SPAN AMERICA MEDICAL SYSTEMS INC
PRODUCTION, MKTG & PRODUCT DEV. SUPPORT AGRMT
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>4
<FILENAME>exhibit10-206302002.txt
<DESCRIPTION>PRODUCTION, MKTG & PRODUCT DEV. SUPPORT AGRMT
<TEXT>
                                  Exhibit 10.2
                                  ------------

         PRODUCTION, MARKETING AND PRODUCT DEVELOPMENT SUPPORT AGREEMENT

         This Production,  Marketing and Product  Development  Support Agreement
(this  "Agreement") is made as of February 1, 2002, by and between  Span-America
Medical  Systems,  Inc., a South Carolina  corporation  ("Company"),  and VADUS,
Inc., a Delaware corporation ("VADUS").

                                    RECITALS

A.       Company is engaged in the medical supply business.

B.       VADUS  has  been   engaged  in  the   medical   product   development,
         manufacturing  and  marketing  business and has  acquired  significant
         experience and expertise in such areas.

C.       Pursuant to that certain Asset Purchase  Agreement  between Company and
         VADUS of even date (the  "Purchase  Agreement"),  Company is  acquiring
         certain assets of VADUS,  including tangible and intellectual  property
         associated with catheter products previously created,  manufactured and
         marketed by VADUS.

D.       Company  wishes to retain  VADUS to assist  Company  in the start up of
         operations  relating to the  production and marketing of products based
         on the assets acquired pursuant to the Purchase  Agreement and with the
         development of future products and VADUS wishes to provide Company with
         such services.

                                    AGREEMENT

         NOW,  THEREFORE,  in  consideration  of the  covenants  and  conditions
hereinafter set forth and for other good and valuable consideration, the receipt
and  adequacy of which are hereby  acknowledged,  the  parties,  intending to be
legally bound, agree as follows:

1.       Scope of Work

         VADUS will  perform the  consulting  services for Company or one of its
affiliated corporations  (together,  the "Company") described in Schedule 1 (the
"Services"),  as may from time to time be  requested  by the Company  during the
Term (as defined herein) of this Agreement.  For purposes of this Agreement, the
term "Field" shall mean  peripheral  intravenous  catheter  products,  including
peripherally inserted central catheter lines and arterial lines.

2.       Compensation

     a.  Fees.  As  compensation  for the  Services  performed  pursuant  to the
Agreement which relate to the Field,  Company will pay VADUS an annul fee in the
amounts set forth below,  which shall be paid in equal installments by the tenth
day of each month during the Term of this  Agreement,  and pro-rated for partial
months:

                i.       Year One - $200,000.00;
                ii.      Year Two - $175,000.00; and
                iii.     Year Three - $150,000.00.

     b.  Expenses.  Company shall  reimburse  VADUS for the  following  expenses
actually  incurred  in  connection  with  the  Services   furnished  under  this
Agreement:

               i. Reasonable travel expenses (not including  relocation expenses
               and normal daily working and commuting expenses);

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<PAGE>

                ii. Component materials required for the development of proto-
                type products as required  under  this  Agreement,   but  not
                including  standard laboratory  supplies;
                iii. Molds and other tooling  required for the development of
                proto-type products;  and
                iv. Technician labor required for the production of proto-type
                products.

All such  expenses  must be  authorized  in advance by  Company,  except for the
travel related  expenses  identified in item i. of this Section 2.b. that do not
exceed $500.00 per trip in total.  The Company shall reimburse all such expenses
within fifteen days after receipt of written  invoices,  which invoices shall be
accompanied  by  supporting  documents  reasonably  satisfactory  to the Company
regarding all such expenses.  The parties agree that VADUS may incur expenses in
delivery of the Services other than those listed in this Section 2.b (the "Other
Expenses").  Company will not  reimburse  VADUS for any Other  Expenses,  unless
VADUS has obtained  prior  authorization  for such Other  Expenses from Company,
where such  authorization for such Other Expenses is solely in the discretion of
Company.

     c. Fees for Nonfield  Services.  For all Services rendered by VADUS that do
not relate to the Field ("Nonfield Services"), Company shall pay VADUS such fees
as VADUS and Company shall  negotiate and  memorialize  in writing  before VADUS
renders any such Nonfield Services.  Such Nonfield Services shall be provided on
a project basis.

3.       Manner of Performance

     a.  Experience;  Quality.  VADUS represents and warrants that VADUS has the
requisite  expertise,  ability,  and legal right to render the Services and will
perform the  Services  with care,  skill,  and  diligence,  in  accordance  with
applicable  industry  standards,  and shall be responsible for the  professional
quality,  technical  accuracy,  completeness,  and  coordination of all reports,
designs,  drawings,  plans,  information,  specifications,  and other  items and
services furnished under this Agreement.

     b.  Compliance with Laws.  VADUS shall comply with all applicable  federal,
state,  and local laws,  ordinances,  codes,  and  regulations in performing the
Services.

     c. Employees;  Key Personnel.  Each of VADUS' employees performing Services
will have the  expertise to perform  assigned  Services in an efficient  manner.
John Marano is considered the key person for this Agreement and shall commit his
full time efforts to providing the Services  during the Term of this  Agreement.
Substitutions for John Marano or substantial reductions in his performance shall
not be made without the prior written consent of Company.

     d.  Conduct on Company  Premises.  VADUS and  employees  of VADUS,  when on
Company's premises,  will comply with Company's policies with respect to conduct
of visitors.

4.      Confidentiality

     a. VADUS' Obligation. In the course of this relationship, it is anticipated
that  VADUS will learn  information  that  Company  regards as  confidential  or
proprietary  (collectively,   "Proprietary  Information").   Except  as  may  be
necessary in the ordinary  course of performing its duties under this Agreement,
VADUS will keep confidential all Proprietary Information which VADUS may acquire
with respect to Company's business,  including,  but not limited to, information
developed by VADUS in the course of performance of the Services and  information
relating  to  new  products,   customers,   pricing,  know-how,  processes,  and
practices.  Notwithstanding the foregoing, this Agreement shall not apply to any
disclosures  of Proprietary  Information  (i) which was known by VADUS prior the
date  hereof  as may be  established  by  prior  documentation;(ii)  which is or
becomes  generally  known to the  public  through  no fault of  VADUS;  (iii) is
subsequently  rightfully  obtained by VADUS from a third  party,  provided  said
third party did not derive such  information from VADUS or at VADUS' request and
is otherwise legally permitted to disclose such Proprietary Information; or (iv)
pursuant to any court  order or other  operation  of law. It is also  understood
that,  at all such times,  VADUS is free to use  information  that is  generally

                                      2

<PAGE>

known in the trade or  industry,  which is not gained as a result of a breach of
this Agreement.  VADUS will not disclose to others,  without Company's  consent,
the fact that it is acting on behalf  of  Company  and will not  publish  on the
subject of this consulting  relationship without the written consent of Company.
This undertaking to keep information  confidential  will survive the termination
of this Agreement.  VADUS will require each of its employees performing Services
to  execute  a  written  acknowledgement  of  and  consent  to be  bound  by the
obligations of confidentiality set forth in this Section 4.a. At the termination
of this  Agreement,  VADUS will return to Company all drawings,  specifications,
manuals, and other printed or reproduced material (including  information stored
on machine  readable  media) provided by Company to VADUS and all copies of such
information made by VADUS or its employees.

     b.  Company's  Obligation.  If Company does not exercise the right  granted
under  Section  5.b.,  any  confidential  or  proprietary  information  of VADUS
disclosed  or  otherwise  provided to Company  pursuant to Section  5.b. of this
Agreement ("VADUS  Information")  shall be held in confidence by the Company and
not disclosed to others or used by Company  without VADUS'  consent.  If Company
does not exercise the right granted  under Section 5.b,  Company shall return to
VADUS all VADUS  Information  related  to the  product  or  process  that is the
subject of right  granted  under  Section  5.b.  and not  exercised  by Company.
Notwithstanding the foregoing, this Agreement shall not apply to any disclosures
of VADUS Information (i) which was known by Company prior the date hereof as may
be established by prior  documentation;(ii)  which is or becomes generally known
to the public  through no fault of  Company;  (iii) is  subsequently  rightfully
obtained by Company from a third party, provided said third party did not derive
such information from Company or at Company's  request and is otherwise  legally
permitted  to disclose  such VADUS  Information;  or (iv)  pursuant to any court
order or other operation of law.


5.      Relationships with Others

     a.  Exclusivity.  During the term of this  Agreement and for one year after
its termination  date,  neither VADUS nor its employees  performing the Services
will perform  services in the area in which VADUS  actually has consulted  under
this  Agreement for any other entity  engaged in the  development,  manufacture,
distribution, or sale of (i) human or veterinary peripheral intravenous catheter
products or services,  (ii) products and services that compete with any products
or services of Company created or derived from the Services  rendered under this
Agreement, or (iii) products or services that would infringe any patent acquired
by Company under the Purchase Agreement or compete with any products or services
derived from such patents.

     b.  Right of First  Refusal.  VADUS has the right to develop  products  and
processes not included in Section 5.a. either for its benefit or for the benefit
of an  independent  third party paying value for such  products or process.  The
right to commercialize,  including manufacturing,  distribution and selling, all
such  products  and  processes  created  by  VADUS,  but  not  developed  for an
independent  third  party who is paying  VADUS fair  value for such  development
services,  shall first be offered in writing to Company  ("Offer  Notice")  upon
reduction  to  practice  by VADUS.  Such  Offer  Notice  shall be  delivered  as
described  in Section  11.c.  Company  shall have 120 days from  receipt of such
Offer Notice to exercise its right to  commercialize  such product or process by
giving VADUS written  Notice of exercise.  If Company  exercises the right,  the
parties shall negotiate the terms of commercialization in good faith. If Company
does not exercise the right or fails to negotiate in good faith,  VADUS shall be
free to pursue  commercialization of such products or processes,  subject to the
limitations of this Agreement.

6.      Independent  Contractor
     VADUS is an  independent  contractor,  not an employee or agent of Company.
Nothing in this Agreement shall render VADUS, or any of its agents or employees,
an employee or agent of Company, nor authorize or empower VADUS or its agents or
employees  to speak for,  represent,  or  obligate  Company in any way.  Company

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<PAGE>

recognizes  that VADUS  retains all the rights and  privileges  of an  employer,
including,  but  not  limited  to,  the  right  to  hire,  direct,   discipline,
compensate,  and terminate its employees assigned to the Company account.  VADUS
shall pay all wages,  salaries, and other amounts due its agents or employees in
connection  with this  Agreement  and shall be  responsible  for all reports and
obligations respecting them relating to social security, income tax withholding,
unemployment compensation, workers' compensation, and similar matters.

7.      Intellectual  Property

     a. Definition. In this Agreement,  "Intellectual Property" means all works,
including all ideas, inventions,  discoveries, and improvements,  whether or not
patentable;   literary  works,   pictorial,   graphic,   and  sculptural  works,
architectural  works,  works of visual  art,  and any other work that may be the
subject  matter of copyright  protection;  advertising  and marketing  concepts;
information;  data;  formulas;  designs;  models;  drawings;  computer programs;
including  all  documentation,  related  listings,  design  specifications,  and
flowcharts, trade secrets, and any inventions including all processes, machines,
manufactures  and compositions of matter and any other invention that may be the
subject matter of patent protection;  and all statutory  protection  obtained or
obtainable thereon.

     b.  Ownership;   Assignment.  Each  work  that  is  copyrightable  will  be
considered a work made for hire pursuant to the United States  Copyright Act, 17
U.S.C. ss.ss. 101 et seq., and the authorship and copyright of the work shall be
in  Company's  name to the extent  permitted  by law.  VADUS  hereby  assigns to
Company all worldwide right, title and interest in and to Intellectual  Property
created,  made,  conceived,  reduced to practice,  or authored by VADUS,  or any
persons  provided by VADUS  either  solely or jointly  with  others,  during the
performance  of the  Services  or with  the use of  information,  materials,  or
facilities  of Company  received  by VADUS  during  the term of this  Agreement.
Company shall be free to make,  have made,  use and sell products  utilizing the
Intellectual  Property  assigned  to  Company.  Notwithstanding  the  foregoing,
Company has obligations to pay royalties and other compensation to VADUS for use
of certain of the Intellectual Property that are independent of this Agreement.

     c.  Disclosure.  VADUS shall promptly  disclose to Company all Intellectual
Property in the Field created by VADUS during the term of this Agreement.

     d. Cooperation.  VADUS shall execute or cause to be executed, all documents
and perform such acts as may be  necessary,  useful or  convenient to secure for
Company statutory protection  throughout the world for all Intellectual Property
assigned to Company pursuant to this Section 7.

     e.  Evidence of  Assignment  by VADUS'  Employees.  VADUS shall  either (i)
provide  Company with a copy of a written  agreement  with each of its employees
prior to their  working  hereunder  through  which all  rights  to  Intellectual
Property created,  made, conceived,  reduced to practice, or authored by VADUS's
employee(s)  within the scope of employment by VADUS in the  performance of this
Agreement are owned by VADUS and thereby subject to the preceding assignment; or
(ii)  require  that the persons it provides to perform the  services  under this
Agreement shall execute an instrument  assigning such  Intellectual  Property to
Company  prior to  commencing  work under this  Agreement,  the form of which is
attached hereto as Exhibit B.

     f.  Disclosures  to  Company.  If during the term of this  Agreement  VADUS
discloses any  copyrightable  works,  inventions,  discoveries,  or ideas in the
Field to Company which were conceived or written prior to this Agreement ("Other
Works")  and not  disclosed  to Company  in  Schedule  5.24(c)  of the  Purchase
Agreement,  Company will have no  liability to VADUS  because of its use of such
Other Works,  except liability for infringement of any valid copyright or patent
now or hereafter  issued  thereon.  The  provisions  of this Section 7.f. do not
supersede,  invalidate,  or otherwise void any limitations that bind the Company
to treat Other Works in a manner other than set forth herein.

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<PAGE>

8.      Term and Termination

     a. Term. The term of this Agreement  shall commence upon the Effective Date
and shall terminate on the third year anniversary thereafter,  unless terminated
earlier as  provided  herein (the  "Term").  The  Effective  Date shall mean the
Closing  Date as that term is defined  in the Asset  Purchase  Agreement  by and
between VADUS and Company, dated February 1, 2002 (the "Purchase Agreement"). In
the event that the Closing, as defined in the Purchase  Agreement,  never occurs
and the Purchase  Agreement is terminated,  this Agreement shall become null and
void simultaneous with the termination of the Purchase Agreement.

     b.  Termination for Cause.  Company may terminate this Agreement  effective
the day of notice by giving VADUS written notice of termination if VADUS:

          i. breaches any of its material obligations under this Agreement;
          ii.  fails to provide the  standard of  performance  of Services  that
     substantially meets Company's reasonable expectations; or
          iii. fails at any time to provide the contracted  Services  defined in
     Schedules 1; or
          iv.  is no longer  able to  provide  the  services  of John  Marano as
     required by Section 3.c.

     c. Effect of  Termination.  If this  Agreement  is  terminated  pursuant to
Section 8.b.,  Company's  remaining  obligation  under this Agreement  shall all
cease,  except,  Company  shall pay VADUS for  Services  rendered  and  expenses
incurred up to the termination date.

9.      Indemnification

     a. Definitions. As used in this Agreement,  "Indemnify" means to indemnify,
defend and hold harmless the indemnified  party (including each of its officers,
directors,  employees and agents).  "Claims" means all claims, actions, demands,
losses,  findings,  causes of  action,  penalties,  determinations,  and  fines,
including reasonable attorneys' fees.

     b.  VADUS's  Acts or  Ommissions.  VADUS shall  Indemnify  Company from all
Claims arising from acts or omissions on the part of VADUS or its employees that
result in:

               i. Loss, damage to or destruction of property of Company or third
          parties;

               ii. Injuries or death to employees of VADUS, except as may result
          from the gross  negligence  or  willful  misconduct  of Company or its
          employees,  agents or  contractors,  wherein  Company shall  indemnify
          VADUS; or

               iii.  Injuries or death to any person,  including but not limited
          to employees or invitees of Company.

However,  nothing in this  Section  9.b.iii.  shall  create any  indemnification
liability  obligation  on the part of VADUS for any  portion of Claims  that are
products liability claims.

     c.  Characterization of Company as Employer.  VADUS shall Indemnify Company
from all Claims  whereby  Company is deemed or  considered to be the employer of
any personnel that VADUS assigns to Company pursuant to this Agreement.

     d.  General.  The  following  applies to all  Indemnities  provided in this
Agreement:  Promptly after receipt by an indemnified party of Notice of a Claim,
the indemnified  party shall give Notice to the indemnifying  party. The failure
of the indemnified  party to give such Notice shall not relieve the indemnifying
party  of any of its  indemnity  obligations  except  to  the  extent  that  the
indemnifying  party is actually  prejudiced  by such failure.  The  indemnifying
party  shall   assume  and   control  the  defense  of  any  Claim   subject  to
indemnification  hereunder.  The indemnified  party shall have the right, at its
own  expense,  to  participate  in the  defense  of any  covered  Claim  without
relieving the  indemnifying  party of any obligation of indemnity,  although the

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<PAGE>

indemnifying  party  shall  control the  defense.  The  indemnified  party shall
cooperate  in  its  defense,  and  any  out-of-pocket  costs  incurred  in  such
cooperation  shall be born by the indemnifying  party.  The  indemnifying  party
shall have the right to consent to  judgment or to settle a Claim only if (i) it
will fully satisfy the judgment or pay the Claim in full; (ii) any Claim against
the indemnified  party will be dismissed with prejudice or barred;  and (iii) no
nonmonetary relief (including,  without  limitation,  an injunction) will remain
against the interests of the indemnified party.

     e.  Intellectual  Property  Infringement.  If a third party Claims that the
methods,  apparatus,  or any  other  technologies  or  tools  used by  VADUS  in
delivering  the  Services,  including  computer  programs,  infringe any patent,
copyright,  or trade  secret,  VADUS  will (as long as Company is not in default
under this  Agreement)  defend and hold harmless  Company  against such Claim at
VADUS' expense.  VADUS also shall pay and Indemnify Company for all damages that
a court finally awards.  In addition to paying such damages,  if such a Claim is
made or appears possible,  VADUS may, at its sole option, secure for Company the
right to continue to use the  Services,  modify or replace the  Services so they
are  noninfringing,  or, if neither of the  foregoing  options is  available  in
VADUS'  judgment,  require  Company to return the Services for a credit equal to
the fees paid for the infringing Services.

10. Limitation of Liability

     In no event shall  either of the parties  hereto be liable to the other for
the payment of any  consequential,  incidental,  indirect,  or special  damages,
including  lost profits.  The  cumulative  liability of VADUS to Company for all
claims arising under or related to this Agreement,  whether in contract, tort or
otherwise,  shall not exceed  the total  amount of fees paid by Company to VADUS
under this  Agreement.  This  limitation  shall not apply to  Sections  9.b.(i),
9.b.(ii), and 9.e. of this Agreement.


11. General

     a.  Assignment.  No assignment  by VADUS of this  Agreement or any sums due
under it will be binding on Company without Company's prior written consent.

     b. Applicable Law and Forum. This Agreement shall be governed and construed
in accordance with the laws of the State of South Carolina without regard to the
conflicts of laws or principles thereof.

     c. Notices.  Any notice or other communication  required or permitted under
this Agreement  ("Notice") shall be given in writing and delivered by hand or by
registered or certified mail, postage prepaid and return receipt  requested,  to
the following persons (or their successors pursuant to due notice):

 If to Company:                            If to VADUS:

 Span-America Medical Systems, Inc.        VADUS, Inc.
 70 Commerce Center                        Five Market Square
 Post Office Box 5231 (Zip Code 29606)     Suite 201/203
 Greenville, South Carolina 29615          Amesbury, Massachusetts 01913
 Attention:  Mr. James Ferguson            Attention: Mr. John Marano

 With copies to:

 Wyche, Burgess, Freeman & Parham, P.A.    Pep & Hazard LLP
 44 East Camperdown Way                    Goodwin Square
 Post Office Box 728 (Zip Code 29602-0728) 225 Asylum Street, 20th Floor
 Greenville, South Carolina  29601         Hartford, Connecticut  06103
 Attention:  James M. Shoemaker, Esquire   Attention: Walter W. Simmers, Esquire

         Notices  shall be deemed  delivered  upon the earlier of receipt by the
recipient or three days after mailing as specified  herein.

                                       6

<PAGE>

     d.  Waiver.  No waiver by either  party of any breach by the other party of
any of the  provisions  of this  Agreement  shall  be  deemed  a  waiver  of any
preceding or succeeding  breach of the same or any other provisions  hereof.  No
such  waiver  shall be  effective  unless in writing and then only to the extent
expressly set forth in writing.

     e.  Entire  Agreement.  This  Agreement,  including  Schedule  1  or  other
agreements or exhibits  attached hereto or that reference the Agreement and that
have been  signed by both  parties,  constitutes  the entire  agreement  between
Company and VADUS. This Agreement  supersedes all proposals or prior agreements,
oral or written,  and any other  communications  between the parties relating to
the subject matter hereof.

     f.  Modifications.  No  modification  of this Agreement  shall be effective
unless in writing and signed by both parties.

     g.  Severability.  If  any  provision  of  this  Agreement  is  invalid  or
unenforceable under any statute, rule of law or judicial order, the provision is
to that extent to be deemed omitted,  and the remaining  provisions shall not be
affected in any way.

     h. Force Majeure. Neither party shall be liable for any failure of or delay
in performance of the Agreement for the period that such failure or delay is due
to acts of God, public enemy,  civil war, strikes or labor disputes.  Each party
agrees to give Notice to the other party  promptly of the occurrence of any such
cause and to carry out this  Agreement  as  promptly as  practicable  after such
cause is terminated.

     i. Headings. The headings in this Agreement are finding aids only and shall
have no effect on the meaning of the terms of this Agreement.

     j.  Survival of Terms.  Any terms of this  Agreement  that by their  nature
extend  beyond  the  termination  of  this  Agreement  remain  in  effect  until
fulfilled.  Such terms  include,  but are not limited to,  Sections 4,5,7 and 9.
Additionally,  if any Offer Notice is outstanding  under Section 5.b at the time
of termination,  such Offer Notice and the rights and obligations of Section 5.b
related to the subject  matter of such Offer  Notice shall  survive  until their
natural termination under Section 5.b.

     k. Authority,  Counterparts.  Each person signing this Agreement  covenants
that he or she is duly  authorized by all necessary  and  appropriate  corporate
actions to execute this  Agreement.  The parties may execute  this  Agreement in
counterparts and, without limitation, may deliver executed copies by fax.

     l. Attorneys'  Fees. If any litigation shall ever occur between the parties
arising  from or  related  to this  Agreement,  the  prevailing  party  shall be
entitled  to  recover  its  reasonable   attorneys'  fees  and  costs  from  the
non-prevailing  party. This includes,  without  limitation,  the recovery of any
reasonable  attorneys' fees and costs incurred in addressing  violations of this
Agreement prior to litigation.

     m. Negotiated  Document.  The parties acknowledge that this is a negotiated
document. No party to this Agreement shall be deemed to be the drafter of it and
any  construction  of  its  terms  shall  be  without  regard  to any  rules  of
construction concerning the drafter.

         Executed by the parties  hereto as an  instrument  under seal as of the
Effective Date written above.

COMPANY:                               VADUS:


                               (Seal)                                     (Seal)
-------------------------------        ------------------------------------
Signature                              Signature


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Title                                  Title

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Date                                   Date


















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                                   SCHEDULE 1
                                    Services

VADUS shall provide the following services:

1.  Relocation  and setup of  Company's  production  facility  for the Secure IV
product,  which includes,  but is not limited to, VADUS:

     a.  Preparing  a plan for the  relocation  of the  production  line for the
Secure IV  product  (the  "Secure  IV  Production  Line")  currently  located in
Haverhill, Massachusetts to Company's South Carolina facility;

     b.  Overseeing and assisting in disassembly of Secure IV Production Line in
Haverhill, Massachusetts;

     c.  Overseeing  and assisting  with packing and relocation of the Secure IV
Production Line;

     d. Overseeing and assisting with the setup of the Secure IV Production Line
in Company's South Carolina facility;

     e. Assist in revalidating  the Secure IV Production Line upon completion of
setup in South Carolina;

     f. Providing  instruction and hands on training to Company personnel in the
operation of the Secure IV Production Line;

     g. Assisting with problem  identification and resolution associate with the
Secure IV Production Line; and

     h.  Assisting  with  establishment  of  relationships  between  Company and
vendors and supplier  associated with the Secure IV Production Line,  including,
but not limited to:

                i. Plastic and rubber parts mold  development;
                ii.  Plastic and parts  molding;  and
                iii.  Needles.

2. Sales and marketing support, which includes, but is not limited to, VADUS:

     a. Conducting  marketing  studies of products or services  created from the
assets  acquired  pursuant to the Purchase  Agreement  or created from  Services
provided  by  VADUS  under  this  Agreement,   including   in-hospital   product
evaluations;

     b. Training Company sales people; and

     c. Assisting  Company's  commercialization  team in defining strategies for
commercializing  products or services created from the assets acquired  pursuant
to the Purchase  Agreement or created from Services provided by VADUS under this
Agreement.

3.  Enhancement of production  process,  which includes,  but is not
limited to, VADUS:

     a.  Assisting  in the  improvement  of the existing  production  process to
increase productivity and reduce costs; and

     b. Assisting in the automation of the existing production process.

4. Development of new products and extensions to existing  product lines,  which
includes, but is not limited to, VADUS:

     a.  Creating  and  providing  Company an outline of  opportunities  for new
products and current product line extensions (individually, an "Opportunity, and

                                       9

<PAGE>

collectively, "Opportunities");

     b.  Preparing a development  plan for each  Opportunity  Company  elects to
pursue, which plan shall include, but is not limited to, timeframes,  resources,
milestones, reporting requirements, and all information known by VADUS regarding
the  potential  to  successfully  patent  or the  susceptibility  to  claims  of
infringement against each such Opportunity; and

     c. Upon  approval  of the plan by Company,  which  shall  occur  within the
earlier of (i) 30 days of submittal of the development  plan by VADUS to Company
if a patent search is not required by the Company, or (ii) if a patent search is
required  by the  Company,  within 30 days after  receipt of the  results of the
patent search by the Company, unless Company objects to the development plan, in
which case such  objection  must be  communicated  within the  applicable 30 day
period, VADUS shall commence execution of the development plan.

All Services  identified in Sections 1, 2, and 3 of this Schedule 1 are Services
related to the Field.  The  Services  provided  in Section 4 of this  Schedule 1
consist  of both  Services  related  to the Field and  Nonfield  Services.  Upon
identification  of  Opportunities,  VADUS shall  designate  each one as either a
Service related to the Field or a Nonfield Service.

























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</TEXT>
</DOCUMENT>
