EXHIBIT 10.17
CERTAIN INFORMATION HAS BEEN DELETED FROM THIS EXHIBIT AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT UNDER RULE 24b-2.
MEDICAL SPECIALTIES
MATERIAL PURCHASE AGREEMENT
1. PARTIES: This Agreement is between Minnesota Mining and Manufacturing
Company ("3M"), (through its Medical Specialties Department, located at
3M Center, ▇▇▇▇. ▇▇▇-▇▇-▇▇, St. ▇▇▇▇, MN 55144-1000) and 3M's medical
Component customer ("Customer") identified below:
CNS, Inc.
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Company Name
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Address
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ 952-229-1500
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City, State Zip Telephone
2. PURPOSE AND EFFECT: This Agreement authorizes Customer and its
authorized converters ("Converters") to purchase the 3M Components set
forth in Schedule 1 at the prices shown as New Contract Price in
Schedule 1, meeting the specifications set forth in Schedule 2, and
such other materials as the parties may agree in writing to add in the
future, ("Components"). Customer agrees to use Components solely for
its use or use by Converters in the manufacture of nasal dilators and
other products as described in paragraph 5 of this Agreement. This
Agreement does not establish Customer or its Converters as a dealer or
distributor of the Components. Customer shall direct its Converters not
to resell any Components to any third party for resale. In the event a
Converter is in breach of Medical Specialties Terms and Conditions of
Sale or any other contractual obligations Converter may have to 3M, 3M
reserves the right not to supply Components to such Converter. Customer
acknowledges and agrees that it has sole responsibility for testing and
evaluating the safety and suitability of use of Components in the
product(s) for which Customer or Converters are purchasing Components.
3. TERM: The term of this Agreement begins on the date the last party
signs this Agreement (the "Effective Date") and will continue for
thirty six months ("Term").
4. TERMINATION FOR CAUSE: Upon default by either party in the performance
of any material obligation in this Agreement, either party may give
notice in writing to the other party and the defaulting party shall
have thirty (30) days to cure the default. However, if the default is
not cured within thirty (30) days, the non-defaulting party may
terminate this Agreement by providing notice of termination, which
shall take effect no earlier than ten (10) days from the receipt of
such notice. Termination under this paragraph shall not relieve either
party of an obligation existing upon the date of termination or relieve
either party from liability for breach of this Agreement subject to the
terms of this Agreement.
5. EXCLUSIVE SALE AND PURCHASE; EXCEPTIONS; FIRST RIGHT OF REFUSAL:
a) Customer agrees that during the Term of this Agreement it will
purchase and direct its Converters to purchase all of its global
requirements of medical grade adhesive tapes used in the manufacturing
of external nasal dilators, with the exception of items in Exhibit A.
b) If Customer develops or has an opportunity to obtain a new or
modified external nasal dilator or any other product that requires the
use of medical grade adhesives or tapes not included as Components in
this Agreement, then Customer agrees to provide specifications,
including but not limited to performance, color, adhesive, and price to
3M in order for 3M to determine its ability to supply such medical
grade adhesives or tapes. If 3M agrees to supply such new medical grade
adhesives or tapes, then these new adhesives or tapes would become
Components and would be added to Schedule 1 by addendum. Purchases of
such new Components would be included in total purchases to determine
if Customer meets minimum purchase quantities and whether Customer
qualifies for any rebate as described in paragraph 8 of this Agreement.
If 3M cannot or does not choose to supply the requested new medical
grade adhesives or tapes to Customer, then 3M will provide such notice
to Customer within 60 days and Customer can purchase the requested
medical grade adhesives or tapes from another source. However, if no
other supplier can supply medical grade adhesives or tapes that meet
the specifications, and Customer changes the specifications in order to
purchase a medical grade adhesive or tape for these new or modified
products, then Customer agrees to give 3M Medical Specialties the first
right of refusal to supply such adhesives or tapes using the new
specifications under the same conditions described earlier in this
paragraph. Customer reserves the right to determine if the 3M medical
grade adhesive tapes meet the new or revised specifications.
c) During the Term 3M Medical Specialties Department will not supply
finished external nasal dilators or Components for use in the
manufacture of external nasal dilators to any third party(s) other than
Customer and its Converters nor will 3M Medical Specialties sell nasal
dilators in the retail market.
d) 3M agrees to give Customer a right of first refusal for any new
tapes or adhesives 3M might develop which could be useful for external
nasal dilators. Customer will have 60 days to commit to using such a
new component and introducing a
product containing such new component within eighteen (18) months. If
Customer does not meet either condition, 3M may sell such new component
to any interested buyers for use in external nasal dilators. If a third
party approaches 3M for such materials 3M will provide CNS with a right
of first refusal to purchase such new component under the terms
proposed by such third party and CNS will have 60 days to accept or
reject such offer.
6. FORECASTS, BINDING PURCHASE ORDERS, MINIMUM PURCHASE REQUIREMENT:
Throughout the Term of this Agreement, Customer shall deliver to 3M on
a monthly basis a forecast showing its estimated requirements for
Components stated in number of strips, for the succeeding two calendar
quarters ("Rolling Forecast"). Customer agrees that it is bound to
purchase, or to direct its Converters to purchase, the first 60 days of
forecasted Component requirements in the months such quantities were
forecast, including any excess Components produced by 3M resulting from
good faith efforts on the part of 3M to convert Rolling Forecast into
square yards of required Components. Binding purchase orders for
requirements for Components shall be placed at least twenty-one (21)
days in advance of the requested ship date. 3M will not be obliged to
fulfill orders received less than 21 days from the requested ship date
or for quantities more than 15% above the applicable Rolling Forecast.
If however, Component requirements exceed 15% of Rolling Forecast, 3M
shall meet with Customer to discuss if and how Customer's production
needs can be met. 3M will use reasonable efforts to meet such increased
requirements.
7. USE OF NAME AND TRADEMARKS: Neither party will make any use whatsoever
of the other party's name without its written permission. The decision
to grant such permission is within sole discretion of the
non-requesting party. Neither party will use or reproduce any of the
other party's trademarks or logos in any manner without prior written
approval. To request this approval, the requesting party must forward
to the other party a complete and accurate specimen copy of the
proposed use. The non-requesting party agrees to reply to the
requesting party within thirty (30) days of receipt of such proposed
use. Any permitted use extends only to authorized materials. 3M agrees
to keep prices, forecast volumes, quantity of purchases and other
material information related to this Agreement confidential during the
Term and for a period of two (2) years therafter.
8. OTHER TERMS AND CONDITIONS: Payment shall be according to the price set
forth on Schedule 1 subject to the following. In each twelve-month
period during the Term, the first period beginning upon the Effective
Date and ending twelve months thereafter, the Customer alone or
together with its Converters shall purchase Components in an amount
equal to the dollar value of Components purchased during the previous
12 month period (the first 12 month period in the Term shall be
measured against the 12 months prior to the Effective Date) (Minimum
Purchase Requirement). If purchases by Customer, together with
Converters, exceed the Minimum Purchase Requirement by no less than
[****] [ ] then 3M shall pay directly to Customer a rebate according to
Schedule 3 attached. In the event Customer, together with its
Converters do not purchase the Minimum Purchase Requirement in any
successive twelve-month period of the Term, , pricing for the
subsequent 12 month period shall revert back to current (2000) prices
based on unit volume per order as shown in Schedule 1. Failure to
purchase the Minimum Purchase Requirement shall not constitute a breach
of this agreement. A price change will not affect any order properly
placed before the effective date of such change. Customer shall direct
its Converters to make payment within 30 days of the date of invoice.
3M reserves the right to not ship Components to any Converter whose
accounts payable for Components are not current. The price for product
set forth in Schedule 1 includes the cost of standard freight to one
destination in the U.S. 3M and Customer will work together in good
faith to try to find opportunities for reducing the cost of Customer's
external nasal dialators that use Components
9. SHIPMENT DEADLINES; RISK OF LOSS; TITLE: 3M will ship Components to
Customer or its authorized converter FOB Point of Shipment, freight and
insurance prepaid and allowed to the first U.S. destination specified
in Customer's or its authorized converter's purchase order. 3M shall
make reasonable efforts to meet any shipping dates specified in
purchase orders, but failure to meet any particular shipping deadline
less than 21 days from promised ship date will not constitute a breach
of this Agreement. Risk of loss passes to Customer when Components are
delivered to designated ship-to dock. For all Components contained in
any single shipment, title passes to Customer's Converters only when
Customer's Converters have fully paid for the shipment.
10. REGULATORY APPROVALS: Customer shall be responsible for obtaining and
maintaining all necessary regulatory approvals for Customer's products
that incorporate Components in the country where products are sold.
11. WARRANTIES LIMITED; INDEMNIFICATION: All statements, technical
information and recommendations contained in any specifications are
based on tests 3M believes to be reliable. 3M warrants only that at the
time of shipment the Components will meet the Component specifications
in effect at the time of ordering and it has the right and authority to
sell the Components pursuant to the terms and conditions of the
Agreement. 3M DISCLAIMS ALL EXPRESS AND IMPLIED WARRANTIES WITH RESPECT
TO COMPONENTS, INCLUDING BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND FREEDOM FROM
INFRINGEMENT. 3M specifically DOES NOT warrant the Components for any
intended or unintended uses (whether or not foreseeable); for
compatibility or suitability with other materials; for a customers or
Third party's negligence in handling or storage; or for the suitability
or acceptability of the Component specifications or test methods. Nor
does 3M warrant that the Component will perform as anticipated as
assembled. 3M also disclaims all warranties against infringement of any
third party patent, in combination with any other materials or in any
process of manufacture or use alone or in combination with any other
materials.
Customer shall indemnify and hold 3M harmless from any and all loss or
liability for any and all claims, causes of action, suits, proceedings,
damages, demands, fees, expenses, fines, penalties and costs (including
without limitation, attorney's fees, costs and disbursements) arising
from any injury or alleged injury to any person or business for
property damage, personal injury or incidental, special or
consequential damages made against Customer or 3M for liability arising
from or caused by Customer's use of Components in Customer's products
except to the extent such liability is caused by the negligence of 3M
in the production, handling or distribution of Components prior to
receipt by Customer or its Converter or by 3M's failure to supply
Components in accordance with the warranty set forth in Paragraph 11.
12. LIMITATION OF REMEDIES: If properly and promptly notified (see
Paragraph 13), 3M will, at its option, replace or refund the purchase
price of any Component that is proved not to conform to 3M's express
limited warranty at the time of shipment. THESE REMEDIES ARE EXCLUSIVE
REMEDIES AGAINST 3M FOR ANY ALLEGED OR ACTUAL NONCONFORMANCE TO
SPECIFICATIONS OR DEFECT OR OTHER FAILURE IN THE COMPONENTS OR FOR 3M'S
PERFORMANCE OF THIS AGREEMENT. UNDER NO CIRCUMSTANCES IS 3M LIABLE TO
CUSTOMER OR CUSTOMER'S DESIGNATED CONVERTER FOR ANY INDIRECT,
INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS)
IN ANY WAY RELATED TO THE COMPONENTS OR TO PERFORMANCE OF THIS
AGREEMENT UNDER ANY THEORY OF LAW INCLUDING, BUT NOT LIMITED TO,
NEGLIGENCE AND STRICT LIABILITY.
13. CUSTOMER'S DUTY TO INSPECT; RETURNS: Customer will direct its
Converters to promptly inspect any shipment of Components received from
3M and to promptly notify 3M in writing of any defects. The notice must
specify the defects in detail; any defect not specified is waived. Any
goods not rejected within fifteen 15 days of delivery are accepted.
After sending the notice, Customer will direct its Converters to follow
the 3M Return Goods Policy then in effect, or any specific and
reasonable instructions that 3M may issue. Customer will allow or will
direct its Converters to allow 3M to inspect any allegedly defective
goods at Customers' or its Converters' site or direct that a sample be
provided to 3M for investigation. For any goods which 3M determines are
defective, Customer and/or its Converters will follow the 3M
instructions and either return the goods to 3M, with 3M responsible for
the return freight or dispose of the goods in a safe manner as directed
by 3M. Reasonable costs for such disposal will be paid by 3M.
14. PROPER USE OF COMPONENTS: Customer will direct its Converters that they
will not process handle or package the Components in any way that might
compromise the Components efficacy or safety. Customer will not and
will direct its Converters to not misuse or mishandle the Components or
treat or deal with the Components in any way that might misrepresent
the characteristics and capabilities of such Components. It is
understood and agreed that the application of mentholated encapsulated
slurry to manufacture mentholated nasal strips does not create a breach
of this agreement. It is further understood that the application of
such slurry to any Component is solely the decision of Customer and
3M's warranty obligations are limited as provided in paragraph 11 or
this agreement.
15. INTELLECTUAL PROPERTY; NO EXCLUSIVE RIGHTS: Nothing herein shall grant
to Customer or any of its Converters any patent, license, right or
assignment in any patent, trade secret or other intellectual property
owned or controlled by 3M or its affiliated companies. Likewise,
nothing herein shall grant to 3M any patent, license, right or
assignment in any patent, trade secret or other intellectual property
owned or controlled by Customer or its Converters.
16. COMPONENT DISCONTINUANCE: 3M may discontinue its production or sale of
Components at any time during the Term of this Agreement if 3M has
reasonable grounds to believe the Components or Customer's products
that use Components present a serious health, safety or environmental
risk.
17. MISCELLANEOUS:
a) INSURANCE: Customer will maintain a liability insurance program
covering such risks (including, but not limited, to products liability
and contractual liability) as are appropriate in accordance with the
sound business practice and Customer's obligations under this
Agreement, including, but not limited to, at least $5,000,000 in
product liability and $5,000,000 in general liability coverage. At the
request of 3M, Customer shall provide a certificate of insurance
evidencing the existence of these coverages on an annual basis.
b) EVENTS OF EXCUSED PERFORMANCE: Neither 3M nor Customer shall be
considered in default or be liable to the other for any delay beyond
the reasonable control of such party, including, but not limited to,
acts of God, explosion, earthquake, fire, flood, war whether declared
or not, accident, strikes, labor disturbances, inability to procure
supplies from third party vendors, sabotage, or order or decrees of any
court or action of a governmental authority. If such delay continues
for a period of more than 30 consecutive days Customer is relieved of
its obligation to purchase exclusively from 3M for the period of 3M's
inability to supply and such longer period as may be reasonably
necessary to secure a supply of similar components from a third party.
3M agrees to use reasonable commercial efforts to help Customer
identify such a supplier.
c) NO ASSIGNMENT OR DELEGATION: Neither this Agreement nor any of the
rights and obligations of a party hereunder shall be assigned,
delegated, sold, transferred, sublicensed or otherwise disposed of, by
operation of law or otherwise, to any third party without the prior
written consent of the other party not to be unreasonably withheld;
provided, however, that either party may, without such consent, assign
this Agreement and its rights and obligations hereunder in connection
with the sale of all or substantially all of its assets related to the
business for the ingredients or the products, or in the event of its
merger or consolidation or change in control or similar transaction.
This paragraph does not prevent Customer from using a designated
converter to process some or all of Components for Customer.
d) NOTICES: Any notice, order or other communication required by this
Agreement must be in writing, sent by first class mail or faster
written means, and addressed to the address listed on Attachment 1. A
party may designate in writing a substitute address.
e) ENTIRE AGREEMENT; NO WAIVER: This Agreement, the schedules attached
hereto, as well as any 3M Component specifications, state the complete
understanding between 3M and Customer on this subject and replace any
statements, communications or understandings, whether oral or written,
made before, during or after this Agreement is signed. Customer or its
Converters may place orders under this Agreement using Customer's or
Converters' regular purchase order form. The only function of such
purchase order shall be to communicate the quantity of Components
desired and any delivery instructions. Any other terms on such forms
are void and of no effect. This Agreement cannot be modified except in
writing, signed by both parties. No sales representative of 3M may
orally or in writing modify this Agreement. A course of dealing or of
performance or usage of trade does not effect a waiver or modification
unless ratified in writing. A party's failure to exercise a right in
one instance does not waive that party's right to later exercise that
right.
f) GOVERNING LAW AND VENUE: Any questions, claims or disputes
concerning or related to this Agreement are governed by the laws of
Minnesota, notwithstanding any conflict of law principle to the
contrary. The parties consent to jurisdiction and venue in the State of
Minnesota.
g) CONVERTERS: It is acknowledged and agreed that Customer shall not be
liable for the performance of any obligation that may be undertaken by
any of the Converters to 3M in connection with the purchase of
Components pursuant to this agreement or otherwise including, without
limitation, the payment for Components pursuant to any orders placed by
such Converters with 3M. Not withstanding the foregoing, Customer
agrees to cooperate with 3M and render all assistance that may be
reasonably requested with respect to any default by Converter in
connection with its purchase of Components from 3M.
h) NATIONAL ACCOUNT REPRESENTATION: 3M agrees during the term of the
agreement to provide Customer with National Account or similar status
and to designate individual(s) where one or more of their
responsibilities is to represent 3M and be a primary contact person for
Customer's staff for, but not limited to the following purposes: new
business opportunities, periodic forecast submissions, material
lead-time and delivery or quantity issues; etc.
i) Both parties agree not to disclose the terms or existence of this
agreement to any third party, other than Customer's Converters, except
to the extent such disclosure is required by law or a valid court
order.
ACCEPTED AND AGREED TO:
MINNESOTA MINING AND MANUFACTURING COMPANY CUSTOMER
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By /s/ ▇▇▇▇▇ ▇▇▇▇
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Print Name Print Name
Business Director VP Operations
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Title Title
7/27/01 8/1/01
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Date Date
CNS, Inc.
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Company Name
Attachment 1
IF TO CNS: COPY TO:
CNS, Inc. CNS, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
Attn: V.P. Operations Attn: Director Materials
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IF TO 3M: COPY TO:
Minnesota Mining and Manufacturing Minnesota Mining and Manufacturing
Company (3M) Company (3M)
Medical Specialties Department Office of General Counsel
Attn: Counsel for Medical Specialties
3M Center Building 275-5W-05 3M Center Building, 220-11W-02
St. ▇▇▇▇, MN 55144-1000 ▇▇. ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Exhibit A
Exceptions
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Schedule 1
Restricted
CNS, Inc.
Component Pricing
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Schedule 2
Restricted
CNS, Inc.
3M Product Specifications
[* * * *]
Schedule 3
Restricted
CNS, Inc.
3M to CNS REBATE FOR GROWTH
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