EXHIBIT 10.1
DISTRIBUTOR AND LICENSE AGREEMENT
DISTRIBUTOR AND LICENSE AGREEMENT, dated as of November 3, 2000,
between CARRINGTON LABORATORIES, INC., a Texas corporation ("Carrington"),
and MEDLINE INDUSTRIES, INC., an Illinois corporation ("Medline").
WHEREAS, Carrington manufactures and sells a dermal management
product line, which it presently markets itself through employees and
independent sale representatives;
WHEREAS, Medline has extensive experience in marketing products to
the hospital, nursing home and home health markets and sells certain dermal
management products of its own to such markets;
WHEREAS, Carrington desires that Medline take over the U.S. sales
and marketing function of its dermal management business by becoming its
exclusive distributor in the United States upon the terms and subject to the
conditions set forth in this Agreement;
WHEREAS, Medline desires to become the exclusive distributor in
the United States of Carrington's dermal management products and to take
over Carrington's present employee sales force and independent sale agents
upon the terms and subject to the conditions set forth in this Agreement;
and
WHEREAS, Medline desires that certain dermal management products
presently sold under the Medline brand be also sold under the Carrington
brand, and Carrington is willing to license certain Carrington trademarks
for such purpose upon the terms and subject to the conditions set forth in
this Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
1. Distributorship.
1.1. Appointment and Duties. Effective December 1, 2000 (the
"Effective Date"), Carrington hereby appoints Medline its exclusive
distributor of the dermal management products listed in Exhibit A, as
amended by addition or deletion from time to time by mutual agreement (the
dermal management products listed on Exhibit A, as so amended, the
"Products"), for distribution and sale to the hospital, nursing home and
home health care markets (the "Markets") in the United States, Canada,
Puerto Rico and the Virgin Islands (the "Territory"), subject to the terms
and conditions set forth in this Agreement. The Products listed on Exhibit
A as attached to this Agreement are, as of the date hereof, all of the
dermal management products sold by Carrington to the Market in the
Territory. Medline accepts such appointment and agrees to use reasonable
business efforts consistent with Medline's approach of offering best value
for customers and sales representatives, to sell Products to the Market in
the Territory. Medline will purchase such quantities of Products from
Carrington as may be necessary, in Medline's reasonable judgment, properly
to service and maintain appropriate inventory levels for customers within
the Territory. Between the date hereof and the Effective Date, Carrington
and Medline will take appropriate steps to effectuate the assumption by
Medline of its responsibilities hereunder and Carrington will cease selling
the Products to the Market in the Territory at the close of business on
November 30, 2000.
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1.2. Exceptions to Exclusivity. During the Term (as
hereinafter defined), Carrington will not directly or indirectly sell
Products to the Market in the Territory, except that:
(a) Carrington may continue to sell Products by direct
sale to purchasers who are natural persons and who order such quantities of
Products which do not suggest an intent to resell Products.
(b) Carrington will not assign the existing contracts
listed on Exhibit B. Carrington will continue to honor its obligations to
supply Products under such contracts through this Agreement. Medline and
Carrington will jointly manage and service the accounts which are the
subject of such contracts. It is the intent of the parties that Medline
receive the same economic benefits and undertake substantially the same
obligations from the sale of Products under such contracts as if such
contracts had been assigned to Medline, without any compensation to
Carrington for jointly managing the account. Without limiting the
generality of the preceding sentence, if such accounts are not billed by
Medline, Medline will nevertheless receive compensation equivalent to the
gross margins it would have received had it acted as distributor hereunder
for such accounts in the form of credits against amounts due to Carrington
from Medline under this Agreement. For all Products sold by Medline after
the Effective Date, Medline will be responsible for any distributor rebates
and contract administration fees under such contracts, either by directly
paying same or adjustment of the credits provided for in the preceding
sentence of this Section 1.2(b), as appropriate.
(c) For the avoidance of doubt, the exclusive
distribution rights granted by Carrington to Medline hereunder do not limit
the sale of any product, other than the Products, by Carrington to the oral
care, nutriceutical, veterinary or consumer products markets.
(d) It is the intent of this Agreement that Medline be
the exclusive distributor of all Carrington dermal management products to
the Market in the Territory. Accordingly, if Carrington develops
enhancements of any Product or new dermal management products that it
reasonably believes are suitable for sale to the Market in the Territory,
Carrington will make such enhancements or new products available to Medline
for distribution under this Agreement as additions to or substitutions for
existing Products. If Medline wishes to distribute such enhancements of any
Product or new dermal management products, it will notify Carrington within
90 days of notification from Carrington of the enhancement or new product.
If Medline does not wish to distribute such Product enhancement or new
dermal management product, Carrington may sell, or appoint one or more
distributors to sell, such Product enhancements or new dermal management
products to the Market in the Territory so long as they are not sold under
the Trademarks (as hereinafter defined) and no such enhancement or new
Product competes with an existing Product.
1.3. Territory. Carrington will use reasonable business
efforts to protect the exclusivity granted to Medline in Section 1.1.
Without limiting the generality of the foregoing, it will cease supplying
any purchaser of the Products inside or outside of the Territory if such
purchaser is reasonably believed to be reselling Products to the Market in
the Territory.
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1.4. Sales Outside the Territory. In any geographic area in
which Carrington does not have an exclusive distributor for the Products
(and Carrington will promptly after the execution of this Agreement deliver
to Medline a list of the geographic areas in which it has appointed
exclusive distributors of the Products and promptly notify Medline of any
changes to such list), Medline may sell Products to any customer which is
not at the time a customer of Carrington. Before accepting any order from a
customer outside the Territory, Medline will contact Carrington to ascertain
if such customer is a current Carrington customer. If Medline is able to
develop significant sales of Products in any geographic area outside the
Territory, Carrington and Medline will enter into good faith negotiations
concerning the amendment of this Agreement to include such geographic area
in the Territory.
1.5. Prices and Terms, etc. (a) All Products will initially
be sold by Carrington to Medline at the prices listed on Exhibit A, unless
an authorized special price has been agreed to in writing in accordance with
the procedures described in Section 1.6. All prices include freight and
insurance to a Medline distribution center; provided, that Carrington will
bill Medline, and Medline will pay Carrington for, freight and insurance for
any orders (for shipment to one location at one time) of Products with a
value of less than $5,000. Medline will pay Carrington for all Products not
later than 30 days after date of invoice.
(b) The prices set forth in Exhibit A shall be firm and
not subject to change during the first two Contract Years (as such term is
defined in Section 9). Thereafter, Carrington may, by not less than 90 days
notice, increase the price of each Product not more often than yearly by a
percentage not exceeding the percentage increase in its direct costs of
manufacturing or having manufactured such Product since the later of the
Effective Date or the most recent price adjustment pursuant to this Section
1.5(b). Medline shall have the right to audit, on reasonable notice and
under reasonable conditions, Carrington's cost information to confirm any
increase in direct costs. If Medline informs Carrington that Medline cannot
increase the resale price of any Product by the percentage by which
Carrington has so increased its price (provided, however, that the
provisions of this and the next sentence of this Section 1.5(b) shall not
apply to any price increase by Carrington not in excess of the price
increases permitted under the terms of the Novation Contract), Carrington
and Medline shall negotiate in good faith a price. If the parties cannot
agree on a price adjustment for any Product, Medline may have the Product
manufactured by a third party and Carrington will take all necessary actions
to assist Medline in having the Product manufactured by a third party,
including but not limited to selling to Medline or such third party
sufficient quantities of Acemannan Hydrogel_ (and any other proprietary
components) at a competitive fair market price to manufacture the Product in
the quantities required by Medline. Notwithstanding anything to the
contrary set forth in this Section 1.5(b), if Carrington is able to reduce
its cost of any Product that is outsourced, Carrington will promptly notify
Medline and the price then in effect will be reduced by one-half of such
reduction.
(c) Carrington will not make any material change in any
Product, or change the manufacturer of any Product which is outsourced,
without the written consent of Medline, which shall not be unreasonably
withheld or delayed.
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(d) Carrington will, at Medline's request, provide
documentation of its cost increases underlying any price adjustment and
Medline will, at Carrington's request, from time to time provide Carrington
with the resale prices of any Product for which Carrington has not been
accorded a full cost-based price increase because of the fifth sentence of
Section 1.5(b).
(e) Carrington represents and warrants that (i) the
prices listed on Exhibit A represent, for the period beginning January 2000
and ending September 2000, on a weighted average basis, a not less than 44.9
percent discount from Carrington's current actual selling prices for the
Products, after taking into account all relevant factors including any
distribution rebates, contract administration fees, and other discounts or
rebates (other than tracing or tracking fees ("Tracking Fees")) and (ii) it
has made no commitments that have altered or would reasonably be expected to
alter those results after the Effective Date. In the event that such
discount is reduced as the result of any actions taken or commitments made
by Carrington prior to the Effective Date (but not as a result of any action
taken by Medline thereafter such as change in product mix or pricing),
Medline shall have the right to offset, against amounts owed to Carrington,
the actual dollar loss to Medline up to the date of payment as a result of
such reduced discount and the parties shall adjust Product prices to
compensate for such reduced discount..
(f) Carrington shall be responsible for Tracking Fees
payable to distributors (i) who are currently distributors of the Products,
(ii) with respect to Tracking Fees calculated as a percentage of sales, at a
rate not higher than the rate paid by Carrington for the latest calculation
period preceding the Effective Date and only with respect to sales of the
Products, and (iii) with respect to fixed or periodic Tracking Fees, only
Tracking Fees that Medline would not have to pay such fee absent sale of
Products to such Distributors. Medline will make reasonable business
efforts, consistent with the parties' mutual goal of increasing sales of the
Products, to reduce Tracking Fees. Medline will invoice Carrington for
Tracking Fees for which Carrington is responsible under this Section 1.5(f)
upon payment thereof, including copies of invoices received from each
distributor, and Carrington will either credit the amount of the invoice
against amounts due from Medline to Carrington or pay Medline within 30 days
the invoiced amount.
1.6. Special Pricing. Special pricing for specific Products
to a particular customer may be authorized by Carrington in writing from
time to time at its sole discretion to assist Medline in selling Products to
significant customers. Such special pricing shall be reflected in invoices,
but shall be limited to quantities ordered for the specific customer (and
Medline, at Carrington's request, will furnish Carrington with sales data
pertaining to such customer).
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1.7. Support by Carrington, etc. Carrington will use
reasonable business efforts to support Medline, at a level comparable to the
support it offers other distributors of its products, at such customers in
the Territory and at such trade shows as Carrington and Medline may from
time to time agree to with technical service and other support. Carrington
will also provide assistance to Medline in obtaining new contracts and
renewals of existing contracts. In addition, Carrington will provide
product training, customer seminars, and other activities designed to
support customer purchases, subject to resource availability. Carrington
and Medline will meet not less often than quarterly to discuss marketing
plans, possible new products and any other issues that may arise under this
Agreement.
1.8. Reporting Requirements. Medline will from time to time
(but not more frequently than quarterly) promptly upon the request of
Carrington furnish Carrington with a list of customers and customer
locations to which it has shipped Products during the period specified in
the request, together with the specific Products shipped to each such
customer and customer location, the quantity of each Product shipped and the
price paid for such Product. Upon termination of this Agreement for any
reason, Medline will, not later than 30 days prior to the effective date of
such termination, furnish Carrington with such information for the Contract
Year then in course and the preceding Contract Year.
1.9. Insurance. Medline and Carrington will at all times
during the term of this Agreement maintain workmen's compensation and
product liability insurance with liability limits and insurance companies
acceptable to the other, naming the other as an additional insured.
2. Purchase of Carrington Inventory. Medline will, on the
Effective Date, purchase Carrington's then existing inventory of the
Products (the "Inventory"), exclusive of damaged, defective, obsolete or
otherwise unsalable items and Products needed to fill orders received by
Carrington prior to the Effective Date, at the prices set forth on Exhibit A
and on the terms and conditions set forth in Section 1.5(a). Physical
transfer of the Inventory will commence as soon as possible after the date
hereof. Title and risk of loss will transfer upon payment by Medline of the
purchase price of the Inventory, except that Medline will bear the risk of
loss of any Inventory transferred to it prior to payment therefor. In the
event that (a) Medline has not sold the entire Inventory by June 1, 2001,
Carrington will credit Medline, not later than 30 days after presentation of
a statement, 50 percent of the price paid by Medline to Carrington for any
Products in the Inventory that have not been sold by Medline by June 1, 2001
and (b) in the event Medline has not sold the entire Inventory by December
1, 2001, Carrington will credit Medline, not later than 30 days after
presentation of a statement, the amount obtained by subtracting from the
price paid by Medline to Carrington for any Products in the Inventory that
have not been sold by December 1, 2001, any amount repaid by Carrington to
Medline pursuant to clause (a) of this sentence. Medline will satisfy
orders for any Product from the Inventory before using any such Product
subsequently ordered from Carrington and will refund to Carrington any
amount paid to Medline by Carrington pursuant to this Section 2 with respect
to any unsold Inventory that is subsequently sold. The Inventory will be
delivered to Medline at such times and in such quantities as Medline may
reasonably request and Carrington will cause any Inventory in its possession
to be covered by its property and casualty insurance. Carrington represents
and warrants that, upon payment therefor, Medline will obtain unencumbered
title to the Inventory, that the Inventory is salable in the ordinary course
of Carrington's business as presently conducted and is not obsolete,
outdated or damaged.
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3. Forecasts and Orders.
3.1. Forecasts. Prior to the Effective Date, Medline will
deliver to Carrington (a) a non-binding forecast of its estimated
requirements of each Product for the four month period ended March 31, 2001
and each of the three-month periods ending June 30, September 30 and
December 31, 2001 and (b) a firm forecast, which shall be binding upon
Medline and Carrington, of the amount of each Product to be delivered during
the period commencing on the date hereof and ending March 31, 2001, stating
the dates of requested delivery, the quantity of each Product required on
each such date and the location to which each delivery is to be made.
Subsequently, Medline will deliver to Carrington, 60 days prior to the
commencement of each calendar quarter of each Contract Year during which
this Agreement is in effect, (x) a firm forecast, which shall be binding
upon Medline and Carrington, of the amount of each Product to be purchased
during the immediately following calendar quarter, stating the dates of
requested delivery, the quantity of each Product required on each such date
and the location to which each delivery is to be made, and (y) a non-binding
forecast setting forth, to the best of Medline's ability, its estimated
requirements of each Product for each of the three subsequent calendar
quarters.
3.2. Increases From Forecasts. If the amount of any Product
set forth in such firm forecasts for the four months ended March 31, 2001 or
any calendar quarter exceeds the amount for such calendar quarter set forth
in the preceding forecast referred to in Section 3.1 by more than 11 per
cent, Carrington shall be under no obligation to supply such excess, but
shall use commercially reasonable efforts to do so. Without limiting the
generality of the foregoing, Carrington will allocate any shortage in
supplies, goods outsourced or manufacturing capacity between Medline's
requirements and Carrington's other needs pro rata and will, to the extent
commercially reasonable, substitute supplies of a different Product that is
available and is acceptable to customers as a substitute for the Product in
short supply.
3.3. Purchase Orders. Subject to the foregoing provisions of
this Section 3, Medline will from time to time submit definitive purchase
orders to Carrington setting forth the quantities of each Product to be
supplied, desired delivery dates and shipping instructions consistent with
the industry norm for the time required for the manufacture, shipment and
delivery of Products in the quantities ordered. Carrington will use
commercially reasonable efforts to accommodate any difference between such
purchase orders and the forecasts provided pursuant to Section 3.1.
4. Carrington Warranties.
(a) Carrington warrants that, at the time of shipment
by Carrington, all Products sold and delivered pursuant to this Agreement
will conform to the specifications therefor.
(b) Carrington warrants that all Products sold and
shipped to Medline pursuant to this Agreement will, at the time of such
shipment, not be adulterated or misbranded within the meaning of any
applicable federal, state or municipal law, as such laws are constituted and
effective at the time of shipment and that no such Product will be an
article which may not be introduced into interstate commerce under the
provisions of any applicable federal, state or municipal law.
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(c) Carrington further warrants that, at the time of
shipment, all Products sold and shipped to Medline pursuant to this
Agreement will be in compliance with all applicable governmental regulations
and will have been manufactured in accordance with applicable current good
manufacturing practices ("cGMP") regulations as set forth in 21 CFR 210, as
then in effect, in a facility that is ISO 9000 certified.
(d) THE WARRANTIES SET FORTH IN THIS SECTION 4, OR
OTHERWISE EXPLICITLY SET FORTH IN THIS AGREEMENT, ARE EXPRESSLY IN LIEU OF,
AND CARRINGTON EXPRESSLY DISCLAIMS AND NEGATES, ALL OTHER WARRANTIES,
EXPRESSED OR IMPLIED, ARISING BY OPERATION OF LAW OR OTHERWISE, INCLUDING
IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
5. Indemnification.
5.1. By Carrington. Carrington agrees to indemnify and hold
harmless Medline and its employees, officers, directors, stockholders,
successors and assigns from and against any and all losses, damages, costs
and expenses, including reasonable legal fees and expenses incident thereto,
arising from any suit, claim or demand of any third party relating to (a)
any design or manufacturing defect in any Product, (b) any statement on any
labeling of or literature supplied or approved by Carrington for any Product
that is false or violates any law or regulation of the United States or any
agency, state or locality thereof, and (c) any infringement by any Product
or any labeling, packaging or product literature approved or authorized by
Carrington of any patent, trademark, copyright, design or other intellectual
property right of any third party.
5.2. By Medline. Medline agrees to indemnify and hold
harmless Carrington and its employees, officers, directors, stockholders,
successors and assigns from and against any and all losses, damages, costs
and expenses, including reasonable legal fees and expenses incident thereto,
arising from any suit, claim or demand of any third party relating to (a)
any representations or claims made by Medline or any of its employees, sales
representatives or distributors not contained in the labeling, packaging or
literature furnished or approved by Carrington for the Products, or (b) any
infringement by any labeling, packaging or literature for any Carrington
Product not furnished or approved by Carrington of any patent, trademark,
copyright, design or other intellectual property right of any third party.
6. Carrington Sales Staff. Exhibit C lists all sales staff and
independent sales representatives for the Products. Promptly following the
execution of this Agreement, Medline will make offers of employment
effective the Effective Date to such members of Carrington's sale staff
("Sales Employees") as determined by Medline in its sole discretion.
Carrington will assist Medline in any necessary discussions with employees
and will provide Medline with up to $150,000 reimbursement of any signing or
stay bonuses paid to Sales Employees promptly upon presentation of invoices
for the amounts so actually paid. Carrington will also seek the consent of
Mears Medical Sales Associates, an independent sales representative for the
Products, to the assignment of the Independent Sales Representative
Agreement with Carrington to Medline. Medline will not be responsible for
any salaries, bonuses, commissions or other compensation of Sales Employees
or independent sales representatives that accrue prior to the Effective
Date.
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7. Trademark License.
7.1. License. Subject to the terms and conditions hereof,
Carrington hereby grants to Medline for the term of this Agreement a
nonexclusive right and license to use the Carrington trademarks listed on
Exhibit D (the "Trademarks") in connection with (a) the marketing,
advertisement, promotion and distribution of the Products in the Territory,
(b) the manufacture, marketing, advertisement, promotion and distribution of
any of the Medline products (the "Medline Products") supplied by Carrington
to Medline under a Supply Agreement, of even date herewith, which Carrington
and Medline agree are appropriately to be sold under the Trademarks, and (c)
such additional dermal management products as Carrington and Medline may
from time to time agree to. Such grant is nondivisible, nonassignable and
nonsublicensable. The license hereby granted extends only to the Products,
such Medline Products and such additional dermal management products.
Medline will not make or authorize any use, direct or indirect, of the
Trademarks with any other products.
7.2. Packaging Requirements. (a) Medline will sell the
Products, any Medline Products labeled as Carrington products and any
additional dermal management products as Carrington and Medline may from
time to time agree may bear the Trademarks under the Trademarks using
properly labeled Carrington packaging. Medline agrees to use only those
tags, labels, imprints, cartons and other packaging, and only the format or
formats and designs of tags, labels, imprints, cartons and other packaging
which are presently used for Products, supplied by Carrington or which
Carrington shall first authorize and approve in writing; provided, however,
that Carrington's prior approval shall not be required for Medline's use of
any such items which is consistent with Carrington's use of such items.
Medline shall use Trademarks upon or in connection with Products, Medline
Products and such other dermal management products with the symbol TM or,
where a United States Federal Trademark Registration has been obtained, with
the symbol R. Repacking of the Products may be undertaken by Medline only
with Carrington's express written authorization and in accordance with such
requirements as Carrington may specify, as well as governmental and other
legal requirements covering quality, safety, health, labeling, etc. that may
apply to the repackaged Product.
(b) In order to assure that the appearance and quality of
the tags, labels, imprints, cartons and other packaging are of such style,
nature and appearance and quality as to be adequate and suited to their
exploitation to the best advantage and to the protection and enhancement of
the goodwill pertaining to the Trademarks, Carrington retains the right to
approve or disapprove of such style, nature, appearance and quality.
Medline shall submit for Carrington=s approval prototype samples of any of
its cartons, containers, packaging, tags and labels bearing the Trademarks
prior to any use thereof by Medline; provided, however, that Medline shall
not be required to submit, and Carrington's prior approval shall not be
required for, and such samples where Medline's use of the Trademarks is
consistent with Carrington's use of the Trademarks. In the event Carrington
fails to approve such material in writing within 30 days after the same has
been furnished to Carrington, it shall be deemed rejected by Carrington.
Except as otherwise provided in Section 7, Medline shall not sell or
distribute any Products hereunder or any Medline Products or other dermal
management products under the Trademarks unless and until the prototype
samples thereof have been approved by Carrington in writing. After samples
have been approved, Medline shall at regular intervals, but not less often
than three times per year, submit additional random samples of the cartons,
labels, tapes, containers, packaging, wrapping materials so that Carrington
can determine if they remain in conformity with the standards and
specifications then in effect for such materials.
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7.3. Medline Cooperation. Carrington may in its discretion
file applications for trademark registration or take other actions which it
deems necessary to protect its rights. Such actions shall be taken at
Carrington=s own expense. Medline agrees to cooperate with and assist
Carrington as required to obtain such protection.
7.4. Covenants. (a) Medline shall not, directly or
indirectly, register, or attempt to register, in any country, territory or
jurisdiction, any of the Trademarks (or any other trademark, trade name or
logo of Carrington) or any derivations or adaptations thereof, or any word,
symbol or design which is so similar thereto as to suggest association with
or a sponsorship by Carrington. Medline will conduct its business in a
manner designed to protect the reputation and integrity of the Trademarks
and the goodwill associated therewith.
(b) Medline shall not attack the title of Carrington in
and to the Trademarks, nor will it attack the validity of the license
granted hereunder.
7.5. Ownership, etc. Medline acknowledges and agrees that
Carrington is the sole owner of all right, title and interest in the
Trademarks and all goodwill relating thereto, and that Medline shall not, by
reason of this Agreement or otherwise, acquire any right, title or other
interest therein, other than the limited rights of use granted hereunder.
All goodwill arising from the use of the Trademarks by Medline shall inure
solely to the benefit of Carrington, and Medline hereby irrevocably assigns
to Carrington all other rights including any copyrights created in any
article, label, design or other material bearing the Trademarks, and any
goodwill created by or arising out of such use.
7.6. Medline Product Standards. To the extent used in
connection with any Medline Product or other dermal management product not
manufactured by or otherwise under the control of Carrington, Medline may
only use the Trademarks on products that conform to the standards of the
Products, and all product containers, packaging, product literature,
advertising and other materials bearing the Trademarks or any of them must
be submitted as set forth in this Section 7 to Carrington for approval prior
to their use.
7.7. Promotional Materials. The cost of all promotional
materials, including artwork, involving Products and Medline Products, shall
be borne by Medline. All artwork and designs involving the Products,
Medline Products or other dermal management products bearing any Trademark
and any reproduction thereof, shall notwithstanding their creation and use
by Medline, be and remain the property of Carrington, and Carrington, to the
extent otherwise consistent with this Agreement, shall be entitled to use
the same or to license the use of the same to others; provided, that any
artwork produced by Medline for Medline Products or other dermal management
products that does not use Carrington trade dress may, upon removal of the
Trademarks, continue to be used by Medline without any other restriction.
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7.8. Non-Assignability of License. The rights granted to
Medline hereunder are personal in nature. Without Carrington's prior
written consent, Medline may not, by operation of law or otherwise, assign,
transfer, sublicense, pledge, hypothecate or otherwise permit, authorize,
dispose of or encumber the right to use or any use of any part of the
Trademarks, whether to or by a receiver or trustee of Medline or any
affiliate of Medline or any other third party, and any such attempted
assignment, transfer, sublicense, pledge, hypothecation or other permission,
authorization, disposition or encumbrance in violation of this section shall
be void ab initio.
7.9. Royalty. If Medline uses any of the Trademarks on any
Medline Products or other dermal management products not manufactured for
Medline by Carrington (the "Trademarked Products"), Medline agrees to pay to
Carrington a royalty in an amount equal to a percentage of net sales of
Trademarked Products in any Contract Year determined by the aggregate net
sales by Medline of the Products and the Trademarked Products ("Net Sales")
as follows:
(a) If Net Sales are less than $12.5 million, the royalty
rate is one percent;
(b) If Net Sales are equal to or more than $12.5 million but
less than $15 million, the royalty rate is two percent;
(c) If Net Sales are equal to or more than $15 million but
less than $17.5 million, the royalty rate is three
percent;
(d) If Net Sales are equal to or more than $17.5 million but
less than $20 million, the royalty rate is four percent;
and
(e) If Net Sales are equal to or more than $20 million, the
royalty rate is five percent.
Carrington and Medline further agree that, with respect to high volume
commodity products, the maximum royalty rate will be two percent. Medline
will, not later than 30 days after the end of any Contract Year for which
royalties are due under this Section 7.9, pay Carrington the full amount of
such royalties and deliver to Carrington a statement showing in sufficient
detail the quantities and the prices at which any such Medline Products or
dermal management products were sold during such calendar quarter and its
Net Sales used for the calculation of the royalty rate. Carrington shall
have the right to audit Medline's books and records to verify the accuracy
of such statements. If any such audit results in an increase of five
percent or more in the amount payable by Medline for any such calendar
quarter, Medline will pay any out of pocket costs incurred by Carrington
(including without limitation the fees of outside auditors) in connection
with such audit.
7.10. Termination of License. In the event of the
termination of this Agreement, the license granted under this Section 7
shall immediately terminate, except that Medline may continue to sell its
existing stock of Products and of Medline Products and other dermal
management products carrying Trademarks in accordance with the provisions of
Section 10.4.
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8. Base Royalty Payment. In consideration of the rights to
distribute the Products and to use the Trademarks granted hereby, Medline
will pay Carrington (a) on each of December 1, 2000 and March 1, June 1
and September 1, 2001, the sum of $875,000; (b) on each of December 1, 2001
and March 1, June 1 and September 1, 2002, the sum of $750,000; (c) on each
of December 1, 2002 and March 1, June 1 and September 1, 2003, the sum of
$625,000; (d) on each of December 1, 2003 and March 1, June 1 and September
1, 2004, the sum of $500,000; and (e) on each of December 1, 2004 and March
1, June 1 and September 1, 2005, the sum of $375,000. In the event this
Agreement is terminated by Medline pursuant to Section 10.1, Carrington will
refund to Medline, not later than 10 days after the effective date of
termination, the amount by which such payments received prior to the
effective date of such termination exceeds the number obtained by
multiplying $208,333.33 by the number of months elapsed from the Effective
Date to the effective date of such termination, rounded to the nearest whole
month. The obligation set forth in the preceding sentence of this Section 8
will be secured by a security interest in the Trademarks evidenced by a
Security Agreement in substantially the form set forth in Exhibit E.
9. Term. The term of this Agreement (the "Term") shall commence
on the date hereof and shall continue until November 30, 2005. For purposes
of this Agreement, each 12-month period following the Effective Date hereof
shall be considered a Contact Year.
10. Termination.
10.1. Termination for Cause. This Agreement may be
terminated on 30 days' written notification under any one of the below
conditions:
(a) By either Carrington or Medline, if the other party
attempts to assign this Agreement without its prior
written consent;
(b) By Carrington, if Medline discontinues its dermal
management product business;
(c) By either Medline or Carrington, if the other party
files for or is petitioned into bankruptcy;
insolvency, liquidation or dissolution of assets;
(d) By either Medline or Carrington, if the other party
fails generally to pay its debts and obligations in
accordance with their terms;
(e) By Carrington, if Medline fails to make timely
payment of any Carrington invoice under this
Agreement (other than amounts disputed in good
faith) and such failure continues for 10 days after
notice thereof;
(f) By either Medline or Carrington, if the other party
materially breaches any term or condition of this
Agreement (other than payment of invoices) and such
breach is not corrected within 45 days of
notification of such breach by the other party; and
<PAGE>
(g) By either Medline or Carrington if the other party
fails to materially perform its obligations
hereunder for any reason set forth in Section 14
and such failure continues for 180 days or more.
10.2. Obligations Upon Termination. Upon termination,
Medline will pay Carrington in full the amounts shown on any outstanding
invoices in accordance with the payment terms set forth in Section 1.5 and
any royalty payable pursuant to Section 7.9. No payment of any kind from
either party to the other on account of the termination of this Agreement
shall be due to the other party and neither party will make any claim
therefor. The provisions of Sections 1.8, 2 (as to Carrington's repurchase
obligation only), 4, 5, 7.4(a) (first sentence only), 7.4(b), 7.5, 7.7,
7.10, 8 (penultimate sentence only), 10.3, 11 and 17 shall survive
termination of this Agreement.
10.3. Disposal of Stock Upon Termination or Expiration.
Upon the termination or expiration of this Agreement, Medline will, at the
election of Carrington, (a) return all Products, Medline Products and other
dermal management products bearing the Trademarks to Carrington, which shall
refund the purchase price thereof (such return to be with (i) freight and
insurance prepaid if Carrington has terminated this Agreement for cause or
if the Term of this Agreement has expired, or (ii) with freight and
insurance to be paid by Carrington, if Medline has terminated this Agreement
for cause), or (b) continue selling its stock of Products, Medline Products
and other dermal management products bearing the Trademarks (using
commercially reasonable efforts to do so) for a period of six months
(provided that, without the consent of Carrington, no such sale of Products
shall be at a price which is more than 10 percent below the resale prices
set forth on Exhibit A, as such prices have been amended from time to time
by mutual agreement of the parties), returning all remaining stock of
Products, Medline Products and other dermal management products bearing
Trademarks at the end of such six-month period, with freight and insurance
charged as set forth above, for a refund of the purchase price thereof.
Carrington will pay Medline for returned Products within 30 days of receipt.
10.4. Effect of Termination or Expiration. Upon or after
the expiration of termination of this Agreement, except as otherwise
specifically provided in this Section 10, all rights granted to Medline
hereunder shall forthwith revert to Carrington and Carrington shall be free
to license others to use the Trademarks or any of them in connection with
the sale and distribution of the Products. Medline will refrain from the
use of the Trademarks, or any further direct or indirect reference to or any
thing deemed by Carrington to be similar to the Trademarks in connection
with the distribution or sale of Medline's products except as provided in
Section 10.3.
11. Confidentiality. The Confidential Disclosure Agreement,
dated December 24, 1997 (the "Confidentiality Agreement"), between
Carrington and Medline, shall continue in effect during the Term and may not
be terminated except by an instrument executed by both Carrington and
Medline, notwithstanding anything set forth in the Confidentiality Agreement
to the contrary.
<PAGE>
12. Right of First Offer. In the event that Carrington decides to
sell any of the Trademarks or any other intellectual property pertaining to
or the assets supporting the production of the Products (without, in the
case of such assets, having arranged for replacement thereof in a manner
that will not interrupt the supply to Medline of Products), Carrington will
notify Medline (the "Offer Notice"), specifying the price and the terms and
conditions upon which it is willing to sell. Upon receipt of an Offer
Notice, the parties will negotiate in good faith for a period of 30 days (or
until Medline informs Carrington that it is not interested in purchasing
such intellectual property or assets if prior to the end of such 30-day
period). If Carrington and Medline agree on the terms of such purchase and
sale, the closing shall take place on a date not later than 60 days after
receipt of the Offer Notice. If Carrington and Medline do not reach an
agreement, Carrington may sell the intellectual property or assets to one or
more third parties; provided, however, that if Carrington offers to sell the
intellectual property or assets at a price lower than the lowest price it
had indicated to Medline it would accept (whether contained in the Offer
Notice or later conveyed to Medline in negotiations or otherwise under the
terms of this Section 12) or on terms and conditions materially more
advantageous to the purchaser than those last offered to Medline, Carrington
will notify Medline (a "Subsequent Offer Notice"), stating such lower price
or more advantageous terms and conditions, and Medline may, within 10 days
of its receipt of the Subsequent Offer Notice, accept such price or terms
and conditions and thereupon purchase the intellectual property or assets.
If Medline does not accept such price or terms and conditions, Carrington
shall be free to sell the intellectual property or assets to one or more
third parties at such price and on such terms and conditions. Carrington
will not sell such Trademarks, intellectual property or assets to a third
party unless such third party agrees to be bound by the terms of this
Agreement, to the extent applicable to the property sold.
13. No Agency. It is expressly agreed and acknowledged by the
parties hereto that Medline is an independent contractor selling entirely
for its own account. Medline is solely responsible for all of its expenses
and costs, including costs of invoicing, collection and credit, and
delivery. Nothing contained herein shall be construed to create a
partnership, joint venture or the relationship of employer and employee or
principal and agent of any kind on behalf of Carrington, or grant Medline
authority to bind Carrington in any respect whatsoever. Medline shall be
responsible for any representation it makes with respect to the Products
that are not set forth in Carrington's own Product literature.
14. Force Majeure. Neither Carrington nor Medline shall be
liable for any failure to perform hereunder (other than payment of invoices
and royalties when due) due, in whole or in part, to any contingency or
cause beyond its reasonable control, including without limitation fire,
explosion, earthquake, storm, flood, drought, or other adverse weather
conditions, accident, crop failure, breakdown of machinery, transportation
or handling difficulties, strike, lockout, or other labor difficulties (from
whatever cause arising, and whether or not the demands of employees are
reasonable or within its power to grant), war, insurrection, riot, act of
God or the public enemy, any law, act, order, proclamation, decree,
regulation, ordinance, instruction, or request of any governmental or other
public authority, any order, judgement or decree of any court, delay or
failure of carriers or contractors, labor shortage, or inability to obtain
transportation equipment, raw materials, fuel, power, plant equipment or
materials required for maintenance or repairs.
<PAGE>
15. No Waiver. The failure by either Carrington or Medline to
enforce, at any time, any of the provisions of this Agreement, or to
exercise any option which is herein provided, or to require at any time
performance of any of the provisions herein, shall in no way be construed to
be a waiver of such provisions, nor in any way to affect the validity of
this Agreement or any part thereof, or the right of Carrington or Medline,
as the case may be, to thereafter enforce each and every such provision.
16. Notices. All notices hereunder shall be in writing and shall
be sent by (a) telecopier with confirmation of receipt, (b) prepaid
overnight delivery through a nationally recognized courier service, or (c)
prepaid certified or registered mail, return receipt requested:
If to Carrington, to:
Carrington Laboratories, Inc.
2001 Walnut Hill Lane
Irving, Texas 75038
Attention: President
If to Medline, to:
Medline Industries, Inc.
One Medline Place
Mundelein, Illinois 60060-4486
Attention: President
17. Miscellaneous. This Agreement, together with the exhibits
hereto and the Supply Agreement, constitutes the entire agreement and
understanding between the parties hereto and supersedes all prior agreements
and understandings relating to the subject matter hereof, except for the
Confidentiality Agreement. This Agreement is not assignable by either party
without the prior written consent of the other party hereto and any
attempted assignment not so consented shall be void and of no legal effect.
This Agreement is binding upon and inures to the benefit of the parties
hereto and their respective successors (whether by merger, stock or asset
sale, or otherwise by operation of contract or law) and permitted assigns.
This Agreement may not be amended, nor may the provisions of this agreement
be waived, except by a written instrument signed by both parties, and no
modification of this Agreement or waiver of the terms or conditions thereof
shall be effected by the acknowledgment or acceptance of any purchase order,
shipping or other forms containing other or different terms or conditions.
This Agreement may be executed in several counterparts, each of which is an
original but all of which together shall constitute one instrument. This
Agreement shall be construed in accordance with and governed by the laws of
the State of Illinois without giving effect to its choice of law rules.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Medline
Agreement to be executed by their duly authorized representatives.
CARRINGTON LABORATORIES, INC.
By /s/ Carlton E. Turner
-------------------------
Title:President & CEO
MEDLINE INDUSTRIES, INC.
By: /s/ Andy Mills
------------------
Title: President
Exhibit A - Products and Prices
Exhibit B - Contracts
Exhibit C - Sales Employees and Independent Sales Representatives
Exhibit D - Trademarks
Exhibit E - Security Agreement
<PAGE>
EXHIBIT A
CARRINGTON/MEDLINE
DISTRIBUTOR AND LICENSE AGREEMENT
EXHIBIT A
This Exhibit has been excluded pursuant to a request for confidential
treatment submitted by the registrant to the Securities and Exchange
Commission and has been filed separately with the Securities and Exchange
Commission.
<PAGE>
EXHIBIT B
CARRINGTON/MEDLINE
DISTRIBUTOR AND LICENSE AGREEMENT
EXHIBIT B
This Exhibit has been excluded pursuant to a request for confidential
treatment submitted by the registrant to the Securities and Exchange
Commission and has been filed separately with the Securities and Exchange
Commission.
<PAGE>
EXHIBIT C
CARRINGTON/MEDLINE
DISTRIBUTOR AND LICENSE AGREEMENT
EXHIBIT C
This Exhibit has been excluded pursuant to a request for confidential
treatment submitted by the registrant to the Securities and Exchange
Commission and has been filed separately with the Securities and Exchange
Commission.
<PAGE>
EXHIBIT D
CARRINGTON / MEDLINE
DISTRIBUTOR AND LICENSE AGREEMENT
Exhibit D - Trademarks
Carrington[R] ***
Carrasyn[R]
CarraGauze[R]
CarraSorb[TM]
CarraGinate[TM]
CarraFilm[TM]
SurgiSuites[TM]
CarraSmart[TM]
CarraDres[TM]
CarraColloid[TM]
CarraKlenz[TM]
UltraKlenz[TM]
MicroKlenz[TM]
CarraFoam[TM]
CarraWash[TM]
CarraFree[TM]
CarraScent[TM]
CarraFresh[TM]
CarraDerm[TM]
DiaB[TM]
RadiaCare[TM]
*** As Product Name Only
<PAGE>
EXHIBIT E
TRADEMARK SECURITY AGREEMENT
THIS TRADEMARK SECURITY AGREEMENT ("Agreement") made as of
November 3, 2000, by and between CARRINGTON LABORATORIES, INC., a Texas
corporation ("Carrington"), and MEDLINE INDUSTRIES, INC., an Illinois
corporation ("Medline").
W I T N E S S E T H:
WHEREAS, Carrington and Medline are parties to that certain
Distributor and License Agreement dated as of even date herewith (as such
agreement may be amended, modified, restated and supplemented from time to
time, the "Distributor Agreement"); and
WHEREAS, Medline has required Carrington to execute and deliver
this Agreement (i) in order to secure the obligations of Carrington (A) to
pay to Medline any and all amounts pursuant to Section 8 of the Distributor
Agreement ("Section 8 Amounts"); and (B) to pay to Medline any and all
damages arising from or related to the rejection or breach of the
Distributor Agreement ("Rejection Damages") in connection with an event
described in Section 10.1(c) or (d) of Distributor Agreement with respect to
Carrington (the failure of Carrington to timely pay to Medline any Section 8
Amounts or any Rejection Damages are each hereinafter referred to as an
"Event of Default"); and (ii) as a condition precedent to Medline entering
into the Distributor Agreement;
NOW, THEREFORE, in consideration of the premises set forth herein
and for other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Carrington agrees as follows:
1. Defined Terms, Etc. Unless otherwise defined herein, each
capitalized term used herein that is defined in the Distributor Agreement
shall have the meaning specified for such term in the Distributor Agreement.
The words "hereof," "herein" and "hereunder" and words of like import when
used in this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement, and section references are to
this Agreement unless otherwise specified. All terms defined in this
Agreement in the singular shall have comparable meanings when used in the
plural, and vice versa, unless otherwise specified.
2. Incorporation of Premises. The premises set forth above are
incorporated into this Agreement by this reference hereto and are made a
part hereof.
3. Incorporation of the Distributor Agreement. The Distributor
Agreement and the terms and provisions thereof are hereby incorporated
herein in their entirety by this reference thereto.
4. Security Interest in Trademarks. To secure the complete and
timely payment, performance and satisfaction of Carrington's obligations (A)
to pay Medline any and all Section 8 Amounts; and (B) to pay to Medline any
and all Rejection Damages, Carrington hereby grants to Medline a security
interest in, as and by way of a first mortgage and security interest having
priority over all other security interests, with power of sale to the extent
permitted by applicable law:
<PAGE>
(a) The trademarks, registered trademarks, trademark
applications, service marks, registered service marks and service mark
applications listed on Schedule A attached hereto and made a part
hereof, together with any good will connected with and symbolized by
any such trademarks, trademark applications, service marks, registered
service marks, service mark applications, and (i) all renewals thereof,
(ii) all income, royalties, damages and payments now and hereafter due
and/or payable under and with respect thereto, including, without
limitation, payments under all licenses entered into in connection
therewith and damages and payments for past or future infringements or
dilutions thereof, (iii) the right to sue for past, present and future
infringements and dilutions thereof, and (iv) all of Carrington's
rights corresponding thereto throughout the world (all of the foregoing
trademarks, registered trademarks and trademark applications, and
service marks, registered service marks and service mark applications,
together with the items described in clauses (i)-(iv) in this Section
4(a), are sometimes hereinafter individually and/or collectively
referred to as the "Trademarks"); and
(b) rights under or interest in any now owned or existing and
hereafter acquired or arising trademark license agreements or service
mark license agreements with any other party relating to any of the
Products, whether Carrington is a licensee or licensor under any such
license agreement, together with any goodwill connected with and
symbolized by any such trademark license agreements or service marks
license agreements, including, without limitation, those trademark
license agreements listed on Schedule B attached hereto and made a part
hereof (all of the foregoing are hereinafter referred to collectively
as the "Licenses").
5. Restrictions on Future Agreements. Carrington will not,
without Medline's prior written consent, enter into any agreement,
including, without limitation, any license agreement, which is inconsistent
with this Agreement or the Distributor Agreement, and Carrington further
agrees that it will not take any action, and will use its best efforts not
to permit any action to be taken by others, including, without limitation,
licensees, or fail to take any action, which would in any respect affect the
validity or enforcement of the rights transferred to Medline under this
Agreement or the rights associated with those Trademarks or Licenses.
6. New Trademarks and Licenses. Carrington represents and
warrants that (a) the Trademarks listed on Schedule A include all of the
trademarks, registered trademarks, trademark applications, service marks,
registered service marks and service mark applications now owned by
Carrington which relate to any of the Products; (b) the Licenses listed on
Schedule B include all of the trademark license agreements and service mark
license agreements pursuant to which Carrington is the licensee or licensor
thereunder; and (c) no other liens, claims or security interests have been
granted by Carrington to any other person or entity in such Trademarks and
Licenses. If, prior to the termination of this Agreement, Carrington shall
(i) obtain rights to any new trademarks, registered trademarks, trademark
applications, service marks, registered service marks or service mark
applications, in each case which relate to any of the Products, (ii) become
entitled to the benefit of any trademarks, registered trademarks, trademark
applications, trademark licenses, trademark license renewals, service marks,
registered service marks, service mark applications, service mark licenses
<PAGE>
or service mark license renewals whether as licensee or licensor, in each
case which relate to any of the Products, or (iii) enter into any new
trademark license agreement or service mark license agreement, in each case
which relate to any of the Products, the provisions of Section 4 above shall
automatically apply thereto and all of the foregoing shall be deemed to be
Trademarks. Carrington shall give to Medline written notice of events
described in clauses (i), (ii) and (iii) of the preceding sentence on a
quarterly basis. Carrington hereby authorizes Medline to modify the
Distributor Agreement by amending Schedule B to include any future
trademarks, registered trademarks, trademark applications, service marks,
registered service marks and service mark applications and by amending this
Agreement to include any future trademark license agreements and service
mark license agreements, which are Trademarks or Licenses under Section 4
above or under this Section 6.
7. Royalties. Carrington hereby agrees that the use by Medline
of the Trademarks and the Licenses (if any) as authorized hereunder in
connection with the exercise of its remedies under Section 16 shall be
coextensive with Carrington's rights thereunder and with respect thereto
and, except as set forth in the Distributor Agreement, without any liability
for royalties or other related charges from Medline to Carrington.
8. Right to Inspect; Further Assignments and Security Interests.
Medline may at all reasonable times have access to, examine, audit, make
copies (at Carrington's expense) and extracts from and examine Carrington's
books, records and operations relating to the Trademarks and the Licenses;
provided that, in conducting such inspections and examinations, Medline
shall use reasonable efforts not to unnecessarily disturb the conduct of
Carrington's ordinary business operations.
9. Termination of Medline's Security Interest. This Agreement
is made for collateral security purposes only. This Agreement shall
terminate upon the earlier to upon the earlier to occur of (i) the
expiration of the Term of the Distributor Agreement; (ii) the termination of
the Distributor Agreement by Medline pursuant to Section 10.1 and the
payment by Carrington to Medline of all amounts required under Section 8 of
the Distributor Agreement; and (iii) the termination of the Distributor
Agreement by Carrington pursuant to Section 10.1 thereof. Upon termination
of this Agreement, Medline shall promptly execute and deliver to Carrington,
at Carrington's expense, all termination statements and other instruments as
may be necessary or proper to terminate Medline's security interest in the
Trademarks and the Licenses, subject to any disposition thereof which may
have been made by Medline pursuant to this Agreement.
10. Duties of Carrington. Carrington shall have the duty, to the
extent desirable in the normal conduct of Carrington's business, to
prosecute diligently any trademark application or service mark application
that is part of the Trademarks pending as of the date hereof or thereafter
until the termination of this Agreement. Carrington further agrees (i) not
to abandon any Trademark or License without the prior written consent of
Medline and (ii) to use its reasonable business efforts to maintain in full
force and effect the Trademarks and Licenses, that are or shall be necessary
or economically desirable in the operation of Carrington's business. Any
expenses incurred in connection with the foregoing shall be borne by
Carrington.
<PAGE>
11. Medline's Right to Sue. From and after the occurrence of an
Event of Default, Medline shall have the right, but shall in no way be
obligated, to bring suit in its own name to enforce the Trademarks and
Licenses and, if Medline shall commence any such suit, Carrington shall, at
the request of Medline, do any and all lawful acts and execute any and all
proper documents required by Medline in aid of such enforcement. Carrington
shall, upon demand, promptly reimburse Medline for all costs and expenses
incurred by Medline in the exercise of its rights under this Section 11
(including, without limitation, reasonable fees and expenses of attorneys
and paralegals for Medline).
12. Waivers. Medline's failure, at any time or times hereafter,
to require strict performance by Carrington of any provision of this
Agreement shall not waive, affect or diminish any right of Medline
thereafter to demand strict compliance and performance therewith nor shall
any course of dealing between Carrington and Medline have such effect. No
single or partial exercise of any right hereunder shall preclude any other
or further exercise thereof or the exercise of any other right. None of the
undertakings, agreements, warranties, covenants and representations of
Carrington contained in this Agreement shall be deemed to have been
suspended or waived by Medline unless such suspension or waiver is in
writing signed by an officer of Medline and directed to Carrington
specifying such suspension or waiver.
13. Medline's Exercise of Rights and Remedies upon an Event of
Default. Notwithstanding anything set forth herein to the contrary, it is
hereby expressly agreed that upon the occurrence of an Event of Default,
Medline may exercise any of the rights and remedies provided in this
Agreement.
14. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but the provisions of this Agreement are severable,
and if any clause or provision shall be held invalid and unenforceable in
whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect only such clause or provision, or part hereof,
in such jurisdiction, and shall not in any manner affect such clause or
provision in any other jurisdiction, or any other clause or provision of
this Agreement in any jurisdiction.
15. Modification. This Agreement cannot be altered, amended or
modified in any way, except as specifically provided in Sections 4 and 6
hereof or by a writing signed by the parties hereto.
<PAGE>
16. Cumulative Remedies; Power of Attorney. All of Medline's
rights and remedies with respect to the Trademarks and the Licenses, whether
established hereby, by any other agreements or by law, shall be cumulative
and may be exercised singularly or concurrently. From and after the
occurrence of an Event of Default, and the giving of written notice by
Medline to Carrington of Medline's intention to enforce its rights and
claims against Carrington, Carrington hereby irrevocably designates,
constitutes and appoints Medline (and all Persons designated by Medline in
its sole and absolute discretion) as Carrington's true and lawful attorney-
in-fact, and authorizes Medline and any of Medline's designees, in
Carrington's or Medline's name, from and after the occurrence of an Event of
Default, to (a) endorse Carrington's name on all applications, documents,
papers and instruments necessary or desirable for Medline in the use of the
Trademarks or the Licenses, (b) assign, pledge, convey or otherwise transfer
title in or dispose of the Trademarks or the Licenses to anyone on
commercially reasonable terms, (c) grant or issue any exclusive or
nonexclusive license under the Trademarks or, to the extent permitted, under
the Licenses, to anyone on commercially reasonable terms, and (d) take any
other actions with respect to the Trademarks or the Licenses as Medline
deems in its best interest. Medline shall take no action pursuant to
clauses (a), (b), (c) or (d) of this Section 16 without taking like action
with respect to the entire goodwill of Carrington's business connected with
the use of, and symbolized by, such Trademarks or Licenses. Carrington
hereby ratifies all that such attorney shall lawfully do or cause to be done
by virtue hereof. This power of attorney is coupled with an interest and
shall be irrevocable until such time as (y) all of Carrington's obligations
under Section 8 of the Distributor Agreement have been satisfied in full and
(z) all of Carrington's obligations to pay to Medline Rejection Damages have
been satisfied in full. Carrington acknowledges and agrees that this
Agreement is not intended to limit or restrict in any way the rights and
remedies of Medline under the Distributor Agreement, but rather is intended
to facilitate the exercise of such rights and remedies. Medline shall have,
in addition to all other rights and remedies given it by the terms of this
Agreement, all rights and remedies allowed by law and the rights and
remedies of a secured party under the Uniform Commercial Code as enacted in
any jurisdiction in which the Trademarks or the Licenses may be located or
deemed located.
17. Successors and Assigns. This Agreement shall be binding upon
Carrington and its successors and assigns, and shall inure to the benefit of
Medline and its successors and assigns. Carrington's successors and assigns
shall include, without limitation, a receiver, trustee or debtor-in-
possession to the extent that any of the foregoing are considered to be a
successor or assign of or for the Carrington; provided, however, that
Carrington shall not voluntarily assign or transfer its rights or
obligations hereunder without Medline's prior written consent.
18. Governing Law. This Agreement shall be construed and
enforced and the rights and duties of the parties shall be governed by in
all respects in accordance with the internal laws (as opposed to conflicts
of law provisions) and decisions of the State of Illinois.
19. Notices. All notices or other communications hereunder shall
be given in the manner and to the addresses set forth in the Distributor
Agreement.
<PAGE>
20. Medline's Duty. Medline shall not have any duty with respect
to the Trademarks or the Licenses. Without limiting the generality of the
foregoing, Medline shall not be under any obligation to take any steps
necessary to preserve rights in the Trademarks or the Licenses against any
other parties, but may do so at its option, and all expenses incurred in
connection therewith shall be for the sole account of Carrington and added
to its obligations secured hereby.
21. Section Titles. The section titles herein are for
convenience of reference only, and shall not affect in any way the
interpretation of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
CARRINGTON LABORATORIES, INC., a Texas corporation
By: /s/ Carlton E. Turner
-------------------------
Title: President & CEO
Accepted and agreed to as of November 3, 2000:
MEDLINE INDUSTRIES, INC.
By: s/s Andy Mills
--------------------
Title: President
<PAGE>
Schedule A
to
TRADEMARK SECURITY AGREEMENT
----------------------------
TRADEMARKS
----------
Country Trademark Serial No. Filing Date
------- --------- ---------- -----------
United States Carrington 75-013,311 11/1/95
United States CarraGauze 74-363,323 2/24/93
Brazil
United States Carrasyn 74-493,220 2/22/94
Canada
Mexico
Austria
Benelux
Denmark
Finland
France
Germany
Great Britain
Greece
Ireland
Italy
Liechtenstein
Norway
Portugal
Spain
Sweden
Switzerland
Australia
China
Japan
South Korea
New Zealand
OAPI
Singapore
South Africa
Argentina
Brazil
Chile
Columbia
Costa Rica
Dominican Republic
Venezuela
Brazil CarraSorb
Brazil CarraFilm
Brazil CarraKlenz
<PAGE>
UNREGISTERED TRADEMARKS
-----------------------
Besides CarraSorb, CarraFilm and CarraKlenz, which are not registered in the
United States, Carrington uses the following unregistered trademarks for its
dermal management products:
CarraGinate
SurgiSuites
CarraSmart
CarraDres
CarraColloid
UltraKlenz
MicroKlenz
CarraFoam
CarraWash
CarraFree
CarraScent
CarraFresh
CarraDerm
DiaB
RadiaCare
<PAGE>
Schedule B
to
TRADEMARK SECURITY AGREEMENT
----------------------------
LICENSES
--------
NONE
