Document:

EXHIBIT 10.1

 

THIS VERSION HAS BEEN
MODIFIED TO OMIT CERTAIN CONFIDENTIAL INFORMATION OF VISION-SCIENCES, INC.,
WHICH HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO RULE 24B-2 UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.  THE PLACES IN THE DOCUMENT
WHERE INFORMATION HAS BEEN OMITTED ARE MARKED WITH [*].

 

EXCLUSIVE DISTRIBUTION AGREEMENT

 

This Exclusive
Distribution Agreement (the “Agreement”) is made as of this 29th day of
December, 2004 (the “Effective Date”) by and between Vision-Sciences, Inc.,
a Delaware corporation (the “Company”), and Medtronic
USA, Inc., a Minnesota corporation (“MDT”, and collectively with the
Company, the “Parties”).

 

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

 

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

 

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

 

1.                                       DEFINITIONS

 

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

 

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

 

1.3                                 “Intellectual
Property” means all rights to patents, software, copyrights, trademarks, trade
secrets, know-how, concepts, designs, techniques, formulae, inventions, trade
names, labels, trade dress, literature, programs, advertising material or other
documents, materials or information.

 

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

 

 

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

 

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

 

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

 

2.                                       APPOINTMENT
OF DISTRIBUTOR; PRODUCTS

 

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

 

2.2                                 (a)                                  Except
as otherwise permitted under this Agreement and unless and until this Agreement
or the exclusivity provisions hereof shall have been terminated in the manner
provided herein, the Company agrees not to: (i) distribute, market or sell the
Products to any Person other than MDT, (ii) authorize any other Person other
than MDT to distribute, market or sell the Products or (iii) enter into any
agreement or arrangement for the private labeling of any of the Products or any
product that is identical or substantially similar in form or function to any
of the Products, in each case of clauses (i) through (iii) above within the Territory
and for use or sale within the Territory and for applications within the Field.  The Company reserves the right to promote the
technology underlying Products, the use and application of Products and the
Company’s role in developing and manufacturing Products, both within and
outside the Territory and Field.  It is
agreed that the Company shall coordinate with MDT in advance of any promotion
or other publicity of the Products within the Territory and for use or
application within the Field.

 

(b)                                 Without
prejudice to any other remedy of the Company hereunder, upon the failure of MDT
to perform its obligations under Section 3.1 below with respect to any Product,
which failure is not cured within thirty (30) days of notice thereof to MDT by
the Company, the Company shall not be restricted from distributing, marketing
or selling, or authorizing any Person other than MDT to distribute, market or
sell such Products within the Territory and for use or sale within the
Territory and for applications within the Field.  Upon the taking of such action by the
Company, MDT shall be released of any future Quota obligations as provided
later herein.

 

2.3                                 MDT
shall have the right to perform its obligations and exercise its rights under
this Agreement through either Medtronic, Inc. or one or more Affiliates of MDT
that are, directly or indirectly, wholly owned subsidiaries of Medtronic, Inc.,
and to appoint agents to market and sell the Products solely to customers
practicing within the Field and for use within the Field and solely to persons
and entities that are within the Territory and for use within the Territory.  MDT shall have the right to appoint
subdistributors to perform MDT’s obligations hereunder in such local markets
where MDT does not currently maintain a direct sales force.  All such agents and subdistributors shall be
party to agreements

 

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with MDT containing terms and conditions that are consistent with the
terms of this Agreement, including, without limitation, those provisions
relating to the marketing and sale of Products, the protection of the Company’s
confidential information, trademarks and intellectual property rights and the
termination of this Agreement.

 

2.4                                 (a)                                  
If the Company develops new products for use and application within the Field
and within the Territory (“New Products”) then the Company and MDT shall, for a
period of 90 days prior to any commercial sale or launch of such New Product
within the Field and within the Territory, negotiate exclusively and in good
faith the reasonable terms and conditions for adding such New Products to Annex
A.  If the Parties are unable to agree on
the terms and conditions of sale of such New Products, including a minimum
purchase commitment therefor during the first twelve-month period following
such commercial launch (the “Initial New Product Quota”), then the Company
shall be free to market, distribute and sell such New Products either alone or
through one or more distributors.  If the
New Product is of a substitute nature with respect to an existing Product and otherwise
directly competes in the market with any of the Products (a “Substitute Product”),
any minimum purchase commitment agreed to with respect to such Product shall
automatically be reduced, on a dollar-for-dollar basis, by the sales of such
Substitute Product by the Company (or persons appointed by the Company other
than MDT) over the same period.  The
Company shall report such sales of Substitute Products to MDT for purposes of
the adjustment to the minimum purchase commitments of MDT.

 

(b)                                 If
MDT wishes for the Company to develop and manufacture a New Product outside of the
Company’s planned product-development process, the Company will, upon MDT’s
request and within a reasonable timeframe, provide to MDT a quote for the
Company’s development and manufacturing of such New Product.  MDT shall promptly notify the Company of its
decision whether to request that the Company develop such New Product and the Parties
shall negotiate in good faith the terms and conditions for adding the New Product
to this Agreement, including the terms for the payment of the quoted costs for
such development and manufacturing. 
Nothing in this Agreement shall be deemed to require the Company to
undertake any particular product development project and the Company shall have
no liability for any failure to develop New Products either on its own
initiative or pursuant to any request of MDT, except for such liabilities and
obligations set forth in any definitive agreement or amendment to this
Agreement setting forth the terms and conditions for the development, marketing
and sale of such New Products.

 

3.                                       MDT’S
DUTIES

 

3.1                                 MDT
agrees to:

 

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

 

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

 

(b)         Carry out the marketing, promotion and sale of
the Products in the Territory efficiently and in an orderly and regulated
manner.

 

(c)          Refrain from selling or promoting in the
Territory products that are directly competitive with the Products, and from
marketing or promoting the Products in the Territory in a manner that is
inferior to the manner in which MDT markets and promotes its other urological
diagnostic products in the Territory.  By
way of example, no products currently marketed and sold by MDT in the Territory
and within the Field as of the date of this Agreement are directly competitive
with the Products within the meaning of this Section 3.1(c).

 

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

 

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

 

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

 

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

 

(h)         Not commence or initiate, or cause to be
commenced or initiated, any engineering, research, development or other
technical activities on any of the Products or otherwise utilizing the Company’s
intellectual property without the prior written consent of the Company.

 

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

 

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

 

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

 

3.4                                 Any and all marketing, promotional, sales and
administrative costs, including any costs associated with MDT’s and its
invitees’ (other than the Company) attendance at or participation in trade
shows, congresses or similar conferences, shall be borne by MDT at its own
expense.

 

4.                                       COMPANY’S
COVENANTS AND DUTIES

 

4.1                                 The
Company agrees to:

 

(a)          Inventory and ship Products upon order and
request of MDT and in accordance
with MDT’s instructions.

 

(b)         Regularly inform MDT about available displays,
literature and other promotional and advertising material, as the Company deems
suitable for MDT in marketing Products for use in the Field.  The Company shall, upon MDT’s reasonable
request, deliver such available artwork, pictures, graphic design files and
other promotional and advertising materials. 
Such deliveries will be free of charge, except for freight and
insurance.  MDT is encouraged and allowed
to issue, at its own expense, any materials related to the Products, provided
that MDT shall obtain written approval from the Company for each such item
prior to issuance, which approval from the Company shall not be unreasonably
withheld or delayed.

 

(c)          Label Products in accordance with this
Agreement.

 

(d)         Staff and maintain a service and repair
facility for the purpose of repairing and/or replacing Products that are within
or outside of their warranty period.  MDT shall advise the Company of Products
requiring repair or replacement and shall forward such Products to the Company’s
designated facility, but only after obtaining from the Company a return
authorization approval pursuant to customary return procedures established from
time to time by the Company.  The Company’s
current return authorization procedures are as set forth on Annex B hereto, and
the Parties shall cooperate in good faith to make such changes to such
procedures from time to time as may be reasonable and appropriate.  The Company shall use reasonable efforts to inspect
the Products and make necessary repairs or replacement, as appropriate, at its
facilities and return the repaired or replacement Product to MDT, or MDT’s customer, as may be mutually agreed
by both Parties, within fifteen (15) business days of receipt of repair
authorization from MDT, but in no event later than thirty (30) business days
following receipt of such repair authorization.  For Products repaired and/or replaced that
are within their warranty scope and period, the Company shall bear all costs
and expenses relating to servicing such Products (including, without
limitation, shipping and handling costs from the Company to MDT or MDT’s customer, as the case may be).  For Products repaired that are outside their
warranty scope or period, the Company shall charge MDT its standard time and materials rate, plus shipping and

 

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handling.  MDT shall purchase,
and the Company shall maintain, a pool of Products which shall be used as
temporary replacements for Products pending repair.  MDT shall instruct the Company from time to
time to ship such replacement Products to MDT’s customers, and to receive
returned replacement Products from MDT’s customers once repaired Products have
been shipped to such customers.  MDT
shall reimburse the Company for all direct reconditioning, repair and shipping
expenses associated with the maintenance of such loaner pool of Products, other
than expenses which are otherwise covered by the applicable Product warranty.

 

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

 

(f)            Provide adequate training to MDT’s product
managers and sales representatives on an as-needed and reasonable basis to
enable MDT to promote the sale of the Product. 
The Company shall provide a minimum of ten (10) days of training per
year, as and when reasonably requested by MDT. 
Such training will be conducted at MDT’s facilities, or another location
mutually agreed upon by both Parties, and will be provided without charge to MDT,
except for the reimbursement of reasonable out-of-pocket expenses of the
Company incurred for training in excess of ten (10) days during the first year
following the date hereof, and in excess of five (5) days per year thereafter.  In addition, the Company will provide to MDT
Product updates and service bulletins as they become available, at no
additional cost to MDT.

 

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

 

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

 

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

 

4.2                                 The
Company shall provide MDT with all technical and clinical information related
to and necessary for the sale of the Products that the Company has in its
possession without any requirement of the Company to produce or requisition any
formal studies, data or information.  The
Company shall be entitled to withhold any information that the Company
determines, in its sole discretion, constitutes

 

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trade secrets of the Company.

 

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

 

4.4                                 The
Company will adhere to good and sound business practices and will carry out its
duties under this Agreement according to the highest standards of professional
business conduct.

 

5.                                       ORDERING,
SUPPLY, PRICE AND PAYMENT

 

5.1                                 Minimum
Purchase Commitments.

 

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

 

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

 

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

 

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

 

(iii)                   For each
successive Quota Period, [*] of the
greater of the Quota for or MDT’s Product sales during the immediately previous
Quota Period.

 

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

 

(d)                                 If
MDT fails to purchase (i) during the first 12-month period following the
earlier of the first commercial sale or launch of any New Product that MDT has
agreed to carry and on which the Company and MDT have agreed upon an Initial
New Product Quota as set forth in Section 2.4 (the “Initial New Product Period”),
no less, in terms of dollars, of such New Product than set forth in the Initial
New Product Quota, and (ii) during each 12-month period following the Initial
New Product Period (each such period, a “New Product Quota Period”), such dollar
amounts of the New Product as shall be negotiated in good faith between the Parties
(the “New Product Quota”) ninety (90) days prior to the expiration of the
Initial New Product Period or successive New Product Quota Period, as
applicable, then the Company shall have the right and option, in its sole
discretion, to (x) terminate the exclusivity of this Agreement upon written
notice to MDT or (y) terminate this Agreement upon written notice to MDT.  Upon the taking of any such action by the
Company, MDT shall be released of any future New Product Quota
obligations.  If the Parties are unable
to agree on the New Product Quota for any New Product Quota Period at least
forty five (45) days prior to the scheduled start of such New Product Quota
Period, then the New Product Quota for such New Product Quota Period shall be [*] of the greater of the New Product Quota for or MDT’s New
Product sales during the immediately previous New Product Quota Period (or
during the Initial New Product Period, for the first New Product Quota Period
following the Initial New Product Period).

 

5.2                                 MDT
shall provide to the Company, on a monthly basis, a rolling [*] forecast of Products it expects to purchase.  The first [*]
months of the first such forecast shall represent, and be accompanied by, a
firm commitment purchase order for Products stated therein, and the [*] month of each such successive forecast (provided that
such [*] month is within the Term) shall
represent, and be accompanied by, a firm commitment purchase order for the
Products stated therein.  MDT will
deliver to the Company, on a bi-weekly basis, a schedule indicating the on-hand
inventory of the Products located in the United States.  The Company shall at all times maintain
inventory levels reasonably adequate to meet its obligations under Section
4.1(a).  The Company shall use its
commercially reasonable best efforts to maintain on hand at all times spare
Product inventory of equal to the monthly average of MDT’s orders therefor in
the then-previous [*]
months.  MDT’s minimum purchase
commitments hereunder shall be tolled for any period during which the Company
is unable to ship Products in accordance with its obligations under Section
4.1(a) (including in connection with the Initial Order).  MDT’s minimum purchase commitments hereunder
with respect to any New Products shall be tolled for any period during which
the Company is unable to ship such New Products in accordance with its
obligations under Section 4.1(a) or any period during which the Company has not
received necessary regulatory approvals as set forth in Section 11.2.

 

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

 

5.4                                 Prices
for the Products ordered by MDT from
the Company shall be as set forth in Annex A to this Agreement.

 

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

 

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

 

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

 

5.8                                 The
Parties agree that MDT may appoint, subject to the Company’s consent as specified
in Section 1.4, one or more MDT Appointees to conduct MDT’s logistics and
supply-chain activities in support of its obligations hereunder.  Such MDT Appointee’s activities under such
appointment may include procurement of Products, Product inspections and shipping
and receiving.  MDT shall enter into an
agreement with each MDT Appointee governing the terms of such appointment, containing
terms and conditions that are consistent with the terms of this Agreement,
including, without limitation, those provisions relating to the marketing and
sale of Products, the payment of invoices, the

 

9

 

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

 

6.                                       REGULATORY;
QUALITY ASSURANCE

 

The Company agrees to comply in all material respects with all
applicable federal, state and local laws, rules, regulations and orders of all
governmental authorities affecting the manufacture, labeling, inspection and
sale of the Products, or that otherwise bear upon Company’s performance
hereunder, as they are presently in effect and as they may be revised and/or
supplemented from time to time.  The
Company agrees to perform current Product performance trending, take corrective
actions and preventative actions and devote appropriate resources for ongoing
quality management support.  The Company
represents and warrants to MDT that the Products have been and shall be
designed, manufactured, labeled, packaged and sold to MDT in accordance with
the Company’s quality system, all applicable laws and regulations of the United
States and Canada, ISO 13485 certification or successor requirement(s), all
other applicable manufacturing requirements and the representations and
warranties set forth in this paragraph and in Section 13.2 of this Agreement.  The Company further represents and warrants
to MDT that the Company’s manufacturing and quality system is in compliance
with the Quality System Regulations promulgated by the U.S. Food and Drug
Administration (or any successor requirements) and has been certified to be in
compliance with the standards set forth in ISO 13485.  Once per year during the Initial Term (as
hereafter defined) of this Agreement or any renewal thereof, the Company shall
provide MDT’s or the applicable MDT Appointee’s regulatory personnel reasonable
access to the facilities and records of the Company for the purpose of
confirming the Company’s and the Products’ compliance with all applicable laws
and regulations (provided that any such MDT Appointee shall first enter into a
confidentiality agreement with the Company containing terms similar to the
provisions of this Agreement concerning the protection of the Company’s
confidential and proprietary information).

 

7.                                       WARRANTIES;
INDEMNITY

 

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

 

(a)                                  Ownership.  The Company is the sole and rightful owner of
all right, title and interest in and to the Products or otherwise has the
unrestricted right to grant to MDT the rights granted in this Agreement without
violating any rights of any third party. 
There are no actual or threatened claims against any of the Products and
no demands of any person or entity pertaining to any of the Products.  No proceedings have been threatened,
instituted or are pending that challenge the rights of the Company in the
Products.  The Company has not been
charged with infringement or violation of any Intellectual Property right of
any person or entity, and, to the Company’s knowledge, is not infringing any
Intellectual Property right of any person or entity in connection with the
manufacture, use, sale or other disposition of any of the Products.

 

(b)                                 Product
Warranty.  Each Basic Cysto Sheath
unit shall, until the expiration date specified on its packaging, and each
other Product unit shall, for the shortest period of time set forth for such
Product on Annex A, be free from defects in material and workmanship and remain
in good working order, and function properly and in conformity with the terms
of this Agreement and with published

 

10

 

specifications
and documentation.  The Company covenants
not to ship to MDT any Basic Cysto Sheath units with an expiration date earlier
than [*] months from the date of
shipment.  The Company shall, at the
request of MDT, its customer or end-user, promptly repair or replace at its
sole cost and expense any Product found to be defective or nonconforming to the
Product warranty (in accordance with the above) within the applicable warranty
period.  MDT may pass such Company
warranty to its customers and to end-users. 
Each Party shall bear its own out-of-pocket expenses (including freight
and customs clearance, if any) incurred in connection with warranty returns,
repairs and replacements.

 

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

 

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

 

7.2                                 Infringement
Indemnity.  The Company, at its own
expense, shall defend, indemnify and hold harmless MDT, its subdistributors, subsidiaries,
affiliates or permitted assignees, and their respective directors, officers,
employees, agents, permitted subcontractors, representatives, successors and permitted
assigns, and defend any action brought against same with respect to any claim,
demand, cause of action, debt or liability, including attorneys’ fees, based
upon a claim that any Product infringes or violates any Intellectual Property
right of any third party, including claims of willful infringement (an “Infringement
Claim”).  MDT and its subdistributors may,
at their own expense, assist in such defense if they so choose, provided that,
as long as the Company can demonstrate sufficient financial resources, the Company
shall control such defense and all negotiations relative to the settlement of
any such claim.  MDT shall promptly
provide the Company with written notice of any claim which MDT believes falls
within the scope of this Section 7.2, including claims against subdistributors.  In the event that the Product, or any portion
thereof, is held to infringe and its use is enjoined, the Company shall have
the obligation to, at its option and expense, (i) modify the infringing Product
without impairing in any material respect the functionality or performance, so
that it is non-infringing, (ii) procure for MDT and its subdistributors the
right to continue to distribute, sell, advertise, promote, market and otherwise
commercialize the infringing Product, or (iii) replace said Product with
equally suitable, non-infringing product. 
If none of the foregoing alternatives is available to the Company, the
Company shall repurchase from MDT or its subdistributors at the price charged to
MDT by the Company, all Products that are in good and saleable condition and
are in unopened, undamaged, sterile packages. 
Except as set forth above, the Company shall have no further liability
to MDT or its subdistributors with respect to any Infringement Claim.

 

11

 

8.                                       RELATIONSHIP

 

The relationship between the Company and MDT is that of independent
contractors.  Nothing contained in this
Agreement shall be construed to imply a joint venture, partnership, or
principal-agent relationship between the Parties; and neither party by virtue
of this Agreement shall have any right, power or authority, express or implied,
to act on behalf of or enter into any undertaking binding the other party, and the
Company and MDT shall each refrain from making any representations to the
contrary.  Except as otherwise set forth
herein, all costs of each party’s operations, including but not limited to
salaries, wages, taxes (corporate, service, employment, franchise, etc.) and
employee benefits of each party and its employees shall be paid solely by such
party, and the other party hereto shall have no liability or responsibility
therefor.

 

9.                                       TERM
AND RENEWAL

 

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

 

10.                                 TERMINATION

 

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

 

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

 

10.3                           Any
expiration or termination of this Agreement shall not alter the rights, duties
and obligations of the Parties for any purchase orders placed by MDT, its
agents, subdistributors or MDT Appointee, or amounts due, prior to the date of
such expiration or termination, nor shall it affect the rights of end-users of
the Products.

 

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

 

12

 

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

 

10.6                           Within
ten (10) days of the expiration or termination of this Agreement, MDT shall
provide the Company a list (in hard copy and sortable electronic format) of MDT
customers who purchased Products in the previous twelve (12) months, including
customer contact information and the lot numbers, quantities by lot number and
models of Products purchased by such customers.

 

11.                                 PRODUCT
LABELING, REGISTRATION

 

11.1                           Product
Labeling.  All Products shall labeled
and marked solely with the Company’s name and logos, and shall be marketed and
sold using the Company’s name and logo as appropriate to indetify the
manufacturer of the Products, provided, that
MDT may continue to operate under its own name and logo(s) and may use such
name and logo(s) (subject to Section 4.1(b)) in connection with the marketing
and sale of the Products on such items as business cards, brochures, customer
communications, invoices, its web site(s), shipping containers for multiple
Products, and the like.  All Product
packaging and labeling shall contain such other designations of the Company,
including identification of the Company as the manufacturer of the Products,
and the country of manufacture, where applicable, as may be necessary to comply
with Title III of the Medical Device User Fee and Modernization Act of 2002
(P.L. 107-250), the Tariff Act of 1930, as amended (19 U.S.C. 1304), or other
legal requirements.  MDT shall sell the
Products in the same condition as they are delivered to it and shall not alter,
deface, remove, cover up or mutilate in any manner whatsoever any trademark,
serial or model number, the words “patent pending” and/or “patent” and/or the
patent number, copyright symbol and any other reference to the Intellectual
Property rights of the Company which the Company may attach or fix to or make
part of the Products.  So long as the
requirements of this Section 11.1 are otherwise complied with, and subject to MDT’s
obligations under Section 13.2 hereof, MDT shall be entitled, but not
obligated, to affix or request the Company to affix to Products such additional
labels as MDT shall deem reasonably necessary solely to comply with applicable
legal or regulatory requirements, provided, that, the Company
shall have approved in writing in advance of such additional labels, such
approval not to be unreasonably withheld.

 

11.2                           Product
Registration.  The Company shall obtain and maintain all necessary registrations,
licenses and permits for the Products within the Field with health and other
competent authorities that may from time to time be required by law, regulation
or otherwise throughout the Territory in which MDT is promoting, advertising
and selling the Product.  The Company
shall obtain any such registrations, licenses and permits required with respect
to any New Product within the Field within six (6) months of the date such New
Product is introduced.  Any such
registrations, licenses or permits shall be in the name of Company unless
prohibited by law, in which case they shall be held in trust by MDT acting as
in-country caretaker for the Company, and shall be subject to transfer,
cancellation, modification or supplement for Product changes at the Company’s
direction.  The
cost and expense of obtaining such registration, license or permit shall be the
responsibility of the Company.  The

 

13

 

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

 

12.                                 RECALLS;
COMPLAINTS

 

12.1                           The
Company shall be responsible for the handling of all recalls and field actions
relating to Products, and MDT shall provide such cooperation to the Company in
regard to such events as the Company may reasonably request.  Within forty-eight (48) hours (excluding
weekends and national holidays) of any Product recall, MDT shall provide the Company
a list (in hard copy and sortable electronic format) of MDT customers who are
or may be affected by such recall, or with respect to which the Company is
required by applicable law to take any action, and such list shall include
customer contact information and the lot numbers, quantities by lot number and
models of Products purchased by such customers. 
In this regard, MDT agrees to advise the Company within forty-eight (48)
hours (excluding weekends and national holidays) of each complaint that MDT may
receive or become aware of concerning the Products, including any complaint
that any of the Products may have been associated in any way with an injury or
death to a user or patient or may have been associated with an incident that
could likely cause serious health problems or death.  MDT agrees to work with and cooperate with the
Company to resolve complaints.  In the
event of a Product recall, the Company shall promptly reimburse MDT for all
reasonable costs and expenses (including the cost of the recalled Products) incurred
by MDT in connection with any such recall. 
Each of the Company and MDT shall notify the other of any reportable
product incident of which either the Company or MDT becomes aware.

 

12.2                           MDT
shall handle all customers’ complaints with a view of securing and maintaining
the goodwill of the Company and of the Products, and shall record all
complaints in detail and promptly submit the same to the Company for its
review, as set forth above.  The Company
shall be responsible for investigation of the reports of such complaints it is
made aware of, by MDT or otherwise, and submission of U.S. Medical Device
Reports (21 CFR Part 803), and/or other governmental agency reports as required
by applicable law or regulation within the Territory.

 

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

 

13.                                 INTELLECTUAL
PROPERTY

 

13.1                           The Company
shall have and shall retain at all times all rights in and to its Intellectual
Property relating to the Products.

 

14

 

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

 

13.3                           MDT
agrees to promptly notify the Company in writing of any and all modifications,
design changes or improvements to the Products (collectively, “Ideas”)
suggested by any customer, employee, subdistributor or agent of MDT for any
purpose, except those that, in the reasonable opinion of MDT, are of no commercial
value to either party.  In the event that
the Company agrees to incorporate any such Idea into a Product or New Product,
then to the extent that MDT has, obtains or derives any rights or benefit in or
to any such Idea by MDT, its employees, agents, customers or other persons, MDT
hereby grants to the Company a perpetual, irrevocable, royalty-free,
transferable and nonexclusive license to use for any purpose such Idea, without
the payment of any additional consideration thereof either to MDT or to any such
persons, except to the extent, and then only to the extent, required by
applicable law or as set forth below. 
MDT shall cause each MDT Appointee and each of its employees, agents and
subdistributors to execute invention assignment agreements with respect to any
Ideas.  To the extent that the Company
agrees to incorporate an Idea developed by MDT and based on valid claims in
issued patents owned by MDT or its Affiliates (each such Idea, an “Invention”)
into a Product or New Product which MDT does not have the right to distribute
or sell hereunder, or from such time as MDT’s right to distribute and sell such
Product or New Product is terminated or otherwise lapses, the Company shall
license the use and application of such Invention for any purpose, on a non-exclusive,
perpetual, irrevocable and transferable basis, in exchange for a royalty based
on a percentage of the annual net sales of such Products or New Products
incorporating such valid claims in patents, ranging from [*],
as determined by an independent arbitrator selected by the Parties in
accordance with Section 21.4, who shall base his or her decision on factors
typically taken into account in determining reasonable royalties.  To the extent that MDT develops any Invention
which the Company has not agreed to incorporate into a Product, the Company
shall have the option to license the use and application of such Invention for
any purpose, on a non-exclusive, perpetual, irrevocable and transferable basis,
in exchange for a royalty based on a percentage of the annual net sales of
products incorporating valid claims in patents granted with respect to such
Invention, ranging from [*], as
determined by an independent arbitrator selected by the Parties in accordance
with Section 21.4, who shall base his or her decision on factors typically
taken into account in determining reasonable royalties.  The Company’s obligation to pay royalties
hereunder with respect to a product incorporating an Invention shall continue
until the expiration of the patent applicable to such Invention.  In no event

 

15

 

shall royalties be payable hereunder with respect to Ideas that are not
Inventions (i.e., based on valid claims in unexpired patents owned by MDT or
its Affiliates).

 

14.                                 REPRESENTATIONS,
WARRANTIES AND COVENANTS OF THE COMPANY

 

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

 

14.1                           The
Company and its employees have all necessary rights, authorizations or licenses
to perform their obligations hereunder and to provide all related materials and
services required under this Agreement.

 

14.2                           Each
Product shall be manufactured and/or developed in a manner consistent with good
commercial practice and regulations and guidelines of the U.S. Food and Drug
Administration for such medical devices, free from defects in material and
workmanship, and shall conform to all applicable laws and regulations relating
to medical devices and to the Product’s published specifications.

 

14.3                           The
Company does not have any obligations or liabilities that might reasonably be
expected to have a material adverse effect on its ability to perform its
obligations hereunder.

 

14.4                           There
are no actions, suits or proceedings instituted or pending or, to the best
knowledge of the Company’s management, threatened against the Company that
might reasonably be expected to have a material adverse effect on the ability
of the Company to perform its obligations hereunder.

 

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

 

14.6                           The execution, delivery and performance of the
obligations of this Agreement have been validly authorized by all necessary
corporate action of the Company, and this Agreement represents the Company’s
valid and legally binding obligation.

 

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

 

15.                                 REPRESENTATIONS,
WARRANTIES AND COVENANTS OF MDT

 

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

 

15.1                           MDT and its employees
have all necessary rights, authorizations or licenses to perform their
obligations hereunder and to provide all related materials and services
required under this Agreement.

 

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

 

16

 

15.3                           There are no actions, suits or proceedings
instituted or pending or, to the best knowledge of MDT’s management, threatened
against MDT that might reasonably be expected to have a material adverse effect
on the ability of MDT to perform its obligations hereunder.

 

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

 

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

 

16.                                 LIMITATION
OF LIABILITY

 

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

 

17.                                 INDEMNIFICATION

 

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

 

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

 

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

 

17

 

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

 

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

 

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

 

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

 

18.                                 CONFIDENTIALITY
AND NON-DISCLOSURE

 

18.1                           Both
Parties acknowledge and agree that this Agreement creates a privileged and
confidential relationship between MDT and the Company and that information
concerning both Parties’ business affairs, customers, vendors, finances,
properties, methods of operations, computer programs and documentation,
diagrams, verbal and written disclosures, drawings, samples, technical
descriptions, specific configurations, dimensions, materials, concepts,
developments, techniques, know-how, inventions, and other such materials
and  information, whether written or
oral, is confidential in nature.  All
such information is hereinafter collectively referred to as “Confidential
Information.”  Neither party will use,
directly or indirectly, for its own benefit or the benefit of others, both
during the term of this Agreement and subsequent to its termination, any
Confidential Information of the other party which may be acquired or developed
in connection with or as a result of the performance of this Agreement without
the prior written consent of the other party.

 

18.2                           Both
Parties agree, except as directed by the other party or provided in this
Section 18.2, not to disclose any Confidential Information of the other party
to any person whatsoever at any time during or after the term of this
Agreement.  Upon termination of this
Agreement and at a party’s written request, each party will turn over to the
other party all documents, papers and other materials in its possession or
control (except for one copy that may be retained solely for archival purposes)
that relate to the other party or the Intellectual Property of the other party.  Both Parties further agree to bind its
employees and subcontractors to the terms and conditions of this
Agreement.  Each party acknowledges that
disclosure of any Confidential Information of the other party by it may give
rise to irreparable injury to the other party, its subsidiaries and/or
affiliated companies or the owner of such information, inadequately compensable
in damages.  Accordingly, the disclosing
party may seek and obtain injunctive relief against the breach or threatened
breach of the foregoing undertakings, in addition to any other legal remedies
that may be available.  Each party
acknowledges and agrees that the covenants contained herein are necessary for
the

 

18

 

protection of legitimate business interests of the other party, its
subsidiaries and/or affiliated companies and are reasonable in scope and
content.

 

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

 

19.                                 NOTICES

 

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

 

If to MDT:

 

Medtronic USA, Inc.

Gastroenterology & Urology Division

4000 Lexington Avenue North

Shoreview, MN 55126-2983

Attn: Vice President & General Manager

Fax:  (763) 514-9701

 

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

 

Medtronic USA, Inc.

710 Medtronic Parkway N.E.

Fridley, MN 55432-5604

Attn.: Senior Vice President & General Counsel

Fax: (763) 572-5459

 

If to the Company:

 

Vision-Sciences, Inc.

40 Ramland Road South

Orangeburg, New York 10962

Attn:  Ron Hadani, President
& CEO

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

Fax:  (845) 365-0620

 

19

 

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

 

Proskauer Rose LLP

1585 Broadway

New York, NY 10036

Attn:  Paul I. Rachlin, Esq.

Tel:  (212) 969-3640

Fax:  (212) 969-2900

 

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

 

20.                                 GENERAL
PROVISIONS

 

20.1                           This
Agreement shall be governed in all respects by the laws of the State of New
York, without regard to any rules of conflict and choice of laws that would
require the application of laws of another jurisdiction.

 

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

 

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

 

20.4                           The
failure by either party to enforce any term or condition of this Agreement, the
written waiver of any term or condition of this Agreement or the acceptance of
any payment shall not be a waiver of further enforcement of that or any other
term or condition.

 

20.5                           The
captions used herein are for convenience only and shall not be considered in
construing or interpreting the provisions hereof.

 

20.6                           If any
provision of this Agreement shall be held to be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall in no way be affected or impaired thereby.

 

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

 

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

 

20

 

deemed
an original but all such counterparts together shall constitute but one and the
same instrument.

 

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

 

20.10                     Without
derogating from anything contained in Sections 2.3 and 5.8 hereof, neither this
Agreement nor any rights granted hereby may be assigned by either party without
the other party’s prior written consent, such consent not to be unreasonably
withheld.  Any attempted assignment in
violation of the proceeding sentence shall be null and void.  Notwithstanding the foregoing, consent shall
not be required for an assignment of this Agreement resulting from (i) a
merger, reorganization, reincorporation or other acquisition of a party or (ii)
the sale of all or substantially all of the urology or urological diagnostics business
of the Company or MDT.  This Agreement
shall inure to the benefit of and be binding upon the successors and permitted
assigns of the Parties hereto.  In the
event that this Agreement is assigned by the Company to a direct competitor of MDT
as a result of the sale of all or substantially all of the Company’s urology or
urological diagnostics business to such competitor of MDT, MDT shall have the
right to terminate this Agreement upon written notice to the Company.

 

20.11                     Neither
party shall be liable for any delay or failure to perform in whole or in part,
resulting from causes beyond such party’s reasonable control, including, but
not limited to, fires, war, terrorism, strikes, insurrections, riots,
embargoes, delays in transportation, inability to obtain supplies of raw
materials, or requirements or regulations of any governmental and/or
semi-governmental authority.  If such
delay or failure extends beyond thirty (30) days, the party not affected by the
delay shall have the right to terminate this Agreement upon written notice.

 

20.12                     Nothing
in this Agreement, whether express or implied, is intended to confer any rights
or remedies under or by reason of this Agreement on any person other than the Parties
to this Agreement and their respective successors and permitted assigns.

 

20.13                     Upon
execution of this Agreement, the Company may issue a press release
substantially in the form of Annex D hereto (the “Release”).  The Company shall be entitled to file a
redacted copy of this Agreement with the Securities and Exchange Commission
after review thereof by MDT, which review by MDT shall be completed in a timely
fashion.  Except to the extent required
by applicable law, neither party shall make any public announcement or
statement regarding the relationship of the Parties hereunder inconsistent with
the Release or any public filings of either party without the prior written
consent of the other party, which shall not be unreasonably withheld.

 

21                                    ALTERNATIVE
DISPUTE RESOLUTION

 

21.1                           If
a dispute, other than a dispute relating to intellectual property or questions
of injunctive relief, between the Parties should arise out of or relate to this
Agreement, the Parties hereby agree to handle the dispute pursuant to the below
outlined binding alternative dispute resolution proceedings in lieu of any other
rights or remedies each may have.

 

21

 

21.2.                        Executive Dispute Resolution. 
The Parties shall attempt in good faith to resolve any dispute arising out of
or relating to this Agreement promptly by negotiation between executives who
have authority to settle the controversy and who are at a higher level of
management than the persons with direct responsibility for administration of
this Agreement.  Either Party may give
written notice to the other Party of any dispute not resolved in the normal
course of business.  Such notice shall
(a) specify the nature of the dispute, (b) state the Party’s arguments
supporting its position and (c) state the name and title of the executive who
will represent that Party in the dispute and any other person who will
accompany the executive.  Within fifteen
(15) days after delivery of the notice, the receiving Party shall submit to the
sending Party a written response.  The
notice and response shall include (a) a statement of that Party’s position and
a summary of arguments supporting that position, and (b) the name and title of
the executive who will represent that Party and of any other person who will
accompany the executive.  Within thirty
(30) days after delivery of the initial notice, the designated executives of
both Parties shall meet at a mutually acceptable time and place, and thereafter
as often as they reasonably deem necessary, to attempt to resolve the
dispute.  All negotiations pursuant to
this clause are confidential and shall be treated as compromise and settlement
negotiations for purposes of applicable rules of evidence.

 

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

 

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

 

22

 

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

 

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

 

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

 

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

 

	
  MEDTRONIC USA, INC.

  	
  VISION-SCIENCES, INC.

  
	
   

  	
   

  	
   

  
	
  By: 

  	
  /s/ Camille I. Farhat

  	
   

  	
  By: 

  	
  /s/ Ron Hadani

  	
   

  
	
  Name:

  	
  Camille I. Farhat

  	
  Name:

  	
  Ron Hadani

  	
   

  
	
  Title:

  	
  Vice President & General Manager

  	
  Title:

  	
  President & CEO

  	
   

  
	
   

  	
  Gastroenterology and
  Urology

  	
  Date:

  	
  Dec. 29, 2004

  	
   

  
	
  Date:

  	
  Dec. 29, 2004

  	
   

  	
   

  	
   

  	
   

  
								

 

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

 

23

 

	
   

  	
  MEDTRONIC, INC.

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ William A. Hawkins

  	
   

  
	
   

  	
  Name: William A. Hawkins

  
	
   

  	
  Title: President and Chief Operating Officer

  
	
   

  	
  Dated: December 29, 2004

  

 

24

 

ANNEX A

 

PRODUCTS AND PRICING

 

 

[*]

 

25

 

ANNEX B

 

RETURN AUTHORIZATION PROCEDURES

 

[*]

 

26

 

ANNEX C

 

INITIAL
PERIOD DELIVERY SCHEDULE

 

[*]

 

27

 

ANNEX D

 

FORM OF PRESS
RELEASE

 

Vision
Sciences Announces Exclusive Distribution Agreement With Medtronic USA, Inc.

for
its Urology Products within the United States and Canada

 

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

 

“We are extremely pleased to have Medtronic
recognize the value of the Flexible
Cystoscope with Slide-OnTM EndoSheath® System and become our marketing and distribution partner in the US and Canada
for our new and growing urology product line. 
Following a strong interest during the annual American Urology
Academy congress held in San Francisco earlier
this year, this agreement marks the official commercial introduction of our new
technology and product line to the domestic urology market. We believe that the
innovative EndoSheath® System, coupled with Medtronic’s highly professional and
established sales and marketing forces, will result in effective market
penetration for the products.  We are
also very pleased with the fact that this is the second Medtronic division with
which we have established distribution arrangements, following the exclusive
distribution agreement we entered into in August 2003 with Medtronic Xomed, the
company’s ENT division. We look forward to a long and mutually rewarding
relationship between the two companies,” stated Ron Hadani, President and CEO
of Vision-Sciences, Inc.

 

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

 

Except for the historical information herein, the
matters discussed in this news release include forward-looking statements for
the purposes of the safe harbor protections under The Private Securities
Litigation Reform Act of 1995.  Future
results may vary significantly based on a number of factors including, but not
limited to, the availability of capital resources, risks in market acceptance
of new products and services and continuing demand for the same, the impact of
competitive products and pricing, seasonality, changing economic conditions and
other risk factors detailed in our most recent annual report and other filings
with the SEC.  The Company assumes no
obligation to update any forward-looking statements as a result of new
information or future events or developments.

 

###

 

28Exhibit 10.27

 

ADESA,
INC.

 

RESTRICTED STOCK UNIT GRANT

 

Name

 

S.S. #

 

In accordance with the
terms of the ADESA, Inc. 2004 Equity and Incentive Plan (the “Plan”), ADESA,
Inc. hereby grants to you (the “Participant”) the right to receive ADESA, Inc.
Restricted Stock Units (the “RSU”), as set forth below, subject to the terms
and conditions set forth in this Grant (including Annex A hereto and all
documents incorporated herein by reference):

 

Number
of RSUs:

 

Date
of Grant:

 

Vesting
Date:        Third Anniversary of the Date
of Grant

 

This Grant is made in
accordance with the Plan, which was approved by ADESA, Inc.’s Board of
Directors in April 2004 and received shareholder approval on April 21, 2004.

 

Further terms and
conditions of the Grant are set forth in Annex A hereto, which is an integral
part of this Grant.  Please complete the
enclosed Income Tax Withholding Election Form and return it to Corporate Human
Resources per the instructions on the Form.

 

All terms, provisions and
conditions set forth in the Plan and not set forth herein are incorporated by
reference.  To the extent any provision
hereof is inconsistent with a provision of the Plan, the provisions of the Plan
will govern.

 

IN WITNESS WHEREOF,
ADESA, Inc. has caused this Grant to be executed by its Chairman, President and
Chief Executive Officer as of the date and year first above written.

 

 

	
   

  	
  ADESA, Inc.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David G.
  Gartzke

  	
   

  
	
   

  	
   

  	
  Chairman, President and CEO

  	
   

  

 

Attachment:  Annex A

 

 

ANNEX
A

RESTRICTED STOCK UNIT GRANT

 

1.                                       Further Terms and Conditions of Restricted
Stock Unit Grant.  The RSU Grant is subject to the following
additional terms and conditions:

 

(a)                                                                          No
Dividend Equivalents. The Participant shall not receive Dividend
Equivalents with respect to the RSU Grant.

 

(b)                                                                         Payment.  Subject to the provisions of subsection (d)
hereof, a distribution of a number of shares of ADESA, Inc. Common Stock (the “Stock”)
that is equal in number to the aggregate number of RSUs shall be distributed no
later than 90 days after the end of the vesting period provided, however,
that the Committee may determine that all or any RSUs payable may be settled in
cash.  The amount of cash paid in
settlement shall be equal to the aggregate Fair Market Value of the shares of
Stock underlying the RSUs that are not settled in Stock.  ADESA, Inc. may elect to deposit the Stock
into a participant account in the ADESA, Inc. Invest Direct plan.

 

(c)                                                                          Tax
Withholding.  The Company shall withhold all applicable taxes required
by law to be withheld with respect to the vesting and settlement of the RSU
award granted to you by the Company.  You
may satisfy the withholding obligation by paying the amount of any taxes in
cash or check prior to the date tax withholding is required. Otherwise, the
Company will withhold from the RSU award the number of shares of Stock having a
value on the date of vesting equal to your tax withholding obligation.  An Income Tax Withholding Election Form will
need to be completed at the time of Award and returned to Corporate Human
Resources.  If no Election Form is
received by Corporate Human Resources within the timeframe detailed on the
Form, the Company will withhold shares of Stock from your RSU award (as
described herein) in order to satisfy the tax withholding obligations.

 

(d)                                                                         Death,
Retirement, Disability, or Termination of Employment.  

 

(1)                                  During the Vesting Period (i) if the
Participant retires pursuant to the terms of a tax qualified retirement plan of
ADESA, Inc. or a Subsidiary or upon such other retirement as may be approved by
the Committee, (ii) in the event of the death of the Participant while in the
employ of ADESA, Inc. or a Subsidiary, or (iii) in the event of the termination
of the employment of the Participant due to Disability (as defined in Section
22(e)(3) of the Code), all unvested RSUs shall vest and be paid promptly to the
Participant (or the Participant’s beneficiary or estate). The payment shall be
prorated based upon the number of whole calendar months within the Vesting
Period which had elapsed as of the date of death, retirement or termination due
to Disability in relation to the number of calendar months in the full Vesting
Period. A whole month is counted in the calculation if the Participant was in
the position as of the 15th of the month.

 

(2)                                  If the Participant’s employment with ADESA,
Inc. or any Subsidiary terminates for any reason other than death, disability
or retirement, as specified in subsection (c)(1) hereof,

 

 

all RSUs, to the extent not yet vested, shall
except as otherwise provided by the Committee, be forfeited on the date of such
termination of employment.

 

2.                                       Ratification of Actions.  By
receiving the Grant or other benefit under the Plan, the Participant and each
person claiming under or through Participant shall be conclusively deemed to
have indicated the Participant’s acceptance and ratification of, and consent
to, any action taken under the Plan or the Grant by ADESA, Inc., the Board or
the Committee.

 

3.                                       Notices.  Any notice hereunder to ADESA,
Inc. shall be addressed to ADESA, Inc., 13085 Hamilton Crossing Blvd., Suite
500, Carmel, Indiana, 46032, Attention: 
Executive Compensation Manager, Human Resources, and any notice
hereunder to the Participant shall be directed to the Participant’s address as
indicated by ADESA, Inc.’s records, subject to the right of either party to
designate at any time hereafter in writing some other address.

 

4.                                       Definitions. 
Capitalized terms not otherwise defined herein shall have the meanings
given them in the Plan.

 

5.                                       Governing Law and Severability.  To
the extent not preempted by Federal law, the Grant will be governed by and
construed in accordance with the laws of the State of Indiana, without regard
to conflicts of law provisions.  In the
event any provision of the Grant shall be held illegal or invalid for any
reason, the illegality or invalidity shall not affect the remaining parts of
the Grant, and the Grant shall be construed and enforced as if the illegal or
invalid provision had not been included.

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