Document:

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                                                                   EXHIBIT 10.77

                                SUPPLY AGREEMENT

                                     BETWEEN

                            AASTROM BIOSCIENCES, INC.

                                       AND

                              MOLL INDUSTRIES, INC.
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                                SUPPLY AGREEMENT

      THIS SUPPLY AGREEMENT (this "Agreement") is made effective as of February
28, 2004 (the "Effective Date") by and between Aastrom Biosciences, Inc., a
Michigan corporation with principal offices at Domino's Farms, Lobby L, Ann
Arbor, Michigan 48106 ("AASTROM") and Moll Industries, Inc., a Delaware
corporation with offices at 13455 Noel Rd., Suite 1420, Dallas, TX 75240 37086
("MOLL").

                              W I T N E S S E T H:

      WHEREAS, AASTROM is developing medical devices to implement proprietary
cell production processes for cellular therapy procedures;

      WHEREAS, such development work has led to the development by AASTROM of
the AastromReplicell System(R), a proprietary medical device for the production
of human stem cells (the "AastromReplicell System"), consisting in part of
single-use, sterile culture chambers;

      WHEREAS, MOLL has expertise and experience in plastic injection molding,
in general, and in the production and assembly of plastic parts for products
that are classified as medical devices under the regulations of the U.S. Food
and Drug Administration (the "FDA"), in particular;

      WHEREAS, AASTROM and MOLL were parties to the Prior Agreement (as defined
below) under which MOLL manufactured and supplied Cell Cassettes (as defined
below) and Components (as defined below) to AASTROM that were manufactured in
accordance with the Specifications (as defined below);

      WHEREAS, in consideration of MOLL's expertise and stated intention to be a
cost effective and a capable manufacturer and supplier of Cell Cassettes and
Components, AASTROM desires for MOLL to be a manufacturer of such Cell Cassettes
and Components throughout the Term of this Agreement, and MOLL desires to be
such supplier for such period.

      NOW, THEREFORE, in consideration of these premises and the mutual
undertakings hereinafter set forth, and for other good and valuable
consideration given by AASTROM and MOLL to each other, the receipt and
sufficiency of which is hereby acknowledged, AASTROM and MOLL, intending to be
legally bound, agree as follows:

SECTION 1. DEFINITIONS.

      The terms set forth below when used with capital letters shall have the
meanings set forth below. Other terms are defined in the Sections of this
Agreement pertinent to their definitions.

(a)   "The Act"               The Act shall mean the Federal Food, Drug and
                              Cosmetics Act, 21 U.S.C. 301, et seq. (1938), as
                              amended, and the rules and regulations promulgated
                              thereunder.

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(b)   "Cell Cassette(s)"      Cell Cassette shall mean a single-use, sterile
                              cell culture chamber consisting of plastic
                              injection molded and other parts made, assembled
                              and encased in a plastic injection molded cassette
                              manufactured in accordance with the DMR and as
                              more particularly described in the Specifications
                              and used in the AastromReplicell System or similar
                              products made by or for AASTROM, and all
                              improvements and modifications to Components
                              thereof that are intended to replace the then
                              current Components.

(c)   "Component(s)"          Component shall mean any component part of a Cell
                              Cassette (e.g., the individual injection molded
                              pieces, bioreactor assembly or fluid pathway
                              tubing assembly) as more particularly described in
                              the Specifications.

(d)   "Confidential
      Information"            Confidential Information shall mean any and all
                              technical and non-technical information,
                              (including information disclosed by AASTROM under
                              the terms of the Confidentiality Agreement between
                              the Parties dated December 22, 1993 or in
                              furtherance of the Prior Agreement), data,
                              techniques, manufacturing procedures, know-how,
                              discoveries, inventions, trade secrets,
                              improvements or innovations that are maintained as
                              proprietary and confidential by the Party owning
                              or controlling the same; but Confidential
                              Information shall not include information that (i)
                              the Recipient can clearly demonstrate to have been
                              in its possession at the time Confidential
                              Information is disclosed to it, provided that,
                              such information is not known by the Recipient to
                              be subject to another confidentiality agreement
                              with, or under other obligation of secrecy to, the
                              Disclosing Party or another party, or (ii) becomes
                              generally available to the public other than as a
                              result of a disclosure by the Recipient, its
                              agents or employees, or (iii) becomes available to
                              the Recipient on a non-confidential basis from a
                              source other than the Disclosing Party, provided
                              that, the Recipient does not know, or have reason
                              to know, that such source is bound by a
                              confidentiality agreement with, or other
                              obligation of secrecy to the Disclosing Party or
                              another party, or (iv) the Recipient can clearly
                              demonstrate to have developed itself independent
                              of the Confidential Information, or (v) the
                              Disclosing Party consents in writing may be
                              disclosed by the Recipient.

(e)   "Disclosing Party"      Disclosing Party shall mean the Party disclosing
                              Confidential Information.

(f)   "DMR"                   DMR shall mean the Device Master Record for the
                              Cell Cassette consisting of a compilation of
                              records containing the procedures and
                              specifications for a finished device including the
                              complete

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                              manufacturing procedures and specification with
                              the necessary quality assurance requirements and
                              labeling and packaging requirements.

(g)   "Equipment"             Equipment shall mean the molds and other equipment
                              listed on Appendix I, annexed hereto, and
                              categorized as being provided either by AASTROM or
                              by MOLL. AASTROM Equipment shall also include any
                              equipment procured by MOLL for manufacture of the
                              Cell Cassettes in accordance with Section
                              21(b)(1).

(h)   "cGMPs"                 cGMPs shall mean the then-current Good
                              Manufacturing Practices (QSR) set out in 21 CFR
                              Part 820, et seq. applicable to a Class III
                              medical device that -- --- govern the methods used
                              in, and the facilities and controls used for the
                              design, manufacturing, packaging, labeling,
                              storage, installation, and servicing of all
                              finished devices intended for human use.

(i)   "Initial Term"          Initial Term shall have the meaning set forth in
                              Section 17.

(j)   "ISO"                   ISO (the International Standards Organization) is
                              a worldwide federation of national standards
                              bodies (ISO member bodies).

(k)   "Party or "Parties"     Party shall mean either AASTROM or MOLL, and
                              Parties shall mean both AASTROM and MOLL.

(l)   "Prior Agreement"       Prior Agreement shall mean that certain
                              Collaborative Supply Agreement dated December 16,
                              1996 between the Parties.

(m)   "Recipient"             Recipient shall mean the Party receiving
                              Confidential Information.

(n)   "Requirements"          Requirements shall mean the rolling four-month
                              firm forecast to be provided by AASTROM under
                              Section 3(a), below, of AASTROM's then-current
                              requirements for Cell Cassettes during the Term.

(o)   "Shipment Lot"          On a quarterly basis, concurrently with the
                              provision by AASTROM of its rolling twelve-month
                              forecast, the Parties shall mutually review and by
                              mutual written consent will specify the number of
                              Cell Cassettes that constitute a Shipment Lot, for
                              the purchase order to be submitted by AASTROM
                              during such quarter, considering volume
                              requirements and anticipated delivery schedules.
                              The mutually agreed upon quantity constituting the
                              Shipment Lot shall be reflected in each purchase
                              order submitted by AASTROM.

(p)   "Specifications"        Specifications shall mean the written
                              specifications for the manufacture of Cell
                              Cassettes and Components (including without
                              limitation the criteria for labeling and
                              packaging, including

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                              graphics, and quality assurance requirements)
                              annexed hereto as Appendix II, as such
                              Specifications may be changed pursuant to Section
                              6, below.

(q)   "Term"                  Term shall mean the period of time from the
                              Effective Date until the date upon which this
                              Agreement expires or is earlier terminated
                              pursuant to Section 17, below.

(r)   "UCC"                   UCC means the Uniform Commercial Code as enacted
                              by the State of New York and in effect during the
                              Term.

SECTION 2. PURCHASE AND SALE.

      AASTROM shall purchase from MOLL AASTROM's Requirements of Cell Cassettes,
and MOLL shall manufacture, assemble and sell to AASTROM all of AASTROM's
purchase orders for Cell Cassettes and Components, subject to the terms and
conditions of this Agreement including, without limitation, AASTROM's rights to
terminate this Agreement in whole or in part pursuant to Sections 6 or 17,
below, and its rights to utilize alternate suppliers of Cell Cassettes and
Components pursuant to Sections 3(b), 4(d), 17 or 18 below.

SECTION 3. FORECASTS; DELIVERY; SHIPMENT.

(a) Rolling Forecasts. At the beginning of each calendar quarter during the
Term, AASTROM shall provide MOLL with a rolling forecast of the anticipated
quantity of each model of Cell Cassettes AASTROM intends to purchase from MOLL
during each month of the following twelve-month period. The quantities given for
the first four months of each twelve-month rolling forecast shall be firm orders
for the immediately succeeding four months (i.e., a forecast given on January
1st would be deemed firm for the period May 1 - August 31) and AASTROM shall
issue its purchase order therefor and note on such purchase order the number of
units it will require for lot testing in accordance with Section 3(g), the
method of shipment and AASTROM destination for delivery, the scheduled delivery
date and the required documentation to be included with the Shipment Lot. MOLL
shall have no obligation to purchase materials or supplies without a purchase
order from AASTROM except as is necessary to meet AASTROM's forecasted
requirements. AASTROM shall pay MOLL for labor, materials, supplies and direct
costs (as set forth in Appendix III) expended by MOLL to fill purchase orders by
AASTROM for Cell Cassettes in the event that they are not used to fulfill such
purchase orders. Quantities forecasted beyond the four-month firm-order period
are for planning purposes only.

(b) No Limit on Sales. MOLL has no right to limit its sales of Cell Cassettes or
Components to AASTROM to a maximum number of units for any period; provided
that, the volume of Cell Cassettes and Components ordered is reasonable in the
light of forecasted amounts and previous delivery schedules. MOLL shall have
adequate capacity to meet AASTROM's then-current total firm-order requirements
as forecasted pursuant to Section 3(a), above. MOLL will take all steps to put
in place additional adequate capacity, if needed, to meet AASTROM's future
requirements as forecasted by AASTROM in accordance with Section 3(a), above;
provided that, the Parties shall cooperate to afford a reasonable transition to
the availability of such additional capacity. Notwithstanding any other
provision of this Agreement (specifically including Sections 2 and

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18), if MOLL is unable to meet AASTROM's requirements for Cell Cassettes
(including any request for an increase in production by AASTROM at any time
during the Term of this Agreement), AASTROM may thereafter utilize one or more
third party manufacturers for all or a portion of AASTROM's requirements for
Cell Cassettes. Furthermore, even if Moll is unable to produce entire Cell
Cassettes, Moll shall be obligated to supply components to AASTROM's Alternate
Supplier.

(c) No Liens. MOLL will deliver Cell Cassettes to AASTROM free and clear of all
liens, claims and encumbrances.

(d) Delivery. MOLL shall deliver Cell Cassettes, and upon AASTROM's request, any
certifications, manufacturing records and test reports as are required for
AASTROM to accept or reject Cell Cassettes under this Section 3, pursuant to
delivery schedules in AASTROM's purchase orders; provided, that, such schedules
are reasonable in light of forecasted amounts and previous delivery schedules.
Delivery schedules in AASTROM's purchase orders shall not be less than fifteen
(15) days after the date of submission by AASTROM of the purchase order without
MOLL's consent. In the event that AASTROM submits a purchase order in excess of
its forecasted requirements for said quarter, MOLL agrees to employ good faith
efforts to supply such larger quantity of Cell Cassettes within such a
reasonable period of time, as the Parties shall mutually agree. MOLL shall not
deliver Cell Cassettes more than ten (10) days prior to scheduled delivery dates
without AASTROM's prior consent. MOLL shall not be responsible for failure to
meet agreed-upon delivery dates if due to reasons of force Majeure as set forth
in Section 20, below or if delays are caused by Aastrom-specified
material/component suppliers or service providers outside of Moll's control.. In
the event of partial failure to deliver, MOLL will have the right to receive
payment pro rata for Cell Cassettes in fact delivered and not rejected by
AASTROM under Section 3(f), below.

(e) Shipment. MOLL shall make shipment to AASTROM's designated U.S. locations,
in accordance with AASTROM's purchase orders, F.O.B. destination. Risk of loss
or damage in transit shall remain with MOLL until delivered to the destination
specified by AASTROM. AASTROM shall notify MOLL within five (5) business days
after receipt if there are any shortages or evidence of damage in transit and
will cooperate with MOLL in any claim for loss or damage in transit that MOLL
makes against a carrier. The method and route of shipment are at AASTROM's
discretion as set forth in its purchase order. MOLL will prepay all costs,
insurance premiums, freight and other expenses incurred in shipment until
delivered to the destination specified by AASTROM and such shipping costs shall
be reimbursed by AASTROM at MOLL's cost without mark-up. If AASTROM defaults in
payment for Cell Cassettes, MOLL may suspend further shipments; however,
continuation of shipments does not constitute a waiver of such default.

(f) Acceptance Procedures. Delivery of each Cell Cassette unit shall be deemed
accepted by AASTROM unless MOLL is notified in writing of AASTROM's rejection of
such delivery within ninety (90) days after the delivery date (the "Acceptance
Period") due to non-conformance with the Specifications. In such case, AASTROM
shall provide MOLL with a written notice of rejection setting forth in detail
the reason for rejection and return the rejected Shipment Lot, or portion
thereof, to MOLL at MOLL's expense for repair or replacement. Upon receipt of
AASTROM's notice of rejection and return of such Shipment Lot of part thereof,

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MOLL shall (i) within ten (10) business days thereafter, provide AASTROM with a
root-cause analysis and suggested corrective/preventative actions; and (ii)
diligently replace the nonconforming Shipment Lot or part thereof by delivery of
non-defective conforming units within a reasonable time (not to exceed thirty
(30) calendar days after notification) and endeavor to resolve the issues
related to the rejection. MOLL shall credit against the purchase price of Cell
Cassettes and Components, AASTROM's out of pocket costs of testing, including,
without limitation, destructive testing of failed Shipment Lots. AASTROM shall
invoice MOLL for such costs, which shall be subject to reasonable audit by MOLL
or its representative. MOLL reserves the right, at MOLL's expense, to have one
or more representatives present at any inspection conducted by AASTROM and to
verify the results of any such inspection and rejection of Shipment Lots. MOLL
shall have the right to use conforming units or parts therefrom as replacement
units provided that such units or parts therefrom are in conformance with
Specifications. In the event MOLL cannot resolve all nonconformities and deliver
conforming replacement Cell Cassettes as required herein MOLL shall issue to
AASTROM a credit for the price of each unit rejected and AASTROM may pursue its
remedies pursuant to this Agreement, including but not limited to Section 17,
below. AASTROM shall pay for repair or replacement for defective Cell Cassettes
(or shall not receive a credit therefor) only to the extent that rejection is
due to a defective component supplied directly by AASTROM. In the event that
MOLL's delivery of Cell Cassettes fails to conform to the quantity specified in
AASTROM's purchase order, AASTROM may, but shall not be obligated to, accept
such partial shipment and MOLL shall deliver any shortfall in delivery quantity
within five (5) calendar days. Notwithstanding the foregoing, AASTROM agrees to
accept partial shipments from MOLL provided that the quantity delivered is at
least ninety percent (90%) of the quantity specified in AASTROM's purchase
order, but only if AASTROM may readily use such partial shipment for its
intended purposes, and AASTROM also agrees to use commercially reasonable
efforts to accept partial shipments of quantities of less than ninety percent
(90%) of the quantity specified in AASTROM's purchase order, but only if AASTROM
may readily use such partial shipment for its intended purpose(s). Any
acceptance of partial shipments by AASTROM shall not be deemed to waive
AASTROM's remedies under Section 17(d) and AASTROM shall be entitled to a
payment credit reflecting the extent of such unit shortfall under a partial
shipment. In the event MOLL fails to deliver any shortfall in quantity within
such five (5) day period, AASTROM may pursue its remedies pursuant to this
Agreement.

(g) Lot Testing. During the Acceptance Period, AASTROM shall have the right, but
not the obligation, to conduct lot testing on a statistically significant number
of units from each Shipment Lot. At the time of submission of AASTROM's purchase
orders in accordance with Section 3(a), AASTROM shall note on such purchase
order the number of units it requires for lot testing. Notwithstanding Section
4(a), MOLL agrees to provide such testing units to AASTROM at MOLL's cost to
manufacture such units (without mark-up) provided that the number of units
requested does not exceed 10% of the number of units ordered, and provided
further that any units provided by MOLL for lot testing shall not be resold by
AASTROM. Any lot testing conducted by AASTROM pursuant to this Section shall not
be deemed to relieve MOLL of any of its warranties or obligations hereunder.

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SECTION 4. PRICES.

(a) Cell Cassette Prices. Prices for Cell Cassettes purchased during the Term
shall be determined as shown in Appendix III, hereto. Prices are exclusive of
all taxes of any nature imposed by any governmental authority, except taxes
imposed on the income or profits of MOLL. All such taxes shall be for AASTROM's
account, whether or not collected, advanced or paid by MOLL, and shall be paid
by AASTROM, without mark-up, upon MOLL's invoice, unless AASTROM timely provides
proper tax exemption documents.

(b) Component Order and Prices. From time to time throughout the Term, AASTROM
may submit to MOLL purchase orders for Components and MOLL shall manufacture and
sell to AASTROM such Components in accordance with the terms of this Agreement
for the manufacture of Cell Cassettes, as they may be applicable, excepting only
the provisions of Sections 3(a) with regard to references to AASTROM's
obligation to forecast and purchase its specific Requirements from MOLL. Prices
for any Components purchased by AASTROM during the Term shall be quoted
separately by MOLL at the time of order with such quoted price not to exceed
MOLL's actual manufacturing costs to produce such Components, multiplied by the
applicable Mark-Up Rates (as set forth in Appendix III) then in effect for the
forecasted annual volume of Cell Cassettes to be purchased by AASTROM.

(c) Best Diligent Efforts. At all times during the Term of this Agreement, MOLL
shall use its best diligent efforts to manufacture Cell Cassettes, procure
components and perform other services as provided in this Agreement at the
lowest cost reasonably practicable. Furthermore, subject to Section 21 below, it
is the explicit understanding of the parties that MOLL will, on a proactive
basis and at no additional cost to AASTROM, seek out additional methods and
means that will lead to reduced costs, quality improvements and increased
efficiency with regard to the manufacture of Cell Cassettes. AASTROM will
reasonably cooperate with MOLL on such cost saving efforts.

(d) Cost Competitive. If AASTROM reasonably believes that MOLL is not remaining
cost competitive, AASTROM may obtain a quote from another qualified supplier to
manufacture the Cell Cassettes (AASTROM will provide MOLL with the source and
supporting information for the price quote for MOLL's review). If such a quote
is ten percent (10%) or more lower than MOLL's price under this Agreement, MOLL
shall either reduce the price to the quoted price within a reasonable time
period (not to exceed sixty (60) days) or AASTROM may thereafter utilize one or
more third party manufacturers for all or a portion of AASTROM's Requirements
for Cell Cassettes (notwithstanding the provisions of Sections 2 and 18). In
order to be considered "qualified", an alternate supplier must be an
established, viable medical contract manufacturer with a multi-year track record
of good performance with respect to FDA regulations, cGMP's, and ISO
certification and must guarantee the new lower price throughout the period
covered by this contract. Aastrom will be limited to a maximum of two of these
competitive price challenge events during the period covered by this contract
and must have placed orders for at least 150 cassettes/month for six consecutive
months before initiating the first competitive price challenge.

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SECTION 5. PAYMENT AND COLLECTION.

(a) Payment. AASTROM shall pay MOLL the full amount of the purchase price of
Cell Cassettes upon the due date set forth on MOLL's invoice; provided, however
invoices for Cell Cassettes rightfully rejected by AASTROM shall not be due
unless and until repair or replacement units are provided by MOLL. With respect
to Cell Cassettes and Components, terms of payment shall be net 30 days from the
date of delivery by MOLL pursuant to Section 3, above, and the submission by
MOLL of an itemized invoice in the form attached hereto in Appendix IV including
the purchase price for such Cell Cassettes calculated in accordance with
Appendix III, together with such supporting documents as AASTROM may reasonably
request. Accounts unpaid beyond their due date will bear interest at 1% per
month on the unpaid balance. If payment by AASTROM is improperly withheld and
MOLL retains an agency and/or attorneys to collect amounts overdue, all
collection costs, including without limitation, reasonable attorneys' fees,
shall be payable by AASTROM.

(b) Deductions from Invoice. AASTROM will promptly notify MOLL of any disputed
invoice. It is the intention of the Parties that disputed invoices will be
settled by the Parties in good faith negotiations prior to the invoice due date.
However, unless MOLL issues a credit memo, or unless AASTROM rightfully rejects
Cell Cassettes or notifies MOLL of its acceptance of a partial shipment pursuant
to Section 3(f), AASTROM shall make full payment of MOLL invoices for accepted
Cell Cassettes without deduction and regardless of any claim, counterclaim or
setoff AASTROM may have against MOLL, except as such setoff may otherwise be
permitted under Appendix III, Section 3(f) or Section 12(d). Any such claim,
counterclaim or setoff shall be resolved exclusively as a separate matter
pursuant to Section 24, below.

(c) Relief for Non-Payment. In the event payment for Cell Cassettes becomes past
due, MOLL will have the option, in addition to any other rights it may have
under the UCC or otherwise, in its sole, absolute discretion, to cancel or delay
shipment or orders of AASTROM previously accepted, to declare all sums owing
from AASTROM to be immediately due and payable, and to cancel credit previously
extended.

SECTION 6. SPECIFICATIONS, DMR AND CHANGES.

(a) Specifications. MOLL shall manufacture and assemble Cell Cassettes to the
then-current Specifications and no part of MOLL's responsibility may be
subcontracted without the prior written consent of AASTROM.

(b) Establish DMR. As further described in Section 9, MOLL shall prepare and
maintain a DMR covering the manufacture of the Cell Cassettes from the
Specifications, other requirements and technical information to be provided by
AASTROM, and manufacturing and quality processes and procedures established by
MOLL. AASTROM shall review and approve the DMR to assure that it accurately
reflects the Specifications.

(c) Specification and DMR Changes. Notwithstanding any provision of this
Agreement to the contrary, MOLL shall not have the right to change the
Specifications without the prior written consent of AASTROM. If AASTROM desires
to change the Specifications or any part of the DMR, AASTROM shall submit the
proposed change to MOLL, setting forth a detailed

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description and drawings thereof. Subject to Section 6(d), the Parties shall
work in good faith as expeditiously as is reasonable to reach a determination on
the effect that such change will have, if any, on quantities, quality criteria,
price and delivery dates.

(d) Implementation of Specifications Changes. If AASTROM proposes a change to
the Specifications and if such change is currently able to be manufactured, then
MOLL will either (i) implement such change into its manufacture of the Cell
Cassettes and/or Components, with an appropriate increase or decrease to the
price thereof based upon the effect of such change, or (ii) refuse to implement
such change, in which case AASTROM shall have the right, without liability, in
accordance with Section 17(b), below, to terminate this Agreement on a
prospective basis for all Requirements incorporating the changed Specifications
that have not yet been submitted on purchase orders. The Parties will cooperate
to implement changes to Specifications in an orderly manner and to afford MOLL a
reasonable transition time to the extent necessary to effect such Specification
changes.

(e) Other Changes. AASTROM may cancel or change quantities or delivery dates
under any purchase order upon terms that make MOLL whole for its costs in
respect of materials and work-in-process as set forth in Section 3(a).

(f) Returns. Except as expressly provided in this Agreement including, without
limitation, as provided in Sections 3(f) and 12(a), below, in no case may Cell
Cassettes be returned to MOLL without first obtaining MOLL's written consent
which will not be unreasonably withheld.

SECTION 7. MOLL'S FACILITIES AND MANUFACTURING ENVIRONMENT.

      With respect to its manufacturing facilities and assembly obligations
applicable to the production of Cell Cassettes, MOLL shall:

(a) be registered with the FDA as a Medical Device Establishment to the extent
required by the Act. As such, MOLL will maintain facility registrations and
inspection records required by the FDA;

(b) have and maintain a Class 100,000 certified assembly area operating at less
than 20,000 particulate-count and arrange for annual certification to be
conducted by an independent testing service. A routine monitoring plan, to
include at least monthly testing, will also be established and performed by MOLL
(the foregoing routine monitoring plan shall be subject to AASTROM's approval,
which approval shall not be unreasonably withheld);

(c) maintain adequate personnel and facilities, including but not limited to
sufficient engineering support and assembly resources to support the manufacture
of Cell Cassettes ordered by AASTROM. MOLL will provide AASTROM annually with a
project plan to meet AASTROM's forecast Requirements and AASTROM will provide
timely comments thereon;

(d) manufacture and assemble all of the Cell Cassettes in compliance with GMPs
as required by the Act; provided that, AASTROM, as the owner of the DMR, shall
have the responsibility for approving the DMR and any changes thereto as
established by MOLL in accordance with Section 9, below;

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(e) shall be certified under an acceptable international quality management
system (e.g., ISO 13485 or 13488) and at all times during this Agreement shall
maintain their quality management system certification;

(f) together with the Equipment to be provided by AASTROM, provide and maintain
adequate manufacturing Equipment to perform its obligations under Section 6 of
this Agreement;

(g) have and maintain adequate procedures for procurement, acceptance, supplier
quality audits and material control of all component parts to be used or
incorporated in Cell Cassettes;

(h) report to AASTROM in writing any known adverse events, circumstances or
potential problems relating to MOLL's FDA registration or its EC certifications
referred to in Section 7(e), above;

(i) allow AASTROM and its agents, at their own cost and risk, to review and
inspect MOLL's facilities, FDA compliance files and correspondence to and from
the FDA and notified bodies applicable to this Agreement; and

(j) maintain files of all Cell Cassette-related complaints received by MOLL from
AASTROM and conduct failure investigations, including establishing written
records with conclusions and corrective measures, for all such Cell Cassettes
complaints involving a failure to meet Specifications.

SECTION 8. MOLL MANUFACTURING PROCEDURES.

      MOLL's obligation to manufacture Cell Cassettes shall be to deliver Cell
Cassettes as described in Section 6(a), above and in accordance with the DMR.
Without expanding or diminishing that obligation, and for purposes of
illustration only, it is contemplated by the Parties that such obligation shall
encompass:

(a) injection molding and processing the main Components of the bioreactor
device for the Cell Cassette including any sonic or RF welding and vacuum plasma
surface treatment operations;

(b) assembling the aforesaid bioreactor devices utilizing fixtures provided by
AASTROM, or alternative fixtures as developed;

(c) injection molding components of the Cell Cassette fluid pathway tubing
assembly;

(d) assembly of the fluid pathway tubing assembly;

(e) injection molding non-fluid contact enclosure components for the Cell
Cassette using molds supplied by AASTROM;

(f) procuring the waste reservoir and media supply enclosure from an
AASTROM-approved source;

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(g) assembling the enclosure, the waste reservoir and media supply enclosure,
the bioreactor and the fluid pathway tubing assembly described in Sections 8(d),
(e), (b), (c), and (f) above, respectively;

(h) performing testing in accordance with the DMR;

(i) validating Cell Cassettes to the applicable sterilization assurance level;
and

(j) performing on-going vendor audits and validation procedures, as required by
GMPs, and conducting a reasonable incoming inspection of purchased components
for compliance with Specifications.

SECTION 9. OTHER RESPONSIBILITIES.

(a) Other Responsibilities of MOLL. In connection with MOLL's manufacturing and
assembly obligations under this Agreement, MOLL shall:

      (1) prepare and maintain the DMR in accordance with the then-current
manufacturing Specifications and the criteria for testing the Cell Cassette, all
to be provided by AASTROM. Manufacturing documentation shall be owned by AASTROM
and shall consist of: (i) the DMR documentation; (ii) documentation of
Specifications and drawings for Cell Cassette parts to be provided by MOLL or
acquired by MOLL from approved vendors; (iii) test and acceptance procedures and
criteria documentation; (iv) subassembly specifications, drawings and
requirements documentation; (v) manufacturing instructions and procedures
documentation; and (vi) quality instructions and procedures documentation;

      (2) prepare the DMR as set forth in Section 6(b), above, and maintain the
DMR in accordance with a documented change management system reasonably
acceptable to AASTROM which system shall include the approval of all Cell
Cassette manufacturing changes by AASTROM prior to implementation by MOLL. The
foregoing change management system documentation shall also include the history
of all changes including validation and/or rationale and shall be owned by
AASTROM;

      (3) shall conduct or subcontract the required processing and laboratory
testing as required by AAMI TIR 27:2001 for quarterly dose audits to maintain
the approved sterilization validation of the cell cassettes.

      (4) to the extent required for submittal by AASTROM to the FDA or other
regulatory authorities in connection with the Cell Cassette, prepare a detailed
description of MOLL's manufacturing methods, processes, procedures and facility
applicable to the manufacture and testing of the Cell Cassette as requested by
AASTROM;

      (5) provide engineering and other support for validation of the Cell
Cassette manufacturing process, for sterility assurance, and for completing
changes to the Cell Cassette design or manufacturing processes. AASTROM may
request such engineering and other support by submitting a written statement of
work executed by a designated AASTROM representative. MOLL shall respond to the
request within one week from receipt of the request, and shall prepare a
proposal to complete the work. AASTROM shall issue its written authorization to

                                       11
<PAGE>
complete the proposed work. Any changes to be implemented in connection with the
work shall be completed in accordance with Section 6. AASTROM has the right to
review the implementation of any changes performed by MOLL, and has the right to
reject any such implementation of changes that AASTROM deems to be detrimental
to the quality of the product;

      (6) use reasonable efforts to train AASTROM's technical representatives at
MOLL's facilities, at AASTROM's request and expense from time to time during the
Term in all applicable procedures for manufacture of the Cell Cassettes. Such
representatives shall sign reasonable non-disclosure agreements in accordance
with Section 16(b) consistent with the terms of this Agreement to protect MOLL's
Confidential Information. AASTROM and such representatives shall also comply
with all of MOLL's reasonable regulations with regard to access by visitors
during such training sessions and MOLL reserves the right to deny access to its
facilities by non-AASTROM employees provided that such access shall not be
unreasonably withheld;

      (7) develop a quality measurement system acceptable to AASTROM and report
in a manner reasonably satisfactory to AASTROM on a monthly basis with regard to
MOLL's progress. This system shall include, at a minimum, (i) metrics on the
percent of non-conforming Cell Cassettes, including trending data; (ii) the
percentage of the top five defects; and (iii) a FRACAS (Failure Report Analysis
and Corrective Action System) detailing the root-cause analysis, corrective
actions taken, and proof of implementation; and

      (8) perform periodic onsite audits of suppliers of components, assemblies,
or services to Moll for manufacture of Cell Cassettes where such supplier is
deemed to be of substantial importance, such as due to being a sole source
supplier, or providing a critical component or service, or providing a complex
component or assembly. Each on-site audit will be scheduled as required, but not
less than annually. Appendix V specifies the current list of suppliers requiring
on-site audit, which can be revised from time to time by mutual agreement
between the two parties.

(b) New Products. From time to time during the Term, AASTROM may provide written
notification to MOLL of AASTROM's desire to have MOLL manufacture a product
other than the Cell Cassette or its Components. Following such notification, the
parties shall negotiate in good faith and attempt to reach mutual agreement on
the terms and conditions governing the manufacture and supply of such new
product, including development obligations, pricing and supply terms.

SECTION 10. EQUIPMENT.

(a) Ownership. The Parties acknowledge that the Equipment is the sole and
exclusive property of the Party indicated on Appendix I as such Appendix may be
augmented by mutual agreement of the Parties from time to time. Equipment shall
be located at the premises of MOLL in SeaGrove, North Carolina or other
facilities of MOLL as the Parties may agree. Except for the sole purpose of
performing maintenance, MOLL shall relocate none of the Equipment owned by
AASTROM without the prior written consent of AASTROM. It is understood that
AASTROM shall have the right to remove the Equipment it owns from MOLL's
facilities at any time upon

                                       12
<PAGE>
reasonable notice to MOLL, except that if such removal shall impede MOLL's
performance under this Agreement, MOLL shall so notify AASTROM and such
Equipment shall not be removed until the condition of such impedance shall no
longer pertain. Notwithstanding the foregoing, in the event that MOLL suspends
MOLL's performance by reason of force Majeure or default, AASTROM shall be
entitled to remove its Equipment to enable AASTROM to continue to manufacture
Cell Cassettes. Upon removal of its Equipment, AASTROM shall pay MOLL its
reasonable costs of disassembly and freight to a location of AASTROM's choice.
AASTROM shall return such Equipment to MOLL's facilities upon MOLL's
demonstration (to the extent it can reasonably do so without the use of such
Equipment) to AASTROM's reasonable satisfaction of MOLL's capability to resume
manufacture of the Cell Cassettes. Equipment added to Appendix I shall be owned
by the Party that paid for it or in accordance with Section 21(b), as
applicable. Upon expiration or earlier termination of this Agreement, and the
payment by AASTROM of all outstanding invoices, MOLL shall, within thirty (30)
days thereafter, return all of AASTROM's Equipment to AASTROM's facilities (or
other location designated by AASTROM in writing) with all reasonable packing,
transportation and insurance costs to be paid by AASTROM.

(b) Identification Tags. Identification tags supplied by AASTROM containing
information relating to its ownership of Equipment shall be affixed by MOLL and
such tags shall not be removed by MOLL without the written approval of AASTROM.

(c) Liens and Insurance. MOLL shall not impair the right, title and interest of
AASTROM in and to the Equipment it owns, nor shall MOLL allow any lien or
encumbrance to be levied upon such Equipment. During the Term, and until
Equipment owned by AASTROM is removed by AASTROM or abandoned, MOLL shall carry
and maintain, at its expense, all-risk property insurance covering the Equipment
at full replacement cost.

(d) Inspection. AASTROM shall have the right, at reasonable times during normal
business hours and upon reasonable notice, to inspect its Equipment from time to
time to ensure that it is being maintained in accordance with Section 10(f),
below, and utilized in a manner consistent with the provisions of this
Agreement.

(e) No Modification. MOLL will not alter or modify AASTROM's Equipment in any
material way without the prior consent of AASTROM. If AASTROM gives such
consent, any alteration or modification shall become the property of AASTROM.

(f) Maintenance. MOLL will conduct day-to-day preventative and operational
maintenance on all of the Equipment. Such day-to-day maintenance will be
adequate: (i) to maintain the Equipment in good working order and condition,
ordinary wear and tear and casualty excepted; (ii) to meet all expressed
conditions required by manufacturers' written warranties, if any, given with the
Equipment so that such warranties remain in effect for their stated terms;
provided that MOLL has received from AASTROM a copy of such warranty; and (iii)
to promote adherence to agreed-upon quality standards as well as the
Specifications and to help minimize unscheduled downtime.

(g) Use. Equipment owned by AASTROM shall be used solely for the benefit of
AASTROM to produce Cell Cassettes.

                                       13
<PAGE>
SECTION 11. RIGHT OF INSPECTION.

(a) Rights of Inspection. In addition to AASTROM's right to inspect Cell
Cassettes upon delivery pursuant to Section 3, AASTROM shall have the following
rights of inspection, each such right to be exercised, if at all, at its own
cost and expense:

      (1) to inspect, sample and test Cell Cassette work-in-progress and review
process control reports and manufacturing records at MOLL's facilities upon at
least three (3) work days' prior notice to MOLL and shall consult with MOLL if
it believes that its inspection shows MOLL is failing to meet its obligations
under this Agreement (in such event the parties will work together toward
resolution of any such failure); and

      (2) to inspect, sample and test Cell Cassettes at MOLL's facilities after
notice by MOLL that a Shipment Lot is ready for shipment to a sterilizer
location. Such inspection must be conducted, if at all, within ten (10) days
after receipt of such notice.

(b) Waiver. AASTROM's right to inspect under this Section 11 and any inspection
by AASTROM hereunder, or AASTROM's acceptance of or payment for Cell Cassettes,
shall not be deemed to relieve MOLL of any of its obligations under the terms of
this Agreement nor a waiver by AASTROM of its rights to inspect upon delivery
pursuant to Section 3 or with respect to breach of warranty as set forth in
Section 12, below.

(c) Self-Certification. The Parties shall work together toward
self-certification pursuant to which MOLL will conduct in-process controls and
finished device testing in order to augment, and reduce the need for, exercise
by AASTROM of its inspection rights.

(d) Records; Inspection. For at least two years after the expiration or any
earlier termination of this Agreement (under Section 17 below), MOLL shall
retain accurate and complete records with respect to its work and manufacture of
the Cell Cassettes to the extent necessary to reasonably satisfy all applicable
FDA and EC requirements and to verify the time worked and material and other
costs invoiced to AASTROM. MOLL shall make available to AASTROM, cost
information that AASTROM may reasonably request in connection with the
establishment of pricing in accordance with Appendix III. Upon reasonable notice
to MOLL, AASTROM and/or its designated independent auditor may inspect and
conduct a reasonable audit on such records. If MOLL does not agree with the
results of the audit, then the dispute shall be resolved pursuant to Section 24,
below. Furthermore, if the results of such audit indicate an overcharge by MOLL
of ten percent (10%) or more of AASTROM's applicable purchase price from MOLL,
MOLL shall reimburse AASTROM for the cost of performing such audit; otherwise
the cost of such audit shall be borne by AASTROM. If such audit shows an
overcharge by MOLL of AASTROM's applicable purchase price from MOLL, MOLL shall,
upon its review of said audit, promptly reimburse AASTROM for such overcharge
plus interest at a rate of 1% per month since the date of payment by AASTROM of
the applicable invoice(s).

SECTION 12. WARRANTY; RECALLS.

(a) Warranty. MOLL warrants to AASTROM that each Cell Cassette and Component
shall comply with the then-current Specifications and shall be free from defects
in material (except for such material as is prescribed by AASTROM, and is
outside the control of Moll), and

                                       14
<PAGE>
workmanship and shall be manufactured and assembled in compliance with the DMR
and all United States federal, state and local laws, rules and regulations and
with all applicable EN29002 and EN46002 requirements (and any amendments thereto
and replacements thereof), applicable at the time of manufacture. Moll's
warranty with respect to Aastrom-specified purchased materials and components is
limited to insuring that they meet the incoming inspection criteria mutually
agreed upon by Astrom and Moll. For a period of one (1) year after delivery to
AASTROM, AASTROM shall have the right to notify MOLL that a Cell Cassette or
Component does not conform to this warranty. Such notice shall set forth in
detail the reason for such non-conformance. AASTROM shall prepare for shipment
and return to MOLL allegedly defective Cell Cassette or Component in accordance
with MOLL's written directions and at MOLL's cost. Upon reasonable verification
of noncompliance with this warranty, MOLL shall repair a defective and
non-conforming Cell Cassette or Component or, at its option, replace a defective
Cell Cassette or Component with non-defective, conforming units within thirty
(30) days after receipt of notice from AASTROM of the nonconformance. However,
if in MOLL's reasonable judgment such repair or replacement cannot be
accomplished within said time, MOLL shall issue to AASTROM a credit for the
price of each unit of Cell Cassette or Component verified as defective. MOLL
shall pay all shipping and other costs incurred in connection with the repair or
replacement of all such nonconforming Cell Cassette or Component units. The
foregoing warranty shall not apply to the extent that the non-conformance is due
to a defective component supplied by AASTROM or compliance with the
Specifications as supplied by AASTROM. Notwithstanding any statutory or other
law to the contrary, it is understood that the foregoing one (1) year warranty
period begins on delivery of the Cell Cassette or Component to AASTROM
regardless as to when a defect in a Cell Cassette or Component may be
discovered.

(b) DISCLAIMER. THE WARRANTY SET FORTH IN SECTION 12(a), ABOVE, IS GIVEN TO
AASTROM ONLY AND IS IN LIEU OF ALL OTHER WARRANTIES, WHETHER EXPRESSED BY
AFFIRMATION, PROMISE, DESCRIPTION, MODEL, SAMPLE OR OTHERWISE. ANY AND ALL OTHER
WARRANTIES, INCLUDING, WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR USE OR PURPOSE, ARE HEREBY
DISCLAIMED. THE REMEDIES SET FORTH IN THIS AGREEMENT SHALL BE AASTROM'S
EXCLUSIVE REMEDIES FOR DEFECTIVE AND NONCONFORMING PRODUCTS.

(c) No Third-Person Warranty. AASTROM will not make any warranty, representation
or guaranty to any person, either orally or in writing, in the name of or on
behalf of MOLL.

(d) Recalls. From time to time throughout the Term, AASTROM may in its
discretion determine that it is necessary or advisable to recall Cell Cassettes
manufactured by MOLL. In such event, if AASTROM reasonably determines that the
number of reported incidence of defective Cell Cassettes is high in relation to
AASTROM's historical incidence rate for defective Cell Cassettes and/or general
medical product industry standards and AASTROM recalls one or more Shipment Lots
due to a failure of such units to meet Specifications during the Warranty
Period, AASTROM shall so notify MOLL of the recall and the Parties shall jointly
exchange relevant information and consult on causation of the defective units
prior to implementing the recall. In the event it is determined by the Parties
that the Cell Cassettes were defective due to a failure of such units to meet
Specifications during the Warranty Period, MOLL agrees to reimburse AASTROM for
the reasonable direct costs incurred by AASTROM in conjunction with the

                                       15
<PAGE>
recall including the cost of replacing, shipping and testing the units of the
Shipment Lot(s) recalled, whether or not all such units are ultimately
determined to have been defective, by way of a reduction in MOLL's applicable
mark-up rates (as set forth on Appendix III) to 15% until the cost of the recall
has been recovered by AASTROM. Any disputes regarding causation of defective
units involved in a recall that cannot be resolved by the Parties will be
resolved through arbitration in accordance with Section 24(b). Furthermore, in
the event this Agreement is terminated for any reason prior to AASTROM
recovering the full amount of its recall costs from MOLL, MOLL shall promptly
pay to AASTROM the amount of any un-reimbursed costs. For the purpose of
clarification, it is agreed that AASTROM shall be solely responsible for
determining whether any product recall, correction or withdrawal is required and
for complying with all of the medical device reporting requirements pursuant to
21 CFR Part 803.

SECTION 13. LIMITATION OF DAMAGES LIABILITY.

(a) Third Party Claims Not Related to Manufacturing Defect. MOLL shall have no
liability for any damages claimed by a third party if the claim does not arise
from or relate to a manufacturing defect by MOLL.

(b) Third Party Claims Related to MOLL's Delays. MOLL shall have no liability
for any damages claimed by a third party arising from or related to MOLL's
delays in manufacturing and delivering Cell Cassettes; provided, however, this
limitation of liability shall not apply with respect to any third party which
has a contractual relationship with MOLL with respect to claims arising out of
such contract.

(c) Third Party Claims for Product Liability. With respect to a third party's
claim for products liability in connection with the manufacture of the Cell
Cassettes or Components, MOLL's liability shall not exceed $5,000,000 in the
aggregate for the Term of this Agreement.

(d) AASTROM's Claims. MOLL's liability for damages to AASTROM for any breaches
of MOLL's obligations, warranties or representations under this Agreement shall
not exceed: (i) in the event of a breach which does not result in the
termination of this Agreement, an amount equal to the price to be paid by
AASTROM for the Cell Cassettes which were specified in the most recent forecast
(as specified in Section 3(a) hereof) given by AASTROM to MOLL prior to the
breach to be purchased by AASTROM during the period of the breach and which were
adversely affected by the breach; or (ii) in the event of a breach which does
result in the termination of this Agreement, an amount equal to the price to be
paid by AASTROM for the Cell Cassettes which were specified in the most recent
forecast (as specified in Section 3(a) hereof) given by AASTROM to MOLL prior to
the breach to be purchased by AASTROM during the 12-months following the date of
termination of this Agreement.

      Notwithstanding the foregoing, the foregoing limitation of liability shall
not apply with respect to any breach of MOLL's obligations to maintain and
protect AASTROM's Equipment, Intellectual Property and Confidential Information,
or MOLL's obligations under Section 23 hereof regarding similar products.

                                       16
<PAGE>
(e) Willful Wrongdoing. Notwithstanding anything to the contrary contained in
this Agreement, there shall be no limitation on MOLL's liabilities arising from
or related to any criminal activity by MOLL or any willful wrongdoing by MOLL.

(f) Nature of Damages. The damages referenced in this Section 13 include damages
of any nature whatsoever including without limitation, direct, indirect,
special, incidental and consequential damages. No Party shall have any liability
for any punitive damages.

(g) Mitigation. The non-breaching Party, as well as the breaching Party, shall
use its best diligent efforts to mitigate the damages caused by the breach.

(h) AASTROM's Liabilities. Except with regard to AASTROM's obligations under
Sections 14(a) and (d) and 16, it is agreed that AASTROM's liability to MOLL
with regard to any claim for damages that may arise from a breach of any of
AASTROM's obligations, warranties and representations under this Agreement shall
not exceed the purchase price for the Cell Cassettes or Components with respect
to which AASTROM is in breach.

      Notwithstanding the foregoing, the foregoing limitation of liability shall
not apply with respect to any breach of AASTROM's obligations with regard to the
Intellectual Property or Confidential Information of MOLL, nor shall such
limitations apply in the event of criminal activity or willful wrongdoing by
AASTROM.

SECTION 14. INDEMNITY.

(a) AASTROM's General Indemnity. The Parties acknowledge that AASTROM has
designed, developed and established the Specifications for the Cell Cassette and
Components. To the extent not covered by MOLL's indemnification obligations
under Section 14(b) below, and to the extent MOLL's liabilities to third parties
exceed the limitation of damage liabilities specified in Section 13(a), (b) and
(c) hereof, AASTROM will indemnify, hold harmless and defend MOLL and its
parents and affiliates and its and their officers, directors, agents, employees
and contractors and their successors and assigns (individually and collectively,
the "MOLL Indemnitees") from and against any and all loss, liability, cost,
damage and expense, including, without limitation, reasonable attorneys' fees,
in connection with bodily injury, death or otherwise, for claims made by third
parties, including, without limitation, a governmental agency or other entity,
against any of the MOLL Indemnitees arising out of or in connection with (1) the
design, manufacture, sale, use, function or operation of the Cell Cassette and
Components or (2) the breach by AASTROM of its covenants, representations or
warranties under this Agreement, or (3) the non-compliance by MOLL with GMPs,
but only to the extent that such non-compliance is caused by the failure of
AASTROM to comply with a covenant under this Agreement, or a Specification or
written requirement of AASTROM that is in express direct violation of GMPs. Upon
receipt of a claim indemnified hereunder, MOLL shall give AASTROM prompt notice
thereof and shall, at no out-of-pocket expense to MOLL, cooperate with AASTROM
with respect to the defense of such matter. MOLL shall have the right, without
affecting its indemnity hereunder, to participate in the administration, defense
or settlement of any such matter at its own expense and with counsel of its own
choosing, but AASTROM will control the defense and selection of lead defense
counsel. AASTROM's counsel shall give due consideration to suggestions of MOLL's
counsel and AASTROM shall not settle any claim

                                       17
<PAGE>
indemnified hereunder unless MOLL is given a full and unconditional release in
respect of such matter and any related matter.

(b) MOLL's General Indemnity. MOLL will indemnify, hold harmless and defend
AASTROM and its parents and affiliates and its and their officers, directors,
agents, employees and contractors and their successors and assigns (individually
and collectively, the "AASTROM Indemnitees") from and against any and all loss,
liability, cost, damage and expense (collectively, "Losses"), including without
limitation, reasonable attorneys' fees, in connection with any claims made by
third parties, including without limitation, a governmental agency or other
entity, against any of the AASTROM Indemnitees for any product liability claim
arising out of or in connection with the breach of any of MOLL's warranties or
obligations hereunder; provided, that notwithstanding anything in this Agreement
to the contrary, MOLL's total liability under this Section 14(b) shall not
exceed Five Million ($5,000,000) dollars, and AASTROM's indemnity set forth in
Section 14(a), above, shall not be affected or limited by Losses that are in
excess of MOLL's indemnification obligations under this Section 14(b). Upon the
receipt of a claim of indemnification hereunder, AASTROM shall give MOLL prompt
notice thereof and shall, at no out-of-pocket expense to AASTROM, cooperate with
MOLL with respect to the defense of such matter. AASTROM shall have the right,
without affecting its indemnity rights hereunder, to participate in the
administration, defense or settlement of any such matter at its own expense and
with counsel of its own choosing, but MOLL will control the defense and
selection of lead defense counsel. MOLL's counsel shall give due consideration
to suggestions of AASTROM's counsel and MOLL shall not settle any claim
indemnified hereunder unless AASTROM is given a full and unconditional release
in respect of such matter.

(c) Intellectual Property Warranty.

      (1) AASTROM represents and warrants that neither the design nor
Specifications furnished by AASTROM to MOLL in connection with this Agreement
nor the manufacture or sale of Cell Cassettes to such design or Specifications
or in conformance with the DMR (but excluding any of MOLL's manufacturing
process or methods that may be incorporated into any of the foregoing by MOLL),
will infringe any United States or foreign patent, trademark, copyright or other
intellectual property right of others.

      (2) MOLL represents and warrants to AASTROM that no manufacturing process
or method employed by MOLL to manufacture the Cell Cassettes will infringe any
United States or foreign patent, trademark, copyright or other intellectual
property right of others; provided that, such process or method was developed
by, or originated from, MOLL but without regard to whether such process or
method is incorporated in the Specifications or DMR.

      (3) Without prejudice to the rights of MOLL or AASTROM as set forth in
Sections 14(d) and 14(e) below, respectively, if the manufacture or sale of Cell
Cassettes to such design Specifications or DMR or the manufacturing process or
method, respectively, is held to constitute an infringement of any intellectual
property right of any third party or to result in such wrong, and such
manufacture and sale is enjoined (by temporary, preliminary or permanent
injunction), AASTROM or MOLL, as the case may be, at its own expense, shall use
its best diligent efforts to procure for the other party the right to continue
to manufacture and sell Cell Cassettes, as applicable.

                                       18
<PAGE>
(d) Intellectual Property Indemnity by AASTROM. AASTROM will indemnify, hold
harmless and defend the MOLL Indemnitees from and against any and all
liabilities, costs and expenses, including, without limitation, reasonable
attorneys' fees, with respect to which a claim is made by a third party against
any of the MOLL Indemnitees arising out of or in connection with the breach of
AASTROM's warranty and representation set forth in Section 14(c), above. Upon
receipt of a claim indemnified hereunder, MOLL shall give AASTROM prompt notice
thereof and shall, at no out-of-pocket expense to MOLL, cooperate with AASTROM
with respect to the defense of such matter. MOLL shall have the right, without
affecting its indemnity hereunder, to participate in the administration, defense
or settlement of any such matter at its own expense and with counsel of its own
choosing, but AASTROM will control the defense and selection of lead defense
counsel. AASTROM's counsel shall give due consideration to suggestions of MOLL's
counsel. AASTROM shall not settle any claim indemnified hereunder unless MOLL is
given a full and unconditional release in respect of such matter and any related
matter.

(e) Intellectual Property Indemnity by MOLL. MOLL will indemnify, hold harmless
and defend the AASTROM Indemnitees from and against any and all liabilities,
costs and expenses, including, without limitation, reasonable attorneys fees,
with respect to which claim is made by a third party against any of the AASTROM
Indemnities arising out of or in connection with the breach of MOLL's warranty
and representation set forth in Section 14(c), above. Upon receipt of a claim
indemnified hereunder, AASTROM shall give MOLL prompt notice thereof and shall,
at no out-of-pocket expense to AASTROM, cooperate with MOLL with respect to the
defense of such matter. AASTROM shall have the right, without affecting its
indemnity hereunder, to participate in the administration, defense or settlement
of any such matter at its own expense and with counsel of its own choosing, but
MOLL will control the defense and selection of lead defense counsel. MOLL's
counsel shall give due consideration to suggestions of AASTROM's counsel. MOLL
shall not settle any claim indemnified hereunder unless AASTROM is given a full
and unconditional release in respect of such matter and any related matter.

SECTION 15. OWNERSHIP OF INTELLECTUAL PROPERTY.

(a) Ownership of Intellectual Property. Each Party shall retain and own (vis a
vis the other Party) all right, title and interest to all copyrightable
material, inventions, trademarks, trade secrets, trade dress or other
intellectual property (collectively, "Intellectual Property") which it now owns.
Notwithstanding the foregoing, AASTROM shall own all Intellectual Property and
documentation generated by MOLL in connection with the collaborative development
and manufacture of Cell Cassettes, whether or not such Intellectual Property was
generated prior to or after the Effective Date, except for Intellectual Property
that relates to the molding and fabrication processes performed by MOLL and the
know-how in connection therewith. Said documentation to be owned by AASTROM
shall include but not be limited to the Specifications for the Cell Cassettes
and Components, DMR documentation, material lists, supplier lists and
descriptions of manufacturing methods and processes for manufacture of the Cell
Cassettes (hereinafter, the "AASTROM Documentation"). Furthermore,
notwithstanding anything contained herein, MOLL acknowledges and agrees that the
AASTROM Documentation will not embody or constitute the Intellectual Property of
MOLL. Nothing in this Agreement shall be deemed to grant a license to either
Party under or with respect to the Intellectual Property of the other Party.

                                       19
<PAGE>
(b) Return of Intellectual Property. Upon expiration of the Term or upon any
earlier termination of this Agreement, MOLL shall promptly transfer to AASTROM
all AASTROM Documentation and Intellectual Property within MOLL's possession or
control, and AASTROM shall promptly transfer to MOLL all MOLL Intellectual
Property within AASTROM's possession or control. Furthermore, in the event of
any expiration or termination of this Agreement by AASTROM "for cause" pursuant
to Section 17, or by MOLL, other than in accordance with Section 17, MOLL will
provide AASTROM with full cooperation with regard to the transfer of any
know-how embodied in AASTROM Documentation that is sufficient to allow AASTROM
to manufacture the Cell Cassettes pursuant to this Agreement; provided that,
except for copying, MOLL shall bear no expense of any nature in connection
therewith.

SECTION 16. CONFIDENTIAL INFORMATION.

(a) Title to Confidential Information and Related Documents. Title to
Confidential Information provided by the Disclosing Party to the Recipient shall
be and remain the sole and exclusive property of the Disclosing Party. Recipient
shall return all such Confidential Information, together with all copies
thereof, except for one archive copy, promptly upon the termination of this
Agreement.

(b) Non-Disclosure and Non-Use of Confidential Information. The Recipient shall
hold all Confidential Information disclosed to it pursuant to this Agreement in
confidence and will use Confidential Information only for the purpose of
performing its obligations under this Agreement and for no other purpose
whatsoever. The Recipient will not disclose Confidential Information to any
third person and will disclose Confidential Information only to such of its
employees as is necessary or reasonably appropriate to the performance of the
Recipient's obligations under this Agreement. Recipient shall ensure that its
employees and any permitted subcontractors having access to the Confidential
Information of the Disclosing Party have previously agreed, either as condition
of employment or to obtain the Confidential Information, to be bound by terms
and conditions substantially similar to those found in this Section 16(b) as a
condition to such access. In the event that the Recipient is requested or
required by court or governmental order to disclose any of the Confidential
Information, the Recipient shall provide the Disclosing Party with prompt
written notice of such request or requirement so that the Disclosing Party may
seek a protective order or other appropriate protection. The Recipient will
cooperate with Disclosing Party at the Disclosing Party's expense, to obtain an
appropriate protective order or other reliable assurance that confidential
treatment will be accorded confidential treatment by such court or governmental
entity.

(c) Protection of Confidential Information. The Recipient will observe
reasonable precautions and procedures to protect and preserve Confidential
Information to the same extent that the Recipient uses with respect to its own
like confidential information.

SECTION 17. TERM AND TERMINATION.

(a) Term of Agreement. The initial term of this Agreement shall commence on the
Effective Date and shall, unless earlier terminated as provided herein, continue
for five (5) years (the "Initial Term"). This Agreement shall, unless earlier
terminated as provided herein, thereafter renew automatically for additional one
(1) year terms. Either party may terminate this

                                       20
<PAGE>
Agreement as of the end of the Initial Term, or as of the end of any subsequent
renewal term, by written notice to the other party at least one (1) year prior
to the renewal date.

(b) Termination Upon Default. Except for a failure and the corresponding remedy
as expressly specified in Sections 3, 12 and 17(d), if either Party shall commit
a material default in any of the material terms or obligations under this
Agreement, the non-defaulting Party shall have the right to give the defaulting
Party notice specifying with particularity the default and the circumstances
surrounding the default. If the defaulting Party shall fail to cure, the noticed
default within thirty (30) days after receipt of such notice (fifteen business
days with respect to non-payment of amounts owed by AASTROM to MOLL under this
Agreement), the non-defaulting Party shall have the right to terminate this
Agreement prospectively by giving the defaulting Party further notice of at
least twenty (20) days prior to the effective date of termination set forth in
such further notice.

(c) Termination Upon Insolvency. Either Party shall have the right to terminate
this Agreement prospectively by notice of at least ten (10) days to the other
Party if the Party receiving such notice has filed a petition in bankruptcy or
insolvency (or if such petition is filed against it and is not vacated, stayed
or bonded within one hundred and twenty (120) days after such filing), or files
a petition or answer seeking reorganization, readjustment or rearrangement of a
substantial part of its business under any law relating to bankruptcy or leading
to bankruptcy or is adjudicated by a competent regulatory agency to be bankrupt
or insolvent, or a receiver is appointed for all or substantially all of the
property of such other Party, or an assignment is made for the benefit of the
creditors of such other Party, or any proceeding are instituted for the
liquidation or winding up of the business of such other Party.

(d) Termination Upon Inability of MOLL to Perform. If, on any three occasions
within a twelve-month period during the Term of this Agreement, one or more of
the following events occur, then AASTROM shall have the right to notify MOLL
that AASTROM intends to terminate this Agreement prospectively, specifying an
effective date of termination not less than thirty (30) days after the date of
such notice: (i) more than ten (10%) percent of the Shipment Lots or units of
Cell Cassettes delivered to AASTROM are properly rejected by AASTROM under
Section 3(f), above; (ii) more than 1 of 1,000 Cell Cassettes accepted by
AASTROM fail to meet the warranty set forth in Section 12(a); or (iii) MOLL
fails to timely deliver a complete order of Cell Cassettes meeting
Specifications. For purposes of this Section 17(d), the term "timely deliver"
shall mean delivery not more than ten (10) days prior to, nor more than five (5)
days after, scheduled delivery dates. Moll will not be held responsible for
performance problems as described above, resulting from inadequacies in (i)
approved design specifications or (ii) Aastrom-specified materials and
components that have passed approved incoming inspection, unless such
inadequacies were caused by Moll. The foregoing right of termination shall be in
addition to AASTROM's right to seek damages available under law subject to the
limitations set forth in Section 13.

(e) Effect of Termination. Termination of this Agreement by either Party shall
not affect any purchase order submitted by AASTROM to MOLL pursuant to the terms
of this Agreement prior to the effective date of termination and the Parties
shall fulfill their obligations under such purchase order or to be undertaken
under this Agreement prior to such termination even if the completion of such
obligations shall be after the effective date of termination. Notwithstanding

                                       21
<PAGE>
the foregoing, upon any termination of this Agreement by AASTROM pursuant to
this Section 17, AASTROM may, in its discretion elect to terminate all
in-process manufacturing of Cell Cassettes by MOLL and MOLL shall terminate such
manufacturing effective immediately upon notice from AASTROM. Furthermore, upon
the expiration of the Term as specified in Section 17(a), or upon the
termination of this Agreement other than a termination by AASTROM as permitted
by Sections 17(b), (c) or (d), then AASTROM shall purchase, at the price set
forth in this Agreement, all Cell Cassette finished goods, work in process and
unique materials that have been purchased by MOLL prior to the effective date of
this Agreement for the manufacture of Cell Cassettes provided that the
quantities of such goods and materials are reasonable in light of AASTROM's
forecasted Requirements and provided that such goods and materials are not
defective (per the Specifications). Without limiting the generality of the
foregoing, to the extent necessary to give effect to the intention of the
Parties expressed therein, the obligations of the Parties under Sections 10
("Equipment"), 11(d) ("Records; Inspection"), 12 ("Warranty; Recalls"), 13
("Limitation of Damages Liability"), 14 ("Indemnity"), 15 ("Ownership of
Intellectual Property"), 16 ("Confidential Information"), 17 ("Term and
Termination"), 18 ("Supplier; Alternate Supplier"), 19 ("Representations and
Warranties"), 23 ("Similar Products"), 24 ("Governing Law; Dispute Resolution"),
25 ("Notices"), 28 ("Severability"), 29 ("Amendment and Waiver") and 32 ("Entire
Agreement") shall survive termination of this Agreement in accordance with their
terms.

(f) Liabilities When No Termination. Notwithstanding the foregoing, in the event
that MOLL is in material breach of any of its warranties or obligations, and
such breach does not allow AASTROM to terminate this Agreement pursuant to
Section 17, then MOLL shall be subject to the liabilities and remedies available
at law and by this Agreement for such breach, subject to the limitations set
forth in Section 13.

(g) Alternative Purchase of Product. If MOLL is in breach of MOLL's obligations
to make and sell Cell Cassettes or Components as specified in this Agreement,
and such breach does not result in a termination of this Agreement, and if
AASTROM has available an alternative manufacturing source for said Cell
Cassettes or Components, then AASTROM may cancel all or any part of any pending
purchase orders (which purchase orders are within the quantities specified in
the 12-month rolling forecast as specified in Section 3(a) hereof) for which
MOLL is unable or unwilling to accept and perform; and AASTROM may have said
purchase orders performed by the alternative manufacturing source; and any
damages suffered by AASTROM as a result of MOLL's breach shall still be
recoverable against MOLL (subject to the limitations specified in Section 13
hereof).

SECTION 18. SUPPLIER; ALTERNATE SUPPLIERS.

(a) Supplier. Subject to MOLL fully complying with all the terms and conditions
of this Agreement, during the Initial Term, AASTROM will purchase its
Requirements of Cell Cassettes from MOLL; provided, however, nothing in this
Agreement shall be deemed to preclude AASTROM from manufacturing any of
AASTROM's requirements for Cell Cassettes by itself or from utilizing alternate
suppliers for such manufacture pursuant to Section 18(b) below.

                                       22
<PAGE>
(b) Alternate Suppliers. AASTROM shall have the right to utilize alternate
suppliers to supply AASTROM's requirement of Cell Cassettes or components if (i)
MOLL is unable or unwilling to meet AASTROM's requirements for quantity, quality
or timing of Cell Cassettes, (ii) MOLL does not remain cost competitive pursuant
to Section 4(d), (iii) MOLL breaches any of its obligations under this Agreement
(without cure thereof), or (iv) with respect to the supply of Cell Cassettes in
a country other than the U.S., on a country-by-country basis, if AASTROM grants
rights to a strategic partner to manufacture such Cell Cassettes for sale in
such country. In the event that AASTROM elects to utilize an alternative
supplier for the Cell Cassettes during the Term due to such an event, MOLL shall
provide reasonable cooperation by promptly supplying AASTROM with copies of all
AASTROM Documentation at the reasonable expense of AASTROM; provided, however
nothing in this Section 18(b) shall be deemed to require MOLL to provide
training or consultation services to the alternate supplier with regard to the
manufacture of the Cell Cassettes. Furthermore, even if Moll is unable to
produce entire Cell Cassettes, Moll shall be obligated to supply components to
AASTROM's Alternate Supplier.

SECTION 19. Representations and Warranties.

         MOLL and AASTROM each represents and warrants (1) that each has,
respectively, the full right and authority to enter into this Agreement, and
nothing provided in this Agreement will conflict in any way with any outstanding
obligation, contractual or otherwise, of such Party, and (2) that each shall
comply with all United States governmental laws, rules, regulations and orders
applicable to its obligations under this Agreement.

SECTION 20. FORCE MAJEURE.

(a) Suspension of Performance. In the event that MOLL or AASTROM (other than
with respect to its obligations to pay money to MOLL) is rendered unable, wholly
or in part, to carry out its obligations under this Agreement by reasons of acts
of God, industrial disturbances, outbreak of a state of emergency, war,
hostilities, civil commotion, riots, epidemics, fires, earthquakes, floods or
any other cause or causes similar or dissimilar to the foregoing beyond the
reasonable control of the Party claiming benefit of force Majeure, upon such
Party's giving notice and reasonably full particulars of such reason to the
other Party within a reasonable time after the occurrence of the cause relied
upon, then the obligations of the Party giving such notice, so far as they are
affected by such reason, shall be suspended during the continuation of any
inability so caused, but no longer, and such cause shall so far as reasonably
possible be remedied with all reasonable dispatch without the necessity of
expending sums (including, without limitation, for overtime labor) not otherwise
required under this Agreement. When the event operating to suspend performance
by either Party shall cease, this Agreement shall continue in full force and
effect until the expiration or earlier termination as provided in this
Agreement.

(b) Cooperation. In the event of a force Majeure, AASTROM and MOLL shall
communicate and cooperate in seeking to avoid or minimize potential interruption
of supply and to develop mutually acceptable contingency plans in the spirit of
this Agreement. In any event, the time for a Party's performance under this
Agreement shall be extended to the extent reasonably necessary to perform the
suspended obligation.

                                       23
<PAGE>
(c) Allocation of Resources. In the event of a force Majeure resulting in a
partial inability of MOLL to supply product to its customers, MOLL may allocate
resources that have not specifically been earmarked to this Agreement, to all of
its customers (including AASTROM) in an equitable manner as determined solely by
MOLL.

SECTION 21. MOLL COMPETITIVENESS; SHARED INVESTMENT RETURN.

(a) MOLL's Competitiveness. The Parties acknowledge that a primary consideration
for AASTROM with regard to the selection of MOLL as its supplier was MOLL's
expertise and stated intention to be a cost-effective and a capable manufacturer
and supplier of Cell Cassettes and Components and that AASTROM's
commercialization strategy is dependent in part upon MOLL's stated intention to
use best diligent efforts to remain cost effective and capable. Thus, MOLL will
use best diligent efforts to search for methods and means that will lead to
in-plant cost reductions, savings and maintenance and quality improvement.
AASTROM will cooperate with MOLL in these efforts.

(b) Shared Investment Return.

      (1) MOLL Capital Investments. If, during the Term, MOLL shall invest in an
AASTROM-approved capital project that results in a cost savings in the
production of Cell Cassettes, MOLL shall be entitled to retain such cost savings
until MOLL has recouped the entire cost of the capital project from Cell
Cassettes purchased by AASTROM. Once MOLL recoups such capital expenditure, the
cost savings resulting from implementation of the capital expenditure shall be
shared by the Parties on a 50%: 50% basis and MOLL shall be deemed to have
assigned to AASTROM sole ownership of the capital property purchased by MOLL
such that the capital property shall be AASTROM's Equipment. Throughout the
Term, MOLL shall use any such capital property purchased by MOLL solely for the
manufacture of Cell Cassettes for AASTROM. The method for recoupment of MOLL's
capital investments and implementation of cost sharing shall be as set forth in
Section 21(b)(2) below.

      (2) Recoupment of MOLL Capital Investment; Cost Sharing. Effective on the
first day of the quarter immediately following the quarter in which a capital
project paid for by MOLL is implemented and cost savings first occur, the Base
Cost Assumption (calculated in accordance with Appendix III) shall be
recalculated (RBCA) to reflect the cost savings resulting from implementation of
the capital project. MOLL shall track the difference between the original Base
Cost Assumption (OBCA) and RBCA on future orders of Cell Cassettes and the
entire cost savings shall be allocated to MOLL until MOLL has recouped the
amount MOLL expended on the capital project. Thereafter, the cost savings
resulting from implementation of the capital expenditure shall be allocated to
AASTROM and MOLL on a 50%: 50% basis with regard to all Cell Cassette orders
submitted by AASTROM.

      (3) AASTROM Capital Investments. AASTROM shall enjoy all savings that
result from capital projects that are paid for by AASTROM or result from any
changes in Specifications made by AASTROM. In the event that any such cost
savings are implemented, the Base Cost Assumption utilized to calculate
AASTROM's purchase price for Cell Cassettes shall be immediately reduced to
reflect the amount of the cost savings. AASTROM shall also retain all

                                       24
<PAGE>
ownership rights with regard to any capital property purchased by AASTROM that
may be used by MOLL in the manufacture of Cell Cassettes for AASTROM.

SECTION 22. INSURANCE.

      During the Term, each Party shall procure and maintain at its own cost and
expense, including the cost of premiums and deductibles, a general liability
insurance policy, including product liability (completed operations) insurance,
in an amount not less than one million ($1,000,000) dollars per occurrence, two
million ($2,000,000) dollars aggregate bodily injury, death and property damage
liability and commercial umbrella coverage of at least three million
($3,000,000) dollars each occurrence and annual aggregate. Such insurance shall
be written by a reputable insurance company licensed to do business in the
United States, shall name the other Party as an additional insured, shall
contain a broad form vendor's endorsement. During Term, MOLL shall also carry
and maintain in full force and effect all-risk property insurance covering the
full replacement value of AASTROM's Equipment and MOLL's building, machinery,
equipment and work-in-process, as well as worker's compensation insurance in the
statutory limits required by the State of North Carolina (or other applicable
jurisdiction). Within ten (10) days after the Effective Date, each Party shall
furnish the other Party with a certificate of insurance confirming the existence
of such insurance and stipulating that the insurer will give the other Party at
least ten (10) days' written notice prior to any cancellation of or material
change in such insurance. The availability of the foregoing insurance coverage
shall in no event be construed to limit or expand the Parties' agreement to
limit liability to one another in accordance with Section 13.

SECTION 23. SIMILAR PRODUCTS.

(a) Continuing Prohibition. At all times both during and after the Term, MOLL
shall not make or sell, or enable others to make or sell, the Cell Cassettes or
Components, excepting only for making and selling the Cell Cassettes or
Components for AASTROM.

(b) Similar Products. During the Term, MOLL shall not (i) manufacture, assemble,
produce, ship or in any other way make available for use or distribution, by any
party other than AASTROM, any product or system that is functionally the same as
the Cell Cassette or Components, or (ii) in any way accept engagement with, or
render service to, any individual, firm or corporation, other than AASTROM, as a
consultant, instructor, expert, designer, manufacturer or producer, or act in
any other capacity, which engagement or rendition of services involves the
development or production of any product or system that performs the same
function as the Cell Cassette. Furthermore, in the event that this Agreement is
terminated by AASTROM "for cause" under Section 17, the foregoing prohibitions
shall continue until twelve (12) months after the effective date of such
termination. As used herein, a hematopoietic stem cell expansion product or
system does not have the same function as a Cell Cassette if it utilizes
distinctly different methods and distinctly different disposable components than
are used for the Cell Cassette.

                                       25
<PAGE>
SECTION 24. GOVERNING LAW; DISPUTE RESOLUTION.

(a) Governing Law. The construction, interpretation and enforcement of the
terms, conditions, rights and liabilities set forth in this Agreement shall be
in accordance with the internal laws of the State of New York, excluding its
conflict-of-laws principles.

(b) Dispute Resolution.

      (1) Any controversy or claim arising out of or relating to this Agreement
or the breach thereof, whether common law or statutory, including, without
limitation, claims asserting violations or the antitrust laws, will be settled
exclusively by arbitration in Dallas, Texas if initiated by AASTROM and in Ann
Arbor, Michigan, if initiated by MOLL (unless another location is mutually
agreed in writing), using the then-current Commercial Rules of the American
Arbitration Association. The arbitration will be heard before three neutral
arbitrators, one to be chosen by AASTROM, one to be chosen by MOLL, and the
third to be chosen by those two arbitrators.

      (2) The arbitrators will apply the internal law of the State of New York
as set forth in Section 24(a), except that the arbitrators will not have the
power to alter, modify, amend, add to or subtract from any term or provision of
this Agreement. To the extent consistent with the terms of this Agreement, the
arbitrators shall have the power to grant injunctive relief. In all other
respects, the then-current Commercial Rules of the American Arbitration
Association will govern the arbitration. Judgment on the award of the
arbitrators may be entered by any court having jurisdiction to do so, and the
parties to this Agreement hereby irrevocably consent and submit to the personal
jurisdiction and venue of the applicable federal courts having jurisdiction in
the district and state in which the arbitration is to occur, if at all, in
accordance with this Section 24(b) (or in the state court in the county and
state in which the arbitration is to occur, if at all, failing jurisdiction of
the federal court) in any action or proceeding for that purpose as well as for
any and all other permitted purposes, including, without limitation, in respect
of a Party seeking injunctive relief, in connection with this Agreement. The
Parties hereby irrevocably waive any and all claims and defenses either might
otherwise have in any such action or proceeding in any of such courts based upon
any alleged lack of personal jurisdiction, improper venue, forum non conveniens
or any similar claim or defense.

      (3) The failure or refusal of either Party to submit to arbitration as
required by Section 24(b) will constitute a material breach of this Agreement.
If judicial action is commenced in order to compel arbitration, and if
arbitration is in fact compelled, the Party that resisted arbitration will be
required to pay to the other parties all costs and expenses, including, without
limitation, reasonable attorneys' fees, that they incur in compelling
arbitration. The prevailing Party in arbitration shall be entitled to its
reasonable attorneys' fees and costs of the arbitration proceeding without
regard to the limitations set forth in Section 13. All other fees and charges of
the American Arbitration Association will be borne, as the arbitrators will
determine in their award.

(c) Notwithstanding the Parties' agreement to submit to arbitration pursuant to
this Section 24, either Party may petition any court of competent jurisdiction
for injunctive relief in the event of an alleged breach of Section 15(b) or 16.

                                       26
<PAGE>
SECTION 25. NOTICES.

      All notices required to be made hereunder shall be sent to the respective
Parties set forth below by certified mail, return receipt requested or by
facsimile (with confirmation copy by such certified mail):

      If to MOLL:       Moll Industries
                        13455 Noel Rd., Suite 1420
                        Dallas, TX 75240
                        Attn.:  Ron Embree
                        Facsimile: 973-763-4001

      With a copy to:   Andrews & Kurth L.L.P.
                        111 Congress Ave., Suite 1700
                        Austin, TX 78701
                        Attn.: Matthew Lyons
                        Facsimile: 512-542-5226

      And

      If to AASTROM:    AASTROM Biosciences, Inc.
                        P.O. Box 376
                        Ann Arbor, Michigan 48106
                        Attn:  Brian Hampson, Vice President
                        Facsimile: 313-665-0485

      With a copy to:   Gray Cary Ware & Freidenrich LLP
                        4365 Executive Drive, Suite 1100
                        San Diego, CA  92121-2189
                        Attn.:  T. Knox Bell, Esq.
                        Facsimile: 619-677-1401

      AASTROM and MOLL may change their respective addresses and facsimile
numbers for notices by a notice given by mail in accordance with this Section
25. Unless otherwise shown by documentary evidence, all notices shall be deemed
received upon the earlier of actual receipt or three days after deposit in the
U.S. mail, postage prepaid, or if by facsimile, on the business day next
following the day sent.

SECTION 26. SUCCESSORS AND ASSIGNS; SURVIVAL.

      This Agreement is not intended to benefit any person not a Party hereto or
to give any rights to any such non-party. This Agreement shall inure solely to
the benefit of and be binding upon the Parties hereto and their successors and
permitted assigns. This Agreement shall bind and inure to the benefit of any
successor to a Party by merger or purchase of substantially all of the assets of
the Party. Except to such a successor, neither AASTROM nor MOLL may assign this
Agreement in whole or in part without the prior written consent of the other,
which consent

                                       27
<PAGE>
shall not be unreasonably withheld. Any assignment or purported assignment by
either party without any such required consent shall be null and void. The
representations, warranties and covenants set forth in this Agreement shall
survive its expiration or earlier termination as expressly provided or as is
necessary to give full effect to the undertakings of the Parties prior to such
expiration or termination.

SECTION 27. HEADINGS.

      Headings inserted in this Agreement are for the convenience of the parties
and shall not govern any conclusion or interpretation of this Agreement or any
of its provisions. Nouns and verbs in the singular person or tense shall include
the plural person and tense and vice versa.

SECTION 28. SEVERABILITY.

      In case any provision or part thereof in this Agreement shall, for any
reason, be held invalid, illegal or unenforceable, such invalidity, illegality
or unenforceability shall not affect any other provision or part thereof, and
this Agreement shall be construed as if such invalid or illegal or unenforceable
provision or part thereof had been reformed so that it would be valid, legal and
enforceable to the maximum extent permitted. Except as otherwise expressly set
forth in this Agreement, neither Party shall have the right to set off all or
any part of the damages it incurs as a result of the other Party's breach of its
obligations in this Agreement against amounts that are owed to such other Party
hereunder.

SECTION 29. AMENDMENT AND WAIVER.

      This Agreement may be amended or modified only by a written instrument
executed by each Party hereto expressly stating that it is an amendment to the
terms of this Agreement. Without limiting the generality of the foregoing, all
sales and purchases of Cell Cassettes contemplated by this Agreement shall be
made solely pursuant to the terms of this Agreement without consideration of any
different or additional terms of any purchase order or sales acknowledgement or
other form of either Party and any such additional or different terms are hereby
objected to. The failure of a Party at any time or times to require performance
of any provision hereof shall in no manner affect the Party's right at a later
time to enforce the same. No waiver by any Party of the breach of any term
contained in this Agreement, in any one or more instances, shall be deemed to be
construed as a further or continuing waiver of any such breach or of the breach
of any other term of this Agreement, nor shall any such waiver be deemed to be a
custom or practice of the waiving Party. No waiver shall be effective unless in
writing, signed by the Party waiving compliance.

SECTION 30. COUNTERPARTS.

      This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.

                                       28
<PAGE>
SECTION 31. INDEPENDENT CONTRACTORS.

      The relationship between the Parties is that of independent contractors
and neither Party shall have the power to bind or obligate the other in any
manner, other than as expressly set forth in this Agreement.

SECTION 32. ENTIRE AGREEMENT.

      This Agreement, including, without limitation, its recitals and
Appendices, sets forth the entire agreement and understanding of the parties in
respect of the subject matter hereof, including, without limitation, the
purchase and sale of Cell Cassettes, and supersedes all prior agreements,
arrangements, presentations and understandings relative to the subject matter
hereof, whether written or oral, express or implied. No oral or written
statement, representation, warranty or promise made prior to or
contemporaneously with the execution of this Agreement shall be binding upon
either party with respect to the subject matter hereof or shall otherwise affect
the enforceability of this Agreement in accordance with its terms.

      IN WITNESS WHEREOF, the undersigned have executed and delivered this
Agreement effective on the Effective Date.

                                        MOLL INDUSTRIES, INC.

                                        By:
                                           -------------------------------
                                             Ron Embree
                                             President

                                        AASTROM BIOSCIENCES, INC.

                                        By:
                                           ------------------------------
                                        Alan M. Wright
                                        Senior V.P. Administrative. & Financial
                                                                 Operations, CFO

                                       29
<PAGE>
                                   APPENDIX I

                                    EQUIPMENT

                    [TO BE REVIEWED AND UPDATED AS NECESSARY]

I.    Cell Cassette-related Manufacturing Equipment to be provided and owned by
      AASTROM

      1.    Bioreactor Assembly Fixtures

      2.    Tissue Culture Treatment Process and Equipment Requiring: 208 Volt 3
            Flux 60HZ @ 60 AMPS Clean Earth Ground 2" Exhaust Vent

            Nitrogen           Carbon Dioxide
            Nitrous Oxide      Helium

      3.    Ultrasonic Welder - Dukane 700 Watt Ultracom Assembly System or
            Equivalent

      4.    Portable Clean Air Tent (if required)

      5.    Leak Tester - Industrial Data Systems Sprint LC-P Pressure Decay
            Leak Tester Equivalent

      6.    Sealing equipment for Harvest Bag, Waste Reservoir, and finished
            device packaging (if required)

      7.    UV curable adhesive application and curing equipment

      8.    Injection Molds

      9.    Robotic End Arm Tools

      10.   EMMA Welder and heat sealing station

II.   Manufacturing Equipment To Be Provided and owned by MOLL:

      1.    Hand Assembly, Pneumatic Tools, and Dimensional Measurement
            Equipment as required by project

      2.    AutoCAD and Pro Engineer workstation(s), either on site or readily
            accessible, to meet program objectives

      3.    Molding Equipment as Required by Program

            (600 ton, 300 ton, and 75 ton molding machines in class 100,000
            medical molding facility;
<PAGE>
            700 ton molding machines in an environment suitable for producing
            parts to be moved into a clean room)

      4.    Robotic pickers for molding machine.

      5.    Class 100,000 Assembly space as required by the Program
<PAGE>
                                   APPENDIX II

                                 SPECIFICATIONS

27-369      CELL CASSETTE, PACKAGED

27-328      CONTROLLED ENVIRONMENT SPECIFICATION

15-034      SURFACE TREATMENT, CELL BED

29-036      CELL CULTURE DEVICE ASSEMBLY FOR AUTOMATED SYSTEM

15-036      CONTROLLED ENVIRONMENT INJECTION MOLDING OF COMPONENTS
<PAGE>
                                  APPENDIX III

                                PRICING SCHEDULE

UNIT PRICING SHALL FOLLOW THE BCA METHOD, WHICH SHALL BE UPDATED QUARTERLY AND
INCLUDES THE FOLLOWING:

Labor: 30% mark-up on wages/salaries and benefits

Molded Components: 30% mark-up on Moll Standard cost

Purchased Materials and Components: 15% mark-up on actual delivered cost

Freight: 0% mark-up -- passed through at cost

Sterilization: 0% mark-up without certification by Moll; 15% mark-up with
certification by Moll

A forecast of monthly volume in excess of 150 cassettes per month for six
consecutive months will trigger a joint meeting between Aastrom and Moll to
review capacity requirements and cost reduction opportunities. At that time, it
may be mutually decided between Aastrom and Moll to adopt a different pricing
method than the BCA method for volumes higher than 150 cassettes per month.
<PAGE>
                                   APPENDIX IV

Suppliers of components, assemblies, or services to Moll for manufacture of Cell
Cassettes where periodic on-site audit is required.

      1)    Ethox Corporation

      2)    Steris Corporation<PAGE>

                                  EXHIBIT 10.4

                              EMPLOYMENT AGREEMENT

      THIS EMPLOYMENT AGREEMENT ("Agreement"), is made and entered into as of
the 1st day of June 2004, by and between Kensey Nash Corporation, a Delaware
corporation (the "Company"), and Joseph W. Kaufmann ("Executive").

      WHEREAS, the Company wishes to retain Executive as an executive employee,
and Executive wishes to be employed by the Company in such capacity, all upon
the terms and conditions hereinafter set forth.

      NOW, THEREFORE, in consideration of the mutual covenants of parties
hereinafter set forth, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:

1. EMPLOYMENT OF EXECUTIVE. The Company engages and employs Executive in an
executive capacity and Executive accepts such employment and agrees to act as an
employee of the Company in accordance with the terms of employment hereinafter
specified. Executive shall hold the office of President and CEO and shall,
subject to the direction and supervision of the Company's of Board of Directors,
(a) have the responsibilities and authority customarily associated with such
office, and (b) perform such other duties and responsibilities as the Company's
Board of Directors shall from time to time assign to him. Executive agrees
diligently and faithfully to serve the Company and to devote his best efforts,
his full business time and his highest talents and skills to the furtherance and
success of the Company's business.

2. COMPENSATION. As full and complete compensation to Executive for all services
to be rendered by Executive hereunder, the Company shall pay Executive as
follows:

      (a) The Company shall, during the term of Executive's employment, pay or
cause to be paid to Executive a base salary at the rate of $290,000 per annum,
or Executive's most recent per annum base salary, whichever is greater. Such
base salary shall be paid in periodic installments at the discretion of the
Company (but not less frequently than monthly) in accordance with the Company's
normal mode of executive salary payment.

      (b) The Company may, during the term of Executive's employment, pay or
cause to be paid to Executive an annual bonus of cash, not to exceed 100% of the
base salary. In addition, stock, stock options and or stock rights may be
awarded by the Company's Board of Directors in their sole discretion.

3. TERM OF EMPLOYMENT; SEVERANCE.

      (a) The term of Executive's employment hereunder (the "Employment Term")
shall commence on the date hereof and shall expire three (3) years after such
date.

      (b) Termination of Executive's employment pursuant to this Agreement or
voluntary termination of employment shall not constitute a waiver of any of
Executive's obligations hereunder which survive termination hereof, including
without limitation those arising under paragraphs 5 through 9 inclusive hereof.

      (c) In the event Executive's employment is terminated by the Company
without cause (as hereinafter determined), Executive shall continue to be
entitled to receive those fringe benefits enumerated in paragraph 4 hereof until
the expiration of the original Employment Term and the Company shall pay to
Executive a severance fee equal to the greater of (i) any amount of base salary
remaining until the expiration of the original Employment Term and bonus for
each remaining year of the original Employment Term, which bonus shall be based
on an average of the bonuses earned by Executive during the last two fiscal
years prior to such termination without cause (the "Estimated Bonus"), to which
Executive would otherwise be entitled but for such termination, or (ii) twelve
(12) months of Executive's salary and Estimated Bonus; provided, however, that
Executive shall not be entitled to receive any fringe benefits or such severance
fee if Executive breaches any of his obligations arising under paragraphs 7
through 9 hereof. The continuance of Executive's fringe benefits and the payment
by the Company of any severance fee to Executive pursuant to this Agreement
shall be in complete satisfaction and settlement of, and as liquidated damages
for, any and all of Executive's claims, damages or causes of action arising
directly or indirectly from this Agreement. In addition, upon the termination of
Executive's employment by the Company without cause, all options to purchase
shares of common stock of the Company ("Options") that were granted to Executive
and have vested prior to the date of such termination without cause shall remain
exercisable for a period of one (1) year from the date of such termination
without cause.

                                       62
<PAGE>

      (d) In the event Executive's employment is terminated with cause, the
Company shall have no further obligations hereunder or otherwise with respect to
Executive's employment from and after the date of such termination, except for
the payment of Executive's base salary accrued through the date of such
termination. For purposes of this Agreement, "cause" for termination shall be
deemed to exist upon (i) a determination by the Company's Board of Directors
that Executive has committed an act of fraud, embezzlement or other act of
dishonesty which would reflect adversely on the integrity of the Company or if
Executive is convicted of any criminal statute involving breach of fiduciary
duty or moral turpitude; (ii) a reasonable determination by the Company's Board
of Directors that Executive has failed to discharge his duties in a reasonably
satisfactory manner which failure is not cured by Executive within thirty (30)
days after delivery of written notice to Executive specifying the nature of such
failure; (iii) the death of Executive; (iv) a mental or physical disability of
Executive which renders Executive, in the reasonable opinion of the Company's
Board of Directors, unable to effectively perform his duties hereunder for a
substantially continuous period of one hundred eighty (180) days; or (v) the
voluntary termination of Executive's employment hereunder other than as a result
of a breach of the Company's obligations hereunder.

      (e) In the event Executive's employment is terminated by the Company
pursuant to a Change in Control (as that term is defined in that certain
Termination and Change in Control Agreement dated of even date herewith between
the Company and Executive (the "Change in Control Agreement")), the Company
shall pay to Executive a severance fee equal to the greater of (i) the amount
Executive would be entitled to receive under paragraph 3(c) of this Agreement
for a termination without cause, or (ii) the amount Executive would be entitled
to receive pursuant to a Change in Control under the Change in Control
Agreement.

      (f) In the event Executive's employment is not renewed by the Company upon
the expiration of the Employment Term for a term (the "Renewal Term") of at
least two (2) years, Executive shall, upon (i) the expiration of the Renewal
Term, if any, or (ii) the Employment Term in the event there is no Renewal Term,
or (iii) upon Executive's voluntary termination within 60 days of the Company's
failure to renew his employment on substantially the same terms as set forth
herein for at least two (2) years, continue to receive those fringe benefits
enumerated in paragraph 4 hereof for a period of twelve (12) months, and the
Company shall pay to Executive a severance fee equal to twelve (12) months of
Executive's salary and the Estimated Bonus; provided, however, that Executive
shall not be entitled to receive any fringe benefits or such severance fee if
Executive breaches any of his obligations arising under paragraphs 7 through 9
hereof. In addition, all Options that were granted to Executive and have vested
prior to the expiration of the Renewal Term shall remain exercisable for a
period of one (1) year from the expiration of the Renewal Term.

      (g) In the event any payments or benefits received by the Executive upon
his termination of employment (which payments shall include, without limitation,
the vesting of an option or other non-cash benefit or property), whether
pursuant to the terms of this Agreement or any other plan, arrangement, or
agreement with the Company or any affiliated company (collectively, the "Total
Payments") would be subject (in whole or in part) to the excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), or
any similar tax as may hereafter be imposed (the "Excise Tax"), the following
provisions shall apply:

            (i) In the event that the Total Payments cause the Executive's
      "parachute payments" within the meaning of Section 280G(b)(2) of the Code
      to equal or to exceed three times the Executive's "base amount" within the
      meaning of Section 280G(b)(3) of the Code (the "Trebled Base Amount") by
      an amount which is not greater than 10% of the Trebled Base Amount, the
      Total Payments shall be reduced (or eliminated) such that no portion of
      the Total Payments is subject to the Excise Tax. Reductions shall be made
      first to those Total Payments arising under the terms of this Agreement.

            (ii) In the event that the Total Payments cause the parachute
      payments to exceed 110% of the Trebled Base Amount, the Company shall pay
      to the Executive at the time specified below, an additional amount
      determined as set forth below (the "Gross-up Payment"). The Gross-up
      Payment shall be made with respect to the amount which equals 100% of the
      Executive's "excess parachute payments" subject to the Excise Tax. The
      Gross-up Payment shall be an amount such that the net amount retained by
      Executive with respect to the Total Payments after reduction for any
      Excise Tax on the Total Payments and any federal, state and local income
      or employment tax and Excise Tax payable by the Executive on the Gross-up
      Payment hereunder (provided that such amount is actually paid when due)
      shall be equal to the amount of the Total Payments that the Executive
      would retain if the Total Payments did not constitute parachute payments.

            (iii) For purposes of determining whether any of the Total Payments
      will be subject to the Excise Tax and the amount of any Excise Tax:

                                       63
<PAGE>

                  (a) The Total Payments shall be treated as "parachute
            payments" within the meaning of Section 280G(b)(2) of the Code, and
            all "excess parachute payments" within the meaning of Section
            280G(b)(1) of the Code shall be treated as subject to the Excise
            Tax, unless, and except that to the extent that, in the written
            opinion of independent legal counsel, compensation consultants or
            auditors of nationally recognized standing ("Independent Advisors")
            selected by the Company and reasonably acceptable to Executive, the
            Total Payments (in whole or in part) do not constitute parachute
            payments, or such excess parachute payments (in whole or in part)
            represent reasonable compensation for services actually rendered
            within the meaning of Section 280G(b)(4) of the Code in excess of
            the base amount within the meaning of Section 280G(b)(3) of the Code
            or are otherwise not subject to the Excise Tax;

                  (b) The amount of the Total Payments which shall be treated as
            subject to the Excise Tax shall be equal to the lesser of (i) the
            total amount of the Total Payments or (ii) the total amount of
            excess parachute payments within the meaning of Section 280G(b)(1)
            of the Code (after applying Section 3(g)(iii)(a) above); and

                  (c) The value of any non-cash benefits or any deferred payment
            or benefit shall be determined by the Independent Advisors in
            accordance with the principles of Sections 280G(d)(3) and (4) of the
            Code.

                  In the event that the Excise Tax is subsequently determined to
            be less than the amount taken into account hereunder at the time the
            Gross-up Payment is made, Executive shall repay to the Company at
            the time that the amount of such reduction in Excise Tax is finally
            determined (but, if previously paid to the taxing authorities, not
            prior to the time the amount of such reduction is refunded to
            Executive or otherwise realized as a benefit by Executive) the
            portion of the Gross-up Payment that would not have been paid if
            such Excise Tax had been applied to initially calculating the
            Gross-up Payment, plus interest on the amount of such repayment at
            the rate provided in Section 1274(b)(2)(B) of the Code. In the event
            that the Excise Tax is determined to exceed the amount taken into
            account hereunder at the time the Gross-up Payment is made
            (including by reason of any payment the existence or amount of which
            cannot be determined at the time of the Gross-up Payment), the
            Company shall make an additional Gross-up Payment and shall
            indemnify and hold Executive harmless in respect of such excess
            (plus any interest and penalties payable with respect to such
            excess) at the time that the amount of such excess is finally
            determined.

            The Gross-up Payment provided for above shall be paid on the 30th
      day (or such earlier date as the Excise Tax becomes due and payable to the
      taxing authorities) after it has been determined that the Total Payments
      (or any other portion thereof) are subject to the Excise Tax; provided,
      however, that if the amount of such Gross-up Payment or portion thereof
      cannot be finally determined on or before such day, the Company shall pay
      to Executive on such day an estimate, as determined by the Independent
      Advisors, of the minimum amount of such payments and shall pay the
      remainder of such payments (together with interest at the rate provided in
      Section 1274(b)(2)(B) of the Code), as soon as the amount thereof can be
      determined. In the event that the amount of the estimated payments exceeds
      the amount subsequently determined to have been due, such excess shall
      constitute a loan by the Company to Executive, payable on the fifth day
      after demand by the Company (together with interest at the rate provided
      in Section 1274(b)(2)(B) of the Code). If more than one Gross-up Payment
      is made, the amount of each Gross-up Payment shall be computed so as not
      to duplicate any prior Gross-up Payment.

            Executive shall notify the Company in writing of any claim by the
      Internal Revenue Service that, if successful, would require the payment by
      the Company of the Gross-up Payment. Such notification shall be given as
      soon as practicable but no later than ten (10) business days after
      Executive is informed in writing of such claim and shall apprise the
      Company of the nature of such claim and the date on which such claim is
      requested to be paid. Executive shall not pay such claim prior to the
      expiration of the 30-day period following the date on which it gives such
      notice to the Company (or such shorter period ending on the date that any
      payment of taxes with respect to such claim is due). If the Company
      notifies Executive in writing prior to the expiration of such period that
      it desires to contest such claim, Executive shall:

            (i)   give the Company any information reasonably requested by the
                  Company relating to such claim;

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<PAGE>

            (ii)  take such action in connection with contesting such claim as
                  the Company shall reasonably request in writing from time to
                  time, including, without limitation, accepting legal
                  representation with respect to such claim by an attorney
                  reasonably selected by the Company;

            (iii) cooperate with the Company in good faith in order effectively
                  to contest such claim; and

            (iv)  permit the Company to participate in any proceedings relating
                  to such claim;

      provided, however, that the Company shall bear and pay directly all costs
      and expenses (including additional interest and penalties) incurred in
      connection with such contest and shall indemnify and hold Executive
      harmless, on an after-tax basis, for any Excise Tax or income or
      employment tax (including interest and penalties with respect thereto)
      imposed as a result of such representation and payment of costs and
      expenses. Without limitation on the foregoing provisions of this Section
      3(g), the Company shall control all proceedings taken in connection with
      such contest and, at its sole option, may pursue or forgo any and all
      administrative appeals, proceedings, hearings and conferences with the
      taxing authority in respect of such claim and proceedings, hearings and
      conferences with the taxing authority in respect of such claim and may, at
      its sole option, either direct Executive to pay the tax claimed and sue
      for a refund or contest the claim in any permissible manner, and Executive
      agrees to prosecute such contest to a determination before any
      administrative tribunal, in a court of initial jurisdiction and in one or
      more appellate courts, as the Company shall determine; provided, however,
      that if the Company directs Executive to pay such claim and sue for a
      refund, the Company shall advance the amount of such payment to Executive,
      on an interest-free basis, and shall indemnify and hold Executive
      harmless, on an after-tax basis, from any Excise Tax or income or
      employment (including income or employment or interest or penalties with
      respect thereto) imposed with respect to such advance or with respect to
      any imputed income with respect to such advance; and further provided that
      any extension of the statute of limitations relating to payment of taxes
      for the taxable year of Executive with respect to which such contested
      amount is claimed to be due is limited solely to such contested amount.
      Furthermore, the Company's control of the contest shall be limited to
      issues with respect to which a Gross-up Payment would be payable hereunder
      and the Executive shall be entitled to settle or contest, as the case may
      be, any other issue raised by the Internal Revenue Service or any other
      taxing authority. If, after the receipt by Executive of an amount advanced
      by the Company pursuant to this Section 3(g), Executive becomes entitled
      to receive any refund with respect to such claim, Executive shall (subject
      to the Company's complying with the requirements of this Section 3(g))
      promptly pay to the Company the amount of such refund (together with any
      interest paid or credited thereon after taxes applicable thereto). If,
      after the receipt by Executive of an amount advanced by the Company
      pursuant to this Section 3(g), a determination is made that Executive
      shall not be entitled to any refund with respect to such claim and the
      Company does not notify Executive in writing of its intent to contest such
      denial of refund prior to the expiration of thirty (30) days after such
      determination, then such advance shall be forgiven and shall not be
      required to be repaid and the amount of such advance shall offset, to the
      extent thereof, the amount of Gross-up Payment required to be paid.

4. FRINGE BENEFITS.

      (a)   During the Employment Term, Executive shall be entitled to
            participate in all health insurance and retirement benefit programs
            normally available to other executives of the Company holding
            positions similar to that of Executive hereunder (subject to all
            applicable eligibility rules thereof), as from time to time in
            effect. Executive shall also receive the benefits listed on Exhibit
            A hereto.

      (b)   Executive shall be entitled to paid vacation according to the normal
            vacation schedule for other executive employees. Executive shall
            make good faith efforts to schedule such vacations so as to least
            conflict with the conduct of the Company's business and shall give
            the Company adequate advance notice of his planned absences.

      (c)   The Company shall reimburse Executive for all business-related
            expenses incurred by Executive at the Company's direction. Executive
            shall submit to the Company expense reports in compliance with
            established Company guidelines.

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<PAGE>

5. INVENTIONS. Executive agrees, on behalf of himself, his heirs and personal
representatives, that he will promptly communicate, disclose and transfer to the
Company free of all encumbrances and restrictions (and will execute and deliver
any papers and take any action at any time deemed necessary by the Company to
further establish such transfer) all inventions and improvements relating to
Company's business originated or developed by Executive solely or jointly with
others during the term of his employment hereunder. Such inventions and
improvements shall belong to the Company whether or not they are patentable and
whether or not patent applications are filed thereon. Such transfer shall
include all patent rights (if any) to such inventions or improvements in the
United States and in all foreign countries. Executive further agrees, at the
request of Company, to execute and deliver, at any time during the term of his
employment hereunder or after termination thereof, all assignments and other
lawful papers (which will be prepared at the Company's expense) relating to any
aspect of the prosecution of such patent applications and rights in the United
States and foreign countries.

6.  EXPOSURE TO PROPRIETARY INFORMATION.

      (a) Executive acknowledges and agrees that during the course of his
employment by Company, he will be in continuous contact with customers,
suppliers and others doing business with the Company throughout the world.
Executive further acknowledges that the performance of his duties hereunder will
expose him to data and information concerning the business and affairs of the
Company, including but not limited to information relative to the Company's
proprietary rights and technology, patents, financial statements, sales
programs, pricing programs, profitability analyses and profit margin
information, customer buying patterns, needs and inventory levels, supplier
identities and other related matters, and that all of such data and information
(collectively "the Proprietary Information") is vital, sensitive, confidential
and proprietary to Company.

      (b) In recognition of the special nature of his employment hereunder,
including but not limited to his special access to the Proprietary Information,
and in consideration of his employment, Executive agrees to the covenants and
restrictions set forth in paragraphs 7 through 9 inclusive hereof. As used in
this Agreement, the term "Company" shall include, where applicable, any parent,
subsidiary, sub-subsidiary, or affiliate of Company.

7. USE OF PROPRIETARY INFORMATION. Executive acknowledges that the Proprietary
Information constitutes a protectible business interest of Company, and
covenants and agrees that during the term of his employment hereunder and after
the termination of such employment, he shall not, directly or indirectly,
whether individually, as a director, stockholder, owner, partner, employee or
agent of any business, or in any other capacity, make known, disclose, furnish,
make available or utilize any of the Proprietary Information, other than in the
proper performance of his duties during the term of his employment hereunder.
Executive's obligations under this paragraph with respect to particular
Proprietary Information shall terminate only at such time (if any) as the
Proprietary Information in question becomes generally known to the public other
than through a breach of Executive's obligations hereunder.

8. RESTRICTION AGAINST COMPETITION AND EMPLOYING OR SOLICITING COMPANY
EMPLOYEES, CUSTOMERS OR SUPPLIERS. Executive covenants and agrees that during
the term hereof and for the one (1) year period immediately following the
effective date of any termination of his employment hereunder (the "Termination
Date"), he shall not, directly or indirectly, whether individually, as a
director, stockholder, partner, owner, employee or agent of any business, or in
any other capacity, (i) engage in a business substantially similar to that which
is conducted by the Company in any market area in which such business is
operated; (ii) solicit any party who is or was a customer or supplier of the
Company on the Termination Date or at any time during the six month period
immediately prior thereto for the sale or purchase of any type or quantity of
products sold by or used in the business of the Company on the Termination Date
or at any time within such six month period; or (iii) solicit for employment any
person who was or is an employee of the Company on the Termination Date or at
any time during the twelve month period immediately prior thereto.

9. RETURN OF COMPANY MATERIALS UPON TERMINATION. Executive acknowledges that all
price lists, sales manuals, catalogs, binders, customer lists and other customer
information, supplier lists, financial information, and other records or
documents containing Proprietary Information prepared by Executive or coming
into his possession by virtue of his employment by the Company is and shall
remain the property of the Company and that upon termination of his employment
hereunder, Executive shall return immediately to the Company all such items in
his possession, together with all copies thereof.

10. EQUITABLE REMEDIES.

      (a) Executive acknowledges and agrees that the covenants set forth in
paragraphs 5 through 9 inclusive hereof are reasonable and necessary for the
protection of the Company's business interests, that irreparable injury will
result to the

                                       66
<PAGE>

Company if Executive breaches any of the terms of said covenants, and that in
the event of Executive's actual or threatened breach of any such covenants, the
Company will have no adequate remedy at law. Executive accordingly agrees that
in the event of any actual or threatened breach by him of any of said covenants,
the Company shall be entitled to immediate injunctive and other equitable
relief, without bond and without the necessity of showing actual monetary
damages. Nothing contained herein shall be construed as prohibiting the Company
from pursuing any other remedies available to it for such breach or threatened
breach, including the recovery of any damages which it is able to prove.

      (b) Each of the covenants in paragraphs 5 through 9 inclusive hereof shall
be construed as independent of any other covenants or other provisions of this
Agreement.

      (c) In the event of any judicial determination that any of the covenants
set forth in paragraphs 5 through 9 inclusive hereof is not fully enforceable,
it is the intention and desire of the parties that the court treat said
covenants as having been modified to the extent deemed necessary by the court to
render them reasonable and enforceable, and that the court enforce them to such
extent.

11. LIFE INSURANCE. The Company may at its discretion and at any time apply for
and procure as owner and for its own benefit and at its own expense, insurance
on the life of Executive in such amounts and in such form or forms as the
Company may choose. Executive shall cooperate with the Company in procuring such
insurance and shall, at the request of Company, submit to such medical
examinations, supply such information and execute such documents as may be
required by the insurance company or companies to whom the Company has applied
for such insurance. Executive shall have no interest whatsoever in any such
policy or policies, except that, upon the termination of Executive's employment
hereunder, Executive shall have the privilege of purchasing any such insurance
from the Company for an amount equal to the actual premiums thereon previously
paid by Company.

12. NOTICES. Any notice required or permitted pursuant to the provisions of this
Agreement shall be deemed to have been properly given if in writing and when
sent by United States mail, certified or registered, postage prepaid, when sent
by facsimile or when personally delivered, addressed as follows:

                  If to Company:

                           Kensey Nash Corporation
                           Marsh Creek Corporate Center
                           55 East Uwchlan Avenue
                           Exton, Pennsylvania 19341
                           Attention: Douglas Evans

                  With a copy to:

                           Katten Muchin & Zavis
                           525 West Monroe Street
                           Suite 1600
                           Chicago, Illinois 60661-3693
                           Attention: David R. Shevitz, Esq.

                  If to Executive:

                           Joseph W. Kaufmann
                           114 Wooded Lane
                           Villanova, PA 19085

      Each party shall be entitled to specify a different address for the
receipt of subsequent notices by giving written notice thereof to the other
party in accordance with this paragraph.

13. WAIVER OF BREACHES. No waiver of any breach of any of the terms, provisions
or conditions of this Agreement shall be construed or held to be a waiver of any
other breach, or a waiver of, acquiescence in or consent to any further or
succeeding breach thereof.

                                       67
<PAGE>

14. ASSIGNMENT. This Agreement shall not be assignable by either party without
the written consent of the other; provided, however, that this Agreement shall
be assignable to any corporation or entity which purchases the assets of or
succeeds to the business of the Company (a "Successor Employer"), and the
Company agrees to cause this Agreement to be assumed by any Successor Employer
as a condition to such purchase or succession. Subject to the foregoing, this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, personal representatives, successors and assigns.

15. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with laws and judicial decisions of the State of Pennsylvania.

16. SEVERABILITY. If any term or provision of this Agreement shall be held to be
invalid or unenforceable, the remaining terms and provisions hereof shall not be
affected thereby.

17. MISCELLANEOUS. Paragraph headings herein are for convenience only and shall
not affect the meaning or interpretation of the contents hereof. This Agreement
contains the entire agreement between the parties hereto with respect to the
subject matter hereof and supersedes all prior agreements and understandings
between the parties and all prior obligations of the Company with respect to the
employment of Executive by the Company or the payment to Executive of
compensation of any kind whatsoever. No supplement or modification of this
Agreement shall be binding unless in writing and signed by both parties hereto.
This agreement may be executed in multiple counterparts, each of which shall be
deemed enforceable without production of the others.

      IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the date first hereinabove set forth.

                                   /s/ Joseph W. Kaufmann
                                   ----------------------
                                   Joseph W. Kaufmann

                                   KENSEY NASH CORPORATION

                                   By: /s/ C. McCollister Evarts, M.D.
                                       -------------------------------
                                   Title: Chairman of the Compensation Committee

                                       68
<PAGE>

                                    Exhibit A

                                    BENEFITS

Health/prescription, dental, and vision insurance equal to that provided for all
other full-time exempt Kensey Nash Corporation employees.

Life insurance in the amount of $300,000

Short-term disability insurance equal to that provided for all other full-time
exempt Kensey Nash Corporation employees.

Long-term disability benefits at 40% of salary

Supplemental long-term disability benefits

Three weeks annual vacation: Accumulated, unused vacation time for Executives of
the Corporation is not vested and will not be paid to Executive either while
employed or upon termination of employment.

Six days annual personal leave

Eleven holidays each year

401K Plan

Employee Incentive Compensation Plan

                                       69

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