EXHIBIT 10.17
TERMINATION AGREEMENT
THIS TERMINATION AGREEMENT is made as of the 30TH day of July, 1998, by and
between CNS, Inc., a Delaware corporation ("CNS") and LecTec Corporation, a
Minnesota corporation ("Manufacturer").
BACKGROUND
CNS, Manufacturer and Pharmadyne Corporation, (Pharmadyne) a Minnesota
Corporation, are parties to that certain Marketing and Distribution Agreement
dated January 11, 1996 (the "Distribution Agreement") whereby Manufacturer
manufactures and CNS markets and distributes a product (the "Product"), as
defined in the Distribution Agreement. In October 1997, Pharmadyne became a
wholly-owned subsidiary of Manufacturer and in December 1997 Pharmadyne was
merged into Manufacturer and ceased to exist as a separate corporation. The
parties wish to terminate the Distribution Agreement and their respective rights
and obligations thereunder.
NOW, THEREFORE, in consideration of the mutual promises contained in this
Termination Agreement, the parties agree as follows:
1. The Distribution Agreement is hereby terminated and of no further force and
effect; provided, however, that Sections 12 (Manufacturer's Warranties and
Representations; Indemnification), 13 (Distributor's Representations,
Indemnification), and 19 (Confidential Information) shall survive
termination as contemplated in the Distribution Agreement.
2. Manufacturer agrees to repurchase all inventory of the Product in the
possession of CNS as of the date of this Termination Agreement, provided
that all such Product has at least 50% (one year) of its original shelf
life and is new, unused and not materially damaged, and in full, unopened
cases (such inventory of Product and Product returns are collectively
referred to hereafter as the "Repurchased Product"). The repurchase shall
be completed no later than September 30, 1998. The purchase price for the
Repurchased Product shall be the original invoice purchase price paid by
CNS for the Product. (Refer to Exhibit A)
3. Manufacturer is hereby authorized to sell the Repurchased Product with the
CNS xxxx and/or packaging; provided, however, that unless otherwise agreed
to in writing, Manufacturer shall not be authorized to include the CNS xxxx
on any product sold after April 30, 1999.
4. CNS shall bear responsibility for any Product that was initially purchased
from CNS or through its broker network, and that is returned by such
brokers or retailers. Manufacturer shall bear responsibility for any
Product returned by brokers or retailers that was shipped directly from and
invoiced by Manufacturer. CNS and Manufacturer agree that responsibility
for specific product returns shall be established based on product lot
number identification. To the extent that any of such returned Product is
damaged or defective and such retailer or broker is then purchasing the
Product from Manufacturer, Manufacturer shall replace such damaged or
defective Product.
Manufacturer is not assuming, and CNS shall bear all responsibility for,
any contractual obligations it entered into prior to the date of this
Agreement, including without limitation, commissions to CNS' brokers and
all other obligations under CNS' agreements with its brokers. Manufacturer
shall be entitled to negotiate such broker agreements for the Product, as
it deems appropriate.
CNS shall bear responsibility for any financial commitments that it or its
brokers made prior to the date of this Agreement (e.g. advertising, co-op,
slotting fees and the like). CNS has represented to Manufacturer that there
are no such outstanding financial commitments as of the date of this
Agreement.
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5. The parties shall cooperate with each other in announcing to the public and
to retailers of the Product the direct role Manufacturer will take in
marketing and distributing the Product as a consequence of the termination
of the Distribution Agreement, it being the objective of the parties to
make the transition of the marketing and distribution of the Product from
CNS to Manufacturer as smooth as reasonably possible. CNS and Manufacturer
shall also cooperate in jointly releasing to the public information
positively reflecting the nature of this transition.
6. The "TheraPatch" Internet web site domain developed by CNS and Manufacturer
shall be transferred to and become the sole property of Manufacturer as of
the date of this Termination Agreement.
7. As additional consideration for the foregoing, the parties hereby release
any and all claims of any nature that they may have against each other and
their respective principals, officers, directors, and agents arising out of
the Distribution Agreement. Nothing in this paragraph 7 shall preclude a
claim based on breach of this Termination Agreement.
8. This Termination Agreement shall be governed by and construed in accordance
with the laws of the State of Minnesota; it constitutes the entire
agreement between the parties on the subject matter hereof and supersedes
all prior negotiations and discussions, written or oral, between the
parties; and no provision shall be modified, amended, waived or
supplemented by any means other than a written instrument which refers to
this Termination Agreement and is signed by the parties hereto. The parties
further agree that, from time to time they will execute and deliver to one
another such further instruments and take such other action as may be
reasonably requested to effect the intentions of the parties as indicated
in this Termination Agreement.
IN WITNESS WHEREOF, the parties have entered this Termination Agreement
effective as of the date first written above.
CNS, INC.
By /s/ Xxxxx X. Xxxx
----------------------------
Its Chief Financial Officer
--------------------------------------
Title
LECTEC CORPORATION
By /s/ Xxxxxx X. Xxxxx
--------------------------------------
Xxxxxx X. Xxxxx
Its Chairman, CEO & President
----------------------------
Title
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EXHIBIT A
SCHEDULE OF REPURCHASED PRODUCT AND CALCULATION OF AMOUNT TO BE PAID TO CNS BY
MANUFACTURER:
Quantity of cases on hand in CNS warehouse of
TheraPatch as of July 30th, 1998 (Confidential treatment
has been requested)
Original invoice price per case paid by CNS as per
Section 2 of this termination agreement (Confidential treatment
has been requested)
Total (Confidential treatment
has been requested)
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