EXHIBIT 10.11

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, Bldg.
275-5W-05, St. Paul, MN 55144-1000) and 3M’s medical Component customer
(“Customer”) identified below:

CNS. Inc.

 

Company Name
7615 Smetana Lane

 

Address
Eden Prairie, MN 55439

952-229-1500

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 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 Twenty-four 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.

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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. 3M will then 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. 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
(“New Components”). Customer will have 60 days to commit to using such a New
Component(s) and introducing a product containing such New Component(s) within
eighteen (18) months. Customer agrees to provide to 3M, regular, timely progress
reports regarding the development and introduction of new or modified products
using these New Components. If satisfactory progress is not made by Customer
toward introduction of such new or modified products, as determined solely by
3M, then 3M shall have the right to sell New Components, after notification to
Customer in writing, to any other customer for any applications without
exceptions. In like manner, if Customer decides to cease efforts to develop and
introduce new or modified products using New Components, then Customer shall
immediately notify 3M of such decision in writing. 3M will then have the right
to sell New Components to any other customer for use in any product without
restrictions. If a third party approaches 3M for any New Components not already
offered to Customer, with the intent to use the New Components in external nasal
dilators, 3M will provide Customer with a right of first refusal to purchase
such New Component under the terms proposed by such third party and Customer
will have 60 days to accept or reject such offer. If Customer accepts the offer,
then Customer commits to purchase and use New Component(s) in the same manner as
described earlier in this paragraph.

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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,
through its converters, will assist 3M in translating the number of required
finished strips into the equivalent number of square yards of Components
required to produce the forecasted strips. 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.
Binding purchase orders for requirements for Components shall be placed at least
twenty-eight (28) days in advance of the requested ship date. If an order has
been received and accepted by 3M for Components and Customer’s converter(s)
request to alter the order quantity of Components or any original requested ship
date(s) for Components, 3M will not be obliged to accept such requests without
prior approval of Customer and agreement by 3M. 3M will not be obliged to
fulfill orders received less than 28 days from the requested ship date or for
quantities more than 10% above the applicable Rolling Forecast. If however,
Component requirements exceed 10% 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
thereafter.

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 first day of the month of the
Effective Date and ending twelve months thereafter, the Customer alone or
together with its Converters shall purchase Components in an amount equal to at
least 95% of 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 month period prior to the Effective Date) (Minimum Purchase Requirement).
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 the order volume 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
dilators that use Components.

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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.

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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.

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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.

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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 wilting, 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.

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Accepted and Agreed to:
MINNESOTA, MINING AND
MANUFACTURING COMPANY

 

CUSTOMER

 

 

 

 

 

 

 

 

By

/s/ JM McQuade

 

/s/ Larry Muma

 

 

 

 

 

J. Michael McQuade

 

Larry Muma

 

Print Name

 

Print Name

 

 

 

 

 

Vice President, 3M Medical

 

VP Operations

 

Title

 

Title

 

 

 

 

 

11/16/04

 

11/22/04

 

Date

 

Date

 

 

 

 

 

 

 

CNS, Inc.

 

 

 

Company Name

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