Exhibit 10.7
AGREEMENT
This Agreement is entered into between Minnesota Mining and
Manufacturing Company ("3M") and CNS, Inc. ("CNS").
RECITALS
WHEREAS, 3M and CNS entered into a Distribution Agreement with an
effective date of August 2, 1995, ("the 1995 Agreement") and
WHEREAS, under the terms of the 1995 Agreement, 3M became CNS's
exclusive distributor of CNS's nasal dilator outside of the United States and
Canada, CNS provided product to 3M with 3M's label, either in bulk or through
packaging by CNS, and 3M licensed the Breathe Right(R) trademark from CNS, but
agreed to use 3M's trade dress, and
WHEREAS, certain disputes and disagreements have arisen between 3M and
CNS, and 3M and CNS wish to finally resolve any such disputes or disagreements,
and
WHEREAS, the parties now desire to amend the 1995 Agreement and change
their business relationship, and
WHEREAS, the purpose of this new Agreement is to allow CNS to assume
the international sales and distribution of nasal dilators from 3M, to provide
for an orderly transition process for doing so, and to provide compensation to
3M for doing so, releasing certain of its rights under the 1995 Agreement.
NOW, THEREFORE, the parties agree as follows:
1. Effective Date. The effective date of this Agreement is September
30, 1999.
2. Amendment. This Agreement modifies and amends the 1995 Agreement,
and the parties deem this Agreement to be sufficient written amendment to meet
the requirements of paragraph 17G of the 1995 Agreement. The terms of this
Agreement control to the extent they are inconsistent with the terms of the 1995
Agreement.
3. Nonexclusive Distribution. Effective on the date hereof, 3M is
authorized by CNS to continue to distribute CNS's nasal dilator strips outside
of the United States and Canada, but its distribution
shall no longer be exclusive. Notwithstanding the foregoing, 3M shall be the
exclusive distributor of CNS nasal dilators to its current drug store and
pharmacy customers outside the United States and Canada and to Boots, Migros and
Franklin's (Australia) provided 3M maintains distribution at those customers
through March 1, 2000. 3M's exclusive distribution rights for such customers
will terminate on March 1, 2000. On that date, 3M's rights will be nonexclusive
until the termination of 3M's distribution rights on June 30, 2000, as set forth
in this Agreement. During the period from the date of this Agreement until June
30, 2000, 3M will sell no nasal dilator strips or dilators other than those
supplied to it by CNS. CNS will not send any direct communications to 3M's
exclusive customers (identified above) regarding the termination of the
Distribution Agreement or the transfer of the business prior to the
communication referenced in paragraph 13(a).
4. Payment. Within ten business days of the effective date of this
Agreement, CNS shall pay to 3M $6,345,000.
5. End of Sales and Distribution. On June 30, 2000, all 3M's rights of
any sort to sell or distribute CNS nasal dilators shall terminate.
6. Non-Competition. 3M will not sell any nasal dilator devices during
the period beginning July 1, 2000 and ending June 30, 2002.
7. Fulfillment of Orders. CNS will continue to fill orders for nasal
dilators to be sold by 3M between the date of this Agreement and June 30, 2000,
and will cooperate to minimize ending inventory while assuring supply. Beginning
January 1, 2000, CNS will supply nasal dialators to fill orders received by 3M
in generic cold seal wrappers ("packaging") on a consignment basis. 3M will pay
for the nasal dilators upon 3M's sale of the nasal dilators to its customers.
8. Remaining Inventory. To the extent any inventory of 3M packaged
dilators is left in 3M's possession or control on June 30, 2000, such inventory
shall be the sole responsibility of 3M and 3M shall destroy that inventory and
shall have no rights to sell such inventory or return such inventory to CNS. The
parties recognize and agree that the purpose of this provision is to provide an
incentive to 3M to meet its responsibilities to continue its marketing and
distribution responsibilities until the termination of its distribution rights
and responsibilities, as set forth below. By September 30, 2000, 3M will return
unsold nasal dilators in generic packaging to CNS.
9. Excessive Sales and Prices. In the period before June 30, 2000, 3M
shall not sell 'excessive' amounts of inventory to customers by offering prices
below 3M's original cost of CNS nasal dilators in local currency. For the
purposes of this paragraph, 'excessive' means amounts substantially in excess of
a reasonable forecast of sales by the customer. Nothing in this paragraph limits
3M's ability to promote CNS nasal dilators to consumers, for example, by
offering 'buy one get two free' or by offering a fee nasal dilator with the
purchase of other 3M products.
10. Product Returns. Customer returns of nasal strip product will be
the responsibility of the Company -- 3M or CNS -- who originally sold that
product.
11. Trade Fund Resolution. 3M will be responsible for any trade funding
commitments that it enters with customers for nasal strips purchased from 3M,
for example, promotional allowances, and volume incentives.
12. License. CNS hereby licenses to 3M the use of the CNS Breathe
Right(R) trademark or trade name for use outside of the United States and Canada
for sales of products provided or to be provided to 3M by CNS for sale and
distribution. This license and 3M's use of the Breathe Right(R) trademark and
trade name shall cease on June 30, 2000.
13. Business Transition. 3M shall make the following reasonable efforts
to arrange for the transition to CNS of its business relationships concerning
nasal dilators and of its sales and distribution of nasal dilators. To that end,
3M shall perform the following:
a) Provide to 3M's customers, and others assisting 3M in
distributing nasal dilators, a written communication concerning the
transfer of the nasal dilator business from 3M to CNS. The
communication shall be in the form of a letter, the text of which shall
be prepared by 3M and approved by CNS. CNS will not withhold its
approval unreasonably. The letter will be sent by March 1, 2000 and
will state that after June 30, 2000, Breathe Right(R) nasal dilators,
or whatever nasal dilator strips are being sold by 3M to customers,
shall thereafter be available from 3M's former licensor, CNS, and its
distributor specified by CNS.
b) Provide to CNS by January 1, 2000, 3M's customer lists and
a two year sales history ending September 30, 1999. 3M will not be
obligated to provide such customer lists and sales history if, prior to
January 1, 2000, CNS announces an intent to be acquired or is acquired
by a competitor of any of 3M's First Aid Dressing and First Aid
Supplies businesses.
14. Release. CNS and 3M hereby release each other, as well as the
directors, officers, employees and agents of the other from all claims up to the
date of this Agreement which the parties have against each other, known or
unknown, including, but not limited to, claims relating to the parties'
performance or lack thereof under the 1995 Agreement. This release does not
excuse 3M from paying for any products that have been ordered or delivered to
date, or excuse CNS from delivering ordered products.
15. Independent Contractors. 3M and CNS are independent contractors.
They are not agents of each other, partners, joint ventures or
franchisor/franchisee. Neither has the right to bind or act on the other's
behalf.
16. No Assignment. Neither party will assign this Agreement without the
consent of the other, except for an assignment by CNS to a successor of CNS's
nasal dilator business.
17. No Waiver. Neither 3M nor CNS waives any of its rights provided by
this Agreement because it fails to enforce them.
18. Entire Agreement. This Agreement is the entire agreement between 3M
and CNS regarding the amendment of the 1995 Agreement. This Agreement supersedes
any other agreement concerning such amendment and may be modified only by a
written agreement.
19. Governing Law. This Agreement shall be governed by Minnesota law.
20. Dispute Resolution. Any controversy or claim arising out of or
relating to this Agreement or the 1995 Agreement, or the breach, termination or
validity thereof, shall be settled by arbitration in accordance with the rules
of the Center of Public Resources by a single arbitrator selected by mutual
agreement of the parties from the panel of the Center for Public Resources. The
arbitration will be governed by the United States Arbitration Act.
a) The arbitrator shall apply Minnesota law and shall have the
power to require specific performance, issue injunctions, declare the
rights of the parties and award damages.
b) Judgment of the arbitrator may be entered by any court with
appropriate jurisdiction.
c) The arbitration hearing shall begin no more than 120 days
from the date Notice of Arbitration is delivered to the respondent.
MINNESOTA MINING AND MANUFACTURING COMPANY
By Dated:
Its
CNS, INC.
By Dated:
Its