**Exhibit 10.1**

 

Confidential Materials omitted and filedseparately with the Securities and Exchange Commission. Asterisks denote omissions.

 

 

**DISTRIBUTION AGREEMENT**

** **

**by and among**

** **

**PLC SYSTEMS INC.,**

** **

**PLC MEDICAL SYSTEMS, INC.**

** **

**and**

** **

**EDWARDS LIFESCIENCES LLC**

** **

**dated**

** **

**February 24, 2004**

 

 

 

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**TABLE OF CONTENTS**

 
| ARTICLE I Definitions                   |                                                       |
|-----------------------------------------|------------------------------------------------------------|
|                                    |                                                       |   |
| ARTICLE II Appointment                  |                                                       |
|                                    |                                                       |   |
| Section 2.1.                            | Appointment                                                |   |
| Section 2.2.                            | Competition                                                |   |
|                                    |                                                       |   |
| ARTICLE III Obligations of Distributor  |                                                       |
|                                    |                                                       |   |
| Section 3.1.                            | General  Obligations of Edwards                            |   |
| Section 3.2.                            | Costs  and Expenses                                        |   |
|                                    |                                                       |   |
| ARTICLE IV Obligations of PLC           |                                                       |
|                                    |                                                       |   |
| Section 4.1.                            | Labeling  of Surgical Products                             |   |
| Section 4.2.                            | Manufacturer’s  Warranty                              |   |
| Section 4.3.                            | Insurance                                                  |   |
| Section 4.4.                            | Production  of User Manuals                                |   |
| Section 4.5.                            | Costs  and Expenses                                        |   |
|                                    |                                                       |   |
| ARTICLE V Sales and Marketing           |                                                       |
|                                    |                                                       |   |
| Section 5.1.                            | Sales  & Marketing                                     |   |
|                                    |                                                       |   |
| ARTICLE VI Purchase Arrangements        |                                                       |
|                                    |                                                       |   |
| Section 6.1.                            | Purchaser  Orders; Product Quantities                      |   |
| Section 6.2.                            | Placement  of Orders                                       |   |
| Section 6.3.                            | PLC  License                                               |   |
| Section 6.4.                            | Failure  to Supply                                         |   |
| Section 6.5.                            | Technology  Escrow and Transfer                            |   |
|                                    |                                                       |   |
| ARTICLE  VII Pricing, Shipping, Payment |                                                       |
|                                    |                                                       |   |
| Section 7.1.                            | Determination  of Disposable Transfer Price                |   |
| Section 7.2.                            | Procedures  for Determination of Disposable Transfer Price |   |
| Section 7.3.                            | Laser  Power Source                                        |   |
| Section 7.4.                            | Product  Accessories                                       |   |
| Section 7.5.                            | Shipping                                                   |   |
| Section 7.6.                            | Payment                                                    |   |

 

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| ARTICLE  VIII Term and Termination;        |                                                   |
|--------------------------------------------|--------------------------------------------------------|
|                                       |                                                   |   |
| Section  8.1.                              | Term and Renewal                                       |   |
| Section 8.2.                               | Immediate  Termination                                 |   |
| Section 8.3.                               | Effect  of Termination                                 |   |
|                                       |                                                   |   |
| ARTICLE  IX Warranties and Indemnification |                                                   |
|                                       |                                                   |   |
| Section 9.1.                               | Warranties                                             |   |
| Section 9.2.                               | Indemnification  by PLC                                |   |
| Section 9.3.                               | Indemnification  by Edwards                            |   |
| Section 9.4.                               | Indemnification  Procedures                            |   |
| Section 9.5.                               | Limitations  on Liability                              |   |
|                                       |                                                   |   |
| ARTICLE  X Trademarks and Confidentiality  |                                                   |
|                                       |                                                   |   |
| Section 10.1.                              | Trademarks                                             |   |
| Section 10.2.                              | Confidential  Information                              |   |
|                                       |                                                   |   |
| ARTICLE  XI MISCELLANEOUS                  |                                                   |
|                                       |                                                   |   |
| Section  11.1.                             | Relationship                                           |   |
| Section 11.2.                              | No  Conflict                                           |   |
| Section 11.3.                              | Governing  Law                                         |   |
| Section 11.4.                              | Escalation                                             |   |
| Section 11.5.                              | Jurisdiction  and Consent to Service                   |   |
| Section 11.6.                              | Notices                                                |   |
| Section 11.7.                              | Interpretation                                         |   |
| Section 11.8.                              | Severability                                           |   |
| Section 11.9.                              | Counterparts                                           |   |
| Section 11.10.                             | Entire  Agreement; No Third Party Beneficiaries        |   |
| Section  11.11.                            | Amendments and Modifications; Waivers and  Extensions. |   |
| Section 11.12.                             | Assignment                                             |   |
| Section 11.13.                             | Schedules                                              |   |
| Section 11.14.                             | Expenses                                               |   |
| Section 11.15.                             | No  Consequential or Punitive Damages                  |   |
| Section 11.16.                             | Force  Majeure                                         |   |

 

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| Schedules                |                                                   |   |
|--------------------------|--------------------------------------------------------|--------|
|                     |                                                   |   |
| Schedule 4.3(a)     | Product Liability Insurance of PLC                     |   |
|                     |                                                   |   |
| Schedule 4.3(b)     | Product Liability Certificate of Insurance of Edwards  |   |
|                     |                                                   |   |
| Schedule 7.2(a)(i)  | Example of Determination of Disposable Transfer Price  |   |
|                     |                                                   |   |
| Schedule 7.2(a)(ii) | Example of Determination of Disposable  Transfer Price |   |
|                     |                                                   |   |
| Schedule 7.2(e)     | Materials Inventory                                    |   |
|                     |                                                   |   |
| Schedule 7.3(i)          | Example  of Determination of Laser Transfer Price      |   |

 

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**DISTRIBUTION AGREEMENT**

 

DISTRIBUTION AGREEMENT, dated as of February24, 2004 this (“Agreement”), by and among Edwards Lifesciences LLC, a Delawarelimited liability company (“Edwards”), PLC Systems Inc., a Yukon Territorycorporation (“PLC Parent”), and PLC Medical Systems, Inc., a Delawarecorporation (“PLC”), which is a wholly owned subsidiary of PLC Parent.

 

WHEREAS, PLC will develop and manufactureSurgical Products pursuant to the Contribution, Development and ManufacturingAgreement (the “CD&M Agreement”), by and among Edwards, PLC Parent and PLC,dated as of February 24, 2004, and desires that the sale and use of SurgicalProducts be promoted by Edwards in the Territory.

 

WHEREAS, Edwards is a company in the medicaldevices field with experience and expertise in the commercialization anddistribution of medical devices;

 

WHEREAS, PLC desires to engage Edwards topurchase, resell and distribute Surgical Products in the Territory; and

 

WHEREAS, Edwards desires to obtain rights topurchase, resell and distribute Surgical Products in the Territory;

 

NOW, THEREFORE, in consideration of themutual agreements and covenants contained herein and for other good andvaluable consideration, the receipt and sufficiency of which are herebyacknowledged, and intending to be legally bound hereby, the Parties heretoagree as follows:

 

**ARTICLE IDefinitions**

 

As used inthis Agreement, defined terms not otherwise defined herein shall have themeanings ascribed to them in the CD&M Agreement.  Further, the following terms shall have the following meanings:

 

“Agreement” shall have the meaning set forthin the recitals.

 

“Average Sales Price” shall have the meaningset forth in Section 7.1(d).

 

“CD&M Agreement” shall have the meaningset forth in the recitals.

 

“Damages” shall have the meaning set forth inSection 9.2.

 

“Direct Disposable Cost of Goods Sold” shallhave the meaning set forth in Section 7.1(b).

 

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“Direct Disposable Materials Cost” shall havethe meaning set forth in Section 7.1(b).

 

“Direct Disposable Labor Cost” shall havemeaning set forth in Section 7.1(b).

 

“Direct Laser Costs” shall have the meaningset forth Section 7.3(c).

 

“Direct Laser Materials” shall have themeaning set forth in Section 7.3(c).

 

“Direct Laser Labor” shall have the meaningset forth in Section 7.3(c).

 

“Disposable Margin Share” shall have themeaning set forth in Section 7.1(c).

 

“Disposable Product Margin” shall have themeaning set forth in Section 7.1(c).

 

“Disposable Product” shall mean a finishedSurgical Product that is not a Laser Power Source.

 

“Disposable Transfer Price” shall have themeaning set forth in Section 7.1(a).

 

“Disposable Warranty Period” shall have themeaning set forth in Section 4.2(a).

 

“Dispute” shall have the meaning set forth inSection 11.4.

 

“Edwards” shall have the meaning set forth inthe recitals.

 

“Edwards Facility” shall have the meaning setforth in Section 7.5.

 

“Edwards Margin Factor” shall have themeaning set forth in Section 7.2(a)(ii).

 

“Edwards’ Representative” shall have themeaning set forth in Section 7.2(d).

 

“Effective Date” shall have the meaning setforth in Section 8.1.

 

“Escalation Notice” shall have the meaningset forth in Section 11.4.

 

“Firm Forecast” shall have the meaning setforth in Section 6.1.

 

“Force Majeure Event” shallhave the meaning set forth in Section 11.16.

 

“Forecast” shall have the meaning set forthin Section 6.1.

 

“Indemnified Party” shall have the meaningset forth in Section 9.4.

 

“Indemnifying Party” shall have the meaningset forth in Section 9.4.

 

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“Laser Power Source” shall mean a medicallaser power source and the associated control system (including all necessaryhardware and software) for tissue ablation in the Field of Use.

 

“Laser System” shall mean a Laser PowerSource and a Disposable Product designed to function together as a system fortreating atrial fibrillation and/or atrial flutter.

 

“Laser Transfer Price” shall have the meaningset forth in Section 7.3.

 

“Laser Warranty Period” shall have themeaning set forth in Section 4.2(a).

 

“Materials Inventory” shall have the meaningset forth in Section 7.2(e).

 

“Person” means any individual, partnership,corporation, limited liability company, joint venture, association, joint-stockcompany, trust, incorporated organization, government or agency or politicalsubdivision thereof, or other entity.

 

“PLC” shall have the meaning set forth in therecitals.

 

“PLC Parent” shall have the meaning set forthin the recitals.

 

“PLC License” shall have the meaning setforth in Section 6.3.

 

“PLC Margin Factor” shall have the meaningset forth in Section 7.2(a)(iii).

 

“PLC’s Representative” shall have the meaningset forth in Section 7.2(d).

 

“PLC Surgical Products Intellectual Property”shall have the meaning set forth in Section 6.3.

 

“Supply Breach” shall have the meaning setforth in Section 6.4(a).

 

“Transfer Price Documents” shall have themeaning set forth in Section 7.2(d).

 

**ARTICLE IIAppointment**

** **

Section 2.1*.           **Appointment*.  Subjectto the terms and conditions contained in this Agreement, PLC hereby appointsEdwards as PLC’s exclusive independent distributor of Surgical Products in theTerritory.  Edwards may appoint asecondary or sub-distributor to sell Surgical Products without PLC’s priorwritten consent.

 

Section 2.2*.           **Competition. *With respect to competitiveSurgical Products in the Field Of Use*,*before Edwards Parent or any of its Subsidiaries offers for sale or sells itemsin the Field of Use that are directly competitive with Surgical Products,Edwards shall offer such items to PLC for manufacture under the CD&MAgreement on the same terms and conditions as apply to Surgical Products by writtennotice to PLC.  If PLC does not acceptsuch offer in writing

 

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within sixty (60) days of receipt of such written notice, Edwards shallbe free to manufacture and sell these items without limitation provided thatneither Edwards Parent nor any of its Subsidiaries shall offer to any thirdparty the right to manufacture such items on terms more favorable to such thirdparty than those offered to PLC without first offering to PLC the right tomanufacture such items on such more favorable terms.  For purposes of clarification, Products that are not used toablate tissue shall not be deemed to be competitive with Surgical Products.

 

**ARTICLE IIIObligations of Distributor**

** **

Section 3.1*.           **GeneralObligations of Edwards. *Edwardsshall use commercially reasonable efforts to distribute and sell SurgicalProducts in the Territory including, without limitation, commerciallyreasonable efforts to do the following:

 

(a)           Promote the sale and use of SurgicalProducts in the Territory;

 

(b)           Provide customer service, includingresponding to customer inquiries and requests for quotes on Product pricing;and

 

(c)           Provide invoices to customers andmanage accounts receivable and collection responsibilities for sales by Edwardsof Surgical Products.  Edwards shall beresponsible for any uncollectable sales of Surgical Products to third parties.

 

(d)           Provide all marketing, sales,training and education collateral material.

 

(e)           Provide all installation, in-servicetraining, in-service education and customer training.

 

(f)            Edwards shall manage the warrantyservice relationships with the customers.

 

Section 3.2*.**           **Costs andExpenses. *Edwards shall bearall the costs and expenses associated with its obligations set forth in thisAgreement.

 

**ARTICLE IVObligations of PLC**

** **

Section 4.1*.**           **Labeling ofSurgical Products. *PLC shalland PLC Parent shall cause PLC to provide and to assume regulatoryresponsibility for all finished Surgical Product-related labeling such that itcomplies with all applicable laws and regulations in the United States and theEuropean Union during the term of this Agreement.  All labeling for Surgical Products shall include the statement“Distributed by Edwards Lifesciences LLC, Manufactured by PLC Medical Systems,Inc” or, if applicable, a similar statement reflecting the appropriate Edwardsentity in a given jurisdiction.  For allcountries of the Territory excluding the United States and the countries of theEuropean Union, Edwards shall provide camera-ready labels in compliance

 

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with all regulatory requirements related to such labeling for SurgicalProducts to be sold in such countries to PLC, which shall be affixed toSurgical Products by PLC.  PLC shalllabel, as appropriate and in accordance with applicable laws and regulations,Surgical Products to be sold in the United States or in any country of theEuropean Union.

 

Section 4.2*.**           **Manufacturer’sWarranty. *PLC shall, and PLCParent shall cause PLC to, provide the manufacturer’s warranty described inthis Section 4.2 to Edwards on all Laser Power Sources for a period (the “LaserWarranty Period”) consisting of the earlier of (i) twelve (12) months fromthe date of delivery of the Surgical Products by Edwards to its customer, or(ii) fifteen (15) months from the date of shipment from PLC to Edwards ofsuch Laser Power Sources.  Such LaserPower Sources must be delivered to PLC for repair or replacement for thiswarranty to be valid and enforceable.

 

(a)           PLC shall, and PLC Parent shall causePLC to, provide the manufacturer’s warranty described in this Section 4.2 onall Disposable Products for a period of time equal to the shelf life asreasonably determined by the Steering Committee, taking into accountappropriate tests for determining shelf life, provided, however, that suchshelf life shall be at least one year (the “Disposable Warranty Period”).  Such Disposable Products must be deliveredto PLC for repair or replacement for this warranty to be valid and enforceable.

 

(b)           Subject to the restrictions in (d)below, PLC warrants to Edwards that all Surgical Products shall be free fromdefects in materials and workmanship under normal use and service during theLaser Warranty Period or the Disposable Warranty Period, as applicable.  PLC shall repair or replace such defectiveSurgical Products at its reasonable option during the Laser Warranty Period orthe Disposable Warranty Period, as applicable, at its own cost and expense.  PLC shall pay all costs associated withshipping and transportation of the defective part or Surgical Product if saiddefect appears during the Laser Warranty Period or the Disposable WarrantyPeriod, as applicable.  Notwithstandingthe previous sentence PLC shall not be responsible for any shipping andtransportation costs for any parts or Surgical Products that are not covered bythe manufacturer’s warranty described in this Section 4.2, and Edwards shallpay, or reimburse PLC for, all such shipping and transportation costs.  For any product failure that appears afterthe expiration of the Laser Warranty Period or the Disposable Warranty Period,as applicable, Edwards shall pay PLC for all usual and reasonable charges ofPLC to repair such product failure including any shipping and transportationcosts, if Edwards elects to have such product failure repaired by PLC.

 

(c)           The warranties described in Section4.2(a)-(c) shall not cover failure due to negligence, accident, deliberateabuse, misuse, nor improper storage, installation and/or maintenance, nor componentssupplied by Edwards.  Any use of aSurgical Product inconsistent with such Surgical Product’s operatinginstructions and any modifications made to such Surgical Product shall voidsuch warranty in its entirety.  Suchwarranty does not cover any Surgical Product which has been altered, serviced,repaired or changed in any manner whatsoever by

 

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anyone otherthan PLC, or an authorized service representative of PLC, provided, however,that such warranty shall not be voided by proper installation of SurgicalProducts.

 

Section 4.3*.           **Insurance. *(a)      Set forth on Schedule 4.3(a) is a copy of PLC’sproduct liability insurance policy which is in full force and effect.  PLC shall and PLC Parent shall cause PLC toobtain and keep in force during the term of this Agreement product liabilityinsurance coverage in an amount not less than $10,000,000, and from an insurerrated A- or better by A.M. Best Company and in a form reasonably acceptable toEdwards.  During the term of thisAgreement and for a period of [**] following the expiration or termination ofthis Agreement, such insurance coverage shall evidence Edwards and all of itsAffiliates that sell Surgical Products manufactured by PLC as additional insuredentities and shall provide for written notification to Edwards by the insurernot less than 30 days prior to cancellation, expiration or modification.  PLC shall and PLC Parent shall cause PLC toprovide a certificate of insurance evidencing compliance with this Section4.3(a) to Edwards within 30 days of the date hereof.

 

(b)           Set forth onSchedule 4.3(b) is a copy of a certificate of insurance evidencingthat Edwards currently has product liability insurance coverage in an amountnot less than $10,000,000, and from an insurer rated A- or better by A.M. BestCompany.  Edwards shall maintain productliability insurance in an amount not less than $10,000,000 and from an insurerrated A- or better by A.M. Best Company during the term of this Agreement.  During the term of this Agreement and for aperiod of [**] following expiration or termination of this Agreement, suchinsurance coverage shall evidence PLC and all of its Affiliates thatmanufacture Surgical Products as additional insured entities and shall providefor written notification to PLC by the insurer not less than 30 days prior tocancellation, expiration or modification. Edwards shall provide PLC with a certificate of insurance evidencingcompliance with this Section 4.3(b) within 30 days of the date hereof.

 

Section 4.4.*           **Productionof User Manuals. *PLC shallproduce all user manuals provided, however, that Edwards shall provide, at nocost to PLC, translation of user interface manuals and end-user interface menusthat are not in English.

 

Section 4.5.*           **Costs andExpenses. *PLC shall and PLCParent shall cause PLC to bear all the costs and expenses associated with PLC’sobligations set forth in this Agreement.

 

**ARTICLE VSales and Marketing**

** **

Section 5.1.*           **Sales &Marketing. *Edwards shall beresponsible, in its sole discretion, for all sales and marketing activities;including, without limitation, the preparation and implementation of all salesand marketing plans and the preparation of all sales literature and marketingmaterials.

 

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**ARTICLE VIPurchase Arrangements**

** **

Section 6.1.*           **PurchaserOrders; Product Quantities. *Edwardsshall provide an updated twelve (12) month forecast (the “Forecast”) for****Surgical Products on or before the firstday of the month preceding each calendar quarter.  The Forecast is non-binding and will be used for planningpurposes only, except for the first two (2) quarters within each Forecast (the“Firm Forecast”).  The Forecast for thefirst quarter within the Firm Forecast cannot be changed and the forecast forthe second quarter within the Firm Forecast cannot be decreased by more than[**] percent ([**]%) when such forecasted amount for the second quarter rollsforward and becomes the forecasted amount for the first quarter.  Edwards shall be obligated to purchase, andshall submit a purchase order to purchase not less than [**] percent ([**]%) ofthe quantities of Surgical Products as specified for the first quarter of themost recent Firm Forecast.  Subject tothe foregoing, Edwards shall determine in its sole discretion the quantity ofSurgical Products it shall forecast and purchase and there shall be no minimumpurchase requirements for any Surgical Products.  To the extent that the terms of any purchase order and the terms ofthis Agreement conflict, the terms of this Agreement shall control.

 

Section 6.2.*           **Placement ofOrders. *All orders forSurgical Products submitted by Edwards shall be initiated by written purchaseorders sent to PLC no later than the first day of the month preceding eachcalendar quarter, which purchase orders shall specify the desired delivery date(which shall not be later than 10 days before the end of a calendar quarter)and the Edwards Facility as the location for delivery in accordance with Section7.5.  Quarterly purchase orderssubmitted to PLC by Edwards will indicate the quantity of Surgical Products tobe delivered for each month of the quarter, provided, however, the quantity forany individual month shall in no case be less than [**]% of the total to bedelivered for the entire quarter.  Thereshall be no upper limit on the quantity of Surgical Products Edwards may orderin a quarter, provided, however, PLC will have no liability under thisAgreement for failure to deliver, in a timely manner, any amount of Product inexcess of [**]% of the quantity most recently forecasted pursuant to Section6.1 for the quarter.  PLC shall usecommercially reasonable efforts to deliver Surgical Products on the agreed upondelivery dates set forth in accepted purchase orders, but, in any event, shallmake all deliveries within ten days of the agreed upon delivery dates set forthin accepted purchase orders.

 

Section 6.3.*           **PLC**License. *Subject to the restrictions setforth herein and only upon the occurrence of a Supply Breach as described inSection 6.4 or pursuant to Section 2.5 of the CD&M Agreement, PLCgrants to Edwards and its Affiliates a non-exclusive license (the “PLCLicense”), in the Territory, to all intellectual property owned or licensed toPLC, to the extent sublicensable, that PLC uses to develop, make or have madethe Surgical Products for Edwards, including, without limitation, the right touse PLC’s manufacturing methods to manufacture Surgical Products (including allnecessary trade secrets, technical know-how and other intellectual property ofPLC) (collectively, the “PLC Surgical Products Intellectual Property”) to make,have made, import, sell, market, or offer for sale, Surgical Products listed on

 

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Schedules 1.1 or 1.2 of the CD&M Agreement (including any SurgicalProducts offered by Edwards and accepted by PLC pursuant to Section 2.2 of thisAgreement) that but for the license granted in this Section 6.3 would infringeor misappropriate PLC Intellectual Property. Edwards covenants not to exercise the license granted under this Section6.3 unless a Supply Breach by PLC occurs.

 

Section 6.4.*           **Failure toSupply. *(a)        In the event PLC (in each case, a“Supply Breach”):  (i) refuses(including a failure to respond in a reasonably timely matter to a writteninquiry, excluding a purchase order) to timely supply either the Laser PowerSource or the Disposable Product in accordance with a timely issued purchaseorder that conforms to all the applicable requirements of this Agreement or(ii) subject to the limits set forth in Section 6.1, fails twice in anytwelve (12) month period to timely supply Edwards with at least [**] percent([**]%) of the quantity of the Laser Power Source forecasted for the firstcalendar quarter of any rolling Forecast, or fails twice in any twelve (12)month period to timely supply Edwards with at least [**] percent ([**]%) of thequantity of the Disposable Product forecasted for the first calendar quarter ofany rolling Forecast (provided that, in each case, Edwards orders at least [**]percent ([**]%) of such forecasted quantity), Edwards shall have the right touse the PLC License granted above under Section 6.3 and Edwards shall have theright to terminate its license to PLC under Section 2.3 of the CD&MAgreement.  Notwithstanding theforegoing, any Supply Breach under Section 6.4(b) above shall be excused ifsuch failure to supply is the direct result of (i) the failure of Edwardsto timely supply the necessary quantity of laser diodes, optics blocks or anyother required Edwards supplied material to PLC within the specified lead timesnecessary for PLC to timely manufacture the quantity of product requested onEdwards purchase order; or (ii) the failure of another PLC supplier tosupply an adequate quantity of materials for the Laser System through no faultof PLC, and where PLC has exercised commercially reasonable efforts to find analternative source of supply for such materials.

 

(b)           In the event of (i) an uncuredSupply Breach related to the Laser Power Source, Edwards may exercise thelicense granted pursuant to Section 6.3 with respect to all Surgical Productslisted on Schedules 1.1 or 1.2 of the CD&M Agreement, and (ii) anuncured Supply Breach related to Disposable Products, Edwards may only exercisethe license granted pursuant to Section 6.3 with respect to Disposable Productslisted on Schedules 1.1 or 1.2 of the CD&M Agreement.  Following such exercise by Edwards, PLCshall no longer be obligated to advance the development of any Products.

 

Section 6.5.*           **TechnologyEscrow and Transfer. *PLCshall place the PLC Surgical Products Intellectual Property in a technologyescrow arrangement with Iron Mountain. The information placed in escrow by PLC shall include all trade secrets,know-how, and other intellectual property to allow Edwards to manufacture theSurgical Products (subject to Section 6.4(b)) in the manner manufactured by PLCimmediately prior to Edwards exercise of the rights under the license grantedunder Section 6.3.  PLC shall refreshthe escrow in a prompt and timely manner with any new innovations or know-howdeveloped or acquired by PLC that relate to the Surgical Products.  Edwards shall have the right to periodicallyassess PLC’s compliance with

 

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PLC’s obligations under this section. All escrow fees shall be paid by PLC. In the event of an escrow release due to an uncured Supply Breach orpursuant to Section 2.5 of the CD&M Agreement, (i) PLC shallprovide Edwards with training in the use of the know-how and such otherassistance as is reasonably required to enable Edwards to manufacture theSurgical Products in the manner manufactured by PLC immediately prior to theexercise of such rights by Edwards, and (ii) PLC shall transfer to Edwardsat no cost to Edwards all (x) Contributed Assets that are still owned byPLC, and (y) all other movable assets used by PLC that are dedicated tomanufacture the Surgical Products, in order to enable Edwards to manufacturethe Surgical Products in the manner manufactured by PLC immediately prior tothe exercise of such rights by Edwards.

 

**ARTICLE VII**Pricing, Shipping, Payment

** **

Section 7.1.*           **Determinationof Disposable Transfer Price. *Edwardsshall purchase the Disposable Products from PLC at the “Disposable TransferPrice”, as determined below.

 

(a)           The “Disposable Transfer Price” shallbe the sum of the “Direct Disposable Cost of Goods Sold” and PLC’s “DisposableMargin Share,” each as determined below.

 

(b)           The “Direct Disposable Cost of GoodsSold” is the sum of PLC’s “Direct Disposable Materials Cost” and PLC’s “DirectDisposable Labor Cost.”  “DirectDisposable Materials Cost” shall mean the direct cost of the materials used ina Disposable Product, including reasonable scrap, but excluding spoilage andexcess and obsolete charges.  PLC’s“Direct Disposable Labor Cost” shall mean the assembler manufacturing time forsuch product multiplied by the assembler hourly wage rate (including fringe andbenefits).

 

(c)           PLC’s “Disposable Margin Share” shallbe the PLC Margin Factor multiplied by the “Disposable Product Margin.”  The “Disposable Product Margin” shall be the“Average Sales Price” as defined below for the Disposable Product less theDirect Disposable Cost of Goods Sold.

 

(d)           “Average Sales Price” shall mean theaverage of the actual sales price for each Disposable Product (other thanTransition Products) sold by Edwards or its Affiliates to an unaffiliated thirdparty during a calendar month, net of any royalty paid to any third party.  For conversion of foreign currency to U.S.dollars with respect to sales of Disposable products in a foreign currency, theconversion method and rate shall be the conversion method and rate used byEdwards to convert the applicable sales into U.S. dollars for purposes of thepreparation of Edwards’s financial statements, such conversion to be calculatedin accordance with generally accepted accounting principles in the UnitedStates, applied consistently.

 

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(e)           If Edwards or any of its Affiliatessells Disposable Products to a customer, together with other Products that arenot Surgical Products manufactured by PLC, in one unified sale, then anydiscounts given to such customer for such Disposable Products or such otherProducts shall not be applied in a manner that discriminates against PLC,taking into account the fair value of such Disposable Products.  In the event such discrimination takesplace, the Average Sales Price shall be appropriately adjusted to reflect thesale of Disposable Products at their fair value.

 

(f)            Within 15 days after the end of eachcalendar quarter Edwards shall provide to PLC a written report showing, forsuch quarter:  (i) Edwards’ salesof Surgical Products, (ii) the names of the customers; (iii) thedates of shipment of Surgical Products, (iv) serial numbers for LaserPower Sources that have been sold, and (v) Edward’s inventory of SurgicalProducts at the end of such quarter.

 

Section 7.2.*           **Procedures forDetermination of Disposable Transfer Price. *(a)              For thefirst calendar quarter of sales of the Disposable Products, Edwards shallpurchase Disposable Products at an estimated Disposable Transfer Price of $[**]for the Encircle Disposable Product and at an estimated Disposable TransferPrice of $[**] for the Endocardial Disposable Product (as each such product isdefined on Schedule 1.1 of the CD&M Agreement).  Within 20 days following the end of such period,Edwards and PLC shall determine the actual Disposable Transfer Price for suchproducts and shall adjust the transfer price paid for such products during suchperiod to reflect the actual transfer prices for these Disposable Products.

 

To determine the actual Disposable TransferPrice, Edwards and PLC shall take the following steps:

 

(i)            Determine the actual Average SellingPrice, the actual Direct Disposable Cost of Goods Sold, and the actualDisposable Product Margin for such period.

 

(ii)           Multiply the actual Average SellingPrice for each such Disposable Product by [**]% and then divide this amount bythe actual Disposable Product Margin to determine the “Edwards Margin Factor.”

 

(iii)          Subtract the Edwards Margin Factorfrom 1 to determine the “PLC Margin Factor.”

 

(iv)          Multiply the actual Disposable ProductMargin by the PLC Margin Factor to determine PLC’s Disposable Margin Share forsuch product for such period.

 

(v)           Add PLC’s Disposable Margin Share tothe Direct Disposable Cost of Goods Sold to obtain the Disposable TransferPrice for such completed quarter.

 

(vi)          Once determined by steps (i) – (v),Edwards Margin Factor and PLC Margin Factor shall remain unchanged.

 

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Schedule 7.2(a)(i) sets forth an exampleof the procedures for the determination of the Disposable Transfer Price.  An additional example is set forth inSchedule 7.2(a)(ii) which shows how this calculation and the calculationin Section 7.1 will work going forward.

 

(b)           At the end of the first calendarquarter of sales of Disposable Products, the actual Direct Disposable Cost ofGoods Sold and the actual Average Sales Price of the Disposable Product forsuch completed quarter shall be used to determine the Disposable Transfer Pricefor the next calendar quarter of sales of this product, taking into account thePLC Margin Factor and the Edwards Margin Factor already determined underSection 7.2(a), and continuing with this approach for each calendar quarterthereafter.

 

(c)           Edwards and PLC shall use allcommercially reasonable efforts to establish the Disposable Transfer Price foreach quarter no later than the end of the first month of each such quarter.

 

(d)           Each of Edwards and PLC shall keepfull, true, and accurate books of account containing information necessary forthe purpose of determining the Disposable Transfer Price and amounts payable toPLC hereunder (the “Transfer Price Documents”).  Upon 30-days prior written notice, such books and Transfer PriceDocuments shall be made available for inspection by an agent or representativeof PLC (“PLC’s Representative”) and reasonably acceptable to Edwards, or anagent or representative of Edwards (“Edwards’ Representative”) and reasonablyacceptable to PLC, as applicable, for the sole purpose of verifying theaccuracy of the Transfer Price Documents and the amounts payable to PLChereunder, and PLC’s Representative or Edwards’ Representative, as applicable,shall be entitled to inspect only such information as is reasonably necessaryfor such verification.  PLC’sRepresentative shall report to PLC only whether Edward has accuratelydetermined the Disposable Transfer Price and amounts payable to PLC hereunderand, if not, the correct determination, and Edwards’ Representative shallreport to Edwards only whether PLC has accurately determined the DirectDisposable Cost of Goods Sold and, if not, the correct determination.  Any such inspection shall take place duringEdwards’ or PLC’s normal business hours, as applicable, at the place where suchbooks and records are ordinarily maintained and shall be conducted in a mannerreasonably calculated to minimize the disruption of Edwards’ business or PLC’sbusiness, as applicable.  PLC and PLC’sRepresentative and Edwards and Edwards’ Representative shall keep anyinformation obtained during such inspection confidential and, upon request ofEdwards or PLC, PLC’s Representative or Edwards’ Representative, as applicable,shall enter into a written confidentiality agreement prior to commencing saidinspection.  Such inspection may takeplace no more frequently than once in any calendar year, and shall be limitedto the books and records necessary to verify the determination of theDisposable Transfer Price and amounts payable to PLC hereunder for no more thantwo calendar years prior to the date of the commencement of theinspection.  In the event PLC’sRepresentative concludes that additional amounts were owed to PLC with respectto any such period, PLC shall notify Edwards of such discrepancy, and in theevent Edwards’ Representative concludes that PLC was paid more than it wasowed, it shall notify PLC of such discrepancy. If an agreement between the Parties is not reached within (30) daysafter such

 

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notice, thenno later than ten (10) days after the expiration of such (30) thirty dayperiod, at a mutually convenient time, PLC or PLC’s Representative shall meetor consult with Edwards and/or Edwards’ Representative to attempt to reconcilethe difference between the calculations of the respective Representatives.  All fees charged and expenses incurred byPLC’s Representative or Edwards’ Representative, as applicable, in connectionwith any inspections, meetings, or consultations provided for herein shall bepaid by the Party who retained such representatives. Any payments to be made toEdwards or PLC, as applicable, pursuant to this Section 7.2(d) shall be madepromptly after agreement of the parties is reached.

 

(e)           Schedule 7.2(e) contains alist of raw material and other inventory items of Edwards (“MaterialsInventory”) related to Surgical Products together with Edward’s actual directmaterial cost of such Materials Inventory, which Schedule shall be updatedby Edwards at the end of the Transition Period.  PLC shall purchase such Materials Inventory remaining at the endof the Transition Period from Edwards on an as-needed first priority basis foruse in the manufacture of Surgical Products, provided such Materials Inventoryis appropriate and its condition is reasonably acceptable to PLC.  PLC shall pay for such Materials Inventoryby crediting the Disposable Transfer Price (or, if applicable, the LaserTransfer Price) on an as-used basis in an amount equal to Edwards’s actualdirect material cost of such Materials Inventory as set forth in Schedule 7.2(e).  All Materials Inventory remaining at the endof the Transition Period shall be delivered to PLC promptly following thecompletion of the Transition Period.

 

Section 7.3.*           **Laser PowerSource. *Subject to anyadjustment provided below, Edwards shall purchase the Laser Power Source fromPLC for $[**] per unit (the “Laser Transfer Price”).  Edwards shall provide laser diodes and optics blocks to PLC forincorporation by PLC into each Laser Power Source.  These laser diodes and optics blocks shall be provided by Edwardsto PLC at no cost to PLC.  The LaserTransfer Price shall adjust from time to time as follows:

 

(a)           If the cost per Laser Power Source ofthe laser diodes and optics blocks supplied by Edwards varies from the initialcost to Edwards of $[**], then the Laser Transfer Price shall be adjusted totake into account [**]% of the positive or negative variance from $[**].  If the variance from $[**]is a positivevariance (i.e. the actual cost of the laser diodes and optics blocks aregreater than $[**]), then [**]% of this positive variance shall be deductedfrom the Laser Transfer Price. Conversely, if the variance from $[**]is a negative variance (i.e. theactual cost of the laser diodes and optics blocks are less than $[**]), then[**]% of this negative variance shall be added to the Laser TransferPrice.

 

(b)           If the “Direct Laser Costs” asdefined below vary from $[**], then the Laser Transfer Price shall be adjustedto take into account [**]% of the positive or negative variance from$[**].  If the variance from $[**] is apositive variance (i.e. the actual Direct Laser Costs are greater than $[**]),then [**]% of this positive variance shall be added to the LaserTransfer Price.  Conversely, if thevariance from $[**] is a negative variance (i.e. the actual Direct Laser Costsare

 

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less than$[**]), then [**]% of this negative variance shall be deducted from theLaser Transfer Price.

 

(c)           “Direct Laser Costs” shall mean thesum of “Direct Laser Materials” and “Direct Laser Labor.”  “Direct Laser Materials” is equal to thedirect cost of the materials used in a Laser Power Source, excluding spoilageand excess and obsolete charges and the laser diodes and optics blocks suppliedby Edwards.  “Direct Laser Labor” shallmean the assembler manufacturing time for the Laser Power Source multiplied bythe assembler hourly wage rate plus fringe and benefits.

 

(d)           Within one hundred-twenty (120) daysafter the Effective Date, the Steering Committee shall approve the estimatedinitial cost of the Direct Laser Materials. This estimate shall be prepared by Minnetronix, Inc. and shall onlyaddress the Direct Laser Materials.  Ifthis cost estimate is greater than $[**], then each dollar of the positivevariance from $[**] (i.e. the amount by which the estimated cost is greaterthan $[**]) shall be added to the Laser Transfer Price.  Conversely, if this cost estimate is lessthan $[**], then each dollar of this negative variance from $[**] (i.e. theamount by which the estimated cost is less than $[**]) shall be subtracted fromthe Laser Transfer Price.

 

(e)           At the end of the first calendarquarter of sales, the actual cost per Laser Power Source of the laser diodesand optics blocks supplied by Edwards shall be prepared by Edwards for suchcompleted quarter, and shall be subject to review and approval by PLC, andfollowing such approval shall be used to determine the Laser Transfer Price forthe next calendar quarter of sales of this product, and continuing with thisapproach for each calendar thereafter.

 

(f)            At the end of the first calendarquarter of sales, the actual Direct Laser Costs shall be prepared by PLC forsuch completed quarter, and shall be subject to review and approval by Edwards,and following such approval shall be used to determine the Laser Transfer Pricefor the next calendar quarter of sales of this product, and continuing withthis approach for each calendar quarter thereafter.

 

(g)           Edwards and PLC shall use allcommercially reasonable efforts to establish the Laser Transfer Price for eachquarter no later than the end of the first month of each such quarter.

 

(h)           Edwards and PLC shall afford to eachother audit rights with respect to Laser Power Sources and the determination ofthe Laser Transfer Price substantially the same as the audit rights granted toEdwards and PLC with respect to Disposable Products and the determination ofthe Disposable Transfer Price in Section 7.2(d).

 

(i)            An example of the above describedcalculation is attached as Schedule 7.3(i).

 

Section 7.4.*           **ProductAccessories. *PLC shallsupply such customary product accessories, including, without limitation cablesand an operation manual, for each Laser Power

 

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Source that it supplies to Edwards. The price for the product accessories is included in the Laser PowerSource price set forth in Section 7.3.

 

Section 7.5.*           **Shipping. *PLC shall deliver Productsdirectly to Edwards.  All prices forSurgical Products shall be F.O.B. to a single facility of Edwards located inthe United States, as designated in writing by Edwards (“Edwards Facility”),which Edwards Facility may be changed to another facility in the United Statesby Edwards upon advance written notice to PLC. The prices will not include any federal, state or local sales, use,excise or value added tax that may be applicable.  If PLC has the legal obligation to collect such taxes, theappropriate amount shall be added to Edwards’ invoice and paid by Edwardsunless Edwards provides PLC with a valid tax exemption certificate authorizedby the appropriate taxing authority. PLC shall ship Surgical Products using the method of transportationreasonably determined by PLC.  In allcases, title, risk of loss and all responsibility for transportation, insuranceand storage shall pass from PLC to Edwards upon transfer of finished SurgicalProducts from PLC to the Edwards Facility and after such transfer PLC shallpromptly issue an invoice related thereto to Edwards.

 

Section 7.6.*           **Payment. *Full payment shall be made byEdwards to PLC within sixty (60) days from the invoice date which shall be theshipping date for Surgical Products to Edwards.  In the event Edwards fails to timely pay more than four (4)invoices in any twelve month period, then payment shall be due to PLC underthis Section 7.6 within thirty (30) days from such invoice date.

 

**ARTICLE VIII**Term and Termination

** **

Section 8.1.*           **Term andRenewal. *This Agreementshall commence on the date hereof (the “Effective Date”) and be valid for aslong as the CD&M Agreement is valid and in effect.

 

Section 8.2.*           **ImmediateTermination. *This Agreementmay be terminated by either Edwards or PLC immediately in the event (a) ofany breach by the other Party of Section 4.3; (b) of any material breachby the other Party remaining uncured 60 days after written notice containingdetails of the breach has been delivered to the other Party; or (c) thatthe other Party shall file for protection from its creditors under anyapplicable Bankruptcy or insolvency laws, shall make an assignment for thebenefit of creditors, or shall have a receiver appointed for its property.

 

Section 8.3.*           **Effect ofTermination. *Upon expirationor early termination of this Agreement, the following shall immediately occur:

 

(a)           Within thirty (30) days of suchexpiration or early termination, PLC and PLC Parent shall return allConfidential Information of Edwards, and vice versa, in its possession or underits control (subject to any continuing licenses under the CD&M Agreement).

 

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(b)           The CD&M Agreement shallterminate.

 

**ARTICLE IX**Warranties and Indemnification

** **

Section 9.1.*           **Warranties. *(a)    PLC warrants that it possesses good and marketable title to allSurgical Products sold to Edwards under this Agreement upon delivery to Edwardsof such Surgical Products; (b) at the time of delivery, each Productconforms to its specifications and will operate according to the indicationsdescribed in its labeling; (c) when available for sale in the TerritorySurgical Products are or will be manufactured pursuant to the CD&MAgreement in conformity with all applicable FDA, UL and/or ETL rules andregulations and applicable laws of the Territory; (d) Surgical Productshave or will have obtained FDA approval or clearance to market and sellSurgical Products when Surgical Products are available for sale in theTerritory; and (e) it complies and will continue to comply with allapplicable laws and regulations of the Territory with respect to SurgicalProducts provided that the foregoing representation, insofar as it relates tolaws of countries outside the United States or the European Union, isconditioned on PLC’s receipt of accurate and complete information from Edwardspursuant to Section 4.1(a)(v) of the CD&M Agreement.  Edwards warrants that it complies and willcontinue to comply with all applicable laws and regulations of the Territorywith respect to Surgical Products and the sale thereof.

 

(b)           EXCEPT AS EXPRESSLY STATED IN THIS AGREEMENTOR IN ANY OF THE TRANSACTION DOCUMENTS, PLC AND ITS THIRD PARTY LICENSORS ANDSUPPLIERS EXPRESSLY DISCLAIM ALL OTHER WARRANTIES, REPRESENTATIONS, CONDITIONS,GUARANTEES OR UNDERTAKINGS OF ANY KIND, EXPRESS OR IMPLIED, STATUTORY OROTHERWISE INCLUDING WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULARPURPOSE.

 

(c)           EXCEPT AS EXPRESSLY STATED IN THISAGREEMENT OR IN ANY OF THE TRANSACTION DOCUMENTS, EDWARDS AND ITS THIRD PARTYLICENSORS AND SUPPLIERS EXPRESSLY DISCLAIM ALL OTHER WARRANTIES, REPRESENTATIONS,CONDITIONS, GUARANTEES OR UNDERTAKINGS OF ANY KIND, EXPRESS OR IMPLIED,STATUTORY OR OTHERWISE INCLUDING WARRANTIES OF MERCHANTABILITY AND FITNESS FORA PARTICULAR PURPOSE.

 

Section 9.2.*           **Indemnificationby PLC. *PLC and PLC Parentshall indemnify and hold harmless Edwards, its officers, directors,shareholders, employees, parents, successors, Affiliates, assigns, in eachcase, from and against any and all costs or expenses (including, withoutlimitation, reasonable attorneys’ fees, and the reasonable out-of-pocketexpenses of testifying and preparing for testimony and responding to documentand other information requests, whether or not a party to such litigation),judgments, fines, losses, claims (whether or not meritorious) and damages (collectively,“Damages”), as incurred, to the extent they relate to,

 

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arise out of or are the result of (i) the manufacture by PLC ofany Surgical Products (except to the extent attributable to components suppliedby Edwards); (ii) the design of any Surgical Products or component ofSurgical Products not developed exclusively by Edwards except to the extentdesigned and built in accordance with the specifications provided by Edwards;(iii) the failure of Surgical Products to satisfy any warranty made byPLC; (iv) PLC failing to perform any of its covenants and responsibilitiesunder the Transaction Documents; and (v) PLC’s gross negligence, willfulmisconduct or fraud in the development, labeling, supply and manufacture ofSurgical Products by PLC.

 

Section 9.3.*           **Indemnificationby Edwards. *Edwards shallindemnify and hold harmless PLC, its officers, directors, shareholders,employees, parents, successors, Affiliates and assigns, in each case, from andagainst any and all Damages, as incurred, to the extent they relate to, ariseout of or are the result of (i) the specifications of the SurgicalProducts provided by Edwards; (ii) the sale by Edwards of any SurgicalProducts except to the extent Edwards is indemnified by PLC (iii) Edwardsfailing to perform any of its covenants and responsibilities under theTransaction Documents and (iv) Edwards’ gross negligence, willfulmisconduct or fraud in the promotion and sale of Surgical Products by Edwards.

 

Section 9.4.*           **IndemnificationProcedures. *The Partyseeking indemnification (the “Indemnified Party”) pursuant to this Article IXshall promptly notify the indemnifying party (the “Indemnifying Party”), inwriting, of such claim describing such claim in reasonable detail, *provided* that the failure to provide suchnotice shall not affect the obligations of the Indemnifying Party unless andonly to the extent it is actually prejudiced thereby.  In the event that such claim involves a claim by a third partyagainst an Indemnified Party, the Indemnifying Party shall have 30 days afterreceipt of such notice to decide whether it will undertake, conduct andcontrol, through counsel of its own choosing (but reasonably acceptable to theIndemnified Party) and at its own expense, the settlement or defense thereofunless (i) the Indemnifying Party is also a party to the proceeding andthe Indemnified Party determines in good faith that joint representation wouldbe inappropriate or (ii) the Indemnifying Party fails to provide reasonableassurance to the Indemnified Party of its financial capacity to defend suchproceeding, and provide indemnification with respect thereto, and if it sodecides, the Indemnified Party shall cooperate with it in connection therewith,*provided* that the IndemnifiedParty may participate in such settlement or defense through counsel chosen byit, and *provided further* that thefees and expenses of such counsel shall be borne by the Indemnified Party.  The Indemnifying Party shall not, withoutthe written consent of the Indemnified Party (which consent shall not beunreasonably withheld, conditioned or delayed), settle or compromise anyaction, unless such settlement or compromise includes an unconditional releaseof the Indemnified Party.  If theIndemnifying Party does not notify the Indemnified Party within 30 days afterthe receipt of notice of a claim of indemnity hereunder that it elects toundertake the defense thereof, the Indemnified Party shall have the right tocontest, settle or compromise the claim but shall not pay or settle any suchclaim without the consent of the Indemnifying Party (which consent shall not beunreasonably withheld, conditioned or delayed).  The Indemnifying Party and the Indemnified Party shall cooperatefully in all aspects of any investigation, defense, pre-trial activities,trial,

 

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compromise, settlement or discharge of any claim in respect of whichindemnity is sought pursuant to Article IX, including, but not limited to, providingthe other Party with reasonable access to employees and officers (including aswitnesses) and other information.  Theremedies provided in this Article IX will not be exclusive of or limit anyother remedies that may be available to the Indemnified Parties.

 

Section 9.5.*           **Limitationson Liability. *NOTWITHSTANDINGANYTHING TO THE CONTRARY IN THIS AGREEMENT, NEITHER PARTY SHALL BE LIABLE TOTHE OTHER PARTY OR THE OTHER PARTY’S AFFILIATES FOR ANY INCIDENTAL, PUNITIVE,SPECIAL, MULTIPLE OR INDIRECT OR CONSEQUENTIAL DAMAGES, HOWEVER CHARACTERIZED,INCLUDING, WITHOUT LIMITATION, LOSS OF PROFITS OR BUSINESS OPPORTUNITIES,ARISING OUT OF, RELATED TO, OR IN CONNECTION WITH THIS AGREEMENT OR ITS EARLYTERMINATION.  IRRESPECTIVE OF WHETHERSUCH LIABILITY IS ASSERTED IN TORT OR CONTRACT AND IRRESPECTIVE OF WHETHER THEPARTIES HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, ALL REMEDIES OFTHE PARTIES SHALL BE LIMITED TO ACTUAL DIRECT DAMAGES.

 

**ARTICLE X**Trademarks and Confidentiality

** **

Section 10.1.*         **Trademarks. *Subject to PLC’s consent, whichconsent shall not be unreasonably withheld, delayed or conditioned, Edwardsshall have the right to indicate to the public that it is an authorizeddistributor of Surgical Products and, at Edwards’ election, to market and sellSurgical Products under any trademarks, service marks and trade names that PLCadopts from time to time.  Edwards shallstate and confirm in all advertising and promotional literature that its use ofPLC’s trademarks, service marks and trade names is pursuant to a license fromPLC and shall identify PLC as the owner of such marks and names and anyproprietary rights.  Edwards shall notalter, obscure or remove any trademarks, service marks or trade names of PLCwhich are contained on or in or affixed to Surgical Products at the time ofshipment.  Edwards shall not use anytrademarks, service marks or trade names of PLC in connection with any businessconducted by Edwards other than dealing with Surgical Products in accordancewith the terms of this Agreement. Edwards agrees that its use of the trademarks, service marks and tradenames of PLC shall not create in its favor any right, title or interest thereinand acknowledges PLC’s exclusive right, title and interest thereto.  Edwards agrees that it will not use, withoutPLC’s prior written consent, any mark which is similar to or is likely to beconfused with any trademarks, service marks or trade names of PLC.  In order to comply with PLC’s qualitycontrol standards, Edwards shall: (i) not modify any of PLC’s trademarks, service marks or tradenames in any way; (ii) use PLC’s trademarks, service marks or trade namesin compliance with all applicable laws and regulations; and (iii) upon 30days written notice, accord PLC the right to inspect during normal businesshours, Edwards’ or its Affiliates facilities used in connection with efforts topromote and sell the Surgical Products in order to confirm that Edwards’ use ofany of PLC’s trademarks, service marks or trade names is in compliance with

 

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this Section 10.1.  Edwards’rights to use the trademarks, service marks and trade names of PLC as set forthin this Section 10.1 shall terminate upon termination or expiration of thisAgreement.

 

Section 10.2.*         **ConfidentialInformation. *In order toavoid disclosure of confidential and proprietary information to any otherperson, firm or corporation, the Parties agree that each will treat any suchinformation which is received from one another in writing and clearly marked as“Confidential” or if disclosed orally, which is confirmed in writing as“Confidential” within thirty (30) days of initial disclosure, with the samedegree of care that each employs with respect to its own information which itdoes not desire to have published or disseminated.  It is understood that each Party shall be liable for anyunauthorized disclosure should it fail to safeguard the disclosed informationwith such care.  This obligation shallsurvive the termination or expiration of this Agreement.  The Parties shall not have any obligationwith respect to such information which is:

 

(a)           independently developed by thereceiving Party without the benefit of the disclosure or is already known tothe receiving Party at the time of the disclosure;

 

(b)           publicly known or becomes publiclyknown without the wrongful act or breach of this Agreement by the receivingParty; or

 

(c)           rightfully received by the receivingParty from a third-party who is not under any obligation of confidentiality ortrade secret obligation to the originating Party.

 

**ARTICLE XI**MISCELLANEOUS

** **

Section 11.1.*         **Relationship. *Therelationship of Edwards and PLC established by this Agreement and theTransaction Documents is of independent contractors and not agents (except asset forth in Section 2.1), and nothing in this Agreement or any TransactionDocument shall be construed:

 

(a)           To give PLC or PLC Parent the powerto direct or control the daily activities of Edwards, or vice versa, beyond theobligations imposed on Edwards and PLC, respectively, by this Agreement;

 

(b)           To constitute the Parties aspartners, joint venturers, co-owners or otherwise as participants in jointundertaking; or

 

(c)           To allow either PLC or PLC Parent tocreate or assume any obligation on behalf of Edwards, or vice versa, for anypurpose whatsoever.  The purchase,promotion, and resale of, or any other legal transactions concerning SurgicalProducts hereunder shall be carried out in the name of and for the account ofEdwards as principal, and Edwards shall not enter into any agreement with thirdpersons binding in any way on PLC or PLC Parent.

 

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Section 11.2.*         **NoConflict. *Each Partyrepresents and warrants to the other Parties that it is not subject to anycontractual obligation or restraint which will materially interfere with itsright and ability to perform pursuant to the terms of this Agreement.

 

Section 11.3.*         **GoverningLaw. *This Agreement shall begoverned by, interpreted under, and construed in accordance with the internallaws of the State of New York, including, without limitation,Sections 5-1401, 5-1402 of the New York General Obligations Law and NewYork Civil Practice Laws and Rules 327(b).

 

Section 11.4.*         **Escalation. *Edwards and PLC (and/or PLCParent) will attempt in good faith to resolve expeditiously any dispute, claimor controversy arising out of or relating to this Agreement (the “Dispute”)promptly by negotiations between executives who have authority to settle thecontroversy and who are at a higher level of management than the persons withdirect responsibility for the administration of this Agreement.  Either Party may give the other Party,written notice (the “Escalation Notice”) of any Dispute not resolved in thenormal course of business.  Within 15days after delivery of the Escalation Notice, the Party in receipt of theEscalation Notice shall submit to the other a written response.  The Escalation Notice and the responsethereto shall include (a) a statement of each Party’s position and asummary of arguments supporting that position, and (b) the name and titleof the executive who will represent that Party and of any other person who willaccompany the executive.  Within 30 daysafter delivery of the Escalation Notice, the executives of both Parties shallmeet at a mutually acceptable time and place, and thereafter as often as theyreasonably deem necessary, to attempt to resolve the Dispute.  All reasonable requests for information madeby one Party to the other will be honored. All negotiations pursuant to this clause are confidential and shall betreated as compromise and settlement negotiations for purposes of applicablerules of evidence.  The Parties shallattempt to resolve any Dispute pursuant to the procedure set forth in thisSection 11.4 for a period up to 60 days from the date of delivery of theEscalation Notice before resorting to other available remedies; *provided, however*, nothing contained inthis Section 11.4 shall prevent any Party from resorting to judicial process ifinjunctive or other equitable relief from a court is necessary to preventserious and irreparable injury to it or to others.  The use of the procedure set forth in this Section 11.4 will notbe construed under the doctrine of laches, waiver or estoppel to affectadversely any Party’s right to assert any claim or defense.

 

Section 11.5.*         **Jurisdictionand Consent to Service. *Inaccordance with the laws of the State of New York, and without limiting thejurisdiction or venue of any other court, the Parties (a) agree that anysuit, action or proceeding arising out of or relating to this Agreement shallbe brought solely in the state or federal courts of New York; (b) consentto the exclusive jurisdiction of each such court in any suit, action or proceedingrelating to or arising out of this Agreement; (c) waive any objectionwhich any of them may have to the laying of venue in any such suit, action orproceeding in any such court; and (d) agree that service of any courtpaper in any such suit, action or proceeding may be made in any manner as maybe provided under the applicable laws or court rules governing service ofprocess in such court.  The foregoingshall not apply to actions for injunctive relief, as to which such jurisdictionshall be non-exclusive.

 

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Section 11.6.*         **Notices. *All notices, demands, requests,consents, approvals or other communications required or permitted to be givenhereunder or which are given with respect to this Agreement shall be in writingand shall be delivered (charges prepaid, receipt confirmed or return receiptrequested (if available)) by hand, by nationally recognized air courierservice, by certified mail or facsimile, addressed as set forth below or tosuch other address as such Party shall have specified most recently by writtennotice.  Notice shall be deemed givenand effective (i) if delivered by hand or by nationally recognized courierservice, when delivered at the address specified in this Section 11.6 (or inaccordance with the latest unrevoked written direction from such Party),(ii) if by certified mail, four (4) business days after mailing or(iii) if given by facsimile when such facsimile is transmitted to the faxnumber specified in this Section 11.6 (or in accordance with the latestunrevoked written direction from such Party), provided the appropriateconfirmation is received.

 

To PLC:

 

PLC SystemsInc.10 Forge ParkFranklin, MA  02038Attention:  Chief Executive OfficerFax:  (508) 541-7990

 

with a copy (which shall not constitutenotice) to:

 

Hale and DorrLLP60 State StreetBoston, MA  02109Attention:  Steven D. Singer, Esq.Fax:  (617) 526-5000

 

To Edwards:

 

EdwardsLifesciences LLCOne Edwards WayIrvine, California 92614Attention:  General CounselFax:  (949) 250-6850

 

with a copy (which shall not constitutenotice) to:

 

Skadden, Arps,Slate, Meagher & Flom LLP300 South Grand Avenue, Suite 3400Los Angeles, California  90071-3144Attention:  Joseph J. Giunta, Esq.Fax:  (213) 687-5600

 

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Section 11.7.*         **Interpretation *When a reference is made in thisAgreement to a Section, Schedule or Exhibit, such reference shall be to aSection, Schedule or Exhibit of this Agreement unless otherwise indicated.  When a reference is made in this Agreementto a specific Schedule, such reference shall be deemed to include, to theextent applicable, all the other Schedules. The table of contents, table of definitions, titles and headingscontained in this Agreement are for reference purposes only and shall notaffect in any way the meaning or interpretation of this Agreement.  When the words “includes” or “including” areused in this Agreement, they shall be deemed to be followed by the words“without limitation.”  All accountingterms not defined in this Agreement shall have the meanings determined bygenerally accepted accounting principles as of the date hereof.  All capitalized terms defined herein areequally applicable to both the singular and plural forms of such terms.

 

Section 11.8.*         **Severability. *In the event that any one or moreof the provisions contained herein, or the application thereof in anycircumstances, is held invalid, illegal or unenforceable in any respect for anyreason, the Parties shall negotiate in good faith with a view to thesubstitution therefore of a suitable and equitable solution in order to carryout, so far as may be valid and enforceable, the intent and purpose of suchinvalid provision; *provided, however*,that the validity, legality and enforceability of any such provision in everyother respect and of the remaining provisions contained herein shall not be inany way impaired thereby, it being intended that all of the rights andprivileges of the Parties hereto shall be enforceable to the fullest extentpermitted by law.

 

Section 11.9.*         **Counterparts. *This Agreement may be executed intwo or more counterparts, each of which shall be deemed an original and all ofwhich shall, taken together, be considered one and the same agreement, it beingunderstood that the Parties need not sign the same counterpart.

 

Section 11.10.*       **EntireAgreement; No Third Party Beneficiaries. *This Agreement and the other Transaction Documents, includingall schedules and exhibits hereto and thereto, by and among the Parties hereto,

 

(a)           constitute the entire agreement ofthe Parties with respect to the subject matter hereof and supersede all priorand contemporaneous agreements, representations, understandings, negotiationsand discussions between the Parties, whether oral or written, with respect tothe subject matter hereof; and

 

(b)           shall be binding upon and shall inureto the benefit of each of the Parties hereto and thereto and their respectivesuccessors and permitted assigns and is not intended to confer any rights,remedies or benefits on any Persons other than as expressly set forth in thisSection 11.10.

 

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Section11.11.*        Amendments and Modifications; Waiversand Extensions.*

 

(a)           No amendment,modification or termination of this Agreement shall be binding upon any otherParty unless executed in writing by the Parties hereto intending to be boundthereby.

 

(b)           Any Party to this Agreement may waiveany right, breach or default which such Party has the right to waive; providedthat such waiver will not be effective against the waiving Party unless it isin writing, is signed by such Party, and specifically refers to thisAgreement.  Waivers may be made inadvance or after the right waived has arisen or the breach or default waivedhas occurred.  Any waiver may beconditional.  No waiver of any breach ofany agreement or provision herein contained shall be deemed a waiver of any precedingor succeeding breach thereof nor of any other agreement or provision hereincontained.  No failure or delay inexercising any right, power or privilege hereunder shall be deemed a waiver orextension of the time for performance of any other obligations or acts norshall any single or partial exercise thereof preclude any other or furtherexercise thereof or the exercise of any other right, power or privilege.

 

Section 11.12.*       **Assignment. *Neither this Agreement nor any ofthe rights, duties or obligations hereunder may be assigned or delegated by anyof the Parties hereto without the prior written consent of PLC or Edwards, asthe case may be, which may be withheld in its sole discretion except thatEdwards may assign all its rights and obligations to any subsidiary of EdwardsLifesciences Corporation, provided, however, any Party may assign thisAgreement and all rights, duties or obligations hereunder in connection withthe sale of more than 51% of the outstanding capital stock of such Party in oneor more related transactions, a merger or the transfer of all or substantially allthe assets to which this Agreement relates. Any attempted assignment or delegation of rights, duties or obligationshereunder in contravention hereof shall be void and of no effect.

 

Section 11.13.*       **Schedules. *Each of the schedules referred toherein and attached hereto is an integral part of this Agreement and isincorporated herein by reference.

 

Section 11.14.*       **Expenses. *Except as otherwise provided inthis Agreement, each Party to this Agreement shall bear its respective expensesincurred in connection with the preparation, execution, and performance of thisAgreement and the transactions contemplated hereby, including all fees andexpenses of agents, representations, counsel and accountants.

 

Section11.15.*        No Consequential or PunitiveDamage. *If any Party claimsany breach of this Agreement by the other Party or otherwise becomesdissatisfied with any matter relating hereto or arising herefrom, it shall haveno right to seek consequential or punitive damages and each Party hereby waivesany right it may have to seek such punitive or consequential damages.

 

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Section 11.16.*       **ForceMajeure. *Notwithstandinganything to the contrary contained in this Agreement, no liability or loss ofrights hereunder shall result to any Party from delay or failure in performance(other than payment) caused by governmental restrictions (excluding anyregulatory actions taken by the FDA or similar bodies), war, acts of terrorism,commotions, riots, strikes, lockouts and acts of God such as fire, flood orother similar causes that are beyond the control of the parties (each a “ForceMajeure Event”).  Except to the extentcaused by the foregoing, Force Majeure Events shall not include shortage oflabor, lack of or inability to obtain materials, fuel or supplies (unlesscaused solely by priorities, restrictions or allocations imposed bygovernmental authority), or any other industrial disturbance.

 

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IN WITNESS WHEREOF, the Parties hereto haveexecuted this Agreement as of the date first above written.

 

 
|   | PLC SYSTEMS  INC.          |
|--------|----------------------------|
|   |                       |   |
|   |                       |   |
|   | By:                        |   | /s/James G.  Thomasch |   |
|   | Name:                      | James G.  Thomasch |
|   | Title:                     | Senior Vice  President and Chief Financial Officer |
|   |                       |   |
|   |                       |   |
|   | PLC MEDICAL  SYSTEMS, INC. |
|   |                       |   |
|   |                       |   |
|   | By:                        |   | /s/James G.  Thomasch |   |
|   | Name:                      | James G.  Thomasch |
|   | Title:                     | Senior Vice  President and Chief Financial Officer |
|   |                       |   |
|   |                       |   |
|   | EDWARDS  LIFESCIENCES LLC  |
|   |                       |   |
|   |                       |   |
|   | By:                        |   | /s/ John H.  Kehl, Jr |   |
|   | Name:                      | John H.  Kehl, Jr. |
|   | Title:                     | Corporate  Vice President, Strategy and Business  Development |

 

24

----

 

**Schedule 4.3(a)**

**Product Liability Insurance of**

 

 

**To be provided**

 

1

----

 

**Schedule 4.3(b)**

**Product Liability Certificate of Insurance ofEdwards**

** **

** **

**To be provided**

 

1

----

 

**Schedule 7.2(a)(i)**

**A-Fib Disposable Margin Factor (Examples to PLC Margin Factor Calculation With variances in ASP & COGS)**

 
| **Assumptions**                    |   | **Encircle  with ASP Variances** |   | **Encircle  With COGS Variances** |   |
|------------------------------------|--------|----------------------------------|--------|-----------------------------------|--------|
| EW Average  Selling Price          |   | [**]                             |   | [**]                              |   | [**] |   | [**] |   | [**] |   | [**] |   |
|                               |   |                             |   |                              |   |   |   |   |   |   |   |   |   |
| PLC’s Direct Disposable COGS  |   |                             |   |                              |   |   |   |   |   |   |   |   |   |
| Direct Disposable Materials Costs  |   | [**]                             |   | [**]                              |   | [**] |   | [**] |   | [**] |   | [**] |   |
| Direct Disposable Labor Costs      |   | [**]                             |   | [**]                              |   | [**] |   | [**] |   | [**] |   | [**] |   |
|                               |   |                             |   |                              |   |   |   |   |   |   |   |   |   |
| Disposable  Product Margin         |   | [**]                             |   | [**]                              |   | [**] |   | [**] |   | [**] |   | [**] |   |
|                               |   |                             |   |                              |   |   |   |   |   |   |   |   |   |
| EW Margin Factor                   |   | [**]                             |   | [**]                              |   | [**] |   | [**] |   | [**] |   | [**] |   |
| PLC Margin Factor                  |   | [**]                             |   | [**]                              |   | [**] |   | [**] |   | [**] |   | [**] |   |
|                               |   |                             |   |                              |   |   |   |   |   |   |   |   |   |
| PLC’s Disposable Margin Share |   | [**]                             |   | [**]                              |   | [**] |   | [**] |   | [**] |   | [**] |   |
|                               |   |                             |   |                              |   |   |   |   |   |   |   |   |   |
| Disposable  Transfer Price         |   | [**]                             |   | [**]                              |   | [**] |   | [**] |   | [**] |   | [**] |   |

 

Absolutenumbers are for illustrative purposes only.All terms are defined in the agreement.

 

1

----

 

**Schedule 7.2(a)(ii)A-Fib Margin Sharing Disposable — (Examples to Show Margin Sharing with VariousASP’s and Costs)**

 
| **Assumptions**                    |   | **Encircle** |   | **COGS (-)** |   | **Probe** |   | **COGS (-)** |
|------------------------------------|--------|--------------|--------|--------------|--------|-----------|--------|--------------|
| EW Average  Selling Price          |   | [**]         |   | [**]         |   | [**]      |   | [**]         |   | [**] |   | [**] |   | [**] |   | $1,500 |
|                               |   |         |   |         |   |      |   | [**]         |   |   |   |   |   |   |   | [**] |
| PLC’s Direct Disposable COGS  |   |         |   |         |   |      |   |         |   |   |   |   |   |   |   |   |
| Direct Disposable Materials Costs  |   | [**]         |   | [**]         |   | [**]      |   | [**]         |   | [**] |   | [**] |   | [**] |   | [**] |
| Direct Disposable Labor Costs      |   | [**]         |   | [**]         |   | [**]      |   | [**]         |   | [**] |   | [**] |   | [**] |   | [**] |
|                               |   |         |   |         |   |      |   |         |   |   |   |   |   |   |   |   |
| Disposable  Product Margin         |   | [**]         |   | [**]         |   | [**]      |   | [**]         |   | [**] |   | [**] |   | [**] |   | [**] |
|                               |   |         |   |         |   |      |   |         |   |   |   |   |   |   |   |   |
| EW Margin Factor                   |   | [**]         |   | [**]         |   | [**]      |   | [**]         |   | [**] |   | [**] |   | [**] |   | [**] |
| PLC Margin Factor                  |   | [**]         |   | [**]         |   | [**]      |   | [**]         |   | [**] |   | [**] |   | [**] |   | [**] |
|                               |   |         |   |         |   |      |   |         |   |   |   |   |   |   |   |   |
| PLC’s Disposable Margin Share |   | [**]         |   | [**]         |   | [**]      |   | [**]         |   | [**] |   | [**] |   | [**] |   | [**] |
|                               |   |         |   |         |   |      |   |         |   |   |   |   |   |   |   |   |
| Disposable  Transfer Price         |   | [**]         |   | [**]         |   | [**]      |   | [**]         |   | [**] |   | [**] |   | [**] |   | [**] |

 

2

----

 

**Schedule 7.2(e)**

**Materials Inventory**

 

***A-Fib Inventory as of 1/1/2004***

 
| **Part Number** |   | **Description**                |   | **Cost per  Unit** |   | **Quantity** |   | **Total  Inventory $** |   |
|-----------------|--------|--------------------------------|--------|--------------------|--------|--------------|--------|------------------------|--------|
|            |   |                           |   |               |   |         |   |                   |   |
| 193769002       |   | MIRROR,  COATED                |   | [**]               |   | 2,832.00     |   | [**]                   |   |
|            |   |                           |   |               |   |         |   |                   |   |
| 597311001       |   | FIBER-MESH  ASSEMBLY           |   | [**]               |   | 525.00       |   | [**]                   |   |
|            |   |                           |   |               |   |         |   |                   |   |
| 597310001       |   | ASSY,  LIGHTSTIC               |   | [**]               |   | 166.00       |   | [**]                   |   |
|            |   |                           |   |               |   |         |   |                   |   |
| 597369001       |   | ASSY,  LIGHTSTIC, EPI          |   | [**]               |   | 137.00       |   | [**]                   |   |
|            |   |                           |   |               |   |         |   |                   |   |
| 193784001       |   | TUBE  CONNECTOR                |   | [**]               |   | 1,124.00     |   | [**]                   |   |
|            |   |                           |   |               |   |         |   |                   |   |
| 193787001       |   | SHEATH  FORMING                |   | [**]               |   | 1,382.00     |   | [**]                   |   |
|            |   |                           |   |               |   |         |   |                   |   |
| 193777001       |   | FIBER  ASSEMBLY 600UM          |   | [**]               |   | 145.99       |   | [**]                   |   |
|            |   |                           |   |               |   |         |   |                   |   |
| 193863001       |   | TUBE,EXTRUSION.  DUAL W/FLAT   |   | [**]               |   | 1,217.00     |   | [**]                   |   |
|            |   |                           |   |               |   |         |   |                   |   |
| 193770002       |   | MIRROR,  POLISHING             |   | [**]               |   | 6,549.00     |   | [**]                   |   |
|            |   |                           |   |               |   |         |   |                   |   |
| 193768001       |   | TUBE,  DIFFUSER                |   | [**]               |   | 4,163.00     |   | [**]                   |   |
|            |   |                           |   |               |   |         |   |                   |   |
| 692577001       |   | PKG. ASSY,  OPTIMAZE HANDPIECE |   | [**]               |   | 26.00        |   | [**]                   |   |
|            |   |                           |   |               |   |         |   |                   |   |
| 193876001       |   | SHRINK TUBE,  GOLD             |   | [**]               |   | 1,078.63     |   | [**]                   |   |
|            |   |                           |   |               |   |         |   |                   |   |
| 193770001       |   | MIRROR,  POLISHING             |   | [**]               |   | 1,923.00     |   | [**]                   |   |
|            |   |                           |   |               |   |         |   |                   |   |
| 193800001       |   | TUBING, GRAY                   |   | [**]               |   | 17,684.85    |   | [**]                   |   |
|            |   |                           |   |               |   |         |   |                   |   |
| 193791001       |   | TUBING,  IRRIGANT              |   | [**]               |   | 20,242.00    |   | [**]                   |   |
|            |   |                           |   |               |   |         |   |                   |   |
| 491136001       |   | CARBON  SPHERICAL POWDER       |   | [**]               |   | 49.99        |   | [**]                   |   |
|            |   |                           |   |               |   |         |   |                   |   |
| 193776001       |   | TRAY,  OPTIMAZE                |   | [**]               |   | 1,805.00     |   | [**]                   |   |
|            |   |                           |   |               |   |         |   |                   |   |
| 193875001       |   | GOLD, WINGED  LASER CUT        |   | [**]               |   | 472.00       |   | [**]                   |   |
|            |   |                           |   |               |   |         |   |                   |   |
| 597314001       |   | ASSY, SHEATH  TUBE 5CM         |   | [**]               |   | 264.00       |   | [**]                   |   |
|            |   |                           |   |               |   |         |   |                   |   |
| 193772001       |   | GOLD, LASER  CUT               |   | [**]               |   | 439.00       |   | [**]                   |   |
|            |   |                           |   |               |   |         |   |                   |   |
| 193767001       |   | GOLD FOIL LS  18               |   | [**]               |   | 26.00        |   | [**]                   |   |

 

1

----

 
| 193786001 |   | HANDLE  CLS180                       |   | [**]   |   | 1,659.00 |   | [**]   |   |
|-----------|--------|--------------------------------------|--------|--------|--------|----------|--------|--------|--------|
|      |   |                                 |   |   |   |     |   |   |   |
| 193946001 |   | TUBE,EXTRUSION  DUAL W/FLAT,EPI      |   | [**]   |   | 430.00   |   | [**]   |   |
|      |   |                                 |   |   |   |     |   |   |   |
| 597315001 |   | ASSY, SUPPLY  TUBE                   |   | [**]   |   | 491.00   |   | [**]   |   |
|      |   |                                 |   |   |   |     |   |   |   |
| 193799001 |   | CARTON,  FOLDING WHITE SBS           |   | [**]   |   | 1,141.00 |   | [**]   |   |
|      |   |                                 |   |   |   |     |   |   |   |
| 193797001 |   | POUCH, OUTER  OPTIMAZE               |   | [**]   |   | 1,593.00 |   | [**]   |   |
|      |   |                                 |   |   |   |     |   |   |   |
| 193780001 |   | LID, TYVEK  BLANK OPTIMAZE           |   | [**]   |   | 2,072.00 |   | [**]   |   |
|      |   |                                 |   |   |   |     |   |   |   |
| 193795001 |   | TUBING, 2  LUMEN PEBAX SHEATH        |   | [**]   |   | 750.00   |   | [**]   |   |
|      |   |                                 |   |   |   |     |   |   |   |
| 193803001 |   | STRAIN  RELIEF, HANDLE               |   | [**]   |   | 1,308.00 |   | [**]   |   |
|      |   |                                 |   |   |   |     |   |   |   |
| 193796001 |   | TUBE, OUTER  SHEATH                  |   | [**]   |   | 1,197.00 |   | [**]   |   |
|      |   |                                 |   |   |   |     |   |   |   |
| 193778001 |   | WIRE MESH  BRAID, SL 180             |   | [**]   |   | 5,515.97 |   | [**]   |   |
|      |   |                                 |   |   |   |     |   |   |   |
| 193794001 |   | BOND HEAT  SHRINK TUBING, FEP        |   | [**]   |   | 168.10   |   | [**]   |   |
|      |   |                                 |   |   |   |     |   |   |   |
| 193785001 |   | LINED SHRINK  SLEEVE, .250” ADH |   | [**]   |   | 927.69   |   | [**]   |   |
|      |   |                                 |   |   |   |     |   |   |   |
| 193781001 |   | BLANK FLAG  LABEL STOCK              |   | [**]   |   | 4,886.00 |   | [**]   |   |
|      |   |                                 |   |   |   |     |   |   |   |
| 491101001 |   | ADH,  MASTERBOND SIL MSIL151         |   | [**]   |   | 2.85     |   | [**]   |   |
|      |   |                                 |   |   |   |     |   |   |   |
| 491100001 |   | ADH, UV  CURE, DYMAX 1187-M          |   | [**]   |   | 21.30    |   | [**]   |   |
|      |   |                                 |   |   |   |     |   |   |   |
| 193944001 |   | SHEATH  FORMING, EPI                 |   | [**]   |   | 100.00   |   | [**]   |   |
|      |   |                                 |   |   |   |     |   |   |   |
| 597405001 |   | OUTPUT PORT  SHIELD                  |   | [**]   |   | 54.00    |   | [**]   |   |
|      |   |                                 |   |   |   |     |   |   |   |
| 193798001 |   | SHPNG  BOX,OPTIMAZE HNDPC 10 PK      |   | [**]   |   | 241.00   |   | [**]   |   |
|      |   |                                 |   |   |   |     |   |   |   |
| 193945001 |   | TUBE, OUTER  SHEATH, EPI             |   | [**]   |   | 500.00   |   | [**]   |   |
|      |   |                                 |   |   |   |     |   |   |   |
| 193947001 |   | WIRE,  MALLEABLE, EPI                |   | [**]   |   | 7,372.00 |   | [**]   |   |
|      |   |                                 |   |   |   |     |   |   |   |
| 299391001 |   | CONNECTOR  SMA 641 UM                |   | [**]   |   | 56.00    |   | [**]   |   |
|      |   |                                 |   |   |   |     |   |   |   |
| 193793001 |   | CAPLUGS,  FIBER PROTECTIVE CAP       |   | [**]   |   | 7,552.00 |   | [**]   |   |
|      |   |                                 |   |   |   |     |   |   |   |
| 491102001 |   | ADHESIVE,  LOCTITE 4081              |   | [**]   |   | 8.97     |   | [**]   |   |
|      |   |                                 |   |   |   |     |   |   |   |
| 193789001 |   | WIRE,  MALLEABLE                     |   | [**]   |   | 2,533.00 |   | [**]   |   |
|      |   |                                 |   |   |   |     |   |   |   |
| 597316001 |   | ASSY, PINCH  TUBE.                   |   | [**]   |   | 504.00   |   | [**]   |   |

 

2

----

 
| 597317001 |   | WIRE,  SUPPORT FORMED           |   | [**]   |   | 931.00   |   | [**]   |   |
|-----------|--------|---------------------------------|--------|--------|--------|----------|--------|--------|--------|
|      |   |                            |   |   |   |     |   |   |   |
| 193788001 |   | SCREW, #4 X  1/4”          |   | [**]   |   | 2,338.00 |   | [**]   |   |
|      |   |                            |   |   |   |     |   |   |   |
| 193766001 |   | HEAT SHRINK  TUB. DIFFUSER CSL  |   | [**]   |   | 24.17    |   | [**]   |   |
|      |   |                            |   |   |   |     |   |   |   |
| 597313001 |   | SILICONE,  PIGMENTED            |   | [**]   |   | 5.99     |   | [**]   |   |
|      |   |                            |   |   |   |     |   |   |   |
| 193779001 |   | CAPLUGS,  VINYL CAP             |   | [**]   |   | 3,150.00 |   | [**]   |   |
|      |   |                            |   |   |   |     |   |   |   |
| 193802001 |   | WASHER,  STAINLESS STEEL        |   | [**]   |   | 189.00   |   | [**]   |   |
|      |   |                            |   |   |   |     |   |   |   |
| 193940001 |   | RIBBON,PRINTER  THERMAL TRANSFE |   | [**]   |   | 2.00     |   | [**]   |   |
|      |   |                            |   |   |   |     |   |   |   |
| 491137001 |   | EPO-TEC  353ND                  |   | [**]   |   | 0.99     |   | [**]   |   |
|      |   |                            |   |   |   |     |   |   |   |
| 193967002 |   | DFU,EW SURG.  ABLATION HNDP     |   | [**]   |   | 128.00   |   | [**]   |   |
|      |   |                            |   |   |   |     |   |   |   |
| 193801001 |   | CONNECTOR ,  Y                  |   | [**]   |   | 166.00   |   | [**]   |   |
|      |   |                            |   |   |   |     |   |   |   |
| 491103001 |   | TITANIUM  DIOXIDE (TIO2) POWER  |   | [**]   |   | 5.99     |   | [**]   |   |
|      |   |                            |   |   |   |     |   |   |   |
| 299393001 |   | BALL CHAIN                      |   | [**]   |   | 180.80   |   | [**]   |   |
|      |   |                            |   |   |   |     |   |   |   |
| 597312001 |   | SILICONE  MASTER                |   | [**]   |   | 4.98     |   | [**]   |   |
|      |   |                            |   |   |   |     |   |   |   |
| 299395001 |   | SS ROUND  BEAD CHAIN            |   | [**]   |   | 36.00    |   | [**]   |   |
|      |   |                            |   |   |   |     |   | [**]   |   |
| Summary   |   |                            |   |   |   |     |   | [**]   |   |

 

3

----

 

***A-Fib LaserTransfer Price — Schedule 7.3(i) (Examples to ShowLaser Transfer Price with Various Costs)***

 
|                                       |   | **Base** |   | **PLC Costs** |   | **EW Costs** |   |       |   |
|--------------------------------------------|--------|----------|--------|---------------|--------|--------------|--------|------------|--------|
| **Laser Assumptions**                      |   | **Case** |   | **Up 10%**    |   | **Down 10%** |   | **Up 10%** |   | **Down 10%** |   | **Comments** |   |
| Direct Laser COGS                          |   |     |   |          |   |         |   |       |   |   |   |   |   |
| Direct Laser Materials Costs (EW)          |   | [**]     |   | [**]          |   | [**]         |   | [**]       |   | [**] |   | Fiber Optic  Blocks & Laser Diodes |   |
| Direct Laser Materials Costs (PLC)         |   | [**]     |   | [**]          |   | [**]         |   | [**]       |   | [**] |   | All Other  Materials |   |
| Direct Labor Laser Costs (PLC)             |   | [**]     |   | [**]          |   | [**]         |   | [**]       |   | [**] |   | Direct Laser  Labor |   |
|                                       |   |     |   |          |   |         |   |       |   |   |   |   |   |
| Variances to Direct Laser Costs            |   |     |   |          |   |         |   |       |   |   |   |   |   |
| Variances to EW Direct Laser Costs         |   |     |   | [**]          |   | [**]         |   | [**]       |   | [**] |   |   |   |
| Variances to PLC Direct Laser Costs        |   |     |   | [**]          |   | [**]         |   | [**]       |   | [**] |   |   |   |
|                                       |   |     |   |          |   |         |   |       |   |   |   |   |   |
| Sharing of Variances to Direct Laser Costs |   |     |   |          |   |         |   |       |   |   |   |   |   |
| EW Portion                                 |   | [**]     |   | [**]          |   | [**]         |   | [**]       |   | [**] |   |   |   |
| PLC Portion                                |   | [**]     |   | [**]          |   | [**]         |   | [**]       |   | [**] |   |   |   |
|                                       |   |     |   |          |   |         |   |       |   |   |   |   |   |
| Laser Transfer Price                       |   | [**]     |   | [**]          |   | [**]         |   | [**]       |   | [**] |   |   |   |

 

Absolute numbersare for illustrative purposes only.

All terms aredefined in the agreement.

 

1

----