EXHIBIT 10.3

VASCULAR SOLUTIONS, INC.

MANUFACTURING AND SUPPLY AGREEMENT

          This Manufacturing and Supply Agreement (“Agreement”) is entered into
as of April 30, 2010 (the “Effective Date”) by and between Escalon Vascular
Access, Inc., a Delaware corporation having its principal place of business at
435 Devon Park Drive, Bldg. 100, Wayne, Pennsylvania 19087 (“Manufacturer”) and
Vascular Solutions, Inc., a Minnesota corporation having its principal place of
business at 6464 Sycamore Court, Minneapolis, Minnesota 55441 (“VSI”).

RECITALS

          WHEREAS, VSI and Manufacturer have entered into an asset purchase
agreement on the date hereof (the “Asset Purchase Agreement”), whereby VSI will
acquire certain of the assets of Manufacturer;

          WHEREAS, pursuant to the terms of the asset sale, VSI desires to have
certain medical devices manufactured to VSI’s specifications, which are
identical to the specifications of Manufacturer and set forth as Exhibit A
attached hereto, for an interim period after the closing of the asset sale;

          WHEREAS, during such interim period, Manufacturer is willing to supply
such medical devices and other raw materials to VSI’s specifications, and
provide related services to VSI as set forth in, and pursuant to the terms and
conditions of, this Agreement;

          NOW THEREFORE, in consideration of the mutual covenants and agreements
set forth herein, the parties hereto agree each with the other as follows:

ARTICLE I DEFINITIONS

          As used herein, the following terms shall have the following meanings:

     Section 1.1 “Applicable Regulations” means all statutes, laws and
regulations applicable to the manufacture, approval and notice for sale, quality
control, testing, sterilization, packaging, labeling, record retention, storage,
handling, transport, and reporting of medical devices in effect at a particular
time and promulgated by the United States Food and Drug Administration (“FDA”)
and any foreign agency or authority equivalent to the FDA, including without
limitation current good manufacturing practices and quality system regulations,
ISO 13485, and any successor or replacement statutes, laws and regulations.

     Section 1.2 “Delivery Date” means the date the Products or Raw Materials
are to be delivered, as set forth in each Purchase Order.

     Section 1.3 “Equipment” means any tools, equipment, moulds and models
supplied by VSI to Manufacturer for the purpose of Manufacturer’s performance
under this Agreement.

     Section 1.4 “Intellectual Property Rights” means on a world-wide basis, any
and all intangible (a) rights associated with works of authorship including,
without limitation, copyrights, moral rights and mask works; (b) trademark and
trade name rights and similar rights;

1

--------------------------------------------------------------------------------

(c) trade secret rights; (d) patents, designs, algorithms and other industrial
property rights; (e) all other intellectual and industrial property rights of
every kind and nature and however designated, whether arising by operation of
law, contract, license or otherwise; and (f) all registrations, applications,
renewals, extensions, continuations, divisions or reissues hereof now or
hereafter in force (including any rights in any of the foregoing).

     Section 1.5 “Manufacturing Facilities” means Manufacturer’s plant located
at 2440 South 179 Street, New Berlin, WI. 53146.

     Section 1.6 “Manufacturing/Quality System Requirements” means the
requirements for the manufacturing, testing, sterilization, packaging and
labeling of the Products and the requirements for the Raw Materials, including
all quality system requirements, outlined in the 21 CFR 820 FDA regulations and
the ISO 13485 Quality System standard.

     Section 1.7 “Product(s)” means the finished devices of the type described
in Exhibit B to be supplied under this Agreement pursuant to binding Purchase
Orders, and which are manufactured, tested, sterilized, packaged and labeled in
accordance with the Specifications, Manufacturing/Quality System Requirements,
this Agreement and all Applicable Regulations.

     Section 1.8 “Purchase Order” means a purchase order issued by VSI
specifying necessary information as set forth in Section 2.4, with the terms and
conditions attached as Exhibit C.

     Section 1.9 “Raw Materials” means the raw materials necessary to
manufacture the Products.

     Section 1.10 “Specifications” means the raw materials, manufacturing,
quality assurance and finished device specifications and protocols for the
Products as set forth on Exhibit A attached hereto.

ARTICLE II MANUFACTURE

     Section 2.1 Manufacture. Manufacturer agrees to manufacture and supply to
VSI those quantities of the Products, and supply to VSI those quantities of Raw
Materials, that VSI may order hereunder, all in accordance with the terms and
conditions of this Agreement.

     Section 2.2 Manufacturing/Quality System Requirements. Manufacturer agrees
that it shall manufacture, test, sterilize (if required by VSI), package, store,
handle, transport, and label the Products and Raw Materials ordered pursuant to
binding Purchase Orders hereunder in strict conformity with the
Manufacturing/Quality System Requirements. Manufacturer agrees to manufacture in
a manufacturing environment such that the particulate and microbial levels are
within the specifications for the Product. The Manufacturing/Quality System
Requirements are specified in Section 1.6.

     Section 2.3 Applicable Regulations. Manufacturer shall manufacture, test,
sterilize (if required by VSI), package, store, handle, transport, and label the
Products and Raw Materials in accordance with all Applicable Regulations. Each
party shall promptly notify the other of any new laws, regulations, rules or
requirements of which it becomes aware that pertain to Products or Raw
Materials, and shall confer with the other with respect to the best means to
comply with such requirements.

     Section 2.4 Production Plan and Purchase Orders. Manufacturer shall produce
Products up to the amounts set forth on Schedule 2.4 (the “Production Plan”).
VSI may order Products and Raw Materials up to the amounts set forth on the
Production Plan by submitting a Purchase

2

--------------------------------------------------------------------------------

Order from time to time to Manufacturer by means of a mailed, couriered,
electronic or facsimile communication. Manufacturer shall be deemed to have
received a Purchase Order when acknowledged by manufacturer. Each Purchase Order
shall be issued in quantities equal to the weekly production capacity pursuant
to the Production Plan and shall be issued 30 days in advance of delivery of the
Products and 7 days in advance of delivery of Raw Materials with the exception
of May and June. VSI will issue Purchase Orders for the entire months of May and
June on May 3, 2010 with weekly delivery dates in May and June. Each Purchase
Order shall include:

 

 

 

 

(a)

date of Purchase Order;

 

 

 

 

(b)

description of the Products and/or Raw Materials ordered, including part numbers
and quantity;

 

 

 

 

(c)

price offered per line item;

 

 

 

 

(d)

the Delivery Date(s);

 

 

 

 

(e)

the delivery address;

 

 

 

 

(f)

terms for Payment;

 

 

 

 

(g)

terms for title transfer of shipment (e.g. FOB Manufacturer’s dock); and

 

 

 

 

(h)

mode of shipment.

     Section 2.5 Acceptance of Purchase Orders. Manufacturer shall notify VSI
within five business days of receipt of any Purchase Order setting forth either
(a) its acceptance of the Purchase Order; or (b) any proposed amendments to the
Delivery Date(s), quantities and Specifications for the Products ordered. If
Manufacturer responds pursuant to (b) above, VSI and Manufacturer shall
negotiate in good faith and in a timely manner such Delivery Dates, quantities
and Specifications. Upon agreement of the parties, an authorized representative
of each party shall execute the Purchase Order and upon the date of
Manufacturer’s execution the Purchase Order shall be deemed accepted. Each
Purchase Order shall become binding upon the parties upon acceptance.

     Section 2.6 Purchase Order Adjustments. VSI may at any time request a
change in a Purchase Order, by submitting written notice to Manufacturer
detailing the nature, extent and proposed manner of performance of the proposed
change, and estimated scheduling, pricing and cost information relating thereto.
Manufacturer shall evaluate each such request, and submit to VSI a written
response, unless otherwise agreed by the parties, to each such request within
seven business days following receipt thereof. Manufacturer’s written response
shall address any impact the proposed changes will have on the Purchase Order.
The parties shall negotiate the desired changes in good faith. If the parties
agree to the changes, VSI shall prepare a written description of the agreed
changes (a “Change Authorization”), which will become effective when both
parties sign it. The Change Authorization will be incorporated as part of the
relevant Purchase Order and will prevail over any inconsistent terms of the
Purchase Order. Manufacturer agrees to implement such agreed changes in an
expeditious and commercially prudent manner. If the parties do not agree to the
changes within fifteen days of first receipt by Manufacturer of written notice
of the changes, VSI may terminate the Purchase Order to which the changes
relate, in whole or in part, with written notice to Manufacturer, without
penalty to VSI.

3

--------------------------------------------------------------------------------

     Section 2.7 INTENTIONALLY OMITTED.

     Section 2.8 Conflicting Terms. This Agreement shall govern each Purchase
Order and any conflict or inconsistency between the terms of this Agreement and
a Purchase Order shall be resolved in favor of this Agreement, unless VSI
expressly states its acceptance to such conflicting term(s). No additional or
conflicting terms in any acknowledgement or acceptance from Manufacturer shall
govern.

     Section 2.9 Purchase Order. All sales of Product and Raw Materials shall be
subject to the terms and conditions of this Agreement and the terms and
conditions of each Purchase Order. VSI may procure the Products from any third
party as it deems appropriate. In no event shall VSI be liable for any direct,
incidental, special, consequential or punitive damages for any failure to submit
additional Purchase Orders under this Agreement or for cancellation of any
Purchase Orders submitted hereunder, in whole or in part.

ARTICLE III PURCHASER PROPERTY

     Section 3.1 VSI Property. VSI shall deliver to Manufacturer such Equipment
agreed upon by the parties for use by Manufacturer only in the performance of
its obligations under this Agreement. Manufacturer shall (a) identify all
Equipment as the property of VSI (“VSI Property”); (b) safely store the VSI
Property at all times when not in use; (c) maintain and deliver (as set forth
herein) the VSI Property in good working condition (where applicable),
reasonable wear and tear excepted; (d) insure the VSI Property and keep it
insured until delivered to VSI in an amount equal to the replacement cost with
loss payable to VSI; and (e) keep the VSI Property free of all liens, claims,
encumbrances and interests of third parties, all at Manufacturer’s sole expense.
Manufacturer is responsible for ensuring that Equipment is routinely calibrated,
inspected, maintained and qualified for use. Calibration must be traceable to
national or international standards and the calibration status must be clearly
identified on the Equipment. Risk of loss to the VSI Property shall transfer to
and remain with Manufacturer from receipt of the Equipment until delivery to
VSI. All VSI Property is subject to inspection by VSI at any time at
Manufacturer’s premises upon reasonable notice. Except as set forth herein, no
use of VSI Property shall be permitted without prior written consent of VSI.

     Section 3.2 Rights. Manufacturer shall have the limited right to use the
VSI Property, Specifications and Manufacturing/Quality System Requirements as
necessary to perform hereunder. VSI owns and shall retain all right title and
interest, including all Intellectual Property Rights, in and to the VSI
Property, Specifications, Manufacturing/Quality System Requirements and
Products, subject to the limited rights granted to Manufacturer herein and
Manufacturer hereby assigns to VSI all right, title and interest, including all
Intellectual Property Rights, it has and may have in and to the VSI Property,
Specifications, Manufacturing/Quality System Requirements and Products.

ARTICLE IV MANUFACTURING PROCESS

     Section 4.1 License Grant. VSI hereby grants Manufacturer a nonexclusive,
nontransferable, worldwide, royalty-free right to the Intellectual Property
comprised of the applicable Products for the Term of this Agreement. VSI hereby
grants Manufacturer a nonexclusive, nontransferable, worldwide, royalty-free
right to use those of VSI’s trademarks, tradenames or logos set forth in each
binding Purchase Order to private label the applicable Products for the

4

--------------------------------------------------------------------------------

Term of this Agreement. VSI agrees that Manufacturer may leave on the Products
any Manufacturer code required by any Applicable Regulation.

     Section 4.2 No Changes. Manufacturer shall perform the obligations set
forth in this Agreement only at the approved Manufacturing Facilities, unless
otherwise agreed by VSI. Manufacturer may not change or deviate from the
Specifications and Manufacturing/Quality System Requirements without the prior
written consent of VSI. Materials, processes, equipment and facilities approved
for manufacturing Products through the validation and verification activities
carried out by VSI may only be changed with the prior written consent of VSI.

     Section 4.3 Packaging Materials. Manufacturer shall be responsible for and
shall provide all packaging materials and printed materials associated with the
Product consistent with Manufacturer’s procedure. This includes, but is not
limited to, container labels, container cartons and packaging material.
Manufacturer shall be responsible for compliance with all Applicable Regulations
concerning packaging and labeling materials, and for obtaining any necessary
regulatory approvals of printed materials, artwork and copy. Manufacturer shall
obtain prior approval from VSI before revising any printed packaging components,
primary container components and any VSI-supplied packaging components used in
the Product.

     Section 4.4 Raw Materials. All Raw Materials are defined by engineering
drawings or specifications. Approved vendors must be designated on the
drawings/specs. Manufacturer will use standard operating procedures which define
the sampling methodology and the analytical methods used to assure that the Raw
Materials meet the defined specifications. VSI will notify Manufacturer in
writing of any changes to the specifications, sampling or test methods of Raw
Materials or any changes in approved vendors.

     Section 4.5 Sampling, Testing and Release of Product. All in-process and
completed Product testing shall be conducted by Manufacturer using approved test
methods. Upon reasonable request, Manufacturer shall provide VSI with a
certificate of analysis indicating each test parameter, test method, test result
and the corresponding acceptance criteria for each batch/lot of Product
manufactured or packaged, as well as a statement indicating that all associated
documentation has been reviewed and approved by the appropriate quality control
unit. Manufacturer shall release the Product to VSI as meeting the
Specifications.

     Section 4.6 Storage, Validation and Environmental Monitoring.
Process/Product and cleaning validation shall be performed by Manufacturer using
protocols developed according to industry standards. Manufacturer shall be
responsible for conducting the validation studies and maintaining validation
reports. Manufacturer is responsible for operating within validated parameters.
Where particulate and microbial levels are required for the Product, then the
facilities and raw materials used during the manufacturing and packaging process
shall be monitored for these factors. Manufacturer shall be responsible for the
establishment and institution of a monitoring program to assure that the Product
will meet the required particulate and microbial levels and shall maintain the
records obtained from this monitoring program.

ARTICLE V SHIPMENT AND ACCEPTANCE TESTING

     Section 5.1 Shipment. Manufacturer shall ship Products and Raw Materials in
accordance with each binding Purchase Order to arrive no later than each
specified Delivery Date. Products and Raw Materials shall be marked for shipment
to VSI, and delivered to a carrier designated by VSI or, if not so designated by
VSI, to a carrier chosen by Manufacturer, F.O.B. Manufacturer’s

5

--------------------------------------------------------------------------------

facilities. VSI shall insure each shipment against loss or damage for their full
replacement value and shall pay freight and insurance costs for such Products
and Raw Materials until delivery to VSI. Manufacturer shall include with each
shipment of Products and Raw Materials written confirmation of conformance of
such Products and Raw Materials to the Manufacturing/Quality System
Requirements, Specifications and all Applicable Regulations. Such written
confirmation shall in no way limit VSI’s rights to inspect and test the Products
or VSI’s rights under any warranty (including implied warranty) or of
indemnification hereunder.

     Section 5.2 Risk of Loss and Title. Risk of loss and title shall pass to
VSI upon shipment to VSI, provided that risk of loss shall revert back to
Manufacturer during any periods of return or reshipment hereunder.

     Section 5.3 Acceptance Testing. Notwithstanding any written confirmation
from Manufacturer, any Products manufactured and Raw Materials supplied
hereunder shall be received by VSI subject to inspection and performance testing
in accordance with the testing protocol set forth in the Manufacturing/Quality
System Requirements. VSI shall have 20 days from the date of receipt of each
shipment of Products and Raw Materials to determine to its reasonable
satisfaction whether the Products and Raw Materials strictly conform to the
applicable Specifications and have been manufactured in strict conformity with
the Manufacturing/Quality System Requirements and all Applicable Regulations
(the “Testing Period”). If and when VSI notifies Manufacturer in writing that
the Products and Raw Materials strictly conform to the applicable Specifications
and have been manufactured in strict conformity with the Manufacturing/Quality
System Requirements and all Applicable Regulations, “Acceptance” shall be deemed
to have occurred; provided, however, that VSI’s failure to provide notice of
Acceptance or Rejection (defined below) to Manufacturer prior to the end of the
applicable Testing Period shall be deemed Acceptance. The Acceptance of any
Product shall in no way limit VSI’s rights under any warranty (including implied
warranty) or for indemnification hereunder.

     Section 5.4 Rejection. If VSI reasonably determines that the Products or
the Raw Materials (or any of them) do not strictly conform to the applicable
Specifications or have not been manufactured in strict conformity with the
Manufacturing/Quality System Requirements or any of the Applicable Regulations,
or any of the foregoing, VSI may, at its option, reject the same by giving
Manufacturer written notice thereof by no later than the close of business on
the last day of the applicable Testing Period (“Rejection”). VSI shall return
any rejected Products and Raw Materials to Manufacturer for credit for the full
price of the rejected Products and Raw Materials. Any exceptions to the
foregoing sentence, in the form of replacement of rejected Products or Raw
Materials with reworked or new Products or Raw Materials, as applicable, will be
negotiated by both parties. In the event that a rework procedure is recommended
by Manufacturer to remedy rejected Products or Raw Materials and VSI approves
the rework procedure, all records documenting the rework must be maintained by
Manufacturer with the Product or Raw Materials lot’s original device history
record, and all identification must relate to the original lot number
identification on Product and Raw Materials and packaging.

     Section 5.5 All returns and reshipments shall be F.O.B. VSI’s facilities.
Manufacturer shall insure all returns and reshipments against loss or damage for
the full replacement value of the Products and Raw Materials returned or
reshipped, and shall pay all freight and insurance costs for such Products and
Raw Materials. Manufacturer shall reimburse VSI for any costs of shipping due
pursuant to this Section 5.5 immediately upon demand. In the event of any

6

--------------------------------------------------------------------------------

destruction of nonconforming Products, VSI shall, if requested by Manufacturer,
deliver to Manufacturer an appropriate written confirmation of destruction.

     Section 5.6 Timely Delivery. VSI may, by notice to Manufacturer, cancel a
Purchase Order, in whole or in part, for any Products or Raw Materials which are
not timely delivered; provided, however, that Manufacturer shall have a 7
calendar day period to cure such untimely delivery (such cure to be VSI’s
receipt of shipment within such 7 calendar day cure period). VSI shall return
Products or Raw Materials pursuant to such cancelled Purchase Order(s) to
Manufacturer, F.O.B. VSI’s facilities. Manufacturer shall insure all such
returns against loss or damage for their full replacement value and shall pay
all freight and insurance costs for such Products and Raw Materials.
Manufacturer shall reimburse VSI for expenses due pursuant to this Section 5.6
immediately upon demand.

ARTICLE VI PRICE; PAYMENT

     Section 6.1 Price. During the term of this Agreement, VSI shall pay to
Manufacturer the price for each Product and Raw Materials as described in
Exhibit B. Manufacturer agrees that the prices for Raw Materials shall be equal
to Manufacturer’s standard cost.

     Section 6.2 INTENTIONALLY OMITTED

     Section 6.3 Invoices. Manufacturer shall invoice VSI for the Product and
Raw Materials upon shipment of Products and Raw Materials under each Purchase
Order. Manufacturer shall invoice VSI for any other amounts due hereunder within
seven days of the end of the month in which such amounts arose.

     Section 6.4 Payment Terms. Undisputed payment for Products and Raw
Materials shall be due 30 days from the date of invoicing. Any other undisputed
amounts due under this Agreement shall be payable 30 days from date of receipt
by VSI of invoice. All amounts shall be due and paid in U.S. Dollars.

     Section 6.5 Taxes. All amounts due hereunder are exclusive of all taxes,
duties, sales taxes, value added taxes, assessments, and similar taxes and
duties relating to the Products.

ARTICLE VII RECORD KEEPING; AUDITS

     Section 7.1 Reconciliation and Traceability System; Recordkeeping;
Retention. Manufacturer shall maintain its existing manufacturing system and
processes capable of reconciliation (inputs and outputs) and traceability, and,
upon request, shall provide VSI with access to such system and processes for the
purposes of conducting audits and implementing recalls, product withdrawals and
field corrections and for other purposes consistent with this Agreement.
Manufacturer shall provide VSI with an accurate monthly listing of all inventory
owned by VSI and located at any of Manufacturer’s locations. In addition,
Manufacturer shall maintain adequate records of the device history, engineering
change, quality systems, receiving and inspection, corrective and preventative
action, supplier, distribution, purchasing, complaint files, testing, training,
service (if applicable), sterilization, packaging and labeling of Products,
processes and Specifications for the Products and Raw Materials to establish
compliance with all Applicable Regulations. Manufacturer agrees that VSI may
review and obtain copies of such records upon reasonable notice in order to
confirm such compliance.

7

--------------------------------------------------------------------------------

     Section 7.2 Inspection. VSI may, upon reasonable notice, inspect and audit
the Manufacturing Facilities to assure compliance by Manufacturer with (a) all
Applicable Regulations, (b) any quality system requirements and regulations set
forth in the Manufacturing/Quality System Requirements, and (c) the terms and
provisions of this Agreement. If VSI discovers any deficiencies during such
audits, VSI shall provide Manufacturer with a written report of such
deficiencies. Manufacturer shall, within 10 days of receipt of such report,
remedy or cause the remedy of any deficiencies described on such report or, if
any such deficiencies cannot reasonably be remedied within such 10 day period,
present to VSI a written plan to remedy such deficiencies as soon as possible,
and implement such plan in a timely manner. If Manufacturer fails to remedy such
deficiencies within 30 days of first receipt by Manufacturer of VSI’s report
hereunder, VSI may terminate this Agreement (and all Purchase Orders) upon
written notice to Manufacturer. Manufacturer acknowledges that the provisions of
this Section 7.2 shall in no way relieve Manufacturer of any of its obligations
under this Agreement.

     Section 7.3 Record Retention. Manufacturer shall retain the records
described in Section 7.1 for a period expiring on the later of five years from
the date of manufacture of each Product to which the records relate and two
years beyond the expiry date of such Product. At or prior to the Final Closing
Date (as defined in the Asset Purchase Agreement), Manufacturer shall deliver to
VSI and VSI will pay for transportation expenses of records, all such records,
including all copies thereof. At no time shall Manufacturer destroy any such
records.

     Section 7.4 VSI Representative. VSI may, at VSI’s expense, place a
representative on-site at the Manufacturing Facilities during the term of this
Agreement. Manufacturer agrees that such representative shall have full access
to all operations, documents, and records that pertain to the manufacture,
testing, sterilization, packaging and labeling of the Products and Raw Materials
so long as Manufacturer’s operations are not materially disrupted.

ARTICLE VIII REGULATORY MATTERS

     Section 8.1 Recalls. In the event VSI is required to initiate a recall,
product withdrawal or field correction of any Products, whether or not such
recall has been requested or ordered by any federal, state or foreign agency,
VSI shall notify Manufacturer and Manufacturer shall fully cooperate with VSI,
including, where requested, initiating the recall, product withdrawal or field
correction itself. If any recall, product withdrawal, or field correction is
initiated because of a defect in any Product (then Manufacturer shall (a)
reimburse VSI the price paid by VSI with respect to such Products; and (b)
reimburse VSI for out-of-pocket costs actually paid by VSI to third parties for
transportation and destruction of the recalled Product and for out-of-pocket
communications expenses associated with such recall. If there are multiple
causes of a recall, product withdrawal or field correction, including those set
forth in the preceding sentence, the parties shall agree in good faith on an
appropriate allocation of the costs of the foregoing in a manner consistent this
Section 8.1.

     Section 8.2 Adverse Event Reporting; Product Complaints. VSI shall be
responsible for all reporting to regulatory authorities of adverse device
experiences associated with the use of Products. VSI shall forward to
Manufacturer copies of all customer complaints, user reports, Manufacturing
Device Reports (“MDRs”) and service reports relating to the manufacture and
operation of the Products, and Manufacturer will cooperate fully with VSI in
investigating such

8

--------------------------------------------------------------------------------

complaints. If Manufacturer receives customer complaints or user reports,
Manufacturer shall immediately forward copies of such complaints and reports to
VSI. Upon the request of VSI, and at a charge mutually agreed upon by the
parties, Manufacturer shall investigate any Product subject to a complaint and
shall promptly provide VSI with a written report on such investigation. The
parties shall agree to the procedures to be adopted for the reporting of MDRs
within 30 days of the Effective Date.

     Section 8.3 Compliance With Laws and Regulations.

          (a) Compliance with Laws and Regulations. Manufacturer hereby
represents and warrants to VSI that it shall, at its sole cost and expense,
timely register with the FDA as a “Contract Medical Device Manufacturer,” or
cause to be timely registered with the FDA as such, in accordance with the
Federal Food, Drug and Cosmetic Act 21 CFR Part 807 and Part 11 as amended.
Additionally, Manufacturer represents and warrants to VSI that it has, and will
retain, its IS0 13485 certification, and will maintain a quality system in
compliance with ISO 13485 for the duration of this Agreement. With respect to
its performance hereunder, Manufacturer shall obtain and comply in all material
respects with all applicable permits and registrations, and all applicable
present and future orders, regulations, requirements and laws of any
governmental authority in addition to the Applicable Regulations, including
without limitation all maintenance and updating obligations relating to such
permits and registrations.

          (b) Regulatory Audits. Manufacturer agrees to promptly notify VSI of
any FDA inspection, or audit by the body that is authorized to give “CE”
certification for products and quality system requirements for European
distribution (the “Notified Body”) of the Manufacturing Facilities, or any
request for information from the FDA, or other regulatory body, related to the
manufacture, testing, sterilization, packaging, and labeling of Products, as
soon as practicable after it received notice of such audit or request.
Manufacturer shall provide VSI with copies of any FDA Form 483 observations,
follow-up warning letters and/or close-out reports for those portions of FDA
CGMP/QSR compliance inspection reports relating specifically to the manufacture
of the Products for any facility where the Products are manufactured.
Manufacturer shall also promptly provide VSI with a written report on the
results of such audit or request for information, including without limitation,
a copy of any request or demand issued by the FDA or other regulatory body.
Failure to remedy any such deficiencies as required by the applicable regulatory
body or a repeated pattern of such deficiencies shall constitute a material
breach of this Agreement.

     Section 8.4 Contacts. Each party shall designate an individual within their
organization to be the primary contact regarding regulatory issues. Such
individual can be changed by giving written notice thereof to the other party.

ARTICLE IX WARRANTIES

     Section 9.1 Product Warranty.

          (a) Manufacturer warrants to VSI that the Products and Raw Materials
shall (i) strictly conform to the applicable Specifications; (ii) meet and be
manufactured in strict conformity with the Manufacturing/Quality System
Requirements and all Applicable Regulations; (iii) not be adulterated or
misbranded within the meaning of the Federal Food, Drug and Cosmetic Act of
1938, as amended, or constitute an article that may not be introduced into
interstate commerce

9

--------------------------------------------------------------------------------

under the provisions of said Act; (iv) be free and clear of any lien or
encumbrance; (v) be merchantable; (vi) be safe and effective for their intended
use; and (vii) be new.

          (b) Without limiting any of VSI’s remedies at law or in equity, VSI
may return or destroy any defective or nonconforming Product or Raw Materials
with written notice to Manufacturer and Manufacturer shall promptly replace the
same free of any additional charge upon agreement.

     Section 9.2 Compliance with Laws. Manufacturer warrants to VSI that
Manufacturer shall perform its obligations hereunder in accordance with all
Applicable Regulations and in compliance with any other applicable law or
regulation.

     Section 9.3 Intellectual Property. Manufacturer warrants to VSI that (a)
neither the manufacture, use or sale of the Products or the Raw Materials
(except to the extent specified in the Specifications); and (b) none of the
applications, processes or systems employed by Manufacturer in the performance
of Manufacturer’s obligations hereunder, shall infringe upon or violate the
rights of any third parties, including, but not limited to, any Intellectual
Property Rights.

     Section 9.4 Other Warranties. Manufacturer warrants to VSI that
Manufacturer has the full power to enter into this Agreement and perform the
obligations set forth herein, and such ability is not limited or restricted by
any agreements or understandings between Manufacturer and other persons or
companies.

     Section 9.5 Application. The warranties set forth in this Agreement shall
remain in effect as to each Product and all Raw Materials furnished, serviced,
repaired or replaced hereunder. In addition, any replacement Products or Raw
Materials shall be subject to the acceptance testing requirements set forth
herein. VSI may warrant the Products to its customers in any way VSI deems
appropriate.

ARTICLE X INDEMNIFICATION

     Section 10.1 Manufacturer Indemnification. Manufacturer shall indemnify,
defend and hold harmless VSI, its directors, officers, employees, agents and
their respective successors and assigns (the “VSI Indemnitees”), from and
against any and all liabilities, damages, losses, settlements, claims,
allegations, actions, suits, penalties, fines, costs or expenses (including,
without limitation, reasonable attorneys’ fees) incurred by or asserted against
any VSI Indemnitee of whatever kind or nature, to the extent arising from or
occurring as a result of a claim or demand made by a third party against any VSI
Indemnitee because of or arising out of any (a) breach of any representation or
warranty made by Manufacturer hereunder; (b) failure of Manufacturer to
manufacture, test, sterilize, package, store, handle, transport, or label the
Products and Raw Materials in accordance with the terms of this Agreement,
including without limitation, the Specifications, and Manufacturing/Quality
System Requirements, and Applicable Regulations; (c) material breach of this
Agreement by Manufacturer; or (d) death, personal injury or property damage
caused by the negligence or willful misconduct of Manufacturer or any of its
subcontractors, agents, employees, director or officers.

     Section 10.2 VSI Indemnification. VSI shall indemnify, defend and hold
harmless Manufacturer, its directors, officers, employees, agents and their
respective successors and assigns (the “Manufacturer Indemnitees”), from and
against any and all liabilities, damages, losses, settlements, claims,
allegations, actions, suits, penalties, fines, costs or expenses

10

--------------------------------------------------------------------------------

(including, without limitation, reasonable attorneys’ fees) incurred by or
asserted against any Manufacturer Indemnitee of whatever kind or nature, to the
extent arising from or occurring as a result of a claim or demand made by a
third party against any Manufacturer Indemnitee because of or arising out of any
(a) breach of any representation or warranty made by VSI hereunder; (b) storing,
handling, transporting and labeling of the Products and Raw Materials by VSI
after such Products and Raw Materials have been received by VSI from
Manufacturer and accepted by VSI pursuant to Article V of this Agreement; (c)
material breach of this Agreement by VSI; or (d) death, personal injury or
property damage caused by the negligence or willful misconduct of VSI or any of
its subcontractors, agents, employees, director or officers.

ARTICLE XI INSURANCE

     Section 11.1 Insurance Coverage. From and after the Effective Date and
throughout the term of this Agreement and for five years thereafter,
Manufacturer shall have and maintain in effect, at Manufacturer’s sole cost, the
following insurance relating to Manufacturer’s performance hereunder:

          (a) Commercial General Liability Insurance and Products Liability
Insurance for each occurrence of bodily injury and property damage, in an amount
of not less than $5,000,000.00; and

          (b) Worker’s Compensation Insurance in accordance with applicable
statutory requirements.

     Section 11.2 Scope. The insurance required by this Article XI shall cover
all performance under this Agreement by Manufacturer and all of its agents,
directors, officers, employees, representatives, and subcontractors.

     Section 11.3 Additional Insured. Manufacturer shall have VSI, its
directors, officers and employees named as additional insureds under each
insurance policy obtained by Manufacturer. Such additional insured status shall
be procured and evidenced by an additional insured endorsement on the policy and
certificate of insurance. Manufacturer’s insurance shall be primary to any valid
collectible insurance carried by the additional insureds.

     Section 11.4 Waiver of Subrogation. Manufacturer waives and will require
its insurers to waive all rights of subrogation and recovery against VSI and its
directors, officers and employees whether sounding in contract, tort (including
negligence and strict liability) or otherwise.

     Section 11.5 Certificates and Endorsements. Manufacturer shall furnish
valid certificates of insurance and endorsements to VSI evidencing that
Manufacturer has obtained insurance coverage required under this Article XI.

ARTICLE XII CONFIDENTIALITY

     Section 12.1 Obligation. Each party agrees to hold in confidence and not
disclose to any third party (other than its agents), or use for its own benefit,
except as permitted under this Agreement, any of the following information which
is disclosed to it by the other party (“Confidential Information”): (a) any
information provided to one party by the other party or its employees, agents,
customers, suppliers or subcontractors that is marked with a proprietary,

11

--------------------------------------------------------------------------------

confidential or other similar notice or orally disclosed to one party by the
other party and followed by written notice within thirty days of such oral
disclosure indicating said information was confidential; and (b) if not so
marked, information that is reasonably understood by one party to be the
confidential information of the disclosing party. For purposes of this Article
XII, without limiting the rights of VSI hereunder, the Specifications,
Manufacturing/Quality System Requirements, Purchase Orders, and any information
relating to VSI’s customers, products, business and finances shall be deemed to
be Confidential Information of VSI. The term Confidential Information shall not
include any item of information which: (i) the receiving party can prove was in
its possession prior to disclosure thereof by the disclosing party without
requirements of confidential treatment; (ii) is or becomes generally available
to the public other than as a result of any action by the receiving party; (iii)
is rightfully disclosed to the receiving party by a third party without the
imposition on the receiving party of any confidentiality obligation or
restrictions on use; or (iv) the disclosing party states in writing should not
be considered to be confidential.

     Section 12.2 Use of Confidential Information. Each party shall, except as
otherwise set forth herein, (a) hold all Confidential Information of the other
party in confidence and not disclose such Confidential Information to anyone
except its employees, agents, subcontractors or suppliers who have a need to
know and who are at all times informed of, and understand that they are bound to
observe, the same confidentiality and nondisclosure restrictions and obligations
as are set forth in this Agreement; (b) protect the confidentiality of and take
all steps necessary to prevent disclosure or unauthorized use of the other
party’s Confidential Information to prevent it from falling into the public
domain or the possession of persons not legally bound to maintain its
confidentiality; and (c) advise the disclosing party in writing if it becomes
aware of any misappropriation or misuse of the disclosing party’s Confidential
Information by any person, and provide reasonable assistance to the disclosing
party in any proceeding or lawsuit related thereto.

     Section 12.3 Ownership of Confidential Information. Each party shall be
deemed the owner of all right, title and interest, including all Intellectual
Property Rights, in and to their own Confidential Information.

     Section 12.4 Legal Disclosure. This Agreement will not prevent the
receiving party from disclosing Confidential Information of the disclosing party
to the extent it is required to be revealed pursuant to law, provided, however,
the receiving party which is under any such requirement of law shall give
reasonable notice to the disclosing party of such requirement and shall
cooperate with the disclosing party (at the cost and expense of the disclosing
party) in reasonable legal efforts to limit or mitigate any such disclosure so
as to preserve the proprietary nature of any Confidential Information contained
therein.

     Section 12.5 Injunctive Relief. The parties acknowledge and agree that any
breach or threatened breach of this Article XII will result in irreparable harm
to the party whose Confidential Information is subject to such breach or
threatened breach, for which remedies at law will not be adequate. Each party,
as a disclosing party, shall therefore be entitled to seek injunctive relief in
any court of competent jurisdiction in addition to any other remedy at law or in
equity in the event of a material breach of this Article XII.

12

--------------------------------------------------------------------------------

ARTICLE XIII TERM AND TERMINATION

     Section 13.1 Term. This Agreement shall commence on the Effective Date and
shall remain in full force and effect until the Final Closing of the Asset
Purchase Agreement, unless terminated earlier as set forth herein.

     Section 13.2 Early Termination.

          (a) This Agreement (and all outstanding Purchase Orders) may be
terminated early as follows:

 

 

 

          (i)     if either party is in breach of any of its material
obligations under this Agreement and fails to remedy that breach within 30 days
after receipt of written notice of such breach from the nonbreaching party, the
nonbreaching party may terminate this Agreement immediately by giving written
notice of such termination;

 

 

 

          (ii)     Intentionally omitted;

 

 

 

          (iii)     if a party files a petition of any type as to its
bankruptcy, is declared bankrupt, becomes insolvent, makes an assignment for the
benefit of creditors, goes into liquidation or receivership, or otherwise loses
legal control of its business, the other party may terminate this Agreement (and
all outstanding Purchase Orders) upon written notice to the first party; and

 

 

 

          (iv)     by VSI pursuant to Section 7.2.

          (b) A Purchase Order may be terminated early by a non-breaching party
with notice to the other party if the other party is in breach of any of its
material obligations under a Purchase Order and fails to remedy that breach
within 30 days after receipt of written notice of such breach from the
non-breaching party.

     Section 13.3 Effect of Termination.

          (a) Upon any expiration or termination of this Agreement, in addition
to the parties other rights and remedies at law and in equity, the parties shall
have the following rights and obligations:

 

 

 

 

          (i)     the parties shall negotiate in good faith the delivery of any
Products under any outstanding binding Purchase Orders and VSI shall pay for
Products accepted in accordance with the terms of this Agreement, provided that
if VSI terminates this Agreement, then VSI may determine in its sole discretion
whether and to what extent it desires to receive, accept and return Products
under outstanding binding Purchase Orders;

 

 

 

          (ii)     except to the extent necessary to complete performance
pursuant to subsection (i):

 

 

 

 

 

          (A) VSI can collect all VSI Property, Specifications and
Manufacturing/Quality System Requirements (and all copies thereof) F.O.B.
Manufacturer’s facilities. All freight and insurance costs of delivering the VSI
Property, Specifications and Manufacturing/Quality System Requirements (and all
copies thereof) shall be borne by VSI;

 

 

 

 

 

          (B) all licenses granted hereunder shall immediately terminate; and

13

--------------------------------------------------------------------------------

 

 

 

 

 

          (C) each party as a receiving party shall deliver to the disclosing
party such disclosing party’s Confidential Information in the receiving party’s
possession or control; and

 

 

 

          (iii)     the parties shall each perform their respective
post-termination obligations described in the Manufacturing/Quality System
Requirements.

          (b) Upon any cancellation of a Purchase Order, in whole or in part, as
set forth herein (excluding termination as set forth in Section 13.2(b)), VSI
shall return to Manufacturer the Products cancelled, F.O.B. VSI’s facilities.
All freight and insurance costs of delivering the Products shall be borne by
Manufacturer. Upon shipment of such Products, VSI shall have no further
liability to Manufacturer for the Products shipped, and Manufacturer shall
reimburse to VSI any amounts paid by VSI for the Products so shipped.

Upon any termination of a Purchase Order pursuant to Section 13.2(b), VSI may
return any Products purchased under such Purchase Order in return for
reimbursement by Manufacturer for all amounts paid for such Products,
Manufacturer shall refund any amounts paid by VSI for which no Products have
been received by VSI, VSI shall have no further obligations under the terminated
Purchase Order, and Manufacturer shall deliver to VSI all VSI Property,
Specifications and Manufacturing/Quality System Requirements (and all copies
thereof) relating solely to such terminated Purchase Order F.O.B. VSI’s
facilities. All freight and insurance costs of delivering such VSI Property,
Specifications and Manufacturing/Quality System Requirements (and all copies
thereof) shall be borne by Manufacturer.

     Section 13.4 Survival of Certain Obligations. Notwithstanding the
expiration or termination of this Agreement, the obligations of the parties
required to perform their respective obligations under Section 13.3(a) shall
survive until performance by each party is fulfilled, and, in addition, Sections
2.8, 5.2, 5.3, 7.1, 7.2, 7.3, 8.2, 8.3, 8.413.3 and 13.4 and Articles I, IX, X,
XI, XII and XIV shall continue in perpetuity.

ARTICLE XIV MISCELLANEOUS

     Section 14.1 Independent Contractors. Notwithstanding anything else set
forth herein to the contrary, the relationship of the parties is that of
independent contractor, and nothing herein shall be construed to create a
partnership, joint venture, franchise, employment, or agency relationship
between the parties. Neither party shall have authority to enter into agreements
of any kind on behalf of the other party, nor shall either party have the power
or authority to bind or obligate the other party in any manner to any third
party.

     Section 14.2 Assignment. Manufacturer shall not assign this Agreement or
any right or interest under this Agreement, nor delegate any work or obligation
to be performed under this Agreement except as expressly permitted herein,
without the prior written consent of VSI. Any attempted assignment of or
delegation by Manufacturer in contravention of this provision shall be void and
ineffective and shall be deemed to be a material breach hereof. VSI may freely
transfer or assign this Agreement. Notwithstanding the foregoing, this Agreement
shall be binding upon and inure to the benefit of the parties hereto, and their
respective successors and permitted assigns.

     Section 14.3 Force Majeure. Not withstanding any other provision of this
Agreement neither VSI nor Manufacturer shall be in default by reason of any
delay or failure in its

14

--------------------------------------------------------------------------------

performance under this Agreement (other than performance of payment obligations)
resulting, directly or indirectly, from fire, explosion, strike, freight
embargo, Act of God or of a public enemy, war, civil disturbance, act of
government, unusually severe weather, quarantine, epidemic, or catastrophe.

     Section 14.4 Notices. Notices permitted or required to be given hereunder
shall be deemed sufficient if given by (a) registered or certified mail, postage
prepaid, return receipt requested, (b) private courier service, or (c) facsimile
addressed to the respective addresses of the parties as first above written, fax
number listed below or at such other fax number or addresses as the respective
parties may designate by like notice from time to time. Notices so given shall
be effective upon (1) receipt by the party to which notice is given, or (2) on
the day of faxing as evidenced by the facsimile transmission page, the fifth day
following domestic mailing or the tenth day following international mailing, as
may be the case, whichever occurs first.

 

 

 

If to VSI:

 

 

Vascular Solutions, Inc.

6464 Sycamore Court

Minneapolis, Minnesota 55441

Attention: Chief Executive Officer

Facsimile No: (763) 656-4250

 

 

 

If to Manufacturer

 

 

Escalon Medical Corp.

435 Devon Park Drive, Bldg. 100

Wayne, Pennsylvania 19087

Attention: Chief Executive Officer

Facsimile No: (610) 688-3641

     Section 14.5 Governing Law. The parties invoke the laws of Delaware
regarding the protection of their rights and enforcement of their obligations
hereunder and they mutually stipulate and agree that this Agreement is in all
respects (including, but not limited to, all matters of interpretation,
validity, performance and the consequences of breach) to be exclusively
construed, governed and enforced in accordance with the internal laws (excluding
all conflict of laws rules) of Delaware and any applicable federal laws of the
United States of America, as from time to time amended and in effect.

     Section 14.6 Venue. Any action at law, suit in equity, or judicial
proceeding of any kind arising directly, indirectly, or otherwise in connection
with, out of, related to or from this Agreement or the relationship between the
parties shall be litigated only in the courts of the State of Delaware, County
of Wilmington and the parties waive any right they may have to challenge the
jurisdiction of this court or seek to bring any action in any other forum,
whether originally or by transfer, removal, or change of venue.

     Section 14.7 Entire Agreement; Amendments. This Agreement, including the
Exhibits attached hereto and any binding Purchase Orders, and the Asset Purchase
Agreement constitutes the entire agreement between the parties concerning the
subject matter hereof, and supersedes

15

--------------------------------------------------------------------------------

and replaces all prior or contemporaneous understandings or agreements, written
or oral, regarding such subject matter. No amendment to or modification of this
Agreement will be binding unless in writing and signed by a duly authorized
representative of both parties.

     Section 14.8 Headings. The section and subsection headings in this
Agreement are inserted solely as a matter of convenience and for reference, and
shall not be considered in the construction or interpretation of any provision
hereof.

     Section 14.9 Severability. If any provision or provisions of this Agreement
shall be determined to be unenforceable, then the parties shall in good faith
negotiate for a substitute provision addressing the same subject matter as the
unenforceable provision(s) as may then be considered to be enforceable,
provided, however, if no substitute provision can be formulated which shall be
accepted by the parties as enforceable, this Agreement shall nonetheless
continue in full force and effect with the unenforceable provision(s) stricken
here from.

     Section 14.10 Waiver. The failure or delay of either party to enforce at
any time any provision hereof shall not be construed to be a waiver of such
provision or of the right thereafter to enforce each and every provision. No
waiver by either party to this Agreement, either express or implied, of any
breach of any term, condition, or obligation of this Agreement, shall be
construed as a waiver of any subsequent term, condition, or obligation of this
Agreement.

     Section 14.11 Execution. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original hereunder. Each party
agrees to be bound by its own facsimile or telecopy signature, and accepts the
facsimile or telecopy signature of the other party hereto.

     Section 14.12 Remedies. All remedies set forth in this Agreement are
cumulative and in addition to any other or further remedies provided in law or
in equity.

     Section 14.13 Setoff. Any amount owed to Manufacturer by VSI shall be
subject to deduction for any setoff counterclaim or indemnification right
arising out of this Agreement.

          IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized and empowered officer and representatives
as of the Effective Date.

 

 

 

 

 

VASCULAR SOLUTIONS, INC.

 

ESCALON VASCULAR ACCESS, INC.

 

 

 

By:

/s/ James Hennen

 

By:

/s/ Richard J. DePiano, Jr.

 

James Hennen

 

 

Richard J. DePiano, Jr., Esquire

 

Chief Financial Officer

 

 

VP & General Counsel

16

--------------------------------------------------------------------------------