Volcano Corporation and Santec Corporation entered into a Supply Agreement, pursuant to which Santec will supply Volcano with scanning lasers for use in Volcano's optical coherence tomography, or OCT, systems. Under the terms of the Agreement, Santec will be responsible for manufacturing the lasers in accordance with Santec's specifications and agreed-upon quality standards. Volcano will initially purchase approximately $1.9 million worth of lasers, which Volcano will pre-pay within 30 days of the date of the Agreement. Volcano has agreed to purchase annual and/or life-of-contract minimum quantities of the lasers, which depending upon the timing and quantity of the purchases, will range from approximately $7.3 million to approximately $9.4 million over a three-year period.

The Agreement provides that Volcano will purchase scanning lasers for use, upon regulatory approval, in its commercial intracoronary imaging OCT products solely from Santec until the earlier of expiration of the agreement or such time as a specified cumulative order amount is reached. Unless earlier terminated, the Agreement will be effective through March 31, 2016. The Agreement may be terminated by Volcano in the event Santec fails to supply products in agreed-upon amounts that conform to the terms of the Agreement and in certain other circumstances.

The Agreement may be terminated by either party in the event of a breach by the other party that is not cured within a specific time frame, or in the event the other party becomes insolvent or ceases to do business.