EXHIBIT 10.1

CONFIDENTIAL TREATMENT REQUESTED

[***] – CONFIDENTIAL PORTIONS OF THIS AGREEMENT WHICH HAVE BEEN REDACTED ARE
MARKED WITH BRACKETS (“[***]”). THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY
WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION.

 

EXCLUSIVE SUPPLY AND DISTRIBUTION AGREEMENT

This EXCLUSIVE SUPPLY AND DISTRIBUTION AGREEMENT (the “Agreement”) is made and
entered into effective as of March 26, 2014 (the “Effective Date”) by and
between Hancock Jaffe Laboratories , Inc., a corporation organized under the
laws of the state of Delaware (“HJL”), with an address at 70 Doppler, Irvine,
California 92618 and CryoLife, Inc., a Florida corporation (“CL”), with an
address at 1655 Roberts Blvd. NW, Kennesaw, Georgia 30144, (hereinafter
sometimes individually or collectively referred to as a “Party” or the
“Parties,” respectively).

RECITALS

 

1.

HJL is engaged in the design, development, manufacture and sale of products for
use for vascular access and peripheral vascular indications.

 

2.

CL sells and distributes medical devices and processes tissues for use in
cardiac and vascular surgeries.

 

3.

HJL once manufactured the Products but ceased manufacturing the Products when it
moved locations.

 

4.

HJL desires to commence manufacturing the Products again and to supply such
quantities of Products as CL desires, and CL desires to obtain from HJL a supply
of the Products so that CL can exclusively distribute the Products worldwide.

 

5.

CL and HJL desire to formalize their relationship by entering into this
Agreement for the purpose of developing, manufacturing, supplying and
distributing the Products, all as further set forth in this Agreement.

NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
representations, warranties, covenants and agreements contained herein, the
Parties hereto agree as follows:

ARTICLE 1

DEFINITIONS

 

1.1.

AAA shall have the meaning set forth in Section 17.1.

 

1.2.

Act shall mean the United States Food, Drug and Cosmetic Act and the regulations
promulgated thereunder, as amended from time to time.

 

1.3.

Acquisition Agreement shall have the meaning set forth in Section 16.1.

 

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1.4.

Actual Quarterly Spend shall have the meaning set forth in Section 5.1.

 

1.5.

Additional Product(s) shall mean all improvements to, modifications of or
subsequent generations of the Products that do not affect the form, fit or
function of the Product and any support product(s) developed by HJL during the
term of this Agreement.

 

1.6.

Affiliates shall mean, with respect to either Party, those entities controlled
by, in control of, or under common control with such person. For the purposes of
this definition, “control” means ownership or control, direct or indirect, of
more than 50% of the voting capital or equity participation of an entity.

 

1.7.

Agreement shall have the meaning set forth in the Preamble.

 

1.8.

Applicable Laws shall mean all applicable common law, statutes, ordinances,
rules, regulations or orders of any governmental authority, including applicable
regulatory laws, rules and regulations, within the Territory.

 

1.9.

Breaching Party shall have the meaning set forth in Section 12.1.

 

1.10.

CAPA shall have the meaning set forth in Section 2.5.

 

1.11.

CE Mark shall mean the Conformité Européenne mark given by a Notified Body that
certifies that the Products comply with all Applicable Laws.

 

1.12.

Change in Control shall mean (i) any consolidation or merger of either Party
with or into any other corporation or other entity or person, or any other
corporate reorganization, in which the stockholders of such Party immediately
prior to such consolidation, merger or reorganization, own less than fifty
percent (50%) of such Party’s voting power immediately after such consolidation,
merger or reorganization, or any transaction or series of related transactions
to which either is a Party in which in excess of fifty percent (50%) of such
Party’s voting power is transferred; or (ii) a sale, lease or other disposition
of all or substantially all the assets of either Party.

 

1.13.

CL shall have the meaning set forth in the Preamble.

 

1.14.

CL Confidential Information shall mean any non-public information about CL, its
development of intellectual property and its operations including, but not
limited to, any non-public information or scientific or technical data,
know-how, or expertise of CL relating to the Products, existing as of the
Effective Date or developed during the term of this Agreement and non-public
information that relates to its financial statements, marketing or finances,
market research, customers, customer lists, markets, product plans, business
plans, services, software, developments, inventions, processes, procedures,
methods, know-how, designs, data, programs, drawings, and engineering
information.

 

1.15.

CL Indemnified Party shall have the meaning set forth in Section 12.1.

 

1.16.

CL Required Markets shall have the meaning set forth in Section 2.2.

 

1.17.

Claims shall have the meaning set forth in Section 12.1.

 

1.18.

Confidential Information shall mean, as appropriate, CL Confidential Information
and/or HJL Confidential information.

 

1.19.

Coronary Indications shall mean uses of any products for indications relating to
the creation of a blood

 

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pathway around a blocked artery in the heart.

 

1.20.

Disposition shall have the meaning set forth in Section 16.2.

 

1.21.

Distribution Fee shall have the meaning set forth in Section 7.5.

 

1.22.

Effective Date shall have the meaning set forth in the Preamble.

 

1.23.

Existing Inventory shall have the meaning set forth in Section 5.2.

 

1.24.

FDA shall mean the Food and Drug Administration of the U.S. Department of Health
and Human Services.

 

1.25.

FDA Approval shall mean the date on which a Product obtains approval from the
FDA to market and sell the Products under the Act.

 

1.26.

First Refusal Option shall have the meaning set forth in Section 16.2.

 

1.27.

F.O.B. shall have the meaning set forth in Section 6.6.

 

1.28.

Force Majeure shall have the meaning set forth in Section 18.1.

 

1.29.

Foreign Approval(s) shall have the meaning set forth in Section 2.3.

 

1.30.

HJL shall have the meaning set forth in the preamble.

 

1.31.

HJL Confidential Information shall mean any non-public information about HJL,
its development of Intellectual Property, and its operations including, but not
limited to, any non-public information or scientific or technical data,
know-how, or expertise of HJL relating to the Products existing as of the
Effective Date or developed during the term of this Agreement and non-public
information that relates to its financial statements, marketing or finances,
market research, customers, markets, product plans, business plans, services,
software, developments, inventions, processes, procedures, methods, know-how,
designs, data, programs, drawings, and engineering information.

 

1.32.

HJL Disposition Notice shall have the meaning set forth in Section 16.2.

 

1.33.

HJL Indemnified Party shall have the meaning set forth in Section 12.1.

 

1.34.

HJL Intellectual Property shall have the meaning set forth in Section 14.4.

 

1.35.

HJL Invention(s) shall mean any invention whether or not patentable, conceived
or developed without the use of any CL Confidential Information by employees of
HJL, alone or together with any Third Party (including Affiliates, agents or
consultants of HJL or a person or entity working in any fashion on the behalf of
HJL but excluding CL), during the term of this Agreement, or prior to the
Effective Date.

 

1.36.

GMP/QSR Regulations shall mean the Good Manufacturing Practices/Quality System
Regulations set forth in 21 C.F.R. Section 820.

 

1.37.

Indemnifying Party shall have the meaning set forth in Section 12.3.

 

1.38.

Initial Build Inventory shall have the meaning set forth in Section 5.1.

 

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[***] – CONFIDENTIAL PORTIONS OF THIS AGREEMENT WHICH HAVE BEEN REDACTED ARE
MARKED WITH BRACKETS (“[***]”). THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY
WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION.

 

1.39.

Initial Term shall have the meaning set forth in Section 10.1.

 

1.40.

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,
(e) all proprietary rights relating thereto, including all applications,
registrations, extensions, divisionals and renewals in connection therewith and
(f) all documents and information relating to the foregoing.

 

1.41.

Manufacturer of Record shall mean the Party who owns the Premarket Clearance and
is responsible for compliance with conditions of clearance of the Premarket
Clearance and for all communications with the Notified Body regarding CE Mark
designations. For purposes of this Agreement, HJL shall be the Manufacturer of
Record for all Products.

 

1.42.

Manufacturing Reimbursement shall have the meaning set forth in Section 5.1.

 

1.43.

MDR shall have the meaning set forth in Section 2.6.

 

1.44.

Medical Device Establishment Registration shall have the meaning set forth in
Section 2.1.

 

1.45.

Net Sales means the total sales of CL from the commercial distribution of
Products excluding fees, freight and shipping costs, and reduced by credits and
returns.

The term “Net Sales” shall not include revenue received by CL (or any of its
Affiliates) from transactions with an Affiliate of CL unless such Affiliate is
the end user of the Product.

 

1.46.

New Product shall mean any improvement to or modification of the Product that
affects the form, fit or function and for which a new regulatory submission or
clearance from a regulatory body is required.

 

1.47.

New Product Development Notice shall have the meaning set forth in Section 4.5.

 

1.48.

Non-Breaching Party shall have the meaning set forth in Section 12.1.

 

1.49.

Notified Body shall mean a certification organization which the competent
national authority of a European member state designates to carry out compliance
assessments of the Products in the relevant market.

 

1.50.

Nonconforming Product shall have the meaning set forth in Section 6.7.

 

1.51.

Option shall have the meaning set forth in Section 16.1.

 

1.52.

Option Acquisition Price shall mean: (i) [***] multiplied by CL’s Net Sales for
the [***] full calendar quarters immediately prior to the date that CL provides
HJL with written notice of the exercise of the Option plus the Royalty Payment.

 

1.53.

Option Period shall have the meaning set forth in Section 16.2.

 

1.54.

Party(ies) shall have the meaning set forth in the preamble.

 

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[***] – CONFIDENTIAL PORTIONS OF THIS AGREEMENT WHICH HAVE BEEN REDACTED ARE
MARKED WITH BRACKETS (“[***]”). THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY
WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION.

 

 

1.55.

Product(s) shall mean Vascular Bioprosthesis for vascular access and peripheral
vascular indications that is currently branded as ProCol®, but shall not include
products intended for Coronary Indications with a diameter of 3 mm or less and a
length of 20 cm or less.

 

1.56.

Product Information shall have the meaning set forth in Section 11.1

 

1.57.

Profit Sharing Payments shall have the set forth in Section 7.6.

 

1.58.

Purchased Assets shall have the meaning set forth in Section 16.1.

 

1.59.

Remedial Action shall have the meaning set forth in Section 2.5.

 

1.60.

Renewal Period shall have the meaning set forth in Section 10.1.

 

1.61.

Requested Delivery Date shall have the meaning set forth in Section 6.5.

 

1.62.

Royalty Payment shall mean for the [***] year period following the closing of
the acquisition of the assets underlying the Option, the following royalty paid
by CL to HJL: an amount equal to [***]% of CL’s Net Sales, provided that in no
event shall such Royalty Payment exceed $[***] in any 12 month period or $[***]
in the aggregate. Such Royalty Payment shall be paid quarterly within 60 days
after the end of each calendar quarter.

 

1.63.

Rules shall have the meaning set forth in Section 17.1.

 

1.64.

Shipping Point shall have the meaning set forth in Section 6.6.

 

1.65.

Specifications shall mean the documents describing the form, fit and function of
the Products that obtain FDA Approval under the FDA’s premarket approval process
including (i) HJL’s design and functionality specifications relating to the
Products and (ii) any specifications for manufacturing, testing, storing,
packaging, shipping or labeling the Products consistent with regulatory
requirements as may be amended or revised from time to time as set forth herein.
Current Specifications for each product category have been agreed to by the
Parties herein, and they may be changed from time to time by the agreement of
the Parties herein.

 

1.66.

Technology shall have the meaning set forth in Section 4.2.

 

1.67.

Territory shall mean worldwide.

 

1.68.

Third Party shall mean any person or entity other than a Party or an Affiliate.

 

1.69.

Transfer Prices shall have the meaning set forth in Section 7.1.

 

1.70.

United States shall mean the several states of the United States of America and
the District of Columbia, and the territories and possessions of the United
States, including the Commonwealth of Puerto Rico.

 

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1.71.

Vigilance Report shall mean the incident report for death or serious injury
required under the post market surveillance system as defined by the European
Council Directive 93/42/EEC or the relevant and applicable equivalent of any
other regulatory body.

ARTICLE 2

REGULATORY

 

2.1.

Medical Device Establishment Registration.  HJL shall maintain a Medical Device
Establishment Registration (as defined under the Act) as Manufacturer of Record
and Specifications developer for the Products, as is required.

 

2.2.

U.S. Approval/Clearance.    HJL shall be responsible, at its expense, for filing
and obtaining and maintaining (including development of and compliance with
necessary quality programs) all necessary authorizations from regulatory
authorities in the United States including the FDA, necessary for the sale of
the Products in the United States (“CL Required Markets”). HJL’s obligations
under this Section 2.2 shall include the preparation and filing of any required
submissions and the establishment and oversight of any required clinical
investigations and clinical follow-up relating to future commercial sale of the
Products in, at a minimum, the CL Required Markets. HJL will provide CL with
drafts of all proposed filings with any U.S. federal, state or foreign
regulatory agency for review and comment by CL in advance of filing with the
applicable authority.

 

2.3.

Foreign Approvals.    To the extent mutually agreed, HJL shall be responsible,
on a timely basis, for filing, obtaining and maintaining all necessary “device”
or “medical” regulatory approvals from foreign regulatory authorities necessary
for the commercial sale of the Products in markets other than the United States
(“Foreign Approvals”). The expense for obtaining such approvals shall be CL’s
responsibility. Except as otherwise required by law or agreed by the Parties,
HJL shall be primarily responsible for all dealings with the appropriate
competent authority such as notification, medical device vigilance and national
labeling issues, and HJL shall bear final legal responsibility for the content
of all its own labeling, provided however that if it chooses, CL may make such
filings and HJL shall supply assistance as reasonably requested by CL.

 

2.4.

Manufacturing Compliance.    In the event that HJL determines that its
manufacturing and/or quality systems, or any portion thereof, are not in
compliance with any Applicable Law, it shall immediately notify CL in writing.
Within three business days of such determination, HJL shall provide in writing
to CL justification for non-compliant processes and an explanation of the
controls that will be implemented to improve those processes.

 

2.5.

Remedial Actions.  Each Party will notify the other immediately, and promptly
confirm such notice in writing, if it obtains information indicating that any of
the Products may be subject to any recall, field corrective action or other
regulatory action (other than a corrective and preventive action (“CAPA”) under
the Act) with respect to a Product taken either by virtue of applicable federal,
state, foreign or other law or regulation or good business judgment (a “Remedial
Action”). The Parties will assist each other in gathering and evaluating such
information as is necessary to determine the necessity of conducting a Remedial
Action; provided that CL shall have sole responsibility for collecting
information from its customers, including customer complaints. HJL will
determine in good faith and in consultation with CL whether to commence any
Remedial Action with respect to the Product. Each Party will maintain adequate
records to permit the Parties to trace the manufacture of the Product and the
distribution and use of the Product. In the event that HJL determines that any
Remedial Action with respect to the Product should be commenced or that a
Remedial Action is required by any governmental authority having jurisdiction
over the matter, HJL will control and coordinate all efforts necessary to
conduct such Remedial Action. If HJL conducts any Remedial Action related to the
Product and HJL is determined to be responsible for the problem requiring the
Remedial Action (i.e., a problem arises from faulty manufacture), HJL, at CL’s
option, will either issue a credit to CL or reimburse CL for the sales price of
all CL devices recalled in such Remedial Action and the other

 

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reasonable costs incurred by CL of conducting such Remedial Action. HJL shall
have sole responsibility for handling any CAPA’s. CL shall cooperate with HJL to
the extent reasonably requested by HJL in handling any CAPA, provided that its
reasonable costs in assisting with the CAPA will be reimbursed by HJL.

 

2.6.

Complaints and Medical Device Reporting.  Each Party will comply with applicable
provisions of the Medical Device Reporting systems, including the requirements
of 21 CFR Part 803, and each Party will cooperate with the other for the
efficient compliance therewith. CL and HJL agree to notify the other within two
(2) business days of receipt from any customer of any complaint or fileable
Medical Device Report (“MDR”) relating to the Product. HJL will investigate such
complaint or MDRs/Vigilance Reports and forward to CL all information relating
to any defects in the performance, design, or quality of the Products. HJL shall
investigate all instances of product failure or inadequacy documented by CL and
forwarded by CL for investigation. HJL shall provide a written summary of the
findings from such investigation to CL within seven days following the date that
HJL is informed of such complaint or MDR. HJL shall have sole responsibility for
filing the MDR with the appropriate regulatory agency.

 

2.7.

Vigilance Reporting.    HJL will notify CL in writing if a Vigilance Report is
required to be filed with respect to the Product. HJL, at its sole cost and
expense, will be responsible for complying with Vigilance Reporting requirements
for the Product. HJL will remain responsible for any and all Product
investigation as provided in Section 2.6.

 

2.8.

CL Audits.    HJL will give CL reasonable access to its records and facilities
to allow CL to conduct full compliance audits relating to the Product, its
manufacture and the Product’s regulatory and quality status, at CL’s expense, as
reasonably deemed necessary by CL, but no more frequently than once in any 12
month period, unless CL determines in good faith that exceptional circumstances
require more frequent audits. The audit may include, without limitation, records
relating to manufacturing compliance with the Specifications, compliance with
quality control and inspection reports procedures, compliance with GMP/QSR
Regulations, CE Mark certification records and procedures, regulatory
compliance, and after the following certifications have been obtained compliance
with ISO 13485:1996 and EN 46001 requirements. Such audits will be conducted
during HJL’s normal business hours, after three business days’ prior written
notice to HJL by CL. HJL will make its regulatory compliance and quality
assurance personnel reasonably available to CL in connection with such audits.
If CL recommends any corrective actions to HJL in connection with such audits,
HJL will take any corrective action recommended by CL within 30 days of receipt
of any corrective action recommendations, if possible, or will inform CL in
writing of the reasons why HJL believes such corrective action is not required
or cannot be completed within such 30 day period. CL will be given access to
audit any corrective action.

 

2.9.

Regulatory Inspections.    HJL will promptly notify CL of any inspection of its
facilities manufacturing the Product or any component part of a Product by the
FDA, ISO, CE Mark certification organization or other federal, state, local or
other regulatory agency which relates to the manufacture, assembly, packaging or
regulatory status of the Product and provide CL with information about the
progress and outcome of such inspection, including, without limitation, copies
of any notice of observations or warnings, requests for Remedial Action, CAPA’s
or other adverse findings. [Add initial inspection language].

 

2.10.

Additional Quality Requirements.  HJL shall comply with those additional quality
requirements set forth in Exhibit A.

ARTICLE 3

AUDIT RIGHTS

CL and its Affiliates shall maintain accurate books and records in accordance
with generally accepted accounting principles showing sales of the Products by
CL and its Affiliates in sufficient detail to enable Net

 

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Sales to be determined. In addition, each Party shall maintain accurate books
and records in accordance with generally accepted accounting principles to
enable each Party to monitor compliance by the other with the terms of this
Agreement. Each Party (or its accountants) shall have the right to inspect such
books and records at reasonable intervals (but no more frequently than once in
any twelve month period) and upon reasonable prior written notice. Such
inspections shall occur during normal business hours at the offices of the Party
being inspected and at the expense of the inspecting Party; provided, however,
that if such inspection shall reveal an overpayment or underpayment by a Party
of amounts actually due of more than five percent (5%), then the Party being
inspected shall bear the expense of such inspection. Any deficiencies in payment
or overpayments shall be immediately due and payable together with interest at
the rate of eighteen percent (18%) per annum from the date or dates such amounts
should have been paid.

ARTICLE 4

APPOINTMENT AS EXCLUSIVE DISTRIBUTOR

 

4.1.

Scope and Consideration.  Subject to the terms and conditions of this Agreement,
HJL grants to CL and its Affiliates the exclusive right to market, sell and
distribute the Products in the Territory.

 

4.2.

Exclusivity.    CL’s distribution rights under this Agreement shall be exclusive
in the Territory for the Products. HJL shall not sell the Products to any party
except to CL. In addition, HJL shall not license or transfer the technology,
consisting of know-how and manufacturing equipment necessary or helpful for the
manufacture of the Products and the process employed in the manufacture thereof
(the “Technology”), to any Third Party that would enable or allow such Third
Party to manufacture the Products or other products or services competitive with
the Products without CL’s prior written consent. HJL represents and warrants to
CL that HJL has not entered into any other agreements, written or oral, with any
Third Party permitting any party other than HJL from manufacturing, selling or
distributing Products in the Territory, and covenants and agrees that during the
term of this Agreement, HJL will (i) not enter into any such agreement in the
Territory or (ii) itself sell, market, promote, manufacture or distribute any
Products in the Territory (except in accordance with this Agreement) or any
products or services competitive with the Products without CL’s prior written
consent.

 

4.3.

Subdistributors and Subagents.    CL may appoint subdistributors or subagents
for distribution of the Products in the Territory, and may provide to HJL a list
of such subdistributors from time to time. Notwithstanding such appointment of
subdistributors, CL shall remain fully responsible for the performance of all of
its covenants and obligations hereunder, and any sales by HJL to such
subdistributor requested by CL shall be billed by HJL to CL directly.

 

4.4.

Additional Products.    CL’s right to distribute Products under this Agreement
includes the right to distribute Additional Products. If HJL, individually or
jointly with CL, develops Additional Products during the term of this Agreement,
HJL shall notify CL in writing promptly after HJL estimates the date that such
Additional Product will be available for commercial sale in the Territory, and
this Agreement shall automatically be amended to include any such Additional
Products, with CL’s written consent.

 

4.5.

New Products.  If HJL develops a New Product during the term of this Agreement,
HJL shall notify CL in writing (a “New Product Development Notice”) promptly
after HJL estimates the date that such New Product will be available for
commercial sale in the Territory, and, subject to CL’s written consent, such new
Product shall be deemed to be part of this Agreement.

 

4.6.

Ownership.  Ownership of and rights to New Products, Additional Products and
other developments and inventions that are developed jointly by CL and HJL shall
be determined in accordance with Applicable Law, including applicable patent
law.

 

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ARTICLE 5

MANUFACTURING REIMBURSEMENT AND INITIAL BUILD

 

5.1.

Manufacturing Reimbursement.

 

  (a)

CL shall reimburse HJL for certain of HJL’s costs to restart and validate its
manufacturing operations at HJL’s facility at 70 Doppler, Irvine, California, in
an amount of up to $2,258,070 (such amount shall be the “Manufacturing
Reimbursement”). Such Manufacturing Reimbursement shall also be used by HJL to
obtain FDA Approval for manufacturing the Products to allow for commercial sale
by CL, including the manufacture of commercially saleable units of Products.
Such Manufacturing Reimbursement shall be advanced to HJL according to the
budget as detailed in Exhibit B every calendar quarter commencing on the
Effective Date. In the event the Effective Date is not April 1, 2014, CL shall
make an initial Manufacturing Reimbursement payment equal to a pro rata amount
of the payments specified in the budget based on the remaining days in that
calendar quarter, if any. Following the end of each calendar quarter period, a
reconciliation shall be made with HJL and CL of actual expenditures during the
quarter. In order to facilitate such reconciliation, HJL shall provide CL with
supporting documentation and data along with other information reasonably
requested by CL for CL to verify expenditures incurred by HJL (such amount the
“Actual Quarterly Spend”). If the Actual Quarterly Spend is within five percent
of the quarterly Manufacturing Reimbursement (pro-rated if the Effective Date is
not on April 1, 2014), no adjustment to future Manufacturing Reimbursements will
be made. If any quarter’s Manufacturing Reimbursement is greater than the Actual
Quarterly Spend by five percent or more, CL may recoup the excess by offsetting
that amount against any future Manufacturing Reimbursement payment or any other
future payments otherwise owed to HJL.

 

  (b)

CL may discontinue the Manufacturing Reimbursement at any time if HJL has
manufactured 1500 commercially saleable units of Product but has not obtained
the necessary FDA Approvals to allow CL to sell such Product. In such case, CL
shall only be required to resume such Manufacturing Reimbursement once FDA
Approval is obtained thereafter. CL may also discontinue the Manufacturing
Reimbursement in the event it becomes reasonably apparent that HJL will not be
able to obtain FDA Approval within nine months, or HJL will not be able to
satisfy its material obligations under this Agreement for six months or more.

 

  (c)

Notwithstanding anything herein to the contrary, in no event shall CL be
required to reimburse HJL more than $2,258,070 in total or $650,000.00 in any
individual quarter for the Manufacturing Reimbursement.

 

  (d)

HJL shall manufacture and deliver 3800 units of saleable Product to CL and CL is
not required to pay any amount for such units except the Manufacturing
Reimbursement (such amounts the “Initial Build Inventory”).

 

5.2.

Existing Inventory.  In consideration for the Manufacturing Reimbursement, CL
shall own and have the exclusive right to market, distribute and sell all units
of Products currently saleable located at HJL’s facility (the “Existing
Inventory”), or use such inventory as samples in the sales process, a schedule
of Existing Inventory along with the shelf life of the Existing Inventory has
already been provided by HJL to CL. HJL shall ship such Products as and when
directed by CL and CL shall be entitled to all revenues associated with such
shipment (although CL will reimburse HJL’s shipping fees associated with such
shipment).

 

5.3.

Initial Build Inventory.  In consideration of the Manufacturing Reimbursement,
HJL shall manufacture and deliver 3800 units (in addition to the Existing
Inventory) of commercially saleable Product to CL as directed by CL. All Product
manufactured by HJL shall first be allocated to the Initial Build Inventory and
other inventory necessary to validate the manufacturing process described in
Section 5.1. The Parties shall mutually agree on the size configurations of the
Initial Build Inventory. HJL

 

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shall ship the Initial Build Inventory as and when requested by CL, including to
CL for CL to ship and sell to others. CL shall own all such Initial Build
Inventory and shall be entitled to all revenues associated with such sales
(although CL will reimburse HJL’s shipping fees associated with HJL’s
shipments). HJL will not manufacture more than 900 commercially saleable units
of the Products for the Initial Build Inventory in any calendar quarter, or 1500
commercially saleable units of the Product for the Initial Build Inventory in
the aggregate, prior to receiving FDA Approval without CL’s prior written
consent.

 

5.4.

Security Interest.  In order to secure HJL’s obligations under this Agreement,
HJL shall provide CL with a first priority security interest in all Initial
Build Inventory and shall take all steps and execute all documents reasonably
requested by CL to effectuate same, including entering into a security agreement
mutually agreed to by the Parties and executed simultaneously herewith.

ARTICLE 6

SUPPLY AND ORDERS FOR PRODUCTS

 

6.1.

Purchase Orders.  CL shall submit purchase orders to HJL for the Products
pursuant to Section 6.3. once the following has occurred: (i) HJL notifies CL in
writing that it has the capability to manufacture the Products in accordance
with the Specifications and Applicable Law and (ii) CL determines the Initial
Build Inventory shall be exhausted within 90 days, or that it needs additional
inventory, Each purchase order shall cover the portion of the forecast that has
become a firm order under Section 6.3 of this Agreement and shall, at a minimum,
include: (a) identification of the Products ordered; (b) quantity; (c) requested
delivery date; and (d) shipping instructions and shipping address. CL may issue
additional purchase orders and/or earlier purchase orders other than those
described in the first sentence of this Section 6.1.

 

6.2.

Acceptance of Orders.  Except as otherwise provided in Section 6.4, all purchase
orders issued in accordance with this Agreement shall be automatically accepted
by HJL. Purchase orders for the Products must be received by HJL at least 30
days prior to delivery date requested. Each purchase order shall be deemed to be
an offer by CL to purchase the Products pursuant to the terms of this Agreement
and shall give rise to a contract between CL and HJL for the sale of the
Products ordered and shall be subject to and governed by the terms of this
Agreement solely and to no other terms including the provisions of the Uniform
Commercial Code. The terms and conditions of this Agreement shall govern and
supersede any additional or contrary terms set forth in CL’s purchase order or
any HJL or CL acceptance, confirmation, invoice or other document, unless the
specific additional or contrary terms are stated in writing and duly signed by
the CFO or CEO of CL and an officer of HJL. With each lot of Products
manufactured by HJL, HJL shall supply to CL documentation certifying in writing
that each shipment of Products complies with (i) the then current Specifications
and with the testing procedures described therein; and (ii) all other
documentation agreed to by CL and HJL.

 

6.3.

Forecasts.  Commencing within 10 business days of the occurrence described in
the first sentence of Section 6.1, CL shall provide to HJL a written rolling
12-month forecast (with such first forecast to be for less than 12 months if the
first forecast is not issued at the beginning of a calendar quarter). The first
three months of each forecast shall constitute a firm order to purchase the
units of the Products specified in the forecast. The first forecast for the
first three months shall not exceed 1500 units without the consent of HJL. The
balance of each forecast shall constitute a non-binding good faith estimate of
expected orders for Products.

 

6.4.

Order Limitations.    HJL shall maintain an adequate inventory of the Products
and shall notify CL immediately in writing upon becoming aware of any actual or
potential interruption in supply. HJL shall not be required to deliver
quantities in excess of 120% of forecasted requirements unless HJL

 

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has been given at least 90 days advance written notice of the quantities to be
delivered which exceed the forecasted amounts. Notwithstanding the foregoing HJL
shall use all commercially reasonable efforts to supply quantities in excess of
120% of forecasted requirements that were given with less than 90 days advance
notice.

 

6.5.

Modification of Orders.    Except as otherwise provided in Section 6.4, no
purchase order shall be modified or canceled except upon the mutual agreement of
the Parties, which shall not be unreasonably withheld by either Party. Mutually
agreed change orders shall be subject to all provisions of this Agreement,
whether or not the changed purchase order so states. Notwithstanding the
foregoing, any purchase order may be canceled by CL as to any Products which are
not delivered within 10 days of the delivery date requested by CL pursuant to a
purchase order submitted to HJL under Section 6.1 and accepted by HJL under
Section 6.2 (the “Requested Delivery Date”), and any such cancellation shall not
limit or affect any contract remedies available to CL with respect thereto.

 

6.6.

Shipment.    All Products sold by HJL to CL shall be shipped by HJL free on
board (“F.O.B.”) HJL’s facility (the “Shipping Point”) addressed to CL’s address
(or such other address as set forth by CL). All shipments of Existing Inventory
and Initial Build Inventory shall be shipped by HJL FOB Shipping Point also as
directed by CL. HJL shall bear all risk of loss prior to HJL’s delivery of the
Products to a common carrier at the Shipping Point, and shall have no further
responsibility for the Products after it has delivered the Products to the
common carrier. CL assumes all risk of loss upon HJL’s delivery of the Products
to a common carrier at the Shipping Point. CL shall pay all loading, freight,
shipping, insurance, forwarding and handling charges, fees, storage, and all
other charges applicable to the Products after they are delivered by HJL to the
common carrier at the Shipping Point.

 

6.7.

Inspection.    HJL will inspect and test the Product as required by the
Specifications, including the Existing Inventory and Initial Build Inventory. CL
will inspect all incoming Product. Upon notification to HJL, CL will have the
right to reject any lot that contains Product that does not meet the
Specifications (“Nonconforming Product”). CL will provide HJL with information
as to the reason for the rejection of the Nonconforming Product including a
description of the test procedure and results, if any, on which the rejection is
based (i) within 60 days of receipt therefor with respect to nonconformities
that can be discovered with reasonable diligence, and (ii) for all other
Nonconforming Products, within 45 days after CL discovered or was informed by a
Third Party or should have discovered the nonconformity. HJL will instruct CL as
to the disposal or return of Nonconforming Product. In the event of
Nonconforming Product(s), HJL will be responsible for return shipping charges.
CL may issue a debit memorandum to HJL, which HJL will honor promptly for CL’s
benefit, for the purchase price, freight and related costs of the Nonconforming
Product and, HJL will promptly replace the Nonconforming Product and invoice CL
for the Product shipped to replace the Nonconforming Product at the time of
shipment of the replacement product.

 

6.8.

Process or Material Changes.

 

  (a)

No material changes, modifications, deviations or exceptions to the
Specifications, materials or fabrication manufacturing or packaging processes
may be made without CL’s consent and 60 days prior written notice by HJL to CL.

 

  (b)

Any such material changes, modifications, deviations or exceptions proposed to
be implemented by HJL shall be subject to prior review by CL for safety,
regulatory issues and efficacy and shall not be implemented for at least such 60
day period or longer as required to address CL’s concerns, if any.

 

  (c)

HJL shall provide, at its sole cost and expense, a limited number of samples of
the Product incorporating the proposed change for such prior evaluation during
the 60 day period.

 

11

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6.9.

Packaging, Sterilization and Labeling.  HJL shall be responsible for packaging,
labeling, instructions for use, and any necessary sterilization of Products
purchased under this Agreement. HJL shall deliver the text of proposed
packaging, labeling, and instructions for use to CL for its review and comment
prior to printing. HJL shall prepare packaging, labeling and instructions for
use in all foreign languages that CL reasonably requests. HJL shall be
responsible for the costs of translating the labels and instructions for use
into any foreign language. CL hereby grants HJL a limited, non-exclusive,
license to use CL’s name and the CL trademark and design in accordance with CL’s
instructions, solely for purposes of packaging and labeling Products sold by HJL
to CL or its Affiliates under this Agreement.

 

6.10.

Subcontracts and Suppliers.  If CL is required to place its CE Mark
certification on the Product, HJL will promptly supply CL a list of HJL’s
subcontractors and suppliers contributing to the manufacture of the Product.
After HJL has supplied CL with such list, HJL shall provide CL with at least 30
days’ notice of any proposed change in such subcontractors and suppliers and
will allow audits of its subcontractors and suppliers.

ARTICLE 7

PRICES AND PAYMENTS

 

7.1.

Transfer Prices.    The purchase price of all Products sold to CL hereunder,
F.O.B. Shipping Point, (“Transfer Prices”) shall be as agreed by the Parties in
a separate document containing Transfer Prices and other miscellaneous terms.
For avoidance of doubt the Parties hereto provide however that Existing
Inventory and Initial Build Inventory are owned by CL due to the Manufacturing
Reimbursement.

 

7.2.

Payment Terms.  HJL will invoice CL upon delivery of Products. Invoices for
Products shall be due and payable in full within 37 days from the date of
invoice.

 

7.3.

Taxes.  The Transfer Prices for Products do 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 imposed on CL
by any country in the Territory. CL shall pay or reimburse HJL for all such
amounts incurred in connection with CL’s purchase of Products; provided,
however, that HJL shall pay all income, excise or franchise taxes imposed upon
the manufacturing activities or income of HJL.

 

7.4.

Resale Prices.    CL may resell the Products at such prices, as CL in its sole
discretion, shall determine.

 

7.5.

Distribution Fee.    CL shall retain a certain amount of the sales price of each
Product as a distribution fee to compensate CL for its sales and marketing costs
(the “Distribution Fee”) as agreed to separately by the Parties.

 

7.6.

Profit Sharing Payments.  Within 60 days after each calendar quarter during
which Product sales to a Third Party occur by CL under this Agreement (excluding
sales of the Initial Build Inventory and Existing Inventory), CL will pay to HJL
a profit sharing payment that will compensate HJL for, among other things, HJL’s
training of CL personnel, sales, marketing, regulatory and clinical support for
the Product (“Profit Sharing Payment”) based on the following formula:

Net Sales of the Products, less each of the following attributable to the sales
of the Products: (i) the Distribution Fee and (ii) the Transfer Prices. The
result shall be divided by two to determine the Profit Sharing Payment earned by
HJL.

 

12

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Such Profit Sharing Payment shall be accompanied by a report setting forth in
reasonable detail the calculation of the Profit Sharing Payment.

ARTICLE 8

GENERAL RIGHTS AND OBLIGATIONS OF CL

 

8.1.

Sales and Marketing.  CL will provide its standard level of sales and marketing
support for the Products and will use commercially reasonable efforts to
promote, market, sell and to distribute the Products in the Territory. CL will
develop and produce brochures and other marketing and sales literature for the
Product as it deems appropriate.

 

8.2.

Post-Marketing Studies.  CL may, in its sole discretion and at its expense,
pursue authorship and publication of post-marketing or white paper studies to
increase market awareness of the Products. HJL will assist CL by providing
marketing and other materials and manufacturing information reasonably necessary
to support such studies. CL shall provide HJL with sufficient opportunity to
review any such proposed publications and CL shall agree not to publish HJL
Confidential Information or publish any information that will affect HJL’s
ability to seek patent protection on the Product or related technology or
know-how. HJL shall inform CL promptly in the event that HJL becomes aware of
(i) post-market clinical studies being conducted involving the Product, or
(ii) literature or unpublished reports of data from any clinical or non-clinical
laboratory studies involving the Product.

 

8.3.

Marketing Materials.  CL shall be responsible for the preparation of sales and
marketing materials for the Products, including (subject to Section 6.9), the
translation, adaptation and/or modification of HJL’s sales and marketing
materials, as deemed appropriate by CL, to reflect local culture or business
practices and languages, and to reflect CL as the exclusive distributor of the
Product. HJL will cooperate with CL in the preparation of CL’s sales and
marketing materials.

 

8.4.

Alteration of Products.  CL, its Affiliates and agents shall not, in any way,
alter the Products or remove, cover, change, alter or add to the labels attached
to the Products by HJL, except with HJL’s prior written approval.

 

8.5.

Import and Export Approvals.  CL shall be responsible for obtaining all import
and export licenses and permits (other than regulatory approvals described in
Article 2) as may be required to export the Products from the United States and
to import the Products into such countries as are selected by CL in accordance
with then-prevailing laws and regulations of such countries. All such filings
and registrations of the Products shall be in the name of CL, whenever feasible
in accordance with prevailing laws and regulations. HJL shall cooperate fully
with CL in its efforts to obtain any such approvals.

ARTICLE 9

GENERAL RIGHTS AND OBLIGATIONS OF HJL

 

9.1.

Manufacture and Supply of Products.  HJL shall exercise all reasonable and
appropriate actions to develop the capability to manufacture the Products in
commercially appropriate quantities in accordance with the Specifications and
Applicable Law, including obtaining FDA Approval. Thereafter, during the term of
this Agreement, HJL shall manufacture and sell Products to CL in accordance with
the Specifications and the terms and conditions set forth in this Agreement. If
HJL (i) is unable to provide Product to CL within 90 days of the delivery/due
date in any order or in accordance with this Agreement, (ii) does not obtain FDA
Approval to manufacture the Product within nine months from the Effective Date
of this Agreement, or (iii) is unable meet the volume requirements established
in accordance with this Agreement, then CL may manufacture the Products itself
or through a Third Party

 

13

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and HJL shall provide all documentation and reasonable assistance necessary for
CL to manufacture or have manufactured the Products. HJL shall escrow the
instructions, know-how and Specifications required to manufacture the Product
with a Third Party reasonably acceptable to both Parties. The escrow agreement
shall provide that if any of the foregoing occurs, then CL shall have access to
the escrowed information and CL may manufacture or have manufactured the Product
either itself or by a Third Party.

 

9.2.

Training and Support.  HJL shall (a) assist, at no charge, in the training of
CL’s sales personnel representing the Products with respect to the promotion and
use of the Products; and (b) travel, at CL’s sole cost and expense, with CL’s
sales personnel to assist in problem solving, market needs identification and
general market development, in each case as may be reasonably requested by CL.
Travel, hotel and any other direct expenses must be pre-approved by CL and will
be billed at cost. It is expected that air travel will be in coach class only
and moderately priced hotels will be used. CL’s corporate travel department is
available upon a request to the appropriate business contact at CL in the event
there is difficulty meeting these requirements. Rental cars may be used if less
expensive than alternate means of transportation. Any additional expenses
incurred for the purpose of delivering the activities in this Section must be
approved in writing by CL.

 

9.3.

Marketing Samples.  HJL will provide to CL at no charge, non-sterile samples of
the Products in a variety of sizes related to its start-up of the manufacturing
of the Products, but at a minimum, no less than 50 samples. CL will provide such
samples to its sales force and customers at no charge. At CL’s request, HJL
shall also (i) provide to CL at no cost any Products in HJL’s possession or
control which do not meet the Specifications for use solely as non-useable
samples, and (ii) sell to CL additional non-sterile samples at 50% of the
Transfer Price.

 

9.4.

Marketing, Artwork and Sales Leads.  HJL shall provide reasonable support to CL
as needed in the marketing and sale of the Products, including contacting key
opinion leaders and assisting with the launch of the Product and providing
training. HJL shall provide camera ready artwork and copies of all advertising
and marketing support materials in its possession or control that are necessary
or helpful for the sale and marketing of the Products in the Territory. HJL
shall forward to CL all leads for sales of Products in the Territory.

 

9.5.

Information Provided. During the period from the Effective Date until FDA
Approval is received, in order to keep CL fully informed of the progress and
activity of HJL in furtherance of this Agreement, HJL shall (i) make its
management and other personnel reasonably available to CL to meet in person or
by teleconference as requested by CL, and (ii) allow CL reasonable access to the
premises of HJL upon reasonable notice.

ARTICLE 10

TERM AND TERMINATION

 

10.1.

Term.  This Agreement shall take effect as of the date first above written and
shall continue in force for a period of three years (the “Initial Term”) from
the Effective Date. Thereafter, this Agreement shall automatically renew for up
to two consecutive one year terms (each a “Renewal Period”), unless CL gives
written notice of termination to the other at least six months prior to the end
of the Initial Term or a Renewal Period, as applicable.

 

10.2.

Termination.   Notwithstanding the provisions of Section 10.1, this Agreement
may only (to the exclusion of any otherwise Applicable Law) be terminated in
accordance with the following provisions:

 

  (a)

Either Party may terminate this Agreement at any time by giving notice in
writing to the other Party, which notice shall be effective upon dispatch,
should the other Party file a petition of any type as to its bankruptcy, be
declared bankrupt, become insolvent, make an assignment for the

 

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benefit of creditors, go into liquidation or receivership, or otherwise lose
legal control of its business.

 

  (b)

CL may terminate this Agreement by giving notice in writing to HJL should an
event of Force Majeure, as defined below, continue for more than six months.

 

  (c)

CL may terminate this Agreement by giving 30 days’ notice in writing to HJL,
which notice shall be effective upon dispatch, if there shall occur a Change in
Control of HJL.

 

10.3.

Rights and Obligations on Termination.  In the event of termination of this
Agreement for any reason, the parties shall have the following rights and
obligations:

 

  (a)

Termination of this Agreement shall not release either Party from the obligation
to make payment of all amounts then or thereafter due and payable.

 

  (b)

The terminating Party shall have the right, at its option, to cancel any or all
purchase orders that provide for delivery after the effective date of
termination.

 

  (c)

CL shall be permitted to resell any inventory of Products on hand at the time of
termination and for a period of 18 months thereafter.

 

  (d)

CL may satisfy any tenders and other contractual commitments which extend beyond
the effective date of termination, and HJL shall continue to comply with all of
its obligations under this Agreement necessary or appropriate to allow CL to
satisfy such commitments including providing appropriate Products to CL at the
Transfer Prices set forth herein as if the Agreement were still in effect.

 

  (e)

HJL shall not use CL’s model numbers for the Products except for any Products
sold to CL, and shall identify the Products only by model numbers that are not
confusingly similar to CL’s designated model numbers.

 

  (f)

CL’s and HJL’s obligations pursuant to Sections 2.6, 2.8, 2.9, 2.10, 8.4, 8.5
and Articles 1, 3, 7, and 11 - 19 shall survive termination of this Agreement.
All other provisions of this Agreement shall terminate upon termination of this
Agreement.

ARTICLE 11

PRODUCT WARRANTIES

 

11.1.

Warranty.  HJL warrants to CL that: (i) the Products, including the Existing
Inventory and Initial Build Inventory, delivered to CL under this Agreement will
be saleable and useable in a clinical setting and will conform to the then
current and agreed Specifications for Products; (ii) the Products, including the
Existing Inventory and Initial Build Inventory, will be free from defects in
design, manufacturing, materials and workmanship under normal intended use and
service, in accordance with all Applicable Laws and requirements including, but
not limited to, the Act and GMP/QSR Regulations; (iii) the Products, including
the Existing Inventory and Initial Build Inventory, have been manufactured,
tested, stored, packaged, labeled and shipped in compliance with the
Specifications and all Applicable Laws including, but not limited to, the Act
and GMP/QSR Regulations; (iv) the Product information (including instructions
and information relating to the storage, handling, maintenance, transportation
and implantation of the Product labeling) and related Product information
provided by HJL (“Product Information”) shall be accurate and complete in all
respects; (v) the Products shall have a shelf life of at least 54 months with at
least 42 months shelf life remaining when received by CL (not including the
Existing Inventory); (vi) HJL’s manufacturing facility is and at the time of
manufacture shall be in compliance with all GMP/QSR Regulations and ISO
13485:1996, EN 46001 requirements; (vii) HJL has and at the time of manufacture
shall have all approvals and consents required to mark

 

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the Products with a CE Mark; and (viii) the Products, including the Existing
Inventory and Initial Build Inventory, are free and clear of any liens, security
interests or encumbrances of any nature whatsoever. CL shall have available the
remedies provided for in Section 6.7 in the event any Products do not meet the
foregoing warranties prior to returning any Products alleged to be defective, CL
shall notify HJL in writing of the claimed defect and shall include the lot and
serial number of such Products, as well as the number and date of the invoice
therefor.

 

11.2.

Limited Warranty.  THE WARRANTIES SET FORTH IN SECTION 11.1 ARE INTENDED SOLELY
FOR THE BENEFIT OF CL. ALL CLAIMS THEREUNDER SHALL BE MADE BY CL AND MAY NOT BE
MADE BY CL’S CUSTOMERS. THE WARRANTIES SET FORTH IN SECTION 11.1 ARE IN LIEU OF
ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, WHICH ARE HEREBY DISCLAIMED AND
EXCLUDED BY HJL, INCLUDING WITHOUT LIMITATION ANY WARRANTY OF MERCHANTABILITY OR
FITNESS FOR PARTICULAR PURPOSE. THE SOLE AND EXCLUSIVE REMEDIES OF CL FOR BREACH
OF THE WARRANTY DESCRIBED IN SECTION 11.1 SHALL BE LIMITED TO THE REMEDIES
PROVIDED IN THIS AGREEMENT.

 

11.3.

CL Warranty Obligations.  CL shall not make any representations or warranties
with respect to HJL’s liability therefore except as set forth in this Article.

 

ARTICLE 12

REPRESENTATIONS, WARRANTIES AND INDEMNIFICATION

 

12.1.

Indemnification.

 

  (a)

Cross Indemnity.  HJL and CL each (when indemnifying such party is the
“Breaching Party”) hereby agree to indemnify, defend and hold the other (the
“Non-Breaching Party”) harmless from and against all suits, actions, claims,
demands, causes of action, judgments, liabilities and expenses (including court
costs and reasonable attorneys’ fees) (“Claims”) which arise or result from the
Breaching Party’s misrepresentations of any representation contained herein, or
default in the observance or performance of any term or provision of this
Agreement. Further, the Breaching Party agrees to indemnify, defend and hold the
Non-Breaching Party harmless from and against all Claims which arise or result
from activities on the part of the Non-Breaching Party, based on actual or
alleged violations by the Breaching Party of Applicable Laws.

 

  (b)

Products Liability.  HJL hereby agrees to defend, indemnify and hold CL and its
Affiliates (each a “CL Indemnified Party”) harmless from and against all Claims
which arise out of or result from personal injury or death incident to the use
of any Products to the extent resulting from: (i) an inadequacy in the Product
Information, (ii) the failure of the Products to meet the Specifications or
(iii) the failure of the Products to be manufactured, tested, stored packaged,
labeled and shipped in compliance with all Applicable Laws.

 

    

CL hereby agrees to defend, indemnify and hold HJL and its Affiliates (each a
“HJL Indemnified Party”) harmless from and against all Claims which arise out of
or result from personal injury incident to the use of any Products to the extent
resulting from the negligent or wrongful acts or omissions of CL.

 

 

12.2.

Insurance Requirements.  CL and HJL shall each possess insurance in the amounts
and types set forth below.

 

  (a)

HJL Insurance Requirements.  HJL will carry product liability insurance covering
any loss, damage, expense or liability incurred or suffered by any party other
than HJL arising out of any use of a Product as agreed to by the Parties. Such
policy or policies, which may include umbrella or excess liabilities coverage,
shall (i) have aggregate limits of liability as agreed to by

 

16

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the Parties with respect to any incident or occurrence and of not less than an
amount agreed to by the Parties in the aggregate on the Effective Date;
(ii) provide for a deductible or retained amount agreed to by the parties; and
(iii) provide that such policy may not be canceled except upon written notice in
accordance with policy provisions. Upon request, HJL shall provide such evidence
of the effectiveness of such insurance to CL.

 

  (b)

CL Insurance Requirements.  CL will carry product liability insurance covering
any loss, damage, expense or liability incurred or suffered by a party other
than CL arising out of any use of a Product as agreed to by the Parties. Such
policy or policies, which may include umbrella or excess liability coverage
shall (i) have aggregate limits of liability agreed to by the Parties with
respect to any incident or occurrence and of not less than an amount agreed to
by the Parties in the aggregate; (ii) provide for a deductible or retained
amount agreed to by the Parties; and (ii) provide that such policy may not be
canceled except upon written notice to both HJL in accordance with the policy
provisions. Upon request, CL shall provide evidence of the effectiveness of such
insurance to HJL.

 

12.3.

Third Party Claims.  If a Claim by a Third Party is made against an Indemnified
Party (whether a HJL Indemnified Party or a CL Indemnified Party) and if the
Indemnified Party intends to seek indemnity with respect thereto from the other
Party (the “Indemnifying Party”) under this Article 12, such Indemnified Party
shall promptly notify the Indemnifying Party of such Claim; provided, however,
that the failure to give timely notice shall not affect the rights of the
Indemnified Party so long as such failure to give timely notice does not
adversely affect the Indemnifying Party’s ability to defend such Claim against a
Third Party. The Indemnifying Party shall be entitled to assume the defense
thereof, with counsel selected by the Indemnifying Party and reasonably
satisfactory to the Indemnified Party. The Indemnifying Party shall have control
of the defense of any such action, including any appeals and negotiations for
the settlement or compromise thereof and shall have authority to enter into a
binding settlement or compromise; provided that, the Indemnifying Party shall
not enter into any settlement or compromise or take any other action with
respect to the Claim which may adversely affect the Indemnified Party without
the Indemnified Party’s prior written consent, which consent shall not be
unreasonably withheld, conditioned or delayed. The Indemnified Party may
participate, at its own cost and expense, in the defense of any such Claim;
provided, however, that such defense shall be controlled by the Indemnifying
Party.

 

12.4.

Cooperation as to Indemnified Liability.  Each Party hereto shall reasonably
cooperate with other parties with respect to access to books, records, or other
documentation within such Party’s control, if deemed reasonably necessary or
appropriate by any Party in the defense of any Claim, which may give rise to
indemnification hereunder.

 

12.5.

CL’s Representations and Warranties.  CL hereby represents and warrants to HJL
that as of the date hereof:

 

  (a)

CL is a corporation duly organized, validly existing and in good standing under
the laws of Florida, and this Agreement has been duly authorized by all
necessary corporate action.

 

  (b)

This Agreement is the legal, valid and binding obligation of CL, enforceable
against CL in accordance with its terms.

 

  (c)

Neither the execution and delivery of this Agreement nor the compliance with the
terms and conditions hereof will conflict with, result in a breach or violation
by CL of or constitute a default under any of the terms, conditions or
provisions of any contract, agreement or other instrument to which CL is or may
be bound or affected.

 

  (d)

CL has full right, power and authority to enter into this Agreement and to grant
to HJL the rights granted and to be granted hereunder.

 

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  (e)

CL is not under any obligations inconsistent with the provisions of this
Agreement.

 

12.6.

HJL’s Representations and Warranties.  HJL hereby represents and warrants to CL
that as of the date hereof:

 

  (a)

HJL is a corporation duly organized, validly existing and in good standing under
the laws of Delaware, and this Agreement has been duly authorized by all
necessary corporate action.

 

  (b)

This Agreement is the legal, valid and binding obligation of HJL, enforceable
against HJL in accordance with its terms.

 

  (c)

Neither the execution and delivery of this Agreement nor the compliance with the
terms and conditions hereof will conflict with, result in a breach or violation
by HJL of or constitute a default under any of the terms, conditions or
provisions of any contract, agreement or other instrument to which HJL is or may
be bound or affected.

 

  (d)

HJL is the sole and exclusive owner of the HJL Inventions and HJL Confidential
Information, free and clear of any security interests, claims, encumbrances or
charges of any kind, and has full right, power and authority to enter into this
Agreement and to grant to CL the rights granted and to be granted hereunder.

 

  (e)

To the best of HJL’s knowledge, HJL Inventions are valid and enforceable, and
the rights and licenses granted under this Agreement do not infringe any patent,
copyright, trademark, license or other Intellectual Property right of any Third
Party and do not misappropriate any trade secret of any Third Party.

 

  (f)

All proprietary technical information developed by and belonging to HJL that has
not been patented has been kept confidential.

 

  (g)

Except as otherwise set forth on Exhibit C, HJL has not patented or applied for
patent protection on any the technology it proposes to use in developing the
Product.

 

  (h)

HJL is not under any obligations inconsistent with the provisions of this
Agreement.

 

ARTICLE 13

CONFIDENTIAL INFORMATION

 

13.1

Confidentiality.  Except as otherwise specifically provided in this Agreement,
CL and HJL each agree that during the term of this Agreement and for a period of
five years thereafter, it will: (i) not use any of the other Party’s
Confidential Information, for any purpose other than as permitted or required
for performance by such Party under this Agreement; (ii) not disclose or provide
any of the other Party’s Confidential Information to any Third Party; and
(iii) to take all reasonably necessary measures to prevent any such disclosure
by its employees, agents, contractors or consultants (who shall only be advised
of such Confidential Information on a need to know basis in furtherance of this
Agreement). Each Party shall advise its employees, agents, contractors and
consultants of the requirements of this Article 13 prior to any disclosure of
the other Party’s Confidential Information to them and shall be responsible to
ensure their compliance with such provisions. Any such employee, agent,
contractor or consultant must be subject to a contractual restriction on use and
disclosure of the Confidential Information consistent with the terms of this
Article 13. Upon request of the other Party or termination of this Agreement,
each Party shall return all such Confidential Information to the other Party
except for one copy which may be retained for archival purposes otherwise
subject to this Article 13.

 

13.2

Existence of Agreement.  The existence of this Agreement and the participation
of the Parties in it

 

18

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shall be deemed to be Confidential Information subject to the provisions of this
Article 13. Any publication, public reference or other transfer of information
into the public sector regarding the relationship as defined in the Agreement or
any of the terms contained in the Agreement shall be prohibited without prior
written consent of the other Party.

 

13.3

Exclusions to Confidential Information.  Confidential Information of either
Party shall exclude information that:

 

  (a)

was already in the possession of receiving Party prior to its receipt from the
disclosing Party (provided that the receiving Party is able to provide the
disclosing Party with reasonable documentary proof thereof);

 

  (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, to the best of receiving Party’s knowledge, has
rightfully obtained such information and has no obligation of non-disclosure or
confidentiality to the disclosing Party with respect thereto;

 

  (d)

is made available by the disclosing Party to a Third Party unaffiliated with the
disclosing Party on an unrestricted basis;

 

  (e)

is independently developed by the receiving Party completely without reference
to any Confidential Information of the disclosing Party, as evidenced by the
receiving Party’s written records; or

 

  (f)

has been or must be publicly disclosed by reason of legal accounting or
regulatory requirements beyond the reasonable control, and despite the
reasonable efforts of the receiving Party.

 

13.4

Required Disclosures.  In the event of any disclosures pursuant to
Section 13.3(f) the receiving Party shall provide (i) prompt prior written
notice that is reasonable under the circumstances to the disclosing Party, and
(ii) reasonable assistance to the disclosing Party in order to obtain a
protective order or otherwise prevent public disclosure of such Confidential
Information at the disclosing Party’s expense. If the disclosing Party fails to
obtain a protective order or other appropriate remedy, the receiving Party will
furnish only that portion of the Confidential Information that is legally
required to be disclosed as advised by its legal counsel.

 

ARTICLE 14

PATENTS AND INTELLECTUAL PROPERTY RIGHTS

 

14.1.

Defense of Claims.  HJL shall, at its own expense, defend any Claim instituted
or asserted against CL which is based on an allegation that any Product
constitutes an infringement of any Intellectual Property right protected under
the laws of the United States, any state of the United States, or any other
nation. HJL shall have control of the defense of any such Claim, including any
appeals and negotiations for the settlement or compromise thereof and shall have
full authority to enter into a binding settlement or compromise; provided that,
HJL shall not enter into any settlement or compromise which may adversely affect
CL without CL’s consent, which consent shall not be unreasonably withheld,
conditioned or delayed. HJL shall indemnify CL against any award of damages and
costs made against CL as a result of any such action. Notwithstanding the
foregoing, CL may participate, at its own cost and expense, in the defense of
any such Claim; provided, however, that such defense shall be controlled by HJL.

 

14.2.

Limitation of Liability.  HJL shall have no liability of any kind to CL under
Section 14.1 to the extent any such Claim is based upon or arises out of (a) the
use of any Product in combination with an apparatus or device not manufactured,
supplied or approved by HJL, (b) the use of any Product in a manner for

 

19

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which it was not designed or intended to be used based upon the Product
Information, or (c) any modification of any Product by CL or any Third Party
which causes it to become infringing.

 

14.3.

Potential Infringement Remediation.  If any Product is held to constitute an
infringement or misappropriation of any Third Party’s Intellectual Property
rights, if HJL and CL concur that any Product constitutes such an infringement
or misappropriation, or if CL is advised by its legal counsel that any Product
potentially infringes or misappropriates any Third Party’s Intellectual Property
right, HJL shall at its expense either: (i) procure the right for CL to continue
distributing the Products in accordance with this Agreement at no additional
cost to CL (ii) replace the Product with a non-infringing and
non-misappropriating equivalent product conforming to the Specifications at no
additional cost to CL, or (iii) modify the Product to make it non-infringing and
non-misappropriating while conforming to the Specifications at no additional
cost to CL. In the event that HJL is unable to or does not secure sufficient
rights to permit CL to sell or market the Products in the manner contemplated by
this Agreement within a reasonable time, HJL shall, at CL’s option, promptly
repurchase the entire Product inventory held by CL and its subdistributors at
the original purchase price (including shipping, customs and related costs), and
CL shall be immediately released of its obligation under this Agreement to sell,
market and promote the Products without waiving any rights available against HJL
for such a breach of this Agreement.

 

14.4.

Intellectual Property.  HJL represents and warrants to CL that: (a) HJL owns,
possesses, or licenses all rights to use all Intellectual Property and know-how
used in the development, manufacture or sale of the Products (“HJL Intellectual
Property”); (b) no Claim is pending or threatened to the effect that the Product
or HJL’s use of HJL Intellectual Property infringes upon or conflicts with the
any Third Party’s Intellectual Property rights, and, to the best of HJL’s
knowledge, there is no basis for any such Claim; (c) no Claim is pending or
threatened to the effect that any such HJL Intellectual Property is invalid or
unenforceable by HJL, and, to the best of HJL’s knowledge, there is no basis for
any such Claim (whether or not pending or threatened); (d) all proprietary
technical information developed by and belonging to HJL which has not been
patented has been kept confidential; (e) the HJL Intellectual Property is not
being and has not been actually or potentially infringed by any company, person
or entity; (f) HJL has not granted any license or other right that would be
inconsistent with or conflict with the grant of the rights granted to CL under
this Agreement.

 

14.5.

Protection of HJL’s Intellectual Property.  HJL shall be responsible for filing
and prosecuting all U.S. and foreign patent, copyright and trademark
applications it deems necessary or appropriate to protect HJL Intellectual
Property.

 

14.6.

Each Party shall promptly notify the other Party of any and all actual or
potential infringements of the HJL Inventions of which such Party becomes aware
within the Territory. HJL shall, at its own cost, take any and all actions,
legal or equitable, necessary to prevent such infringements and to eliminate or
minimize the consequences of any such infringement. At HJL’s request and
expense, CL will provide reasonable assistance to HJL in taking action against
any such infringements. If HJL fails to take appropriate action against such
infringements within 60 days after notice, CL may take such actions at HJL’s
expense as CL deems necessary and appropriate, including but not limited to
filing a lawsuit against the infringing or potentially infringing Third Party
(and/or their patents) in HJL’s name or its own name and/or requesting that
patent offices (or their equivalents) reconsider the validity of Third Party
patents and HJL shall reasonably assist CL.

 

ARTICLE 15

TRADEMARKS

 

15.1.

License.  HJL hereby grants to CL a non-exclusive, non-transferable, and
royalty-free right and license to use those HJL trademarks, trade names and
logotypes identified on Exhibit C in connection

 

20

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with the sale, distribution, promotion and advertising of the Products as long
as such trademarks are used by CL in accordance with HJL’s standards,
specifications and instructions of which CL has been advised in writing, but in
no event beyond the term of this Agreement, subject to any post termination
rights provided for herein. CL shall not acquire any right, title or interest
under the laws of any nation in such trademarks, trade names or logotypes of HJL
other than the foregoing limited license and shall not attempt to assert or
register any such right, title or interest. CL shall not use any of HJL’s
trademarks, trade names or logotypes as part of CL’s corporate or trade names or
permit any Third Party to do so without the prior written consent of HJL. CL
shall permit HJL to inspect any material on which HJL’s trademarks, trade names
and logo types appear, and CL agrees to make any changes in future materials
reasonably required by HJL. CL shall in addition have the right to promote and
sell the Products under trademarks, trade names and logotypes of CL selected by
CL, which trademarks, trade names and logotypes shall be and shall remain the
property of CL.

 

15.2.

Infringement.  CL shall promptly notify HJL of any use by any Third Party of
HJL’s trademarks, trade names or logotypes or any use by such Third Parties of
similar marks which may constitute an infringement or passing off of HJL’s
trademarks, trade names or logotypes of which CL has knowledge. HJL reserves the
right in its sole discretion to institute any proceedings against such Third
Party infringers and CL shall refrain from doing so. CL agrees to provide
reasonable cooperation to HJL in any action taken by HJL against such Third
Parties, provided that all expenses of such action shall be borne by HJL and all
damages which may be awarded or agreed upon in settlement of such action shall
accrue to HJL.

 

15.3.

Termination of Use.   CL acknowledges HJL’s proprietary rights in and to HJL’s
trademarks, trade names and logotypes, and CL hereby waives all right to any
trademarks, trade names and logotypes now or hereafter originated by HJL. CL
shall not adopt, use or register any words, phrases or symbols which are
identical to or confusingly similar to any of HJL’s trademarks. Upon termination
of this Agreement, CL shall cease using HJL’s trademarks, trade names and
logotypes in any manner, subject to CL’s right, if any, to continue to sell
Products held in inventory or if CL purchases or otherwise licenses such rights
to the trademarks, trade names and logotypes pursuant to a separate agreement or
agreements, in which case such agreement(s) shall control.

 

ARTICLE 16

OPTION TO PURCHASE AND RIGHT OF FIRST REFUSAL

 

16.1.

Option to Purchase.  HJL grants to CL the exclusive right and option (the
“Option”) to allow CL to acquire all assets (the “Purchased Assets”) of HJL
relating to the Products and the HJL Intellectual Property, all documents and
information relevant thereto and all equipment and tooling necessary or helpful
for the manufacture of the Products as forth in this Section. This Option shall
survive the acquisition of HJL or substantially all of HJL’s assets or a Change
in Control of HJL. The Option may be exercised by CL any time commencing 25
months after the Effective Date of this Agreement, or sooner in the event HJL or
substantially all of HJL’s assets are acquired by CL delivering written notice
to HJL. The agreement to acquire the Purchased Assets (the “Acquisition
Agreement”) free and clear of all liens and encumbrances shall be negotiated in
good faith promptly by both Parties at such time as CL exercises the Option. The
Acquisition Agreement shall include, without limitation, representations,
warranties, covenants and indemnities that are usual and customary in a
transaction of this nature as such may be mutually agreed upon between the
Parties, including: (i) covenants by HJL not to compete directly or indirectly
with the Products in the Territory for a period of five years, (ii) to assist CL
with training, the transfer of all HJL Intellectual Property relating to the
Products, (iii) the sale and marketing of the Products during a transition
period of the transfer of the Products and (iv) those items set forth on Exhibit
D attached hereto. Subject to the satisfaction of all conditions precedent
contained in the Acquisition Agreement, CL’s obligation to execute, deliver and
perform the Acquisition Agreement shall be conditioned upon approval of the
transaction by the CL Board of

 

21

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Directors and any requirements of Applicable Laws. As consideration for the
purchase of the Purchased Assets, CL shall pay to HJL at the closing of the
transaction the Option Acquisition Price. The Parties acknowledge that they may
need to enter in a post-closing supply agreement whereby HJL will continue to
manufacture the Products for CL at a transfer price to be agreed (which shall
not include any profit sharing provision) in which case there should be a
corresponding reduction in the Option Acquisition Price.

 

16.2.

Right of First Refusal.

 

  (a)

If HJL receives any bona fide offer(s) to purchase in one transaction or series
of transactions, or reaches an agreement in principal (subject to CL’s rights
under this Article) with, or otherwise determines that it is willing to accept
an offer from, any Third Party, which agreement(s) or offer(s) includes terms
and provisions regarding the sale, license or other transfer of any HJL
Intellectual Property and/or all equipment, facilities and tooling used in the
development, manufacture, processing, packaging, sterilization, or sale of
products for Coronary Indications (whether as an entire product line, or as one,
several or all of the Products, but excluding any transaction involving a Change
in Control of HJL) (in each case a “Disposition”), then HJL shall, within five
business days after receipt of any such offer or agreement in principal, or
after such determination, notify CL in writing thereof ( “HJL Disposition
Notice”). Any HJL Disposition Notice shall (i) specify the pricing, terms,
conditions, timing and all material provisions with respect to the proposed
transaction, (ii) identify the proposed party or parties to such transaction,
and (iii) include a copy of the proposed agreement in principal or offer for the
proposed transaction between HJL and the proposed Third Party or parties.

 

  (b)

CL shall have the irrevocable right and option (the “First Refusal Option”),
exercisable in writing to HJL any time within 60 days after CL’s receipt of the
HJL Disposition Notice (the “Option Period”), to elect to enter into such
proposed transaction upon the same or comparable pricing (or the monetary
equivalent of any non-monetary consideration), terms, conditions and other
material provisions as set forth in HJL’s Disposition Notice. If the
consideration proposed to be paid for the Disposition is in property, services
or other non-cash consideration, the fair market value of the non-cash portion
of the consideration shall be determined in good faith by HJL’s Board of
Directors and set forth in the HJL Disposition Notice (such amount to be subject
to agreement by CL). If CL cannot for any reason pay in the same form of
non-cash consideration, CL shall pay the cash value equivalent thereof (unless
in the case of stock consideration, HJL consents to CL providing capital stock
of CL of an equal value as mutually determined by HJL’s and CL’s Board of
Directors). If CL elects to exercise its First Refusal Option, HJL and CL shall
use their best efforts to consummate such proposed transaction within 60 days
following exercise of the First Refusal Option by CL.

 

  (c)

If CL fails to exercise its First Refusal Option to enter into such proposed
transaction, HJL and the proposed party identified in the HJL Disposition Notice
may complete such proposed transaction upon the pricing, terms, conditions and
material provisions specified in the HJL Disposition Notice; provided that, if
(i) HJL and such Third Party fail to complete such transaction within 90 days
after the expiration of CL’s First Refusal Option, (ii) if any of the pricing,
terms, conditions or other material provisions contained in HJL’s Disposition
Notice are modified so as to be less favorable to HJL, or (iii) if the identity
of such Third Party changes, provided that an Affiliate of such third party
shall not be considered a change of identity of such Third Party, then, in any
such event, HJL shall provide a new HJL Disposition Notice to CL, and CL shall
have a new First Refusal Option pursuant to the procedures above with respect to
such delayed or modified proposed transaction.

 

16.3.

Failure to Agree.  In the event the Parties are not able to reach agreement on
all or any part of this Article 16, the matter in dispute (including determining
the appropriate representations, warranties, covenants and indemnities for the
Acquisition Agreement and finalizing the remainder of the terms of the
Acquisition Agreement if the Parties are able to reach agreement on certain or
all terms) shall be resolved by binding arbitration in accordance with Article
17 below.

 

22

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ARTICLE 17

ARBITRATION

 

17.1.

Disputes.  Any dispute, controversy or claim arising out of or relating to this
Agreement, or the breach, termination or invalidity thereof, shall be finally
settled by arbitration in accordance with the Commercial Arbitration Rules (the
“Rules”) of the American Arbitration Association (“AAA”) in effect on the date
of this Agreement by a single arbitrator who shall be experienced in the medical
device industry and who shall be appointed in accordance with the Rules and such
arbitration shall be administered by AAA with a single arbitrator selected from
a list of arbitrators proposed by AAA in accordance with the Rules. The
arbitrator shall allow such discovery as is appropriate and consistent with the
purposes of the arbitration in accomplishing fair, speedy and cost-effective
resolution of disputes. The costs of the arbitration including the arbitrators’
fees shall be shared equally by the Parties. Judgment upon the award rendered in
any such arbitration may be entered in any court of competent jurisdiction, or
application may be made to such court for a judicial acceptance of the award and
enforcement, as the law of such jurisdiction may require or allow. The place of
arbitration shall be Atlanta, Georgia.

 

17.2.

Governing Law.  This Agreement shall be governed by, and interpreted and
construed in accordance with the laws of the State of Georgia.

 

ARTICLE 18

FORCE MAJEURE

 

18.1.

Force Majeure Definition.  Force Majeure shall mean 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 or which renders the performance of such obligations so
difficult or costly as to make such performance commercially unreasonable.
Without limiting the foregoing, the following shall constitute events or
conditions of Force Majeure: riots, civil or military disturbances, war,
epidemics, fire, flood, hurricane, typhoon, earthquake, lightning, and
explosion.

 

18.2.

Notice.  Upon giving notice to the other Party, a Party affected by an event of
Force Majeure shall be released without any liability on its part from the
performance of its obligations under this Agreement, except for the obligation
to pay any amounts due and owing hereunder, but only to the extent and only for
the period that its performance of such obligations is prevented by the event of
Force Majeure. Such notice shall include a description of the nature of the
event of Force Majeure, its cause and possible consequences. The Party claiming
Force Majeure shall promptly notify the other Party of the termination of such
event.

 

18.3.

Suspension of Performance.   During the period that the performance by one of
the Parties of its obligations under this Agreement has been suspended by reason
of an event of Force Majeure, the other Party may likewise suspend the
performance of all or part of its obligations hereunder, except for the
obligation to pay any amounts due and owing hereunder, to the extent that such
suspension is commercially reasonable.

 

ARTICLE 19

MISCELLANEOUS

 

19.1.

Relationship.    This Agreement does not make either Party the employee, agent
or legal representative of the other for any purpose whatsoever. Neither Party
is granted any right or authority to assume or to create any obligation or
responsibility, express or implied, on behalf of or in the name

 

23

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of the other Party. In fulfilling its obligations pursuant to this Agreement
each Party shall be acting as an independent contractor.

 

19.2.

Assignment.  Except as otherwise provided in this Agreement, neither Party may
assign or otherwise transfer its rights and obligations under this Agreement
without the prior written consent of the other Party. Notwithstanding any other
provision in this Agreement to the contrary, and subject to CL’s rights as set
forth in Article 16, either Party may assign this Agreement to a company
controlling, controlled by or under common control with the assigning Party, or
to its successor in connection with a Change in Control of such Party. Any
prohibited assignment shall be null and void. All terms and conditions of this
Agreement shall be binding on and inure to the benefit of the successors and
permitted assigns of the Parties.

 

19.3.

Notices. Notice permitted or required to be given under this Agreement shall be
deemed sufficient if given in writing by commercial air delivery service or by
registered or certified air mail, postage prepaid, return receipt requested,
addressed to the respective addresses of the Parties set forth below or at such
other address as the respective Parties may designate by like notice from time
to time. Notices so given shall be effective upon the earlier of: (a) receipt by
the Party to which notice is given; (b) on the seventh business day following
the date such notice was deposited in the mail; or (c) when received. Notices
shall be given as follows:

 

If to HJL:    Hancock Jaffe Laboratories, Inc.      

70 Doppler

      Irvine, CA 92618       Attn:  Norman Jaffe    If to CL:    CryoLife, Inc.
      1655 Roberts Blvd. NW       Kennesaw, GA 30144       Attn:  CEO       With
a copy to CL’s General Counsel at the same address

 

19.4.

Entire Agreement.  This Agreement, including the exhibits attached hereto and
incorporated as an integral part of this Agreement, constitutes the entire
agreement of the Parties with respect to the subject matter hereof, and
supersedes all previous proposals, oral or written, and all negotiations,
conversations or discussions heretofore had between the Parties related to this
Agreement.

 

19.5.

Amendment.  This Agreement shall not be deemed or construed to be modified,
amended, rescinded, canceled or waived, in whole or in part, other than by
written amendment signed by the Parties hereto, except as expressly provided in
this Agreement.

 

19.6.

Severability. In the event that any of the terms of this Agreement are in
conflict with any rule of law or statutory provision or otherwise unenforceable
under the laws or regulations of any government or subdivision thereof, such
terms shall be deemed stricken from this Agreement, but such invalidity or
unenforceability shall not invalidate any of the other terms of this Agreement
and this Agreement shall continue in force, unless the invalidity or
unenforceability of any such provisions of this Agreement substantially
violates, comprises an integral part of or is otherwise inseparable from the
remainder of this Agreement.

 

19.7.

Counterparts.   This Agreement shall be executed in two or more counterparts,
and each such counterpart shall be deemed an original hereof.

 

24

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19.8.

Waiver.  No failure by either Party to take any action or assert any right
hereunder shall be deemed to be a waiver of such right in the event of the
continuation or repetition of the circumstances giving rise to such right.

 

19.9.

Use of Certain Words.   Throughout this Agreement, the use of the words “and” or
“or” shall be deemed to refer to “and/or” and the use of the word “including”
shall be deemed to refer to “including but not limited to.”

 

19.10.

Publications.   HJL and CL may pursue publication of the results of any clinical
study or trial conducted with respect to Products including white paper
publications by CL to expand market usage for Products. The Party seeking to
publish shall provide the non-publishing Party with sufficient opportunity to
review any such proposed publications and make recommendations as to revisions
to any such proposed publication. Notwithstanding the foregoing, neither Party
shall publish the other Party’s Confidential Information, without the express
written consent of the non-publishing Party, which consent may not be
unreasonably withheld, conditioned or delayed, or publish any information that
will affect the non-publishing Party’s rights under this Agreement or ability to
seek patent protection.

 

IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed on the
date first above written.

 

CryoLife, Inc.

    Hancock Jaffe Laboratories, Inc.  

By: /s/ D.A. Lee                                                  

    By: /s/ Norman Jaffe                                                       
 

Name: D. Ashley Lee                                        

    Name: Norman Jaffe                                                         

Title: EVP, COO and CFO                                 

    Title: President                                       
                          

 

25

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EXHIBIT A

 

ADDITIONAL QUALITY REQUIREMENTS

 

1.            All Products shall be assigned a specific HJL lot and/or serial
number. This number(s) shall be clearly identified on the Product and/or its
packaging, as well as on traceability records.

2.            HJL shall assign a quality representative for the duration of this
Agreement. This individual shall be responsible for overseeing HJL activities
that impact the Products and acting on HJL’s behalf in matters associated with
Product quality.

3.            HJL shall validate all instruments and equipment used during the
production of Products in accordance with the Specifications and Applicable
Laws.

4.            In all events, HJL shall provide reasonable resources, maintain
copies of all documentation, and perform failure investigation and reasonable
corrective and/or preventive actions with respect to any and all complaints.

5.            HJL shall define, implement, and maintain a CAPA process. This
process should include a disciplined approach to determining the root cause of
problems and issues and developing, implementing, and verifying the solutions
needed to resolve them. HJL’s CAPA process shall include provisions for
recording the following information associated with or having an impact upon the
Products:

 

                 —        Product statement                     —        Root
cause investigation method and results                     —        Solution
description and associated implementation plan                     —  
     Verification of implementation and effectiveness   

CAPA records shall be retained as required by Applicable Laws and shall be made
available to CL upon request.

 

26

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EXHIBIT B

HJL BUDGET

Confidential

 

ProCol® Manufacturing Budget
Projection 2014    January     February     March     April     May     June    
July     August     September     October     November     December       TOTAL
                                                     

Direct and Indirect Labor

    [***]         [***]         [***]         [***]         [***]      
  [***]         [***]         [***]         [***]         [***]      
  [***]         [***]       [***]

Raw Materials (Tissue)

    [***]         [***]         [***]         [***]         [***]      
  [***]         [***]         [***]         [***]         [***]      
  [***]         [***]       [***]

Supplies for Production

    [***]         [***]         [***]         [***]         [***]      
  [***]         [***]         [***]         [***]         [***]      
  [***]         [***]       [***]

Packaging

                [***]                     [***]                       [***]

Facilities

    [***]         [***]         [***]         [***]         [***]      
  [***]         [***]         [***]         [***]         [***]      
  [***]         [***]       [***]

Quality Tests, Audits, Outside Services

    [***]         [***]         [***]         [***]         [***]      
  [***]         [***]         [***]         [***]         [***]      
  [***]         [***]       [***]

Insurance

    [***]         [***]         [***]         [***]         [***]      
  [***]         [***]         [***]         [***]         [***]      
  [***]         [***]       [***]

Administrative

    [***]         [***]         [***]         [***]         [***]      
  [***]         [***]         [***]         [***]         [***]      
  [***]         [***]       [***]                                              
       

TOTAL

    [***]         [***]         [***]         [***]         [***]      
  [***]         [***]         [***]         [***]         [***]      
  [***]         [***]       [***]                          

Direct Labor - Includes Benefits

    [***]         [***]         [***]         [***]         [***]      
  [***]         [***]         [***]         [***]         [***]      
  [***]         [***]       [***]

# Employees

    [***]         [***]         [***]         [***]         [***]      
  [***]         [***]         [***]         [***]         [***]      
  [***]         [***]      

Indirect Labor - Includes Benefits

    [***]         [***]         [***]         [***]         [***]      
  [***]         [***]         [***]         [***]         [***]      
  [***]         [***]       [***]

# Employees

    [***]         [***]         [***]         [***]         [***]      
  [***]         [***]         [***]         [***]         [***]      
  [***]         [***]      

# Units / QTR

        [***]             [***]             [***]             [***]       [***]

Average ASP =[***]

                         

2014 Budget Provided by Hancock Jaffe to estimate 1st year costs of bringing
ProCol Online

 

[***] - CONFIDENTIAL PORTIONS OF THIS AGREEMENT WHICH HAVE BEEN REDACTED ARE

MARKED WITH BRACKETS (“[***]”). THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY

WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION.

 

27

--------------------------------------------------------------------------------

EXHIBIT C

HJL has no existing patents on technology it uses with the Product.

 

HJL TRADEMARKS

 

HJL Trademarks:

ProCol®

 

28