**EXHIBIT 10.1**

 

THIS VERSION HAS BEENMODIFIED TO OMIT CERTAIN CONFIDENTIAL INFORMATION OF VISION-SCIENCES, INC.,WHICH HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSIONPURSUANT TO RULE 24B-2 UNDER THE SECURITIES EXCHANGE ACT OF 1934, ASAMENDED.  THE PLACES IN THE DOCUMENTWHERE INFORMATION HAS BEEN OMITTED ARE MARKED WITH [*].

 

**EXCLUSIVE DISTRIBUTION AGREEMENT**

 

This ExclusiveDistribution Agreement (the “Agreement”) is made as of this 29th day ofDecember, 2004 (the “Effective Date”) by and between **V****ision-Sciences, Inc.**,a Delaware corporation (the “Company”), and **MedtronicUSA, Inc**., a Minnesota corporation (“MDT”, and collectively with theCompany, the “Parties”).

 

WHEREAS,the Company is engaged in developing, manufacturing and marketing medicaldevices for use in urology and related applications; and

 

WHEREAS, the Company wishes to appoint MDT, and MDTwishes to accept its appointment as, the exclusive distributor of the Products(as defined below) in the Field (as defined below), all in accordance with theterms and conditions of this Agreement.

 

NOW,THEREFORE, in consideration of the mutual covenants and agreements hereinafterset forth, and for other good and valuable consideration, the receipt andsufficiency of which are hereby acknowledged, the Parties agree as follows:

 

1.                                       DEFINITIONS

 

1.1                                 “Affiliate”means, in respect of any specified Person, any other Person which, but only forso long as such other Person, directly or indirectly, controls, is controlledby, or is under common control with, such specified Person.  The term “control” means the possession,directly or indirectly, of the power to direct or cause the direction of themanagement or policies of a Person, through the ownership of voting securitiesor other equity interests, and the terms “controlled” and “common control”shall have correlative meanings.

 

1.2                                 “Field”means the field of urology including urogynecology.

 

1.3                                 “IntellectualProperty” means all rights to patents, software, copyrights, trademarks, tradesecrets, know-how, concepts, designs, techniques, formulae, inventions, tradenames, labels, trade dress, literature, programs, advertising material or otherdocuments, materials or information.

 

1.4                                 “MDTAppointee” means an entity other than an Affiliate of MDT appointed by MDT,with Company’s consent, which shall not be unreasonably withheld, to performone or more of MDT’s duties or functions pursuant to this Agreement.

 

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1.5                                 “Person”means any natural person or any corporation, partnership, limited liabilitycompany, business association, joint venture or other entity.

 

1.6                                 “Products”means the product or product groups listed on Annex A attached to and made apart of this Agreement, improvements and replacements for those products, andsuch other product or product groups as shall be added to Annex A pursuant toSection 2.4, provided that Products shall only include products that aredirected to applications within the Field and that are labeled and intended foruse within the Field.

 

1.7                                 “Territory”means the United States of America and Canada.

 

2.                                       APPOINTMENTOF DISTRIBUTOR; PRODUCTS

 

2.1                                 The Company hereby grants MDT the exclusiveright, effective as of the Effective Date, to distribute, sell, advertise, promoteand market the Products solely to customers practicing within the Field and foruse within the Field and solely to persons and entities that are within theTerritory and for use within the Territory. MDT hereby accepts such appointment.

 

2.2                                 (a)                                  Exceptas otherwise permitted under this Agreement and unless and until this Agreementor the exclusivity provisions hereof shall have been terminated in the mannerprovided herein, the Company agrees not to: (i) distribute, market or sell theProducts to any Person other than MDT, (ii) authorize any other Person otherthan MDT to distribute, market or sell the Products or (iii) enter into anyagreement or arrangement for the private labeling of any of the Products or anyproduct that is identical or substantially similar in form or function to anyof the Products, in each case of clauses (i) through (iii) above within the Territoryand for use or sale within the Territory and for applications within the Field.  The Company reserves the right to promote thetechnology underlying Products, the use and application of Products and theCompany’s role in developing and manufacturing Products, both within andoutside the Territory and Field.  It isagreed that the Company shall coordinate with MDT in advance of any promotionor other publicity of the Products within the Territory and for use orapplication within the Field.

 

(b)                                 Withoutprejudice to any other remedy of the Company hereunder, upon the failure of MDTto perform its obligations under Section 3.1 below with respect to any Product,which failure is not cured within thirty (30) days of notice thereof to MDT bythe Company, the Company shall not be restricted from distributing, marketingor selling, or authorizing any Person other than MDT to distribute, market orsell such Products within the Territory and for use or sale within theTerritory and for applications within the Field.  Upon the taking of such action by theCompany, MDT shall be released of any future Quota obligations as providedlater herein.

 

2.3                                 MDTshall have the right to perform its obligations and exercise its rights underthis Agreement through either Medtronic, Inc. or one or more Affiliates of MDTthat are, directly or indirectly, wholly owned subsidiaries of Medtronic, Inc.,and to appoint agents to market and sell the Products solely to customerspracticing within the Field and for use within the Field and solely to personsand entities that are within the Territory and for use within the Territory.  MDT shall have the right to appointsubdistributors to perform MDT’s obligations hereunder in such local marketswhere MDT does not currently maintain a direct sales force.  All such agents and subdistributors shall beparty to agreements

 

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with MDT containing terms and conditions that are consistent with theterms of this Agreement, including, without limitation, those provisionsrelating to the marketing and sale of Products, the protection of the Company’sconfidential information, trademarks and intellectual property rights and thetermination of this Agreement.

 

2.4                                 (a)                                  If the Company develops new products for use and application within the Fieldand within the Territory (“New Products”) then the Company and MDT shall, for aperiod of 90 days prior to any commercial sale or launch of such New Productwithin the Field and within the Territory, negotiate exclusively and in goodfaith the reasonable terms and conditions for adding such New Products to AnnexA.  If the Parties are unable to agree onthe terms and conditions of sale of such New Products, including a minimumpurchase commitment therefor during the first twelve-month period followingsuch commercial launch (the “Initial New Product Quota”), then the Companyshall be free to market, distribute and sell such New Products either alone orthrough one or more distributors.  If theNew Product is of a substitute nature with respect to an existing Product and otherwisedirectly competes in the market with any of the Products (a “Substitute Product”),any minimum purchase commitment agreed to with respect to such Product shallautomatically be reduced, on a dollar-for-dollar basis, by the sales of suchSubstitute Product by the Company (or persons appointed by the Company otherthan MDT) over the same period.  TheCompany shall report such sales of Substitute Products to MDT for purposes ofthe adjustment to the minimum purchase commitments of MDT.

 

(b)                                 IfMDT wishes for the Company to develop and manufacture a New Product outside of theCompany’s planned product-development process, the Company will, upon MDT’srequest and within a reasonable timeframe, provide to MDT a quote for theCompany’s development and manufacturing of such New Product.  MDT shall promptly notify the Company of itsdecision whether to request that the Company develop such New Product and the Partiesshall negotiate in good faith the terms and conditions for adding the New Productto this Agreement, including the terms for the payment of the quoted costs forsuch development and manufacturing. Nothing in this Agreement shall be deemed to require the Company toundertake any particular product development project and the Company shall haveno liability for any failure to develop New Products either on its owninitiative or pursuant to any request of MDT, except for such liabilities andobligations set forth in any definitive agreement or amendment to thisAgreement setting forth the terms and conditions for the development, marketingand sale of such New Products.

 

3.                                       MDT’SDUTIES

 

3.1                                 MDTagrees to:

 

(a)          Use its commercially reasonable best efforts,comparable in nature to efforts used by MDT to market, promote, sell andsupport its other urological diagnostic products, to market, promote,distribute, sell and support the Products on a continuing basis throughout the termof this Agreement and throughout the entire Territory.  MDT’s obligation to market the Products underthis Agreement shall require MDT, among other things, to: (i) conduct periodicpromotions and obtain usual and customary market feedback (but without therequirement of MDT to undertake or requisition any formal studies from thirdparties) with respect to the Products, (ii) maintain an adequate urinarydiagnostic or other comparable sales force to market and sell the Products,(iii) utilize its existing training facilities and

 

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programs to present the Products, (iv) maintain adequate levels ofProduct inventory, (v) provide incentives to its sales force for promoting andselling the Products that are as favorable as those for promoting and sellingMDT’s other diagnostic products in the Field, and (vi) include the Products inits promotional materials and on its website, at trade shows, congresses andsimilar conferences, and at sales and training courses and programs for MDTsales and marketing personnel.

 

(b)         Carry out the marketing, promotion and sale ofthe Products in the Territory efficiently and in an orderly and regulatedmanner.

 

(c)          Refrain from selling or promoting in theTerritory products that are directly competitive with the Products, and frommarketing or promoting the Products in the Territory in a manner that isinferior to the manner in which MDT markets and promotes its other urologicaldiagnostic products in the Territory.  Byway of example, no products currently marketed and sold by MDT in the Territoryand within the Field as of the date of this Agreement are directly competitivewith the Products within the meaning of this Section 3.1(c).

 

(d)         Refrain from making any oral or written statementsor representations that vary from the specifications, instructions, warrantiesor representations given or made in this Agreement by the Company to MDT withrespect to Products.

 

(e)          Not modify, adulterate, misbrand, alter orremove labels from Products.

 

(f)            Promptly refer to the Company any inquiry(other than a purchase order or potential purchase order originating within theTerritory) from the public, any governmental authority, any trade associationor any news media, publication or reporter concerning the Products or theCompany.

 

(g)         Except as may be required by applicable law orregulation, or as may reasonably be required for the proper handling of Productquality issues from time to time, not take any action detrimental to thereputation or goodwill of the Products and/or the Company.

 

(h)         Not commence or initiate, or cause to becommenced or initiated, any engineering, research, development or othertechnical activities on any of the Products or otherwise utilizing the Company’sintellectual property without the prior written consent of the Company.

 

(i)             Consistent with established industrystandards and applicable laws, not pay or make gift of value, directly orindirectly, to any officer, employee or agent of a political party, governmentor administrative or governmental agency or to any candidate for public office,for the purpose of obtaining or retaining business related to the Products.

 

3.2                                 MDT will comply, and will cause the MDTAppointees and all agents and subdistributors appointed by it to comply, in allmaterial respects with all applicable federal, state and local laws, rules,regulations and orders of all governmental authorities affecting the sale anddistribution of the Products, as they are presently in effect and as they maybe revised or supplemented from time to time.

 

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3.3                                 MDT will adhere, and will cause the MDT Appointeeand all agents and subdistributors appointed by it to adhere, to good and soundbusiness practices and carry out its duties under this Agreement according tothe highest standards of professional business conduct.

 

3.4                                 Any and all marketing, promotional, sales andadministrative costs, including any costs associated with MDT’s and itsinvitees’ (other than the Company) attendance at or participation in tradeshows, congresses or similar conferences, shall be borne by MDT at its ownexpense.

 

4.                                       COMPANY’SCOVENANTS AND DUTIES

 

4.1                                 TheCompany agrees to:

 

(a)          Inventory and ship Products upon order andrequest of MDT and in accordancewith MDT’s instructions.

 

(b)         Regularly inform MDT about available displays,literature and other promotional and advertising material, as the Company deemssuitable for MDT in marketing Products for use in the Field.  The Company shall, upon MDT’s reasonablerequest, deliver such available artwork, pictures, graphic design files andother promotional and advertising materials. Such deliveries will be free of charge, except for freight andinsurance.  MDT is encouraged and allowedto issue, at its own expense, any materials related to the Products, providedthat MDT shall obtain written approval from the Company for each such itemprior to issuance, which approval from the Company shall not be unreasonablywithheld or delayed.

 

(c)          Label Products in accordance with thisAgreement.

 

(d)         Staff and maintain a service and repairfacility for the purpose of repairing and/or replacing Products that are withinor outside of their warranty period.  MDT shall advise the Company of Productsrequiring repair or replacement and shall forward such Products to the Company’sdesignated facility, but only after obtaining from the Company a returnauthorization approval pursuant to customary return procedures established fromtime to time by the Company.  The Company’scurrent return authorization procedures are as set forth on Annex B hereto, andthe Parties shall cooperate in good faith to make such changes to suchprocedures from time to time as may be reasonable and appropriate.  The Company shall use reasonable efforts to inspectthe Products and make necessary repairs or replacement, as appropriate, at itsfacilities and return the repaired or replacement Product to MDT, or MDT’s customer, as may be mutually agreedby both Parties, within fifteen (15) business days of receipt of repairauthorization from MDT, but in no event later than thirty (30) business daysfollowing receipt of such repair authorization.  For Products repaired and/or replaced thatare within their warranty scope and period, the Company shall bear all costsand expenses relating to servicing such Products (including, withoutlimitation, shipping and handling costs from the Company to MDT or MDT’s customer, as the case may be).  For Products repaired that are outside theirwarranty scope or period, the Company shall charge MDT its standard time and materials rate, plus shipping and

 

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handling.  MDT shall purchase,and the Company shall maintain, a pool of Products which shall be used astemporary replacements for Products pending repair.  MDT shall instruct the Company from time totime to ship such replacement Products to MDT’s customers, and to receivereturned replacement Products from MDT’s customers once repaired Products havebeen shipped to such customers.  MDTshall reimburse the Company for all direct reconditioning, repair and shippingexpenses associated with the maintenance of such loaner pool of Products, otherthan expenses which are otherwise covered by the applicable Product warranty.

 

(e)          Subject to Section 6, incorporate anymodifications and improvements that the Company makes to any of its products into the Products if so desired by MDT and makethe changed Products immediately available to MDT.  If MDT requests that the Company makemodifications or improvements to the Products, such changes shall be made onlyif mutually agreed to by the Company and MDT (including, without limitation,concerning any change to price charged by the Company to MDT).  If the Parties are unable to agree on anysuch Product modification which is reasonably necessary to ensure productsafety, MDT may suspend its distribution of the Product(s) affected, and MDT’sminimum purchase commitment hereunder shall be tolled, until such time as theParties resolve such dispute as provided for herein.

 

(f)            Provide adequate training to MDT’s productmanagers and sales representatives on an as-needed and reasonable basis toenable MDT to promote the sale of the Product. The Company shall provide a minimum of ten (10) days of training peryear, as and when reasonably requested by MDT. Such training will be conducted at MDT’s facilities, or another locationmutually agreed upon by both Parties, and will be provided without charge to MDT,except for the reimbursement of reasonable out-of-pocket expenses of theCompany incurred for training in excess of ten (10) days during the first yearfollowing the date hereof, and in excess of five (5) days per year thereafter.  In addition, the Company will provide to MDTProduct updates and service bulletins as they become available, at noadditional cost to MDT.

 

(g)         Consistent with established industry standardsand applicable laws, not pay or make gift of value, directly or indirectly, toany officer, employee or agent of a political party, government oradministrative or governmental agency or to any candidate for public office,for the purpose of obtaining or retaining business related to the Products.

 

(h)         Provide MDT with its written specificationsfor each of the Products.

 

(i)             Except as may be required by applicablelaw or regulation, or as may reasonably be required for the proper handling ofProduct quality issues from time to time, not take any action detrimental tothe reputation or goodwill of the Products and/or MDT.

 

4.2                                 TheCompany shall provide MDT with all technical and clinical information relatedto and necessary for the sale of the Products that the Company has in itspossession without any requirement of the Company to produce or requisition anyformal studies, data or information.  TheCompany shall be entitled to withhold any information that the Companydetermines, in its sole discretion, constitutes

 

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trade secrets of the Company.

 

4.3                                 TheCompany reserves the right to change a Product or its specifications withoutpayment of compensation to MDT, so long as such changes do not affect theefficacy, safety, form, fit or function of the Product or require regulatoryapproval or amendment.  If such changesdo affect the efficacy, safety, form, fit or function of a particular Product,or require regulatory approval or amendment, the Company shall not be entitledto make such change without the prior written consent of MDT, which consentshall not be unreasonably withheld or delayed. The Company shall provide MDT with ninety (90) days’ advance notice ofany changes of Products to the extent possible.

 

4.4                                 TheCompany will adhere to good and sound business practices and will carry out itsduties under this Agreement according to the highest standards of professionalbusiness conduct.

 

5.                                       ORDERING,SUPPLY, PRICE AND PAYMENT

 

5.1                                 MinimumPurchase Commitments.

 

(a)                                  Withinthirty (30) days following the Effective Date, MDT shall issue to the Company apurchase order (the “Initial Order”) for the period from the Effective Dateuntil March 31, 2006 (the “Initial Period”), providing for MDT to purchasepursuant to such purchase order during the Initial Period no fewer than **[*]** of the Company’s Slide-OnTM EndoSheath® System for theCST-2000, **[*]** with the Company’s catalog No. 08-2101(hereinafter,the “Basic Cysto Sheath”) and no fewer than **[*]**of the Company’s flexible Cystoscope (catalog No. 08-2201) (the “CST-2000”) atthe prices set forth on Annex A (the “Initial Quota”).  References in this Section 5.1 to “individualunits” of a Product refer to a single unit of such Product and do not refer toa single package that may contain one or more single units that are packaged andsold together under one catalog number.  MDTshall be obligated to purchase the Products during the Initial Period accordingto the delivery schedule set forth on Annex C. The minimum purchase requirements of this Section 5.1 shall only applyto and be satisfied by sales of Products for use and sale within the UnitedStates, and shall not apply to or be satisfied by sales of Products for use andsales in Canada.

 

(b)                                 IfMDT fails to purchase, during each successive 12-month period following theInitial Period (each such period, a “Quota Period”), the minimum dollar amountsof Products (the “Quota”), at the prices set forth on Annex A, which minimumdollar amounts shall be negotiated in good faith between the Parties hereto ninety(90) days prior to the expiration of the Initial Period or any successive QuotaPeriod, as applicable, then the Company shall have the right and option, in itssole discretion, to (x) terminate the exclusivity of this Agreement uponwritten notice to MDT or (y) terminate this Agreement upon written notice to MDT.  Upon the taking of any such action by theCompany, MDT shall be released of any future Quota obligations.  If the Parties are unable to agree on theQuota for any Quota Period at least forty five (45) days prior to the scheduledstart of such Quota Period, then the Quota for such Quota Period shall be:

 

(i)                         For thefirst Quota Period following the Initial Period, **[*]**of the greater of the Initial Quota or MDT’s Product sales during the InitialPeriod; and

 

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(ii)                      For thesecond Quota Period following the Initial Period, **[*]**of the greater of the Quota for or MDT’s Product sales during the first QuotaPeriod following the Initial Period; and

 

(iii)                   For eachsuccessive Quota Period, **[*]** of thegreater of the Quota for or MDT’s Product sales during the immediately previousQuota Period.

 

(c)                                  Followingthe Initial Period (and without derogating from the Quota otherwise set for anyQuota Period), MDT shall purchase no fewer than **[*]**of the Basic Cysto Sheath and no fewer than **[*]**of the CST-2000 during each calendar quarter.

 

(d)                                 IfMDT fails to purchase (i) during the first 12-month period following theearlier of the first commercial sale or launch of any New Product that MDT hasagreed to carry and on which the Company and MDT have agreed upon an InitialNew Product Quota as set forth in Section 2.4 (the “Initial New Product Period”),no less, in terms of dollars, of such New Product than set forth in the InitialNew Product Quota, and (ii) during each 12-month period following the InitialNew Product Period (each such period, a “New Product Quota Period”), such dollaramounts of the New Product as shall be negotiated in good faith between the Parties(the “New Product Quota”) ninety (90) days prior to the expiration of theInitial New Product Period or successive New Product Quota Period, asapplicable, then the Company shall have the right and option, in its solediscretion, to (x) terminate the exclusivity of this Agreement upon writtennotice to MDT or (y) terminate this Agreement upon written notice to MDT.  Upon the taking of any such action by theCompany, MDT shall be released of any future New Product Quotaobligations.  If the Parties are unableto agree on the New Product Quota for any New Product Quota Period at leastforty five (45) days prior to the scheduled start of such New Product QuotaPeriod, then the New Product Quota for such New Product Quota Period shall be **[*]** of the greater of the New Product Quota for or MDT’s NewProduct sales during the immediately previous New Product Quota Period (orduring the Initial New Product Period, for the first New Product Quota Periodfollowing the Initial New Product Period).

 

5.2                                 MDTshall provide to the Company, on a monthly basis, a rolling **[*]** forecast of Products it expects to purchase.  The first **[*]**months of the first such forecast shall represent, and be accompanied by, afirm commitment purchase order for Products stated therein, and the **[*]** month of each such successive forecast (provided thatsuch **[*]** month is within the Term) shallrepresent, and be accompanied by, a firm commitment purchase order for theProducts stated therein.  MDT willdeliver to the Company, on a bi-weekly basis, a schedule indicating the on-handinventory of the Products located in the United States.  The Company shall at all times maintaininventory levels reasonably adequate to meet its obligations under Section4.1(a).  The Company shall use itscommercially reasonable best efforts to maintain on hand at all times spareProduct inventory of equal to the monthly average of MDT’s orders therefor inthe then-previous **[*]**months.  MDT’s minimum purchasecommitments hereunder shall be tolled for any period during which the Companyis unable to ship Products in accordance with its obligations under Section4.1(a) (including in connection with the Initial Order).  MDT’s minimum purchase commitments hereunderwith respect to any New Products shall be tolled for any period during whichthe Company is unable to ship such New Products in accordance with itsobligations under Section 4.1(a) or any period during which the Company has notreceived necessary regulatory approvals as set forth in Section 11.2.

 

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5.3                                 Uponshipment, the Company shall promptly invoice MDT in U.S. Dollars.  Payment for Products shall be in U.S.Dollars and is due **[*]** from shipmentof the Product by the Company; providedthat MDT shall be entitled to a **[*]** discount on any amounts paid and received by theCompany within **[*]**.  Latepayments will be assigned a monthly service fee equal to **[*]**of the amount due.  Persistent failure topay invoices when due shall constitute a material breach of this Agreement.  MDT shall pay all invoices in full accordingto the stated terms.  The Company willissue credits for any rejected Product pursuant to Section 5.7 below that MDTmay use to reduce payment of future invoices.

 

5.4                                 Pricesfor the Products ordered by MDT fromthe Company shall be as set forth in Annex A to this Agreement.

 

5.5                                 Allprices and charges for Products are FOB designated Company facility.  Title to Products delivered hereunder and allrisks of loss or damage thereto shall pass to MDT upon shipment from the Company’s facility.

 

5.6                                 The Company shall package Products inaccordance with good commercial practices and mutually agreed specifications,and in a manner sufficient to withstand the rigors of transportation.

 

5.7                                 MDT shall have the right, within fifteen(15) days from receipt, to reject any Product that does not meet the Company’s writtenspecifications or any applicable laws or regulations or that is otherwisedefective consistent with the FOB terms specified in Section 5.5 above and thewarranties set forth in Section 7.1(b) below. Any such rejection shall be accomplished by a notice from MDT identifying and specifying, inreasonable detail, the Product rejected and the reasons for rejection.  Any Product rejected by MDT shall be made available, on reasonablenotice and during normal business hours, for inspection by the Company or itsrepresentatives in a manner consistent with the Company’s return authorizationprocedures established from time to time and as previously communicated to MDT.  The Company will repair or replace any rightfullyrejected Product free of charge and will indemnify MDT for reasonable out-of-pocket expenses (including freight andcustoms clearance, if any) incurred by MDTin connection with (a) shipment of repaired or replacement Product to the samelocation and (b) shipment of the nonconforming Product back to the Company (ifso requested by the Company and then pursuant to the Company’s returnauthorization approval procedures).  Inthe event of a rejection of defective Product, the Company shall ship, at itssole option, either repaired or replacement Product within seven (7) days ofits receipt of the rejected Product from MDT,or such longer period of time as may be reasonable under the circumstances.  For purposes of clarification, the Companyshall either repair the rightfully rejected or returned Product unit or replacesuch returned Product unit with a new Product unit, but shall not replace anyreturned Product unit with another used or repaired unit.

 

5.8                                 TheParties agree that MDT may appoint, subject to the Company’s consent as specifiedin Section 1.4, one or more MDT Appointees to conduct MDT’s logistics andsupply-chain activities in support of its obligations hereunder.  Such MDT Appointee’s activities under suchappointment may include procurement of Products, Product inspections and shippingand receiving.  MDT shall enter into anagreement with each MDT Appointee governing the terms of such appointment, containingterms and conditions that are consistent with the terms of this Agreement,including, without limitation, those provisions relating to the marketing andsale of Products, the payment of invoices, the

 

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protection of the Company’s confidential information, trademarks andintellectual property rights and the termination of this Agreement.  MDT hereby unconditionally, absolutely andirrevocably guarantees each MDT Appointee’s full and prompt performance of andcompliance with this Agreement.

 

6.                                       REGULATORY;QUALITY ASSURANCE

 

The Company agrees to comply in all material respects with allapplicable federal, state and local laws, rules, regulations and orders of allgovernmental authorities affecting the manufacture, labeling, inspection andsale of the Products, or that otherwise bear upon Company’s performancehereunder, as they are presently in effect and as they may be revised and/orsupplemented from time to time.  TheCompany agrees to perform current Product performance trending, take correctiveactions and preventative actions and devote appropriate resources for ongoingquality management support.  The Companyrepresents and warrants to MDT that the Products have been and shall bedesigned, manufactured, labeled, packaged and sold to MDT in accordance withthe Company’s quality system, all applicable laws and regulations of the UnitedStates and Canada, ISO 13485 certification or successor requirement(s), allother applicable manufacturing requirements and the representations andwarranties set forth in this paragraph and in Section 13.2 of this Agreement.  The Company further represents and warrantsto MDT that the Company’s manufacturing and quality system is in compliancewith the Quality System Regulations promulgated by the U.S. Food and DrugAdministration (or any successor requirements) and has been certified to be incompliance with the standards set forth in ISO 13485.  Once per year during the Initial Term (ashereafter defined) of this Agreement or any renewal thereof, the Company shallprovide MDT’s or the applicable MDT Appointee’s regulatory personnel reasonableaccess to the facilities and records of the Company for the purpose ofconfirming the Company’s and the Products’ compliance with all applicable lawsand regulations (provided that any such MDT Appointee shall first enter into aconfidentiality agreement with the Company containing terms similar to theprovisions of this Agreement concerning the protection of the Company’sconfidential and proprietary information).

 

7.                                       WARRANTIES;INDEMNITY

 

7.1                                 TheCompany hereby represents and warrants to, and covenants with, MDT as follows:

 

(a)                                  Ownership.  The Company is the sole and rightful owner ofall right, title and interest in and to the Products or otherwise has theunrestricted right to grant to MDT the rights granted in this Agreement withoutviolating any rights of any third party. There are no actual or threatened claims against any of the Products andno demands of any person or entity pertaining to any of the Products.  No proceedings have been threatened,instituted or are pending that challenge the rights of the Company in theProducts.  The Company has not beencharged with infringement or violation of any Intellectual Property right ofany person or entity, and, to the Company’s knowledge, is not infringing anyIntellectual Property right of any person or entity in connection with themanufacture, use, sale or other disposition of any of the Products.

 

(b)                                 ProductWarranty.  Each Basic Cysto Sheathunit shall, until the expiration date specified on its packaging, and eachother Product unit shall, for the shortest period of time set forth for suchProduct on Annex A, be free from defects in material and workmanship and remainin good working order, and function properly and in conformity with the termsof this Agreement and with published

 

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specificationsand documentation.  The Company covenantsnot to ship to MDT any Basic Cysto Sheath units with an expiration date earlierthan **[*]**months from the date ofshipment.  The Company shall, at therequest of MDT, its customer or end-user, promptly repair or replace at itssole cost and expense any Product found to be defective or nonconforming to theProduct warranty (in accordance with the above) within the applicable warrantyperiod.  MDT may pass such Companywarranty to its customers and to end-users. Each Party shall bear its own out-of-pocket expenses (including freightand customs clearance, if any) incurred in connection with warranty returns,repairs and replacements.

 

(c)                                  Disclaimer.  THE COMPANY MAKES NO REPRESENTATION ORWARRANTY WITH REGARD TO ANY PRODUCT OR OTHER ITEM FURNISHED UNDER THISAGREEMENT EXCEPT AS SPECIFICALLY SET FORTH IN THIS AGREEMENT.  EXCEPT AS EXPRESSLY PROVIDED IN THISAGREEMENT, THE COMPANY DISCLAIMS AND MDT WAIVES AND RELEASES ALL RIGHTS ANDREMEDIES OF MDT AND ALL WARRANTIES AND OBLIGATIONS OF THE COMPANY, EXPRESS ORIMPLIED, ARISING BY LAW OR OTHERWISE, WITH RESPECT TO ANY PRODUCTS OR OTHERITEMS DELIVERED BY OR ON BEHALF OF THE COMPANY PURSUANT TO THIS AGREEMENT,INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED WARRANTY OF MERCHANTABILITY ORFITNESS FOR A PARTICULAR PURPOSE, IMPLIED WARRANTY ARISING FROM COURSE OFPERFORMANCE, COURSE OR DEALING OR USAGE OF TRADE, AND ANY IMPLIED WARRANTY OFNONINFRINGEMENT.

 

(d)                                 No Royalties.  No royalties or other amounts will be payableby MDT to others as a result of this Agreement or any of the transactionscontemplated hereby.

 

7.2                                 InfringementIndemnity.  The Company, at its ownexpense, shall defend, indemnify and hold harmless MDT, its subdistributors, subsidiaries,affiliates or permitted assignees, and their respective directors, officers,employees, agents, permitted subcontractors, representatives, successors and permittedassigns, and defend any action brought against same with respect to any claim,demand, cause of action, debt or liability, including attorneys’ fees, basedupon a claim that any Product infringes or violates any Intellectual Propertyright of any third party, including claims of willful infringement (an “InfringementClaim”).  MDT and its subdistributors may,at their own expense, assist in such defense if they so choose, provided that,as long as the Company can demonstrate sufficient financial resources, the Companyshall control such defense and all negotiations relative to the settlement ofany such claim.  MDT shall promptlyprovide the Company with written notice of any claim which MDT believes fallswithin the scope of this Section 7.2, including claims against subdistributors.  In the event that the Product, or any portionthereof, is held to infringe and its use is enjoined, the Company shall havethe obligation to, at its option and expense, (i) modify the infringing Productwithout impairing in any material respect the functionality or performance, sothat it is non-infringing, (ii) procure for MDT and its subdistributors theright to continue to distribute, sell, advertise, promote, market and otherwisecommercialize the infringing Product, or (iii) replace said Product withequally suitable, non-infringing product. If none of the foregoing alternatives is available to the Company, theCompany shall repurchase from MDT or its subdistributors at the price charged toMDT by the Company, all Products that are in good and saleable condition andare in unopened, undamaged, sterile packages. Except as set forth above, the Company shall have no further liabilityto MDT or its subdistributors with respect to any Infringement Claim.

 

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8.                                       RELATIONSHIP

 

The relationship between the Company and MDT is that of independentcontractors.  Nothing contained in thisAgreement shall be construed to imply a joint venture, partnership, orprincipal-agent relationship between the Parties; and neither party by virtueof this Agreement shall have any right, power or authority, express or implied,to act on behalf of or enter into any undertaking binding the other party, and theCompany and MDT shall each refrain from making any representations to thecontrary.  Except as otherwise set forthherein, all costs of each party’s operations, including but not limited tosalaries, wages, taxes (corporate, service, employment, franchise, etc.) andemployee benefits of each party and its employees shall be paid solely by suchparty, and the other party hereto shall have no liability or responsibilitytherefor.

 

9.                                       TERMAND RENEWAL

 

Subject to earlier termination as provided in Section 10 of thisAgreement, the term of this Agreement shall commence on the Effective Date andcontinue in full force and effect until March 31, 2006 (the “Initial Term”).  Thereafter, this Agreement will automaticallybe renewed for successive one (1) year periods unless either party notifies theother party in writing at least ninety (90) days prior to the end of the InitialTerm or any renewal thereof that it does not wish to extend thisAgreement.  The Initial Term and anyrenewal thereof, if any, are collectively referred to as the “Term.”

 

10.                                 TERMINATION

 

10.1                           Eachparty shall have the right to terminate this Agreement if the other party is inmaterial breach of any term or condition herein.  A party that materially breaches thisAgreement shall be given written notice of such breach by the other party andshall have the opportunity to take remedial action within a period of sixty(60) days or other longer period defined in such notice.  If the breaching party fails to remedy thebreach within such sixty (60) day or other longer defined period, the otherparty shall have the right to immediately terminate this Agreement.

 

10.2                           Ifeither party becomes insolvent or files, or has filed against it, any petitionunder any bankruptcy or insolvency law or similar law which is not dismissed orstayed within sixty (60) days, is adjudged bankrupt or insolvent or the like,makes or attempts to make an assignment for the benefit of creditors or thelike, or a trustee in bankruptcy or a receiver is appointed for either party,the other party shall have the right to immediately terminate this Agreement.

 

10.3                           Anyexpiration or termination of this Agreement shall not alter the rights, dutiesand obligations of the Parties for any purchase orders placed by MDT, itsagents, subdistributors or MDT Appointee, or amounts due, prior to the date ofsuch expiration or termination, nor shall it affect the rights of end-users ofthe Products.

 

10.4                           Upontermination or expiration of this Agreement, MDT and its permitted agents andsubdistributors shall have the non-exclusive right to sell their existing,saleable inventory of Products in the Territory (but the Company shall not beobligated to ship any Products to MDT after the date of such termination,regardless of the date of the purchase order therefor) in bona fidetransactions to unrelated third parties during the six (6) months following anysuch termination, and the Company shall provide the necessary materials andsupport to assist MDT in doing so.

 

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10.5                           Inthe event that the Company elects not to renew this Agreement at any timepursuant to Section 9 above, MDT may request the Company to grant MDT, and theCompany then shall grant to MDT, the exclusive right to continue to sell,pursuant to the terms hereof, MDT’s then-existing inventory of Products for aperiod of three (3) months following such expiration of this Agreement.  MDT shall make such demand, if at all, notlater than 30 days following notice of such non-renewal.  The Company shall have no obligation toprovide MDT with any additional Products following the expiration of this Agreement,regardless of the date of any purchase order therefor.

 

10.6                           Withinten (10) days of the expiration or termination of this Agreement, MDT shallprovide the Company a list (in hard copy and sortable electronic format) of MDTcustomers who purchased Products in the previous twelve (12) months, includingcustomer contact information and the lot numbers, quantities by lot number andmodels of Products purchased by such customers.

 

11.                                 PRODUCTLABELING, REGISTRATION

 

11.1                           ProductLabeling.  All Products shall labeledand marked solely with the Company’s name and logos, and shall be marketed andsold using the Company’s name and logo as appropriate to indetify themanufacturer of the Products, *provided*, thatMDT may continue to operate under its own name and logo(s) and may use suchname and logo(s) (subject to Section 4.1(b)) in connection with the marketingand sale of the Products on such items as business cards, brochures, customercommunications, invoices, its web site(s), shipping containers for multipleProducts, and the like.  All Productpackaging and labeling shall contain such other designations of the Company,including identification of the Company as the manufacturer of the Products,and the country of manufacture, where applicable, as may be necessary to complywith Title III of the Medical Device User Fee and Modernization Act of 2002(P.L. 107-250), the Tariff Act of 1930, as amended (19 U.S.C. 1304), or otherlegal requirements.  MDT shall sell theProducts in the same condition as they are delivered to it and shall not alter,deface, remove, cover up or mutilate in any manner whatsoever any trademark,serial or model number, the words “patent pending” and/or “patent” and/or thepatent number, copyright symbol and any other reference to the IntellectualProperty rights of the Company which the Company may attach or fix to or makepart of the Products.  So long as therequirements of this Section 11.1 are otherwise complied with, and subject to MDT’sobligations under Section 13.2 hereof, MDT shall be entitled, but notobligated, to affix or request the Company to affix to Products such additionallabels as MDT shall deem reasonably necessary solely to comply with applicablelegal or regulatory requirements, provided, that, the Companyshall have approved in writing in advance of such additional labels, suchapproval not to be unreasonably withheld.

 

11.2                           ProductRegistration.  The Company****shall obtain and maintain all necessary registrations,licenses and permits for the Products within the Field with health and othercompetent authorities that may from time to time be required by law, regulationor otherwise throughout the Territory in which MDT is promoting, advertisingand selling the Product.  The Companyshall obtain any such registrations, licenses and permits required with respectto any New Product within the Field within six (6) months of the date such NewProduct is introduced.  Any suchregistrations, licenses or permits shall be in the name of Company unlessprohibited by law, in which case they shall be held in trust by MDT acting asin-country caretaker for the Company, and shall be subject to transfer,cancellation, modification or supplement for Product changes at the Company’sdirection. ** **Thecost and expense of obtaining such registration, license or permit shall be theresponsibility of the Company.  The

 

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Company shall provide,free of charge, such samples of Products, data and investigation reports andall other documentation as it possesses to the extent that they are required bylocal law and will facilitate registration throughout the Territory.  The Company****shallalso obtain, at its sole expense, the appropriate approval of all governmentalcontrol agencies as required throughout the Territory for any purchases andsales contemplated by this Agreement, and specifically the Company****shall obtain all necessary approvals for the importing,storing and selling of Products subject to sterile conditions.  The Company shall have no obligation toobtain or maintain any registrations, licenses or permits for the Productsoutside the United States of America and Canada.

 

12.                                 RECALLS;COMPLAINTS

 

12.1                           TheCompany shall be responsible for the handling of all recalls and field actionsrelating to Products, and MDT shall provide such cooperation to the Company inregard to such events as the Company may reasonably request.  Within forty-eight (48) hours (excludingweekends and national holidays) of any Product recall, MDT shall provide the Companya list (in hard copy and sortable electronic format) of MDT customers who areor may be affected by such recall, or with respect to which the Company isrequired by applicable law to take any action, and such list shall includecustomer contact information and the lot numbers, quantities by lot number andmodels of Products purchased by such customers. In this regard, MDT agrees to advise the Company within forty-eight (48)hours (excluding weekends and national holidays) of each complaint that MDT mayreceive or become aware of concerning the Products, including any complaintthat any of the Products may have been associated in any way with an injury ordeath to a user or patient or may have been associated with an incident thatcould likely cause serious health problems or death.  MDT agrees to work with and cooperate with theCompany to resolve complaints.  In theevent of a Product recall, the Company shall promptly reimburse MDT for allreasonable costs and expenses (including the cost of the recalled Products) incurredby MDT in connection with any such recall. Each of the Company and MDT shall notify the other of any reportableproduct incident of which either the Company or MDT becomes aware.

 

12.2                           MDTshall handle all customers’ complaints with a view of securing and maintainingthe goodwill of the Company and of the Products, and shall record allcomplaints in detail and promptly submit the same to the Company for itsreview, as set forth above.  The Companyshall be responsible for investigation of the reports of such complaints it ismade aware of, by MDT or otherwise, and submission of U.S. Medical DeviceReports (21 CFR Part 803), and/or other governmental agency reports as requiredby applicable law or regulation within the Territory.

 

12.3                           If anyof the Products sold by MDT is recalled from the market or withdrawn from salewithin the Territory for reasons of product safety or quality as determined byany applicable governmental authority or by mutual agreement of the Parties,any minimum purchase commitment or Quota with respect to such Product shall besuspended until 90 days after the date on which the Product has beenre-introduced into the market.

 

13.                                 INTELLECTUALPROPERTY

 

13.1                           The Companyshall have and shall retain at all times all rights in and to its IntellectualProperty relating to the Products.

 

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13.2                           Inconnection with any promotional or other Product related materials or events, MDTshall use reasonable efforts to prominently depict or display the Company’sname, logo and Product related trademarks or service marks, and indicate thatthe Products have been manufactured by the Company using the Company’sproprietary technologies and all packaging and physical embodiments of theProduct shall display the Company’s mark.  Any use of any trademarks or service marksthat are owned by the Company in any such promotional materials shall beaccompanied by an appropriate legend indicating that such trademarks andservice marks are the property of the Company. The designation “[Mark]® (or [Mark]TM, as the case may be) is a[registered, if applicable] trademark of Vision-Sciences, Inc.” shall besufficient designation to comply with the foregoing requirement.  Within ten (10) days of execution of thisAgreement, Company shall provide MDT with a list of its trademarks, includingdesignation of registered trademarks, that are applicable to the Products, andshall supplement or amend such list as appropriate from time-to-time.  Each Party shall have and shall retain at alltimes all rights in and to its respective trademarks and logos used inconnection with the Products, and no right in such trademarks and logos isconveyed hereunder to the other, except as expressly set forth herein.

 

13.3                           MDTagrees to promptly notify the Company in writing of any and all modifications,design changes or improvements to the Products (collectively, “Ideas”)suggested by any customer, employee, subdistributor or agent of MDT for anypurpose, except those that, in the reasonable opinion of MDT, are of no commercialvalue to either party.  In the event thatthe Company agrees to incorporate any such Idea into a Product or New Product,then to the extent that MDT has, obtains or derives any rights or benefit in orto any such Idea by MDT, its employees, agents, customers or other persons, MDThereby grants to the Company a perpetual, irrevocable, royalty-free,transferable and nonexclusive license to use for any purpose such Idea, withoutthe payment of any additional consideration thereof either to MDT or to any suchpersons, except to the extent, and then only to the extent, required byapplicable law or as set forth below. MDT shall cause each MDT Appointee and each of its employees, agents andsubdistributors to execute invention assignment agreements with respect to anyIdeas.  To the extent that the Companyagrees to incorporate an Idea developed by MDT and based on valid claims inissued patents owned by MDT or its Affiliates (each such Idea, an “Invention”)into a Product or New Product which MDT does not have the right to distributeor sell hereunder, or from such time as MDT’s right to distribute and sell suchProduct or New Product is terminated or otherwise lapses, the Company shalllicense the use and application of such Invention for any purpose, on a non-exclusive,perpetual, irrevocable and transferable basis, in exchange for a royalty basedon a percentage of the annual net sales of such Products or New Productsincorporating such valid claims in patents, ranging from **[*]**,as determined by an independent arbitrator selected by the Parties inaccordance with Section 21.4, who shall base his or her decision on factorstypically taken into account in determining reasonable royalties.  To the extent that MDT develops any Inventionwhich the Company has not agreed to incorporate into a Product, the Companyshall have the option to license the use and application of such Invention forany purpose, on a non-exclusive, perpetual, irrevocable and transferable basis,in exchange for a royalty based on a percentage of the annual net sales ofproducts incorporating valid claims in patents granted with respect to suchInvention, ranging from **[*]**, asdetermined by an independent arbitrator selected by the Parties in accordancewith Section 21.4, who shall base his or her decision on factors typicallytaken into account in determining reasonable royalties.  The Company’s obligation to pay royaltieshereunder with respect to a product incorporating an Invention shall continueuntil the expiration of the patent applicable to such Invention.  In no event

 

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shall royalties be payable hereunder with respect to Ideas that are notInventions (i.e., based on valid claims in unexpired patents owned by MDT orits Affiliates).

 

14.                                 REPRESENTATIONS,WARRANTIES AND COVENANTS OF THE COMPANY

 

The Company herebyrepresents, warrants and covenants to MDT that:

 

14.1                           TheCompany and its employees have all necessary rights, authorizations or licensesto perform their obligations hereunder and to provide all related materials andservices required under this Agreement.

 

14.2                           EachProduct shall be manufactured and/or developed in a manner consistent with goodcommercial practice and regulations and guidelines of the U.S. Food and DrugAdministration for such medical devices, free from defects in material andworkmanship, and shall conform to all applicable laws and regulations relatingto medical devices and to the Product’s published specifications.

 

14.3                           TheCompany does not have any obligations or liabilities that might reasonably beexpected to have a material adverse effect on its ability to perform itsobligations hereunder.

 

14.4                           Thereare no actions, suits or proceedings instituted or pending or, to the bestknowledge of the Company’s management, threatened against the Company thatmight reasonably be expected to have a material adverse effect on the abilityof the Company to perform its obligations hereunder.

 

14.5                           The Company is a corporation duly organized,validly existing and in good standing under the laws of the jurisdiction of itsincorporation, and is duly qualified to do business in all jurisdictions whereit does business, and has all requisite corporate power and authority toexecute, deliver and perform the terms of this Agreement.

 

14.6                           The execution, delivery and performance of theobligations of this Agreement have been validly authorized by all necessarycorporate action of the Company, and this Agreement represents the Company’svalid and legally binding obligation.

 

14.7                           The execution, delivery and performance of theobligations of this Agreement by the Company in accordance with the terms ofthis Agreement do not and will not conflict with or otherwise violate the termsof any other agreement to which the Company is a party.

 

15.                                 REPRESENTATIONS,WARRANTIES AND COVENANTS OF MDT

 

MDT hereby represents, warrants and covenants to the Company that:

 

15.1                           MDT and its employeeshave all necessary rights, authorizations or licenses to perform theirobligations hereunder and to provide all related materials and servicesrequired under this Agreement.

 

15.2                           MDT does not have any obligations or liabilitiesthat might reasonably be expected to have a material adverse effect on itsability to perform its obligations hereunder.

 

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15.3                           There are no actions, suits or proceedingsinstituted or pending or, to the best knowledge of MDT’s management, threatenedagainst MDT that might reasonably be expected to have a material adverse effecton the ability of MDT to perform its obligations hereunder.

 

15.4                           MDT is a corporation duly organized,validly existing and in good standing under the laws of the jurisdiction of itsincorporation, and in all jurisdictions where it does business, and has allrequisite corporate power and authority to execute, deliver and perform theterms of this Agreement.

 

15.5                           The execution, delivery and performance ofthe obligations of this Agreement have been validly authorized by all necessarycorporate action on the part of MDT, and this Agreement represents MDT’s validand legally binding obligation.

 

16.                                 LIMITATIONOF LIABILITY

 

IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHERFOR ANY INCIDENTAL, INDIRECT, SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIALDAMAGES, OR FOR LOST PROFITS, SAVINGS, USE, OPPORTUNITY OR REVENUES OF ANYKIND, OR ANY OTHER COMMERCIAL DAMAGE, WHETHER OR NOT THE PARTY HAS BEEN ADVISEDOF THE POSSIBILITY OF SUCH DAMAGES OCCURRING, AND WHETHER SUCH DAMAGES ARISEFROM CONTRACT, NEGLIGENCE, TORT OR OTHERWISE. TO THE EXTENT THAT A PARTY HERETO IS HELD LIABLE TO ANY THIRD PARTY FORANY SUCH INCIDENTAL, INDIRECT, SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIALDAMAGES, OR FOR ANY LOST PROFITS, SAVINGS, USE, OPPORTUNITY OR REVENUES OF ANYKIND, OR ANY OTHER COMMERCIAL DAMAGE, AS A RESULT OF ANY ACT OR OMISSION OF THEOTHER PARTY HERETO SUBJECT TO THE INDEMNIFICATION PROVISIONS OF SECTIONS 7.2AND 17, SUCH DAMAGES SHALL NOT SOLELY BY VIRTUE OF THIS SECTION 16 BE EXCLUDEDOR DISCLAIMED.

 

17.                                 INDEMNIFICATION

 

17.1                           MDT shall indemnify and defend the Company,its affiliates, and their respective directors, officers, representatives,employees, agents, subcontractors, successors and assigns, against and holdthem harmless from any liability, damage, cost or expense resulting from anyclaim made by any third party (including, without limitation, any claimalleging personal injury or property damage) attributable to any breach of thisAgreement by MDT or to anyintentional or negligent act or omission of MDT, its employees, agents, or subcontractors in the performanceof this Agreement, except to the extent that a claim is caused by thenegligence or willful misconduct of the Company, its employees, agents, orsubcontractors.

 

17.2                           The Companyshall indemnify and defend MDT,its affiliates, and their respective directors, officers, employees, agents,subcontractors, successors and assigns, against and hold them harmless from anyliability, damage, cost or expense resulting from:

 

(a)          any claim made by anythird party (including any claim alleging personal injury or property damage)attributable to any breach of this Agreement by the Company or to anyintentional or negligent act or omission of the Company, its employees, agents,or subcontractors in the

 

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performance of this Agreement, except to theextent that a claim is caused by the negligence or willful misconduct of MDT,its employees, agents, or subcontractors;

 

(b)         anythird party claim for bodily injury, including death, or property damage causedby defects in design or manufacture of the Products, except to the extent aclaim is caused by the negligence or willful misconduct of MDT in its sale,distribution or handling of the Products; and

 

(c)          any Product recalls orreplacements by any competent government authority or other agency deemedappropriate by mutual agreement of the Company and MDT, except to the extent such recall or replacement is causedby the negligence or willful misconduct of MDT in its sale, distribution or handling of the Products.

 

17.3                           Inthe event of any claim subject to the indemnification provisions of thisSection 17, the party seeking indemnification shall promptly notify the otherparty in writing, and permit that party upon its request, to control thedefense and/or settlement of the relevant claim.  Each party shall make a reasonable effort tocooperate in such settlement and/or defense and neither party shall settle anyclaim for which it is obligated under this Section 17 without the prior writtenapproval of the other party.

 

18.                                 CONFIDENTIALITYAND NON-DISCLOSURE

 

18.1                           BothParties acknowledge and agree that this Agreement creates a privileged andconfidential relationship between MDT and the Company and that informationconcerning both Parties’ business affairs, customers, vendors, finances,properties, methods of operations, computer programs and documentation,diagrams, verbal and written disclosures, drawings, samples, technicaldescriptions, specific configurations, dimensions, materials, concepts,developments, techniques, know-how, inventions, and other such materialsand  information, whether written ororal, is confidential in nature.  Allsuch information is hereinafter collectively referred to as “ConfidentialInformation.”  Neither party will use,directly or indirectly, for its own benefit or the benefit of others, bothduring the term of this Agreement and subsequent to its termination, anyConfidential Information of the other party which may be acquired or developedin connection with or as a result of the performance of this Agreement withoutthe prior written consent of the other party.

 

18.2                           BothParties agree, except as directed by the other party or provided in thisSection 18.2, not to disclose any Confidential Information of the other partyto any person whatsoever at any time during or after the term of thisAgreement.  Upon termination of thisAgreement and at a party’s written request, each party will turn over to theother party all documents, papers and other materials in its possession orcontrol (except for one copy that may be retained solely for archival purposes)that relate to the other party or the Intellectual Property of the other party.  Both Parties further agree to bind itsemployees and subcontractors to the terms and conditions of thisAgreement.  Each party acknowledges thatdisclosure of any Confidential Information of the other party by it may giverise to irreparable injury to the other party, its subsidiaries and/oraffiliated companies or the owner of such information, inadequately compensablein damages.  Accordingly, the disclosingparty may seek and obtain injunctive relief against the breach or threatenedbreach of the foregoing undertakings, in addition to any other legal remediesthat may be available.  Each partyacknowledges and agrees that the covenants contained herein are necessary forthe

 

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protection of legitimate business interests of the other party, itssubsidiaries and/or affiliated companies and are reasonable in scope andcontent.

 

18.3                           Eachparty’s obligation of non-disclosure and non-use shall not apply to information(i) which at the time of its disclosure to the receiving party is available tothe public, (ii) which the receiving party can show was properly in itspossession prior to disclosure, (iii) that is published or otherwise becomesavailable to the public through no fault of the receiving party, (iv) that thereceiving party can show was received by it from a third party without breachof a confidentiality obligation, (v) is independently developed by thereceiving party without use of any Confidential Information of the other party,or (vi) is required to be disclosed by any governmental agency, provided thatthe disclosing party shall give the other party reasonable notice of suchrequirement and shall afford the other party the opportunity to prevent suchdisclosure.

 

19.                                 NOTICES

 

Anynotice or other communication required or permitted hereunder shall be inwriting and shall be delivered by (a) personal delivery, (b) expedited deliveryservice, (c) facsimile transmission or (d) certified or registered mail,postage prepaid, addressed as follows:

 

If to MDT:

 

Medtronic USA, Inc.

Gastroenterology & Urology Division

4000 Lexington Avenue North

Shoreview, MN 55126-2983

Attn: Vice President & General Manager

Fax:  (763) 514-9701

 

with a copy to (which shall not constitute notice):

 

Medtronic USA, Inc.

710 Medtronic Parkway N.E.

Fridley, MN 55432-5604

Attn.: Senior Vice President & General Counsel

Fax: (763) 572-5459

 

If to the Company:

 

Vision-Sciences, Inc.

40 Ramland Road South

Orangeburg, New York 10962

Attn:  Ron Hadani, President& CEO

Tel:   (845) 365-0600 (ext. 116)

Fax:  (845) 365-0620

 

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With a copy to (which shall not constitute notice):

 

Proskauer Rose LLP

1585 Broadway

New York, NY 10036

Attn:  Paul I. Rachlin, Esq.

Tel:  (212) 969-3640

Fax:  (212) 969-2900

 

Any party may, by notice given in accordance with this Section 19 tothe other party, designate another address or person for receipt of notices.

 

20.                                 GENERALPROVISIONS

 

20.1                           ThisAgreement shall be governed in all respects by the laws of the State of NewYork, without regard to any rules of conflict and choice of laws that wouldrequire the application of laws of another jurisdiction.

 

20.2                           ThisAgreement constitutes the entire Agreement between the Parties with respect tothe subject matter hereof and supersedes all previous proposals, negotiations,representations or commitments between the Parties, both written and oral.  The terms of this Agreement shall prevail inthe event that there is a conflict or variance with the terms and conditions ofany purchase order form or other document submitted by MDT or with any invoiceor other document submitted by the Company.

 

20.3                           Allrights and remedies conferred under this Agreement or by any other instrumentor law shall be cumulative and may be exercised singularly or concurrently.

 

20.4                           Thefailure by either party to enforce any term or condition of this Agreement, thewritten waiver of any term or condition of this Agreement or the acceptance ofany payment shall not be a waiver of further enforcement of that or any otherterm or condition.

 

20.5                           Thecaptions used herein are for convenience only and shall not be considered inconstruing or interpreting the provisions hereof.

 

20.6                           If anyprovision of this Agreement shall be held to be invalid, illegal orunenforceable, the validity, legality and enforceability of the remainingprovisions shall in no way be affected or impaired thereby.

 

20.7                           Notwithstandingthe termination or expiration of this Agreement, it is acknowledged and agreedthat the following provisions shall survive any such termination or expiration,in addition to such other provisions of this Agreement which by their terms areintended to survive the termination of this Agreement:  Sections 7.1(b), 7.2, 10.3, 10.4, 10.5, 10.6,12.1, 12.2, 13.1, 13.2, 16, 17.1, 17.2, 17.3, 18.1, 18.2, 18.3, 19 and 20.1.

 

20.8                           ThisAgreement may be executed in any number of counterparts, each of which shall be

 

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deemedan original but all such counterparts together shall constitute but one and thesame instrument.

 

20.9                           ThisAgreement shall not be valid until signed and accepted by authorizedrepresentatives for each party, and no party shall be bound by any change,alteration, amendment modification, termination or attempted waiver of any ofthe provisions hereof unless in writing and signed by an authorized officer ofthe party against whom it is sought to be enforced.

 

20.10                     Withoutderogating from anything contained in Sections 2.3 and 5.8 hereof, neither thisAgreement nor any rights granted hereby may be assigned by either party withoutthe other party’s prior written consent, such consent not to be unreasonablywithheld.  Any attempted assignment inviolation of the proceeding sentence shall be null and void.  Notwithstanding the foregoing, consent shallnot be required for an assignment of this Agreement resulting from (i) amerger, reorganization, reincorporation or other acquisition of a party or (ii)the sale of all or substantially all of the urology or urological diagnostics businessof the Company or MDT.  This Agreementshall inure to the benefit of and be binding upon the successors and permittedassigns of the Parties hereto.  In theevent that this Agreement is assigned by the Company to a direct competitor of MDTas a result of the sale of all or substantially all of the Company’s urology orurological diagnostics business to such competitor of MDT, MDT shall have theright to terminate this Agreement upon written notice to the Company.

 

20.11                     Neitherparty shall be liable for any delay or failure to perform in whole or in part,resulting from causes beyond such party’s reasonable control, including, butnot limited to, fires, war, terrorism, strikes, insurrections, riots,embargoes, delays in transportation, inability to obtain supplies of rawmaterials, or requirements or regulations of any governmental and/orsemi-governmental authority.  If suchdelay or failure extends beyond thirty (30) days, the party not affected by thedelay shall have the right to terminate this Agreement upon written notice.

 

20.12                     Nothingin this Agreement, whether express or implied, is intended to confer any rightsor remedies under or by reason of this Agreement on any person other than the Partiesto this Agreement and their respective successors and permitted assigns.

 

20.13                     Uponexecution of this Agreement, the Company may issue a press releasesubstantially in the form of Annex D hereto (the “Release”).  The Company shall be entitled to file aredacted copy of this Agreement with the Securities and Exchange Commissionafter review thereof by MDT, which review by MDT shall be completed in a timelyfashion.  Except to the extent requiredby applicable law, neither party shall make any public announcement orstatement regarding the relationship of the Parties hereunder inconsistent withthe Release or any public filings of either party without the prior writtenconsent of the other party, which shall not be unreasonably withheld.

 

21                                    ALTERNATIVEDISPUTE RESOLUTION

 

21.1                           Ifa dispute, other than a dispute relating to intellectual property or questionsof injunctive relief, between the Parties should arise out of or relate to thisAgreement, the Parties hereby agree to handle the dispute pursuant to the belowoutlined binding alternative dispute resolution proceedings in lieu of any otherrights or remedies each may have.

 

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21.2.                        Executive Dispute Resolution. The Parties shall attempt in good faith to resolve any dispute arising out ofor relating to this Agreement promptly by negotiation between executives whohave authority to settle the controversy and who are at a higher level ofmanagement than the persons with direct responsibility for administration ofthis Agreement.  Either Party may givewritten notice to the other Party of any dispute not resolved in the normalcourse of business.  Such notice shall(a) specify the nature of the dispute, (b) state the Party’s argumentssupporting its position and (c) state the name and title of the executive whowill represent that Party in the dispute and any other person who willaccompany the executive.  Within fifteen(15) days after delivery of the notice, the receiving Party shall submit to thesending Party a written response.  Thenotice and response shall include (a) a statement of that Party’s position anda summary of arguments supporting that position, and (b) the name and title ofthe executive who will represent that Party and of any other person who willaccompany the executive.  Within thirty(30) days after delivery of the initial notice, the designated executives ofboth Parties shall meet at a mutually acceptable time and place, and thereafteras often as they reasonably deem necessary, to attempt to resolve thedispute.  All negotiations pursuant tothis clause are confidential and shall be treated as compromise and settlementnegotiations for purposes of applicable rules of evidence.

 

21.3.                        Mediation.  If the disputehas not been resolved by negotiation as provided in Section 21.2 withinforty-five (45) days after delivery of the initial notice of negotiation, or ifthe Parties failed to meet within thirty (30) days after delivery of theinitial notice, the Parties shall endeavor to settle the dispute by mediationunder the Center for Public Resources (“CPR”) mediation procedures thencurrently in effect; provided, however, that if one Party fails to participatein the executive dispute negotiation as provided in Section 21.2, the otherParty can initiate mediation prior to the expiration of the forty-five (45)days. Unless otherwise agreed, the Parties will select a mediator from the CPRPanels of Distinguished Neutrals, and if the Parties are unable to agree on amediator, then CPR shall select a mediator.

 

21.4.                        Arbitration.  Except asprovided in Sections 21.1 or 21.5, any dispute arising out of or relating tothe formation or performance of this Agreement, including the breach,termination or validity thereof, which has not been resolved by mediation asprovided herein within thirty (30) days after initiation of the mediationprocedure, shall be finally resolved by binding arbitration by a single neutralarbitrator mutually selected by the Parties in accordance with the CPR Rulesfor Non-administered Arbitration then currently in effect; provided, however,that if one Party fails to participate in either the negotiation or mediationas agreed herein, the other Party can commence binding arbitration prior to theexpiration of the time periods set forth above. The sole arbitrator shall bemutually selected by the Parties, and if the Parties are unable to agree on thesole arbitrator, then CPR shall select the sole arbitrator.  The solearbitrator shall not have had a business relationship with either Party duringany of the past 10 years, and shall be an attorney specializing in businesslitigation who has at least fifteen (15) years of experience with a law firm ofover 25 lawyers or was a judge of a court of general jurisdiction, except thatin the case of an arbitration concerning a royalty rate dispute pursuant toSection 13.3, such arbitrator shall be an attorney specializing in patentlitigation rather than business litigation. The sole arbitrator may be the mediator selected previously, unless aParty objects to such person serving as the sole arbitrator.  The award of the sole arbitrator shallinclude a reasoned basis for the award and shall be binding on theParties.  The arbitration shall be heldin New York, New York, and the arbitrator shall apply the substantive law ofthe State of New York, except that the interpretation and enforcement of thisarbitration provision shall be governed by the Federal

 

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Arbitration Act, 9 U.S.C. §§1-16. Within thirty (30) days of initiation of arbitration, the Parties shallreach agreement upon and thereafter follow procedures assuring that thearbitration will be concluded and the award rendered within no more than six(6) months from the selection of the arbitrator.  Failing such agreement, CPR will design andthe Parties will follow such procedures. The Parties hereby consent to the jurisdiction of the Federal DistrictCourt for Southern District of New York for the enforcement of these provisionsand the entry of judgment on any award rendered hereunder.  Should such court for any reason lackjurisdiction, any court with jurisdiction shall enforce this clause and enterjudgment on any award rendered hereunder.

 

21.5.                        **Limited Judicial Dispute Resolution.** Notwithstanding any other provision in this Agreement, the arbitrator selectedunder Section 21.4 above shall have no jurisdiction or authority to grantinjunctive relief, award punitive or exemplary damages (except as required togive effect to Sections 7.2 or 17 of this Agreement for indemnity against athird-party award, it being the intent of the Parties as stated in Section 16that no punitive or exemplary damages shall be awarded on direct claims betweenthem), or determine any issue of intellectual property interpretation,infringement, validity or enforceability.  Each party reserves all rightsand remedies available to it for any dispute relating to intellectual propertyor questions of injunctive relief.

 

21.6.                        **Fees and Expenses of Arbitration/Mediation.**  The Parties shall share equally the totalcost of the mediator and the arbitrator’s fees and expenses.  Each party shall bear its own attorneys’fees, costs and expenses associated with any such mediation or arbitration.

 

IN WITNESS WHEREOF the Parties hereto have executed this Agreement asof the date above written.

 
| **MEDTRONIC USA, INC.** | **VISION-SCIENCES, INC.**            |
|-------------------------|--------------------------------------|
|                    |                                 |   |
| By:                     | /s/ Camille I. Farhat                |   | By: | /s/ Ron Hadani |   |
| Name:                   | Camille I. Farhat                    | Name: | Ron Hadani |   |
| Title:                  | Vice President & General Manager | Title: | President & CEO |   |
|                    | Gastroenterology and  Urology        | Date: | Dec. 29, 2004 |   |
| Date:                   | Dec. 29, 2004                        |   |   |   |   |
|                         |                                      |  |  |  |  |  |  |

 

For good and valuable consideration, the receipt and sufficiency ofwhich are hereby acknowledged, Medtronic, Inc., a Minnesota corporation (“Medtronic”),hereby (i) absolutely, irrevocably and unconditionally guarantees to theCompany the prompt and full performance when due of all obligations of MDT (asubsidiary of Medtronic) to the Company arising under the above Agreement,including, without limitation, Section 17.1 thereof and (ii) agrees thatthe Agreement may be modified by written agreement of the Parties in anyrespect without affecting Medtronic’s obligations under this guaranty.  If MDT fails to perform any of itsobligations under the above Agreement, Medtronic shall perform that obligationin place of MDT.

 

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|   | **MEDTRONIC, INC.**                          |
|--------|----------------------------------------------|
|   |                                         |
|   | By:                                          | /s/ William A. Hawkins |   |
|   | Name: William A. Hawkins                     |
|   | Title: President and Chief Operating Officer |
|   | Dated: December 29, 2004                     |

 

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## **ANNEX A**

##  

### **PRODUCTS AND PRICING**

 

 

**[*]**

 

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**ANNEX B**

 

**RETURN AUTHORIZATION PROCEDURES**

 

**[*]**

 

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**ANNEX C**

 

**INITIALPERIOD DELIVERY SCHEDULE**

 

**[*]**

 

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**ANNEX D**

 

**FORM OF PRESSRELEASE**

 

VisionSciences Announces Exclusive Distribution Agreement With Medtronic USA, Inc.

forits Urology Products within the United States and Canada

 

Natick, Mass. – Vision-Sciences, Inc., (Nasdaq:VSCI) announced today that it has signed a distribution agreement under whichMedtronic USA, Inc. (a unit of Medtronic, Inc. (NYSE: MDT)) has become theexclusive distributor in the U.S. and Canada of Vision Sciences’ Flexible Cystoscope with Slide-OnTM EndoSheath® System within the fieldof urology including urogynecology. Medtronic will market and sell Vision Sciences’ cystoscopy products,under Vision Science’s brand names, through its dedicated urodiagnostic salesforce.

 

“We are extremely pleased to have Medtronicrecognize the value of the FlexibleCystoscope with Slide-OnTM EndoSheath® System and become our marketing and distribution partner in the US and Canadafor our new and growing urology product line. Following a strong interest during the annual American UrologyAcademy congress held in San Francisco earlierthis year, this agreement marks the official commercial introduction of our newtechnology and product line to the domestic urology market. We believe that theinnovative EndoSheath® System, coupled with Medtronic’s highly professional andestablished sales and marketing forces, will result in effective marketpenetration for the products.  We arealso very pleased with the fact that this is the second Medtronic division withwhich we have established distribution arrangements, following the exclusivedistribution agreement we entered into in August 2003 with Medtronic Xomed, thecompany’s ENT division. We look forward to a long and mutually rewardingrelationship between the two companies,” stated Ron Hadani, President and CEOof Vision-Sciences, Inc.

 

**Vision-Sciences,Inc. designs, develops, manufactures and markets unique flexible endoscopicproducts utilizing sterile disposable sheaths, the Slide-OnTM EndoSheath®System, which provide the users quick, efficient product turnover whileensuring the patient a contaminant-free product. Information about VisionSciences’ products is available on the Internet at www.visionsciences.com.**

** **

Except for the historical information herein, thematters discussed in this news release include forward-looking statements forthe purposes of the safe harbor protections under The Private SecuritiesLitigation Reform Act of 1995.  Futureresults may vary significantly based on a number of factors including, but notlimited to, the availability of capital resources, risks in market acceptanceof new products and services and continuing demand for the same, the impact ofcompetitive products and pricing, seasonality, changing economic conditions andother risk factors detailed in our most recent annual report and other filingswith the SEC.  The Company assumes noobligation to update any forward-looking statements as a result of newinformation or future events or developments.

 

###

 

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