EXHIBIT 99.1
GENERAL TERMS AND CONDITIONS FOR THE
PURCHASE OF CAPITAL EQUIPMENT
DATE: 12/02/04
EQUIPMENT: LECTEC CORPORATION: PATCH MANUFACTURING AND PACKAGING EQUIPMENT
1. COMPLETE AGREEMENT.
These Terms and Conditions for the Purchase of Capital Equipment set forth
on Exhibit A attached hereto and made a part hereof ("Terms and
Conditions") constitute the Complete and Final Agreement (the "Agreement")
of the Novartis Consumer Health Inc. ("Buyer") and LecTec Corporation
("Seller"), and all prior negotiations, proposal and writings pertaining to
the "Agreement" or the subject matter thereof, are superseded hereby. All
headings and numberings contained in these terms and conditions are for
convenience of reference only.
2. SCOPE OF WORK.
Except as expressly stated otherwise in the Agreement, Seller is
responsible for (i) providing Buyer the Equipment listed on Exhibit "A"
attached. This commitment includes granting access to all facilities and
utilities required to remove said Equipment from Sellers facility on a
schedule as agreed to by both Buyer and Seller. Agreement does not require
Seller to install the Equipment at Buyer's facility.
3. TAXES.
Any tax imposed on Seller by any federal, state, local or other legal
government taxing authority which arises out of or is based upon the sale
of the Equipment (for greater certainty, excluding and excepting any taxes
based on Seller's income), whether characterized as present or future
sales, use, excise, value added, or other similar tax applicable to the
price, sale or delivery of any products or services furnished hereunder or
to their use by Seller or Buyer will be for Buyer's account and will be
quoted as separate itemized charges. In addition to the Contract Price
specified herein, Buyer shall pay the gross amount of any such present or
future sales, use, excise, value added, or other similar tax; or Buyer
shall furnish Seller with evidence of an acceptable exemption to the taxing
authorities.
4. CONTRACT PRICE, DELIVERY AND REMOVAL.
Buyer shall pay Seller the Contract Price identified on Exhibit "A" as full
consideration for Equipment purchased by this Agreement. The Contract Price
is based upon Buyer taking delivery of the Equipment at Seller's facility
which shall be deemed to have occurred when Buyer's representatives or
employees begin dismantling the Equipment in preparation for shipment
(Delivery). All cost associated with the dismantling of the Equipment and
preparation of the Equipment for shipment, shipment of the Equipment,
including freight costs and charges, and restoration of Seller's facility
to applicable local codes and the repair of any damage to the Seller's
facility shall be borne by the Buyer.Seller must take Delivery (as defined
above) of the Equipment no later than December 20, 2004 and the Equipment
must be completely removed from Seller's facility no later than December
30, 2004 (Removal).
The Contract Price referred to in Exhibit "A" is stated in U.S. dollars.
5. PAYMENT TERMS.
Payments shall be made upon Xxxxx's receipt of a correct invoice as
follows: 50% down payment upon execution of this Agreement and 50% payment
within ten (10) days of Equipment Delivery to Buyer at Seller's facility
(as defined above in Section 4) but, in any case, no later than December
30, 2004. All Payments are due net upon receipt of invoice. The Acceptance
of any payment by the Seller shall constitute a release of Buyer from any
other liability, except retainage, due to any reasons arising or incurred
prior to the date of the invoice to which the payment relates. Acceptance
of final payment by Seller constitutes a general release of Buyer. If
Xxxxxx chooses not to release Buyer from any liabilities by not accepting
payment, Xxxxxx agrees to return payment in entirety with a written
affidavit of an officer of Seller listing every issue Seller is contesting.
6. PRE-ACCEPTANCE AND ACCEPTANCE
Seller has and will continue to supply Buyer all reasonable production,
function and quality control test reports as Buyer may request from time to
time concerning the Equipment. Seller has and will continue to grant Buyer
the right to enter Seller's premises at any reasonable time to make an
inspection and examination of the Equipment. Seller has and will continue
to reasonably fully cooperate with Buyer in such inspections.
7. SELLER'S WARRANTIES.
Seller warrants that the Equipment and Seller Services (i) will be free and
clear of all liens, claims or encumbrances arising or resulting from the
acts or omissions of Seller or anyone claiming by or through Seller, (ii)
will not be less than merchantable and fit for the particular purpose(s)
known by or disclosed to Seller as applicable thereto, and (iii) shall be
mechanically and electrically functional for production purposes upon
delivery to Buyer as defined above in Section 4. Seller further warrants
that (i) it is a corporation duly organized, existing and in good standing
under the laws of the State of Minnesota, with full right, power and
authority to enter into this Agreement, (ii) the execution, delivery and
performance of this Agreement does not conflict with, violate or breach any
agreement to which Seller is a party, or Seller's Certificate of
Incorporation or Bylaws, and (iii) this Agreement has been duly executed
and delivered by Seller and is a legal, valid and binding obligation
enforceable against Seller in accordance with its terms, and does not
require approval of Seller's shareholders. Seller shall defend, indemnify
and hold Buyer (including all officers, directors, employees, Affiliates
and agents of Buyer) harmless against any and all claims, damages,
expenses, attorneys' fees, settlement amounts, and judgments arising out of
any breach of this Agreement by Supplier including any Warranty contained
herein.
8. INSURANCE.
Seller and its subcontractors shall maintain Commercial General Liability
Insurance, including coverage for products liability and completed
operations arising out of or related to the Equipment or Seller's
performance under this Agreement, with a per occurrence limit of not less
than $2,000,000, and a general aggregate of not less than $5,000,000.
Seller's insurance shall be primary and non-contributing to any other
insurance that may apply. Seller will furnish certificates of insurance to
Buyer at the time the Agreement is issued by Xxxxx. The insurance policies
will provide for cancellation only after thirty (30) days prior written
notice to Xxxxx. Buyer's failure to require or demand any evidence of
insurance does not constitute a waiver of any requirement for Seller to
obtain insurance, nor does it limit Seller's other obligations.
Buyer and its subcontractors shall maintain Commercial General Liability
Insurance including coverage for its operations arising out of or related
to the Equipment or Buyer's performance under this Agreement, with a per
occurrence limit of not less than $2,000,000, and a general aggregate of
not less than $5,000,000. Buyer's insurance shall be primary and
non--contributing to any other insurance that may apply.
9. DOCUMENTATION
Seller will provide Buyer at no additional cost to Buyer all documentation
in its possession associated with the purchased Equipment per Attachment
"A" including, but not limited to, (i) Equipment operation, maintenance,
and training manuals, (ii) Technical and mechanical specifications relating
to the Equipment, including layouts, diagrams and software, (iii) Equipment
maintenance, operating and cleaning logs, (iv) Line batch tickets,
operating and cleaning procedures and (v) Validation and investigation
documentation. Any and all Documentation provide to Buyer shall be written
in English. Seller further agrees, at its own cost and expense, to ensure
that any Documentation provided to Buyer accurately reflects the
description, design, specifications, etc. of the Equipment as of Delivery
to Buyer.
10. CONFIDENTIALITY AND TRADE SECRETS, AND KNOW-HOW.
Seller will at no time directly or indirectly reproduce, disclose,
advertise, publish or otherwise make known any information, design,
specification, idea, concept, plan, copy, formula, drawing, process,
procedure, performance characteristics or other confidential information
which has been or will be disclosed to Seller in connection with the
Equipment or of Buyer's evaluation, study, design, production, testing,
installation or performance of the Equipment or its usage, or received by
Seller in performing this Agreement (collectively, the "Information").
Seller will not use any of Buyer's Information, which is disclosed to or in
possession, or control of Seller, except in performing this Agreement,
unless in compliance with written instruction of Buyer. Upon Xxxxx's
request, Seller may execute a separate confidentiality/non-disclosure or
development agreement, which shall be incorporated into this Agreement by
this reference.
11. SPARE PARTS.
Seller to provide to Buyer any and all spare parts currently in the
possession of the Seller for the Equipment identified in Attachment "A".
12. SOFTWARE.
Seller to provide Buyer any and all software in its possession associated
with the Equipment as identified in Attachment "A" including, but not
limited to: (i) Software copies and archived software versions, (ii)
Software updates that have been procured but are yet to be installed on the
Equipment, (iii) Hard copy printouts of all programs and (iv) any history
documentation associated with the software provided on the Equipment.
13. FEDERAL CONTRACTOR.
Seller acknowledges that the Buyer serves from time to time as a
subcontractor for the United States government. In those cases Seller shall
comply with the federal laws regulations and rules applicable to
subcontractors of government contractors including but not limited to those
relating to equal employment opportunity and affirmative action in the
employment of minorities (Executive Agreement 11246), women (Executive
Agreement 11375) the handicapped (29 USC 793), and certain veterans (36 USC
2012), and contracting with women-owned or small and disadvantaged business
concerns. Where applicable, Seller certifies that it maintains no
segregated employee facilities as provided in 41 CFR 60-I8 and that it is
not debarred from being awarded federal or federally assisted contracts.
14. ARBITRATION.
The parties agree to submit all disputes between them arising out of or
related to this Agreement or the breach, alleged breach or interpretation
thereof to binding arbitration. Within thirty (30) days after either party
has notified the other in writing that it is submitting a dispute to
arbitration, one arbitrator shall be selected under the then current rules
of the American Arbitration Association ("AAA") pertaining to commercial
disputes. The arbitration shall be conducted in accordance with the
Commercial Arbitration rules of the AAA except AAA shall not have authority
to make any award for damages excluded herein. The arbitration award shall
be by a written decision and shall be final and binding, and enforceable by
any court of competent jurisdiction.
15. MISCELLANEOUS.
All agreements contained in this Agreement shall bind and inure to the
benefit of the respective successors and assigns of the parties whether so
expressed or not, except that Seller shall have no right to assign its
rights or any interest herein without the prior consent of Buyer. No
amendment, modification, termination or waiver of any provision of this
Agreement will be effective unless in writing and signed by both parties,
and then such waiver or consent will be effective only in the specific
instance and for the specific purpose for which given. In performing its
obligations, Seller is and will be deemed to be an independent contractor
and not an agent or employee of Buyer. This Agreement shall be governed
under the laws of the State of Minnesota. If any provision provided in this
Agreement is or becomes invalid or unenforceable under any law of mandatory
application, the parties agree that such provision will be deemed severed
and omitted from the Agreement and the remainder of this Agreement will
remain in full force and effect.
LECTEC CORPORATION NOVARTIS CONSUMER HEALTH, INC.
By:____/s/ Xxxxxxx X. Xxxxxxxxxx_________ By:____/s/ Xxxx X. Xxxxx_______________
Name:____ Xxxxxxx X. Xxxxxxxxxx___________ Name:____ Xxxx X. Xxxxx_________________
Title:_____ CEO, President________________ Title:_____ VP Supply Chain and Mfg_____
Date:_____ 7 December 2004_______________ Date:_____ 12/3/04______________________
Exhibit A LecTec Corporation
Machinery and Equipment -- Hydrogel Coating
Appraised
Description Fair Market Value
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18" width capacity Tech-Mach hydrogel coating line with: $100,000
dual web in-feed stations (2 spindles each) with magnetic tension controls
Fife web steering unit -- in-feed
ten (10) foot radiant heat pivoting overhead oven section with 4 zone set point controllers and
feed-back sensors
web speed controls with dual readouts
vacuum pull roll system with EZ Trac tension control and readout (includes vacuum pump)
six (6) foot inspection tunnel with swing up polycarbonate doors
dual spindle take-up winder with Fife steering control
portable hydraulic lift for coated roll unloading
top liner feeding station (2 spindle) with magnetic tension controls and web steering unit
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Two (2)Acrison powder feeders on portable (movable) frames with Xxxxxx M drive
controllers (1 ea Model 402-200-175-1057-DD, SN 96311-01;1 ea Model 105Z-E, SN
84353-01), 5 wand vacuum extraction powder delivery system and Dynequip HCA
controller with three Swoot control units $ 21,000
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Two (2) Readco twin screw continuous mixing processor heads on portable frames $165,000
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Liquid mass flow pumping and control station containing four (4) Xxxxxx Control
coriolis effect sensors, three (3) precision gear pumps and one (1) dual head
peristaltic pump - all with Xxxxxx M drive controllers $ 17,500
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Mixing Equipment $ 5,200
Two (2) flat bottom tank stands w/ Lightnin(R)mixers and floor scales for 100 gal plastic tanks
One (1) cone bottom tank stand w/ Lightnin(R)mixer and floor scale for 55 gal plastic tank
One (1) cone bottom tank stand w/ Lightnin(R)mixer and floor scale for 360 gal plastic tank
Six (6) plastic mixing tanks, 1-55 gal, 4-100 gal., 1 360 gal
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One (1) group of equipment consisting of 1 each Alumalift elevating platform
with calibration scale, 1 each Xxxxx pressure washer, 2 each Lightning mixers, 1
each Presto hydraulic lift (for Adhesive tank) $ 14,800
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Total Hydrogel Coating Machinery and Equipment $323,500
Machinery and Equipment -- Therapeutic Converting
Appraised
Description Fair Market Value
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Delta Mod-Tech Model MOD-GNL-18, 3-5-6 lane capacity Converter / Packager $400,000
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TM Electronics BT-1000 Burst Tester with controller and readout display $9,600
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Total Therapeutic Converting Machinery and Equipment $409,600
Total All Above $733,100
