PROMISSORY NOTE
Published on August 16, 2004
Exhibit 10.02
PROMISSORY NOTE
January 1, 2004
Minnetonka, Minnesota
FOR VALUE RECEIVED, the undersigned, LECTEC CORPORATION, a Minnesota
corporation with a mailing address of 10701 Red Circle Drive, Minnetonka, MN
55343 (hereinafter referred to as the "LecTec"), promises to pay to the order of
NOVARTIS CONSUMER HEALTH, INC. with a mailing address of 200 Kimball Drive,
Parsippany, NJ 07054 (hereinafter referred to as "Novartis"), the lesser of the
sum of Two Million ($2,000,000.00) Dollars or so much thereof as has been
advanced and remains outstanding pursuant to Section 2.5 of the Supply and
License Agreement between LecTec and Novartis dated as of January 1, 2004, (the
"Agreement") together with interest and costs thereon as set forth below, such
interest and costs being payable only in the event of default by LecTec
hereunder.
All amounts outstanding under this Note, together with interest
thereon, shall be repaid in full on upon Novartis' acceptance of final shipment
of Product delivered by LecTec under the Agreement. This Note may be subject to
mandatory prepayment under circumstances as set forth in the Agreement.
Interest on the principal amount outstanding hereunder shall begin to
accrue as of the date hereof, and shall be payable only in the event of default
by LecTec hereunder on the date of such default whether or not any judgment has
been issued thereon. Such default interest shall be payable at the rate per
annum which shall be two (2) percentage points higher than the "prime" rate as
reported in The Wall Street Journal on the first business day of each month,
adjusted monthly.
This Note is the New Advance Payment Note as defined in the Agreement,
to which reference may be made for a description of the terms and conditions of
advances of principal hereof and the method of payment by way of credits for
products sold and
delivered by LecTec to Novartis. The indebtedness described herein shall have
the benefit of the Collateral as set forth in a Security Agreement between
LecTec and Novartis of even date herewith.
This Note may be prepaid, at any time, in whole or in part, without
premium or fee. If this Note is not paid when due, LecTec agrees to pay all
costs of collection, including reasonable attorneys' fees. LecTec hereby waives
demand, presentment, notice of dishonor, protest, and notice of protest.
WITHOUT LIMITING OTHER RIGHTS ACCORDED TO NOVARTIS HEREUNDER, LECTEC
HEREBY CERTIFIES THAT THE TRANSACTION CONTEMPLATED BY THIS NOTE IS A COMMERCIAL
TRANSACTION AND HEREBY WAIVES (A) ITS RIGHTS TO NOTICE AND HEARING AS OTHERWISE
ALLOWED BY LAW WITH RESPECT TO ANY PREJUDGMENT REMEDY WHICH NOVARTIS MAY DECIDE
TO USE, AND (B) ALL RIGHTS AS OTHERWISE ALLOWED BY LAW TO REQUEST THAT NOVARTIS
POST A BOND, WITH OR WITHOUT SURETY, TO PROTECT LECTEC OR ANY OTHER PERSON OR
ENTITY LIABLE UNDER THIS NOTE AGAINST DAMAGES THAT MAY BE CAUSED BY ANY
PREJUDGMENT REMEDY SOUGHT OR OBTAINED BY NOVARTIS BY VIRTUE OF ANY DEFAULT OR
PROVISION OF THIS NOTE OR THE AGREEMENT, AND LECTEC HEREBY CONSENTS TO THE
ISSUANCE OF ANY SUCH PREJUDGMENT REMEDY WITHOUT SUCH A BOND.
IN WITNESS WHEREOF, the undersigned has executed and delivered this
Note as of the date and year first above written.
LECTEC CORPORATION
By /s/ Timothy P. Fitzgerald
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Name
Its: CEO
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Title