average cost of living for the COL Year. By way of illustration, assume
the following: (i) the average cost of living for the
* - Deleted due to confidentiality.
54
COL Year is one hundred ($100) dollars and (ii) the average cost of living for
the Determination Year is one hundred and five ($105) dollars. In this example,
the Minimum Product Sales requirement which must be met for the year shall be
($*), which is the amount arrived at by multiplying ($*) by one hundred five
(105%) percent (the ratio of the average cost of living for the Determination
Year to the average cost of living for the COL Year: one hundred five ($105)
dollars divided by one hundred ($100) dollars).
B. The Distributor shall not be required to meet the Minimum Sales
Requirements for any given period in which the Manufacturer is (i) not in
compliance with the representations, warranties and covenants set forth in
Paragraphs "E", "F" and "G" of Article "11" of this Agreement or (ii) unable to
timely deliver the Distributor's orders which prevents the Distributor from
meeting the Minimum Sales Requirement.
11. The Manufacturer's Representations, Warranties and Covenants. The
Manufacturer represents, warrants, and covenants to the Distributor that:
A. Corporate Status. The Manufacturer is a corporation with all of the
requisite power and authority to carry on its businesses as presently conducted
in all jurisdictions where presently conducted.
* - Deleted due to confidentiality.
55
B. Authority. The Manufacturer has the full right, power and legal
capacity to enter into this Agreement and to consummate the transactions
contemplated hereby. This Agreement constitutes the valid and legally binding
obligation of the Manufacturer, enforceable in accordance with its terms and
conditions. The execution and delivery of this Agreement by the Manufacturer and
the consummation by it of the transactions contemplated hereby have been duly
approved and authorized by all necessary action of the Manufacturer's Board of
Directors, and no further authorization shall be necessary on the part of the
Manufacturer for the performance and consummation by the Manufacturer of the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement in accordance with its terms does not and shall not require
approval, consent or authorization of any third party, including any
governmental agency or authority or any political subdivision thereof.
C. Compliance with the Law and Other Instruments. The business and
operations of the Manufacturer have been and are being conducted in accordance
with all applicable laws, rules, and regulations of all authorities which affect
the Manufacturer or its properties, assets, businesses or prospects. The
performance of this Agreement shall not result in any breach of, or constitute a
default under, or result in the imposition of any lien or encumbrance upon any
property of the Manufacturer or cause an acceleration under any arrangement,
agreement or other instrument to which the Manufacturer is a party or by which
any of its assets are bound. The Manufacturer has performed all of its
obligations which are required to be performed by it pursuant to the terms of
any such agreement, contract, or commitment.
56
D. Intellectual Property. The Manufacturer is the sole and exclusive owner
of the Intellectual Property and has the sole and exclusive right to license the
use thereof to the Distributor free and clear of any lien, encumbrance or any
other restriction, except as set forth on Exhibit "D". The Manufacturer has no
knowledge that any Product or any of the Intellectual Property infringes on any
trademark, trade name, servicemark, copyright or patent or any trade secret or
other proprietary right of any other person. The Manufacturer does not know or
have any reason to believe that there are any claims of any third parties with
respect to the use of any of the Intellectual Property within the Territory,
except as set forth on Exhibit "E".
E. Compliance with Standards. The Manufacturer is currently in compliance
with, and shall remain compliant with, Good Manufacturing Practice standards and
with the Food and Drug Administration's filing requirements, if any, with
respect to the Product.
F. Right to Use. The Manufacturer has not granted and shall not grant,
directly or indirectly, to any other person any right to use any right or
license to use the Intellectual Property within the Territory.
G. Right to Distribute. The Manufacturer has not granted and shall not,
during the Term, grant, directly or indirectly, to any other person any right
(whether current, future, contingent or otherwise) to sell the Product in or
into the Territory.
57
H. Litigation. Except as set forth on Exhibit "E", there are no legal,
administrative, arbitration, or other proceeding or governmental investigations
adversely affecting the Manufacturer or its properties, assets or businesses, or
with respect to any matter arising out of the conduct of the Manufacturer's
business pending or to its knowledge threatened, by or against, any officer or
director of the Manufacturer in connection with its affairs, whether or not
covered by insurance. Except as set forth on Exhibit "E", neither the
Manufacturer nor its officers or directors are subject to any order, writ,
injunction, or decree of any court, department, agency, or instrumentality,
affecting the Manufacturer.
I. No Approval. No approval of any third party including, but not limited
to, any governmental authority is required in connection with the consummation
of the transactions set forth in this Agreement.
J. Survival. The covenants, representations and warranties made by the
Manufacturer in or in connection with this Agreement shall survive the execution
and delivery of this Agreement and shall continue in full force and effect
during the Term and for two (2) years after the expiration of the Term, it being
agreed and understood that each of such covenants, representations and
warranties is of the essence to this Agreement and the same shall be binding
upon the Manufacturer and inure to the Distributor, its successors and assigns.
K. Complete Disclosure. The Manufacturer has no knowledge that any
covenant, representation or warranty of the Manufacturer which is contained in
this Agreement or in a writing furnished or to be furnished pursuant to this
Agreement contains or shall contain any untrue statement of a material fact,
omits or shall omit to state any material fact which is required to make the
statements which are contained herein or therein, not misleading.
58
L. Notification of an Event. If, during the Term, any event occurs or any
event known to the Manufacturer relating to or affecting the Manufacturer shall
occur as a result of which (i) any provision of this Article "11" of this
Agreement at that time shall include an untrue statement of a fact, or (ii) this
Article "11" of this Agreement shall omit to state any fact necessary to make
the statements herein, in light of the circumstances under which they were made,
not misleading, the Manufacturer shall immediately notify the Distributor
pursuant to Paragraph "C" of Article "28" of this Agreement.
M. No Defense. It shall not be a defense to a suit for damages for any
misrepresentation or breach of a covenant, representation or warranty that the
Distributor knew or had reason to know that any covenant, representation or
warranty in this Agreement contained untrue statements.
12. The Distributor's Representations, Warranties and Covenants. The Distributor
represents, warrants and covenants to the Manufacturer as follows:
A. Corporate Status. The Distributor is a corporation with all of the
requisite power and authority to carry on its businesses as presently conducted
in all jurisdictions where presently conducted.
B. Authority. The Distributor has the full right, power and legal capacity
to enter into this Agreement and to consummate the transactions contemplated
hereby. This Agreement constitutes the valid and legally binding obligation of
the Distributor enforceable in accordance with its terms and conditions. The
execution and delivery of this Agreement by the Distributor and the consummation
by it of the transactions contemplated hereby have been duly approved and
authorized by all necessary action of the Distributor's Board of Directors, and
no further authorization shall be necessary on the part of the Distributor for
the performance and consummation by the Distributor of the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
in accordance with its terms does not and shall not require approval, consent or
authorization of any third party, including any governmental agency or authority
or any political subdivision thereof.
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C. Compliance with the Laws and Other Instruments. The business and
operations of the Distributor have been and are being conducted in accordance
with all applicable laws, rules, and regulations of all authorities which affect
the Distributor or its properties, assets, businesses or prospects. The
performance of this Agreement shall not result in any breach of, or constitute a
default under, or result in the imposition of any lien or encumbrance upon any
property of the Distributor or cause an acceleration under any arrangement,
agreement or other instrument to which the Distributor is a party or by which
any of its assets are bound. The Distributor has performed all of its
obligations which are required to be performed by it pursuant to the terms of
any such agreement contract, or commitment.
D. Right to Distribute. The Distributor shall not grant, directly or
indirectly, to any other person any right to use any right or license to use any
Intellectual Property within the Territory.
E. Litigation. There are no legal, administrative, arbitration, or other
proceeding or governmental investigations adversely affecting the Distributor or
its properties, assets or businesses, or with respect to any matter arising out
of the conduct of the Distributor's business pending or to its knowledge
threatened, by or against, any officer or director of the Distributor in
connection with its affairs, whether or not covered by insurance. Neither the
Distributor nor its officers or directors are subject to any order, writ,
injunction, or decree of any court, department, agency, or instrumentality,
affecting the Distributor.
F. No Approval. No approval of any third party including, but not limited
to, any governmental authority is required in connection with the consummation
of the transactions set forth in this Agreement.
G. Survival. The covenants, representations and warranties made by the
Distributor in or in connection with this Agreement shall survive the execution
and delivery of this Agreement and shall continue in full force and effect
during the Term and for two (2) years after the expiration of the Term, it being
agreed and understood that each of such covenants, representations and
warranties is of the essence of this Agreement and the same shall be binding
upon the Distributor and inure to the Manufacturer, its successors and assigns.
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H. Complete Disclosure. The Distributor has no knowledge that any
covenant, representation or warranty of the Distributor which is contained in
this Agreement or in a writing furnished or to be furnished pursuant to this
Agreement contains or shall contain any untrue statement of a material fact,
omits or shall omit to state any material fact which is required to make the
statements which are contained herein or therein, not misleading.
I. Notification of an Event. If, during the Term, any event occurs or any
event known to the Distributor relating to or affecting the Distributor shall
occur as a result of which (i) any provision of this Article "12" of this
Agreement at that time shall include an untrue statement of a fact, or (ii) this
Article "12" of this Agreement shall omit to state any fact necessary to make
the statements herein, in light of the circumstances under which they were made,
not misleading, the Distributor shall immediately notify the Manufacturer
pursuant to Paragraph "C" of Article "28" of this Agreement.
J. No Defense. It shall not be a defense to a suit for damages for any
misrepresentation or breach of a covenant, representation or warranty that the
Manufacturer knew or had reason to know that any covenant, representation or
warranty in this Agreement contained untrue statements.
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13. Term. Subject to the provisions of Article "17" of this Agreement, the Term
of this Agreement shall be perpetual.
14. Capitalization of the Distributor.
A. The capitalization of the Distributor shall be at least two million
($2,000,000) dollars on the date upon which the final monthly installment (the
"Final Installment Date") with respect to the purchase price for the license is
due and payable as set forth in Paragraph "B" of Article "4" of this Agreement;
provided, however, that of said two million ($2,000,000) dollars, one million
six hundred thousand ($1,600,000) dollars can be used to pay the purchase price
for the license as set forth in Article "4" of this Agreement.
B. The Distributor shall advise the Manufacturer that it has obtained the
capitalization required pursuant to Paragraph "A" of this Article "14" of this
Agreement.
C. If, on the Final Installment Date, the Distributor fails to have
obtained the two million ($2,000,000) dollars required pursuant to Paragraph "A"
of this Article "14" of this Agreement, this Agreement shall terminate and be
null and void upon the Distributor's receipt of written notice from the
Manufacturer and failure to cure as set forth in Paragraph "A" of Article "17"
of this Agreement.
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D. The Distributor's capitalization shall be utilized exclusively for
working capital activities in the Distributor's sole and absolute discretion and
sales and marketing activities with respect to the Product, except as otherwise
provided in Paragraph "A" of this Article "14" of this Agreement.
15. Warranties.
A. All units of the Product delivered to the Distributor pursuant to this
Agreement shall be of good and merchantable quality, free from defects in
material and workmanship and reasonably fit for their intended purpose.
B. THE MANUFACTURER HEREBY DISCLAIMS ANY REPRESENTATIONS, WARRANTIES AND
GUARANTIES WITH RESPECT TO UNITS OF THE PRODUCT PURCHASED HEREUNDER, WHETHER
WRITTEN, ORAL, IMPLIED OR INFERRED BY TRADE, CUSTOM OR PRACTICE, INCLUDING,
WITHOUT LIMITATION, IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE, EXCEPT AS PROVIDED IN PARAGRAPH "A" OF THIS ARTICLE "15" OF
THIS AGREEMENT. THE MANUFACTURER SHALL NOT BE LIABLE UNDER ANY CIRCUMSTANCES FOR
DAMAGES OF ANY KIND, WHETHER DIRECT, CONSEQUENTIAL OR OTHERWISE RELATING TO THE
PERFORMANCE OF ANY UNIT OF THE PRODUCT OR BY ANY FAILURE OF THE MANUFACTURER. IN
NO EVENT SHALL THE MANUFACTURER'S LIABILITY TO ANY USER OF THE PRODUCT EXCEED
THE PURCHASE PRICE FOR THAT PRODUCT PURSUANT TO THIS AGREEMENT.
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C. The Distributor shall inspect the units of the Product within seven (7)
days after delivery of the shipment containing such units of the Product. If the
Distributor, prior to the expiration of such seven (7) day period rejects any
units of the Product because such units of the Product do not conform to any
agreed upon specifications, the Manufacturer may substitute a like quantity of
conforming units of the Product. The Distributor may reject any shipment of
non-conforming units of the Product only within seven (7) days after delivery of
such shipment, by notice to the Manufacturer, pursuant to Paragraph "C" of
Article "28" of this Agreement, stating the reason for rejection with
specificity. Failure to timely reject or give proper notice of rejection shall
be deemed to constitute acceptance of such shipment. Properly rejected units of
the Product shall, in the Manufacturer's sole and absolute discretion, to be
exercised by written notice pursuant to Paragraph "C" of Article "28" of this
Agreement, either (i) be returned to the Manufacturer at the Manufacturer's
expense or (ii) be destroyed by the Distributor at the Manufacturer's expense.
D. If any shipping date is specified, such date represents a good faith
estimate by the Manufacturer. In no event shall the Manufacturer be responsible
for a delay in shipment or for damages or losses attributable to any such delay.
E. The Distributor may not cancel or assign any order given by it to the
Manufacturer.
F. Non delivery or default by the Manufacturer as to any shipment shall
not relieve the Distributor from its obligation to accept and pay for any
subsequent or prior installment.
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16. Force Majeure. Neither the Manufacturer nor the Distributor shall be
responsible for failure or delay in performing any of its respective obligations
pursuant to this Agreement, including, but not limited to, the provisions of
Article "10" of this Agreement, due to causes beyond its control, including, but
not limited to, fire, storm, flood, earthquake, explosion, accident, acts of a
public enemy, war (whether or not declared), rebellion, insurrection, sabotage,
acts of terrorism, epidemic, quarantine restrictions, labor disputes or
controversies, labor shortages, transportation embargoes or failures or delays
in transportation, fuel or energy shortages, power interruptions or failures,
acts of God, acts, rules, regulations, orders or directives of any government or
any political subdivision, agency or instrumentality thereof, or the order of
any court or regulatory or arbitral body of competent jurisdiction, including,
but not limited to, any injunction entered against either the Manufacturer or
the Distributor, as the case may be, or their respective suppliers enjoining it
or them from manufacturing, selling or distributing the Product.
17. Termination.
A. Notwithstanding anything in this Agreement to the contrary, the
Manufacturer shall have the right to terminate this Agreement in accordance with
the provisions of this Article "17" of this Agreement if, the Distributor shall
at any time commit any of the following breaches of this Agreement or of the
Definitive Agreement or any of the following defaults in the performance of any
of its obligations pursuant to this Agreement or pursuant to the Definitive
Agreement unless within fifteen (15) calendar days after receipt of written
notice of such default in accordance with Paragraph "C" of Article "28" of this
Agreement the Distributor cures such default:
i. The Distributor's obligation to pay the purchase price for the
license as set forth in Paragraph "B" of Article "4" of this Agreement;
ii. The Distributor's obligation with respect to the Manufacturer's
ownership interest in the Distributor as set forth in Article "5" of this
Agreement;
iii. Intentionally Deleted;
iv. The Distributor's obligation to submit quarterly reports as set
forth in Article "7" of this Agreement;
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v. The Distributor's obligation to pay the Wholesale Price as set
forth in Paragraph "A" of Article "8" of this Agreement;
vi. Intentionally deleted;
vii. The Distributor's obligation to meet the Minimum Sales
Requirements as set forth in, and subject to the provisions of, Article "10" of
this Agreement;
viii. Intentionally deleted;
ix. The Distributor's obligations with respect to the use of the
Patents and the Trademark as set forth in Article "21" of this Agreement;
x. The Distributor's obligations not to disclose Confidential
Information as set forth in Article "23" of this Agreement; provided, however,
that if the Distributor has taken reasonable measures to protect the
Confidential Information from any accidental, unauthorized or premature,
disclosure or destruction by any of its Agents, then such disclosure or
destruction of the Confidential Information by its Agents shall not be deemed a
default pursuant to this Paragraph "A" of this Article "17" of this Agreement;
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xi. The Distributor's obligations not to compete as set forth in
Paragraph "B" of Article "24" of this Agreement; provided, however, that if the
Distributor has taken all reasonable measures to prevent any of its Agents from
breaching the provisions of Paragraph "B" of Article "24" of this Agreement,
then such breach by its Agents shall not be deemed a default pursuant to this
Paragraph "A" of this Article "17" of this Agreement;
xii. The Distributor's obligation to obtain the Manufacturer's
written consent of a transfer as set forth in Paragraph "E" of Article "28" of
this Agreement; and
xiii. Cantor's obligations not to compete as set forth in Paragraph
"B" of Article "24" of this Agreement, and not to disclose Confidential
Information as set forth in Article "6" of the Definitive Agreement; provided,
however, that if the Distributor has taken all reasonable measures to prevent
any of its Agents from breaching the provisions of Paragraph "B" of Article "24"
of this Agreement, then such breach by its Agents shall not be deemed a default
pursuant to this Paragraph "A" of this Article "17" of this Agreement.
The right of the Manufacturer to terminate this Agreement pursuant to this
Article "17" of this Agreement or otherwise shall be in addition to and not
exclusive of any other right or remedy that may exist at law, equity or
otherwise, that the Manufacturer may possess pursuant to this Agreement, all of
which rights and remedies shall survive such termination.
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B. Notwithstanding the provisions of Paragraph "A" of this Article "17" of
this Agreement, the Manufacturer shall have the right to terminate this
Agreement without prior notice to the Distributor if:
i. Any material representation or warranty of the Distributor
contained in this Agreement is untrue when made
ii. The Distributor admits in writing its inability to pay its debts
as they mature;
iii. The Distributor files a petition in bankruptcy;
iv. The Distributor makes an assignment for the benefit of its
creditors;
v. The Distributor consents to the appointment of, or possession by,
a custodian for itself or for all or substantially all of its property;
vi. A petition in bankruptcy is filed with the written consent of
the Distributor;
vii. The Distributor fails to have a petition in bankruptcy which
was filed without its consent dismissed within one hundred twenty (120) days
from the date upon which such petition was filed;
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viii. Notwithstanding the one hundred twenty (120) day period set
forth in Subparagraph "vii" of this Paragraph "B" of this Article "17" of this
Agreement, the Distributor is adjudicated bankrupt on a petition in bankruptcy
filed against it;
ix. A court of competent jurisdiction enters a final non-appealable
order, judgment or decree appointing, without the consent of the Distributor, a
receiver, trustee or custodian for the Distributor or for all or substantially
all of the property or assets of the Distributor; and
x. A court of competent jurisdiction enters a final judgment for the
payment of money against the Distributor, which judgment the Distributor shall
not discharge (or provide for such discharge) in accordance with its terms
within one hundred twenty (120) days of the date of entry thereof, or procure a
stay of execution thereof within one hundred twenty (120) days from the date of
entry thereof and, within such one hundred twenty (120) day period, or such
longer period during which execution of such judgment shall have been stayed,
appeal therefrom and cause the execution thereof to be stayed during such
appeal.
C. Except as otherwise set forth in Paragraph "B" of Article "10" of this
Agreement, if the Distributor fails to achieve the Minimum Product Sales, the
Manufacturer may, in its sole and absolute discretion, to be exercised by
written notice to the Distributor pursuant to Paragraph "C" of Article "28" of
this Agreement, either (i) terminate this Agreement (ii) decrease the geographic
scope of the Territory, or (iii) modify the grant of distribution rights from
exclusive to non-exclusive.
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D. If upon termination pursuant to this Article "17" of this Agreement,
the Distributor has in its possession or control any units of the Product, the
Manufacturer, in its sole and absolute discretion, shall either (i) allow the
Distributor to sell said units of the Product remaining in its possession or
control for a period of ninety (90) days after termination or (ii) repurchase
said units of the Product remaining in the Distributor's possession or control
from the Distributor at the price paid by the Distributor for said units of the
Product which the Distributor shall ship, at the Distributor's sole expense, to
the Manufacturer. If the Manufacturer allows the Distributor to sell the units
of the Product remaining in its possession or control, then after said ninety
(90) day period, if the Distributor has in its possession or control any
remaining units of the Product, the Distributor shall, at its sole expense,
arrange to ship any such units of the Product to the Manufacturer and the
Manufacturer shall have no obligation to pay for the units of the Product
returned to it.
All units of the Product shipped to the Manufacturer shall be shipped
F.O.B. Destination which means that the Distributor shall retain title to the
Product and be responsible for the risk of loss, customs clearing,
transportation, the cost of shipment and insurance of the Product and all other
costs until the Manufacturer has received the shipment at its principal place of
business (the "Point of Destination"). The Distributor acknowledges that it is
responsible for the risk of loss, customs clearing, transportation, the cost of
shipment and insurance of the Product and all other costs until the Manufacturer
has received the shipment at the Point of Destination. The Distributor further
acknowledges that title to all the Product shall remain with it upon shipping
F.O.B. Destination until the Product is received at the Point of Destination by
the Manufacturer.
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18. Effect of Termination. The termination of this Agreement for any reason
shall not release any party from any liability, obligation or agreement that,
pursuant to any provision of this Agreement, is intended to survive or be
performed after the termination of this Agreement.
19. Inventions or Improvements by the Distributor. If, during the Term, the
Distributor makes any improvements in the Product or the Technology or the mode
of using them, or becomes the owner of any such improvements either through
Patents or otherwise, then it shall and hereby does assign such improvements to
the Manufacturer (without cost to the Manufacturer) and shall give the
Manufacturer full information with respect to the mode of using them. However,
during the Term, the Distributor shall be entitled to use the same with all
rights which are hereby granted to the Distributor with respect to the
Technology. The Distributor shall also provide the Manufacturer with any and all
test results arising from tests of any Product as soon as practicable after such
results are available.
20. Ownership of Intellectual Property. All Intellectual Property shall be the
exclusive property of the Manufacturer.
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21. Uses of Intellectual Property.
A. Patents. The Distributor may, only with the express written consent of
the Manufacturer and at its own expense, apply for patents in any country on any
discovery or invention which Distributor or its employees shall have obtained
prior to the termination of this Agreement with respect to the Technology,
Intellectual Property or Products. The Distributor shall notify the Manufacturer
of its intention, keep the Manufacturer currently informed of its activities
with respect thereto, and provide the Manufacturer with copies of patent
applications and amendments thereto, patent office communications, and other
relevant papers. All such patent applications shall be submitted in the
Manufacturer's name; provided, however, that if such patent application cannot
be submitted in the Manufacturer's name, then such patent application and any
patents issued pursuant to such patent application shall be assigned to the
Manufacturer without cost to the Manufacturer.
B. Trademark. During the Term, the Manufacturer grants to the Distributor
the right to affix, without charge to the Distributor, the Trademark (which is
owned by the Manufacturer as a xxxx of certification to the Product distributed
in the Territory by the Distributor, provided:
i. All labels, advertising, and packaging for units of the Product
by the Distributor must conform to the specifications of the Manufacturer.
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ii. Whenever the Distributor uses the Trademark in advertising or in
any other manner in connection with the sale and distribution of the Product,
the Distributor shall indicate clearly the Manufacturer's ownership of the
Trademark. The Distributor agrees to affix to each unit of the Product and to
the package containing each unit of the Product and any papers inserted in the
Package a notice stating "Licensed under United States Patent Nos. RE 32,000, RE
4,624,264, 4,651,749, 6,086,247, 6,135,968". The Distributor shall provide the
Manufacturer with samples of all literature, packages, labels, labeling and
advertising prepared by or for the Distributor and intended to be used by the
Distributor. When using the Trademark, the Distributor undertakes to comply with
all trademark laws, including, but not limited to, compliance with marking
requirements.
iii. If required, the Manufacturer shall make application to
register the Distributor as a Permitted User or Registered User of the
Trademark, and if necessary or if requested by the Manufacturer, the Distributor
undertakes to join in such application and to execute any such documents and to
take such action as may be necessary or requested by the Distributor to
implement such application or retain, enforce or defend the Trademark.
iv. The Distributor acknowledges the Manufacturer's exclusive right,
title and interest in and to the Trademark, and shall not at any time do or
cause to be done any act or thing contesting or in any way impairing or tending
to impair any part of such right, title and interest. The Distributor shall not
in any manner represent that it has any ownership in the Trademark or
registration thereof, and the Distributor acknowledges that use of the Trademark
shall not create in the Distributor's favor any right, title or interest in or
to the Trademark.
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C. Nothing contained in this Agreement shall be construed as conferring
upon the Distributor or customers, directly or by implication, estoppel or
otherwise, any additional license under any trade secrets or know-how of the
Manufacturer, and no such license or other rights shall arise from this
Agreement or from any acts, statements or dealings resulting from or relating
to, this Agreement.
D. The Manufacturer assumes no liability to the Distributor or to third
parties with respect to the performance characteristics of the Product sold by
the Distributor.
22. Manufacturer's Exclusive Rights, Title and Interest in and to Intellectual
Property.
A. The Distributor acknowledges the Manufacturer's exclusive right, title
and interest in and to the Intellectual Property, and shall not at any time do
or cause to be done any act or thing contesting or in any way impairing or
tending to impair any part of such right, title and interest. The Distributor
shall not in any manner represent that it has any ownership in the Intellectual
Property, and the Distributor acknowledges that use of the Intellectual
Property, shall not create in the Distributor's favor any right, title or
interest in or to the Intellectual Property other than as expressly provided in
this Agreement.
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B. If the applicable Intellectual Property law requires, the Manufacturer
shall make application to register the Distributor as a Permitted User or
Registered User of the Intellectual Property and if necessary, the Distributor
undertakes to join in such application and to execute any such documents and to
take such action as may be necessary to implement such application.
C. The Distributor acknowledges that the use of the Intellectual Property
shall not create in the Distributor any right, title or interest in or to the
Intellectual Property other than as expressly provided in this Agreement.
D. Upon termination of this Agreement in any manner as provided in this
Agreement, the Distributor shall cease and desist from all use of the
Intellectual Property in any manner.
23. Nondisclosure of Confidential Information.
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A. As used in this Agreement, "Confidential Information" shall mean oral
or written information which is directly or indirectly presented to the
Distributor, its past, present or future subsidiaries, parents, officers,
consultants, directors, stockholders, affiliates, attorneys, employees, agents
and its and their respective Immediate Families (as defined below; all of the
foregoing are hereinafter collectively referred to as "Agents") by the
Manufacturer, including, but not limited to, information which is developed,
conceived or created by the Manufacturer, or disclosed to the Distributor or its
Agents or known by or conceived or created by the Distributor or its Agents
during the Term or after the termination of this Agreement if disclosed to the
Distributor or its Agents or known by or conceived or created by the Distributor
or its Agents as a result of this Agreement, with respect to the Manufacturer,
its business or any of its products, processes, and other services relating
thereto relating to the past or present business or any plans with respect to
future business of the Manufacturer, or relating to the past or present business
of a third party or plans with respect to future business of a third party which
are disclosed to the Manufacturer. Confidential Information includes, but is not
limited to, all documentation, hardware and software relating thereto, and
information and data in written, graphic and/or machine readable form, products,
processes and services, whether or not patentable, trademarkable or
copyrightable or otherwise protectable, including, but not limited to,
information with respect to discoveries; know-how; ideas; computer programs,
source codes and object codes; designs; algorithms; processes and structures;
product information; marketing information; price lists; cost information;
product contents and formulae; manufacturing and production techniques and
methods; research and development information; lists of clients and vendors and
other information relating thereto; financial data and information; business
plans and processes; documentation with respect to any of the foregoing; and any
other information of the Manufacturer that the Manufacturer informs the
Distributor or its Agents or the Distributor or its Agents should know, by
virtue of its or their position or the circumstances in which the Distributor or
its Agents learned such other information, is to be kept confidential including,
but not limited to, any information acquired by the Distributor or its Agents
from any sources prior to the commencement of this Agreement. Confidential
Information also includes similar information obtained by the Manufacturer in
confidence from its vendors, licensors, licensees, customers and/or clients.
Confidential Information may or may not be labeled as confidential.
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For purposes of this Agreement, "Immediate Families" shall include, but
shall not be limited to, the following: any spouse, parent, spouse of a parent,
mother-in-law, father-in-law, brother-in-law, sister-in-law, child, spouse of a
child, sibling, spouse of a sibling, grandparent, spouse of a grandparent or any
issue or spouse of any of the foregoing. A parent of a specified person shall
include an affiliate controlling such person directly or indirectly through one
or more intermediaries.
B. Except as required in the performance of the Distributor's or its
Agents' obligations pursuant to this Agreement, neither the Distributor nor its
Agents shall, during or after the Term, directly or indirectly, use any
Confidential Information or disseminate or disclose any Confidential Information
to any person, firm, corporation, association or other entity. The Distributor
or its Agents shall take reasonable measures to protect Confidential Information
from any accidental, unauthorized or premature use, disclosure or destruction.
Information shall not be considered Confidential Information if it: (i) is at
the time of disclosure or thereafter a part of the public domain without breach
of this Agreement by the Distributor or its Agents; provided, however, that the
act of copyrighting shall not cause or be construed as causing the copyrighted
materials to be in the public domain, (ii) is disclosed as reasonably required
in a proceeding to enforce the Distributor's rights under this Agreement or
(iii) is disclosed as required by court order or applicable law; provided,
however, that if either the Distributor or its Agents is legally requested or
required by court order or applicable law, including, but not limited to, by
oral question, interrogatories, request for information or documents, subpoenas,
civil investigative demand or similar process to disclose any Confidential
Information, the Distributor or its Agents, as the case may be, shall promptly
notify the Manufacturer of such request or requirement so that the Manufacturer
may seek an appropriate protective order; provided further, however; that if
such protective order is not obtained, the Distributor and its Agents agree to
furnish only that portion of the Confidential Information which they are advised
by their respective counsels is legally required.
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C. Upon termination of this Agreement for any reason or at any time upon
request of the Manufacturer, the Distributor and its Agents agree to deliver to
the Manufacturer all materials of any nature which are in the Distributor's or
its Agents' possession or control and which are or contain Confidential
Information, Work Product or Work Products (hereinafter defined), or which are
otherwise the property of the Manufacturer or any vendor, licensor, licensee,
customer or client of the Manufacturer, including, but not limited to writings,
designs, documents, records, data, memoranda, tapes and disks containing
software, computer source code listings, routines, file layouts, record layouts,
system design information, models, manuals, documentation and notes. The
Distributor and its Agents shall destroy all written documentation prepared by
them for internal purposes based in whole or in part on any Confidential
Information and such destruction shall be confirmed to the Manufacturer in
writing by an officer of the Distributor and/or its Agents.
D. All ideas, inventions, discoveries or improvements, whether patentable
or not, conceived by the Distributor or its Agents (alone or with others) during
the Term ("Work Products") shall be the exclusive property of and assigned to
the Manufacturer or as the Manufacturer may direct without compensation to the
Distributor or its Agents. Any records with respect to the foregoing shall be
the sole and exclusive property of the Manufacturer and the Distributor or its
Agents shall surrender possession of such records to the Manufacturer upon
termination of this Agreement. Any Work Product shall be deemed incorporated in
the definition of Confidential Information for all purposes hereunder.
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E. Neither the Distributor nor its Agents shall assert any rights with
respect to the Manufacturer, its business, or any of its products, processes and
other services relating thereto, Work Product or any Confidential Information as
having been acquired or known by the Distributor or its Agents prior to the
commencement of the Term.
24. Protection of Intellectual Property; Indemnification; Defense; Products
Liability.
A. If the Distributor learns of any infringement of any Intellectual
Property or imitation or counterfeiting of any Product, Distributor shall
promptly notify the Manufacturer of such information. Upon learning of such
information, the Manufacturer shall take such action as it deems advisable in
its sole and absolute discretion for the protection of the Intellectual
Property.
B. In order to induce the Manufacturer to enter into this Agreement, in
addition to and in no way limiting Paragraph "C" of Article "3" of this
Agreement, the Distributor agrees, on its own behalf and on behalf of its Agents
(with the exception of the Manufacturer), that neither the Distributor, nor any
of its Agents, shall during the Term and, for a period of five (5) years from
the date of termination of this Agreement, (i) manufacture any Competing
Products (as defined below), (ii) directly or indirectly sell or market any
product which competes either directly or indirectly with any product of the
Manufacturer that screens for, or is a detection modality for prostate, cancer,
kidney disease and strokes or any product which is based upon the technology of
temperature differentials ("Competing Products"), or (iii) directly or
indirectly own, manage, participate in the operation or control of, or be
connected as an officer, director, shareholder, partner, consultant, owner,
employee, agent, lender, donor, vendor or otherwise, or have any financial
interest in or aid or assist anyone else in the conduct of any competing entity
which manufactures, distributes or offers for sale Competing Products. The
Distributor further agrees, on its own behalf and on behalf of its Agents, that
neither it nor its Agents shall during the Term and for a period of five (5)
years from the date of termination of this Agreement (i) personally, or cause
others to personally induce or attempt to induce any employee to terminate their
employment with the Manufacturer; (ii) interfere with or disrupt the
Manufacturer's relationship with its suppliers, vendors, customers or employees;
or (iii) solicit or entice any person to leave their employ with the
Manufacturer.
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C. The Manufacturer agrees, on its own behalf and on behalf of its Agents,
that neither it nor its Agents shall during the Term and for a period of five
(5) years from the date of termination of this Agreement (i) personally, or
cause others to personally induce or attempt to induce any employee to terminate
their employment with the Distributor; (ii) interfere with or disrupt the
Distributor's relationship with its suppliers, vendors, customers or employees;
or (iii) solicit or entice any person to leave their employ with the
Distributor.
D. The Distributor agrees, on its behalf and on behalf of its Agents, that
the duration, scope and geographic area for which the provisions set forth in
Paragraph "B" of this Article "24" of this Agreement are to be effective are
reasonable. If any court of competent jurisdiction determines that any provision
of this Agreement is invalid or unenforceable by reason of such provision
extending the covenants and agreements contained herein for too great a period
of time or over too great a geographical area, or by reason of it being too
extensive in any other respect, such agreement or covenant shall be interpreted
to extend only over the maximum period of time and geographical area, and to the
maximum extent in all other respects, as to which it is valid and enforceable,
all as determined by such court in such action. Any determination that any
provision of this Agreement is invalid or unenforceable, in whole or in part,
shall have no effect on the validity or enforceability of any remaining
provision of this Agreement.
E. Any period of time set forth in this Agreement shall not be construed
to permit either the Distributor or its Agents to engage in any of the
prohibited acts set forth in this Agreement after such period if such acts would
otherwise be prohibited by any applicable statute or legal precedent.
80
25. Indemnification.
A. Indemnification by the Distributor. In order to induce the Manufacturer
to enter into and perform this Agreement, the Distributor does hereby indemnify,
protect, defend and save and hold harmless the Manufacturer and each of its
shareholders, affiliates, officers, directors, control persons, employees,
attorneys, agents, partners and trustees and personal representatives of any of
the foregoing ("Indemnified Parties"), from and against any loss resulting to
any of them from any material loss, liability, cost, damage, or expense which
the Indemnified Parties may suffer, sustain or incur arising out of or due to a
breach by the Distributor of the representations, warranties and covenants set
forth in Article "12" of this Agreement or in any documents delivered pursuant
hereto, or of a breach by the Distributor of any of its obligations pursuant to
this Agreement or in any documents delivered pursuant hereto.
B. Indemnification by the Manufacturer. In order to induce the Distributor
to enter into and perform this Agreement, the Manufacturer does hereby
indemnify, protect, defend and save and hold harmless the Distributor and each
of its members, affiliates, officers, managers, control persons, employees,
attorneys, agents, partners and trustees and personal representatives of any of
the foregoing ("Indemnified Parties"), from and against any loss resulting to
any of them from any material loss, liability, cost, damage, or expense which
the Indemnified Parties may suffer, sustain or incur arising out of or due to a
breach by the Manufacturer of the representations, warranties and covenants set
forth in Article "11" of this Agreement or in any documents delivered pursuant
hereto, or of a breach by the Manufacturer of any of its obligations pursuant to
this Agreement or in any documents delivered pursuant hereto.
C. Reasonable Costs, Etc. The indemnification, which is set forth in this
Article "25" of this Agreement shall be deemed to include not only the specific
liabilities or obligation with respect to which such indemnity is provided, but
also all counsel fees, reasonable costs, expenses and expenses of settlement
relating thereto, whether or not any such liability or obligation shall have
been reduced to judgment.
81
D. Third Party Claims. If any demand, claim, action or cause of action,
suit, proceeding or investigation (collectively, the "Claim") is brought against
an Indemnified Party for which the Indemnified Party intends to seek indemnity
from the other party hereto (the "Indemnifying Party"), then the Indemnified
Party within twenty-one (21) days after such Indemnified Party's receipt of the
Claim, shall notify the Indemnifying Party pursuant to Paragraph "C" of Article
"28" of this Agreement which notice shall contain a reasonably thorough
description of the nature and amount of the Claim (the "Claim Notice"). The
Indemnifying Party shall have the option to undertake, conduct and control the
defense of such claim or demand. Such option to undertake, conduct and control
the defense of such claim or demand shall be exercised by notifying the
Indemnified Party within ten (10) days after receipt of the Claim Notice
pursuant to Paragraph "C" of Article "28" of this Agreement (such notice to
control the defense is hereinafter referred to as the "Defense Notice"). The
failure of the Indemnified Party to notify the Indemnifying Party of the Claim
shall not relieve the Indemnifying Party from any liability which the
Indemnifying Party may have pursuant to this Article "25" of this Agreement
except to the extent that such failure to notify the Indemnifying Party
prejudices the Indemnifying Party. The Indemnified Party shall use all
reasonable efforts to assist the Indemnifying Party in the vigorous defense of
the Claim. All costs and expenses incurred by the Indemnified Party in defending
the Claim shall be paid by the Indemnifying Party. If, however, the Indemnified
Party desires to participate in any such defense or settlement, it may do so at
its sole cost and expense (it being understood that the Indemnifying Party shall
be entitled to control the defense). The Indemnified Party shall not settle the
Claim. If the Indemnifying Party does not elect to control the defense of the
Claim, within the aforesaid ten (10) day period by proper notice pursuant to
Paragraph "C" of Article "28" of this Agreement, then the Indemnified Party
shall be entitled to undertake, conduct and control the defense of the Claim (a
failure by the Indemnifying Party to send the Defense Notice to the Indemnified
Party within the aforesaid ten (10) day period by proper notice pursuant to
Paragraph "C" of Article "28" of this Agreement shall be deemed to be an
election by the Indemnifying Party not to control the defense of the Claim);
provided, however, that the Indemnifying Party shall be entitled, if it so
desires, to participate therein (it being understood that in such circumstances,
the Indemnified Party shall be entitled to control the defense). Regardless of
which party has undertaken to defend any claim, the Indemnifying Party may,
without the prior written consent of the Indemnified Party, settle, compromise
or offer to settle or compromise any such claim or demand; provided however,
that if any settlement would result in the imposition of a consent order,
injunction or decree which would restrict the future activity or conduct of the
Indemnified Party, the consent of the Indemnified Party shall be a condition to
any such settlement. Notwithstanding the foregoing provisions of this Article
"25" of this Agreement, as a condition to the Indemnifying Party either having
the right to defend the Claim, or having control over settlement as indicated in
this Article "25" of this Agreement, the Indemnifying Party shall execute an
agreement, in the form annexed hereto and made a part hereof as Exhibit "F",
acknowledging its liability for indemnification pursuant to this Article "25" of
this Agreement. Whether the Indemnifying Party shall control and assume the
defense of the Claim or only participate in the defense or settlement of the
Claim, the Indemnified Party shall give the Indemnifying Party and its counsel
access, during normal business hours, to all relevant business records and other
documents, and shall permit them to consult with its employees and counsel.
82
26. Equitable Relief. If the Distributor breaches this Agreement, the
Manufacturer shall have the right, at its election, to obtain equitable relief
including, but not limited to, an order for specific performance of this
Agreement or an injunction, without the need to: (i) post a bond or other
security, (ii) to prove any actual damage or (iii) to prove that money damages
would not provide an adequate remedy. Resort to such equitable relief, however,
shall not be construed to be a waiver of any other rights or remedies which the
Manufacturer may have for damages or otherwise.
27. No Agency. Except as provided for in this Agreement, neither party is the
legal representative or agent of, or has the power to obligate the other for any
purpose whatsoever; and no partnership, joint venture, agent, fiduciary, or
employment relationship is intended or created by reason of this Agreement. It
is the intent of the parties hereto that each party shall be an independent
contractor of the other. Neither has the authority to assume or create any
obligation or liability, express or implied, upon the other's behalf or in its
name or to bind the other in any manner whatsoever. The Distributor shall not
sign any document as an authorized person of the Manufacturer and none of its
employees or members shall hold themselves out as officers, directors, or
shareholders of the Manufacturer, or as otherwise having any authority to enter
into contracts binding upon the Manufacturer, or to create any obligations on
the part of the Manufacturer. The Manufacturer shall not sign any document as an
authorized person of the Distributor and none of its employees or shareholders
shall hold themselves out as officers, managers, or members of the Distributor,
or as otherwise having any authority to enter into contracts binding upon the
Distributor, or to create any obligations on the part of the Distributor.
83
28. Miscellaneous.
A. Headings. Headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
B. Enforceability. If any provision which is contained in this Agreement
should, for any reason, be held to be invalid or unenforceable in any respect
under the laws of any jurisdiction, such invalidity or unenforceability shall
not affect any other provision of this Agreement and this Agreement shall be
construed as if such invalid or unenforceable provision had not been contained
herein.
C. Notices. Any notice or other communication required or permitted
hereunder shall be sufficiently given if sent by (i) mail by (a) certified mail,
postage prepaid, return receipt requested and (b) first class mail, postage
prepaid (ii) overnight delivery with confirmation of delivery or (iii) facsimile
transmission with an original mailed by first class mail, postage prepaid,
addressed as follows:
84
To the Manufacturer: Scantek Medical, Inc.
0X Xxxx Xxxxx
Xxxxx Xxxxxx, Xxx Xxxxxx 00000
Attn: Xx. Xxxxxxxx X. Xxxx, President
Fax No.: (000) 000-0000
With a copy to: Xxxxx & Fraade, P.C.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxxxx X. Xxxxx, Esq.
Fax No.: (000) 000-0000
To the Distributor: Life Medical Technologies, Inc.
X.X. Xxx 000 Xxxxxxx, Xxx Xxxx 00000 Attn:
Xx. Xxxxxx Xxxxxx, President Fax No.: (631)
376-0073
With a copy to: Xxxxxxx, Xxxxxxxxx & Xxxxxxxx, LLP
000 Xxxxxxx Xxxxxxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Attn.: Xxxxx X. Xxxxxxxxx, Esq.
Fax No.: (000) 000-0000
or in each case to such other address and facsimile number as shall have last
been furnished by like notice. If all of the methods of notice set forth in this
Paragraph "C" of this Article "28" of this Agreement are impossible for any
reason, notice shall be in writing and personally delivered to the aforesaid
addresses. Each notice or communication shall be deemed to have been given as of
the date so mailed or delivered as the case may be; provided, however, that any
notice sent by facsimile shall be deemed to have been given as of the date so
sent if a copy thereof is also mailed by first class mail on the date sent by
facsimile. If the date of mailing is not the same as the date of sending by
facsimile, then the date of mailing by first class mail shall be deemed to be
the date upon which notice is given; provided further, however, that any notice
sent by overnight delivery shall be deemed to have been given as of the date of
delivery.
85
D. Governing Law; Disputes. This Agreement shall in accordance with
Section 5-1401 of the General Obligations Law of New York in all respects be
construed, governed, applied and enforced under the internal laws of the State
of New York without giving effect to the principles of conflicts of laws and be
deemed to be an agreement entered into in the State of New York and made
pursuant to the laws of the State of New York. Except as otherwise provided in
Article "26" of this Agreement, the parties agree that they shall be deemed to
have agreed to binding arbitration solely in New York, New York, with respect to
the entire subject matter of any and all disputes relating to or arising under
this Agreement including, but not limited to, the specific matters or disputes
as to which arbitration has been expressly provided for by other provisions of
this Agreement. Any such arbitration shall be by a panel of three arbitrators
and pursuant to the commercial rules then existing of the American Arbitration
Association in the State of New York, County of New York. In all arbitrations,
judgment upon the arbitration award may be entered in any court having
jurisdiction. The parties agree, further, that the prevailing party in any such
arbitration as determined by the arbitrators shall be entitled to such costs and
attorney's fees, if any, in connection with such arbitration as may be awarded
by the arbitrators. In connection with the arbitrators' determination for the
purpose of which party, if any, is the prevailing party, they shall take into
account all of the factors and circumstances including, without limitation, the
relief sought, and by whom, and the relief, if any, awarded, and to whom. In
addition, and notwithstanding the foregoing sentence, a party shall not be
deemed to be the prevailing party in a claim seeking monetary damages, unless
the amount of the arbitration award exceeds the amount offered in a legally
binding writing by the other party by fifteen (15%) percent or more. For
example, if the party initiating arbitration ("A") seeks an award of one hundred
thousand ($100,000) dollars plus costs and expenses, the other party ("B") has
offered A fifty thousand ($50,000) dollars in a legally binding written offer
prior to the commencement of the arbitration proceeding, and the arbitration
panel awards any amount less than fifty-seven thousand five hundred ($57,500)
dollars to A, the panel should determine that B has "prevailed". The parties
specifically designate the courts in the City of New York, State of New York as
properly having jurisdiction for any proceeding to confirm and enter judgment
upon any such arbitration award. The parties hereby consent to and submit to
personal jurisdiction over each of them solely by the courts of the State of New
York in any action or proceeding, waive personal service of any and all process
and specifically consent that in any such action or proceeding in the courts of
the State of New York, any service of process may be effectuated upon any of
them by certified mail, return receipt requested, in accordance with Paragraph
"C" of this Article "28" of this Agreement.
86
The arbitration panel shall have no power to award non-monetary or
equitable relief of any sort. It shall also have no power to award (i) damages
inconsistent with any applicable agreement between the parties or (ii) punitive
damages or any other damages not measured by the prevailing party's actual
damages; and the parties expressly waive their right to obtain such damages in
arbitration or in any other forum. In no event, even if any other portion of
these provisions is held invalid or unenforceable, shall the arbitration panel
have power to make an award or impose a remedy which could not be made or
imposed by a court deciding the matter in the same jurisdiction.
Discovery shall be permitted in connection with the arbitration only to
the extent, if any, expressly authorized by the arbitration panel upon a showing
of substantial need by the party seeking discovery.
All aspects of the arbitration shall be treated as confidential. The
parties and the arbitration panel may disclose the existence, content or results
of the arbitration only as provided in the rules of the American Arbitration
Association in New York, New York. Before making any such disclosure, a party
shall give written notice to all other parties and shall afford such parties a
reasonable opportunity to protect their interest.
E. No Assignment by the Distributor. The rights granted pursuant to this
Agreement shall not be assignable by the Distributor without the Manufacturer's
prior written consent, which consent shall not be unreasonably withheld. The
Manufacturer's withholding of consent shall not be deemed unreasonable if the
entity to which the Distributor seeks to make the assignment is not an entity
(i) in which Cantor has in excess of fifty (50%) percent of the voting power of
its capital stock, (ii) which has the financial capability to perform the terms
of this Agreement and (iii) whose officers and directors have the experience,
capability and know-how to operate a medical distributorship and perform the
terms of this Agreement. For purposes of this Paragraph "E" of this Article "28"
of this Agreement, any transfer of a controlling interest by Cantor or any other
person or entity having a controlling interest in the Distributor shall be
deemed to be an assignment by the Distributor and if such transfer of a
controlling interest has been made without the Manufacturer's prior written
consent as set forth in the first sentence of this Paragraph "E" of this Article
"28" of this Agreement, the Manufacturer may in its sole and absolute discretion
terminate this Agreement by written notice pursuant to Paragraph "C" of this
Article "28" of this Agreement; provided, however, that for purposes of this
Paragraph "E" of this Article "28" of this Agreement, Cantor or any other person
or entity shall only be deemed to have transferred a controlling interest if:
(i) he, she or it transferred more than twenty-five (25%) percent of issued and
outstanding capital stock of the Distributor at any time within the prior one
hundred twenty (120) days and (ii) he, she or it was an officer or director of
the Distributor at any time within the prior one hundred twenty (120) days.
87
F. Assignment by the Manufacturer. This Agreement shall be transferable by
the Manufacturer.
G. Construction. Each of the parties hereto hereby further acknowledges
and agrees that (i) each has been advised by counsel during the course of
negotiations and (ii) each counsel has had significant input in the development
of this Agreement and (iii) this Agreement shall not, therefore, be construed
more strictly against any party responsible for its drafting regardless of any
presumption or rule requiring construction against the party whose attorney
drafted this Agreement.
H. Entire Agreement. This Agreement and all documents and instruments
referred to herein (i) constitute the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof and thereof, and (ii) are not intended to
confer upon any person other than the parties hereto any rights or remedies
hereunder. Each party hereto agrees that, except for the representations and
warranties contained in this Agreement, neither the Manufacturer nor the
Distributor makes any other representations or warranties, and each hereby
disclaims any other representations and warranties made by itself or any of its
officers, directors, managers, employees, agents, financial and legal advisors
or other representatives, with respect to the execution and delivery of this
Agreement or the transactions contemplated hereby, notwithstanding the delivery
or disclosure to the other or the other's representatives of any documentation
or other information with respect to any one or more of the foregoing.
88
I. Further Assurances. The parties agree to execute any and all such other
further instruments and documents, and to take any and all such further actions
which are reasonably required to effectuate this Agreement and the intents and
purposes hereof.
J. Binding Agreement. This Agreement shall not be binding upon and inure
to the benefit of the parties hereto and their heirs, executors, administrators,
personal representatives, successors and assigns unless and until each of the
parties to this Agreement have executed and delivered to the other party a fully
executed copy of this Agreement.
K. Non-Waiver. Except as otherwise expressly provided herein, no waiver of
any covenant, condition, or provision of this Agreement shall be deemed to have
been made unless expressly in writing and signed by the party against whom such
waiver is charged; and (i) the failure of any party to insist in any one or more
cases upon the performance of any of the provisions, covenants or conditions of
this Agreement or to exercise any option herein contained shall not be construed
as a waiver or relinquishment for the future of any such provisions, covenants
or conditions, (ii) the acceptance of performance of anything required by this
Agreement to be performed with knowledge of the breach or failure of a covenant,
condition or provision hereof shall not be deemed a waiver of such breach or
failure, and (iii) no waiver by any party of one breach by another party shall
be construed as a waiver of any other or subsequent breach of this Agreement.
L. Counterparts. This Agreement may be executed simultaneously in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
M. Modifications. This Agreement may not be changed, modified, extended,
terminated or discharged orally, but only by an agreement in writing, which is
signed by all of the parties to this Agreement.
N. Exhibits. All Exhibits annexed or attached to this Agreement are
incorporated into this Agreement by reference thereto and constitute an integral
part of this Agreement.
O. Survival. All of the provisions and obligations of this Agreement shall
survive the termination of this Agreement.
89
P. Severability. The provisions of this Agreement shall be deemed
separable. Therefore, if any part of this Agreement is rendered void, invalid or
unenforceable, such rendering shall not affect the validity or enforceability of
the remainder of this Agreement; provided that if the part or parts which are
void, invalid or unenforceable as aforesaid shall substantially impair the value
of the whole Agreement to either party, that party may cancel, and terminate the
Agreement by giving written notice to the other party.
IN WITNESS WHEREOF, the parties to this Agreement have set their hands and
seals or caused these presents to be signed of the day and year first above
written.
Scantek Medical, Inc.
By: ___________________________
Xx. Xxxxxxxx X. Xxxx, President
Life Medical Technologies, Inc.
By: ___________________________
Xxxxxx Xxxxxx, President & CEO
90
List of Exhibits
Exhibit A: Patents
Exhibit B: Description of the Product
Exhibit C: Trademark
Exhibit D: Liens
Exhibit E: Litigation
Exhibit F: Form of Letter Agreement to be Executed Pursuant to Article
"25" of the Agreement
00
XXXXXXX X
XXXXXXX
XXXXXX XXXXXX:
-------------
RE 32,000
RE 4,624,264
4,651,749
6,086,247
6,135,968
U.S. PATENT APPLICATIONS
------------------------
APPLICATION NUMBER DATE OF APPLICATION
------------------ -------------------
08/854144 5/14/97
08/926790 9/10/97
09/018765 2/05/98
92
EXHIBIT B
PRODUCT KNOWN AS BREASTCARE(TM) /BREASTALERT(TM)
Notwithstanding the following more specific description of the Product,
the Products shall include any temperature sensing product manufactured by the
Manufacturer using the patented technology set forth in the Patents listed in
Exhibit "A" or improvements thereto. The BreastCare(TM) /BreastAlert(TM) is an
early diagnostic direct reading, digital product to screen the breast for
abnormalities, including cancer.
The BreastCare(TM) /BreastAlert(TM) measures underlying breast tissue
temperature and not skin surface temperature by retaining the emitted heat when
BreastCare(TM) /BreastAlert(TM) is placed against the breast for 15 minutes. The
averaged and recorded reading on the BreastCare(TM) /BreastAlert(TM) has taken
into consideration that the temperature patterns of a woman's breasts are
closely symmetrical. This method detects abnormalities by comparing the
temperature differences in the corresponding areas of a woman's breasts.
The BreastCare(TM) /BreastAlert(TM) product consists of a pair of non-woven pads
made of spun-fiber material, each of which has three wafer-thin, pliant,
aluminum foil, and temperature responsive segments attached to its inner
surface. Each segment is wedge-shaped and contains 18 columns or bars of thermal
dots. These dots contain chemical heat sensors that change color when exposed to
a specific temperature.
93
EXHIBIT C
TRADEMARK
BreastAlert
BreastCare
94
EXHIBIT D
LIENS
1. UCC-1 filed by Xxx Xxxxxxx;
2. UCC-1 filed by Canal Jeans Co.;
3. UCC-1s filed by Xxxxxx Xxxxxxx;
4. UCC-1 filed by First Sierra Financial Inc. (obligation has been
paid; UCC-3 has not been filed);
5. UCC-1 filed by Zigmed Inc.;
6. UCC-1 filed by Trinity Xxx.
95
EXHIBIT E
LITIGATION
1. Xxxxx X. Xxxxxx, Xxxxxx X. Xxxxx, PLLC and Xxxxxx X. Xxxxx, individually v.
Scantek Medical, Inc. and Xx. Xxxxxxxx X. Xxxx, Case No. 04-3978 in the United
States District Court for the District of New Jersey. Xx. Xxxxxx is seeking (A)
the distribution rights with respect to the Product in the United States and
Mexico and (B) approximately $286,003 in loans made to the Manufacturer and/or
approximately 6,650,000 shares of common stock, par value $.001 of the
Manufacturer ("Common Stock"). Xxxxxx V, Xxxxx, PLLC and Xxxxxx X. Xxxxx are
seeking $10,000 and 25,000 shares of Common Stock for legal fees and the costs
and expenses of collection.
The Manufacturer, prior to the service of the lawsuit, had paid $105,000
plus interest to Xx. Xxxxxx with respect to one of the loans and issued to him
1,650,000 shares of the 6,650,000 shares of Common Stock Xx. Xxxxxx is seeking.
The Manufacturer believes that (A) there is virtually no basis for Xx. Xxxxxx'x
claim to the remaining 5,000,000 shares of Common Stock, and (B) while Xx.
Xxxxxx is entitled to approximately $105,000 in repayment of another loan, Xx.
Xxxxxx does not have a valid cause of action with respect to any of his other
claims.
96
On October 15, 2004, the Manufacturer filed a Motion to Dismiss based upon
insufficiency of service of process and failure to state a claim for which
relief could be granted, for numerous reasons, including, but not limited to,
(A) the Manufacturer had repaid the only loan evidenced by a promissory note
made pursuant to the terms of the Letter of Intent and (B) the Manufacturer had
issued 1,650,000 shares to Xx. Xxxxxx. Accordingly, the repayment of the
$105,000 loan makes the claim for the balance of the shares claimed by Xxxxxx
moot because those shares were being held in escrow to secure repayment of the
$105,000 loan, and the issuance of the 1,650,000 shares makes the claim for the
$33,000 loan moot. Xx. Xxxxxx and Xx. Xxxxx requested that the Manufacturer
allow them to (A) withdraw the action in New Jersey and (B) commence the action
in New York. In view of the time and money spent thus far defending the case in
New Jersey, the Manufacturer was not willing to allow Xx. Xxxxxx and Xx. Xxxxx
to withdraw the case in New Jersey. The Manufacturer determined to concede
jurisdiction over it in New Jersey, and informed the Court of its decision. On
August 8, 2005, the Court issued a decision with respect to the remainder of the
Manufacturer's Motion to Dismiss. The Court dismissed many of Xx. Xxxxxx'x
claims against the Manufacturer and dismissed the Complaint in its entirety with
respect to Xx. Xxxx for lack of jurisdiction. The Manufacturer intends to
vigorously defend against the remaining claims.
On August 22, 2005, Xx. Xxxxxx commenced an action in the Supreme Court of
the State of New York against Xx. Xxxx, the Manufacturer's counsel, Xxxxx &
Fraade, P.C., the two named partners of Xxxxx & Fraade, P.C. and certain
individuals and entities with which the Manufacturer is engaged in business. Xx.
Xxxxxx is seeking the following damages which he allegedly incurred: (1)
compensatory damages in excess of $10,000,000, (2) punitive damages in excess of
$5,000,000 and (3) 3,000,000 shares of Common Stock. Xx. Xxxx and Xxxxx &
Fraade, P.C. and its named partners intend to vigorously defend against these
claims for which the Manufacturer is potentially liable pursuant to its
indemnification of Xx. Xxxx and counsel. The Manufacturer believes that Xxxxxx'x
claims in the New York litigations against Xx. Xxxx, Xxxxx & Fraade, P.C. and
the partners of Xxxxx & Fraade, P.C. have no merit.
97
2. Carriage House Capital, on May 13, 2004, docketed with the Superior Court of
New Jersey a judgment against the Manufacturer entered on July 17, 2001 in the
Superior Court for the State of Arizona in the amount of $10,000 plus interest
from November 20, 2000 plus attorneys' fees and costs in the amount of
$6,401.50. The Arizona judgment also provides for the issuance of 5,000 shares
of Common Stock for every week commencing November 20, 2000 in which the
judgment remains unsatisfied, which was later postponed to December 10, 2000
pursuant to an agreement between the Manufacturer and Carriage House Capital. On
July 14, 2004, Carriage House Capital filed a motion to compel delivery of the
stock and payment of attorneys' fees and costs. As of September 16, 2005, the
Manufacturer owed Carriage House 570,000 shares of Common Stock. The
manufacturer intends to pay the $10,000 plus interest to Carriage House Capital,
and to negotiate with Carriage House Capital to reduce the number of shares of
Common Stock to be issued to Carriage House Capital.
3. Judgment entered on October 12, 2000 in favor of Tapecon Inc. in the amount
of $14,563.82 with costs in an amount of $230.56. On December 8, 2000, Tapecon
received $8,176.81 towards the payment of the judgment.
4. Judgment entered on June 25, 2004 in favor of Kamal, Scantek's prior
landlord, in the amount of $34,959.94. Scantek has established a payment plan
with Kamal pursuant to which it has already made two payments.
5. Stursberg & Xxxxx and Xxxxxxxxxx & McGerity seek to recover fees in the
aggregate amount of $70,358.49 for legal services allegedly performed from 1997
through 1999. Opposing counsel tried to have the case put on the calendar for
trial and the Manufacturer opposed said action on the basis of incomplete
discovery. On September 30, 2004, the Court ordered the case to be remanded and
reassigned to a non-commercial part. The parties have recently reached an oral
agreement with respect to the payment of the $70,358.49 sought by Stursberg &
Xxxxx and Folkenflik & McGerity. Commencing on January 15, 2005, the
Manufacturer shall pay $5,000 to Stursberg & Xxxxx and Xxxxxxxxxx & McGerity and
on the fifteenth of each month thereafter, the Manufacturer shall pay Stursberg
& Xxxxx and Xxxxxxxxxx & McGerity $10,000 until the fees have been paid in full.
The Manufacturer has made the $5,000 payment due on January 15, 2005 and the
$10,000 payments due through June 15, 2005. Accordingly, the Manufacturer has
paid approximately 78% of the money owed to Stursberg & Xxxxx and Xxxxxxxxxx &
McGerity and the amount currently owed is $15,358.49.
98
After making the May 15, 2005 payment, the Manufacturer requested an extension
of thirty (30) days with respect to the June 15, 2005 payment and subsequent
payments. The Manufacturer had been orally advised by Xxx Xxxxxxxxxx of
Stursberg & Xxxxx and Xxxxxxxxxx & McGerity that the extension would be granted.
However, the Manufacturer was unable to make the next payment on July 15, 2005,
and on July 19, 2005, Stursberg & Xxxxx and Xxxxxxxxxx & McGerity sent it a
notice of default with respect to the June 15, 2005 and July 15, 2005 payments.
Although the Manufacturer made the payment due on June 15, 2005 on August 18,
2005, it has not made the remaining payments which were due on July 15, 2005 and
August 15, 2005. Stursberg & Xxxxx and Xxxxxxxxxx & McGerity may enter a
judgment with the Clerk of the Court for $70,358.49, less the payments of
$55,000 previously made, plus compounded interest at the rate of 8% per annum
from March 15, 1999.
99
EXHIBIT F
FORM OF LETTER AGREEMENT TO BE
EXECUTED PURSUANT TO ARTICLE 25
OF THE AGREEMENT
From: The Indemnifying Party
(Name and Address)
To: The Indemnified Party
(Name and Address)
Date:
Gentlemen/Ladies:
This shall confirm and acknowledge that pursuant to Article "25" of the
Exclusive Distribution Agreement (the "Agreement") dated as of the ___ day of
________, by and among Scantek Medical, Inc. and Life Medical Technologies,
Inc., the undersigned acknowledges its liability for indemnification to you with
respect to _________________ (description of claim) (the "Claim"), and shall not
take the position that it is not liable to you with respect to the Claim. Such
obligation is subject to all of the provisions, terms and conditions of the
Agreement.
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Very truly yours,
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Name of Indemnifying Party
By: ___________________________
(Authorized Signature)
STATE OF )
)ss.:
COUNTY OF )
On the ____ day of __________, ____ before me personally came __________ to me
known, who, being by me duly sworn, did depose and say that that he or she is
the ____________ of __________________________, the ___________ described in and
which executed the foregoing instrument; that he or she knows the seal of said
_________________; that the seal affixed to said instrument is such _________
seal; that it was so affixed by order of the board of _________ of said
_______________, and that he or she signed his or her name thereto by like
order.
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Notary Public
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