SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A-1
AMENDMENT TO
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED JUNE 30, 1996.
Commission file number: 0-16159
LECTEC CORPORATION
(Exact name of Registrant as specified in its charter)
Minnesota 41-1301578
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
10701 Red Circle Drive, Minnetonka, Minnesota 55343
(Address of principal executive offices)
Registrant's telephone number, including area code: (612) 933-2291
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, ($0.01 par value)
(Title of Class)
Exhibit Index Appears on Page 7
FILING OF REVISED EXHIBITS 10.17 AND 10.19
On September 30, 1996, LecTec Corporation (the "Company") filed its
Annual Report on Form 10-K for the Fiscal Year Ended June 30, 1996 (the "Form
10-K"). Certain confidential portions of Exhibits 10.17 and 10.19 were omitted
from such Exhibits; these portions were filed separately with the Securities and
Exchange Commission (the "Commission") pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934, as amended, and accompanied by a confidential treatment
request. In a comment letter dated November 14, 1996, the Commission requested
that the Company add certain language to each place in the Exhibits in which
confidential information had been omitted. In addition, the Commission made
certain comments regarding the scope of the confidential treatment requested
with respect to Schedule B to Exhibit 10.17 and Exhibit A to Exhibit 10.19, in
response to which the Company is amending its confidential treatment request
with regard to those items. The sole purpose of this Amendment 10-K/A-1 is to
refile Exhibits 10.17 and 10.19 to include such language and to amend the
information as to which confidential treatment has been requested in Schedule B
to Exhibit 10.17 and Exhibit A to Exhibit 10.19.
Other than such amended Exhibits 10.17 and 10.19, this Amendment
10-K/A-1 contains no financial statements, financial statement schedules,
exhibits and or other papers and documents.
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) Financial Statements, Schedules and Exhibits
1. Financial Statements
The following consolidated financial statements of the Company and its
subsidiaries are filed as a part of this Form 10-K in Part II, Item 8:
(i) Report of Independent Certified Public Accountants
(ii) Consolidated Balance Sheets at June 30, 1996 and 1995
(iii) Consolidated Statements of Operations for the years
ended June 30, 1996, 1995 and 1994
(iv) Consolidated Statements of Shareholders' Equity for
the years ended June 30, 1996, 1995 and 1994
(v) Consolidated Statements of Cash Flows for the years
ended June 30, 1996, 1995 and 1994
(vi) Notes to the Consoldiated Financial Statements
2. Financial Statement Schedules :
All schedules have been omitted since the required information is not
present or not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the financial
statements or the notes thereto.
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3. Exhibits Method of Filing
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<S> <C> <C>
3.01 Articles of Incorporation of Registrant, as amended (1)
3.02 By-laws of Registrant (1)
10.01 Service Agreement dated July 1, 1986, between LecTec (1)
International, Inc., a U.S. Virgin Islands
corporation, and LecTec Corporation, relating to the
sale, lease or rental of certain property outside the
United States.
10.02 Distribution and Commission Agreement dated July 1, (1)
1986, between LecTec International, Inc., a U.S.
Virgin Islands corporation, and LecTec Corporation,
relating to the sale, lease or rental of certain
property outside the United States.
10.03 1986 Incentive Stock Option Plan (1)
10.04 Agreement dated June 1, 1983, between LecTec (1)
Corporation and George Ingebrand, relating to the
grant of stock-equivalent units.
10.05 Certificate of Secretary pertaining to Resolution of (1)
Board of Directors of LecTec Corporation, dated
October 30, 1986, implementing a Profit Sharing Bonus
Plan.
10.06 Research Agreement dated December 31, 1991, between (2)
LecTec Corporation and the University of Minnesota,
whereby LecTec Corporation received exclusive rights
to market and sell a non-nicotine compound to be
mutually developed for smoking cessation.
10.07 Assignment and Mutual Release Agreement dated March (2)
9, 1993 between Pharmaco Behavioral Associates, Inc.,
Robert M. Keenan, Ph.D., M.D. and the University of
Minnesota, whereby the University assigned title,
royalty and patent rights associated with the
technology to alleviate symptoms of tobacco
withdrawal to Pharmaco Behavioral Associates, Inc.
and Dr. Keenan. Also included is a mutual release of
all parties on all past title, royalty and patent
rights.
10.08 License Agreement dated March 9, 1993 between (2)
Pharmaco Behavioral Associates, Inc. and LecTec
Corporation, whereby the Company received an
exclusive, worldwide license to market, make and
sublicense product associated with the technology to
alleviate symptoms of tobacco withdrawal.
10.09 Consultant Contract and Invention Assignment dated (2)
March 9, 1993 between Robert Keenan, Ph.D., M.D. and
LecTec Corporation, whereby the Company received
assignment of patent and invention rights associated
with the technology to alleviate symptoms of tobacco
withdrawal including provisions that the Company
enter into a consulting agreement with Dr. Keenan.
10.10 Research Agreement dated June 30, 1992, between (2)
LecTec Corporation and Natus Corporation, whereby
Natus will fund the the development of an analgesic
patch for exclusive rights to sell the the product.
10.11 Stock Investment and Repurchase Agreement dated July (2)
1, 1992, between LecTec Corporation and Natus
Corporation, whereby LecTec purchased Common Stock of
Natus Corporation.
10.12 Amendments dated March 18, 1993 to the original (2)
Research Agreement dated June 30, 1992, between
LecTec Corporation and Natus Corporation.
10.13 Subscription Agreement dated June 17, 1993 between (2)
LecTec Corporation and Natus Corporation.
10.14 A Promissory Note dated June 17, 1993 between LecTec (2)
Corporation and Natus Corporation. Included in the
note is an option for LecTec to receive common stock
of Natus in lieu of payment.
10.15 Amended and Restated Stock Option Agreement between (3)
LecTec Corporation and Natus Corporation, whereby
LecTec has obtained the option to acquire the
additional shares required to equal 51% of the Common
Stock of Natus.
10.16 Contribution Agreement dated March 12, 1996 between (4)
Natus Corporation and ACM Investments, L.L.C.
regarding the acquisition of an equity interest in
Natus L.L.C
*10.17 Distribution Agreement dated March 12, 1996 between (4)
LecTec Corporation, Natus Corporation and Natus
L.L.C.
10.18 Operating Agreement dated March 12, 1996 between (4)
Natus L.L.C., ACM Investments, L.L.C., Natus
Corporation and Natus Management, Inc.
*10.19 Marketing and Distribution Agreement dated January (4)
11, 1996 between LecTec Corporation, Natus
Corporation and CNS, Inc. regarding an analgesic pain
patch
10.20 Credit Agreement dated May 1, 1996 between LecTec (4)
Corporation and The First National Bank of Saint
Paul, a national banking association, whereby LecTec
Corporation has an unsecured $1 million working
capital line of credit
10.21 Revolving Credit Note dated May 1, 1996 between (4)
LecTec Corporation and The First National Bank of
Saint Paul, a national banking association
10.22 Working Capital Loan Agreement dated September 5, (4)
1995 between LecTec Corporation and Natus Corporation
relating to a loan from LecTec to Natus Corporation
10.23 Form of Working Capital Loan Agreement dated (4)
September 5, 1995; between Natus Corporation and
various shareholders relating to loans to Natus
Corporation
21.01 Subsidiaries of the Company (3)
23.01 Consent of Grant Thornton LLP (4)
27.01 Financial Data Schedule (4)
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</TABLE>
* Filed with this report on Form 10-K/A-1, Amendment to Form
10-K, for the fiscal year ended June 30, 1996. Confidential
treatment has been requested for portions of this Exhibit
pursuant to Rule 24b-2 under the Securities Exchange Act of
1934 as amended, the confidential portions have been deleted
and filed separately with the Securities and Exchange
Commission together with a confidential treatment request.
(1) Incorporated herein by reference to the Company's Form S-18
Registration Statement (file number 33-9774C) filed on October
31, 1986 and amended on December 12, 1986.
(2) Incorporated herein by reference to the Company's Annual
Report on Form 10-K for the year ended June 30, 1993.
(3) Incorporated herein by reference to the Company's Annual
Report on Form 10-K for the year ended June 30, 1994.
(4) Filed herewith.
(b) 1. Reports on Form 8-K.
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report on Form
10-K/A-1 Amendment to Form 10-K to be signed on its behalf by the undersigned,
thereunto duly authorized, on the 27th day of November, 1996.
LECTEC CORPORATION
/s/Rodney A. Young
------------------
Rodney A. Young
Chief Executive Officer, President
and Chairman
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
/s/Rodney A. Young November 27, 1996
- -------------------------------------------
Rodney A. Young
Chief Executive Officer, President
Chairman
(Principal Executive Officer)
/s/Justin W. Shireman November 27, 1996
- -------------------------------------------
Justin W. Shireman
Controller
(Principal Financial and Accounting Officer)
/s/Rodney A. Young November 27, 1996
- -------------------------------------------
Rodney A. Young
Chief Executive Officer, President,
Chairman, Director
/s/Alan C. Hymes November 27, 1996
- -------------------------------------------
Alan C. Hymes
Director
/s/Lee M. Berlin November 27, 1996
- -------------------------------------------
Lee M. Berlin
Director
/s/Paul Johnson November 27, 1996
- -------------------------------------------
Paul Johnson
Director
/s/Alan J. Wilensky November 27, 1996
- -------------------------------------------
Alan J. Wilensky
Director
EXHIBIT INDEX
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Exhibits Page
-------- ----
3.01 Articles of Incorporation of Registrant, as amended (Note 1)
3.02 By-laws of Registrant (Note 1)
10.01 Service Agreement dated July 1, 1986, between LecTec
International, Inc., a U.S. Virgin Islands corporation, and
LecTec Corporation, relating to the sale, lease or rental of
certain property outside the United States (Note 1).
10.02 Distribution and Commission Agreement dated July 1, 1986,
between LecTec International, Inc., a U.S. Virgin Islands
corporation, and LecTec Corporation, relating to the sale,
lease or rental of certain property outside the United States
(Note 1).
10.03 1986 Incentive Stock Option Plan (Note 1).
10.04 Agreement dated June 1, 1983, between LecTec Corporation and
George Ingebrand, relating to the grant of stock-equivalent
units (Note 1).
10.05 Certificate of Secretary pertaining to Resolution of Board of
Directors of LecTec Corporation, dated October 30, 1986,
implementing a Profit Sharing Bonus Plan (Note 1).
10.06 Research Agreement dated December 31, 1991, between LecTec
Corporation and the University of Minnesota, whereby LecTec
Corporation received exclusive rights to market and sell a
non-nicotine compound to be mutually developed for smoking
cessation (Note 2).
10.07 Assignment and Mutual Release Agreement dated March 9, 1993
between Pharmaco Behavioral Associates, Inc., Robert M.
Keenan, Ph.D., M.D. and the University of Minnesota, whereby
the University assigned title, royalty and patent rights
associated with the technology to alleviate symptoms of
tobacco withdrawal to Pharmaco Behavioral Associates, Inc. and
Dr. Keenan. Also included is a mutual release of all parties
on all past title, royalty and patent rights (Note 2).
10.08 License Agreement dated March 9, 1993 between Pharmaco
Behavioral Associates, Inc. and LecTec Corporation, whereby
the Company received an exclusive, worldwide license to
market, make and sublicense product associated with the
technology to alleviate symptoms of tobacco withdrawal
(Note 2).
10.09 Consultant Contract and Invention Assignment dated March 9,
1993 between Robert Keenan, Ph.D., M.D. and LecTec
Corporation, whereby the Company received assignment of
patent and invention rights associated with the technology to
alleviate symptoms of tobacco withdrawal, including provisions
that the Company enter into a consulting agreement with Dr.
Keenan.
10.10 Research Agreement dated June 30, 1992, between LecTec
Corporation and Natus Corporation, whereby Natus will fund the
the development of an analgesic patch for exclusive rights to
sell the the product (Note 2).
10.11 Stock Investment and Repurchase Agreement dated July 1, 1992,
between LecTec Corporation and Natus Corporation, whereby
LecTec purchased Common Stock of Natus Corporation (Note 2).
10.12 Amendments dated March 18, 1993 to the original Research
Agreement dated June 30, 1992 between LecTec Corporation and
Natus Corporation (Note 2).
10.13 Subscription Agreement dated June 17, 1993 between LecTec
Corporation and Natus Corporation (Note 2).
10.14 Promissory Note dated June 17, 1993 between LecTec Corporation
and Natus Corporation. Included in the note is an option for
LecTec to receive common stock of Natus in lieu of payment
(Note 2).
10.15 Amended and Restated Stock Option Agreement between LecTec
Corporation and Natus Corporation, whereby LecTec obtained the
option to acquire the additional shares required to equal 51%
of the Common Stock of Natus (Note 3).
10.16 Contribution Agreement dated March 12, 1996 between Natus
Corporation and ACM Investments, L.L.C.regarding the
acquisition of an equity interest in Natus L.L.C
*10.17 Distribution Agreement dated March 12, 1996 between LecTec
Corporation, Natus Corporation and Natus L.L.C
10.18 Operating Agreement dated March 12, 1996 between Natus L.L.C.,
ACM Investments, L.L.C., Natus Corporation and Natus
Management, Inc.
*10.19 Marketing and Distribution Agreement dated January 11, 1996
between LecTec Corporation, Natus Corporation and CNS, Inc.
regarding an analgesic pain patch
10.20 Credit Agreement dated May 1, 1996 between LecTec Corporation
and The First National Bank of Saint Paul, a national banking
association, whereby LecTec Corporation has an unsecured $1
million working capital line of credit
10.21 Revolving Credit Note dated May 1, 1996 between LecTec
Corporation and The First National Bank of Saint Paul, a
national banking association
10.22 Working Capital Loan Agreement dated September 5, 1995 between
LecTec Corporation and Natus Corporation relating to a loan
from LecTec to Natus Corporation
10.23 Form of Working Capital Loan Agreement dated September 5,
1995; between Natus Corporation and various shareholders
relating to loans to Natus Corporation
21.01 Subsidiaries of the Company (Note 3)
23.01 Consent of Grant Thornton LLP
27.01 Financial Data Schedule
Notes:
* Filed with this report on Form 10-K/A-1, Amendment to Form
10-K, for the fiscal year ended June 30, 1996. Confidential
treatment has been requested for portions of this Exhibit
pursuant to Rule 24b-2 under the Securities Exchange Act of
1934 as amended, the confidential portions have been deleted
and filed separately with the Securities and Exchange
Commission together with a confidential treatment request.
(1) Incorporated herein by reference to the Company's Form S-18
Registration Statement (file number 33-9774C) filed on October
31, 1986 and amended on December 12, 1986.
(2) Incorporated herein by reference to the Company's Annual
Report on Form 10-K for the year ended June 30, 1993.
(3) Incorporated herein by reference to the Company's Annual
Report on Form 10-K for the year ended June 30, 1994.
Certain confidential portions of this Exhibit have been deleted and filed
separately with the Securities and Exchange Commission. An asterisk (*) denotes
confidential information that has been omitted from the Exhibit and filed
separately, accompanied by a confidential treatment request, with the Securities
and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934.
DISTRIBUTION AGREEMENT
This Distribution Agreement ("Agreement") is entered into and is
effective this 12th day of March, 1996, by and among LecTec Corporation, a
Minnesota corporation having its principal place of business at 10701 Red Circle
Drive, Minnetonka, Minnesota ("LecTec"), Natus Corporation, a Minnesota
corporation having its principal place of business at 10701 Red Circle Drive,
Minnetonka, Minnesota ("Old Natus") and Natus, L.L.C., an Arizona limited
liability company having its principal place of business at 3001 East Camelback
Road, Suite 200, Phoenix, Arizona 85016 ("New Natus").
WHEREAS, LecTec is in the business of manufacturing Patches (as defined
below) for marketing, distribution and sale to the general public; and
WHEREAS, Old Natus is in the business of distributing Patches
manufactured by LecTec through means other than multi-level (network) direct
sales marketing and distribution; and
WHEREAS, LecTec owns a majority of the outstanding shares of Old Natus;
and
WHEREAS, New Natus is in the business of multi-level (network) direct
sales marketing and distribution of products such as the Patches and desires to
purchase the Patches for resale to in its multi-level (network) direct sales
marketing and distribution business under Natus trademarks, utilizing Natus
packaging and Natus promotional material; and
WHEREAS, LecTec has the capacity to manufacture or have manufactured
New Natus's requirements of such products; and
WHEREAS LecTec is willing to sell the Patches to Old Natus for
distribution to New Natus, and Old Natus is willing to distribute the Patches to
New Natus, for the multi-level (network) direct sales marketing and distribution
in the Exclusive Market (as defined below);
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and promises expressed herein, LecTec and New Natus agree as follows:
1. Definitions. As used herein, the following terms shall have the
following meanings:
1.1 "Agreement" shall mean this Distribution Agreement,
including any future written amendments, modifications, or supplements made in
accordance herewith.
1.2 "Effective Date" shall have the meaning set forth in
Section 3.
1.3 "Exclusive Market" shall mean the world-wide
person-to-person multi-level network marketing and distribution of Patches, and
specifically does not include institutional, retail, direct response infomercial
or commercial spots, electronic retailing (such as HSN or QVC), marketing and
distribution of Patches. It is expressly understood that this Agreement does not
grant marketing and distribution rights outside the Exclusive Market.
1.4 "FDA" shall have the meaning set forth in Section 13.1(B).
1.5 "LecTec" shall mean LecTec Corporation, a Minnesota
corporation.
1.6 "Old Natus" shall mean Natus Corporation, a Minnesota
corporation.
1.7 "Monthly Forecast" shall have the meaning set forth in
Section 9.2.
1.8 "New Natus" shall mean Natus, L.L.C., an Arizona limited
liability company.
1.9 "Patches" shall mean analgesic patches which meet the
criteria set forth in the United States Food and Drug Administration monograph
on external analgesic drug products for over-the-counter human use which contain
the active ingredients methyl salicylate, menthol and camphor.
1.10 "Re-Commencing Party" shall have the meaning set forth in
Section 19.5.
1.11 "Restricted Period" shall have the meaning set forth in
Section 19.5.
1.12 "Termination Notice" shall have the meaning set forth in
Section 19.4.
2. Engagement. Old Natus hereby engages New Natus, and New Natus hereby
accepts such engagement, to act as the distributor for Old Natus in the
Exclusive Market on the terms and conditions as set forth in this Agreement.
3. Term. The initial term of this Agreement shall begin on the date
first set forth above ("Effective Date") and shall end on February 28, 2001.
This Agreement shall be renewable for successive five (5) year terms thereafter
provided that the parties have, prior to the end of each preceding term, reached
an agreement on the price per Patch and minimum annual purchase amounts
applicable to such renewal term. The parties shall, beginning not later than one
year prior to the expiration of the initial term and each renewal term
thereafter, negotiate in good faith with the object of reaching agreement on the
price per Patch and the minimum annual purchase amount to be applied to the
subsequent renewal term.
4. Limited Exclusivity. New Natus shall be the exclusive distributor of
Patches in the Exclusive Market during the term of this Agreement, including any
renewals hereof. New Natus shall not market Patches in or for resale in any
other markets except the Exclusive Market. Neither LecTec nor Old Natus shall
sell Patches to any other person or entity in or for resale in the Exclusive
Market.
5. Right of First Offer for Other Analgesic Patches. Neither LecTec nor
Old Natus may offer analgesic patches other than the Patches for distribution,
sale or resale, whether directly or through a distributor, in the Exclusive
Market unless LecTec or Old Natus, as the case may be, first offers the right to
distribute such other analgesic patches to New Natus, specifying the terms of
such distribution relationship, and New Natus does not accept such offer. If New
Natus does not accept such offer to distribute such other analgesic patches on
the terms so offered within thirty (30) days of such offer, LecTec or Old Natus,
as the case may be, may offer such other analgesic patches for distribution,
sale or resale in the Exclusive Market, but only through a distributor and only
on such terms as are no more favorable to such distributor than the terms
offered to New Natus pursuant to this Section 5.
6. Order; Minimum Purchase. New Natus shall order Patches by submitting
a purchase order for the quantity of Patches desired to Old Natus. New Natus may
order and purchase Patches in any quantity so long as the quantity equals or
exceeds (*) Patches per order, and so long as the aggregate of all orders
purchased exceeds the minimum annual purchase amounts as set forth on Schedule
A, attached hereto and incorporated by this reference, for each year set forth
in Schedule A. For the purposes of calculating the aggregate orders purchased by
New Natus within the first year of this Agreement, all Patches contributed by
Old Natus to New Natus pursuant to the Contribution Agreement dated March 12th,
1996, shall be deemed to have been purchased by New Natus pursuant to this
Agreement.
7. Price. The purchase price to New Natus for the Patches meeting the
specifications set forth in Schedule B, attached hereto and incorporated by this
reference, shall be (*) per Patch purchased (other than those Patches deemed to
have been purchased pursuant to the last sentence of Section 6). In the event
that New Natus desires to purchase Patches other than Patches meeting the
specifications set forth in Schedule B, New Natus and Old Natus will negotiate
in good faith in an attempt to agree on a price for such Patches. In no event
shall Old Natus's charges to New Natus for Patches, whether meeting the
specifications set forth in Schedule B or otherwise, be in excess of LecTec's or
Old Natus' usual and customary charges for Patches of the same specifications to
distributors in markets other than the Exclusive Market, and if LecTec or Old
Natus offers a distributor in another market a lower price per Patch of the same
specifications, New Natus shall be permitted to purchase Patches on the same
terms as such other distributor.
8. Payment for Orders. New Natus shall pay to Old Natus the purchase
price for Patches ordered from Old Natus within 30 days after such order is
received by New Natus by payment to Old Natus.
9. Duties of New Natus.
9.1 New Natus shall devote the amount of time and effort on
the part of its personnel required to promote, market and distribute the
Patches.
9.2 On or before April 1, 1996, and at the beginning of each
calendar month thereafter during the term hereof, New Natus shall provide Old
Natus with an estimate of New Natus' requirements for Patches for the next
ninety (90) days (the "Monthly Forecast").
9.3 New Natus shall comply with all United States Food and
Drug Administration regulations applicable to New Natus' distribution of the
Patches, including but not limited to storage, distribution and the handling of
customer complaints. New Natus shall not misrepresent the nature of indications
for use of the Patches and will not alter the Patches.
9.4 New Natus shall take such reasonable actions as are
reasonably necessary (including cutting off supplies of Patches to or
terminating distributors) to prevent any domestic or foreign entity from
distributing or selling, directly or indirectly, outside the Exclusive Market
any Patches sold to New Natus hereunder.
10. Duties of LecTec.
10.1 LecTec shall devote the amount of time and effort on the
part of its personnel required to manufacture, produce and timely deliver all
Patches ordered by New Natus. LecTec shall fill and ship all orders placed by
New Natus within thirty (30) days after receipt of the corresponding purchase
order provided that the quantity of Patches in such order does not exceed the
estimate of New Natus' requirements for Patches contained in the Monthly
Forecast. Any orders for quantities of Patches in excess of the foregoing limits
shall be filled and shipped (i) to the extent of the foregoing limits, within
thirty (30) days after receipt of the corresponding purchase order and, (ii) to
the extent in excess of the foregoing limits, within sixty (60) days after
receipt of the corresponding purchase order.
10.2 LecTec and Old Natus shall notify New Natus of any
applications made or proposed (unless such notification is expressly prohibited
by the third party, if any, making or proposing such application) for regulatory
approval in any country or territory for the marketing or sale to the public of
the Patch and any other analgesic patch for which New Natus is the distributor
in the Exclusive Market, promptly upon LecTec or Old Natus obtaining knowledge
of such applications. LecTec and Old Natus will, on a quarterly basis, notify
New Natus of the status of any such applications made or proposed, unless such
notification is expressly prohibited by the third party, if any, making or
proposing such application. At the request of New Natus, LecTec and Old Natus
shall cooperate with New Natus to the extent necessary to include in such
applications a request for regulatory approval for the distribution and
marketing within the Exclusive Market of Patches and any other analgesic patches
for which New Natus is the distributor in the Exclusive Market unless such
inclusion is expressly prohibited by the third party, if any, making such
application. New Natus shall reimburse LecTec and Old Natus for any additional
cost to LecTec and Old Natus directly associated with, and reasonably incurred
as a result of, securing such additional regulatory approval for distribution
and marketing in the Exclusive Market, if such additional regulatory approval is
requested by New Natus.
11. Duties of Old Natus. Old Natus will timely forward any or all
purchase orders and Monthly Forecasts received by it to LecTec. The failure of
Old Natus to timely forward any or all purchase orders or Monthly Forecasts to
LecTec shall not excuse LecTec from the timely performance of its obligations
hereunder, including, without limitation, the obligation to timely fill and ship
orders pursuant to Section 10 hereof.
12. Shipping. All shipping and handling costs; demurrage; storage
costs; transportation insurance; sales or use taxes; and/or duties associated
with any order placed by New Natus shall be paid by New Natus; provided,
however, that any such costs associated with replacement shipments for defective
products shipped by LecTec shall be paid by LecTec. The method and route of
shipment shall be at New Natus's discretion.
13. Representations and Warranties of LecTec and Old Natus.
13.1 LecTec and Old Natus represent and warrant that:
(A) All Patches, their formulations and the
methodology used in their manufacture are owned or controlled by LecTec or Old
Natus and do not infringe upon any formulations or methodology not owned or
controlled by LecTec or Old Natus.
(B) All Patches are produced in conformity
with the United States Food and Drug Administration ("FDA") Tentative Final
Monograph on External Analgesic Drug Products and are permitted to be marketed
in the United States under a deferral letter from the FDA. It is expressly
understood, however, that no representations or warranties are made as to the
existence or likelihood of obtaining final regulatory approval for the marketing
of the Patches in the United States or regulatory approval in any country
outside of the United States for marketing of the Patches.
(C) Old Natus is the authorized distributor
of the Patches in the Exclusive Market and has the right to enter into this
Agreement relating to the distribution of the Patches in the Exclusive Market
pursuant to the terms hereof.
13.2 LecTec represents and warrants that all Patches will meet
LecTec's written quality and quantity specifications and are free from defects
in materials and workmanship.
14. Indemnification of New Natus. LecTec and Old Natus, jointly and
severally, shall indemnify, defend and hold New Natus harmless from and against
any and all demands, penalties, liabilities, claims and expenses, including
without limitation any attorneys' fees and costs, arising out of or relating to
(1) any breach by LecTec or Old Natus of the representations and warranties
contained in Section 13 hereof, or (2) any defects in the formulation,
ingredients, materials, packaging, labeling or printed materials supplied by
LecTec (including, but not limited to, instructions or indications for use) with
respect to the Patches, provided such defect is not directly caused by
negligence on the part of New Natus.
15. Indemnification of LecTec and Old Natus. New Natus shall indemnify,
defend and hold LecTec and Old Natus harmless from and against any and all
demands, penalties, liabilities, claims and expenses, including without
limitation any attorneys' fees and costs, arising out of or relating to any
claims by distributors or customers of New Natus with respect to the Patches,
including, without limitation, false or deceptive advertising or claims of the
Patches, except as set forth in Section 14 hereof, or the breach by New Natus of
Section 9.3 hereof.
16. Insurance. LecTec and New Natus shall each secure and maintain
product liability insurance in the amount of not less than $1,000,000.00 and
will cause the other and Old Natus to be named as an additional insured party as
its interest bears under their respective policies. LecTec and New Natus shall
each provide the other and Old Natus with a certificate of insurance evidencing
the requisite coverage as well as any revisions or changes subsequently made
thereto.
17. Force Majeure. Neither LecTec nor Old Natus shall be responsible or
liable for any loss, damage, detention or delay caused by fire, civil or
military authority, insurrection, riot, or railroad, air or port embargoes.
18. Survival. The covenants and agreements of the parties contained in
Sections 9.3, 14, 15 and 16 hereof shall survive the termination of this
Agreement and for a period of three (3) years following the termination.
Notwithstanding the foregoing, in the event that any party has given notice of a
claim for indemnification within the foregoing time limit, specifying in
reasonable detail the nature and, to the extent then known, the amount of the
claim, such claim shall survive until resolved.
19. Termination.
19.1 Either LecTec and Old Natus, jointly, or New Natus may
terminate this Agreement for cause during its term in the event of a material
default by the other party in its performance of any of the terms and conditions
or covenants of this Agreement, which material default is not cured within
thirty (30) days after receipt of a written notice to the defaulting party from
the nondefaulting party specifying the nature of such default.
19.2 If New Natus fails to make payments in accordance with
Section 8 hereof for Patches delivered to it by LecTec or Old Natus, LecTec and
Old Natus may cease production and delivery of Patches against any then current
and outstanding purchase order placed by New Natus with Old Natus under this
Agreement until New Natus's account is brought current and such action by LecTec
or Old Natus shall not constitute a breach under this Agreement.
19.3 Either LecTec and Old Natus, jointly, or New Natus may
terminate this Agreement at any time if the other party, or (solely with respect
to New Natus' right to terminate) Old Natus, initiates any voluntary proceeding
or becomes the subject of any voluntary proceeding under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, receivership,
dissolution, or liquidation law or statute of any jurisdiction, whether now or
hereafter in effect; is adjudicated insolvent or bankrupt by a decree of a court
of competent jurisdiction; petitions or applies for, acquiesces in or consents
to, the appointment of any receiver or trustee of such party or for all or a
substantial part of the property of the party; makes an assignment for the
benefit of creditors; or admits in writing its inability to pay its debts as
they mature.
19.4 New Natus may terminate this Agreement upon ninety (90)
days notice (the "Termination Notice") to LecTec and Old Natus if it determines
it is not in its best interests to continue to distribute the Patches. If New
Natus wishes to obtain Patches for sale in the Exclusive Market within the
period beginning on the date of the termination of this Agreement pursuant to
this Section 19.4 and ending on the earlier of (i) two (2) years from the date
of termination of this Agreement pursuant to this Section 19.4, or (ii) the date
upon which this Agreement would otherwise have expired pursuant to Section 3
hereof, New Natus shall offer to obtain such Patches from LecTec and Old Natus,
specifying the terms upon which New Natus proposes to obtain such Patches. If
LecTec and Old Natus do not accept such offer on the terms so offered within
thirty (30) days of such offer, New Natus may obtain such Patches from any other
supplier or suppliers, provided New Natus obtains such Patches only on such
terms as are no less favorable to New Natus than those terms offered to LecTec
and Old Natus. Upon the termination of this Agreement pursuant to this Section
19.4, New Natus shall purchase, upon the terms and conditions set forth herein,
all unpurchased Patches manufactured prior to receipt by LecTec of the
Termination Notice in reasonable reliance upon the Monthly Forecast and shall
purchase (at LecTec's actual cost) all unused packaging materials ordered by
LecTec prior to the Termination Notice in reasonable reliance on the Monthly
Forecast.
19.5 LecTec and Old Natus, jointly, may terminate this
Agreement upon ninety (90) days notice to New Natus if they determine it is not
in their best interests to continue to manufacture the Patches. Under such a
termination, neither LecTec nor Old Natus may supply Patches to any other
distributor in the Exclusive Market or any other market during the period (the
"Restricted Period") beginning on the date of the termination of this Agreement
pursuant to this Section 19.5 and ending on the earlier of (i) two (2) years
from the date of termination of this Agreement pursuant to this Section 19.5 or
(ii) the date upon which this Agreement would otherwise have expired pursuant to
Section 3 hereof. If LecTec or Old Natus wishes to supply Patches to any other
distributor in the Exclusive Market or any other market during the Restricted
Period, LecTec or Old Natus, as the case may be, (the "Re-Commencing Party")
shall first offer to New Natus the right to distribute such Patches, specifying
the terms of such distribution relationship. If New Natus does not accept such
offer on the terms so offered within thirty (30) days of such offer, the
Re-Commencing Party may offer such Patches for distribution, sale or resale, but
only through a distributor and only on such terms as are no more favorable to
such distributor than the terms offered to New Natus pursuant to this Section
19.5.
19.6 LecTec and Old Natus, jointly, may terminate this
Agreement within the notice period permitted by the FDA if the United States
Food and Drug Administration forbids production or distribution of the Patches.
19.7 Notwithstanding anything in any agreement between Old
Natus and LecTec to the contrary, in the event of the termination of Old Natus'
right to distribute the Patches for any reason, this Agreement shall not thereby
be terminated. In the event of any such termination, this Agreement shall
continue in full force and effect and New Natus shall continue to be the
distributor of Patches in the Exclusive Market.
20. Miscellaneous.
20.1 At all times during the term of this Agreement, LecTec,
Old Natus and New Natus shall be deemed to be independent parties, and neither
shall have any right or authority to (a) act for the other; (b) incur, assume or
create any obligation, liability or responsibility, express or impled, in the
name or on behalf of the other; or (c) bind the other in any manner whatsoever.
No agency, joint venture, partnership or other representative or fiduciary
relationship between or among any of New Natus, LecTec and Old Natus is created
by, or may be inferred from, this Agreement or the parties' performance
hereunder.
20.2 Neither this Agreement nor any right or obligation
hereunder shall be assigned or otherwise transferred, in whole or in part, by
any party hereto (whether by operation of law or otherwise, without the prior
written consent of each other party. Any assignment or transfer contrary to the
terms hereof shall be null and void and of no force or effect.
20.3 This Agreement is to be governed by and construed and
enforced in accordance with the laws of the State of Arizona without regard to
its internal laws respecting conflicts. The venue for any dispute arising
hereunder shall be Maricopa County, Arizona.
20.4 The prevailing party in any legal proceedings arising out
of this Agreement shall be entitled to recover, in addition to all other legal
or equitable remedies available to it, reasonable attorneys' fees and costs from
the other party.
20.5 All notices, requests, demands and other communications
pursuant to this Agreement shall be in writing and shall be delivered personally
or sent by certified or registered mail, return receipt requested, or by
telefacsimile, with receipt confirmed by telephone and hard copy mailed, to the
parties at the addresses set forth below:
LecTec Corporation
10701 Red Circle Drive
Minnetonka, Minnesota 55343
Fax: (612) 933-1068
Attention:
Natus Corporation
10701 Red Circle Drive
Minnetonka, Minnesota 55343
Fax: (612) 933-1068
Attention:
Natus, L.L.C.
2777 East Camelback Road
Phoenix, Arizona 85016
Fax: (602) 954-9851
Attention: President
Any such notice, request, demand or other communication shall be deemed
to have been given as of the date delivered or sent by telefacsimile, or three
(3) days after deposit in the U.S. mails. A party may change the address to
which notices, requests, demands and other communications hereunder are sent, by
giving written notice of said change of address to the other parties in the
manner above stated.
20.6 Section headings of this Agreement are solely for
convenience and shall not be used in any way in the interpretation of this
Agreement or otherwise be given any legal effect.
20.7 This Agreement, including all of the schedules attached
hereto, together with the Operating Agreement of New Natus dated March 12th,
1996, and the Contribution Agreement by and among Old Natus and ACM Investments,
L.L.C., dated March 12th, 1996, constitute the entire understanding and
agreement between the parties and supersede all previous negotiations,
representations and agreements made by the parties with respect to the subject
matter hereof. There are no understandings or agreements relative hereto which
are not fully expressed herein; no amendments hereof shall be valid unless in
writing and signed by all parties; no waiver or discharge thereof shall be valid
unless in writing and signed by the party or parties whose rights are adversely
affected thereby.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement in
duplicate, each of which shall for all purposes be deemed an original, effective
as of the Effective Date.
"LECTEC" "NEW NATUS"
LECTEC CORPORATION Natus, L.L.C.
/s/Thomas E. Brunelle /s/ Richard J. Bennetts
President and CEO Richard J. Bennetts, President
"OLD NATUS"
NATUS CORPORATION
/s/Kathleen A. Billings
President
SCHEDULE A--MINIMUM ANNUAL PURCHASE
Year Minimum Number of Patches
March 1, 1996 to February 28, 1997 (*)
March 1, 1997 to February 28, 1998 (*)
March 1, 1998 to February 28, 1999 (*)
March 1, 1999 to February 29, 2000 (*)
March 1, 2000 to February 28, 2001 (*)
SCHEDULE B--PATCH SPECIFICATIONS
Individually wrapped patches of a 2 inch by 3 inch dimension, packaged in
boxes of 20 patches each.
Certain confidential portions of this Exhibit have been deleted and filed
separately with the Securities and Exchange Commission. An asterisk (*) denotes
confidential information that has been omitted from the Exhibit and filed
separately, accompanied by a confidential treatment request, with the Securities
and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
1934.
CONFIDENTIAL
MARKETING AND
DISTRIBUTION AGREEMENT
THIS AGREEMENT is made and entered into as of the 11th day of January,
1996 between CNS, Inc., a Delaware corporation ("Distributor"), Natus
Corporation, a Minnesota corporation ("Natus"), and LecTec Corporation, a
Minnesota corporation ("LecTec") (Natus and LecTec are collectively referred
to herein as "Manufacturer").
BACKGROUND
LecTec manufactures the Product (as defined below) and Natus has
rights to the Product. Manufacturer is the owner of the Product. Distributor is
in the business of manufacturing and marketing consumer medical products and has
established sales channels for such products. Manufacturer desires to enter into
a marketing and distribution agreement for the Product on the terms and
conditions set forth in this Agreement
TERMS AND CONDITIONS
NOW THEREFORE, in consideration of the mutual promises contained
herein, the parties hereto agree as follows:
1. Definitions. For purposes of this Agreement, the following terms
shall be defined in the manner set forth below:
1.1 "Product" shall mean Manufacturer's topical analgesic
pain relief patch containing any of the active ingredients methyl salicylate,
menthol and camphor, and all alterations of and improvements to such Product;
provided, however, that Manufacturer may not alter the Product without
Distributor's approval which approval shall not be unreasonably withheld.
1.2 "Territory" shall mean the United States of America and
Canada, and all of their possessions and territories.
1.3 "Exclusive Market" shall mean all retail stores in the
Territory and all wholesalers serving those retail stores.
1.4 "Non-Exclusive Market" shall mean those retail channels
in the Territory other than the channels in the Exclusive Market; provided,
however, that the Non-Exclusive Market shall not include (i) direct response
infommericals and electronic retailing through television-based shopping
programs such as (but not limited to) QVC and HSN, or (ii) direct person to
person marketing, including multi-level distributorships.
1.5 "Growth Factor" for any one calendar year shall mean the
product of Distributor's minimum purchase obligation for the prior year and the
total growth in the United States' retail topical analgesic market for such
prior year as measured by Information Resources, Inc. ("IRI") or Nielson Rating
Services ("Nielson") scanner data.
2. APPOINTMENT OF DISTRIBUTOR.
2.1 Subject to the terms and conditions contained herein,
Manufacturer grants to the Distributor, and the Distributor hereby accepts, the
rights and responsibilities of (i) an exclusive distributor of the Product in
the Exclusive Market in the Territory and (ii) a non-exclusive distributor of
the Product in the Non-Exclusive Market in the Territory. Distributor is
prohibited from selling the Product outside the Exclusive Market or
Non-Exclusive Market or to any customer who is not in the Territory. In
addition, Distributor is hereby granted a right of first refusal to act as
exclusive distributor in the Exclusive Market of any analgesic patch developed
by the Manufacturer other than the Product. Such right of first refusal shall
expire on the first anniversary of the commencement of test marketing of the
Product hereunder.
2.2 Beginning on January 1, 1996 and during the Term of this
Agreement, Manufacturer shall maintain Distributor's exclusivity in the
Exclusive Market in the Territory by not appointing any sales representatives or
distributors, or selling directly through other outlets in the Exclusive Market
in the Territory. Nothing contained herein shall in any manner restrict or limit
Manufacturer in regard to appointing another distributor for the Product or in
regard to selling directly or through other outlets in the Non-Exclusive Market.
Distributor acknowledges that Manufacturer has granted to a third party certain
rights to sell the Product in the Exclusive Market under the trademark "Natus
Patch," which rights are terminable by Manufacturer, and that on January 1, 1996
Manufacturer will give notice to such party to terminate such third party's
rights to sell the Product in the Exclusive Market effective January 30, 1996.
2.3. Each of the parties is an independent contractor and
nothing contained herein shall be deemed or construed to create the relationship
of an agency, partnership, joint venture, franchise or any other association or
relationship between the parties except that of a marketing and distributor
relationship. Distributor is not granted any right or authority to assume or
create any obligations or responsibilities, express or implied, on behalf or in
the name of, Manufacturer or to bind Manufacturer in any manner or thing
whatsoever, without the prior written approval and acceptance by Manufacturer in
each instance.
3. PURCHASE ORDERS.
3.1 No purchase orders of Distributor shall be binding upon
Manufacturer until accepted by Manufacturer in writing. Except as otherwise
agreed in writing by Manufacturer, an order may not be canceled by Distributor
after it has been accepted.
3.2 All sales of Product by Manufacturer to Distributor
hereunder shall be subject to the provisions of this Agreement and shall not be
subject to the terms and conditions contained in any purchase order of
Distributor or confirmation of Manufacturer, except insofar as any such purchase
order or confirmation establishes (i) the quantity of Product to be sold or (ii)
the shipment date of Product.
4. SHIPMENT OF PRODUCT.
4.1 Subject to delay due to force majeure, Manufacturer will
ship Product on the date indicated in Distributor's purchase order if such order
is within the then current sales projection of Distributor. If such order is
beyond the projection, Manufacturer will use commercially reasonable efforts to
meet such order and will not unreasonably withhold or delay its acceptance of
the order.
4.2 All Product sold by Manufacturer to Distributor
hereunder will be shipped by Manufacturer F.O.B. LecTec's loading dock
("Shipping Point").
4.3 Distributor shall assume all risk of loss for Product
upon delivery by Manufacturer of the Product to the Shipping Point.
4.4 Distributor will pay all loading, freight, shipping,
insurance, forwarding and handling charges, taxes, storage, and all other
charges applicable to the Product after it is delivered by Manufacturer to the
Shipping Point.
5. PRICE AND PAYMENT.
5.1 Manufacturer agrees to sell the Product to Distributor
F.O.B. Shipping Point at the price set forth on Exhibit A. Prices may not be
changed without Distributor's prior approval and changes will be based on the
national consumer price index.
5.2 The parties agree to renegotiate in good faith the price
paid by Distributor for the Product in the following situations: (i) for
specified packout configurations, for which different prices will be based on
any cost savings or increases that Manufacturer incurs as a result of such
packout changes, (ii)) in the event price elasticity or competitive pricing
pressures impact Distributor's ability to effectively penetrate the market, in
which case the new prices will be negotiated in good faith; and (iii) to share
manufacturing cost reductions with Distributor in the event that unit sales of
the Product reach sufficient sustainable volume to generate manufacturing
economies of scale, in which case the new prices will be negotiated in good
faith with the understanding that the parties will take into consideration any
cost saving experienced by Distributor in connection with its marketing efforts.
5.3 Manufacturer agrees that it will not (i)) sell
comparably-sized Product to any other party in the Non-Exclusive Market at a
price less than the price paid by Distributor or (ii) sell comparably-sized
Product to any other party at a price less than the price paid for the Product
by Distributor. The restriction in Section 5.3(ii) shall not apply to sales
under (a) agreements existing as of the date of this Agreement or (b) agreements
for sales through direct person to person marketing, including multi-level
distributorships.
5.4 Except as otherwise provided in this Agreement,
Distributor shall pay Manufacturer for each shipment of Product within thirty
(30) days of the date of the invoice issued by Manufacturer in conjunction with
such shipment.
6. RETURNED GOODS POLICY. Distributor may return Product to
Manufacturer upon Manufacturer's prior written approval if such Product deviated
from Distributor's packaging specifications or if the Product or packaging does
not meet the warranties contained in Section 13.1. Complaints concerning
conditions of any Product or packaging must be made within fifteen (15) days of
receipt by Distributor of such Product. Manufacturer shall pay all freight
charges incurred in connection with any return of Product pursuant to this
returned goods policy.
7. MANUFACTURER'S RESPONSIBILITIES.
7.1 In support of Distributor's sales efforts to promote
Product in the Territory, Manufacturer will furnish, at no cost to Distributor,
(i) to the extent known and available to Manufacturer, medical literature
regarding or relating to the Product, including abstracts of clinical studies
and medical journal articles, (ii) sales and promotional materials as may be
developed by Manufacturer, limited to technical data and technical journal
reprints, and (iii) samples of Product in reasonable quantities, as requested by
Distributor and agreed to by Manufacturer, each acting in good faith.
Manufacturer will furnish information to aid in the orientation and training of
Distributor's service and sales personnel.
7.2 Manufacturer will package the Product in conformance
with the packaging specifications provided by Distributor. Distributor will
provide camera-ready artwork for labels and packaging.
7.3 Manufacturer shall take such actions as are necessary
(such as cutting off supply of Product) to prevent any domestic or foreign
entity from distributing or selling, directly or indirectly, the Product in the
Exclusive Market in the Territory.
7.4 Manufacturer shall, with the exception of an IND,
underwrite the cost of any clinical studies necessary to support the Citizens
Petition or other similar FDA filings. Distributor and Manufacturer shall
jointly underwrite the cost of any mutually agreed upon clinical studies
intended to broaden Product claims beyond the monograph. Neither party shall be
obligated to file an IND or perform any clinical studies with respect to the
Product.
7.5 Manufacturer shall give Distributor 180 days' written
notice prior to discontinuing the manufacture of the Product and shall not
discontinue manufacturing the Product prior to December 31, 1997 without
Distributor's written approval, unless the Food and Drug Administration forbids
production or distribution of the Product.
7.6 Manufacturer shall maintain a 30-day inventory of
Product to meet Distributor's forecasted volume requirements provided to
Manufacturer pursuant to Section 8.2.
8. DISTRIBUTOR'S RESPONSIBILITIES. In addition to the duties and
responsibilities outlined elsewhere in this Agreement, Distributor agrees as
follows:
8.1 Distributor will vigorously promote the sale and
acceptance of Product throughout the Territory. Distributor shall provide its
customers with all necessary and appropriate training and support regarding the
use of the Product.
8.2 Distributor shall furnish to Manufacturer a written
four-month rolling forecast for the Product, which forecast shall be given to
Manufacturer on or before the 10th day of each month.
8.3 Distributor shall underwrite the cost of any comparative
clinical studies for the Product. Distributor and Manufacturer shall jointly
underwrite the cost of any clinical studies intended to broaden Product claims
beyond the monograph, which are mutually agreed upon by the parties.
8.4 Claims language in all advertising or promotional
materials utilized by Distributor, its agents or employees in conjunction with
the sale of Product, other than such sales literature as is furnished to
Distributor by Manufacturer, shall be approved, in writing, by Manufacturer
prior to their use or dissemination.
8.5 Distributor shall cooperate fully with Manufacturer in
dealing with customer complaints concerning the Product and shall take such
action to resolve such complaints as may be requested by Manufacturer.
8.6 Distributor agrees, during the term of this Agreement,
to comply with all FDA regulations applicable to the Product. Distributor shall
not, in any way, misrepresent the nature or indications for use of the Product
or, except by prior written approval of Manufacturer, alter the Product.
9. MINIMUM PURCHASE OBLIGATIONS AND RETAIL STORE PLACEMENTS.
9.1 During the term of this Agreement, Distributor shall
purchase a minimum number of Product from Manufacturer per calendar year and
shall have the Product placed in a minimum number of retail stores as of
December 31 of each year, as set forth below.
9.1.1 Year Number of Patches
1996 (*)
1997 (*)
1998 (*)
Thereafter (*)
9.1.2 Year Number of Stores
1996 (*)
1997 (*)
Thereafter (*)
The above minimums assume that test marketing of the Product will begin by May
1, 1996. If test marketing begins later, the parties shall renegotiate the
minimums in good faith.
9.2 The minimum purchase obligation for 1997 may be satisfied
by achieving a combined volume of (*) patches during 1996 and 1997.
9.3 During years 1996, 1997 and 1998, Distributor's
obligations under this Section 9 may be satisfied by achieving either the
Product minimums or retail store minimums determined through IRI or Nielson data
and store purchase data, records of which may be reviewed by Manufacturer.
9.4 In the event that Manufacturer loses its Product deferral
with the FDA and, as a consequence, Distributor is prohibited from selling the
Product, the minimum requirements set forth above shall be waived.
9.5 In the event Distributor shall fail to meet any minimum
requirements as set forth in this Section 9, Distributor shall have defaulted
under this Agreement, and Manufacturer's exclusive remedy is to terminate this
Agreement pursuant to Section 10; provided, however, that after 1998,
Distributor shall not be in breach of this Section 9 and Manufacturer may not
terminate this Agreement until (i) Distributor shall have failed to meet any of
its minimum requirements, (ii) Manufacturer has given Distributor a 30-day
written notice of such failure, and (iii) Distributor fails to meet the minimum
requirements after an additional six-month period to cure.
9.6 The minimums stated above will be appropriately reduced by
good faith negotiation of the parties (i) if Manufacturer does not use
reasonable efforts to defend its patents, (ii) if Manufacturer does not obtain
or maintain the necessary governmental or regulatory approvals to sell the
Product or (iii) where the parties are unable to agree on the price of the
Product pursuant to in paragraph 5.2(ii) hereof.
10. TERM OF AGREEMENT: TERMINATION.
10.1 This Agreement shall commence on the date hereof and
terminate on the later of (i) expiration of the last of Manufacturer's United
States patents on the Product issued or pending as of the date of this Agreement
and (ii) any other patent issued or pending or application filed on the Product
after the date hereof
10.2 Either party may terminate this Agreement by giving
thirty (30) days' written notice to the other party of any material breach
provided that as of the expiration of said thirty (30) day notice period and an
additional sixty (60) days' cure period such breach remains uncured (other than
as set forth in Section 9.5)(iii).
10.3 Either party may terminate this Agreement immediately
upon written notice to the other party if the other party shall: (i) file a
voluntary petition in bankruptcy or be the subject of an involuntary petition in
bankruptcy which is not dismissed within thirty (30) days of the date of filing;
(ii) be voluntarily or involuntarily dissolved; or (iii) have a receiver,
trustee or other court officer appointed for its property in connection with any
such bankruptcy proceeding, liquidation or insolvency proceeding.
10.4 Termination of this Agreement shall not relieve
Manufacturer of its obligations to deliver all Product ordered by Distributor
and accepted by Manufacturer prior to such termination; nor will such
termination relieve Distributor of its obligation to accept and pay for all
Product ordered by Distributor under purchase orders issued by Distributor and
accepted by Manufacturer prior to the date of such termination. Termination
shall not relieve or release either party from its obligation to make any other
payments which may be owing to the other party under the terms of this Agreement
or from any other liability which either party may have to the other arising out
of this Agreement or the breach of this Agreement. Following notice of
termination, Manufacturer shall have no obligation to accept any orders for
Product from Distributor.
10.5 Upon termination of this Agreement for breach by
Manufacturer or for breach by Distributor of its minimum purchase obligations or
minimum store placements hereunder, Distributor shall have the right, but not
the obligation, to cause Manufacturer to repurchase all Product having at least
50% of its original shelf life in possession of Distributor, at the lower of
Distributor's original invoice purchase price or the then current invoice price,
provided, that such Product is new, unused and not materially damaged.
Manufacturer agrees to buy said Product from Distributor for said price should
Distributor exercise this right.
10.6 Upon termination of this Agreement for breach by
Distributor (other than a breach by Distributor of its minimum purchase
obligations or minimum store placements hereunder), Manufacturer shall have no
obligation to repurchase Distributor's inventory of Product, and shall have the
right, but not the obligation, to cause Distributor to purchase, at the then
current price, Manufacturer's 30 day inventory of Product as required to be held
by Manufacturer pursuant to Section 7.6, having at least 50% of its original
shelf life in Manufacturer's possession, provided, that such Product is new,
unused and not materially damaged. Distributor agrees to buy said Product from
Manufacturer for said price should Manufacturer exercise this right.
10.7 Notwithstanding anything contained herein to the
contrary, Sections 12, 13 and 19 of this Agreement shall survive termination of
this Agreement and shall remain in full force and effect.
11. Waiver of Breach. The waiver or failure of either party to
enforce the terms of this Agreement in one instance shall not constitute a
waiver of said party's rights under this Agreement with respect to other
violations.
12. MANUFACTURER'S WARRANTIES AND REPRESENTATIONS: INDEMNIFICATION.
12.1 Manufacturer warrants that the Product and its
packaging (i) are free from defects in material and manufacture, (ii) are fit to
be used as indicated in the Product labeling, (iii) meet all specifications and
performance claims, and (iv) are not adulterated or misbranded (as defined by
the FDA). If a Product or the packaging does not meet its warranty, Manufacturer
shall replace such Product or packaging or refund Distributor's purchase price.
In case of a recall, Manufacturer shall reimburse Distributor for its reasonable
costs in assisting in the recall.
THE WARRANTIES SET FORTH ABOVE ARE IN LIEU OF ALL OTHER WARRANTIES,
EXPRESS OR IMPLIED, WHICH ARE HEREBY DISCLAIMED AND EXCLUDED BY
MANUFACTURER, INCLUDING WITHOUT LIMITATION ANY WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF USE, EXCEPT AS
EXPRESSED ABOVE IN PARAGRAPH 12.1.
12.2 Manufacturer will comply with all material laws and
regulations, including FDA GMPs with respect to the manufacturing, packaging and
labeling of the Products. Distributor may periodically audit procedures,
processes, process controls and manufacturing records of Manufacturer.
12.3 Each of LecTec and Natus has been duly incorporated and
is validly existing as a corporation in good standing under the laws of the
State of Minnesota and the undersigned has been duly authorized to execute this
Agreement on behalf of the Manufacturer, and when so executed, this Agreement
will constitute the valid and binding obligation of Manufacturer, enforceable in
accordance with its terms.
12.4 Manufacturer has the exclusive right, under the
applicable patents related to the Product, to manufacture the Product, for the
duration of such patents, in the United States and Canada and Manufacturer has
obtained clearance to market the Product in the United States from the FDA. It
will use commercially reasonable efforts to obtain clearance from the Ministry
of Health to market the Product in Canada taking into account the costs of
obtaining such clearance and the anticipated market for the Products in Canada.
12.5 LecTec and Natus shall jointly and severally save
Distributor, its directors, officers and employees from and against and
indemnify them from any and all claims, liabilities, costs and expenses of any
nature (including attorney's fees) caused by reason of claim that the Product
caused personal injury or property damage; provided, however, that
Manufacturer's indemnification obligations are conditioned upon Distributor
giving Manufacturer prompt written notice of any such claims and allowing
Manufacturer to participate in its own defense with its own counsel.
12.6 Manufacturer shall maintain product liability insurance
coverage in the amount of $2 million per occurrence which will be renewed
annually and which shall name Distributor as an additional named insured.
12.7 No party shall be liable to another party for any
consequential damages (e.g., lost profits, business opportunities or
investments) that arise as a result of this Agreement or its termination.
13. DISTRIBUTOR'S REPRESENTATIONS: INDEMNIFICATION.
13.1 Distributor shall not make any statements concerning
the Product which are not approved by Manufacturer, and any such statements by
Distributor shall be the sole responsibility of Distributor and Distributor
shall save Manufacturer, its directors, officers and employees harmless against
and indemnify them from the liability, costs, and expenses of any nature
(including attorneys' fees) which Manufacturer may incur as the result of any
such statements; provided, however, that Distributor's indemnification
obligations are conditioned upon Manufacturer giving Distributor prompt written
notice of any such claims and allowing Distributor to participate in its own
defense with its own counsel.
13.2 Distributor has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Delaware and the undersigned has been duly authorized to execute this Agreement
on behalf of the Distributor, and when so executed, this Agreement will
constitute the valid and binding obligation of Distributor, enforceable in
accordance with its terms.
14. TRADEMARKS AND TRADE NAMES.
14.1 Manufacturer hereby grants to Distributor the exclusive
license to use the "TheraPatch(TM)" trade name for use in the Territory in
connection with the advertising and sale of the Product. If at any time
Distributor markets the Product under a trade name other than "TheraPatch," the
exclusive license granted pursuant to this Section 14.1 shall terminate.
Distributor will discontinue the use of such trade name at the end of this
Agreement. If Distributor uses the TheraPatch name in connection with the
advertising and sale of the Product, Distributor shall indicate on package
labeling of the Product that the product is manufactured by LecTec and that
"TheraPatch" is a trademark of the Manufacturer."
14.2 Distributor is hereby granted the first right of
negotiation to acquire the trade name "TheraPatch." Such right of negotiation
shall expire on the first anniversary of the commencement of test marketing of
the Product hereunder.
14.3 Distributor shall not remove, cover, change, or add to
the labels affixed by Manufacturer to Product without first receiving
Manufacturer's written approval.
15. PATENT OR TRADEMARK INFRINGEMENT.
15.1 If a patent infringement action is commenced or
threatened against Manufacturer as to any Product and Manufacturer elects to, as
a result, discontinue the sale of the Product in any part or all of the
Territory, Distributor shall discontinue its efforts to sell said Product in any
such part or all of the Territory immediately upon receipt of written notice
thereof from Manufacturer. LecTec and Natus shall jointly and severally save
Distributor, its directors, officers and employees harmless from and against and
indemnify them from any and all claims, liabilities, costs and expenses of any
nature (including attorney's fees) caused by reason of claims that the Product
infringes the intellectual property rights of others (e.g., patent, copyright,
trademark, trade name, etc.); provided, however, that Manufacturer's
indemnification obligations are conditioned upon Distributor giving Manufacturer
prompt written notice of any such claims and giving the defense of the claim to
Manufacturer and reasonably cooperating with Manufacturer in the defense.
Distributor shall have a right to cooperate in its own defense with its own
counsel.
15.2 Distributor shall promptly notify Manufacturer in the
event Distributor becomes aware of any activities of a third party that may
constitute infringement of the Manufacturer's patents or pending patents on the
Product or trademarks.
16. Recall. Distributor shall maintain complete and accurate records
of all Product sold by Distributor, its agents or employees (including without
limitation a complete and current list of all customers who have purchased, the
date of such purchases and the lot numbers of the units purchased). In the event
of a recall of any of the Product, Distributor will cooperate fully with
Manufacturer in effecting such recall, including without limitation, promptly
contacting any purchasers Manufacturer desires be contacted during the course of
any such recall, and promptly communicating to such purchasers such information
or instructions as Manufacturer may desire be transmitted to such purchasers.
17. Traceability . Distributor agrees to comply with all traceability
programs in effect at any time as initiated by Manufacturer. Manufacturer may
examine and make transcripts of any records required as part of a traceability
program at reasonable times during business hours.
18. Appointment of Subdistributors. In the event Distributor appoints
any subdistributors or sales representatives in the Territory in connection with
the performance of this Agreement, such appointment shall be made only in the
name and for the account of Distributor and shall be for a term no greater than
the term of this Agreement. Distributor shall not grant to the subdistributors
and/or sales representatives any rights greater than those which are granted by
Manufacturer to Distributor under this Agreement. Distributor shall also impose
on the subdistributors and/or sales representatives the same obligations as
Manufacturer has imposed on Distributor under this Agreement.
19. Confidential Information. Manufacturer and Distributor may
exchange information each considers confidential ("Confidential Information").
"Confidential Information" shall include any information that is not generally
known, including trade secrets, outside of that disclosing party and that is
proprietary to that party, relating to any phase of that party's existing or
reasonably foreseeable business which is disclosed to the receiving parties
during the term of this Agreement. "Confidential Information" does not include
information that (i) is or becomes publicly available through no fault of the
receiving parties, (ii) is in the possession of the receiving parties prior to
the receipt from the disclosing party, (iii) is developed by the receiving party
independently of the Confidential Information, or (iv) is given to the receiving
party by someone else who has the right to do so. Each party hereto specifically
agrees to keep confidential and not to disclose to others any and all
Confidential Information. Upon the request of the disclosing party, or in the
event of the expiration or other termination of this Agreement, the receiving
parties shall promptly return all such Confidential Information to the
disclosing party. Each party hereto agrees not to use any such Confidential
Information except in conjunction with the purposes of this Agreement. The duty
not to disclose or use (other than in conjunction with the performance of this
Agreement) such Confidential information shall survive the termination of this
Agreement.
20. Force Majeure. Neither Manufacturer nor Distributor shall be in
breach of this Agreement for a failure to perform or be liable to the other for
any failure to perform under this Agreement if such failure is caused, in whole
or in part, directly or indirectly, by strikes, lockouts, or any other labor
troubles, fires, floods, acts of God, accidents, embargoes, war, riots, act or
order of any government or governmental agency, delay in the delivery of raw
material parts, or completed merchandise by the supplier thereof or any other
cause beyond the control of, or occurring without the fault of, such party.
21. Notice. All notices under this Agreement shall be in writing, and
may be delivered by hand or sent by mail or facsimile transaction. Notices sent
by mail shall be sent by registered mail return receipt requested, and shall be
deemed received on the date of receipt indicated by the receipt verification
provided by the United States postal service. Notices delivered by hand or
facsimile transaction shall be effective upon receipt. Notices shad be given,
mailed, or sent to the parties at the following addresses:
If to LecTec: With a copy to:
LecTec Corporation Dorsey & Whitney P.L.L.P.
10701 Red Circle Drive Pillsbury Center South
Minnetonka, MN 55343 220 South 6th Street
Attn: Thomas E. Brunelle, Ph.D. Minneapolis, MN 55402
Phone: (612) 933-2291 Attn: Karin Keitel
Fax: (612) 933-1068 Phone: (612) 340-8809
Fax: (612) 340-8738
If to Natus: With a copy to:
Natus Corporation Dorsey & Whitney P.L.L.P.
4550 W. 77th Street Pillsbury Center South
Edina, MN 55435 220 South 6th Street
Attn: Kathleen A. Billings Minneapolis, MN 55402
Phone: (612) 835-4626 Attn: Karin Keitel
Fax: (612) 835-2317 Phone: (612) 340-8809
Fax: (612) 340-8738
If to Distributor: With a copy to:
CNS, Inc. Lindquist & Vennum P.L.L.P.
P.O. Box 39802 4200 MS Center
Minneapolis, MN 55439 80 South 8th Street
Attn: Richard E. Jahnke Minneapolis, MN 55402
Phone: (612) 820-6696 Attn: Patrick Delaney
Fax: (612) 820-6697 Phone: (612) 371-3281
Fax: (612) 371-3207
Any party hereto may designate any other address for notices given it
hereunder for written notice to the other party given at least ten (10) days
prior to the effective date of such change.
22. ENTIRE CONTRACT There are no oral or other agreements or
understandings between the parties affecting this Agreement or relating to the
selling or purchase of Product. This Agreement supersedes all previous oral and
written arrangements between the parties, including their letter of intent dated
October 10, 1995, and is intended as a complete and exclusive statement of the
terms of their understanding.
23. AMENDMENTS. Amendments, if any, shall be in writing and valid
only when signed by all parties.
24. ASSIGNABILITV. No party may assign this Agreement without the
written consent of the other parties; provided, however, that either party may
assign this Agreement without such consent to any majority-owned or controlled
affiliate or subsidiary.
25. SEVERABILITY. In the event that any provision of this Agreement
is held invalid by the final judgment of any court of competent jurisdiction,
the remaining provisions shall remain in full force and effect as if such
invalid provision had not been included herein.
26. REMEDIES. The parties acknowledge that money damages may not be
an adequate remedy for any breach of the provisions of this Agreement and that,
in addition to any other relief afforded by law, an injunction against such
violation may be issued against it and every other person concerned thereby, it
being understood that both damages and an injunction shall be proper modes of
relief and are not to be considered mutually exclusive remedies. In the event of
any such violation, the parties agrees to pay, in addition to the actual damages
sustained by the other parties as a result thereof, the reasonable attorneys'
fees incurred by such party in pursuing any of its rights under this Agreement.
27. ACTION FOR BREACH. The time within which Manufacturer or
Distributor may bring an action for breach of this Agreement shall be one year
from the date of knowledge of such breach. No action may be commenced after that
one-year period.
28. DISPUTES: APPLICABLE LAW AND FORUM SELECTION. Except as altered
or expanded by this Agreement, the substantive law (and not the law of
conflicts) of the State of Minnesota shall govern this Agreement in all respects
as to the validity, interpretation, construction and enforcement of this
Agreement and all aspects of the relationship between the parties hereto. Any
disputes between the parties hereto relating to any provision hereof shall be
settled by submission for arbitration at the Minneapolis, Minnesota office of
the American Arbitration Association under the then current rules of the
American Arbitration Association. Notwithstanding the foregoing, nothing herein
shall prevent a party from seeking and obtaining equitable relief in a court of
competent jurisdiction solely for the purpose of protecting such party's rights,
pending a final decree of the arbitrator.
IN WITNESS WHEREOF, the parties have herunto set their hands ^I as of the day
and year first above written
LECTEC CORPORATION NATUS CORPORATION
By: /s/Thomas E. Brunelle By: /s/Kathleen A. Billings
Thomas E. Brunelle, Ph.D Kathleen A. Billings, President and CEO
Chairman, President and CEO
CNS, INC.
By: /s/Richard J. Jahnke
Richard J. Jahnke, President and COO
Exhibit A
PRICES
The initial price for the Product shall be (*) per patch based on packaging of
five patches per box. The price shall be subject to change based on future
negotiation
