Exhibit 10.11
(Certain information has been omitted from this exhibit and filed separately
with the SEC pursuant to a request for confidential treatment under Rule 24b-2)
3M - CNS
DISTRIBUTION AGREEMENT
EFFECTIVE DATE: AUGUST 2, 1995
1. Parties
A. Minnesota Mining and Manufacturing Company
Consumer and Professional Health Care
Medical-Surgical Markets Division
275-5SW 0X Xxxxxx
Xx. Xxxx, XX 00000
B. CNS, Inc.
0000 Xxxx Xxxx
Xxxxxxxxxx, XX 00000
2. Purpose
A. 3M will be CNS's exclusive distributor of CNS's nasal dilator
outside of the US and Canada.
B. CNS will provide product with 3M's label, either in bulk or
packaged in 3M's packaging.
C. 3M will license the 'Breathe Right' trademark but will use 3M
trade dress.
3. Term and Termination
A. Term Initial term: 5 years. After 5 years, the agreement
continues until terminated.
B. Termination for cause
Either 3M or CNS may terminate this agreement if the other
materially breaches it by giving 90 days' written notice
within 90 days opportunity to cure the breach.
C. Termination without cause
1) CNS may
a. terminate the EXCLUSIVITY of this agreement
without cause after the third year of the
initial term by giving one year written
notice. Notice may be given prior to the end
of the third year.
i. As of the termination date, 3M will
no longer be the exclusive
distributor outside the United
States and Canada, and will no
longer have a license to use the
Breathe Right trademark;
ii. However, 3M may continue to sell
product with the Breathe Right
trademark which was manufactured
prior to the termination date and
use its inventory of packaging with
the Breathe Right trademark;
iii. All other terms and conditions of
this agreement will continue to
apply, except for the minimum
purchase requirements, which will
no longer apply;
AND/OR
b. terminate this agreement after the fifth
year of the initial term by
i. giving one year written notice.
Notice may be given prior to the
end of the fifth year; AND
ii. paying to 3M. [Confidential
Treatment Requested]
iii. 3M will give to CNS information
about its sales of Product by
customer after it receives the
payment described above.
iv. NONCOMPETE. 3M will not sell other
nasal dilator devices for two years
after the date of termination. 3M
may sell non-mechanical nasal
dilators, such as pharmaceutical
nasal dilators.
2) 3M. 3M may terminate this agreement without cause after the
initial term by giving one year written notice. Notice may be
given prior to the end of the initial term.
a NONCOMPETE. 3M will not sell other nasal dilator
devices for three years from the date the agreement
is terminated. 3M may sell non-mechanical nasal
dilators, such as pharmaceutical nasal dilators.
4. Product
CNS's nasal dilator packaged with 3M's labeling ('Product'). Product
and package specifications stated in Exhibit A. 3M may not alter
Products or change its package specifications without CNS's approval.
CNS will not withhold its approval unreasonably.
5. Prices
A. Exhibit B. Prices in US $. FOB CNS or assignee facility.
B. Prices will be effective for 1995 and 1996. After 1996, CNS
may change its prices as follows:
1) 3M components. CNS may increase its prices at anytime
by the amount of any increase in prices of 3M
components.
2) All other costs. CNS may increase its prices once per
calendar year after 1996 to reflect an increase in
the cost of producing the Products, excluding the
cost of 3M components, by giving 3M 90 days' written
notice of the price change.
a. CNS will not increase the price by more than
the increase in the consumer price index for
the previous year times [1 minus the
fraction whose numerator is 3M component
costs and whose denominator is the price].
C. Cost reductions. 3M and CNS will establish targets for cost
reductions and identify possible sources of reductions. CNS
will determine feasibility of the cost reduction projects
before implementing. CNS will lower its prices to reflect cost
reductions achieved through joint cost reduction programs.
D. Competitive prices. 3M and CNS will discuss price reductions
to meet competitive situations in specific countries.
6. Markets
A. 3M is the exclusive distributor of CNS's nasal dilator outside
of the US (including its territories, such as Puerto Rico) and
Canada. 3M will use reasonable efforts to promote the Product.
("Reasonable efforts" shall mean efforts consistent with 3M's
efforts relating to other products in the Consumer and
Professional Health Care business unit.) CNS will not sell the
nasal dilator to customers outside the US and Canada directly
or through other another party.
B. 3M will comply with all material laws and regulations
applicable to the sale of the Product outside of the US and
Canada. 3M is responsible for obtaining appropriate approvals
to sell the Product in countries outside of the US and Canada.
It will obtain those approvals in 3M's name. CNS will
reasonably cooperate at its own expense.
C. 3M will not manufacture similar nasal dilators or purchase
them from other vendors during this agreement, unless CNS is
unable to supply at least 75% of 3M's forecasted quantities
for any reason for more than 90 days. 3M may manufacture or
purchase similar nasal dilators only during the period that
CNS is unable to supply them.
D. 3M and CNS will cooperate to prevent the resale of
1) CNS's nasal dilator (under any label besides 3M's)
outside of the US and Canada; and
2) the Product (under 3M's label) in the US or Canada.
E. CNS may request that 3M discontinue selling Product within a
country in which a claim has been made that the Product
infringes anyone else's intellectual property rights. If 3M
continues to sell Product within that country, it shall be in
default hereunder and shall waive its right to indemnification
(see paragraph 12) for its sales subsequent to CNS's request.
7. Minimum Purchases
A. Minimum purchases: See Exhibit B.
1) The minimums stated in Exhibit B will be
appropriately reduced if CNS
a. does not use reasonable efforts to defend
its patents or tradenames;
b. does not have certifications (e.g. CE xxxx)
needed to market the product competitively;
or where 3M cannot obtain timely regulatory or other
governmental approval to sell the Product despite its
reasonable efforts (as defined in 6.A.) to obtain the
approvals, and these situations would have a material
effect on 3M's ability to meet the minimums.
2) CNS's exclusive remedy in case 3M fails to meet its
minimum purchases requirement is to terminate this
agreement. It will not be entitled to any damages.
3) CNS must give 3M its notice of termination and
opportunity to cure by January 31 of the year
following 3M's failure to meet its minimum
requirements. 3M will have 90 days to purchase the
amount needed to meet the minimum. These quantities
will not count toward the next year's minimum.
B. 3M will roll-out sales globally as described in Exhibit B.
8. Forecasts, Orders, Deliveries
A. Forecasts
1) 3M will give monthly 12 month rolling forecasts. The
first three months of the forecast is 3M's order. In
the next month's forecast, 3M may change the forecast
for the second three months of the previous forecast
by 5% and may change the previous forecast for the
last six months by 15%.
2) For example, if in December 3M forecasts that it will
purchase 100 units per month during the next twelve
months, then
a. The forecast for January, February and March
are 3M's firm orders for those months;
b. In the January forecast,
i. The January forecast for February
and March are firm orders from the
December forecast;
ii. the January forecast for April may
be increased to 105 units, which
becomes 3M's firm order;
iii. the January forecast for May and
June may be increased to 105 units,
but these are not a firm orders;
iv. the January forecast for
July-December may be increased to
115 units per month, and these are
not firm orders.
3) CNS will promptly notify 3M if it is unable to meet
3M's forecast.
B. 3M will order using a blanket purchase order. The quantities
stated are non-binding estimates. 3M will only be obligated
for the first three months of each rolling forecast.
C. Delivery by dates stated in purchase order releases. However,
the delivery dates must give CNS reasonable time to acquire
packaging.
D. CNS will ship Product in containers that meet international
shipping requirements. 3M will have the risk of loss when
Product is delivered to its carrier at CNS's facility, except
where damage is due to the use of containers that do not meet
international shipping requirements.
E. Payment due net 30 from the date of delivery.
F. In case of backorder, CNS will allocate to 3M the same percent
of production that 3M's sales represent of CNS's total sales
of nasal dilators.
9. Manufacturing
A. CNS will comply with all material laws and regulations,
including FDA GMPs.
B. CNS will use its best efforts to become certified where
certification by authorities outside of the US is needed to
market the product (e.g., CE xxxx in Europe).
C. CNS will manufacture and package the Product in conformance
with Product and packaging specifications. CNS will not change
any specifications, processes, raw materials, or components
that could affect the performance or appearance of the nasal
dilator or its packaging without 3M's approval. 3M will not
unreasonably withhold its approval.
D. CNS will continue to use the 3M components it currently uses,
unless 3M stops offering those components to CNS or if 3M is
unable to supply CNS's requirements.
E. 3M will provide camera-ready artwork for labels and packaging.
F. Master file. CNS is responsible for maintaining master files
and ensuring products are manufactured according to the
documentation.
G. Quality testing. CNS will certify that its products and
packaging pass all QC tests.
H. Audits. 3M may periodically audit procedures, processes,
process controls, and manufacturing records of CNS and its
subcontractors. CNS remains responsible for those functions
and records.
I. 3M suggestions. 3M may make suggestions regarding operations,
quality assurance, cost reductions and other matters. CNS will
independently determine whether to implement any of those
suggestions and will be responsible for them.
J. Inability to supply. CNS hereby grants to 3M a royalty-free
license to make or have made the Product for sale outside the
US and Canada for the duration of CNS's inability to supply at
least 75% of 3M's forecast. 3M may exercise its rights under
this license only if CNS is unable to supply 75% of 3M's
forecasted quantities for any reason (other than 3M's
inability to supply components) for more than 90 days.
10. Intellectual Property
A. CNS trade name and patents.
1) CNS hereby licenses to 3M the use of the CNS "Breathe
Right" trademark for use outside of the US and Canada
during this agreement.
2) 3M will use the 'Breathe Right' trademark where it is
registered and/or reasonable to do so until it
receives notice of termination of 3M's exclusivity or
this agreement. It will use another name where it is
not reasonable to use "Breathe Right," for example,
where another company claims it infringes their
trademark, where "Breathe Right" cannot be protected
as a trademark, or where "Breathe Right" is
culturally inappropriate. From the time 3M receives
notice of termination, 3M may continue to use the
"Breathe Right" trademark or, at 3M's discretion, use
another name for the Product.
3) 3M will discontinue the use of the 'Breathe Right'
trade name at the end of this agreement.
4) 3M will notify CNS if it believes another party is
infringing CNS's patents or trademarks in any country
outside of the United States and Canada. CNS will
promptly notify 3M whether it intends to defend its
patents or trademarks. If it decides not to do so, 3M
may defend them at its own cost.
B. 3M trademarks, trade names and trade dress.
1) Packaging and labels will include 3M trademarks,
trade names and trade dress.
2) CNS has no right or interest in 3M's trademarks,
trade names or trade dress. It will only use them on
packages it sells to 3M. It will discontinue using
them at the end of this agreement or upon 3M's
request.
11. Warranties and Remedies
A. Warranty
1) CNS warrants that its products and packages
a. are free from material defects in material
and manufacture;
b. are fit to be used as indicated in the
Product labeling;
c. meet all specifications and performance
claims;
d. are not adulterated or misbranded (as
defined by the FDA).
2) CNS warrants that it has the exclusive license to
make, use and sell the nasal dilator for the duration
of the applicable patents in the countries where the
patents apply.
3) CNS warrants that it has the exclusive right to use
its trademark in those countries in which the
trademark is registered.
B. Remedies. If a product does not meet its warranty, CNS will
repair, replace or refund 3M's purchase price, at CNS's cost.
In case of a recall in any country, CNS will reimburse 3M for
its reasonable costs in assisting in the recall, unless the
recall is caused by defective components provided by 3M.
C. Returned Goods. 3M will obtain CNS's authorization prior to
returning any products. CNS has the right to appropriately
inspect the returned goods.
12. Indemnification
A. CNS will indemnify and defend 3M against any claim that its
products infringe anyone else's intellectual property rights
(e.g., patent, copyright, trademark).
B. CNS will indemnify and defend 3M against any claim that its
products caused personal injury or property damage, unless the
injury or property damage is caused by components provided by
3M.
C. CNS's obligations to indemnify and defend 3M are conditioned
upon 3M giving CNS prompt notice of the claim, giving the
defense of the claim to CNS and reasonably cooperating with
CNS in the defense.
D. 3M will indemnify and defend CNS against any claim that arises
from statements 3M makes about the Product which are not
approved by CNS. 3M's obligations to indemnify and defend CNS
are conditioned upon CNS giving 3M prompt notice of the claim,
giving the defense of the claim to 3M and reasonably
cooperating with 3M in the defense.
13. No Consequential Damages
A. 3M and CNS recognize that this agreement involves risk.
Neither company guarantees that their efforts will be
successful.
B. Neither 3M nor CNS will be liable to the other for any
consequential damages (for example, lost profits, business
opportunities or investments) that arise as a result of this
agreement or its termination.
14. Confidential Information
A. 3M and CNS may exchange information each considers
confidential ('Confidential Information').
B. Neither party will disclose Confidential Information it
receives from the other that is in writing and labeled
'Confidential.'
1) marketing information: for one year from the date it
receives the information;
2) process information: for three years from the date it
receives the information.
There is no restriction on the internal use of the
Confidential Information.
C. The obligation not to disclose does not apply to information
that
1) is or becomes publicly available;
2) is in the possession of the receiving party prior to
receipt;
3) is developed by the receiving party independently of
the Confidential Information;
4) is given to the receiving party by someone else who
has the right to do so.
D. The CNS, Inc. Standard Confidential Disclosure Agreement,
dated July 19, 1994, will continue to apply to Confidential
Information CNS disclosed to 3M prior to the expiration of
that agreement or the effective date of this agreement,
whichever is earlier. The CNS, Inc. Standard Confidential
Disclosure Agreement is attached as Exhibit C.
15. Notices
3M will send notices to:
Xxxxxxx X. Xxxxxx
President and COO
CNS, Inc.
0000 Xxxx Xxxx
Xxxxxxxxxx, XX 00000
cc: Xxxxxxx Xxxxxxx
Xxxxxxxxx & Xxxxxx P.L.L.P.
0000 XXX Xxxxxx
Xxxxxxxxxxx, XX 00000
CNS will send notices to:
Xxxxx Xxxxxxxx-Xxxxx
Consumer and Personal Health Care
Medical-Surgical Markets Division
Minnesota Mining and Manufacturing Company
275-5SW 0X Xxxxxx
Xx. Xxxx, XX 00000
16. CNS Discussions with other Parties.
CNS will notify 3M if it enters any significant discussions with other
parties regarding the sale of CNS or the nasal dilator business or
assets.
17. Additional Terms and Conditions
A. Force Majeure. Neither party is in breach if it cannot perform
for reasons beyond its control.
B. Independent Contractors. 3M and CNS are independent
contractors. They are not agents of each other, partners,
joint-venturers, or franchisor/franchisee. Neither has the
right to bind or commit the other or act on the other's
behalf.
C. Assignment. Neither party will assign this agreement without
the consent of the other, except to a successor of the nasal
dilator business.
D. Dispute resolution
1) Both parties will try to amicably resolve all
disputes.
2) If they are unable to do so, a manager from each
company with full authority to resolve the dispute
will meet with a mediator.
3) If mediation is unsuccessful within 6 months from the
date CNS or 3M requests mediation in writing, either
party may initiate binding arbitration. If a party
needs to preserve its rights by commencing
arbitration prior to the end of the 6 month period,
it may do so, but will continue the arbitration until
the parties attempt to mediate the dispute.
4) Arbitration will be held in Minnesota before a single
arbitrator selected by mutual agreement from the
panel of the Center for Public Resources. It will be
governed by the US Arbitration Act and held in
accordance with the rules of the Center for Public
Resources. The arbitrator will apply Minnesota law.
5) Judgment of the arbitrator may be entered by any
court with appropriate jurisdiction.
F. No waiver. Neither 3M nor CNS waives any of its rights
provided by this agreement because it fails to enforce them.
G. Entire agreement. This agreement and its exhibits are the
entire agreement between 3M and CNS regarding the distribution
of CNS's nasal dilator by 3M. They supersede all previous
agreements. They may be modified only by written agreement.
MINNESOTA MINING AND CNS, Inc.
MANUFACTURING COMPANY
By By /s/ Xxxxxxx X. Xxxxxx
J. Xxxxx Xxxxxxx Xxxxxxx X. Xxxxxx
Title Vice President Title President and COO
Medical Surgical Markets Division
By /s/ Xxxxxxxxx X. Xxxxxxxx
Xxxxxxxxx X. Xxxxxxxx
Title Vice President
Medical Products Technology Division
Exhibit A: Products and package specs
Exhibit B: Prices, minimum purchase requirements
Exhibit C: CNS, Inc. Standard Confidential Disclosure Agreement
3M - CNS
DISTRIBUTION AGREEMENT
EXHIBIT A
PRODUCT AND PACKAGING SPECIFICATIONS
Product and Packaging specifications: CNS specifications for
its current product and packaging. To be provided by CNS
promptly after signing.
All packaging (including shipping cartons) must meet
international shipping requirements. CNS will supply to 3M
results of tests validating that the packaging meets those
requirements, upon request by 3M.
EXHIBIT B
PRICING
[Confidential Treatment Requested]
VOLUME COMMITMENTS
YEAR '95 '96 '97 '98 '99 2000
---- --- --- --- --- --- ----
Volume
[Confidential Treatment Requested]
REGION ROLL-OUT PLAN:
'95
[Confidential Treatment Requested]
'96
PRICING
1995 1996
---- ----
Bulk
[Confidential Treatment Requested]
Finished Goods*
EXHIBIT C
CNS, INC.
STANDARD CONFIDENTIAL
DISCLOSURE AGREEMENT
This agreement and entered into as of this 19th day of July, 1994, by
and between CNS, Inc., which has an office at 0000 Xxxx Xxxx, Xxxxxxxxxx,
Xxxxxxxxx 00000 (hereinafter referred to as "CNS"), and 3M Company, which has an
office at 3M Center, St. Xxxx, Minnesota, (hereinafter referred to as
"Recipient").
WHEREAS, both parties for their mutual benefit, desire that CNS
disclose certain technical and business information relating to CNS and its
products.
NOW, THEREFORE, it is agreed:
Definition: Confidential and Proprietary Information - The term
"Confidential and Proprietary (C/P) Information" shall mean information not
generally known, including trade secrets, about CNS's methods, processes, and
products, including but not limited to, information relating to such matters as
research and development, manufacturing methods, regulatory matters, processes,
techniques, applications for particular technologies, materials or designs,
vendor names, customer lists, management systems, and sales and marketing plans.
All information disclosed by CNS to the Recipient which is marked or described
as C/P Information within 30 days of disclosure, shall be C/P Information.
Handling of Confidential and Proprietary Information:
Recipient agrees to treat such Confidential/Proprietary Information as
such for a period of five years from the date received, and will handle such C/P
Information with the same degree of care it uses to handle its own C/P
Information, but with no less than a reasonable degree of care. There shall be
no restrictions on the handling of information which is not
Confidential/Proprietary Information, which includes information that:
1. was in possession of Recipient prior to receiving it from CNS,
or
2. is or becomes part of the public knowledge or literature by
acts other than those of Recipient after receiving it, or
3. is or becomes available to Recipient from a source other than
CNS that is not under a duty of confidentiality to CNS, or
4. is or becomes available to a third party from CNS on an
unrestricted basis, or
5. is transmitted by CNS after receiving notification in writing
from Recipient that it does not desire to receive any further
Proprietary Information, or
6. is independently developed by Recipient without the use of
CNS's C/P Information, or
7. is transmitted after the expiration of this agreement.
Limitation on Disclosure:
Recipient shall not divulge, in whole or in part, such
Confidential/Proprietary Information to any third party without the prior
written consent of CNS, but only to the extent and during the period of time
that such Information is to be treated as Confidential/Proprietary under the
foregoing provisions of this Agreement.
Limitation of Use:
Recipient shall make no commercial use, in whole or in part, of any
such Confidential/Proprietary Information without the prior written consent of
CNS, but only to the Extent, and during the period, of time such information is
to be treated as Confidential/Proprietary under the foregoing provisions of this
Agreement. Recipient of C/P Information may retain in the offices of its legal
counsel one copy of any written C/P Information for record purposes only.
Term:
The term of this Agreement shall be for an original period of one year
commencing on the date recited in the first paragraph of this Agreement;
however, Recipient's obligations with respect to Confidential/Proprietary
Information disclosed to it prior to termination shall not be affected by the
termination of this Agreement.
Mutual Disclaimers:
No rights or obligations other than those expressly recited herein are
to be implied from this Agreement. In particular, no license is hereby granted
directly or indirectly under any patent now held by, or which may be obtained
by, or which is or may be licensable by either party.
CNS, Inc. 3M
By: /s/ Xxxxxxx X. Xxxxxx By: /s/ J. Xxxxx Xxxxxxx
Title: President & COO Title: General Manager
Date 7/22/94 Date 7/19/94
