EXCLUSIVE DISTRIBUTION AGREEMENT

This Exclusive Distribution Agreement (this “Agreement”) is dated this 16th day of April, 2008, but is effective as of May 1, 2008 (the “Effective Date”), by and between CryoLife, Inc., 1655 Roberts Blvd., NW, Kennesaw, GA  30144 (“CryoLife”) and Medafor, Inc., 2800 Freeway Blvd., Suite 800, Minneapolis, MN  55430 (“Medafor”).

A.           Medafor is in the business of developing, manufacturing and selling proprietary hemostatic products, including the Product (as defined below).

B.           CryoLife develops and commercializes biomaterials and preserves and distributes human tissue for vascular and cardiac transplant applications.

C.           Medafor desires to appoint CryoLife as the exclusive distributor of the Product throughout the Territory (as defined below) for use in applications in the Field (as defined below), and CryoLife desires to accept such appointment, all in accordance with the terms and conditions of this Agreement.

In consideration of the mutual covenants contained in this Agreement, CryoLife and Medafor agree as follows:

1.1.   Definitions.

(a)   Terms Defined in this Article.   For purposes of this Agreement, the following terms shall have the following meanings:

“Affiliates” as it relates to a Party, shall mean any Person controlling, controlled by or under common control with a Party.

“Annual Minimum” shall have the meaning ascribed to it in Section 2.2 .

“Annual Minimum Dispute Notice” shall have the meaning ascribed to it in Section 2.2 .

“Applicable Laws” means all applicable common law, statutes, ordinances, rules, regulations or orders of any Governmental Authority, including Regulatory Laws.

“Bellows Applicator” means the bellows applicator manufactured by Medafor for use with MPH Product.

“Business Day” means any day other than a Saturday, a Sunday or a day on which banks in New York are authorized or obligated by law or executive order to remain closed.

“China” means the People’s Republic of China

“Claim” shall have the meaning ascribed to it in Section 7.2 .

“CGMP” shall have the meaning ascribed to it in Section 4.2 .

“Commercially Reasonable Efforts” means, with respect to a Party’s diligence in satisfying an obligation under this Agreement, that the Party applies the level of efforts, expertise and resources that it would apply in the ordinary course of business to satisfy a comparable obligation and that such actions be taken in good faith.  In determining whether a Party is applying Commercially Reasonable Efforts, the potential benefit to such Party not taking such efforts (e.g. benefit in receipt of payments for products that are sold inappropriately through a Crossover) shall not be considered. At the reasonable request of the non-offending Party, as that term is used in Section 2.1 , Commercially Reasonable Efforts will include ceasing to provide Products or MPH Product to the offending distributor.

“Confidential Information” shall have the meaning ascribed to it in Section 6.1 .

“Crossover” shall have the meaning ascribed to in Section 2.1 .

“CryoLife Applicator” means any applicator developed by CryoLife for use with the MPH Product.

“CryoLife IP” shall have the meaning ascribed to it in Section 7.1 .

“CryoLife Marks” means the brand names and marks CryoLife designates pursuant to Section 2.4 for use on Product packaging.

“Department of Defense Hospitals” those hospitals that are run by the U.S. Department of Defense and located on any United States military facility anywhere in the world.  Notwithstanding the foregoing, hospitals run by the Veterans Administration shall not be deemed “Department of Defense Hospitals”, regardless of their location.

“Distribute” shall be the meaning ascribed to it in Section 2.1 .

“Effective Date” means May 1, 2008.

“Failure to Supply” shall have the meaning ascribed to it in Section 10.2 .

“FDA” means the United States Food and Drug Administration or any successor agency having the administrative authority to grant Marketing Approval in the United States.

“Field” means: (i) all applications in cardiac surgery and vascular surgery in the United States; and (ii) all general surgery applications outside the United States including cardiac and vascular surgeries, but excluding orthopedic and ear, nose, and throat surgeries. For avoidance of doubt, the parties agree that neurosurgery and topical applications are also excluded from the definition of “Field”.

“Field Action” means any correction or removal action by CryoLife or Medafor due to safety, efficacy, quality or regulatory compliance concerns, including actions to recover title to or possession of, or to halt distribution of, Products that previously have been shipped to customers.

“Forecast” shall be the meaning ascribed to it in Section 3.1 .

“Governmental Authority” means the United States and any other country in which the Product is manufactured, marketed, sold, tested, investigated or otherwise regulated, and all states or other political subdivisions thereof and supranational bodies applicable thereto, including the European Union, and all agencies, commissions, officials, courts or other instrumentalities of the foregoing.

“HemArrest” means HemArrest, Inc., a Minnesota corporation.

“Insolvency Event” means that the Party (a) has commenced a voluntary proceeding under any insolvency law, (b) had an involuntary proceeding commenced against it under any insolvency law which has continued undismissed or unstayed for sixty (60) consecutive days, (c) had a receiver, trustee or similar official appointed for it or for any substantial part of its property, (d) made an assignment for the benefit of creditors or (e) had an order for relief entered with respect to it by a court of competent jurisdiction under any insolvency law.  For purposes hereof, the term “insolvency law” means any applicable bankruptcy, insolvency or other similar law now or hereafter in effect.

“Intellectual Property” means (a) discoveries, inventions, improvements, concepts and ideas, whether or not patentable, (b) works of authorship fixed in a tangible medium of expression, (c) Trademarks, (d) trade secrets and know-how and (e) all proprietary rights relating thereto, including all applications, registrations and renewals in connection therewith.

“Initial Term” shall have the meaning ascribed to it in Section 10.1 .

“Inventory Cost” shall mean the specific and direct manufacturing or procurement cost to Medafor associated with the manufacturing or procurement of such inventory (but shall not include overhead, markup or carrying costs).

“ISO” shall have the meaning ascribed to it in Section 4.2 .

“Losses” shall have the meaning ascribed to it in Section 9.1 .

“Marketing Approval” means, with respect to any country or jurisdiction, the act of the applicable Regulatory Authority that is necessary under applicable Regulatory Laws for the manufacture, marketing, distribution and sale of the Product in that country or jurisdiction, and satisfaction of all applicable regulatory and notification requirements and, to the extent applicable, the grant of Pricing Approval.

“Medafor IP” shall have the meaning set forth in Section 7.2 .

“MPH Product” means Medafor’s proprietary product for effecting hemostasis at the site of a wound, cut or incision using a patented technology known as MPH ^® (Microporous Polysaccharide Hemospheres).  The MPH Product for surgical use is currently referred to as Arista®. MPH Product includes all product improvements, modifications, additions and refinements thereto made by Medafor during the Term.

 “Other Manufacturing Laws” shall have the meaning ascribed to it in Section 4.2 .

“Party” means CryoLife or Medafor, as the context requires.

“Person” means any individual, group or entity, including Governmental Authorities.

“Pricing Approval” means, with respect to any country or jurisdiction in which Governmental Authorities determine the pricing at which products will be reimbursed, the approval, agreement, determination or decision by the applicable authorities establishing that pricing.

“Product” means a Product Applicator containing MPH Product per the Specifications.

“Product Applicator” means a Bellows Applicator or a CryoLife Applicator.  The term “Product Applicator” includes all product applicator improvements, modifications, additions and refinements thereto made by Medafor or CryoLife, as applicable, during the Term.

“Product Complaint” means any expression by a Third Party of dissatisfaction relating to the identity, durability, reliability, safety, efficacy or performance of any Product, including actual or suspected product tampering, contamination, mislabeling or misformulation.

“Product Information” shall have the meaning ascribed to it in Section 2.3 .

“QSR” shall have the meaning ascribed to it in Section 4.2 .

“Regulatory Authority” means, with respect to any country or jurisdiction, any Governmental Authority involved in granting Marketing Approval or Pricing Approval or in administering Regulatory Laws in that country or jurisdiction, including the FDA in the United States.

“Regulatory Laws” means all Applicable Laws governing (i) the import, export, testing, investigation, manufacture, marketing or sale of the Product, (ii) establishing recordkeeping or reporting obligations, (iii) any Field Action or (iv) similar regulatory matters.

“Right of Renewal” shall have the meaning ascribed to it in Section 10.1 .

“Specifications” means, collectively, (i) Medafor’s design and functionality specifications relating to the Product set forth in Exhibit A and (ii) any specifications for manufacturing, testing, storing, packaging, shipping or labeling (including CryoLife’s labeling and packaging requirements and instructions as set forth herein) the Product set forth in any approved application for Marketing Approval and any supplements and amendments thereto.

“Term” shall have the meaning ascribed to it in Section 10.1

“Territory” shall mean the United States, Canada, the United Kingdom and Germany commencing on the Effective Date.  Beginning January 1, 2009, the Territory shall expand to mean the entire world except for the countries of Japan and China.  Notwithstanding the foregoing, in no event shall the Territory include any Department of Defense Hospitals.  Although the Territory shall initially include the United States, the parties agree that in the United States the Territory shall exclude those certain enumerated hospitals listed on Exhibit B in the United States until the times set forth therein.

“Third Party” means any Person other than a Party or its Affiliates.

“Trademarks” means all trademarks, service marks, trade dress, logos and trade names, together with all translations, adaptations, derivations and combinations thereof (including all goodwill associated therewith), and all applications, registrations and renewals in connection therewith.

“United Kingdom” means the United Kingdom of Great Britain and North Ireland.

“United States” means the United States of America, including its territories, commonwealths and possessions.

“ Year ” shall mean the period commencing the Effective Date and ending June 30, 2009, or any subsequent twelve month period commencing July 1 and ending on the following June 30.

1.2.   Rules of Construction.

(a)   When a reference is made in this Agreement to a Recital, an Article, a Section, a Schedule or an Exhibit, such reference is to a Recital, Article or Section of, or a Schedule or an Exhibit to, this Agreement, unless otherwise indicated.  All Exhibits and Schedules attached hereto are incorporated in this Agreement by reference.

(b)   Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be understood to be followed by the words “without limitation.”

(c)   Pronouns, including “he,” “she” and “it,” when used in reference to any Person, shall be deemed applicable to entities or individuals, male or female, as appropriate in any given case.

(d)   Article, Section and other headings contained in this Agreement are for reference purposes only and are not intended to describe, interpret, define or limit the scope, extent or intent of any provision of this Agreement.

(e)   Standard variations on defined terms (such as the plural form of a term defined in the singular form, and the past tense of a term defined in the present tense) shall be deemed to have meanings that correlate to the meanings of the defined terms.

2.1.   Exclusive Distribution Rights.

(a)   Medafor hereby grants to CryoLife, and CryoLife hereby accepts, the exclusive right to promote, market, sell and distribute (collectively, “Distribute”) the Product throughout the Territory for all uses and applications in the Field.  Medafor shall not, directly or indirectly, Distribute, or permit Distribution of, Products or the MPH Product anywhere in the Territory for any uses or applications in the Field, either on its own behalf or through any Affiliate or Third Party. CryoLife shall not, directly or indirectly, Distribute, or permit Distribution of, the Product anywhere in the Territory for any uses or applications outside of the Field, either on its own behalf or through any Affiliate or Third Party.

(b)   Both Parties acknowledge and agree that, notwithstanding their efforts to the contrary, given the nature of the industry, the distribution of products and that both Parties employ distributors, there may be inadvertent sales “Crossover” by either or both Parties, i.e. inadvertent sales unknown to CryoLife of Product into applications outside of the Field and inadvertent sales unknown to Medafor of MPH Product or Products into applications in the Field. Upon learning of such inadvertent sales, the non-offending Party shall give the other Party written notice of the facts and circumstances of the inadvertent sale, and the Party receiving such notice will use its Commercially Reasonable Efforts to prevent additional prohibited sales and report what steps it has taken to prevent a reoccurrence. Such inadvertent sales shall not be considered a material breach of this Section, provided the other Party takes prompt and Commercially Reasonable Efforts to prevent additional prohibited sales and timely reports what steps it has taken to prevent a reoccurrence to the non-offending Party.

(c)   Medafor represents and warrants that attached hereto as Schedule 2.1 is a list of all agreements that permit others to Distribute Products in the Field (or if such agreement is oral, a description of such oral arrangement).  Medafor represents and warrants that:

(i)   it has delivered to CryoLife the most current and complete copies of each of the agreements listed on Schedule 2.1 (or if such agreement is oral, that is has summarized all terms of such oral arrangement);

(ii)   by the Effective Date there shall be no agreement or arrangements to which it is a party or by which it is bound that would permit others to Distribute Products in the Field in the United States, Canada, the United Kingdom or Germany; provided however that distribution rights that allow for the promotion, sale or distribution of the Product in Department of Defense Hospitals shall not be deemed a violation of this Section; and provided, further and notwithstanding the foregoing, the distribution by the three distributors disclosed on Schedule 2.1 that have agreements that do not expire or terminate on the Effective Date shall not be deemed a violation of this Section to the limited extent that they permit promotion, sale or distribution to those hospitals within the United States that are identified on Exhibit B ;

(iii)   by January 1, 2009 there shall be no agreements or arrangements to which it is a party or by which it is bound that would permit others to Distribute Products in the Field outside of the United States, Canada, the United Kingdom or Germany, Japan or China; or

(iv)   it will not take any action with respect to any of its agreements with third parties that may expose CryoLife to any liability.

(d)   Medafor represents and warrants that other than the existing distributors identified on Schedule 2.1 , it does not currently have any other agents, representatives, or distributors entitled to Distribute Products for use in the Field within the Territory, and that there is no restriction, covenant, or agreement to which it is a party or by which it is bound that would prevent or delay Medafor from providing to CryoLife the exclusive distribution rights contained in this Agreement.  Medafor agrees that it will not, directly or indirectly, undertake any action, omit to take any action, or enter into any agreement that will prevent or delay the enjoyment by CryoLife of the full benefits of the exclusive distribution relationship provided in this Agreement.  Medafor agrees to direct all sales inquiries respecting the Product within the Field in the Territory to CryoLife immediately during the Term of this Agreement.  Medafor represents and warrants that its termination of agreements that permit others to Distribute Products in the Field in the Territory shall not cause CryoLife any Losses.  CryoLife agrees to direct all sales inquires respecting the Product outside the Field immediately to Medafor during the Term of this Agreement.

2.2.   Annual Minimums.

(a)   During the Initial Term, CryoLife agrees to order the following minimum Product amounts (the “Annual Minimum”) during the periods set forth below:

(b)   After Year 3, CryoLife agrees that the minimums for Years 4-6 shall be as set forth below:

The parties expressly acknowledge and agree that CryoLife’s obligation to purchase the Annual Minimums set forth in Sections 2.2(a) and 2.2(b) is based on CryoLife’s unimpaired ability to sell the Product under private label, beginning on the Effective Date throughout the United States, Canada, Germany and the United Kingdom (except for those specific hospitals set forth on Exhibit B ); and beginning on January 1, 2009, throughout out the entire Territory.  In the event that CryoLife is unable to sell such Products under private label as set forth herein in the Territory, as a result of impairment (unless such impairment is caused directly by CryoLife) then such Annual Minimums shall be equitably adjusted downward as follows:  CryoLife shall provide written notice to Medafor of the impairment and its proposed reduction based on such impairment.  Medafor shall have fifteen (15) days from receipt of such notice to notify CryoLife in writing that it disagrees with CryoLife’s reduction with such notice also detailing the proposed number Medafor believes is the appropriate reduction, if any, in the Annual Minimum.  In the event that Medafor fails to notify CryoLife, the Annual Minimum for the Year in question shall be reduced per CryoLife’s notice set forth above.  In the event that Medafor notifies CryoLife that it disagrees with CryoLife, the parties shall have fifteen (15) days to resolve the dispute, after which, after which, either Party may notify the other Party that it requests that an arbitrator decide upon the appropriate reduction pursuant to Schedule 2.2 attached hereto pursuant to so called “Baseball” arbitration (such notice, the “Annual Minimum Dispute Notice”).  The parties agree that the equitable adjustment downward for purposes of the “Baseball” arbitration shall be based on the following factors: CryoLife’s projection of sales in such country(ies), the number of medical procedures that the Product could be sold for use in such country(ies), sales of the Product in similarly situated countries, and other similar facts that the parties deem to be important.

(c)   The parties acknowledge and agree that the Annual Minimums are based on Medafor’s current sales of the Product and therefore, Medafor represents and warrants that it has delivered to CryoLife, prior to the execution of this Agreement, Medafor’s current sales information for the first quarter of 2008 for the Product and that such information is true, correct and complete.

(d)   During Year 1, CryoLife agrees to submit purchase orders for the Products as follows: (i) for the period between the Effective Date and July 31, 2008, CryoLife will submit to Medafor a purchase order for at least $500,000 of Products and such purchase order shall be submitted upon the execution of this Agreement by the Parties; (ii) for the period between August 1, 2008 and  October 31, 2008 and by no later than June 15, 2008, CryoLife shall submit to Medafor a purchase order for at least $750,000 of Products; (iii) for the remainder of Year 1, CryoLife shall submit monthly purchase orders for $ [***] worth of Products with the understanding that each monthly purchase order shall not be deemed effective unless it is submitted in accordance with Section 3.2 .  CryoLife’s obligations under this subsection shall be equitably adjusted in the event of any reduction in the Annual Minimum for Year 1.

(e)   After the conclusion of Year 1 and during the remainder of the Term, CryoLife will submit purchase orders for at least 15% of the applicable Annual Minimum for the calendar quarter commencing July 1, 25% for the calendar quarter commencing October 1, 25% for the calendar quarter commencing January 1, and 35% for the calendar quarter commencing April 1.  Such purchase orders may be submitted at any time prior to and including the first date of the applicable calendar quarter and should be consistent with the three (3) month portion of the rolling forecast set forth in Section 3.1 .  CryoLife may submit purchase orders monthly provided that for a purchase order to be effective it must be submitted in accordance with Section 3.2 .

(f)   The foregoing minimum purchases may be reduced by CryoLife in any given period to the extent of any prior purchase by CryoLife in excess of the minimum amounts specified above for any and all preceding periods. The inability of CryoLife to meet any minimum purchase requirement by reason of Product returns pursuant to Section 2.6, any breach of this Agreement by Medafor resulting in an impairment to CryoLife’s ability to sell into any portion of the Territory based on the timelines set forth herein, supply interruption by Medafor, force majeure, or any Product recall shall not cause CryoLife to be in default under this Section.

(g)   During Year 1, all Product purchases shall be for Products in 3 gram and 5 gram volumes. Thereafter, Medafor agrees to make additional volume Product and configurations available for purchase, as reasonably requested by CryoLife, at prices and volumes to be mutually negotiated and agreed to by the Parties.

2.3.   Marketing and Sales Activities.

(a)   CryoLife shall have sole control and authority over its marketing activities for the Products.  All business decisions concerning the sales and marketing of Products within the Field and the Territory, including the price, product packaging and configuration, and other sale and promotional terms thereof, will be within the sole discretion of CryoLife, except that CryoLife shall provide Medafor with a reasonable opportunity to review and approve all marketing materials relating to the Products for purposes of compliance with Regulatory Laws and to reasonably protect its rights in its trademarks and copyrights, which approval shall not be unreasonably withheld or delayed.  CryoLife shall comply with the appropriate quality control instructions of Medafor as to the form and manner in which such Medafor trademarks shall be used In its discretion, CryoLife may conduct clinical trials for the Products in order to support CryoLife’s marketing and sales efforts. CryoLife agrees to provide Medafor with written results of such clinical trials for Medafor’s records and uses in areas outside of the Field.

(b)   Medafor agrees to provide to CryoLife all reasonable technical assistance, including necessary information related to the Product in the Field to CryoLife in order for CryoLife to market the Product and so CryoLife may develop its own technical, scientific and clinical information files for purposes of obtaining new product committee approvals at target hospitals.  Medafor agrees to provide reasonable training CryoLife’s sales force regarding the Products either at Medafor’s facilities or in the Field; provided that CryoLife shall be responsible for the costs and expenses of CryoLife personnel incurred in connection with Medafor providing such train-the trainer technical assistance and training and CryoLife shall reimburse Medafor for its incurred travel expenses.  Medafor agrees to provide CryoLife with copies of its product handling manuals, sales literature, promotion materials, training materials, videos, demonstration kits and other applicable information for the Products.  To the extent possible Medafor shall provide CryoLife in electronic form and format all such marketing materials and information described in this Section (collectively all such information described in this Section is “Product Information”).

(c)   Portions of the Product Information may be incorporated into CryoLife’s materials used for the promotion of the Products.  Medafor represents and warrants that the Product Information shall be accurate and complete in all material respects, and undertakes to update any such Product Information when any information included therein becomes outdated, inaccurate, or misleading.  CryoLife shall have the right to produce, at its expense, promotional material, Products handling manuals, instructions for use, and other written information relating to the Products that is based in whole or in part on the material supplied by Medafor subject to the limitations set forth above.

(d)   Medafor will cooperate with CryoLife in the sponsorship and planning of seminars and marketing events for Products.

(e)   Medafor shall furnish without charge to CryoLife, any market surveys and related information prepared by or for Medafor pertaining to the market for the Products in the Territory.  CryoLife will treat such information as Medafor IP in accordance with the applicable provisions of Section 7.1 .

2.4.   Branding.   The Products shall be sold under CryoLife’s brand names as directed by CryoLife; provided however, that CryoLife’s branding will use the MPH® trademark owned by Medafor on its external packaging in a manner reasonably acceptable to Medafor and in accordance with all Applicable Laws and in accordance with appropriate quality control instructions of Medafor as to form and manner of use.  Notwithstanding the foregoing, the parties have agreed that CryoLife may use the name Hemostase as the private label and to the extent necessary Medafor agrees to consent to the use and filing of the name Hemostase MPH ^® or Hemostase MPH ^® trademarks by CryoLife with appropriate Governmental Authorities, if CryoLife so desires.  Medafor shall adapt packaging and labeling for the Products as instructed by CryoLife to meet CryoLife’s usual, normal and reasonable branding standards, which packaging shall be developed by CryoLife.  CryoLife, subject to Medafor’s reasonable acceptance, shall have final approval over all packaging and labeling of the Products.

2.5.   Sample Products.   Medafor shall provide to CryoLife sterile samples of Product at no charge according to the following commitment:

(a)   Year 1- 800 boxes of 5 gram

(b)   Year 2- 400 boxes of 5 gram

Unless otherwise agreed, samples shall be delivered to CryoLife at the commencement of Year 1 and Year 2 in accordance with forecasts that in the case of Year 1 have already been delivered to Medafor, and that will be delivered to Medafor in conjunction with the forecasts set forth in Section 3.1 for Year 2.   CryoLife may purchase additional sterile samples of boxes of 3 gram or 5 gram product at a fixed price of $125 per box over the Initial Term.  If requested by Medafor, CryoLife will make all reasonable efforts to document the no charge use of these samples.  CryoLife shall use sample units only for demonstrations and marketing purposes and may not resell any samples.

2.6.   Acceptance of Products.   CryoLife shall have twenty (20) Business Days to inspect and to verify that the Products conform to the applicable firm order and the Specifications from the date of arrival of such Products at the point of delivery.  Unless CryoLife rejects any Product within such twenty (20) Business Day period in writing to Medafor specifying the reason for such rejection, the entire shipment shall be deemed accepted by CryoLife. Any Product rejected in accordance with the preceding sentence shall, if requested by Medafor be either returned to Medafor or CryoLife shall provide such other evidence of the deficiency of the Products to Medafor.  CryoLife will follow Medafor’s reasonable instructions to return such Products or to otherwise dispose of them, and will not take any action in relation to such Products until it receives such instructions from Medafor.  Medafor shall have fifteen (15) Business Days from CryoLife’s notice to check, verify, test and respond to any claims by CryoLife that Products are not in conformity with the Specifications, before agreeing to replace the defective   nonconforming product.  Medafor shall bear all costs of return (including freight and insurance) for defective or non conforming Product and shall either replace the defective or nonconforming Product without charge (including payment of freight and insurance for delivery of the replacement Product) or, at CryoLife’s request, refund to CryoLife the entire amount paid in connection with the rejected Product (including transportation and shipping charges.  All such replacement product shall be shipped to CryoLife within thirty five (35) calendar days.   Nothing in this Section, including the exercise of rights hereunder, shall be construed as a waiver of CryoLife’s indemnification rights, its warranty rights or any other common law or statutory remedies.  CryoLife agrees to reimburse Medafor for any freight and insurance costs incurred by Medafor with respect to Product originally rejected by CryoLife, that Medafor determines through verification and/or testing was not defective and conformed to Specifications.

3.1.   Forecasts.   On a quarterly basis and twenty (20) days before the end of each quarter, CryoLife shall provide to Medafor twelve (12) month rolling forecasts of the anticipated quarterly quantities and mix of the Products that CryoLife expects to order (each, a “Forecast”), which shall correspond to at least the minimum purchase quantities in Section 2.2 of this Agreement provided that such forecasts shall not be binding unless and until CryoLife delivers a purchase order to Medafor.

3.2.   Firm Orders. Medafor shall supply to CryoLife the minimum quantities as described in Section 2.2 of this agreement against purchase orders placed by CryoLife. In regard to purchase orders placed above the minimum purchase requirements as per Section 2.2 , Medafor shall fulfill all firm additional orders for the Product submitted by CryoLife provided that such orders are not more than 50% above the minimums set forth in Section 2.2 . CryoLife shall place any firm purchase orders, so that they have been received by Medafor no less than thirty-five (35) calendar days prior to the requested ship date.  Firm purchase orders may be submitted via regular mail or facsimile to the following:

Medafor, Inc.

2700 Freeway Blvd., Suite 800

Minneapolis, MN  55430

Attn:  Carl Orr

Fax No.:  763-571-1035

Each firm order shall be deemed accepted upon receipt by Medafor.  Except as otherwise provided herein, Medafor may not reject any purchase order received from CryoLife unless such purchase order: (a) has not been forecasted pursuant to Section 3.1 and (b) is not consistent with the Annual Minimums to the extent the order exceeds the forecasted amount.  If Medafor rejects a purchase order due to a force majeure event or as otherwise provided herein, Medafor must give notice within two (2) Business Days of receipt of such purchase order (and before receipt of payment) and must advise CryoLife in writing of the reason.  In the event of such rejection, CryoLife’s annual minimum requirements as set forth in Section 2.2 shall be adjusted accordingly.

3.3.   Transfer Pricing.

(a)   Subject to Section 3.3(b) below, the transfer pricing for the Products ordered by CryoLife during the Initial Term shall be as set forth in Exhibit C .  Medafor represents and warrants that its current pricing in the Territory to its distributors and for direct sales by Medafor, if any, has been delivered to CryoLife and that such information delivered to CryoLife is true, correct and complete.  The parties acknowledge that in the event that CryoLife is unable to obtain appropriate margins, the parties will, in good faith, negotiate an equitable adjustment to such pricing.

(b)   The transfer pricing set forth in Exhibit C is for finished Products (i.e. packaged, labeled and sterilized).  CryoLife shall be responsible for all applicable (i) sales, use, value-added or similar taxes imposed by any Governmental Authority, and (ii) excises, duties, import fees and export fees. CryoLife shall be also responsible for all reasonable freight and delivery charges and any other costs for shipment of the Products from Medafor’s facilities in Minneapolis, Minnesota to CryoLife’s facilities as specified in the applicable firm order.  Title to products and all risk of loss shall pass from CryoLife to Medafor upon Medafor’s delivery of Products to CryoLife’s designated shipper at Medafor’s Minneapolis, Minnesota location.  Each shipment of Products from Medafor to CryoLife shall contain such quality control certificates reasonably requested by CryoLife certifying that the Products shipped conform to the specifications.

3.4.             Payment Terms.   Medafor shall deliver to CryoLife an invoice for each firm order, which invoice shall contain customary information for CryoLife to verify the invoice, including the quantity of Products delivered.  Payment terms for undisputed amounts (excluding for the first and second quarters of 2008 which shall be paid immediately upon delivery of the inventory due) shall be [***] ([***]) days from when the Products are shipped in accordance with Section 3. 5 or, if later, ten (10) days after date that CryoLife receives the applicable invoice.  All payments hereunder will be made in United States dollars.

3.5.           Shipping.

(a) Medafor shall at all times use its Commercially Reasonable Efforts to ship Products to CryoLife no later than the ship date set forth in the applicable firm order.

(b) Medafor shall package, label, store and ship all Products in compliance with Applicable Laws and in accordance with good commercial and industry practice.  CryoLife shall select the shipper.  The Products shall be delivered to CryoLife sterile and ready for end-user sale and use, including all packaging, labeling, and instructions for use.  Medafor shall package the Products suitably for export and appropriately to prevent damage during shipment.  The packing slip shall have the part number, purchase order number and delivery quantity.

(c)           The Products shall be shipped F.O.B. Medafor facilities in Minneapolis, Minnesota.  At CryoLife’s expense, Medafor shall ship the Products to CryoLife as directed by CryoLife in the applicable firm purchase order.

4.1.   Inventory.

(a)   Medafor shall at all times maintain a [***] ( [***] ) [***] supply of Products in inventory to support CryoLife’s sales efforts based on the higher of (A) the total amount of Products ordered by CryoLife during the preceding [***] on a rolling basis, or (B) the minimum amount of Products CryoLife is required to purchase pursuant to subsections 2.2(b) and 2.2(c) for the following [***] on a rolling basis.

(b)   Medafor will notify CryoLife immediately in writing upon becoming aware of any supply shortage, or other interruption or potential interruption in the supply of any material, component, or sub-assembly, in each case as it relates to Products.

(c)   Medafor shall at all times ensure that sufficient manufacturing capacity (including appropriate manufacturing, storage and distribution facilities and qualified personnel) is maintained to meet CryoLife’s forecasted demand plus 50%.  If at any time Medafor does not have enough component materials to fulfill, or other supply or manufacturing problems prevent Medafor from fulfilling, on a timely basis, its supply obligations to CryoLife for CryoLife’s purchase orders for Products, Medafor shall promptly notify CryoLife of the nature and extent of the impairment to Medafor’s ability to supply and shall allocate its remaining manufacturing resources to CryoLife’s purchase orders for the Products first.  Only after such action is taken and completed shall Medafor allocate remaining manufacturing resources to other competitive products Medafor produces, so that CryoLife will not be disadvantaged in its ability to obtain Products during such impairment.

(d)   In the event Medafor is unable to fulfill CryoLife’s purchase orders for Products, CryoLife’s Annual Minimum and calendar quarter purchase requirements for the Year and subsequent Years shall be suspended until Medafor is able to fulfill CryoLife’s purchase orders for at least one calendar quarter. Thereafter, CryoLife’s Annual Minimum and calendar quarter purchase requirements shall be reduced by a reasonable amount to account for the shortage and any resulting interruption of CryoLife’s ability to supply its customers.

(e)   If this Agreement is terminated by CryoLife (other than for Medafor’s breach of this Agreement or pursuant to Section 10.2(c) or 10.2(e) ) then CryoLife shall reimburse Medafor for the total Inventory Cost of up to [***] ([***]) [***] inventory maintained pursuant to Section 4.1(a) unless CryoLife directs that inventory be shipped to CryoLife pursuant to Section 10.3 (in which case CryoLife shall pay the amounts for the inventory as set forth herein); provided that inventory already paid for by CryoLife shall be deducted from this amount.

(f)   If CryoLife requires any changes to any CryoLife-specific components during the Term, outside of a required change by Regulatory Authorities which renders such CryoLife-specific components unusable for sale by CryoLife, then CryoLife shall reimburse Medafor for the Inventory Cost of the CryoLife-specific components that are rendered unusable due to such change; provided, however, that the total amount of reimbursement under this Section 4.1(f) shall only be paid for inventory that has been kept as part of the [***] ([***] ) [***] inventory set forth in Section 4.1(a) .

4.2.   Manufacturing.   Medafor will manufacture the Products in accordance with the then current (i) Specifications, (ii) applicable regulations relating to current Good Manufacturing Practices (“CGMP”) and similar protocols required by the United States Food, Drug and Cosmetic Act and similar laws and regulations in foreign jurisdictions within the Territory that regulate the manufacture, distribution, and sale of the Products for use in the Field, all as may be amended from time to time (“Other Manufacturing Laws”), quality system regulations (“ QSR ”) of the United States Food and Drug Administration, including master device and lot history records, and ISO 13485 requirements (including appropriate certification) (“ISO”), MDD requirements, CMDCAS requirements, and (iii) other pertinent rules and regulations of any Regulatory Authorities within the Territory that have approved the sale of the Products.  Upon CryoLife’s request, Medafor shall provide CryoLife with written evidence of compliance with the criteria set forth herein.  During the Term, Medafor will maintain, or cause to be maintained, the Product manufacturing facility’s registration as a certified medical device manufacturing facility with all applicable Regulatory Authorities or cause such facility to be maintained such that the facility would pass an audit for compliance with CGMP, QSR, Other Manufacturing Laws and ISO.  Medafor shall maintain ongoing quality assurance and testing policies sufficient to satisfy its obligations under this Agreement and Medafor’s standard quality assurance policies.  Medafor shall