<PAGE>

                                                                   EXHIBIT 10.17


                            DISTRIBUTION AGREEMENT

                                BY AND BETWEEN

                              DEPUY ACROMED, INC.

                                      AND

                          ORATEC INTERVENTIONS, INC.
<PAGE>

                             DISTRIBUTION AGREEMENT

THIS AGREEMENT is between Oratec Interventions, Inc., a California corporation,
with its principal place of business at 3700 Haven Court, Menlo Park, California
94025, hereinafter referred to a "Oratec" and DePuy AcroMed, Inc., an Ohio
corporation with offices at 3303 Carnegie Ave., Cleveland, Ohio 44115
hereinafter referred to as "DePuy," effective as of the 30 day of March, 1999
(the "Effective Date").

WHEREAS, Oratec has developed, prototyped, and/or manufactured and verified
clinically products used to apply heat to the spine to denervate and shrink
spinal disc tissue, as further described herein; and

WHEREAS, DePuy has developed an extensive worldwide distribution capability and
desires to distribute the Products to surgeons worldwide, with the exception of
the United States; and

WHEREAS, Oratec desires to contract with DePuy to assist Oratec in conducting
selected clinical evaluations with surgeons outside the United States and in
obtaining regulatory approval for the Products outside the United States, and to
exclusively market, distribute and sell the Products, as further described
herein; and

WHEREAS, DePuy is willing to contract with Oratec to assist Oratec in conducting
such selected clinical evaluations, obtaining regulatory approval outside the
United States and to exclusively market, distribute and sell the Products;

NOW, THEREFORE, in consideration of the mutual covenants set forth below, the
parties agree as follows:

1.  DEFINITIONS

    1.1  "Products" shall mean all Oratec products developed, designed, intended
         or sold for the spine or neurosurgery markets for use by any medical
         practitioner, including any improvements or variations thereto. The
         SpineCATH Intradiscal Catheter Product including any modification
         thereto, may not be sold into any other medical or surgical specialty
         without the prior written consent of DePuy. All such Products currently
         in existence are listed on Appendix A. Appendix A shall be modified in
         writing as additional Products, including improvements and variations
         thereto, become available.

    1.2 "New Products" means those Oratec products developed, designed, intended
         or sold for the spine or neurosurgery markets for use by any medical
         practitioner which perform a significantly different function or
         perform in a significantly different manner from Products.


    *** Certain information in this document has been omitted and filed
    separately with the Securities and Exchange Commission. Confidential
    treatment has been requested with respect to the omitted portions.
<PAGE>

    1.3  "Specifications" shall mean the detailed written specifications for a
         Product in such form as Oratec shall provide and DePuy shall accept.

    1.4  "Territory" shall mean the entire world, excluding the United States.

2.  APPOINTMENT OF DEPUY AS EXCLUSIVE DISTRIBUTOR

    2.1  Oratec hereby grants DePuy the exclusive right to market, sell and
         distribute the Products in the Territory.

    2.2  Provided Oratec has first offered the New Products to DePuy and DePuy
         has declined the opportunity to market the New Products, Oratec may
         freely negotiate with other parties to market the New Products. DePuy
         shall have ninety (90) days within which to accept or reject any such
         opportunity to market New Products. In the case in which Oratec had
         first offered the New Products to DePuy and the parties were unable to
         negotiate mutually acceptable terms, Oratec is free to contact with
         other parties provided Oratec does not accept terms inferior to DePuy's
         last offer. In the case in which the third party's offered terms are
         equal to or inferior to DePuy's last offer, Oratec will contract with
         DePuy under the terms of DePuy's last offer.

    2.3  If a third party appointed by Oratec to sell Oratec products for non-
         spine applications sells such products for spine applications within
         the Territory, Oratec shall take all reasonable steps to prevent such
         occurrences by said third party. Sales by third parties resulting form
         such occurrences shall be applied toward DePuy's minimum purchase
         requirements. DePuy shall not sell the Products for non-spine
         applications. If a Distributor appointed by DePuy to sell the Products
         sells such Products for non-spine applications within the Territory,
         DePuy shall take all reasonable steps to prevent such occurrences by
         said Distributor.

3.  MUTUAL COOPERATION

    3.1  It is the parties intention to cooperate and communicate regarding the
         development and marketing of the Products. The parties agree to make
         reasonable efforts to share general information received by either
         party on the Products and competitive activities.

4.  INTELLECTUAL PROPERTY

    4.1  Any and all technology and intellectual property developed by Oratec
         used in development or manufacture of a Product shall be the property
         of Oratec. Oratec shall have sole responsibility for filing and
         maintaining any and all patents and patent applications which address
         or cover its Products.
<PAGE>

5.  ORATEC'S COVENANTS

    5.1  Oratec hereby agrees to supply the Products to DePuy in accordance with
         the terms set forth in this Agreement.

    5.2  Oratec will work actively to make available in sufficient quantities
         Products that meet mutually agreed upon specifications to meet DePuy's
         requirements; provided that, shipment of all orders by Oratec shall be
         on a "first in, first out" inventory basis, and may be subject to
         delays due to transportation difficulties, government regulations,
         inability to obtain new materials, and other circumstances beyond
         Oratec's control.

    5.3  Oratec will extend technical assistance to DePuy as DesPuy may
         reasonably request to assist in the marketing and sale of the Products
         at periodic intervals to be agreed upon by Oratec and DePuy. The
         parties will agree upon a mutually acceptable technical training
         program.

    5.4  Oratec will provide training to the DePuy sales force on the proper use
         of the Products at times and places mutually agreed upon by the parties
         throughout the duration of this Agreement.

    5.5  Oratec will use commercially reasonable efforts to obtain FDA approval,
         including 510(k) approval, ISO 9000 Certification and obtain CE
         marking(s) for each Product prior to the sale to DePuy of such Product.

    5.6  Oratec agrees to cooperate with DePuy and supply DePuy with any
         information required by DePuy to allow DePuy to respond to or comply
         with any inquiry or regulation from any foreign government agency
         regarding the use, marketing, sales or distribution of Products.

    5.7  Oratec will as soon as possible after receipt of notice advise DePuy of
         any claim, complaint, suit or action involving any Product sold by
         DePuy or involving DePuy's marketing, sale or distribution of the
         Products if such claim, complaint, suit or action relates to a Product
         performance issue or could have a potential adverse impact on DePuy.

    5.8  Oratec shall sell DePuy a reasonable number of demonstration samples of
         Products at the cost specified in Appendix B, for use by the DePuy
         sales force for customer presentations, for presentations at seminars,
         meetings, conventions and the like. The samples will be marked "For
         demonstration only, not for human use."

6.  ORATEC'S REPRESENTATIONS AND WARRANTIES

    6.1  Oratec shall have full title and full right to manufacture all Products
         sold to DePuy hereunder.
<PAGE>

    6.2  Oratec represents and warrants that to the best of Oratec's knowledge,
         as of the date of this Agreement, the distribution, marketing,
         promotion and sale of Products by DePuy will not infringe any patents
         held by persons who are not parties to this Agreement.

    6.3  To Oratec's knowledge, there are no licenses or other agreements
         relating to the Products that would affect Oratec's ability to
         manufacture and deliver the Products or substantially equivalent
         products and none are contemplated or anticipated by Oratec, except for
         an agreement now in place with Oratec's vendor for generators.

    6.4  All necessary governmental approvals required by the federal, state
         and/or local governments of the United States for the Products will
         have been obtained by Oratec prior to the sale of the Products to or by
         DePuy, and will be obtained by Oratec should the need arise in the
         future.

    6.5  To Oratec's knowledge, all Products comprising each shipment or other
         delivery made to DePuy are and, at all times, will be as of the date of
         such shipment or delivery, in compliance with all applicable United
         States laws, as well as all regulations, rules, declarations,
         interpretations and orders issued thereunder.

    6.6  To Oratec's knowledge, no Product is in violation of any United States
         law, statute, executive order or regulation regarding packaging,
         labeling, manufacturing, distribution, or sale. Oratec shall use
         commercially reasonable efforts to comply with any applicable foreign
         law, statute, executive order or regulation regarding, packaging,
         labeling, manufacturing, distribution, or sale made known to Oratec.

    6.7  Oratec has no pre-existing distribution or other arrangements
         concerning the Products in any country located within the Territory
         that would affect DePuy's ability to sell the Products in the Territory
         or DePuy's right to select and appoint Distributors or affiliates to
         sell the Products in the Territory.

7.  PACKAGING AND LABELING

    7.1  DePuy will use the Oratec trademark in marketing the Products unless
         prohibited by law or regulation. DePuy will acknowledge Oratec and its
         patent pending or patented technology in Product promotional materials.
         DePuy shall not modify any Oratec trademark in any way without Oratec's
         prior written approval or use any Oratec trademark with any goods or
         services other than the Products.

    7.2  During the term of this Agreement, the parties may, at their option,
         indicate on signs, advertising, publicity, or other sales, marketing,
         or promotional media or materials that DePuy is the authorized dealer
         or distributor of the Products for spine applications. Neither party
         shall otherwise use the other party's name,
<PAGE>

         trademarks, service marks, trade names, commercial symbols or logos
         without having received the other party's prior written approval.

    7.3  Upon termination of this Agreement, each party's license in or right to
         use the other party's name, trademarks, services marks, trade names,
         commercial symbols or logos shall terminate, except that DePuy shall
         have the right to continue such use with respect to any inventory of
         Products not purchased by Oratec as provided by Section 20.1.

    7.4  Oratec will provide the Products to DePuy sterile and in standard
         packaging. In the event that Oratec's sterilization processes or
         standard product packaging is unacceptable to any regulatory or
         government agency, Oratec shall modify its sterilization processes
         and/or standard product packaging to comply with the requirements of
         such regulatory or government agency. The parties shall evaluate the
         costs associated with any such required modifications by country,
         comparing the country sales forecast with extraordinary costs that
         Oratec would have to incur.

8.  DEPUY'S COVENANTS

    8.1  DePuy hereby agrees to sell the Products through its marketing and
         sales distribution network comprised of independent sales
         representatives (the "Distributors"), through employees who specialize
         in geographical regions or in designated professional fields, or
         through affiliated companies, provided that any such affiliated company
         is not a competitor of Oratec. DePuy shall have the right to select and
         appoint all Distributors and affiliates to market and sell the Products
         in the Territory. While DePuy has exclusive distribution rights in the
         Territory under this Agreement, DePuy will obtain the Products for sale
         in the Territory only from Oratec.

    8.2  Depuy will actively promote the Products and will provide its
         Distributors and employees with the following:

         1.  Product samples
         2.  Appropriate training related to Products
         3.  Exposure of Products at appropriate training courses and
             conventions

    8.3  Provided the Products are available in adequate quantities, DePuy will
         work to market the Products by including them as important promotional
         Products for its Distributors in 1999 and 2000. For purposes of this
         Section 8.3, adequate quantities shall mean Product quantities
         necessary to support DePuy's sales forecasts for the Products. DePuy
         will provide to Oratec an initial forecast of sales for a one year
         period for such Products. When the parties agree to develop and market
         a Product not included in the original list of Products in Appendix A,
         DePuy will provide Oratec with a sales forecast for that Product within
         30 days of the date a Product is available for sale and marketing. All
         such forecasts will be
<PAGE>

         updated on a quarterly basis. Thereafter, DePuy will provide Oratec on
         the last day of October of each year during the duration of this
         Agreement, with a forecast for each forthcoming contract year for all
         Products sold by DePuy at that time in order to properly provide for
         all accounts, insure prompt service to customers and avoid out-of-stock
         conditions. Forecasts shall be provided on a country basis when it may
         be necessary to reduce minimums due to late regulatory approvals and/or
         mutual decisions not to market in a particular country.

    8.4  DePuy will show the Products at major meetings in 1999 and 2000 and
         will be responsible for all costs of exhibiting at such major meetings
         as well as local conventions and trade shows unless otherwise agreed by
         Oratec prior to such meeting, convention or trade show.

    8.5  DePuy will take reasonable and necessary steps to provide that DePuy's
         marketing, sale and distribution of the Products complies with
         applicable government regulations throughout the Territory and will
         provide reasonable assistance to Oratec as Oratec may reasonably
         request to allow Oratec to comply with regulatory requirements of
         government agencies throughout the Territory regarding the use, sale
         and distribution of the Products.

    8.6  DePuy shall, as soon as possible after receipt of notice, advise Oratec
         of any claim, suit, or other action regarding any of the Products sold
         by DePuy.

    8.7  DePuy will prepare and submit import licenses, registrations or other
         listings and regulatory approvals for the sale and import of the
         Products in countries within the Territory. DePuy may use its system of
         independent companies and Distributors throughout the Territory to
         assist in obtaining import licenses and/or approvals. DePuy will obtain
         necessary certifications for the Products where required. Upon any
         termination of this Agreement other than for a material breach by
         Oratec which remains uncured by Oratec for more than forty-five (45)
         days after receipt of written notice from DePuy, DePuy shall transfer
         all import licenses, registrations, listings and regulatory approvals
         for the sale and import of the Products to Oratec, provided that Oratec
         reimburses DePuy at the time of transfer for the cost to DePuy to
         obtain and maintain all such import licenses, registrations, listings
         and regulatory approvals. Any such transfer shall take place
         immediately upon receipt of the foregoing payment and Oratec's
         contractual commitment to buy back all inventory of Products maintained
         by DePuy, its affiliates or its Distributors. DePuy makes no
         representation or warranty regarding the transferability of any of the
         foregoing licenses, registrations, listings, and approvals.

    8.8  DePuy will provide proposed Product literature to Oratec for approval
         of the content of Product marketing claims. Oratec will respond to
         DePuy's request for Product literature approval within ten (10) working
         days.
<PAGE>

    8.9  DePuy will provide required multilingual labeling to Oratec for
         placement on the Product packaging during manufacture.

9.  PRICES

    9.1  Initial Prices for the Products shall be as set forth on Appendix B.
         Prices for all Products will be based on a transfer price (as
         hereinafter defined) that allows DePuy, for the duration of this
         Agreement and any extension thereof, to receive a gross margin of at
         least ***, as exemplified in Appendix B. Transfer price shall mean
         the price charged to DePuy by Oratec for the Products. Oratec shall
         give DePuy at least six (6) months prior written notice of any price
         increase. During the first nine (9) months that this Agreement is in
         effect, Oratec shall provide probes to DePuy at *** for each probe
         and catheters to DePuy at *** for each catheter. The transfer price
         will then be revised to reflect a *** gross margin if the average end
         user selling price equals or exceeds *** per probe and *** per spine
         catheter. The limit on the probe and spine catheter transfer prices
         will be set at *** and ***, respectively.

    9.2  DePuy retains the right to select its customers and to sell the
         Products at such prices and on such terms and conditions as it may
         elect. DePuy intends to market the Products at competitive pricing that
         produces maximum revenues, but DePuy shall retain the right to sell the
         Products at a discount where DePuy, in its sole discretion, deems it
         necessary.

10. CLINICAL TRIALS

    10.1  In the event that a limited clinical trial or similar testing of any
          Product is required to obtain governmental approval outside the Untied
          States before sale and use of the Product, the parties will conduct
          such trial(s) jointly.  DePuy will coordinate the trials through
          surgeons and other medical personnel and health care providers.
          Oratec will provide reusable and disposable products for such trials
          at no costs to DePuy.  However, any reuseable and disposable products
          such as generators, needle benders, cables, etc. will remain the
          property of Oratec and will be returned to Oratec when the need for
          the products has ended.  Should extensive clinical trials be required
          for a Product outside the United States, the parties will determine a
          mutually acceptable plan which will include financial incentives to
          DePuy regarding such extensive clinical trials.

11. ORDERING

    11.1  All forecasts shall be non-binding.  Notwithstanding any forecast
          made by DePuy, DePuy shall place firm written purchase orders
          identifying the Products ordered and requested delivery date(s) with
          Oratec on DePuy purchase order forms with at least 90 days lead time
          to allow Oratec to optimize inventory and production

   ***    Confidential treatment requested.
<PAGE>

          patterns.  Oratec will ship Product pursuant to such purchase orders
          within ninety (90) days of the receipt by Oratec of such purchase
          order.

    11.2  DePuy will have *** purchase requirements in 1999 ***.  Oratec and
          DePuy will agree upon minimum purchase requirements for the year 2000
          by October 31, 1999.  If annual minimum purchase requirements for the
          year 2000 are not agreed to by October 31, 1999, the parties shall
          engage a mutually acceptable third party to consult with them to
          develop an acceptable compromise.  Should the parties be unable to
          select a mutually acceptable third party to develop an acceptable
          compromise, the parties shall engage in arbitration as provided in
          Section 11.4.  Minimum purchase requirements for subsequent years that
          the Agreement is in effect will be established in the same manner.
          DePuy shall have no obligation to purchase the minimum purchase
          requirements, provided that  failure to do so shall trigger the rights
          provided to Oratec in Section 11.3.  DePuy will generate a purchase
          order for samples and demo equipment within 30 days of the effective
          date of this Agreement.  In the event that regulatory approvals
          required to market and sell the Products in any country located within
          the Territory are not secured or are delayed, minimum purchase
          requirements for the Products shall be appropriately reduced.

    11.3  Beginning with the year 2000 and for any subsequent year this
          Agreement is in effect, provided that Oratec has supplied adequate
          quantities of Products that meet Specifications, if less than *** of
          the mutually agreed upon annual minimum purchase requirement for all
          Products is not achieved by DePuy by the end of any applicable year,
          DePuy's exclusive distribution rights under this Agreement may become
          non-exclusive at Oratec's option, written notice of which must be
          received by DePuy prior to November 1st of such year. Upon receipt of
          such written notice, DePuy may make up any shortfall in the minimum
          purchase requirement through a purchase of Products (the "Shortfall
          Purchase") by issuing a purchase order by December 1st of such year,
          specifying delivery by December 31st or as soon as possible
          thereafter. If DePuy makes this Shortfall Purchase, DePuy shall retain
          its exclusive distribution rights. If DePuy does not make the
          Shortfall Purchase, DePuy's exclusive distribution rights, may, at
          Oratec's option, become non-exclusive. If the Shortfall Purchase is
          not made, and if at least *** of the mutually agreed upon annual
          minimum purchase requirement for all Products is not achieved by DePuy
          in the next consecutive year this Agreement is in effect, and DePuy
          does not make a Shortfall Purchase in that next consecutive year,
          Oratec may, upon written notice to DePuy received within sixty (60)
          days after the end of such year, terminate this Agreement. In any
          event, the mutually agreed upon annual minimum purchase requirement
          for any year this Agreement is in effect will be considered to be met
          if at least *** of such minimum purchase requirement has been met by
          DePuy.

   ***    Confidential treatment requested.
<PAGE>

    11.4  All disputes, controversies, or differences arising between the
          parties hereto, out of, or in relation to, or in connection with,
          minimum purchase requirements which cannot be settled amicably by the
          parties shall be resolved by arbitration under the Rules of Procedure
          of the American Arbitration Association (the "Rules") then prevailing
          arbitration shall be by a single arbitrator chosen by the parties,
          provided that if the parties fail to agree and to appoint such single
          arbitrator within thirty (30) days after demand for arbitration, the
          arbitrator shall be chosen in accordance with the Rules. The decision
          of the arbitrator shall be final and binding on the parties with
          respect to minimum purchase requirements.

12. PAYMENT

    12.1  Depuy shall be responsible for the collection of all amounts due
          from customers for the Products. DePuy shall pay for its purchases
          of Products (except for those Products returned pursuant to Section
          15) within *** days of its receipt of the specific Products. A
          late penalty of *** or the maximum rate permitted by law shall be
          levied on outstanding balances for every month extending beyond the
          *** day payment period beginning with the *** day. DePuy shall
          be responsible for the payment of all taxes arising from the
          purchase and sale of the Products by DePuy except for taxes on the
          income of Oratec. These taxes include import duties, forwarding
          taxes, value added taxes and any similar taxes imposed by the
          jurisdictions in which the Products are sold.

13. SHIPPING

    13.1  Oratec shall deliver Products directly to DePuy via common or contract
          carrier. All costs of transportation and shipping to DePuy's
          facilities in Cleveland, Ohio, Warsaw, Indiana, Raynham,
          Massachusetts, or Leeds, England will be paid by DePuy. Title to shall
          transfer and risk of loss of the Products shall pass to DePuy upon
          DePuy's receipt of the Products. Notwithstanding the foregoing, any
          fees to expedite shipments to DePuy at DePuy's request will be borne
          by DePuy, unless the need for expedited shipment was due to Oratec's
          failure to deliver promised quantities on time.

14. WARRANTY

    14.1  Oratec represents and warrants to DePuy that all Products supplied in
          connection with this Agreement shall be of merchantable quality, free
          from defects in material and workmanship and shall be manufactured and
          provided in accordance and conformity with the Specifications and in
          compliance with this Agreement.

    14.2  DePuy may return non-conforming and/or defective Products, including
          Products which malfunction or fail to operate, or bear a sterilization
          date at the time of

   ***    Confidential treatment requested.
<PAGE>

          receipt by DePuy that is more than sixty (60) days old, to Oratec.
          Oratec shall replace or repair such nonconforming and/or defective
          Products at no cost to DePuy or the customer.  Replacement of such
          non-conforming and/or defective Products includes payment of DePuy's
          reasonable shipping costs, both from and to Oratec.  Oratec shall
          replace or repair such non-conforming and/or defective Products
          promptly provided that the non-conformance or defect was caused by
          Oratec.  Oratec shall have no obligation to replace or repair Product
          adulterated, misused or repackaged by another party without the
          previous written approval of Oratec.

    14.3  NEITHER PARTY SHALL HAVE ANY LIABILITY TO EACH OTHER OR TO ANY THIRD
          PARTY FOR ANY PUNITIVE, SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES
          ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT, OR THE
          MANUFACTURE, SALE SUPPLY, DISTRIBUTION, MARKETING, ORDERING OR
          DELIVERY OF THE PRODUCTS, INCLUDING BY WAY OF EXAMPLE AND NOT BY WAY
          OF LIMITATION, ANY DAMAGES, EXPENSES OR LOSSES INCURRED BY REASON OF
          LOST REVENUES, LOST PROFITS, COSTS OF SUBSTITUTE PRODUCTS, AND ANY
          SIMILAR AND DISSIMILAR DAMAGES, EXPENSES OR LOSSES EVEN IF THAT PARTY
          HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, EXPENSES OR
          LOSSES.  NOTWITHSTANDING THE ABOVE, NOTHING IN THIS AGREEMENT SHALL BE
          CONSTRUED TO LIMIT EITHER OF THE PARTIES' LIABILITY FOR DAMAGES OR
          PERSONAL INJURIES, INCLUDING PROPERTY DAMAGE AND DEATH, SUFFERED BY
          ANY THIRD PARTY AS A RESULT OF ACTIONS OR OMISSIONS OF SUCH PARTY.

LEGAL RELATIONSHIP AND INDEMNIFICATION

    15.1  DePuy is an independent contractor and the relationship between Oratec
          and DePuy is that of Vendor and Vendee. Nothing herein is intended or
          shall be construed, either express or implied, to authorize either
          party to create or assume any liability or obligation of any kind for
          or on behalf of the other party. Neither party will be considered or
          will represent itself as the agent or legal representative of the
          other party for any purpose whatsoever.

    15.2  The parties hereto are each responsible for their own acts, alleged
          acts or omissions and respectively agree to protect, indemnify, defend
          and hold harmless each other and any affiliate from and against any
          and all claims, losses, demands and liabilities, including attorneys'
          fees and court costs, which may arise therefrom.

    15.3  Notwithstanding anything in this Agreement to the contrary, Oratec
          agrees to indemnify and hold harmless DePuy from any loss, claim or
          judgment, including reasonable costs and expenses of defending same,
          arising out of bodily injury,
<PAGE>

          property damage or any other damage or injury which is caused by any
          defect in the design, material, or manufacture of a Product, but
          excluding any oral or written statements or representations by DePuy
          or its distributors or employees concerning the Products inconsistent
          with Oratec's training or literature. Oratec shall have control of the
          defense of any litigation arising out of alleged defect in the design,
          material or manufacture of a Product and DePuy agrees to cooperate
          with Oratec in such defense.

    15.4  DePuy agrees to indemnify and hold harmless Oratec from any loss,
          claim or judgment, including reasonable costs and expenses of
          defending same, arising out of any bodily injury caused by any
          negligent or intentional misrepresentation concerning the Products by
          DePuy or its sales employees inconsistent with Oratec's training or
          literature, to the extent that Oratec is damaged due to such negligent
          or intentional misrepresentation.

    15.5  Should any person assert a claim against DePuy based on the alleged
          infringement of a patent or other protected intellectual property
          right related to a Product, Oratec agrees to indemnify and hold
          harmless DePuy from and against any and all losses, claims, or
          judgments, including reasonable costs and expenses of defending same,
          arising directly or indirectly from any such claims of infringement of
          patents or other protected intellectual property rights.

    15.6  Oratec has or will have prior to the sale of the Products by DePuy
          and will maintain at all times while this Agreement is in effect, a
          product liability insurance policy providing at least *** dollars
          (***) coverage per occurrence and *** dollars (***) aggregate
          coverage per policy year, which policy shall either name DePuy as
          insured or shall, by endorsement or otherwise, provide such coverage
          to DePuy for any claim arising out of the sale of any Product by
          DePuy. Oratec shall furnish DePuy with acceptable certificates
          evidencing such insurance coverage prior to the release of any
          Products for clinical studies or evaluation. Such insurance
          certificates shall contain a provision that a thirty (30) day
          advance written notice will be given to DePuy prior to any material
          change or cancellation of such insurance.

16. ASSIGNMENT AND SALE OF INTERESTS

    16.1  Neither party shall have the right to assign this Agreement without
          the other's prior written consent, except that either party may assign
          its obligations hereunder to an entity under common control with,
          controlled by or which controls the assigning party. Notwithstanding
          the foregoing, DePuy agrees that it will not assign its obligations
          hereunder to any such entity that competes with Oratec.

    16.2  In the event that Oratec should desire to sell all or any part of its
          interests

   ***    Confidential treatment requested.
<PAGE>

          in the Products or any one of them or a majority of or all of the
          stock and/or assets of Oratec, Oratec shall notify DePuy in writing of
          such desire.  DePuy will have thirty (30) days after receipt of such
          written notice to make an offer for such interests, stock or assets or
          any part thereof.  During such thirty (30) day period, Oratec will not
          sell any interests, stock or assets without seriously considering an
          offer from DePuy.  This thirty (30) day period does not constitute a
          right of first refusal but rather an equal opportunity to purchase
          such interests in the Products, a majority of Oratec's stock and/or
          assets.  The foregoing provision shall not apply if, at the time of
          such sale, Oratec's securities are publicly traded.

    16.3  If the sale of Oratec's interests in any Products and/or a majority
          of it stock and/or assets would result in this Agreement being
          assigned to a competitor of DePuy, DePuy may, at its sole option,
          continue under the terms of this Agreement for a period of *** after
          such assignment or sale.  If the sale of Oratec's interests in any
          Products and/or a majority of its stock and/or assets would result in
          this Agreement being assigned to a third party other than a competitor
          of DePuy, DePuy may, at its sole option, continue under the terms of
          this Agreement for a period of *** after such assignment or sale.
          Following the expiration of such *** or *** month period, the
          Agreement shall terminate.

17. CONFIDENTIALITY

    17.1  Each party will keep confidential and not disclose to any third party,
          without the prior written consent of the disclosing party, any
          information received from the other party, including, without
          limitation, the technology, capabilities, business plans, operations,
          and personnel of the other party (the "Confidential Information").
          Confidential Information shall not include: (a) information which is
          or later becomes generally available to the public by use, publication
          or the like, by a party other than the party receiving the
          Confidential Information pursuant to the Agreement; (b) is obtained by
          a party on a non-confidential basis from a third party; (c) is in the
          possession of the receiving party prior to its disclosure, as is
          evidenced by written record; or (d) is required by law to be
          disclosed. The obligation of this Section 17 shall continue for a
          period of three (3) years from the date of termination of this
          Agreement.

18. APPLICABLE LAW

    18.1  Any controversy or claim relating to this Agreement, or its breach, or
          to the relationship created by this Agreement, shall be resolved
          through legal proceedings initiated in the United States District
          Court for the Northern District of California. The laws of the State
          of California shall control as to all such matters. The parties waive
          the right to trial by jury, the right to seek or collect

   ***    Confidential treatment requested.
<PAGE>

          punitive or exemplary damages, and any claim of consequential damages.
          If any portion of this Agreement itself is contrary to law, or
          declared invalid or unenforceable by a court of competent
          jurisdiction, the remaining provisions shall remain valid and
          enforceable.  The parties shall consult and use reasonable efforts to
          agree upon a valid and enforceable provision as a reasonable
          substitute for such provision in the light of the intent of this
          Agreement.

19. TERMINATION OF AGREEMENT

    19.1  The initial term of this Agreement shall be five years from the date
          first written above.  Thereafter, this Agreement will renew for
          successive periods of one (1) year each.  This Agreement may be
          terminated during either the initial term or the renewal term in
          accord with the provisions of Sections 19.2, 19.3, 19.4 or 19.5.

    19.2  This Agreement will be automatically terminated if a party files a
          voluntary petition for bankruptcy or reorganization, is the subject of
          an involuntary petition for bankruptcy, has its affairs placed in the
          hands of a receiver, enters into a composition for the benefit of
          creditors, or is deemed insolvent by a court of competent
          jurisdiction.

    19.3  This Agreement may also be terminated if a party is in material breach
          of this Agreement provided the non-breaching party has provided at
          least forty-five (45) days prior written notice and such breach has
          not been cured within said forty-five (45) days.

    19.4  This Agreement may be terminated by DePuy upon 180 days' prior written
          notice to Oratec. Should DePuy provide such written notice of
          termination to Oratec, DePuy's distribution rights hereunder shall
          become non-exclusive during such 180 day period.

    19.5  This Agreement may also be terminated in accordance with the
          provisions of Article 11.3.

    19.6  This Agreement may be terminated by Oratec at the end of the initial
          term upon 180 days' prior written notice to DePuy, which termination
          shall take effect at the end of such 180 day period.

20  OBLIGATIONS UPON TERMINATION

    20.1  Upon termination or non-renewal of this Agreement by Oratec, DePuy
          will return all unsold saleable Products in its possession and will
          use commercially reasonable efforts to retrieve unsold saleable
          Products from its distributors. DePuy agrees not to market Oratec
          Products beyond *** days following

   ***    Confidential treatment requested.
<PAGE>

          termination of this Agreement.  Oratec will reimburse DePuy for such
          inventory in the following manner:

               Sealed, sterile disposable Product:  DePuy cost
               Unused generators and equipment:     DePuy cost
               Demo generators and equipment:       Not reimbursable

          Oratec will pay inventory-shipping costs unless DePuy
          initiates Agreement termination.

    20.2  In the event of termination, DePuy may, at its sole option, decide to
          make its customer listing available to Oratec.

21. COMPLETE AGREEMENT

    21.1  This Agreement constitutes the entire agreement between DePuy and
          Oratec. No modifications of this Agreement shall be binding on either
          party unless made in writing and signed by both parties, and this
          Agreement supersedes and cancels any and all previous contracts,
          arrangements or understandings that may have existed or may exist
          between the parties, whether written or verbal. There are no
          understandings, representations or warranties of any such kind,
          expressed or implied, that are not expressly set forth herein. The
          language of this Agreement shall for all purposes be construed as a
          whole, according to its fair meaning, not strictly for or against
          either party, and without regard to identity or status of any person
          who drafted all or any part of it.

22. NOTICES

    22.1  All notices required under this Agreement shall be sent registered
          mail, return receipt requested, or by other means of verified
          delivery, or by personal delivery, as follows:

          If to Oratec:          Oratec Interventions, Inc.
                                 3700 Haven Court
                                 Menlo Park, CA  94025
                                 Attn:  President

          If to DePuy:           DePuy AcroMed, Inc.
                                 3303 Carnegie Ave.
                                 Cleveland, OH  44115
                                 Attn:  President

          With a copy to:        DePuy AcroMed, Inc.
                                 325 Paramount Drive
                                 Raynham, MA  02767
                                 Attn:  President
<PAGE>

          Either party may change its address for notice purposes by notifying
          the other party of such change of address, such notice to be as
          required herein. Notice is effective when actually received by the
          addressee or when the addressee refuses delivery, or is sent by
          Registered Mail, Return Receipt Requested, on the fifteen (15th) day
          following deposit. If sent by facsimile, notice shall be deemed
          effective when sender receives confirmation of receipt.

23. MISCELLANEOUS

    23.1  Notwithstanding any other provision in this Agreement, the parties
          agree that Sections 4.1, 5.6, 5.7, 7.3, 8.6, 12, 14, 15, 16, 17, 18,
          19, and 20 shall survive the termination of this Agreement.

    23.2  DePuy may not customize, modify or have customized or modified any
          Product.  In the event that DePuy should receive a request from a
          customer or other party for a customized or modified Product, such
          request shall be forwarded to Oratec who will solely be responsible
          for response and/or customization or modification of the Product.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as
of the date and year first written.


Oratec Interventions, Inc.          DePuy AcroMed, Inc.

Date: March 30, 1999                Date:  April 1, 1999
     ------------------------             -----------------------
<PAGE>

Appendix A.

<TABLE>
<CAPTION>
Item Number                                                    Name / Description
----------------------------------------------   -----------------------------------------------

<S>                                              <C>
902002                                           SpineCATH Intradiscal Catheter
                                                 Flexible Intradiscal Catheter specifically
                                                 designed to provide precise hearing over a
                                                 broad intradiscal surface.  (IDET Procedure)

902003                                           ORAflex ElectroThermal Probe
                                                 Unique RF probe featuring a deflectable rip
                                                 for improved posterior access in thermal
                                                 endoscopic herniated disk treatment.

805017                                           ORA 50 S ElectroThermal Spine System Generator
                                                 Designed specifically for spinal procedures,
                                                 the ORA 50 S provides the needed RF output for
                                                 the SpineCATH and ORAflex products.  Includes
                                                 foot pedal and power cord.

902004                                           Needle Introducer (Box of 5)
                                                 For use with the SpineCATH Intradiscal
                                                 Catheter, the 17 gauge needle provides
                                                 minimally invasive access to the internal disc.

802004                                           Needle Bender
                                                 Instrument designed for contouring of the
                                                 Introducer Needle.

805016                                           ElectroThermal System Extension Cable
                                                 Featuring a universal 4 pin connector, the
                                                 Extension cable links either the ORAflex probe
                                                 or the Intradiscal Catheter to the generator.

805012/19                                        Indifferent Electrode Pad
                                                 Grounding pad for monopolar applications
                                                 (ORAflex).

805011/13                                        Indifferent Electrode Adapter
                                                 Plug adapter to facilitate attachment of
                                                 various indifferent electrodes.
</TABLE>
<PAGE>

DePuy Transfer Spine Products Pricing Schedule




<TABLE>
<CAPTION>
Initial Pricing                                        Transfer Price   Demo Price
----------------------------------------------------   --------------   ----------
<S>                                                    <C>              <C>

                  SpineCATH(TM)                         ***              ***

                    ORAflex(TM)                         ***              ***

             SpineCATH Needles                          ***              ***

                     (box of 5)

         Electro Thermal Spine                          ***              ***

                     Generator

                   Probe Cable                          ***              ***
</TABLE>


***  Confidential treatment requested.