Exhibit 10.12
                                    AGREEMENT
                                    ---------

         This AGREEMENT ("Agreement"), dated as of October 1, 2004, by and
between VALLEY FORGE SCIENTIFIC CORP. a Pennsylvania corporation with a business
address of 136 Green Tree Road, Oaks, PA 19456 ("Valley Forge"), and Codman &
Shurtleff, Inc. ("CODMAN") a corporation existing under the laws of
Massachusetts with a business address of 325 Paramount Drive, Raynham, MA 02767.

         WHEREAS, CODMAN develops, manufactures, and markets medical
instruments, implants and accessories for the diagnosis and treatment of
conditions affecting the central nervous system;

         WHEREAS, Valley Forge develops, manufactures and supplies medical
devices and related instrumentation and accessories used for the bipolar
electrical and radio frequency surgical treatment of bodily tissues and titanium
mesh products related to surgery;

         WHEREAS, the parties desire that CODMAN distribute Valley Forge's
Existing Products (as defined below) through December 31, 2005 under the Valley
Forge Patents (as defined below) pursuant to the terms of this Agreement;

         WHEREAS, the parties desire to set forth certain other agreements
regarding Valley Forge's New Product (as defined below); and

         WHEREAS, the parties desire to agree upon other matters as set forth
herein.


         NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements hereinafter set forth, the parties hereto agree as follows:

                                   ARTICLE ONE

                                   DEFINITIONS
                                   -----------

         As used throughout this Agreement, each of the following terms shall
have the respective meaning set forth below:

                  "Affiliate" of a party shall mean any entity or person that
directly or indirectly controls, is controlled by or is under common control
with such party. For purposes of this definition, "control" shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of an entity, whether through the
ownership of voting securities, by contract or otherwise.

                                       1
<PAGE>

                  "Calendar Quarter" shall mean the calendar quarter customarily
used by CODMAN for internal accounting purposes consisting of approximately
three months in which each of the first two months consists of four weeks and
the third month consists of five weeks.

                  "Valley Forge Patents" shall mean (i) all of the Patents as
defined below, (ii) all other patents and applications for patents that cover
the manufacture, use, importation or sale of any Existing Product, in which
Valley Forge (or any Affiliate of Valley Forge) has any rights, any foreign
counterparts thereof, as well as all continuations, continuations-in-part,
divisions and renewals thereof, all patents which may be granted thereon, and
all reissues, reexaminations and extensions.

                  "Field" shall mean the practice of neurocranial and
neurospinal surgery.

                  "Improvement" shall mean any adaptation, change, redesign,
improvement, modification of any Existing Product (as defined below), the
Specifications (as defined below) therefor, the Raw Materials (as defined below)
or the method or process of manufacture or production of any Existing Product
provided, however, any adaptation, change, redesign, improvement, or
modification of any Existing Product which results in such Existing Product
being indicated for use in applications other than those within the Field shall
not be considered an Improvement. Notwithstanding anything in this Agreement to
the contrary, an Improvement shall not mean the New Product, or any adaptation,
change, redesign, improvement, modification of the New Product.

                  "Know-How" shall mean all know-how relating to the
development, manufacture, sale or use of any Existing Product, including,
without limitation, processes, techniques, methods, products, apparatuses,
biological materials and other materials and compositions which are reasonably
related thereto. Notwithstanding anything in this Agreement to the contrary,
Know-How shall not mean any know-how relating to the development, manufacture,
sale or use of the New Product.

                  "Manufacturing Costs" shall mean the direct labor, direct
overhead and Raw Materials costs incurred in the manufacture of Existing
Product.

                                       2
<PAGE>

                  "Patents" shall mean the U.S. Patents set forth on Schedule C,
along with any foreign counterparts thereof, as well as all continuations,
continuations-in-part, divisions and renewals thereof, all patents which may be
granted thereon, and all reissues, reexaminations, extensions, patents of
addition, and any subsequent improvement patents or applications, such
improvement patents and applications being those the practice of which falls
within the claims any of said patents.

                  "Existing Products" shall mean the medical devices,
disposables and accessory products indicated for use in the Field as described
in Schedule A attached hereto.

                  "New Product" shall mean the New Product as described in
Schedule B, attached hereto.

                  "Accessory Products" shall have the meaning set forth in
Schedule A, attached hereto.

                  "Medical Device Products" shall have the meaning set forth in
Schedule A, attached hereto.

                  "Disposable Products" shall have the meaning set forth in
Schedule A, attached hereto.

                  "Raw Materials" shall mean the materials, components, and
packaging required to manufacture and to package any Existing Product in
accordance with the Specifications.

                  "Specifications" shall mean the specifications for the design,
composition, product safety assurance, manufacture, packaging, and/or quality
control of any Existing Products the same may hereafter be modified by mutual
agreement of the parties in writing. Schedule D, attached hereto, references the
document that contains the agreed upon Specifications for the Existing Products,
which is made a part hereof.

                  "Exclusivity Term" shall have the meaning set forth in Section
10.01, herein.

                  "Extended Term" shall have the meaning set forth in Section
10.02, herein.

                  "Exclusivity End Date" shall mean March 31, 2005, or such
later date as may be mutually agreed to in writing by CODMAN and Valley Forge.

                                       3
<PAGE>

                                   ARTICLE TWO

                      SUPPLY OF PRODUCT, PRICE, OTHER TERMS
                      -------------------------------------

         2.01   Distribution Rights. Valley Forge hereby appoints CODMAN, and
CODMAN hereby accepts appointment, as Valley Forge's exclusive worldwide
distributor of the Existing Products in the Field for the Exclusivity Term of
this Agreement. Thereafter, Valley Forge hereby appoints CODMAN and CODMAN
accepts appointment, as Valley Forge's non-exclusive worldwide distributor of
the Existing Products in the Field for the Extended Term of this Agreement.
Valley Forge understands and agrees that during the term of this Agreement,
CODMAN may utilize its Affiliates to act as distributors hereunder in certain
geographic areas, provided that CODMAN shall at all times remain responsible for
performance of all of its obligations under this Agreement.

         (a) The parties acknowledge that Valley Forge develops, manufactures
             and markets through other distributors medical devices and related
             instrumentation indicated for use outside the Field, and that it is
             in the parties' mutual interest to ensure that such other products
             are not used in the Field during the Exclusivity Term. In the event
             Valley Forge becomes aware during the Exclusivity Term that any of
             its other distributors of its medical devices and related
             instrumentation intended for use outside the Field are promoting
             the use of such devices and/or instrumentation in the Field, Valley
             Forge shall take all such reasonable actions as may be permitted by
             law to prevent or discourage such promotion in the Field.

         (b) Valley Forge acknowledges that CODMAN and Dr. Leonard I. Malis have
             entered into a trademark/license agreement ("Trademark Agreement")
             for the "Malis" trademark ("Trademark"). On this date, Leonard I.
             Malis and CODMAN have entered into an extension of the Trademark
             Agreement coterminous with the Exclusivity Term and the Extended
             Term. Valley Forge consents to CODMAN using the "Malis" trademark
             in accordance with the terms of the Trademark Agreement as
             extended, and CODMAN consents to Dr. Leonard I. Malis entering into
             an option agreement with Valley Forge and transferring to Valley
             Forge the Trademark on terms substantially similar to the form of
             option agreement, attached as Exhibit A, hereto.

                                       4
<PAGE>

         2.02   Supply of Product. During the term of this Agreement, Valley
Forge shall supply all product quantities of Existing Products as required by
CODMAN (and its Affiliates), subject to the terms and conditions of this
Agreement, for distribution for use in the Field pursuant to this Agreement.
Each such Existing Product shall be manufactured and packaged by Valley Forge or
its suppliers in accordance with the Specifications.

         2.03   Prices.

         (a) The initial price (the "Price") for each Existing Product (other
             than sample, special or prototype products) during the term of this
             Agreement is as set forth on Schedule E attached hereto. The Prices
             set forth in Schedule E include all costs of manufacturing and
             packaging in accordance with the Specifications and such Prices are
             F.O.B. Valley Forge's facilities in Philadelphia, PA or Oaks, PA.

         (b) The Prices set forth on Schedule E shall remain in effect through
             December 31, 2005.

         (c) Valley Forge hereby agrees that it shall use its good faith efforts
             to minimize its Manufacturing Costs of producing the Existing
             Products to the extent it may do so without compromising the
             quality of the Existing Products or compliance with terms of this
             Agreement.

         2.04   Forecasts. The parties understand and agree that certain
critical Existing Product components have significant procurement lead times,
and the parties understand and acknowledge that the prices of Existing Products
above the levels set forth in the forecasts will be greater than the prices set
forth in Schedule E, attached hereto. Attached as Schedule F are CODMAN's
forecasts for Medical Device Products and Accessory Products for the period from
October 1, 2004 to December 31, 2005 and forecasts for Disposable Products for
the period from October 1, 2004 to June 30, 2005. On or before March 31, 2005,
CODMAN shall provide to Valley Forge its forecasts for the Disposable Products
for the period from July 1, 2005 to December 31, 2005. If CODMAN does not
provide to Valley Forge its projections for the Disposable Products by March 31,
2005, the projections for the period from July 1, 2005 to December 31, 2005
shall be the same as the forecasts for quantities of Disposable Products for the
immediately preceding six (6) month period. Valley Forge shall be under no

                                       5
<PAGE>

obligation to supply CODMAN Disposable Products for the period from July 1, 2005
to December 31, 2005 in quantities in excess of 125% over the forecasted amounts
for the immediately preceding six (6) month period. CODMAN will confirm these
projections with the issuance to Valley Forge of its official purchase order.

         2.05   Orders. CODMAN shall place any binding orders for Existing
Products by written or electronic purchase order (or by any other means agreed
to by the parties) to Valley Forge. Such purchase orders shall set forth the
desired date of delivery with respect to the Products ordered and shall be
placed at least ninety (90) days prior to such desired date of delivery for all
Medical Device Products and at least sixty (60) days prior to such desired date
of delivery for all Disposable Products and Accessory Products. To the extent
there is any conflict or inconsistency between this Agreement and any purchase
order, purchase order release, confirmation, acceptance or any similar document,
the terms of this Agreement shall govern. Valley Forge shall be obligated to
supply up to 110% of the quantity forecasted pursuant to Section 2.04. Orders in
excess of such 110% shall be subject to acceptance by Valley Forge; provided
that Valley Forge will accept such excess orders to the extent it has, and its
suppliers have the manufacturing capacity to supply them.

         2.06   Delivery. All charges for final packaging and transport
packaging are included in the Price. All shipments must be accompanied by a
packing slip that describes the articles, states the purchase order number and
shows the shipment's destination. Valley Forge agrees to promptly forward the
original bill of lading or other shipping receipt for each shipment in
accordance with CODMAN's instructions. Valley Forge further agrees to promptly
render correct and complete invoices to CODMAN, and to accept payment by check
or, at CODMAN's discretion, cash or electronic transfer of funds. All invoices
submitted by Valley Forge shall be payable net within thirty (30) days after the
date of such invoices. The date of invoice with respect to any Existing Product
shall not be earlier than the date of shipment of such Existing Product.

         2.07   Shipment. Valley Forge shall ship Existing Products, at CODMAN's
cost to the extent set forth in Section 2.03, to any location chosen by CODMAN
utilizing carriers approved by CODMAN. The risk of loss with respect to all
Existing Products shall remain with Valley Forge until the products to be
shipped are loaded on to the carrier specified by CODMAN. Valley Forge will
package all Existing Products in accordance with the packaging requirements
included in the Specifications.

                                       6
<PAGE>

         2.08   Minimum Purchase Requirements:

         (a) Existing Products. CODMAN shall purchase Existing Products from
             Valley Forge for the period from October 1, 2004 to March 31, 2005
             in the minimum dollar amount of $1 million dollars per calendar
             quarter ("Minimum Dollar Purchase Obligations").

         (b) The Minimum Dollar Purchase Obligations shall be proportionally
             reduced on a unit-for-unit product basis to the extent (i) Valley
             Forge is for any reason unable to supply Existing Products in
             accordance with the terms of this Agreement, (ii) the particular
             Existing Product is recalled or withdrawn from the market for
             reasons of product safety, efficacy, reliability or deviation from
             the Specifications, or (iii) a third party infringes any of the
             Patents and such infringement is deemed the cause for the Minimum
             Dollar Purchase Obligations not to be met. The Minimum Dollar
             Purchase Obligations for the particular Existing Product or
             Products shall be reduced to zero in any given year in which the
             Existing Product or Products are the subject of a formal claim
             filed in a proceeding in the U.S. by a third party asserting that
             the manufacture, importation, use or sale of the Existing Product
             or Products infringes the intellectual property rights of a third
             party and will be adjusted prospectively upon final resolution of
             such claim. If the claim is filed in a proceeding outside the U.S.
             for a particular product, then the Minimum Dollar Purchase
             Obligations for the particular Existing Product shall be reduced on
             a proportionate basis based on sales of the particular Existing
             Product in the country where the claim is filed as compared to the
             total worldwide sales of the same Existing Product.

                                  ARTICLE THREE

                      ADDITIONAL OBLIGATIONS OF THE PARTIES
                      -------------------------------------

         3.01   Sales of Existing Products. All business decisions relating to
the sale, price, marketing and promotion of any Existing Product supplied under
this Agreement shall be within the sole discretion of CODMAN. Valley Forge
further agrees that (i) payment by CODMAN to Valley Forge of the Prices set

                                       7
<PAGE>

forth in Section 2.03 hereof for purchased Existing Product, and (ii) satisfying
the Minimum Dollar Purchase Obligations; shall constitute complete satisfaction
of any duty, whether express or implied, which could be imposed upon CODMAN to
commercially exploit its rights under this Agreement and are accepted by Valley
Forge in lieu of any best efforts obligations on the part of CODMAN, and the
remedies for the failure to fulfill any such obligations shall be limited, as
applicable, to loss of exclusivity, termination or the payment of the Price for
purchased Existing Product as expressly set forth herein.

         3.02   Package Labeling. CODMAN shall be responsible for the text and
regulatory compliance of all package labels, labeling and Existing Product
inserts used in connection with the Existing Products. For purposes of this
Agreement the terms "label" and "labeling" shall have the meanings set forth in
Sections 201(k) and 201(m) respectively of the U.S. Federal Food, Drug and
Cosmetics Act.

         3.03   Provision of Information by Valley Forge. Valley Forge shall, at
the request of CODMAN, provide CODMAN with the following information relating to
the Existing Products and to the extent reasonably available to Valley Forge, at
no cost to CODMAN:

         (i)      provide all relevant information on product safety, efficacy,
                  reliability and performance characteristics;

         (ii)     the Device Master Record and Device History Record, as defined
                  in 21 Code of Federal Regulations, Part 820, for the Existing
                  Products and components thereof;

         (iii)    copies of all U.S. and foreign regulatory submissions,
                  including any 510(k) submissions for the Existing Products;

         (iv)     supply the written text of a technical service manual and user
                  manual for each Existing Product in "print ready" form at no
                  cost to CODMAN. CODMAN will supply Valley Forge with a
                  quantity of technical service manuals and user manuals at its
                  cost and Valley Forge will ship the same with each unit of
                  Existing Product purchased.

         3.04   Changes. In no event shall any change in form, fit or function,
safety, efficacy or reliability, or the appearance of an Existing Product
("Significant Change") be made without the prior written approval of CODMAN. If
the parties agree on any such change, they shall modify the Specifications to
reflect the same. Valley Forge further agrees that no significant changes to the
method or process of manufacture or production of any Existing Product or the
Raw Materials shall be made without prior written notification to and approval
of CODMAN. As used in this Section 3.04, the term "significant change" shall
mean any change that (i) results in a change to the Specifications (ii) affects
Existing Product performance, labeling, physical appearance or configuration,

                                       8
<PAGE>

software (other than debugging or other error correction which does not
otherwise affect on the performance of the software), packaging, or
sterilization processes, (iii) affects Product safety, reliability or integrity
or (iv) requires a submission to or approval from a governmental body. In the
event of any significant change, CODMAN shall have the responsibility to
establish an appropriate qualification protocol, if required by CODMAN, and
CODMAN and Valley Forge shall determine an appropriate inventory level for the
pre-change Existing Product in order to cover on-going requirements during the
qualification process. The parties will negotiate in good faith to determine the
change in the purchase price, if any, which may be required by the change.

         3.05   Insurance. Valley Forge agrees to procure and maintain in full
force and effect during the term of this Agreement valid and collectible
insurance policies in connection with its activities as contemplated hereby
which policies shall provide Comprehensive General Liability coverage including
Existing Products and Contractual Liability coverage in an amount not less than
$5 million per occurrence. Such policy shall name CODMAN as an insured or an
additional insured. Upon CODMAN's request, Valley Forge shall provide to CODMAN
certificate of coverage or other written evidence reasonably satisfactory to
CODMAN of such insurance coverage. Such insurance policy shall provide that in
the event such insurance coverage should be materially adversely changed or
terminated for any reason, the insurer thereunder will give Valley Forge and
CODMAN ten (10) days' prior notice. The existence of such coverage shall in no
way limit Valley Forge's liability or obligations hereunder.

         3.06   Training. CODMAN shall develop and implement training programs
for its sales representatives and customers with respect to the operation and
maintenance of the Existing Products. Valley Forge shall be responsible for the
technical accuracy of all training materials and shall assist CODMAN in
preparing the technical aspects of such training programs. Valley Forge shall
actively participate in training CODMAN trainers, who will in turn train CODMAN
sales representatives and customers.

         3.07   Governmental Registrations. CODMAN shall apply, in its name and
at its cost, for all governmental registrations required for CODMAN to market
Existing Products during the Exclusivity Term as a distributor in those

                                       9
<PAGE>

countries where CODMAN desires to market Existing Products during the
Exclusivity Term, unless the applicable laws of a particular country require
that such registrations be obtained by and in the name of the manufacturer of
the applicable product, in which event Valley Forge shall apply for such
approvals at CODMAN's cost. Valley Forge shall reasonably cooperate with CODMAN
in its efforts to obtain such approvals. Valley Forge agrees that CODMAN shall
have access to all of Valley Forge regulatory submissions and technical files
for the Existing Products to the extent necessary to exercise its rights or
fulfill its obligations hereunder.

         3.08   CODMAN will:

         i.     advertise the Existing Products in those medical journals and/or
Direct Mail which in its judgment are best suited for sale of the Existing
Products, a copy of such advertisement will be reviewed by Valley Forge prior to
its release. In disagreements as to marketing or sales content, CODMAN shall
prevail. On matters of technical description or medical use or practice, Valley
Forge shall prevail.

         ii.    show the Existing Products at the AANS and CNS and such other
trade shows as mutually agreed upon by CODMAN and Valley Forge.

         iii.   CODMAN will review its marketing plan for the Existing Products
with Valley Forge on a semi-annual basis, commencing within forty-five (45) days
of the signing of this Agreement.

         3.09   Valley Forge shall:

                (a) during the Exclusivity Term provide CODMAN with field
         testing units of the New Product for CODMAN's evaluation and testing;
         provided, however, notwithstanding anything in this Agreement to the
         contrary, except as set forth in Section 3.11, below, CODMAN shall have
         no rights regarding New Product (including without limitation
         distribution or sales rights), except as agreed by Valley Forge in
         writing in Valley Forge's sole and absolute discretion.

                (b) use commercially reasonable efforts (i) to enter into a
         lease for a new facility to consolidate its existing Philadelphia and
         Oaks facilities into a single facility; and (ii) to occupy that
         facility by December 31, 2004. During the Exclusivity Term, Valley
         Forge will review with CODMAN from time-to-time the plans to
         consolidate its operations into a single facility, including its
         efforts to sell its existing Philadelphia facility.

                                       10
<PAGE>

         3.10   During the Exclusivity Term, Valley Forge and CODMAN will
cooperate with each other in good faith to develop mutually agreeable project
plans and schedules for the review and evaluation of the New Product and will
conduct project reviews no less frequently than monthly in order to enable
Valley Forge to complete field testing units for the New Product by the November
30, 2004 target date. CODMAN will conduct its field testing and evaluation of
New Product within ninety (90) days after the date that the field testing units
of the New Product are delivered by Valley Forge to CODMAN, but in no event
later than the end of the Exclusivity Period ("Evaluation Period").

         3.11   Limited Right of First Refusal for New Product During the
Exclusivity Term

         (a) During the Exclusivity Term, prior to offering the New Product to a
third party distributor to distribute or sell the New Product for use in the
Field, Valley Forge shall offer CODMAN the right of first refusal to market the
New Product in the Field by giving CODMAN a written notice ("New Product
Notice") of the minimum purchase requirements CODMAN's purchase price for the
New Product, and other terms, after which CODMAN shall have a period of thirty
(30) days or until the end to the Exclusivity Term, whichever is earlier, ("New
Product Decision Period") to enter into a distribution agreement for the New
Product under the terms set forth in the New Product Notice or other terms
mutually agreed upon in writing by Valley Forge and CODMAN ("New Distribution
Agreement").

         (b) In the event CODMAN (i) gives written notice to Valley Forge of its
decision not to exercise its right of first refusal during the First New Product
Decision Period, or (ii) if CODMAN fails to enter into a New Distribution
Agreement with Valley Forge during the New Product Decision Period, then,
notwithstanding anything in this Agreement to the contrary, Valley Forge may
pursue other distribution opportunities for the New Product in the Field, on
terms that are, in the aggregate, not less favorable to Valley Forge than the
terms specified by Valley Forge in the New Product Notice or contained in the
last subsequent proposal by Valley Forge to CODMAN, if any, and, in the event
that Valley Forge desires to pursue such less favorable distribution
opportunities, then Valley Forge shall be required (each time such situation

                                       11
<PAGE>

arises during the Exclusivity Term) to give a new notice to CODMAN pursuant to
this Section 3.11 and comply with the right of first refusal set forth herein.

         (c) Notwithstanding anything in this Agreement to the contrary, the
right of first refusal set forth in Section 3.11(a) and (b), above shall
terminate at the end of the Exclusivity Term.

         (d) Furthermore, notwithstanding anything in this Agreement to the
contrary, the right of first refusal in Section 3.11(a) and (b), above shall not
apply to Valley Forge or any wholly-owned subsidiary marketing or selling the
New Product through its own sales force or through independent sales
representatives. Valley Forge (including any wholly-owned subsidiaries),
however, agrees not to market or sell the New Product in the Field through its
own sales force or through independent sales representatives until the earlier
of the expiration of the Evaluation Period or the end of the Exclusivity Term.

                                  ARTICLE FOUR

                  QUALITY/DEFECTIVE PRODUCT/INSPECTIONS/TESTING
                  ---------------------------------------------

         4.01   Inspections. CODMAN shall have the right, upon reasonable notice
to Valley Forge and during regular business hours, to inspect and audit the
facilities being used by Valley Forge (or any third party) for production and
storage of Existing Products to assure compliance by Valley Forge (and its
suppliers) with (i) all applicable statutes, laws and regulations, including,
without limitation, Quality System Regulations ("QSRs") enforced by the United
States Food and Drug Administration (the "FDA"), (ii) CODMAN Quality Assurance
Policies, (iii) Johnson & Johnson Corporate Quality Assurance Requirements, and
(iv) the terms and provisions of this Agreement. Valley Forge shall within
fourteen days remedy or cause the remedy of any deficiencies which may be noted
in any such audit or, if any such deficiencies can not reasonably be remedied
within such fourteen day period, present to CODMAN a written plan to remedy such
deficiencies as soon as possible; and the failure by Valley Forge to remedy or
cause the remedy of any such deficiencies within such fourteen day period or to
present such a plan within such fourteen day period and then use its best
efforts to remedy or cause the remedy of such deficiencies in accordance with
such written plan, as the case may be, shall be deemed a material breach of this

                                       12
<PAGE>

Agreement. Valley Forge acknowledges that the provisions of this Section 4.01
granting CODMAN certain audit rights shall in no way relieve Valley Forge of any
of its obligations under this Agreement, nor shall such provisions require
CODMAN to conduct any such audits.

         4.02   Acceptance; Disposition of Non-Compliant Product. CODMAN shall
have no obligation to pay for any Existing Product that is subject to such a
claim of non-compliance with the specifications; provided CODMAN shall pay for
Product within 30 days of receipt unless such Existing Product has been rejected
within such 30-day period. Valley Forge shall replace at its own cost and
expense, including reimbursement of freight costs incurred by CODMAN, Existing
Product that fails to comply with the Specifications or other warranties made in
Article Five, which replacement shall constitute CODMAN's sole and exclusive
remedy therefor (but in no way limiting Valley Forge's indemnity obligations
under Section 6.01). CODMAN shall notify Valley Forge of the existence and
nature of any non-compliance with the specifications that comes to its attention
and shall return such non-compliant Existing Product to Valley Forge within
fifteen (15) days after it is rejected by CODMAN. Valley Forge shall have a
reasonable opportunity, not to exceed ten (10) days from receipt of such
Existing Product, to inspect such non-compliant product and provide CODMAN an
explanation of the non-compliance and proposed course of action (i.e. repair
(including the nature of the repair) or replacement of the Existing Product).
The acceptance (or non-rejection) of any Existing Products shall in no way limit
CODMAN's rights under Valley Forge product warranty or for indemnification
hereunder; provided however that Valley Forge shall replace non-compliant
product (i) under this Section 4.02 if found to be non-compliant within 60 days
following receipt thereof by CODMAN and (ii) under Section 5.01 if found to be
non-compliant after such 60 day period.

         4.03   Independent Testing. If, after Valley Forge's inspections of any
Existing Product, the parties disagree as to whether such Existing Product
conforms to the Specifications, either party may deliver the item to an
independent third-party laboratory, mutually and reasonably acceptable to both
parties, for analytical testing to confirm such item's conformance to the
Specifications. All costs associated with such third-party testing shall be at
CODMAN's expense unless the tested item is deemed by such third-party to be not
in compliance with the Specifications, in which case all such costs, including
reimbursement of freight and disposition costs, shall be promptly paid by Valley
Forge. No inspection or testing of or payment for Existing Product by CODMAN or

                                       13
<PAGE>

any third-party agent of CODMAN shall constitute acceptance by CODMAN thereof,
nor shall any such inspection or testing be in lieu or substitution of any
obligation of Valley Forge for testing, inspection and quality control as
provided in the Specifications or under applicable local, state, or federal
laws, rules, regulations, standards, codes or statutes.

         4.04   Corrective Action. In the event any governmental agency having
jurisdiction shall request or order, or if CODMAN shall reasonably determine to
undertake, any corrective action with respect to any Existing Product, including
any recall, corrective action or market action, and the cause or basis of such
recall or action is attributable to a breach by Valley Forge of any of its
warranties, guarantees, representations, obligations or covenants relating to
that Product, then Valley Forge shall actively cooperate with CODMAN in
executing such corrective action relating to Existing Product quality and
performance, and Valley Forge shall reimburse CODMAN for the reasonable out of
pocket costs of such action, including the cost of replacing any Existing
Product which is so recalled, whether or not any such specific unit of Existing
Product shall be established to be in breach of any warranty by Valley Forge
hereunder: provided however, if none of the units of Existing Product returned
to Valley Forge are determined to be (in accordance with the terms of Sections
4.02 and 4.03) in breach of any warranty provided by Valley Forge hereunder,
then CODMAN shall reimburse Valley Forge for its reasonable out of pocket costs
for such action, and CODMAN shall not offset amounts owing to Valley Forge for
the cost of any Existing Product returned to Valley Forge.

         4.05   Notice of Audit or Inquiry. Each party agrees to promptly notify
the other of any FDA audit, or any audit by any other regulatory body, of its
facilities used for the manufacture, storage or distribution of Existing
Products, or any request for information from the FDA, or other regulatory body,
related to the manufacture of Existing Products, as soon as practicable after it
received notice of such audit or request.

         4.06.   Warranty Service. With the exception of disposable and
limited-use products, Valley Forge agrees to perform repair, maintenance,
modification and other services (including warranty repairs) on a timely basis
on Existing Products purchased by CODMAN, its Affiliates, or its customers. All
requests for service from customers shall be directed to CODMAN, who will
arrange for the customer to ship the applicable Existing Product directly to
Valley Forge. Valley Forge will repair and return product in accordance with
CODMAN instructions. In the case of out-of-warranty service, Valley Forge will

                                       14
<PAGE>

bill CODMAN, who in turn will bill the customer. The rates for out-of-warranty
service shall be agreed upon from time-to-time by CODMAN and Valley Forge.
Subject to the availability of specific parts from suppliers, Valley Forge
agrees to maintain an inventory for spare and replacement parts for each
Existing Product sold under this Agreement if and when production ceases for a
period of at least three (3) years following the delivery date of the particular
Existing Product.

         4.07.   Medical Device Reports; It will be the duty of CODMAN to notify
the FDA of any Medical Device Reports pertaining to the Existing Products.
CODMAN shall notify Valley Forge at the same time that it notifies the FDA.

         4.08   Recalls and Market Withdrawal: Valley Forge and CODMAN shall
actively cooperate in investigating the circumstances underlying in the Medical
Device Report and in responding to FDA inquiries. In the event any governmental
agency having jurisdiction shall request or order, or if CODMAN shall determine,
in its sole discretion, to undertake any corrective action with respect to any
Existing Product (or any finished Existing Product containing or contained in
any Existing Product), including any recall, corrective action or market action,
and the cause or basis of such recall or action is attributable to a breach by
Valley Forge of any of its warranties, guarantees, representations, obligations
or covenants contained herein, then Valley Forge shall be liable, and shall
reimburse CODMAN for the reasonable costs of such action including the cost of
any Existing Product (or any finished Existing Product containing or contained
in any Existing Product) which is affected thereby whether or not such
particular Existing Product shall be established to be in breach of any warranty
by Valley Forge.

                                  ARTICLE FIVE

                         REPRESENTATIONS AND WARRANTIES
                         ------------------------------

         5.01   (a) Valley Forge warrants to CODMAN that the Existing Products
will meet the Specifications and will be free from material defects in material,
workmanship and design, PROVIDED THAT:

         1.       The Existing Product has been installed, stored, used and
                  maintained in strict compliance with the safety procedures,
                  Operating Instructions and storage and handling requirements
                  provided with the Existing Product.

                                       15
<PAGE>

         2.       Valley Forge or an authorized Valley Forge representative is
                  notified. At such time Existing Product shall be taken out of
                  service, as soon as notice of an alleged defect is received by
                  CODMAN or the alleged defect appears.

         3.       The Existing Product has not been subject to (i) neglect,
                  misuse or operation contrary to the Operating Instructions
                  provided with the Existing Product or (ii) improper storage or
                  handling contrary to the storage and handling instructions
                  provided with the Existing Product.

         4.       No repairs have been attempted or parts replaced by anyone not
                  authorized by Valley Forge to perform such repair, and that
                  the Existing Product serial number, date stamp or other
                  identification marks have not been removed or defaced.

                           (a)   Valley Forge's liability under this warranty is
                  limited to the supply of replacement parts or Existing
                  Product, or labor and parts repair at an authorized Valley
                  Forge facility, to a value not exceeding the original Valley
                  Forge invoice price of the Existing Product.

                        The warranty does not include:

                        i) Packaging, freight and insurance to and from
                        authorized Valley Forge repair facility.

                        ii)Existing Products not provided by Valley Forge or
                        damage to the Existing Product that is caused by any
                        such products.

                           (b)   Valley Forge represents and warrants that it
                  complies and shall comply with applicable statutes, laws,
                  ordinances, rules and regulations relating to the manufacture,
                  assembly and supply of the Existing Product, including,
                  without limitation, those enforced by the FDA (including
                  compliance with QSRs and GMPs) and International Standards
                  Organization (ISO) Rules 9,000 et seq. Valley Forge represents
                  and warrants that it has obtained ISO 9001 certification and
                  has where required by the applicable regulations, submitted to
                  the FDA an application for 510K clearance for the Product and
                  that the applications for such certification and clearance
                  contain (or prior to certification or clearance will contain)
                  complete and accurate information and that the information
                  contained therein, obtained in good faith in compliance with
                  all applicable statutes, laws, ordinances, rules and
                  regulations.

                                       16
<PAGE>

         5.02   Execution and Performance of Agreement. Valley Forge and CODMAN
each represents and warrants to the other that it has full right, power and
authority to enter into and perform its obligations under this Agreement. Valley
Forge and CODMAN each `further represents and warrants to the other that the
performance of its obligations under this Agreement will not result in a
violation or breach of, and will not conflict with or constitute a default under
any agreement, contract, commitment or obligation to which such party or any of
its Affiliates is a party or by which it is bound and that it has not granted
and will not grant during the term of this Agreement or any renewal thereof, any
conflicting rights, license, consent or privilege with respect to the rights
granted herein.

         5.03   Intellectual Property. Valley Forge represents and warrants to
CODMAN that Valley Forge owns all of the rights, title and interest in and to
the Valley Forge Patents and Know-How and all other Valley Forge intellectual
property that appear on Valley Forge intellectual property or used in connection
with the Existing Products; no academic institution, member of an academic
institution, corporation or other entity, or any local, state or federal
government holds any property rights through it in any Existing Product; Valley
Forge is able to consummate this Agreement in the capacity of a free agent; the
manufacture, use and sale of the Products in accordance with the terms of this
Agreement does not and will not infringe any third party's rights under any
patent; the use of the Valley Forge Trademarks by CODMAN hereunder does not and
will not infringe the rights of any third party; and Valley Forge is presently
aware of no infringement by any third party of any Valley Forge Patent or any
Valley Forge Trademark.

         5.04   (a) VALLEY FORGE MAKES NO WARRANTY OTHER THAN THOSE EXPRESSLY
MADE HEREIN, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION, ANY WARRANTY OF
MERCHANTABILITY OR OF FITNESS FOR ANY PARTICULAR PURPOSE.

                (b) THE ABOVE WARRANTY SHALL SUPERSEDE THE DISCLAIMER OF
WARRANTIES STATEMENT WHICH IS INCLUDED IN THE OPERATING INSTRUCTIONS, OR ANY
OTHER DOCUMENTATION PROVIDED WITH THE PRODUCT, TO THE EXTENT THE PROVISIONS OR
SUCH DISCLAIMER OF WARRANTIES ARE INCONSISTENT WITH THIS WARRANTY.

                                       17
<PAGE>

                (c) NOTHING CONTAINED IN THIS ARTICLE 5 SHALL IN ANY WAY LIMIT
VALLEY FORGE'S INDEMNITY OBLIGATIONS UNDER SECTION 6.01.

                                   ARTICLE SIX

                                 INDEMNIFICATION
                                 ---------------

         6.01   Indemnification by Valley Forge. Valley Forge shall indemnify
and hold harmless CODMAN and its Affiliates and their respective officers,
directors and employees from and against any and all claims, damages, lawsuits,
liabilities, costs, charges, judgments and expenses (including interest,
penalties and reasonable attorneys' fees) (collectively "Damages") incurred by
such party arising out of or resulting from (i) material breach by Valley Forge
of any of its representations, warranties, guarantees, covenants or obligations
contained herein; or (ii) manufacturing defects in Existing Products Valley
Forge supplied to CODMAN pursuant to this Agreement, except to the extent caused
by CODMAN's distribution practices, CODMAN's advertising or promotional material
for the Existing Products that has not been approved by Valley Forge, or
misrepresentations of the Existing Products by CODMAN, or improper use of the
Existing Products. Except for the parties to this Agreement and their
affiliates, no other persons shall be a third party beneficiary of this Section
6.01.

         6.02   Indemnification by CODMAN. CODMAN shall indemnify and hold
harmless Valley Forge and its Affiliates and their respective officers,
directors and employees from and against any and all Damages incurred by such
party arising out of or resulting from (i) any material breach by CODMAN of any
of its representations, warranties, guarantees, covenants or obligations
contained herein or (ii) the use of the Existing Products (including personal
injury and product liability claims) to the extent caused by CODMAN's
distribution practices, CODMAN's advertising or promotional material for the
Products that has not been approved by Valley Forge, or misrepresentations of
the Existing Products by CODMAN. Except for the parties to this Agreement and
their affiliates, no other persons shall be a third party beneficiary of this
Section 6.02.

         6.03   Claims. Each indemnified party agrees to give the indemnifying
party prompt written notice of any matter upon which such indemnified party
intends to base a claim for indemnification (an "Indemnity Claim") under this

                                       18
<PAGE>

Article Six. The indemnified party shall have the right to participate with the
indemnifying party in the indemnifying party's defense, settlement or other
disposition of any Indemnity Claim, subject to the ultimate control of the
indemnifying party. With respect to any Indemnity Claim relating solely to the
payment of money damages and which could not result in the indemnified party's
becoming subject to injunctive or other equitable relief or otherwise materially
adversely affect the business of the indemnified party in any manner, and as to
which the indemnifying party shall have acknowledged in writing the obligation
to indemnify the indemnified party hereunder, the indemnifying party shall have
the sole right to defend, settle or otherwise dispose of such Indemnity Claim,
on such terms as the indemnifying party, in its sole discretion, shall deem
appropriate, provided that the indemnifying party shall provide reasonable
evidence of its ability to pay any damages claimed and with respect to any such
settlement shall have obtained the written release of the indemnified party from
the Indemnity Claim. The indemnifying party shall obtain the written consent of
the indemnified party prior to ceasing to defend, settling or otherwise
disposing of any Indemnity Claim if as a result thereof the indemnified party
would become subject to injunctive or other equitable relief or the business of
the indemnified party would be adversely affected in any manner.

         6.04   Survival.  This Article 6 shall survive any termination of this
Agreement.

                                  ARTICLE SEVEN

                     INABILITY TO MANUFACTURE, FORCE MAJEURE
                     ---------------------------------------

         7.01   Failure to Supply. (a) During the Exclusivity Term, should
Valley Force be unable to or fail for any reason, other than as set forth in
paragraph 7.02 hereof, to manufacture an Existing Product in accordance with the
agreed upon Specifications or quantities or to comply with applicable Good
Manufacturing Practices as specified in paragraph 5.01 (a) (hereinafter referred
to as a "Manufacturing Deficiency"), CODMAN within sixty (60) days of the
discovery of the Manufacturing Deficiency, on ninety (90) days prior written
notice to Valley Forge, may remove the particular Existing Product from the
terms of this Agreement. During the ninety (90) day notice period set forth in
the preceding sentence, Valley Forge will have the right to cure such
Manufacturing Deficiency in order to keep the particular Existing Product in
compliance with the terms of this Agreement, in which event the notice shall be
null and void.

                                       19
<PAGE>

         7.02   Force Majeure. Valley Forge shall not be liable for any failure
to supply, deliver or for any delay in the delivery of the Existing Products
hereunder, when any such failure or delay is caused, directly or indirectly, by
fires, floods, accidents, explosions, strikes or other labor disturbances
(regardless of the reasonableness of the demands or labor), wars, shortages of
fuel, power, or raw materials, inability to obtain or delays of transportation
facilities, acts of God, or any cause, whether similar or dissimilar, to the
foregoing beyond the reasonable control of Valley Forge, as the case may be
affecting Valley Forge's production and/or delivery of the Existing Products
covered by this Agreement or CODMAN's acceptance or resale thereof. Such failure
will be excused for three months or as long as such event shall be continuing
(whichever period is shorter) provided that Valley Forge gives immediate written
notice to CODMAN of the Force Majeure Event. Valley Forge shall exercise all
reasonable efforts to eliminate the Force Majeure event and to resume
performance. In the event the failure continues beyond three months then CODMAN
may at CODMAN's option require Valley Forge to find another source (approved and
qualified by CODMAN) within thirty (30) days from the end of the three month
period to manufacture and supply the Existing Products in accordance with the
Specifications. The provisions of this paragraph shall not serve to modify any
rights CODMAN may have under paragraph 7.01 concerning Valley Forge's inability
to manufacture.

                                  ARTICLE EIGHT

                                 CONFIDENTIALITY
                                 ---------------

         8.01   Confidential Information. As used herein, "Confidential
Information" shall mean the Specifications, the Know-How, the Manufacturing
Costs, information pertaining to the New Product or any other Valley Forge
product (including information obtained from the testing and evaluation of the
New Product pursuant to this Agreement and Specifications and Know-How
pertaining to the New Product) the Raw Materials, and all other confidential or
proprietary information that is reduced to writing, marked as confidential and
given to one party by the other party relating to such other party or any of its
Affiliates, including information regarding any of the products of such other
party or any of its Affiliates, information regarding its advertising,

                                       20
<PAGE>

distribution, marketing or strategic plans or information regarding its costs,
productivity or technological advances. Neither party shall, during the term of
this Agreement and for a period of five years following the termination or
expiration of this Agreement for any reason, use, or disclose to third parties
any Confidential Information of the other (except to the extent reasonably
necessary to exercise its rights or comply with its obligations under this
Agreement) and each party shall insure that its employees, officers and agents
shall not use, or disclose to third parties any Confidential Information of the
other (except to the extent reasonably necessary to exercise its rights or
comply with its obligations under this Agreement); provided, however, that
CODMAN may disclose Confidential Information of Valley Forge to CODMAN's
Affiliates and consultants if such persons are informed of the confidential
nature of such information and are under contractual obligation to CODMAN to
keep such information confidential and not use or disclose such Confidential
Information. Confidential Information shall not include information that (i) was
already known to the receiving party at the time of its receipt thereof, as
evidenced by its written records (other than information obtained from Valley
Forge or from a third party that did not have the right to make a disclosure of
information without violating an obligation of confidentiality), (ii) is
disclosed to the receiving party after its receipt thereof by a third party who
has a right to make such disclosure without violating any obligation of
confidentiality, (iii) is or becomes part of the public domain through no fault
of the receiving party or (iv) is required to be disclosed to comply with
applicable laws or regulations or an order of a court or regulatory body having
competent jurisdiction.

                                  ARTICLE NINE

                                 LICENSE RIGHTS
                                 --------------

         9.01   License Upon Bankruptcy. Valley Forge hereby grants to CODMAN an
exclusive worldwide license, with the right to grant sub-licenses to its
Affiliates, under the Valley Forge Patents and Know How in the Field, to use,
sell, make and have made the Existing Products, and to use the Valley Forge
Trademarks in connection therewith for the Exclusivity Term (collectively the
"Bankruptcy License Rights"); provided, however, that the Bankruptcy License
Rights granted hereunder shall be subject to the terms of Section 9.02, and
shall be effective only if during the Exclusivity Term (i) a Title 11 proceeding
has been voluntarily filed by Valley Forge, or filed by a third party and not
dismissed within 90 days thereafter, and (ii) this Agreement has been rejected

                                       21
<PAGE>

in the Title 11 proceeding (a "Bankruptcy Event"). Notwithstanding anything in
this Article 9 to the contrary, CODMAN shall not have any Bankruptcy License
Rights, nor shall it exercise any Bankruptcy License Rights, other than after
the occurrence of a Bankruptcy Event. Furthermore, notwithstanding anything in
this Article 9 to the contrary, any and all Bankruptcy License Rights shall
terminate at the Exclusivity Term of this Agreement.

         9.02   Rights Upon Bankruptcy. All rights and licenses to Valley Forge
Patents and Know-How granted under this Agreement by Valley Forge to CODMAN are,
for all purposes of Section 365(n) of Title 11 of the U.S. Code ("Title 11"),
licenses of rights to intellectual property as defined in Title 11. Valley Forge
agrees during the term of this Agreement to create and maintain current copies
or, if not amenable to copying, detailed descriptions or other appropriate
embodiments, of all such Valley Forge Patents and Know-How. If a case is
commenced by or against Valley Forge under Title 11, then, unless and until this
Agreement is rejected as provided in Title 11, Valley Forge (in any capacity,
including debtor-in-possession) and its successors and assigns (including,
without limitation, a Title 11 trustee) at its option shall either perform all
of the obligations provided in this Agreement to be performed by Valley Forge or
provide to CODMAN all such intellectual property reasonably required to make or
have made, use and sell Existing Products in the Field (including all
embodiments thereof) held by Valley Forge and such permitted successors and
assigns, as CODMAN may elect in a written request, immediately upon such
request. If a Title 11 case is commenced by or against Valley Forge, this
Agreement is rejected as provided in Title 11 and CODMAN elects to retain its
rights hereunder as provided in Title 11, then Valley Forge (in any capacity,
including debtor-in-possession) and its successors and assigns (including,
without limitation, a Title 11 trustee) shall provide to CODMAN all such
intellectual property (including all embodiments thereof) held by Valley Forge
and such successors and assigns immediately upon CODMAN's written request
therefor. All rights, powers and remedies of CODMAN, as a licensee hereunder,
provided herein are in addition to and not in substitution for any and all other
rights, powers and remedies now or hereafter existing at law or in equity
(including, without limitation, Title 11) in the event of the commencement of a
Title 11 case by or against Valley Forge. CODMAN, in addition to the rights,
powers and remedies expressly provided herein, shall be entitled to exercise all

                                       22
<PAGE>

other such rights and powers and resort to all other such remedies as may now or
hereafter exist at law or in equity (including Title 11) in such event.

         9.03   Prosecution of Patents. Valley Forge agrees to, at its expense,
prosecute, or cause to be prosecuted to allowance or rejection, and reasonably
maintain, in the United States and such other countries selected by mutual
agreement of Valley Forge and CODMAN, the patents and patent applications
included in the Valley Forge Patents. Valley Forge shall issue as a patent each
such application prosecuted to allowance. Valley Forge shall pay all government
fees required to keep in force patents and applications therefor included in the
Valley Forge Patents and shall submit evidence to CODMAN, upon request, that
said government fees have been timely paid.

         9.04   Third-Party Infringement. In the event there is infringement by
a third party of any Valley Forge Patent and CODMAN becomes aware of such
infringement, CODMAN shall give Valley Forge written notice to that effect,
including with such written notice evidence establishing a prima facie case of
infringement by such third party. Valley Forge shall bear all expenses of any
suit brought by it based upon such infringement and shall retain all damages or
other monies awarded or received in settlement of such suit. If, after the
expiration of ninety (90) days from the date of such notice, Valley Forge has
not obtained a discontinuance of such infringement or brought suit against the
third party infringer, then CODMAN shall have the right, but not the obligation,
to bring suit against such infringer. Valley Forge will cooperate with CODMAN in
any such suit for infringement brought by CODMAN against a third party, and
shall have the right to consult with CODMAN and to participate in and be
represented by independent counsel in such litigation at its own expense. CODMAN
shall bear all expenses of such suit, and shall retain any damages or other
monies awarded or received in consequence of such litigation.

         9.05   Ownership of Developments.

         (a) All inventions made, conceived or acquired by Valley Forge, and the
intellectual property related to any Existing Product, the New Product ,or any
other product including any Improvement of any such product and Know-How related
to any such product shall be the exclusive property of Valley Forge.

                                       23
<PAGE>

          (b) Except as provided in Section 9.05(a), above, all inventions made,
conceived or acquired by CODMAN, and the intellectual property related thereto,
will be the exclusive property of CODMAN.

                                   ARTICLE TEN

                              TERM AND TERMINATION
                              --------------------

        10.01   Exclusivity Term. The "Exclusivity Term" of this Agreement shall
commence on October 1, 2004 and continue until March 31, 2005, or such later
date that is mutually agreed to in writing by CODMAN and Valley Forge, or such
earlier date as provided in this Section 10..

        10.02   Extended Term. The "Extended Term" shall be from the end of the
Exclusivity Term to December 31, 2005, or such earlier date as provided in this
Section 10. Notwithstanding anything in this Section 10 to the contrary, neither
the Exclusivity Term nor the Extended Term shall be subject to early termination
as a result of Valley Forge merging or combing with another entity.

        10.03   Termination for Breach. If either Valley Forge, on the one hand,
or CODMAN, on the other hand, shall materially breach any covenant, agreement or
obligation under this Agreement, then the other party may give notice to
terminate this Agreement by giving such party notice of such breach. The party
receiving such notice shall have ninety (90) days from the date of receipt
thereof to cure such breach. If such breach is not cured within such ninety (90)
day period, then the non-breaching party shall have the right to terminate this
Agreement effective as of the end of such period. In the event such breach is
cured during such period, such notice shall be of no force or effect and this
Agreement shall not be terminated.

        10.04   Termination for Insolvency. Either party may terminate this
Agreement upon notice if the other party makes an assignment for the benefit of
creditors, is the subject of proceedings in voluntary or involuntary bankruptcy
instituted on behalf of or against such party, or has a receiver or trustee
appointed for all or substantially all of its property; provided that in the
case of an involuntary bankruptcy proceeding, such right to terminate shall only
become effective if the other party consents to the involuntary bankruptcy or
such proceeding is not dismissed within ninety (90) days after the filing
thereof.

                                       24
<PAGE>

        10.05   Termination for Patent Infringement. CODMAN may terminate this
Agreement at the end of a 90-day period following Valley Forge's receipt of
written notice from CODMAN if a judgment from a court of competent jurisdiction
in the United States holds that the manufacture, use, importation or sale of the
Medical Device Products, which have not been discontinued or otherwise removed
from Schedule A, infringe the patents rights of a third party.

        10.06   Effect of Termination. Notwithstanding the termination of this
Agreement for any reason, each party hereto shall be entitled to recover any and
all damages (other than consequential damages) that such party shall have
sustained by reason of the breach by the other party hereto of any of the terms
of this Agreement. Termination of this Agreement for any reason shall be without
prejudice to Valley Forge's right to receive all payments accrued and unpaid on
the effective date of termination and shall not release either party hereto from
any liability which at such time has already accrued or which thereafter accrues
from a breach or default prior to such expiration or termination, nor affect in
any way the survival of any other right, duty or obligation of either party
hereto which is expressly stated elsewhere in this Agreement to survive such
termination. In the event of termination for any reason, CODMAN shall have the
non-exclusive right to continue to market and distribute the Existing Products
until its inventory is fully depleted.

        10.07   Survival of Certain Provisions. The provisions of this Agreement
set forth in Sections 10.06 and 8.01 and Articles Six and Eleven, and any
remedies for the breach thereof, shall survive the termination of this Agreement
under the terms hereof.

                                 ARTICLE ELEVEN

                                  MISCELLANEOUS
                                  -------------

         11.01  Arbitration.

         a)     Any dispute, claim or controversy arising from or related in any
way to this Agreement or the interpretation, application, breach, termination or
validity thereof, including any claim of inducement of this Agreement by fraud
or otherwise, will be submitted for resolution to final and binding arbitration
pursuant to the commercial arbitration rules then pertaining of the Center for
Public Resources ("CPR"), except where those rules conflict with these
provisions, in which case these provisions control. The arbitration will be held
in Philadelphia, Pennsylvania.

                                       25
<PAGE>

         b)     The panel shall consist of three arbitrators chosen from the CPR
Panels of Distinguished Neutrals each of whom is a lawyer specializing in
business litigation with at least 15 years experience with a law firm of over 25
lawyers or was a judge of a court of general jurisdiction. In the event the
aggregate damages sought by the claimant are stated to be less than $5 million,
and the aggregate damages sought by the counterclaimant are stated to be less
than $5 million, and neither side seeks equitable relief, then a single
arbitrator shall be chosen, having the same qualifications and experience
specified above.

         c)     The parties agree to cooperate (1) to obtain selection of the
arbitrator(s) within 30 days of initiation of the arbitration, (2) to meet with
the arbitrator(s) within 30 days of selection and (3) to agree at that meeting
or before upon procedures for discovery and as to the conduct of the hearing
which will result in the hearing being concluded within no more than 9 months
after selection of the arbitrator(s) and in the award being rendered within 60
days of the conclusion of the hearings, or of any post-hearing briefing, which
briefing will be completed by both sides with 20 days after the conclusion of
the hearings. In the event no such agreement is reached, the CPR will select
arbitrator(s), allowing appropriate strikes for reasons of conflict or other
cause and three peremptory challenges for each side. The arbitrator(s) shall set
a date for the hearing, commit to the rendering of the award within 60 days of
the conclusion of the evidence at the hearing, or of any post-hearing briefing
(which briefing will be completed by both sides in no more than 20 days after
the conclusion of the hearings), and provide for discovery according to these
time limits, giving recognition to the understanding of the parties hereto that
they contemplate reasonable discovery, including document demands and
depositions, but that such discovery be limited so that the time limits
specified herein may be met without undue difficulty. In no event will the
arbitrator(s) allow either side to obtain more than a total of 40 hours of
deposition testimony from all witnesses, including both fact and expert
witnesses. In the event multiple hearing days are required, they will be
scheduled consecutively to the greatest extent possible.

         d)     The arbitrator(s) shall render their award following the
substantive law of New Jersey. The arbitrator(s) shall render an opinion setting
forth findings of fact and conclusions of law with the reasons therefor stated.
A transcript of the evidence adduced at the hearing shall be made and shall,
upon request, be made available to either party.

                                       26
<PAGE>

         e)     To the extent possible, the arbitration hearings and award will
be maintained in confidence.

         f)     The United States District Court for New Jersey may enter
judgment upon any award. In the event the panel's award exceeds $5 million in
monetary damages or includes or consists of equitable relief, then the court
shall vacate, modify or correct any award where the arbitrators' findings of
fact are clearly erroneous, and/or where the arbitrators' conclusions of law are
erroneous; in other words, it will undertake the same review as if it were a
federal appellate court reviewing a district court's findings of fact and
conclusions of law rendered after a bench trial. An award for less than $5
million in damages and not including equitable relief may be vacated, modified
or corrected only upon the grounds specified in the Federal Arbitration Act. The
parties consent to the jurisdiction of the above-specified Court for the
enforcement of these provisions, the entry of judgment on any award, and the
vacatur, modification and correction of any award as above specified. In the
event such Court lacks jurisdiction, then any court having jurisdiction of this
matter may enter judgment upon any award and provide the same relief, and
undertake the same review, as specified herein.

         g)     Each party has the right before or during the arbitration to
seek and obtain from the appropriate court provisional remedies such as
attachment, preliminary injunction, replevin, etc. to avoid irreparable harm,
maintain the status quo, or preserve the subject matter of the arbitration.

         h)     EACH PARTY HERETO WAIVES ITS RIGHT TO TRIAL OF ANY ISSUE BY
JURY.

         i)     EACH PARTY HERETO WAIVES ANY CLAIM TO PUNITIVE OR EXEMPLARY
DAMAGES FROM THE OTHER.

         j)     EACH PARTY HERETO WAIVES ANY CLAIM OF CONSEQUENTIAL DAMAGES FROM
THE OTHER EXCEPT WITH RESPECT TO ANY BREACH OF SECTION 8.01; IT BEING AGREED
THAT A PARTY MUST PROVE THE EXISTANCE OF, AND ITS ENTITLEMENT TO, CONSEQUENTIAL
DAMAGES WITH RESPECT TO A BREACH OF SECTION 8.01 IN ACCORDANCE WITH APPLICABLE
LAW.

         11.02  Publicity. Except as provided in Section 3.02, and excepting
public press releases describing material events as required under applicable
regulations of the Securities and Exchange Commission, neither party hereto
shall originate any publicity, news release, or other announcement, written or

                                       27
<PAGE>

oral, whether to the public press, the trade, CODMAN's or Valley Forge's
customers or otherwise, relating to this Agreement, or to performance hereunder
or the existence of an arrangement between the parties without the prior written
approval of the other party hereto. Valley Forge shall not use the name of
Johnson & Johnson, CODMAN, or any of its Affiliates for advertising or
promotional purposes without the prior written consent of CODMAN.

         11.03  Headings. The Article and Section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning and interpretation of this Agreement.

         11.04  Notices. All notices and other communications hereunder shall be
in writing. All notices hereunder of an Indemnity Claim, a Force Majeure Event,
default or breach hereunder, or, if applicable, termination of the term hereof,
or any other notice of any event or development material to this Agreement taken
as a whole, shall be delivered personally, or sent by national overnight
delivery service or postage pre-paid registered or certified U.S. mail, and
shall be deemed given when delivered, if by personal delivery or overnight
delivery service, or three business days after deposit in the mail, if sent by
U.S. mail, and shall be addressed as follows:

         If to Valley Forge:     Valley Forge Scientific Corp.
                                 136 Green Tree Road
                                 P.O. Box 1179
                                 Oaks, PA  19456
                                 Fax: (610) 666 7565
                                 Attention:  President

         with a copy to:         Russell U. Schenkman, Esq.
                                 Schenkman Jennings & Howard, LLC
                                 13 Roszel Road
                                 Suite C225
                                 Princeton, NJ 08540

         If to CODMAN:           Codman & Shurtleff, Inc.
                                 325 Paramount Drive
                                 Raynham, MA  02767-0350
                                 Attention:  President

                                       28
<PAGE>

         with a copy to:
                                 General Counsel
                                 Johnson & Johnson
                                 One Johnson & Johnson Plaza
                                 New Brunswick, NJ  08933

or to such other place as either party may designate by written notice to the
other in accordance with the terms hereof.

         11.05  Failure to Exercise. The failure of either party to enforce at
any time for any period any provision hereof shall not be construed to be a
waiver of such provision or of the right of such party thereafter to enforce
each such provision.

         11.06  Assignment. This Agreement, or any of the rights and obligations
created herein, shall not be assigned or transferred, in whole or in part, by
either party hereto without the prior written consent of the other party;
provided, however, that either party shall have the right to assign any or all
of its rights or obligations under this Agreement to any Affiliate, or a
successor to that part of its business to which this Agreement relates. Any
attempted assignment or transfer of such rights or obligations without such
consent, except as provided herein, shall be void. Subject to the foregoing
sentence, this Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns.

         11.07  Severability. In the event that any one or more of the
provisions (or any part thereof) contained in this Agreement or in any other
instrument referred to herein, shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, then to the maximum extent permitted by
law, such invalidity, illegality or unenforceability shall not affect any other
provision of this Agreement or any other such instrument. Any term or provision
of this Agreement which is invalid, illegal or unenforceable in any jurisdiction
shall, to the extent the economic benefits conferred by this Agreement to both
parties remain substantially unimpaired, not affect the validity, legality or
enforceability of any of the terms or provisions of this Agreement in any other
jurisdiction.

         11.08  Relationship of the Parties. The relationship of CODMAN and
Valley Forge established by this Agreement is that of independent contractors,
and nothing contained herein shall be construed to (i) give either party any
right or authority to create or assume any obligation of any kind on behalf of
the other or (ii) constitute the parties as partners, joint venturers, co-owners
or otherwise as participants in a joint or common undertaking.

                                       29
<PAGE>

         11.09  Competing Products. Valley Forge recognizes and acknowledges
that CODMAN (and its Affiliates) has been, and will continue to be, actively
involved in the design, development and marketing of instruments and accessories
for the treatment of neurological and spinal disorders. Except for the Existing
Products in Schedule A, CODMAN shall not, during the Exclusivity Term of this
Agreement market for specific use in the central nervous system (i.e. the
cranial cavity and spinal column), itself or through any third parties, bipolar
generators and associated products for use with the bipolar generators,
irrigators, integrated cord and tubing sets (except as noted in Schedule A),
footswitches, footpedals, footswitch cables, generator remote controls, or
disposable hand-held surgical bipolar electrosurgery pens, disposable hand-held
surgical bipolar electrosurgery coagulation balls, or disposable hand-held
surgical bipolar electrosurgery loops; it being agreed by Valley Forge that
nothing contained in this Section 11.09 shall restrict an Affiliate of CODMAN
from engaging in any of the above described activities independently of CODMAN,
provided such Affiliates do not have access to, or use, Valley Forge's
confidential information. Furthermore, it being agreed that nothing contained in
this Section 11.09 shall restrict CODMAN during the Exclusivity Term from
marketing or selling its own or another bipolar generator solely for the use in
the field of the percutaneaous pain treatment, but in no other field. Subject to
the confidentiality provisions in this Agreement and other agreements entered
into between CODMAN and Valley Forge, after the Exclusivity Term, CODMAN shall
be free to market or sell its own or another manufacturer's bipolar generators,
associated products for use with such bipolar generators, irrigators, integrated
cord and tubing sets, footswitches, footpedals, footswitch cables, generator
remote controls, disposable hand-held surgical bipolar electrosurgery pens,
disposable hand-held surgical bipolar electrosurgery coagulation balls, or
disposable hand-held surgical bipolar electrosurgery loops.

         11.10  Entire Agreement. It is the desire and intent of the parties to
provide certainty as to their future rights and remedies against each other by
defining the extent of their undertakings herein. This Agreement constitutes and
sets forth the entire agreement and understanding between the parties with
respect to the subject matter hereof and is intended to define the full extent
of the legally enforceable undertakings of the parties hereto, and no promise,
agreement or representation, written or oral, which is not set forth explicitly
in this Agreement is intended by either party to be legally binding. Each party

                                       30
<PAGE>

acknowledges that in deciding to enter into this Agreement and to consummate the
transactions contemplated hereby it has not relied upon any statements, promises
or representations, written or oral, express or implied, other than those
explicitly set forth in this Agreement. This Agreement supersedes all previous
understandings, agreements and representations between the parties, written or
oral, with respect to the subject matter hereof.

         11.11  Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

         11.12  Expenses. Each party shall pay all of its own fees and expenses
(including all legal, accounting and other advisory fees) incurred in connection
with the negotiation and execution of this Agreement and the arrangements
contemplated hereby.

         11.13  Modifications and Amendments. This Agreement shall not be
modified or otherwise amended except pursuant to an instrument in writing
executed and delivered by each of the parties hereto.

         11.14  Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement.

         11.15  Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New Jersey, without
giving effect to the choice of law provisions thereof.

         11.16  Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.

                                       31
<PAGE>

                  IN WITNESS WHEREOF, the parties hereto intending legally to be
bound hereby, have each caused this Agreement to be duly executed as of the date
first above written.

                                              VALLEY FORGE SCIENTIFIC CORP.

                                              By: /s/ JERRY L. MALIS
                                                  ------------------------------
                                                  Jerry L. Malis
                                                  CEO and President

                                              Date:  October 15, 2004
                                                    ----------------------------


                                              CODMAN & SHURTLEFF, INC.

                                              By: /s/ GLEN A. KASHUBA
                                                  ------------------------------
                                                  Glen A. Kashuba
                                                  Worldwide President

                                              Date:  October 15, 2004
                                                    ----------------------------

                                       32