POSSIS MEDICAL, INC.

                                  EXHIBIT INDEX




Exhibit
Number                                  Description 


10.25          Settlement agreement and mutual release relating to the 
               termination of the Perma-Seal supply and distribution agreement 
               with C.R. Bard, Inc., dated January 28, 1997.

27             Financial data schedule (electronically filed only).
<PAGE>

                     SETTLEMENT AGREEMENT AND MUTUAL RELEASE



     This Settlement Agreement and Mutual Release  ("Agreement") is entered into
effective the 28th day of January,  1997, by and between  Possis  Medical,  Inc.
("Possis"),  on the one hand, and Bard Vascular  Systems  Division,  C. R. Bard,
Inc. ("Bard"), and IMPRA, Inc., on the other hand.

                                    RECITALS

     WHEREAS,  Possis and Bard entered into a Supply and Distribution  Agreement
dated  December 30, 1994  ("Distribution  Agreement"),  regarding  the worldwide
distribution,  marketing,  and sales of the Possis  Perma~Seal  dialysis  access
graft, a vascular  graft serving as an artificial  blood vessel and access point
for  kidney  dialysis   treatment,   and  other  related  or  improved  products
manufactured by Possis (hereinafter referred to collectively as the Perma-Seal
Graft")

     WHEREAS,  Possis and Bard  entered  into an  Addendum  to the  Distribution
Agreement dated April 1, 1996 ("Addendum"),  which modified some of the terms of
the Distribution Agreement;

     WHEREAS, Bard acquired IMPRA, a manufacturer of vascular grafts,  including
grafts used in connection with dialysis treatment,  through a merger transaction
that was consummated on or about September 15, 1996;

     WHEREAS, disputes have arisen between Possis, on the one hand, and Bard and
     IMPRA on the other hand, regarding the distribution,  marketing,  and sales
of the Perma-Seal  Graft and the rights and obligations of the parties under the
Distribution Agreement and Addendum; and

     WHEREAS,  Possis, Bard, and IMPRA have independently  determined that it is
desirable and beneficial to settle,  compromise,  and resolve their disputes and
claims,  without any admission of liability by any party, on the terms set forth
in this Agreement;

     NOW,  Therefore,  in order to consummate the intent of the parties to enter
into a full,  final,  and complete  settlement of all disputes and claims as set
forth in the  foregoing  recitals,  which  are made a  contractual  part of this
Agreement,  and in consideration of the mutual covenants  contained herein,  and
other good and valuable  consideration,  the receipt and sufficiency of which is
hereby acknowledged, the undersigned parties agree as follows:

     1.  Settlement Sum. Bard shall pay Possis a settlement sum in the amount of
One Million Seven Hundred Fifty Thousand Dollars ($1,750,000.00) within ten (10)
days after the effective date of this  Agreement.  Payment of the settlement sum
shall be made by wire transfer of immediately  available  funds to the following
account:
<PAGE>

   Name of Bank:               Norwest Bank Minnesota, N.A.
   Address of Bank:            Norwest Center, Sixth Street & Marquette Avenue, 
                                   Minneapolis Minnesota 55479-1041
   Name of Account Holder:     Possis Medical, Inc.
   Account Number:             6355003718
   Bank ABA Number:            091000019
   Attention:                  Ms. Vicki Plymate (612-667-0557)

or in such other manner as Possis may reasonably  request in advance of the
payment date.

     2.  Termination of Distribution  Agreement and Addendum.  The  Distribution
Agreement and Addendum are hereby terminated,  and the rights and obligations of
the parties  thereunder  are hereby  canceled,  save as set forth in paragraph 3
below regarding Restricted Information.

     3. Restricted Information.  The provisions regarding Restricted Information
set forth in Sections 1.10, 11.01, and 11.02 of the Distribution Agreement shall
remain in full force and effect.  Restricted  Information  shall  continue to be
held in confidence as set forth in Section 11.01 of the Distribution  Agreement,
and,  with the exception of the retention of one (1) archival copy of Restricted
Information  as set forth in Section 11.02 of the  Distribution  Agreement,  all
Restricted  Information shall be returned to the disclosing party within 30 days
after the effective date of this Agreement.

     4. Return of Perma-Seal Graft Inventory. Within 30 days after the effective
date of this Agreement,  Bard shall return to Possis all unused inventory of the
Perma-Seal  Graft  that it is still  holding.  All costs  and risks of  shipment
involved  in  accomplishing  the return of  inventory  shall be borne  solely by
Possis.  Bard hereby assigns and transfers the unused Perma~Sea1 Graft inventory
to Possis  "AS IS" and  "WHERE  IS" and  without  recourse,  representation,  or
warranty, express or implied.

     5. Mutual  Releases:  
     a) Possis hereby fully and completely  releases and forever discharges Bard
and IMPRA, each and all of their respective predecessors,  successors,  parents,
subsidiaries,  and  affiliates,  and each and all of their  present  and  former
officers,  directors,  partners,  principals,  employees,  agents,  and assigns,
jointly and severally (collectively in this paragraph 5(a), "Releasees"), of and
from any and all claims, complaints, causes of action, debts, demands, disputes,
liabilities, or obligations whatsoever,  whether legal or equitable, and whether
sounding  in tort or  contract  or based on any other  theory of  recovery,  and
whether for compensatory or punitive damages or other relief or remedy,  whether
known or unknown,  whether  suspected  or  unsuspected,  whether  liquidated  or
unliquidated,  whether  mature or unmatured,  which Possis had, has, or may ever
have or claim to have against any of the  Releasees  for,  upon, or by reason of
any matter,  event,  cause, or thing  whatsoever from the beginning of the world
through the effective date of this Agreement, including, without limitation, all
claims, complaints, causes of action, debts, demands, disputes,  liabilities, or
obligations  arising  out of or  relating  to the  Distribution  Agreement,  the
Addendum, the Perma-Seal Graft, or Bard's acquisition of IMPRA.

     b) Bard and IMPRA hereby fully and completely release and forever discharge
Possis, each and all of its predecessors, successors, parents, subsidiaries, and
affiliates,  and each and all of their present and former  officers,  directors,
partners,  principals,  employees,  agents,  and assigns,  jointly and severally
(collectively  in this  paragraph  5(b),  "Releasees"),  of and from any and all
claims, complaints, causes of action, debts, demands, disputes,  liabilities, or
obligations whatsoever, whether legal or equitable, and whether sounding in tort
or  contract  or  based  on any  other  theory  of  recovery,  and  whether  for
compensatory  or punitive  damages or other relief or remedy,  whether  known or
unknown,  whether suspected or unsuspected,  whether liquidated or unliquidated,
whether mature or unmatured,  which Bard or IMPRA had, have, or may ever have or
claim to have  against  any of the  Releasees  for,  upon,  or by  reason of any
matter,  event,  cause,  or thing  whatsoever  from the  beginning  of the world
through the effective date of this Agreement, including, without limitation, all
claims, complaints, causes of action, debts, demands, disputes,  liabilities, or
obligations  arising  out of or  relating  to the  Distribution  Agreement,  the
Addendum, the Perma-Seal Graft, or Bard's acquisition of IMPRA.
<PAGE>

     6.   Non-Disparagement:
     a) Possis shall not,  directly or indirectly,  make  statements or comments
about  Bard or  IMPRA  or  their  officers,  directors,  or  employees  or their
reputations,  products,  or businesses  which would reasonably be interpreted in
the vascular graft and medical device industry as being demeaning,  disparaging,
or defamatory.

     b) Bard and IMPRA shall not,  directly or  indirectly,  make  statements or
comments  about  Possis  or  its  officers,   directors,  or  employees  or  its
reputation,  products,  or business which would reasonably be interpreted in the
vascular graft and medical device industry as being demeaning,  disparaging,  or
defamatory.

     7.  Confidentiality.  The  terms  and  conditions  of  this  Agreement  are
confidential  in nature and are  intended to be kept  confidential.  The parties
shall not disclose,  comment upon, or publish, in any manner, to any third party
(i.e.,  a person or entity who is not an  employee,  agent,  or  director of the
parties) the amount of the  settlement  sum or the terms and  conditions of this
Agreement,  and they shall take all  reasonable and prudent steps to ensure that
no such third-party  disclosures are made by any of their employees,  agents, or
directors,  except  (a) as may be  necessary  in  dealing  with  legal  counsel,
auditors, or lenders in their normal course of business, (b) as may be necessary
to comply with the requirements of any regulatory agency or body which exercises
oversight over their  business,  (c) as may be necessary for the  preparation of
financial  statements  or tax  returns,  (d) as may be  necessary  for  adequate
disclosure to  shareholders,  in quarterly and annual  earnings  releases and in
quarterly  and annual  reports of Possis to its  shareholders  or in response to
inquiries from shareholders,  (e) in response to subpoena,  official  government
inquiry,  or other lawful process,  (f) as otherwise  required by law, or (g) to
enforce the terms and conditions of this Agreement.  Any third-party  disclosure
of the  settlement  terms in  accordance  with  subparts (a) through (g) of this
paragraph  7 shall be  neutral  in  nature  consistent  with  paragraph  6 above
regarding  non-disparagement  and  paragraph 9 below  regarding  no admission of
liability or wrongdoing by any party.
<PAGE>

     8.  Press  Release  or Public  Announcement.  Any press  release  or public
announcement  regarding the subject matter of this Agreement shall be subject to
advance  review  and  approval  by  Bard.  Any  such  press  release  or  public
announcement  shall be  neutral  in nature  consistent  with  paragraph  6 above
regarding  non-disparagement  and  paragraph 9 below  regarding  no admission of
liability or wrongdoing by any party, and shall preserve the  confidentiality of
the settlement terms as required by paragraph 7 above.

     9. No Admission of Liability or Wrongdoing.  The parties have agreed to the
settlement embodied in this Agreement to resolve their disputes and to avoid the
costs and burdens of litigation. Therefore, nothing in this Agreement, including
payment  of the  settlement  sum,  shall in any way be  deemed or  construed  to
constitute an admission of liability or wrongdoing by any party or the waiver of
any defense.

     This  Agreement  has been  drafted  and  entered  into as a  compromise  of
disputed  claims under Rule 408 of the Federal  Rules of Evidence,  and it shall
not be offered or received conditions hereof.

     10.  Acknowledgment of Representation by Independent  Counsel.  The parties
acknowledge  that they  have been  represented  by their own  independent  legal
counsel in entering into this Agreement, and that they are each relying on their
own  judgment  and that of their  own legal  counsel  as to all of the terms and
conditions of this Agreement.

     11. Representations. The parties each represent and warrant as follows:

     (a) They  have not  assigned  or  transferred  to  anyone,  voluntarily  or
involuntarily,  any matter released pursuant to the terms of this Agreement,  or
any part or portion thereof.

     (b) They have full power and authority to enter into this Agreement,  which
constitutes the valid, legal, and binding obligation of each of them.

     (c) The person who has  executed  this  Agreement  on their behalf has full
authority to do so, and to bind them as a party to this Agreement.

     12.  General Provisions:

     (a) This Agreement  constitutes  the entire  Agreement  between the parties
regarding the subject matter hereof. No representations or inducements have been
made to any party  concerning this Agreement other than the  representations  or
covenants set forth herein,  and this Agreement  supersedes all prior agreements
and  understandings  between the parties,  oral or written,  with respect to the
subject matter hereof.
<PAGE>

     (b) This Agreement may be amended or modified only by a written  instrument
signed by all of the parties or their successors in interest.

     (c) The terms and conditions of this  Agreement are  contractual in nature,
and  not a mere  recital.  The  Agreement  shall  be  governed  by,  interpreted
according to, and enforced in accordance  with the laws of the  Commonwealth  of
Massachusetts.

     (d) This  Agreement  shall be binding and shall inure to the benefit of the
parties and their respective successors and assigns.

     (e) The captions  identified in the  paragraphs  of this  Agreement are for
convenience only, and they do not in any way limit,  expand, or modify the terms
and conditions of this Agreement.

     (f) This  Agreement  may be executed by facsimile  signature  and in one or
more counterparts, each of which shall be deemed an original.

     IN WITNESS WHEREOF, the undersigned parties have executed this Agreement to
be effective as of the date first set forth above.

P0SSIS MEDICAL, INC.               BARD VASCULAR SYSTEMS DIVISION
                                   C. R. BARD, INC.

By                                 By               
Its                                Its 


                                   IMPRA, INC.

                                   By    
                                   Its      
1492536.1