CNS INC /DE/
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<TYPE>EX-10
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<FILENAME>cns032695_ex10-26.txt
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                                                                   EXHIBIT 10.26


                                [CNS Letterhead]





February 14, 2002

Teri Osgood
6905 Howard Lane
Eden Prairie, MN  55346

Dear Teri:

This letter describes our agreement regarding your resignation as
Vice-President, US Marketing and officer of CNS, Inc. ("CNS") effective April
15, 2002.

We will provide you with the following benefits in connection with your
departure from CNS:

1.   We will pay you Salary Continuation pursuant to the terms of Paragraph 7 of
     the Employment Agreement as follows: 24 semi-monthly paychecks of
     $7,299.05, subject to applicable withholding, beginning with the later of
     (a) our April 30, 2002 payday or (b) our first regular payday following
     expiration of the 15-day rescission period described on page 3 of this
     agreement and our receipt of Exhibit A, signed and dated by you after
     expiration of the rescission period. Exhibit A is your certification that
     you took no steps to exercise your right of rescission. In the event of a
     Change in Control, as that term is defined in the "Executive Employment
     Agreement" dated February 12, 1999, the above- referenced semimonthly
     paychecks will be accelerated and payable, in full, on demand by you. We
     will also pay you for your accrued unused paid time off ($9,287.78 or
     110.28 hours, as of February 15, 2002.)

     You will be eligible to receive a bonus consistent with CNS business
     performance under the CNS Management Incentive Plan for 2001/2002 based on
     your April 15, 2002 Resignation Date, the terms of the Plan and provided
     that the Plan objectives have been met. Payment of any available bonus
     would occur at the normal payout time for all employees. We estimate the
     payout to be made in May 2002.




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Teri Osgood Separation Letter
Page Two


2    We will continue to pay the employer share, and you will continue to be
     responsible for the employee share, as applicable, of your CNS group
     health, dental and life insurance premiums through April 30, 2003 or, if
     earlier, the date on which you are eligible to participate in other group
     plans through your new employer, provided you make the appropriate timely
     written elections to continue your CNS group coverage's. Your share of the
     premiums will be deducted from the Salary Continuation payments described
     in paragraph 1. You agree to notify CNS immediately if your eligibility
     under other group plans through your new employer occurs. If you are not
     covered under other such group plans as of April 30, 2003, you will have
     the right to continue your group coverage's at your own expense for up to
     an additional six months, in accordance with applicable state and federal
     group insurance continuation laws and the terms of the plans. All rights
     which you may have under CNS's group plans, are subject to the terms of the
     plans, applicable laws and the continuation of said plans for active CNS
     employees. Information and election forms concerning your group coverages
     will be mailed to you.

3.   We are providing you with the opportunity to voluntarily resign from your
     employment. If any prospective employer of yours wishes to contact CNS for
     employment information, you agree to direct that employer to make a written
     inquiry to Michelle Beuning, Director of Human Resources. Ms. Beuning will
     provide the prospective employer, in writing, with your job title, the
     scope of your responsibilities, your dates of employment, and the fact that
     you voluntarily resigned your employment.

4.   We will provide an executive outplacement package that we have selected
     with Right Management Consultants at our expense.

5.   To the extent required under applicable law, we will indemnify you and hold
     you harmless with respect to any action in which you are a named defendant
     which arises out of your CNS employment responsibilities.

6.   We will remove all restrictive legends on any shares of CNS common stock
     held by you. In connection with the removal, you agree that for a period of
     90 days from the date you cease to be employed by CNS, any shares that you
     sell will be sold in compliance with the applicable requirements of Rule
     144 under the Securities Act of 1933.




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Teri Osgood Separation Letter
Page Three


As of April 15, 2002 the remaining 50,400 shares of your stock options will be
exercisable according to the terms of the applicable Stock Option Plan. Your
stock options are set forth on Exhibit B.

In consideration of the benefits to be afforded to you as outlined above, you
agree to do the following things:

1.   You hereby release CNS, Inc., its past and present affiliates, and its and
     their past and present officers, directors, agents, shareholders,
     employees, attorneys, insurers and indemnitors (collectively, the
     "Releasees") from any and all claims and causes of action, known or
     unknown, which you may have against any and all of them. Through this
     release, you extinguish all causes of action against the Releasees
     occurring up to the date on which you sign this agreement, including but
     not limited to any contract, compensation or benefit claims; intentional
     infliction of emotional distress, defamation or any other tort claims; and
     all claims arising from any federal, state or municipal law or ordinance,
     including the Employee Retirement Income Security Act, the Family and
     Medical Leave Act. This release extinguishes any potential claims of
     employment discrimination arising from your employment with and resignation
     from CNS, including specifically any claims under the Minnesota Human
     Rights Act, the Americans With Disabilities Act, Title VII of the Civil
     Rights Act of 1964, the Older Workers Benefit Protection Act, and the Age
     Discrimination in Employment Act. This release does not extinguish any
     claims that arise against CNS after you sign this agreement. You certify
     that you (a) have not filed any claims, complaints or other actions against
     any Releasee and (b) are hereby waiving any right to recover from any
     Releasee under any lawsuit or charge filed by you or any federal, state or
     local agency on your behalf based upon any event occurring up to the date
     on which you sign this agreement. You are advised by CNS to review your
     rights and responsibilities under this agreement with your own lawyer.




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Teri Osgood Separation Letter
Page Four


     You have 21 days to review and consider this offer. If you sign this letter
     before 21 days have elapsed from the date on which you first receive it,
     then you will be voluntarily waiving your right to the full 21-day review
     period. You also have the right to rescind this agreement within 15
     calendar days of the date upon which you sign it. You understand that if
     you desire to rescind this agreement, you must put the rescission in
     writing and deliver it to Michelle Beuning, CNS, Inc., 7615 Smetana Lane,
     P.O. Box 39802, Minneapolis, MN 55439-0802 by hand or by mail within 15
     calendar days of the date on which you sign this agreement. If you deliver
     the rescission by mail, it must be postmarked within 15 calendar days of
     the date on which you sign this agreement and sent by certified mail,
     return receipt requested. If you rescind this agreement, all of CNS's
     obligations to you, other than payment of accrued unused paid time off,
     will immediately cease, and CNS will owe you nothing hereunder.

2.   At our specific request and at mutually convenient times while you are
     receiving payments under this agreement, you agree to consult with me or my
     designee with respect to transitional CNS business matters. You also agree
     to cooperate with CNS in any current or future claims or lawsuits involving
     CNS where you have knowledge of the underlying facts. In addition, you
     agree that you will not voluntarily aid, assist, or cooperate with any
     claimants or plaintiffs or their attorneys or agents in any claims or
     lawsuits commenced in the future against CNS, provided, however, that
     nothing in this agreement will be construed to prevent you from testifying
     truthfully as required by valid legal or administrative process.

3.   You agree that you will continue to speak positively and with respect
     towards CNS as you have in the past.

4.   All knowledge and information not already available to the public which you
     have acquired with respect to product development, improvements,
     modifications, discoveries, designs, methods, systems, computer software,
     programs, codes and documentation, research, designs, formulas,
     instructions, methods, inventions, trade secrets, services or other private
     or confidential matters of CNS (such as those concerning sales, costs,
     profits, organizations, customer lists, pricing methods, etc.), or of any
     third party which CNS is obligated to keep confidential, shall be regarded
     by you as strictly confidential and shall not be used by you directly or
     indirectly or disclosed to any persons, corporations or firms. All of the
     foregoing knowledge and information are collectively referred to as
     "Confidential Information". Your obligations under this paragraph will not
     apply to any information which (a) is or becomes known to the general
     public under




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Teri Osgood Separation Letter
Page Five


     circumstances involving no breach by you of the terms of this paragraph,
     (b) is generally disclosed to third parties by CNS as a continuing practice
     without restriction on such third parties, (c) is approved for release by
     written authorization of CNS' Board, or (d) you are obligated by law to
     disclose. Confidential Information also includes the terms of this
     agreement. You agree that you will not disclose its terms to anyone other
     than your family members, tax and legal advisors and as otherwise required
     by law.

5.   During the one-year period following your termination date, you shall not
     directly or indirectly engage in, enter into or participate in the business
     of CNS or in any business or commercial activity which does or is
     reasonably likely to compete with or adversely affect the Business or
     products of CNS, either as an individual for your own account, as a partner
     or a joint venturer, or as an officer, director, consultant or holder of
     more than five percent (5%) of the entity interest in, any other person,
     firm, partnership or corporation, or an employee, agent or salesman for any
     person. In addition, during such period you shall not: avail yourself of
     any advantages or acquaintances you have made with any person who has,
     within the twelve (12) month period ended on the date of termination of
     your employment, been a customer of CNS or its affiliates, and which would,
     directly or indirectly, materially divert business from or materially and
     adversely affect the Business of CNS; interfere with the contractual
     relations between CNS and any of its employees; or employ or cause to be
     employed in any capacity or retain or cause to be retained as a consultant
     any person who was employed in any capacity by CNS during the twelve (12)
     month period ended on the date of termination of your employment.

     For purposes of this Agreement, the "Business of CNS" or "Business" means
     and includes the business of the manufacture, production, sale, marketing
     and distribution of the Breathe Right strip, FiberChoice, Flair strips and
     any other products currently offered or currently under development by CNS
     or offered or currently under development by CNS during the 12 months prior
     to the date of termination of your employment.




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Teri Osgood Separation Letter
Page Six


6.   For one year following your termination date, you agree that you will not,
     directly or indirectly, solicit any current or prospective CNS customer,
     broker, vendor or distributor who is not, as of your termination date, a
     current customer, broker, vendor or distributor of your new employer,
     consulting business or any other enterprise in which you become involved
     after your resignation from CNS, for the purpose of providing products or
     services for or on behalf of said customer, broker, vendor or distributor
     which are currently competitive with the products or services being
     provided by CNS, which are in the development stages of being competitive
     with the products or services being provided by CNS, or which would in any
     way cause said customer, broker, vendor or distributor to discontinue or
     reduce its business relationship with CNS. Current CNS customers, brokers,
     vendors or distributors include those customers, brokers, vendors or
     distributors with whom CNS has had a business relationship at any time
     within the two years immediately preceding your resignation date.
     Prospective CNS customers, brokers, vendors and distributors are those with
     whom (a) a CNS representative has been in direct personal contact and (b)
     CNS has a reasonable opportunity of entering into a business relationship
     within six months following your resignation date. You also agree that
     during the same one-year period, you will not directly or indirectly
     solicit any CNS employee to terminate his or her employment with CNS. This
     employee nonsolicitation obligation shall apply to employees of CNS as of
     your resignation date.

     If, in your opinion, the restrictions in this paragraph 6 or in paragraph 5
     prevent you from obtaining employment, you may make a written request for
     modification of the restrictions with respect to a specific position that
     you are considering. The president of CNS will review and consider your
     request and if she determines, in her sole discretion, that the requested
     modification will not be adverse to CNS's business interests, she will
     provide you with the modification, which must then be memorialized in
     writing and signed by both parties. In addition, if you have any questions
     with respect to the scope of your obligations hereunder, you agree to seek
     clarification from the president.

This agreement shall not in any way be construed as an admission of liability by
CNS or as an admission that CNS has acted wrongfully with respect to you. CNS
specifically denies and disclaims any such liability or wrongful acts. If any
provision of this agreement is found to be illegal or unenforceable, such
provision will be severed or modified to the extent necessary to make it
enforceable, and as so severed or modified, the remainder of this agreement
shall remain in full force and effect.

You understand that if you violate any obligation which you have to CNS under
this agreement, all payments and benefits to you hereunder will immediately
cease. In such event, your release




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Teri Osgood Separation Letter
Page Seven


of your claims shall remain fully in effect in consideration of the payments and
benefits which you received prior to any such breach.

This agreement sets forth our entire agreement and fully supersedes any prior
agreements, contracts or understandings between you and CNS. CNS asks that our
records reflect that you conclude your employment on terms you understand and
accept. Therefore, we ask you to declare that you have entered into this
agreement voluntarily, without coercion, duress, or reliance on any
representations by any CNS employee, agent or lawyer.

If this letter accurately reflects our understanding and agreement, please sign
both copies and return the original to me. We appreciate all of your efforts and
contributions to CNS over the past 3 1/2 years and wish you success in your
future career.

Sincerely,

CNS, INC.


/s/  Marti Morfitt
------------------------------------
Marti Morfitt
President & CEO

Acknowledged and agreed to, with declarations confirmed, this 22nd day of
February, 2002.



/s/  Teri Osgood
------------------------------------
Teri Osgood




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                                    EXHIBIT A
                                       TO
                                RELEASE AGREEMENT




March 11, 2002




Ms. Michelle Beuning
Director of Human Resources
CNS, Inc.
7615 Smetana Lane
P. O. Box 39802
Minneapolis, MN  55439-0802

Dear Michelle:

This letter, signed and dated more than 15 days after I signed the Agreement
between CNS and me dated February 14, 2002, is to certify that I have taken no
steps to exercise my 15-day right of rescission, as described in the Agreement.

Sincerely,

/s/  Teri Osgood
------------------------------------
Teri Osgood




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                                    EXHIBIT B



                              STOCK OPTION SCHEDULE
                                  As of 4/15/02

--------------------------------------------------------------------------------
      OPTION PLAN           PRICE       DATE GRANTED     REMAINING VESTED SHARES
--------------------------------------------------------------------------------
1994 Stock Option Plan      4.125         08/17/98               30,000
--------------------------------------------------------------------------------
1994 Stock Option Plan      2.8125        04/15/99               15,000
--------------------------------------------------------------------------------
1990 Stock Option Plan       4.00         05/03/00                2,400
--------------------------------------------------------------------------------
2000 Stock Option Plan      4.375         03/15/01                3,000
--------------------------------------------------------------------------------

The stock option exercise period for the grants dated 8/17/98, 4/15/99 and
5/3/00 has been extended from 30 days to 90 days to the extent exercisable at
date of termination for the lesser of 90 days from the date of termination or
the balance of the option's term.

This will constitute the only amendment to these stock option agreements.


/s/  Marti Morfitt
------------------------------------
Marti Morfitt
President and CEO




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