SUPPLY AGREEMENT

EXHIBIT 10.21

[NOTE: CERTAIN PORTIONS OF THIS DOCUMENT HAVE BEEN MARKED TO INDICATE THAT CONFIDENTIAL INFORMATION HAS BEEN OMITTED. CONFIDENTIALITY HAS BEEN REQUESTED FOR THIS CONFIDENTIAL INFORMATION. THE CONFIDENTIAL PORTIONS HAVE BEEN PROVIDED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION]

SUPPLY AGREEMENT

     THIS SUPPLY AGREEMENT (the “ Agreement ”) is made and entered into as of July 21, 2003 (the “ Effective Date ”) between VOLCANO THERAPEUTICS, INC. (as defined below, “ Volcano ” or “ Supplier ”), a Delaware corporation, and AVE GALWAY LIMITED (as defined below, “ Medtronic ”), a corporation existing under the laws of the Republic of Ireland.

RECITALS

     WHEREAS, Volcano has acquired substantially all of the assets associated with the functional measurement and IVUS businesses of JOMED, Inc. and its affiliates (the “ JOMED Acquisition ”);

     WHEREAS, Volcano and Medtronic are simultaneously entering into a License Agreement (the “ License Agreement ”), an Option to Distribute Agreement and a Right of First Negotiation and First Refusal Agreement and a financing agreement pursuant to which Medtronic will purchase Series B Preferred Stock of Volcano; and

WHEREAS, Supplier desires to manufacture and supply Products (as defined below) to Medtronic, and Medtronic desires to purchase Products from Supplier, all in accordance with the terms of this Agreement;

AGREEMENTS

     NOW THEREFORE, in consideration of the representations, warranties, covenants and agreements contained herein, and for other valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties mutually agree as follows:

ARTICLE 1
DEFINITIONS

     1.1 Specific Definitions . As used in this Agreement, the following terms shall have the meanings set forth or as referenced below:

     “ Adverse Event ” means injury, toxicity or sensitivity reaction associated with the use of the Product.

     “ Affiliate ” of a specified person (natural or juridical) means a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified. “Control” shall mean ownership of more than 50% of the shares of stock entitled to vote for the election of directors in the case of a corporation, and more than 50% of the voting power in the case of a business entity other than a corporation.

     “ Agreement ” means this Agreement and all Exhibits and Schedules hereto.

     “ Confidential Information ” means any written or tangible information of one of the parties (the “ disclosing party ”) which is disclosed to the other party (the “ receiving party ”) that is not generally known to the public that is marked or identified as “Confidential,” “Proprietary” or the like, including, without limitation, trade secrets and know-how, but excluding information which:

     (a) was already in the possession of or known by the receiving party prior to its receipt from the disclosing party;

     (b) is or becomes part of the public domain by reason of acts not attributable to the receiving party;

     (c) is or becomes available to receiving party from a source other than the disclosing party which source, has rightfully obtained such information and has no obligation of non-disclosure or confidentiality to the disclosing party with respect thereto;

     (d) has been independently developed by the receiving party without breach of this Agreement or use of any Confidential Information of the other party; or

     (e) has been or must be publicly disclosed by reason of legal, accounting or regulatory requirements beyond the reasonable control of the receiving party provided the receiving party provides the disclosing party notice of the intended disclosure in order for the disclosing party to take such action it deems appropriate to protect the confidentiality of the information to be disclosed.

     “ FDA ” means the United States Food and Drug Administration.

     “ Force Majeure ” means any event or condition, not existing as of the date of this Agreement, not reasonably foreseeable as of such date and not reasonably within the control of either party, which prevents in whole or in material part the performance by one of the parties of its obligations hereunder, such as an act of government, war or related actions, civil insurrection, riot, sabotage, strike, epidemic, fire, flood, windstorm, and similar events.

     “ GMP ” means Good Manufacturing Practices as defined in 21 CFR Parts 210 through 226 and Parts 600 through 680 and any successor provisions thereof that apply to production of the Products under this Agreement.

     “ Manufacturing Cost ” means Supplier’s actual cost of raw materials, parts and sub assemblies, direct labor and all related expenses incurred in the direct support of manufacturing including but not limited to facilities including rent, utilities and property taxes, equipment maintenance and depreciation, manufacturing engineering support, quality and control support, including any testing requested by Medtronic, production planning and material warehousing, and product volume-based fees and royalties payable under the Philips Technology and product volume-based fees and royalties related to Supplier’s Trak Back product (disposable micro motor device). To the extent that Supplier is obligated to pay any other license fees or royalties pursuant to licenses executed after the Effective Date in connection with the manufacture of the

Product, Supplier shall promptly notify Medtronic and the parties shall negotiate in good faith an adjustment, if any, to the Manufacturing Cost. Such costs and expenses shall be consistently applied and shall be determined and allocated in a manner consistent with generally accepted accounting principles in effect in the United States from time to time. Manufacturing Cost shall exclude any cost or expenses paid by Medtronic and expenses related to (i) research and development, (ii) marketing and sales, and (iii) finance, legal and other general corporate overhead.

     “ Medtronic ” means AVE Galway Limited and its Affiliates.

     “ Medtronic Products ” means any and all Medtronic products incorporating Product.

     “ Philips Technology ” shall have the meaning assigned to such term in the License Agreement.

     “ Product ” means phased-array based transducers, transducer subassemblies and other IVUS related accessories and components (other than consoles) currently produced by Volcano or acquired in the JOMED Acquisition, and as improved or modified by Volcano in the future; provided, however, that any transducer, transducer subassembly or other accessory or component that is covered by the Philips Technology will constitute a “Product” hereunder to the extent, but only to the extent, that (i) the license grant in Section 2.2(a) of the License Agreement becomes effective with respect to such Philips Technology pursuant to the terms and conditions of Section 2.2(a), (c) and (d) of the License Agreement or (ii) Medtronic has been granted a license to such Philips Technology pursuant to the terms and condition of Section 2.2(b) of the License Agreement, as limited by Sections 2.2(c) and (d) of the License Agreement.

     “ Product Liability Damages ” means any liability, claim or expense, including but not limited to reasonable attorneys’ fees and medical expenses, arising in whole or in part out of claims of third parties for personal injury or loss of or damage to property relating to or arising out of the Products or Medtronic Products, whether based on strict liability in tort, negligent manufacture of product, or any other allegation of liability arising from the design, testing, manufacture, packaging, labeling (including instructions for use), or sale of the Products and/or Medtronic Products.

     “ Specifications ” means the specifications of the Product as in effect from time to time, as determined by Volcano in accordance with this Agreement.

     “ Supplier ” or “ Volcano ” means Volcano Therapeutics, Inc. and its Affiliates.

     1.2 Other Terms . Other terms may be defined elsewhere in the text of this Agreement and shall have the meaning indicated throughout this Agreement.

     1.3 Definitional Provisions .

     (a) The words “hereof,” “herein,” and “hereunder” and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole and not to any particular provisions of this Agreement.

     (b) The terms defined in the singular shall have a comparable meaning when used in the plural, and vice versa.

     (c) References to an “Exhibit” or to a “Schedule” are, unless otherwise specified, to one of the Exhibits or Schedules attached to or referenced in this Agreement, and references to an “Article” or a “Section” are, unless otherwise specified, to one of the Articles or Sections of this Agreement.

     (d) The term “person” includes any individual, partnership, joint venture, corporation, trust, unincorporated organization or government or any department or agency thereof.

ARTICLE 2
SUPPLY

     2.1 Supply of Products . Supplier shall manufacture and supply the quantities of Products ordered by Medtronic pursuant to Article 3 below, in accordance with the Specifications in effect at the time of order for each Product.

     2.2 Promotion and Training . Upon the reasonable request by Medtronic, Supplier will assist Medtronic in preparing promotional, marketing and training literature and instructions for the Products’ functionality within the Medtronic Products, including any artwork, and will conduct training courses and seminars to educate medical professionals and Medtronic personnel with respect to the Products’ functionality and use with the Medtronic Products. Further, upon the reasonable request of Medtronic, Supplier shall provide training to Medtronic personnel with respect to final testing of the Products after such Products have been incorporated into or combined with a Medtronic Product. Medtronic shall pay Supplier a reasonable and customary per diem rate for each Volcano employee providing services to Medtronic pursuant to this Section 2.2, provided that such services are not otherwise required under the License Agreement to be provided by Volcano to Medtronic. Further, Medtronic shall reimburse Supplier for travel, direct and indirect costs, and other out-of-pocket costs reasonably incurred by Supplier in connection with such training upon submission by Supplier of appropriate documentation thereof.

     2.3 Packaging and Labeling . Supplier shall package and label the Products in accordance with the Specifications and applicable regulatory requirements. Upon Medtronic’s submission of its first Purchase Order, Medtronic shall to provide Supplier with a list of all countries in which it anticipates marketing Medtronic Product and, in the event Medtronic adds a country to said list, the addition of such new country shall be made at the time the next Purchase Order is submitted. Medtronic further agrees that in each Purchase Order it shall identify the country Medtronic anticipates to sell or market the Medtronic Product. Notwithstanding anything to the contrary in this Section 2.3, in the event Medtronic fails to provide Supplier with such initial list or fails to identify in any Purchase Order the country (or countries) Medtronic Product shall be sold or marketed, Supplier shall label the Product for sale in the United States of America.

     2.4 Compliance With Laws and Regulations .

     (a) Supplier shall be responsible for compliance with the applicable statutes, laws, ordinances and regulations of national, federal, state and local governments that relate to its manufacture and sale of the Products.

     (b) Medtronic shall be responsible for compliance with the applicable statutes, laws, ordinances and regulations of national, federal, state and local governments that relate to its marketing, distribution and sale of the Medtronic Products, including applicable import and export laws.

     2.5 Complaints and Adverse Events . Each party agrees to inform the other party promptly (but in no event more than forty-eight (48) hours after becoming aware of same) of any information concerning any complaint involving the Products or that might be applicable to the Products, or an Adverse Event, provided that:

(a) all notifications to Medtronic shall be by facsimile and on Medtronic’s designated adverse event forms (attached hereto as Schedule 2.5(a) ); and

(b) all notifications to Supplier shall be by facsimile and on Supplier’s designated adverse event forms (attached hereto as Schedule 2.5(b) ).

     2.6 Recall .

     (a) In the event that Medtronic is required by any regulatory agency to recall Medtronic Products or if Medtronic voluntarily initiates a recall of Medtronic Products, and in either case such recall is due primarily as a result of a breach of any of the warranties under Section 5.1, Supplier shall bear the direct costs of such recall, including shipping costs related to returning recalled Medtronic Products to Medtronic and replacing Products to Medtronic for replacement of the Products incorporated into the recalled Medtronic Products. The cost and expense of recalls of Medtronic Products not due primarily as a result of a breach of Supplier’s warranties under Section 5.1 shall be borne by Medtronic.

     (b) Medtronic will control all recalls of Medtronic Product and Supplier will cooperate with and assist Medtronic in effecting any recalls due in whole or in part to Supplier’s breach of any of the warranties under Section 5.1, including assisting Medtronic in determining the information and instructions to be transmitted by Medtronic to purchasers of the Medtronic Products in connection with a recall.

     2.7 Certain Responsibilities . Notwithstanding anything contained herein, Supplier shall not be responsible for any loss or damage , including Products Liability Damages, from the use or performance of the Products manufactured under this Agreement where (a) such loss or damage did not arise out of or is not related to a breach of this Agreement by Supplier, including, without limitation, Supplier’s warranties and (b) the Products complied with Specifications.

ARTICLE 3
FORECASTS, ORDERS AND DELIVERY

     3.1 Forecasts . On the last day of each calendar month during the Term, Medtronic shall provide Supplier with a twelve-month rolling forecast of Medtronic’s good faith estimate of its Product requirements for the following twelve months. Except as set forth in this Section 3.1 and in Section 3.2, such forecasts are not firm commitments by Medtronic to order or purchase Products, but are provided only as a guide to assist Supplier in scheduling production. Notwithstanding the foregoing, such forecasts shall, in accordance with Section 3.2, become binding and firm with respect to any given month (a “ Binding Month ”) 60 days prior to the beginning of such month (the “ Binding Date ”). With respect to any month, such forecast may be modified at any time prior to the Binding Date with respect to such month.

     3.2 Purchase Orders . Medtronic shall submit on or before each Binding Date a firm purchase order (a “ Purchase Order ”) setting forth (i) the quantity of Product to be purchased during the Binding Month, (ii) the delivery date of Product, which date shall not be less than 90 days after the date of the Purchase Order, and (iii) delivery destination for the Products and freight arrangements for Product, provided that if Medtronic does not issue such Purchase Order on or before a Binding Date, the most recently delivered forecast for the Binding Month (provided such forecast is delivered prior to the Binding Date) shall be deemed a binding Purchase Order as of the respective Binding Date for the quantity amount. Each Purchase Order shall give rise to a contract between Medtronic and Supplier for the purchase and sale of the Products ordered and shall be subject to and governed by the terms of this Agreement. The terms and conditions of this Agreement shall so govern and supersede any additional or contrary terms set forth in Medtronic’s Purchase Order or any Supplier or Medtronic acceptance, confirmation, invoice or other document unless duly signed by an authorized officer of Medtronic and of Supplier and expressly stating and identifying which specific additional or contrary terms shall supersede the terms and conditions of this Agreement. With respect to all Purchase Orders submitted at least ninety (90) days in advance of the earliest scheduled delivery date set forth in such Purchase Order, Supplier shall fill such orders in accordance with the scheduled delivery dates set forth therein, provided that the quantity of Product ordered pursuant to such Purchase Order is not more than 120% of the quantity forecasted for the applicable period in the most current forecast. Any amount in excess of 120% of such forecasted quantity shall be filled by Supplier on a commercially reasonable basis.

     3.3 Modification of Orders . No Purchase Order shall be modified or canceled except upon the mutual agreement of the parties; provided, however, that Medtronic may cancel a Purchase Order based upon actions of a regulatory authority and Medtronic may make changes to a Purchase Order in quantities that do not exceed 10% more or less of such outstanding Purchase Order, provided that Medtronic will reimburse Supplier for costs incurred on any such cancelled orders to the extent Supplier is not able to recover its costs actually incurred in connection therewith and provided further that Medtronic gives Supplier at least 30 days notice prior to the delivery date specified in such Purchase Order of any modification to the Purchase Order. Mutually agreed change orders shall be subject to all provisions of this Agreement, whether or not the change order so states. Notwithstanding the foregoing, any Purchase Order

may be cancelled by Medtronic, without any liability to Medtronic, as to any Product that is not delivered within three (3) business days after the delivery date specified by Medtronic, and any such cancellation shall not limit or affect any contract remedies available to Medtronic with respect thereto, provided that a partial delivery of a Purchase Order that does not deviate from the quantities ordered by more than 7.5% shall not be subject to such cancellation and Medtronic’s sole remedy with respect to such shortage is Supplier’s delivery of the shortfall amount within five (5) business days after the delivery date set forth in the Purchase Order and the shipping charges for the shortfall amount shall be at Supplier’s cost. Any such cancellation by Medtronic must be by written notice to Supplier given within ten (10) business days after such three (3) business day period.

     3.4 Delivery Terms . Unless otherwise agreed in writing by Medtronic and Supplier, delivery of Products will be FCA Supplier’s facility (per Incoterms 2000), and title and risk of loss will pass from Supplier to Medtronic when Products are tendered for shipment as directed by Medtronic. Medtronic shall be responsible for all shipping, handling, and insurance costs.

     3.5 Product Changes; Continuity of Supply; Prototypes .

     (a) Change in Specifications and Continuity of Supply . Volcano shall have the right to modify the Specifications at anytime and from time to time; provided, however , that Volcano will use commercially reasonable efforts so that any modified Specifications or Product will continue to be compatible with Medtronic Products; provided, further , that in the event Supplier determines to modify any Product, Supplier shall provide Medtronic with prompt written notice of such proposed modification so as to allow Medtronic the reasonable opportunity to modify the Medtronic Products, at Medtronic’s expense. To the extent that Medtronic chooses not to modify the Medtronic Product or is unable to modify the Medtronic Product to become compatible with the modified Product, Volcano agrees that it will continue to supply such Product without such modification (such unmodified Product, the “ Unmodified Product ”) for the remainder of the Term of this Agreement. Medtronic shall continue to forecast and order the Unmodified Product in accordance with Section 3.1 and 3.2 above, and Volcano shall supply such Unmodified Products in accordance with Section 2.1 above.

     (b) Product Changes Requested by Medtronic . Upon written notice, Medtronic may request that Supplier make commercially reasonable modifications to the Specifications, and Volcano shall make such modifications to the Specifications, provided however , that Supplier shall not have any obligation to make any requested changes which are substantial or fundamental to the transducer portion of any Product unless Supplier, in its reasonable determination, agrees to make such modifications.

     (c) Adjustment in Transfer Price . If any modification to the Specifications made pursuant to Section 3.5(a) or (b) above results in a change in the Manufacturing Cost as shown by documentation provided by Supplier, the parties shall agree upon an appropriate corresponding adjustment to the Transfer Price for the Product; and if such modification result in a delay in delivery, the parties shall negotiate a reasonable extension of the affected lead times.

     (d) Prototype Units . Upon the reasonable request by Medtronic, Supplier shall meet with Medtronic to discuss the manufacture for Medtronic prototype units of a proposed Product. Supplier agrees to manufacture such prototype unit, provided that such prototype unit does not require any substantial or fundamental change to the transducer portion of any Product. Supplier shall manufacture multiple copies of the prototype units in order for Medtronic to verify design concepts. The number of prototypes that Supplier will deliver to Medtronic shall be as reasonably requested by Medtronic and pursuant to specifications reasonably requested by Medtronic. The cost of such prototypes shall be as determined under the definition of “ Manufacturing Cost ” and pursuant to paragraph 3 of Exhibit A hereto. Once prototypes are completed and can be provided on a commercially reasonable basis, such prototypes shall be considered “Products” hereunder, and any modifications (including modifications to hardware, software or mechanical features incorporated therein or associated therewith) required as a result of further testing will be done in accordance with the terms hereof.

     (e) Supplier shall provide to Medtronic upon request all Specifications for the Product.

ARTICLE 4
PRICES AND PAYMENTS

     4.1 Prices .

     (a) Unless and until otherwise mutually agreed by the parties in writing, the purchase price for Product manufactured by Supplier for Medtronic under this Agreement (the “ Transfer Price ”) shall be determined under the definition of “ Manufacturing Cost ” and Exhibit A .

     (b) Supplier will use commercially reasonable efforts to minimize the Manufacturing Cost of all Products.

     4.2 Payment Terms . Payments made by Medtronic for Products purchased hereunder shall be due and payable in full within 30 days after the date of invoice by Supplier, which date of invoice shall be no earlier than the date of delivery of such Products.

     4.3 Taxes . The Transfer Price does not include any sales, use, value added or similar taxes, customs, duties, or tariffs imposed by any governmental authority or agency on Products or any components thereof that are imported by Medtronic into any country, and Medtronic shall bear all such taxes and duties (other than taxes on the net income of Supplier). Supplier shall be required to take appropriate steps to minimize imposition of such taxes by filing sales exemption certificates and taking similar actions where applicable to the Supplier. When Supplier has the legal obligation to collect and/or pay such taxes, the appropriate amount shall be added to Medtronic’s invoice and paid by Medtronic, unless Medtronic provides Supplier with a valid tax exemption certificate authorized by the appropriate taxing authority. Notwithstanding the foregoing, Medtronic shall not be obligated to pay or reimburse Supplier for taxes, duties or

tariffs that are not imposed on the sale of Product to Medtronic or taxes related to the net income of the Supplier.

ARTICLE 5
WARRANTY AND SERVICE

     5.1 Warranty . Supplier represents and warrants to Medtronic that:

     (a) All Products sold under this Agreement will have been manufactured, labeled and packaged in accordance with all applicable laws and regulations, including (as applicable) FDA GMP requirements and, if applicable, ISO 9001 certifications, or successor requirements, and all other applicable manufacturing requirements, as well as the Specifications;

     (b) Supplier has or will have (through contracting with third parties) the facilities, equipment, licenses, permits and personnel to manufacture and supply the Products in accordance with Specifications and in compliance with applicable laws and regulations; and

     (c) The Product, at the time of delivery to Medtronic, shall: (i) meet the Specifications and warranties set forth herein; (ii) be free from defects in materials and workmanship; and (iii) not be adulterated or misbranded within the meaning of the U.S. Food, Drug and Cosmetic Act and regulations thereunder or any similar law or regulation.

     (d) EXCEPT AS EXPRESSLY PROVIDED IN THIS SECTION 5.1 OR AS EXPRESSLY PROVIDED ELSEWHERE IN THIS AGREEMENT, SUPPLIER MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE PRODUCT, AND SUPPLIER HEREBY EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE.

     5.2 Intentionally Left Blank .

     5.3 Non-Conforming Product