Exhibit 10.39
DATED March 20
th 2004
(1)
LONGPORT
INCORPORATED
(2)
FUTURE SCAN
INCORPORATED
DISTRIBUTION
AGREEMENT
THIS AGREEMENT is made the 20 th day of
March 2004
BETWEEN :
(1)
LONGPORT INCORPORATED,
a corporation incorporated under the
laws of Delaware and having its principal place of business at 740
South Chester Road, Swarthmore, PA 19081, (“ Longport
”); and
(2)
FUTURE SCAN
INCORPORATED , a
corporation incorporated under the laws of and having
Delaware its principal place of business at , 720 Benjamin Fox
Pavilion Jenkintown, PA 19046 (“FUTURE
SCAN”).
WHEREAS :
(A)
Longport develops, supplies and
supports B-scan ultrasound scanning equipment (the “
Equipment ”) and software (the “ Software
”) detailed in Schedule 1 (together, the “
Scanner ” which expression extends to any versions,
derivatives, parts, aspects and ingredients thereof from time to
time as specifically outlined in Schedule 1) which has been
designed for the purpose of imaging the human skin and underlying
few centimeters soft tissue, detecting the onset of certain
conditions that impact this region and allowing the monitoring of
the rate and extent of change to skin tissue induced by treatments
or through natural processes.
(B)
Longport wishes to appoint FUTURE
SCAN as a distributor of the Scanner and FUTURE SCAN agrees to
accept such appointment on the terms set out in this Agreement,
which, for the avoidance of doubt, shall include the Terms and
Conditions attached hereto. !
IT IS HEREBY AGREED as follows:
1.
DEFINITIONS
1.1
In this Agreement the following
expressions shall have the following meanings:
“Application
Training” means clinical training on
the use of the scanner; such training will only be provided to
individuals who have previously successfully completed
“System
1
Training”.
Fees over and above Longport’s agreed selling price will
under normal circumstances be charged for this “Application
Training” (see Schedule 3);
“Business Day”
means any day on
which banks are open to conduct business in the United States of
America;
“FUTURE SCAN
Group” means
together FUTURE SCAN and every holding company or subsidiary
of FUTURE SCAN;
“ Effective Date
” means five business days after signature of this
Agreement
“ Longport Group
” means together Longport and every holding company or
subsidiary of Longport;
“ Order ” means
any order for the Scanner placed with Longport by FUTURE SCAN from
time to time in accordance with this Agreement;
“Parties”
mean the parties to this Agreement
namely, Longport and FUTURE SCAN;
“ Restricted
Information ” has the meaning attributed to it in
Condition 21 of the Terms and Conditions;
“Sub-agent” shall mean a subsidiary sales or distribution
agent appointed by FUTURE SCAN;
“System
Training” shall
mean instruction offered by Longport on the general use of the
scanner hardware and software.
“ Terms and Conditions
” has the meaning attributed to them in Schedule 2,
and;
“ Territory ”
means the United States of America.
1.2
Any reference in this Agreement to
any statute or statutory provision shall be construed as including
a reference to that statute or statutory provision as from time to
time amended modified extended or re-enacted whether before or
after the date of this Agreement and to
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all statutory instruments orders and
regulations for the time being made pursuant to it or deriving
validity from it and so far as may be applicable any past statutory
provisions as from time to time amended modified extended or
re-enacted which such provision has directly or indirectly
replaced.
1.3
Except so far as the context
otherwise requires words denoting the singular shall include the
plural and vice versa and words denoting any one gender shall
include all genders and words denoting persons shall include bodies
corporate, unincorporated, associations, partnerships and
individuals.
1.4
Unless otherwise stated definitions
of the parties included in the statement of parties in Clause 1 of
this Agreement and any definitions included in any particular
Clauses, or Schedules also apply in the remainder of this
Agreement.
1.5
Headings to Clauses are included for
ease of reference only and shall have no effect on the
interpretation or construction of this Agreement.
2.
APPOINTMENT
2.1
Subject to the terms of this
Agreement, Longport hereby appoints FUTURE SCAN as a non-exclusive
distributor into all applicable medical markets for the
“Scanner” across the Territory and FUTURE SCAN hereby
accepts such appointment.
2.2
For the avoidance of doubt, Longport
shall be entitled at any time or from time to time to sell the
Scanner direct to customers in the Territory.
2.3
For the duration of this Agreement
the FUTURE SCAN Group shall obtain the Scanner only from
Longport.
2.4
FUTURE SCAN shall not, during this
Agreement without the prior written consent of Longport, be
involved directly or indirectly whether on its own account or for
or through any other person, including its sub-agents, in the
manufacture, sale, distribution, promotion or marketing in the
Territory of any ultrasound based product which (a) competes
or (b) is capable of competing with the Scanner.
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2.5
For the duration of this Agreement,
FUTURE SCAN shall not seek customers for the Scanner outside the
Territory and will not establish or maintain any branch or
distribution depot for the Scanner outside the
Territory.
2.6
In addition, the appointment of
FUTURE SCAN is subject to the Terms and Conditions.
3.
UNDERTAKINGS AND
OBLIGATIONS
3.1
The FUTURE SCAN Group undertakes to
Longport :
(a)
not to register or assert any rights
to :
(i)
any trade mark, patent, registered
design, internet domain name or other intellectual property rights
owned from time to time by any member of the Longport
Group;
(ii)
the design of the Scanner or any
invention contained therein;
(b)
not to be involved in any activity
for the duration of this Agreement which may bring the
intellectual property rights or other rights of Longport or
Longport the entity into question or disrepute;
(c)
bring to the attention of Longport
any improper or wrongful use of the Scanner or any possible
infringement of Longport’s intellectual property rights, or
any faults or defects in the Scanner which have become known to
FUTURE SCAN;
(d)
shall comply fully with the
requirements of all relevant regulatory bodies and shall ensure
that it does not take any action or make any representation which
may impede Longport in obtaining or continuing subsistence of any
such approval; and
(e)
to attend the initial training
courses on the use of the Scanner, and any further training courses
required in the event that Longport produces an update, enhancement
or modification to the Scanner.
3.2
FUTURE SCAN and its Sub-Agent shall
not through any means state or imply that FUTURE SCAN has the any
exclusive distribution rights in the Territory.
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3.3
The FUTURE SCAN Group and Longport
Group undertake to each other during the continuance of this
Agreement as well as after its termination to maintain the
confidentiality obligations contained in Condition 21 of
Schedule 2.
3.4
For the duration of this Agreement,
FUTURE SCAN and Longport agree not to issue press releases or other
announcements that mentions the other party or its interests
without first seeking the written authorization, and whenever
possible the agreement of the other party. Neither party should
unnecessary delay announcements by the other party and should give
good reason why they have requested editorial changes, including
when appropriate reference to this Agreement. Whenever a
significant event occurs involving Longport and FUTURE SCAN, both
parties shall co-ordinate the issuance of appropriate press
releases in a timely manner. For the avoidance of doubt the events
described in Clause 7.1, subject to Clause 7.6, shall be considered
a significant event.
4.
RESTRICTIVE
COVENANTS
4.1
The FUTURE SCAN Group hereby
warrants and undertakes in favor of Longport :
(a)
not for a period of 36 months after
the date of termination of this Agreement howsoever arising to be
directly or indirectly (whether as a shareholder, partner,
consultant, employee, agent or principal or in any other capacity)
engaged concerned or interested in any business or company carrying
on within the Territory the business of the manufacture,
distribution or sale of any ultrasound device which is capable of
competing with the Scanner, except that FUTURE SCAN may be
beneficially interested in the securities in any company carrying
on within the Territory such a business if such securities are
listed on a recognized Stock Exchange and the FUTURE SCAN Group
together with any associate neither holds nor is beneficially
interested in more than a total of five per cent of all the
securities in that company;
(b)
not at any time after the
termination of this Agreement to use or hold itself out as using
any of the corporate or trading names of Longport or any colorable
imitation or derivative thereof;
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(c)
not for a period of 12 months after
the termination of this Agreement to directly or through any other
person to employ or seek to entice away from the employment of
Longport any person who was at any time during the twelve months
prior to the termination of this Agreement employed by Longport;
and
(d)
not at any time after the
Termination of this Agreement to represent it or permit it to be
held out as being in any way connected with or interested in the
business of Longport.
4.2
The parties to this Agreement agree
that the restrictions set out in Clause 4.1 are separate and
severable undertakings and are reasonable in the circumstances and
necessary for the protection of the legitimate interests of
Longport and the goodwill of FUTURE SCAN. If, however, any
part of Clause 4.1 is found to be invalid or unenforceable for any
reason then the remainder of Clause 4.1 shall continue in full
force and effect.
5.
DURATION
5.1
Subject to Clause 12 below, this
Agreement shall commence on the Effective Date and shall continue
for an initial period expiring on the third anniversary after the
Effective Date (“the Initial Term”).
6.
SUPPLY
6.1
Subject to Clause 7.6 below and
Condition 14 (Force Majeure) of the Terms and Conditions, Longport
shall use all reasonable endeavors to supply the Scanner to FUTURE
SCAN in accordance with each Order placed by FUTURE
SCAN.
6.2
Longport shall be entitled at any
time or from time to time to make such modifications to the
specification of the Scanner as it may in its sole discretion think
fit. Whenever possible Longport will review any change in
specification with FUTURE SCAN before they are
implemented.
6.3
FUTURE SCAN shall in respect of each
Order for the Scanner to be supplied hereunder be responsible for
:
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(a)
ensuring the accuracy of the
Order;
(b)
providing Longport with any
information which is reasonably necessary in order to enable
Longport to fulfill the Order;
6.4
Upon receipt and confirmation of
each Order Longport shall, as soon as is reasonably practicable,
inform FUTURE SCAN of Longport’s estimated delivery date for
the order. Longport shall use all reasonable endeavors to
meet the delivery date, normally four months after receipt of
order, but time of delivery shall not be of the essence and
accordingly Longport shall have no liability to FUTURE SCAN if,
notwithstanding such endeavors, there is any delay in delivery.
Longport shall however advise FUTURE SCAN of any expected delivery
delays at the earliest practical opportunity.
6.5
The terms of this Agreement, which
includes the Schedules attached hereto, shall apply to the
exclusion of any other terms and conditions including any implied
by trade, custom, practice or course of dealing. Purported
provisions to the contrary are excluded.
7.
PAYMENTS
7.1
On signature of this Agreement
FUTURE SCAN shall provide Longport with an initial order for 100
Scanners at a cost of $20,000 per Scanner. A 20% advance
payment shall be made for these units, however half of this advance
payment shall be deferred until the first 10 scanners are
delivered. Within 5 business days from the date of applying
FUTURE SCAN’s and Longport’s authorized signature to
this Agreement, Longport shall receive from FUTURE SCAN half of the
advance payment ($200,000) by wire transfer for these Scanners.
Longport shall immediately notify FUTURE SCAN of the receipt of the
transfer of these funds.
7.2
This agreed selling price of $20,000
per Scanner excludes any applicable taxes and duties and does not
include any end user customer training and it is expected that
FUTURE SCAN or one of its sub-agents shall provide the first level
of direct customer support in both application and customer support
matters.
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7.3
The first 10 units covered by this
Agreement shall be delivered by Longport to FURTURESCAN within 120
days of signature of this Agreement. Within 5 business days of
receipt of these first 10 Scanners FUTURE SCAN shall pay to
Longport the outstanding deposit of $200,000 and the residue amount
due on these first 10 scanners ($160,000).
7.4
Future scan shall take delivery of
the remaining 90 scanners at a rate of approximately 10 per month
following the acceptance of the first ten scanners; however, all
scanners shall be accepted and paid for in full by FUTURE SCAN, no
longer than 11 months following the delivery date of the first 10
scanners.
7.5
Upon FUTURE SCAN accepting the last
of the ordered 100 scanners, Longport shall issue to FUTURE SCAN
200,000 warrants. Each warrant shall entitle FUTURE SCAN to
purchase one common share of restricted stock of
Longport, Inc., at the price of $1.75 per share,
for a period of one year from the date of issue of the
warrant. In the event that the common stock trades at or
above a price of $3.50 per share for a period of 5
consecutive trading days, following the date of the issue of the
warrant, FUTURE SCAN has sixty calendar days from the last
date of the five consecutive trading days to exercise any or all of
the warrants. Any warrants not exercised during this time
period shall be canceled at the end of this time period.
7.6
This Agreement shall not be
considered consummated until the payments described in 7.1 are
received by Longport. If Longport does not receive the payment
described in Clause 7.1 within 5 business days of signature of this
Agreement, this Agreement will automatically be null and
void.
7.7
Between the time of signature of
this Agreement and the day that the initial deposit of the $200,000
is received by Longport, no press release or announcement shall be
made by either party in regard to this Agreement. Further, if any
party believes that the other party, any company, sub-agent or any
individual associated with that party has directly or indirectly
gained or tried to gain or enabled an opportunity for any third
party to gain any benefit from the existence of this Agreement
before it has been announced to the public at large this Agreement
can be made null and void, subject to Clause 10.3.
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7.8
FUTURE SCAN’s normal purchase
price for the Scanner shall be $20,000 per unit when ordered in
quantities of 10 units or greater, excluding any applicable taxes
and duties. A 20% advance payment shall be made when each order is
placed. This price does not include end user customer training and
it is expected that FUTURE SCAN or one of its sub-agents shall
provide the first level of direct customer support in both
application and operational matters. Service support, training
provision as well as component costs available through Longport are
defined in Schedule 3 of this Agreement.
7.9
Longport has the right to change the
purchase price for future orders. Not withstanding this Clause 7.9
it is recognized that FUTURE SCAN can purchase additional scanners
at a set price of $20,000 until September 3 rd
2004.
8.
MARKETING
8.1
FUTURE SCAN shall use its best
endeavors to promote the sale of the Scanner throughout the
Territory.
8.2
FUTURE SCAN shall be entitled to
market, resell or lease the Scanner to its customers at such prices
as it may determine.
8.3
FUTURE SCAN shall respond promptly
to all enquiries from prospective customers.
8.4
In connection with the promotion and
marketing of the Scanner FUTURE SCAN :
(a)
shall not misrepresent Longport and
shall make clear in all dealings with customers and prospective
customers that it is acting as distributor of the Scanner and not
as Longport’s agent, and shall use all reasonable endeavors
to protect the good name and reputation of Longport throughout the
Territory;
(b)
shall comply with all legal
requirements from time to time in force relating to the storage and
sale of the Scanner;
(c)
inform Longport in writing of its
selling price current from time to time;
(d)
provide Longport on a quarterly
basis (or on such other basis as agreed from time to time) with a
report, in such form as Longport may reasonably require, of sales
of the Scanner which it has made in the preceding 3 months and
containing such other information as Longport may reasonably
require;
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(e)
from time to time consult with
Longport’s representatives for the purpose of assessing the
market in the Territory and permit them to;
(i)
inspect any premises or documents
used by FUTURE SCAN in connection with the sale of the Scanner;
or
(ii)
accompany FUTURE SCAN on visits to
customers or potential customers, subject to the agreement of the
customer;
(f)
at the request of Longport provide
to it copies of such sales catalogues, sales brochures and sales
manuals as relate to the Scanner;
(g)
use in relation to the Scanner only
such advertising promotional and selling materials as are approved
in advance in writing by Longport;
(h)
maintain an active and suitably
trained sales force;
8.5
In connection with the promotion and
marketing of the Scanner, Longport shall :
(a)
provide FUTURE SCAN with literature
in English in relation to the Scanner. The cost of this literature
shall be borne by Longport if requested in reasonable quantities
and in Longport’s standard format, but at FUTURE SCAN’s
expense if literature is requested in quantities greater than
thought reasonable by Longport or if requested in a FUTURE SCAN
specified format;
(b)
support FUTURE SCAN by means of
comprehensive website coverage, which shall include the contact
details of FUTURE SCAN and links to any appropriate FUTURE SCAN
website(s);
(c)
provide FUTURE SCAN with access to a
global network of research activities, including opportunities for
FUTURE SCAN to participate in local activities; and
(d)
provide FUTURE SCAN with general
marketing, clinical and technical support and insights into
development activities and new products.
9.
WARRANTIES
9.1
Longport warrants and undertakes in
favor of FUTURE SCAN that :
(a)
Longport is the owner with full
title guarantee of each Scanner sold or offered for sale to FUTURE
SCAN pursuant to this Agreement;
(b)
all Scanners delivered hereunder
shall be of satisfactory quality and fit for the purpose for which
they are stated by Longport to be designed;
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(c)
Longport’s Scanner technology
has FDA marketing clearance (FDA Ref K990238);
(d)
Scanners supplied will be UL kite
marked and UL listed under the appropriate medical device category;
and
(e)
the Scanner manufacture will be
undertaken by an FDA registered company.
9.2
FUTURE SCAN warrants in favor of
Longport that it has all necessary power and authority to enter
into this Agreement and to perform the obligations set out herein
and that this Agreement has been properly authorized and
constitutes binding obligations on it.
9.3
In the event of any breach of
Longport’s warranty in Clause 11.1 (whether by reason of
defective materials, production faults or otherwise)
Longport’s liability shall be limited to replacement of the
Scanner in question.
9.4
Notwithstanding anything to the
contrary in this Agreement, Longport shall not, except in respect
of death or personal injury caused by Longport’s negligence,
be liable to FUTURE SCAN by reason of any representation or implied
warranty, condition or other term or any duty at common law, or
under the express terms of this Agreement for any consequential
loss or damage (whether for loss of profit or otherwise and whether
occasioned by the negligence of Longport or its employees or agents
or otherwise) arising out of or in connection with any act or
omission of Longport to the manufacture or supply of the Scanner,
its resale by FUTURE SCAN or its use by any customer.
9.5
Longport shall provide product
liability insurance with reputable insurance companies in the
amount of at least $5 million per claim or series of connected
claims.
10.
TERMINATION
10.1
Longport shall be entitled without
prejudice to its other rights, to terminate this Agreement by
notice in writing to FUTURE SCAN in the event that :
(a)
FUTURE SCAN commits any breach of
its obligations hereunder and fails to remedy such breach within
fifteen (15) Business Days of receipt of notice from Longport
requiring the remedy thereof.
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(b)
FUTURE SCAN makes any arrangement
with its creditors or an order is made or a resolution is passed
for the winding-up of FUTURE SCAN (other than solely for the
purpose of amalgamation or reconstruction) or a receiver,
administrator or administrative rece
