Document:

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

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

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

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

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

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

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

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

                                   ARTICLE ONE

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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                                   ARTICLE TWO

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

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

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

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

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

         2.03   Prices.

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

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

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

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

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

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

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

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

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         2.08   Minimum Purchase Requirements:

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

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

                                  ARTICLE THREE

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

         3.08   CODMAN will:

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

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

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

         3.09   Valley Forge shall:

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

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

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

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

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

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

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

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

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

                                  ARTICLE FOUR

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

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

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

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

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

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

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

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

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

                                       14
<PAGE>

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

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

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

                                  ARTICLE FIVE

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

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

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

                                       15
<PAGE>

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

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

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

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

                        The warranty does not include:

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

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

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

                                       16
<PAGE>

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

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

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

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

                                       17
<PAGE>

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

                                   ARTICLE SIX

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

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

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

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

                                       18
<PAGE>

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

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

                                  ARTICLE SEVEN

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

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

                                       19
<PAGE>

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

                                  ARTICLE EIGHT

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

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

                                       20
<PAGE>

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

                                  ARTICLE NINE

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

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

                                       21
<PAGE>

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

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

                                       22
<PAGE>

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

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

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

         9.05   Ownership of Developments.

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

                                       23
<PAGE>

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

                                   ARTICLE TEN

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

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

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

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

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

                                       24
<PAGE>

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

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

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

                                 ARTICLE ELEVEN

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

         11.01  Arbitration.

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

                                       25
<PAGE>

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

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

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

                                       26
<PAGE>

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

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

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

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

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

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

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

                                       27
<PAGE>

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

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

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

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

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

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

                                       28
<PAGE>

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

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

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

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

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

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

                                       29
<PAGE>

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

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

                                       30
<PAGE>

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

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

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

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

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

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

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

                                       31
<PAGE>

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

                                              VALLEY FORGE SCIENTIFIC CORP.

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

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

                                              CODMAN & SHURTLEFF, INC.

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

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

                                       32Exhibit 10.13

                        SUPPLY AND DISTRIBUTION AGREEMENT

         THIS AGREEMENT is made and effective the 25th day of October, 2004
("Effective Date") between Valley Forge Scientific Corp., a Pennsylvania
corporation, ("VFS"), and Stryker Instruments Division of Stryker Corporation, a
Michigan corporation ("Distributor").

                                   WITNESSETH

         WHEREAS, VFS designs, develops, manufactures and sells bipolar
electronic systems and stimulators;

         WHEREAS, Distributor designs, develops, manufactures and markets
medical devices, including devices for the treatment of chronic pain;

         WHEREAS, VFS and Distributor entered into a certain Development
Agreement dated as of September 6, 2002 (the "Development Agreement") pursuant
to which they collaborated to determine the feasibility of the commercialization
of certain products, which Development Agreement has terminated in accordance
with its terms;

         WHEREAS, as a result of the collaboration under the Development
Agreement, VFS desires to manufacture and supply to Distributor certain
products, which are more fully described in Schedule A, as the same may be
amended or supplemented from time to time by an instrument executed on behalf of
each of VFS and Distributor (the "Products"), all in accordance with the terms
and conditions set forth herein; and

         WHEREAS, Distributor desires to purchase Products from VFS and
distribute the Products throughout the world for use solely in connection with
the percutaneous treatment of pain (the "Field").

         NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein and intending to be legally bound, the
parties agree as follows:

SECTION I         SUPPLY AGREEMENT

         1.       Supply Requirements.

         1.1      Distributor agrees to purchase from VFS and VFS agrees to sell
to Distributor the Products on the terms set forth in this Agreement solely for
use in the Field.

         1.2      (a)      VFS shall deliver to Distributor, for Distributor's
inspection, a reasonable number of preproduction quality samples of each of the
Products ("Inspection Samples") as agreed upon by the parties which conform to
the specifications, consisting in the case of the Products designated as the
<PAGE>

Generator Product thereon (the "Generator Product") of the relevant
manufacturing specifications and subsidiary detail specifications, as set forth
in Schedule A, and drawings agreed upon by Distributor and VFS
("Specifications"), including reports documenting that the Products have been
inspected and tested.

         (b)      Distributor shall provide to VFS any objections it has
concerning the conformance of the Inspection Samples to the Specifications
within thirty (30) days after receipt of the Inspection Samples (the "Inspection
Period") and VFS shall make such changes to Products prior to production. If no
objections are received by Distributor during the Inspection Period, the
Inspection Samples shall be deemed acceptable by Distributor. The Inspection
Period for the Inspection Samples of the initial Products covered by this
Agreement that are listed in Schedule A on the Effective Date shall be known as
the "Initial Inspection Period".

         1.3      On or prior to the end of the Initial Inspection Period,
Distributor shall deliver to VFS a forecast of Distributor's requirements for
Products during the initial six-month period after the Initial Inspection
Period. On or before the last day of each month after the Initial Inspection
Period and during the Term, Distributor shall deliver to VFS a six-month rolling
forecast of Distributor's requirements for Products. Each forecast shall specify
the quantities of each Product and the projected shipment dates therefor. The
first three months of the initial six-month forecast shall represent
Distributor's binding purchase order for the quantities of Products specified
therein. For each six-month rolling forecast thereafter, the third month of such
rolling forecast shall be Distributor's binding purchase order for the
quantities specified therein. VFS shall not be obligated to supply quantities of
Products in excess of those quantities subject to binding purchase orders. VFS,
however, shall use its commercially reasonable efforts to deliver to
Distributor, pursuant to purchase orders, quantities of Products even if
Distributor has modified a projection of Product requirements for such
quantities. Three (3) months prior to the end of each Agreement Year (as defined
below) during the term of this Agreement, Distributor and VFS shall meet to
review the projected quantity mix of Products for purchase during the next
Agreement Year for manufacturing planning purposes.

         1.4      It is understood that the terms of this Agreement shall
supersede any conflicting terms of purchase orders for all purchases of
Products.

         1.5      Distributor and VFS have agreed upon the following minimum
purchase requirements (the "Initial Products Minimum") for the first three (3)
Agreement Years for the Generator Product:

                                                  Initial
                      Agreement Year         Products Minimum
                      --------------         ----------------

                             1                       *
                             2                       *
                             3                       *

                                       2
<PAGE>

For purposes of this Agreement, the term "Agreement Year" shall mean the period
beginning on the date of the first acceptance by Distributor of a Generator
Product delivered by VFS to Distributor as ready for commercial sale
(Distributor shall diligently and in good faith promptly evaluate the "readiness
for commercial sale" of the Generator Product that VFS has delivered to
Distributor) and ending on the last day of the calendar quarter in which the
first anniversary date of such date occurs, unless such anniversary date is the
first day of a calendar quarter, in which case the first Agreement Year shall
end on the last day of the preceding calendar quarter, and each successive
twelve (12)-month period thereafter. On or before the beginning of the last
calendar quarter of the third Agreement Year and each Agreement Year thereafter,
VFS and Distributor shall conduct good faith negotiations regarding the Initial
Products Minimum for the next Agreement Year. In the event that one or more new
products have been added to Schedule A as contemplated by Section I, Paragraph
1.6(a), a separate minimum purchase requirement shall be agreed for each Product
that is a New Field Product ("New Product Minimum"). Notwithstanding the
foregoing, the minimum purchase requirements shall be reduced for each Agreement
Year to the extent that (i) VFS shall fail to deliver Products, subject to
binding purchase orders with a projected shipment date during such Agreement
Year, within thirty (30) days after the projected shipment date but, in any
event, during such Agreement Year, and/or (ii) VFS has been advised by
Distributor in writing and in timely manner that Products delivered during such
Agreement Year do not conform to the requirements of Section I, Paragraph 4
(which writing shall specify in reasonable detail how the Products do not
conform to the requirements of Section I, Paragraph 4) and, if it is determined
that such Products do not conform to the requirements of Section I, Paragraph 4,
replacements conforming to the requirements of Section I, Paragraph 4 have not
been delivered during such Agreement Year.

         1.6      (a) If during the term of this Agreement, VFS develops or
acquires rights to any new product indicated for use in the Field ("New Field
Product") then, prior to offering such New Field Product to a third party for
use in the Field, VFS shall offer Distributor the right of first refusal to
market the New Field Product in the Field under the terms of this Agreement", by
giving Distributor a written notice ("New Field Product Notice") of the product
specifications, intended use, projected availability, Distributor's purchase
price for the New Field Product, the applicable New Product Minimum, and other
terms, after which Distributor shall have thirty (30) days ("First New Field
Product Decision Period") to inform VFS in writing of its interest to market
such product under the terms proposed, subject to satisfactory review of a
"Field Ready Prototype" of such New Field Product; provided, however, that
Distributor shall have no rights to any new product for which the idea was
initially brought to VFS by a third party unless VFS in writing seeks
Distributor's input in connection with the development thereof, in which case
the parties shall agree in advance as to Distributor's rights. During the First
New Field Product Decision Period, VFS shall provide to Distributor such
information reasonably available to VFS, which Distributor reasonably requires
regarding the new product, subject to confidentiality and non-disclosure
provisions in this Agreement. The term "Field Ready Prototype" shall mean a
prototype functionally ready to be used in the indicated clinical testing
applications, except for complying with applicable government regulations
related to such testing, which shall be the sole responsibility of Distributor.

         In the event Distributor gives written notice to VFS of its decision
not to exercise its right of first refusal during the First New Field Product
Decision Period, or fails to give written notice to VFS of its decision to

                                       3
<PAGE>

exercise its right of first refusal within said First New Field Product Decision
Period, then, notwithstanding anything in this Agreement to the contrary, VFS
may pursue other distribution opportunities for the New Field Product in the
Field, on terms that are, in the aggregate, not less favorable to VFS than the
terms specified by VFS in the New Field Product Notice or contained in the last
subsequent proposal by VFS to Distributor, if any, and, in the event that VFS
desires to pursue such less favorable distribution opportunities, then VFS shall
be required (each time such situation arises) to give a new notice to
Distributor pursuant to this Paragraph 1.6(a) and comply with the right of first
refusal set forth herein for an additional thirty (30)-day period following the
receipt of such new notice by Distributor.

         In the event Distributor gives written notice to VFS of its decision to
exercise its right of first refusal during the First New Field Product Decision
Period, VFS shall provide to Distributor a Field Ready Prototype of the New
Field Product when such prototype is available, after which Distributor shall
have ninety (90) days to determine whether the Field Ready Prototype is
acceptable to Distributor ("Second New Field Product Decision Period") and to
agree in writing to have the New Field Product be added to Schedule A of this
Distribution Agreement under the terms set forth in the New Field Product
Notice, whereupon the parties shall agree upon the initial production run
purchases and add such New Field Product to Schedule A. Notwithstanding the
foregoing, the Second New Field Product Decision Period shall be extended to
forty-five (45) days after receipt of the necessary government approvals, if
any, for the clinical testing of the Field Ready Prototype of the New Field
Product provided that Distributor has in good faith commenced the effort to
obtain such approvals promptly after giving written notice of its decision
during the First New Field Product Decision Period to exercise its right of
first refusal with respect to such New Field Product and using commercially
reasonable efforts has diligently pursued the obtaining of such approvals until
such approvals are obtained. During the Second New Field Product Decision
Period, VFS shall provide to Distributor such information reasonably available
to VFS, which Distributor reasonably requires regarding the new product, subject
to confidentiality and non-disclosure provisions in this Agreement. In the event
Distributor gives written notice to VFS of its decision not to exercise its
right of first refusal during the Second New Field Product Decision Period, or
fails to give written notice to VFS of its decision to exercise its right of
first refusal within said Second New Product Decision Period, then,
notwithstanding anything in this Agreement to the contrary, VFS may pursue other
distribution opportunities in the Field, for the New Field Product on terms that
are, in the aggregate, not less favorable to VFS than the terms specified by VFS
in the New Field Product Notice or contained in the last subsequent proposal by
VFS to Distributor, if any, and, in the event that VFS desires to pursue such
less favorable distribution opportunities, then VFS shall be required (each time
such situation arises) to give a new notice to Distributor pursuant to this
Paragraph 1.6(a) and comply with the right of first refusal set forth herein for
an additional thirty (30)-day period following the receipt of such new notice by
Distributor.

         (b)      During the term of this Agreement, prior to offering a new
product indicated for use in lesion/ablation applications in conjunction with
generator products with the same features and technical specifications as the
Generator Product ("New Outside Product") to a third party distributor to
distribute or sell the New Outside Product for use in the field of orthopedic
surgery, ENT, craniomaxillofacial surgery or head and neck surgery (individually
an "Expanded Field" and collectively "Expanded Fields"), VFS shall offer
Distributor the right of first refusal to market the New Outside Product by

                                       4
<PAGE>

giving Distributor a written notice ("New Outside Product Notice") of the
minimum purchase requirements, the particular Expanded Fields where the New
Outside Product is indicated for use, Distributor's purchase price for the New
Outside Product, product features and benefits, general specifications and other
terms, after which Distributor shall have a period of thirty (30) days after
delivery of a Field Ready Prototype of such New Outside Product ("New Outside
Product Decision Period") to enter into a distribution agreement for the New
Outside Product under the terms set forth in the New Product Notice that VFS
plans to offer such New Outside Product to a third party distributor ("New
Distribution Agreement").

         In the event the Distributor (i) gives written notice to VFS of its
decision not to exercise its right of first refusal during the New Outside
Product Decision Period, or (ii) if Distributor fails to enter into a New
Distribution Agreement with VFS during the New Outside Product Decision Period,
then, notwithstanding anything in this Agreement to the contrary, VFS may pursue
other distribution opportunities for the New Outside Product in the Expanded
Field(s) designated in the New Outside Product Notice, on terms that are, in the
aggregate, not less favorable to Valley Forge than the terms specified by VFS in
the New Outside Product Notice or contained in the last subsequent proposal by
VFS to Distributor, if any, and, in the event that VFS desires to pursue such
less favorable distribution opportunities, then VFS shall be required (each time
such situation arises during the term of this Agreement) to give a new notice to
Distributor pursuant to this Paragraph 1.6(b) and comply with the right of first
refusal set forth herein for an additional thirty (30)-day period following the
receipt of such new notice by Distributor.

         Notwithstanding anything in this Agreement to the contrary, the right
of first refusal in this Paragraph 1.6(b) shall not apply to (i) the marketing
or sale by VFS (including a Permitted Assignee as defined in Section III,
Paragraph 8.3) or its subsidiaries or other affiliates of any product through
its own sales force or through independent sales representatives and (ii) any
neurocranial or neurospinal application of any product.

         (c)      Notwithstanding anything in this Agreement to the contrary,
the rights of first refusal set forth in this Paragraph 1.6 shall terminate upon
the earlier of (i) the termination of this Agreement or (ii) upon the failure of
Distributor to satisfy the Initial Products Minimum or a New Product Minimum, as
the case may be, for any Product or New Field Product as set forth in Section I,
Paragraph 1.5, herein.

         1.7      (a) If Distributor does not meet the Initial Products Minimum
and/or a New Product Minimum for an Agreement Year, Distributor may, at its
option, nevertheless be deemed to have fulfilled such obligation by paying VFS
an amount (the "shortfall amount") equal to fifty percent (50%) of the
difference between (A) the amount Distributor would have paid to VFS had it
fulfilled such minimum purchase requirement for such Agreement Year and (B) the
amount Distributor has paid (or will pay) for the applicable Product or Products
actually purchased during such Agreement Year. Such payment, if made, shall be
due within thirty (30) days following the end of the such Agreement Year in
which Distributor did not fulfill its minimum purchase requirement.

                                       5
<PAGE>

         (b)      If Distributor does not meet the Initial Products Minimum
and/or a New Product Minimum (or pay the applicable shortfall amount pursuant to
Paragraph 1.7 (a)) during an Agreement Year, VFS shall have the right to
terminate this Agreement, with respect only to the Products that are listed on
Schedule A on the Effective Date if the failure relates to the Initial Products
Minimum and/or with respect only to the applicable New Field Product if the
failure relates to one or more New Product Minimums, upon ninety (90) days prior
written notice to Distributor, such notice to be given not later than fifteen
(15) business days after the expiration of the 30-day period referred to in
Paragraph 1.7(a). The parties agree that, notwithstanding anything to the
contrary in this Agreement, if they mutually agree that material changes in
market conditions have occurred, then they will in good faith renegotiate the
Initial Product Minimums and/or the applicable New Product Minimums rather than
terminate this Agreement.

2.       Prices and Payment.

         2.1      During the first Agreement Year, pricing of Products shall be
according to the terms set forth in Schedule B attached hereto.

         2.2      Upon the request of either party, the parties shall negotiate
in good faith during the first two months of the fourth quarter of each
Agreement Year with respect to changes in the pricing of Products to be
effective on the first day of the second Agreement Year and of each Agreement
Year thereafter. Such negotiations shall take into account, among other things,
the competitive market conditions then existing, the cost of materials and
labor, quantities of Products to be purchased by Distributor and economic
conditions. The price in effect for any Product for any Agreement Year shall,
however, not increase by more than three percent (3%) over the price in effect
for the preceding Agreement Year. Price increases resulting from improvements or
changes in a particular Product shall be negotiated in good faith by both
parties prior to the delivery of the improved or changed Product and shall not
be subject to the foregoing limitation on the amount of increase.

         2.3      Payment to VFS for Products shall be made forty-five (45) days
following the date of the invoice from VFS (which shall be no earlier than the
date of shipment) for Products specified in purchase orders and not rejected by
Distributor for nonconformance pursuant to Section I, Paragraph 4.1. All
payments to VFS under this Agreement shall be made in U.S. dollars. All payments
due under this Agreement not made on their due date shall bear interest at the
lesser of (i) one and one-half percent (1.5%) per month and (ii) the maximum
lawful interest rate permitted under applicable law.

3.       Shipment.

         3.1      All sales of Products shall be F.O.B. VFS's factory at the
prices set forth in Schedule B, which prices shall be exclusive of freight,
insurance and taxes. VFS shall, at Distributor's cost, ship the Products to any
location chosen by Distributor, utilizing carriers chosen by Distributor. Title
and risk of loss or damage to the Products shall pass to Distributor at the time
they are loaded on to the carrier specified by Distributor.

                                       6
<PAGE>

         3.2      Unless otherwise agreed in advance, all Products, inclusive of
operating and service manuals and complete standard sets of accessories, shall
be packed, labeled, marked and otherwise prepared for shipment by VFS in such a
way as to be acceptable to carriers and in accordance with good commercial
practice, so as to minimize risk of loss or damage in transit. An itemized
packing list and Product inspection report in the form set forth in Schedule C
attached hereto shall accompany each shipment.

4.       Specifications, Testing, and Warranty.

         4.1      VFS agrees to sell the Products to Distributor for use in the
Field, for the term of this Agreement and warrants that such Products will meet
the Specifications or such modified specifications as may be agreed upon in
writing by Distributor and VFS. Distributor shall have a period of thirty (30)
days from date of receipt of Products to inspect and accept Products that
conform to the Specifications or reject Products that do not conform to the
Specifications. Rejection of non-conforming Products by Distributor shall not
excuse VFS from its obligations to deliver Products pursuant to this Agreement.

         4.2      VFS reserves the right to make engineering changes that do not
affect the form, fit, function, performance or appearance of the Products and
that do not require regulatory approval without the prior approval of
Distributor; provided, however, that VFS shall provide Distributor with notice
of such change as promptly as practical after VFS's final internal approval of
such change. With regard to all other material changes to the Products, VFS
agrees to give Distributor written notice and to simultaneously provide
Distributor with Specifications for the changes. No changes relating to the
form, fit, function, performance or appearance will be made to any Products
supplied to Distributor at any time without the prior written approval or deemed
approval as provided below of Distributor. Distributor agrees to inform VFS of
its approval or disapproval of changes relating to the form, fit, function,
performance or appearance of the Products within thirty (30) days after
receiving notice of any such proposed changes. If Distributor does not respond
to VFS within said thirty (30)-day period, the change will be deemed to have
been approved.

         4.3      Distributor may request, in writing, that VFS change the
Specifications or otherwise incorporate changes into the Products and/or develop
customized Products for Distributor. Such request will include a description of
the proposed changes that will reasonably permit VFS to evaluate the cost and
feasibility. Within forty-five (45) days after receiving such a request from
Distributor, VFS will advise Distributor whether it is reasonably able to make
such changes and, if so, the timetable and terms and conditions under which it
would make such changes, and any resulting increase or decrease in prices
hereunder. VFS's evaluation shall be in writing and, if it is reasonably able to
make the change, it shall also state the impact on delivery schedules for
Products covered by pending purchase orders hereunder. If, after good faith
negotiations, Valley Forge and Distributor agree upon the terms of the changes,
then this Agreement, the Specifications, delivery schedules and pricing schedule
will be amended accordingly.

         i.       Unless otherwise agreed to in writing by VFS and Distributor,
         purchases by Distributor of more customized products shall not be
         credited to Distributor in meeting the dollar amount of the minimum
         purchase requirement pursuant to Section I, Paragraph 1.5.

                                       7
<PAGE>

         ii       VFS shall not unreasonably refuse to incorporate the changes
         or develop a more customized product when requested by Distributor .

         4.4      Within the times specified in this Paragraph 4.4, Distributor
shall have the right to return to VFS, for full credit/refund plus cost of
freight, any Product that is defective or fails to comply with the
Specifications, provided, however, that such defect or failure is in no way the
result of any modification to the Product, improper repair, or of any damage
(assuming proper packaging for transportation by VFS) to the Product after
loaded on to the carrier specified by Distributor. Notwithstanding failure of
Distributor to inspect and/or return any shipment, or its acceptance of any
shipment, Distributor shall be entitled to return to VFS, for either repair,
free of charge, credit/refund or exchange, at VFS's option, any Product that is
defective or fails to comply with the Specifications if returned by Distributor
within one (1) year after shipment of Generator Product by Distributor to its
end user or ninety (90) days after shipment of any other Product by Distributor
to its end user. Notwithstanding anything in this Agreement to the contrary, the
use of any instrument other than one approved by VFS for use with the Generator
Product shall void all warranties contained in this Agreement with regard to the
Generator Product.

         4.5      In the event it is discovered by Distributor, and VFS is
notified by Distributor within the time periods stated in Section I., Paragraph
4.4 hereof, that a Product is defective or fails to comply with the
Specifications, Distributor shall return the Product to VFS and specify in
writing the alleged complaint, Product code, serial number, if there is one, and
the return address of Distributor or the end user if the Product is to be drop
shipped to the end user. VFS will, at its option and at its expense, either
repair or replace such defective Product within fifteen (15) business days after
its return by Distributor, freight prepaid to VFS at its repair facility, and
receipt by VFS at such facility. If VFS determines that the returned Product has
been abused by the end user, VFS shall provide Distributor with a quote for
repair of the Product and Distributor shall either agree to pay for the repair,
parts, labor and calibration or instruct VFS to return the Product to
Distributor without repairs. In either case, Distributor shall pay the freight
for return of the Product to Distributor. VFS shall charge Distributor for any
such repair, parts, labor and calibration as set forth in Section I,
Paragraph.4.6 hereof.

         4.6      VFS agrees to provide repair, maintenance, modification and
other services on a timely basis on units of the Generator Product purchased by
Distributor or its end user at $125.00/hour (as increased by the percentage
increase (if any)in the Consumer Price Index (CPI), as defined by the U.S.
Department of Labor, Bureau of Labor Statistics measured as of the ninth month
of the then current Agreement Year as compared to the CPI measured as of
December 2002), plus the charges for repair parts. Notwithstanding the foregoing
sentence, the hourly rate that VFS charges Distributor for such services shall
not exceed the lowest rate that VFS charges any other customer for similar
services. Upon request by Distributor, VFS shall provide to Distributor its then
current price list for spare or replacement parts for Generator Products. VFS
agrees to maintain an inventory of spare and replacement parts for the Generator
Product if and when production ceases for a period of at least five (5) years

                                       8
<PAGE>

following the last delivery date of a Generator Product to Distributor. VFS
agrees to refurbish Generator Products at a cost agreed upon annually by VFS and
Distributor.

         4.7      VFS MAKES NO WARRANTY OTHER THAN THOSE EXPRESSLY MADE HEREIN,
EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION, ANY WARRANTY OF
MERCHANTABILITY OR OF FITNESS FOR ANY PARTICULAR PURPOSE.

5.       Compliance With Laws and Regulations.

         5.1      VFS represents and warrants that it is and, during the term of
this Agreement, will continue to be (i) a Domestic Device Establishment,
registered with the FDA and (ii) ISO 9001 and EN 46001 certified. VFS further
represents and warrants that all Products sold and delivered to Distributor
under this Agreement shall be manufactured in accordance with the
Specifications, applicable industry standards and current Good Manufacturing
Practices ("cGMPs") as set forth in the Quality System Regulation promulgated by
the FDA and found in Code of Federal Regulations, Title 21 Part 820 (the "QSR")
and in accordance with all United States applicable statutes, laws, standards
and regulations (including, but not limited to, the United States Medical
Devices Amendments of 1976) and the regulations promulgated thereunder,
including the QSR, that are applicable to the Products. VFS agrees to provide
Distributor with copies of its FDA registration, ISO 9001 certificate and EN
46001 certificate.

         5.2      Distributor, upon reasonable advance notice to VFS during
normal business hours, may on an annual basis visit VFS manufacturing facilities
to observe VFS quality assurance procedures for testing, packaging and shipping
during VFS's initial production runs of the Products and shall have the right to
evaluate VFS's manufacturing, documentation control, inspection and calibration
systems. Such visits by Distributor personnel will be mutually scheduled by
Distributor and VFS.

         5.3      VFS shall notify Distributor of any FDA audit, or any audit
from any other regulatory body, of its facilities for the manufacture of the
Products, or any request for information from the FDA or other regulatory body
related to the manufacture of the Products, as soon as practicably possible
after receipt of such notice of such audit or such request. VFS shall notify
Distributor as soon as practicable after receiving notice of any claim or action
by the FDA or other regulatory body stating any non-compliance with this
Paragraph 5 or any notice with respect to any violation of applicable statutes,
laws, rules or regulations. Both parties shall notify each other of any adverse
reaction, malfunction, injury or other similar claims with respect to the
Products or the devices in which they are incorporated, of which either party
becomes aware. The parties shall discuss and determine the responsibility for
the investigation of all such complaints and the responsible party shall forward
to the other a summary of its findings with respect thereto. Distributor shall
be responsible for managing all customer and end-user communications with
respect to such complaints and for filing any medical device report required to
be filed with the FDA and vigilance reports required to be filed with regulatory
authorities in other jurisdictions in which the Products are marketed. Nothing

                                       9
<PAGE>

herein shall preclude either party from taking any action that it is required to
take under applicable law or regulation.

         5.4      Unless otherwise agreed to in writing by the Parties, VFS
shall be responsible for the preparation, submission and obtaining of
appropriate documents for regulatory clearance to market the Products in the
United States, including but not limited to 510(k)'s and/or PMA's, as may be
applicable, and shall provide copies of such documents to Distributor upon
request. VFS shall provide Distributor with such information as VFS and
Distributor shall reasonably agree upon, for the purpose of registration and/or
regulatory clearance to sell the Products in any other country in which
Distributor proposes to sell the Products. Distributor shall be solely
responsible, at its own cost, to obtain the CE mark on any Products subject to
this Agreement. Any additional costs reasonably incurred by VFS in obtaining
and/or maintaining international compliance will be billed to Distributor (and
paid by Distributor) at VFS's direct engineering costs, as the costs are
incurred during the approval process. If compliance is not commercially
reasonable in a particular country foreign to the United States, VFS and
Distributor will negotiate in good faith in an attempt to determine whether
compliance will be obtained.

         5.5      If requested by Distributor, VFS, at Distributor's cost, shall
take all steps necessary to obtain and maintain determinations that the Products
meet the consensus-based standards of safety required by the Occupational Safety
and Health Act as determined by one or more Nationally Recognized Testing
Laboratories and the equivalent approvals under the applicable standards
promulgated by the Canadian Standards Association, the International
Electrotechnical Commission, the German Technical Inspection Associations (TUVs)
or their equivalents in other jurisdictions.

         5.6      This Agreement shall be reviewed by VFS at least annually for
compliance to ISO 9001 Section 4.3.

         5.7      Unless otherwise agreed to in writing by the parties, VFS
shall take all action necessary and bear all engineering costs incurred to
insure that the Products and any changes or improvements to the Products conform
with applicable regulatory standards required to allow application of the CE
mark for the Products, recognizing that Distributor will be responsible for
obtaining the CE mark for the Products and all costs for submission and testing
in connection associated therewith.

6.       Product Recall.

         If either party believes that because of a defect in manufacturing or
design a recall, market withdrawal, safety alert or similar action ("Recall") of
any Products is desirable or required by law, it will promptly notify the other
party. The parties will then discuss reasonably and in good faith whether such
Recall is appropriate or required and the manner in which any mutually agreed
Recall shall be handled. This Paragraph 6 shall not limit the obligations of
either party under law with respect to Recall of Products required by law or
properly mandated by governmental authority. Voluntary Recalls shall be
conducted by mutual agreement (agreement not to be unreasonably withheld). VFS
shall bear all reasonable costs and expenses of any such Recall which relates to
the manufacture of the Products. Distributor shall maintain complete and

                                       10
<PAGE>

accurate records for such periods as may be required by applicable law of all
the Products sold by it. The parties will cooperate fully with each other in
effecting any Recall of the Products pursuant to this Paragraph 6. However,
Distributor shall be responsible for the actual conduct of any Recall of the
Products, including communications with customers and end-users, and for any
required notification to the FDA and other applicable regulatory authorities in
respect thereof.

7.       Product Name/Private Labeling.

         Distributor shall have the right to market and advertise Products
exclusively in the Field under Distributor's name, trademarks, trade names,
labels or other designations (collectively referred to as the "Marks") for the
term of this Agreement. All of such Marks shall remain the property of
Distributor, and VFS shall have no rights thereto. Distributor agrees to
recognize the role of VFS as manufacturer of the Products through identification
of VFS on the Products and literature relating thereto with the "Manufactured by
Valley Forge Scientific Corp." logo, except as otherwise required for CE marked
Products.

SECTION II        DISTRIBUTION AGREEMENT.

1.       Appointment.

         1.1      VFS hereby grants Distributor exclusive worldwide marketing
rights for distribution and sale of the Products for use in the Field for the
term of this Agreement ("Exclusive Rights"). VFS shall not distribute or cause
to be distributed products in the Field that are competitive with the Products
during the term of this Agreement. Nothing in this Agreement shall restrict VFS
or its subsidiaries or other affiliates from selling the Products to others for
use outside of the Field.

         1.2      (a) Distributor covenants and agrees that it and its
distributors shall not directly or indirectly sell the Products for any use
outside of the Field.

                  (b) Distributor covenants and agrees that it will not sell any
bipolar electrosurgical products for use in the Field other than the Products
for the term of this Agreement. Notwithstanding the foregoing, Distributor may
sell the N-50 products and accessories currently marketed by it prior to the
date of first commercial sale of a Generator Product by Distributor. After such
first commercial sale, Distributor shall be prohibited from selling the N-50
generator products other than the sale of its inventory of such generator
products existing immediately prior to such first commercial sale. Nothing in
this Agreement shall prohibit Distributor from continuing to sell accessories
for use with the N-50 generator products and servicing such products sold by
Distributor.

         1.3      For the term of this Agreement, Distributor shall have the
right to distribute and sell the Products and all modifications, improvements,
and developments incorporated into the Products and accessories and components
thereof manufactured by VFS in the Field and to appoint sub-distributors for
national and international sales in the Field.

                                       11
<PAGE>

2.       Responsibilities of Distributor.

         2.1      In marketing the Products, Distributor shall use commercially
reasonable efforts in the promotion and sale of the Products and in providing
support to end users who own the Products and prospective customers for the
Products. Within thirty (30) days prior to the end of the Initial Inspection
Period, Distributor shall provide to VFS a marketing plan for the Products.

         2.2      Distributor will:

                  i.       advertise the Products in medical journals that in
                           its judgment are suited for sale of the Products, and
                           the copy of such advertisement, as well as any and
                           all other brochures, marketing and sales materials,
                           etc. used by Distributor shall be subject to review
                           by VFS for technical accuracy prior to its release.
                           In disagreements as to marketing or sales content,
                           Distributor shall prevail. On matters of technical
                           description or medical use or practice, VFS shall
                           prevail;

                  ii.      show the Products at a minimum of four (4) trade
                           shows per year;

                  iii.     provide education to the customer/end user on proper
                           use of all Products prior to initial use; and

                  iv.      Review its marketing plan for the Products with VFS
                           on a semi-annual basis.

         2.3      Distributor shall maintain methods for identifying and tracing
Products that it distributes. Distributor and VFS shall agree upon methods for
this tracking system.

         2.4      (a) Distributor agrees to designate one or more "Distributor
Trainer(s)." Distributor shall be responsible for all costs associated with the
Distributor Trainer(s), including without limitation, the cost of training the
Distributor Trainer(s) so that they are able to provide comprehensive training
to Distributor's sales representatives, which training shall include preparing
sales representatives to educate the customer/end-user on the uses and operation
of the Products. VFS shall assist Distributor in preparing sales training and
customer education materials. All materials must be approved by VFS before
distribution to sales representatives and customers. Distributor shall bear all
costs of production of these educational materials.

         (b)      VFS shall attend up to two (2) Distributor meetings per year
in order to assist Distributor in providing training for Distributor Trainers
and sales representatives at no cost to Distributor. Additional training will be
provided by VFS as agreed upon by VFS and Distributor and with VFS being
reimbursed for all travel expenses for its employees.

3.       Technical Assistance and Labeling.

         As promptly as possible after completion of any development work and at
such other times as are reasonably requested by Distributor, VFS will furnish
Distributor with examples of VFS labeling, user and technical manuals, in

                                       12
<PAGE>

electronic file form to the extent available, for the Products and written
information regarding the Products required for inclusion in customer user and
service manuals. Distributor and VFS agree to cooperate in issuing any changes
to the manuals through agreed upon Engineering Change Orders (ECO's). VFS will
also assist and cooperate with Distributor in reviewing Distributor developed
labeling, manuals and sales information about the Products for technical
content. Distributor will be solely responsible for all costs, including the
design, production, printing, and distribution costs, of customer user manuals
and sales aids or marketing materials for the Products in the Field..

4.       Patent Infringement.

         4.1      VFS represents that the waveform and circuitry of the
Generator Product is covered by the patents and patent applications set forth on
Exhibit 1 attached hereto, which are exclusively owned or licensed by VFS. If a
third party claims that the sale, distribution or use of the Products infringes
a patent or trademark owned by that third party and such party threatens to
commence or commences a suit or action based upon such claim, the parties agree
to notify each other promptly of such threat of action or action, and to
cooperate with each other in the defense of such a suit or action, subject to
the indemnification obligations set forth in Section III., Paragraph 4.1.

         4.2      In addition to the requirements of Section II., Paragraph 4.1
hereof, if the sale, distribution or use of a Product (other than the Products
designated as Developed Products on Schedule A) infringes on the patent of a
third party, and Distributor or its customer is enjoined by final judgment of a
court of competent jurisdiction from using the Product, VFS shall (or if any
Product or part thereof becomes, or in VFS's opinion is likely to become, the
subject of a claim of infringement of any intellectual property right of a third
party, VFS may), at VFS's option, either (i) replace or modify the Product so
that it becomes non-infringing or (ii) procure for Distributor the right to
continue to sell the Product for the term of this Agreement, or, if neither (i)
or (ii) is feasible, terminate this Agreement with regard to the infringing
Product and repurchase all Distributor's inventory of the infringing Product at
the price paid by Distributor, including freight.

5.       Manufacturing Rights.

         5.1      (a) Should VFS be unable to or fail for any reason, other than
as set forth in Section I, Paragraph 5.2 hereof, to manufacture a Product in
quantities at least equal to the Initial Products Minimum or the applicable New
Product Minimum, as the case may be, that are in accordance with the agreed upon
Specifications, applicable industry standards and current Good Manufacturing
Practices ("cGMPs") as set forth in the Quality System Regulation promulgated by
the FDA and found in Code of Federal Regulations, Title 21 Part 820 (the "QSR")
that are applicable to the Products (hereinafter referred to as a "Manufacturing
Deficiency"), Distributor within 30 days of the discovery of the Manufacturing
Deficiency, on one hundred and twenty (120) days prior written notice to VFS,
may: (i) remove the particular Product from the terms of this Agreement; or (ii)
exercise the right to designate a manufacturer, set forth in Paragraph 5.1(b)
herein. During the one hundred and twenty (120)-day notice period set forth in
the preceding sentence, VFS will have the right to cure such Manufacturing

                                       13
<PAGE>

Deficiency in order to keep the particular Product in compliance with the terms
of this Agreement and, if it is successful in doing so, the notice shall be null
and void.

         (b)      In the event that VFS fails to cure the Manufacturing
Deficiency, Distributor may at Distributor's option require VFS to find and
contract with another source (reasonably acceptable to Distributor) within
thirty (30) days to manufacture the Product in accordance with the Specification
set forth in Schedule A. VFS agrees to provide such source with the technology
necessary to enable it to manufacture the Product and to render such other
assistance as may reasonably be requested to assure an orderly transition of the
manufacturing operation.

         5.2      VFS shall not be liable for any failure to supply or deliver,
or for any delay in the delivery of, the Products hereunder, when any such
failure or delay is caused, directly or indirectly, by fires, floods, accidents,
explosions, strikes or other labor disturbances (regardless of the
reasonableness of the demands or labor), wars, shortages of fuel, power or raw
materials, inability to obtain or delays of transportation facilities, acts of
God, or any cause, whether similar or dissimilar, to the foregoing beyond the
reasonable control of VFS, as the case may be, affecting VFS's production and/or
delivery of the Products covered by this Agreement or Distributor's acceptance
or resale thereof. Such failure will be excused for three months or as long as
such event shall be continuing (whichever period is shorter) provided that VFS
gives immediate written notice to Distributor of the Force Majeure Event. VFS
shall exercise all reasonable efforts to eliminate the Force Majeure event and
to resume performance. In the event the failure continues beyond three months,
then Distributor may at Distributor's option require VFS to find and contract
with another source (reasonably acceptable to Distributor) within thirty (30)
days from the end of the three-month period to manufacture and supply the
Products. VFS agrees to provide such source with the technology necessary to
enable it to manufacture the Products and to render such other assistance as may
reasonably be requested to assure an orderly transition of the manufacturing
operation.

         5.3      (a) Valley Forge hereby grants to Distributor a royalty-free
license to use all techniques, processes, documentation and know-how that have
been developed or are owned by VFS or as to which VFS has acquired any rights
that are necessary or useful in the manufacture of the Products (the
"Manufacturing Technology") in the Field to use, sell, make and have made the
Products for use in the Field (collectively the "Bankruptcy License Rights");
provided, however, that the Bankruptcy License Rights granted hereunder shall be
subject to the terms of Paragraph 5.3(b) and shall be effective only if (i) a
petition under Title 11 of the United States Code ("Title 11") has been
voluntarily filed by VFS, or involuntarily filed by a third party or parties and
not dismissed within ninety (90) days thereafter, and (ii) this Agreement has
been rejected in the Title 11 case (a "Bankruptcy Event"). Notwithstanding
anything in this Paragraph 5.3(a) to the contrary, Distributor shall not have
any Bankruptcy License Rights, nor shall it exercise any Bankruptcy License
Rights, other than after the occurrence of a Bankruptcy Event. Furthermore,
notwithstanding anything in this Paragraph 5.3(a) to the contrary, any and all
Bankruptcy License Rights shall terminate at the end of the term of this
Agreement.

         (b)      All rights and licenses to Manufacturing Technology granted
under this Agreement by VFS to Distributor are, for all purposes of Section
365(n) of Title 11, licenses of rights to intellectual property as defined in
Title 11. VFS agrees during the term of this Agreement to create and maintain

                                       14
<PAGE>

current copies or, if not amenable to copying, detailed descriptions or other
appropriate embodiments, of all such Manufacturing Technology. If a case is
commenced by or against VFS under Title 11, then, unless and until this
Agreement is rejected as provided in Title 11, VFS (in any capacity, including
debtor-in-possession) and its successors and assigns (including, without
limitation, a Title 11 trustee) at its option shall either perform all of the
obligations provided in this Agreement to be performed by VFS or provide to
Distributor all such Manufacturing Technology reasonably required to make or
have made, use and sell Products (including all embodiments thereof) in the
Field +held by VFS, as provided in this Agreement, as Distributor may elect in a
written request, immediately upon such request, and VFS shall not interfere with
Distributor's rights. If a Bankruptcy Event occurs and Distributor elects to
retain its rights hereunder as provided in Title 11, then VFS (in any capacity,
including debtor-in-possession) and its successors and assigns (including,
without limitation, a Title 11 trustee) shall provide to Distributor all such
Manufacturing Technology (including all embodiments thereof) held by VFS
immediately upon Distributor's written request therefor and nothing herein is
intended to, nor shall, impair or adversely affect Distributor's rights under
Title 11, including under Section 365(n) of Title 11.

SECTION III        GENERAL PROVISIONS

1.       Term.

         1.1      Unless terminated sooner pursuant to Section III., Paragraph 2
hereof or extended as provided herein, the term of this Agreement shall commence
on the Effective Date and shall continue in force until the end of the fifth
Agreement Year. If on or before the end of the fourth Agreement Year, the term
of this Agreement has not been extended beyond the end of the fifth Agreement
Year by written agreement of Distributor and VFS, the parties on written notice
from either party shall for a period of ninety (90) days after such written
notice (but in no event shall such period extend past the end of the fifth
Agreement Year) conduct good faith discussions at mutually convenient times
regarding the terms and conditions of an extension to this Agreement. While the
parties are obligated to discuss an extension in good faith, there is no
obligation on the part of either party to agree to an extension.

2.       Termination and Remedies

         2.1      Either party may terminate this Agreement upon written notice
to the other party in the event of a material breach of this Agreement by the
other party which is not cured within ninety (90) days after written notice of
such breach is given. Notwithstanding the foregoing, (i) in the event
Distributor fails to timely pay for shipped Products within the time period set
forth in Section I, Paragraph 2.3 or breaches the covenants and agreements in
Section II, Paragraph 1.2 (a), VFS may terminate the Agreement if such breach is
not cured within ten (10) days after written notice by VFS; (ii) in the event
that Distributor breaches the covenants and agreements in Section II, Paragraph
1.2(b), VFS may terminate this Agreement if Distributor does not cease from
selling products in breach of the terms of Section II, Paragraph 1.2(b)
("Prohibited Products") within ten (10) days after written notice and within
sixty (60) days after such written notice pay to VFS an amount for each
Prohibited Product sold by Distributor equal to fifty percent (50%) of the then
current price of the Product that has the same or similar use as the Prohibited

                                       15
<PAGE>

Product; (iii) in the event of a breach of Section III, Paragraph 3, and in
addition to all other rights and remedies that VFS has under this Agreement or
at law or equity, VFS may terminate this Agreement within ten (10) days after
written notice to Distributor; and (iv) in the event a business combination
transaction occurs that results in a New VFS (as defined in Section III,
Paragraph 8.3) that competes with Distributor or its affiliates in the
manufacture and/or sale of products for use in the field of pain management,
Distributor may terminate this Agreement by giving at least ninety (90) days'
written notice to such New VFS at any time during the six (6)-month period
following the effective date of such transaction. The notice and cure periods in
this Paragraph 2.1 shall not apply to Distributor's failure to satisfy its
minimum purchase requirements or payment of the shortfall amount as set forth in
Section I, Paragraph 1.7.

         2.2      Either party, at its election, may declare the other party
to be in default under the Agreement and, without prejudice to any of its rights
hereunder, may forthwith terminate the Agreement by written notice to the other
party in the event the other party (i) makes a general assignment for the
benefit of creditors, (ii) has a receiver of all or substantially all of its
assets appointed, (iii) files a voluntary petition for reorganization or other
arrangement or in bankruptcy under the U.S. bankruptcy laws, or (iv) is declared
insolvent.

         2.3      Notwithstanding anything to the contrary in this Agreement,
any termination of this Agreement will not affect any rights of either party
arising under this Agreement prior to such termination. In addition each party
shall have all rights and remedies available to it at law or equity, except as
limited by the terms of , Section III, Paragraph 2.4, below.

         2.4      NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY,
EACH PARTY HERETO WAIVES ANY CLAIM TO PUNITIVE DAMAGE OR EXEMPLARY DAMAGES FROM
THE OTHER. NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, EACH
PARTY HERETO WAIVES ANY CLAIM OF CONSEQUENTIAL DAMAGES FROM THE OTHER EXCEPT
WITH RESPECT TO ANY BREACH OF SECTION III, PARAGRAPH 3; IT BEING AGREED THAT A
PARTY MUST PROVE THE EXISTENCE OF, AND ITS ENTITLEMENT TO, CONSEQUENTIAL DAMAGES
WITH RESPECT TO A BREACH OF SECTION III, PARAGRAPH 3 IN ACCORDANCE WITH
APPLICABLE LAW.

3.       Confidential Information.

         3.1.     As used herein, "Confidential Information" shall mean the
Specifications, all know-how relating to the development, manufacture, sale or
use of any Product, including, without limitation, processes, techniques,
methods, products, apparatuses, biological materials and other materials and
compositions which are reasonably related thereto, the direct labor, direct
overhead and raw materials costs incurred in the manufacture of Product, the raw
material, and all other confidential or proprietary information that is reduced
to writing, marked as confidential and given to one party by the other party
relating to such other party or any of its affiliates, including information
regarding any of the products of such other party or any of its affiliates,
information regarding its advertising, distribution, marketing or strategic
plans or information regarding its costs, productivity or technological
advances. Neither party shall, during the term of this Agreement and for a
period of five (5) years following the termination or expiration of this

                                       16
<PAGE>

Agreement for any reason, use or disclose to third parties any Confidential
Information of the other (except to the extent reasonably necessary to exercise
its rights or comply with its obligations under this Agreement) and each party
shall insure that its employees, officers and agents shall not use or disclose
to third parties any Confidential Information of the other (except to the extent
reasonably necessary to exercise its rights or comply with its obligations under
this Agreement); provided, however, that Distributor and VFS may disclose
Confidential Information to their employees on a need to know basis provided
such persons are informed of the confidential nature of such information and are
under contractual obligation to not use the Confidential Information and to keep
such information confidential. Confidential Information shall not include
information that (i) was already known to the receiving party at the time of its
receipt thereof, as evidenced by its written records, (ii) is disclosed to the
receiving party after its receipt thereof by a third party who has a right to
make such disclosure without violating any obligation of confidentiality, (iii)
is or becomes part of the public domain through no fault of the receiving party
or (iv) is required to be disclosed to comply with applicable laws or
regulations or an order of a court or regulatory body having competent
jurisdiction.

         3.2      In the event that a party receives a subpoena which requires
the disclosure of Confidential Information, such party shall provide the other
party at least ten (10) days' written notice of such subpoena prior to the
return date, or as much advance notice as possible if the return date is in less
than ten (10) days, to allow the other party to move to quash such subpoena. The
party shall not disclose the Confidential Information during the notice period
and during the pendency of any motion to quash the subpoena.

         3.3      Title to all tangible forms of Confidential Information,
including any copies thereof, shall be and remain with discloser. The recipient
shall not copy or reproduce, in whole or in part, any Confidential Information
from the discloser without written authorization except as is necessary to
fulfill the purpose of this Agreement. Upon written request or termination of
this Agreement, all tangible forms of Confidential Information with exception of
an archive copy to be used solely for compliance with the recipient's
obligations under this Agreement or applicable law, shall be promptly returned
to the discloser or destroyed.

4.       Indemnification and Insurance.

         4.1      VFS shall indemnify and hold Distributor harmless against any
and all claims, suits, proceedings, expenses, attorney's fees, recoveries and
damages, including expenses of total or partial Recall of Products, caused by
defects in design, materials, or workmanship of the Products or based on a claim
that the Products (other than the Products designated as Developed Products on
Schedule A) or their use infringes upon the claim of a patent of a third party,
except to the extent caused by Distributor's distribution practices,
Distributor's advertising or promotional material for the Products that has not
been approved by VFS, misrepresentations by Distributor, use of the Product in
an application or an environment for which it was not designed or contemplated
hereunder, or modifications to, or improper repair of the Product. The
indemnification obligation, however, shall not apply if any Product is used in
conjunction with a device, instrument or product that is not approved for use
with the Product.

                                       17
<PAGE>

         4.2      VFS shall maintain product liability insurance (containing
either a vendor's endorsement or a contractual liability coverage) on Products
supplied by VFS with minimum limits of three million dollars
($3,000,000.00)/five million dollars ($5,000,000.00) and shall furnish to
Distributor, within thirty (30) days after the Effective Date of this Agreement,
a certificate of insurance by the carrier including the foregoing endorsements,
coverage and limits providing that such insurance may not be cancelable without
at least thirty (30) days prior notice to Distributor.

         4.3      Distributor shall indemnify and hold VFS harmless against any
and all claims, suits, proceedings, expenses, recoveries and damages, including
expenses of total or partial Recall of Products caused by Distributor's
distribution practices or Distributor's advertising or promotional material for
the Products, which advertising or promotional material has not been approved by
VFS, or misrepresentations of the Products by Distributor or damage to the
Products caused by unauthorized repair or modification of the Products by
Distributor.

5.       No Transfer of Patent and Know-How.

         Nothing in this Agreement constitutes or shall be construed as a
transfer to Distributor of any of the patents, intellectual property rights,
trade secrets or know-how of VFS relating to the Products or any other products
or products-in-development of VFS or a license for Distributor to use such
patents, intellectual property rights, trade secrets or know-how.

6.       Representations, Warranties and Agreements of VFS

         6.1      VFS is a corporation duly organized and validly existing in
good standing under the laws of Pennsylvania. VFS has the corporate power to
execute, deliver and perform this Agreement.

         6.2      The execution and delivery of this Agreement by VFS does not,
and the performance of VFS's obligations hereunder will not, violate any
provision of the organization documents of VFS or violate any provision of, or
result in a breach of any of the terms or provisions of or the acceleration of
any of the obligations under, or constitute a default under, any mortgage,
lease, agreement, instrument, order, arbitration award, judgment or decree to
which VFS is a party or to which VFS or its assets, properties or business are
subject to on the date hereof. This Agreement is a valid and binding agreement
of VFS enforceable against it in accordance with its terms.

         6.3      VFS is not party to any agreement with or obligation to any
third-party or any other legally binding commitment of any kind or nature
whatsoever that would, in the reasonable opinion of VFS, adversely affect VFS'
ability to perform the terms of this Agreement.

         6.4      No approval of any person, entity or government authority is
necessary with respect to the execution, delivery and performance by VFS of this
Agreement.

                                       18
<PAGE>

         7.       Representations, Warranties and Agreements of Stryker.

         7.1      Stryker is a corporation duly organized and validly existing
in good standing under the laws of Michigan. Stryker has the corporate power to
execute, deliver and perform this Agreement.

         7.2      The execution and delivery of this Agreement by Stryker does
not, and the performance of Stryker's obligations hereunder will not, violate
any provision of the organization documents of Stryker or violate any provision
of, or result in a breach of any of the terms or provisions of or the
acceleration of any of the obligations under, or constitute a default under, any
mortgage, lease, agreement, instrument, order, arbitration award, judgment or
decree to which Stryker is a party or to which Stryker or its assets, properties
or business are subject to on the date hereof. This Agreement is a valid and
binding agreement of Stryker enforceable against it in accordance with its
terms.

         7.3      Stryker is not party to any agreement with or obligation to
any third-party or any other legally binding commitment of any kind or nature
whatsoever that would, in the reasonable opinion of Stryker, adversely affect
Stryker's ability to perform the terms of this Agreement.

         7.4      No approval of any person, entity or government authority is
necessary with respect to the execution, delivery and performance by Stryker of
this Agreement.

8.       Miscellaneous.

         8.1      This Agreement is not intended to create a partnership,
association, joint venture or unincorporated business between VFS and
Distributor, or any other type of entity which could be determined to be
obligated to file tax or reporting returns pursuant to the Internal Revenue Code
(or similar taxing laws of any county or U.S. State). Except as otherwise
provided herein, each party hereto shall be responsible for the payment of all
expenses or obligations incurred by it, including payments of withholding,
social security, or other taxes or charges applicable to its employees,
consultants, or contractors. Except as provided herein, neither party shall have
the right to make any agreement in the name of the other party, nor obligate the
other party to pay any amount, perform any act, or incur any liability or
obligation.

         8.2      Except as specifically agreed to in writing, each party shall
bear all cost and expenses which it incurs in connection with this Agreement.

         8.3      Except as provided below, this Agreement may only be assigned
with the prior written consent of the other party, which consent shall not be
unreasonably withheld. Notwithstanding the foregoing, (i) a business combination
transaction that results in another person or entity (a "New VFS") becoming the
owner of in excess of 35% of VFS' voting securities, whether through a merger or
sale of stock, or acquiring all or substantially all of the assets of VFS, or
otherwise obtaining effective operating control of VFS or (ii) any other change
in VFS' stockholders shall not constitute an assignment of this Agreement by VFS
that requires Distributor's consent provided that VFS obtains the written
agreement of any New VFS to be bound by this Agreement as was VFS. In the event
of any permitted assignment pursuant to this Paragraph 8.3, the assignee,

                                       19
<PAGE>

including without limitation a New VFS (the "Permitted Assignee"), shall
automatically be entitled to the benefits and terms of this Agreement as was the
assignor from and after the date of such assignment and shall automatically be
obligated as was the assignor as to all obligations then accrued or thereafter
to accrue under this Agreement.

         8.4      No amendment of modification or addition hereto shall be
effective or binding on either of the parties hereto unless or until the same is
reduced to writing and signed by both parties.

         8.5      This Agreement, together with its Schedules and Exhibit,
embodies the entire understanding between the parties regarding the subject
matter hereof and supersede any and all prior understandings and agreements
relating to such subject matter.

         8.6      The validity and interpretation of this Agreement shall be
governed by the laws of the State of New York. Any disputes or contentions
arising in connection with this Agreement between the parties shall, if
possible, be settled in an amicable way. If, however, no understanding is
reached, such disputes and contentions shall be exclusively and finally settled
by binding arbitration before three (3) arbitrators in accordance with the rules
of the American Arbitration Association. All arbitrations shall take place in
New York, New York.

         8.7      If the performance of this Agreement or any obligation
hereunder, except the making of payments hereunder, is prevented, restricted or
interfered with by reason of fire, flood, earthquake, explosion or other
casualty or accident; strikes or labor disputes; inability to procure parts,
supplies or power; war or other violence; any law, order, proclamation,
regulation, ordinance, demand or requirement of any government agency; or any
other act or condition whatsoever beyond the reasonable control of the affected
party, the party so affected, upon giving prompt notice to the other party,
shall be excused from such performance to the extent of such prevention,
restriction or interference; provided, however, such prevention, restriction or
interference does not continue for more than one hundred and twenty (120) days
and provided that the party so affected shall take all reasonable steps to avoid
or remove such causes of nonperformance and shall resume performance hereunder
with dispatch whenever such causes are removed prior to such one hundred and
twenty (120) days. This Paragraph 8.7 shall not be applicable to the failure of
VFS to supply or deliver, or for any delay in the delivery of, the Products,
which failure or delay shall be covered by Section II, Paragraph 5.2.

         8.8      It is expressly understood that the failure of either party to
enforce any rights arising from the failure of the other party to perform, or
perform properly, the other party's obligations hereunder shall not constitute a
waiver of its rights arising from such failure or improper performance, and that
enforcement of any right hereunder shall not preclude exercise of any other
remedies available at law. All rights and remedies, whether conferred hereby or
by any other instrument or by law shall be cumulative, and may be exercised
singularly or concurrently.

         8.9      If any provision of the Agreement is held invalid by law,
rule, order, or regulation of any government or by the final determination of
any court of the United States, such invalidity shall not affect the
enforceability of any other provision in this Agreement not held to be invalid.

                                       20
<PAGE>

         8.10     This Agreement may be signed in counterparts; each counterpart
shall constitute an original document, but all of which shall constitute one
instrument. This Agreement may be duly executed and delivered by a party by
execution and facsimile delivery of signature page of a counterpart to the other
party, provided that, in such case, the executing party shall promptly deliver a
complete counterpart that it has executed to the other party.

         8.11     Any press release or other disclosure to the public regarding
this Agreement and the transactions contemplated hereby shall be mutually agreed
upon by the parties hereto; provided, however, that either party may make any
such public announcement or disclosure that counsel advises in writing is
required by applicable securities laws or regulations or rules or agreements
with any stock exchange on which its shares are listed, in which case the party
making the announcement or disclosure shall inform the other party in advance of
the timing and proposed content and shall provide the other party with
reasonable opportunity to review and comment on any such required announcement
or disclosure.

         8.12     All notices and consents hereunder shall be in writing and
shall be deemed to have been properly given and to be effective on the date of
delivery if delivered in person, by one-day courier service or by facsimile
transmission (provided a copy is sent by one-day courier service) to the
respective address or facsimile number provided below or to such other address
or facsimile number as either party shall designate by written notice to the
other in such manner:

         To VFS:
         -------

         Valley Forge Scientific Corp.
         136 Greentree Road, Suite 100
         Oaks, Pennsylvania  19456
         Attention:  Michael Ritchie, Vice President-General Manager
         Facsimile: (610) 666-7565

         with a copy to:

         Russell U. Schenkman, Esq.
         Schenkman Jennings & Howard, LLC
         13 Roszel Road, Suite C-225
         Princeton, New Jersey  08540
         Facsimile: (609) 799-1555

         To Distributor:
         ---------------

         Stryker Corporation
         Stryker Instruments Division
         4100 East Milham Avenue
         Kalamazoo, Michigan 49001-6197
         Attn:  Dave Koldyke, Vice President, Finance  and Accounting
         Facsimile:  269-324-5331

                                       21
<PAGE>

         with a copy to:

         John H. Denne, Esq.
         Winston & Strawn LLP
         200 Park Avenue
         New York, New York  10166
         Facsimile:  (212) 294-4700

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the Effective Date by their duly authorized officers.

Stryker Corporation                          Valley Forge Scientific Corp.

By: /s/ CURT HARTMAN                         By: /s/ JERRY L. MALIS
    ---------------------------                  -----------------------------

Title: President                             Title: President

Date: October 25, 2004                       Date: October 25, 2004

                                       22

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