Exclusive Distribution Agreement

EXCLUSIVE DISTRIBUTION AGREEMENT


THIS AGREEMENT is made effective the 25th day of January, 2000, by and between Daig Corporation, a Minnesota Corporation whose principal place of business is at 14901 DeVeau Place, Minnetonka, Minnesota ("Distributor") and Cardima Incorporated whose principal place of business is at 47266 Benicia St., Fremont, California ("Manufacturer").


The Parties, intending to be legally bound, agree as follows:


1. DISTRIBUTORSHIP TERMS


1.01 Appointment and Acceptance. Manufacturer hereby appoints Distributor
as its exclusive distributor of Products in the Territory. Distributor
accepts this appointment. Manufacturer shall not directly or indirectly
sell or offer to sell any of the Products in the Territory to any third
party. In the event Manufacturer receives requests for information relating
to, or purchase orders for, Products from customers or potential customers
within the Territory, Manufacturer shall promptly forward such requests or
orders to Distributor. Distributor shall have the right to appoint sub-
distributors at its discretion.


1.02 Products Defined. Products are those described in Schedule A
(including all modifications, new versions or replacements therefor),
together with such other electrophysiology catheter products and
accessories intended for diagnostic use that Manufacturer develops during
the term of this Agreement in the Field of Use. Distributor acknowledges
that the Products shall not include any electrophysiology catheter products
that are intended primarily for therapeutic use. In the event that the
overall unit sales of Distributor exceed the original forecasts given to
Manufacturer by Distributor (attached as Schedule E) for any calendar year
by ***** or greater, Manufacturer may increase the transfer price of the
Products to Distributor by five (5) percentage points for the following
calendar year (e.g. if the then current transfer price is ***** off list
price, the transfer price may be increased to ***** off list price). This
increase may be taken one time only. All price increases thereafter shall
be governed by Section 2.03 herein below.


1.03 Territory Defined. The Territory is defined to be the United States
of America (including its territories and possessions), exclusive only of
hospitals in the states of ***** and ***** with ship to addresses
containing the zip codes outlined in Schedule B. During the term of this
Agreement, Distributor shall have the first right of refusal at its option
to expand the Territory in order to distribute the Products on an exclusive
basis in all other countries of the world. Manufacturer shall give
Distributor written notice and the terms under which it intends to permit
distribution, or the terms of any offer or request from a third party for
rights to distribute, any of the Products in any country not then included
in the Territory. Distributor shall accept or reject such offer in writing
within thirty (30) days after receipt thereof, and, if Distributor accepts
such offer, the Territory shall be


_________ Confidential treatment has been requested with respect to certain portions of this agreement. The copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as *****. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.


appropriately expanded.


1.04 Field of Use Defined. The Field of Use is catheter-based cardiac
electrophysiology.


1.05 Manufacturing Materials Defined. Manufacturing Materials shall mean
all items necessary for Distributor or Distributor's designated party to
manufacture and sell the Products, including, but not be limited to: design
specifications and documents; manufacturing specifications, procedures and
documents; quality assurance and quality control procedures and documents;
written transfer of regulatory documents such as 510(k) approvals and other
approvals such as CE marks, to the extent permitted; rights to all patents,
trademarks, trade secrets and confidential information, worldwide;
specifications for all equipment used in the manufacture of the Products;
and, text specifications for all labeling and packaging.


1.06 No Activities Outside the Territory. Distributor shall not solicit
sales of Product or promote the sale of Products outside the Territory.
Distributor shall not establish an office or warehouse outside the
Territory for the sale of Products.


1.07 Distributor's Right to Distribute Other Products. During the term of
this Agreement and afterwards, Distributor shall have the right to
manufacture, market, distribute and sell any and all products in the
Territory, regardless of whether such products compete with the Products.


2. PRICES AND TERMS


2.01 Prices. Manufacturer shall sell Products to Distributor in such
quantities and at such times as Distributor may reasonably request.
Distributor shall submit written orders to Manufacturer. Manufacturer
shall, at Distributor's option, ship directly to Distributor or a
purchasing customer(s) at the ship to address provided by Distributor.
Product pricing is contained in Schedule A. Shipping terms and credit terms
are listed on Schedule C.


2.02 Claim for Shortage. Distributor shall submit in writing to
Manufacturer all claims for shortages in shipments within thirty (30)
business days of receipt of notice by customers of a shortage.


2.03 Price Changes. Manufacturer may change the list price of Products only
once a year on the anniversary of the Agreement, subject to consultation
with Distributor in advance, by giving Distributor written notice sixty
days in advance of such price change. Manufacturer list price increases to
Distributor of greater than 2% for any given Product in a given year must
be by mutual consent, unless Manufacturer's average selling price ("ASP")
for any product over the course of the prior year has increased by more
than 2% in which case the Distributor price increase may equal 75% of the
relevant ASP percentage increase.


2.04 Return Policy. Manufacturer's return policy is contained in
Schedule C.


2.05 Promotional Material. Non-sterile product samples and promotional
materials shall be made available to Distributor by Manufacturer at prices
outlined in Schedule D. New materials may be developed and added to this
list of available promotional materials from time to time. Upon purchase,
these materials become property of Distributor.


2.06 Resale Prices. Distributor shall solely determine the prices at which
it resells the Products in the Territory.


2.07 Governing Document. This Agreement, together with its Schedules, shall
supersede any conflicting or additional terms used by Manufacturer or
Distributor in the ordering, shipment and receiving of Products, unless
such terms have been agreed to in writing by the parties.


3. DISTRIBUTOR'S DUTIES


3.01 Distributor's Efforts. Distributor shall use commercially reasonable
efforts to promote the sale of Products in the Territory. Distributor shall
not knowingly detract from the good name of Manufacturer or the reputation
of Products.


3.02 Payment of Account. Distributor shall promptly pay its account with
Manufacturer when due. Terms are net 30 days due, with 1.5% per month late
fee on past due invoices.


3.03 Sales Quotas. Distributor shall maintain its exclusive right to
distribute the Products in the Territory so long as the minimum purchase
quotas established in Schedule E are met or exceeded in each year of the
Agreement. If Distributor fails to meet the minimum purchase quotas in the
first year or in any given six month period thereafter, then Manufacturer
shall give Distributor written notice of such failure, and Distributor
shall have ninety (90) days after its receipt of such notice to correct
such failure (i.e., through submission of purchase orders to Manufacturer
for additional units of the Products). If Distributor fails to correct such
failure in a timely manner, then Manufacturer shall have the option to
convert Distributor's appointment granted in Section 1.1 hereof to a non-
exclusive appointment in the Territory, notwithstanding anything to the
contrary in Section 1.1, provided that Manufacturer gives Distributor
written notice of such conversion within thirty (30) days.


3.04 Compliance With Law. Distributor shall comply with all laws and
regulations affecting its business.


3.05 Recalls. In the event Manufacturer recalls any Products sold by
Distributor in the Territory, Distributor shall reasonably assist
Manufacturer with such recall. Manufacturer agrees to give prompt notice to
Distributor in the event that Manufacturer recalls any


Product, or ceases or suspends the sale of any Product due to any problem
which relates to such Product's efficacy or patient safety. Manufacturer
shall reimburse Distributor for reasonable expenses incurred by Distributor
at the request of Manufacturer to effect a recall, and the value of all
Products purchased by Distributor and recalled shall count towards the
minimum purchase quotas described in Section 3.03. In order to assist
Manufacturer in the event of a recall, Distributor shall maintain a
complete and current listing of the locations of all sterile Products in
Distributor's inventory, and the names of customers who have purchased
Products from Distributor. Manufacturer shall maintain a complete and
current listing of the locations of all sterile Products in Manufacturers
inventory, and the names of customers who have received shipments from
Manufacturer, together with the reorder numbers, lot numbers or other
identifying characteristics of Products purchased and the date of such
purchase.


3.06 Traceability. Distributor shall comply with all reasonable
traceability programs of Manufacturer to the extent it is apprised of them
by Manufacturer.


3.07 Training. Distributor shall be responsible for training all of its
personnel who promote Products so that they are knowledgeable about the
Products and can adequately represent the Products. Manufacturer shall
cooperate in effecting such training.


3.08 Product Warranty. Manufacturer hereby authorizes Distributor to pass
on the Manufacturer standard warranty set forth in Schedule C to
Distributor's customers in the Territory. In addition, Manufacturer
warrants to Distributor that the Products purchased by Distributor shall be
in saleable condition with a minimum of eighteen (18) months shelf life
from the date of shipment (based on the present understanding that the
total shelf life for the Product from the date of manufacturer currently is
twenty-four (24) months). In the event that Manufacturer receives approval
from authorities for a shelf life for the Product from the date of
manufacture in excess of twenty-four (24) months (the "Date of Manufacture
Shelf Life"), Manufacturer agrees that it shall warrant that Product
purchased by Distributor shall be in a saleable condition with a minimum
shelf life from the date of shipment of no less than the lessor of thirty-
six (36) months or six (6) months less than the Date of Manufacture Shelf
Life.


3.09 Distributor's Expenses. All costs, including salaries, commissions,
bonuses, contributions to social security or other welfare system payments,
benefits, severance pay and other expenses incurred by Distributor in
connection with its performance of this Agreement shall be borne solely by
Distributor.


3.10 Non Binding Forecast. At the end of each calendar quarter,
Distributor shall provide Manufacturer with a non-binding forecast of
Distributor's purchases for the next four quarters .


4. OBLIGATIONS OF MANUFACTURER


4.01 Compliance with Laws. Manufacturer shall comply with the laws and
regulations


which govern its business.


4.02 Insurance. Manufacturer shall carry reasonable amounts of insurance,
whether through self-insurance or otherwise, to cover its responsibilities
with respect to indemnification under Section 7 below. Distributor shall
have the right to examine the policies of insurance of Manufacturer upon
request.


4.03 Regulatory Registrations and Approvals. Manufacturer shall obtain and
maintain all regulatory authorizations required for the sale of the
Products in all countries in the Territory as requested by Distributor, and
Manufacturer shall be responsible for all costs and expenses incurred in
this regard. Manufacturer shall make available to Distributor complete
copies of all applications and all registrations and approvals obtained
therefrom relating to the Products and provide Distributor with any other
information or material it requests to enable Distributor to sell the
Products in the Territory.


4.04 Quality Control/Product Complaints. Manufacturer agrees to maintain
ongoing quality assurance and testing procedures sufficient to satisfy
applicable regulatory requirements. Manufacturer shall be responsible for
responding to all product complaints, including whatever response may be
required to any governmental or certification authority, subject to the
reasonable cooperation of Distributor as set forth in Section 3.06 hereof.


4.05 Scientific and Technical Information Manufacturer shall provide to
Distributor scientific and technical information available to Manufacturer
and required to obtain registrations, licenses, and permits required for
the sale and distribution of Products in the Territory, or to respond to
inquiries from customers, or governmental or regulatory authorities.


4.06 Training. Manufacturer shall provide training for Distributor's
employees and sub-distributors relating to the use and application of the
Products. Such training shall be conducted at least once per year, if
requested by Distributor, and shall be provided without charge to
Distributor. Notwithstanding the above, all expenses incurred by
Distributor's personnel in connection with such training, including,
without limitation, travel and housing expenses, shall be borne by
Distributor.


4.07 Support. Manufacturer, at its own expense, and as deemed reasonable
by Manufacturer, shall provide consultation to Distributor in a timely
fashion concerning technical aspects and use of the Products as requested
by Distributor.


4.08 Telephone Service. Manufacturer shall provide a telephone number in
the United States during Manufacturer's normal business hours for
Distributor's use in placing telephone orders and in obtaining telephone
advice and support from Manufacturer regarding the Products.


5. TRADEMARKS


5.01 Use of Manufacturer's Trademarks. Manufacturer hereby grants to
Distributor, and Distributor accepts from Manufacturer, a non-exclusive,
royalty-free, sublicensable right and license, during the term of this
Agreement, to indicate to the public that it is an authorized distributor
of the Products and to advertise only within the Territory such Products
under the trademarks and trade names that Manufacturer may adopt from time
to time ("Manufacturer Trademarks"). Distributor shall not alter or remove
any Manufacturer Trademarks applied to the Products by Manufacturer.
Nothing herein shall grant to Distributor any right, title, or interest in
Manufacturer Trademarks, subject to the foregoing limited license. Upon
termination of this Agreement, Distributor shall cease using all trademarks
of Manufacturer.


5.02 Distributor's Use of Trademark. Distributor shall use Manufacturer
Trademarks only in the manner authorized by Manufacturer.


6. CONFIDENTIAL INFORMATION


6.01 Confidentiality. The parties acknowledge that by reason of their
relationship to each other hereunder, each shall have access to certain
information and materials concerning the other's business, plans,
customers, technology, and/or products that is confidential and of
substantial value to that party, which value would be impaired if such
information were disclosed to third parties. Except as required in order to
perform its obligations hereunder, each party agrees that it shall not use
in any way for its own account or the account of any third party, nor
disclose to any third party, any such confidential information revealed to
it by the other party and shall take every reasonable precaution to protect
the confidentiality of such information during the term of this Agreement
and for one (1) year thereafter. Each party shall advise the other whether
or not it considers any particular information or materials to be
confidential by marking on it "Confidential", "Proprietary" or some similar
designation.


6.02 Confidentiality Exceptions. The provisions of Section 6.01 shall not
apply to confidential information to the extent that:


(i) such information was generally known or otherwise in the public
domain prior to to disclosure hereunder, or becomes so known
subsequent to such disclosure through no fault of the receiving
party;


(ii) such information was received without restriction from a third
party not under an obligation to the non-receiving party not to
disclose it and otherwise not in violation of the non-receiving
party's rights; or


(iii) such information is disclosed pursuant to the order or
requirement of a court, administrative agency, or other
governmental body; provided,


however, that the disclosing party shall provide prompt notice
thereof to the non-disclosing party to enable such party to seek
a protective order or otherwise prevent such disclosure.


(iv) such information was developed independently by the parties
without use of the confidential information of the disclosing
party.


(v) such information was known by a party prior to its disclosure by
the other party.


6.03 ...