form10_72.htm


    EXHIBIT
10.72

       

       

      INTERNATIONAL DISTRIBUTION
AGREEMENT

      


       

          THIS
INTERNATIONAL DISTRIBUTION AGREEMENT (the "Agreement") is made effective on 24
of April, 2009 (the "Effective Date"), by and between Cyberonics, Inc., a
corporation organized under the laws of the State of Delaware, United
States  ("Cyberonics"), and Nihon Kohden Corporation, a
corporation organized under the laws of Japan ("Distributor").

      


      RECITALS

      


          WHEREAS,
Cyberonics is engaged in the research, manufacture, and sale of implantable
medical devices, including the “Products” (as defined below), useful in the
treatment of epilepsy, depression or other treatment-resistant
disorders;

      


          WHEREAS,
Distributor desires to be appointed as exclusive distributor of the “Products”
in the “Field” (as defined below) in the “Territory” (as defined below);
and

      


          WHEREAS,
Cyberonics is willing to appoint Distributor of such distributorship, subject to
the terms and conditions set forth below.

      


          NOW,
THEREFORE, Cyberonics and Distributor, intending to be legally bound, agree as
follows:

      


      
        	
                1.

              	
                 Definitions.

              


      

      


          1.1    The following
capitalized terms shall be defined as follows:

      


      
        
          	
                  (i)

                	
                  “Field”
      shall expressly be limited to
epilepsy.

                


        

      

      


      
        
          	
                  (ii)

                	
                  “Products”
      shall mean those products listed on Schedule A attached hereto, as
      modified from time to time by mutual written agreement or pursuant to
      Section 2.2.

                


        

      

      


      
        
          	
                  (iii)

                	
                  “Territory”
      shall mean Japan, provided that this country is not placed under any kind
      of embargo or trade sanction (“Trade Sanction”) which would prohibit the
      sale of the “Products” to said country.  To the extent that all
      or part of the “Territory” is placed under Trade Sanction, this definition
      shall automatically be amended without the need of any action by the
      parties to exclude such sanctioned country or
  countries.

                


        

      

      


      
        	
                2.

              	
                Distributorship
      Terms.

              


      

      


          2.1    Appointment and
Acceptance.  Subject to the terms of this Agreement, Cyberonics
appoints Distributor as its exclusive distributor of “Products” in the “Field”
in the “Territory”.  Distributor accepts this
appointment.  Subject to Section 2.4, Cyberonics shall not appoint any
other distributor of the “Products” in the “Field” in the “Territory” during the
term of this Agreement.  In the event, during the Term of this
Agreement, Cyberonics proposes to sell any new product in the “Field” in
the  “Territory”, Cyberonics agrees that it will not grant sales,
distribution and marketing rights to such new product to any third party in the
“Territory” without first offering such product to Distributor on terms and
conditions equivalent to those to be offered to the third party.  In
the event Distributor has not accepted such new product for sales, distribution
and marketing on such terms within sixty (60) days after receipt of Cyberonics’
offer, Cyberonics shall be free to enter into such third-party arrangement in
Territory without further obligation to Distributor.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

          2.2    Discontinuation of
Production.  Distributor acknowledges that Cyberonics reserves
the right to discontinue the manufacture, production or distribution of products
(including the “Products”) subject to Section 3.4.  To the maximum
extent practicable, Cyberonics agrees to give Distributor at least one (1)
year  advance written notice of any such decision and shall continue
to provide Distributor with repair service, service parts or any other products
necessary for after-sales service to the discontinued  “Products” for
six (6) years after Cyberonics discontinued any “Products.”   In
addition, if Cyberonics changes any specifications of any “Products” that relate
to the “Products” safety or effectiveness , Cyberonics shall provide Distributor
with as much prior notice as is practicable, endeavoring to give Distributor at
least six (6) months prior written notice.

      


          2.3    Limitation of
Appointment.  Nothing in this Agreement is intended to nor
shall grant Distributor any rights to distribute (a) any products other than the
“Products”; (b) any “Products” for indications outside of the “Field;” or any
“Products” outside the “Territory.”

      


          2.4    Right Reserved by
Cyberonics.  Cyberonics expressly reserves the right to (a)
make, market and sell products other than “Products”; (b) make, market and sell
products (including the “Products”) outside  the “Territory”; (c)
make, market and sell products (including the “Products”) in the “Territory”
outside of the “Field” either directly for its own account or via distributors
or agents.

      


          2.5    No Activities Outside the
“Field” or the “Territory”.  In accordance with Section 2.3,
Distributor shall not solicit sales of “Products” or promote the sale,
distribution or marketing of “Products” outside of the “Field” or the
“Territory”.  Distributor shall not establish an office or warehouse
outside the “Territory” for the sale of “Products”.  In the event
Distributor receives an inquiry or purchase order from a third party for
delivery or sale outside of the “Field” or the “Territory”, Distributor shall
promptly refer such third party, and any inquiry or purchase order submitted
thereby, to Cyberonics, it being understood that in no event shall Distributor
fill any portion of any such purchase order unless Cyberonics first consents in
writing.  In addition, Distributor shall not, without the prior
written consent of Cyberonics, supply Products to any customer if Distributor
knows that such customer will actively sell those Products into territories
which are not reserved to Distributor or are allocated exclusively to another
reseller. Distributor
shall immediately notify Cyberonics upon learning that Product sold by
Distributor has been used outside of the “Field” or removed from the
“Territory”.

      


          2.6    Sub-Distributors.  Distributor
will purchase the “Products” from Cyberonics for resale on Distributor’s own
account and   Distributor shall notify Cyberonics of its Sales
subsidiaries  for the distribution of “Products” in the “Field” in the
“Territory”.

      


      
        	
                3.

              	
                Prices and
      Terms.

              


      

      


          3.1    Purchase
Orders.  During the term hereof, Distributor shall order
“Products” from Cyberonics by submitting a written purchase order
identifying:  the “Products” ordered by catalog number and quantity;
the requested delivery date(s); and any export/import information required to
enable Cyberonics to fill the order.  All purchase orders for
“Products” are subject to acceptance by Cyberonics by either shipping the
“Products” or issuing a written order acknowledgement. Cyberonics reserves the
right to fulfill purchase orders in one or more shipments. In case of such
partial shipments, Cyberonics shall follow Distributor’s shipping instruction
and shall not ship without prior consent of Distributor.  Cyberonics
shall have no liability to Distributor with respect to purchase orders which are
not accepted; provided, however, that Cyberonics will use reasonable efforts to
accept any purchase order for “Products” which does not require any modification
or addition in order to meet the specifications of Distributor or its customers,
and which corresponds to quantities of “Products” forecast by Distributor in
accordance with Section 3.2. Should Cyberonics decide not to accept a purchase
order, Cyberonics shall provide Distributor with a written order rejection
within  five(5) days after receiving the purchase order.  If
Cyberonics does not provide such an order rejection, the purchase order is
considered to be accepted.

       

          3.2    Forecasts.  To
facilitate Cyberonics' production scheduling, within five (5) business days of
the beginning of each calendar month during the Term, Distributor shall provide
Cyberonics in writing with a rolling, non-binding forecast of Distributor's
anticipated monthly requirements of “Products” for the six (6) month period
commencing on the month following the month of such
forecast.  Distributor agrees to use its best efforts to make each
such forecast as accurate as possible.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

          3.3    Product
Prices.  In consideration of Cyberonics providing “Products”
ordered by Distributor, Distributor shall pay Cyberonics the amount set forth on
Schedule A.   No price change necessitated by a change in the
reimbursement amount shall affect “Products” ordered pursuant to purchase orders
accepted by Cyberonics prior to the date such price change becomes
effective.  In the event that the “Product” price under this Agreement
increases, Distributor’s purchases of “Products” at the previous price shall be
limited to the number of “Products” actually purchased by Distributor in the
three-month period immediately prior to the price increase.  Any
purchase orders for “Products” in excess of this defined amount shall be at
Cyberonics’ discretion.

      


          3.4    Price Increase or Product
Discontinuance.  In the event Cyberonics wishes to seek a price
increase or Product discontinuance, Cyberonics shall notify Distributor and the
parties shall negotiate in good faith regarding the requested price increase or
Product discontinuance.  

      


          3.5    Sole
Remuneration.  The difference between Distributor's resale
price and the purchase price due to Cyberonics under Section 3.3 shall be
Distributor's sole remuneration for the distribution of the “Products” by
Distributor pursuant to this Agreement.

      


          3.6    Cancellation, Rescheduling,
and Returns.  Purchase orders placed by Distributor and
accepted by Cyberonics shall not be canceled or rescheduled unless mutually
agreed upon by both parties, except purchase orders may be canceled if
“Products” are not shipped within thirty (30) days of the delivery date
requested in the corresponding purchase order.  Except in cases of the
return of “Products” which qualify for coverage under the Cyberonics’ Limited
Replacement Warranty set forth on Schedule D and the return of “Products” that
do not conform to Distributor’s order, “Products” may not be returned for any
reason without first obtaining Cyberonics' prior written consent and adhering to
Cyberonics’ Return Policy as set forth in Schedule C, as amended by Cyberonics
upon six (6) months prior written notice to Distributor. Except in cases of the
return of “Products” which qualify for coverage under the Cyberonics’ Limited
Replacement Warranty set forth on Schedule D and the return of “Products” that
do not conform to Distributor’s order, Distributor will bear the cost of and
risk of loss or damage associated with the return of “Products”.

      


          3.7    Compliance with
Laws.  The ultimate shipment of “Products” to Distributor shall
be subject to the right and ability of Cyberonics to make such sales, and obtain
all required licenses and permits, under all applicable decrees, statutes,
rules, laws and regulations then in effect, whether promulgated by the
government of the United States, the governments of the countries comprising the
Territory or any other governmental body and agencies or instrumentality’s of
the foregoing.  Any purchase order, which has been accepted by
Cyberonics but which cannot be fulfilled due to any such decree, statute, rule,
or regulation shall be considered to have been rejected when submitted to
Cyberonics for acceptance or rejection.  Distributor will: (i) apply
for all approvals required for the commercialization of the “Products” in the
“Territory” in Distributor’s name; (ii), transfer such approvals as directed by
Cyberonics upon such termination or expiration of this Agreement as set forth in
Section 8.7.1 or 8.7.2,  after Distributor receives the termination
fee from Cyberonics according to Section 8.7.1 or 8.7.2, if possible under
applicable law; (iii) comply with all decrees, statutes, rules, laws and
regulations then in effect, which shall be applicable to Distributor, whether
promulgated by the government of the United States (including, but not limited
to the Foreign Corrupt Practices Act and Export Administration Regulations), the
government of the Territory or any other governmental body and agencies or
instrumentality’s of the foregoing; (iv)  maintain the necessary
records to comply with such decrees, statutes, rules, laws and regulations; (v)
not  export any “Products” except in compliance with such decrees,
statutes, rules, laws and regulations; (vi) not sell, transfer or otherwise
dispose of “Products” in violation of applicable export decrees, statutes,
rules, laws and regulations then in effect; and (vii)  indemnify and
hold harmless Cyberonics, its parent, officers, directors, and employees from
any and all fines, damages, losses, costs and expenses (including reasonable
attorneys' fees) incurred by Cyberonics as a result of any breach of this
Section 3.7 by Distributor or any of its sales subsidiaries
..    It is further agreed that Distributor will notify
Cyberonics of any known, material developments in the applicable decrees,
statues, rules, laws and regulations applicable to the sale of the “Products” in
the “Territory” to the extent reasonably practicable.

      


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          
    3.8    Shipping.  Unless
Distributor requests otherwise, all “Products” ordered by Distributor pursuant
to this Agreement shall be packed for shipment and storage in accordance with
Cyberonics' standard commercial practices and shipped directly to Distributor.
Cyberonics will attempt to comply with any special packaging requirements
requested by Distributor, provided that Distributor bears any and all expense
associated with Cyberonics’ compliance. Distributor shall purchase the Products
from Cyberonics EXW (as defined under Incoterms 2000 of the International
Chamber of Commerce) place of manufacture with title and risk of loss to
“Products” passing to Distributor upon delivery of the Products to the carrier
designated by Distributor at the EXW point.  Distributor will inspect
the “Products” promptly upon arrival. To the maximum extent that non-conformity
can be discovered, all claims for non-conforming shipments must be made in
writing to Cyberonics within thirty (30) days of the receipt of the “Products”
by Distributor.  Any claims for discoverable non-conformities not made
within such period shall be deemed forever waived and
released.

      

      


          3.9    Payment.  All
amounts due and payable with respect to “Products” purchased by Distributor
shall be paid within 60 days after the invoice date.    All
such amounts, and any other payment due pursuant to the terms of this Agreement,
shall be paid in United States dollars by wire transfer of immediately available
funds to the bank listed below (or such other bank as Cyberonics may specify in
writing) or, if applicable law or regulation prohibits paying in United States
dollars, by other means specified in writing and mutually agreed by both parties
to the account information provided by Cyberonics in writing from time to time.
All costs incurred in connection with any such wire transfer shall be the
responsibility of Distributor.  Whenever any amount hereunder is due
on a day which is not a day on which the bank to which payments are to be made
by Distributor to Cyberonics hereunder is open for business (a "Business Day"),
such amount shall be paid on the next Business Day.  Amounts due
hereunder shall be considered paid as of the day such funds are received by the
aforementioned bank.  No part of any amount payable to Cyberonics
hereunder may be reduced due to any counterclaim, set-off, adjustment or other
right which Distributor might have or assert against Cyberonics, its parent, any
other party or otherwise.

      


          3.10    Credit Line.
At Cyberonics’ sole option, Cyberonics may from time to time grant Distributor a
credit line in an amount and at terms established by
Cyberonics.  Cyberonics reserves the unilateral right to modify,
decrease, increase or cancel said credit line upon written notice to
Distributor.  At all times, the maintenance of the credit line will be
conditioned upon the prompt payment by Distributor of all amounts due and
payable under this Agreement. No modification or cancellation of the credit line
shall constitute a waiver by Cyberonics of any of its rights or
Distributor’s obligations pursuant to this Agreement including, but not limited
to, the obligation of Distributor to make payments as provided
herein.  Subject to the terms of this Article 3, as of the Effective
Date, Cyberonics agrees to grant Distributor an initial credit line of
$1,500,000.00.

      


          3.11    Late
Payments.  In addition to the other rights of Cyberonics
hereunder, all amounts due and owing to Cyberonics hereunder but not paid by
Distributor on the due date thereof shall bear interest in United States dollars
at the rate of the greater of: (i) One per cent (1%) per annum above the then
applicable prime interest rate per annum then in effect by Bank of America in
United States dollars on the invoice date; or (ii) the maximum lawful interest
rate permitted under applicable law. Such interest shall accrue on the balance
of unpaid amounts from time to time outstanding from the date on which portions
of such amounts became due and owing until payment thereof in
full.  Cyberonics reserves the right to require advance payment or to
decline to accept or make shipment against purchase orders if Distributor is
delinquent in payments or, in Cyberonics’ sole opinion, Distributor’s ability or
willingness to pay appears doubtful.

      


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

          3.12    Currency
Conversion.  If any currency conversion is required in
connection with the calculation of payments hereunder, such conversion shall be
made using the selling exchange rate for conversion of the foreign currency into
United States dollars, quoted for current transactions reported in The Wall
Street Journal for the invoice date.

      


          3.13    Return
Policy.  Except in cases of the return of “Products” which
qualify for coverage under the Cyberonics’ Limited Replacement Warranty set
forth on Schedule D and the return of “Products” that do not conform to
Distributor’s order,, the return of Products shall be made pursuant to the terms
of Cyberonics' return policy.  Said return policy is attached hereto
as Schedule C, and may be changed by Cyberonics upon six (6) months prior
written notice to Distributor.  Cyberonics shall have no duty to
accept for return “Products” reported by Distributor to Cyberonics as
sold.

      


          3.14    Governing
Document.  This Agreement, together with its Schedules, shall
supersede any terms used by Cyberonics or Distributor in the ordering, shipment
and receiving of “Products” including, but not limited to, the terms (excluding
quantity) appearing on Distributor’s purchase order or other documents, none of
which shall apply to transactions entered into for the supply of Products
pursuant to this Agreement. 

      


      
        	
                4.

              	
                Distributor's
      Duties.

              


      

      


          4.1    Distributor's
Efforts.  Distributor will use its best efforts to aggressively
and vigorously promote the sale of “Products” in the “Field” in the “Territory”
including, but not limited to, maintaining, at its own expense, a suitable place
of business in the “Territory” staffed with a competent sales
force.  Distributor will use its best efforts to maintain and promote
and do nothing to detract from the good name of Cyberonics or the reputation of
“Products”.  At Cyberonics' request, Distributor will attend, exhibit
and assist at trade shows, physician meetings and other professional gatherings
in the “Territory” at Distributor’s own expense.

      


          4.2    Payment of
Account.  Distributor will promptly pay its account with
Cyberonics when due.

      


          4.3    Purchase
Goals.  Distributor agrees to establish and work diligently to
meet or exceed the minimum purchase goals attached as Schedule B
hereto.  The parties expressly agree to review said annual purchase
goals (a) on or about ninety (90) days after the initial establishment of the
reimbursement amount for the “Products” in the “Territory” by Japan’s Ministry
of Health, Labour and Welfare; and (b) on or about sixty (60) days prior to the
end of each year of the Term.

      


          4.4    Reports.  Distributor
will provide Cyberonics with quarterly reports of Distributor's sales in the
“Territory” on a hospital-by-hospital basis in sufficient detail to allow
Cyberonics to confirm that Distributor is meeting its purchase
goals.  Distributor will also provide Cyberonics with quarterly
reports of its efforts to seek and support reimbursement, the reimbursement
environment in the “Territory” and Product approval-related
activities.  Upon request, Distributor will provide Cyberonics with
adequate financial information, on a confidential basis, or credit references to
assure Cyberonics of Distributor's ability to timely pay its
account.

      


          4.5    Regulatory
Compliance.  Distributor will comply with all applicable
decrees, statutes, rules, laws and regulations applicable to its distribution of
“Products” (including prohibitions on the promotion of off-label use) and keep
Cyberonics informed with respect to such decrees, statutes, rules, laws and
regulations and the “Products”-related regulatory submissions and
approvals.  Distributor will submit copies of such regulatory
submissions and approvals to Cyberonics  after such submissions
are  permitted by or approvals are submitted by the applicable
regulatory authority and receipt of such approval by Distributor, provided that,
Cyberonics shall not submit regulatory application to  Japan’s
Ministry of Health, Labour and Welfare using such copies of the Distributor’s
submissions or resulting approvals without obtaining prior written consent of
Distributor.    

      


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

          4.6    Adverse Event
Reporting.  If  either party becomes aware of any
death or serious injury (collectively, a “Complaint”) that is, is alleged to be
or may have been caused, in whole or in part, by a defect in or malfunction of
one or more of the “Products”, it will report such Complaint to the other party
in writing within  three (3) business days after having knowledge of
said Complaint by facsimile  or electronic mail (to Cyberonics by
facsimile at 281-853-1222, Attention: Clinical/Technical Services Department, or
by electronic mail at clinicaltechnicalservices@cyberonics.com or to Distributor
by facsimile at Japan 3-5348-1518 and provide  the other party with
such documentation and assistance in investigating and reporting such Compliant
as required by the applicable laws in accordance with Schedule E hereto to the
extent reasonable practical and the Pharmaceutical Affairs Law in
Japan.  Either party is obligated to notify the other party under this
Section 4.6 without regard to whether there is or appears to be a valid basis
that any Complaint is related to the Products.  Either party will
cooperate with the other party in assuring that all vigilance reporting is
completed.  If permitted by applicable regulatory authority,
Cyberonics shall be responsible for investigating  and reporting
Complaints as required by the applicable laws and Distributor will cooperate
with Cyberonics in the conduct of such investigations and reporting or, if the
applicable regulatory authority will not permit Cyberonics to do such
investigations and reporting, Distributor will be responsible for
investigating  and reporting Complaints as required by the applicable
laws and Distributor will send Cyberonics copies of all related
documents.  It is specifically agreed by the parties that they will
endeavor to work together in order to properly report any MDRs as required by
applicable law.  To the extent that Distributor is required by law to
report MDRs to  Japan’s Ministry of Health, Labour and Welfare,
Distributor agrees to provide Cyberonics  with advance copies of any
proposed submissions in English and agrees that no such proposed submission will
be submitted unless Cyberonics has approved same.   Cyberonics
agrees to provide Distributor with any submissions made by it to the U.S. FDA
that relates to “Products” sold pursuant to this Agreement.

      


          4.7    Recalls.  Cyberonics
shall be responsible for conducting any recall of any or all of the “Products”
initiated by Cyberonics or governmental authority acting within or outside of
the “Territory.”  In the event of any Products recall in Japan,
whether it is initiated by Cyberonics or Distributor (if such recall is mandated
by the Japanese regulatory authorities), both parties shall fully cooperate on
the recall.  In principle, if the recall requires the removal of
“Products” from the market, Distributor shall recall the “Products” in Japan and
shall return the recalled “Products” to Cyberonics. Cyberonics shall provide
Distributor with substitute products for the recalled “Products”.  Distributor shall
also maintain the documentations establishing the effectiveness of its efforts
to initiate and/or support the recall, as appropriate, and provide Cyberonics
with access to such documentation as requested by
Cyberonics.   Cyberonics shall reimburse Distributor for
reasonable expenses incurred by Distributor to conduct the
recall.  Distributor shall cooperate with Cyberonics in any such
recall.  In order to assist Cyberonics in the event of a recall,
Distributor will maintain for a period of not less than ten (10) years a
complete and current listing of the locations of all “Products” in Distributor's
inventory, the names and addresses of customers who have purchased “Products”
from Distributor, together with the model number, lot number and serial numbers
of “Products” purchased and the date of such purchase.  Distributor
agrees to make the foregoing information available to Cyberonics or governmental
authority acting within or outside the “Territory” upon request by
Cyberonics.  Within 30 days after expiration or termination of this
Agreement, Distributor will provide a copy of its records containing the
foregoing information to Cyberonics.

      


          4.8    Traceability, Complaints and
Complaint Reporting.  Distributor shall comply with the
traceability program that the parties mutually agree upon in
writing.   Cyberonics has the right to review said traceability
program and the related compliance-related records at reasonable
times.

      


          4.9    [Intentionally Left
Blank]

      


          4.10   No Prohibited Payments to
Public Officials.  Distributor will not, directly or
indirectly, make any payment which are prohibited under the laws promulgated by
the government of the United States, which shall be applicable to Distributor,
or any law of the “Territory”  and shall otherwise comply with the
laws and regulations then in effect in the “Territory”, if any, governing
interactions with government officials, political parties, political officials
or candidates for political office (or any agents, employees or representatives
thereof).


      
        
           


        

        
           


          
            

          

        

        
           


        

      


      


          4.11    Training.  Distributor
shall be responsible for training all of its personnel who promote “Products” so
that they are knowledgeable about the “Products” and can aggressively and
vigorously promote the “Products” in accordance with the terms
hereof.

      


          4.12    Attendance at
Meetings.  At Cyberonics' request, Distributor shall at
Distributor’s expense have one or more representatives attend product- and
company-related educational meetings at least once each year during the term
hereof.

      


          4.13    Product
Warranty.    The exclusive warranty relating to the
“Products” shall be as set forth in the attached Schedule D.  Said
warranty may be changed from time to time upon mutual agreement of the
parties.

      


          4.14    Technical
Support.  In the “Territory”, Distributor will provide
technical support for “Products” during its normal business hours and will
publicize this service in its advertising and literature.

      


          4.15    Distributor's
Expenses.  All costs including, but not limited to, salaries,
commissions, bonuses, and other compensation expenses, and contributions to
social security or other social program payments, benefits, severance pay, and
other expenses incurred by Distributor in connection with its performance of
this Agreement and the maintenance of its sales force shall be borne solely by
Distributor.

      


          4.16    Insurance
Requirement.  Distributor will obtain reasonable amounts of
insurance to protect it and its employees for loss of or damage to inventory and
liability for personal injury and/or property damage arising from Distributor's
activities hereunder, and any other insurance, which may be required in the
“Territory” in which Distributor distributes “Products”.  Cyberonics
shall have the right to examine such insurance policies upon
request.

      


          4.17    Conflict of
Interest.  Distributor warrants and agrees that during the term
of this Agreement, it shall refrain from (i) having any direct or indirect
financial interest consciously in any entity or person that is developing,
manufacturing, clinically investigating or distributing products that compete
with “Products”; or (ii) assisting, engaging in or inducing others to engage in
the development, production, sale, offering for sale or representation of
products that compete with “Products”.  Ownership of mutual funds or
interests in retirement plans managed by an independent trustee will not violate
this obligation.

      


          4.18    Non-Compete.  Distributor
warrant and agree that it does not as of the Effective Date and will not during
the Term of this Agreement and, solely in the case that this Agreement is
terminated  by Cyberonics with cause, for a period of one (1) year
after its expiry or termination, without obtaining the prior written consent of
Cyberonics, directly or indirectly represent, sell, distribute, or promote, or
assist in the sale, distribution, or promotion of any products in the
“Territory” which directly compete with any of the “Products” ,as hereinafter
defined.  The products which directly compete with the “Products”
shall mean implantable medical devices used to stimulate the vagus
nerve.  The parties agree that a breach by Distributor of this Section
4.18 will result in irreparable injury to Cyberonics and Cyberonics will not be
adequately compensated for such damages by monetary award
alone.  Accordingly, the parties agree that in the event of any such
breach, in addition to other remedies available at law, equity, or otherwise,
Cyberonics shall be entitled as a matter of right to relief by injunction,
restraining order, decree or other such relief as may be appropriate to ensure
compliance by Distributor. Any remedy expressly set forth in this Section 4.18
shall be in addition to and not inclusive of or dependent upon the exercise of
any other remedy available at law, equity, or otherwise.  The parties
agree that the non-compete restrictions set forth in this Section 4.18 are
reasonable, necessary, and fundamental to the protection of
Cyberonics.

      


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

          4.19    Indemnification.  Distributor
shall indemnify and hold Cyberonics and its parent and their directors,
officers, employees, and agents harmless from any loss, damage, cost, and
expense, including attorney's fees and other professional expenses, arising
from:  a) losses relating to the liability of Distributor as an
employer for claims by Distributor's employees, sub-distributors or agents; b)
injury to persons or damage to property caused by the willful act or negligence
of Distributor or Distributor's agents in the distribution, sale,
transportation, possession or use of “Products”; c) any claim arising from
warranties made by Distributor different from or in addition to those made in
writing by Cyberonics and attached hereto as Schedule D; and d) any claims
arising out of the dissemination of marketing materials which contain claims
that are not consistent with the “Products” labeling.

      


          4.20    Labeling.  It
is acknowledged by the parties that (1) Distributor shall submit any proposed
labeling to Cyberonics for pre-approval (with an English translation) and that
such labeling may not be used in connection with the “Products” until approved
by Cyberonics; (2) Distributor will attach statutory labels as required under
the laws of the “Territory” to the packaging of “Products;” and (3) provided
that such labeling is approved by Cyberonics, the attachment of statutory labels
shall be authorized and shall not be deemed as any alteration of the packaging,
form or design of “Products” for the purpose of this Agreement.

      


          4.21    Access to
Records.  Distributor shall grant Cyberonics access to its
non-confidential books and records relating to the distribution of the
“Products” (excluding books and records relating to the pricing between
Distributor and its sub-distributors) upon reasonable notice and at an agreed
upon time and place.

      


          4.22    Clinical
Matters.  It is acknowledged by the parties that Cyberonics
shall have primary responsibility and decision-making powers regarding any
clinical matters relating to the “Products” including, but not limited to, the
drafting of any study protocols involving the “Products.”

      


          4.23    Marketing
Materials.  Distributor shall submit copies of major advertising and
other promotional materials relating to the “Products” which it will use or uses
in the “Field” in the “Territory” to Cyberonics.   To the maximum
extent possible, Distributor shall submit such materials to Cyberonics in
advance of their printing or other distribution.

      


      
        	
                5.

              	
                Intellectual
      Property.

              


      

      


          5.1    Cyberonics' Intellectual
Property.  Distributor acknowledges that the patents,
trademarks, trade names, emblems, designs, models and methods of Cyberonics
(“Intellectual Property”) relating to the “Products” are the sole property of
Cyberonics and Distributor will take no steps to challenge or impair
same.  Distributor will not acquire any right, title or interest in
the Intellectual Property by virtue of the execution or performance of this
Agreement, nor at any time describe or represent itself to others as having such
right, title or interest.

      


          5.2    Distributor's Use of
Intellectual
Property.  Distributor shall use the Intellectual Property only
in connection with and to the extent necessary to promote, solicit and sell the
“Products”.  Distributor will promptly notify Cyberonics of any
improper use of any trademark of Intellectual Property in the “Territory”, which
comes to the attention of Distributor.  Upon termination of this
Agreement, Distributor shall cease using all trademarks of Intellectual
Property.

      


      
        	
                6.

              	
                Confidential
      Information; Cyberonics' Property.

              


      

      


          6.1    Confidential
Information.  Except as expressly provided herein, for the term
of this Agreement and for five (5) years thereafter, either party (“Receiving
Party”) shall not publish or otherwise disclose and shall not use for any
purpose, except as expressly permitted herein, any information which is
furnished to it by the other party (“Disclosing Party”) pursuant to this
Agreement and which is marked as proprietary or confidential or which is
disclosed orally as proprietary and/or confidential and is confirmed in writing
as so within thirty (30) days of initial disclosure ("Confidential
Information").  Notwithstanding the foregoing, it is understood and
agreed that Confidential Information shall not include information that, in each
case as demonstrated by written documentation:

      


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

          (a)    was already
known to Receiving Party, other than under an obligation of confidentiality, at
the time of disclosure;

      


          (b)    was generally
available to the public or otherwise part of the public domain at the time of
its disclosure to Receiving Party;

      


          (c)    became
generally available to the public or otherwise part of the public domain after
its disclosure and other than through any act or omission of Receiving Party in
breach of this Agreement; or

      


          (d)    was
subsequently lawfully disclosed to Receiving Party by a person other than a
party hereto or independently developed by Receiving Party without reference to
any Confidential Information disclosed by Disclosing Party.

      


          6.2    Cyberonics'
Property.  Cyberonics may from time to time provide Distributor
with demonstration “Products”, models, advertising materials, booklets and
brochures, reprints of technical articles and marketing plans, and any such
material shall remain the sole property of Cyberonics.  Such items
remaining in the possession of Distributor shall be, at Cyberonics’ request at
the time of expiration or termination of this Agreement, promptly returned to
Cyberonics or destroyed at Cyberonics’ option.

       

      
        	
                
                  7.

                

              	
                Indemnification
      of Distributor.

              


      

       

          7.1    Limitation of Indemnity
Rights. To the maximum extent permissible by applicable law, the
indemnification rights established in this Article 7 shall be to the exclusion
of any and all other indemnification rights available.

      


          7.2    By Cyberonics.
Notwithstanding anything to the contrary contained herein (including but not
limited to the provision of  Section 10.9), Cyberonics shall indemnify
and hold Distributor harmless from and against all costs, expenses, claims,
demands, causes of action, damages and judgments (collectively called “Claim”),
including reasonable attorney's fees as follows:  (i) Any “Claim”
alleging loss or damage, personal injury or death, arising out of the purchase,
operation and/or use of the “Products” or any of the “Products” by third
parties; and (ii) Any “Claim” alleging that the “Products” or any of the
“Products” directly infringe any third party’s legally enforceable intellectual
property rights protected by laws in the “Territory”.  Excluded from
this provision, in addition to any indemnification of Cyberonics by Distributor
in accordance with Section 4.19, are any “Claim” which is the result of the
negligent or willful act, omission, or misconduct of Distributor, its officers,
employees, or agents, including but not limited to:

      


          (1)    any warranty,
express or implied, unauthorized by Cyberonics; or

      


          (2)    (i) any
physical or chemical change in the form of a Product made intentionally by the
Distributor,

      


              (ii) improper
storage, handling, or transportation of a Product by the Distributor, including,
but not limited to, improper or unauthorized repackaging or removal of the
Product from its original packaging or canister; or

      


              (iii) “Products”
which after distribution or sale by Cyberonics to Distributor have been labeled
except for such statutory labels set forth in Section 4.20 or used by or on
behalf of Distributor as a container, part or ingredient of any other product or
substance.

      


          7.3    Conditions of
Indemnification.  Cyberonics shall not be obligated to
indemnify Distributor under Section 7.2 unless:

      


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

          (a)    Distributor
gives Cyberonics prompt written notice of any “Claim” for which it seeks
indemnification;

      


          (b)    Distributor
fully cooperates with Cyberonics in the defense of the “Claim”;

      


          (c)    Cyberonics
shall have the sole right to defend and to control the defense of any such
“Claim” in the manner it deems advisable, including using counsel of Cyberonics'
choice; and

      


          (d)    Cyberonics
shall have the sole right to settle any such “Claim”, provided any such
settlement completely releases Distributor and that the settlement terms do not
provide for an admission of liability by Distributor.

      


          7.4    Limited to
Distributor.  The indemnity in Section 7.2 applies only to
Distributor and not to any other person or entity.

      


          7.5    Survival of
Indemnity.  The indemnity of Section 7.2 shall apply to all
“Products” sold by Distributor in the “Field” in the “Territory” during the term
of this Agreement and shall survive the termination of this
Agreement.

      


          7.6    Limitation.
Notwithstanding anything to the contrary contained herein, in no event will
Cyberonics be liable to Distributor for indirect, incidental, special or
consequential damages for such “Claims” such as those referred to in Section
7.2, or for any other Claims, nor shall Cyberonics be liable to Distributor for
any loss of revenue or profit, or for any loss of goodwill or reputation. Any
and all damages for which Distributor shall indemnify any third party in
compliance with any decision of the court shall not be deemed such indirect,
incidental, special or consequential damages mentioned above.

      


      
        	
                8.

              	
                Term and
      Termination.

              


      

      


          8.1    Term.  Subject
to earlier termination as provided herein, this Agreement shall take effect on
the “Effective Date” and will continue until the fifth anniversary thereof (the
“Term”) and shall be automatically renewed for additional one year periods,
unless either party gives to the other party written notice not to renew this
Agreement at least six (6) months prior to the expiration of the Term of this
Agreement or any renewal thereof.  For purposes of this Agreement, the
term “Start Date” is defined as the date of the initial establishment of the
reimbursement amount for the first of the “Products” in the “Territory” by
Japan’s Ministry of Health, Labour and Welfare.

       

          8.2    Termination For
Breach  Either party may
terminate this Agreement in the event the other party breaches this Agreement
(including that Distributor fails to meet any purchase goals on an annual total
basis for periods subsequent to Year One (defined on Schedule B), which shall be
agreed upon by the parties during the Term, Distributor fails to follow any of
the aforementioned traceability programs, or Distributor fails to comply with
the reporting procedures) by giving the breaching party written notice
describing the breach in detail and giving the breaching party thirty (30) days
to cure the breach.  If the breach has not been cured within the
thirty (30) days of receipt of such notice, the party giving such notice may
immediately terminate the Agreement upon notice to the breaching
party.  If a breaching party who has been given written notice and
cured a breach subsequently commits the same breach, then the other
non-breaching party shall have the right to immediately terminate the Agreement
without further opportunity to cure and without further obligation.

      


          8.3    Immediate
Termination.  Notwithstanding anything to the contrary
contained herein, Cyberonics may terminate this Agreement immediately upon
notice without further obligation to Distributor in the event
that:  (i) Distributor directly or indirectly sells “Products” to a
country under Trade Sanctions; or (ii) Distributor deliberately renders its
assistance to the sale or implantation of expired “Products”.

      


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

          8.4    Termination for
Insolvency.  Upon the filing of a petition in bankruptcy,
insolvency, or reorganization against or by either party, or either party
becoming subject to a composition for creditors, whether by law or agreement, or
either party going into receivership or otherwise becoming insolvent (the
"Insolvent Party"), this Agreement may be terminated by the other party by
giving written notice of termination to the ”Insolvent Party”, such termination
being effective immediately without further obligation upon giving of such
notice.

      


          8.5    Termination Due to Change in
Control.   If either party is acquired by or merged into
any third party or in the event of a change in 50% or more of the ownership of
either party, including sale, transfer or relinquishment of any such an interest
in the ownership of the business, the other party may terminate this Agreement
immediately upon notice.

      


          8.6    Termination Due to
Competition.  Cyberonics may terminate this Agreement
immediately upon notice without further obligation to Distributor in the event
Distributor directly or indirectly sells or promotes any product which directly
competes with the “Products” as defined in Section 4.18.

      


          8.7    Termination
Fee.

      


                8.7.1   In the event that Cyberonics
terminates this Agreement other than pursuant to Section 8.3, 8.4 or 8.6 or
Cyberonics gives Distributor written notice not to renew this Agreement beyond
the Term in accordance with Section 8.1, one of the following termination fees
shall be due to Distributor according to the effective date of said termination
or expiration within thirty (30) days of the effective date of said termination
or expiration:

      


      
        
          
            	
                    Start
      Date to the third anniversary thereof

                  	
                    $***

                  
	
                    Third
      anniversary of the Start Date plus one day to the fourth anniversary
      thereof

                  	
                    $***

                  
	
                    Fourth
      anniversary of the Start Date plus one day to the fifth anniversary
      thereof

                  	
                    $***

                  
	
                    Fifth
      anniversary of the Start Date plus one day to the sixth anniversary
      thereof

                  	
                    $***

                  


          

        

      

      


                8.7.2    In the event that the
definition of “Products” is amended by mutual consent of the parties to include
a VNS TherapyTM System which includes a model of the generator that is not
available for commercial sale in the United States as of the Effective Date and
Distributor obtains the governmental approvals for the commercialization of such
new Products in the Territory (the “New Products Approval”), the termination
fees set forth in Section 8.7.1 shall be replaced with the
following:

      


      
        
          	
                  Effective
      date of the “New Products Approval” to the first anniversary
      thereof

                	
                  $***

                
	
                  First
      anniversary of the “New Products Approval” plus one day to the second
      anniversary thereof

                	
                  $***

                
	
                  Second
      anniversary of the “New Products Approval” plus one day to the third
      anniversary thereof

                	
                  $***

                
	
                  Third
      anniversary of the “New Products Approval” plus one day to the fourth
      anniversary thereof

                	
                  $***

                


        

      

       

      
 

      
        
          	
                  ***
      Portions of this page have been omitted pursuant to a Confidential
      Treatment request and filed separately with the
  Commission.

                


        

      

      



      
        
           


        

        
           


          
            

          

        

        
           


        

      


      


          8.8    Effects of
Termination.

      


                8.8.1   In the event that either
party terminates this Agreement as authorized herein, all rights of the parties
(other than the right of Cyberonics to collect any outstanding balances and the
rights which survive termination pursuant to Section 8.9) will immediately cease
as of the effective date of the termination. Except for the right of Cyberonics
to collect any outstanding balances and the rights which survive termination
pursuant to Section 8.9, no party terminating this Agreement in accordance with
this Article 8 shall be liable to the
other party by reason of said termination (including, but not limited to, any
liability for indemnification payment, lost profits or prospective profits or
damages relating to expenditures, investments or commitments in connection with
the business or goodwill).

      


                8.8.2   Within twenty (20) business
days of the termination or expiration of this Agreement, Distributor agrees to
make its current inventory of “Products” (whether in its possession or
otherwise) available to Cyberonics for inspection and
testing.  Cyberonics agrees to evaluate whether it would like to
repurchase “Products” which, in Cyberonics’ sole opinion and subject to
Cyberonics' inspection, testing, and acceptance, are saleable, in their original
packaging and unaltered from their original form and design.  Said
repurchase will be at the original invoice price.  Any Product that
has not been paid for by Distributor must be immediately returned to Cyberonics,
without obligation of re-purchase.  For one (1) year after the
expiration or termination of this Agreement, Distributor may sell any of the
inventory of Products in its possession at the time of termination or expiration
of this Agreement if Cyberonics does not elect to directly or indirectly
re-purchase pursuant to this Section 8.8.2. Notwithstanding the provision of
Section 5.2, Distributor may continue to use the trademarks of Cyberonics but
only to the extent necessary for this stated
purpose.   

      


             8.8.3   At Cyberonics’ request at
the time of expiration or termination of this Agreement, promptly, but in no
event more than thirty (30) days, following expiration or termination of this
Agreement, Distributor shall return to Cyberonics all Confidential Information
and property of Cyberonics' in Distributor's possession or destroy them at
Cyberonics’ option.

      


                8.8.4   Upon termination or
expiration of this Agreement, Cyberonics or its designee shall be responsible
for  after-sales service to all “Products” which Distributor sold in
“Territory”, including, without limitation, repair service and supply of service
parts, accessories or other necessary products.

      


          8.9   Survival.  All
provisions in this Agreement intended to be observed and preformed after
expiration or termination hereof, including, without limitation, Articles 6, 7
and 10, and Sections 2.3, 2.4, 3.7, 3.9, 3.10, 3.11, 3.13, 4.2, 4.5, 4.6, 4.7,
4.8,4.13, 4.15, 4.16, 4.18 (for the period stated therein), 4.19, 8.8 (in its
entirety), 8.9, 10.1, 10.3, 10.14 and 10.15 shall survive expiration or
termination of this Agreement.

      


          8.10    Clinical
Trials.   Both parties acknowledge that this Agreement is
based upon the premise that all governmental approvals for the commercialization
of Products in the Territory will be obtained by Distributor without clinical
trials.  In the event that clinical trials are required by Japan’s
Ministry of Health, Labour and Welfare for obtaining the approvals, both parties
shall review and amend the provisions of this Agreement related to the
approvals, including without limitation, the costs for obtaining the approvals,
the transfer of the approval to Cyberonics and the termination fees set forth in
Section 8.7.  If the parties fail to reach an agreement to amend this
Agreement for such clinical trials, either party may terminate this Agreement by
giving written notice to the other party.

      


          8.11    Post-Marketing Surveillance
Studies.     The parties have agreed as follows
regarding  post-marketing surveillance studies that may be required by
Japan’s Ministry of Health, Labour and Welfare :  (A) Distributor
shall bear all costs and expenses associated with  the post-marketing
surveillance studies required by Japan’s Ministry of Health, Labour and Welfare;
and (B) Cyberonics shall bear any costs and expenses associated with any
additional data collection or studies that it may request that is not otherwise
required by Japan’s Ministry of Health, Labour and Welfare.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      
 

      
        	
                9.
      

              	
                [INTENTIONALLY
      LEFT BLANK]

              


      

      


      
        	
                10.

              	
                General
      Provisions.

              


      

      


          10.1    Notices.  Any
notice, request, or other document to be given to a party under this Agreement
shall be in writing and A) sent by registered or certified mail, postage
prepaid, B) hand delivered, C) sent by express mail or other overnight delivery
service which provides documentation of receipt, or D) sent by email or
facsimile, both with confirmation, addressed as follows:

      


      If to
Cyberonics:

      


      Cyberonics,
Inc.

      100
Cyberonics Blvd.

      Houston,
TX 77058

      Attn:
Vice President, Sales and Marketing &

                General
Manager, International

      Facsimile:  (281)
218-9332

      E-mail:
james.reinstein@cyberonics.com

      


      With copy
to:

      


      Cyberonics,
Inc.

      100
Cyberonics Blvd.

      Houston,
TX 77058

      Attn:  Vice
President & General Counsel

      Facsimile:  (281)
218-9332

      E-mail:  david.wise@cyberonics.com

      


                 If
to Distributor:

      


      Nihon Kohden Corporation

      14-20 Higashi Nakano
3-chome

      Nakano-ku
Tokyo

      164-0003

      Japan

      Attention:
Hiroshi Aida

      Facsimile: 81 3 5348 1517

       

      A party
may change its address for receiving notices, requests or other documents by
giving notice of the change to the other party.

      


          10.2    Set-Offs.  Cyberonics
reserves the right to set off any amounts Distributor owes to Cyberonics against
any amount Cyberonics owes to Distributor.

      


          10.3    Disputes.  The
laws of England and Wales shall govern the construction, validity and
performance of this Agreement, without reference to conflict of laws
provisions.  The terms of the United Nations Convention on Contracts
for the International Sale of Goods are expressly rejected by the parties hereto
and are not applicable to this Agreement.  All disputes between the
parties arising out of or in connection with this Agreement or relating to the
performance of the parties hereunder shall be finally settled by binding
arbitration as follows:

      


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

              a)  If
Cyberonics requests the arbitration, it shall take place in Tokyo, Japan
pursuant to the Commercial Arbitration Rules of The Japan Commercial Arbitration
Association.

      


              b)  If
Distributor requests the arbitration, it shall be conducted according to the
rules of conciliation and arbitration of the Center for Public Resources before
one arbitrator selected by mutual agreement of the parties.  The
arbitration will be conducted in Houston, Texas, in the English language,
applying the laws of England and Wales, excluding its conflicts of law
provisions.  Each party will bear its own costs for the presentation,
prosecution and defense of its own case, and both parties will share equally the
costs, if any, of the arbitrator.  Each party hereby submits to such
arbitration and jurisdiction, and agrees that the decision of the arbitrator
will be final and binding on the parties and may be enforced by the prevailing
party in any court having jurisdiction over the person or property of the other
party.  Upon request of either party, the arbitrator will provide both
parties with a written decision, including conclusions of fact and conclusions
of law.

      


          10.4    No Oral
Modifications.  Except as provided in Section 1.1, this
Agreement may not be modified except in writing, such written modification to be
signed by the parties hereto.

      


          10.5    No Implied
Waiver.  No failure of either party to enforce any obligations
shall prevent later enforcement of that obligation.  Any waiver of an
obligation must be in writing, will only apply to the specific circumstances to
which it relates, and shall not prevent the enforcement of the obligation in the
event of a subsequent breach.

      


          10.6    Assignment.   Neither
party may assign or transfer this Agreement or any right, benefit or obligation
under this Agreement without the prior written consent of the other
party.  In the event such assignment is permitted by the other party,
this Agreement shall be binding upon and inure to the benefit of the permitted
successor and assignee.

      


          10.7    Relationship of
Parties.  The relationship between the parties established by
this Agreement is that of independent contractors and not an agency, employment,
joint venture, franchise, or partnership relationship.

      


          10.8    Taxes.  Taxes
now or hereafter imposed with respect to the transactions contemplated hereunder
(with the exception of income taxes or other taxes imposed upon Cyberonics and
measured by the gross or net income of Cyberonics) shall be the responsibility
of Distributor, and if paid or required to be paid by Cyberonics, the amount
thereof shall be added to and become a part of the amounts payable by
Distributor to Cyberonics hereunder.

      


          10.9    Force
Majeure.  Neither Cyberonics nor Distributor shall be liable in
damages to the other or any third party, for any delay or default in performing
any obligation hereunder if that delay in or failure to perform is directly or
indirectly caused by or resulting from any cause, event or circumstances beyond
the reasonable control and without fault or negligence of the party claiming
force majeure (the “Force Majeure Event”); provided, however, that in order to
excuse its delay in or failure to perform hereunder, a party claiming a “Force
Majeure Event” shall notify the other party in writing within fifteen (15)
calendar days of the occurrence thereof, specifying the nature and particulars
thereof and the expected duration thereof; and provided further that within
fifteen (15) calendar days after the termination of such occurrence, the party
claiming a “Force Majeure Event” shall give written notice to the other party,
specifying the date of termination thereof. All obligations of the parties shall
return to being in full force and effect upon the termination of such occurrence
or cause (including, without limitation, any payments which became due and
payable hereunder prior to the termination of such occurrence or
cause).  For the purposes of this Section 10.9, a "Force Majeure
Event" shall include, without limitation of the phrase, any act of God, act of
any government or other authority or judicial or statutory undertaking,
industrial dispute, fire, explosion, accident, delay or failure of carriers,
subcontractors or suppliers, strike or other labor difficulty,  energy
shortage, power failure, climatic conditions, flood, civil disturbance, riot,
war (declared or undeclared) and/or any other events or circumstances (whether
or not of the same or similar kind to those enumerated) beyond the reasonable
control and without the fault or negligence of the party claiming force majeure.
If a Force Majeure Event prevents a party’s performance hereunder and continues
for more than ninety (90) consecutive days, the other party may terminate this
Agreement by giving written notice to the party that claimed a Force Majeure
Event under this Section 10.9.

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

          10.10    Severability.  If
any provision of this Agreement is declared invalid or unenforceable by an
arbitrator or court having competent jurisdiction, it is mutually agreed that
this Agreement shall endure except for the provision declared invalid or
unenforceable.   In such event, the parties shall consult and use
their best efforts to agree upon a valid and enforceable provision, which shall
be a reasonable substitute for such invalid or unenforceable provision in light
of the original intent of the parties upon entry into this
Agreement.

      


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

      


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

      


          10.13    Entire
Agreement.  The Schedules referred to in this Agreement are
considered to be part of this Agreement.  This Agreement contains the
entire agreement between the parties with respect to the subject matter hereof
and supersedes all previous agreements and understandings, whether written or
oral, between the parties regarding the subject matter
hereof.  Neither party has entered into this Agreement in reliance
upon any representation, warranty or undertaking of the other party which is not
expressly set out or referred to in this Agreement  and neither party
shall have any remedy in respect of any misrepresentation or untrue statement
made by the other party which is not contained in this Agreement SAVE THAT this
clause shall not exclude any liability for, or remedy in respect of, fraudulent
misrepresentations, or misrepresentations in respect of fundamental
matters.  

      


          10.14    Disclaimer of Warranties;
Limitation of Liability.  THE LIMITED WARRANTY PROVIDED IN
SCHEDULE D TO THIS AGREEMENT IS OFFERED IN LIEU OF ALL OTHER WARRANTIES, EXPRESS
OR IMPLIED, INCLUDING BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF FITNESS FOR
A PARTICULAR PURPOSE, SATISFACTORY QUALITY, AND NON-INFRINGEMENT OF THE
INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES.   CYBERONICS AND
ITS THIRD PARTY SUPPLIERS (IF ANY) GRANT NO OTHER WARRANTIES, EXPRESS OR
IMPLIED, STATUTORY OR OTHERWISE, REGARDING THE “PRODUCTS”, AND CYBERONICS AND
ITS THIRD PARTY SUPPLIERS (IF ANY) HEREBY DISCLAIM THE IMPLIED WARRANTIES OF
FITNESS FOR A PARTICULAR PURPOSE, SATISFACTORY QUALITY, AND NON-INFRINGEMENT OF
THE INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES.  ANY OTHER
REPRESENTATIONS OR WARRANTIES MADE BY ANY PERSON OR ENTITY, INCLUDING EMPLOYEES
OF DISTRIBUTOR OR CYBERONICS, THAT ARE INCONSISTENT HEREWITH SHALL BE
DISREGARDED AND SHALL NOT BE BINDING UPON CYBERONICS OR ITS THIRD PARTY
SUPPLIERS (IF ANY).  IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE
OTHER PARTY FOR LOST PROFITS, OR FOR ANY SPECIAL, CONSEQUENTIAL, INCIDENTAL, OR
INDIRECT DAMAGES UNDER ANY THEORY OF LIABILITY.  THIS LIMITATION SHALL
APPLY EVEN WHERE THE PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES.

      


      10.15           Use
of Name.  Neither party to this Agreement shall use the name of any
other party hereto or the name of any of the other party’s employee without the
prior written consent of such party.

      


      IN
WITNESS WHEREOF, the parties hereto have signed this Agreement.

      


      
        
          
            
              
                
                  
                    	
                            CYBERONICS,
      INC.

                          	 	
                            DISTRIBUTOR

                          
	 
      	 	 
      
	 
      	 	 
      
	
                            By:/s/Daniel
      J Moore

                          	 	
                            By:/s/Fumio
      Suzuki

                          
	
                                  Daniel
      J. Moore

                          	 	 
      
	
                                  President
      & Chief Executive Officer

                          	 	
                            Printed
      Name: Fumio Suzuki

                          
	 
      	 	 
      
	 
      	 	
                            Title:
      President and Chief Operating Officer

                          
	 
      	 	 
      
	
                            Date: 
      24 April 2009

                          	 	
                            Date: 
      20 May
2009

                          


                  

                

              

            

          

        

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      


      SCHEDULE
A

      


      PRODUCTS

      


      Pricing
for other components of the “Products” shall be as follows:

      


      
        
          	
                  ·

                	
                  Model
      103 or Model 104 VNS Therapy System
    Generators:  ***

                
	
                  ·

                	
                  Model
      302 Bipolar Stimulation Lead or Model 303 Bipolar Stimulation
      Lead:  ***

                
	
                  ·

                	
                  Model
      402 Tunneling Tool:  $***

                
	
                  ·

                	
                  Model
      201 Programming Wand: $***

                
	
                  ·

                	
                  Model
      250 7.1 Software and Hand-held Computer: $***

                
	
                  ·

                	
                  Patient
      Essentials Kit: $***

                


        

      

      


      For
purposes of this Agreement, the term “Year One" shall mean the period from the
“Start Date” to the first anniversary thereof.

      


      
        
          	
                  ***
      Portions of this page have been omitted pursuant to a Confidential
      Treatment request and filed separately with the
  Commission.

                


        

      

      



      
        
           


        

        
           


          
            

          

        

        
           


        

      


      SCHEDULE
B

      


       PURCHASE
GOALS

      


      


      
        	 
      


      

      


      Purchase
Goal: Year One

      


      A “Product Unit” shall be defined as
including one of each of the items outlined in No. 1, 2 and 3,
below:

      1. 
Model 103 or Model 104 VNS Therapy System Generator

      2. 
Model 302 or Model 303 Bipolar Stimulation Lead

      3. 
Model 402 Tunneling Tool

      


      Total
Revenue Goal:  *** Product Units

      


      
        	
                Year
      One

              	
                Quarter
      1

              	
                Quarter
      2

              	
                Quarter
      3

              	
                Quarter
      4

              
	
                Epilepsy

              	
                ***

              	
                ***

              	
                ***

              	
                ***

              


      

      


       

      For purposes of this
Agreement, the term “Year One " shall mean the period from the ”Start Date”
to the first anniversary thereof.  Distributor’s failure to meet this
Purchase Goal for Year One shall not be the cause for the termination set forth
in Section 8.2.

      


      


      
        
          	
                  ***
      Portions of this page have been omitted pursuant to a Confidential
      Treatment request and filed separately with the
  Commission.

                


        

      

      


      

        
          
             


          

          
             


            
              

            

          

          
             


            
              
                	
                        SCHEDULE
      C

                      


              

              


            

          

        


        

        
          	
                  VNS
      Therapyä
      System for Vagus Nerve Stimulation

                


        

         

        
           

          
            
              	
                       
      

                    	
                      Returned
      Material Policy ~ CYBX

                    


            

          

           

          


        

        
          
            
              	
                      Process
      Overview

                    	
                      Products
      to be returned to Cyberonics must meet the following
      requirements:

                      ▪ Product
      must be in their original packaging and condition.

                      ▪ A
      Returned Goods Authorization (RGA) number must be obtained within
      14 days of receipt by calling:

                      001+866-332-1375
      ~ Cyberonics Customer Support

                      ▪ Return
      must be approved by an authorized Cyberonics representative.

                      ▪ The
      RGA number must be clearly printed on the outside packaging of the
      returned product.

                      ▪ A
      completed Return Product Form must accompany all returned
      product.

                      Notwithstanding
      the foregoing, there shall be no return or exchange of expired
      product.

                    
	
                      Receiving
      Inspection

                    	
                      Each
      shipment must be inspected at the time of receipt for accuracy and damage.
      Any discrepancy should be promptly reported to Cyberonics Customer
      Support.

                      Note:
      If Cyberonics shipped an item incorrectly, Cyberonics will (at Cyberonics’
      expense), ship the proper item and arrange to have the wrong item returned
      to Cyberonics.

                    
	
                      Damaged Goods     
      

                    	
                      Since
      damage claim procedures vary from one carrier to another, immediately
      contacting Cyberonics Customer Support is imperative so the proper steps
      can be taken to arrange for replacement.

                    
	
                      Shipping
      Returned Product

                      Return
      Address

                    	
                      Return packages to the following
      address:

                      Cyberonics,
      Inc.

                      100
      Cyberonics Boulevard

                      Houston,
      Texas 77058

                    
	
                      Label Requirement   
        

                    	
                      Returned
      products will not be accepted unless package is clearly marked with
      Cyberonics-issued RGA number.

                    
	
                      Shipping Charges  
        

                    	
                      Shipping-related
      charges on returns are at the expense of the Sender.

                    
	
                      Restocking
      Fees & Credit

                    	
                      If
      product is returned with original packaging and condition as confirmed by
      the Quality Assurance Department, credit is issued in the form of a credit
      memo net the restocking charges of 35%.

                      Credit
      will not be issued for:

                      ▪ Product
      returned with opened and/or damaged packaging regardless of invoice
      date

                      ▪ Product
      returned outside of terms (i.e., RGA not requested or requested after 14
      days of receipt).

                    


            

          

        

        


        


         


        
          
             


          

          
             


            
              

            

          

          
             


            
              
                	
                        SCHEDULE
      D

                      


              

              


            

          

        


        

        


        VNS
Therapy Pulse Model 102 Generator, Pulse Duo

        Model
102R Generator, & VNS Therapy Model 302 Lead

         

        
          
            
              	
                      Cyberonics
      Limited Replacement Warranty

                    


            

          

           

        

        
          	
                  Warranty
      & Exclusions

                	
                  Cyberonics,
      Inc. warrants the VNS Therapy Pulse Generator against any defects due to
      faulty material or workmanship for a period of two (2) years from the date
      of implant. This warranty applies only to the original purchaser of the
      VNS Therapy Pulse Generator and the patient implanted with it. This
      Limited Replacement Warranty also applies only when the product is used in
      accordance with the product’s Physician’s Manual and excludes damage due
      to improper handling, defacing, accident (including dropping), or misuse.
      This product is not warranted when used or implanted by a person(s) not
      trained in or familiar with the VNS Therapy Lead, Pulse Generator, and
      Model 250 Software Physician’s Manuals. This Limited Replacement Warranty
      is not a representation that any one VNS Therapy Pulse Generator will last
      the entire time of the Limited Replacement Warranty.

                
	
                  Damages   
    

                	
                  In
      no event shall Cyberonics, Inc, be liable for any special, incidental,
      indirect, or consequential damages based on the failure of the device to
      function within normal tolerances, or resulting from damage to the device
      by external forces, whether the claim is based on warranty, contract,
      tort, or otherwise, or in connection with the purchase, use, or surgical
      implantation of this device or associated components or costs over and
      above the original purchase price from Cyberonics, Inc.

                
	
                  Qualifications

                	
                  To
      qualify for the Limited Replacement Warranty, the following conditions
      must be met:

                  ▪ A
      properly completed Implant and Warranty Registration Card for both the VNS
      Therapy Pulse Generator and the VNS Therapy Lead must be returned to
      Cyberonics, Inc. within thirty (30) days of device
      implantation;

                  ▪ The
      battery cannot have been depleted as a result of programming to unusually
      high output currents, pulse widths, or duty cycles, which will cause a
      high energy/current drain;

                  ▪ The
      product must have been used and prescribed in accordance with the
      VNS Therapy Lead, VNS Therapy Pulse Generator, and Model 250 Software
      Physician’s Manuals;

                  ▪ The
      VNS Therapy Pulse Generator must have been implanted prior to its
      “Expiration Date”;

                  ▪ The
      defective VNS Therapy Pulse Generator must be returned to Cyberonics, Inc.
      with an accompanying Returned Goods Authorization (RGA) number, available
      from Customer Support at 001+866-332-1375, and confirmed defective by the
      Quality Assurance Department; and

                  ▪ All
      returned VNS Therapy Pulse Generators shall become the property of
      Cyberonics, Inc.

                
	
                  Replacement
      Process

                	
                  If
      the VNS Therapy Pulse Generator becomes defective within the warranty
      period, contact Cyberonics Customer Support Service for a no-cost
      replacement.

                
	
                  Warranty
      Breach

                	
                  The
      exclusive remedy for any breach of this Limited Warranty shall be the
      replacement of the product or, at Cyberonics’ sole option, the return of
      the purchase price paid for the product.  Cyberonics, Inc.
      reserves the right to replace a product with the most comparable product
      currently available. Returned bio-hazardous product should be clearly
      identified as such on the outside surface of the
  package.

                
	
                  Remedy
      & Authority

                	
                  This
      Limited Warranty is offered in lieu of all other warranties, express or
      implied, including but not limited to, any implied warranty of
      merchantability or fitness for a particular purpose. This replacement
      warranty shall be the exclusive remedy available to any person. No person
      has any authority to bind Cyberonics, Inc. to any representation,
      condition, or warranty except this Limited Replacement
      Warranty.