Exhibit 10.2
SETTLEMENT AND LICENSE AGREEMENT
This SETTLEMENT AND LICENSE AGREEMENT (“Agreement”), effective as of the
Effective Date (as defined below), is made by and among LecTec Corporation, a
Minnesota corporation having its principal place of business at 1407 S. Kings
Highway, Texarkana, TX 75501 (“LecTec”) and Endo Pharmaceuticals Inc., a
Delaware corporation having its principal place of business at 100 Endo
Boulevard, Chadds Ford, PA 19317 (“Endo”). LecTec and Endo are hereinafter
collectively referred to as the “Parties”, and each individually as a “Party”.
RECITALS
WHEREAS, LecTec is the owner of United States Patent Nos. 5,536,263 and
5,741,510 (the “Patents-In-Suit”);
WHEREAS, LecTec and Endo are litigants in a civil action pending in the United
States District Court for the Eastern District of Texas, captioned LecTec
Corporation v. Chattem, Inc., Endo Pharmaceuticals Inc., et al, Civil Action
No. 5:08cv130 (DF) (the “Texas Litigation”);
WHEREAS, LecTec and Endo recognize the uncertainty of the outcome of disputed,
complex litigation such as the Texas Litigation, as well as the extended time it
could take to resolve matters by litigation, and have independently concluded
that their respective interests are best served by compromising and thereby
terminating and concluding the Texas Litigation and all disputes between them.
NOW, THEREFORE, in consideration of the covenants, conditions and obligations
expressed herein, and intending to be legally bound thereby, the Parties hereto
agree as follows:
ARTICLE I.
DEFINITIONS
Section 1.1. Definitions. The following terms will have the meanings provided
below:
“Affiliate” shall mean, with respect to any entity, any other entity that
directly or indirectly, through one or more intermediaries, controls, is
controlled by or is under common control with such first entity. The term
“control” (including its correlative meanings “controlled by” and “under common
control with”) shall mean possession, directly or indirectly, of power to direct
or cause the direction of management or policies (whether through ownership of
securities or partnership or other ownership interests, by contract or
otherwise).
“Agreement” has the meaning specified in the introductory paragraph hereof.
“Covenant Not To Sue” has the meaning specified in Section 3.2.

 

 

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“Covenant Patents” means (a) any and all United States and foreign patents and
patent applications owned or controlled by LecTec or its Affiliates as of the
Effective Date, (b) all continuations, continuations-in-part and divisionals
thereof, (c) any United States patents resulting from the reissue or
reexamination of any of the patents and applications set forth in clauses (a) or
(b) above, and (d) any United States and foreign patents or patent applications
claiming common priority with any of the patents or applications set forth in
clauses (a), (b) or (c) above (whether claiming priority from such patents and
patent applications or forming the basis of priority for such patents and patent
applications), in each case including all extensions thereof.
“Covenant Term” has the meaning specified in Section 3.3(b).
“Dismissal Date” means the date on which the Texas Litigation is dismissed
against Endo pursuant to the Stipulation of Dismissal to be filed by the Parties
pursuant to this Agreement.
“Effective Date” means the latest date on which each Party has provided to the
other a fully executed counterpart of this Agreement.
“Endo” has the meaning specified in the introductory paragraph hereof.
“Endo Products” means any and all products offered for sale or sold by Endo or
any of its Affiliates at any time on or prior to the Effective Date.
“Endo Releasing Parties” has the meaning specified in Section 2.2(b).
“Field of Use” means any and all uses in connection with any and all
prescription pain medicines and treatments, in any dosage form, for humans or
animals.
“LecTec” has the meaning specified in the introductory paragraph hereof.
“LecTec Releasing Parties” has the meaning specified in Section 2.2(a).
“License” has the meaning specified in Section 3.1.
“Licensed Patents” means the (a) Patents-In-Suit, (b) any continuations,
continuations-in-part or divisionals of the Patents-In-Suit and any United
States patents resulting from any reissue or reexamination of the
Patents-In-Suit, (c) any United States or foreign patents or patent applications
claiming common priority to any of the patents or patent applications set forth
in clauses (a) and (b) above (whether claiming priority from such patents and
patent applications or forming the basis of priority for such patents and patent
applications), and (d) any foreign counterparts to any of the patents and patent
applications set forth in clauses (a), (b) and (c) above, in each case including
all extensions thereof.
“License Fee” has the meaning set forth in Section 3.4.
“License Term” has the meaning specified in Section 3.3(a).

 

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“Orange Book” has the meaning specified in Section 3.5.
“Party” and “Parties” have the meanings specified in the introductory paragraph
hereof.
“Patents-In-Suit” has the meaning set forth in the recitals.
“Person” means any person, corporation, partnership, joint venture, association,
joint-stock company, trust or unincorporated organization.
“Texas Litigation” has the meaning set forth in the recitals.
“Third Party” means any Person other than Endo and LecTec and their respective
Affiliates.
ARTICLE II.
SETTLEMENT; DISMISSAL OF ACTION; RELEASE
Section 2.1. Required Filings. On the Effective Date, LecTec and Endo will
execute and deliver to the other Party, or cause their respective attorneys of
record in the Texas Litigation to execute and deliver to the other Party, the
Stipulation of Dismissal attached hereto as Appendix A, pursuant to which the
Parties will stipulate to the dismissal of the Texas Litigation with prejudice
and without costs. Promptly after the Effective Date, the attorneys for Endo and
LecTec shall submit such executed Stipulation of Dismissal to the court in the
Texas Litigation. Within sixty (60) days of the filing of the Stipulation of
Dismissal, LecTec will comply with Section 23 of the Agreed Protective Order
with respect to all Endo Confidential Discovery Material (as defined in the
Protective Order), including without limitation by returning to Endo (rather
than destroying) all of Endo’s production documents received by LecTec.
Section 2.2. Releases. (a) Effective on the Dismissal Date, LecTec, on behalf of
itself and its past and present Affiliates and its and their respective
successors and assigns (collectively, the “LecTec Releasing Parties”), does
hereby release and forever discharge Endo and its respective past, present and
future Affiliates and their respective successors and assigns and their
respective past, present and future employees, officers, directors, principals,
agents, attorneys, accountants, shareholders, licensees, sublicensees,
customers, suppliers, contractors, importers, manufacturers, distributors,
insurers, or any heirs, administrators, executors, predecessors, successors,
affiliates, or assigns of the foregoing, from any and all claims, rights, causes
of action, counterclaims, defenses, damages and liabilities whatsoever, whether
based on federal, state, local, statutory or common law or any other law, rule
or regulation, whether known or unknown, whether accrued and existing or which
may arise or accrue after the date hereof, which (i) relate to any products sold
or offered for sale by Endo and (ii) either (a) were asserted or could have been
asserted in the Texas Litigation by any LecTec Releasing Party, or (b) in any
way relate to, arise from, or are in any manner connected to the
Patents-In-Suit.

 

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(b) Effective on the Dismissal Date, Endo, on behalf of itself and its past and
present Affiliates and its and their respective successors and assigns
(collectively, the “Endo Releasing Parties”), does hereby release and forever
discharge LecTec and its respective past, present and future Affiliates and
their respective successors and assigns and their respective past, present and
future employees, officers, directors, principals, agents, attorneys,
accountants, shareholders, licensees, sublicensees, customers, suppliers,
contractors, importers, manufacturers, distributors, insurers, or any heirs,
administrators, executors, predecessors, successors, affiliates, or assigns of
the foregoing, from any and all claims, rights, causes of action, counterclaims,
defenses, damages and liabilities whatsoever, whether based on federal, state,
local, statutory or common law or any other law, rule or regulation, whether
known or unknown, whether accrued and existing or which may arise or accrue
after the date hereof, which were asserted or could have been asserted in the
Texas Litigation by any Endo Releasing Party which relate to the Patents-in-Suit
or any products sold or offered for sale by LecTec.
(c) LecTec and Endo agree and acknowledge that this Agreement is the result of a
compromise and shall never be construed as any admission by either of them of
any liability, wrongdoing, or responsibility on its part.
Section 2.3. Costs; Dismissals. All dismissals of all claims and counterclaims
specified in Section 2.1 will be without costs to either Party and will include
an irrevocable release by each Party, on behalf of itself and its Affiliates, of
all claims for attorneys’ fees. Each Party will bear its own costs in connection
with entering into this Agreement and the negotiation and submission of the
dismissals specified in Section 2.1.
ARTICLE III.
LICENSE AND COVENANT NOT TO SUE
Section 3.1. License. LecTec hereby grants to Endo, and Endo hereby accepts, a
perpetual, irrevocable, non-terminable, fully paid-up, royalty-free and
worldwide license (the “License”), under the Licensed Patents, during the
Licensed Term, to develop, make, have made, use, sell, offer to sell, market,
distribute, import and otherwise exploit any and all current and future
products, services, methods and processes. The License shall be exclusive to
Endo and sublicenseable by Endo within the Field of Use. The License shall be
non-exclusive and non-sublicenseable as to all fields outside of the Field of
Use, except that Endo may grant sublicenses outside of the Field of Use to
manufacturers for the sole and limited purpose of making Endo products and
selling/importing such Endo products to Endo, which Endo ultimately re-sells
under this License. LecTec retains no rights under the Licensed Patents in the
Field of Use. Endo shall have the exclusive right to grant sublicenses under the
License within the Field of Use (but not outside the Field of Use) in its sole
discretion.
Section 3.2. Covenant Not To Sue. During the Covenant Term, LecTec, on behalf of
itself and its Affiliates and their respective successors and assigns (including
any successors and assigns of the Covenant Patents), covenant that they will not
sue, assert any claim or counterclaim against, or otherwise participate in any
action or proceeding against Endo or any of its Affiliates or any of their
respective past, present and future employees, officers, directors, principals,
agents, attorneys, accountants shareholders, licensees, sublicensees, customers,
suppliers, contractors, importers, manufacturers, distributors, insurers, or any
heirs, administrators, executors, predecessors, successors, affiliates, or
assigns of the foregoing, or cause, authorize or assist any Person to do any of
the foregoing, in each case relating to any Endo Products with respect to any
Covenant Patents anywhere in the world (the “Covenant Not to Sue”).

 

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Section 3.3. License Term; Covenant Term. (a) The term of the License (“License
Term”) will commence on the Effective Date and will continue until the
expiration of the last to expire claims of the Licensed Patents.
(b) The term of the Covenant Not To Sue (“Covenant Term”) will commence on the
Effective Date and will continue until the expiration of the last to expire
claims of the Covenant Patents.
Section 3.4. License Fee. Conditioned upon the Dismissal Date having occurred,
Endo shall pay to LecTec a one-time, non-refundable license fee equal to
$23,000,000 (twenty three million dollars) on or before December 15, 2009 (such
amount, the “License Fee”), by wire transfer of immediately available funds to
the following account:

     
Receiving Bank Name:
   National City Bank of Michigan/Illinois
 
   755 West Big Beaver Road
 
   Troy, MI 48084
 
   
Receiving Bank ABA#
   072000915
 
   
Beneficiary Account Name:
   RADER, FISHMAN & GRAUER PLLC
 
   
Beneficiary Account Number:
   
 
   
Swift:
   

It is hereby agreed that the foregoing payment is accepted by LecTec as the sole
consideration for the execution of this Agreement and the License, covenants and
releases set forth herein. LecTec shall be solely responsible for any and all
taxes, duties, levies or fees charged or owing with respect to the License Fee.
Endo agrees that the License Fee is non-refundable, including in the event that
any of the Licensed Patents are subsequently adjudicated to be invalid or
unenforceable.
Section 3.5. Patent Listing. If requested by Endo, LecTec shall reasonably
cooperate in effecting the listing of the Patents-In-Suit on the U.S. Food and
Drug Administration’s Orange Book: Approved Drug Products with Therapeutic
Equivalence Evaluations or any successor thereto (the “Orange Book”). Any such
listing shall be at Endo’s sole discretion.
Section 3.6. Assignment. Neither LecTec nor any of its Affiliates may assign or
transfer (whether by operation of law, contract or otherwise) the Licensed
Patents or Covenant Patents without first requiring the proposed assignee or
transferee to acknowledge and agree in writing to the terms and conditions of
this Agreement, including the License and Covenant Not To Sue, relating to the
Licensed Patents and Covenant Patents, a copy of such written agreement to be
promptly provided to Endo.

 

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Section 3.7. Bankruptcy Rights. All rights and licenses granted under or
pursuant to this Agreement by LecTec are, and shall otherwise be deemed to be,
for purposes of Section 365(n) of the U.S. Bankruptcy Code, licenses of rights
to “intellectual property” as defined under Section 101 of the U.S. Bankruptcy
Code. The Parties agree that Endo, as a licensee of intellectual property under
this Agreement, shall retain and may fully exercise all of its rights and
elections under the U.S. Bankruptcy Code. The Parties further agree that, in the
event of a rejection of this Agreement by LecTec in any bankruptcy proceeding by
or against such Party under the U.S. Bankruptcy Code, LecTec shall not interfere
with Endo’s rights to intellectual property and all embodiments of intellectual
property, and shall assist and not interfere with Endo in obtaining intellectual
property and all embodiments of intellectual property from another entity. The
term “embodiments” of intellectual property includes all tangible, intangible,
electronic or other embodiments of rights and licenses hereunder, including all
compounds and products embodying intellectual property, regulatory filings and
related rights, and Licensed Patents and Covenant Patents.
ARTICLE IV.
MAINTENANCE; ENFORCEMENT
Section 4.1. Maintenance.
(a) LecTec shall maintain the Licensed Patents during the term of this
Agreement. LecTec shall keep Endo apprised of the continuing maintenance of the
Licensed Patents. Payment of all fees and costs relating to the maintenance of
the Licensed Patents shall be the sole responsibility of LecTec. LecTec promptly
shall provide to Endo copies of all patent-related documents that it files with
any patent office with respect to the Licensed Patents. In the event LecTec
decides not to continue to maintain any United States or foreign patent
comprised within the Licensed Patents, LecTec timely shall notify Endo in
writing of such decision so that Endo may continue said maintenance of such
Licensed Patents at its own expense. In such case, such Licensed Patents shall
be assigned, and hereby are assigned, to Endo.
(b) Enforcement. Endo shall have the sole and exclusive right to prosecute, at
its own expense and utilizing counsel of its choice, any infringement of the
Licensed Patents within the Field of Use, and to control any lawsuits or other
actions relating thereto.
(i) The total cost of any such action commenced by Endo shall be borne by Endo.
Any damages or settlement payments resulting from any such action commenced by
Endo, whether in an out-of-court settlement or through legal adjudication of
such action, shall be retained solely by Endo.
(ii) In any infringement action Endo may institute pursuant to this
Section 4.1(b), LecTec shall, at the request of Endo, cooperate in all respects
and, to the extent possible, have its employees testify when requested and make
available relevant records, papers, information, samples, specimens, and the
like. Endo shall reimburse LecTec for its reasonable out-of-pocket costs and
expenses incurred in providing such cooperation.

 

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Section 4.2. Cooperation. In furtherance of Section 4.1, LecTec agrees, if
necessary under the applicable law to be legally joined as a party in any suit,
action or proceeding that is the subject of such Sections, at the expense of
Endo, and Endo shall have the right to control and settle any such litigation.
LecTec shall have no right to require Endo to join in any suit.
ARTICLE V.
CONFIDENTIALITY
Section 5.1. The Parties shall issue press releases in the form attached as
Appendix B to this Agreement on or after the Effective Date. No Party may make
any press release or public disclosure (written or oral) concerning the
existence of, or the transactions contemplated by, this Agreement, prior to
issuing that press release. The Parties shall be permitted to make any filings
required by the Securities and Exchange Commission.
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES
Section 6.1. Representations by Endo. Endo hereby represents and warrants to
LecTec as follows:
(a) it has the corporate power and authority to execute and deliver this
Agreement and to perform its obligations hereunder, and the execution, delivery
and performance of this Agreement has been duly and validly authorized by it.
Upon execution and delivery of this Agreement by it, this Agreement will
constitute a legal, valid and binding agreement, enforceable in accordance with
its terms, subject to bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforceability of creditors’ rights generally
and other general equitable principles which may limit the right to obtain
certain remedies;
(b) neither the execution and delivery of this Agreement, nor consummation of
the transactions contemplated herein requires it to obtain any permits,
authorizations or consents from any governmental body or from any other Person
other than such permits, authorizations or consents as it has already obtained;
and
(c) it has not assigned or otherwise transferred to any Person any of its
claims, rights, causes of action, counterclaims or defenses that are covered by
the release granted under Section 2.2(b).

 

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Section 6.2. Representations by LecTec. LecTec represents and warrants to Endo
as follows:
(a) It has the corporate power and authority to execute and deliver this
Agreement and to perform its obligations hereunder, and the execution, delivery
and performance of this Agreement has been duly and validly authorized by it.
Upon execution and delivery of this Agreement by LecTec, this Agreement will
constitute a legal, valid and binding agreement of LecTec, enforceable in
accordance with its terms, subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforceability of creditors’
rights generally and other general equitable principles which may limit the
right to obtain certain remedies;
(b) neither the execution and delivery of this Agreement nor consummation of the
transactions contemplated herein requires LecTec to obtain any permits,
authorizations or consents from any governmental body or from any other Person;
(c) LecTec has not assigned or otherwise transferred to any Person any of its
claims, rights, causes of action, counterclaims or defenses that are covered by
the release granted under Section 2.2(a);
(d) Subject to its agreements with the Mentholatum Company and Novartis, LecTec
exclusively owns all right, title, and interest in and to the Licensed Patents,
including all right, title, and interest to sue for infringement thereof, and
has the right and ability to grant the License and Covenant Not To Sue, in each
case free and clear of any liens, encumbrances, claims and charges. LecTec has
obtained and properly recorded all assignment agreements as necessary to fully
perfect its rights and title in the Licensed Patents in accordance with
governing law in each respective jurisdiction. LecTec is the owner of record
with the U.S. Patent and Trademark Office and all other applicable patent
offices of the Licensed Patents;
(e) There is no obligation imposed on LecTec or any prior owner to license any
of the Licensed Patents on particular terms or conditions. Other than the rights
granted to the Mentholatum Company and Novartis in their respective agreements,
no licenses or other rights under the Licensed Patents have been granted by
LecTec, any prior owners, or inventors;
(f) LecTec is not subject to any covenant not to sue or similar restrictions on
its enforcement or enjoyment of the Licensed Patents in the Field of Use as a
result of any prior transaction related to the Licensed Patents. The Licensed
Patents are not subject to any governmental or court order or decision of any
kind. None of the Licensed Patents have been created, developed or authored
under any contract or other understanding with any governmental entity or
educational institution or utilizing the funding, facilities or resources of any
governmental entity or educational institution. LecTec has not invited any third
party to enter into a license under any of the Licensed Patents within the Field
of Use;

 

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(g) None of the Licensed Patents has ever been found invalid, unpatentable, or
unenforceable for any reason in any administrative, arbitration, judicial or
other proceeding. The Licensed Patents are in good standing and have not
expired, been cancelled or abandoned. If any of the Licensed Patents are
terminally disclaimed to another patent or patent application, all patents and
patent applications subject to such terminal disclaimer are included in this
transaction as Licensed Patents;
(h) All maintenance fees, annuities, and the like due or payable on the Licensed
Patents have been timely paid. For the avoidance of doubt, such timely payment
includes payment of any maintenance fees for which the fee is payable (e.g., the
fee payment window opens) even if the surcharge date or final deadline for
payment of such fee would be in the future; and
(i) No representation or warranty made by LecTec in this Agreement contains any
untrue statement of a material fact or omits to state any material fact
necessary to make any such representation or warranty not misleading to a
prospective buyer of the Licensed Patents and other rights to be transferred
under this Agreement seeking full information as to the Licensed Patents and
such other rights.
ARTICLE VII.
TERMINATION
Section 7.1. General. The Parties shall have the rights and remedies with
respect to the termination and/or enforcement of this Agreement which are set
forth in this Article VII.
Section 7.2. Term. The term of this Agreement shall commence on the Effective
Date, and unless earlier terminated pursuant to Section 7.3, shall remain in
force through the later of the License Term and the Covenant Term.
ARTICLE VIII.
MISCELLANEOUS
Section 8.1. Governing Law; Jurisdiction. The validity and interpretation of
this Agreement and the legal relations of the Parties to it will be governed
exclusively by the internal laws, and not the law of conflicts, of the
Commonwealth of Pennsylvania. Each of the Parties agrees to the non-exclusive
jurisdiction of any state or federal court located in the Commonwealth of
Pennsylvania with respect to any action or dispute arising under or relating to
this Agreement, and waives personal service of any and all process upon it, and
consents that all services of process be made by registered mail, directed to it
or him at its or his address as set forth in Section 8.2, and service so made
shall be deemed to be completed when received. Each of the Parties waives any
objection based on forum non conveniens and waives any objection to venue of any
action instituted hereunder. Nothing in this Section 8.1 shall affect the right
of any Party to serve legal process in any other manner permitted by law.

 

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Section 8.2. Notices. All notices, requests and other communications hereunder
will be in writing, will be addressed to the receiving Party’s address set forth
below or to such other address as a Party may designate by notice hereunder, and
will be either (a) delivered by hand, (b) made by facsimile transmission (to be
followed with written confirmation by the delivering Party), (c) sent by private
courier service providing evidence of receipt, or (d) sent by registered or
certified mail, return receipt requested, postage prepaid. The addresses and
other contact information for the Parties are as follows:

     
For Endo:
  Endo Pharmaceuticals Inc.
 
  100 Endo Boulevard
 
  Chadds Ford, PA 19317
 
   
with a copy to:
  General Counsel
 
   
For LecTec:
  Judd Berlin
 
  LecTec Corporation
1407 South Kings Highway
Texarkana, Texas 75501
 
   
with a copy to:
  R. Terrance Rader
 
  Thomas E. Bejin
 
  Glenn E. Forbis
 
  RADER, FISHMAN & GRAUER PLLC
 
  39533 Woodward Avenue, Suite 140
 
  Bloomfield Hills, MI 48304

or to such other addresses as will have been subsequently furnished by written
notice to the other Parties.
Section 8.3. Entire Agreement; Waiver. This Agreement, including the Appendices
attached hereto, contains the entire agreement between the Parties with respect
to the subject matter hereof and supersedes all prior drafts or understandings,
including without limitation the Term Sheet executed November 6, 2009. No
change, modification, amendment or waiver of any obligation, term or provision
contained herein will be valid or enforceable unless the same is reduced to
writing and signed by a duly authorized representative of each of the Parties to
be bound hereby. The waiver by a Party to this Agreement of a breach of any
provision set forth herein or of any right contained herein will not operate as
or be construed as a continuing waiver or a waiver of any subsequent breach or
right granted herein.
Section 8.4. Counterparts. This Agreement may be executed in counterparts, each
of which will be deemed be an original, but all of which together will
constitute one agreement.
Section 8.5. No Third Party Beneficiaries. Except as expressly provided herein,
nothing is intended or will be construed to confer upon any Person other than
the Parties hereto and their successors or assigns, any rights or remedies under
or by reason of this Agreement.

 

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Section 8.6. Assignment. This Agreement will be binding upon and inure to the
benefit of the Parties and their permitted successors and assigns. This
Agreement and the rights granted herein may not be assigned or transferred
(whether by contract, operation of law or otherwise) by any Party without the
prior written consent of the other Parties, provided that this Agreement shall
be assignable by a Party in connection with the sale of all or substantially all
of the assets of the business of such Party to which this Agreement relates, and
provided further that (a) the Party whose assets are being sold notifies the
other Parties of any such assignment of this Agreement in writing (including the
identity of the assignee) and (b) the purchaser of those assets provides written
confirmation that it agrees to assume all of the assigning Party’s obligations
hereunder. The covenants, rights and obligations of each Party under this
Agreement shall remain binding upon such Party notwithstanding any assignment or
transfer of this Agreement by such Party as permitted by this Section 8.6, and
also shall inure to the benefit of and be binding upon any permitted assignee or
transferee of this Agreement.
Section 8.7. Limitation of Liability. In no event shall either party be liable
to the other Party for any indirect, incidental, special, punitive or
consequential damages of any kind arising out of or in connection with this
Agreement.
Section 8.8. Expenses. Each Party will pay its own expenses incurred in
connection with its negotiation of this Agreement and the consummation of the
transactions contemplated hereby.
Section 8.9. Headings. The headings contained in this Agreement are for
convenience of reference only and will not affect the meaning or interpretation
of this Agreement.
Section 8.10. Rules of Construction. (a) The definitions of the terms herein
shall apply equally to the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words “include”, “includes” and
“including” shall be deemed to be followed by the phrase “without limitation”.
The word “will” shall be construed to have the same meaning and effect as the
word “shall”. The word “any” shall mean “any and all” unless otherwise clearly
indicated by context. “$” as used in this Agreement means the lawful currency of
the United States of America. Where either Party’s consent is required
hereunder, except as otherwise specified herein, such Party’s consent may be
granted or withheld in such Party’s sole discretion.
(b) Unless the context requires otherwise, (i) any definition of or reference to
any agreement, instrument or other document herein shall be construed as
referring to such agreement, instrument or other document as from time to time
amended, supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein or therein), (ii) any
reference to any laws herein shall be construed as referring to such laws as
from time to time enacted, repealed or amended, (iii) any reference herein to
any person shall be construed to include the person’s successors and assigns,
(iv) the words “herein”, “hereof” and “hereunder”, and words of similar import,
shall be construed to refer to this Agreement in its entirety and not to any
particular provision hereof, and (v) all references herein to Articles, Sections
or Appendices, unless otherwise specifically provided, shall be construed to
refer to Articles, Sections and Appendices of this Agreement.

 

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IN WITNESS WHEREOF, the Parties have executed this Agreement on the date first
above written.

              ENDO PHARMACEUTICALS INC.    
 
            By:   /s/ David Holveck              
 
  Name and Title:   David Holveck, Chief Executive Officer     Date:
November 11, 2009    
 
            LECTEC CORPORATION       By:   /s/ Judd Berlin              
 
  Name and Title:   Judd Berlin, Chief Executive Officer and    
 
      Chairman of Board of Directors     Date: November 11, 2009    
 
            By:   /s/ C. Andrew Rollwagon              
 
  Name and Title:   C. Andrew Rollwagon, Member of Board of Directors     Date:
November 11, 2009    
 
            By:   /s/ Daniel Sigg              
 
  Name and Title:   Daniel Sigg, Member of Board of Directors     Date:
November 11, 2009    
 
            By:   /s/ Sanford Brink              
 
  Name and Title:   Sanford Brink, Member of Board of Directors     Date:
November 11, 2009    

 

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APPENDIX A

STIPULATION OF DISMISSAL

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF TEXAS
TEXARKANA DIVISION

         
LECTEC CORPORATION
  §    
 
  §    
Plaintiff,
  §    
 
  §   No. 5:08cv130 (DF)
v.
  §    
 
  §   JURY
CHATTEM, INC.; ENDO
  §    
PHARMACEUTICALS, INC.
  §    
JOHNSON & JOHNSON CONSUMER
  §    
COMPANY, INC.; THE MENTHOLATUM
  §    
COMPANY, INC. and PRINCE OF PEACE
  §    
ENTERPRISES, INC.,
  §    
 
  §    
Defendants.
  §    

WHEREAS, plaintiff LecTec Corporation (“Plaintiff”) is the assignee and owner of
United States Patent Nos. 5,536,263 and 5,741,510 (the “Patents-In-Suit”);
WHEREAS, Plaintiff and Endo Pharmaceuticals, Inc. (“Defendant”) are parties to
litigation relating to the Patents-In-Suit; and
WHEREAS, Plaintiff and Defendant have entered into a Settlement and License
Agreement, dated as of November  _____, 2009 (“Settlement Agreement”), pursuant
to which the parties have resolved the above-referenced actions and Plaintiff
has granted to Defendant an exclusive license under the Patents-In-Suit.

 

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NOW, THEREFORE, Plaintiff and Defendant stipulate that:

  1.   All claims and counterclaims in the above-referenced actions are
dismissed with prejudice.     2.   Each party shall bear its own costs, expenses
and attorneys’ fees in connection with the above-referenced actions.     3.  
The parties waive any right of appeal from this Stipulation of Dismissal.

IT IS SO ORDERED, this                      day of November, 2009.

                             Hon. David J. Folsom, U.S.D.J.   

Stipulated as to form and entry:

                      Dechert llp       Rader, Fishman & Grauer PLLC    
Attorneys for Defendant and Counterclaim Plaintiff       Attorneys for Plaintiff
LecTec Corporation     Endo Pharmaceuticals, Inc.                
 
                   
By:
  /s/ Robert D. Rhoad       By:        
 
 
 
         
 
    Robert D. Rhoad       R. Terrance Rader     902 Carnegie Center       Thomas
E. Bejin     Suite 500       Glenn E. Forbis     Princeton, NJ 08540       39533
Woodward Ave., Suite 140     Telephone: (609) 955-3200       Bloomfield Hills,
MI 48304                 Telephone: (248) 594-0636    

Martin J. Black
DECHERT LLP
Cira Centre
2929 Arch Street
Philedelphia, PA 19104-2808
Telephone: (215) 994-4000

 

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APPENDIX B

FORM OF PRESS RELEASES
ENDO PRESS RELEASE:
ENDO PHARMACEUTICALS AND LECTEC SETTLE PATENT DISPUTE
CHADDS FORD, Pa., Nov. 11, 2009 — Endo Pharmaceuticals (Nasdaq: ENDP) announced
today that it has reached a settlement with LecTec Corporation on outstanding
patent litigation related to LecTec’s U.S. Patent Nos. 5,536,263 and 5,741,510.
Endo Pharmaceuticals has agreed to make a one-time, $23 million payment for the
exclusive license to these two patents for use in the field of prescription pain
medicines and treatment. “We are pleased to add these patents to our IP
inventory especially as they relate to Lidoderm®,” said Caroline Manogue,
executive vice president and chief legal officer of Endo Pharmaceuticals.
About Endo
Endo Pharmaceuticals is a specialty pharmaceutical company engaged in the
research, development, sale and marketing of branded and generic prescription
pharmaceuticals used to treat and manage pain, prostate cancer and the early
onset of puberty in children, or central precocious puberty (CPP). Its products
include LIDODERM®, a topical patch to relieve the pain of postherpetic
neuralgia; Percocet® and Percodan® tablets for the relief of
moderate-to-moderately severe pain; FROVA® tablets for the acute treatment of
migraine attacks with or without aura in adults; OPANA® tablets for the relief
of moderate-to-severe acute pain where the use of an opioid is appropriate;
OPANA® ER tablets for the relief of moderate-to-severe pain in patients
requiring continuous, around-the-clock opioid treatment for an extended period
of time; Voltaren® Gel, which is owned and licensed by Novartis AG, a
nonsteroidal anti-inflammatory drug indicated for the relief of the pain of
osteoarthritis of joints amenable to topical treatment, such as those of the
hands and the knees; VANTAS® for the palliative treatment of advanced prostate
cancer; SUPPRELIN® LA for the treatment of early onset puberty in children; and
VALSTAR™ for the treatment of BCG-refractory carcinoma in situ (CIS) of the
urinary bladder in patients for whom immediate cystectomy would be associated
with unacceptable medical risks. The company markets its branded pharmaceutical
products to physicians in pain management, urology, endocrinology, oncology,
neurology, surgery and primary care. More information, including this and past
press releases of Endo Pharmaceuticals, is available at www.endo.com.

 

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Safe Harbor Statement
This press release contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 regarding, among other things,
the company’s financial position, results of operations, market position,
product development and business strategy, as well as estimates of future net
sales, future expenses, future net income and future earnings per share. 
Statements including words such as “believes,” “expects,” “anticipates,”
“intends,” “estimates,” “plan,” “will,” “may,” “intend,” “guidance” or similar
expressions are forward-looking statements.  Because these statements reflect
our current views, expectations and beliefs concerning future events, these
forward-looking statements involve risks and uncertainties. Investors should
note that many factors could affect our future financial results and could cause
our actual results to differ materially from those expressed in forward-looking
statements contained in this press release. These factors include, but are not
limited to: the possibility that the acquisition of Indevus is not complementary
to Endo; the inherent uncertainty of the timing and success of, and expense
associated with, research, development, regulatory approval and
commercialization of our products and pipeline products; competition in our
industry, including for branded and generic products, and in connection with our
acquisition of rights to assets, including intellectual property; government
regulation of the pharmaceutical industry; our dependence on a small number of
products and on outside manufacturers for the manufacture of our products; our
dependence on third parties to supply raw materials and to provide services for
certain core aspects of our business; new regulatory action or lawsuits relating
to our use of controlled substances in many of our core products; our exposure
to product liability claims and product recalls and the possibility that we may
not be able to adequately insure ourselves; our ability to protect our
proprietary technology; our ability to successfully implement our in-licensing
and acquisition strategy; the availability of third-party reimbursement for our
products; the outcome of any pending or future litigation or claims by the
government; our dependence on sales to a limited number of large pharmacy chains
and wholesale drug distributors for a large portion of our total net sales; a
determination by a regulatory agency that we are engaging in inappropriate sales
or marketing activities, including promoting the “off-label” use of our
products; the loss of branded product exclusivity periods and related
intellectual property; and exposure to securities that are subject to market
risk including auction-rate securities the market for which is currently
illiquid; and other risks and uncertainties, including those detailed from time
to time in our periodic reports filed with the Securities and Exchange
Commission, including our current reports on Form 8-K, quarterly reports on Form
10-Q and annual reports on Form 10-K, particularly the discussion under the
caption “Item 1A, RISK FACTORS” in our annual report on Form 10-K for the year
ended December 31, 2008, which was filed with the Securities and Exchange
Commission on March 2, 2009. The forward-looking statements in this press
release and on the related conference call are qualified by these risk factors.
These are factors that, individually or in the aggregate, we think could cause
our actual results to differ materially from expected and historical results. We
assume no obligation to publicly update any forward-looking statements, whether
as a result of new information, future developments or otherwise.

 

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LECTEC PRESS RELEASE:
LecTec Corporation and Endo Pharmaceuticals Inc. Settle Patent Dispute
November 11, 2009 — Texarkana, Texas — LecTec Corporation (OTCBB: LECT)
announced today that it has reached a settlement with Endo Pharmaceuticals Inc.
on outstanding patent litigation related to LecTec’s U.S. Patent Nos. 5,536,263
and 5,741,510. Endo Pharmaceuticals has agreed to make a one–time, $23 million
payment for the exclusive license to these two patents for use in the field of
prescription pain medicines and treatment. “LecTec is pleased to have reached an
agreement with Endo Pharmaceuticals which avoids the uncertainties of litigation
and provides LecTec with the capital to explore the opportunities in its patent
portfolio,” said Judd Berlin, chief executive officer of LecTec.
LecTec filed a patent infringement action in U.S. District Court in July 2008
against Endo Pharmaceuticals and others in the topical medicated patch business
alleging patent infringement of the core structure and composition claims of two
of LecTec’s patents.
About LecTec Corporation
LecTec Corporation is an intellectual property licensing and holding company.
The Company’s primary focus is to derive royalty and other income from patents
that the Company owns based on its advanced skin interface technologies. The
Company was an innovator in hydrogel–based topical delivery of therapeutic
over–the–counter medications, which provide alternatives to topical creams and
ointments. A hydrogel is a gel–like material having an affinity for water and
similar compounds. These gels are ideal for delivering medication onto the skin.
The Company holds multiple domestic and international patents on its hydrogel
technology.

 

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Cautionary Statements
This press release contains forward–looking statements concerning possible or
anticipated future results of operations or business developments which are
typically preceded by the words “believes,” “wants,” “expects,” “anticipates,”
“intends,” “will,” “may,” “should,” or similar expressions. Such forward-looking
statements are subject to risks and uncertainties, which could cause results or
developments to differ materially from those, indicated in the forward–looking
statements. Such risks and uncertainties include, but are not limited to, the
Company’s dependence on royalty payments from Novartis Consumer Health, Inc.,
which recently re–launched an adult vapor patch licensed by the Company, the
Company’s dependence on key personnel and Board of Director members, the
Company’s pending patent infringement litigation against Chattem, Inc. (NASDAQ:
CHTT), Johnson & Johnson Consumer Company, Inc., a subsidiary of Johnson &
Johnson (NYSE: JNJ), and Prince of Peace Enterprises, Inc., the issuance of new
accounting pronouncements, the availability of opportunities for licensing
agreements related to patents that the Company holds, limitations on market
expansion opportunities, and other risks and uncertainties detailed from time to
time in the Company’s filings with the Securities and Exchange Commission, and
particularly as described in the “Risk Factors” included in our Form 10–K for
the year ended December 31, 2008.

 

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