EXTRACARPARCAL DISPOSABLES DISTRIBUTION AGREEMENT

Exhibit 10.4

Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.

EXTRACORPOREAL DISPOSABLES DISTRIBUTION AGREEMENT

          This Agreement, dated as of July 25, 2007 (the “Effective Date”), is between Medisystems Corporation, a Washington corporation with offices at 701 Pike Street, 16th Floor, Seattle, Washington 98101-3016 (“MDS”) and Henry Schein, Inc. a Delaware corporation with offices at 135 Duryea Road, Melville, NY 11747 (together with its subsidiaries, “Schein”).

          In consideration of the mutual promises made herein and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto agree as follows:

   1.0 BACKGROUND

     1.1 The following are examples of certain disposable medical devices useful in dialysis and pheresis therapies (collectively, the “Products”):

	a.		Blood, dialysate and/or fluid sets for dialysis such as blood tubing sets, peritoneal sets, reversing connector sets, priming sets and the like (“BTL”),
	b.		extracorporeal access needle sets such as AVF needle sets, pheresis needle sets, ButtonHole needle sets, Vasca access needle sets and the like (“AVF”),
	c.		antistick, plastic access needle/connectors and the like (“Needleless”), and
	d.		air filters, such as transducer protectors, diagnostic pressure measurement devices and the like (“TP”).

     MDS designs and supplies certain Products under Specifications (as hereinafter defined) including MDS labeling which MDS controls and currently has produced by subsidiaries or contract manufacturers (“MDS Products”). Schein wishes to purchase certain MDS Products for resale to its dialysis customers in certain countries of the world as listed in Exhibit A (the “Territory”).

   2.0 TERM OF AGREEMENT

     2.1 The term (including any extensions, the “Term”) of this Agreement shall be for a two year period beginning on the Effective Date of this Agreement. The Agreement shall terminate at the end of the Term, unless the parties agree on provisions for an extension of the Term not less than six (6) months prior to the date on which this Agreement would otherwise terminate.

   3.0 MDS PRODUCTS

     3.1 The MDS Products that Schein wishes to purchase pursuant to this Agreement are listed in Exhibit B as “MDS BTL”, “MDS AVF”, “MDS Needleless”, “MDS TP”, etc., as such Exhibit B may be amended from time to time by mutual agreement of the parties. The codes of the MDS Products that are the subject of this Agreement are hereafter referred to as “Codes”. The Codes shall meet specifications as set forth in Exhibit C, or as such specifications, including labeling may be modified from time to time pursuant to Sections 9.1, 9.2 and 9.3 (the “Specifications”), provided that such modifications are agreed upon in amendments to Exhibit C signed pursuant to Section 18.3 hereof.

     MDS reserves the right, at its sole discretion, to incorporate clinical use enhancements or developments in existing Codes of the MDS Products or to supply existing Codes from alternate manufacturing sites even if MDS designates them with a different Code prefix, provided that no price increase is requested by MDS.

   4.0 PURCHASES AND ORDERS

     4.1 Subject to the terms and conditions of this Agreement, MDS shall sell the MDS Products listed in Exhibit B to Schein and Schein shall purchase the MDS Products listed in Exhibit B for use or resale by Schein only in the Territory.

     4.2 “Contract Year” shall mean the twelve-month period commencing on the Effective Date and each subsequent twelve-month period during the Term.

     4.3 During the Term of this Agreement, Schein hereby agrees to sell in the Territory BTL and AVF sourced only and exclusively from among MDS BTL and MDS AVF listed in Exhibit B (the “Exclusive Products”). Except as provided in this Agreement, Schein shall not purchase or sell in the Territory any Products identical, similar or competitive to Exclusive Products from any other supplier (“Competing Products”).

     Further, during each [**] month period during the Term of this Agreement, Schein shall purchase from MDS, by way of valid Delivery Orders (as hereinafter defined) only, not less than [**] pairs of MDS BTL and [**] each-equivalents of MDS AVF (the “Purchase Commitment”).

     Notwithstanding the above, if during any Contract Year during the Term of this Agreement MDS or its affiliates sells more than $[**] worth of either the MDS BTL or the MDS AVF listed in Exhibit B directly to any provider of chronic in-center dialysis services, then for such Contract Year and for any remaining Contract Year during the Term of this Agreement, Schein shall be relieved of its obligation not to purchase or sell either BTL and/or AVF, as the case may be, that are Competing Products.

     The failure of Schein to order the minimum quantities of the Purchase Commitments shall be a material breach of this Agreement, and shall entitle MDS to terminate this Agreement pursuant to Section 14.1 hereof and to seek any and all other remedies provided for in this Agreement.

     4.4 Schein hereby warrants that as of the Effective Date, Schein neither purchases from any source nor sells, any Competing Products in the Territory.

     4.5 After the Effective Date, except as set forth in Sections 8.1 and 8.9, MDS shall not sell Exclusive Products to any Med/Surg Distributor (as hereinafter defined), other than Schein, in the Territory. For the purposes of this Agreement a “Med/Surg Distributor” is defined as a distributor who distributes general medical/surgical items such as syringes, gauze, drugs, etc. rather than one who distributes primarily dialyzers, dialysis services and/or dialysis machines. Med/Surg Distributors include [**] and other similar general medical surgical item distributors.

     4.6 Notwithstanding 4.5 above, as of the Effective Date, MDS sells or may sell MDS Products, including Exclusive Products, to dialysis specialty distributors currently including Fresenius Medical Care, Inc., Baxter Healthcare Corporation, NxStage, Inc., Gambro Renal Products, Inc., B. Braun Medical and Sorb Technology, each of which is a manufacturer or exclusive importer of a hemodialyzer, hemodialysis machine, implanted dialysis access port or provider of specific dialysis services. All MDS Products sold to [**] are

intended for exclusive use by [**] as a provider of specific dialysis services in its owned or managed facilities and for the home-care patients thereof. MDS, to the extent allowable by law, will not sell MDS Products to [**] with the intent that [**] will distribute, redistribute, resell, or otherwise transfer to any other third party any MDS Products during the term of this Agreement.

     4.7 Except as set forth in Section 8.9, MDS shall not sell Exclusive Products to any distributor at more favorable prices, including [**], discounts and the like, than those offered to Schein for similar Delivery Order or Purchase Commitment quantities.

     4.8 Prior to the [**] day of each month during the Term of this Agreement (the “Order Date”), Schein will provide MDS with one or more noncancellable delivery order(s) (a “Delivery Order” or “Delivery Orders”) for the MDS Products. Any Delivery Order provided to MDS after the [**] day of the month shall be deemed to have an Order Date on the [**] day of the subsequent month. The requested delivery date (“Due Date”) provided by Schein on each Delivery Order shall be not earlier than [**] days after the Order Date for all Products. Each Schein Delivery Order for delivery to each FOB Location (as hereinafter defined) shall conform to the per Code or per MDS Product quantity minimums and multiples stated in Exhibit B.

     Any Delivery Orders with a common Due Date, FOB Location and Manufacturing Location that cumulatively comprise less than the number of pallets required to comprise full container loads or truck loads as indicated in Exhibit B, shall be subject to freight cost premiums as quoted to Schein by MDS at the time the Delivery Order is accepted.

     4.9 MDS shall not be required to accept any Schein Delivery Orders with a common Order Date to the extent that the quantity of Codes in any Code Group so ordered exceeds [**] percent ([**]%) of the average monthly quantity ordered during the immediately preceding [**] months. If accepted, such excess quantities shall be deemed to have an Order Date on the [**] day of the next subsequent calendar month and shall remain subject to the provisions of this Section. If MDS reallocates any Schein Delivery Orders pursuant to this Section 4.9, it shall consult with Schein to determine which orders shall be reallocated to a future Order Date.

     Notwithstanding the foregoing, MDS shall be obligated to deliver MDS Products in excess of such [**]% if the Delivery

Orders for such excesses are for Codes to be sold by Schein to customers already purchasing such Codes from another MDS Contract Distributor, but only to the extent that the excesses in Delivery Orders are for such sales.

     4.10 To the extent Schein commences sale to any new customer with more than [**] hemodialysis patients and, as a result, Schein’s Delivery Orders to MDS increase significantly, MDS’s timely delivery of such increased quantities of MDS Products shall not be subject to the provisions of Section 8.5. In such a circumstance, however, MDS will use reasonable commercial efforts to fulfill all of Schein’s requirements as soon as commercially possible.

     4.11 Notwithstanding the foregoing, during the final [**] months of this Agreement as determined in accordance with Section 2.1 hereof, MDS shall not be obligated to accept Delivery Orders to the extent that they cumulatively exceed [**]% of the cumulative quantity of MDS Products ordered pursuant to Delivery Orders placed in the immediately preceding [**] month period.

     4.12 In the event that either Schein or MDS determines that [**], Schein and MDS shall [**]. In the event that Schein and MDS agree on a [**], MDS and Schein shall [**] agree to a [**] which will include such [**]; provided, however, that Schein [**] to the extent of [**]. As of the Effective Date, all [**] under any previous agreement between MDS and Schein are [**], and new [**] may be [**]. All [**]. The [**] will be [**] as reasonably possible

based on [**].

     MDS shall be [**] including but not limited to; [**].

     4.13 By the [**] day of each month during the Term of this Agreement, Schein shall provide MDS with a non-binding forecast of the quantity of each Code Schein estimates it shall place orders for during the following [**] months. These forecast figures will be e-mailed to the Marketing Services Manager [**].

     By the [**] day of each month, Schein shall also provide Schein end-user sales information to MDS from the previous month, including MDS Product sales across all Schein divisions. Such sales information shall include; the Code, quantity, end-user name, end-user city and end-user state. By the [**] day of each month, Schein shall also provide its ending inventory information from the previous month to MDS, including inventory amounts across all Schein divisions, by Code and warehouse.

   5.0 SHIPMENT OF MDS PRODUCTS

     5.1 MDS will ship the MDS Products, freight and insurance paid, to the F.O.B. location specified on Schein’s Delivery Order (“F.O.B. Location”) at the prices listed in Exhibit D, provided however, Schein shall only specify F.O.B. Locations listed in Exhibit D. MDS and Schein may agree to add new F.O.B. Locations at any time provided the prices for delivery to such F.O.B. Locations shall be added by amendment to Exhibit D, signed pursuant to Section 18.3 hereof.

     5.2 MDS shall prepare and send by facsimile transmission or via e-mail to Schein a packing list for each shipment of MDS Products. This shipping information will include Schein’s specific purchase order number, item shipping quantities, and item back order information. When MDS has the necessary systems and procedures in place, the packing slip will also accompany

the shipment to avoid loss of missing faxes and to reduce the chance of mismatching the paper to the shipment.

     5.3 MDS shall notify Schein as soon as MDS becomes aware that any shipment may not be delivered within a period commencing [**] days prior to the Due Date and ending [**] days after the Due Date applicable to a Delivery Order, such period being hereinafter referred to as the “Delivery Window”. Except as set forth in Section 8.1, if MDS is delinquent with Delivery Orders properly placed by Schein and accepted by MDS in accordance with the terms of this Agreement, and as a result, to the degree that Schein has insufficient MDS Products to ship to its customer in its customary manner and at customary prices, MDS will be responsible for incremental freight costs including all priority and cross shipping charges associated with MDS delayed order fulfillment provided that the proper documentation of such incremental charges is produced, with prior written authorization by MDS, of which such authorization shall not be unreasonably withheld.

     5.4 Schein will notify MDS in writing of any receiving discrepancy (over, short or patently damaged), within [**] business days of receipt of such delivery. Schein hereby agrees to hold the relevant part (over, short or patently damaged) intact pending resolution by MDS. At the time of receipt of MDS Products by Schein, any damage, shortage or overage noted at that time must be noted by Schein on the Bill of Lading. Credit will be issued only upon MDS’ verification of such damage, shortage or overage, which verification shall not be unreasonably with-held. MDS hereby agrees to arrange verification and to provide a disposition of such receiving discrepancy within [**] business days from receipt of such notice. In the event of a receiving discrepancy, for the purpose of Section 7.1, MDS’s invoice shall be deemed to be dated on the date MDS provides the disposition.

     5.5 Schein accepts MDS’s standard packaging and palletizing methods. MDS will examine proposals to modify the palletizing methods as requested by Schein, and provided these modifications are approved by MDS, Schein agrees to pay any additional costs and to accept responsibility for any damage related to the new packaging methods. MDS will use reasonable best efforts to revisit its pallet size and work to conform to the Schein rack height configurations.

   6.0 PRICES

     6.1 During [**] of this Agreement, MDS will sell the Codes meeting the Specifications set forth in Exhibit C to Schein, and Schein agrees to buy the MDS Products from MDS at the base prices and at F.O.B. Locations listed in Exhibit D (“Base Prices”). MDS makes no commitment to provide any Code at these Base Prices beyond [**] of this Agreement. Any price increase for [**] shall be limited to MDS’ increased costs of goods sold. MDS shall notify Schein of the prices for the second Contract Year [**] months after the Effective Date.

     6.2 [**] months prior to the end of the initial two year Term of this Agreement, and [**] months prior to the end of the last year of any extension of the Term of this Agreement, MDS may submit to Schein a written proposal for a revised Exhibit D which, if submitted, shall set forth MDS’ proposed prices for MDS Products applicable during the next term of this Agreement, subject to the other terms and conditions of this Agreement, if the parties agree to extend this Agreement.

     6.3 The quantity prices listed in Exhibit D are set forth on the basis of the total quantity of Delivery Orders placed during each Contract Year for Codes. Prices include all United States import duties, clearing charges, and freight up to the F.O.B. Location designated.

     6.4 It is expressly agreed that Base Prices for the MDS Products include delivery in full trailer load or container load quantities to each F.O.B. Location, by ocean freight or least cost overland method. Premiums for (i) air freight, (ii) LTL shipments, (iii) expedited delivery, (iv) shipments of partial orders, or (v) other unusual or extra transportation expenses, if authorized in advance by Schein in writing, (“Premiums”) will be invoiced to Schein.

     6.5 Schein will qualify for an additional [**]% discount (“Additional Discount”) from MDS, provided their Net Purchases (as hereinafter defined) from MDS are greater than $[**] over the most recent [**]-month period. If Schein does qualify for such Additional Discount, the Additional Discount will be calculated at the conclusion of each calendar quarter, and shall be credited to Schein within 30 days of the end of the calendar quarter. Net Purchases are equal to the dollar amount invoiced by MDS to Schein, less all credits and discounts, including but not limited to all product returns, [**] and quick-pay discounts. MDS and Schein agree that should a change occur within section 4.6 of this Agreement with respect to a dialysis specialty customer, and as a result of such change the amount of

MDS Products that Schein is purchasing would materially increase, the companies agree to adjust the Net Purchases requirement of $[**] to a new figure mutually agreeable to both companies.

   7.0 PAYMENT

     7.1 The terms of payment for the MDS Products purchased by Schein under this Agreement shall be [**] days [**] from MDS’s invoice date, as determined by the date of collected funds receipt of wire transfer or ACH transfer to MDS’ designated financial institution. Any amounts not paid within [**] days from the invoice date shall be subject to a service charge until paid, in an amount equal to [**]% per month. Such service charge shall be computed on the last working day of the calendar month, on a pro rata basis if applicable, for invoices [**] days old or more. In addition, if full payment including service charge is not received by MDS within [**] days from MDS’s invoice date MDS may restrict weekly sales to Schein to a dollar amount equal to the payments received from Schein in the previous week. If full payment is not received by MDS within [**] days of MDS’s invoice date Schein shall be considered to be in material breach of this Agreement and subject to Section 14.1.

     MDS may invoice Schein upon email notification to Schein that MDS Products are available for carrier pickup at the FOB location listed in Exhibit D.

     7.2 All Schein payments are to be made by either wire transfer or ACH transfer and remitted to the financial institution designated by MDS to receive such payments.

   8.0 DELAYED AND REPLACEMENT PRODUCTS

     8.1 MDS assumes no liability and shall not be liable to Schein for any failure to fill or delay in filling Delivery Orders received from Schein to the extent such failure or delay results from strikes, lockouts, or any other labor troubles, floods, fires, accidents, delays in the delivery of raw materials, parts or completed merchandise by the supplier thereof or any cause beyond the control of or occurring without the fault of MDS. In the event of any delay caused by any of the above, MDS shall use commercially reasonable best efforts to fulfill Schein’s orders in a timely fashion, provided, however, that in the event of a shortage of available MDS Products, whether resulting from market conditions, manufacturing

constraints, FDA action against any company or otherwise, MDS may allocate supply between Schein and other MDS customers at its discretion, but will use commercially reasonable best efforts to allocate in reasonable proportion to Schein’s market share, as compared to the total market size. MDS shall notify Schein promptly if it anticipates any potential delay in the filling of any of Schein’s Delivery Orders caused by any of the above.

     In the event an FDA action against any company results in a reduction of [**]% or more in the overall market supply within the Territory of any product type (AVF, BTL, etc.) MDS may allocate supply of MDS Products within such product type to any customer or distributor at its discretion without regard to the provisions of Sections 4.5, 4.6 or 4.7.

     8.2 Schein assumes no liability and shall not be liable to MDS for any failure to place Delivery Orders to the extent that such failure is because of strikes, lockouts, or any other labor troubles, floods, fires, accidents, or any cause beyond the control of or occurring without the fault of Schein.

     8.3 Notwithstanding Section 4.3, Schein may be relieved of its commitment to purchase Exclusive Products only from MDS, in whole or in part, at Schein’s option, should MDS be in material breach of this Agreement, if such breach remains uncured [**] days after MDS receives notice from Schein of such breach.

     8.4 Notwithstanding Sections 4.3 and 4.8 Schein may, at its option, be relieved of its obligations with respect to any specific Delivery Order, in whole or in part, at Schein’s option, should a delay caused by an event described in Section 8.1 occur, if such delay is uncured within [**] days after the Delivery Window of such Delivery Order. To the extent MDS is unable to deliver within [**] days after the Delivery Window applicable to any Delivery Order MDS Products delayed by an event described in Section 8.1, Schein may purchase replacement Products from others.

     8.5 Except as set forth in Sections 4.8 and 8.1, if MDS is unable to deliver MDS Products during the Delivery Window applicable to a Schein Delivery Order, or MDS replaces MDS Products pursuant to sections 11.3, 13.2 or 16.1, MDS will deliver or replace the MDS Products as soon as possible, on an expedited basis (via air freight, exclusive use truck, overtime customs clearance or similar means) at MDS’ expense if requested by Schein.

     8.6 To the extent MDS is unable to deliver MDS Products within [**] days of the Delivery Window applicable to a Schein Delivery Order, Schein may, at its option, purchase Products from other suppliers to meet its immediate needs. Schein also reserves the right to cancel outstanding orders if the [**] day Delivery Window is not met, up to the amount of orders not delivered to Schein within the Delivery Window.

     8.7 To the extent that Schein, pursuant to Sections 8.6, 10.1, 12.1 or 16.1, but not Section 8.1, purchases replacement products from others, which are documented to be not of MDS origin and more expensive than the relevant MDS Products, MDS shall credit Schein a portion of the cost of such replacement products up to [**]% of the applicable price of the MDS Products which were replaced or the cost of the replacement products, whichever is less, provided that Schein supplies MDS with copies of such orders and the invoices related thereto. To the extent Schein purchases and is credited for such replacement or fill-in products from others, it shall be relieved of its obligation to take delivery of and pay for equivalent quantities of MDS Products pursuant to Delivery Orders.

     8.8 Schein and MDS will make a cooperative effort to evaluate and implement supply chain improvement opportunities, as mutually agreed upon.

     8.9 To the degree that Schein has Obsolete Inventory or Excess Inventory (as hereinafter defined) and Schein advises MDS of such Product inventory, Schein and MDS will make reasonable cooperative efforts to transfer to other MDS Contract Distributors; return to MDS; or promote to Schein’s customers at a reduced price. Products that are no longer sold by MDS as a Code or specification (“Obsolete Inventory”) or Products considered by Schein to be at inventory levels greater than sales projections (“Excess Inventory”) may be requested for return to MDS, up to a maximum MDS invoice value of $[**] per calendar quarter (“Quarterly Credit”) without carryover of such Quarterly Credit, provided that any such Products returned to MDS are no older than [**] months after Sterilization Date and provided further that if MDS notifies Schein (in a form substantially similar to Exhibit I) that Schein is placing an order for Products that MDS reasonably believes will become Obsolete Inventory or considered Excess Inventory by Schein before such product can be sold, and notwithstanding such advice Schein refuses to revise such orders within [**] business days, and orders such volume, MDS will not accept the return of such Products. Schein must submit in writing any potential Quarterly Credit, within the calendar quarter, or it cannot be submitted

for that quarter. MDS shall have the right to resell such returned Products to any party that it wishes to, including any Med/Surg Distributor. In addition, any approved returns pursuant to section 11.3 of this Agreement will not be included in the Quarterly Credit.

     MDS must receive any such qualified returned Products at MDS’ specified location within [**] days after providing written return authorization to Schein, or such return shall be disallowed.

     8.10 [**] each calendar quarter, Schein shall conduct a physical inventory review of all MDS Products at all Schein warehouses for the purpose of determining any inventory greater than [**] months and [**] months old based upon the lot number. Schein shall report to MDS each such Code, lot, quantity and location. Schein shall prioritize all MDS Products over [**] months old for early shipment. Schein shall manage all MDS Products [**] months old in a high priority fashion for immediate shipment to the next order, or in accordance with Section 8.9 if applicable.

   9.0 MDS PRODUCT CHANGES AND NEW MDS PRODUCTS

     9.1 During the Term of this Agreement, MDS shall offer, on a non-exclusive basis, to incorporate into the MDS Products any clinical use enhancements or developments or new MDS BTL or MDS AVF that MDS designs, which enhancements, developments or products MDS controls, such enhancements being subject to prior sale, exclusive license or exclusive contract.

     9.2 If Schein agrees in writing to accept any such enhancement or development or new MDS BTL or MDS AVF, and the parties agree in writing on any price adjustment made necessary or possible by such enhancement or development, Exhibits B, C and D shall be amended to incorporate such changes. Notwithstanding the above, MDS reserves the right to incorporate clinical use enhancements or developments in MDS Products as described herein, in accordance only with Section 9.3, provided that no price increase is requested by MDS.

     9.3 MDS shall notify Schein in writing, using the “Vendor Notice of Change” form attached as Exhibit F, at least [**] days prior to any substantial change in design of the MDS Products, components of the MDS Products or packaging which may necessitate in-servicing or notification to end-users.