UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
x    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2014
OR
¨    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission file number: 1-13165
CRYOLIFE, INC.
(Exact name of registrant as specified in its charter)

Florida	 	59-2417093	
(State or other jurisdiction of	 	(I.R.S. Employer	
incorporation or organization)	 	Identification No.)	
 	 	
1655 Roberts Boulevard, NW, Kennesaw, Georgia	 	30144	
(Address of principal executive offices)	 	(Zip Code)	
(770) 419-3355
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.            Yes  x                         No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
          Yes x                        No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	 	¨	  	Accelerated filer	 	x	
 	 	 	 	
Non-accelerated filer	 	¨  (Do not check if a smaller reporting company)	  	Smaller reporting company	 	¨	
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
            Yes ¨                    No x                                                                         
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	  	Outstanding at October 23, 2014	
Common Stock, $.01 par value per share	  	27,942,146 Shares	

Part I – FINANCIAL INFORMATION
Item 1. Financial Statements.
CRYOLIFE, INC. AND SUBSIDIARIES
SUMMARY CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)

 	  	Three Months
Ended
September 30,	 	 	Nine Months
Ended
September 30,	 	
 	  	 	 	 	 	 	 	 	
 	  	2014	 	 	2013	 	 	2014	 	 	2013	 	
 	  	 	 	 	 	 	 	 	
 	  	(Unaudited)	 	 	(Unaudited)	 	
Revenues:	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Products	  	$	20,405	  	 	$	18,833	  	 	$	60,210	  	 	$	56,824	  	
Preservation services	  	 	16,664	  	 	 	17,417	  	 	 	47,280	  	 	 	48,411	  	
Other	  	 	—	  	 	 	—	  	 	 	—	  	 	 	71	  	
 	  	 	 	 	 	 	 	 	
Total revenues	  	 	37,069	  	 	 	36,250	  	 	 	107,490	  	 	 	105,306	  	

Cost of products and preservation services:	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Products	  	 	4,167	  	 	 	3,544	  	 	 	12,099	  	 	 	10,730	  	
Preservation services	  	 	9,103	  	 	 	9,357	  	 	 	26,735	  	 	 	26,472	  	
 	  	 	 	 	 	 	 	 	
Total cost of products and preservation services	  	 	13,270	  	 	 	12,901	  	 	 	38,834	  	 	 	37,202	  	
 	  	 	 	 	 	 	 	 	
Gross margin	  	 	23,799	  	 	 	23,349	  	 	 	68,656	  	 	 	68,104	  	

Operating expenses:	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
General, administrative, and marketing	  	 	18,882	  	 	 	16,532	  	 	 	55,116	  	 	 	51,441	  	
Research and development	  	 	1,902	  	 	 	2,252	  	 	 	6,607	  	 	 	5,976	  	
 	  	 	 	 	 	 	 	 	
Total operating expenses	  	 	20,784	  	 	 	18,784	  	 	 	61,723	  	 	 	57,417	  	
 	  	 	 	 	 	 	 	 	
Operating income	  	 	3,015	  	 	 	4,565	  	 	 	6,933	  	 	 	10,687	  	
 	  	 	 	 	 	 	 	 	
Interest expense	  	 	65	  	 	 	55	  	 	 	110	  	 	 	159	  	
Interest income	  	 	(1	) 	 	 	(1	) 	 	 	(49	) 	 	 	(3	) 	
Other expense (income), net	  	 	4	  	 	 	(121	) 	 	 	(206	) 	 	 	120	  	
 	  	 	 	 	 	 	 	 	
Income before income taxes	  	 	2,947	  	 	 	4,632	  	 	 	7,078	  	 	 	10,411	  	
Income tax expense	  	 	621	  	 	 	1,463	  	 	 	1,532	  	 	 	3,265	  	
 	  	 	 	 	 	 	 	 	
Net income	  	$	2,326	  	 	$	3,169	  	 	$	5,546	  	 	$	7,146	  	

Income per common share:	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic	  	$	0.08	  	 	$	0.11	  	 	$	0.20	  	 	$	0.26	  	
 	  	 	 	 	 	 	 	 	
Diluted	  	$	0.08	  	 	$	0.11	  	 	$	0.19	  	 	$	0.25	  	

Dividends declared per common share	  	$	0.0300	  	 	$	0.0275	  	 	$	0.0875	  	 	$	0.0800	  	
 	 	 	 	 	
Weighted-average common shares outstanding:	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic	  	 	27,367	  	 	 	26,985	  	 	 	27,414	  	 	 	26,857	  	
Diluted	  	 	28,268	  	 	 	27,699	  	 	 	28,345	  	 	 	27,499	  	
 	 	 	 	 	
Net income	  	$	2,326	  	 	$	3,169	  	 	$	5,546	  	 	$	7,146	  	
Other comprehensive (loss) income	  	 	(80	) 	 	 	17	  	 	 	(73	) 	 	 	38	  	
 	  	 	 	 	 	 	 	 	
Comprehensive income	  	$	2,246	  	 	$	3,186	  	 	$	5,473	  	 	$	7,184	  	

See accompanying Notes to Summary Consolidated Financial Statements.
 
2

CRYOLIFE, INC. AND SUBSIDIARIES
SUMMARY CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)

 	  	September 30,
        2014        	 	 	December 31,
        2013        	 	
 	  	 	 	 	
 	  	(Unaudited)	 	 	 	 	
ASSETS	  	 	 	 	 	 	 	 	
Current assets:	  	 	 	 	 	 	 	 	
Cash and cash equivalents	  	$	29,823	  	 	$	37,643	  	
Restricted cash and securities	  	 	923	  	 	 	5,350	  	
Receivables, net	  	 	21,595	  	 	 	18,307	  	
Deferred preservation costs	  	 	25,869	  	 	 	27,297	  	
Inventories	  	 	13,162	  	 	 	9,771	  	
Deferred income taxes	  	 	5,767	  	 	 	5,162	  	
Prepaid expenses and other	  	 	5,491	  	 	 	2,797	  	
 	  	 	 	 	
Total current assets	  	 	102,630	  	 	 	106,327	  	

Property and equipment, net	  	 	12,160	  	 	 	12,171	  	
Restricted cash	  	 	5,000	  	 	 	—	  	
Goodwill	  	 	11,365	  	 	 	11,365	  	
Patents, net	  	 	1,892	  	 	 	1,934	  	
Trademarks and other intangibles, net	  	 	19,453	  	 	 	19,985	  	
Notes receivable	  	 	2,000	  	 	 	2,000	  	
Deferred income taxes	  	 	16,183	  	 	 	16,885	  	
Other	  	 	4,478	  	 	 	4,016	  	
 	  	 	 	 	
Total assets	  	$	        175,161	  	 	$	        174,683	  	
 	  	 	 	 	
LIABILITIES AND SHAREHOLDERS’ EQUITY	  	 	 	 	 	 	 	 	
Current liabilities:	  	 	 	 	 	 	 	 	
Accounts payable	  	$	5,389	  	 	$	5,514	  	
Accrued compensation	  	 	4,528	  	 	 	4,886	  	
Accrued procurement fees	  	 	4,874	  	 	 	5,427	  	
Accrued expenses and other	  	 	4,795	  	 	 	4,579	  	
Deferred income	  	 	410	  	 	 	316	  	
 	  	 	 	 	
Total current liabilities	  	 	19,996	  	 	 	20,722	  	

Contingent consideration	  	 	1,392	  	 	 	1,884	  	
Other	  	 	6,911	  	 	 	7,330	  	
 	  	 	 	 	
Total liabilities	  	 	28,299	  	 	 	29,936	  	

Commitments and contingencies	  	 	 	 	 	 	 	 	
 	 	 	
Shareholders’ equity:	  	 	 	 	 	 	 	 	
Preferred stock	  	 	—	  	 	 	—	  	
Common stock (issued shares of 29,027 in 2014 and 28,244 in 2013)	  	 	290	  	 	 	282	  	
Additional paid-in capital	  	 	133,143	  	 	 	128,585	  	
Retained earnings	  	 	21,835	  	 	 	18,741	  	
Accumulated other comprehensive (loss) income	  	 	(66	) 	 	 	7	  	
Treasury stock at cost (shares of 991 in 2014 and 413 in 2013)	  	 	(8,340	) 	 	 	(2,868	) 	
 	  	 	 	 	
Total shareholders’ equity	  	 	146,862	  	 	 	144,747	  	
 	  	 	 	 	
Total liabilities and shareholders’ equity	  	$	175,161	  	 	$	174,683	  	

See accompanying Notes to Summary Consolidated Financial Statements.
 
3

CRYOLIFE, INC. AND SUBSIDIARIES
SUMMARY CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

 	  	Nine Months Ended
September 30,	 	
 	  	 	 	 	
 	  	2014	 	 	2013	 	
 	  	 	 	 	
 	  	 	(Unaudited)	  	
Net cash flows from operating activities:	  	 	 	 	 	 	 	 	
Net income	  	$	5,546	  	 	$	7,146	  	
 	 	 	
Adjustments to reconcile net income to net cash from operating activities:	  	 	 	 	 	 	 	 	
Depreciation and amortization	  	 	4,468	  	 	 	4,413	  	
Non-cash compensation	  	 	2,736	  	 	 	2,357	  	
Deferred income taxes	  	 	97	  	 	 	960	  	
Other non-cash adjustments to income	  	 	(641	) 	 	 	1,133	  	
 	 	 	
Changes in operating assets and liabilities:	  	 	 	 	 	 	 	 	
Receivables	  	 	(3,288	) 	 	 	(4,143	) 	
Deferred preservation costs and inventories	  	 	(2,123	) 	 	 	570	  	
Prepaid expenses and other assets	  	 	(3,156	) 	 	 	(745	) 	
Accounts payable, accrued expenses, and other liabilities	  	 	(306	) 	 	 	(384	) 	
 	  	 	 	 	
Net cash flows provided by operating activities	  	 	3,333	  	 	 	11,307	  	

Net cash flows from investing activities:	  	 	 	 	 	 	 	 	
Capital expenditures	  	 	(3,225	) 	 	 	(3,241	) 	
Other	  	 	(1,582	) 	 	 	(159	) 	
 	  	 	 	 	
Net cash flows used in investing activities	  	 	(4,807	) 	 	 	(3,400	) 	

Net cash flows from financing activities:	  	 	 	 	 	 	 	 	
Cash dividends paid	  	 	(2,452	) 	 	 	(2,202	) 	
Proceeds from exercise of stock options and issuance of common stock	  	 	1,409	  	 	 	852	  	
Repurchases of common stock	  	 	(4,584	) 	 	 	(1,523	) 	
Other	  	 	(677	) 	 	 	(407	) 	
 	  	 	 	 	
Net cash flows used in financing activities	  	 	(6,304	) 	 	 	(3,280	) 	

Effect of exchange rate changes on cash	  	 	(42	) 	 	 	43	  	
 	  	 	 	 	
(Decrease) increase in cash and cash equivalents	  	 	(7,820	) 	 	 	4,670	  	
 	 	 	
Cash and cash equivalents, beginning of period	  	 	37,643	  	 	 	13,009	  	
 	  	 	 	 	
Cash and cash equivalents, end of period	  	$	            29,823	  	 	$	            17,679	  	

See accompanying Notes to Summary Consolidated Financial Statements.
 
4

CRYOLIFE, INC. AND SUBSIDIARIES
NOTES TO SUMMARY CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Basis of Presentation
The accompanying summary consolidated financial statements include the accounts of CryoLife, Inc. and its subsidiaries (“CryoLife,” the “Company,” “we,” or “us”). All significant intercompany accounts and transactions have been eliminated in consolidation. The accompanying Summary Consolidated Balance Sheet as of December 31, 2013 has been derived from audited financial statements. The accompanying unaudited summary consolidated financial statements as of and for the three and nine months ended September 30, 2014 and 2013 have been prepared in accordance with (i) accounting principles generally accepted in the U.S. for interim financial information and (ii) the instructions to Form 10-Q and Rule 10-01 of Regulation S-X of the U.S. Securities and Exchange Commission (“SEC”). Accordingly, such statements do not include all of the information and disclosures required by accounting principles generally accepted in the U.S. for a complete presentation of financial statements. In the opinion of management, all adjustments (including those of a normal, recurring nature) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014. These summary consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in CryoLife’s Annual Report on Form 10-K for the year ended December 31, 2013.
2. Financial Instruments
The following is a summary of the Company’s financial instruments measured at fair value (in thousands):

September 30, 2014	  	Level 1	 	  	Level 2	 	  	Level 3	 	 	Total	 	
Cash equivalents:	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	
Money market funds	  	$	7,018	  	  	$	—	  	  	$	—	  	 	$	7,018	  	
U.S. Treasury debt securities	  	 	            15,000	  	  	 	                   —	  	  	 	                   —	  	 	 	            15,000	  	
Restricted securities:	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	
Money market funds	  	 	923	  	  	 	—	  	  	 	—	  	 	 	923	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	
Total assets	  	$	22,941	  	  	$	—	  	  	$	—	  	 	$	22,941	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	
Long-term liabilities:	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	
Contingent consideration	  	$	—	  	  	$	—	  	  	$	(1,392	) 	 	$	(1,392	) 	
 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	
Total liabilities	  	$	—	  	  	$	—	  	  	$	(1,392	) 	 	$	(1,392	) 	

December 31, 2013	  	Level 1	 	  	Level 2	 	  	Level 3	 	 	Total	 	
Cash equivalents:	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	
Money market funds	  	$	5,349	  	  	$	—	  	  	$	—	  	 	$	5,349	  	
Certificates of deposit	  	 	749	  	  	 	—	  	  	 	—	  	 	 	749	  	
Restricted securities:	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	
Money market funds	  	 	350	  	  	 	—	  	  	 	—	  	 	 	350	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	
Total assets	  	$	6,448	  	  	$	—	  	  	$	—	  	 	$	6,448	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	
Long-term liabilities:	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	
Contingent consideration	  	$	—	  	  	$	—	  	  	$	(1,884	) 	 	$	(1,884	) 	
 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	
Total liabilities	  	$	—	  	  	$	—	  	  	$	(1,884	) 	 	$	(1,884	) 	
 	  	 	 	 	  	 	 	 	  	 	 	 	 	 	 	 	
The Company used prices quoted from its investment management companies to determine the Level 1 valuation of its investments in money market funds, U.S. Treasury debt securities, and certificates of deposit. The Company recorded a contingent consideration liability, classified as Level 3, as a result of its acquisition of Hemosphere, Inc. (“Hemosphere”) in May 2012. Refer to Note 5 for further discussion of the Level 3 contingent consideration liability.
 
5

Changes in fair value of Level 3 liabilities are listed below (in thousands):

 	  	Contingent
Consideration	 	
 	  	 	 	 	
Balance as of December 31, 2013	  	$	1,884	  	
Gain on remeasurement of contingent consideration	  	 	(492	) 	
 	  	 	 	 	
Balance as of September 30, 2014	  	$	1,392	  	
 	  	 	 	 	
3. Cash Equivalents and Restricted Cash and Securities
The following is a summary of cash equivalents and restricted cash and securities (in thousands):

September 30, 2014	  	Cost Basis	 	  	Unrealized
Holding
Gains	 	  	Estimated
Market Value	 	
Cash equivalents:	  	 	 	 	  	 	 	 	  	 	 	 	
Money market funds	  	$	7,018	  	  	$	—	  	  	$	7,018	  	
U.S. Treasury debt securities	  	 	            15,000	  	  	 	            —	  	  	 	            15,000	  	
Restricted cash and securities:	  	 	 	 	  	 	 	 	  	 	 	 	
Cash	  	 	5,000	  	  	 	—	  	  	 	5,000	  	
Money market funds	  	 	923	  	  	 	—	  	  	 	923	  	
 	 	 	 	
December 31, 2013	  	Cost Basis	 	  	Unrealized
Holding
Gains	 	  	Estimated
Market Value	 	
Cash equivalents:	  	 	 	 	  	 	 	 	  	 	 	 	
Money market funds	  	$	5,349	  	  	$	—	  	  	$	5,349	  	
Certificates of deposit	  	 	749	  	  	 	—	  	  	 	749	  	
Restricted cash and securities:	  	 	 	 	  	 	 	 	  	 	 	 	
Cash	  	 	5,000	  	  	 	—	  	  	 	5,000	  	
Money market funds	  	 	350	  	  	 	—	  	  	 	350	  	
As of September 30, 2014 and December 31, 2013 $923,000 and $350,000, respectively, of the Company’s money market funds were designated as short-term restricted securities due to a contractual commitment to hold the securities as pledged collateral relating primarily to international tax obligations. As of September 30, 2014 $5.0 million of the Company’s cash was designated as long-term restricted cash due to a financial covenant requirement under the Company’s amended and restated credit agreement with General Electric Capital Corporation (“GE Capital”), as discussed in Note 11. This restriction lapses upon expiration of the credit agreement with GE Capital on September 26, 2019. As of December 31, 2013 $5.0 million of the Company’s cash was designated as short-term restricted cash under the Company’s credit agreement with GE Capital prior to the September 26, 2014 amendment.
There were no gross realized gains or losses on cash equivalents in the three and nine months ended September 30, 2014 and 2013. As of September 30, 2014 $273,000 of the Company’s restricted securities had a maturity date within three months and $650,000 had a maturity date of between three months and one year. As of December 31, 2013 $328,000 of the Company’s restricted securities had a maturity date within three months and $22,000 had a maturity date between three months and one year. As of September 30, 2014 and December 31, 2013 $5.0 million of the Company’s restricted cash had no maturity date.
4. ProCol Distribution Agreement
In March 2014 CryoLife acquired the exclusive worldwide distribution rights for ProCol® Vascular Bioprosthesis (“ProCol”) from Hancock Jaffe Laboratories, Inc. (“Hancock Jaffe”). The agreement between CryoLife and Hancock Jaffe (the “HJ Agreement”) has an initial three-year term and is renewable for two one-year periods at CryoLife’s option. Per the terms of the HJ Agreement, CryoLife has the option to acquire the ProCol product line from Hancock Jaffe beginning in March 2016.
ProCol, which is approved for sale in the U.S., is a biological graft derived from a bovine mesenteric vein that provides vascular access for end-stage renal disease (“ESRD”) hemodialysis patients. It is intended for the creation of a bridge graft for vascular access subsequent to at least one previously failed prosthetic access graft. ProCol is complementary to the Company’s
 
6

Hemodialysis Reliable Outflow Graft (“HeRO® Graft”), which also serves patients with ESRD. ProCol provides vascular access for earlier-stage ESRD patients, while HeRO Graft is designed for patients with limited access options and central venous obstruction.
In accordance with the terms of the HJ Agreement, CryoLife will make payments to Hancock Jaffe of up to $2.3 million during 2014, with no more than $650,000 payable in any quarter. In exchange for these payments, CryoLife will receive a designated amount of ProCol inventory for resale, including a small amount of existing commercially salable inventory, which it received in the first half of 2014, and additional inventory. Additional inventory becomes available for distribution as it is manufactured and following Hancock Jaffe’s receipt of U.S. Food and Drug Administration (“FDA”) approval of the Premarket Approval Supplement associated with its new manufacturing facility, which it received on September 29, 2014. Subsequent to this initial inventory purchase, CryoLife can purchase additional units from Hancock Jaffe at an agreed upon transfer price.
As of September 30, 2014 the Company had made payments of $1.7 million to Hancock Jaffe, and the Company began limited distribution of ProCol in the second quarter of 2014.
5. Hemosphere Acquisition
On May 16, 2012 CryoLife acquired Hemosphere, which the Company now operates as a wholly owned subsidiary. Hemosphere is the developer and marketer of the HeRO Graft, a proprietary graft-based solution for ESRD hemodialysis patients with limited access options and central venous obstruction.
As of the Hemosphere acquisition date, CryoLife recorded a contingent consideration liability of $1.8 million in long-term liabilities on its Summary Consolidated Balance Sheet, representing the estimated fair value of the contingent consideration expected to be paid to the former shareholders of Hemosphere upon the achievement of certain revenue-based milestones. The acquisition agreement provides for a maximum of $4.5 million in future consideration payments through December 2015 based on specified sales targets.
The fair value of the contingent consideration liability was based on unobservable inputs, including management’s estimates and assumptions about future revenues, and is, therefore, classified as Level 3 within the fair value hierarchy presented in Note 2. The Company will remeasure this liability at each reporting date and will record changes in the fair value of the contingent consideration liability in other expense (income), net on the Company’s Summary Consolidated Statement of Operations and Comprehensive Income. Increases or decreases in the fair value of the contingent consideration liability can result from changes in discount periods and rates, as well as changes in the timing and amount of Company revenue estimates.
The Company recorded gains of $196,000 and $492,000 in the three and nine months ended September 30, 2014, respectively, and a gain of $32,000 and a loss of $46,000 in the three and nine months ended September 30, 2013, respectively, on the remeasurement of the contingent consideration liability. The gains and losses in the current and prior year periods are due to the effect of the passage of time on the fair value measurements and changes in the Company’s estimates. The balance of the contingent consideration liability was $1.4 million as of September 30, 2014 and $1.9 million as of December 31, 2013.
6. ValveXchange
Preferred Stock Investment
In July 2011 the Company purchased shares of series A preferred stock of ValveXchange, Inc. (“ValveXchange”) for approximately $3.5 million. ValveXchange is a private medical device company that was spun off from Cleveland Clinic to develop a lifetime heart valve replacement technology platform featuring exchangeable bioprosthetic leaflets. As ValveXchange’s stock is not actively traded on any public stock exchange, and as the Company’s investment is in preferred stock, the Company initially accounted for this investment using the cost method. The Company initially recorded its investment as a long-term asset, investment in equity securities, on the Company’s Summary Consolidated Balance Sheets.
During the fourth quarter of 2013 the Company reevaluated its investment in ValveXchange preferred stock for impairment. Based on this analysis, the Company believed that its investment in ValveXchange was fully impaired as of December 31, 2013, and the impairment was other than temporary. Therefore, in the fourth quarter of 2013 the Company recorded an other non-operating expense of $3.2 million to write-down the remaining value of its investment in ValveXchange preferred stock. As of September 30, 2014 and December 31, 2013 the carrying value of the Company’s investment in ValveXchange preferred stock was zero.
 
7

Loan Agreement
The Company’s agreement with ValveXchange, as amended, makes available up to $2.0 million to ValveXchange in debt financing through a revolving credit facility (the “Loan”). The Loan includes various affirmative and negative covenants, including financial covenant requirements, and expires on July 30, 2018, unless terminated earlier. Amounts outstanding under the Loan earn interest at an 8% annual rate and are secured by substantially all of the tangible and intangible assets of ValveXchange. The Company incurred loan origination costs, net of fees charged to ValveXchange, of approximately $117,000, which are being expensed on a straight-line basis over the expected life of the loan facility. The Company advanced $2.0 million to ValveXchange under this loan in 2012. The $2.0 million advance is recorded as long-term notes receivable on the Company’s Summary Consolidated Balance Sheets as of September 30, 2014 and December 31, 2013.
During 2013 CryoLife repeatedly notified ValveXchange that ValveXchange was in default of certain loan covenants, due to various factors including ValveXchange’s failure to obtain CryoLife’s consent for certain convertible note financings that ValveXchange previously obtained. In April 2014, in conjunction with ValveXchange’s series B preferred stock fundraising (the “Series B”), CryoLife and ValveXchange entered into an amendment to the Loan agreement pursuant to which CryoLife waived ValveXchange’s previous Loan defaults in exchange for an agreement that 10% of any amounts raised in the Series B in excess of $1.25 million would be paid to CryoLife. As of September 30, 2014 ValveXchange had raised $1.7 million under the Series B. ValveXchange continues to seek additional funding under the Series B.
Management believes that ValveXchange will continue to need additional funds to support its short-term and long-term operations, as it is currently not selling any product. Specifically, ValveXchange will need to expand its clinical trial in order to obtain approval to distribute its product in Europe. ValveXchange does not currently have the funds necessary to finance this expansion, and without this expansion, ValveXchange is not expected to be able to generate revenues. However, even if ValveXchange is able to secure additional funds, if those funds are insufficient and ValveXchange cannot meet its business obligations, CryoLife may need to foreclose on the related collateral to secure repayment of the Loan. Although CryoLife currently believes that the value of the collateral is adequate to repay the Loan, there is no guarantee of such adequacy. ValveXchange’s current liquidity position is critical, and without additional funding, ValveXchange will likely be required to cease operations during the fourth quarter of 2014. If ValveXchange is forced to cease operations or seek reorganization in bankruptcy, the Company may be unable to secure full repayment of the Loan.
Option Agreement
Concurrently with the Loan agreement described above, CryoLife entered into an option agreement with ValveXchange pursuant to which CryoLife obtained (i) the right of first refusal to acquire ValveXchange during a period that extends through the completion of initial commercialization milestones and (ii) the right to negotiate with ValveXchange for European distribution rights. As part of the Series B, CryoLife agreed to forego its rights to negotiate with ValveXchange for European distribution rights. The Company’s rights may be further modified or reduced in connection with a future round of financing.
7. Medafor Matters
Investment in Medafor Common Stock
In 2009 and 2010 CryoLife purchased shares of common stock in Medafor, Inc. (“Medafor”). The Company initially recorded its investment using the cost method as a long-term asset, investment in equity securities, on the Company’s Summary Consolidated Balance Sheets.
On October 1, 2013 C.R. Bard, Inc. (“Bard”) and subsidiaries completed its previously announced acquisition of the outstanding shares of Medafor common stock. The Company received an initial payment of approximately $15.4 million for its 2.4 million shares of Medafor common stock and recorded an initial gain of approximately $12.7 million on the sale in the fourth quarter of 2013. The Company could receive additional payments totaling up to $8.4 million upon the release of funds held in escrow and the satisfaction of certain contingent milestones, measurable through June 2015. In October 2014 the Company received the first of these additional payments, totaling $530,000, which will be recorded as a gain in the fourth quarter of 2014. Subsequent payments will be recorded as an additional gain if, and when, received by the Company.
Legal Action
CryoLife received a letter from Medafor in September 2012 stating that PerClot®, when introduced in the U.S. and used in accordance with the method published in CryoLife’s literature and with the instructions for use, will infringe Medafor’s (now Bard’s) U.S. patent. CryoLife does not believe that its sales of PerClot will infringe Bard’s patent.
 
8

In April 2014 the Company filed a declaratory judgment lawsuit against Bard and certain of its subsidiaries, including Medafor (collectively, “Defendants”), in the U.S. District Court for the District of Delaware (the “Court”). CryoLife requested that the Court confirm that CryoLife’s anticipated sales of PerClot, when it is approved by the FDA, and certain of its derivative products, such as PerClot Topical, which has been cleared by the FDA, will not infringe any valid claim of the patent held by Bard and/or that the Bard patent is invalid.
In June 2014 CryoLife filed an amended complaint, and the Defendants filed a counterclaim for infringement in August 2014. The Defendants also filed various motions to dismiss; the Court has not ruled on these motions.
On September 19, 2014 the Defendants filed with the Court a motion for a preliminary injunction, asking the Court to enjoin CryoLife’s marketing and sale of PerClot in the U.S. Discovery with respect to this motion has commenced, and the Court has set a hearing date of January 23, 2015. See also Part II, Item 1, Legal Proceedings of this Form 10-Q.
8. Deferred Preservation Costs and Inventories
Deferred preservation costs at September 30, 2014 and December 31, 2013 are comprised of the following (in thousands):

 	  	September 30,
2014	 	  	December 31,
2013	 	
 	  	 	 	 	
Cardiac tissues	  	$	11,372	  	  	$	12,239	  	
Vascular tissues	  	 	14,497	  	  	 	15,058	  	
 	  	 	 	 	
Total deferred preservation costs	  	$	            25,869	  	  	$	            27,297	  	
 	  	 	 	 	
Inventories at September 30, 2014 and December 31, 2013 are comprised of the following (in thousands):

 	  	September 30,
2014	 	  	December 31,
2013	 	
 	  	 	 	 	
Raw materials and supplies	  	$	7,548	  	  	$	5,706	  	
Work-in-process	  	 	1,265	  	  	 	767	  	
Finished goods	  	 	4,349	  	  	 	3,298	  	
 	  	 	 	 	
Total inventories	  	$	            13,162	  	  	$	              9,771	  	
 	  	 	 	 	
9. Goodwill and Other Intangible Assets
Indefinite Lived Intangible Assets
As of September 30, 2014 and December 31, 2013 the carrying values of the Company’s indefinite lived intangible assets are as follows (in thousands):

 	  	September 30,
2014	 	  	December 31,
2013	 	
 	  	 	 	 	
Goodwill	  	$	            11,365	  	  	$	            11,365	  	
Procurement contracts and agreements	  	 	2,013	  	  	 	2,013	  	
Trademarks	  	 	851	  	  	 	841	  	
Based on its experience with similar agreements, the Company believes that its acquired procurement contracts and agreements have an indefinite useful life, as the Company expects to continue to renew these contracts for the foreseeable future. The Company believes that its trademarks have an indefinite useful life as the Company currently anticipates that these trademarks will contribute to cash flows of the Company indefinitely.
As of September 30, 2014 and December 31, 2013 the Company’s entire goodwill balance is related to its Medical Devices segment, and there has been no change from the balance recorded as of December 31, 2013.
 
9

Definite Lived Intangible Assets
As of September 30, 2014 and December 31, 2013 the gross carrying values, accumulated amortization, and approximate amortization period of the Company’s definite lived intangible assets are as follows (in thousands):

September 30, 2014	  	Gross Carrying
Value	 	  	Accumulated
Amortization	 	  	Amortization
Period	 	
Acquired technology	  	$	    14,020	  	  	$	      3,530	  	  	 	11 – 16 Years	  	
Patents	  	 	4,325	  	  	 	2,433	  	  	 	17 Years	  	
Distribution and manufacturing rights and know-how	  	 	4,059	  	  	 	914	  	  	 	15 Years	  	
Customer lists and relationships	  	 	3,370	  	  	 	753	  	  	 	13 – 17 Years	  	
Non-compete agreement	  	 	381	  	  	 	295	  	  	 	10 Years	  	
Other	  	 	467	  	  	 	216	  	  	 	1 –   5 Years	  	
 	 	 	 	
December 31, 2013	  	Gross Carrying
Value	 	  	Accumulated
Amortization	 	  	Amortization
Period	 	
Acquired technology	  	$	14,020	  	  	$	2,677	  	  	 	11 – 16 Years	  	
Patents	  	 	4,348	  	  	 	2,414	  	  	 	17 Years	  	
Distribution and manufacturing rights and know-how	  	 	3,559	  	  	 	714	  	  	 	15 Years	  	
Customer lists and relationships	  	 	3,370	  	  	 	572	  	  	 	13 – 17 Years	  	
Non-compete agreement	  	 	381	  	  	 	267	  	  	 	10 Years	  	
Other	  	 	202	  	  	 	171	  	  	 	1 –   3 Years	  	
Amortization Expense
The following is a summary of amortization expense as recorded in general, administrative, and marketing expenses on the Company’s Summary Consolidated Statement of Operations and Comprehensive Income (in thousands):

 	  	Three Months Ended
September 30,	 	 	 	  	Nine Months Ended
September 30,	 	
 	  	 	 	 	 	 	  	 	 	 	
 	  	2014	 	  	2013	 	 	 	  	2014	 	  	2013	 	
 	  	 	 	 	 	 	  	 	 	 	
Amortization expense	  	$	            504	  	  	$	            493	  	 	 	  	$	            1,503	  	  	$	            1,515	  	
As of September 30, 2014 scheduled amortization of intangible assets for the next five years is as follows (in thousands):

 	  	Remainder
of 2014	 	  	2015	 	  	2016	 	  	2017	 	  	2018	 	  	2019	 	
Amortization expense	  	$	504	  	  	$	            1,987	  	  	$	            1,980	  	  	$	            1,926	  	  	$	            1,917	  	  	$	            1,911	  	
10. Income Taxes
Income Tax Expense
The Company’s effective income tax rate was approximately 21% and 22% for the three and nine months ended September 30, 2014, respectively, as compared to 32% and 31% for the three and nine months ended September 30, 2013, respectively.
The Company’s income tax rate for the three and nine months ended September 30, 2014 was favorably affected by the reduction of uncertain tax positions and by favorable deductions taken on the Company’s 2013 federal tax return, which was filed in the third quarter of 2014. To a lesser extent, the Company’s income tax rate was unfavorably affected by its inability to claim the research and development tax credit, which has not yet been enacted for the 2014 tax year. The Company’s income tax rate in 2013 was favorably affected by the full year 2012 research and development tax credit, which was enacted in January 2013 and, therefore, reduced the Company’s tax expense during the first quarter of 2013.
 
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In June 2014 the Internal Revenue Service completed a limited scope examination of certain of the Company’s federal income tax returns. At the resolution of this examination, the Company reevaluated its liabilities for uncertain tax positions, primarily related to its research and development tax credits and credit carryforwards, and, based on revised estimates and the settlement of the examination, reversed $748,000 in uncertain tax liabilities and tax expense.
Deferred Income Taxes
Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and tax return purposes. The Company generates deferred tax assets primarily as a result of book write-downs, reserves, or impairments which are not immediately deductible for tax return purposes. The Company acquired significant deferred tax assets, primarily net operating loss carryforwards, from its acquisitions of Hemosphere and Cardiogenesis Corporation in the second quarters of 2012 and 2011, respectively. The Company currently estimates that a portion of its state net operating loss carryforwards will not be recoverable and has, therefore, recorded a valuation allowance against these state net operating loss carryforwards.
As of September 30, 2014 the Company had a total of $1.5 million in valuation allowances against deferred tax assets, related to state net operating loss carryforwards, and a net deferred tax asset of $22.0 million. As of December 31, 2013 the Company had a total of $1.5 million in valuation allowances against deferred tax assets and a net deferred tax asset of $22.0 million.
11. Debt
GE Credit Agreement
On September 26, 2014 CryoLife amended and restated its credit agreement with GE Capital, extending the expiration date and amending other terms, which are discussed further below. CryoLife’s amended and restated credit agreement with GE Capital (the “GE Credit Agreement”) provides revolving credit for working capital, permitted acquisitions, and general corporate purposes. The GE Credit Agreement has aggregate commitments of $20.0 million for revolving loans, including swing loans subject to a sublimit and letters of credit, and expires on September 26, 2019. The commitments may be reduced from time to time pursuant to the terms of the GE Credit Agreement. The GE Credit Agreement also permits CryoLife to request a term loan in an aggregate amount of up to $25.0 million to finance the purchase price of a permitted acquisition.
Amounts borrowed under the GE Credit Agreement are secured by substantially all of the tangible and intangible assets of CryoLife and its subsidiaries and bear interest, based on the Company’s election, at either LIBOR or GE Capital’s base rate plus the respective applicable margins. All swing loans will, however, bear interest at the base loan rate. Commitment fees are paid based on the unused portion of the facility. If an event of default occurs, the applicable interest rate will increase by 2.0% per annum. The aggregate interest rate was 4.75% and 6.5% as of September 30, 2014 and December 31, 2013, respectively. As of September 30, 2014 and December 31, 2013 the outstanding balance of the GE Credit Agreement was zero, and the remaining availability was $20.0 million.
The GE Credit Agreement places limitations on the amount that the Company may borrow and includes various affirmative and negative covenants, including financial covenants such as a requirement that CryoLife (i) not exceed a defined leverage ratio and (ii) maintain minimum earnings subject to defined adjustments as of specified dates. The agreement also (i) limits the payment of cash dividends, up to specified maximums and subject to satisfaction of specified conditions, (ii) requires that, after giving effect to a stock repurchase, the Company maintain liquidity, as defined within the agreement, of at least $20.0 million, (iii) limits acquisitions or mergers except for certain permitted acquisitions, (iv) sets specified limits on the amount the Company can pay to purchase or redeem CryoLife common stock pursuant to a stock repurchase program and to fund estimated tax liabilities incurred by officers, directors, and employees as a result of awards of stock or stock equivalents, and (v) includes customary conditions on incurring new indebtedness. As of September 30, 2014 the Company was in compliance with the covenants of the GE Credit Agreement.
As required under the terms of the GE Credit Agreement, the Company is maintaining cash and cash equivalents of at least $5.0 million in accounts in which GE Capital has a first priority perfected lien. These amounts are recorded as long-term restricted cash as of September 30, 2014 on the Company’s Summary Consolidated Balance Sheet, as they are restricted for the term of the GE Credit Agreement. As of December 31, 2013 $5.0 million of the Company’s cash was designated as short-term restricted cash on the Company’s Summary Consolidated Balance Sheet under the Company’s credit agreement with GE Capital prior to the September 26, 2014 amendment.
 
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Interest Expense
Interest expense was $65,000 and $110,000 for the three and nine months ended September 30, 2014, respectively. Interest expense was $55,000 and $159,000 for the three and nine months ended September 30, 2013, respectively. Interest expense in all periods included interest on debt and uncertain tax positions. Interest expense for the nine months ended September 30, 2014 was favorably affected by the reversal of interest expense related to a reduction in liability for uncertain tax positions.
12. Commitments and Contingencies
Leases
In October 2014 the Company signed an agreement to lease approximately 25,000 square feet of additional office space near the Company’s headquarters in suburban Atlanta, Georgia. The lease is expected to commence in February 2015 for an initial term of approximately 11 years, which the Company can renew for up to two five-year renewal periods. Payments due under this lease will total approximately $4.4 million during the initial term, after consideration of expected rent abatements and construction and moving allowances.
Liability Claims
The Company accrues its estimate of unreported product and tissue processing liability claims as a component of other long-term liabilities and records the related recoverable insurance amount as a component of other long-term assets, as appropriate. At September 30, 2014 and December 31, 2013 the Company’s estimated unreported loss liability was $1.5 million. The related recoverable insurance amounts were $610,000 and $580,000 as of September 30, 2014 and December 31, 2013, respectively. Further analysis indicated that the liability as of September 30, 2014 could have been estimated to be as high as $2.7 million, after including a reasonable margin for statistical fluctuations calculated based on actuarial simulation techniques.
Employment Agreements
In July 2014 the Company’s Board of Directors appointed Mr. James P. Mackin as President and Chief Executive Officer (“CEO”), and the Company and Mr. Mackin entered into an employment agreement, which became effective September 2, 2014. The employment agreement has an initial three-year term. Beginning on the second anniversary of the effective date, and subject to earlier termination pursuant to the agreement, the employment term will, on a daily basis, automatically extend by one day. In accordance with the agreement, on September 2, 2014, Mr. Mackin received a one-time signing bonus of $200,000, a grant of 400,000 stock options, and a performance stock award grant of 250,000 shares. The agreement also provides for a severance payment, which would become payable upon the occurrence of certain employment termination events, including termination by the Company without cause.
The Company’s employment agreement, as amended, with its former President and CEO, and current Executive Chairman, Mr. Steven G. Anderson, confers benefits, which become payable upon the occurrence of certain events, including the voluntary retirement of Mr. Anderson or termination of his employment in conjunction with certain change in control events. As of both September 30, 2014 and December 31, 2013 the Company had $2.1 million in accrued expenses and other current liabilities on the Summary Consolidated Balance Sheets representing benefits payable upon Mr. Anderson’s voluntary retirement, for which he is currently eligible. Mr. Anderson’s employment agreement took effect on January 1, 2013 and terminates on December 31, 2016.
13. Shareholders’ Equity
Common Stock Repurchase
In February 2013 the Company’s Board of Directors authorized the purchase of up to $15.0 million of its common stock through October 31, 2014.
In the nine months ended September 30, 2014 the Company purchased approximately 488,000 shares for an aggregate purchase price of $4.6 million. As of September 30, 2014 the Company had $8.9 million in remaining authorizations under the repurchase program. For the year ended December 31, 2013 the Company purchased approximately 253,000 shares for an aggregate purchase price of $1.5 million. These shares were recorded, at cost, as part of treasury stock on the Company’s Summary Consolidated Balance Sheets.
 
12

Cash Dividends
The Company initiated a quarterly cash dividend of $0.025 per share of common stock outstanding in the third quarter of 2012 and increased this dividend to $0.0275 per share of common stock outstanding in the second quarter of 2013. In May 2014 the Board of Directors approved an increase in the quarterly cash dividend to $0.03 per share of common stock outstanding for the second quarter 2014. The Company paid dividend payments of $842,000 and $2.5 million from cash on hand for the three and nine months ended September 30, 2014, respectively, and $759,000 and $2.2 million for the three and nine months ended September 30, 2013, respectively. The dividend payments were recorded as a reduction to retained earnings on the Company’s Summary Consolidated Balance Sheets.
14. Stock Compensation
Overview
The Company has stock option and stock incentive plans for employees and non-employee Directors that provide for grants of restricted stock awards (“RSAs”), performance stock awards (“PSAs”), restricted stock units (“RSUs”), performance stock units (“PSUs”), and options to purchase shares of Company common stock at exercise prices generally equal to the fair values of such stock at the dates of grant. The Company also maintains a shareholder-approved Employee Stock Purchase Plan (the “ESPP”) for the benefit of its employees. The ESPP allows eligible employees the right to purchase common stock on a regular basis at the lower of 85% of the market price at the beginning or end of each offering period.
Equity Grants
During the nine months ended September 30, 2014 the Compensation Committee of the Company’s Board of Directors authorized awards from approved stock incentive plans of RSAs to non-employee directors, RSUs to certain employees, and RSAs, PSUs, and PSAs to certain Company officers, which, assuming that performance under the PSUs were to be achieved at target levels, together totaled 655,000 shares and had an aggregate grant date market value of $6.6 million. The PSUs granted in 2014 represent the right to receive from 50% to 150% of the target number of shares of common stock. The performance component of PSU awards granted in 2014 is based on attaining specified levels of adjusted earnings, as defined in the PSU grant documents, for the 2014 calendar year. The Company currently believes that achievement of the performance component is probable, and it will reevaluate this likelihood on a quarterly basis. The performance component of PSA award granted in 2014 is based upon attaining specified levels of adjusted earnings over any four consecutive calendar quarters during a three-year employment period, as defined in the PSA grant documents. The Company currently believes that achievement of the performance component is probable, and it will reevaluate this likelihood on a quarterly basis.
During the nine months ended September 30, 2013 the Compensation Committee of the Company’s Board of Directors authorized awards from approved stock incentive plans of RSAs to non-employee directors, RSUs to certain employees, and RSAs and PSUs to certain Company officers which, assuming that performance under the PSUs were to be achieved at target levels, together totaled 395,000 shares of common stock and had an aggregate grant date market value of $2.4 million. Shares issued under the 2013 PSU awards were earned at approximately 115% of the target number of shares.
The Compensation Committee of the Company’s Board of Directors authorized, from approved stock incentive plans, grants of stock options to purchase a total of 562,000 and 162,000 shares to certain Company officers during the nine months ended September 30, 2014 and 2013, respectively. The exercise prices of the options were equal to the stock prices on their respective grant dates.
Employees purchased common stock totaling 111,000 and 97,000 shares in the nine months ended September 30, 2014 and 2013, respectively, through the Company’s ESPP.
 
13

Stock Compensation Expense
The following weighted-average assumptions were used to determine the fair value of options:

 	  	Three Months Ended
September 30, 2014	 	  	Nine Months Ended
September 30, 2014	 	
 	  	 	 	 	  	 	 	 	
 	  	Stock Options	 	  	ESPP Options	 	  	Stock Options	 	  	ESPP Options	 	
 	  	 	 	 	  	 	 	 	
Expected life of options	  	 	4.20 Years	  	  	 	.50 Years	  	  	 	4.21 Years	  	  	 	.50 Years	  	
Expected stock price volatility	  	 	0.55	  	  	 	0.38	  	  	 	0.55	  	  	 	0.34	  	
Dividends	  	 	1.18%	  	  	 	1.30%	  	  	 	1.16%	  	  	 	0.99%	  	
Risk-free interest rate	  	 	1.41%	  	  	 	0.07%	  	  	 	1.34%	  	  	 	0.10%	  	

 	  	Three Months Ended
September 30, 2013	 	  	Nine Months Ended
September 30, 2013	 	
 	  	 	 	 	  	 	 	 	
 	  	Stock Options	 	  	ESPP Options	 	  	Stock Options	 	  	ESPP Options	 	
 	  	 	 	 	  	 	 	 	
Expected life of options	  	 	N/A	  	  	 	.50 Years	  	  	 	4.25 Years	  	  	 	.50 Years	  	
Expected stock price volatility	  	 	N/A	  	  	 	0.35	  	  	 	0.60	  	  	 	0.43	  	
Dividends	  	 	N/A	  	  	 	1.74%	  	  	 	1.91%	  	  	 	1.61%	  	
Risk-free interest rate	  	 	N/A	  	  	 	0.10%	  	  	 	0.70%	  	  	 	0.16%	  	
The following table summarizes total stock compensation expenses prior to the capitalization of amounts into deferred preservation and inventory costs (in thousands):

 	  	Three Months Ended
September 30,	 	  	Nine Months Ended
September 30,	 	
 	  	 	 	 	  	 	 	 	
 	  	2014	 	  	2013	 	  	2014	 	  	2013	 	
 	  	 	 	 	  	 	 	 	
RSA, PSA, RSU, and PSU expense	  	$	944	  	  	$	628	  	  	$	2,357	  	  	$	1,891	  	
Stock option and ESPP option expense	  	 	219	  	  	 	225	  	  	 	590	  	  	 	632	  	
 	  	 	 	 	  	 	 	 	
Total stock compensation expense	  	$	            1,163	  	  	$	            853	  	  	$	            2,947	  	  	$	            2,523	  	
 	  	 	 	 	  	 	 	 	
Included in the total stock compensation expense, as applicable in each period, were expenses related to RSAs, PSAs, RSUs, PSUs, and stock options issued in each respective year, as well as those issued in prior periods that continue to vest during the period, and compensation related to the Company’s ESPP. These amounts were recorded as stock compensation expense and were subject to the Company’s normal allocation of expenses to deferred preservation costs and inventory costs. The Company capitalized $71,000 and $54,000 in the three months ended September 30, 2014 and 2013, respectively, and $211,000 and $166,000 in the nine months ended September 30, 2014 and 2013, respectively, of the stock compensation expense into its deferred preservation costs and inventory costs.
As of September 30, 2014 the Company had total unrecognized compensation costs of $6.7 million related to RSAs, PSAs, RSUs, and PSUs and $2.4 million related to unvested stock options, before considering the effect of expected forfeitures. As of September 30, 2014 this expense is expected to be recognized over a weighted-average period of 2.43 years for stock options, 2.92 years for PSAs, 1.55 years for RSUs, 1.34 years for RSAs, and 0.98 years for PSUs.
 
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15. Income Per Common Share
The following table sets forth the computation of basic and diluted income per common share (in thousands, except per share data):

 	  	Three Months Ended
September 30,	 	 	 	  	Nine Months Ended
September 30,	 	
 	  	 	 	 	 	 	  	 	 	 	
Basic income per common share	  	2014	 	 	2013	 	 	 	  	2014	 	 	2013	 	
 	  	 	 	 	 	 	  	 	 	 	
Net income	  	$	2,326	  	 	$	3,169	  	 	 	  	$	5,546	  	 	$	7,146	  	
Net income allocated to participating securities	  	 	(53	) 	 	 	(72	) 	 	 	  	 	(112	) 	 	 	(163	) 	
 	  	 	 	 	 	 	  	 	 	 	
Net income allocated to common shareholders	  	$	2,273	  	 	$	3,097	  	 	 	  	$	5,434	  	 	$	6,983	  	

Basic weighted-average common shares outstanding	  	 	27,367	  	 	 	26,985	  	 	 	  	 	27,414	  	 	 	26,857	  	
 	  	 	 	 	 	 	  	 	 	 	
Basic income per common share	  	$	0.08	  	 	$	0.11	  	 	 	  	$	0.20	  	 	$	0.26	  	

 	  	 
 	Three Months Ended
September 30,	  
  	 	 	  	 
 	Nine Months Ended
September 30,	  

Diluted income per common share	  	2014	 	 	2013	 	 	 	  	2014	 	 	2013	 	
 	  	 	 	 	 	 	  	 	 	 	
Net income	  	$	2,326	  	 	$	3,169	  	 	 	  	$	5,546	  	 	$	7,146	  	
Net income allocated to participating securities	  	 	(52	) 	 	 	(70	) 	 	 	  	 	(110	) 	 	 	(160	) 	
 	  	 	 	 	 	 	  	 	 	 	
Net income allocated to common shareholders	  	$	2,274	  	 	$	3,099	  	 	 	  	$	5,436	  	 	$	6,986	  	

Basic weighted-average common shares outstanding	  	 	27,367	  	 	 	26,985	  	 	 	  	 	27,414	  	 	 	26,857	  	
Effect of dilutive stock options and awardsa	  	 	901	  	 	 	714	  	 	 	  	 	931	  	 	 	642	  	
 	  	 	 	 	 	 	  	 	 	 	
Diluted weighted-average common shares outstanding	  	 	28,268	  	 	 	27,699	  	 	 	  	 	28,345	  	 	 	27,499	  	
 	  	 	 	 	 	 	  	 	 	 	
Diluted income per common share	  	$	        0.08	  	 	$	        0.11	  	 	 	  	$	        0.19	  	 	$	        0.25	  	

a     The Company excluded stock options from the calculation of diluted weighted-average common shares outstanding if the per share value, including the sum of (i) the exercise price of the options and (ii) the amount of the compensation cost attributed to future services and not yet recognized, was greater than the average market price of the shares because the inclusion of these stock options would be antidilutive to income per common share. Accordingly, stock options to purchase a weighted-average 352,000 shares and 239,000 shares for the three and nine months ended September 30, 2014, respectively, and 1.1 million shares and 1.2 million shares for the three and nine months ended September 30, 2013, respectively, were excluded from the calculation of diluted weighted-average common shares outstanding.
16. Segment Information
The Company has two reportable segments organized according to its products and services: Medical Devices and Preservation Services. The Medical Devices segment includes external revenues from product sales of BioGlue ®  Surgical Adhesive (“BioGlue”), BioFoam ®  Surgical Matrix (“BioFoam”), PerClot, revascularization technologies, HeRO Graft, and other products. The Preservation Services segment includes external services revenues from the preservation of cardiac and vascular tissues. There are no intersegment revenues.
The primary measure of segment performance, as viewed by the Company’s management, is segment gross margin, or net external revenues less cost of products and preservation services. The Company does not segregate assets by segment; therefore, asset information is excluded from the segment disclosures below.
 
15

The following table summarizes revenues, cost of products and services, and gross margins for the Company’s operating segments (in thousands):

 	  	Three Months Ended
September 30,	 	  	 	  	Nine Months Ended
September 30,	 	
 	  	 	 	 	  	 	  	 	 	 	
 	  	2014	 	  	2013	 	  	 	  	2014	 	  	2013	 	
 	  	 	 	 	  	 	  	 	 	 	
Revenues:	  	 	 	 	  	 	 	 	  	 	  	 	 	 	  	 	 	 	
Medical devices	  	$	20,405	  	  	$	18,833	  	  	 	  	$	60,210	  	  	$	56,824	  	
Preservation services	  	 	16,664	  	  	 	17,417	  	  	 	  	 	47,280	  	  	 	48,411	  	
Othera	  	 	—	  	  	 	—	  	  	 	  	 	—	  	  	 	71	  	
 	  	 	 	 	  	 	  	 	 	 	
Total revenues	  	 	37,069	  	  	 	36,250	  	  	 	  	 	107,490	  	  	 	105,306	  	
 	 	 	 	 	 	
Cost of products and preservation services:	  	 	 	 	  	 	 	 	  	 	  	 	 	 	  	 	 	 	
Medical devices	  	 	4,167	  	  	 	3,544	  	  	 	  	 	12,099	  	  	 	10,730	  	
Preservation services	  	 	9,103	  	  	 	9,357	  	  	 	  	 	26,735	  	  	 	26,472	  	
 	  	 	 	 	  	 	  	 	 	 	
Total cost of products and preservation services	  	 	13,270	  	  	 	12,901	  	  	 	  	 	38,834	  	  	 	37,202	  	
 	 	 	 	 	 	
Gross margin:	  	 	 	 	  	 	 	 	  	 	  	 	 	 	  	 	 	 	
Medical devices	  	 	16,238	  	  	 	15,289	  	  	 	  	 	48,111	  	  	 	46,094	  	
Preservation services	  	 	7,561	  	  	 	8,060	  	  	 	  	 	20,545	  	  	 	21,939	  	
Othera	  	 	—	  	  	 	—	  	  	 	  	 	—	  	  	 	71	  	
 	  	 	 	 	  	 	  	 	 	 	
Total gross margin	  	$	            23,799	  	  	$	            23,349	  	  	 	  	$	            68,656	  	  	$	            68,104	  	
 	  	 	 	 	  	 	  	 	 	 	
The following table summarizes net revenues by product and service (in thousands):

 	  	Three Months Ended
September 30,	 	  	 	  	Nine Months Ended
September 30,	 	
 	  	 	 	 	  	 	  	 	 	 	
 	  	2014	 	  	2013	 	  	 	  	2014	 	  	2013	 	
 	  	 	 	 	  	 	  	 	 	 	
Products:	  	 	 	 	  	 	 	 	  	 	  	 	 	 	  	 	 	 	
BioGlue and BioFoam	  	$	15,116	  	  	$	14,232	  	  	 	  	$	45,745	  	  	$	43,238	  	
PerClot	  	 	998	  	  	 	882	  	  	 	  	 	3,057	  	  	 	2,686	  	
Revascularization technologies	  	 	2,306	  	  	 	2,353	  	  	 	  	 	6,074	  	  	 	6,837	  	
HeRO Graft	  	 	1,984	  	  	 	1,366	  	  	 	  	 	5,304	  	  	 	4,063	  	
Other products	  	 	1	  	  	 	—	  	  	 	  	 	30	  	  	 	—	  	
 	  	 	 	 	  	 	  	 	 	 	
Total products	  	 	20,405	  	  	 	18,833	  	  	 	  	 	60,210	  	  	 	56,824	  	
 	 	 	 	 	 	
Preservation services:	  	 	 	 	  	 	 	 	  	 	  	 	 	 	  	 	 	 	
Cardiac tissue	  	 	8,337	  	  	 	8,572	  	  	 	  	 	21,981	  	  	 	22,035	  	
Vascular tissue	  	 	8,327	  	  	 	8,845	  	  	 	  	 	25,299	  	  	 	26,376	  	
 	  	 	 	 	  	 	  	 	 	 	
Total preservation services	  	 	16,664	  	  	 	17,417	  	  	 	  	 	47,280	  	  	 	48,411	  	
 	 	 	 	 	 	
Othera	  	 	—	  	  	 	—	  	  	 	  	 	—	  	  	 	71	  	
 	  	 	 	 	  	 	  	 	 	 	
Total revenues	  	$	            37,069	  	  	$	            36,250	  	  	 	  	$	            107,490	  	  	$	            105,306	  	

a 	The “Other” designation includes grant revenue.	
 
16

PART I – FINANCIAL INFORMATION
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Overview
CryoLife, Inc. (“CryoLife,” the “Company,” “we,” or “us”) develops, manufactures, and commercializes medical devices for cardiac and vascular applications and preserves and distributes human tissues for transplantation. CryoLife’s surgical sealants and hemostats include BioGlue ®  Surgical Adhesive (“BioGlue”), BioFoam ®  Surgical Matrix (“BioFoam”), and PerClot ® , a powdered hemostat, which the Company distributes internationally for Starch Medical, Inc. (“SMI”). CryoLife’s subsidiary, Cardiogenesis Corporation (“Cardiogenesis”), specializes in the treatment of coronary artery disease using a laser console system and single-use, fiber-optic handpieces to treat patients with severe angina. CryoLife and its subsidiary, Hemosphere, Inc. (“Hemosphere”), market the  He modialysis  R eliable  O utflow Graft (“HeRO ® Graft”), which is a solution for end-stage renal disease (“ESRD”) in certain hemodialysis patients. The cardiac and vascular human tissues distributed by CryoLife include the CryoValve ®  SG pulmonary heart valve (“CryoValve SGPV”) and the CryoPatch ®  SG pulmonary cardiac patch tissue (“CryoPatch SG”), both of which are processed using CryoLife’s proprietary SynerGraft ®  technology.
During the quarter ended September 30, 2014 CryoLife reported third quarter revenues of $37.1 million, a 2% increase over the quarter ended September 30, 2013, and a new quarterly record. This increase was primarily due to an increase in BioGlue revenues, despite the seasonal decline in demand typically experienced in third quarter BioGlue sales, and due to record HeRO Graft revenues. These increases were partially offset by decreases in cardiac and vascular preservation services revenues.
See the “Results of Operations” section below for additional analysis of the three and nine months ended September 30, 2014.
Recent Events
Appointment of Mr. James P. Mackin as President and CEO
On September 2, 2014 Mr. James P. Mackin became the President and Chief Executive Officer (“CEO”) of CryoLife and Mr. Steven G. Anderson, the former President and CEO, continued employment with the Company and assumed the role of Executive Chairman. Mr. Mackin previously worked at Medtronic, Inc. (“Medtronic”), where he most recently served as President of Cardiac Rhythm Disease Management, Medtronic’s largest operating division. Mr. Mackin is a highly respected professional with more than 20 years of medical device industry experience. Mr. Mackin was appointed to the Company’s Board of Directors in October 2014.
Regulatory Activity
In January 2013 CryoLife received a warning letter (“Warning Letter”) from the U.S. Food and Drug Administration (“FDA”). The Warning Letter followed a Form 483, Notice of Inspectional Observations, from the FDA (“2012 CryoLife Form 483”), related to a routine quality system inspection of the Company’s facilities by the FDA in September and October 2012.
In February and March 2014 the FDA re-inspected the Company to review the Company’s actions and responses to the Warning Letter and to conduct a quality system inspection. Following this re-inspection, on March 20, 2014 CryoLife received a Form 483, Notice of Inspectional Observations, from the FDA (“2014 CryoLife Form 483”). The 2014 CryoLife Form 483 included observations concerning design and process validations, environmental monitoring, product controls and handling, corrective and preventive actions, and employee training.
The Company responded to the 2014 CryoLife Form 483 on April 10, 2014 and provided periodic updates during the second and third quarters of 2014. Communications with the FDA related to these observations are ongoing. As part of the Company’s response to the 2014 CryoLife Form 483, the Company voluntarily restricted the distribution of certain cardiac and vascular tissues during the second quarter of 2014 while it performed a review of its internal training programs. The Company gradually resumed shipments of tissues during the second quarter of 2014, in accordance with its procedures, as it completed its training program review. The Company continues to review and modify its procedures as part of its ongoing compliance efforts. Preservation services revenues were negatively impacted during the second and third quarters as a result of reduced tissue availability due to these efforts. Some of these procedural modifications resulted in additional costs to the Company during the second and third quarters of 2014. These efforts and additional costs are ongoing and are expected to continue at least through the end of 2014. See the “Results of Operations” section below for additional discussion of preservation services revenues for the three and nine months ended September 30, 2014.
 
17

The Company believes that the changes it has implemented, and will implement, will adequately address the FDA’s observations; however, it is possible that the Company may not be able to do so in a manner satisfactory to the FDA, and the FDA could issue a warning letter or take other enforcement or regulatory actions, including requiring a recall or manufacturing hold. In addition to the efforts discussed above, it is possible that actions that the FDA may take, or that the Company may be required to take, in response to the 2014 CryoLife Form 483 could materially, adversely affect the Company’s revenues, financial condition, profitability, and/or cash flows in future periods.
Regulatory Status of the CryoValve SGPV
On February 20, 2003 the Company received a letter from the FDA stating that a 510(k) premarket notification should be filed for the Company’s decellularized CryoValve SGPV. On November 3, 2003 the Company filed a 510(k) premarket notification, which was cleared by the FDA on February 7, 2008. At the time of the clearance, the CryoValve SGPV was categorized by the FDA as an “unclassified” medical device. At the FDA’s request, CryoLife committed to conducting a post-clearance study to collect long-term clinical data for the CryoValve SGPV. The follow-up study will include a minimum of 800 cumulative patient years. The Company anticipates submitting the favorable results of this study to the FDA by December 31, 2014.
On October 9, 2014 the FDA convened an advisory committee meeting to consider the FDA’s recommendation to classify more than minimally manipulated (“MMM”) allograft heart valves from an unclassified medical device to a class III medical device. The class of MMM allograft heart valves includes CryoLife’s CryoValve SGPV. At the meeting a majority of the advisory committee panel recommended to the FDA that MMM allograft heart valves should be classified as a class III product. CryoLife expects that the FDA will issue a proposal for classification of MMM allograft heart valves, which would be subject to a public comment period before finalization. After publication of the reclassification rule, CryoLife expects it would have thirty months to submit for a Premarket Approval (“PMA”), after which the FDA would determine if, and for how long, CryoLife could continue to provide these tissues to customers. The Company currently plans to continue to process and ship its CryoValve SGPV tissues. If the FDA ultimately classifies CryoLife’s CryoValve SGPV as a class III medical device, the Company anticipates it will request a meeting with the FDA to determine the specific requirements to file for and obtain a PMA, and will determine an appropriate course of action in light of these requirements. The costs associated with obtaining such a PMA and the potential impact upon the Company’s tissue revenues, if there were delays in obtaining the PMA or if the Company were unsuccessful in obtaining the PMA, could materially, adversely affect the Company’s revenues, financial condition, profitability, and/or cash flows in future periods.
Critical Accounting Policies
A summary of the Company’s significant accounting policies is included in Note 1 of the “Notes to Consolidated Financial Statements,” contained in the Company’s Form 10-K for the year ended December 31, 2013. Management believes that the consistent application of these policies enables the Company to provide users of the financial statements with useful and reliable information about the Company’s operating results and financial condition. The summary consolidated financial statements are prepared in accordance with accounting principles generally accepted in the U.S., which require the Company to make estimates and assumptions. The Company did not experience any significant changes during the quarter ended September 30, 2014 in any of its Critical Accounting Policies from those contained in the Company’s Form 10-K for the year ended December 31, 2013.
New Accounting Pronouncements
In May 2014 the Financial Accounting Standards Board issued ASU No. 2014-09, Revenue from Contracts with Customers, which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance. The core principle of the revenue model is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new standard is effective for annual and interim reporting periods beginning after December 15, 2016, and early application is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the effect that ASU 2014-09 will have on its consolidated financial statements and related disclosures, but does not expect the adoption of ASU 2014-09 to have a material impact on its financial position, results of operations, or cash flows.
 
18

Results of Operations
(Tables in thousands)
Revenues

 	  	Revenues for the
Three Months Ended
September 30,	 	  	Revenues as a Percentage of
Total Revenues for the
Three Months Ended
September 30,	 	
 	  	 	 	 	  	 	 	 	
 	  	2014	 	  	2013	 	  	2014	 	  	2013	 	
 	  	 	 	 	  	 	 	 	
Products:	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
BioGlue and BioFoam	  	$	15,116	  	  	$	14,232	  	  	 	41%	  	  	 	39%	  	
PerClot	  	 	998	  	  	 	882	  	  	 	3%	  	  	 	2%	  	
Revascularization technologies	  	 	2,306	  	  	 	2,353	  	  	 	6%	  	  	 	7%	  	
HeRO Graft	  	 	1,984	  	  	 	1,366	  	  	 	5%	  	  	 	4%	  	
Other products	  	 	1	  	  	 	—	  	  	 	—%	  	  	 	—%	  	
 	  	 	 	 	  	 	 	 	
Total products	  	 	20,405	  	  	 	18,833	  	  	 	55%	  	  	 	52%	  	
 	 	 	 	 	
Preservation services:	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Cardiac tissue	  	 	8,337	  	  	 	8,572	  	  	 	23%	  	  	 	24%	  	
Vascular tissue	  	 	8,327	  	  	 	8,845	  	  	 	22%	  	  	 	24%	  	
 	  	 	 	 	  	 	 	 	
Total preservation services	  	 	16,664	  	  	 	17,417	  	  	 	45%	  	  	 	48%	  	
 	 	 	 	 	
Other	  	 	—	  	  	 	—	  	  	 	—%	  	  	 	—%	  	
 	  	 	 	 	  	 	 	 	
Total	  	$	37,069	  	  	$	36,250	  	  	 	100%	  	  	 	100%	  	

 	  	Revenues for the
Nine Months Ended
September 30,	 	  	Revenues as a Percentage of
Total Revenues for the
Nine Months Ended
September 30,	 	
 	  	 	 	 	  	 	 	 	
 	  	2014	 	  	2013	 	  	2014	 	  	2013	 	
 	  	 	 	 	  	 	 	 	
Products:	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
BioGlue and BioFoam	  	$	45,745	  	  	$	43,238	  	  	 	42%	  	  	 	41%	  	
PerClot	  	 	3,057	  	  	 	2,686	  	  	 	3%	  	  	 	3%	  	
Revascularization technologies	  	 	6,074	  	  	 	6,837	  	  	 	6%	  	  	 	6%	  	
HeRO Graft	  	 	5,304	  	  	 	4,063	  	  	 	5%	  	  	 	4%	  	
Other products	  	 	30	  	  	 	—	  	  	 	—%	  	  	 	—%	  	
 	  	 	 	 	  	 	 	 	
Total products	  	 	60,210	  	  	 	56,824	  	  	 	56%	  	  	 	54%	  	
 	 	 	 	 	
Preservation services:	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Cardiac tissue	  	 	21,981	  	  	 	22,035	  	  	 	20%	  	  	 	21%	  	
Vascular tissue	  	 	25,299	  	  	 	26,376	  	  	 	24%	  	  	 	25%	  	
 	  	 	 	 	  	 	 	 	
Total preservation services	  	 	47,280	  	  	 	48,411	  	  	 	44%	  	  	 	46%	  	
 	 	 	 	 	
Other	  	 	—	  	  	 	71	  	  	 	—%	  	  	 	—%	  	
 	  	 	 	 	  	 	 	 	
Total	  	$	        107,490	  	  	$	        105,306	  	  	 	100%	  	  	 	100%	  	
 	  	 	 	 	  	 	 	 	
Revenues increased 2% for both the three and nine months ended September 30, 2014, as compared to the three and nine months ended September 30, 2013, respectively. A detailed discussion of the changes in product revenues and preservation services revenues for the three and nine months ended September 30, 2014 is presented below.
Products
Revenues from products increased 8% for the three months ended September 30, 2014, as compared to the three months ended September 30, 2013. Revenues from products increased 6% for the nine months ended September 30, 2014, as compared to the nine months ended September 30, 2013. These increases were primarily due to increases in BioGlue and HeRO Graft revenues. A
 
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detailed discussion of the changes in product revenues for BioGlue and BioFoam, PerClot, revascularization technologies, and HeRO Graft is presented below.
The Company’s sales of products through its direct sales force to U.K. hospitals are denominated in British Pounds, and its sales to German, Austrian, and Irish hospitals and certain distributors are denominated in Euros, and are, therefore, subject to changes in foreign exchange rates. If the exchange rates between the U.S. Dollar and the British Pound and/or Euro decline materially in the future, this would have a material, adverse effect on the Company’s revenues denominated in these currencies.
BioGlue and BioFoam
Revenues from the sale of surgical sealants, consisting of BioGlue and BioFoam, increased 6% for the three months ended September 30, 2014, as compared to the three months ended September 30, 2013. This increase was primarily due to a 6% increase in the volume of milliliters sold, which increased revenues by 4%, and an increase in average sales prices, which increased revenues by 2%.
Revenues from the sale of surgical sealants increased 6% for the nine months ended September 30, 2014, as compared to the nine months ended September 30, 2013. This increase was primarily due to a 4% increase in the volume of milliliters sold, which increased revenues by 3%, an increase in average sales prices, which increased revenues by 2%, and the favorable effect of foreign currency exchange, which increased revenues by 1%.
The increase in sales volume of surgical sealants for the three months ended September 30, 2014 was primarily due to an increase in shipments of BioGlue in international markets, largely Japan, Western Europe, and Brazil. The increase in sales volume of surgical sealants for the nine months ended September 30, 2014 was due to an increase in shipments of BioGlue in both international and domestic markets, primarily Western Europe, including sales for neurological indications, and the U.S.
The increase in average sales prices for the three and nine months ended September 30, 2014 was primarily due to list price increases in domestic markets and due to the routine negotiation of pricing contracts with certain customers.
Revenues from shipments to Japan were $1.4 million and $1.1 million for the three months ended September 30, 2014 and 2013, respectively, and $3.9 million and $4.0 million for the nine months ended September 30, 2014 and 2013, respectively. Management currently believes that BioGlue sales will be positively affected by increased shipments to Japan for the full year 2014, as compared to 2013, although this increase is expected to be less than the increase experienced in 2013 over 2012. Management is currently seeking expanded indications for BioGlue in Japan and regulatory approval for BioGlue in China and, if successful, believes this will provide additional international growth opportunities for BioGlue in future years.
Domestic revenues accounted for 56% of total BioGlue revenues for both the three and nine months ended September 30, 2014, and 58% and 56% of total BioGlue revenues for the three and nine months ended September 30, 2013, respectively. BioFoam sales accounted for less than 1% of surgical sealant sales for each of the three and nine months ended September 30, 2014 and 2013. BioFoam is currently approved for sale in certain international markets.
PerClot
Revenues from the sale of PerClot increased 13% for the three months ended September 30, 2014, as compared to the three months ended September 30, 2013. This increase was primarily due to a 4% increase in the volume of grams sold, which increased revenues by 11%, an increase in average selling prices, which increased revenues by 1%, and the favorable effect of foreign currency exchange, which increased revenues 1%.
Revenues from the sale of PerClot increased 14% for the nine months ended September 30, 2014, as compared to the nine months ended September 30, 2013. This increase was primarily due to a 19% increase in the volume of grams sold, which increased revenues by 16%, and the favorable effect of foreign currency exchange, which increased revenues 2%, partially offset by a decrease in average selling prices, which decreased revenues 4%.
Revenues during these periods were largely for sales in certain international markets, as PerClot was only recently approved for limited domestic distribution for topical indications, as discussed below. These increases were primarily due to increased sales in the Company’s direct markets in Europe, partially due to volume growth and new surgical indications.
In March 2014 CryoLife received approval of its investigational device exemption (“IDE”) for PerClot from the FDA. This approval allows the Company to begin its pivotal clinical trial to gain approval to commercialize PerClot in the U.S. The Company plans to begin enrollment in the trial in the first quarter of 2015 and currently expects to receive PMA from the FDA during 2017. In April 2014 CryoLife received 510(k) clearance for PerClot Topical from the FDA, which allowed CryoLife to
 
20

begin commercialization of PerClot Topical in the U.S. The Company began shipping PerClot Topical in August 2014 and is currently in the initial stages of this product launch.
The Company expects that overall PerClot revenues will increase in 2014, as compared to 2013; however, revenues may show some variability from quarter-to-quarter.
Revascularization Technologies
Revenues from revascularization technologies include revenues related primarily to the sale of handpieces and, in certain periods, revenues from the sale of laser consoles. Revenues from revascularization technologies decreased 2% for the three months ended September 30, 2014, as compared to the three months ended September 30, 2013. Revenues from the sale of laser consoles were $87,000 and $379,000 for the three months ended September 30, 2014 and 2013, respectively. Revenues from the sale of handpieces increased 13% for the three months ended September 30, 2014, as compared to the three months ended September 30, 2013. This increase was primarily due to a 12% increase in unit shipments of handpieces, which increased revenues by 11%, and an increase in average sales prices, which increased revenues by 2%.
Revenues from revascularization technologies decreased 11% for the nine months ended September 30, 2014, as compared to the nine months ended September 30, 2013. Revenues from the sale of laser consoles were $144,000 and $462,000 for the nine months ended September 30, 2014 and 2013, respectively. Revenues from the sale of handpieces decreased 8% for the nine months ended September 30, 2014, as compared to the nine months ended September 30, 2013. This decrease was primarily due to a 10% decrease in unit shipments of handpieces, which decreased revenues by 10%, and an increase in average sales prices, which increased revenues by 2%.
In June 2013 the FDA approved the Company’s new handpiece design, and the Company made the decision to exclusively distribute the new handpiece beginning late in the second quarter of 2013. Following the rollout of the new handpiece, the Company’s handpiece revenues decreased sequentially in the third and the fourth quarters of 2013, due to the slower than anticipated adoption of the new handpiece design. This decrease in handpiece revenues slowed in the first quarter of 2014. Handpiece revenues increased 33% for the three months ended June 30, 2014, as compared to the three months ended March 31, 2014, and increased 6% for the three months ended September 30, 2014, as compared to the three months ended June 30, 2014. Management believes that handpiece sales in the fourth quarter of 2014 will increase over the prior year fourth quarter.
The amount of revenues from laser console sales can vary significantly from quarter-to-quarter due to the long lead time required to generate sales of capital equipment.
HeRO Graft
Revenues from HeRO Grafts include revenues related to the sale of vascular grafts, venous outflow components, and accessories, which are generally sold together as a kit. HeRO Grafts are primarily distributed in domestic markets as a solution for ESRD in certain hemodialysis patients. HeRO Graft revenues increased 45% for the three months ended September 30, 2014, as compared to the three months ended September 30, 2013. HeRO Graft revenues increased 31% for the nine months ended September 30, 2014, as compared to the nine months ended September 30, 2013. The increase in HeRO Graft revenues was primarily due to an increase in the volume of kits sold as a result of increases in procedure volume and in the number of implanting physicians.
Management expects that HeRO Graft revenues will increase in the fourth quarter of 2014, as compared to the same period in 2013. Although HeRO Graft revenues are subject to variability quarter-to-quarter due to the timing of surgical cases, the Company believes that this variability will continue to decrease as the Company broadens its base of implanting physicians.
Preservation Services
Revenues from preservation services decreased 4% for the three months ended September 30, 2014, as compared to the three months ended September 30, 2013. Revenues from preservation services decreased 2% for the nine months ended September 30, 2014, as compared to the nine months ended September 30, 2013. The decrease in preservation services revenues was primarily due to a decrease in vascular tissue service revenues, and, to a lesser extent, due to a decrease in cardiac tissue services revenues.
During the second quarter of 2014 the Company voluntarily restricted the distribution of certain cardiac and vascular tissues while it performed a review of its internal training programs. The Company gradually resumed shipments of tissues during the second quarter of 2014, in accordance with its procedures, as it completed its training program review. The Company continues to review and modify its procedures as part of its ongoing compliance efforts. Preservation services revenues were negatively impacted during the second and third quarters of 2014 as a result of reduced tissue availability due to these efforts. These efforts
 
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are ongoing and are expected to continue at least through the end of 2014. A detailed discussion of the changes in cardiac and vascular preservation services revenues is presented below.
Preservation services revenues, particularly revenues for certain high-demand tissues, can vary from quarter-to-quarter and year-to-year due to a variety of factors including: quantity and type of incoming tissues, yields of tissue through the preservation process, timing of receipt of donor information, timing of the release of tissues to an implantable status, demand for certain tissue types due to the number and type of procedures being performed, and pressures from competing products or services. See further discussion of any specific items affecting cardiac and vascular preservation services revenues for the three and nine months ended September 30, 2014 below.
Cardiac Preservation Services
Revenues from cardiac preservation services, consisting of revenues from the distribution of heart valves and cardiac patch tissues, decreased 3% for the three months ended September 30, 2014, as compared to the three months ended September 30, 2013. This decrease was primarily due to an 8% decrease in unit shipments of cardiac tissues, which decreased revenues by 8%, partially offset by an increase in average service fees, which increased revenues by 5%.
Revenues from cardiac preservation services decreased slightly for the nine months ended September 30, 2014, as compared to the nine months ended September 30, 2013. This decrease was primarily due to a 4% decrease in unit shipments of cardiac tissues, which decreased revenues 6%, largely offset by an increase in average service fees, which increased revenues by 6%.
The decrease in volume for the three and nine months ended September 30, 2014 was primarily due to a decrease in volume of cardiac valve shipments in domestic markets and due to a significant decrease in cardiac shipments in Europe, as discussed further below, partially offset by an increase in shipments of cardiac patches in domestic markets. The decrease in cardiac valve shipments in domestic markets was due to the timing of tissue releases, which were unfavorably impacted by reduced tissue availability as discussed above, as compared to the prior year periods. The Company ceased the routine distribution of tissues into Europe as of March 31, 2014, although a limited number of tissues have shipped and may continue to be shipped through a special regulatory process. During the nine months ended September 30, 2014 the Company’s revenues from shipments of cardiac tissues into Europe were $182,000, as compared to $891,000 in the corresponding period in 2013.
The increase in average service fees for the three and nine months ended September 30, 2014 was primarily due to list fee increases in domestic markets that took effect in July 2014 and 2013 and due to the routine negotiation of pricing contracts with certain customers.
Revenues from SynerGraft processed tissues, including the CryoValve SGPV and CryoPatch SG, accounted for 69% and 64% of total cardiac preservation services revenues for the three and nine months ended September 30, 2014, respectively, and 52% and 51% of total cardiac preservation services revenues for the three and nine months ended September 30, 2013, respectively. Domestic revenues accounted for 96% of total cardiac preservation services revenues for both the three and nine months ended September 30, 2014, and 91% and 93% of total cardiac preservation services revenues for the three and nine months ended September 30, 2013, respectively.
The Company’s cardiac valves are primarily used in cardiac replacement and reconstruction surgeries, including the Ross procedure, for patients with endocarditis or congenital heart defects.
The Company expects that cardiac preservation services revenues in the fourth quarter of 2014 will be comparable to or increase slightly from revenues in the fourth quarter of 2013, notwithstanding the cessation of routine tissue shipments to Europe.
Vascular Preservation Services
Revenues from vascular preservation services decreased 6% for the three months ended September 30, 2014, as compared to the three months ended September 30, 2013. This decrease was primarily due to a 9% decrease in unit shipments of vascular tissues, which decreased revenues by 13%, partially offset by an increase in average service fees, which increased revenues by 7%.
Revenues from vascular preservation services decreased 4% for the nine months ended September 30, 2014, as compared to revenues for the nine months ended September 30, 2013. This decrease was primarily due to a 9% decrease in unit shipments of vascular tissues, which decreased revenues by 11%, partially offset by an increase in average service fees, which increased revenues by 7%.
The decrease in volume for the three and nine months ended September 30, 2014 was primarily due to decreases in shipments of saphenous veins, and to a lesser extent, decreases in shipments of arterial tissues, both of which were impacted by reduced tissue availability as discussed above.
 
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The increase in average service fees for the three and nine months ended September 30, 2014 was primarily due to list fee increases in domestic markets that took effect in July 2014 and 2013, fee differences due to physical characteristics of vascular tissues, and the routine negotiation of pricing contracts with certain customers.
The majority of the Company’s vascular preservation services revenues are related to shipments of saphenous veins, which are mainly used in peripheral vascular reconstruction surgeries to avoid limb amputations. These tissues are primarily distributed in domestic markets.
The Company expects that vascular preservation services revenues in the fourth quarter of 2014 will decrease from revenues in the fourth quarter of 2013 due to reduced availability of vascular tissues.
Cost of Products and Preservation Services
Cost of Products

 	  	Three Months Ended
September 30,	 	  	Nine Months Ended
September 30,	 	
 	  	 	 	 	  	 	 	 	
 	  	2014	 	  	2013	 	  	2014	 	  	2013	 	
 	  	 	 	 	  	 	 	 	
Cost of products	  	$	          4,167	  	  	$	          3,544	  	  	$	        12,099	  	  	$	        10,730	  	
Cost of products increased 18% and 13% for the three and nine months ended September 30, 2014, respectively, as compared to the three and nine months ended September 30, 2013, respectively. Cost of products in 2014 and 2013 includes costs related to BioGlue, BioFoam, PerClot, revascularization technologies, HeRO Grafts, and other products.
The increase in cost of products in the three and nine months ended September 30, 2014 was primarily due to an increase in the volume of products sold, the increase in the per unit cost of manufacturing HeRO Grafts, as a result of the transfer of manufacturing to a new location and lower manufacturing throughput, and, to a lesser extent, due to the increase in the cost of manufacturing BioGlue. Cost of products for the nine months ended September 30, 2013 includes $487,000 in additional costs for revascularization technologies handpieces that were made obsolete by the Company’s decision to exclusively distribute the new handpiece design, which was approved by the FDA in June 2013.
Cost of Preservation Services

 	  	Three Months Ended
September 30,	 	  	Nine Months Ended
September 30,	 	
 	  	 	 	 	  	 	 	 	
 	  	2014	 	  	2013	 	  	2014	 	  	2013	 	
 	  	 	 	 	  	 	 	 	
Cost of preservation services	  	$	          9,103	  	  	$	          9,357	  	  	$	        26,735	  	  	$	        26,472	  	
Cost of preservation services decreased 3% and increased 1% for the three and nine months ended September 30, 2014, respectively, as compared to the three and nine months ended September 30, 2013, respectively. Cost of preservation services includes costs for cardiac and vascular tissue preservation services.
Cost of preservation services decreased in the three months ended September 30, 2014 primarily due to a decrease in volume of tissues shipped during the period, partially offset by an increase in the per unit cost of processing tissues, as a result of lower processing throughput of tissues, increased compliance and personnel costs, and an increase in the cost of materials. Cost of preservation services increased in the nine months ended September 30, 2014 due to an increase in the per unit cost of processing tissue, as discussed above, largely offset by a decrease in volume of tissues shipped during the period. The higher per unit cost of processing tissues is expected to continue through the end of 2014 and into 2015.
Gross Margin

 	  	Three Months Ended
September 30,	 	  	Nine Months Ended
September 30,	 	
 	  	 	 	 	  	 	 	 	
 	  	2014	 	  	2013	 	  	2014	 	  	2013	 	
 	  	 	 	 	  	 	 	 	
Gross margin	  	$	        23,799	  	  	$	        23,349	  	  	$	        68,656	  	  	$	        68,104	  	
Gross margin as a percentage of total revenues	  	 	64%	  	  	 	64%	  	  	 	64%	  	  	 	65%	  	
 
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Gross margin increased 2% and 1% for the three and nine months ended September 30, 2014, respectively, as compared to the three and nine months ended September 30, 2013, respectively. Gross margin as a percentage of total revenues in the three and nine months ended September 30, 2014 was comparable to the three and nine months ended September 30, 2013, respectively.
Operating Expenses
General, Administrative, and Marketing Expenses

 	  	Three Months Ended
September 30,	 	  	Nine Months Ended
September 30,	 	
 	  	 	 	 	  	 	 	 	
 	  	2014	 	  	2013	 	  	2014	 	  	2013	 	
 	  	 	 	 	  	 	 	 	
General, administrative, and marketing expenses	  	$	              18,882	  	  	$	              16,532	  	  	$	              55,116	  	  	$	              51,441	  	
General, administrative, and marketing expenses
as a percentage of total revenues	  	 	51%	  	  	 	46%	  	  	 	51%	  	  	 	49%	  	
General, administrative, and marketing expenses increased 14% for the three months ended September 30, 2014, as compared to the three months ended September 30, 2013. General, administrative, and marketing expenses increased 7% for the nine months ended September 30, 2014, as compared to the nine months ended September 30, 2013. The increase in general, administrative, and marketing expenses in the current year periods was due to $1.0 million and $1.4 million for the three and nine months ended September 30, 2014, respectively, in compensation charges related to personnel changes, including the appointment of Mr. Mackin as President and CEO in the third quarter of 2014 and one-time expenses associated with certain employee departures. In addition, the increase was due to higher legal and professional fees, and higher expenses to support the Company’s increasing revenue base, international expansion, new product offerings, and increasing employee headcount.
The Company expects that its general, administrative, and marketing expenses will increase for the fourth quarter 2014, as compared to 2013 due to the factors discussed above. In addition, the effects of business development expenses or legal fees could further increase expenses. As discussed in Part II, Item 1, Legal Proceedings, in the second quarter of 2014 the Company filed a declaratory judgment action against C.R. Bard, Inc. (“Bard”) and certain of its subsidiaries. Management expects this litigation to be protracted and the costs associated with it during the fourth quarter of 2014 and into 2015 to be material.
Research and Development Expenses

 	  	Three Months Ended
September 30,	 	  	Nine Months Ended
September 30,	 	
 	  	 	 	 	  	 	 	 	
 	  	2014	 	  	2013	 	  	2014	 	  	2013	 	
 	  	 	 	 	  	 	 	 	
Research and development expenses	  	$	              1,902	  	  	$	              2,252	  	  	$	              6,607	  	  	$	              5,976	  	
Research and development expenses
as a percentage of total revenues	  	 	5%	  	  	 	6%	  	  	 	6%	  	  	 	6%	  	
Research and development expenses decreased 16% and increased 11% for the three and nine months ended September 30, 2014, respectively, as compared to the three and nine months ended September 30, 2013, respectively. Research and development spending in these periods was primarily focused on clinical and pre-clinical work with respect to PerClot, the Company’s tissue processing, and BioGlue and BioFoam. The Company expects that research and development spending will increase materially in 2015, due to planned increases in spending on PerClot clinical studies.
Earnings

 	  	Three Months Ended
September 30,	 	  	Nine Months Ended
September 30,	 	
 	  	 	 	 	  	 	 	 	
 	  	2014	 	  	2013	 	  	2014	 	  	2013	 	
 	  	 	 	 	  	 	 	 	
Income before income taxes	  	$	2,947	  	  	$	4,632	  	  	$	7,078	  	  	$	10,411	  	
Income tax expense	  	 	621	  	  	 	1,463	  	  	 	1,532	  	  	 	3,265	  	
 	  	 	 	 	  	 	 	 	
Net income	  	$	2,326	  	  	$	3,169	  	  	$	5,546	  	  	$	7,146	  	

Diluted income per common share	  	$	0.08	  	  	$	0.11	  	  	$	0.19	  	  	$	0.25	  	
 	  	 	 	 	  	 	 	 	
Diluted weighted-average common shares outstanding	  	 	         28,268	  	  	 	         27,699	  	  	 	         28,345	  	  	 	         27,499	  	

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Income before income taxes decreased 36% and 32% for the three and nine months ended September 30, 2014, respectively, as compared to the three and nine months ended September 30, 2013, respectively. The decrease in income before income taxes for the three and nine months ended September 30, 2014 was primarily due to an increase in general, administrative, and marketing expenses, as discussed above, partially offset by increased revenues.
The Company’s effective income tax rate was approximately 21% and 22% for the three and nine months ended September 30, 2014, respectively, as compared to 32% and 31% for the three and nine months ended September 30, 2013, respectively.
In June 2014 the Internal Revenue Service completed a limited scope examination of certain of the Company’s federal income tax returns. At the resolution of this examination, the Company reevaluated its liabilities for uncertain tax positions, primarily related to its research and development tax credits and credit carryforwards, and, based on revised estimates and the settlement of the examination, reversed $748,000 in uncertain tax liabilities and tax expense.
The Company’s income tax rate for the three and nine months ended September 30, 2014 was favorably affected by the reduction of uncertain tax positions and by favorable deductions taken on the Company’s 2013 federal tax return, which was filed in the third quarter of 2014. To a lesser extent, the Company’s income tax rate in 2014 was unfavorably affected by its inability to claim the research and development tax credit, which has not yet been enacted for the 2014 tax year. The Company’s income tax rate in 2013 was favorably impacted by the full year 2012 research and development tax credit, which was enacted in January 2013, and, therefore, reduced the Company’s tax expense during the first quarter of 2013.
Net income and diluted income per common share decreased for the three and nine months ended September 30, 2014, as compared to the three and nine months ended September 30, 2013, respectively, primarily due to the decrease in income before income taxes, as discussed above, partially offset by the favorable effect of the decrease in income tax expense, as discussed above.
Diluted income per common share could be unfavorably affected in future periods by the issuance of additional shares of common stock and favorably affected by the Company’s repurchase of its common stock. Stock repurchases are influenced by many factors, including stock price, available funds, and competing demands for such funds, and as a result, may be suspended or discontinued at any time.
Seasonality
The Company believes the demand for BioGlue is seasonal, with a decline in demand generally occurring in the third quarter followed by stronger demand in the fourth quarter. Management believes that this trend for BioGlue may be due to the summer holiday season in Europe and in the U.S. The Company believes that demand for BioGlue in Japan may continue to be lowest in the second quarter of each year due to distributor ordering patterns driven by the slower summer holiday season in Japan.
The Company is uncertain whether the demand for PerClot will be seasonal, as PerClot is a new product and the nature of any seasonal trends in PerClot sales may be obscured.
The Company does not believe the demand for revascularization technologies and HeRO Grafts is seasonal, as the Company’s data does not indicate a significant trend.
The Company’s demand for its cardiac preservation services has traditionally been seasonal, with peak demand generally occurring in the third quarter. Management believes that this trend for cardiac preservation services is primarily due to the high number of surgeries scheduled during the summer months for school-aged patients. Based on experience in recent years, management believes that this trend is lessening as the Company is distributing a higher percentage of its tissues for use in adult populations.
The Company’s demand for its vascular preservation services is seasonal, with lowest demand generally occurring in the fourth quarter. Management believes this trend for vascular preservation services is primarily due to fewer vascular surgeries being scheduled during the winter holiday months.
Liquidity and Capital Resources
Net Working Capital
At September 30, 2014 net working capital (current assets of $102.6 million less current liabilities of $20.0 million) was $82.6 million, with a current ratio (current assets divided by current liabilities) of 5 to 1, compared to net working capital of $85.6 million and a current ratio of 5 to 1 at December 31, 2013.
 
25

Overall Liquidity and Capital Resources
The Company’s largest cash requirement for the nine months ended September 30, 2014 was cash for general working capital needs, as certain of the Company’s current asset balances increased significantly from December 31, 2013. These increases are primarily due to increases in purchased finished goods and raw materials inventory, payment of the Company’s annual insurance policy renewals, and cash advances related to the Company’s new ProCol Vascular Bioprosthesis (“ProCol”) product line. In addition, the Company’s other cash requirements included common stock repurchases, capital expenditures, and cash dividend payments. The Company funded its cash requirements through its existing cash reserves and its operating activities, which generated cash during the period.
On September 26, 2014 CryoLife amended and restated its credit agreement with General Electric Capital Corporation (“GE Capital”), extending the expiration date and amending other terms, which are discussed further below. CryoLife’s amended and restated credit agreement with GE Capital (the “GE Credit Agreement”) provides revolving credit for working capital, acquisitions, and general corporate purposes. The GE Credit Agreement has a borrowing capacity of $20.0 million (including a letter of credit subfacility and a swingline subfacility) and expires on September 26, 2019. The commitment may be reduced or increased from time to time pursuant to the terms of the GE Credit Agreement. The GE Credit Agreement also permits CryoLife to request a term loan in an aggregate amount of up to $25.0 million to finance or refinance the purchase price of a permitted acquisition. As required under the terms of the GE Credit Agreement, the Company is maintaining cash and cash equivalents of at least $5.0 million in accounts in which GE Capital has a first priority perfected lien. As a result, these funds will not be available to meet the Company’s liquidity needs during the term of the GE Credit Agreement and, as such, have been recorded as long-term restricted cash on the Company’s Summary Consolidated Balance Sheets. Also, the GE Credit Agreement requires that, after giving effect to a stock repurchase, the Company maintain liquidity, as defined in the agreement, of at least $20.0 million. As of September 30, 2014 the outstanding balance under the GE Credit Agreement was zero, and $20.0 million was available for borrowing.
In the nine months ended September 30, 2014 the Company purchased approximately 488,000 shares of its common stock for an aggregate purchase price of $4.6 million. As of September 30, 2014 the Company had $8.9 million in remaining authorizations under common stock repurchase programs authorized by the Company’s Board of Directors, which expire October 31, 2014. The purchase of shares may be made from time to time in the open market or through privately negotiated transactions, on such terms as management deems appropriate, and will be dependent upon various factors, including: price, regulatory requirements, and other market conditions.
As of September 30, 2014 approximately 8% of the Company’s cash and cash equivalents were held in foreign jurisdictions.
On October 1, 2013 Bard completed its previously announced acquisition of the outstanding shares of Medafor, Inc. (“Medafor”) common stock. The Company received an initial payment of approximately $15.4 million for its 2.4 million shares of Medafor common stock and recorded an initial gain of approximately $12.7 million on the sale in the fourth quarter of 2013. The Company could receive additional payments totaling up to $8.4 million upon the release of funds held in escrow and the satisfaction of certain contingent milestones that are measurable through June 2015. In October 2014 the Company received the first of these additional payments, totaling $530,000, which will be recorded as a gain in the fourth quarter of 2014. Subsequent payments will be recorded as an additional gain if, and when, received by the Company.
As discussed elsewhere in this Form 10-Q, in September 2012, CryoLife received a letter from Medafor stating that PerClot, when introduced in the U.S and used in accordance with the method published in CryoLife’s literature and with the instructions for use, will infringe Medafor’s (now Bard’s) U.S. patent. CryoLife does not believe that its sales of PerClot will infringe Bard’s patent. Accordingly, in April 2014 the Company filed a declaratory judgment action against Bard and certain of its subsidiaries, including Medafor, in federal court, requesting that the court confirm that CryoLife’s anticipated sales of PerClot and certain of its derivative products, such as PerClot Topical, will not infringe any valid claim of the patent held by Bard and/or that the Bard patent is invalid. In June 2014 CryoLife filed an amended complaint, and Bard filed a counterclaim for infringement in August 2014. Bard filed various motions to dismiss; the Court has not ruled on these motions. On September 19, 2014 Bard filed with the Court a motion for a preliminary injunction, asking the Court to enjoin CryoLife’s marketing and sale of PerClot in the U.S. Discovery, with respect to this motion, has commenced, and the Court has set a hearing date of January 23, 2015. See also Part II, Item 1, Legal Proceedings of this Form 10-Q. Management expects this litigation to be protracted and the costs associated with it during the fourth quarter of 2014 and into 2015 will be material.
In March 2014 CryoLife received approval of its IDE for PerClot from the FDA. This approval allows the Company to begin its pivotal clinical trial to gain approval to commercialize PerClot in the U.S. The Company plans to begin enrollment in the trial in the first quarter of 2015. Management believes that the costs of this clinical trial will be material in 2015. In April 2014 CryoLife received 510(k) clearance from the FDA to market PerClot Topical, a version of the Company’s PerClot product, which allowed CryoLife to begin commercialization of PerClot Topical in the U.S. The Company began shipping PerClot Topical in August 2014 and is currently in the initial stages of this product launch. As a result of this recent approval and clearance, CryoLife paid $1.0 million to SMI in the second quarter of 2014 pursuant to the terms of the agreements between CryoLife and SMI.
 
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In March 2014 CryoLife acquired the exclusive worldwide distribution rights for ProCol from Hancock Jaffe Laboratories, Inc. (“Hancock Jaffe”). CryoLife will make payments to Hancock Jaffe of up to $2.3 million during 2014, with no more than $650,000 payable in any quarter. As of September 30, 2014 the Company had made payments of $1.7 million to Hancock Jaffe, and it began limited distribution of ProCol in the second quarter of 2014.
During 2012 the Company advanced a total of $2.0 million in debt financing to ValveXchange, Inc. (“ValveXchange”) through a revolving credit facility (the “Loan”). The Loan is secured by substantially all of the tangible and intangible assets of ValveXchange. ValveXchange will continue to need additional funds to support its short-term and long-term operations, as it is currently not selling any product. Specifically, ValveXchange will need to expand its clinical trial in order to obtain approval to distribute its product in Europe. ValveXchange does not currently have the funds necessary to fund this expansion, and without this expansion, ValveXchange is not expected to be able to generate revenues. However, even if ValveXchange is able to secure additional funds, if those funds are insufficient and ValveXchange cannot meet its business obligations, CryoLife may need to foreclose on the related collateral to secure repayment of the Loan. Although CryoLife currently believes that the value of the collateral is adequate to repay the Loan, there is no guarantee of such adequacy. ValveXchange’s current liquidity position is critical, and without additional funding, ValveXchange will likely be required to cease operations during the fourth quarter of 2014. If ValveXchange is forced to cease operations or to seek reorganization in bankruptcy, the Company may be unable to secure full repayment of the Loan.
The Company believes that its cash from operations and existing cash and cash equivalents will enable the Company to meet its current operational liquidity needs for at least the next twelve months. The Company’s future cash requirements are expected to include cash to fund the startup of the PerClot clinical trials, to fund the declaratory judgment action against Bard, to make payments to Hancock Jaffe related to the ProCol distribution agreement, to fund business development activities, to repurchase the Company’s common stock, to fund the cash dividend to common shareholders, to fund additional research and development expenditures, for general working capital needs, for capital expenditures, and for other corporate purposes. These items may have a significant effect on the Company’s cash flows during the remainder of 2014 and in 2015. The Company may seek additional borrowing capacity or financing, pursuant to its current or any future shelf registration statement, for general corporate purposes or to fund other future cash requirements. If the Company undertakes further significant business development activity in 2014 or 2015, it may need to finance such activities by drawing down monies under the GE Credit Agreement, obtaining additional debt financing, or using a shelf registration statement to sell equities.
The Company acquired net operating loss carryforwards from its acquisitions of Hemosphere and Cardiogenesis that the Company believes will reduce required cash payments for federal income taxes by approximately $1.5 million for the 2014 tax year.
Net Cash Flows from Operating Activities
Net cash provided by operating activities was $3.3 million for the nine months ended September 30, 2014, as compared to $11.3 million for the nine months ended September 30, 2013. The decrease in net cash provided was primarily due to a decrease in net income, as discussed in Results of Operations above, and an increase in working capital needs, as discussed further below.
The Company uses the indirect method to prepare its cash flow statement and, accordingly, the operating cash flows are based on the Company’s net income, which is then adjusted to remove non-cash items and for changes in operating assets and liabilities from the prior year end. For the nine months ended September 30, 2014 these non-cash items included a favorable $4.5 million in depreciation and amortization expenses and $2.7 million in non-cash compensation.
The Company’s working capital needs, or changes in operating assets and liabilities, also affected cash from operations. For the nine months ended September 30, 2014 these changes included unfavorable adjustments of $3.3 million due to the timing differences between the recording of receivables and the receipt of cash, and increased balances of $2.1 million in deferred preservation costs and inventories and $3.2 million in prepaid expenses and other assets, for which payments have already been made.
Net Cash Flows from Investing Activities
Net cash used in investing activities was $4.8 million for the nine months ended September 30, 2014, as compared to $3.4 million for the nine months ended September 30, 2013. The current year cash used was primarily due to $3.2 million in capital expenditures.
 
27

Net Cash Flows from Financing Activities
Net cash used in financing activities was $6.3 million for the nine months ended September 30, 2014, as compared to $3.3 million for the nine months ended September 30, 2013. The current year cash used was primarily due to $4.6 million in purchases of treasury stock related to the Company’s publicly announced stock repurchase plan and $2.5 million in cash dividends paid.
Off-Balance Sheet Arrangements
The Company has no off-balance sheet arrangements.
Capital Expenditures
Capital expenditures were $3.2 million for both the nine months ended September 30, 2014 and 2013. Capital expenditures in the nine months ended September 30, 2014 were primarily related to the routine purchases of manufacturing and tissue processing equipment, including support for the Company’s HeRO Graft and PerClot product lines; revascularization technologies lasers; leasehold improvements needed to support the Company’s business; computer software; and computer and office equipment.
Scheduled Contractual Obligations and Future Payments
Scheduled contractual obligations and the related future payments as of September 30, 2014 were as follows (in thousands):

 	  	Total	 	  	Remainder of
2014	 	  	2015	 	  	2016	 	  	2017	 	  	2018	 	  	Thereafter	 	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Operating leases	  	$	23,164	  	  	$	537	  	  	$	3,241	  	  	$	3,173	  	  	$	3,062	  	  	$	3,026	  	  	$	10,125	  	
Purchase commitments	  	 	4,777	  	  	 	1,421	  	  	 	1,695	  	  	 	1,661	  	  	 	—	  	  	 	—	  	  	 	—	  	
Contingent payments	  	 	3,500	  	  	 	—	  	  	 	—	  	  	 	2,500	  	  	 	1,000	  	  	 	—	  	  	 	—	  	
Compensation payments	  	 	1,985	  	  	 	—	  	  	 	—	  	  	 	—	  	  	 	1,985	  	  	 	—	  	  	 	—	  	
Research obligations	  	 	2,254	  	  	 	1,217	  	  	 	948	  	  	 	89	  	  	 	—	  	  	 	—	  	  	 	—	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total contractual obligations	  	$	    35,680	  	  	$	    3,175	  	  	$	    5,884	  	  	$	    7,423	  	  	$	    6,047	  	  	$	    3,026	  	  	$	    10,125	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
The Company’s operating lease obligations result from the lease of land and buildings that comprise the Company’s corporate headquarters and manufacturing facilities, leases related to additional office and warehouse space, leases on Company vehicles, and leases on a variety of office equipment.
The Company’s purchase commitments include minimum purchase requirements for PerClot related to the Company’s transaction with SMI. These minimum purchases are included through 2016, which assumes that the Company receives FDA approval for PerClot in the first half of 2017. Upon FDA approval, the Company may terminate its minimum purchase requirements, per the terms of the agreements between the parties, which the Company expects to do. However, if the Company does not terminate this provision, it will have minimum purchase obligations of up to $1.75 million per year through the end of the contract term in 2025. The Company’s purchase commitments also include obligations to purchase ProCol from Hancock Jaffe and obligations from agreements with other suppliers.
The contingent payment obligations include obligations related to the Company’s acquisition of Hemosphere and transaction with SMI. The contingent payment obligation for Hemosphere represents the payments that the Company will make if certain revenue milestones are achieved. The schedule includes one contingent milestone payment for $2.5 million that the Company believes it may pay in 2016, although the timing of this payment may change. The schedule excludes one Hemosphere contingent milestone payment of up to $2.0 million, as the Company cannot make a reasonably reliable estimate of when this future payment may be made, if at all. The contingent payment obligation for PerClot represents the payments that the Company will make if certain FDA regulatory approvals and other commercial milestones are achieved. The schedule excludes one PerClot contingent milestone payment of $500,000, as the Company cannot make a reasonably reliable estimate of timing of this future payment.
The Company’s compensation payment obligations represent estimated payments for post-employment benefits for Mr. Steven G. Anderson, the Company’s former President and CEO and current Executive Chairman. The timing of Mr. Anderson’s post-employment benefits is based on the December 2016 expiration date of the his current employment agreement; however, payment of these benefits may be accelerated upon the occurrence of certain events, including Mr. Anderson’s voluntary retirement, for which he is currently eligible, or his termination in conjunction with certain change in control events.
The Company’s research obligations represent commitments for ongoing studies and payments to support research and development activities and largely represent commitments related to the PerClot pivotal clinical trial.
 
28

The schedule of contractual obligations above excludes (i) obligations related to the Company’s new operating lease dated October 2014, as this was not an obligation of the Company as of September 30, 2014, (ii) obligations for estimated liability claims unless they are due as a result of a settlement agreement or other contractual obligation and (iii) any estimated liability for uncertain tax positions and interest and penalties, currently estimated to be $1.9 million, because the Company cannot make a reasonably reliable estimate of the amount and period of related future payments as no specific assessments have been made for specific litigation or by any taxing authorities.
 
29

Forward-Looking Statements
This Form 10-Q includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. Forward-looking statements give the Company’s current expectations or forecasts of future events. The words “could,” “may,” “might,” “will,” “would,” “shall,” “should,” “pro forma,” “potential,” “pending,” “intend,” “believe,” “expect,” “anticipate,” “estimate,” “plan,” “future,” and other similar expressions generally identify forward-looking statements. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Readers are cautioned not to place undue reliance on these forward-looking statements, which are made as of the date of this Form 10-Q. Such forward-looking statements reflect the views of management at the time such statements are made and are subject to a number of risks, uncertainties, estimates, and assumptions, including, without limitation, in addition to those identified in the text surrounding such statements, those identified under “Risks and Uncertainties” and elsewhere in this Form 10-Q.
All statements, other than statements of historical facts, included herein that address activities, events, or developments that the Company expects or anticipates will or may occur in the future, are forward-looking statements, including statements regarding:
 
 	•	 	Plans, costs, and expected timelines regarding clinical trials to obtain PMA to distribute PerClot in the U.S., regulatory approval for PerClot, the distribution of PerClot in certain markets after the requisite regulatory approvals are obtained, and the Company’s expectation that it will terminate its minimum purchase requirements after regulatory approval of PerClot;	
 
 	•	 	The Company’s belief regarding the sufficiency of its response to the 2014 CryoLife Form 483 and the Warning Letter, and that any issues related to the FDA’s observations in the 2014 CryoLife Form 483 and the Warning Letter will not have a continuing material effect on the Company;	
 
 	•	 	Expected timing and results of the Company’s CryoValve SG pulmonary valve post-clearance study submission to the FDA;	
 
 	•	 	The potential impact of the FDA review of the classification of CryoValve SG pulmonary valve tissue and the FDA advisory committee’s vote in favor of classifying such tissue as a class III device;	
 
 	•	 	Potential benefits and additional applications of the Company’s products;	
 
 	•	 	Revenue trend estimates for the Company’s products and services for 2014;	
 
 	•	 	Plans related to regulatory approval in certain markets for BioFoam, and the subsequent distribution of BioFoam in those markets;	
 
 	•	 	Expectations regarding growth opportunities for BioGlue in Japan and China;	
 
 	•	 	Expectations regarding 2014 tissue processing revenues;	
 
 	•	 	Receipt of ProCol inventory from Hancock Jaffe, and the receipt of distribution fees and profits resulting from the sale of ProCol;	
 
 	•	 	Expected payments to Hancock Jaffe pursuant to the ProCol exclusive distribution agreement;	
 
 	•	 	Potential for competitive products and services to affect the market for the Company’s products and services;	
 
 	•	 	Anticipated payment of quarterly dividends each year;	
 
 	•	 	Expectations regarding the recoverability and realizability of deferred tax assets and the anticipated benefits of net operating loss carryforwards;	
 
 	•	 	Estimates of fair value of acquired assets, and the Company’s belief that the estimates are reasonable;	
 
 	•	 	Expectations that the Company will continue to renew certain acquired contracts and procurement agreements for the foreseeable future;	
 
 	•	 	Assumptions regarding the adequacy of, and competitive advantages conferred by, the Company’s intellectual property protections;	
 
 	•	 	Plans and expectations regarding research and development of new technologies and products;	
 
 	•	 	Expectations about whether, and when, the Company may receive additional payments related to its sale of Medafor stock;	
 
 	•	 	Expectations that general, administrative, and marketing expenses will increase in 2014, as compared to 2013;	
 
 	•	 	Expectations that research and development expenses will increase materially in 2015;	
 
 	•	 	The Company’s belief that its sales of PerClot, upon FDA approval, and its derivative products will not infringe the patent held by Bard, that the costs associated with the litigation with Bard and certain of its subsidiaries during the fourth quarter of 2014 and into 2015 will be material;	
 
30

 	•	 	Expectations regarding business consolidations in the healthcare industry that could exert downward pressure on demand for Company products and the fees charged by the Company;	
 
 	•	 	Expectations regarding sales of BioGlue, PerClot, HeRO Grafts, handpieces, and laser consoles and the factors affecting such sales;	
 
 	•	 	The Company’s belief that healthcare policy and law changes may have a material adverse effect on the business;	
 
 	•	 	The Company’s belief that the underlying collateral is sufficient to secure the Company’s $2.0 million loan to ValveXchange;	
 
 	•	 	The Company’s beliefs and underlying assumptions regarding the seasonal nature of the demand for some of its products and services;	
 
 	•	 	Adequacy of the Company’s financial resources and its belief that it will have sufficient cash to meet its operational liquidity needs for at least the next twelve months;	
 
 	•	 	Estimates of contingent payments and royalties that may be paid by the Company and the timing of such payments;	
 
 	•	 	The impact on cash flows of funding business development activities and the potential need to obtain additional borrowing capacity or financing;	
 
 	•	 	Expectations regarding the source of any future payments related to any unreported product or tissue processing liability claims;	
 
 	•	 	The anticipated impact of changes in prevailing economic conditions, interest rates, and foreign currency exchange rates;	
 
 	•	 	Constraints imposed on the Company by its lender under the existing credit facility;	
 
 	•	 	Plans regarding acquisition and investment opportunities of complementary product lines and companies;	
 
 	•	 	The anticipated effect of suppliers’/sources’ inability to deliver critical raw materials or tissues and/or the Company having to source supply from an alternate supplier;	
 
 	•	 	Expected impacts of issuance of additional shares and share repurchases on financial results calculated on a per-share basis;	
 
 	•	 	Issues that may affect the Company’s future growth, financial performance, and cash flows; and	
 
 	•	 	Other statements regarding future plans and strategies, anticipated events, or trends.	
These statements are based on certain assumptions and analyses made by the Company in light of its experience and its perception of historical trends, current conditions, and expected future developments as well as other factors it believes are appropriate in the circumstances. However, whether actual results and developments will conform with the Company’s expectations and predictions is subject to a number of risks and uncertainties which could cause actual results to differ materially from the Company’s expectations, including, without limitation, in addition to those specified in the text surrounding such statements, the risk factors set forth below, the risk factors set forth under Part I, Item 1A of the Company’s Form 10-K for the year ended December 31, 2013, and other factors, many of which are beyond the control of the Company. Consequently, all of the forward-looking statements made in this Form 10-Q are qualified by these cautionary statements, and there can be no assurance that the actual results or developments anticipated by the Company will be realized or, even if substantially realized, that they will have the expected consequences to or effects on the Company or its business or operations. The Company assumes no obligation to update publicly any such forward-looking statements, whether as a result of new information, future events, or otherwise.
 
31

Risks and Uncertainties
Along with the risks identified in Part II, Item 1A of this Form 10-Q, the risks and uncertainties which might affect the forward-looking statements and the Company, its ability to continue as a going concern, and the trading value of its common stock include concerns that:
 
 	•	 	We are significantly dependent on our revenues from BioGlue and are subject to a variety of risks affecting this product;	
 
 	•	 	Our BioGlue patent has expired in the U.S. and most of the rest of the world. Competitors may utilize the inventions disclosed in the expired patents in competing products, although the competing product will have to be approved by the appropriate regulatory authority;	
 
 	•	 	Competitors have obtained FDA approval for indications in which BioGlue has been used off-label and for which we cannot market BioGlue, which has reduced, and could continue to reduce, the addressable procedures for BioGlue;	
 
 	•	 	Our products and tissues are subject to many significant risks, including being recalled or placed on hold by us, the FDA, or other regulatory bodies and being subjected to adverse publicity, which could lead to decreased use, additional regulatory scrutiny, and/or product liability lawsuits;	
 
 	•	 	The FDA has expressed an intent to reevaluate the classification of CryoValve SG pulmonary valve tissue, and its advisory committee has voted in favor of classification of such tissue as a class III medical device. If CryoValve SG pulmonary valve tissue were to be reclassified as a class III medical device, we would be required to obtain a PMA. If we were unable to obtain a PMA, issuance of the PMA were delayed, or the attendant investment were to make pursuit of a PMA infeasible, we would be unable to distribute CryoValve SG pulmonary valve tissue to our customers, which would materially, adversely impact our revenues, liquidity, and net income;	
 
 	•	 	Regulatory agencies could require us to change or modify our processes, procedures, and manufacturing operations, and such agencies could reclassify or reevaluate our clearances and approvals to sell our medical devices and tissue services;	
 
 	•	 	Our tissues, which are not sterile when processed, and our medical devices allegedly have caused, and may in the future cause, injury to patients, which has exposed, and could in the future expose, us to tissue processing and product liability claims and additional regulatory scrutiny and inspections as a result;	
 
 	•	 	The FDA may determine that our corrective actions have not, and/or proposed corrective actions will not, adequately address the issues raised in the 2014 CryoLife Form 483 and/or the Warning Letter. If we have failed to respond to the notice of violations in the 2014 CryoLife Form 483 or the Warning Letter to the FDA’s satisfaction, we may be subject to additional regulatory action by the FDA, including recalls, injunctions, and/or civil money penalties, and the demand for our products and services could be negatively impacted by adverse publicity with respect to the 2014 CryoLife Form 483 and/or the Warning Letter. In addition, further actions required to be taken in response to the 2014 CryoLife Form 483 and/or the Warning Letter could impact the availability of our products and tissues and our cost structure, including our revenues, financial condition, profitability, and cash flows;	
 
 	•	 	We will not fully realize the benefit of our investment in our distribution and license and manufacturing agreements with Starch Medical, Inc. unless we are able to obtain FDA approval to distribute PerClot in the U.S., which will require an additional commitment of funds;	
 
 	•	 	We may ultimately be unsuccessful in our PerClot clinical trials and/or may be unable to obtain FDA approval to market and distribute PerClot in the U.S. Even if we receive FDA approval, we may be unsuccessful in our efforts to sell PerClot in the U.S. as other competing products may have penetrated the market by that time;	
 
 	•	 	Our litigation with Bard and certain of its subsidiaries will continue to be expensive, and if we lose, we may be prohibited from selling PerClot and its derivative products, such as PerClot Topical, or may have to pay substantial royalties or damages related to such sales;	
 
 	•	 	The receipt of impaired materials or supplies that do not meet our standards, the recall of materials or supplies by our vendors or suppliers, or our inability to obtain materials and supplies could have a material, adverse impact on our revenues, financial condition, profitability, and cash flows;	
 
 	•	 	Certain of our key production inputs are sourced from single suppliers. Should those suppliers experience production or other disruptions or temporarily suspend or discontinue their business operations or relevant product lines or configurations, or should we be unable to successfully negotiate agreements with them for continued supply, our production output could be reduced or halted, which could have a material, adverse impact on our revenues, financial condition, profitability, and cash flows;	
 
 	•	 	As a result of the funding issues that have been affecting ValveXchange, our Loan to ValveXchange may become uncollectible, which could have a material, adverse impact on our business. Even if ValveXchange is able to secure additional financing, it may nonetheless default on the Loan in the future, we may need to foreclose on the Loan, and there is no guarantee that the security for the notes will be sufficient to repay the Loan;	
 
32

 	•	 	We continue to evaluate expansion through acquisitions, licenses, investments, and other distribution arrangements in other companies or technologies, and such actions involve the risk of unknown liabilities, and could result in the dilution of our stockholders’ value, the consumption of resources that may be necessary to operate our business, the incurrence of debt on unfavorable terms, and unfavorable tax consequences;	
 
 	•	 	We may not realize the anticipated benefits from acquisitions, and we may be unable to integrate, upgrade, or replace systems acquired in acquisitions, secure the services of key employees, or succeed in the marketplace with the acquisition;	
 
 	•	 	Our sales are impacted by challenging domestic and international economic conditions and their constraining effect on hospital budgets, and demand for our products and tissues could decrease in the future, which could have a material, adverse impact on our business;	
 
 	•	 	Healthcare policy changes, including recent federal legislation to reform the U.S. healthcare system, may have a material, adverse impact on us;	
 
 	•	 	Key growth strategies may not generate the anticipated benefits;	
 
 	•	 	We may not be successful in obtaining necessary clinical results and regulatory approvals for products and services in development, and our new products and services may not achieve market acceptance;	
 
 	•	 	Extensive government regulation may adversely impact our ability to develop and market products and services, and restrictive laws, regulations, and rules could have a material, adverse impact on our revenues, financial condition, profitability, and cash flows;	
 
 	•	 	Uncertainties related to patents and protection of proprietary technology may adversely impact the value of our intellectual property or may result in our payment of significant monetary damages and/or royalty payments, negatively impacting our ability to sell current or future products, or prohibit us from enforcing our patent and other proprietary technology rights against others;	
 
 	•	 	Our right to receive additional payments for our Medafor common stock is subject to revenue performance conditions related to the Arista product, as to which we have no control or ability to predict;	
 
 	•	 	Intense competition may impact our ability to operate profitably;	
 
 	•	 	If we are not successful in expanding our business activities in international markets, it could have a material, adverse impact on our revenues, financial condition, profitability, and cash flows;	
 
 	•	 	We are dependent on the availability of sufficient quantities of tissue from human donors;	
 
 	•	 	Consolidation in the healthcare industry could continue to result in demands for price concessions, limits on the use of our products and tissues, and limitations on our ability to sell to certain of our significant market segments;	
 
 	•	 	The success of many of our products and tissues depends upon strong relationships with physicians;	
 
 	•	 	Our existing insurance policies may not be sufficient to cover our actual claims liability, and we may be unable to obtain future insurance policies in an amount sufficient to cover our anticipated claims at a reasonable cost or at all;	
 
 	•	 	We are not insured against all potential losses. Natural disasters or other catastrophes could adversely impact our business;	
 
 	•	 	Our current plans and ability to continue to pay a quarterly cash dividend may change;	
 
 	•	 	Our credit facility limits our ability to pursue significant acquisitions and also may limit our ability to borrow;	
 
 	•	 	Continued fluctuation of foreign currencies relative to the U.S. Dollar could materially, adversely impact our business;	
 
 	•	 	Rapid technological change could cause our products and services to become obsolete; and	
 
 	•	 	We are dependent on our key personnel.	
 
33

Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Interest Rate Risk
The Company’s interest income and interest expense are sensitive to changes in the general level of U.S. interest rates. In this regard, changes in U.S. interest rates affect the interest earned on the Company’s cash and cash equivalents of $29.8 million and restricted cash of $5.0 million and interest paid on the Company’s variable rate line of credit as of September 30, 2014. A 10% adverse change in interest rates, as compared to the rates experienced by the Company in the nine months ended September 30, 2014, affecting the Company’s cash and cash equivalents, restricted cash and securities, and line of credit would not have a material effect on the Company’s financial position, profitability, or cash flows.
Foreign Currency Exchange Rate Risk
The Company has balances, such as cash, accounts receivable, accounts payable, and accruals that are denominated in foreign currencies. These foreign currency denominated balances are sensitive to changes in exchange rates. In this regard, changes in exchange rates could cause a change in the U.S. Dollar equivalent of cash or funds that the Company will receive in payment for assets or that the Company would have to pay to settle liabilities. As a result, the Company could be required to record these changes as gains or losses on foreign currency translation.
The Company has revenues and expenses that are denominated in foreign currencies. Specifically, a significant portion of the Company’s international BioGlue and PerClot revenues are denominated in British Pounds and Euros, and a portion of the Company’s general, administrative, and marketing expenses are denominated in British Pounds, Euros, Swiss Francs, and Singapore Dollars. These foreign currency transactions are sensitive to changes in exchange rates. In this regard, changes in exchange rates could cause a change in the U.S. Dollar equivalent of net income from transactions conducted in other currencies. As a result, the Company could recognize a reduction in revenues or an increase in expenses related to a change in exchange rates.
An additional 10% adverse change in exchange rates from the exchange rates in effect on September 30, 2014 affecting the Company’s balances denominated in foreign currencies would not have had a material effect on the Company’s financial position or cash flows. An additional 10% adverse change in exchange rates from the weighted-average exchange rates experienced by the Company for the nine months ended September 30, 2014, affecting the Company’s revenue and expense transactions denominated in foreign currencies, would not have had a material effect on the Company’s financial position, profitability, or cash flows.
Item 4. Controls and Procedures.
The Company maintains disclosure controls and procedures (“Disclosure Controls”) as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934. These Disclosure Controls are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the Commission’s rules and forms, and that such information is accumulated and communicated to management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosures.
The Company’s management, including the Company’s President and CEO and the Company’s Executive Vice President of Finance, Chief Operating Officer, and CFO, does not expect that its Disclosure Controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdown can occur because of simple error or mistake. The Company’s Disclosure Controls have been designed to provide reasonable assurance of achieving their objectives.
Based upon the most recent Disclosure Controls evaluation conducted by management with the participation of the CEO and CFO, as of September 30, 2014 the CEO and CFO have concluded that the Company’s Disclosure Controls were effective at the reasonable assurance level to satisfy their objectives and to ensure that the information required to be disclosed by the Company in its periodic reports is accumulated and communicated to management, including the CEO and CFO, as appropriate to allow timely decisions regarding disclosure and is recorded, processed, summarized, and reported within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms.
 
34

On May 14, 2013 the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) issued an updated version of its Internal Control—Integrated Framework (“2013 Framework”). Originally issued in 1992 (“1992 Framework”), the framework helps organizations design, implement, and evaluate the effectiveness of internal control concepts and simplify their use and application. The 1992 Framework will remain effective during the transition, which extends to December 15, 2014, after which time COSO will consider it as superseded by the 2013 Framework. As of September 30, 2014, the Company is using the 1992 Framework. During the quarter ended September 30, 2014 there were no changes in the Company’s internal control over financial reporting that materially affected, or that are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Part II – OTHER INFORMATION
Item 1. Legal Proceedings.
On April 28, 2014 CryoLife filed a declaratory judgment lawsuit (the “Original Complaint”) against C.R. Bard, Inc. (“Bard”), Davol, Inc., and Medafor, Inc. (collectively, “Defendants”), in the U.S. District Court for the District of Delaware (the “Court”). CryoLife requested that the Court declare that CryoLife’s manufacture, use, offer for sale, and sale of PerClot in the U.S. does not infringe and would not infringe Bard’s United States Patent No. 6,060,461 (the “‘461 Patent”). In addition CryoLife requested that the Court declare that the claims of the ‘461 Patent are invalid. As part of the relief requested, CryoLife requested injunctive relief and an award of attorneys’ fees.
The lawsuit against Bard follows the receipt by CryoLife of a letter from Medafor, Inc. in September 2012 stating that PerClot, when introduced in the U.S., will infringe the ‘461 Patent when used in accordance with the method published in CryoLife’s literature and with the instructions for use. CryoLife received FDA 510(k) clearance for the sale of PerClot Topical in April 2014, began distributing PerClot Topical in September 2014, and received approval for an IDE in late March 2014 to begin clinical trials for PerClot in certain surgical indications.
In June 2014 CryoLife filed an amended complaint, and the Defendants filed a counterclaim for infringement in August 2014. The Defendants filed various motions to dismiss; the Court has not yet ruled on those motions.
On September 19, 2014 the Defendants filed with the Court a motion for a preliminary injunction, asking the Court to enjoin CryoLife’s marketing and sale of PerClot in the U.S. Discovery with respect to such motion has commenced, and the Court has set a hearing date of January 23, 2015.
Item 1A. Risk Factors.
There have been no material changes to the Risk Factors as previously disclosed in Part I, Item 1A, “Risk Factors” in our 10-K for the year ended December 31, 2013.
 
35

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
 
 	(c)	The following table provides information about purchases by the Company during the quarter ended September 30, 2014 of equity securities that are registered by the Company pursuant to Section 12 of the Securities Exchange Act of 1934:	
Issuer Purchases of Equity Securities
Common Stock and Common Stock Units

Period	  	Total Number of
Common Shares
and Common Stock
Units Purchased	 	  	Average Price
Paid per
Common Share	 	  	Total Number
of Common Shares
Purchased as Part
of Publicly
Announced
Plans or Programs	 	  	Dollar Value of
Common Shares
That May Yet Be
Purchased Under the
Plans or Programs	 	
07/01/14-07/31/14	  	 	64,200	  	  	$	8.89	  	  	 	64,200	  	  	$	10,899,487	  	
08/01/14-08/31/14	  	 	100,555	  	  	 	10.33	  	  	 	97,200	  	  	 	9,896,165	  	
09/01/14-09/30/14	  	 	104,411	  	  	 	10.10	  	  	 	99,316	  	  	 	8,892,877	  	
 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total	  	 	269,166	  	  	 	9.89	  	  	 	260,716	  	  	 	 	 	
In February 2013 the Company announced that its Board of Directors had authorized the purchase of up to $15.0 million of its common stock through October 31, 2014. The purchase of shares may be made from time to time in the open market or through privately negotiated transactions, on such terms as management deems appropriate, and will be dependent upon various factors, including: price, regulatory requirements, and other market conditions. For the quarter ended September 30, 2014, the Company purchased 261,000 shares of its common stock through this authorization for an aggregate purchase price of approximately $2.6 million.
Under the Company’s amended and restated credit agreement with General Electric Capital Corporation, the Company is required, after giving effect to stock repurchases, to maintain liquidity, as defined within the agreement, of at least $20.0 million. The Company is also entitled to repurchase up to approximately $14.0 million of common stock under the February 2013 authorization without obtaining its lender’s consent.
The Company purchased 8,000 common shares during the quarter ended September 30, 2014 that were tendered to the Company in payment of the exercise price of outstanding options and taxes on stock compensation and were not part of a publicly announced plan or program.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
 
36

Item 6. Exhibits.
The exhibit index can be found below.

Exhibit
Number	 	Description	
 	 	
3.1*	 	Amended and Restated Articles of Incorporation of the Company.	
 	 	
3.2	 	Amended and Restated By-Laws. (Incorporated herein by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed July 27, 2011.) (File No. 001-13165)	
 	 	
4.1	 	Form of Certificate for the Company’s Common Stock. (Incorporated herein by reference to Exhibit 4.2 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 1997.) (File No. 001-13165)	
 	 	
4.2	 	First Amended and Restated Rights Agreement, dated as of November 2, 2005, between CryoLife, Inc. and American Stock Transfer & Trust Company. (Incorporated herein by reference to Exhibit 4.1 to Registrant’s Current Report on Form 8-K filed November 3, 2005.) (File No. 001-13165)	
 	 	
10.1	 	Employment Agreement, dated as of July 7, 2014, between CryoLife, Inc. and James P. Mackin. (Incorporated herein by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed July 11, 2014.)	
 	 	
10.2*	 	Separation and Release Agreement, dated as of August 28, 2014, between CryoLife, Inc. and Jeffrey W. Burris.	
 	 	
10.3*	 	Stock Option Grant Agreement, dated September 2, 2014, by and between CryoLife, Inc. and James P. Mackin.	
 	 	
10.4*	 	Restricted Stock Award Agreement, dated as of September 2, 2014, by and between CryoLife, Inc. and James P. Mackin.	
 	 	
10.5	 	Second Amendment, dated as of September 3, 2014, to the Employment Agreement, dated as of October 23, 2012, by and between CryoLife, Inc. and Steven G. Anderson. (Incorporated herein by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed September 9, 2014.)	
 	 	
10.6*	 	Second Amended and Restated Credit Agreement, dated September 26, 2014, by and among CryoLife, Inc. and certain of its subsidiaries, as borrowers, General Electric Capital Corporation, as lender, swingline lender, as letter of credit issuer, and as the agent for all lenders, and GE Capital Markets, Inc., as sole lead arranger and bookrunner.	
 	 	
10.7*	 	First Amendment to the Distribution Agreement between CryoLife, Inc. and Starch Medical, Inc., dated May 18, 2011. (Redacted version filed with Registrant’s current Report on Form 8-K filed January 30, 2012.)	
 	 	
31.1*	 	Certification by James P. Mackin pursuant to section 302 of the Sarbanes-Oxley Act of 2002.	
 	 	
31.2*	 	Certification by D. Ashley Lee pursuant to section 302 of the Sarbanes-Oxley Act of 2002.	
 	 	
32**	 	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.	
 	 	
101.INS*	 	XBRL Instance Document	
 	 	
101.SCH*	 	XBRL Taxonomy Extension Schema Document	
 	 	
101.CAL*	 	XBRL Taxonomy Extension Calculation Linkbase Document	
 	 	
101.DEF*	 	XBRL Taxonomy Extension Definition Linkbase	
 	 	
101.LAB*	 	XBRL Taxonomy Extension Label Linkbase Document	
 	 	
101.PRE*	 	XBRL Taxonomy Extension Presentation Linkbase Document	
 
*	Filed herewith.	
 
**	Furnished herewith.	
 
37

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 	 	 	 	CRYOLIFE, INC.
(Registrant)	
 	 	 	
/s/ JAMES P. MACKIN	 	 	 	/s/ D. ASHLEY LEE	
JAMES P. MACKIN
President and Chief Executive Officer
(Principal Executive Officer)	 	 	 	D. ASHLEY LEE
Executive Vice President, Chief Operating
Officer, and Chief Financial Officer
(Principal Financial and Accounting Officer)	
 	 	 	
October 28, 2014	 	 	 	 	
DATE	 	 	 	 	
 
38

Exhibit 3.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION OF
CRYOLIFE, INC.
Articles of Restatement

1. The name of the corporation is CRYOLIFE, INC.
2. Restated Articles of Incorporation: This Amendment and Restatement of the Articles of Incorporation does not contain an amendment to the Articles requiring shareholder approval. The Board of Directors adopted these Amended and Restated Articles of Incorporation on July 30, 2014.
3. The text of the Amended and Restated Articles of Incorporation is as follows:
ARTICLE I
NAME
The name of this corporation shall be CRYOLIFE, INC.
ARTICLE II
EXISTENCE OF CORPORATION
This corporation shall have perpetual existence.
ARTICLE III
PURPOSES
The corporation may engage in the transaction of any or all lawful business for which corporations may be incorporated under the laws of the State of Florida.
ARTICLE IV
GENERAL POWERS
The corporation shall have power:
(a) To purchase, take, receive, lease, or otherwise acquire, own, hold, improve, use, or otherwise deal in and with real or personal property or any interest therein, wherever situated.
(b) To sell, convey, mortgage, pledge, create a security interest in, lease, exchange, transfer, and otherwise dispose of all or part of its property and assets.

(c) To lend money to, and use its credit to assist its officers and employees in accordance with Section 607.141, Florida Statutes (1976).
(d) To purchase, take, receive, subscribe for, or otherwise acquire, own, hold, vote, use, employ, sell, mortgage, lend, pledge, or otherwise dispose of, and otherwise use and deal in and with, shares or other interests in, or obligations of, other domestic or foreign corporations, associations, partnerships, or individuals, or direct or indirect obligations of the United States or of any other government, state, territory, governmental district, or municipality or of any instrumentality thereof.
(e) To make contracts and guarantees and incur liabilities, borrow money at such rates of interest as the corporation may determine, issue its notes, bonds, and other obligations, and secure any of its obligations by mortgage or pledge of all or any of its property, franchise, and income.
(f) To lend money for its corporate purposes, invest and reinvest its funds, and take and hold real and personal property as security for the payment of funds so loaned or invested.
(g) To conduct its business, carry on its operations, and have offices and exercise the powers granted by the State of Florida, within or without the state.
(h) To elect or appoint officers and agents of the corporation and define their duties and fix their compensation.
(i) To make and alter by-laws, not inconsistent with the laws of the State of Florida, for the administration and regulation of the affairs of the corporation.
(j) To make donations for the public welfare or for charitable, scientific or educational purposes.
(k) To transact any lawful business which the board of directors shall find will be in aid of governmental policy.
(l) To pay pensions and establish pension plans, profit sharing plans, stock bonus plans, stock option plans, and other incentive plans for any or all of its directors, officers, and employees and for any or all of the directors, officers, and employees of its subsidiaries.
(m) To be a promoter, incorporator, partner, member, associate, or manager of any corporation, partnership, joint venture, trust, or other enterprise.
(n) To have and exercise all powers necessary or convenient to effect its purposes.
ARTICLE V
CAPITAL STOCK
(a)(1) The number of shares of capital stock authorized to be issued by this corporation shall be Seventy Five Million (75,000,000) shares of common stock, each with a par value of One Cent ($.01) and Five Million (5,000,000) shares of preferred stock, each with a par value of One Cent ($.01). The shares of preferred stock may be divided into and issued in series.

(a)(2) Pursuant to Section 607.047 of the Florida Statutes, the Board of Directors is expressly authorized and empowered to divide any or all of the shares of preferred stock into series and, within the limitations set forth in Section 607.047 of the Florida Statutes, to fix and determine the relative rights and preferences of the shares of any series so established. The Board of Directors is expressly authorized to designate each series of preferred stock so as to distinguish the shares thereof from the shares of all other series and classes.
(a)(3) Each share of issued and outstanding common stock shall entitle the holder thereof to one (1) vote on each matter with respect to which shareholders have the right to vote, to fully participate in all shareholder meetings, and to share ratably in the net assets of the corporation upon liquidation and/or dissolution. Each share of issued and outstanding preferred stock shall have such rights to share in the net assets of the corporation upon liquidation and/or dissolution as are determined and fixed by the Board of Directors pursuant to Florida Statutes Section 607.047. All or any part of said capital stock may be paid for in cash, in property or in labor or services at a fair valuation to be fixed by the Board of Directors at a meeting called for such purposes. All stock when issued shall be paid for and shall be non-assessable.
(b) In the election of directors of this corporation, there shall be no cumulative voting of the stock entitled to vote at such election.
(c) There shall be a series of Preferred Stock, par value $.01 per share, of the Corporation with the following designated number of shares, relative rights, preferences, and limitations thereof:
(1) Designation and Amount. The shares of such series shall be designated as “Series A Junior Participating Preferred Stock” (the “Series A Preferred Stock”) and the number of shares constituting the Series A Preferred Stock shall be two million (2,000,000) shares of the five million (5,000,000) authorized preferred shares. The two million (2,000,000) Series A Preferred Stock shares shall be reserved for issuance in connection with the exercise of certain rights granted pursuant to a First Amended and Restated Rights Agreement, amended effective as of November 23, 2005, by and between the Corporation and American Stock Transfer & Trust Company, as Rights Agent thereunder. Such number of shares may be increased or decreased by resolution of the Board of Directors; provided, that no decrease shall reduce the number of shares of Series A Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Corporation convertible into Series A Preferred Stock.
(2) Dividends and Distributions.
(A) Subject to the rights of the holders of any shares of any series of Preferred Stock (or any similar stock) ranking prior and superior to the Series A Preferred Stock with respect to dividends, the holders of shares of Series A Preferred Stock, in preference to the holders of Common Stock, par value $.01 per share (the “Common Stock”), of the Corporation, and of any other junior stock, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the first day of March, June, September and December in each year (each such date being referred to

herein as a “Quarterly Dividend Payment Date”), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $1.00 or (b) subject to the provision for adjustment hereinafter set forth, 100 times the aggregate per share amount of all cash dividends, and 10 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions, other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Preferred Stock. In the event the Corporation shall at any time after the issuance of Series A Preferred Stock declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the Series A Preferred Stock as provided in paragraph (A) above immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per share on the Series A Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series A Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than 60 days prior to the date fixed for the payment thereof.

(3) Voting Rights. The holders of shares of Series A Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth, each share of Series A Preferred Stock shall entitle the holder thereof to 100 votes on all matters submitted to a vote of the stockholders of the Corporation. In the event the Corporation shall at any time after issuance of Series A Preferred Stock declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the number of votes per share to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
(B) Except as otherwise provided herein, in any other document or filing creating a series of Preferred Stock or any similar stock, or by law, the holders of shares of Series A Preferred Stock and the holders of shares of Common Stock and any other capital stock of the Corporation having general voting rights shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation.
(C) Except as set forth herein, or as otherwise provided by law, holders of Series A Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action.
(4) Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or distributions payable on the Series A Preferred Stock as provided in subparagraph 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Preferred Stock outstanding shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends, or make any other distributions, on any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock;
(ii) declare or pay dividends, or make any other distributions, on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except dividends paid ratably on the Series A Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series A Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for consideration any shares of Series A Preferred Stock, or any shares of stock ranking on a parity with the

Series A Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (A) of this subparagraph 4, purchase or otherwise acquire such shares at such time and in such manner.
(5) Reacquired Shares. Any shares of Series A Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock subject to the conditions and restrictions on issuance set forth herein, in the Certificate of Incorporation, or in any other document or filing creating a series of Preferred Stock or any similar stock or as otherwise required by law.
(6) Liquidation, Dissolution or Winding Up. Upon any liquidation, dissolution or winding up of the Corporation, no distribution shall be made (1) to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock unless, prior thereto, the holders of shares of Series A Preferred Stock shall have received $1.00 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, provided that the holders of shares of Series A Preferred Stock shall be entitled to receive an aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to 100 times the aggregate amount to be distributed per share to holders of shares of Common Stock, or (2) to the holders of shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except distributions made ratably on the Series A Preferred Stock and all such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. In the event the Corporation shall at any time after the issuance of Series A Preferred Stock declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the aggregate amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under the proviso in clause (1) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.
(7) Consolidation, Merger, etc. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case each share of Series A Preferred Stock shall at the same time be similarly exchanged or changed into an amount per share, subject to the provision for adjustment hereinafter set forth, equal to 100 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is

changed or exchanged. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of common stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series A Preferred Stock shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. In the event both this subparagraph 7 and subparagraph 2 appear to apply to a transaction, this subparagraph 7 will control.
(8) No Redemption; No Sinking Fund. The shares of Series A Preferred Stock shall not be redeemable; provided, however, that the Corporation may purchase or otherwise acquire outstanding shares of Series A Preferred Stock in the open market or by offer to any holder or holders of shares of Series A Preferred Stock. The shares of Series A Preferred Stock shall not be subject to or entitled to the operation of a retirement or sinking fund.
(9) Rank. The Series A Preferred Stock shall rank, with respect to the payment of dividends and the distribution of assets, junior to all series of any other class of the Corporation’s Preferred Stock, unless the Board of Directors shall specifically determine otherwise in fixing the powers, preferences, and relative, participating, optional and other special rights of the shares of such series and the qualifications, limitations and restrictions thereof.
(10) Fractional Shares. The Series A Preferred Stock shall be issuable upon exercise of the Rights issued pursuant to the Rights Agreement in whole shares or in any fraction of a share that is one one-hundredth of a share or any integral multiple of such fraction which shall entitle the holder, in proportion to such holder’s fractional shares, to receive dividends, exercise voting rights, participate in distributions and to have the benefit of all other rights of holders of Series A Preferred Stock. In lieu of fractional shares, the Corporation, prior to the first issuance of a share or a fraction of a share of Series A Preferred Stock, may elect (1) to make a cash payment as provided in the Rights Agreement for fractions of a share other than one one-hundredth of a share or any integral multiple thereof or (2) to issue depository receipt evidencing such authorized fraction of a share of Series A Preferred Stock pursuant to an appropriate agreement between the Corporation and a depository selected by the Corporation; provided that such agreement shall provide that the holders of such depository receipts shall have all the rights, privileges and preferences to which they are entitled as holders of the Series A Preferred Stock.
(11) Amendment. These Articles of Incorporation of the Corporation shall not be amended in any manner which would materially alter or change the powers, preferences or special rights of the Series A Preferred Stock so as to affect them adversely without the affirmative vote of the holders of at least two-thirds of the outstanding shares of Series A Preferred Stock, voting together as a single class.

ARTICLE VI
AMENDMENT OF ARTICLES OF INCORPORATION
The corporation reserves the right to amend, alter, change or repeal any provisions contained in these Articles of Incorporation in the manner now or hereafter prescribed by statute, and all rights conferred upon the stockholders herein are subject to this reservation.
ARTICLE VII
INDEMNIFICATION
If in the judgment of the majority of the entire Board of Directors (excluding from such majority and director under consideration for indemnification), the criteria set forth in Section 607.014(1) or (2), Florida Statutes, have been met, then the corporation shall indemnify any officer or director, or former officer or director, his personal representatives, devisees or heirs, in the manner and to the extent contemplated by the said Section 607.014.
ARTICLE VIII
SHAREHOLDERS PROHIBITED FROM TAKING
ACTION WITHOUT A MEETING
The shareholders may not take action by written consent. Any and all action by a shareholder is required to be taken at the annual shareholders meeting or at a special shareholders meeting. This provision applies to common stock and all classes of preferred stock.
ARTICLE IX
SPECIAL MEETINGS OF SHAREHOLDERS
Special meetings of the shareholders for any purpose may be called at the request in writing of shareholders owning not less than 50% of all votes entitled to be cast on any issue proposed to be considered at the proposed meeting by delivering one or more written demands for the meeting which are signed, dated and delivered to the Secretary of the Company and describing the purposes for which the meeting is to be held.
4. These Amended and Restated Articles of Incorporation supersede the original Articles of Incorporation and all previous amendments thereto.
IN WITNESS WHEREOF, these Amended and Restated Articles of Incorporation have been executed as of the 5th day of August, 2014.

/s/ Steven G. Anderson	
Steven G. Anderson	
Chairman of the Board, President,	
& Chief Executive Officer	

Exhibit 10.2
SEPARATION AND RELEASE AGREEMENT
In consideration of the promises and mutual undertakings contained herein, and other good and valuable consideration, the receipt and sufficiency of which the parties hereby acknowledge, the parties to this Separation and Release Agreement (the “Agreement”), Jeffrey W. Burris (“Burris”) and CryoLife, Inc. (“CryoLife” or the “Company”), hereby agree as follows:
1. Burris terminated employment as a result of his retirement with CryoLife effective 18th day of August, 2014 (the “Termination Date”).
2. In consideration of Burris’ release of CryoLife, entry into the restrictive covenants set forth below and the other covenants and undertakings herein, CryoLife agrees to take each of the following actions:
a. Pay Burris the total gross amount of $302,000.00, which represents twelve (12) months base salary, such amount to be paid in equal installments over twelve (12) months in accordance with the Company’s normal payroll procedures and payroll dates commencing with the first pay day that occurs after the Effective Date of this Agreement. The “Effective Date” of this Agreement will be the date following the expiration of the seven (7)-day revocation period referenced below.
b. Pay Burris a lump sum in the amount of $9,292.32 representing the eight (8) days of vacation time that had accrued on the Termination Date, such amount to be paid thirty (30) days after the Effective Date.
c. Pay Burris a pro-rata bonus, equal to the amount, if any, and payable in the form to which he would be entitled for the plan year ending December 31, 2014 (the “2014 Bonus”) in accordance with the terms of the Fiscal Year 2014 Bonus Agreement under the 2007 Executive Incentive Plan (the “Bonus Agreement”), provided that, (i) the amount of the 2014 Bonus will be pro-rated based on the number of days during the 2014 plan year that he was employed by the Company, (ii) the 2014 Bonus shall be paid in accordance with terms of Section 6 of the Company’s 2007 Executive Incentive Plan, (iii) the Bonus Agreement shall be deemed amended if and to the extent (and only to the extent) necessary to comply with the terms stated herein, (iv) Burris shall, for purposes of 2014 Bonus computation, be deemed to have met or exceeded his personal performance goals during the portion of the 2014 plan year that he was employed by the Company, and (v) the Company shall not (i) alter the bonus formula for Burris by changing his performance targets under Section 4 of the 2007 Executive Incentive Plan or (ii) terminate the Bonus Agreement under Section 8 of the Bonus Agreement, in each case under clauses (i) or (ii) unless the Company takes such actions uniformly for all of its executives under similar agreements.”.
d. Provide reimbursement of costs for up to twelve (12) months of outplacement services through an outplacement provider selected by Burris and approved by the Company, in an amount not to exceed $15,000.00.
e. If Burris timely elects continued coverage under CryoLife’s group medical plan pursuant to Section 4980B of the Internal Revenue Code of 1986, as amended (“COBRA”), in accordance with ordinary plan practice and provides appropriate documentation of such payment as requested by CryoLife or its COBRA administrator, then, for a period of eighteen (18) consecutive months, CryoLife agrees to reimburse Burris an amount equal to the difference between the amount Burris pays for such COBRA continuation coverage each such month and the amount paid by a full-time active employee of CryoLife each such month for the same level of coverage elected by Burris. Such reimbursement shall end if and when Burris becomes eligible to participate as an employee in a plan of another employer providing group health benefits to Burris and Burris’ eligible family members and dependents, which plan does not contain any exclusion or limitation with respect to any pre-existing condition of Burris or any eligible family member or dependent who would otherwise be covered under CryoLife’s group medical plan.
Burris acknowledges that the consideration set forth in this paragraph shall be the sole monetary obligation that CryoLife has to him following his execution of this Agreement and that he shall have no further claim to monies of any kind, whether representing vacation pay, bonuses, stock, or otherwise, unless such claim is not permitted to be waived by law. Notwithstanding anything to the contrary set forth above, because of his retirement, Burris shall be entitled to the benefits that accrue upon retirement pursuant to the Company’s Stock Plans and deferred compensation plans (including, for avoidance of doubt, with respect to the Stock Plans, his options granted pursuant to Option Agreements, which shall remain exercisable to the extent vested as of the Termination Date until the earlier of the end of the applicable option term or thirty-six (36) months from the Termination Date, and otherwise in accordance with the applicable Option Agreement).
 
1

All payments to Burris shall be subject to normal deductions and withholdings where applicable. Further, the parties agree that CryoLife makes no representations or warranties to Burris with respect to the tax consequences (including but not limited to income tax consequences) contemplated by this Agreement or the payment of any benefits hereunder and that CryoLife has no responsibility to take or refrain from taking any actions in order to achieve a certain tax result for Burris.
3. In consideration of the covenants from CryoLife to Burris set forth above, the receipt and sufficiency of which are hereby acknowledged, Burris agrees to release and forever discharge CryoLife and all of its present and former officers, directors, partners, employees, agents, insurers, affiliates, attorneys, parents, subsidiaries, and representatives (hereafter “the Released Parties”) from any and all claims and causes of action (including but not limited to costs and attorneys’ fees) of whatever kind or nature, joint or several, under any federal, state or local statute, ordinance or under the common law, including, but not limited to, the Age Discrimination in Employment Act, the Older Workers’ Benefit Protection Act, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Americans with Disabilities Act, the Equal Pay Act, the Fair Labor Standards Act, the Workers Compensation Act, the Employee Retirement Income Security Act, the Family and Medical Leave Act of 1993, the Unemployment Compensation laws and any other employment discrimination law, state or federal, as well as any other claims based on constitutional, statutory, common law or regulatory grounds, that Burris has now or may have in the future against the Released Parties, whether known or unknown, which are based on acts or facts arising or occurring prior to the Effective Date of this Agreement.
4. In further consideration of the covenants from CryoLife to Burris set forth above, the receipt and sufficiency of which are hereby acknowledged, Burris agrees to the following:
a. Definitions. For the specific purpose of the covenants contained in this Section and for all other purposes under this Agreement, certain terms are defined as follows:
(1) “Company Business” shall mean and include the allograft cardiac or vascular tissue processing business, the biological glue, powdered hemostat or protein hydrogel product business, and the transmyocardioal revascularization business.
(2) “Competing Business” shall mean any person or entity that is engaged in, or conducts, a business substantially similar to the Company Business and only that portion of the business that is in competition with the Company Business.
(3) “Confidential Information” shall mean, collectively, all “Proprietary Information” and “Trade Secrets” of the Company.
(4) “Proprietary Information” shall mean all data, formulae, processes, procedures, methods, documentation, information, records, drawings, designs, specifications, test results, evaluations, know-how, material directly related to sales processes, information risk management, tests or assays, business, assets, products or prospects related to the Company and the Company Business, which is or was communicated to, supplied to, observed by or created by Burris, either directly or indirectly, at any time during the employment relationship, whether or not received from the Company or from any actual or potential customer or client of the Company, or from any person with a business relationship, whether contractual or otherwise, with the Company. The term “Proprietary Information” shall not include any information that Burris can prove: (a) was known by Burris prior to the time of employment with the Company as long as such information was not acquired, either directly or indirectly, from the Company; (b) is or becomes publicly known through no direct or indirect act, fault or omission of Burris; (c) is or becomes part of the public domain through no direct or indirect act, fault or omission of Burris; or (d) was received by Burris from a third party having the legal right to transmit the same without restriction as to use and disclosure and such receipt was not in connection with any business relationship or prospective business relationship with the Company or its Affiliates; provided, however, that a combination of features shall not be deemed to be within the foregoing exceptions merely because individual features are in the public domain or otherwise within such exceptions, as previously described, unless the combination itself is in the public domain or otherwise entirely within any one such exception.
(5) “Territory” shall mean the State of Georgia.
 
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(6) “Trade Secrets” shall mean information not generally known about the Company’s business which is the subject of efforts that are reasonable under the circumstances to maintain its secrecy or confidentiality and from which the Company derives economic value from the fact that the information is not generally known to other persons who can obtain economic value from its disclosure or use, and shall include any and all Proprietary Information which may be protected as a trade secret under any applicable law, even if not specifically designated as such. Trade Secrets may include, but are not limited to, technical or non-technical data, compilations, programs and methods, techniques, drawings, processes, financial data, lists of actual customers and potential customers, customer route books, cards or lists containing the names, addresses, habits and business locations of past, present and prospective customers, sales reports, price lists, product formulae, methods and procedures relating to services.
b. Acknowledgments. Burris acknowledges that: (i) the Company has expended substantial time, money, effort and other resources to develop its goodwill, clients, business sources and relationships; (ii) the Company has a legitimate business interest in protecting the same; (iii) in connection with Burris’ employment by the Company, the Company has introduced Burris to its customers, business sources and relationships and has expended considerable time, effort and capital to train Burris in the Company Business; (iv) by virtue of Burris’ employment with the Company, Burris had contact with certain of the Company’s customers and business sources and relationships; (v) in Burris’ capacity, Burris may be privy to certain Confidential Information, Proprietary Information and Trade Secrets not generally known or available to the Company’s competitors or the general public; (vi) the nature and periods of the restrictions imposed by the covenants contained in this Section are fair, reasonable, and necessary to protect and preserve for the Company and that such restrictions will not prevent Burris from earning a livelihood; (vii) the Company would sustain great and irreparable loss and damage if Burris were in any manner to breach any of such covenants; (viii) the Company conducts its business actively in and throughout all geographical areas included within the Territory and other persons are engaged in like and similar business in the Territory; and (ix) the Territory is reasonable because Burris’ responsibilities were performed throughout the Territory.
c. Agreement Not to Divert Customers. Burris covenants and agrees with the Company that Burris will not, on behalf of a Competing Business, at any time during the twenty-four (24) months after the Effective Date of this Agreement, either directly or indirectly, solicit, divert, appropriate, or otherwise attempt to take away any customer or active prospect of the Company with whom Burris had Material Contact, as statutorily defined, for the purpose of furthering a business relationship on behalf of the Company, with a view to selling or providing any product, equipment or service competitive with the Business of the Company.
d. Agreement Not to Divert Employees. Burris covenants and agrees with the Company that Burris will not, within the Territory, at any time during the twenty-four (24) months after the Effective Date of this Agreement, either directly or indirectly, solicit, entice, persuade or induce, or attempt to solicit, entice, persuade or induce any person who is employed by the Company to terminate his or her employment or contractual arrangement with the Company.
e. Protection of Confidential Information. Burris covenants and agrees that all Confidential Information (including all Proprietary Information and Trade Secrets) and all physical embodiments thereof received or developed by Burris or disclosed to Burris while employed by the Company is confidential and is and will remain the sole and exclusive property of the Company. Burris further covenants and agrees, for so long as such information remains confidential, to hold all Confidential Information in trust and in the strictest confidence, and will not use, reproduce, distribute, disclose or otherwise disseminate the Confidential Information or any physical embodiments thereof and in no event shall Burris take any action causing or fail to take the action necessary in order to prevent any Confidential Information disclosed to or developed by Burris to lose its character or cease to qualify as Confidential Information. Notwithstanding anything contained herein to the contrary, this covenant shall not limit in any manner the protection of the Company’s Trade Secrets otherwise afforded by law.
f. Breach. Burris agrees that upon the filing of a judicial proceeding alleging any breach, CryoLife may continue to make payments to Burris directly or may, instead, make any payments still due to Burris under this Agreement to the judicial authority overseeing such proceeding for distribution as such authority determines. If CryoLife continues to make payments to Burris directly, those payments shall be without prejudice to its claims in the judicial proceeding.
 
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g. Cooperation. Burris agrees to cooperate with CryoLife, during the twelve (12) months following the Effective Date, by responding to reasonable requests by the Company for information and assistance and providing such information and/or assistance up to four (4) hours per week (the “Comp Time”) for no additional consideration other than the benefits described in Section 2 above. Burris acknowledges that such cooperation may include timely completion of an officers and directors questionnaire provided by CryoLife. Such cooperation may be completed by Burris after normal office hours once Burris becomes eligible to participate as an employee in a plan of another employer providing group health benefits to Burris as set forth in Section 2(e) and CryoLife will use reasonable efforts to accommodate schedule limitations imposed on Burris by his employment. If such assistance includes matters involving litigation and exceeds the Comp Time, Burris agrees to provide such assistance unless it unreasonably interferes with any employment in which he is engaged. The parties agree to reimburse Burris for assistance exceeding the Comp Time for such matters at a commercially reasonable rate. There shall be no carryover of unused Comp Time from one week to any other week.
5. Burris agrees to return all Company property in Burris’ possession, custody or control immediately. Notwithstanding anything to the contrary in this Agreement, no consideration will be payable under this Agreement until Burris has satisfied this obligation.
6. Burris represents and warrants that as of the date of execution of this Agreement, Burris has not assigned or transferred or purported to assign or transfer any of the claims released herein. Burris hereby agrees to indemnify and hold harmless the Released Parties against, without any limitation, any and all claims and causes of action (including, but not limited to, costs and attorneys’ fees), arising out of any such transfer or assignment.
7. This Agreement and the covenants, representations, warranties and releases contained herein shall inure to the benefit of and be binding upon Burris and CryoLife and each of their successors, heirs, assigns, agents, affiliates, parents, subsidiaries and representatives.
8. This Agreement contains the entire agreement and understanding concerning the subject matter between the parties. Each party acknowledges that no one has made any representation whatsoever not contained herein concerning the subject matter hereof, to induce the execution of this Agreement. This Agreement expressly supersedes, without limitation, that certain R&D/Key Employee Secrecy and Noncompetition Agreement dated December 10, 2013 between the Company and Burris. The applicable Option Agreements shall remain in effect as set forth herein .
9. Burris acknowledges that the consideration for signing this Agreement is a benefit to which Burris would not have been entitled without signing this Agreement.
10. Burris acknowledges that, pursuant to the Older Workers Benefit Protection Act of 1990, Burris has the right to, and has been advised to, consult with an attorney before signing this Agreement. Burris further acknowledges Burris’ understanding that Burris has twenty-one (21) days to consider the Agreement before signing it, that Burris may revoke this Agreement within seven (7) calendar days after signing it, by delivering written evidence of such revocation to CryoLife within that seven (7)-day period, and that this Agreement will not be effective or enforceable until expiration of that seven (7)-day revocation period. Revocation may be made by delivering written notice of revocation to the attention of D. Ashley Lee, Executive Vice President and Chief Financial Officer of the Company, at CryoLife, Inc., 1655 Roberts Boulevard, NW, Kennesaw, Georgia 30144.
11. Burris agrees to refrain from making any disparaging remarks about CryoLife or Burris’ employment at CryoLife, other than as may reasonably be necessary for fair competition.
12. CryoLife agrees to refrain from making any disparaging remarks about Burris or Burris’ employment at CryoLife, other than as may reasonably be necessary for fair competition.
13. Miscellaneous.
a. Severability. In the event a court of competent jurisdiction finds any provision (or subpart thereof) (including but not limited to the covenants referenced in Section 4) to be illegal or unenforceable, the parties agree that the court shall modify the provision(s) (or subpart(s) thereof) to make the provision(s) (or subpart(s) thereof) and this Agreement valid and enforceable to the fullest extent permitted by law. Any illegal or unenforceable provision (or subpart thereof) shall otherwise be severable and shall not affect the validity of the remainder of such provision and any other provision of this Agreement.
 
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b. Modification, Governing Law; Waiver. Subject to Section 13(a) above, this Agreement can only be modified by a writing signed by the parties, and shall be interpreted in accordance with and governed by the laws of the State of Georgia (including Georgia’s new Restrictive Covenants Act) without regard to the choice of law provisions thereof. Any dispute arising out of or relating to this Agreement, or the construction, enforceability or breach thereof, shall be brought only in a state or federal court sitting in Cobb County, Georgia. Burris hereby expressly consents to personal jurisdiction in said courts and waives any objections to jurisdiction and venue of said courts for the resolution of disputes as described herein. Failure to assert or act upon any breach of this Agreement shall not constitute a waiver of the right to assert a future breach of the Agreement or any portion thereof.
14. Burris and CryoLife agree that certain Change of Control Agreement, by and between Burris and CryoLife dated December 17, 2012 is hereby terminated and of no further force and effect.
MY SIGNATURE BELOW SIGNIFIES MY UNDERSTANDING OF AND VOLUNTARY ASSENT TO THE TERMS OF THIS AGREEMENT. I UNDERSTAND AND ACKNOWLEDGE THAT BY SIGNING THIS AGREEMENT, I MAY BE GIVING UP VALUABLE RIGHTS.

 	 	/s/ Jeffrey W. Burris	
 	 	Jeffrey W. Burris	
 	 	
Date:	 	August 28, 2014	

Sworn to and subscribed before me this 28th day of August, 2014.	
 	
/s/ Susan M. Weaver	
Notary Public	

CryoLife, Inc.	
 	 	
By:	 	/s/ Steven G. Anderson	
 	 	Steven G. Anderson
Chairman, President and Chief Executive Officer	
 	 	
Date:	 	August 29, 2014	

Sworn to and subscribed before me this 29th day of August, 2014.	
 	
/s/ Suzanne K. Gabbert	
Notary Public	
 
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Exhibit 10.3
CryoLife, Inc.
1655 Roberts Boulevard N.W.
Kennesaw, Georgia 30144
Date: September 2, 2014

Name:	  	Mr. J. Patrick Mackin	
Address:	  	250 Bergamot Drive	
 	  	Medina, MN 55340	
RE: Grant of Stock Option
Dear Pat:
This letter sets forth the agreement (the “Agreement”) between you (the “Employee”) and CryoLife, Inc., a Florida corporation (the “Company”), regarding your option to acquire shares of the Company’s Common Stock.
1.Grant of Option. Subject to the terms set forth below, the Company hereby grants to Employee the right, privilege, and option to purchase up to 400,000 shares (of Common Stock the “Option Shares”) at the purchase price of $10.18 per share. The date of grant (“Grant Date”) of the option is September 2, 2014. This option is intended to be and shall be treated as an “Incentive Stock Option,” which is an option that is intended to be an “incentive stock option” pursuant to Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”). Notwithstanding the foregoing, to the extent that all or any portion of the option fails for any reason to comply with the provisions of Section 422 of the Code, it shall be treated as a “Non-Qualified Stock Option.” This option is granted pursuant to the CryoLife, Inc. Second Amended and Restated 2009 Stock Incentive Plan (the “Plan”).
2.Time of Exercise of Option. Prior to its termination as set forth in Section 5 below, and subject to Section 8 of the Plan, this option shall vest, and the Employee may exercise the option granted herein on the following dates, or thereafter provided the option is exercised prior to its termination:

Vesting/ Initial Exercise Date	  	Number of Option
Shares Exercisable	 	  	Cumulative Percentage of
Option Shares Exercisable	 	
 	 	 	
September 2, 2015	  	 	133,333	  	  	 	33 1/3	% 	
September 2, 2016	  	 	133,333	  	  	 	33 1/3	% 	
September 2, 2017	  	 	133,334	  	  	 	33 1/3	% 	

3.Method of Exercise. The option shall be exercised by written notice directed to the Compensation Committee (the “Committee”), at the Company’s principal executive office, and except as set forth below, must be accompanied by payment of the option price for the number of Option Shares purchased in accordance with the Plan’s requirements. The payment for the number of Option Shares purchased may be payable in cash or by tendering (by actual delivery of shares) unrestricted shares of the Company’s common stock in accordance with the Plan. To the extent permitted by applicable law, you may elect to pay for the number of Option Shares purchased by irrevocably authorizing a third party to sell shares of the Company’s common stock acquired upon exercise of the Option Shares and remitting to the Company a sufficient portion of the sale proceeds as payment of the entire option price for the number of Option Shares purchased, including any tax withholding resulting from such exercise. The Company shall make delivery of such shares in accordance with the Plan provided that if any law or regulation requires the Company to take any action with respect to the shares specified in such notice before the issuance thereof, then the date of delivery of such shares shall be extended for the period necessary to take such action.
4.The Plan. The Plan, as amended from time to time by the Board of Directors of the Company, is hereby incorporated in this Agreement, and to the extent that anything in this Agreement is inconsistent with the Plan, the terms of the Plan shall control. Employee acknowledges that the Company has provided a copy of the Plan to Employee.
5.Termination of Option. Except as herein otherwise stated, and subject to the provisions of Section 5.15 of the Plan, the option, to the extent not previously exercised, shall terminate in accordance with the Plan and upon the first to occur of the following events:
(a) Disability. The expiration of 36 months after the date on which Employee’s employment by the Company is terminated, if such termination be by reason of Employee’s permanent and total disability, provided, however, that (i) the option shall be exercisable only to the extent that Employee had the right to exercise the option at the time of termination, and (ii) if the Employee dies within such 36 month period, any unexercised option held by such Employee shall thereafter be exercisable in accordance with the provisions of and shall terminate upon the first to occur of the events described in Sections 5(b) and (d);
(b) Death. In the event of Employee’s death while in the employ of the Company, the expiration of 12 months following the date of his or her death, provided that the option shall be exercisable following the Employee’s death only to the extent that Employee had the right to exercise the option at the time of his or her death;
(c) Retirement. In the event Employee’s employment with the Company terminates by reason of normal or early retirement, any option held by such Employee may be exercised by the Employee for a period of 36 months from the date of such termination to the extent that Employee had the right to exercise the option at the time of his or her termination; provided, however, that if the Employee dies within such 36 month period any unexercised option held by Employee shall thereafter be exercisable in accordance with the provisions of and shall terminate upon the first to occur of the events described in Section 5(b) and (d); or
(d) Other. Upon the earlier to occur of (i) 84 months following the Grant Date, or (ii) upon termination of Employee’s employment by the Company (except if such termination be by reason of death, disability, or normal or early retirement or, in accordance with Section 5.15 of the Plan, following a Change In Control). It is in Compensation Committee’s sole discretion to determine whether the Employee’s employment with the Company terminates by reason of disability, normal or early retirement.
 
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Except as set forth above, the option may not be exercised unless Employee, at the time he or she exercises the option, is, and has been at all times since the date of grant of the option, an employee of the Company. Employee shall be deemed to be employed by the Company if he or she is employed by the Company or any of its subsidiaries. Notwithstanding the above, in no event may the option be exercised after 84 months following the Grant Date.
6.Reclassification, Consolidation, or Merger. The number of Option Shares may be adjusted in accordance with the Plan if certain events such as merger, reorganization, consolidation, recapitalization, stock dividends, stock splits, or other changes in the Company’s corporate structure affecting its Common Stock occur.
7.Rights Prior to Exercise of Option. This option is not transferrable by Employee, except by will or by the laws of descent and distribution or as otherwise set forth in the Plan, and during Employee’s lifetime shall be exercisable only by Employee. This option shall confer no rights to the holder hereof to act as stockholder with respect to any of the Option Shares until payment of the option price and delivery of a share certificate has been made.
8.Employee’s Representations and Warranties. By execution of this Agreement, Employee represents and warrants to the Company as follows:
(a) The entire legal and beneficial interest of the option and the Option Shares are for and will be held for the account of the Employee only and neither in whole nor in part for any other person.
 
 	(b)	Employee resides at the following address:	
250 Bergamot Drive
Medina, MN 55340
(c) Employee is familiar with the Company and its plans, operations, and financial condition. Prior to the acceptance of this option, Employee has received all information as he or she deems necessary and appropriate to enable an evaluation of the financial risk inherent in accepting the option and has received satisfactory and complete information concerning the business and financial condition of the Company in response to all inquiries in respect thereof.
9. Restricted Securities. Employee recognizes and understands that this option and the Option Shares are currently registered under the Securities Act of 1933, as amended (the “Act”), but may not remain so registered, and are not registered under any state securities law. Any transfer of the option (if otherwise permitted hereunder, and once exercised, the Option Shares)
 
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will not be recognized by the Company unless such transfer is registered under the Act, the Georgia Uniform Securities Act of 2008, as amended, (the “Georgia Act”) and any other applicable state securities laws or effected pursuant to an exemption from such registration which may then be available. If the Option Shares are not registered, any share certificates representing the Option Shares may be stamped with legends restricting transfer thereof in accordance with the Company’s policy with respect to unregistered shares of its Common Stock issued to employees as a result of exercise of options granted under the Plan. The Company may make a notation in its stock transfer records of the aforementioned restrictions on transfers and legends. Employee recognizes and understands that the Option Shares may be restricted securities within the meaning of Rule 144 promulgated under the Act; that the exemption from registration under Rule 144 may not be available under certain circumstances and that Employee’s opportunity to utilize such Rule 144 to sell the Option Shares may be limited or denied. The Company shall be under no obligation to maintain or promote a public trading market for the class of shares for which the option is granted or to make provision for adequate information concerning the Company to be available to the public as contemplated under Rule 144. The Company will be under no obligation to recognize any transfer or sale of any Option Shares pursuant to Rule 144 unless the terms and conditions of Rule 144 are complied with by the Employee. By acceptance hereof, Employee agrees that no permitted disposition of any Option Shares shall be made unless and until (i) there is at the time of exercise of the option in effect a registration statement under the Act, or (ii) Employee shall have notified the Company of a proposed Option disposition and shall have furnished to the Company a detailed statement of the circumstances surrounding such disposition, together with an opinion of counsel acceptable in form and substance to the Company that such disposition will not require registration of the shares so disposed under the Act, the Georgia Act, and any applicable state securities laws. The Company shall be under no obligation to permit such transfer or disposition on its stock transfer books unless counsel for the Company shall concur as to such matters. Employee recognizes and understands that if and for so long as Employee is a designated Section 16 officer of the Company, and for up to six months thereafter, any sales of Option Shares will be subject to Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the regulations promulgated thereunder. Employee also recognizes and understands that any sale of the Option Shares will also be subject to Rule 10b-5 promulgated under the Exchange Act. Employee agrees that any disposition of the Option Shares shall be made only in compliance with the Act, the Exchange Act, and the rules and regulations promulgated thereunder.
10.Tax Matters. The Employee hereby agrees to comply with any applicable federal, state, and local income and employment tax requirements which might arise with regard to a disposition of any Option Shares and to inform the Company of any such disposition which occurs prior to the expiration of (i) two years from the date of grant of the options, and (ii) one year from the date of transfer to him of Option Shares. No later than the date as of which an amount first becomes includable in the gross income of the Employee for federal income tax purposes with respect to the exercise of any option under the Plan, Employee shall pay to the Company, or make arrangements satisfactory to the Committee regarding the payment of, any federal, state, or local taxes of any kind required by law to be withheld with respect to such amount. The obligations of the Company under the Plan are conditional on such payment or arrangements and the Company shall have the right to deduct any such taxes from any payment of any kind otherwise due to Employee.
 
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11.Section 409A. This Agreement is intended to comply with, or otherwise be exempt from, Section 409A of the Code. This Agreement shall be administered, interpreted and construed in a manner consistent with such Code section. Should any provision of this Agreement be found not to comply with, or otherwise be exempt from, the provisions of Section 409A of the Code, it shall be modified and given effect, in the sole discretion of the Committee and without requiring your consent, in such manner as the Committee determines to be necessary or appropriate to comply with, or effectuate an exemption from, Section 409A of the Code.
12.Binding Effect. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators, successors, and permissible assigns.
13.Miscellaneous. This Agreement shall be governed by and construed under the laws of the State of Georgia. If any term or provision hereof shall be held invalid or unenforceable, the remaining terms and provisions hereof shall continue in full force and effect. Any modification to this Agreement shall not be effective unless the same shall be in writing and such writing shall be signed by authorized representatives of both of the parties hereto. The terms of paragraphs 8 and 9 hereof shall survive exercise of the option by Employee and shall attach to the Option Shares. The option contained in this letter shall not confer upon Employee any right to continued employment with the Company, nor shall it interfere in any way with the right of the Company to terminate the employment of Employee at any time. This letter can be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute but one and the same instrument.
[Signatures on Following Page]
 
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Please signify your acceptance of the option and your agreement to be bound by the terms hereof by promptly signing one of the two original letters provided to you and returning the same to Roger Weitkamp, CryoLife, Inc., 1655 Roberts Blvd., Kennesaw, GA 30144.

 	 	 	 	Sincerely,	
 	 	 	
(SEAL)	 	 	 	THE COMPANY:	
 	 	 	
 	 	 	 	CRYOLIFE, INC.	
 	 	 	
 	 	 	 	/s/ Steven G. Anderson	
Attest:	 	 	 	Steven G. Anderson	
 	 	 	 	Chairman	
 	 	 	
/s/    Roger Weitkamp        	 	 	 	 	
 	 	 	
 	 	 	 	EMPLOYEE:	
 	 	 	
 	 	 	 	/s/ James P. Mackin	
 	 	 	 	J. Patrick Mackin	
 	 	 	 	CEO & President	
 
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Exhibit 10.4
Name: J. Patrick Mackin            
CRYOLIFE RESTRICTED STOCK AWARD AGREEMENT
CRYOLIFE, INC. (“CryoLife”) is pleased to grant you the restricted stock award described below (“Stock Award”). This grant is made subject to the further terms and conditions set forth in this Agreement and the terms of the CryoLife, Inc. Second Amended and Restated 2009 Stock Incentive Plan (the “Plan”).

Grant Date:	  	September 2, 2014	
 	 	
Market Price on Grant Date:	  	$10.18 per share	
 	 	
Total Number of Shares of Stock Award:	  	250,000	
Vesting:
Subject to Section 8 of the Plan, this Stock Award vests 100% on September 2, 2017 (the “Vesting Date”)  if  CryoLife achieves aggregate “Adjusted EBITDA” of at least $20.0 million over any four consecutive calendar quarters commencing after the Effective Date and ending prior to the Vesting Date. You must be employed by CryoLife or one of its Subsidiaries or Affiliates on the Vesting Date to be entitled to the vesting of the Stock Award on such date; provided, however, that (A) should your employment terminate by reason of (i) death, (ii) Permanent Disability or (iii) termination by the Company without Cause prior to the Vesting Date, and (B) prior to such termination CryoLife has achieved at least $20 million in Adjusted EBITDA over any four consecutive calendar quarters commencing after the Effective Date and ending prior to such termination, then the vesting of the Stock Award shall accelerate, and the Stock Award shall be vested (a) one-third (83,333 shares), if such termination occurs after September 2, 2015 and on or before September 2, 2016; and (b) two-thirds (166,666 shares), if such termination occurs after September 2, 2016. The vesting of all or any portion of the Stock Award is subject to certification by the Compensation Committee that the Adjusted EBITDA performance goal has been achieved. The Compensation Committee may not exercise discretion to increase the number of shares subject to this Stock Award upon attainment of the performance goal.
“Adjusted EBITDA” is defined on Exhibit A. The terms “Permanent Disability,” “Cause,” “Effective Date,” and “Employment Period”  shall have the meaning ascribed to them in your Employment Agreement executed July 7, 2014.
Additional Terms and Conditions describes withholding of taxes on your award, transferability of your award, where to send notices and other matters.
The Plan contains the detailed terms that govern your Stock Award. If anything in this Agreement or the other attachments is inconsistent with the Plan, the terms of the Plan, as amended from time to time, will control.
The Plan Prospectus Document covering the Stock Award contains important information, including federal income tax consequences.
The 2013 Annual Report of CryoLife contains financial and other background information regarding CryoLife (not attached if you previously received the 2013 Annual Report).
 
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Please sign below to show that you accept this Stock Award after review of the above documents. Keep a copy and return both originals to Roger Weitkamp, CryoLife, Inc., 1655 Roberts Boulevard, NW, Kennesaw, Georgia 30144.

CRYOLIFE, INC.	 	 	 	GRANTEE:	
 	 	 	 	
By:	 	/s/ Steven G. Anderson	 	 	 	/s/ James P. Mackin	
Name:	 	Steven G. Anderson	 	 	 	Name:	 	J. Patrick Mackin	
Its:	 	Chairman	 	 	 	Social Security Number:    360-52-6460	
Date:	 	September 2, 2014	 	 	 	Your Residential Address:	
 	 	 	 	 	 	250 Bergamot Drive	
 	 	 	 	 	 	Medina, MN 55340	
 	 	 	 	 	 	Date:	 	September 2, 2014	
 
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EXHIBIT A
ADJUSTED EBITDA
Adjusted EBITDA, a non-GAAP adjusted performance measure, is calculated as the Company’s consolidated net income before interest, taxes, depreciation and amortization, as further adjusted by:
 
 	•	 	removing the impact of the following:	
 
 	•	 	stock-based compensation	
 
 	•	 	research and development expenses (excluding salaries and related expense)	
 
 	•	 	grant revenue	
 
 	•	 	litigation expense or income	
 
 	•	 	acquisition, license, and other business development expense	
 
 	•	 	integration costs (including any litigation costs or income related to assumed litigation)	
 
 	•	 	other income or expense	
 
 	•	 	including the impact of the change in balances of deferred preservation costs, inventory, and trade receivables on the company’s balance sheets	
As an example of computation of Adjusted EBITDA, the table below provides a reconciliation of 2013 Adjusted EBITDA to the Company’s 2013 net income under GAAP:
2013 Adjusted EBITDA Reconciliation (In Thousands)

2013 Adjusted EBITDA	  	$	28,171	  	
Change in deferred preservation costs	  	 	(657	) 	
Change in inventory	  	 	(786	) 	
Change in trade receivables	  	 	1,897	  	
Amortization expense	  	 	(2,006	) 	
Depreciation expense	  	 	(3,837	) 	
Other than temporary investment impairment	  	 	(3,229	) 	
Other income, net	  	 	26	  	
Interest income	  	 	4	  	
Interest expense	  	 	(71	) 	
Income tax expense, net	  	 	(7,120	) 	
Charges related to acquisitions, licenses, business development or integration and litigation costs	  	 	(1,625	) 	
Grant revenues	  	 	71	  	
Research and development expense, excluding that portion pertaining to salaries and related expenses	  	 	(4,168	) 	
Stock compensation expense, excluding stock compensation expense related to the bonus program itself	  	 	(3,240	) 	
Gain on sale of Medafor investment	  	 	12,742	  	
 	  	 	 	 	
2013 GAAP Net Income	  	$	16,172	  	

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ADDITIONAL TERMS AND CONDITIONS OF YOUR RESTRICTED STOCK AWARD
STOCK AWARD SHARE CERTIFICATES. Certificates representing the shares of Common Stock to be issued pursuant to the Stock Award shall be issued in your name and shall be held by CryoLife until the Stock Award is vested or forfeited as provided herein. Upon vesting of your Stock Award, CryoLife shall promptly deliver to you a certificate or certificates representing the shares as to which the Stock Award has vested free of the restrictions described in the following section.
RIGHTSWITH RESPECTTO STOCK AWARD PRIORTO VESTING. You may not transfer your Stock Award or the shares to be issued hereunder prior to vesting. Once this Stock Award vests, you will receive transferable certificates representing the vested portion. Prior to vesting, you are entitled to all other rights as a shareholder with respect to the shares underlying the Stock Award, including the right to vote such shares and to receive dividends and other distributions, if any, payable with respect to such shares after the Grant Date.
WITHHOLDING. Whenever CryoLife proposes, or is required, to distribute shares to you or pay you dividends with respect to the unvested portion of your Stock Award, CryoLife may either: (a) require you to pay to CryoLife an amount sufficient to satisfy any local, state, Federal and foreign income tax, employment tax and insurance withholding requirements prior to the delivery of any payment or Stock certificate owing to you pursuant to the Stock Award; or, in its discretion, (b) reduce the number of shares to be delivered to you by that number of shares of the Stock Award sufficient to satisfy all or a portion of such tax withholding requirements, based on the fair market value of the Stock Award as determined under the Plan.
NOTICES. All notices delivered pursuant to this Agreement shall be in writing and shall be (i) delivered by hand, (ii) mailed by United States certified mail, return receipt requested, postage prepaid, or (iii) sent by an internationally recognized courier which maintains evidence of delivery and receipt. All notices or other communications shall be directed to the following addresses (or to such other addresses as such parties may designate by notice to the other parties):

To CryoLife:	  	CryoLife, Inc.	
 	  	1655 Roberts Boulevard, NW	
 	  	Kennesaw, Georgia 30144	
 	  	Attention: Secretary	
 	 	
To you:	  	The address set forth in the Agreement.	
MISCELLANEOUS. Failure by you or CryoLife at any time or times to require performance by the other of any provisions in this Restricted Stock Award Agreement (“Agreement”) will not affect the right to enforce those provisions. Any waiver by you or CryoLife of any condition or of any breach of any term or provision in this Agreement, whether by conduct or otherwise, in any one or more instances, shall apply only to that instance and will not be deemed to waive conditions or breaches in the future. If any court of competent jurisdiction holds that any term or provision of this Agreement is invalid or unenforceable, the remaining terms and provisions will continue in full force and effect, and this Agreement shall be deemed to be amended automatically to exclude the offending provision. This Agreement may be executed in multiple copies and each executed copy shall be an original of this Agreement. This Agreement shall be subject to and governed by the laws of the State of Georgia. No change or modification of this Agreement shall be valid unless it is in writing and signed by the party against which enforcement is sought, except where specifically provided to the contrary herein. This Agreement shall be binding upon, and inure to the benefit of, the permitted successors, assigns, heirs, executors and legal representatives of the parties hereto. The headings of each section of this Agreement are for convenience only. This Agreement, together with the Plan, contains the entire Agreement of the parties hereto, and no representation, inducement, promise, or agreement or other similar understanding between the parties not embodied herein shall be of any force or effect, and no party will be liable or bound in any manner for any warranty, representation, or covenant except as specifically set forth herein or in the Plan.
 
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Exhibit 10.6
$20,000,000 CREDIT FACILITY
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of September 26, 2014
by and among
CRYOLIFE, INC. and each of its Subsidiaries signatory hereto,
as the Borrowers,
THE OTHER PERSONS PARTY HERETO THAT ARE
DESIGNATED AS CREDIT PARTIES
GENERAL ELECTRIC CAPITAL CORPORATION
for itself, as a Lender, as Swingline Lender, as L/C Issuer and as the Agent for all Lenders,
THE OTHER FINANCIAL INSTITUTIONS FROM TIME TO TIME PARTY HERETO
as Lenders,
and
GE CAPITAL MARKETS, INC.,
as Sole Lead Arranger and Bookrunner

TABLE OF CONTENTS

ARTICLE I - THE CREDITS	  	 	2	  	
1.1	 	Amounts and Terms of Commitments	  	 	2	  	
1.2	 	Notes	  	 	7	  	
1.3	 	Interest	  	 	7	  	
1.4	 	Loan Accounts	  	 	8	  	
1.5	 	Procedure for Revolving Credit Borrowing	  	 	9	  	
1.6	 	Conversion and Continuation Elections	  	 	10	  	
1.7	 	Optional Prepayments	  	 	11	  	
1.8	 	Mandatory Prepayments of Loans and Commitment Reductions	  	 	11	  	
1.9	 	Fees	  	 	13	  	
1.10	 	Payments by the Borrowers	  	 	14	  	
1.11	 	Payments by the Lenders to the Agent; Settlement	  	 	15	  	
1.12	 	Borrower Representative	  	 	19	  	
1.13	 	Incremental Term Loans	  	 	20	  	
 	 	
ARTICLE II - CONDITIONS PRECEDENT	  	 	22	  	
2.1	 	Conditions to Effectiveness	  	 	22	  	
2.2	 	Conditions to All Borrowings	  	 	23	  	
 	 	
ARTICLE III - REPRESENTATIONS AND WARRANTIES	  	 	24	  	
3.1	 	Corporate Existence and Power	  	 	24	  	
3.2	 	Corporate Authorization; No Contravention	  	 	24	  	
3.3	 	Governmental Authorization	  	 	25	  	
3.4	 	Binding Effect	  	 	25	  	
3.5	 	Litigation	  	 	25	  	
3.6	 	No Default	  	 	25	  	
3.7	 	ERISA Compliance	  	 	26	  	
3.8	 	Use of Proceeds; Margin Regulations	  	 	26	  	
3.9	 	Title to Properties	  	 	26	  	
3.10	 	Taxes	  	 	26	  	
3.11	 	Financial Condition	  	 	27	  	
3.12	 	Environmental Matters	  	 	27	  	
3.13	 	Regulated Entities	  	 	28	  	
3.14	 	Solvency	  	 	28	  	
3.15	 	Labor Relations	  	 	29	  	
3.16	 	Intellectual Property	  	 	29	  	
3.17	 	Subsidiaries	  	 	29	  	
3.18	 	Brokers’ Fees; Transaction Fees	  	 	29	  	
3.19	 	Insurance	  	 	29	  	
3.20	 	Full Disclosure	  	 	29	  	
3.21	 	Foreign Assets Control Regulations and Anti-Money Laundering	  	 	30	  	
3.22	 	FDA Regulatory Compliance	  	 	30	  	
 
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3.23	 	Healthcare Regulatory Compliance	  	 	31	  	
3.24	 	Reimbursement Coding	  	 	33	  	
3.25	 	HIPAA	  	 	33	  	
 	 	
ARTICLE IV - AFFIRMATIVE COVENANTS	  	 	33	  	
4.1	 	Financial Statements	  	 	33	  	
4.2	 	Certificates; Other Information	  	 	34	  	
4.3	 	Notices	  	 	35	  	
4.4	 	Preservation of Corporate Existence, Etc.	  	 	38	  	
4.5	 	Maintenance of Property	  	 	38	  	
4.6	 	Insurance	  	 	38	  	
4.7	 	Payment of Obligations	  	 	39	  	
4.8	 	Compliance with Laws	  	 	40	  	
4.9	 	Inspection of Property and Books and Records	  	 	41	  	
4.10	 	Use of Proceeds	  	 	41	  	
4.11	 	Cash Management Systems	  	 	41	  	
4.12	 	Landlord Agreements	  	 	42	  	
4.13	 	Further Assurances	  	 	42	  	
 	 	
ARTICLE V - NEGATIVE COVENANTS	  	 	44	  	
5.1	 	Limitation on Liens	  	 	44	  	
5.2	 	Disposition of Assets	  	 	45	  	
5.3	 	Consolidations and Mergers	  	 	46	  	
5.4	 	Loans and Investments	  	 	46	  	
5.5	 	Limitation on Indebtedness	  	 	47	  	
5.6	 	Transactions with Affiliates	  	 	48	  	
5.7	 	Management Fees and Compensation	  	 	48	  	
5.8	 	Use of Proceeds	  	 	48	  	
5.9	 	Contingent Obligations	  	 	49	  	
5.10	 	Compliance with ERISA	  	 	50	  	
5.11	 	Restricted Payments	  	 	50	  	
5.12	 	Change in Business	  	 	51	  	
5.13	 	Change in Structure	  	 	51	  	
5.14	 	Accounting Changes, Name and Jurisdiction of Organization	  	 	51	  	
5.15	 	No Negative Pledges	  	 	52	  	
5.16	 	OFAC; Patriot Act	  	 	52	  	
5.17	 	Press Release and Related Matters	  	 	52	  	
5.18	 	Sale-Leasebacks	  	 	53	  	
5.19	 	Hazardous Materials	  	 	53	  	
5.20	 	Financial Advisors	  	 	53	  	
 	 	
ARTICLE VI - FINANCIAL COVENANTS	  	 	53	  	
6.1	 	Leverage Ratio	  	 	53	  	
6.2	 	Minimum Adjusted EBITDA	  	 	53	  	
6.3	 	Minimum Cash on Hand	  	 	53	  	
 
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ARTICLE VII - EVENTS OF DEFAULT	  	 	54	  	
7.1	 	Event of Default	  	 	54	  	
7.2	 	Remedies	  	 	56	  	
7.3	 	Rights Not Exclusive	  	 	57	  	
7.4	 	Cash Collateral for Letters of Credit	  	 	57	  	
 	 	
ARTICLE VIII - THE AGENT	  	 	57	  	
8.1	 	Appointment and Duties	  	 	57	  	
8.2	 	Binding Effect	  	 	58	  	
8.3	 	Use of Discretion	  	 	59	  	
8.4	 	Delegation of Rights and Duties	  	 	59	  	
8.5	 	Reliance and Liability	  	 	60	  	
8.6	 	Agent Individually	  	 	61	  	
8.7	 	Lender Credit Decision	  	 	61	  	
8.8	 	Expenses; Indemnities	  	 	62	  	
8.9	 	Resignation of Agent or L/C Issuer	  	 	63	  	
8.10	 	Release of Collateral or Guarantors	  	 	64	  	
8.11	 	Additional Secured Parties	  	 	64	  	
 	 	
ARTICLE IX - MISCELLANEOUS	  	 	65	  	
9.1	 	Amendments and Waivers	  	 	65	  	
9.2	 	Notices	  	 	66	  	
9.3	 	Electronic Transmissions	  	 	67	  	
9.4	 	No Waiver; Cumulative Remedies	  	 	69	  	
9.5	 	Costs and Expenses	  	 	69	  	
9.6	 	Indemnity	  	 	69	  	
9.7	 	Marshaling; Payments Set Aside	  	 	70	  	
9.8	 	Successors and Assigns	  	 	71	  	
9.9	 	Assignments and Participations; Binding Effect	  	 	71	  	
9.10	 	Confidentiality	  	 	74	  	
9.11	 	Set-off; Sharing of Payments	  	 	75	  	
9.12	 	Counterparts	  	 	76	  	
9.13	 	Severability; Facsimile Signature	  	 	77	  	
9.14	 	Captions	  	 	77	  	
9.15	 	Independence of Provisions	  	 	77	  	
9.16	 	Interpretation	  	 	77	  	
9.17	 	No Third Parties Benefited	  	 	77	  	
9.18	 	Governing Law and Jurisdiction	  	 	77	  	
9.19	 	Waiver of Jury Trial	  	 	78	  	
9.20	 	Entire Agreement; Release; Survival	  	 	78	  	
9.21	 	Patriot Act	  	 	79	  	
9.22	 	Replacement of Lender	  	 	79	  	
9.23	 	Joint and Several	  	 	80	  	
9.24	 	Creditor-Debtor Relationship	  	 	80	  	
9.25	 	Location of Closing	  	 	80	  	
9.26	 	Judgment Currency	  	 	81	  	
9.27	 	Amendment and Restatement	  	 	81	  	
9.28	 	Keepwell	  	 	82	  	
 
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ARTICLE X - TAXES, YIELD PROTECTION AND ILLEGALITY	  	 	82	  	
10.1	 	Taxes	  	 	82	  	
10.2	 	Illegality	  	 	86	  	
10.3	 	Increased Costs and Reduction of Return	  	 	87	  	
10.4	 	Funding Losses	  	 	88	  	
10.5	 	Inability to Determine Rates	  	 	89	  	
10.6	 	Reserves on LIBOR Rate Loans	  	 	89	  	
10.7	 	Certificates of Lenders	  	 	89	  	
 	 	
ARTICLE XI - DEFINITIONS	  	 	90	  	
11.1	 	Defined Terms	  	 	90	  	
11.2	 	Other Interpretive Provisions	  	 	115	  	
11.3	 	Accounting Terms and Principles	  	 	116	  	
11.4	 	Payments	  	 	116	  	
 
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SCHEDULES

Schedule 1.1	  	Commitments	
Schedule 3.2	  	Capitalization	
Schedule 3.5	  	Litigation	
Schedule 3.7	  	ERISA	
Schedule 3.10	  	Tax Audits	
Schedule 3.12	  	Environmental	
Schedule 3.15	  	Labor Relations	
Schedule 3.18	  	Brokers’ and Transaction Fees	
Schedule 3.22	  	FDA Regulatory Compliance	
Schedule 5.1	  	Liens	
Schedule 5.4	  	Investments	
Schedule 5.5	  	Indebtedness	
Schedule 5.9	  	Contingent Obligations	
 	
EXHIBITS	
 	 	
Exhibit 1.1(b)	  	Form of L/C Request	
Exhibit 1.1(c)	  	Form of Swingline Request	
Exhibit 1.6	  	Form of Notice of Conversion/Continuation	
Exhibit 2.1	  	Closing Checklist	
Exhibit 4.2(b)	  	Form of Compliance Certificate	
Exhibit 11.1(a)	  	Form of Assignment	
Exhibit 11.1(b)	  	Form of Revolving Note	
Exhibit 11.1(c)	  	Form of Swingline Note	
Exhibit 11.1(d)	  	Form of Notice of Borrowing	
 
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SECOND AMENDED AND RESTATED CREDIT AGREEMENT
This SECOND AMENDED AND RESTATED CREDIT AGREEMENT (including all exhibits and schedules hereto, as the same may be amended, modified and/or restated from time to time, this “ Agreement ”), dated as of September 26, 2014, by and among CryoLife, Inc., a Florida corporation (“ CryoLife ”), Cardiogenesis Corporation, a Florida corporation (“ Cardiogenesis ”), AuraZyme Pharmaceuticals, Inc., a Florida corporation (“ AuraZyme ”), Hemosphere, Inc., a Delaware corporation (“ Hemosphere ”), CryoLife International, Inc., a Florida corporation (“ International ”, and together with CryoLife, Cardiogenesis, AuraZyme and Hemosphere, the “ Borrowers ”, and each individually a “ Borrower ”), CryoLife, as Borrower Representative, the other Persons party hereto that are designated as a “Credit Party”, General Electric Capital Corporation, a Delaware corporation (in its individual capacity, “ GE Capital ”), as Agent for the several financial institutions from time to time party to this Agreement (collectively, the “ Lenders ” and individually each a “ Lender ”) and for itself as a Lender, as Swingline Lender and as L/C Issuer, and such other Lenders, amends and restates in its entirety the Credit Agreement (as amended to the date hereof, without giving effect to the amendments and restatements set forth herein, the “ Existing Credit Agreement ”), dated as of October 28, 2011, among the Borrowers, the Credit Parties party thereto from time to time, the several financial institutions from time to time party thereto as Lenders and GE Capital, as agent for such lenders.
W I T N E S S E T H:
WHEREAS, pursuant to the Existing Credit Agreement revolving loans were made pursuant to a $20,000,000 revolving loan credit facility (including a letter of credit subfacility and a swingline subfacility);
WHEREAS, the Borrowers have requested that the Existing Credit Agreement be amended and restated in the manner set forth below, and in connection therewith to continue the revolving loan credit facility thereunder (including the continuation of the letter of credit subfacility and the swingline subfacility thereunder), all on the terms and conditions set forth in this Agreement; and
WHEREAS, subject to the terms and conditions set forth in this Agreement, the Lenders have agreed to amend and restate the Existing Credit Agreement in the manner set forth below;
NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained herein, the parties hereto agree that the Existing Credit Agreement is amended and restated as follows:
 
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ARTICLE I - THE CREDITS
1.1 Amounts and Terms of Commitments.
(a) The Revolving Credit. Subject to the terms and conditions of this Agreement and in reliance upon the representations and warranties of the Credit Parties contained herein, each Revolving Lender severally and not jointly agrees to make Loans to the Borrowers (each such Loan, a “ Revolving Loan ”) from time to time on any Business Day during the period from the Effective Date to the Revolving Termination Date, in an aggregate amount not to exceed at any time outstanding the amount set forth opposite such Lender’s name in  Schedule 1.1  under the heading “Commitment” (such amount as the same may be reduced or increased from time to time in accordance with this Agreement, being referred to herein as such Lender’s “ Commitment ”); provided, however, that, after giving effect to any Borrowing of Revolving Loans, the aggregate principal amount of all outstanding Revolving Loans shall not exceed the Maximum Revolving Loan Balance. Subject to the other terms and conditions hereof, amounts borrowed under this subsection 1.1(a)  may be repaid and reborrowed from time to time. The “ Maximum Revolving Loan Balance ” from time to time will be the Aggregate Revolving Loan Commitment then in effect,  less  the sum of (I) the aggregate amount of Letter of Credit Obligations,  plus  (II) the aggregate principal amount of outstanding Swing Loans.
If at any time the then outstanding principal balance of Revolving Loans exceeds the Maximum Revolving Loan Balance, then the Borrowers shall immediately prepay the outstanding Revolving Loans in an amount sufficient to eliminate such excess.
(b) Letters of Credit. (i) Commitment and Conditions. On the terms and subject to the conditions contained herein, each L/C Issuer agrees to Issue, at the request of the Borrower Representative, in accordance with such L/C Issuer’s usual and customary business practices, and for the account of the Borrowers (or, as long as the Borrowers remain responsible for the payment in full of all amounts drawn thereunder and related fees, costs and expenses, for the account of any Subsidiary of a Borrower), Letters of Credit (denominated in Dollars) from time to time on any Business Day during the period from the Initial Closing Date through the earlier of the Revolving Termination Date and 7 days prior to the date specified in clause (a) of the definition of Revolving Termination Date; provided, however, that such L/C Issuer shall not Issue any Letter of Credit upon the occurrence of any of the following or, if after giving effect to such Issuance:
(A) (i) the aggregate outstanding principal balance of Revolving Loans would exceed the Maximum Revolving Loan Balance or (ii) the Letter of Credit Obligations for all Letters of Credit would exceed $2,000,000 (the “ L/C Sublimit ”);
(B) the expiration date of such Letter of Credit (i) is not a Business Day, (ii) is more than one year after the date of Issuance thereof or (iii) is later than 7 days prior to the date specified in clause (a) of the definition of Revolving Termination Date; provided, however, that any Letter of Credit with a term not exceeding one year may provide for its renewal for additional periods not exceeding one year as long as (x) each of each Borrower and such L/C Issuer have the option to prevent such renewal before the expiration of such term or any
 
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such period and (y) neither such L/C Issuer nor any Borrower shall permit any such renewal to extend such expiration date beyond the date set forth in clause (iii) above; or
(C) (i) any fee due in connection with, and on or prior to, such Issuance has not been paid, (ii) such Letter of Credit is requested to be Issued in a form that is not acceptable to such L/C Issuer or (iii) such L/C Issuer shall not have received, each in form and substance reasonably acceptable to it and duly executed by the Borrowers or the Borrower Representative on their behalf (and, if such Letter of Credit is Issued for the account of any Subsidiary of a Borrower, such Person), the documents that such L/C Issuer generally uses in the ordinary course of its business for the Issuance of letters of credit of the type of such Letter of Credit (collectively, the “ L/C Reimbursement Agreement ”).
Furthermore, GE Capital as an L/C Issuer may elect only to Issue Letters of Credit in its own name and may only Issue Letters of Credit to the extent permitted by Requirements of Law, and such Letters of Credit may not be accepted by certain beneficiaries such as insurance companies.
For each Issuance, the applicable L/C Issuer may, but shall not be required to, determine that, or take notice whether, the conditions precedent set forth in  Section 2.2  have been satisfied or waived in connection with the Issuance of any Letter of Credit; provided, however, that no Letter of Credit shall be Issued during the period starting on the first Business Day after the receipt by such L/C Issuer of notice from the Agent or the Required Revolving Lenders that any condition precedent contained in Section 2.2  is not satisfied and ending on the date all such conditions are satisfied or duly waived.
Notwithstanding anything else to the contrary herein, if any Lender is a Non-Funding Lender or Impacted Lender, no L/C Issuer shall be obligated to Issue any Letter of Credit unless (w) the Non-Funding Lender or Impacted Lender has been replaced in accordance with  Section 9.9  or 9.22, (x) the Letter of Credit Obligations of such Non-Funding Lender or Impacted Lender have been cash collateralized in amounts, on terms and conditions and with parties satisfactory to the Agent, (y) the Commitments of the other Lenders have been increased by an amount sufficient to satisfy Agent that all future Letter of Credit Obligations will be covered by all Revolving Lenders that are not Non-Funding Lenders or Impacted Lenders, or (z) the Letter of Credit Obligations of such Non-Funding Lender or Impacted Lender have been reallocated to other Revolving Lenders in a manner consistent with subsection 1.11(e)(ii) .
(ii) Notice of Issuance. The Borrower Representative shall give the relevant L/C Issuer and the Agent a notice of any requested Issuance of any Letter of Credit, which shall be effective only if received by such L/C Issuer and the Agent not later than 11:00 a.m. (New York time) on the third Business Day prior to the date of such requested Issuance. Such notice shall be made in a writing or by Electronic Transmission substantially in the form of  Exhibit 1.1(b)  duly completed or in a writing in any other form acceptable to such L/C Issuer (an “ L/C Request ”) or by telephone if confirmed promptly, but in any event within one Business Day and prior to such Issuance, with such an L/C Request.
 
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(iii) Reporting Obligations of L/C Issuers. Each L/C Issuer agrees to provide the Agent (which, after receipt, the Agent shall provide to each Revolving Lender), in form and substance satisfactory to the Agent, each of the following on the following dates: (A) (i) on or prior to any Issuance of any Letter of Credit by such L/C Issuer, (ii) immediately after any drawing under any such Letter of Credit or (iii) immediately after any payment (or failure to pay when due) by the Borrowers of any related L/C Reimbursement Obligation, notice thereof, which shall contain a reasonably detailed description of such Issuance, drawing or payment; (B) upon the request of the Agent (or any Revolving Lender through the Agent), copies of any Letter of Credit Issued by such L/C Issuer and any related L/C Reimbursement Agreement and such other documents and information as may reasonably be requested by the Agent; and (C) on the first Business Day of each calendar week, a schedule of the Letters of Credit Issued by such L/C Issuer, in form and substance reasonably satisfactory to the Agent, setting forth the Letter of Credit Obligations for such Letters of Credit outstanding on the last Business Day of the previous calendar week.
(iv) Acquisition of Participations. Upon any Issuance of a Letter of Credit in accordance with the terms of this Agreement resulting in any increase in the Letter of Credit Obligations, each Revolving Lender shall be deemed to have acquired, without recourse or warranty, an undivided interest and participation in such Letter of Credit and the related Letter of Credit Obligations in an amount equal to its Commitment Percentage of such Letter of Credit Obligations.
(v) Reimbursement Obligations of the Borrowers. The Borrowers agree to pay to the L/C Issuer of any Letter of Credit each L/C Reimbursement Obligation owing with respect to such Letter of Credit no later than the first Business Day after the Borrowers or the Borrower Representative receive notice from such L/C Issuer that payment has been made under such Letter of Credit or that such L/C Reimbursement Obligation is otherwise due (the “ L/C Reimbursement Date ”) with interest thereon computed as set forth in clause (A) below. In the event that any L/C Issuer incurs any L/C Reimbursement Obligation not repaid by the Borrowers as provided in this clause (v) (or any such payment by the Borrowers is rescinded or set aside for any reason), such L/C Issuer shall promptly notify the Agent of such failure (and, upon receipt of such notice, the Agent shall forward a copy to each Revolving Lender) and, irrespective of whether such notice is given, such L/C Reimbursement Obligation shall be payable on demand by the Borrowers with interest thereon computed (A) from the date on which such L/C Reimbursement Obligation arose to the L/C Reimbursement Date, at the interest rate applicable during such period to Revolving Loans that are Base Rate Loans and (B) thereafter until payment in full, at the interest rate applicable during such period to past due Revolving Loans that are Base Rate Loans.
 
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(vi) Reimbursement Obligations of the Revolving Credit Lenders. Upon receipt of the notice described in clause (v) above from the Agent, each Revolving Lender shall pay to the Agent for the account of such L/C Issuer its Commitment Percentage of such L/C Reimbursement Obligation. By making such payment (other than during the continuation of an Event of Default under  subsection 7.1(f)  or  7.1(g) ), such Lender shall be deemed to have made a Revolving Loan to the Borrowers, which, upon receipt thereof by such L/C Issuer, the Borrowers shall be deemed to have used in whole to repay such L/C Reimbursement Obligation. Any such payment that is not deemed a Revolving Loan shall be deemed a funding by such Lender of its participation in the applicable Letter of Credit and the related Letter of Credit Obligations. Such participation shall not otherwise be required to be funded. Upon receipt by any L/C Issuer of any payment from any Lender pursuant to this clause (vi) with respect to any portion of any L/C Reimbursement Obligation, such L/C Issuer shall promptly pay over to such Lender all payments received by such L/C Issuer after such payment by such Lender with respect to such portion.
(vii) Obligations Absolute. The obligations of the Borrowers and the Revolving Lenders pursuant to clauses (iv), (v) and (vi) above shall be absolute, unconditional and irrevocable and performed strictly in accordance with the terms of this Agreement irrespective of (A) (i) the invalidity or unenforceability of any term or provision in any Letter of Credit, any document transferring or purporting to transfer a Letter of Credit, any Loan Document (including the sufficiency of any such instrument), or any modification to any provision of any of the foregoing, (ii) any document presented under a Letter of Credit being forged, fraudulent, invalid, insufficient or inaccurate in any respect or failing to comply with the terms of such Letter of Credit or (iii) any loss or delay, including in the transmission of any document, (B) the existence of any setoff, claim, abatement, recoupment, defense or other right that any Person (including any Credit Party) may have against the beneficiary of any Letter of Credit or any other Person, whether in connection with any Loan Document or any other Contractual Obligation or transaction, or the existence of any other withholding, abatement or reduction, (C) in the case of the obligations of any Revolving Lender, (i) the failure of any condition precedent set forth in  Section 2.2  to be satisfied (each of which conditions precedent the Revolving Lenders hereby irrevocably waive) or (ii) any adverse change in the condition (financial or otherwise) of any Credit Party and (D) any other act or omission to act or delay of any kind of Agent, any Lender or any other Person or any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this subsection 1.1(b)(vii) , constitute a legal or equitable discharge of any obligation of the Borrowers or any Revolving Lender hereunder.
(c) Swing Loans. (i) Availability. Subject to the terms and conditions of this Agreement and in reliance upon the representations and warranties of the Credit Parties contained herein, the Swingline Lender may, in its sole discretion, make Loans (each a “ Swing Loan ”) available to the Borrowers under the Commitments
 
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from time to time on any Business Day during the period from the Effective Date through the Revolving Termination Date in an aggregate principal amount at any time outstanding not to exceed its Swingline Commitment; provided, however, that the Swingline Lender may not make any Swing Loan (x) to the extent that after giving effect to such Swing Loan, the aggregate principal amount of all Revolving Loans would exceed the Maximum Revolving Loan Balance and (y) during the period commencing on the first Business Day after it receives notice from Agent or the Required Revolving Lenders that one or more of the conditions precedent contained in  Section 2.2  are not satisfied and ending when such conditions are satisfied or duly waived. In connection with the making of any Swing Loan, the Swingline Lender may but shall not be required to determine that, or take notice whether, the conditions precedent set forth in  Section 2.2  have been satisfied or waived. Each Swing Loan shall be a Base Rate Loan and must be repaid as provided herein, but in any event must be repaid in full on the Revolving Termination Date. Within the limits set forth in the first sentence of this clause (i), amounts of Swing Loans repaid may be reborrowed under this clause (i).
(ii) Borrowing Procedures. In order to request a Swing Loan, the Borrower Representative shall give to Agent a notice to be received not later than 2:00 p.m. (New York time) on the day of the proposed Borrowing, which shall be made in a writing or in an Electronic Transmission substantially in the form of  Exhibit 1.1(c)  or in a writing in any other form acceptable to Agent duly completed (a “ Swingline Request ”). In addition, if any Notice of Borrowing of Revolving Loans requests a Borrowing of Base Rate Loans, the Swingline Lender may, notwithstanding anything else to the contrary herein, make a Swing Loan to the Borrowers in an aggregate amount not to exceed such proposed Borrowing, and the aggregate amount of the corresponding proposed Borrowing shall be reduced accordingly by the principal amount of such Swing Loan. Agent shall promptly notify the Swingline Lender of the details of the requested Swing Loan. Upon receipt of such notice and subject to the terms of this Agreement, the Swingline Lender may make a Swing Loan available to the Borrowers by making the proceeds thereof available to Agent and, in turn, Agent shall make such proceeds available to the Borrowers on the date set forth in the relevant Swingline Request or Notice of Borrowing.
(iii) Refinancing Swing Loans.
(1) The Swingline Lender may at any time (and shall no less frequently than once each week) forward a demand to Agent (which Agent shall, upon receipt, forward to each Revolving Lender) that each Revolving Lender pay to Agent, for the account of the Swingline Lender, such Revolving Lender’s Commitment Percentage of the outstanding Swing Loans (as such amount may be increased pursuant to  subsection 1.11(e)(ii) ).
(2) Each Revolving Lender shall pay the amount owing by it to Agent for the account of the Swingline Lender on the Business Day following receipt of the notice or demand therefor. Payments received by Agent after 1:00 p.m. (New York time) may, in Agent’s discretion, be deemed to be received on
 
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the next Business Day. Upon receipt by Agent of such payment (other than during the continuation of any Event of Default under  subsection 7.1(f)  or  7.1(g) ), such Revolving Lender shall be deemed to have made a Revolving Loan to the Borrowers, which, upon receipt of such payment by the Swingline Lender from Agent, the Borrowers shall be deemed to have used in whole to refinance such Swing Loan. In addition, regardless of whether any such demand is made, upon the occurrence of any Event of Default under  subsection 7.1(f)  or  7.1(g) , each Revolving Lender shall be deemed to have acquired, without recourse or warranty, an undivided interest and participation in each Swing Loan in an amount equal to such Lender’s Commitment Percentage of such Swing Loan. If any payment made by any Revolving Lender as a result of any such demand is not deemed a Revolving Loan, such payment shall be deemed a funding by such Lender of such participation. Such participation shall not be otherwise required to be funded. Upon receipt by the Swingline Lender of any payment from any Revolving Lender pursuant to this clause (iii) with respect to any portion of any Swing Loan, the Swingline Lender shall promptly pay over to such Revolving Lender all payments of principal (to the extent received after such payment by such Lender) and interest (to the extent accrued with respect to periods after such payment) on account of such Swing Loan received by the Swingline Lender with respect to such portion.
(iv) Obligation to Fund Absolute. Each Revolving Lender’s obligations pursuant to clause (iii) above shall be absolute, unconditional and irrevocable and shall be performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever, including (A) the existence of any setoff, claim, abatement, recoupment, defense or other right that such Lender, any Affiliate thereof or any other Person may have against Swingline Lender, the Agent, any other Lender or L/C Issuer or any other Person, (B) the failure of any condition precedent set forth in  Section 2.2  to be satisfied or the failure of the Borrower Representative to deliver a Notice of Borrowing (each of which requirements the Revolving Lenders hereby irrevocably waive) and (C) any adverse change in the condition (financial or otherwise) of any Credit Party.
1.2 Notes. The Revolving Loans made by each Revolving Lender and Swing Loans made by the Swingline Lender shall be evidenced by this Agreement and, if requested by such Lender or Swingline Lender, a Revolving Note or Swingline Note, as applicable, payable to the order of such Lender or Swingline Lender in an amount equal to such Lender’s Commitment or the Swingline Commitment, as applicable.
1.3 Interest.
(a) Subject to subsections 1.3(c) and 1.3(d), each Loan shall bear interest on the outstanding principal amount thereof from the date when made at a rate per annum equal to the LIBOR or the Base Rate, as the case may be,  plus  the Applicable Margin;  provided ,  however , Swing Loans shall be Base Rate Loans. Each determination of an interest rate by the Agent shall be conclusive and binding on each Borrower and the Lenders in the absence of demonstrable error. All computations of fees and interest
 
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payable under this Agreement shall be made on the basis of a 360-day year and actual days elapsed. Interest and fees shall accrue during each period during which interest or such fees are computed from the first day thereof to the last day thereof.
(b) Interest on each Loan shall be paid in arrears on each Interest Payment Date. Interest shall also be paid on the date of any payment or prepayment of Loans in full.
(c) At the election of the Agent or the Required Lenders while any Event of Default exists (or automatically while any Event of Default under  subsection 7.1(f)  or  7.1(g)  exists), the Borrowers shall pay interest (after as well as before entry of judgment thereon to the extent permitted by law) on the Obligations under the Loan Documents from and after the date of occurrence of such Event of Default, at a rate per annum which is determined by adding two percent (2.0%) per annum to the Applicable Margin then in effect for such Loans (plus the LIBOR or Base Rate, as the case may be) and, in the case of Obligations under the Loan Documents not subject to an Applicable Margin (other than the fees described in  subsection 1.9(c) ), at a rate per annum equal to the rate per annum applicable to Revolving Loans which are Base Rate Loans (including the Applicable Margin with respect thereto) plus two percent (2.0%). All such interest shall be payable on demand of the Agent or the Required Lenders.
(d) Anything herein to the contrary notwithstanding, the obligations of the Borrowers hereunder shall be subject to the limitation that payments of interest shall not be required, for any period for which interest is computed hereunder, to the extent (but only to the extent) that contracting for or receiving such payment by the respective Lender would be contrary to the provisions of any law applicable to such Lender limiting the highest rate of interest which may be lawfully contracted for, charged or received by such Lender, and in such event the Borrowers shall pay such Lender interest at the highest rate permitted by applicable law (“ Maximum Lawful Rate ”);  provided ,  however , that if at any time thereafter the rate of interest payable hereunder is less than the Maximum Lawful Rate, Borrowers shall continue to pay interest hereunder at the Maximum Lawful Rate until such time as the total interest received by Agent, on behalf of Lenders, is equal to the total interest that would have been received had the interest payable hereunder been (but for the operation of this paragraph) the interest rate payable since the Initial Closing Date as otherwise provided in this Agreement.
1.4 Loan Accounts.
(a) The Agent, on behalf of the Lenders, shall record on its books and records the amount of each Loan made, the interest rate applicable, all payments of principal and interest thereon and the principal balance thereof from time to time outstanding. The Agent shall deliver to the Borrower Representative on a monthly basis a loan statement setting forth such record for the immediately preceding month. Such record shall, absent manifest error, be conclusive evidence of the amount of the Loans made by the Lenders to the Borrowers and the interest and payments thereon. Any failure to so record or any error in doing so, or any failure to deliver such loan statement shall not, however, limit or otherwise affect the obligation of the Borrowers hereunder (and under any Note) to pay any amount owing with respect to the Loans or provide the basis for any claim against the Agent.
 
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(b) The Agent, acting as agent of the Borrowers solely for tax purposes and solely with respect to the actions described in this  subsection 1.4(b) , shall establish and maintain at its address referred to in  Section 9.2  (or at such other address as the Agent may notify the Borrower Representative) (A) a record of ownership (the “ Register ”) in which the Agent agrees to register by book entry the interests (including any rights to receive payment hereunder) of the Agent, each Lender and each L/C Issuer in the Revolving Loans, Swing Loans and Letter of Credit Obligations, each of their obligations under this Agreement to participate in each Loan, Letter of Credit and L/C Reimbursement Obligations, and any assignment of any such interest, obligation or right and (B) accounts in the Register in accordance with its usual practice in which it shall record (1) the names and addresses of the Lenders and the L/C Issuers (and each change thereto pursuant to  Sections 9.9  and  9.22 ), (2) the Commitments of each Lender, (3) the amount of each Loan and each funding of any participation described in clause (A) above, for LIBOR Rate Loans, the Interest Period applicable thereto, (4) the amount of any principal or interest due and payable or paid, (5) the amount of the L/C Reimbursement Obligations due and payable or paid in respect of Letters of Credit and (6) any other payment received by the Agent from a Borrower and its application to the Obligations.
(c) Notwithstanding anything to the contrary contained in this Agreement, the Loans (including any Notes evidencing such Loans and the corresponding obligations to participate in Letter of Credit Obligations and Swing Loans) and the L/C Reimbursement Obligations are registered obligations, the right, title and interest of the Lenders and the L/C Issuers and their assignees in and to such Loans or L/C Reimbursement Obligations, as the case may be, shall be transferable only upon notation of such transfer in the Register and no assignment thereof shall be effective until recorded therein. This  Section 1.4  and Section 9.9  shall be construed so that the Loans and L/C Reimbursement Obligations are at all times maintained in “registered form” within the meaning of Sections 163(f), 871(h)(2) and 881(c)(2) of the Code.
(d) The Credit Parties, the Agent, the Lenders and the L/C Issuers shall treat each Person whose name is recorded in the Register as a Lender or L/C Issuer, as applicable, for all purposes of this Agreement. Information contained in the Register with respect to any Lender or any L/C Issuer shall be available for access by the Borrowers, the Borrower Representative, the Agent, such Lender or such L/C Issuer at any reasonable time and from time to time upon reasonable prior notice. No Lender or L/C Issuer shall, in such capacity, have access to or be otherwise permitted to review any information in the Register other than information with respect to such Lender or L/C Issuer unless otherwise agreed by the Agent.
1.5 Procedure for Revolving Credit Borrowing.
(a) Each Borrowing of a Revolving Loan shall be made upon the Borrower Representative’s irrevocable (subject to  Section 10.5  hereof) written notice
 
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delivered to the Agent in the form of a Notice of Borrowing, which notice must be received by the Agent prior to 1:00 p.m. (New York time) on the requested Borrowing date in the case of each Base Rate Loan and (ii) on the day which is three (3) Business Days prior to the requested Borrowing date in the case of each LIBOR Rate Loan. Such Notice of Borrowing shall specify:
(i) the amount of the Borrowing (which shall be in an aggregate minimum principal amount of $100,000 and multiples of $50,000 in excess thereof);
(ii) the requested Borrowing date, which shall be a Business Day;
(iii) whether the Borrowing is to be comprised of LIBOR Rate Loans or Base Rate Loans; and
(iv) if the Borrowing is to be LIBOR Rate Loans, the Interest Period applicable to such Loans.
(b) Upon receipt of a Notice of Borrowing, the Agent will promptly notify each Revolving Lender of such Notice of Borrowing and of the amount of such Lender’s Commitment Percentage of the Borrowing.
(c) Unless the Agent is otherwise directed in writing by the Borrower Representative, the proceeds of each requested Borrowing after the Initial Closing Date will be made available to the Borrowers by the Agent by wire transfer of such amount to the Borrowers pursuant to the wire transfer instructions specified on the signature page hereto.
1.6 Conversion and Continuation Elections.
(a) Borrowers shall have the option to (i) request that any Loan (other than Swing Loans) be made as a LIBOR Rate Loan, (ii) convert at any time all or any part of outstanding Loans (other than Swing Loans) from Base Rate Loans to LIBOR Rate Loans, (iii) convert any LIBOR Rate Loan to a Base Rate Loan, subject to  Section 10.4  if such conversion is made prior to the expiration of the Interest Period applicable thereto, or (iv) continue all or any portion of any Loan as a LIBOR Rate Loan upon the expiration of the applicable Interest Period. Any Loan or group of Loans having the same proposed Interest Period to be made or continued as, or converted into, a LIBOR Rate Loan must be in a minimum amount of $1,000,000 and integral multiples of $500,000 in excess of such amount. Any such election must be made by Borrower Representative by 1:00 p.m. (New York time) on the 3rd Business Day prior to (1) the date of any proposed Revolving Loan which is to bear interest at LIBOR, (2) the end of each Interest Period with respect to any LIBOR Rate Loans to be continued as such, or (3) the date on which Borrowers wish to convert any Base Rate Loan to a LIBOR Rate Loan for an Interest Period designated by Borrower Representative in such election. If no election is received with respect to a LIBOR Rate Loan by 1:00 p.m. (New York time) on the 3rd Business Day prior to the end of the Interest Period with respect thereto, that
 
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LIBOR Rate Loan shall be converted to a Base Rate Loan at the end of its Interest Period. Borrower Representative must make such election by notice to Agent in writing, by fax or overnight courier (or by telephone, to be confirmed in writing on such day). In the case of any conversion or continuation, such election must be made pursuant to a written notice (a “ Notice of Conversion/Continuation ”) in the form of  Exhibit 1.6 . No Loan shall be made, converted into or continued as a LIBOR Rate Loan, if an Event of Default has occurred and is continuing and Agent or Required Lenders have determined not to make or continue any Loan as a LIBOR Rate Loan as a result thereof.
(b) Upon receipt of a Notice of Conversion/Continuation, the Agent will promptly notify each Lender thereof. In addition, the Agent will, with reasonable promptness, notify the Borrower Representative and the Lenders of each determination of LIBOR;  provided  that any failure to do so shall not relieve any Borrower of any liability hereunder or provide the basis for any claim against the Agent. All conversions and continuations shall be made pro rata according to the respective outstanding principal amounts of the Loans held by each Lender with respect to which the notice was given.
(c) Notwithstanding any other provision contained in this Agreement, after giving effect to any Borrowing, or to any continuation or conversion of any Loans, there shall not be more than seven (7) different Interest Periods in effect.
1.7 Optional Prepayments.
(a) The Borrowers may at any time upon at least two (2) Business Days’ prior written notice by Borrower Representative to the Agent, prepay the Loans in whole or in part in an amount greater than or equal to $100,000, in each instance, without penalty or premium except as provided in  Section 10.4 .
(b) The notice of any prepayment shall not thereafter be revocable by the Borrowers or Borrower Representative and the Agent will promptly notify each Lender thereof and of such Lender’s Commitment Percentage of such prepayment. The payment amount specified in such notice shall be due and payable on the date specified therein. Together with each prepayment under this  Section 1.7 , the Borrowers shall pay any amounts required pursuant to  Section 10.4 .
1.8 Mandatory Prepayments of Loans and Commitment Reductions.
(a) Revolving Loan. The Borrowers shall repay to the Lenders in full on the date specified in clause (a) of the definition of “Revolving Termination Date” the aggregate principal amount of the Revolving Loans and Swing Loans outstanding on the Revolving Termination Date. The Agent shall calculate, on the first Business Day of each month and more frequently in its sole discretion, the Dollar Equivalent of the Letter of Credit Obligations and Maximum Revolving Loan Balance. If after giving effect to such calculation and solely as a result of changes in the Spot Exchange Rate, the Dollar Equivalent of the outstanding principal balance of Revolving Loans exceeds the Maximum Revolving Loan Balance or the Dollar Equivalent of the Letter of Credit Obligations exceed the L/C Sublimit, then Borrowers shall, in either case, immediately prepay the amount of such excess and/or cash collateralize Letter of Credit Obligations in
 
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amounts, on terms and conditions and with parties satisfactory to the Agent. Such prepayment shall be applied first to any Base Rate Loans then outstanding and then to outstanding LIBOR Rate Loans in order of the shortest Interest Periods remaining, and shall be accompanied by any amounts required pursuant to  Section 10.4  hereof.
(b) Asset Dispositions. If a Borrower or any Subsidiaries of a Borrower shall at any time or from time to time after an Event of Default has occurred and is continuing:
(i) make or agree to make a Disposition; or
(ii) suffer an Event of Loss;
and the aggregate amount of the Net Proceeds received by the Borrowers and their Subsidiaries in connection with such Disposition or Event of Loss and all other Dispositions and Events of Loss occurring during the fiscal year exceeds $500,000, then (A) the Borrower Representative shall promptly notify the Agent of such proposed Disposition or Event of Loss (including the amount of the estimated Net Proceeds to be received by a Borrower and/or such Subsidiary in respect thereof) and (B) promptly upon receipt by a Borrower and/or such Subsidiary of the Net Proceeds of such Disposition or Event of Loss, the Borrowers shall deliver, or cause to be delivered, such excess Net Proceeds to the Agent for distribution to the Lenders as a prepayment of the Loans, which prepayment shall be applied in accordance with  subsection 1.8(d)  hereof. Notwithstanding the foregoing and provided no Default or Event of Default has occurred and is continuing, such prepayment shall not be required to the extent a Borrower or such Subsidiary reinvests the Net Proceeds of such Disposition or Event of Loss in productive assets (other than Inventory) of a kind then used or usable in the business of a Borrower or such Subsidiary, within one hundred eighty (180) days after the date of such Disposition or Event of Loss or enters into a binding commitment thereof within said one hundred eighty (180) day period and subsequently makes such reinvestment;  provided  that Borrower Representative notifies Agent of such Borrower’s or such Subsidiary’s intent to reinvest and of the completion of such reinvestment at the time such proceeds are received and when such reinvestment occurs, respectively. Pending such reinvestment, the Net Proceeds shall be delivered to the Agent, for distribution first, to the Swingline Lender as a prepayment of Swing Loans (to the extent of Swing Loans outstanding), but not as a permanent reduction of the Swingline Commitment, and thereafter to the Revolving Lenders, as a prepayment of the Revolving Loans (to the extent of Revolving Loans then outstanding), but not as a permanent reduction of the Commitments.
(c) Issuance of Securities. Immediately upon the receipt by any Credit Party or any Subsidiary of any Credit Party of the Net Issuance Proceeds of the issuance of Stock or Stock Equivalents (including any capital contribution) or debt securities (other than Net Issuance Proceeds from the issuance of (i) debt securities in respect of Indebtedness permitted hereunder and (ii) Excluded Equity Issuances), at any time that an Event of Default has occurred and is continuing, the Borrowers shall deliver, or cause to be delivered, to the Agent an amount equal to such Net Issuance Proceeds, for application to the Loans in accordance with  subsection 1.8(d) .
 
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(d) Application of Prepayments. Subject to subsection 1.10(c), any prepayments pursuant to subsection 1.8(b) (other than prepayments of Swing Loans and Revolving Loans as set forth therein) or  1.8(c)  shall be applied first to prepay outstanding Swing Loans, second to prepay outstanding Revolving Loans, without permanent reduction of the Aggregate Revolving Loan Commitment, and third to cash collateralize L/C Reimbursement Obligations to the extent not then due and payable. To the extent permitted by the foregoing sentence, amounts prepaid shall be applied first to any Base Rate Loans then outstanding and then to outstanding LIBOR Rate Loans with the shortest Interest Periods remaining. Together with each prepayment under this Section 1.8 , the Borrowers shall pay any amounts required pursuant to  Section 10.4  hereof
(e) No Implied Consent. Provisions contained in this Section 1.8 for the application of proceeds of certain transactions shall not be deemed to constitute consent of the Lenders to transactions that are not otherwise permitted by the terms hereof or the other Loan Documents.
1.9 Fees.
(a) Fees. The Borrowers shall pay to the Agent for its account the fees set forth in the Fee Letter in the amounts and on the dates set forth therein, which fees shall be fully earned and non-refundable when paid.
(b) Unused Commitment Fee. The Borrowers shall pay to the Agent, for the ratable benefit of the Revolving Lenders, a fee (the “ Unused Commitment Fee ”) in an amount equal to
(i) the Aggregate Revolving Loan Commitment, less
(ii) the sum of (x) the average daily balance of all Revolving Loans outstanding plus (y) the average daily amount of Letter of Credit Obligations, in each case, during the preceding month,
multiplied by (0.50%) per annum. Such fee shall be payable quarterly in arrears on the last day of each calendar quarter following the Effective Date. The Unused Commitment Fee provided in this  subsection 1.9(b)  shall accrue at all times from and after the Effective Date.
(c) Letter of Credit Fee. The Borrowers agree to pay to Agent for the ratable benefit of the Revolving Lenders, as compensation to such Lenders for Letter of Credit Obligations incurred hereunder, (i) without duplication of costs and expenses otherwise payable to Agent or Lenders hereunder or fees otherwise paid by the Borrowers, all reasonable costs and expenses incurred by Agent or any Lender on account of such Letter of Credit Obligations, and (ii) for each calendar quarter during which any Letter of Credit Obligation shall remain outstanding, a fee (the “ Letter of Credit Fee ”) in an amount equal to the product of the average daily undrawn face amount
 
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of all Letters of Credit issued, guaranteed or supported by risk participation agreements multiplied by a per annum rate equal to the Applicable Margin with respect to Revolving Loans which are LIBOR Rate Loans;  provided ,  however , at Agent’s or Required Revolving Lenders’ option, while an Event of Default exists (or automatically while an Event of Default under subsection 7.1(f)  or  7.1(g)  exists), such rate shall be increased by two percent (2.00%) per annum. Such fee shall be paid to Agent for the benefit of the Revolving Lenders in arrears, on the last day of each calendar quarter and on the Revolving Termination Date. In addition, the Borrowers shall pay to Agent for the benefit of any L/C Issuer, on demand, such reasonable fees, without duplication of fees otherwise payable hereunder (including all per annum fees), charges and expenses of such L/C Issuer in respect of the issuance, negotiation, acceptance, amendment, transfer and payment of such Letter of Credit or otherwise payable pursuant to the application and related documentation under which such Letter of Credit is issued.
1.10 Payments by the Borrowers.
(a) All payments (including prepayments) to be made by each Credit Party on account of principal, interest, fees and other amounts required hereunder shall be made without set-off, recoupment, counterclaim or deduction of any kind, shall, except as otherwise expressly provided herein, be made to the Agent (for the ratable account of the Persons entitled thereto) at the address for payment specified in the signature page hereof in relation to the Agent (or such other address as the Agent may from time to time specify in accordance with  Section 9.2 ), and shall be made in Dollars and in immediately available funds, no later than 2:00 p.m. (New York time) on the date due. Any payment which is received by the Agent later than 2:00 p.m. (New York time) shall be deemed to have been received on the immediately succeeding Business Day and any applicable interest or fee shall continue to accrue. Each Borrower and each other Credit Party hereby irrevocably waives the right to direct the application during the continuance of an Event of Default of any and all payments in respect of any Obligation and any proceeds of Collateral. Each Borrower hereby authorizes the Agent and each Lender to make a Revolving Loan (which shall be a Base Rate Loan and which may be a Swing Loan) to pay (i) interest, principal (including Swing Loans), agent fees, Unused Commitment Fees and Letter of Credit Fees, in each instance, on the date due, or (ii) after five (5) days prior notice to the Borrower Representative, other fees, costs or expenses payable by a Borrower or any of its Subsidiaries hereunder or under the other Loan Documents.
(b) Subject to the provisions set forth in the definition of “Interest Period” herein, if any payment hereunder shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of interest or fees, as the case may be.
(c) During the continuance of an Event of Default, the Agent shall, unless otherwise directed in writing by Required Lenders, apply any and all payments in respect of any Obligation in accordance with clauses first through sixth below. Notwithstanding any provision herein to the contrary, all amounts collected or received by the Agent after any or all of the Obligations have been accelerated (so long as such
 
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acceleration has not been rescinded) and all proceeds received by the Agent as a result of the exercise of its remedies under the Collateral Documents after the occurrence and during the continuance of an Event of Default shall be applied as follows:
first, to payment of costs and expenses, including Attorney Costs, of the Agent payable or reimbursable by the Credit Parties under the Loan Documents;
second, to payment of Attorney Costs of Lenders payable or reimbursable by the Borrowers under this Agreement;
third, to payment of all accrued unpaid interest on the Obligations and fees owed to the Agent, Lenders and L/C Issuers
fourth, to payment of principal of the Obligations including, without limitation, L/C Reimbursement Obligations then due and payable, any Obligations under any Secured Rate Contract and cash collateralization of L/C Reimbursement Obligations to the extent not then due and payable;
fifth, to payment of any other amounts owing constituting Obligations; and
sixth, any remainder shall be for the account of and paid to whoever may be lawfully entitled thereto.
In carrying out the foregoing, (i) amounts received shall be applied in the numerical order provided until exhausted prior to the application to the next succeeding category, (ii) each of the Lenders or other Persons entitled to payment shall receive an amount equal to its pro rata share of amounts available to be applied pursuant to clauses third, fourth and fifth above, and (iii) no payments by a Guarantor and no proceeds of Collateral of a Guarantor shall be applied to Obligations the guaranty of which by such Guarantor constitute Excluded Rate Contract Obligations of such Guarantor.
1.11 Payments by the Lenders to the Agent; Settlement.
(a) Agent may, on behalf of Lenders, disburse funds to the Borrowers for Loans requested. Each Lender shall reimburse Agent on demand for all funds disbursed on its behalf by Agent, or if Agent so requests, each Lender will remit to Agent its Commitment Percentage of any Loan before Agent disburses same to the Borrowers. If Agent elects to require that each Lender make funds available to Agent prior to disbursement by Agent to the Borrowers, Agent shall advise each Lender by telephone or fax of the amount of such Lender’s Commitment Percentage of the Loan requested by the Borrower Representative no later than 1:00 p.m. (New York time) on the scheduled Borrowing date applicable thereto, and each such Lender shall pay Agent such Lender’s Commitment Percentage of such requested Loan, in same day funds, by wire transfer to Agent’s account on such scheduled Borrowing date. If any Lender fails to pay its Commitment Percentage within one (1) Business Day after Agent’s demand, Agent shall promptly notify the Borrower Representative, and the Borrowers shall immediately repay
 
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such amount to Agent. Any repayment required pursuant to this subsection 1.11(a) shall be without premium or penalty. Nothing in this  subsection 1.11(a)  or elsewhere in this Agreement or the other Loan Documents, including the remaining provisions of Section 1.11 , shall be deemed to require Agent to advance funds on behalf of any Lender or to relieve any Lender from its obligation to fulfill its Commitments hereunder or to prejudice any rights that Agent or Borrowers may have against any Lender as a result of any default by such Lender hereunder.
(b) At least once each calendar week or more frequently at Agent’s election (each, a “Settlement Date ”), Agent shall advise each Lender by telephone or fax of the amount of such Lender’s Commitment Percentage of principal, interest and fees paid for the benefit of Lenders with respect to each applicable Loan. Provided that each Lender has funded all payments required to be made by it and funded all purchases of participations required to be funded by it under this Agreement and the other Loan Documents as of such Settlement Date, Agent shall pay to each Lender such Lender’s Commitment Percentage of principal, interest and fees paid by the Borrowers since the previous Settlement Date for the benefit of such Lender on the Loans held by it. Such payments shall be made by wire transfer to such Lender) not later than 2:00 p.m. (New York time) on the next Business Day following each Settlement Date.
(c) Availability of Lender’s Commitment Percentage. Agent may assume that each Revolving Lender will make its Commitment Percentage of each Revolving Loan available to Agent on each Borrowing date. If such Commitment Percentage is not, in fact, paid to Agent by such Revolving Lender when due, Agent will be entitled to recover such amount on demand from such Revolving Lender without setoff, counterclaim or deduction of any kind. If any Revolving Lender fails to pay the amount of its Commitment Percentage forthwith upon Agent’s demand, Agent shall promptly notify the Borrower Representative and the Borrowers shall immediately repay such amount to Agent. Nothing in this  subsection 1.11(c)  or elsewhere in this Agreement or the other Loan Documents shall be deemed to require Agent to advance funds on behalf of any Revolving Lender or to relieve any Revolving Lender from its obligation to fulfill its Commitments hereunder or to prejudice any rights that the Borrowers may have against any Revolving Lender as a result of any default by such Revolving Lender hereunder. To the extent that Agent advances funds to the Borrowers on behalf of any Revolving Lender and is not reimbursed therefor on the same Business Day as such advance is made, Agent shall be entitled to retain for its account all interest accrued on such advance until reimbursed by the applicable Revolving Lender.
(d) Return of Payments.
(i) If Agent pays an amount to a Lender under this Agreement in the belief or expectation that a related payment has been or will be received by Agent from the Borrowers and such related payment is not received by Agent, then Agent will be entitled to recover such amount from such Lender on demand without setoff, counterclaim or deduction of any kind.
 
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(ii) If Agent determines at any time that any amount received by Agent under this Agreement must be returned to any Credit Party or paid to any other Person pursuant to any insolvency law or otherwise, then, notwithstanding any other term or condition of this Agreement or any other Loan Document, Agent will not be required to distribute any portion thereof to any Lender. In addition, each Lender will repay to Agent on demand any portion of such amount that Agent has distributed to such Lender, together with interest at such rate, if any, as Agent is required to pay to any Borrower or such other Person, without setoff, counterclaim or deduction of any kind.
(e) Non-Funding Lenders.
(i) Responsibility. The failure of any Non-Funding Lender to make any Revolving Loan or any payment required by it hereunder, or to fund any purchase of any participation to be made or funded by it (including, without limitation, with respect to any Letter of Credit or Swing Loan) on the date specified therefor shall not relieve any other Lender (each such other Revolving Lender, an “ Other Lender ”) of its obligations to make such loan or fund the purchase of any such participation on such date, but neither any Other Lender nor Agent shall be responsible for the failure of any Non-Funding Lender to make a loan, fund the purchase of a participation or make any other payment required hereunder. Notwithstanding anything set forth herein to the contrary, a Non-Funding Lender shall not have any voting or consent rights under or with respect to any Loan Document or constitute a “Lender” or a “Revolving Lender” (or be included in the calculation of “Required Lenders” hereunder) for any voting or consent rights under or with respect to any Loan Document.
(f) (ii) Reallocation. If any Revolving Lender is a Non-Funding Lender, all or a portion of such Non-Funding Lender’s Letter of Credit Obligations (unless such Lender is the L/C Issuer that Issued such Letter of Credit) and reimbursement obligations with respect to Swing Loans shall, at Agent’s election at any time or upon any L/C Issuer’s or Swingline Lender’s, as applicable, written request delivered to Agent (whether before or after the occurrence of any Default or Event of Default), be reallocated to and assumed by the Revolving Lenders that are not Non-Funding Lenders or Impacted Lenders pro rata in accordance with their Commitment Percentages of the Aggregate Revolving Loan Commitment (calculated as if the Non-Funding Lender’s Commitment Percentage was reduced to zero and each other Revolving Lender’s Commitment Percentage had been increased proportionately), provided that no Revolving Lender shall be reallocated any such amounts or be required to fund any amounts that would cause the sum of its outstanding Revolving Loans, outstanding Letter of Credit Obligations, amounts of its participations in Swing Loans and its pro rata share of unparticipated amounts in Swing Loans to exceed its Revolving Loan Commitment.
(iii) Voting Rights. Notwithstanding anything set forth herein to the contrary, including Section 9.1, a Non-Funding Lender shall not have any voting or consent rights under or with respect to any Loan Document or constitute a “Lender” or a “Revolving Lender” (or be, or have its Loans and Commitments, included in the determination of “Required Lenders”, “Required Revolving Lenders” or “Lenders
 
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directly affected” pursuant to Section 9.1) for any voting or consent rights under or with respect to any Loan Document, provided that (A) the Commitment of a Non-Funding Lender may not be increased, extended or reinstated, (B) the principal of a Non-Funding Lender’s Loans may not be reduced or forgiven, and (C) the interest rate applicable to Obligations owing to a Non-Funding Lender may not be reduced in such a manner that by its terms affects such Non-Funding Lender more adversely than other Lenders, in each case, without the consent of such Non-Funding Lender. Moreover, for the purposes of determining Required Lenders, Required Revolving Lenders, the Loans, Letter of Credit Obligations, and Commitments held by Non-Funding Lenders shall be excluded from the total Loans and Commitments outstanding.
(g) (iv) Borrower Payments to a Non-Funding Lender. Agent shall be authorized to use all payments received by Agent for the benefit of any Non-Funding Lender pursuant to this Agreement to pay in full the Aggregate Excess Funding Amount to the appropriate Secured Parties. Agent shall be entitled to hold as cash collateral in a non-interest bearing account up to an amount equal to such Non-Funding Lender’s pro rata share, without giving effect to any reallocation pursuant to  subsection 1.11(e)(ii) , of all Letter of Credit Obligations until the Facility Termination Date. Upon any such unfunded obligations owing by a Non-Funding Lender becoming due and payable, Agent shall be authorized to use such cash collateral to make such payment on behalf of such Non-Funding Lender. With respect to such Non-Funding Lender’s failure to fund Revolving Loans or purchase participations in Letters of Credit or Letter of Credit Obligations, any amounts applied by Agent to satisfy such funding shortfalls shall be deemed to constitute a Revolving Loan or amount of the participation required to be funded and, if necessary to effectuate the foregoing, the other Revolving Lenders shall be deemed to have sold, and such Non-Funding Lender shall be deemed to have purchased, Revolving Loans or Letter of Credit participation interests from the other Revolving Lenders until such time as the aggregate amount of the Revolving Loans and participations in Letters of Credit and Letter of Credit Obligations are held by the Revolving Lenders in accordance with their Commitment Percentages of the Aggregate Revolving Loan Commitment. Any amounts owing by a Non-Funding Lender to Agent which are not paid when due shall accrue interest at the interest rate applicable during such period to Revolving Loans that are Base Rate Loans. In the event that Agent is holding cash collateral of a Non-Funding Lender that cures pursuant to clause (v) below or ceases to be a Non-Funding Lender pursuant to the definition of Non-Funding Lender, Agent shall return the unused portion of such cash collateral to such Lender. The “ Aggregate Excess Funding Amount ” of a Non-Funding Lender shall be the aggregate amount of (A) all unpaid obligations owing by such Lender to Agent, L/C Issuers, Swingline Lender and other Lenders under the Loan Documents, including such Lender’s pro rata share of all Revolving Loans, Letter of Credit Obligations and Swing Loans, plus, without duplication, (B) all amounts of such Non-Funding Lender’s Letter of Credit Obligations and reimbursement obligations with respect to Swing Loans reallocated to other Lenders pursuant to  subsection 1.11(e)(ii) .
(v) Cure. A Lender may cure its status as a Non-Funding Lender under clause (a) of the definition of Non-Funding Lender if such (A) Lender fully pays to Agent, on behalf of the applicable Secured Parties, the Aggregate Excess Funding
 
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Amount, plus all interest due thereon. Any such cure shall not relieve any Lender from liability for breaching its contractual obligations hereunder and (B) timely funds the next Revolving Loan required to be funded by such Lender or makes the next reimbursement required to be made by such Lender.
(vi) Fees. A Lender that is a Non-Funding Lender pursuant to clause (a) of the definition of Non-Funding Lender shall not earn and shall not be entitled to receive, and the Borrowers shall not be required to pay, such Lender’s portion of the Unused Commitment Fee during the time such Lender is a Non-Funding Lender pursuant to clause (a) thereof. In the event that any reallocation of Letter of Credit Obligations occurs pursuant to  subsection 1.11(e)(ii) , during the period of time that such reallocation remains in effect, the Letter of Credit Fee payable with respect to such reallocated portion shall be payable to (A) all Revolving Lenders based on their pro rata share of such reallocation or (B) to the L/C Issuer for any remaining portion not reallocated to any other Revolving Lenders.
(h) Procedures. Agent is hereby authorized by each Credit Party and each other Secured Party to establish procedures (and to amend such procedures from time to time) to facilitate administration and servicing of the Loans and other matters incidental thereto. Without limiting the generality of the foregoing, Agent is hereby authorized to establish procedures to make available or deliver, or to accept, notices, documents and similar items on, by posting to or submitting and/or completion on, E-Systems. The posting, completion and/or submission by any Credit Party of any communication pursuant to an E-System shall constitute a representation and warranty by the Credit Parties that any representation, warranty, certification or other similar statement required by the Loan Documents to be provided, given or made by a Credit Party in connection with any such communication is true, correct and complete except as expressly noted in such communication or E-System.
1.12 Borrower Representative. Each Borrower hereby designates and appoints CryoLife as its representative and agent on its behalf (the “ Borrower Representative ”) for the purposes of issuing Notices of Borrowings, Notices of Conversion/Continuation, L/C Requests and Swingline Requests, delivering certificates including Compliance Certificates, giving instructions with respect to the disbursement of the proceeds of the Loans, selecting interest rate options, giving and receiving all other notices and consents hereunder or under any of the other Loan Documents and taking all other actions (including in respect of compliance with covenants) on behalf of any Borrower or Borrowers under the Loan Documents. Borrower Representative hereby accepts such appointment. Agent and each Lender may regard any notice or other communication pursuant to any Loan Document from Borrower Representative as a notice or communication from all Borrowers. Each warranty, covenant, agreement and undertaking made on behalf of a Borrower by Borrower Representative shall be deemed for all purposes to have been made by such Borrower and shall be binding upon and enforceable against such Borrower to the same extent as if the same had been made directly by such Borrower.
 
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1.13 Incremental Term Loans.
(a) Borrowers may from time to time (but on no more than three separate occasions), upon written notice to the Agent (who shall promptly provide a copy of such notice to each Lender), request a term loan commitment (each, an “ Incremental Term Loan Commitment ” and the term loans thereunder, an “ Incremental Term Loan ”) in Dollars in an aggregate amount for all such Incremental Term Loan Commitments not to exceed Twenty-Five Million Dollars ($25,000,000). Such notice shall set forth (i) the amount of the Incremental Term Loan Commitment being requested (which shall be in a minimum amount of $5,000,000 and multiples of $100,000 in excess thereof), (ii) the date (an “ Incremental Effective Date ”) on which such Incremental Term Loan is requested to be funded (which, unless otherwise agreed by Agent, shall not be less than 20 Business Days nor more than 60 days after the date of such notice), and (iii) whether the related Incremental Term Loan is to be a LIBOR Rate Loan or a Base Rate Loan (and, if a LIBOR Rate Loan, the Interest Period therefor). Each Lender shall have the right for a period of fifteen (15) days following receipt of such notice, to elect by written notice to the Borrower Representative and the Agent, to commit to provide all or a portion of such Incremental Term Loan Commitment. Final allocations of the Incremental Term Loan Commitment shall be determined by the Agent after consultation with the Borrower Representative. No Lender (or any successor thereto) shall have any obligation to provide all or any portion of such Incremental Term Loan Commitment or to increase any other obligations under this Agreement and the other Loan Documents, and any decision by a Lender to provide all or any portion of such Incremental Term Loan Commitment shall be made in its sole discretion independently from any other Lender.
(b) If the Lenders do not commit to provide the entire Incremental Term Loan Commitment pursuant to subsection (a)  of this  Section 1.13 , the Borrower may designate another bank or other financial institution (which may be, but need not be, one or more of the existing Lenders);  provided ,  however  that if such Person is not an existing Lender, such Person must be acceptable to the Agent and join this Agreement as a Lender (an “ Additional Lender ”).
(c) The Borrower will enter into an amendment with the Agent, those Lenders providing the Incremental Term Loan Commitment and Additional Lenders, if any (which shall upon execution thereof become Lenders hereunder if not theretofore Lenders) to provide for such Incremental Term Loan Commitment and the related Incremental Term Loan, which amendment shall set forth any terms and conditions of the Incremental Term Loan Commitment and related Incremental Term Loan not covered by this Agreement as agreed by the Borrower, Agent and such Lenders, and shall provide for the issuance of promissory notes to evidence the Incremental Term Loan if requested by such Lenders (which notes shall constitute Notes for purposes of this Agreement), such amendment to be in form and substance reasonably acceptable to Agent and consistent with the terms of this  Section 1.13(c)  and of the other provisions of this Agreement. No consent of any Lender not providing all or a part of such Incremental Term Loan Commitment is required to permit an Incremental Term Loan Commitment contemplated by and otherwise complying with this  Section 1.13(c)  or the aforesaid amendment to effectuate the Incremental Term Loan Commitment. This clause (c) shall supersede any provisions contained in this Agreement, including, without limitation,  Section 9.1.
 
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(d) No Incremental Term Loan Commitment or the related Incremental Term Loan shall become effective under this Section 1.13  unless the following conditions precedent are satisfied:
(i) after giving pro forma effect to such Incremental Term Loan Commitment, the Incremental Term Loan to be made thereunder and the application of the proceeds therefrom:
(A) no Default or Event of Default shall have occurred and be continuing,
(B) as of the last day of the most recent quarter for which financial statements have been delivered pursuant to  Section 4.1 , the Leverage Ratio recomputed on a pro forma basis shall not exceed the maximum Leverage Ratio permitted under  Section 6.1  at such time,
(C) Borrowers will be in pro forma compliance with the covenant set forth in Section 6.2, and
(D) Agent shall have received a certificate of a Responsible Officer of the Borrower Representative certifying as to the foregoing;
(ii) the proceeds of such Incremental Term Loan shall be used solely to finance or refinance the purchase price of a Permitted Acquisition consummated substantially concurrently with the incurrence thereof or within 30 days prior to the date of incurrence;
(iii) execution of the amendment hereto referenced in clause (c) above by Agent, the Lenders and Additional Lenders providing the Incremental Term Loan Commitment and the Credit Parties;
(iv) delivery to Agent of a certificate of the Secretary or an Assistant Secretary of each Credit Party, in form and substance satisfactory to Agent, certifying the resolutions of such Person’s board of directors (or equivalent governing body) approving and authorizing the Incremental Term Loan Commitment and the incurrence of the related Incremental Term Loan (if not previously delivered to Agent), and certifying that none of the organizational documents of such Credit Party delivered to the Agent prior thereto have been modified or altered in any way (or if modifications have occurred, certifying new copies of such organizational documents);
(v) delivery to Agent of an opinion of counsel to the Credit Parties in form and substance and from counsel reasonably satisfactory to the Agent, addressed to Agent and Lenders providing the Incremental Term Loan Commitment and covering such matters as the Agent may reasonably request; and
(vi) receipt by Agent of such new Notes and reaffirmations of guaranties, as Agent may reasonably request, together with amendments to any Mortgages reflecting that the Incremental Term Loan is secured pari passu with the Revolving Loans, and such endorsements to title policies or additional title searches as the Agent may reasonably request.
 
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(e) The final maturity date of any Incremental Term Loan shall be no earlier than the date set forth in clause (a) of the definition of Revolving Termination Date. If the initial all-in yield (including interest rate margins, any interest rate floors, original issue discount and upfront fees (based on the lesser of a four-year average life to maturity or the remaining life to maturity), but excluding reasonable and customary arrangement, structuring and underwriting fees paid or payable to GE Capital or any of its Affiliates with respect to such Incremental Term Loan) applicable to any Incremental Term Loan exceeds by more than 0.50% per annum the corresponding all-in yield (determined on the same basis) applicable to the Revolving Loans or any outstanding prior Incremental Term Loan, (each, an “ Existing Facility ” and the amount of such excess above 0.50% being referred to herein as the “ Yield Differential ”), then the Applicable Margin with respect to each Existing Facility, as the case may be, shall automatically be increased by the Yield Differential, effective upon the making of such Incremental Term Loan (it being agreed that to the extent the all-in-yield with respect to such Incremental Term Loan is greater than the all-in-yield of an Existing Facility solely as a result of a higher LIBOR floor, then the increased interest rate applicable to an Existing Facility shall be effected solely by increasing the LIBOR floor applicable thereto).
ARTICLE II - CONDITIONS PRECEDENT
2.1 Conditions to Effectiveness. The obligation of each Lender to make its Loans on the Effective Date and of each L/C Issuer to Issue, or cause to be Issued, any Letters of Credit on the Effective Date is subject to satisfaction of the following conditions:
(a) Loan Documents. The Agent shall have received on or before the Effective Date all of the agreements, documents, instruments and other items set forth on the Closing Checklist attached hereto as  Exhibit 2.1 , each in form and substance reasonably satisfactory to the Agent.
(b) Revolving Loans. After giving effect to the funding of any Loans made on the Effective Date and the Issuance of any Letters of Credit Issued on the Effective Date, no more than $500,000 of Loans and Letter of Credit Obligations shall be outstanding.
(c) Solvency. Agent shall be satisfied, based on financial statements (actual and pro forma), projections and a certificate of the Chief Financial Officer of the Borrower Representative, that the Credit Parties, after giving effect to any Loans made and any Letters of Credit Issued on or prior to the Effective Date and the payment of all fees, costs and expenses in connection therewith, will each be Solvent.
 
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(d) Absence of Litigation. There shall not exist any action, suit, investigation, litigation or proceeding pending or threatened in any court or before any arbitrator or governmental authority challenging the Loan Documents or any of the transactions contemplated herein.
(e) No Material Adverse Effect. Since December 31, 2010, there shall have been no events, circumstances, developments or other changes in facts that would, in the aggregate, have a Material Adverse Effect.
2.2 Conditions to All Borrowings. Except as otherwise expressly provided herein, no Lender or L/C Issuer shall be obligated to fund any Loan or incur any Letter of Credit Obligation, if, as of the date thereof:
(a) both before and after giving effect to such Loan or, as applicable, such Issuance, the representations and warranties set forth in any Loan Document shall be untrue or incorrect (i) if such date is the Effective Date, on and as of such date and (ii) otherwise, in all material respects (but in all respects if such representation or warranty is qualified by “material” or “Material Adverse Effect”) on and as of such date or, to the extent such representations and warranties expressly relate to an earlier date, on and as of such earlier date;
(b) any Default or Event of Default has occurred and is continuing or would result after giving effect to any Loan (or the incurrence of any Letter of Credit Obligation), and Agent or Required Lenders shall have determined not to make any Loan or incur any Letter of Credit Obligation as a result of that Default or Event of Default; and
(c) after giving effect to any Loan (or the incurrence of any Letter of Credit Obligations), the aggregate outstanding amount of the Revolving Loans would exceed the Maximum Revolving Loan Balance.
The request by Borrower Representative and acceptance by Borrowers of the proceeds of any Loan or the incurrence of any Letter of Credit Obligations shall be deemed to constitute, as of the date thereof, (i) a representation and warranty by Borrowers that the conditions in this  Section 2.2  have been satisfied and (ii) a reaffirmation by each Credit Party of the granting and continuance of Agent’s Liens, on behalf of itself and Lenders, pursuant to the Collateral Documents.
 
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ARTICLE III - REPRESENTATIONS AND WARRANTIES
The Credit Parties, jointly and severally, represent and warrant to the Agent and each Lender that the following are true, correct and complete:
3.1 Corporate Existence and Power. Each Credit Party and each of their respective Subsidiaries:
(a) is a corporation, limited liability company or limited partnership, as applicable, duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, organization or formation, as applicable;
(b) has the power and authority and all governmental licenses, authorizations, Permits, consents and approvals to own its assets, carry on its business and execute, deliver, and perform its obligations under, the Loan Documents to which it is a party;
(c) is duly qualified as a foreign corporation, limited liability company or limited partnership, as applicable, and licensed and in good standing, under the laws of each jurisdiction where its ownership, lease or operation of Property or the conduct of its business requires such qualification or license; and
(d) is in compliance with all Requirements of Law;
except, in each case referred to in clause (c) or clause (d), to the extent that the failure to do so would not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect.
3.2 Corporate Authorization; No Contravention.
(a) The execution, delivery and performance by each of the Credit Parties of this Agreement, and by each of the Credit Parties and each of their respective Subsidiaries of any other Loan Document to which such Person is party, have been duly authorized by all necessary action, and do not and will not:
(i) contravene the terms of any of that Person’s Organization Documents;
(ii) conflict with or result in any material breach or contravention of, or result in the creation of any Lien under, any document evidencing any material Contractual Obligation to which such Person is a party or any order, injunction, writ or decree of any Governmental Authority to which such Person or its Property is subject; or
(iii) violate any material Requirement of Law in any material respect.
(b) Schedule 3.2 sets forth the authorized Stock and Stock Equivalents of each of the Credit Parties and each of their respective Subsidiaries. All issued and outstanding Stock and Stock Equivalents of each of the Credit Parties and each of their respective Subsidiaries are duly authorized and validly issued, fully paid, non-assessable, and free and clear of all Liens other than, with respect to the Stock and Stock Equivalents of Borrowers and Subsidiaries of the Borrowers, those in favor of the Agent, for the
 
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benefit of the Secured Parties. All such securities were issued in compliance with all applicable state and federal laws concerning the issuance of securities. All of the issued and outstanding Stock and Stock Equivalents of the other Subsidiaries of CryoLife is owned by the Persons and in the amounts set forth on  Schedule 3.2 . Except as set forth on  Schedule 3.2 , there are no pre-emptive or other outstanding rights, options, warrants, conversion rights or other similar agreements or understandings for the purchase or acquisition of any Stock and Stock Equivalents of any Credit Party.
3.3 Governmental Authorization. No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority is necessary or required in connection with the execution, delivery or performance by, or enforcement against, any Credit Party or any Subsidiary of any Credit Party of this Agreement or any other Loan Document except (a) for recordings and filings in connection with the Liens granted to the Agent under the Collateral Documents and (b) those obtained or made on or prior to the Effective Date.
3.4 Binding Effect. This Agreement and each other Loan Document to which any Credit Party or any Subsidiary of any Credit Party is a party constitute the legal, valid and binding obligations of each such Person which is a party thereto, enforceable against such Person in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, or similar laws affecting the enforcement of creditors’ rights generally or by equitable principles relating to enforceability.
3.5 Litigation. Except as specifically disclosed in Schedule 3.5, there are no actions, suits, proceedings, claims or disputes pending, or to the best knowledge of each Credit Party, threatened or contemplated, at law, in equity, in arbitration or before any Governmental Authority, against any Credit Party, any Subsidiary of any Credit Party or any of their respective Properties which:
(a) purport to affect or pertain to this Agreement, any other Loan Document or any of the transactions contemplated hereby or thereby; or
(b) would reasonably be expected to result in equitable relief or monetary judgment(s), individually or in the aggregate, having a Material Adverse Effect.
No injunction, writ, temporary restraining order or any order of any nature has been issued by any court or other Governmental Authority purporting to enjoin or restrain the execution, delivery or performance of this Agreement or any other Loan Document, or directing that the transactions provided for herein or therein not be consummated as herein or therein provided. Except as specifically disclosed in  Schedule 3.5 , as of the Effective Date, no Credit Party or any Subsidiary of any Credit Party is the subject of an audit by the IRS or other Governmental Authority or, to each Credit Party’s knowledge, any review or investigation by the IRS or other Governmental Authority concerning the violation or possible violation of any Requirement of Law.
3.6 No Default. No Default or Event of Default exists or would result from the incurring of any Obligations by any Credit Party or the grant or perfection of the
 
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Agent’s Liens on the Collateral. No Credit Party and no Subsidiary of any Credit Party is in default under or with respect to any Contractual Obligation in any respect which, individually or together with all such defaults, would reasonably be expected to have a Material Adverse Effect.
3.7 ERISA Compliance. Schedule 3.7 sets forth, as of the Effective Date, a complete and correct list of, and that separately identifies, (a) all Title IV Plans, (b) all Multiemployer Plans and (c) all material Benefit Plans. To the knowledge of the Credit Parties, each Benefit Plan, and each trust thereunder, intended to qualify for tax exempt status under Section 401 or 501 of the Code or other Requirements of Law so qualifies. Except for any of the following that would not, in the aggregate, have a Material Adverse Effect, (x) each Benefit Plan is in compliance with applicable provisions of ERISA, the Code and other Requirements of Law, (y) there are no existing or pending (or to the knowledge of any Credit Party, threatened) claims (other than routine claims for benefits in the normal course), sanctions, actions, lawsuits or other proceedings or investigation involving any Benefit Plan to which any Credit Party incurs any obligation or any Liability or otherwise has or could have an obligation or any Liability and (z) no ERISA Event is reasonably expected to occur. On the Effective Date, no ERISA Event has occurred in connection with which obligations and liabilities (contingent or otherwise) remain outstanding. On the Effective Date, no ERISA Affiliate would have any Withdrawal Liability as a result of a complete withdrawal from any Multiemployer Plan on the date this representation is made.
3.8 Use of Proceeds; Margin Regulations. The proceeds of the Loans are intended to be and shall be used solely for the purposes set forth in and permitted by  Section 4.10 , and are intended to be and shall be used in compliance with  Section 5.8 . No Credit Party and no Subsidiary of any Credit Party is engaged in the business of purchasing or selling Margin Stock or extending credit for the purpose of purchasing or carrying Margin Stock. Proceeds of the Loans shall not be used for the purpose of purchasing or carrying Margin Stock.
3.9 Title to Properties. Each of the Credit Parties and each of their respective Subsidiaries has good record and marketable title in fee simple to, or valid leasehold interests in, all real Property, and good and valid title to all owned personal property and valid leasehold interests in all leased personal property, in each instance, necessary or used in the ordinary conduct of their respective businesses. The Property of the Credit Parties and its Subsidiaries is subject to no Liens, other than Permitted Liens. As of the Effective Date, none of the Credit Parties or their Subsidiaries own any Real Estate in fee simple.
3.10 Taxes. All federal, state, local and foreign income and franchise and other material tax returns, reports and statements (collectively, the “ Tax Returns ”) required to be filed by any Tax Affiliate have been filed with the appropriate Governmental Authorities in all jurisdictions in which such Tax Returns are required to be filed, all such Tax Returns are true and correct in all material respects, and all taxes, charges and other impositions reflected therein or otherwise due and payable have been paid prior to the date on which any Liability may be added thereto for non-payment thereof except for
 
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those contested in good faith by appropriate proceedings diligently conducted and for which adequate reserves are maintained on the books of the appropriate Tax Affiliate in accordance with GAAP. Except as set forth on  Schedule 3.10 , as of the Effective Date, no Tax Return is under audit or examination by any Governmental Authority and no notice of such an audit or examination or any assertion of any claim for Taxes has been given or made by any Governmental Authority. Proper and accurate amounts have been withheld by each Tax Affiliate from their respective employees for all periods in full and complete compliance in all material respects with the tax, social security and unemployment withholding provisions of applicable Requirements of Law and such withholdings have been timely paid to the respective Governmental Authorities. No Tax Affiliate has participated in a “reportable transaction” within the meaning of Treasury Regulation Section 1.6011-4(b) or has been a member of an affiliated, combined or unitary group other than the group of which a Tax Affiliate is the common parent.
3.11 Financial Condition.
(a) Each of the audited consolidated balance sheets of the Borrowers and their Subsidiaries dated December 31, 2011, December 31, 2012, and December 31, 2013 and the related consolidated statements of income or operations, shareholders’ equity and cash flows for the fiscal years ended on such dates:
(x) were prepared in accordance with GAAP consistently applied throughout the respective periods covered thereby, except as otherwise expressly noted therein, subject to, in the case of the unaudited interim financial statements, normal year-end adjustments and the lack of footnote disclosures; and
(y) present fairly in all material respects the consolidated financial condition of the Borrowers and their Subsidiaries as of the dates thereof and results of operations for the periods covered thereby.
(b) Since December 31, 2010, there has been no Material Adverse Effect.
(c) The Credit Parties and their Subsidiaries have no Indebtedness other than Indebtedness permitted pursuant to Section 5.5  and have no Contingent Obligations other than Contingent Obligations permitted pursuant to  Section 5.9 .
(d) All financial performance projections delivered to the Agent represent the Borrowers’ best good faith estimate of future financial performance and are based on assumptions believed by the Borrowers to be fair and reasonable in light of current market conditions, it being acknowledged and agreed by the Agent and Lenders that projections as to future events are not to be viewed as facts and that the actual results during the period or periods covered by such projections may differ from the projected results.
3.12 Environmental Matters. Except as set forth on Schedule 3.12, (a) the operations of each Credit Party and each Subsidiary of each Credit Party are and have been in compliance with all applicable Environmental Laws, including obtaining,
 
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maintaining and complying with all Permits required by any applicable Environmental Law, other than non-compliances that, in the aggregate, would not have a reasonable likelihood of resulting in Material Environmental Liabilities to any Credit Party or any Subsidiary of any Credit Party, (b) no Credit Party and no Subsidiary of any Credit Party is party to, and no Credit Party and no Subsidiary of any Credit Party and no real property currently (or to the knowledge of any Credit Party previously) owned, leased, subleased, operated or otherwise occupied by or for any such Person is subject to or the subject of, any Contractual Obligation or any pending (or, to the knowledge of any Credit Party, threatened) order, action, investigation, suit, proceeding, audit, claim, demand, dispute or notice of violation or of potential liability or similar notice relating in any manner to any Environmental Law other than those that, in the aggregate, are not reasonably likely to result in Material Environmental Liabilities to any Credit Party or any Subsidiary of any Credit Party, (c) no Lien in favor of any Governmental Authority securing, in whole or in part, Environmental Liabilities has attached to any property of any Credit Party or any Subsidiary of any Credit Party and, to the knowledge of any Credit Party, no facts, circumstances or conditions exist that could reasonably be expected to result in any such Lien attaching to any such property, (d) no Credit Party and no Subsidiary of any Credit Party has caused or suffered to occur a Release of Hazardous Materials at, to or from any real property of any such Person and each such real property is free of contamination by any Hazardous Materials except for such Release or contamination that could not reasonably be expected to result, in the aggregate, in Material Environmental Liabilities to any Credit Party or any Subsidiary of any Credit Party, (e) no Credit Party and no Subsidiary of any Credit Party (i) is or has been engaged in, or has permitted any current or former tenant to engage in, operations or (ii) knows of any facts, circumstances or conditions, including receipt of any information request or notice of potential responsibility under the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. §§ 9601 et seq.) or similar Environmental Laws, that, in the aggregate, would have a reasonable likelihood of resulting in Material Environmental Liabilities to any Credit Party or any Subsidiary of any Credit Party and (f) each Credit Party has made available to Agent copies of all existing environmental reports, reviews and audits and all documents pertaining to actual or potential Environmental Liabilities, in each case to the extent such reports, reviews, audits and documents are in their possession, custody or control.
3.13 Regulated Entities. None of any Credit Party, any Person controlling any Credit Party, or any Subsidiary of any Credit Party, is (a) an “investment company” within the meaning of the Investment Company Act of 1940 or (b) subject to regulation under the Federal Power Act, the Interstate Commerce Act, any state public utilities code, or any other Federal or state statute, rule or regulation limiting its ability to incur Indebtedness, pledge its assets or perform its Obligations under the Loan Documents.
3.14 Solvency. Both before and after giving effect to (a) the Loans made and Letters of Credit Issued on or prior to the date this representation and warranty is made or remade, (b) the disbursement of the proceeds of such Loans, and (c) the payment and accrual of all transaction costs in connection with the foregoing, both the Credit Parties taken as a whole and each Borrower individually are Solvent.
 
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3.15 Labor Relations. There are no strikes, work stoppages, slowdowns or lockouts existing, pending (or, to the knowledge of any Credit Party, threatened) against or involving any Credit Party or any Subsidiary of any Credit Party, except for those that would not, in the aggregate, reasonably be expected to have a Material Adverse Effect. Except as set forth on  Schedule 3.15 , as of the Effective Date, (a) there is no collective bargaining or similar agreement with any union, labor organization, works council or similar representative covering any employee of any Credit Party or any Subsidiary of any Credit Party, (b) no petition for certification or election of any such representative is existing or pending with respect to any employee of any Credit Party or any Subsidiary of any Credit Party and (c) no such representative has sought certification or recognition with respect to any employee of any Credit Party or any Subsidiary of any Credit Party.
3.16 Intellectual Property. Each Credit Party and each Subsidiary of each Credit Party owns, or is licensed to use, all Intellectual Property necessary to conduct its business as currently conducted except for such Intellectual Property the failure of which to own or license would not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect. To the knowledge of each Credit Party, (a) the conduct and operations of the businesses of each Credit Party and each Subsidiary of each Credit Party does not infringe, misappropriate, dilute, violate or otherwise impair any Intellectual Property owned by any other Person and (b) no other Person has contested any right, title or interest of any Credit Party or any Subsidiary of any Credit Party in, or relating to, any Intellectual Property, other than, in each case, as cannot reasonably be expected to affect the Loan Documents and the transactions contemplated therein and would not, in the aggregate, reasonably be expected to have a Material Adverse Effect.
3.17 Subsidiaries. As of the Effective Date, no Credit Party has any Subsidiaries or equity investments in any other corporation or entity other than those specifically disclosed in  Schedule 3.2 .
3.18 Brokers’ Fees; Transaction Fees. Except as disclosed on Schedule 3.18 and except for fees payable to the Agent and Lenders, none of the Credit Parties or any of their respective Subsidiaries has any obligation to any Person in respect of any finder’s, broker’s or investment banker’s fee in connection with the transactions contemplated hereby.
3.19 Insurance. Each of the Credit Parties and each of their respective Subsidiaries and their respective Properties are insured with financially sound and reputable insurance companies which are not Affiliates of the Borrowers, in such amounts, with such deductibles and covering such risks as are customarily carried by companies engaged in similar businesses and owning similar Properties in localities where such Person operates. A true and complete listing of such insurance, including issuers, coverages and deductibles, has been provided to the Agent.
3.20 Full Disclosure. None of the representations or warranties made by any Credit Party or any of their Subsidiaries in the Loan Documents as of the date such representations and warranties are made or deemed made, and none of the statements
 
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contained in each exhibit, report, statement or certificate furnished by or on behalf of any Credit Party or any of their Subsidiaries in connection with the Loan Documents (including the offering and disclosure materials, if any, delivered by or on behalf of any Credit Party to the Lenders prior to the Effective Date), contains any untrue statement of a material fact or omits any material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they are made, not misleading as of the time when made or delivered.
3.21 Foreign Assets Control Regulations and Anti-Money Laundering.
(a) OFAC. Neither any Credit Party nor any Subsidiary of any Credit Party (i) is a person whose property or interest in property is blocked or subject to blocking pursuant to Section 1 of Executive Order 13224 of September 23, 2001 Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)), (ii) engages in any dealings or transactions prohibited by Section 2 of such executive order, or is otherwise associated with any such person in any manner violative of Section 2, or (iii) is a person on the list of Specially Designated Nationals and Blocked Persons or subject to the limitations or prohibitions under any other U.S. Department of Treasury’s Office of Foreign Assets Control regulation or executive order.
(b) Patriot Act. Each of the Credit Parties and each of their respective Subsidiaries are in compliance, in all material respects, with (a) the Trading with the Enemy Act, and each of the foreign assets control regulations of the United States Treasury Department and any other enabling legislation or executive order relating thereto, (b) the Patriot Act and (c) other federal or state laws relating to  “know your customer”  and anti-money laundering rules and regulations. No part of the proceeds of the Loans will be used, directly or indirectly, for any payments to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as amended.
3.22 FDA Regulatory Compliance.
(a) Each of the Credit Parties and their Subsidiaries have all Registrations from FDA or other Governmental Authority required to conduct their respective businesses as currently conducted. Each of the Registrations is valid and subsisting in full force and effect. Except as set forth in Schedule 3.22, to the knowledge of the Credit Parties and their Subsidiaries, the FDA is not considering limiting, suspending, or revoking such Registrations or changing the marketing classification or labeling of the products of the Credit Parties and their Subsidiaries. To the knowledge of the Credit Parties and their Subsidiaries, there is no false or misleading information or significant omission in any product application or other submission to FDA or any comparable Governmental Authority. The Credit Parties and their Subsidiaries have fulfilled and performed their obligations under each Registration in all material respects, and no event has occurred or condition or state of facts exists which would constitute a
 
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breach or default or would cause revocation or termination of any such Registration that could reasonably be expected to result in a Material Adverse Effect. To the knowledge of the Credit Parties and their Subsidiaries, any third party that is a manufacturer or contractor for the Credit Parties and their Subsidiaries is in compliance with all Registrations from the FDA or comparable Governmental Authority insofar as they pertain to the manufacture of product components or products for the Credit Parties and their Subsidiaries.
(b) All products developed, manufactured, tested, distributed or marketed by or on behalf of the Credit Parties and their Subsidiaries that are subject to the jurisdiction of the FDA or comparable Governmental Authority have been and are being developed, tested, manufactured, distributed and marketed in compliance with the FDA Laws or any other applicable Requirement of Law, including, without limitation, pre-market notification, good manufacturing practices, labeling, advertising, record-keeping, and adverse event reporting, except where a failure to be in compliance could not reasonably be expected to result in a Material Adverse Effect, and have been and are being tested, investigated, distributed, marketed, and sold in compliance in all material respects with FDA Laws or any other applicable Requirement of Law, except where a failure to be in compliance could not reasonably be expected to result in a Material Adverse Effect.
(c) Except as set forth in Schedule 3.22, the Credit Parties and their Subsidiaries are not subject to any obligation arising under an administrative or regulatory action, FDA inspection, FDA warning letter, FDA notice of violation letter, or other notice, response or commitment made to or with the FDA or any comparable Governmental Authority. The Credit Parties and their Subsidiaries have made all notifications, submissions, and reports required by any such obligation, and all such notifications, submissions and reports were true, complete, and correct in all material respects as of the date of submission to FDA or any comparable Governmental Authority.
(d) Since December 31, 2010, no product has been seized, withdrawn, recalled, detained, or become subject to a suspension of manufacturing except as disclosed on  Schedule 3.22 , and there are no facts or circumstances reasonably likely to cause, (i) the seizure, denial, withdrawal, recall, detention, field correction, safety alert or suspension of manufacturing relating to any product; (ii) a change in the labeling of any product; or (iii) a termination, seizure or suspension of marketing of any product, which could reasonably be expected to result in a Material Adverse Effect. No proceedings in the United States or any other jurisdiction seeking the withdrawal, recall, suspension, import detention, or seizure of any product are pending or, to the knowledge of the Credit Parties and their Subsidiaries, threatened against the Credit Parties and their Subsidiaries.
3.23 Healthcare Regulatory Compliance.
(a) To the knowledge of the Credit Parties and their Subsidiaries, none of the Credit Parties, their Subsidiaries and their other Affiliates, nor any officer, director, managing employee or agent (as those terms are defined in 42 C.F.R. § 1001.1001) thereof, is a party to, or bound by, any order, individual integrity agreement, corporate integrity agreement or other formal or informal agreement with any Governmental Authority concerning compliance with Federal Health Care Program Laws.
 
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(b) To the knowledge of the Credit Parties and their Subsidiaries, none of the Credit Parties, their Subsidiaries and their other Affiliates, nor any officer, director, managing employee or agent (as those terms are defined in 42 C.F.R. § 1001.1001) thereof: (i) has been charged with or convicted of any criminal offense relating to the delivery of an item or service under any Federal Health Care Program; (ii) has been debarred, excluded or suspended from participation in any Federal Health Care Program; (iii) has had a civil monetary penalty assessed against it, him or her under Section 1128A of the SSA; (iv) is currently listed on the General Services Administration published list of parties excluded from federal procurement programs and non-procurement programs; or (v) to the knowledge of the Borrowers, is the target or subject of any current or potential investigation relating to any Federal Health Care Program-related offense.
(c) None of the Credit Parties, their Subsidiaries and their other Affiliates, nor any officer, director, managing employee or agent (as those terms are defined in 42 C.F.R. § 1001.1001): has engaged in any activity that is in violation, to the extent such violation could reasonably be expected to result in a Material Adverse Effect to any Credit Party or their Subsidiaries, of the federal Medicare or federal or state Medicaid statutes, Sections 1128, 1128A, 1128B, 1128C or 1877 of the SSA (42 U.S.C. §§ 1320a-7, 1320a-7a, 1320a-7b, 1320a-7c and 1395nn), the federal TRICARE statute (10 U.S.C. § 1071 et seq.), the civil False Claims Act of 1863 (31 U.S.C. § 3729 et seq.), criminal false claims statutes (e.g., 18 U.S.C. §§ 287 and 1001), the Program Fraud Civil Remedies Act of 1986 (31 U.S.C. § 3801 et seq.), the anti-fraud and related provisions of the Health Insurance Portability and Accountability Act of 1996 (e.g., 18 U.S.C. §§ 1035 and 1347), or related regulations or other federal or state laws and regulations relating to healthcare fraud or government healthcare programs (collectively, “ Federal Health Care Program Laws ”), including the following:
(i) knowingly and willfully making or causing to be made a false statement or representation of a material fact in any application for any benefit or payment;
(ii) knowingly and willfully making or causing to be made a false statement or representation of a material fact for use in determining rights to any benefit or payment;
(iii) knowingly and willfully soliciting or receiving any remuneration (including any kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in cash or kind (1) in return for referring an individual to a person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part under any Federal Health Care Program; or (2) in return for purchasing, leasing, or ordering, or arranging, or arranging for or recommending purchasing, leasing, or ordering any good, facility, service or item for which payment may be made in whole or in part under any Federal Health Care Program;
 
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(iv) knowingly and willfully offering or paying any remuneration (including any kickback, bribe or rebate), directly or indirectly, overtly or covertly, in cash or in kind, to any person to induce such person (1) to refer an individual to a person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part under a Federal Health Care Program; or (2) to purchase, lease, order or arrange for or recommend purchasing, leasing or ordering any good, facility, service or item for which payment may be made in whole or in part under a Federal Health Care Program; or
(v) any other activity that violates any state or federal law relating to prohibiting fraudulent, abusive or unlawful practices connected in any way with the provision of health care items or services or the billing for such items or services provided to a beneficiary of any Federal Health Care Program.
(d) To the knowledge of the Borrowers, no person has filed or has threatened to file against any Credit Party, any of their Subsidiaries or other Affiliates an action under any federal or state whistleblower statute, including without limitation, under the False Claims Act of 1863 (31 U.S.C. § 3729 et seq.).
3.24 Reimbursement Coding. To the extent the Credit Parties or any of their Subsidiaries provide to their customers or any other Persons reimbursement coding or billing advice regarding products offered for sale by the Credit Parties and their Subsidiaries, such advice is complete and accurate in all material respects, conforms to the applicable American Medical Association’s Current Procedural Terminology (CPT), the International Classification of Disease, Ninth Revision, Clinical Modification (ICD 9 CM), and other applicable coding systems, and the advice can be relied upon to create accurate claims for reimbursement by federal, state and commercial payors.
3.25 HIPAA. Each of the Credit Parties and their Subsidiaries is in compliance with the provisions of all business associate agreements (as such term is defined by HIPAA) to which it is a party except for the non-compliance of which would not have a Material Adverse Effect and to the knowledge of each of the Credit Parties and their Subsidiaries has implemented adequate policies, procedures and training designed to assure continued compliance and to detect non-compliance.
ARTICLE IV - AFFIRMATIVE COVENANTS
Each Credit Party covenants and agrees that until the Facility Termination Date:
4.1 Financial Statements. Each Credit Party shall maintain, and shall cause each of its Subsidiaries to maintain, a system of accounting established and administered in accordance with sound business practices to permit the preparation of financial statements in conformity with GAAP (provided that monthly financial statements shall not be required to have footnote disclosures and are subject to normal year-end adjustments). The Borrowers shall deliver to the Agent and each Lender in electronic form and in detail reasonably satisfactory to the Agent and the Required Lenders:
(a) as soon as available, but not later than ninety (90) days after the end of each fiscal year, a copy of the audited consolidated balance sheets of the Borrowers and each of their Subsidiaries as at the end of such year and the related consolidated statements of income or operations, shareholders’ equity and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, and accompanied by the unqualified opinion of any “Big Four” or other nationally-recognized independent public accounting firm reasonably acceptable to the Agent which report shall state that such consolidated financial statements present fairly in all material respects the financial position for the periods indicated in conformity with GAAP applied on a basis consistent with prior years; and
 
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(b) as soon as available, but not later than forty-five (45) days after the end of each fiscal quarter of each year, a copy of the unaudited consolidated balance sheets and statements of income of the Borrowers and each of their Subsidiaries, and the related statements of shareholders’ equity and cash flows as of the end of such quarter and for the portion of the fiscal year then ended, all certified on behalf of the Borrowers by an appropriate Responsible Officer of the Borrower Representative as being complete and correct and fairly presenting, in all material respects, in accordance with GAAP, the financial position and the results of operations of the Borrowers and their Subsidiaries, subject to normal year-end adjustments and absence of footnote disclosures.
4.2 Certificates; Other Information. The Borrowers shall furnish in electronic form, to the Agent and each Lender:
(a) together with each delivery of financial statements pursuant to subsections 4.1(a) and (b), (i) a management report, in reasonable detail, signed by the chief financial officer of the Borrower Representative, describing the operations and financial condition of the Credit Parties and their Subsidiaries for the month and the portion of the fiscal year then ended (or for the fiscal year then ended in the case of annual financial statements), and (ii) a report setting forth in comparative form the corresponding figures for the corresponding periods of the previous fiscal year and the corresponding figures from the most recent projections for the current fiscal year delivered pursuant to  subsection 4.2(f)  and discussing the reasons for any significant variations; provided, however , to the extent the Borrower Representative makes 10-Q and 10-K filings with the Securities and Exchange Commission with an MD&A report, such filings shall be deemed to satisfy this clause (a).
(b) together with each delivery of financial statements pursuant to subsections 4.1(a) and (b), a fully and properly completed certificate in the form of  Exhibit 4.2(b)  (“ Compliance Certificate ”), certified on behalf of the Borrowers by a Responsible Officer of the Borrower Representative;
(c) [Reserved];
(d) together with each delivery of financial statements pursuant to subsections 4.1(a) and (b), a list of any applications for the registration of any Patent, Trademark or Copyright filed by any Credit Party with the United States Patent and
 
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Trademark Office, the United States Copyright Office or any similar office or agency during the most-recently ended fiscal quarter, or as at such other date as the Agent may reasonably require;
(e) as soon as available and in any event no later than the 60th day after the last day of each fiscal year of the Borrowers, board-approved projections of the Credit Parties (and their Subsidiaries’) consolidated financial performance for the forthcoming fiscal year including without limitation an unaudited consolidated balance sheet, statement of income, in each case of the Borrowers and each of their Subsidiaries;
(f) promptly upon receipt thereof, copies of any reports submitted by the certified public accountants in connection with each annual, interim or special audit or review of any type of the financial statements or internal control systems of any Credit Party made by such accountants, including any formal, final comment letters submitted by such accountants in writing to management of any Credit Party in connection with such financial statements or internal control systems;
(g) from time to time, if the Agent determines that obtaining appraisals is necessary in order for the Agent or any Lender to comply with applicable laws or regulations (including any appraisals required to comply with FIRREA), and at any time if a Default or an Event of Default shall have occurred and be continuing, the Agent may, or may require the Borrowers to, in either case at the Borrowers’ expense, obtain appraisals in form and substance and from appraisers reasonably satisfactory to the Agent stating the then current fair market value of all or any portion of the real or personal property of any Credit Party or any Subsidiary of any Credit Party;
(h) together with each delivery of financial statements pursuant to subsection 4.1(a), each in form and substance satisfactory to the Agent, a summary of all material insurance coverage maintained as of the date thereof by any Credit Party and its Subsidiaries, together with such other related documents and information as the Agent may reasonably require; and
(i) promptly, such additional business, financial, corporate affairs, perfection certificates and other information as the Agent may from time to time reasonably request.
4.3 Notices. The Borrowers shall notify promptly the Agent and each Lender of each of the following (and in no event later than five (5) Business Days after a Responsible Officer becoming aware thereof):
(a) the occurrence or existence of any Default or Event of Default, or any event or circumstance that foreseeably will become a Default or Event of Default;
(b) any breach or non-performance of, or any default under, any Contractual Obligation of any Credit Party or any Subsidiary of any Credit Party, or any violation of, or non-compliance with, any Requirement of Law, which would reasonably be expected to result, either individually or in the aggregate, in a Material Adverse Effect, including a description of such breach, non-performance, default, violation or non-compliance and the steps, if any, such Person has taken, is taking or proposes to take in respect thereof;
 
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(c) the commencement of, or any material development in, any dispute, litigation, investigation, proceeding or suspension which may exist at any time between any Credit Party or any Subsidiary of any Credit Party and any Governmental Authority which would reasonably be expected to result, either individually or in the aggregate, in a Material Adverse Effect;
(d) any notice that the FDA or other similar Governmental Authority is limiting, suspending or revoking any Registration, changing the market classification or labeling of the products of the Credit Parties and their Subsidiaries, or considering any of the foregoing could reasonably be expected to result in Liabilities that in the aggregate would exceed $2,500,000, or could have a Material Adverse Effect;
(e) any Credit Party or any of its Subsidiaries becoming subject to any administrative or regulatory action; any Credit Party or any of its Subsidiaries receiving a Form FDA 483, FDA warning letter, FDA notice of violation letter, or any other written or verbal communication from FDA (other than informal verbal communications from FDA investigators during the course of an inspection that are not documented in a Form FDA 483) or any comparable Governmental Authority alleging material noncompliance with any Requirement of Law; any product of any Credit Party or any of its Subsidiaries being seized, withdrawn, recalled, detained, or subject to a suspension of manufacturing that could reasonably be expected to result in Liabilities that in the aggregate would exceed $2,500,000, or could have a Material Adverse Effect; or the commencement of any proceedings in the United States or any other jurisdiction seeking the withdrawal, recall, suspension, import detention, or seizure of any product of the Credit Parties or their Subsidiaries which, if adversely determined, could reasonably be expected to result in Liabilities that in the aggregate would exceed $2,500,000, or could have a Material Adverse Effect;
(f) the commencement of, or any material development in, any litigation or proceeding affecting any Credit Party or any Subsidiary of any Credit Party (i) in which the amount of damages claimed is $1,000,000 (or its equivalent in another currency or currencies) or more, (ii) in which injunctive or similar relief is sought and which, if adversely determined, would reasonably be expected to have a Material Adverse Effect, or (iii) in which the relief sought is an injunction or other stay of the performance of this Agreement or any Loan Document;
(g) (i) the receipt by any Credit Party of any notice of violation of or potential liability or similar notice under Environmental Law, (ii)(A) unpermitted Releases, (B) the existence of any condition that could reasonably be expected to result in violations of or liabilities under, any Environmental Law or (C) the commencement of, or any material change to, any action, investigation, suit, proceeding, audit, claim, demand, dispute alleging a violation of or liability under any Environmental Law, that, for each of clauses (i) and (ii)(A), (B) and (C) above (and, in the case of clause (C), if adversely determined), in the aggregate for each such clause, could reasonably be expected to result
 
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in Material Environmental Liabilities, (iii) the receipt by any Credit Party of notification that any property of any Credit Party is subject to any Lien in favor of any Governmental Authority securing, in whole or in part, Environmental Liabilities and (iv) any proposed acquisition or lease of real property, if such acquisition or lease would have a reasonable likelihood of resulting in aggregate Material Environmental Liabilities;
(h) (i) on or prior to any filing by any ERISA Affiliate of any notice of any reportable event under Section 4043 of ERISA or intent to terminate any Title IV Plan, a copy of such notice and (ii) promptly, and in any event within 10 days, after any officer of any ERISA Affiliate knows or has reason to know that a request for a minimum funding waiver under Section 412 of the Code has been filed with respect to any Title IV Plan or Multiemployer Plan, a notice (which may be made by telephone if promptly confirmed in writing) describing such waiver request and any action that any ERISA Affiliate proposes to take with respect thereto, together with a copy of any notice filed with the PBGC or the IRS pertaining thereto, and (iii) promptly, and in any event within ten (10) days after any officer of any ERISA Affiliate knows or has reason to know that an ERISA Event will or has occurred, a notice describing such ERISA Event, and any action that any ERISA Affiliate proposes to take with respect thereto, together with a copy of any notices received from or filed with the PBGC, IRS, Multiemployer Plan or other Benefit Plan pertaining thereto;
(i) any Material Adverse Effect subsequent to the date of the most recent audited financial statements delivered to the Agent and Lenders pursuant to this Agreement;
(j) any material change in accounting policies or financial reporting practices by any Credit Party or any Subsidiary of any Credit Party;
(k) any labor controversy resulting in or threatening to result in any strike, work stoppage, boycott, shutdown or other labor disruption against or involving any Credit Party or any Subsidiary of any Credit Party if the same would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect;
(l) the creation, establishment or acquisition of any Subsidiary or the issuance by or to any Credit Party of any Stock or Stock Equivalent other than options and stock grants pursuant to CryoLife’s incentive plans, stock plans, stock option plan or employee stock purchase plan now existing or hereafter created; and
(m) (i) the creation, or filing with the IRS or any other Governmental Authority, of any Contractual Obligation or other document extending, or having the effect of extending, the period for assessment or collection of any taxes with respect to any Tax Affiliate and (ii) the creation of any Contractual Obligation of any Tax Affiliate, or the receipt of any request directed to any Tax Affiliate, to make any adjustment under Section 481(a) of the Code, by reason of a change in accounting method or otherwise, which would have a Material Adverse Effect.
 
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Each notice pursuant to this Section shall be in electronic form accompanied by a statement by a Responsible Officer of the Borrower Representative, on behalf of the Borrowers, setting forth details of the occurrence referred to therein, and stating what action the Borrowers or other Person proposes to take with respect thereto and at what time. Each notice under  subsection 4.3(a) shall describe with particularity any and all clauses or provisions of this Agreement or other Loan Document that have been breached or violated.
4.4 Preservation of Corporate Existence, Etc.. Each Credit Party shall, and shall cause each of its Subsidiaries to:
(a) preserve and maintain in full force and effect its organizational existence and good standing under the laws of its jurisdiction of incorporation, organization or formation, as applicable, except, with respect to the Borrowers’ Subsidiaries, in connection with transactions permitted by  Section 5.3 ;
(b) preserve and maintain in full force and effect all rights, privileges, qualifications, permits, licenses and franchises necessary in the normal conduct of its business except in connection with transactions permitted by  Section 5.3  and sales of assets permitted by  Section 5.2  and except as would not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect;
(c) use its reasonable efforts, in the Ordinary Course of Business, to preserve its business organization and preserve the goodwill and business of the customers, suppliers and others having material business relations with it; and
(d) preserve or renew all of its registered trademarks, trade names and service marks, the non-preservation of which would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect.
4.5 Maintenance of Property. Each Credit Party shall maintain, and shall cause each of its Subsidiaries to maintain, and preserve all its Property which is used or useful in its business in good working order and condition, ordinary wear and tear excepted and shall make all necessary repairs thereto and renewals and replacements thereof except where the failure to do so would not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect.
4.6 Insurance.
(a) Each Credit Party shall, and shall cause each of its Subsidiaries to, (i) maintain or cause to be maintained in full force and effect all policies of insurance of any kind with respect to the property and businesses of the Credit Parties and such Subsidiaries (including policies of life, fire, theft, product liability, public liability, Flood Insurance, property damage, other casualty, employee fidelity, workers’ compensation, business interruption and employee health and welfare insurance) with financially sound and reputable insurance companies or associations (in each case that are not Affiliates of Borrowers) of a nature and providing such coverage as is sufficient and as is customarily carried by businesses of the size and character of the business of the Credit Parties and
 
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(ii) cause all such insurance relating to any property or business of any Credit Party to name Agent as additional insured or loss payee, as appropriate. All policies of insurance on real and personal property of the Credit Parties will contain an endorsement, in form and substance acceptable to Agent, showing loss payable to Agent (Form CP 1218 or equivalent and naming Agent as lenders loss payee as agent for the Lenders) and extra expense and business interruption endorsements. Such endorsement, or an independent instrument furnished to Agent, will provide that the insurance companies will give Agent at least (i) sixty days’ notice before the effective date of cancellation; (ii) ten days’ notice before the effective date of cancellation for non-payment of premium; or (iii) ten days’ notice after the first named insured cancels such policy, and that no act or default of the Credit Parties or any other Person shall affect the right of Agent to recover under such policy or policies of insurance in case of loss or damage. Each Credit Party shall direct all present and future insurers under its “All Risk” policies of insurance to pay all proceeds payable thereunder directly to Agent. If any insurance proceeds are paid by check, draft or other instrument payable to any Credit Party and Agent jointly, Agent may endorse such Credit Party’s name thereon and do such other things as Agent may deem advisable to reduce the same to cash. Agent reserves the right at any time, after the occurrence of any event or circumstance that could reasonably be expected to have a Material Adverse Effect on any Credit Party’s risk profile, to require additional forms and limits of insurance as Agent shall reasonably require. Notwithstanding the requirement in subsection (i) above, Federal Flood Insurance shall not be required for (x) Real Estate not located in a Special Flood Hazard Area, or (y) Real Estate located in a Special Flood Hazard Area in a community that does not participate in the National Flood Insurance Program.
(b) Unless the Borrowers provide the Agent with evidence of the insurance coverage required by this Agreement (including, without limitation, Flood Insurance), the Agent may purchase insurance (including, without limitation, Flood Insurance) at the Credit Parties’ expense to protect the Agent’s and Lenders’ interests in the Credit Parties’ and their Subsidiaries’ properties. This insurance may, but need not, protect the Credit Parties’ and their Subsidiaries’ interests. The coverage that the Agent purchases may not pay any claim that any Credit Party or any Subsidiary of any Credit Party makes or any claim that is made against such Credit Party or any Subsidiary in connection with said Property. The Borrowers may later cancel any insurance purchased by the Agent, but only after providing the Agent with evidence that there has been obtained insurance as required by this Agreement. If the Agent purchases insurance, the Credit Parties will be responsible for the costs of that insurance, including interest and any other charges the Agent may impose in connection with the placement of insurance, until the effective date of the cancellation or expiration of the insurance. The costs of the insurance shall be added to the Obligations. The costs of the insurance may be more than the cost of insurance the Borrowers may be able to obtain on their own.
4.7 Payment of Obligations. Such Credit Party shall, and shall cause each of its Subsidiaries to, pay, discharge and perform as the same shall become due and payable or required to be performed, all their respective obligations and liabilities, including:
(a) all tax liabilities, assessments and governmental charges or levies upon it or its properties or assets, unless the same are being contested in good faith by appropriate proceedings diligently prosecuted which stay the enforcement of any Lien and for which adequate reserves in accordance with GAAP are being maintained by such Person;
 
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(b) all lawful claims which, if unpaid, would by law become a Lien upon its Property unless the same are being contested in good faith by appropriate proceedings diligently prosecuted which stay the imposition or enforcement of the Lien and for which adequate reserves in accordance with GAAP are being maintained by such Person;
(c) all Indebtedness, as and when due and payable, but subject to any subordination provisions contained herein and/or in any instrument or agreement evidencing such Indebtedness; and
(d) the performance of all obligations under any Contractual Obligation to such Credit Party or any of its Subsidiaries is bound, or to which it or any of its properties is subject, except where the failure to perform would not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect.
4.8 Compliance with Laws.
(a) Each Credit Party shall, and shall cause each of its Subsidiaries to, comply with all Requirements of Law of any Governmental Authority having jurisdiction over it or its business, except where the failure to comply would not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect.
(b) Without limiting the generality of the foregoing, each Credit Party shall, and shall cause each of its Subsidiaries to, comply in all material respects with all applicable statutes, rules, regulations, standards, guidelines, policies and orders administered or issued by FDA (“ FDA Laws ”) or any comparable Governmental Authority. All products developed, manufactured, tested, distributed or marketed by or on behalf of the Credit Parties and their Subsidiaries that are subject to the jurisdiction of the FDA or comparable Governmental Authority shall be developed, tested, manufactured, distributed and marketed in compliance with the Requirements of Law of the jurisdiction in which the applicable product is marketed or commercialized, including, without limitation, pre-market notification, good manufacturing practices, labeling, advertising, record-keeping, and adverse event reporting, and have been and are being tested, investigated, distributed, marketed, and sold in compliance with the Requirements of Law of such applicable jurisdiction.
(c) Without limiting the generality of the foregoing, each Credit Party shall, and shall cause each of its Subsidiaries to, comply with, and maintain its real property, whether owned, leased, subleased or otherwise operated or occupied, in compliance with, all applicable Environmental Laws (including by implementing any Remedial Action necessary to achieve such compliance or that is required by lawful
 
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orders and directives of any Governmental Authority) except for failures to comply that would not, in the aggregate, have a Material Adverse Effect. Without limiting the foregoing, if an Event of Default is continuing or if Agent at any time has a reasonable basis to believe that there exist violations of Environmental Laws by any Credit Party or any Subsidiary of any Credit Party or that there exist any Environmental Liabilities, in each case, that would have, in the aggregate, a Material Adverse Effect, then each Credit Party shall, promptly upon receipt of request from Agent, cause the performance of, and allow Agent and its Related Persons access to such real property for the purpose of conducting, such environmental audits and assessments, including subsurface sampling of soil and groundwater, and cause the preparation of such reports, in each case as Agent may from time to time reasonably request. Such audits, assessments and reports, to the extent not conducted by Agent or any of its Related Persons, shall be conducted and prepared by reputable environmental consulting firms reasonably acceptable to Agent and shall be in form and substance reasonably acceptable to Agent.
4.9 Inspection of Property and Books and Records. Each Credit Party shall maintain and shall cause each of its Subsidiaries to maintain proper books of record and account, in which full, true and correct entries in conformity with GAAP consistently applied shall be made of all financial transactions and matters involving the assets and business of such Person. Each Credit Party shall, and shall cause each of its Subsidiaries to, with respect to each owned, leased, or controlled property, during normal business hours and upon reasonable advance notice (unless an Event of Default shall have occurred and be continuing, in which event no notice shall be required and Agent shall have access at any and all times during the continuance thereof): (a) provide access to such property to Agent and any of its Related Persons, as frequently as Agent determines to be appropriate; (b) permit Agent and any of its Related Persons to inspect, audit and make extracts and copies (or take originals if reasonably necessary) from all of such Credit Party’s books and records; and (c) permit Agent to inspect, review, evaluate and make physical verifications and appraisals of the inventory and other Collateral in any manner and through any medium that Agent considers advisable, in each instance, at the Credit Parties’ expense provided the Credit Parties shall not be responsible for costs and expenses more than one time per year at a cost of no more than $15,000, unless an Event of Default has occurred and is continuing. Any Lender may accompany Agent in connection with any inspection at such Lender’s expense.
4.10 Use of Proceeds. The Borrowers shall use the proceeds of Revolving Loans solely (a) for working capital and general corporate purposes not in contravention of any Requirement of Law and not in violation of this Agreement, (b) to finance Permitted Acquisitions and (c) to pay fees and expenses incurred in connection with the funding of the Loans. The Borrowers shall use proceeds of Incremental Term Loans solely as provided in  Section 1.13(d)(ii) .
4.11 Cash Management Systems. Each Credit Party shall, and shall cause each Domestic Subsidiary of each Credit Party to, enter into, and cause each depository, securities intermediary or commodities intermediary to enter into, Control Agreements with respect to each deposit, securities, commodity or similar account maintained by such Person (other than any payroll account or other disbursement account to the extent such payroll account or disbursement account is a zero balance account and withholding tax and fiduciary accounts) as of or after the Initial Closing Date.
 
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4.12 Landlord Agreements. In addition to the landlord agreements and bailee waivers required to be delivered prior to the Initial Closing Date, each Credit Party shall, and shall cause each of its Domestic Subsidiaries to, use commercially reasonable efforts to obtain a landlord agreement or bailee or mortgagee waivers, as applicable, from the lessor of each leased property, bailee in possession of any Collateral or mortgagee of any owned property with respect to each location where Collateral with an aggregate value of $250,000 or more is stored or located, which agreement shall be reasonably satisfactory in form and substance to Agent. Notwithstanding the foregoing, landlord, bailee or mortgagee waivers shall not be required with respect to (a) locations where hospitals and other clients of the Credit Parties store laser consoles which are rented by, are subject to evaluation by or have been loaned at no cost to such hospitals or clients from a Credit Party and (b) freezers that are owned by any Credit Party and placed under bailment arrangements.
4.13 Further Assurances.
(a) Each Credit Party shall ensure that all written information, exhibits and reports furnished to the Agent or the Lenders do not and will not contain any untrue statement of a material fact and do not and will not omit to state any material fact or any fact necessary to make the statements contained therein not misleading in light of the circumstances in which made, and will promptly disclose to the Agent and the Lenders and correct any defect or error that may be discovered therein or in any Loan Document or in the execution, acknowledgement or recordation thereof.
(b) Promptly upon request by the Agent, the Credit Parties shall (and, subject to the limitations hereinafter set forth, shall cause each of their Subsidiaries to) take such additional actions as the Agent may reasonably require from time to time in order (i) to carry out more effectively the purposes of this Agreement or any other Loan Document, (ii) to subject to the Liens created by any of the Collateral Documents any of the Properties, rights or interests covered by any of the Collateral Documents, (iii) to perfect and maintain the validity, effectiveness and priority of any of the Collateral Documents and the Liens intended to be created thereby (including, without limitation, by the filing of UCC financing statements in such jurisdictions as may be required by the Loan Documents or applicable Requirements of Law or as the Agent may deem appropriate), and (iv) to better assure, convey, grant, assign, transfer, preserve, protect and confirm to the Secured Parties the rights granted or now or hereafter intended to be granted to the Secured Parties under any Loan Document or under any other document executed in connection therewith. Without limiting the generality of the foregoing and except as otherwise approved in writing by Required Lenders, the Credit Parties shall cause each of their Domestic Subsidiaries to become a Borrower hereunder and to cross-guaranty the Obligations and to cause each such Subsidiary to grant to the Agent, for the benefit of the Secured Parties, a security interest in, subject to the limitations hereinafter set forth, all of such Subsidiary’s Property to secure such guaranty. Furthermore and except as otherwise approved in writing by Required Lenders, each Credit Party shall,
 
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and shall cause each of its Domestic Subsidiaries to pledge all of the Stock and Stock Equivalents of each of its Domestic Subsidiaries and First Tier Foreign Subsidiaries (provided that with respect to any First Tier Foreign Subsidiary, such pledge shall be limited to sixty-six percent (66%) of such Foreign Subsidiary’s outstanding voting Stock and Stock Equivalents and one hundred percent (100%) of such Foreign Subsidiary’s outstanding non-voting Stock and Stock Equivalents) to the Agent, for the benefit of the Secured Parties, to secure the Obligations. In connection with each pledge of Stock and Stock Equivalents, the Credit Parties shall deliver, or cause to be delivered, to the Agent, irrevocable proxies and stock powers and/or assignments, as applicable, duly executed in blank. In the event any Credit Party or any Domestic Subsidiary of any Credit Party acquires any owned real Property, simultaneously with such acquisition, such Person shall execute and/or deliver, or cause to be executed and/or delivered, to the Agent, (A) a fully executed Mortgage, in form and substance reasonably satisfactory to the Agent together with an A.L.T.A. lender’s title insurance policy issued by a title insurer reasonably satisfactory to the Agent, in form and substance and in an amount reasonably satisfactory to the Agent insuring that the Mortgage is a valid and enforceable first priority Lien on the respective property, free and clear of all defects, encumbrances and Liens, (B) then current A.L.T.A. surveys, certified to the Agent by a licensed surveyor sufficient to allow the issuer of the lender’s title insurance policy to issue such policy without a survey exception, (C) an environmental site assessment prepared by a qualified firm reasonably acceptable to the Agent, in form and substance satisfactory to the Agent, (D) an appraisal complying with FIRREA and (E) to the extent such Real Property is located in a Special Flood Hazard Area, Federal Flood Insurance as required by subsection 4.6(a) . In addition to the obligations set forth in  subsections 4.6(a)  and this  subsection 4.13(b) , within forty-five (45) days after written notice from Agent to the Credit Parties that any Real Estate is located in a Special Flood Hazard Area, the Credit Parties shall satisfy the Federal Flood Insurance requirements of  subsection 4.6(a) . Upon request of the Agent, the Credit Parties shall deliver to the Agent legal opinions relating to the matters described in this  Section 4.13 , which opinions shall be as reasonably required by, and in form and substance and from counsel reasonably satisfactory to, the Agent. Notwithstanding the foregoing, the Credit Parties shall not be required to take any action to perfect a security interest in any Collateral to the extent the Agent and Borrower Representative agree the cost of such perfection is excessive in relation to the benefit afforded thereby.
(c) To the extent that any holding company acquires 100% of the Stock of the Borrower, the Borrower shall cause such holding company to guarantee the Obligations and to pledge to the Agent, for the benefit of the Secured Parties, all of the Stock of the Borrower to secure such guaranty, pursuant to documentation reasonably satisfactory to the Agent and accompanied by such corporate documents and legal opinions as the Agent shall reasonably request. In connection with such guaranty and pledge of Stock, the Credit Parties shall deliver, or cause to be delivered, to the Agent, all original certificates evidencing the Stock of the Borrower, together with irrevocable proxies and stock powers and/or assignments, as applicable, duly executed in blank.
 
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ARTICLE V - NEGATIVE COVENANTS
Each Credit Party covenants and agrees that until the Facility Termination Date:
5.1 Limitation on Liens. No Credit Party shall, and no Credit Party shall suffer or permit any of its Subsidiaries to, directly or indirectly, make, create, incur, assume or suffer to exist any Lien upon or with respect to any part of its Property, whether now owned or hereafter acquired, other than the following (“ Permitted Liens ”):
(a) any Lien existing on the Property of a Credit Party or a Subsidiary of a Credit Party on the Effective Date and set forth in  Schedule 5.1  securing Indebtedness outstanding on such date and permitted by  subsection 5.5(c) , including replacement Liens on the Property currently subject to such Liens securing Indebtedness permitted by  Section 5.5(c) ;
(b) any Lien created under any Loan Document;
(c) Liens for taxes, fees, assessments or other governmental charges (i) which are not delinquent or remain payable without penalty, or (ii) the non-payment of which is permitted by  Section 4.7 ;
(d) carriers’, warehousemen’s, mechanics’, landlords’, materialmen’s, repairmen’s or other similar Liens arising in the Ordinary Course of Business which are not delinquent for more than ninety (90) days or remain payable without penalty or which are being contested in good faith and by appropriate proceedings diligently prosecuted, which proceedings have the effect of preventing the forfeiture or sale of the Property subject thereto and for which adequate reserves in accordance with GAAP are being maintained;
(e) Liens (other than any Lien imposed by ERISA) consisting of pledges or deposits required in the Ordinary Course of Business in connection with workers’ compensation, unemployment insurance and other social security legislation or to secure the performance of tenders, statutory obligations, surety, stay, customs and appeals bonds, bids, leases, governmental contract, trade contracts, performance and return of money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money) or to secure liability to insurance carriers;
(f) Liens consisting of judgment or judicial attachment liens, provided that the enforcement of such Liens is effectively stayed and all such Liens secure claims in the aggregate at any time outstanding for the Credit Parties and their Subsidiaries not exceeding $500,000;
(g) easements, rights-of-way, zoning and other restrictions, minor defects or other irregularities in title, and other similar encumbrances incurred in the Ordinary Course of Business which, either individually or in the aggregate, are not substantial in amount, and which do not in any case materially detract from the value of the Property subject thereto or interfere in any material respect with the ordinary conduct of the businesses of any Credit Party or any Subsidiary of any Credit Party;
 
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(h) Liens on any Property acquired or held by any Credit Party or any Subsidiary of any Credit Party securing Indebtedness incurred or assumed for the purpose of financing (or refinancing) all or any part of the cost of acquiring such Property and permitted under  subsection 5.5(d) ;  provided that  (i) any such Lien attaches to such Property concurrently with or within twenty (20) days after the acquisition thereof, (ii) such Lien attaches solely to the Property so acquired in such transaction, and (iii) the principal amount of the debt secured thereby does not exceed 100% of the cost of such Property;
(i) Liens securing Capital Lease Obligations permitted under subsection 5.5(d);
(j) any interest or title of a lessor or sublessor under any lease permitted by this Agreement;
(k) Liens arising from precautionary uniform commercial code financing statements filed under any lease permitted by this Agreement;
(l) licenses, sublicenses, leases or subleases granted to third parties in the Ordinary Course of Business not interfering with the business of the Credit Parties or any of their Subsidiaries, and permitted under  Section 5.2 ;
(m) Liens in favor of collecting banks arising under Section 4-210 of the UCC;
(n) Liens (including the right of set-off) in favor of a bank or other depository institution arising as a matter of law encumbering deposits;
(o) Liens arising out of consignment or similar arrangements for the sale of goods entered into by a Borrower or any Subsidiary of a Borrower in the Ordinary Course of Business; and
(p) Liens in favor of customs and revenue authorities arising as a matter of law which secure payment of customs duties in connection with the importation of goods in the Ordinary Course of Business.
5.2 Disposition of Assets. No Credit Party shall, and no Credit Party shall suffer or permit any of its Subsidiaries to, directly or indirectly, sell, assign, lease, convey, transfer or otherwise dispose of (whether in one or a series of transactions) any Property (including accounts and notes receivable, with or without recourse) or enter into any agreement to do any of the foregoing, except:
(a) dispositions of inventory, or used, worn-out or surplus equipment, all in the Ordinary Course of Business;
 
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(b) dispositions not otherwise permitted hereunder which are made for fair market value and the mandatory prepayment in the amount of the Net Proceeds of such disposition is made if and to the extent required by  Section 1.8 ;  provided , that (i) at the time of any disposition, no Event of Default shall exist or shall result from such disposition, (ii) the aggregate fair market value of all assets so sold by the Credit Parties and their Subsidiaries, together, shall not exceed in any fiscal year  $ 1,000,000 and (iii) after giving effect to such disposition, the Credit Parties are in compliance on a pro forma basis with the covenants set forth in Article VI, recomputed for the most recent fiscal period for which financial statements have been delivered pursuant to Section 4.1(b) ;
(c) dispositions of Cash Equivalents;
(d) licenses, sublicenses, leases or subleases of Patents, Trademarks, Copyrights and other intellectual property rights granted to third parties in the Ordinary Course of Business not interfering with the business of the Credit Parties or any of their Subsidiaries, either on a non-exclusive basis or on an exclusive basis where exclusivity is restricted to a limited field of use that does not prohibit Borrowers and their Subsidiaries, or any of them, from commercializing the intellectual property rights so licensed or leased in applications outside the limited field of use or in an application presently commercialized by the Borrowers and their Subsidiaries; provided, however that (i) the Agent has a perfected first priority security interest in each such license, sublicense, lease or sublease and (ii) no Default or Event of Default shall exist at the time any Credit Party or any of its Subsidiaries enter into any such license, sublicense, lease or sublease; and
(e) licenses, sublicenses, leases or subleases of property other than intellectual property rights granted to third parties in the Ordinary Course of Business not interfering with the business of the Credit Parties or any of their Subsidiaries.
5.3 Consolidations and Mergers. No Credit Party shall, and no Credit Party shall suffer or permit any of its Subsidiaries to, merge, consolidate with or into, or convey, transfer, lease or otherwise dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to or in favor of any Person, except upon not less than five (5) Business Days prior written notice to the Agent, (a) any Subsidiary of CryoLife may merge with, or dissolve or liquidate into, a Borrower or a Wholly-Owned Subsidiary of a Borrower which is a Domestic Subsidiary, provided that a Borrower or such Wholly-Owned Subsidiary which is a Domestic Subsidiary shall be the continuing or surviving entity, (b) any Foreign Subsidiary may merge with or dissolve or liquidate into another Foreign Subsidiary provided if a First Tier Foreign Subsidiary is a constituent entity in such merger, dissolution or liquidation, such First Tier Foreign Subsidiary shall be the continuing or surviving entity, and (c) CryoLife or any Subsidiary of CryoLife may enter into a merger that is a Permitted Acquisition.
5.4 Loans and Investments. No Credit Party shall and no Credit Party shall suffer or permit any of its Subsidiaries to (i) purchase or acquire, or make any commitment to purchase or acquire any Stock or Stock Equivalents, or any obligations or other securities of, or any interest in, any Person, including the establishment or creation
 
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of a Subsidiary, or (ii) make or commit to make any Acquisitions, or any other acquisition of all or a substantial portion of the assets of another Person, or of any business or division of any Person, including without limitation, by way of merger, consolidation or other combination or (iii) make or commit to make any advance, loan, extension of credit or capital contribution to or any other investment in, any Person including any Affiliate of a Borrower or any Subsidiary of a Borrower (the items described in clauses (i), (ii) and (iii) are referred to as “ Investments ”), except for:
(a) Investments in cash and Cash Equivalents;
(b) extensions of credit by (i) any Credit Party to any other Credit Party, (ii) a Borrower or any Domestic Subsidiary of a Borrower to Foreign Subsidiaries of a Borrower not to exceed $3,000,000 in the aggregate at any time outstanding for all such extensions of credit (including intercompany accounts receivable owed by Foreign Subsidiaries) provided, if the extensions of credit described in foregoing clauses (i) and (ii) are evidenced by notes, such notes shall be pledged to the Agent, for the benefit of the Secured Parties, and have such terms as the Agent may reasonably require and (iii) a Foreign Subsidiary of a Borrower to another Foreign Subsidiary of a Borrower;
(c) loans and advances to employees in the Ordinary Course of Business not to exceed $250,000 in the aggregate at any time outstanding;
(d) Investments received as the non-cash portion of consideration received in connection with transactions permitted pursuant to  Section 5.2(b) ;
(e) Investments acquired in connection with the settlement of delinquent Accounts in the Ordinary Course of Business or in connection with the bankruptcy or reorganization of suppliers or customers; and
(f) Investments existing on the Effective Date and set forth on Schedule 5.4;
(g) Permitted Acquisitions;
(h) Investments by any Credit Party to or in ValveXchange, Inc., a Delaware corporation, consisting of (i) up to $8,000,000 of preferred Stock and (ii) advances, loans and extensions of credit at any time outstanding of up to $2,500,000; and
(i) other Investments not referred to above in an aggregate amount not to exceed $2,000,000.
5.5 Limitation on Indebtedness. No Credit Party shall, and no Credit Party shall suffer or permit any of its Subsidiaries to, create, incur, assume, permit to exist, or otherwise become or remain directly or indirectly liable with respect to, any Indebtedness, except:
(a) Indebtedness incurred pursuant to this Agreement;
 
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(b) Indebtedness consisting of Contingent Obligations described in clause (i) of the definition thereof and permitted pursuant to  Section 5.9 ;
(c) Indebtedness existing on the Effective Date and set forth in Schedule 5.5 including extensions and refinancings thereof which do not increase the principal amount of such Indebtedness as of the date of such extension or refinancing;
(d) Indebtedness not to exceed $3,000,000 in the aggregate at any time outstanding consisting of Capital Lease Obligations or secured by Liens permitted by  subsection 5.1(h) ;
(e) unsecured intercompany Indebtedness permitted pursuant to subsection 5.4(b);
(f) unsecured Indebtedness owed to insurance companies consisting of financed insurance premiums by such insurance companies so long as the aggregate principal amount of such Indebtedness does not exceed $3,000,000 at any time outstanding and the term of any such notes payable does not exceed one year;
(g) other unsecured Indebtedness not exceeding in the aggregate at any time outstanding $1,000,000; and
(h) other unsecured Indebtedness subordinated to the Obligations in amounts and on terms satisfactory to the Agent.
5.6 Transactions with Affiliates. No Credit Party shall, and no Credit Party shall suffer or permit any of its Subsidiaries to, enter into any transaction with any Affiliate of a Borrower or of any such Subsidiary, except:
(a) as expressly permitted by this Agreement; or
(b) in the Ordinary Course of Business and pursuant to the reasonable requirements of the business of such Credit Party or such Subsidiary provided that, in the case of this clause (b), upon fair and reasonable terms no less favorable to such Credit Party or such Subsidiary than would be obtained in a comparable arm’s length transaction with a Person not an Affiliate of a Borrower or such Subsidiary and which are disclosed in writing to the Agent.
5.7 Management Fees and Compensation. No Credit Party shall, and no Credit Party shall permit any of its Subsidiaries to, pay any management, consulting or similar fees to any Affiliate of any Credit Party or to any officer, director or employee of any Credit Party or any Affiliate of any Credit Party except payment of reasonable compensation to officers and employees for actual services rendered to the Credit Parties and their Subsidiaries in the Ordinary Course of Business.
5.8 Use of Proceeds. No Credit Party shall, and no Credit Party shall suffer or permit any of its Subsidiaries to, use any portion of the Loan proceeds, directly or indirectly, to purchase or carry Margin Stock or repay or otherwise refinance
 
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Indebtedness of any Credit Party or others incurred to purchase or carry Margin Stock, or otherwise in any manner which is in contravention of any Requirement of Law or in violation of this Agreement.
5.9 Contingent Obligations. No Credit Party shall, and no Credit Party shall suffer or permit any of its Subsidiaries to, create, incur, assume or suffer to exist any Contingent Obligations except in respect of the Obligations and except:
(a) endorsements for collection or deposit in the Ordinary Course of Business;
(b) Rate Contracts entered into in the Ordinary Course of Business for bona fide hedging purposes and not for speculation with the Agent’s prior written consent;
(c) Contingent Obligations of the Credit Parties and their Subsidiaries existing as of the Effective Date and listed in Schedule 5.9 , including extension and renewals thereof which do not increase the amount of such Contingent Obligations as of the date of such extension or renewal;
(d) Contingent Obligations incurred in the Ordinary Course of Business with respect to surety and appeal bonds, performance bonds and other similar obligations;
(e) Contingent Obligations arising under indemnity agreements to title insurers to cause such title insurers to issue to the Agent title insurance policies;
(f) Contingent Obligations arising with respect to customary indemnification obligations in favor of (i) sellers in connection with Acquisitions permitted hereunder, (ii) purchasers in connection with dispositions permitted under  subsection 5.2(b) , and (iii) contracts and license agreements entered into in the Ordinary Course of Business;
(g) Contingent Obligations arising under Letters of Credit;
(h) Contingent Obligations arising under guarantees made in the Ordinary Course of Business of obligations of any Credit Party, which obligations are otherwise permitted hereunder; provided that if such obligation is subordinated to the Obligations, such guarantee shall be subordinated to the same extent;
(i) Contingent Obligations for earn-out payments pursuant to Permitted Acquisitions;
(j) Contingent Obligations for royalty obligations in connection with license, sublicense or royalty agreements entered into by a Credit Party pursuant to  Section 5.2(d) ; and
(k) other Contingent Obligations not exceeding $1,000,000 in the aggregate at any time outstanding.
 
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5.10 Compliance with ERISA. No ERISA Affiliate shall cause or suffer to exist (a) any event that could result in the imposition of a Lien on any asset of a Credit Party or a Subsidiary of a Credit Party with respect to any Title IV Plan or Multiemployer Plan or (b) any other ERISA Events, that would, in the aggregate, have a Material Adverse Effect. No Credit Party shall cause or suffer to exist any event that could result in the imposition of a Lien arising with respect to any Benefit Plan.
5.11 Restricted Payments. No Credit Party shall, and no Credit Party shall suffer or permit any of its Subsidiaries to, (i) declare or make any dividend payment or other distribution of assets, properties, cash, rights, obligations or securities on account of any Stock or Stock Equivalent, (ii) purchase, redeem or otherwise acquire for value any Stock or Stock Equivalent now or hereafter outstanding or (iii) make any payment or prepayment of principal of, premium, if any, interest, fees, redemption, exchange, purchase, retirement, defeasance, sinking fund or similar payment with respect to, Indebtedness subordinated to the Obligations (the items described in clauses (i), (ii) and (iii) above are referred to as “ Restricted Payments ”); except that
(a) any Wholly-Owned Subsidiary of a Borrower may declare and pay dividends to a Borrower or any Wholly-Owned Subsidiary of a Borrower,
(b) CryoLife may declare and make dividend payments or other distributions payable solely in its Stock or Stock Equivalent;
(c) the Borrowers may redeem from officers, directors and employees Stock and Stock Equivalents provided all of the following conditions are satisfied:
(i) no Default or Event of Default has occurred and is continuing or would arise as a result of such Restricted Payment;
(ii) after giving effect to such Restricted Payment, the Credit Parties are in compliance on a pro forma basis with the covenants set forth in Article VI, recomputed for the most recent fiscal period for which financial statements have been delivered pursuant to  Section 4.1(b) ;
(iii) Restricted Payments under this clause (c) made for the purpose of funding estimated tax liabilities incurred by officers, directors and employees as a result of awards of Stock or Stock Equivalents (or as a result of the vesting of the same) shall not exceed (x) $10,000,000 in the aggregate after the Effective Date, or (y) $4,000,000 in any fiscal year; and
(iv) the aggregate Restricted Payments under this clause (c) (other than those described in subclause (iii) above) permitted in any fiscal year of the Borrowers shall not exceed $300,000;
 
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(d) CryoLife may undertake purchases or redemptions of the common stock of CryoLife pursuant to a stock buyback program (each, a “Stock Buyback”) in an aggregate amount not to exceed $14,000,000 during the period commencing on the Effective Date and ending on the Revolving Termination Date; provided, that (i) both before and after giving pro forma effect to each such Stock Buyback, the Credit Parties shall be in compliance with the covenants set forth in Article VI as of the most recently ended fiscal quarter for which financial statements have been delivered under  Section 4.1(a)  or  (b) , (ii) both before and after giving pro forma effect to each such Stock Buyback, no Default or Event of Default shall have occurred and be continuing, (iii) after giving effect to each such Stock Buyback the Credit Parties shall have at least $20,000,000 of Liquidity and (iv) the Credit Parties shall promptly comply with the requirements of Section 5.3 of the Guaranty and Security Agreement with respect to any Stock acquired pursuant to a Stock Buyback which are not cancelled or retired and which remain issued and outstanding;
(e) CryoLife may declare and make dividend payments with respect to its common stock in an aggregate amount not to exceed in any fiscal year: (a) $4,000,000 for fiscal year ended December 31, 2014, (b) $4,000,000 for fiscal year ended December 31, 2015, (c) $4,500,000 for fiscal year ended December 31, 2016, (d) $5,000,000 for fiscal year ended December 31, 2017, (e) $5,000,000 for fiscal year ended December 31, 2018, and (f) $6,000,000 for fiscal year ended December 31, 2019; provided ,  that , both before and after giving pro forma effect to each such dividend payment and any Loan made on the date such dividend payment is made, (i) the Credit Parties shall be in compliance on a pro forma basis with the covenants set forth in Article VI  as of the most recently ended fiscal quarter for which financial statements have been delivered under  Section 4.1(a)  or (b) , and (ii) no Default or Event of Default shall have occurred and be continuing.
5.12 Change in Business. No Credit Party shall, and no Credit Party shall permit any of its Subsidiaries to, engage in any material line of business substantially different from those lines of business carried on by it as of the Effective Date, unless otherwise approved by Agent in connection with a Permitted Acquisition.
5.13 Change in Structure. Except as expressly permitted under Section 5.3, no Credit Party (other than CryoLife) shall, and no Credit Party shall permit any of its Subsidiaries to, make any material changes in its equity capital structure (including in the terms of its outstanding Stock or Stock Equivalents), or amend any of its Organization Documents in any material respect or in any respect adverse to the Agent or Lenders.
5.14 Accounting Changes, Name and Jurisdiction of Organization. No Credit Party shall, and no Credit Party shall suffer or permit any of its Subsidiaries to, (i) make any significant change in accounting treatment or reporting practices, except as required by GAAP, (ii) change the fiscal year or method for determining fiscal quarters of any Credit Party or of any consolidated Subsidiary of any Credit Party, (iii) change its name as it appears in official filings in its jurisdiction of organization or (iv) change its jurisdiction of organization, in the case of clauses (iii) and (iv), without at least thirty (30) days’ prior written notice to Agent and the acknowledgement of Agent that all actions required by Agent, including those to continue the perfection of its Liens, have been completed.
 
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5.15 No Negative Pledges.
(a) No Credit Party shall, and no Credit Party shall permit any of its Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any consensual restriction or encumbrance of any kind on the ability of any such Subsidiary to pay dividends or make any other distribution on any of such Subsidiary’s Stock or Stock Equivalents or to pay fees, including management fees, or make other payments and distributions to a Borrower or any of its Subsidiaries. No Credit Party shall, and no Credit Party shall permit any of its Subsidiaries to, directly or indirectly, enter into, assume or become subject to any Contractual Obligation prohibiting or otherwise restricting the existence of any Lien upon any of its assets in favor of the Agent, whether now owned or hereafter acquired except in connection with any document or instrument governing Liens permitted pursuant to  subsections 5.1(h)  and  (i)  provided that any such restriction contained therein relates only to the asset or assets subject to such permitted Liens.
(b) No Borrower shall issue any Stock or Stock Equivalents (i) if such issuance would result in an Event of Default under  subsection 7.1(k)  and (ii) unless such Stock and Stock Equivalents are pledged to the Agent, for the benefit of the Secured Parties, as security for the Obligations, on substantially the same terms and conditions as the Stock and Stock Equivalents of the Borrowers are pledged to the Agent as of the Effective Date.
5.16 OFAC; Patriot Act. (a) No Credit Party shall, and no Credit Party shall permit any of its Subsidiaries to (i) become a person whose property or interests in property are blocked or subject to blocking pursuant to Section 1 of Executive Order 13224 of September 23, 2001 Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit or Support Terrorism (66 Fed. Reg. 49079(2001), (ii) engage in any dealings or transactions prohibited by Section 2 of such executive order, or be otherwise associated with any such person in any manner violative of Section 2, or (iii) otherwise become a person on the list of Specially Designated Nationals and Blocked Persons or subject to the limitations or prohibitions under any other OFAC regulation or executive order.
(b) No Credit Party shall, and no Credit Party shall permit any of its Subsidiaries to fail to comply with the laws, regulations and executive orders referred to in Section 3.21(b).
5.17 Press Release and Related Matters. No Credit Party shall, and no Credit Party shall permit any of its Affiliates to, issue any press release or other public disclosure (other than any document filed with any Governmental Authority relating to a public offering of securities of any Credit Party) using the name, logo or otherwise referring to GE Capital or of any of its Affiliates, the Loan Documents or any transaction contemplated therein to which the Agent is party without the prior consent of GE Capital except to the extent required to do so under applicable Requirements of Law and then, only after consulting with GE Capital prior thereto.
 
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5.18 Sale-Leasebacks. No Credit Party shall, and no Credit Party shall permit any of its Subsidiaries to, engage in a sale leaseback, synthetic lease or similar transaction involving any of its assets.
5.19 Hazardous Materials. No Credit Party shall, and no Credit Party shall permit any of its Subsidiaries to, cause or suffer to exist any Release of any Hazardous Material at, to or from any real property owned, leased, subleased or otherwise operated or occupied by any Credit Party or any Subsidiary of any Credit Party that would violate any Environmental Law or form the basis for any Environmental Liabilities, other than such violations and Environmental Liabilities that would not, in the aggregate, have a Material Adverse Effect.
5.20 Financial Advisors. The Credit Parties shall not, and shall not cause or permit their Subsidiaries to, retain the services of a financial advisor or investment bank pursuant to an arrangement providing for the payment of a success fee, contingency fee or completion fee in connection with a restructuring or reorganization of the Credit Parties’ liabilities without the prior written consent of Agent. For the avoidance of doubt, this  Section 5.21  does not apply to financial advisors or investment banks retained in connection with any acquisition or contemplated acquisition.
ARTICLE VI - FINANCIAL COVENANTS
Each Credit Party covenants and agrees that until the Facility Termination Date:
6.1 Leverage Ratio. The Credit Parties shall not permit the Leverage Ratio for the twelve month period ending as of any date to be greater than 2.50:1.00. “Leverage Ratio” shall be calculated in the manner set forth in Exhibit 4.2(b).
6.2 Minimum Adjusted EBITDA. The Credit Parties shall not permit Adjusted EBITDA for the twelve month period ending on the last day of any date set forth below to be less than the amount set forth in the table below opposite such date:

Date	  	Minimum Adjusted EBITDA	 	
December 31, 2014	  	$	12,500,000	  	
March 31, 2015	  	$	12,500,000	  	
June 30, 2015	  	$	12,500,000	  	
September 26, 2015	  	$	13,500,000	  	
December 31, 2015 and the last day of each calendar quarter thereafter	  	$	15,000,000	  	
6.3 Minimum Cash on Hand. The Credit Parties shall maintain at all times cash and Cash Equivalents of at least $5,000,000 in a deposit or securities account in which the Agent has a first priority perfected Lien.
 
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ARTICLE VII - EVENTS OF DEFAULT
7.1 Event of Default. Any of the following shall constitute an “Event of Default”:
(a) Non-Payment. Any Credit Party fails (i) to pay when and as required to be paid herein, any amount of principal of any Loan, including after maturity of the Loans, or to pay any L/C Reimbursement Obligation or (ii) to pay within three (3) Business Days after the same shall become due, interest on any Loan, any fee or any other amount payable hereunder or pursuant to any other Loan Document; or
(b) Representation or Warranty. Any representation, warranty or certification by or on behalf of any Credit Party or any of its Subsidiaries made or deemed made herein, in any other Loan Document, or which is contained in any certificate, document or financial or other statement by any such Person, or their respective Responsible Officers, furnished at any time under this Agreement, or in or under any other Loan Document, shall prove to have been incorrect in any material respect (or in any respect if such representation or warranty is qualified by “material” or “Material Adverse Effect”) when made or deemed made; or
(c) Specific Defaults. Any Credit Party fails to perform or observe any term, covenant or agreement contained in any of  Sections 4.1 ,  4.2(b) ,  4.3(a) ,  4.6 ,  4.9(a)-(c) ,  Article V  or  Article VI  hereof; or
(d) Other Defaults. Any Credit Party or Subsidiary of any Credit Party fails to perform or observe any other term, covenant or agreement contained in this Agreement or any other Loan Document, and such default shall continue unremedied for a period of thirty (30) days after the earlier to occur of (i) the date upon which a Responsible Officer of any Credit Party becomes aware of such default and (ii) the date upon which written notice thereof is given to the Borrower Representative by the Agent or Required Lenders; or
(e) Cross-Default. Any Credit Party or any Subsidiary of any Credit Party (i) fails to make any payment in respect of any Indebtedness (other than the Obligations) or Contingent Obligation having an aggregate principal amount (including undrawn committed or available amounts and including amounts owing to all creditors under any combined or syndicated credit arrangement) of more than $1,000,000 when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) and such failure continues after the applicable grace or notice period, if any, specified in the document relating thereto on the date of such failure; or (ii) fails to perform or observe any other condition or covenant, or any other event shall occur or
 
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condition exist, under any agreement or instrument relating to any such Indebtedness or Contingent Obligation, if the effect of such failure, event or condition is to cause, or to permit the holder or holders of such Indebtedness or beneficiary or beneficiaries of such Indebtedness (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause such Indebtedness to be declared to be due and payable prior to its stated maturity (without regard to any subordination terms with respect thereto), or such Contingent Obligation to become payable or cash collateral in respect thereof to be demanded; or
(f) Insolvency; Voluntary Proceedings. A Borrower, individually, ceases or fails, or the Credit Parties and their Subsidiaries on a consolidated basis, cease or fail, to be Solvent, or any Credit Party or any Subsidiary of any Credit Party: (i) generally fails to pay, or admits in writing its inability to pay, its debts as they become due, subject to applicable grace periods, if any, whether at stated maturity or otherwise; (ii) voluntarily ceases to conduct its business in the ordinary course; (iii) commences any Insolvency Proceeding with respect to itself; or (iv) takes any action to effectuate or authorize any of the foregoing; or
(g) Involuntary Proceedings. (i) Any involuntary Insolvency Proceeding is commenced or filed against any Credit Party or any Subsidiary of any Credit Party, or any writ, judgment, warrant of attachment, execution or similar process, is issued or levied against a substantial part of any such Person’s Properties, and any such proceeding or petition shall not be dismissed, or such writ, judgment, warrant of attachment, execution or similar process shall not be released, vacated or fully bonded within sixty (60) days after commencement, filing or levy; (ii) any Credit Party or any of its Subsidiary of any Credit Party admits the material allegations of a petition against it in any Insolvency Proceeding, or an order for relief (or similar order under non-U.S. law) is ordered in any Insolvency Proceeding; or (iii) any Credit Party or any Subsidiary of any Credit Party acquiesces in the appointment of a receiver, trustee, custodian, conservator, liquidator, mortgagee in possession (or agent therefor), or other similar Person for itself or a substantial portion of its Property or business; or
(h) Monetary Judgments. One or more judgments, non-interlocutory orders, decrees or arbitration awards shall be entered against any one or more of the Credit Parties or any of their respective Subsidiaries involving in the aggregate a liability (to the extent not covered by independent third-party insurance) as to any single or related series of transactions, incidents or conditions, of $1,000,000 or more, and the same shall remain unsatisfied, unvacated and unstayed pending appeal for a period of thirty (30) days after the entry thereof; or
(i) Non-Monetary Judgments. One or more non-monetary judgments, orders or decrees shall be rendered against any one or more of the Credit Parties or any of their respective Subsidiaries which has or would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect, and there shall be any period of ten (10) consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or
 
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(j) Collateral. Any material provision of any Loan Document shall for any reason cease to be valid and binding on or enforceable against any Credit Party or any Subsidiary of any Credit Party party thereto or any Credit Party or any Subsidiary of any Credit Party shall so state in writing or bring an action to limit its obligations or liabilities thereunder; or any Collateral Document shall for any reason (other than pursuant to the terms thereof) cease to create a valid security interest in the Collateral purported to be covered thereby or such security interest shall for any reason (other than the failure of the Agent to take any action within its control) cease to be a perfected and first priority security interest subject only to Permitted Liens; or
(k) Ownership. The occurrence of one or more of the following events: (i) any sale, lease, exchange or other transfer (in a single transaction or a series of related transactions) of all or substantially all of the assets of CryoLife to any Person or “group” (within the meaning of the Securities Exchange Act of 1934 and the rules of the Securities and Exchange Commission thereunder in effect on the date hereof), (ii) the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or “group” (within the meaning of the Securities Exchange Act of 1934 and the rules of the Securities and Exchange Commission thereunder as in effect on the date hereof) of 25% or more of the outstanding shares of the voting stock of CryoLife, (iii) occupation of a majority of the seats (other than vacant seats) on the board of directors of CryoLife by Persons who were neither (a) nominated by the current board of directors nor (b) appointed by directors so nominated or (iv) CryoLife ceasing to own and control, beneficially and of record, 100% of the Stock and Stock Equivalents of the other Credit Parties; or
(l) Government Authorities. FDA or any other Governmental Authority initiates enforcement action against any Credit Party or any Subsidiary of any Credit Party that causes such Credit Party or Subsidiary to discontinue marketing any of its products; or any Credit Party or any Subsidiary of any Credit Party conducts a recall which could reasonably be expected to have a Material Adverse Effect; or any Credit Party or any of its Subsidiaries enters into a settlement agreement with a Governmental Authority that results in aggregate liability as to any single or related series of transactions, incidents or conditions, of $1,000,000 or more, or could reasonably be expected to have a Material Adverse Effect.
7.2 Remedies. Upon the occurrence and during the continuance of any Event of Default, the Agent may, and shall at the request of the Required Lenders:
(a) declare all or any portion of the Commitment of each Lender to make Loans or of the L/C Issuer to issue Letters of Credit to be terminated, whereupon such Commitments shall forthwith be terminated;
(b) declare all or any portion of the unpaid principal amount of all outstanding Loans, all interest accrued and unpaid thereon, and all other amounts owing or payable hereunder or under any other Loan Document to be immediately due and payable; without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by each Credit Party; and/or
(c) exercise on behalf of itself and the Lenders all rights and remedies available to it and the Lenders under the Loan Documents or applicable law;
 
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provided, however, that upon the occurrence of any event specified in subsections 7.1(f) or 7.1(g) above (in the case of clause (i) of  subsection 7.1(g)  upon the expiration of the sixty (60) day period mentioned therein), the obligation of each Lender to make Loans and the obligation of the L/C Issuer to issue Letters of Credit shall automatically terminate and the unpaid principal amount of all outstanding Loans and all interest and other amounts as aforesaid shall automatically become due and payable without further act of the Agent, any Lender or the L/C Issuer.
7.3 Rights Not Exclusive. The rights provided for in this Agreement and the other Loan Documents are cumulative and are not exclusive of any other rights, powers, privileges or remedies provided by law or in equity, or under any other instrument, document or agreement now existing or hereafter arising.
7.4 Cash Collateral for Letters of Credit. If an Event of Default has occurred and is continuing or this Agreement (or the Commitment) shall be terminated for any reason, then the Agent may, and upon request of Required Revolving Lenders, shall, demand (which demand shall be deemed to have been delivered automatically upon any acceleration of the Loans and other obligations hereunder pursuant to  Section 7.2  hereof), and the Borrowers shall thereupon deliver to the Agent, to be held for the benefit of the L/C Issuer, Agent and the Lenders entitled thereto, an amount of cash equal to 105% of the amount of Letter of Credit Obligations as additional collateral security for Obligations in respect of any outstanding Letter of Credit. The Agent may at any time apply any or all of such cash and cash collateral to the payment of any or all of the Credit Parties’ Obligations in respect of any Letters of Credit. Pending such application, the Agent may (but shall not be obligated to) invest the same in an interest bearing account in the Agent’s name, for the benefit of the L/C Issuers, Agent and the Lenders entitled thereto, under which deposits are available for immediate withdrawal, at such bank or financial institution as the L/C Issuer and Agent may, in their discretion, select.
ARTICLE VIII - THE AGENT
8.1 Appointment and Duties.
(a) Appointment of Agent. Each Lender and each L/C Issuer hereby appoints GE Capital (together with any successor Agent pursuant to  Section 8.9 ) as the Agent hereunder and authorizes the Agent to (i) execute and deliver the Loan Documents and accept delivery thereof on its behalf from any Credit Party, (ii) take such action on its behalf and to exercise all rights, powers and remedies and perform the duties as are expressly delegated to the Agent under such Loan Documents and (iii) exercise such powers as are reasonably incidental thereto.
(b) Duties as Collateral and Disbursing Agent. Without limiting the generality of clause (a) above, the Agent shall have the sole and exclusive right and authority (to the exclusion of the Lenders and L/C Issuers), and is hereby authorized, to
 
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(i) act as the disbursing and collecting agent for the Lenders and the L/C Issuers with respect to all payments and collections arising in connection with the Loan Documents (including in any proceeding described in  subsection 7.1(g)  or any other bankruptcy, insolvency or similar proceeding), and each Person making any payment in connection with any Loan Document to any Secured Party is hereby authorized to make such payment to the Agent, (ii) file and prove claims and file other documents necessary or desirable to allow the claims of the Secured Parties with respect to any Obligation in any proceeding described in subsection 7.1(g)  or any other bankruptcy, insolvency or similar proceeding (but not to vote, consent or otherwise act on behalf of such Person), (iii) act as collateral agent for each Secured Party for purposes of the perfection of all Liens created by such agreements and all other purposes stated therein, (iv) manage, supervise and otherwise deal with the Collateral, (v) take such other action as is necessary or desirable to maintain the perfection and priority of the Liens created or purported to be created by the Loan Documents, (vi) except as may be otherwise specified in any Loan Document, exercise all remedies given to the Agent and the other Secured Parties with respect to the Collateral, whether under the Loan Documents, applicable Requirements of Law or otherwise and (vii) execute any amendment, consent or waiver under the Loan Documents on behalf of any Lender that has consented in writing to such amendment, consent or waiver; provided, however, that the Agent hereby appoints, authorizes and directs each Lender and L/C Issuer to act as collateral sub-agent for the Agent, the Lenders and the L/C Issuers for purposes of the perfection of all Liens with respect to the Collateral, including any deposit account maintained by a Credit Party with, and cash and Cash Equivalents held by, such Lender or L/C Issuer, and may further authorize and direct the Lenders and the L/C Issuers to take further actions as collateral sub-agents for purposes of enforcing such Liens or otherwise to transfer the Collateral subject thereto to the Agent, and each Lender and L/C Issuer hereby agrees to take such further actions to the extent, and only to the extent, so authorized and directed.
(c) Limited Duties. Under the Loan Documents, the Agent (i) is acting solely on behalf of the Lenders and the L/C Issuers (except to the limited extent provided in  subsection 1.4(b)  with respect to the Register), with duties that are entirely administrative in nature, notwithstanding the use of the defined term “Agent”, the terms “agent”, “Agent” and “collateral agent” and similar terms in any Loan Document to refer to the Agent, which terms are used for title purposes only, (ii) is not assuming any obligation under any Loan Document other than as expressly set forth therein or any role as agent, fiduciary or trustee of or for any Lender, L/C Issuer or any other Person and (iii) shall have no implied functions, responsibilities, duties, obligations or other liabilities under any Loan Document, and each Lender and L/C Issuer hereby waives and agrees not to assert any claim against the Agent based on the roles, duties and legal relationships expressly disclaimed in clauses (i) through (iii) above.
8.2 Binding Effect. Each Lender and each L/C Issuer agrees that (i) any action taken by the Agent or the Required Lenders (or, if expressly required hereby, a greater proportion of the Lenders) in accordance with the provisions of the Loan Documents, (ii) any action taken by the Agent in reliance upon the instructions of Required Lenders (or, where so required, such greater proportion) and (iii) the exercise by the Agent or the Required Lenders (or, where so required, such greater proportion) of the powers set forth herein or therein, together with such other powers as are reasonably incidental thereto, shall be authorized and binding upon all of the Secured Parties.
 
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8.3 Use of Discretion
(a) No Action without Instructions. The Agent shall not be required to exercise any discretion or take, or to omit to take, any action, including with respect to enforcement or collection, except any action it is required to take or omit to take (i) under any Loan Document or (ii) pursuant to instructions from the Required Lenders (or, where expressly required by the terms of this Agreement, a greater proportion of the Lenders).
(b) Right Not to Follow Certain Instructions. Notwithstanding clause (a) above, the Agent shall not be required to take, or to omit to take, any action (i) unless, upon demand, the Agent receives an indemnification satisfactory to it from the Lenders (or, to the extent applicable and acceptable to the Agent, any other Person) against all Liabilities that, by reason of such action or omission, may be imposed on, incurred by or asserted against the Agent or any Related Person thereof or (ii) that is, in the opinion of the Agent or its counsel, contrary to any Loan Document or applicable Requirement of Law.
(c) Exclusive Right to Enforce Rights and Remedies. Notwithstanding anything to the contrary contained herein or in any other Loan Document, the authority to enforce rights and remedies hereunder and under the other Loan Documents against the Credit Parties or any of them shall be vested exclusively in, and all actions and proceedings at law in connection with such enforcement shall be instituted and maintained exclusively by, Agent in accordance with the Loan Documents for the benefit of all the Lenders and the L/C Issuer; provided that the foregoing shall not prohibit (i) Agent from exercising on its own behalf the rights and remedies that inure to its benefit (solely in its capacity as Agent) hereunder and under the other Loan Documents, (ii) each of the L/C Issuer and the Swingline Lender from exercising the rights and remedies that inure to its benefit (solely in its capacity as L/C Issuer or Swingline Lender, as the case may be) hereunder and under the other Loan Documents, (iii) any Lender from exercising setoff rights in accordance with  Section 9.11  or (iv) any Lender from filing proofs of claim or appearing and filing pleadings on its own behalf during the pendency of a proceeding relative to any Credit Party under any bankruptcy or other debtor relief law; and provided further that if at any time there is no Person acting as Agent hereunder and under the other Loan Documents, then (A) the Required Lenders shall have the rights otherwise ascribed to Agent pursuant to  Section 7.2  and (B) in addition to the matters set forth in clauses (ii), (iii) and (iv) of the preceding proviso and subject to  Section 9.11 , any Lender may, with the consent of the Required Lenders, enforce any rights and remedies available to it and as authorized by the Required Lenders.
8.4 Delegation of Rights and Duties. The Agent may, upon any term or condition it specifies, delegate or exercise any of its rights, powers and remedies under, and delegate or perform any of its duties or any other action with respect to, any Loan Document by or through any trustee, co-agent, employee, attorney-in-fact and any other Person (including any Secured Party). Any such Person shall benefit from this  Article VIII  to the extent provided by the Agent.
 
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8.5 Reliance and Liability.
(a) The Agent may, without incurring any liability hereunder, (i) treat the payee of any Note as its holder until such Note has been assigned in accordance with  Section 9.9 , (ii) rely on the Register to the extent set forth in  Section 1.4 , (iii) consult with any of its Related Persons and, whether or not selected by it, any other advisors, accountants and other experts (including advisors to, and accountants and experts engaged by, any Credit Party) and (iv) rely and act upon any document and information (including those transmitted by Electronic Transmission) and any telephone message or conversation, in each case believed by it to be genuine and transmitted, signed or otherwise authenticated by the appropriate parties.
(b) None of the Agent and its Related Persons shall be liable for any action taken or omitted to be taken by any of them under or in connection with any Loan Document, and each Lender, L/C Issuer, each Borrower and each other Credit Party hereby waive and shall not assert (and each of the Borrowers shall cause each other Credit Party to waive and agree not to assert) any right, claim or cause of action based thereon, except to the extent of liabilities resulting primarily from the gross negligence or willful misconduct of the Agent or, as the case may be, such Related Person (each as determined in a final, non-appealable judgment by a court of competent jurisdiction) in connection with the duties expressly set forth herein. Without limiting the foregoing, the Agent:
(i) shall not be responsible or otherwise incur liability for any action or omission taken in reliance upon the instructions of the Required Lenders or for the actions or omissions of any of its Related Persons selected with reasonable care (other than employees, officers and directors of the Agent, when acting on behalf of the Agent);
(ii) shall not be responsible to any Lender, L/C Issuer or other Person for the due execution, legality, validity, enforceability, effectiveness, genuineness, sufficiency or value of, or the attachment, perfection or priority of any Lien created or purported to be created under or in connection with, any Loan Document;
(iii) makes no warranty or representation, and shall not be responsible, to any Lender, L/C Issuer or other Person for any statement, document, information, representation or warranty made or furnished by or on behalf of any Credit Party or any Related Person of any Credit Party in connection with any Loan Document or any transaction contemplated therein or any other document or information with respect to any Credit Party, whether or not transmitted or (except for documents expressly required under any Loan Document to be transmitted to the Lenders) omitted to be transmitted by the Agent, including as to completeness, accuracy, scope or adequacy thereof, or for the scope, nature or results of any due diligence performed by the Agent in connection with the Loan Documents; and
 
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(iv) shall not have any duty to ascertain or to inquire as to the performance or observance of any provision of any Loan Document, whether any condition set forth in any Loan Document is satisfied or waived, as to the financial condition of any Credit Party or as to the existence or continuation or possible occurrence or continuation of any Default or Event of Default and shall not be deemed to have notice or knowledge of such occurrence or continuation unless it has received a notice from the Borrower Representative, any Lender or L/C Issuer describing such Default or Event of Default clearly labeled “notice of default” (in which case the Agent shall promptly give notice of such receipt to all Lenders);
and, for each of the items set forth in clauses (i) through (iv) above, each Lender, L/C Issuer and each Borrower hereby waives and agrees not to assert (and each of the Borrowers shall cause each other Credit Party to waive and agree not to assert) any right, claim or cause of action it might have against the Agent based thereon.
8.6 Agent Individually. The Agent and its Affiliates may make loans and other extensions of credit to, acquire Stock and Stock Equivalents of, engage in any kind of business with, any Credit Party or Affiliate thereof as though it were not acting as Agent and may receive separate fees and other payments therefor. To the extent the Agent or any of its Affiliates makes any Loan or otherwise becomes a Lender hereunder, it shall have and may exercise the same rights and powers hereunder and shall be subject to the same obligations and liabilities as any other Lender and the terms “Lender”, “Revolving Lender”, “Required Lender”, “Required Revolving Lender” and any similar terms shall, except where otherwise expressly provided in any Loan Document, include, without limitation, the Agent or such Affiliate, as the case may be, in its individual capacity as Lender, Revolving Lender or as one of the Required Lenders or Required Revolving Lenders.
8.7 Lender Credit Decision. (a) Each Lender and each L/C Issuer acknowledges that it shall, independently and without reliance upon the Agent, any Lender or L/C Issuer or any of their Related Persons or upon any document (including any offering and disclosure materials in connection with the syndication of the Loans) solely or in part because such document was transmitted by the Agent or any of its Related Persons, conduct its own independent investigation of the financial condition and affairs of each Credit Party and make and continue to make its own credit decisions in connection with entering into, and taking or not taking any action under, any Loan Document or with respect to any transaction contemplated in any Loan Document, in each case based on such documents and information as it shall deem appropriate. Except for documents expressly required by any Loan Document to be transmitted by the Agent to the Lenders or L/C Issuers, the Agent shall not have any duty or responsibility to provide any Lender or L/C Issuer with any credit or other information concerning the business, prospects, operations, property, financial and other condition or creditworthiness of any Credit Party or any Affiliate of any Credit Party that may come in to the possession of the Agent or any of its Related Persons.
 
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(b) If any Lender or L/C Issuer has elected to abstain from receiving MNPI (as defined below in Section 9.10) concerning the Credit Parties or their Affiliates, such Lender or L/C Issuer acknowledges that, notwithstanding such election, Agent and/or the Credit Parties will, from time to time, make available syndicate-information (which may contain MNPI) as required by the terms of, or in the course of administering the Loans to the credit contact(s) identified for receipt of such information on the Lender’s administrative questionnaire who are able to receive and use all syndicate-level information (which may contain MNPI) in accordance with such Lender’s compliance policies and contractual obligations and applicable law, including federal and state securities laws; provided, that if such contact is not so identified in such questionnaire, the relevant Lender or L/C Issuer hereby agrees to promptly (and in any event within one (1) Business Day) provide such a contact to Agent and the Credit Parties upon request therefor by Agent or the Credit Parties. Notwithstanding such Lender’s or L/C Issuer’s election to abstain from receiving MNPI, such Lender or L/C Issuer acknowledges that if such Lender or L/C Issuer chooses to communicate with Agent, it assumes the risk of receiving MNPI concerning the Credit Parties or their Affiliates.
8.8 Expenses; Indemnities.
(a) Each Lender agrees to reimburse the Agent and each of its Related Persons (to the extent not reimbursed by any Credit Party) promptly upon demand, severably and ratably, of any costs and expenses (including fees, charges and disbursements of financial, legal and other advisors and Other Taxes paid in the name of, or on behalf of, any Credit Party) that may be incurred by the Agent or any of its Related Persons in connection with the preparation, syndication, execution, delivery, administration, modification, consent, waiver or enforcement (whether through negotiations, through any work-out, bankruptcy, restructuring or other legal or other proceeding or otherwise) of, or legal advice in respect of its rights or responsibilities under, any Loan Document.
(b) Each Lender further agrees to indemnify the Agent and each of its Related Persons (to the extent not reimbursed by any Credit Party), severably and ratably, from and against Liabilities (including taxes, interests and penalties imposed for not properly withholding or backup withholding on payments made to on or for the account of any Lender) that may be imposed on, incurred by or asserted against the Agent or any of its Related Persons in any matter relating to or arising out of, in connection with or as a result of any Loan Document, any Related Document or any other act, event or transaction related, contemplated in or attendant to any such document, or, in each case, any action taken or omitted to be taken by the Agent or any of its Related Persons under or with respect to any of the foregoing; provided, however, that no Lender shall be liable to the Agent or any of its Related Persons to the extent such liability has resulted primarily from the gross negligence or willful misconduct of the Agent or, as the case may be, such Related Person, as determined by a court of competent jurisdiction in a final non-appealable judgment or order.
 
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(c) To the extent required by any applicable law, Agent may withhold from any payment to any Lender under a Loan Document an amount equal to any applicable withholding tax. If the IRS or any other Governmental Authority asserts a claim that Agent did not properly withhold tax from amounts paid to or for the account of any Lender (because the appropriate certification form was not delivered, was not properly executed, or fails to establish an exemption from, or reduction of, withholding tax with respect to a particular type of payment, or because such Lender failed to notify Agent or any other Person of a change in circumstances which rendered the exemption from, or reduction of, withholding tax ineffective, or for any other reason), or Agent reasonably determines that it was required to withhold taxes from a prior payment but failed to do so, such Lender shall promptly indemnify Agent fully for all amounts paid, directly or indirectly, by Agent as tax or otherwise, including penalties and interest, and together with all expenses incurred by Agent, including legal expenses, allocated internal costs and out-of-pocket expenses. Agent may offset against any payment to any Lender under a Loan Document, any applicable withholding tax that was required to be withheld from any prior payment to such Lender but which was not so withheld, as well as any other amounts for which Agent is entitled to indemnification from such Lender under this  Section 8.8(c) .
8.9 Resignation of Agent or L/C Issuer.
(a) The Agent may resign at any time by delivering notice of such resignation to the Lenders and the Borrower Representative, effective on the date set forth in such notice or, if no such date is set forth therein, upon the date such notice shall be effective. If the Agent delivers any such notice, the Required Lenders shall have the right to appoint a successor Agent. If, within 30 days after the retiring Agent having given notice of resignation, no successor Agent has been appointed by the Required Lenders that has accepted such appointment, then the retiring Agent may, on behalf of the Lenders, appoint a successor Agent from among the Lenders. Each appointment under this clause (a) shall be subject to the prior consent of the Borrower Representative, which may not be unreasonably withheld but shall not be required during the continuance of an Event of Default.
(b) Effective immediately upon its resignation, (i) the retiring Agent shall be discharged from its duties and obligations under the Loan Documents, (ii) the Lenders shall assume and perform all of the duties of the Agent until a successor Agent shall have accepted a valid appointment hereunder, (iii) the retiring Agent and its Related Persons shall no longer have the benefit of any provision of any Loan Document other than with respect to any actions taken or omitted to be taken while such retiring Agent was, or because such Agent had been, validly acting as Agent under the Loan Documents and (iv) subject to its rights under  Section 8.3 , the retiring Agent shall take such action as may be reasonably necessary to assign to the successor Agent its rights as Agent under the Loan Documents. Effective immediately upon its acceptance of a valid appointment as Agent, a successor Agent shall succeed to, and become vested with, all the rights, powers, privileges and duties of the retiring Agent under the Loan Documents.
 
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(c) Any L/C Issuer may resign at any time by delivering notice of such resignation to the Agent, effective on the date set forth in such notice or, if no such date is set forth therein, on the date such notice shall be effective. Upon such resignation, the L/C Issuer shall remain an L/C Issuer and shall retain its rights and obligations in its capacity as such (other than any obligation to Issue Letters of Credit but including the right to receive fees or to have Lenders participate in any L/C Reimbursement Obligation thereof) with respect to Letters of Credit issued by such L/C Issuer prior to the date of such resignation and shall otherwise be discharged from all other duties and obligations under the Loan Documents.
8.10 Release of Collateral or Guarantors. Each Lender and L/C Issuer hereby consents to the release and hereby directs the Agent to release (or, in the case of clause (b)(ii) below, release or subordinate) the following:
(a) any Subsidiary of a Borrower from its guaranty of any Obligation if all of the Stock and Stock Equivalents of such Subsidiary owned by any Credit Party are sold or transferred in a transaction permitted under the Loan Documents (including pursuant to a waiver or consent), to the extent that, after giving effect to such transaction, such Subsidiary would not be required to guaranty any Obligations pursuant to  Section 4.13 ; and
(b) any Lien held by the Agent for the benefit of the Secured Parties against (i) any Collateral that is sold, transferred, conveyed or otherwise disposed of by a Credit Party in a transaction permitted by the Loan Documents (including pursuant to a valid waiver or consent), to the extent all Liens required to be granted in such Collateral pursuant to  Section 4.13  after giving effect to such transaction have been granted, (ii) any property subject to a Lien permitted hereunder in reliance upon subsection 5.1(h)  or (i) and (iii) all of the Collateral and all Credit Parties, upon (A) the occurrence of the Facility Termination Date and (B) to the extent requested by the Agent, receipt by Agent and the Secured Parties of liability releases from the Credit Parties each in form and substance acceptable to the Agent.
Each Lender and L/C Issuer hereby directs the Agent, and the Agent hereby agrees, upon receipt of reasonable advance notice from the Borrower Representative, to execute and deliver or file such documents and to perform other actions reasonably necessary to release the guaranties and Liens when and as directed in this  Section 8.10 .
8.11 Additional Secured Parties. The benefit of the provisions of the Loan Documents directly relating to the Collateral or any Lien granted thereunder shall extend to and be available to any Secured Party that is not a Lender or L/C Issuer party hereto as long as, by accepting such benefits, such Secured Party agrees, as among the Agent and all other Secured Parties, that such Secured Party is bound by (and, if requested by the Agent, shall confirm such agreement in a writing in form and substance acceptable to the Agent) this Article VIII,  Section 9.3 ,  Section 9.9 ,  Section 9.10 ,  Section 9.11 ,  Section 9.17 ,  Section 9.24  and Section 10.1  and the decisions and actions of the Agent and the Required Lenders (or, where expressly required by the terms of this Agreement, a greater proportion of the Lenders or other parties hereto as required herein) to the same extent a
 
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Lender is bound; provided, however, that, notwithstanding the foregoing, (a) such Secured Party shall be bound by Section 8.8 only to the extent of Liabilities, costs and expenses with respect to or otherwise relating to the Collateral held for the benefit of such Secured Party, in which case the obligations of such Secured Party thereunder shall not be limited by any concept of pro rata share or similar concept, (b) each of the Agent, the Lenders and the L/C Issuers party hereto shall be entitled to act at its sole discretion, without regard to the interest of such Secured Party, regardless of whether any Obligation to such Secured Party thereafter remains outstanding, is deprived of the benefit of the Collateral, becomes unsecured or is otherwise affected or put in jeopardy thereby, and without any duty or liability to such Secured Party or any such Obligation and (c) except as otherwise set forth herein, such Secured Party shall not have any right to be notified of, consent to, direct, require or be heard with respect to, any action taken or omitted in respect of the Collateral or under any Loan Document.
ARTICLE IX - MISCELLANEOUS
9.1 Amendments and Waivers.
(a) No amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent with respect to any departure by any Credit Party therefrom, shall be effective unless the same shall be in writing and signed by the Required Lenders (or by the Agent with the consent of the Required Lenders), the Borrowers and acknowledged by the Agent, and then such waiver shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no such waiver, amendment, or consent shall, unless in writing and signed by all the Lenders directly affected thereby (or by the Agent with the consent of all the Lenders directly affected thereby), in addition to the Required Lenders (or by the Agent with the consent of the Required Lenders), the Borrowers and acknowledged by the Agent, do any of the following:
(i) increase or extend the Commitment of any Lender (or reinstate any Commitment terminated pursuant to subsection 7.2(a) );
(ii) postpone or delay any date fixed for, or waive, any scheduled installment of principal or any payment of interest, fees or other amounts due to the Lenders (or any of them) or L/C Issuer hereunder or under any other Loan Document;
(iii) reduce the principal of, or the rate of interest specified herein or the amount of interest payable in cash specified herein on any Loan, or of any fees or other amounts payable hereunder or under any other Loan Document, including L/C Reimbursement Obligations;
(iv) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Loans which shall be required for the Lenders or any of them to take any action hereunder;
 
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(v) amend this Section 9.1 or the definition of Required Lenders or any provision providing for consent or other action by all Lenders; or
(vi) discharge any Credit Party from its respective payment Obligations under the Loan Documents, or release all or substantially all of the Collateral, except as otherwise may be provided in this Agreement or the other Loan Documents;
it being agreed that all Lenders shall be deemed to be directly affected by an amendment or waiver of the type described in the preceding clauses (iv), (v) and (vi).
(b) No amendment, waiver or consent shall, unless in writing and signed by the Agent, the L/C Issuer or the Swingline Lender, as the case may be, in addition to the Required Lenders or all Lenders directly affected thereby or all the Lenders, as the case may be (or by the Agent with the consent of the Required Lenders or all the Lenders directly affected thereby, as the case may be), affect the rights or duties of the Agent, the L/C Issuer or the Swingline Lender, as applicable, under this Agreement or any other Loan Document. No amendment, modification or waiver of this Agreement or any Loan Document altering the ratable treatment of Obligations arising under Secured Rate Contracts resulting in such Obligations being junior in right of payment to principal on the Loans or resulting in Obligations owing to any Secured Swap Provider becoming unsecured (other than releases of Liens permitted in accordance with the terms hereof), in each case in a manner adverse to any Secured Swap Provider, shall be effective without the written consent of such Secured Swap Provider or, in the case of a Secured Rate Contract for which GE Capital or an Affiliate of GE Capital has provided credit enhancement either through an assignment right or a letter of credit in favor of the Secured Swap Provider, GE Capital.
(c) No amendment or waiver shall, unless signed by Agent and Required Revolving Lenders (or by Agent with the consent of Required Revolving Lenders) in addition to the Required Lenders (or by Agent with the consent of the Required Lenders): (i) amend or waive compliance with the conditions precedent to the obligations of Lenders to make any Revolving Loan (or of any L/C Issuer to Issue any Letter of Credit) in  Section 2.2 ; or (ii) waive any Default or Event of Default for the purpose of satisfying the conditions precedent to the obligations of Lenders to make any Revolving Loan (or of any L/C Issuer to Issue any Letter of Credit) in  Section 2.2 . No amendment shall: (x) amend or waive this  Section 9.1(c)  or the definitions of the terms used in this  Section 9.1(c)  insofar as the definitions affect the substance of this  Section 9.1(c) ; (y) change the definition of the term Required Revolving Lenders; or (z) change the percentage of Lenders which shall be required for Revolving Lenders to take any action hereunder, in each case, without the consent of all Revolving Lenders.
9.2 Notices.
(a) Addresses. All notices, demands, requests, directions and other communications required or expressly authorized to be made by this Agreement shall,
 
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whether or not specified to be in writing but unless otherwise expressly specified to be given by any other means, be given in writing and (i) addressed to the address set forth on the applicable signature page hereto, (ii) posted to Syndtrak ®  (to the extent such system is available and set up by or at the direction of the Agent prior to posting) in an appropriate location by uploading such notice, demand, request, direction or other communication to  www.Syndtrak.com , or using such other means of posting to Syndtrak ®  as may be available and reasonably acceptable to the Agent prior to such posting, (iii) posted to any other E-System approved by or set up by or at the direction of Agent or (iv) addressed to such other address as shall be notified in writing (A) in the case of the Borrowers, the Swingline Lender and the Agent, to the other parties hereto and (B) in the case of all other parties, to the Borrower Representative and the Agent. Transmission by electronic mail (including E-Fax) shall not be sufficient or effective to transmit any such notice under this  clause (a ) unless such transmission is an available means to post to any E-System.
(b) Effectiveness. (i) All communications described in clause (a) above and all other notices, demands, requests and other communications made in connection with this Agreement shall be effective and be deemed to have been received (i) if delivered by hand, upon personal delivery, (ii) if delivered by overnight courier service, 1 Business Day after delivery to such courier service, (iii) if delivered by mail, when deposited in the mails, (iv) if delivered by facsimile (other than to post to an E-System pursuant to clause (a)(ii) or (a)(iii) above), upon sender’s receipt of confirmation of proper transmission, and (v) if delivered by posting to any E-System, on the later of the date of such posting and the date access to such posting is given to the recipient thereof in accordance with the standard procedures applicable to such E-System;  provided ,  however , that no communications to Agent pursuant to Article I shall be effective until received by Agent.
(ii) The posting, completion and/or submission by any Credit Party of any communication pursuant to an E-System shall constitute a representation and warranty by the Credit Parties that any representation, warranty, certification or other similar statement required by the Loan Documents to be provided, given or made by a Credit Party in connection with any such communication is true, correct and complete except as expressly noted in such communication or E-System.
(c) Each Lender shall notify the Agent in writing of any changes in the address to which notices to such Lender should be directed, of addresses of its Lending Office, of payment instructions in respect of all payments to be made to it hereunder and of such other administrative information as the Agent shall reasonably request.
9.3 Electronic Transmissions.
(a) Authorization. Subject to the provisions of Section 9.2(a), each of Agent, Lenders, each Credit Party and each of their Related Persons, is authorized (but not required) to transmit, post or otherwise make or communicate, in its sole discretion, Electronic Transmissions in connection with any Loan Document and the transactions contemplated therein. Each Credit Party and each Secured Party hereto acknowledges
 
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and agrees that the use of Electronic Transmissions is not necessarily secure and that there are risks associated with such use, including risks of interception, disclosure and abuse and each indicates it assumes and accepts such risks by hereby authorizing the transmission of Electronic Transmissions.
(b) Signatures. Subject to the provisions of Section 9.2(a), (i)(A) no posting to any E-System shall be denied legal effect merely because it is made electronically, (B) each E-Signature on any such posting shall be deemed sufficient to satisfy any requirement for a “signature” and (C) each such posting shall be deemed sufficient to satisfy any requirement for a “writing”, in each case including pursuant to any Loan Document, any applicable provision of any UCC, the federal Uniform Electronic Transactions Act, the Electronic Signatures in Global and National Commerce Act and any substantive or procedural Requirement of Law governing such subject matter, (ii) each such posting that is not readily capable of bearing either a signature or a reproduction of a signature may be signed, and shall be deemed signed, by attaching to, or logically associating with such posting, an E-Signature, upon which Agent, each Secured Party and each Credit Party may rely and assume the authenticity thereof, (iii) each such posting containing a signature, a reproduction of a signature or an E-Signature shall, for all intents and purposes, have the same effect and weight as a signed paper original and (iv) each party hereto or beneficiary hereto agrees not to contest the validity or enforceability of any posting on any E-System or E-Signature on any such posting under the provisions of any applicable Requirement of Law requiring certain documents to be in writing or signed; provided ,  however , that nothing herein shall limit such party’s or beneficiary’s right to contest whether any posting to any E-System or E-Signature has been altered after transmission.
(c) Separate Agreements. All uses of an E-System shall be governed by and subject to, in addition to Section 9.2 and this  Section 9.3 , separate terms and conditions posted or referenced in such E-System and related Contractual Obligations executed by Agent and Credit Parties in connection with the use of such E-System.
(d) LIMITATION OF LIABILITY. ALL E-SYSTEMS AND ELECTRONIC TRANSMISSIONS SHALL BE PROVIDED “AS IS” AND “AS AVAILABLE”. NONE OF AGENT, ANY LENDER OR ANY OF THEIR RELATED PERSONS WARRANTS THE ACCURACY, ADEQUACY OR COMPLETENESS OF ANY E-SYSTEMS OR ELECTRONIC TRANSMISSION AND DISCLAIMS ALL LIABILITY FOR ERRORS OR OMISSIONS THEREIN. NO WARRANTY OF ANY KIND IS MADE BY AGENT, ANY LENDER OR ANY OF THEIR RELATED PERSONS IN CONNECTION WITH ANY E-SYSTEMS OR ELECTRONIC COMMUNICATION, INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD-PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS. Each of each Borrower, each other Credit Party executing this Agreement and each Secured Party agrees that Agent has no responsibility for maintaining or providing any equipment, software, services or any testing required in connection with any Electronic Transmission or otherwise required for any E-System.
 
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9.4 No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of the Agent or any Lender, any right, remedy, power or privilege hereunder, shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. No course of dealing between any Credit Party, any Affiliate of any Credit Party, the Agent or any Lender shall be effective to amend, modify or discharge any provision of this Agreement or any of the other Loan Documents.
9.5 Costs and Expenses. Any action taken by any Credit Party under or with respect to any Loan Document, even if required under any Loan Document or at the request of Agent or Required Lenders, shall be at the expense of such Credit Party, and neither Agent nor any other Secured Party shall be required under any Loan Document to reimburse any Credit Party or any Subsidiary of any Credit Party therefor except as expressly provided therein. In addition, the Borrowers agree to pay or reimburse upon demand (a) the Agent for all reasonable out-of-pocket costs and expenses incurred by it or any of its Related Persons (but only to the extent Agent or its Affiliates are required to reimburse such Related Persons), in connection with the investigation, development, preparation, negotiation, syndication, execution, interpretation or administration of, any modification of any term of or termination of, any Loan Document, any commitment or proposal letter therefor, any other document prepared in connection therewith or the consummation and administration of any transaction contemplated therein, in each case including Attorney Costs to the Agent, (b) the Agent for all reasonable costs and expenses incurred by it or any of its Related Persons in connection with internal audit reviews, field examinations and Collateral examinations (which shall be reimbursed, in addition to the out-of-pocket costs and expenses of such examiners, at the per diem rate per individual charged by the Agent for its examiners), (c) each of the Agent, its Related Persons, and L/C Issuer for all costs and expenses incurred in connection with (i) any refinancing or restructuring of the credit arrangements provided hereunder in the nature of a “work-out”, (ii) the enforcement or preservation of any right or remedy under any Loan Document, any Obligation, with respect to the Collateral or any other related right or remedy or (iii) the commencement, defense, conduct of, intervention in, or the taking of any other action with respect to, any proceeding (including any bankruptcy or insolvency proceeding) related to any Credit Party, any Subsidiary of any Credit Party, Loan Document or Obligation (or the response to and preparation for any subpoena or request for document production relating thereto), including Attorney Costs and (d) fees and disbursements of Attorney Costs of one law firm on behalf of all Lenders (other than Agent) incurred in connection with any of the matters referred to in clause (c) above.
9.6 Indemnity.
(a) Each Credit Party agrees to indemnify, hold harmless and defend Agent, each Lender, each L/C Issuer and each of their respective Related Persons (each such Person being an “ Indemnitee ”) from and against all Liabilities (including brokerage commissions, fees and other compensation) that may be imposed on, incurred by or asserted against any such Indemnitee (regardless of whether such matter is initiated by a third party, by a Borrower or any of their respective affiliates) in any matter relating to or
 
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arising out of, in connection with or as a result of (i) any Loan Document, any Obligation (or the repayment thereof), any Letter of Credit, the use or intended use of the proceeds of any Loan or the use of any Letter of Credit or any securities filing of, or with respect to, any Credit Party, (ii) any commitment letter, proposal letter or term sheet with any Person or any Contractual Obligation, arrangement or understanding with any broker, finder or consultant, in each case entered into by or on behalf of any Credit Party or any Affiliate of any of them in connection with any of the foregoing and any Contractual Obligation entered into in connection with any E-Systems or other Electronic Transmissions, (iii) any actual or prospective investigation, litigation or other proceeding, whether or not brought by any such Indemnitee or any of its Related Persons, any holders of securities or creditors (and including attorneys’ fees in any case), whether or not any such Indemnitee, Related Person, holder or creditor is a party thereto, and whether or not based on any securities or commercial law or regulation or any other Requirement of Law or theory thereof, including common law, equity, contract, tort or otherwise or (iv) any other act, event or transaction related, contemplated in or attendant to any of the foregoing (collectively, the “ Indemnified Matters ”); provided, however, that no Credit Party shall have any liability under this  Section 9.6  to any Indemnitee with respect to any Indemnified Matter, and no Indemnitee shall have any liability with respect to any Indemnified Matter other than (to the extent otherwise liable), to the extent such liability has resulted primarily from the gross negligence or willful misconduct of such Indemnitee, as determined by a court of competent jurisdiction in a final non-appealable judgment or order. Furthermore, each of each Borrower and each other Credit Party executing this Agreement waives and agrees not to assert against any Indemnitee, and shall cause each other Credit Party to waive and not assert against any Indemnitee, any right of contribution with respect to any Liabilities that may be imposed on, incurred by or asserted against any Related Person. This Section 9.6(a) shall not apply with respect to Taxes other than any Taxes that represent Liabilities arising from any non-Tax claim.
(b) Without limiting the foregoing, “Indemnified Matters” includes all Environmental Liabilities, including those arising from, or otherwise involving, any Property of any Credit Party or any Related Person of any Credit Party or any actual, alleged or prospective damage to Property or natural resources or harm or injury alleged to have resulted from any Release of Hazardous Materials on, upon or into such Property or natural resource or any Property on or contiguous to any real Property of any Credit Party or any Related Person or any Credit Party, whether or not, with respect to any such Environmental Liabilities, any Indemnitee is a mortgagee pursuant to any leasehold mortgage, a mortgagee in possession, the successor-in-interest to any Credit Party or any Related Person of any Credit Party or the owner, lessee or operator of any Property of any Related Person through any foreclosure action, in each case except to the extent such Environmental Liabilities (i) are incurred solely following foreclosure by Agent or following Agent or any Lender having become the successor-in-interest to any Credit Party or any Related Person of any Credit Party and (ii) are attributable solely to acts of such Indemnitee.
9.7 Marshaling; Payments Set Aside. No Secured Party shall be under any obligation to marshal any Property in favor of any Credit Party or any other Person or against or in payment of any Obligation. To the extent that the Secured Party receives a
 
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payment from a Borrower, from any other Credit Party, from the proceeds of the Collateral, from the exercise of its rights of setoff, any enforcement action or otherwise, and such payment is subsequently, in whole or in part, invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, receiver or any other party, then to the extent of such recovery, the obligation or part thereof originally intended to be satisfied, and all Liens, rights and remedies therefor, shall be revived and continued in full force and effect as if such payment had not occurred.
9.8 Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided that any assignment by any Lender shall be subject to the provisions of  Section 9.9  hereof, and provided further that no Borrower may assign or transfer any of its rights or obligations under this Agreement without the prior written consent of the Agent and each Lender.
9.9 Assignments and Participations; Binding Effect.
(a) On and after the Effective Date, this Agreement shall be binding upon and inure to the benefit of, but only to the benefit of, the Borrowers, the other Credit Parties hereto (in each case except for  Article VIII ), the Agent, each Lender and L/C Issuer party hereto and, to the extent provided in  Section 8.11 , each other Secured Party and, in each case, their respective successors and permitted assigns. Except as expressly provided in any Loan Document (including in  Section 8.9 ), none of any Borrower, any other Credit Party, any L/C Issuer or the Agent shall have the right to assign any rights or obligations hereunder or any interest herein.
(b) Each Lender may sell, transfer, negotiate or assign (a “Sale”) all or a portion of its rights and obligations hereunder (including all or a portion of its Commitments and its rights and obligations with respect to Loans and Letters of Credit) to (i) any existing Lender (other than a Non-Funding Lender or Impacted Lender), (ii) any Affiliate or Approved Fund of any existing Lender (other than a Non-Funding Lender or Impacted Lender) or (iii) any other Person acceptable (which acceptance shall not be unreasonably withheld or delayed) to the Agent and, as long as no Event of Default is continuing, the Borrower Representative and each L/C Issuer that is a Lender (which acceptances of L/C Issuer and Borrower Representative shall be deemed to have been given unless an objection is delivered to Agent within five (5) Business Days after notice of a proposed Sale is delivered to Borrower Representative);  provided ,  however , that (x) such Sales must be ratable among the obligations owing to and owed by such Lender with respect to the Revolving Loans and (y) for each Loan, the aggregate outstanding principal amount (determined as of the effective date of the applicable Assignment) of the Loans, Commitments and Letter of Credit Obligations subject to any such Sale shall be in a minimum amount of $1,000,000, unless such Sale is made to an existing Lender or an Affiliate or Approved Fund of any existing Lender, is of the assignor’s (together with its Affiliates and Approved Funds) entire interest in such facility or is made with the prior consent of the Borrower Representative (to the extent Borrower Representative’s consent is otherwise required) and Agent, (y) interest accrued, prior to and through the date of any such Sale may not be assigned, and (z) such Sales by
 
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Lenders who are Non-Funding Lenders due to clause (a) of the definition of Non-Funding Lender shall be subject to Agent’s prior written consent in all instances, unless in connection with such sale, such Non-Funding Lender cures, or causes the cure of, its Non-Funding Lender status as contemplated in  subsection 1.11(e)(v) . Agent’s refusal to accept a Sale to a Credit Party, an Affiliate of a Credit Party, a holder of Indebtedness subordinated to the Obligations or an Affiliate of such a holder, or to a Person that would be a Non-Funding Lender or an Impacted Lender, or the imposition of conditions or limitations (including limitations on voting) upon Sales to such Persons, shall not be deemed to be unreasonable .
(c) The parties to each Sale made in reliance on clause (b) above (other than those described in clause (e) or (f) below) shall execute and deliver to the Agent an Assignment via an electronic settlement system designated by the Agent (or, if previously agreed with the Agent, via a manual execution and delivery of the Assignment) evidencing such Sale, together with any existing Note subject to such Sale (or any affidavit of loss therefor acceptable to the Agent), any Tax forms required to be delivered pursuant to  Section 10.1  and payment of an assignment fee in the amount of $3,500, provided that (1) if a Sale by a Lender is made to an Affiliate or an Approved Fund of such assigning Lender, then no assignment fee shall be due in connection with such Sale, and (2) if a Sale by a Lender is made to an assignee that is not an Affiliate or Approved Fund of such assignor Lender, and concurrently to one or more Affiliates or Approved Funds of such Assignee, then only one assignment fee of $3,500 shall be due in connection with such Sale. Upon receipt of all the foregoing, and conditioned upon such receipt and, if such Assignment is made in accordance with  Section 9.9(b)(iii ), upon the Agent (and the Borrower Representative, if applicable) consenting to such Assignment (if required), from and after the effective date specified in such Assignment, the Agent shall record or cause to be recorded in the Register the information contained in such Assignment.
(d) Subject to the recording of an Assignment by the Agent in the Register pursuant to Section 1.4(b), (i) the assignee thereunder shall become a party hereto and, to the extent that rights and obligations under the Loan Documents have been assigned to such assignee pursuant to such Assignment, shall have the rights and obligations of a Lender, (ii) any applicable Note shall be transferred to such assignee through such entry and (iii) the assignor thereunder shall, to the extent that rights and obligations under this Agreement have been assigned by it pursuant to such Assignment, relinquish its rights (except for those surviving the termination of the Commitments and the payment in full of the Obligations) and be released from its obligations under the Loan Documents, other than those relating to events or circumstances occurring prior to such assignment (and, in the case of an Assignment covering all or the remaining portion of an assigning Lender’s rights and obligations under the Loan Documents, such Lender shall cease to be a party hereto).
(e) In addition to the other rights provided in this Section 9.9, each Lender may grant a security interest in, or otherwise assign as collateral, any of its rights under this Agreement, whether now owned or hereafter acquired (including rights to payments of principal or interest on the Loans), to (A) any federal reserve bank (pursuant
 
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to Regulation A of the Federal Reserve Board), without notice to the Agent or (B) any holder of, or trustee for the benefit of the holders of, such Lender’s Indebtedness or equity securities, by notice to the Agent;  provided ,  however , that no such holder or trustee, whether because of such grant or assignment or any foreclosure thereon (unless such foreclosure is made through an assignment in accordance with clause (b) above), shall be entitled to any rights of such Lender hereunder and no such Lender shall be relieved of any of its obligations hereunder.
(f) In addition to the other rights provided in this Section 9.9, each Lender may, (x) with notice to the Agent, grant to an SPV the option to make all or any part of any Loan that such Lender would otherwise be required to make hereunder (and the exercise of such option by such SPV and the making of Loans pursuant thereto shall satisfy the obligation of such Lender to make such Loans hereunder) and such SPV may assign to such Lender the right to receive payment with respect to any Obligation and (y) without notice to or consent from the Agent or the Borrowers, sell participations to one or more Persons in or to all or a portion of its rights and obligations under the Loan Documents (including all its rights and obligations with respect to the Revolving Loans and Letters of Credit);  provided ,  however , that, whether as a result of any term of any Loan Document or of such grant or participation, (i) no such SPV or participant shall have a commitment, or be deemed to have made an offer to commit, to make Loans hereunder, and, except as provided in the applicable option agreement, none shall be liable for any obligation of such Lender hereunder, (ii) such Lender’s rights and obligations, and the rights and obligations of the Credit Parties and the Secured Parties towards such Lender, under any Loan Document shall remain unchanged and each other party hereto shall continue to deal solely with such Lender, which shall remain the holder of the Obligations in the Register, except that (A) each such participant and SPV shall be entitled to the benefit of  Article X , but, with respect to  Section 10.1 , only to the extent such participant or SPV delivers the tax forms such Lender is required to collect pursuant to  subsection 10.1(f)  and then only to the extent of any amount to which such Lender would be entitled in the absence of any such grant or participation and (B) each such SPV may receive other payments that would otherwise be made to such Lender with respect to Loans funded by such SPV to the extent provided in the applicable option agreement and set forth in a notice provided to the Agent by such SPV and such Lender,  provided ,  however , that in no case (including pursuant to clause (A) or (B) above) shall an SPV or participant have the right to enforce any of the terms of any Loan Document, and (iii) the consent of such SPV or participant shall not be required (either directly, as a restraint on such Lender’s ability to consent hereunder or otherwise) for any amendments, waivers or consents with respect to any Loan Document or to exercise or refrain from exercising any powers or rights such Lender may have under or in respect of the Loan Documents (including the right to enforce or direct enforcement of the Obligations), except for those described in clauses (ii) and (iii) of  subsection 9.1(a)  with respect to amounts, or dates fixed for payment of amounts, to which such participant or SPV would otherwise be entitled and, in the case of participants, except for those described in clause (vi) of  subsection 9.1(a) . No party hereto shall institute (and each Borrower shall cause each other Credit Party not to institute) against any SPV grantee of an option pursuant to this clause (f) any bankruptcy, reorganization, insolvency, liquidation or similar proceeding, prior to the date that is one year and one day after the payment in full of all outstanding
 
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commercial paper of such SPV; provided, however, that each Lender having designated an SPV as such agrees to indemnify each Indemnitee against any Liability that may be incurred by, or asserted against, such Indemnitee as a result of failing to institute such proceeding (including a failure to get reimbursed by such SPV for any such Liability). The agreement in the preceding sentence shall survive the termination of the Commitments and the payment in full of the Obligations.
9.10 Confidentiality. Each of Agent, each Lender and each L/C Issuer acknowledges and agrees that it may receive material non-public information (“ MNPI ”) hereunder concerning the Credit Parties and their Affiliates and agrees to use such information in compliance with all relevant policies, procedures and applicable Requirements of Laws (including United States federal and state securities laws and regulations). Each Lender, L/C Issuer and the Agent agrees to use all reasonable efforts to maintain, in accordance with its customary practices, the confidentiality of information obtained by it pursuant to any Loan Document and designated in writing by any Credit Party as confidential for a period of two (2) years following the date on which this Agreement terminates in accordance with the terms hereof, except that such information may be disclosed (i) with the Borrower Representative’s consent, (ii) to Related Persons of such Lender, L/C Issuer or the Agent, as the case may be, or to any Person that any L/C Issuer causes to issue Letters of Credit hereunder, that are advised of the confidential nature of such information and are instructed to keep such information confidential, (iii) to the extent such information presently is or hereafter becomes available to such Lender, L/C Issuer or the Agent, as the case may be, on a non-confidential basis from a source other than any Credit Party, (iv) to the extent disclosure is required by applicable Requirements of Law or other legal process or requested or demanded by any Governmental Authority, (v) to the extent necessary or customary for inclusion in league table measurements or in any tombstone or other advertising materials (and the Credit Parties consent to the publication of such tombstone or other advertising materials by the Agent, any Lender, any L/C Issuer or any of their Related Persons), (vi) (A) to the National Association of Insurance Commissioners or any similar organization, any examiner or, on a confidential basis, to any nationally recognized rating agency or (B) otherwise to the extent consisting of general portfolio information that does not identify borrowers, (vii) to current or prospective assignees, SPVs (including the investors or prospective investors therein) or participants, direct or contractual counterparties to any Secured Rate Contracts and to their respective Related Persons, in each case to the extent such assignees, investors, prospective investors, participants, counterparties or Related Persons agree to be bound by provisions substantially similar to the provisions of this  Section 9.10  (and such Person may disclose information to their respective Related Persons in accordance with clause (ii) above), (viii) to any other party hereto, and (ix) in connection with the exercise or enforcement of any right or remedy under any Loan Document, in connection with any litigation or other proceeding to which such Lender, L/C Issuer or Agent or any of their Related Persons is a party or bound, or to the extent necessary to respond to public statements or disclosures by Credit Parties or their Related Persons referring to a Lender, L/C Issuer or Agent or any of their Related Persons. In the event of any conflict between the terms of this  Section 9.10  and those of any other Contractual Obligation entered into with any Credit Party (whether or not a Loan Document), the terms of this Section 9.10  shall govern. Each Credit Party consents to the
 
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publication by Agent or any Lender of advertising material relating to the financing transactions contemplated by this Agreement using a Borrower’s or any other Credit Party’s name, product photographs, logo or trademark. Agent or such Lender shall provide a draft of any advertising material to Borrower Representative for review and comment prior to the publication thereof.
(b) The Credit Parties acknowledge and agree that the Loan Documents and all reports, notices, communications and other information or materials provided or delivered by, or on behalf of, the Credit Parties hereunder (collectively, the “ Borrower Materials ”) may be disseminated by, or on behalf of, Agent, and made available, to the Lenders and the L/C Issuers by posting such Borrower Materials on an E-System. The Credit Parties authorize Agent to download copies of their logos from its website and post copies thereof on an E-System. Each Credit Party consents to the publication by the Agent or any Lender of any press release, tombstone, advertising or other promotional materials (including, without limitation, via any Electronic Transmission) relating to the financing transactions contemplated by this Agreement using such Group Member’s name, product photographs, logo or trademark;  provided  such publication is in compliance with applicable Requirements of Law.
(c) The Credit Parties hereby agree that if either they, any parent company or any Subsidiary of the Credit Parties has publicly traded equity or debt securities in the United States, they shall (and shall cause such parent company or Subsidiary, as the case may be, to) (i) identify in writing, and (ii) to the extent reasonably practicable, clearly and conspicuously mark such Borrower Materials that contain only information that is publicly available or that is not material for purposes of United States federal and state securities laws as “PUBLIC”. The Credit Parties agree that by identifying such Borrower Materials as “PUBLIC” or publicly filing such Borrower Materials with the Securities and Exchange Commission, then Agent, the Lenders and the L/C Issuers shall be entitled to treat such Borrower Materials as not containing any MNPI for purposes of United States federal and state securities laws. The Credit Parties further represent, warrant, acknowledge and agree that the following documents and materials shall be deemed to be PUBLIC, whether or not so marked, and do not contain any MNPI: (A) the Loan Documents, including the schedules and exhibits attached thereto, and (B) administrative materials of a customary nature prepared by the Credit Parties or Agent (including, Notices of Borrowing, Notices of Conversion/Continuation, L/C Requests, Swingline Requests and any similar requests or notices posted on or through an E-System). Before distribution of Borrower Materials, the Credit Parties agree to execute and deliver to Agent a letter authorizing distribution of the evaluation materials to prospective Lenders and their employees willing to receive MNPI, and a separate letter authorizing distribution of evaluation materials that do not contain MNPI and represent that no MNPI is contained therein.
9.11 Set-off; Sharing of Payments.
(a) Right of Setoff. Each of the Agent, each Lender, each L/C Issuer and each Affiliate (including each branch office thereof) of any of them is hereby authorized, without notice or demand (each of which is hereby waived by each Credit
 
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Party), at any time and from time to time during the continuance of any Event of Default and to the fullest extent permitted by applicable Requirements of Law, to set off and apply any and all deposits (whether general or special, time or demand, provisional or final) at any time held and other Indebtedness, claims or other obligations at any time owing by the Agent, such Lender, such L/C Issuer or any of their respective Affiliates to or for the credit or the account of the Borrowers or any other Credit Party against any Obligation of any Credit Party now or hereafter existing, whether or not any demand was made under any Loan Document with respect to such Obligation and even though such Obligation may be unmatured. No Lender or L/C Issuer shall exercise any such right of setoff without the prior consent of Agent or Required Lenders. Each of the Agent, each Lender and each L/C Issuer agrees promptly to notify the Borrower Representative and the Agent after any such setoff and application made by such Lender or its Affiliates; provided, however, that the failure to give such notice shall not affect the validity of such setoff and application. The rights under this  Section 9.11  are in addition to any other rights and remedies (including other rights of setoff) that the Agent, the Lenders, the L/C Issuer, their Affiliates and the other Secured Parties, may have.
(b) Sharing of Payments, Etc. If any Lender, directly or through an Affiliate or branch office thereof, obtains any payment of any Obligation of any Credit Party (whether voluntary, involuntary or through the exercise of any right of setoff or the receipt of any Collateral or “proceeds” (as defined under the applicable UCC) of Collateral) other than pursuant to Article X and such payment exceeds the amount such Lender would have been entitled to receive if all payments had gone to, and been distributed by, the Agent in accordance with the provisions of the Loan Documents, such Lender shall purchase for cash from other Lenders such participations in their Obligations as necessary for such Lender to share such excess payment with such Lenders to ensure such payment is applied as though it had been received by the Agent and applied in accordance with this Agreement (or, if such application would then be at the discretion of the Borrowers, applied to repay the Obligations in accordance herewith); provided, however, that (a) if such payment is rescinded or otherwise recovered from such Lender or L/C Issuer in whole or in part, such purchase shall be rescinded and the purchase price therefor shall be returned to such Lender or L/C Issuer without interest and (b) such Lender shall, to the fullest extent permitted by applicable Requirements of Law, be able to exercise all its rights of payment (including the right of setoff) with respect to such participation as fully as if such Lender were the direct creditor of the applicable Credit Party in the amount of such participation. If a Non-Funding Lender receives any such payment as described in the previous sentence, such Lender shall turn over such payments to Agent in an amount that would satisfy the cash collateral requirements set forth in  subsection 1.11(e) .
9.12 Counterparts. This Agreement may be executed in any number of counterparts and by different parties in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Signature pages may be detached from multiple separate counterparts and attached to a single counterpart. Delivery of an executed signature page of this Agreement by facsimile transmission or Electronic Transmission shall be as effective as delivery of a manually executed counterpart hereof.
 
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9.13 Severability; Facsimile Signature. The illegality or unenforceability of any provision of this Agreement or any instrument or agreement required hereunder shall not in any way affect or impair the legality or enforceability of the remaining provisions of this Agreement or any instrument or agreement required hereunder. Any Loan Document, or other agreement, document or instrument, delivered by facsimile transmission shall have the same force and effect as if the original thereof had been delivered.
9.14 Captions. The captions and headings of this Agreement are for convenience of reference only and shall not affect the interpretation of this Agreement.
9.15 Independence of Provisions. The parties hereto acknowledge that this Agreement and other Loan Documents may use several different limitations, tests or measurements to regulate the same or similar matters, and that such limitations, tests and measurements are cumulative and must each be performed, except as expressly stated to the contrary in this Agreement.
9.16 Interpretation. This Agreement is the result of negotiations among and has been reviewed by counsel to the Agent, each Lender and other parties hereto, and is the product of all parties hereto. Accordingly, this Agreement and the other Loan Documents shall not be construed against the Lenders or the Agent merely because of the Agent’s or Lenders’ involvement in the preparation of such documents and agreements. Without limiting the generality of the foregoing, each of the parties hereto has had the advice of counsel with respect to  Sections 9.18  and  9.19 .
9.17 No Third Parties Benefited. This Agreement is made and entered into for the sole protection and legal benefit of the Borrowers, the Lenders, the L/C Issuer, the Agent and, subject to the provisions of  Section 8.11  hereof, each other Secured Party, and their permitted successors and assigns, and no other Person shall be a direct or indirect legal beneficiary of, or have any direct or indirect cause of action or claim in connection with, this Agreement or any of the other Loan Documents. Neither the Agent nor any Lender shall have any obligation to any Person not a party to this Agreement or the other Loan Documents.
9.18 Governing Law and Jurisdiction.
(a) Governing Law. The laws of the State of New York shall govern all matters arising out of, in connection with or relating to this Agreement, including, without limitation, its validity, interpretation, construction, performance and enforcement (including, without limitation, any claims sounding in contract or tort law arising out of the subject matter hereof and any determinations with respect to post-judgment interest).
(b) Submission to Jurisdiction. Any legal action or proceeding with respect to any Loan Document may be brought in the courts of the State of New York located in the City of New York, Borough of Manhattan, or of the United States of America for the Southern District of New York and, by execution and delivery of this Agreement, each Borrower and each other Credit Party executing this Agreement hereby
 
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accepts for itself and in respect of its Property, generally and unconditionally, the jurisdiction of the aforesaid courts; provided that nothing in this Agreement shall limit the right of Agent to commence any proceeding in the federal or state courts of any other jurisdiction to the extent Agent determines that such action is necessary or appropriate to exercise its rights or remedies under the Loan Documents. The parties hereto (and, to the extent set forth in any other Loan Document, each other Credit Party) hereby irrevocably waive any objection, including any objection to the laying of venue or based on the grounds of forum non conveniens, that any of them may now or hereafter have to the bringing of any such action or proceeding in such jurisdictions.
(c) Service of Process. Each Credit Party hereby irrevocably waives personal service of any and all legal process, summons, notices and other documents and other service of process of any kind and consents to such service in any suit, action or proceeding brought in the United States of America with respect to or otherwise arising out of or in connection with any Loan Document by any means permitted by applicable Requirements of Law, including by the mailing thereof (by registered or certified mail, postage prepaid) to the address of Borrowers specified herein (and shall be effective when such mailing shall be effective, as provided therein). Each Credit Party agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.
(d) Non-Exclusive Jurisdiction. Nothing contained in this Section 9.18 shall affect the right of Agent or any Lender to serve process in any other manner permitted by applicable Requirements of Law or commence legal proceedings or otherwise proceed against any Credit Party in any other jurisdiction.
9.19 Waiver of Jury Trial. THE PARTIES HERETO, TO THE EXTENT PERMITTED BY LAW, WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING ARISING OUT OF, IN CONNECTION WITH OR RELATING TO, THIS AGREEMENT, THE OTHER LOAN DOCUMENTS AND ANY OTHER TRANSACTION CONTEMPLATED HEREBY AND THEREBY. THIS WAIVER APPLIES TO ANY ACTION, SUIT OR PROCEEDING WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE.
9.20 Entire Agreement; Release; Survival.
(a) THE LOAN DOCUMENTS EMBODY THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDE ALL PRIOR AGREEMENTS AND UNDERSTANDINGS RELATING TO THE SUBJECT MATTER THEREOF AND ANY PRIOR LETTER OF INTEREST, COMMITMENT LETTER, CONFIDENTIALITY AND SIMILAR AGREEMENTS INVOLVING ANY CREDIT PARTY AND ANY LENDER OR ANY L/C ISSUER OR ANY OF THEIR RESPECTIVE AFFILIATES RELATING TO A FINANCING OF SUBSTANTIALLY SIMILAR FORM, PURPOSE OR EFFECT OTHER THAN THE FEE LETTER. IN THE EVENT OF ANY CONFLICT BETWEEN THE TERMS OF THIS AGREEMENT AND ANY OTHER LOAN DOCUMENT, THE TERMS OF THIS AGREEMENT
 
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SHALL GOVERN (UNLESS SUCH TERMS OF SUCH OTHER LOAN DOCUMENTS ARE NECESSARY TO COMPLY WITH APPLICABLE REQUIREMENTS OF LAW, IN WHICH CASE SUCH TERMS SHALL GOVERN TO THE EXTENT NECESSARY TO COMPLY THEREWITH).
(b) Execution of this Agreement by the Credit Parties constitutes a full, complete and irrevocable release of any and all claims which each Credit Party may have at law or in equity in respect of all prior discussions and understandings, oral or written, relating to the subject matter of this Agreement and the other Loan Documents. In no event shall any Indemnitee be liable on any theory of liability for any special, indirect, consequential or punitive damages (including any loss of profits, business or anticipated savings). Each of each Borrower and each other Credit Party signatory hereto hereby waives, releases and agrees (and shall cause each other Credit Party to waive, release and agree) not to sue upon any such claim for any special, indirect, consequential or punitive damages, whether or not accrued and whether or not known or suspected to exist in its favor.
(c) (i) Any indemnification or other protection provided to any Indemnitee pursuant to Article VIII (The Agent), Section 9.5  (Costs and Expenses),  Section 9.6  (Indemnity), this  Section 9.20 , and  Article X  (Taxes, Yield Protection and Illegality) of this Agreement, (ii) solely for the two (2) year time period specified therein, the provisions of  Section 9.10  of this Agreement and (iii) the provisions of Section 8.1 of the Guaranty and Security Agreement, in each case, shall (x) survive the termination of the Commitments and the payment in full of all other Obligations and (y) with respect to clause (i) hereof, inure to the benefit of any Person that at any time held a right thereunder (as an Indemnitee or otherwise) and, thereafter, its successors and permitted assigns.
9.21 Patriot Act. Each Lender that is subject to the Patriot Act hereby notifies the Borrowers that pursuant to the requirements of the Patriot Act, it is required to obtain, verify and record information that identifies each Borrower, which information includes the name and address of each Borrower and other information that will allow such Lender to identify each Borrower in accordance with the Patriot Act.
9.22 Replacement of Lender. Within forty-five days after: (i) receipt by the Borrower Representative of written notice and demand from any Lender (an “ Affected Lender ”) for payment of additional costs as provided in  Sections 10.1 ,  10.3 and/or  10.6 ; (ii) any default by a Lender in its obligation to make Loans hereunder after all conditions thereto have been satisfied or waived in accordance with the terms hereof, provided such default shall not have been cured; or (iii) any failure by any Lender (other than Agent or an Affiliate of Agent) to consent to a requested amendment, waiver or modification to any Loan Document in which Required Lenders have already consented to such amendment, waiver or modification but the consent of each Lender (or each Lender directly affected thereby, as applicable) is required with respect thereto, the Borrowers may, at their option, notify the Agent and such Affected Lender (or such defaulting or non-consenting Lender, as the case may be) of the Borrowers’ intention to obtain, at the Borrowers’ expense, a replacement Lender (“ Replacement Lender ”) for such Affected
 
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Lender (or such defaulting or non-consenting Lender, as the case may be), which Replacement Lender shall be reasonably satisfactory to the Agent. In the event the Borrowers obtain a Replacement Lender within forty-five (45) days following notice of its intention to do so, the Affected Lender (or defaulting or non-consenting Lender, as the case may be) shall sell and assign its Loans and Commitments to such Replacement Lender, at par, provided that the Borrowers have reimbursed such Affected Lender for its increased costs for which it is entitled to reimbursement under this Agreement through the date of such sale and assignment. In the event that a replaced Lender does not execute an Assignment and Acceptance pursuant to  Section 9.9  within five (5) Business Days after receipt by such replaced Lender of notice of replacement pursuant to this  Section 9.22  and presentation to such replaced Lender of an Assignment evidencing an assignment pursuant to this  Section 9.22 , the Borrowers shall be entitled (but not obligated) to execute such an Assignment on behalf of such replaced Lender, and any such Assignment so executed by the Borrowers, the Replacement Lender and the Agent, shall be effective for purposes of this  Section 9.22  and Section 9.9 . Notwithstanding the foregoing, with respect to a Lender that is a Non-Funding Lender or an Impacted Lender, Agent may, but shall not be obligated to, obtain a Replacement Lender and execute an Assignment on behalf of such Non-Funding Lender or Impacted Lender at any time with three (3) Business Days’ prior notice to such Lender (unless notice is not practicable under the circumstances) and cause such Lender’s Loans and Commitments to be sold and assigned, in whole or in part, at par. Upon any such assignment and payment and compliance with the other provisions of Section 9.9 , such replaced Lender shall no longer constitute a “Lender” for purposes hereof; provided, any rights of such replaced Lender to indemnification hereunder shall survive as to such replaced Lender.
9.23 Joint and Several. The obligations of the Credit Parties hereunder and under the other Loan Documents are joint and several. Without limiting the generality of the foregoing, reference is hereby made to Article II of the Guaranty and Security Agreement, to which the obligations of Borrower and the other Credit Parties are subject.
9.24 Creditor-Debtor Relationship. The relationship between Agent, each Lender and the L/C Issuer, on the one hand, and the Credit Parties, on the other hand, is solely that of creditor and debtor. No Secured Party has any fiduciary relationship or duty to any Credit Party arising out of or in connection with, and there is no agency, tenancy or joint venture relationship between the Secured Parties and the Credit Parties by virtue of, any Loan Document or any transaction contemplated therein.
9.25 Location of Closing. Each Lender acknowledges and agrees that it has delivered, with the intent to be bound, its executed counterparts of this Agreement to the Agent, c/o King & Spalding LLP, 1185 Avenue of the Americas, New York, New York 10036. Each Borrower acknowledges and agrees that it has delivered, with the intent to be bound, its executed counterparts of this Agreement and each other Loan Document, together with all other documents, instruments, opinions, certificates and other items required under  Section 2.1 , to the Agent, c/o King & Spalding LLP, 1185 Avenue of the Americas, New York, New York 10036. All parties agree that closing of the transactions contemplated by this Credit Agreement has occurred in New York.
 
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9.26 Judgment Currency.
(a) If, for the purposes of obtaining judgment in any court, it is necessary to convert a sum due hereunder in any currency (the “ Original Currency ”) into another currency (the “ Other Currency ”), the parties hereto agree, to the fullest extent permitted by law, that the rate of exchange used shall be that at which, in accordance with normal banking procedures, the Agent could purchase the Original Currency with such Other Currency in New York, New York on the Business Day immediately preceding the day on which any such judgment, or any relevant part thereof, is given.
(b) The obligations of the Borrowers in respect of any sum due from it to the Agent, the L/C Issuer or Lenders hereunder shall, notwithstanding any judgment in such Other Currency, be discharged only to the extent that on the Business Day following receipt by Agent, L/C Issuer or such Lender of any sum adjudged to be so due in such Other Currency, the Agent, L/C Issuer or such Lender may in accordance with normal banking procedures purchase the Original Currency with such Other Currency. If the Original Currency so purchased is less than the sum originally due the Agent, L/C Issuer or such Lender in the Original Currency, Borrowers agree, as a separate obligation and notwithstanding any such judgment, to indemnify the Agent, L/C Issuer or such Lender against such loss, and if the Original Currency so purchased exceeds the sum originally due to the Agent, L/C Issuer or such Lender in the Original Currency, the Agent, the L/C Issuer or such Lender shall remit such excess to the Borrowers.
9.27 Amendment and Restatement.
(a) Amendment and Restatement; No Novation. On the Effective Date, the Existing Credit Agreement shall be amended and restated in its entirety by this Agreement and (i) all references to the Existing Credit Agreement in any Loan Document other than this Agreement (including in any amendment, waiver or consent) shall be deemed to refer to the Existing Credit Agreement as amended and restated hereby, (ii) all references to any section (or subsection) of the Existing Credit Agreement in any Loan Document (but not herein) shall be amended to be, mutatis mutandis, references to the corresponding provisions of this Agreement and (iii) except as the context otherwise provides, all references to this Agreement herein (including for purposes of indemnification and reimbursement of fees) shall be deemed to be reference to the Existing Credit Agreement as amended and restated hereby. This Agreement is not intended to constitute, and does not constitute, a novation of the obligations and liabilities under the Existing Credit Agreement (including the Obligations) or to evidence payment of all or any portion of such obligations and liabilities.
(b) Effect on Existing Credit Agreement and on the Obligations. On and after the Effective Date, (i) the Existing Credit Agreement shall be of no further force and effect except as amended and restated hereby and except to evidence (A) the incurrence by any Credit Party of the “Obligations” under and as defined therein (whether or not such “Obligations” are contingent as of the Effective Date), (B) the representations and warranties made by any Credit Party prior to the Effective Date and (C) any action or omission performed or required to be performed pursuant to such
 
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Existing Credit Agreement prior to the Effective Date (including any failure, prior to the Effective Date, to comply with the covenants contained in such Existing Credit Agreement) and (ii) the terms and conditions of this Agreement and the Secured Parties’ rights and remedies under the Loan Documents, shall apply to all Obligations incurred under the Existing Credit Agreement.
(c) No Implied Waivers. Except as expressly provided in any Loan Document, this Agreement (x) shall not cure any breach of the Existing Credit Agreement or any “Default” or “Event of Default” thereunder existing prior to the Effective Date and (y) is limited as written and is not a consent to any other modification of any term or condition of any Loan Document, each of which shall remain in full force and effect.
(d) Reaffirmation of Liens. Each of the Borrowers reaffirms the Liens granted pursuant to the Collateral Documents to the Agent for the benefit of the Secured Parties, which Liens shall continue in full force and effect during the term of this Agreement and any renewals or extensions thereof and shall continue to secure the Obligations.
9.28 Keepwell. Each Qualified ECP Guarantor hereby jointly and severally absolutely, unconditionally and irrevocably undertakes to provide such funds or other support as may be needed from time to time by each other Credit Party to honor all of its obligations under the Guaranty and Security Agreement in respect of Swap Obligations under any Secured Rate Contract (provided, however, that each Qualified ECP Guarantor shall only be liable under this Section 9.28 for the maximum amount of such liability that can be hereby incurred without rendering its obligations under this Section 9.28, or otherwise under the Guaranty and Security Agreement, voidable under applicable Requirements of Law relating to fraudulent conveyance or fraudulent transfer, and not for any greater amount). The obligations of each Qualified ECP Guarantor under this Section 9.28 shall remain in full force and effect until the guarantees in respect of Swap Obligations under each Secured Rate Contract have been discharged, or otherwise released or terminated in accordance with the terms of this Agreement. Each Qualified ECP Guarantor intends that this Section 9.28 constitute, and this Section 9.28 shall be deemed to constitute, a “keepwell, support, or other agreement” for the benefit of each other Credit Party for all purposes of Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.
ARTICLE X - TAXES, YIELD PROTECTION AND ILLEGALITY
10.1 Taxes.
(a) Except as otherwise provided in this Section 10.1, or as required by a Requirement of Law, each payment by any Credit Party under any Loan Document shall be made free and clear of all present or future taxes, levies, duties, imposts, deductions, charges or withholdings (including back-up withholding), assessments, fees or other charges imposed by any Governmental Authority, including any interest,
 
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additions to tax, penalties or other Liabilities with respect thereto (and without deduction for any of them) (collectively, “ Taxes ”) other than for (i) taxes measured by net income (including branch profits taxes) and franchise taxes imposed in lieu of net income taxes, in each case imposed on any Secured Party as a result of a present or former connection between such Person and the jurisdiction of the Governmental Authority imposing such tax or any political subdivision or taxing authority thereof or therein (other than such connection arising solely from any Secured Party having executed, delivered or performed its obligations or received a payment under, or enforced, any Loan Document) or (ii) taxes that are directly attributable to the failure (other than as a result of a change in any Requirement of Law) by Agent or any Lender to deliver the documentation required to be delivered pursuant to clause (f) below.
(b) If any Taxes shall be required by any Requirement of Law to be deducted from or in respect of any amount payable under any Loan Document to any Secured Party (i) if such Tax is an Indemnified Tax, such amount payable shall be increased as necessary to ensure that, after all required deductions for Indemnified Taxes are made (including deductions applicable to any increases to any amount under this  Section 10.1 ), such Secured Party receives the amount it would have received had no such deductions been made, (ii) the relevant Credit Party shall make such deductions, (iii) the relevant Credit Party shall timely pay the full amount deducted to the relevant Governmental Authority in accordance with applicable Requirements of Law and (iv) within 30 days after such payment is made, the relevant Credit Party shall deliver to the Agent an original or certified copy of a receipt evidencing such payment; provided, however, that no such increase shall be made with respect to, and no Credit Party shall be required to indemnify any Secured Party pursuant to clause (d) below for, withholding taxes to the extent that the obligation to withhold amounts existed on the date that such Person became a ‘Secured Party” under this Agreement in the capacity under which such Person makes a claim under this clause (b), except in each case to the extent such Person is a direct or indirect assignee (other than pursuant to  Section 9.22 ) of any other Secured Party that was entitled, at the time the assignment to such Person became effective, to receive additional amounts under this clause (b).
(c) In addition, the Borrowers agree to pay, and authorize the Agent to pay in their name, any stamp, documentary, excise or property Tax, charges or similar levies imposed by any applicable Requirement of Law or Governmental Authority and all Liabilities with respect thereto (including by reason of any delay in payment thereof), in each case arising from the execution, delivery or registration of, or otherwise with respect to, any Loan Document or any transaction contemplated therein (collectively, “ Other Taxes ”). The Swingline Lender may, without any need for notice, demand or consent from the Borrowers or the Borrower Representative, by making funds available to Agent in the amount equal to any such payment, make a Swing Loan to the Borrowers in such amount, the proceeds of which shall be used by Agent in whole to make such payment. Within 30 days after the date of any payment of Taxes or Other Taxes by any Credit Party, the Borrowers shall furnish to the Agent, at its address referred to in  Section 9.2 , the original or a certified copy of a receipt evidencing payment thereof.
 
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(d) The Credit Parties hereby acknowledge and agree that (i) neither GE Capital nor any Affiliate of GE Capital has provided any Tax advice to any Tax Affiliate in connection with the transactions contemplated hereby or any other matters and (ii) the Credit Parties have received appropriate Tax advice to the extent necessary to confirm that the structure of any transaction contemplated by the Credit Parties in connection with this Agreement complies in all material respects with applicable federal, state and foreign Tax laws.
(e) The Borrowers shall reimburse and indemnify, within 30 days after receipt of demand therefor (with copy to the Agent), each Secured Party for all Indemnified Taxes (including any Indemnified Taxes imposed by any jurisdiction on amounts payable under this  Section 10.1 ) paid or payable by such Secured Party and any Liabilities arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally asserted. A certificate of the Secured Party (or of the Agent on behalf of such Secured Party) claiming any compensation under this clause (e), setting forth the amounts to be paid thereunder and delivered to the Borrower Representative with copy to the Agent, shall be conclusive, binding and final for all purposes, absent manifest error. In determining such amount, the Agent and such Secured Party may use any reasonable averaging and attribution methods.
(f) Any Lender claiming any additional amounts payable pursuant to this Section 10.1 shall use its reasonable efforts (consistent with its internal policies and Requirements of Law) to change the jurisdiction of its lending office if such a change would reduce any such additional amounts (or any similar amount that may thereafter accrue) and would not, in the sole determination of such Lender, be otherwise disadvantageous to such Lender.
(g) (i) Each Non-U.S. Lender Party that, at any of the following times, is entitled to an exemption from United States withholding Tax or, after a change in any Requirement of Law, is subject to such withholding Tax at a reduced rate under an applicable Tax treaty, shall (w) on or prior to the date such Non-U.S. Lender Party becomes a “Non-U.S. Lender Party” hereunder, (x) on or prior to the date on which any such form or certification expires or becomes obsolete, (y) after the occurrence of any event requiring a change in the most recent form or certification previously delivered by it pursuant to this clause (i) and (z) from time to time if requested by the Borrower Representative or the Agent (or, in the case of a participant or SPV, the relevant Lender), provide the Agent and the Borrower Representative (or, in the case of a participant or SPV, the relevant Lender) with two completed originals of each of the following, as applicable: (A) Forms W-8ECI (claiming exemption from U.S. withholding Tax because the income is effectively connected with a U.S. trade or business), W-8BEN (claiming exemption from, or a reduction of, U.S. withholding Tax under an income Tax treaty) and/or W-8IMY (together with appropriate forms, certifications and supporting statements) or any successor forms, (B) in the case of a Non-U.S. Lender Party claiming exemption under Sections 871(h) or 881(c) of the Code, Form W-8BEN (claiming exemption from U.S. withholding Tax under the portfolio interest exemption) or any successor form and a certificate in form and substance acceptable to the Agent that such Non-U.S. Lender Party is not (1) a “bank” within the meaning of Section 881(c)(3)(A) of
 
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the Code, (2) a “10 percent shareholder” of the Borrowers within the meaning of Section 881(c)(3)(B) of the Code or (3) a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code or (C) any other applicable document prescribed by the IRS certifying as to the entitlement of such Non-U.S. Lender Party to such exemption from United States withholding Tax or reduced rate with respect to all payments to be made to such Non-U.S. Lender Party under the Loan Documents. Unless the Borrower Representative and the Agent have received forms or other documents satisfactory to them indicating that payments under any Loan Document to or for a Non-U.S. Lender Party are not subject to United States withholding Tax or are subject to such Tax at a rate reduced by an applicable Tax treaty, the Credit Parties and the Agent shall withhold amounts required to be withheld by applicable Requirements of Law from such payments at the applicable statutory rate.
(ii) Each U.S. Lender Party shall (A) on or prior to the date such U.S. Lender Party becomes a “U.S. Lender Party” hereunder, (B) on or prior to the date on which any such form or certification expires or becomes obsolete, (C) after the occurrence of any event requiring a change in the most recent form or certification previously delivered by it pursuant to this clause (g) and (D) from time to time if requested by the Borrower Representative or the Agent (or, in the case of a participant or SPV, the relevant Lender), provide the Agent and the Borrower Representative (or, in the case of a participant or SPV, the relevant Lender) with two completed originals of Form W-9 (certifying that such U.S. Lender Party is entitled to an exemption from U.S. backup withholding Tax) or any successor form.
(iii) Each Lender having sold a participation in any of its Obligations or identified an SPV as such to the Agent shall collect from such participant or SPV the documents described in this clause (g) and provide them to the Agent.
(iv) If a payment made to a Non-U.S. Lender Party would be subject to United States federal withholding Tax imposed by FATCA if such Non-U.S. Lender Party fails to comply with the applicable reporting requirements of FATCA, such Non-U.S. Lender Party shall deliver to Agent and the Borrower Representative any documentation under any Requirement of Law or reasonably requested by Agent or the Borrower Representative sufficient for Agent or Borrowers to comply with their obligations under FATCA and to determine that such Non-U.S. Lender has complied with its obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for the purposes of this clause (iv), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.
(h) If any Secured Party determines, in its sole discretion exercised in good faith, that it has received a refund of any Indemnified Taxes as to which it has been indemnified pursuant to this Section 10.1 (including by the payment of additional amounts pursuant to Section 10.1(b)), it shall pay to the relevant Credit Party an amount equal to such refund (but only to the extent of indemnity payments made under this Section 10.1 with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses (including Taxes) of such Secured Party and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund). Such
 
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Credit Party, upon the request of such Secured Party, shall repay to such Secured Party the amount paid over pursuant to this Section 10.1(h) (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) in the event that such Secured Party is required to repay such refund to such Governmental Authority. Notwithstanding anything to the contrary in this Section 10.1(h), in no event shall the Secured Party be required to pay any amount to a Credit Party pursuant to this Section 10.1(h) the payment of which would place the Secured Party in a less favorable net after-Tax position than the Secured Party would have been in if the Tax subject to indemnification and giving rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts with respect to such Tax had never been paid. This Section 10.1(h) shall not be construed to require any Secured Party to make available its Tax returns (or any other information relating to its Taxes that it deems confidential) to the Credit Party or any other Person.
10.2 Illegality. If after the Initial Closing Date any Lender shall determine that the introduction of any Requirement of Law, or any change in any Requirement of Law or in the interpretation or administration thereof, has made it unlawful, or that any central bank or other Governmental Authority has asserted that it is unlawful, for any Lender or its Lending Office to make LIBOR Rate Loans, then, on notice thereof by such Lender to the Borrowers through the Agent, the obligation of that Lender to make LIBOR Rate Loans shall be suspended until such Lender shall have notified the Agent and the Borrower Representative that the circumstances giving rise to such determination no longer exists.
(a) Subject to clause (c) below, if any Lender shall determine that it is unlawful to maintain any LIBOR Rate Loan, the Borrowers shall prepay in full all LIBOR Rate Loans of such Lender then outstanding, together with interest accrued thereon, either on the last day of the Interest Period thereof if such Lender may lawfully continue to maintain such LIBOR Rate Loans to such day, or immediately, if such Lender may not lawfully continue to maintain such LIBOR Rate Loans, together with any amounts required to be paid in connection therewith pursuant to  Section 10.4 .
(b) If the obligation of any Lender to make or maintain LIBOR Rate Loans has been terminated, the Borrower Representative may elect, by giving notice to such Lender through the Agent that all Loans which would otherwise be made by any such Lender as LIBOR Rate Loans shall be instead Base Rate Loans.
(c) Before giving any notice to the Agent pursuant to this Section 10.2, the affected Lender shall designate a different Lending Office with respect to its LIBOR Rate Loans if such designation will avoid the need for giving such notice or making such demand and will not, in the judgment of the Lender, be illegal or otherwise disadvantageous to the Lender.
 
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10.3 Increased Costs and Reduction of Return.
(a) If any Lender or L/C Issuer shall determine that, due to either (i) the introduction of, or any change in, or in the interpretation of, any Requirement of Law or (ii) the compliance with any guideline or request from any central bank or other Governmental Authority (whether or not having the force of law), in the case of either clause (i) or (ii) subsequent to the Initial Closing Date, (x) there shall be any increase in the cost to such Lender or L/C Issuer of agreeing to make or making, funding or maintaining any LIBOR Rate Loans or of Issuing or maintaining any Letter of Credit or (y) the Lender or L/C Issuer shall be subject to any Taxes (other than (A) Indemnified Taxes, (B) Taxes described in clauses (b) through (d) of the definition of Excluded Taxes and (C) Connection Income Taxes) on its loans, loan principal, letters of credit, commitments, or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto, then the Borrowers shall be liable for, and shall from time to time, within thirty (30) days of demand therefor by such Lender or L/C Issuer (with a copy of such demand to the Agent), pay to the Agent for the account of such Lender or L/C Issuer, additional amounts as are sufficient to compensate such Lender or L/C Issuer for such increased costs or such Taxes; provided, that the Borrowers shall not be required to compensate any Lender or L/C Issuer pursuant to this Section for any increased costs incurred more than 180 days prior to the date that such Lender or L/C Issuer notifies the Borrower Representative, in writing of the increased costs and of such Lender’s or L/C Issuer’s intention to claim compensation thereof; provided, further, that if the circumstance giving rise to such increased costs is retroactive, then the 180-day period referred to above shall be extended to include the period of retroactive effect thereof.
(b) If any Lender or L/C Issuer shall have determined that:
(i) the introduction of any Capital Adequacy Regulation;
(ii) any change in any Capital Adequacy Regulation;
(iii) any change in the interpretation or administration of any Capital Adequacy Regulation by any central bank or other Governmental Authority charged with the interpretation or administration thereof; or
(iv) compliance by such Lender or L/C Issuer (or its Lending Office) or any entity controlling the Lender or L/C Issuer, with any Capital Adequacy Regulation;
affects the amount of capital required or expected to be maintained by such Lender or L/C Issuer or any entity controlling such Lender or L/C Issuer and (taking into consideration such Lender’s or such entities’ policies with respect to capital adequacy and such Lender’s or L/C Issuer’s desired return on capital) determines that the amount of such capital is increased as a consequence of its Commitment(s), loans, credits or obligations under this Agreement, then, within thirty (30) days of demand of such Lender or L/C Issuer (with a copy to the Agent), the Borrowers shall pay to such Lender or L/C Issuer, from time to time as specified by such Lender or L/C Issuer, additional amounts
 
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sufficient to compensate such Lender or L/C Issuer (or the entity controlling the Lender or L/C Issuer) for such increase; provided, that the Borrowers shall not be required to compensate any Lender or L/C Issuer pursuant to this Section for any amounts incurred more than 180 days prior to the date that such Lender or L/C Issuer notifies the Borrower Representative, in writing of the amounts and of such Lender’s or L/C Issuer’s intention to claim compensation thereof; provided, further, that if the event giving rise to such increase is retroactive, then the 180-day period referred to above shall be extended to include the period of retroactive effect thereof.
(c) Notwithstanding anything herein to the contrary, (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (ii) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case in respect of this clause (ii) pursuant to Basel III, shall, in each case, be deemed to be a change in a Requirement of Law under Section 10.3(a) above and/or a change in Capital Adequacy Regulation under Section 10.3(b) above, as applicable, regardless of the date enacted, adopted or issued.
10.4 Funding Losses. The Borrowers agree to reimburse each Lender and to hold each Lender harmless from any loss or expense which such Lender may sustain or incur as a consequence of:
(a) the failure of the Borrowers to make any payment or mandatory prepayment of principal of any LIBOR Rate Loan (including payments made after any acceleration thereof);
(b) the failure of the Borrowers to borrow, continue or convert a Loan after the Borrower Representative has given (or is deemed to have given) a Notice of Borrowing or a Notice of Conversion/Continuation;
(c) the failure of the Borrowers to make any prepayment after the Borrowers have given a notice in accordance with Section 1.7 ;
(d) the prepayment (including pursuant to Section 1.8) of a LIBOR Rate Loan on a day which is not the last day of the Interest Period with respect thereto; or
(e) the conversion pursuant to Section 1.6 of any LIBOR Rate Loan to a Base Rate Loan on a day that is not the last day of the applicable Interest Period;
including any such loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain its LIBOR Rate Loans hereunder or from fees payable to terminate the deposits from which such funds were obtained; provided that, with respect to the expenses described in clauses (d) and (e) above, such Lender shall have notified Agent of any such expense within two (2) Business Days of the date on which such expense was incurred. Solely for purposes of calculating amounts payable by the Borrowers to the Lenders under this  Section 10.4  and under  subsection 10.3(a) : each LIBOR Rate Loan made by a Lender (and each related reserve, special deposit or similar
 
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requirement) shall be conclusively deemed to have been funded at the LIBOR used in determining the interest rate for such LIBOR Rate Loan by a matching deposit or other borrowing in the interbank eurodollar market for a comparable amount and for a comparable period, whether or not such LIBOR Rate Loan is in fact so funded.
10.5 Inability to Determine Rates. If the Agent shall have determined in good faith that for any reason adequate and reasonable means do not exist for ascertaining the LIBOR for any requested Interest Period with respect to a proposed LIBOR Rate Loan or that the LIBOR applicable pursuant to  subsection 1.3(a)  for any requested Interest Period with respect to a proposed LIBOR Rate Loan does not adequately and fairly reflect the cost to the Lenders of funding or maintaining such Loan, the Agent will forthwith give notice of such determination to the Borrower Representative and each Lender. Thereafter, the obligation of the Lenders to make or maintain LIBOR Rate Loans hereunder shall be suspended until the Agent revokes such notice in writing. Upon receipt of such notice, the Borrower Representative may revoke any Notice of Borrowing or Notice of Conversion/Continuation then submitted by it. If the Borrower Representative does not revoke such notice, the Lenders shall make, convert or continue the Loans, as proposed by the Borrower Representative, in the amount specified in the applicable notice submitted by the Borrower Representative, but such Loans shall be made, converted or continued as Base Rate Loans.
10.6 Reserves on LIBOR Rate Loans. The Borrowers shall pay to each Lender, as long as such Lender shall be required under regulations of the Federal Reserve Board to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency funds or deposits (currently known as “Eurocurrency liabilities”), additional costs on the unpaid principal amount of each LIBOR Rate Loan equal to actual costs of such reserves allocated to such Loan by such Lender (as determined by such Lender in good faith, which determination shall be conclusive absent demonstrable error), payable on each date on which interest is payable on such Loan provided the Borrower Representative shall have received at least fifteen (15) days’ prior written notice (with a copy to the Agent) of such additional interest from the Lender. If a Lender fails to give notice fifteen (15) days prior to the relevant Interest Payment Date, such additional interest shall be payable fifteen (15) days from receipt of such notice.
10.7 Certificates of Lenders. Any Lender claiming reimbursement or compensation pursuant to this Article X shall deliver to the Borrower Representative (with a copy to the Agent) a certificate setting forth in reasonable detail the amount payable to such Lender hereunder and such certificate shall be conclusive and binding on the Borrowers in the absence of manifest error.
 
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ARTICLE XI - DEFINITIONS
11.1 Defined Terms. The following terms are defined in the Sections or subsections referenced opposite such terms:

“Additional Lender”	  	1.13(b)	
“Affected Lender”	  	9.22	
“Aggregate Excess Funding Amount”	  	1.11(e)(iv)	
“Agreement”	  	Preamble	
“AuraZyme”	  	Preamble	
“Borrower” and “Borrowers”	  	Preamble	
“Borrower Materials”	  	9.10	
“Borrower Representative”	  	1.12	
“Cardiogenesis”	  	Preamble	
“Commitment”	  	1.1(a)	
“Compliance Certificate”	  	4.2(b)	
“EBITDA”	  	Exhibit 4.2(b)	
“Event of Default”	  	7.1	
“Existing Credit Agreement”	  	Preamble	
“Existing Facility”	  	1.13(e)	
“GE Capital”	  	Preamble	
“Hemosphere”	  	Preamble	
“Incremental Effective Date”	  	1.13(a)	
“Incremental Term Loan”	  	1.13(a)	
“Incremental Term Loan Commitment”	  	1.13(a)	
“Indemnified Matters”	  	9.6	
“Indemnitees”	  	9.6	
“International”	  	Preamble	
“L/C Reimbursement Agreement”	  	1.1(b)	
“L/C Reimbursement Date”	  	1.1(b)	
“L/C Request”	  	1.1(b)	
“L/C Sublimit”	  	1.1(b)	
“Lender”	  	Preamble	
“Letter of Credit Fee”	  	1.9(c)	
“Leverage Ratio”	  	Exhibit 4.2(b)	
“Maximum Lawful Rate”	  	1.3(d)	
“Maximum Revolving Loan Balance”	  	1.1(a)	
“MNPI”	  	9.10	
“Notice of Conversion/Continuation”	  	1.6(a)	
“Original Currency”	  	9.26(a)	
“Other Currency”	  	9.26(a)	
“Other Lender”	  	1.11(e)	
“Other Taxes”	  	10.1(c)	
“Permitted Liens”	  	5.1	
“Register”	  	1.4(b)	
“Restricted Payments”	  	5.11	
“Replacement Lender”	  	9.22	
“Revolving Loan”	  	1.1(a)	
“Sale”	  	9.9(b)	
“Settlement Date”	  	1.11(b)	
“Swingline Request”	  	1.1(c)	
“Swing Loan”	  	1.1(c)	
“Taxes”	  	10.1(a)	
“Unused Commitment Fee”	  	1.9(b)	
“Yield Differential”	  	1.13(e)	
 
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In addition to the terms defined elsewhere in this Agreement, the following terms have the following meanings:
“Account” means, as at any date of determination, all “accounts” (as such term is defined in the UCC) of the Borrowers and their Subsidiaries, including, without limitation, the unpaid portion of the obligation of a customer of a Borrower or any of its Subsidiaries in respect of Inventory purchased by and shipped to such customer and/or the rendition of services by a Borrower or such Subsidiary, as stated on the respective invoice of a Borrower or such Subsidiary, net of any credits, rebates or offsets owed to such customer.
“Account Debtor” means the customer of a Borrower or any of its Subsidiaries who is obligated on or under an Account.
“Acquisition” means any transaction or series of related transactions for the purpose of or resulting, directly or indirectly, in (a) the acquisition of all or substantially all of the assets of a Person, or of any business, product line or division of a Person, (b) the acquisition of in excess of fifty percent (50%) of the Stock and Stock Equivalents of any Person or otherwise causing any Person to become a Subsidiary of a Borrower, or (c) a merger or consolidation or any other combination with another Person.
“Adjusted EBITDA” means, as of any determination date, without duplication, the sum of
(a) EBITDA of the Borrowers and their Subsidiaries for the period in question for which the Agent has received financial statements,  plus
(b) the sum of the following:
(i) with respect to Targets owned by the Borrowers for which the Agent has not received financial statements pursuant to  subsection 4.1(b)  for at least one (1) full quarter, the sum of Pro Forma EBITDA for all such Targets; plus
(ii) with respect to Targets owned by the Borrowers for which the Agent has received financial statements pursuant to  subsection 4.1(b)  for not less than one (1) full quarter but less than four (4) full quarters, the product obtained by multiplying Pro Forma EBITDA by a fraction, the numerator of which is four (4) minus the number of full quarters that the Target has been owned by the Borrowers for which the Agent has received such financial statements, and the denominator of which is four (4);  minus
(c) with respect to any Disposition consummated within the period in question, EBITDA attributable to the subsidiary, profit centers, publication or other asset which is the subject of such Disposition from the beginning of such period until the date of consummation of such Disposition.
 
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“Affiliate” means, as to any Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person; provided, however, that no Secured Party shall be an Affiliate of any Credit Party or of any Subsidiary of any Credit Party solely by reason of the provisions of the Loan Documents. A Person shall be deemed to control another Person if the controlling Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of the other Person, whether through the ownership of voting securities, by contract or otherwise. Without limitation, any director, executive officer or beneficial owner of five percent (5%) or more of the Stock (either directly or through ownership of Stock Equivalents) of a Person shall for the purposes of this Agreement, be deemed to control the other Person. Notwithstanding the foregoing, neither the Agent nor any Lender shall be deemed an “Affiliate” of any Credit Party or of any Subsidiary of any Credit Party.
“Agent” means GE Capital in its capacity as administrative agent for the Lenders hereunder, and any successor administrative agent.
“Aggregate Revolving Loan Commitment” means the combined Commitments of the Lenders, which, as of the Effective Date, shall be $20,000,000, as such amount may be reduced or increased from time to time pursuant to this Agreement.
“Applicable Margin” means with respect to all Loans: (x) if a Base Rate Loan, two and three-quarters percent (2.75%) per annum and (y) if a LIBOR Rate Loan, three and three-quarters percent (3.75%) per annum. Notwithstanding anything herein to the contrary, Swing Loans may not be LIBOR Rate Loans.
“Assignment” means an assignment agreement entered into by a Lender, as assignor, and any Person, as assignee, pursuant to the terms and provisions of  Section 9.9  (with the consent of any party whose consent is required by Section 9.9 ), accepted by the Agent, in substantially the form of  Exhibit 11.1(a)  or any other form approved by the Agent.
“Attorney Costs” means and includes all reasonable fees and disbursements of any law firm or other external counsel.
“Availability” means, as of any date of determination, the amount by which (a) the Maximum Revolving Loan Balance, exceeds (b) the aggregate outstanding principal balance of Revolving Loans.
“Bankruptcy Code” means the Federal Bankruptcy Reform Act of 1978 (11 U.S.C. §101, et seq.), as amended and in effect from time to time and the regulations issued from time to time thereunder.
 
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“Bard Litigation” means CryoLife, Inc. v. C.R. Bard, Inc., et al. Civil Action No. 14-559 (SLR) (U.S. District Court for the District of Delaware).
“Base Rate” means, for any day, a rate per annum equal to the highest of (a) the rate last quoted by The Wall Street Journal  as the “Prime Rate” in the United States or, if  The Wall Street Journal  ceases to quote such rate, the highest per annum interest rate published by the Federal Reserve Board in Federal Reserve Statistical Release H.15 (519) (Selected Interest Rates) as the “bank prime loan” rate or, if such rate is no longer quoted therein, any similar rate quoted therein (as determined by Agent) or any similar release by the Federal Reserve Board (as determined by Agent), (b) the sum of 3.00% per annum and the Federal Funds Rate, (c) the sum of (x) LIBOR calculated for each such day based on an Interest Period of three months determined two (2) Business Days prior to such day, plus (y) the excess of the Applicable Margin for LIBOR Rate Loans over the Applicable Margin for Base Rate Loans, in each instance, as of such day and (d) 1.00% per annum. Any change in the Base Rate due to a change in any of the foregoing shall be effective on the effective date of such change in the Federal Funds Rate or LIBOR for an Interest Period of three months.
“Base Rate Loan” means a Loan that bears interest based on the Base Rate.
“Benefit Plan” means any employee benefit plan as defined in Section 3(3) of ERISA (whether governed by the laws of the United States or otherwise) to which any Credit Party incurs or otherwise has any obligation or liability, contingent or otherwise.
“Borrowing” means a borrowing hereunder consisting of Loans made to or for the benefit of the Borrowers on the same day by the Lenders pursuant to Article I.
“Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by law to close  and , if the applicable Business Day relates to any LIBOR Rate Loan, a day on which dealings in Dollar deposits are carried on in the London interbank market.
“Capital Adequacy Regulation” means any guideline, request or directive of any central bank or other Governmental Authority, or any other law, rule or regulation, whether or not having the force of law, in each case, regarding capital adequacy of any Lender or of any corporation controlling a Lender.
“Capital Lease” means, with respect to any Person, any lease of, or other arrangement conveying the right to use, any Property by such Person as lessee that has been or should be accounted for as a capital lease on a balance sheet of such Person prepared in accordance with GAAP.
“Capital Lease Obligations” means, at any time, with respect to any Capital Lease, any lease entered into as part of any sale leaseback transaction of any Person or any synthetic lease, the amount of all obligations of such Person that is (or that would be, if such synthetic lease or other lease were accounted for as a Capital Lease) capitalized on a balance sheet of such Person prepared in accordance with GAAP.
 
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“Cash Equivalents” means (a) any readily-marketable securities (i) issued by, or directly, unconditionally and fully guarantied or insured by the United States federal government or (ii) issued by any agency of the United States federal government the obligations of which are fully backed by the full faith and credit of the United States federal government, (b) any readily-marketable direct obligations issued by any other agency of the United States federal government, any state of the United States or any political subdivision of any such state or any public instrumentality thereof, in each case having a rating of at least “A-1” from S&P or at least “P-1” from Moody’s, (c) any commercial paper rated at least “A-1” by S&P or “P-1” by Moody’s and issued by any Person organized under the laws of any state of the United States, (d) any Dollar-denominated time deposit, insured certificate of deposit, overnight bank deposit or bankers’ acceptance issued or accepted by (i) any Lender or (ii) any commercial bank that is (A) organized under the laws of the United States, any state thereof or the District of Columbia, (B) “adequately capitalized” (as defined in the regulations of its primary federal banking regulators) and (C) has Tier 1 capital (as defined in such regulations) in excess of $250,000,000 and (e) shares of any United States money market fund that (i) has substantially all of its assets invested continuously in the types of investments referred to in clause (a), (b), (c) or (d) above with maturities as set forth in the proviso below, (ii) has net assets in excess of $500,000,000 and (iii) has obtained from either S&P or Moody’s the highest rating obtainable for money market funds in the United States; provided, however, that the maturities of all obligations specified in any of clauses (a), (b), (c) or (d) above shall not exceed 365 days.
“Code” means the Internal Revenue Code of 1986, and regulations promulgated thereunder.
“Collateral” means all Property and interests in Property and proceeds thereof now owned or hereafter acquired by any Credit Party, any of their respective Subsidiaries and any other Person who has granted a Lien to the Agent, in or upon which a Lien now or hereafter exists in favor of any Lender or the Agent for the benefit of the Agent, Lenders and other Secured Parties, whether under this Agreement or under any other documents executed by any such Persons and delivered to the Agent, including, without limitation, 100% of all outstanding equity interests (or, in the case of first tier Excluded Foreign Subsidiaries, 65% of the voting and 100% of the non-voting equity interests) of all subsidiaries of the Borrowers.
“Collateral Documents” means, collectively, the Guaranty and Security Agreement, the Mortgages, each Control Agreement and all other security agreements, pledge agreements, patent and trademark security agreements, lease assignments, guarantees and other similar agreements, and all amendments, restatements, modifications or supplements thereof or thereto, by or between any one or more of any Credit Party, any of their respective Subsidiaries or any other Person pledging or granting a lien on Collateral or guaranteeing the payment and performance of the Obligations, and any Lender or the Agent for the benefit of the Agent, the Lenders and other Secured Parties now or hereafter delivered to the Lenders or the Agent pursuant to or in connection with the transactions contemplated hereby, and all financing statements (or comparable documents now or hereafter filed in accordance with the UCC or comparable
 
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law) against any such Person as debtor in favor of any Lender or the Agent for the benefit of the Agent, the Lenders and the other Secured Parties, as secured party, as any of the foregoing may be amended, restated and/or modified from time to time.
“Commitment Percentage” means, as to any Lender, the percentage equivalent of such Lender’s Commitment, or Incremental Term Loan Commitment, divided by the Aggregate Revolving Loan Commitment or the aggregate outstanding Incremental Term Loan Commitments, as applicable;  provided , that after the Incremental Term Loans relating to any Incremental Term Loan Commitment have been funded, Commitment Percentages shall be determined for the Incremental Term Loans by reference to the outstanding principal balances thereof as of any date of determination rather than the Incremental Term Loan Commitments therefor;  provided further , that following acceleration of the Loans, such term means, as to any Lender, the percentage equivalent of the principal amount of the Loans (including participations in Swing Loans and Letters of Credit) held by such Lender, divided by the aggregate principal amount of the Loans held by all Lenders.
“Commodity Exchange Act” means the Commodity Exchange Act (7 U.S.C. § 1 et seq.).
“Connection Income Taxes” means Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise Taxes or branch profit Taxes.
“Contingent Obligation” means, as to any Person, any direct or indirect liability, contingent or otherwise, of that Person: (i) with respect to any Indebtedness, lease, dividend or other obligation of another Person if the primary purpose or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability that such liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such liability will be protected (in whole or in part) against loss with respect thereto; (ii) with respect to any letter of credit issued for the account of that Person or as to which that Person is otherwise liable for reimbursement of drawings; (iii) under any Rate Contracts; (iv) to make take-or-pay or similar payments if required regardless of nonperformance by any other party or parties to an agreement; or (v) for the obligations of another Person through any agreement to purchase, repurchase or otherwise acquire such obligation or any Property constituting security therefor, to provide funds for the payment or discharge of such obligation or to maintain the solvency, financial condition or any balance sheet item or level of income of another Person. The amount of any Contingent Obligation shall be equal to the amount of the obligation so guaranteed or otherwise supported or, if not a fixed and determined amount, the maximum amount so guaranteed or supported.
“Contractual Obligations” means, as to any Person, any provision of any security (whether in the nature of Stock, Stock Equivalents or otherwise) issued by such Person or of any agreement, undertaking, contract, indenture, mortgage, deed of trust or other instrument, document or agreement (other than a Loan Document) to which such Person is a party or by which it or any of its Property is bound or to which any of its Property is subject.
 
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“Control Agreement” means a tri-party deposit account, securities account or commodities account control agreement by and among the applicable Credit Party, Agent and the depository, securities intermediary or commodities intermediary, and each in form and substance reasonably satisfactory in all respects to Agent and in any event providing to Agent “control” of such deposit account, securities or commodities account within the meaning of Articles 8 and 9 of the UCC.
“Conversion Date” means any date on which the Borrowers convert a Base Rate Loan to a LIBOR Rate Loan or a LIBOR Rate Loan to a Base Rate Loan.
“Copyrights” means all rights, title and interests (and all related IP Ancillary Rights) arising under any Requirement of Law in or relating to copyrights and all mask work, database and design rights, whether or not registered or published, all registrations and recordations thereof and all applications in connection therewith.
“Credit Parties” means each Borrower and each other Person (i) which executes this Agreement as a “Credit Party,” (ii) which executes a guaranty of the Obligations, (iii) which grants a Lien on all or substantially all of its assets to secure payment of the Obligations and (iv) all of the Stock of which is pledged to Agent for the benefit of the Secured Parties.
“CryoLife” means CryoLife, Inc., a Florida corporation.
“Default” means any event or circumstance which, with the giving of notice, the lapse of time, or both, would (if not cured or otherwise remedied during such time) constitute an Event of Default.
“Disposition” means (a) the sale, lease, conveyance or other disposition of Property, other than sales or other dispositions expressly permitted under  subsection 5.2(a) ,  5.2(c)  and  5.2(d) , and (b) the sale or transfer by a Borrower or any Subsidiary of a Borrower of any Stock or Stock Equivalent issued by any Subsidiary of a Borrower and held by such transferor Person.
“Dollar Equivalent” means with respect to an amount denominated in Euros on any date, the amount of Dollars that may be purchased with such amount of Euros at the Spot Exchange Rate on such date.
“Dollars”, “dollars” and “$” each mean lawful money of the United States of America.
“Domestic Subsidiary” means, with respect to any Person, a Subsidiary of such Person, which Subsidiary is incorporated or otherwise organized under the laws of a state of the United States of America.
“Effective Date” means September 26, 2014.
 
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“Electronic Transmission” means each document, instruction, authorization, file, information and any other communication transmitted, posted or otherwise made or communicated by e-mail or E-Fax, or otherwise to or from an E-System or other equivalent service.
“EMU” means the Economic and Monetary Union as contemplated in the Treaty on European Union.
“EMU Legislation” means legislative measures of the European Union for the introduction of, changeover to or operation of a single or unified European currency (whether known as the Euro or otherwise), being in part the implementation of the third stage of EMU.
“Environmental Laws” means all present and future Requirements of Law and Permits imposing liability or standards of conduct for or relating to the regulation and protection of human health, safety, the environment and natural resources, and including public notification requirements and environmental transfer of ownership, notification or approval statutes.
“Environmental Liabilities” means all Liabilities (including costs of Remedial Actions, natural resource damages and costs and expenses of investigation and feasibility studies) that may be imposed on, incurred by or asserted against any Credit Party or any Subsidiary of any Credit Party as a result of, or related to, any claim, suit, action, investigation, proceeding or demand by any Person, whether based in contract, tort, implied or express warranty, strict liability, criminal or civil statute or common law or otherwise, arising under any Environmental Law or in connection with any environmental, health or safety condition or with any Release and resulting from the ownership, lease, sublease or other operation or occupation of Property by any Credit Party or any Subsidiary of any Credit Party, whether on, prior or after the Effective Date.
“ERISA” means the Employee Retirement Income Security Act of 1974.
“ERISA Affiliate” means, collectively, any Credit Party and any Person under common control or treated as a single employer with, any Credit Party, within the meaning of Section 414(b), (c), (m) or (o) of the Code.
“ERISA Event” means any of the following: (a) a reportable event described in Section 4043(b) of ERISA (or, unless the 30-day notice requirement has been duly waived under the applicable regulations, Section 4043(c) of ERISA) with respect to a Title IV Plan; (b) the withdrawal of any ERISA Affiliate from a Title IV Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer, as defined in Section 4001(a)(2) of ERISA; (c) the complete or partial withdrawal of any ERISA Affiliate from any Multiemployer Plan; (d) with respect to any Multiemployer Plan, the filing of a notice of reorganization, insolvency or termination (or treatment of a plan amendment as termination) under Section 4041A of ERISA; (e) the filing of a notice of intent to terminate a Title IV Plan (or treatment of a plan amendment as termination) under Section 4041 of ERISA; (f) the institution of proceedings to terminate a Title IV Plan or Multiemployer Plan by the PBGC; (g) the failure to make any required
 
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contribution to any Title IV Plan or Multiemployer Plan when due; (h) the imposition of a lien under Section 412 or 430(k) of the Code or Section 302, 303(k) or 4068 of ERISA on any property (or rights to property, whether real or personal) of any ERISA Affiliate or a violation of Section 436 of the Code with respect to a Title IV Plan; (i) the failure, upon determination by the IRS, of a Benefit Plan or any trust thereunder intended to qualify for tax exempt status under Section 401 or 501 of the Code or other Requirements of Law to qualify thereunder; (j) a Title IV plan is in “at risk” status within the meaning of Code Section 430(i); (k) a Multiemployer Plan is in “endangered status” or “critical status” within the meaning of Section 432(b) of the Code; and (l) any other event or condition that might reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Title IV Plan or Multiemployer Plan or for the imposition of any liability upon any ERISA Affiliate under Title IV of ERISA other than for PBGC premiums due but not delinquent.
“Euro” and “€” means the single currency of the European Union as constituted by the Treaty on European Union and as referred to in EMU Legislation
“Event of Loss” means, with respect to any Property, any of the following: (a) any loss, destruction or damage of such Property; (b) any pending or threatened institution of any proceedings for the condemnation or seizure of such Property or for the exercise of any right of eminent domain; or (c) any actual condemnation, seizure or taking, by exercise of the power of eminent domain or otherwise, of such Property, or confiscation of such Property or the requisition of the use of such Property.
“Excluded Equity Issuance” means Net Issuance Proceeds resulting from the issuance of (a) Stock or Stock Equivalents by CryoLife to management or employees of a Credit Party under any employee stock option or stock purchase plan or other employee benefits plan in existence from time to time, (b) Stock or Stock Equivalents by a Wholly-Owned Subsidiary of a Borrower to a Borrower or another Wholly-Owned subsidiary of a Borrower constituting an Investment permitted hereunder, (c) Stock or Stock Equivalents by a Wholly-Owned Subsidiary of CryoLife to CryoLife or another Wholly-Owned subsidiary of CryoLife constituting an Investment permitted hereunder, and (d) Stock or Stock Equivalents by a Foreign Subsidiary of such Foreign Subsidiary to qualify directors where required pursuant to a Requirement of Law or to satisfy other requirements of applicable law, in each instance, with respect to the ownership of Stock of Foreign Subsidiaries.
“Excluded Foreign Subsidiary” means any subsidiary of any Borrower that is a controlled foreign corporation as defined in the Internal Revenue Code (a) for which the failure to include such subsidiary as an “Excluded Foreign Subsidiary” hereunder would result in materially adverse tax consequences to Borrowers, the Guarantors and their subsidiaries taken as a whole and (b) that has not guaranteed or pledged any of its assets or suffered a pledge of more than 65% of its voting stock, with substantially similar tax consequences, to secure, directly or indirectly, any indebtedness (other than under the Loan Documents) of Borrowers or any Guarantor (excluding such subsidiary).
 
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“Excluded Rate Contract Obligation” means, with respect to any Guarantor, any guarantee of any Swap Obligations under a Secured Rate Contract if, and only to the extent that and for so long as, all or a portion of the guarantee of such Guarantor of, or the grant by such Guarantor of a security interest to secure, such Swap Obligation under a Secured Rate Contract (or any guarantee thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of such Guarantor’s failure for any reason to constitute an “eligible contract participant” as defined in the Commodity Exchange Act at the time the guarantee of such Guarantor or the grant of such security interest becomes effective with respect to such Swap Obligation under a Secured Rate Contract. If a Swap Obligation under a Secured Rate Contract arises under a master agreement governing more than one swap, such exclusion shall apply only to the portion of such Swap Obligation under a Secured Rate Contract that is attributable to swaps for which such guarantee or security interest is or becomes illegal.
“E-Fax” means any system used to receive or transmit faxes electronically.
“E-Signature” means the process of attaching to or logically associating with an Electronic Transmission an electronic symbol, encryption, digital signature or process (including the name or an abbreviation of the name of the party transmitting the Electronic Transmission) with the intent to sign, authenticate or accept such Electronic Transmission.
“E-System” means any electronic system, including Syndtrak® and ClearPar® and any other Internet or extranet-based site, whether such electronic system is owned, operated or hosted by the Agent, any of its Related Persons or any other Person, providing for access to data protected by passcodes or other security system.
“Excluded Tax” means with respect to any Secured Party: (a) Taxes measured by net income (including branch profit Taxes) and franchise Taxes imposed in lieu of net income Taxes, in each case (i) imposed on any Secured Party as a result of being organized under the laws of, or having its principal office or, in the case of any Lender, its applicable lending office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (ii) that are Other Connection Taxes; (b) withholding Taxes to the extent that the obligation to withhold amounts existed on the date that such Person became a Secured Party under this Agreement in the capacity under which such Person makes a claim under Section 10.1(b) or designates a new Lending Office, except in each case to the extent such Person is a direct or indirect assignee (other than pursuant to Section 9.22) of any other Secured Party that was entitled, at the time the assignment to such Person became effective, to receive additional amounts under Section 10.1(b); (c) Taxes that are directly attributable to the failure (other than as a result of a change in any Requirement of Law) by any Secured Party to deliver the documentation required to be delivered pursuant to Section 10.1(g); and (d) any United States federal withholding Taxes imposed under FATCA.
 
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“Facility Termination Date” means the date on which (A) the Revolving Loan Commitments have terminated, (B) all Loans, all L/C Reimbursement Obligations and all other Obligations under the Loan Documents and all Obligations arising under Secured Rate Contracts, that Agent has theretofore been notified in writing by the holder of such Obligation are then due and payable have been paid and satisfied in full, and (C) there shall have been deposited cash collateral with respect to all contingent Obligations (or, as an alternative to cash collateral, in the case of any Letter of Credit Obligation, Agent shall have received a back-up letter of credit) in amounts and on terms and conditions and with parties satisfactory to Agent and each Indemnitee that is, or may be, owed such Obligations (excluding contingent Obligations (other than L/C Reimbursement Obligations) as to which no claim has been asserted).
“FATCA” means Sections 1471, 1472, 1473 and 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), current or future United States Treasury Regulations promulgated thereunder and published guidance with respect thereto, any agreements entered into pursuant to Section 1471(b)(1) of the Code and any applicable intergovernmental agreements with respect thereto.
“FDA” means the United States Food and Drug Administration and any successor thereto.
“FDA Laws” has the meaning set forth in Section 4.8.
“Federal Flood Insurance” means federally backed Flood Insurance available under the National Flood Insurance Program to owners of real property improvements located in Special Flood Hazard Areas in a community participating in the National Flood Insurance Program.
“Federal Funds Rate” means, for any day, the rate per annum (rounded upward to the nearest 1/100th of 1%) equal to the weighted average of the rates on overnight Federal Funds transactions with members of the Federal Reserve System arranged by Federal Funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day, provided that if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate quoted to the Agent on such day on such transactions as determined by the Agent in a commercially reasonable manner.
“Federal Health Care Program” has the meaning specified in Section 1128B(f) of the SSA and includes the Medicare, Medicaid and TRICARE programs.
“Federal Health Care Program Laws” has the meaning specified in Section 3.23(c).
“Federal Reserve Board” means the Board of Governors of the Federal Reserve System, or any entity succeeding to any of its principal functions.
 
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“Fee Letter” means that certain Amended and Restated Fee Letter, dated as of the Effective Date, by and between the Borrowers and the Agent.
“FEMA” means the Federal Emergency Management Agency, a component of the U.S. Department of Homeland Security that administers the National Flood Insurance Program.
“FIRREA” means the Financial Institutions Reform, Recovery and Enforcement Act of 1989.
“First Tier Foreign Subsidiary” means a Foreign Subsidiary more than fifty percent (50%) of the voting Stock (directly or through ownership of Stock Equivalents) of which are held directly by a Borrower or indirectly by a Borrower through one or more Domestic Subsidiaries.
“Flood Insurance” means, for any Real Estate located in a Special Flood Hazard Area, Federal Flood Insurance or private insurance that (a) meets the requirements set forth by FEMA in its  Mandatory Purchase of Flood Insurance Guidelines and (b) shall be in an amount equal to the full, unpaid balance of the Loans and any prior liens on the Real Estate up to the maximum policy limits set under the National Flood Insurance Program, or as otherwise required by Agent, with deductibles not to exceed $50,000.
“Foreign Subsidiary” means, with respect to any Person, a Subsidiary of such Person, which Subsidiary is not a Domestic Subsidiary.
“GAAP” means generally accepted accounting principles set forth from time to time in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the accounting profession), which are applicable to the circumstances as of the date of determination.
“Governmental Authority” means any nation, sovereign or government, any state or other political subdivision thereof, any agency, authority or instrumentality thereof and any entity or authority exercising executive, legislative, taxing, judicial, regulatory or administrative functions of or pertaining to government, including any central bank, stock exchange, regulatory body, arbitrator, public sector entity, supra-national entity (including the European Union and the European Central Bank) and any self-regulatory organization (including the National Association of Insurance Commissioners).
“Guarantor” means any Person that has guaranteed any Obligations.
“Guaranty and Security Agreement” means that certain Guaranty and Security Agreement, dated as of the Initial Closing Date, made by the Credit Parties in favor of the Agent, for the benefit of the Secured Parties, as amended on the date hereof and as the same may be further amended, restated and/or modified from time to time.
 
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“Hazardous Materials” means any substance, material or waste that is classified, regulated or otherwise characterized under any Environmental Law as hazardous, toxic, a contaminant or a pollutant or by other words of similar meaning or regulatory effect, including petroleum or any fraction thereof, asbestos, polychlorinated biphenyls and radioactive substances.
“HIPAA” means the Health Insurance Portability and Accountability Act of 1996.
“Impacted Lender” means any Lender that fails to provide Agent, within three (3) Business Days following Agent’s written request, satisfactory assurance that such Lender will not become a Non-Funding Lender, or any Lender that has a Person that directly or indirectly controls such Lender and such Person (a) becomes subject to a voluntary or involuntary case under the Bankruptcy Code or any similar bankruptcy laws, (b) has appointed a custodian, conservator, receiver or similar official for such Person or any substantial part of such Person’s assets, or (c) makes a general assignment for the benefit of creditors, is liquidated, or is otherwise adjudicated as, or determined by any Governmental Authority having regulatory authority over such Person or its assets to be, insolvent or bankrupt, and for each of clauses (a) through (c), Agent has determined that such Lender is reasonably likely to become a Non-Funding Lender. For purposes of this definition, control of a Person shall have the same meaning as in the second sentence of the definition of Affiliate.
“Indebtedness” of any Person means, without duplication: (a) all indebtedness for borrowed money; (b) all obligations issued, undertaken or assumed as the deferred purchase price of Property or services (other than trade payables entered into in the Ordinary Course of Business); (c) the face amount of all letters of credit issued for the account of such Person and without duplication, all drafts drawn thereunder and all reimbursement or payment obligations with respect to letters of credit, surety bonds and other similar instruments issued by such Person; (d) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of Property, assets or businesses; (e) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to Property acquired by the Person (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such Property); (f) all Capital Lease Obligations; (g) the principal balance outstanding under any synthetic lease, off-balance sheet loan or similar off balance sheet financing product; (h) all obligations, whether or not contingent, to purchase, redeem, retire, defease or otherwise acquire for value any of its own Stock or Stock Equivalents (or any Stock or Stock Equivalent of a direct or indirect parent entity thereof) prior to the date that is 180 days after the date set forth in clause (a) of the definition of “Revolving Termination Date”, valued at, in the case of redeemable preferred Stock, the greater of the voluntary liquidation preference and the involuntary liquidation preference of such Stock plus accrued and unpaid dividends; (i) all indebtedness referred to in clauses (a) through (h) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in Property (including accounts and contracts rights) owned by such Person, even though such Person has not assumed or become liable for the payment of
 
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such indebtedness; and (j) all Contingent Obligations described in clause (i) of the definition thereof in respect of indebtedness or obligations of others of the kinds referred to in clauses (a) through (i) above.
“Indemnified Tax” means (a) any Tax other than an Excluded Tax and (b) to the extent not otherwise described in clause (a), Other Taxes.
“Initial Closing Date” means March 27, 2008.
“Insolvency Proceeding” means (a) any case, action or proceeding before any court or other Governmental Authority relating to bankruptcy, reorganization, insolvency, liquidation, receivership, dissolution, winding-up or relief of debtors, or (b) any general assignment for the benefit of creditors, composition, marshaling of assets for creditors, or other, similar arrangement in respect of its creditors generally or any substantial portion of its creditors; in each case in (a) and (b) above, undertaken under U.S. Federal, state or foreign law, including the Bankruptcy Code.
“Intellectual Property” means all rights, title and interests in or relating to intellectual property and industrial property arising under any Requirement of Law and all IP Ancillary Rights relating thereto, including all Copyrights, Patents, Trademarks, Internet domain names, Trade Secrets and IP Licenses.
“Interest Payment Date” means, (a) with respect to any LIBOR Rate Loan (other than a LIBOR Rate Loan having an Interest Period of six (6) months) the last day of each Interest Period applicable to such Loan, (b) with respect to any LIBOR Rate Loan having an Interest Period of six (6) months, the last day of each three (3) month interval and, without duplication, the last day of such Interest Period, and (c) with respect to Base Rate Loans (including Swing Loans), the last day of each calendar quarter.
“Interest Period” means, with respect to any LIBOR Rate Loan, the period commencing on the Business Day such Loan is disbursed or continued or on the Conversion Date on which a Base Rate Loan is converted to the LIBOR Rate Loan and ending on the date one, two, three or six months thereafter, as selected by the Borrower Representative in its Notice of Borrowing or Notice of Conversion/Continuation;  provided  that:
(a) if any Interest Period pertaining to a LIBOR Rate Loan would otherwise end on a day which is not a Business Day, that Interest Period shall be extended to the next succeeding Business Day unless the result of such extension would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the immediately preceding Business Day;
(b) any Interest Period pertaining to a LIBOR Rate Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period;
 
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(c) no Interest Period for any Revolving Loan shall extend beyond the Revolving Termination Date and no Interest Period for an Incremental Term Loan or any portion thereof shall extend beyond the last scheduled payment date therefor; and
(d) no Interest Period applicable to an Incremental Term Loan or portion thereof shall extend beyond any date upon which is due any scheduled principal payment in respect of such Incremental Term Loan unless the aggregate principal amount of Incremental Term Loans represented by Base Rate Loans or by LIBOR Rate Loans having Interest Periods that will expire on or before such date is equal to or in excess of the amount of such principal payment.
“Inventory” means all of the “inventory” (as such term is defined in the UCC) of the Borrowers and their Subsidiaries, including, but not limited to, all merchandise, raw materials, parts, supplies, work-in-process and finished goods intended for sale, together with all the containers, packing, packaging, shipping and similar materials related thereto, and including such inventory as is temporarily out of a Borrower’s or such Subsidiary’s custody or possession, including inventory on the premises of others and items in transit.
“IP Ancillary Rights” means, with respect to any other Intellectual Property, as applicable, all foreign counterparts to, and all divisionals, reversions, continuations, continuations-in-part, reissues, reexaminations, renewals and extensions of, such Intellectual Property and all income, royalties, proceeds and Liabilities at any time due or payable or asserted under or with respect to any of the foregoing or otherwise with respect to such Intellectual Property, including all rights to sue or recover at law or in equity for any past, present or future infringement, misappropriation, dilution, violation or other impairment thereof, and, in each case, all rights to obtain any other IP Ancillary Right.
“IP License” means all Contractual Obligations (and all related IP Ancillary Rights), whether written or oral, granting any right, title and interest in or relating to any Intellectual Property.
“IRS” means the Internal Revenue Service of the United States and any successor thereto.
“Issue” means, with respect to any Letter of Credit, to issue, extend the expiration date of, renew (including by failure to object to any automatic renewal on the last day such objection is permitted), increase the face amount of, or reduce or eliminate any scheduled decrease in the face amount of, such Letter of Credit, or to cause any Person to do any of the foregoing. The terms “Issued” and “Issuance” have correlative meanings.
“L/C Issuer” means GE Capital or a Subsidiary thereof or a bank or other legally authorized Person selected by or acceptable to Agent in its sole discretion, in such Person’s capacity as an issuer of Letters of Credit hereunder. As of the Initial Closing Date, the “L/C Issuer” is GE Capital.
 
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“L/C Reimbursement Obligation” means, for any Letter of Credit, the obligation of the Borrowers to the L/C Issuer thereof, as and when matured, to pay all amounts drawn under such Letter of Credit.
“Lending Office” means, with respect to any Lender, the office or offices of such Lender specified as its “Lending Office” beneath its name on the applicable signature page hereto, or such other office or offices of such Lender as it may from time to time notify the Borrower Representative and the Agent.
“Letter of Credit” means documentary or standby letters of credit issued for the account of the Borrowers by L/C Issuers, and bankers’ acceptances issued by a Borrower, for which Agent and Lenders have incurred Letter of Credit Obligations.
“Letter of Credit Obligations” means all outstanding obligations incurred by Agent and Lenders at the request of the Borrowers or the Borrower Representative, whether direct or indirect, contingent or otherwise, due or not due, in connection with the issuance of Letters of Credit by L/C Issuers or the purchase of a participation as set forth in  Section 1.1(b) with respect to any Letter of Credit. The amount of such Letter of Credit Obligations shall equal the maximum amount that may be payable by Agent and Lenders thereupon or pursuant thereto.
“Liabilities” means all claims, actions, suits, judgments, damages, losses, liability, obligations, responsibilities, fines, penalties, sanctions, costs, fees, taxes, commissions, charges, disbursements and expenses (including without limitation, those incurred upon any appeal or in connection with the preparation for and/or response to any subpoena or request for document production relating thereto), in each case of any kind or nature (including interest accrued thereon or as a result thereto and fees, charges and disbursements of financial, legal and other advisors and consultants), whether joint or several, whether or not indirect, contingent, consequential, actual, punitive, treble or otherwise.
“LIBOR” means, for each Interest Period, the higher of (a) the offered rate per annum for deposits of Dollars for the applicable Interest Period that appears on Reuters Screen LIBOR01 page as of 11:00 a.m. (London, England time) two (2) Business Days prior to the first day in such Interest Period and (b) 1.00% per annum. If no such offered rate exists, such rate will be the rate of interest per annum, as determined by the Agent (rounded upwards, if necessary, to the nearest 1/100 of 1%) at which deposits of Dollars in immediately available funds are offered at 11:00 a.m. (London, England time) two (2) Business Days prior to the first day in such Interest Period by major financial institutions reasonably satisfactory to the Agent in the London interbank market for such Interest Period for the applicable principal amount on such date of determination.
“LIBOR Rate Loan” means a Loan that bears interest based on LIBOR.
“Lien” means any mortgage, deed of trust, pledge, hypothecation, assignment, charge or deposit arrangement, encumbrance, lien (statutory or otherwise) or preference, priority or other security interest or preferential arrangement of any kind or nature
 
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whatsoever (including those created by, arising under or evidenced by any conditional sale or other title retention agreement, the interest of a lessor under a Capital Lease, any synthetic or other financing lease having substantially the same economic effect as any of the foregoing, or the filing of any financing statement naming the owner of the asset to which such lien relates as debtor, under the UCC or any comparable law) and any contingent or other agreement to provide any of the foregoing, but not including the interest of a lessor under a lease which is not a Capital Lease.
“Liquidity” shall mean, as of any date of determination, (a) Availability plus (b) available cash and Cash Equivalents in bank accounts or securities accounts subject to Control Agreements.
“Loan” means an extension of credit by a Lender to the Borrowers pursuant to Article I hereof, and may be a Base Rate Loan or a LIBOR Rate Loan.
“Loan Documents” means this Agreement, the Notes, the Fee Letter, the Collateral Documents and all documents delivered to the Agent and/or any Lender in connection with any of the foregoing.
“Margin Stock” means “margin stock” as such term is defined in Regulation T, U or X of the Federal Reserve Board.
“Material Adverse Effect” means: (a) a material adverse change in, or a material adverse effect upon, the operations, business, Properties, condition (financial or otherwise) or prospects of any Credit Party or the Credit Parties and the Subsidiaries taken as a whole; (b) a material impairment of the ability of any Credit Party, any Subsidiary of any Credit Party or any other Person (other than the Agent or Lenders) to perform in any material respect its obligations under any Loan Document; or (c) a material adverse effect upon (i) the legality, validity, binding effect or enforceability of any Loan Document, or (ii) the perfection or priority of any Lien granted to the Lenders or to the Agent for the benefit of the Secured Parties under any of the Collateral Documents.
“Material Environmental Liabilities” means Environmental Liabilities exceeding $500,000 in the aggregate.
“Mortgage” means any deed of trust, leasehold deed of trust, mortgage, leasehold mortgage, deed to secure debt, leasehold deed to secure debt or other document creating a Lien on real Property or any interest in real Property.
“Multiemployer Plan” means any multiemployer plan, as defined in Section 3(37) or 4001(a)(3) of ERISA, as to which any ERISA Affiliate incurs or otherwise has any obligation or liability, contingent or otherwise.
“National Flood Insurance Program” means the program created by the U.S. Congress pursuant to the National Flood Insurance Act of 1968 and the Flood Disaster Protection Act of 1973, as revised by the National Flood Insurance Reform Act of 1994, that mandates the purchase of flood insurance to cover real property improvements located in Special Flood Hazard Areas in participating communities and provides protection to property owners through a federal insurance program.
 
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“Net Issuance Proceeds” means, in respect of any issuance of debt or equity, cash proceeds (including cash proceeds as and when received in respect of non-cash proceeds received or receivable in connection with such issuance), net of underwriting discounts and reasonable out-of-pocket costs and expenses paid or incurred in connection therewith in favor of any Person not an Affiliate of a Borrower.
“Net Proceeds” means proceeds in cash, checks or other cash equivalent financial instruments (including Cash Equivalents) as and when received by the Person making a Disposition and insurance proceeds received on account of an Event of Loss, net of: (a) in the event of a Disposition (i) the direct costs relating to such Disposition excluding amounts payable to a Borrower or any Affiliate of a Borrower, (ii) sale, use or other transaction taxes paid or payable as a result thereof, and (iii) amounts required to be applied to repay principal, interest and prepayment premiums and penalties on Indebtedness secured by a Lien on the asset which is the subject of such Disposition and (b) in the event of an Event of Loss, (i) all money actually applied to repair or reconstruct the damaged Property or Property affected by the condemnation or taking, (ii) all of the costs and expenses reasonably incurred in connection with the collection of such proceeds, award or other payments, and (iii) any amounts retained by or paid to parties having superior rights to such proceeds, awards or other payments.
“Non-Funding Lender” means any Lender that has (a) failed to fund any payments required to be made by it under the Loan Documents within two (2) Business Days after any such payment is due (excluding expense and similar reimbursements that are subject to good faith disputes), (b) given written notice (and Agent has not received a revocation in writing), to a Borrower, Agent, any Lender, or the L/C Issuer or has otherwise publicly announced (and Agent has not received notice of a public retraction) that such Lender believes it will fail to fund payments or purchases of participations required to be funded by it under the Loan Documents or one or more other syndicated credit facilities, (c) failed to fund, and not cured, loans, participations, advances, or reimbursement obligations under one or more other syndicated credit facilities, unless subject to a good faith dispute, or (d) any Person that directly or indirectly controls such Lender has, (i) become subject to a voluntary or involuntary case under the Bankruptcy Code or any similar bankruptcy laws, (ii) a custodian, conservator, receiver or similar official appointed for it or any substantial part of such Person’s assets, or (iii) made a general assignment for the benefit of creditors, been liquidated, or otherwise been adjudicated as, or determined by any Governmental Authority having regulatory authority over such Person or its assets to be, insolvent or bankrupt, and for this clause (d), Agent has determined that such Lender is reasonably likely to fail to fund any payments required to be made by it under the Loan Documents. For purposes of this definition, control of a Person shall have the same meaning as in the second sentence of the definition of Affiliate.
 
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“Non-U.S. Lender Party” means each of the Agent, each Lender, each L/C Issuer, each SPV and each participant, in each case that is not a United States person under and as defined in Section 7701(a)(30) of the Code.
“Note” means any Revolving Note or Swingline Note and “Notes” means all such Notes.
“Notice of Borrowing” means a notice given by the Borrower Representative to the Agent pursuant to Section 1.5 , in substantially the form of  Exhibit 11.1(d)  hereto.
“Obligations” means all Loans, and other Indebtedness, advances, debts, liabilities, obligations, covenants and duties owing by any Credit Party to any Lender, the Agent, any L/C Issuer, any Secured Swap Provider or any other Person required to be indemnified, that arises under any Loan Document or any Secured Rate Contract, whether or not for the payment of money, whether arising by reason of an extension of credit, loan, guaranty, indemnification or in any other manner, whether direct or indirect (including those acquired by assignment), absolute or contingent, due or to become due, now existing or hereafter arising and however acquired; provided, that Obligations of any Guarantor shall not include any Excluded Rate Contract Obligations.
“Omnibus Reaffirmation Agreement” means that certain Omnibus Reaffirmation Agreement, dated as of the Effective Date, among the Agent and the Credit Parties party thereto.
“Ordinary Course of Business” means, in respect of any transaction involving any Credit Party or any Subsidiary of any Credit Party, the ordinary course of such Person’s business, as conducted by any such Person in accordance with past practice and undertaken by such Person in good faith and not for purposes of evading any covenant or restriction in any Loan Document.
“Organization Documents” means, (a) for any corporation, the certificate or articles of incorporation, the bylaws, any certificate of determination or instrument relating to the rights of preferred shareholders of such corporation, any shareholder rights agreement, (b) for any partnership, the partnership agreement and, if applicable, certificate of limited partnership, (c) for any limited liability company, the operating agreement and articles or certificate of formation or (d) any other document setting forth the manner of election or duties of the officers, directors, managers or other similar persons, or the designation, amount or relative rights, limitations and preference of the Stock of a Person.
“Other Connection Taxes” means, with respect to any Secured Party, Taxes imposed as a result of a present or former connection between such Secured Party and the jurisdiction imposing such Tax, other than any such connection arising solely from the Secured Party having executed, delivered, become a party to, performed its obligations or received a payment under, received or perfected as a security interest under, engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an interest in any Loan or Loan Document.
 
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“Patents” means all rights, title and interests (and all related IP Ancillary Rights) arising under any Requirement of Law in or relating to letters patent and applications therefor.
“Patriot Act” means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, P.L. 107-56, as amended.
“PBGC” means the United States Pension Benefit Guaranty Corporation or any successor thereto.
“Permits” means, with respect to any Person, any permit, approval, authorization, license, registration, certificate, concession, grant, franchise, variance or permission from, and any other Contractual Obligations with, any Governmental Authority, in each case whether or not having the force of law and applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.
“Permitted Acquisition” means any Acquisition by (i) a Borrower or any Wholly-Owned Subsidiary of a Borrower which is a Domestic Subsidiary of substantially all of the assets of a Target, which assets are located in the United States or (ii) a Borrower or any Wholly-Owned Subsidiary of a Borrower which is a Domestic Subsidiary of 100% of the Stock and Stock Equivalents of a Target incorporated under the laws of any State in the United States or the District of Columbia to the extent that each of the following conditions shall have been satisfied:
(a) to the extent the Acquisition will be financed in whole or in part with the proceeds of any Loan, the conditions set forth in  Section 2.2  shall have been satisfied;
(b) the Borrowers shall have furnished to the Agent and Lenders at least ten (10) Business Days prior to the consummation of such Acquisition (1) an executed term sheet and/or commitment letter (setting forth in reasonable detail the terms and conditions of such Acquisition) and, at the request of the Agent, such other information and documents that the Agent may request, including, without limitation, executed counterparts of the respective agreements, documents or instruments pursuant to which such Acquisition is to be consummated (including, without limitation, any related management, non-compete, employment, option or other material agreements), any schedules to such agreements, documents or instruments and all other material ancillary agreements, instruments and documents to be executed or delivered in connection therewith, (2) pro forma financial statements of CryoLife and its Subsidiaries after giving effect to the consummation of such Acquisition, (3) a certificate of a Responsible Officer of the Borrower Representative demonstrating on a pro forma basis compliance with the covenants set forth in  Sections 6.1  and  6.2  hereof after giving effect to the consummation of such Acquisition and (4) a copy of such other agreements, instruments and other documents (including, without limitation, the Loan Documents required by  Section 4.13 ) as the Agent reasonably shall request;
 
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(c) the Borrowers and their Subsidiaries (including any new Subsidiary) shall execute and deliver the agreements, instruments and other documents required by  Section 4.13  and the Agent shall have received, for the benefit of the Secured Parties, a collateral assignment of the seller’s representations, warranties and indemnities to the Borrowers or any of their Subsidiaries under the acquisition documents;
(d) such Acquisition shall not be hostile and shall have been approved by the board of directors (or other similar body) and/or the stockholders or other equity holders of the Target;
(e) no Default or Event of Default shall then exist or would exist after giving effect thereto;
(f) after giving effect to such Acquisition, Availability shall be not less than $1,500,000; and
(g) the total consideration paid or payable (including without limitation, any deferred payment, but excluding royalties and earn-out payments that are performance based) for all Acquisitions consummated during the term of this Agreement, less the portion of any such consideration funded by the issuance of common or preferred stock of Borrower, shall not exceed $35,000,000 in the aggregate for all such Acquisitions.
“Person” means an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture or Governmental Authority.
“Pledged Collateral” has the meaning specified in the Guaranty and Security Agreement and shall include any other Collateral required to be delivered to Agent pursuant to the terms of any Collateral Document.
“Pro Forma EBITDA” means, with respect to any Target, EBITDA for such Target for the most recent twelve (12) month period for which financial statements are available at the time of determination thereof, adjusted by verifiable expense reductions, including excess owner compensation, if any, which are expected to be realized, in each case calculated by the Borrowers and approved by the Agent.
“Property” means any interest in any kind of property or asset, whether real, personal or mixed, and whether tangible or intangible.
“Qualified ECP Guarantor” means, in respect of any Swap Obligation under a Secured Rate Contract, each Credit Party that has total assets exceeding $10,000,000 at the time the relevant guarantee or grant of the relevant security interest becomes effective with respect to such Swap Obligation under a Secured Rate Contract or such other person as constitutes an “eligible contract participant” under the Commodity Exchange Act and can cause another person to qualify as an “eligible contract participant” at such time by entering into a keepwell under Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.
 
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“Rate Contracts” means swap agreements (as such term is defined in Section 101 of the Bankruptcy Code) and any other agreements or arrangements designed to provide protection against fluctuations in interest or currency exchange rates
“Registrations” means authorizations, approvals, licenses, permits, certificates, or exemptions issued by any Governmental Authority (including pre-market approval applications, pre-market notifications, investigational device exemptions, product recertifications, manufacturing approvals and authorizations, CE Marks, pricing and reimbursement approvals, labeling approvals or their foreign equivalent) held by the Credit Parties or their Subsidiaries immediately prior to the Effective Date, that are required for the research, development, manufacture, distribution, marketing, storage, transportation, use and sale of the products of the Credit Parties and their Subsidiaries.
“Related Persons” means, with respect to any Person, each Affiliate of such Person and each director, officer, employee, agent, trustee, representative, attorney, accountant and each insurance, environmental, legal, financial and other advisor (including those retained in connection with the satisfaction or attempted satisfaction of any condition set forth in Article II) and other consultants and agents of or to such Person or any of its Affiliates.
“Releases” means any release, threatened release, spill, emission, leaking, pumping, pouring, emitting, emptying, escape, injection, deposit, disposal, discharge, dispersal, dumping, leaching or migration of Hazardous Material into or through the environment.
“Remedial Action” means all actions required to (a) clean up, remove, treat or in any other way address any Hazardous Material in the indoor or outdoor environment, (b) prevent or minimize any Release so that a Hazardous Material does not migrate or endanger or threaten to endanger public health or welfare or the indoor or outdoor environment or (c) perform pre remedial studies and investigations and post-remedial monitoring and care with respect to any Hazardous Material.
“Required Lenders” means at any time (a) Lenders then holding at least more than fifty percent (50%) of the sum of the Aggregate Revolving Loan Commitment then in effect plus the aggregate unpaid principal balance of the Incremental Term Loans then outstanding, or (b) if the Aggregate Revolving Loan Commitments have been terminated, Lenders then having at least more than fifty percent (50%) of the aggregate unpaid principal amount of Loans (other than Swing Loans) then outstanding plus outstanding Letter of Credit Obligations, amounts of participations in Swing Loans and the principal amount of unparticipated portions of Swing Loans.
“Required Revolving Lenders” means at any time (a) Lenders then holding at least more than fifty percent (50%) of the Aggregate Revolving Loan Commitment then in effect or (b) if the Aggregate Revolving Loan Commitments have been terminated, Lenders then having at least more than fifty percent (50%) of the aggregate unpaid principal amount of Revolving Loans (other than Swing Loans) then outstanding plus outstanding Letter of Credit Obligations, amounts of participations in Swing Loans and the principal amount of unparticipated portions of Swing Loans.
 
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“Requirement of Law” means, with respect to any Person, the common law and any federal, state, local, foreign, multinational or international laws, statutes, codes, treaties, standards, rules and regulations, ordinances, orders, judgments, writs, injunctions, decrees (including administrative or judicial precedents or authorities) and the interpretation or administration thereof by, and other determinations, directives, requirements or requests of, any Governmental Authority, in each case that are applicable to or binding upon such Person or any of its Property or to which such Person or any of its Property is subject, including without limitation the FDA Laws and the Federal Health Care Program Laws.
“Responsible Officer” means the chief executive officer or the president of a Borrower or Borrower Representative, as applicable, or any other officer having substantially the same authority and responsibility; or, with respect to compliance with financial covenants or delivery of financial information, the chief financial officer or the treasurer of a Borrower or Borrower Representative, as applicable, or any other officer having substantially the same authority and responsibility.
“Revolving Lender” means each Lender with a Commitment (or if the Commitments have terminated, who hold Revolving Loans or participations in Swing Loans).
“Revolving Note” means a promissory note of the Borrowers payable to the order of a Lender in substantially the form of  Exhibit 11.1(b)  hereto, evidencing Indebtedness of the Borrowers under the Commitment of such Lender.
“Revolving Termination Date” means the earlier to occur of: (a) September 26, 2019 and (b) the date on which the Aggregate Revolving Loan Commitment shall terminate in accordance with the provisions of this Agreement.
“Secured Party” means the Agent, each Lender, each L/C Issuer, each other Indemnitee and each other holder of any Obligation of a Credit Party including each Secured Swap Provider.
“Secured Rate Contract” means any Rate Contract between a Borrower and the counterparty thereto, (i) for which GE Capital or an Affiliate of GE Capital has provided credit enhancement through either an assignment right or a letter of credit in favor of the counterparty, or (ii) which Agent has acknowledged in writing constitutes a “Secured Rate Contract” hereunder.
“Secured Swap Provider” means (i) a Lender or an Affiliate of a Lender (or a Person who was a Lender or an Affiliate of a Lender at the time of execution and delivery of a Rate Contract) who has entered into a Secured Rate Contract with a Borrower, or (ii) a Person with whom a Borrower has entered into a Secured Rate Contract for which GE Capital or an Affiliate of GE Capital has provided credit enhancement through either an assignment right or a letter of credit in favor of such Person and any assignee thereof.
 
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“Solvent” means, with respect to any Person as of any date of determination, that, as of such date, (a) the value of the assets of such Person (both at fair value and present fair saleable value) is greater than the total amount of liabilities (including contingent and unliquidated liabilities) of such Person, (b) such Person is able to pay all liabilities of such Person as such liabilities mature and (c) such Person does not have unreasonably small capital. In computing the amount of contingent or unliquidated liabilities at any time, such liabilities shall be computed at the amount that, in light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.
“Special Flood Hazard Area” means an area that FEMA’s current flood maps indicate has at least a one percent (1%) chance of a flood equal to or exceeding the base flood elevation (a 100-year flood) in any given year.
“Spot Exchange Rate” means, at any date of determination thereof, the U.S.-dollar foreign-exchange rate for Euros for the most recent reported date published by the Wall Street Journal on its website at  http://online.wsj.com  on the “Exchange Rates: New York Closing Snapshot” page (or such other page as may replace such page on such service for the purpose of displaying the New York Closing foreign-exchange rate for the conversion of Dollars into Euros or Euros into Dollars); provided that if there shall at any time no longer exist such a page on such service, the foreign-exchange rate shall be determined by reference to another similar rate publishing service selected by the Agent and reasonably acceptable to the Borrowers
“SPV” means any special purpose funding vehicle identified as such in a writing by any Lender to the Agent.
“SSA” means the Social Security Act of 1935, codified at Title 42, Chapter 7, of the United States Code.
“Stock” means all shares of capital stock (whether denominated as common stock or preferred stock), equity interests, beneficial, partnership or membership interests, joint venture interests, participations or other ownership or profit interests in or equivalents (regardless of how designated) of or in a Person (other than an individual), whether voting or non-voting.
“Stock Equivalents” means all securities convertible into or exchangeable for Stock or any other Stock Equivalent and all warrants, options or other rights to purchase, subscribe for or otherwise acquire any Stock or any other Stock Equivalent, whether or not presently convertible, exchangeable or exercisable.
“Subsidiary” of a Person means any corporation, association, limited liability company, partnership, joint venture or other business entity of which more than fifty percent (50%) of the voting Stock (in the case of Persons other than corporations), is owned or controlled directly or indirectly by the Person, or one or more of the Subsidiaries of the Person, or a combination thereof.
 
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“Swap Obligation” means, with respect to any Guarantor, any obligation to pay or perform under any agreement, contract or transaction that constitutes a “swap” within the meaning of section 1a(47) of the Commodity Exchange Act.
“Swingline Commitment” means $3,000,000.
“Swingline Lender” means, each in its capacity as Swingline Lender hereunder, GE Capital or, upon the resignation of GE Capital as Agent hereunder, any Lender (or Affiliate or Approved Fund of any Lender) that agrees, with the approval of Agent (or, if there is no such successor Agent, the Required Lenders) and the Borrowers, to act as the Swingline Lender hereunder.
“Swingline Note” means a promissory note of the Borrowers payable to the Swingline Lender, in substantially the form of  Exhibit 11.1(c)  hereto, evidencing the Indebtedness of the Borrowers to the Swingline Lender resulting from the Swing Loans made to the Borrowers by the Swingline Lender.
“Target” means any other Person or business unit or asset group of any other Person acquired or proposed to be acquired in an Acquisition.
“Tax Affiliate” means, (a) each Borrower and its Subsidiaries and (b) any Affiliate of a Borrower with which such Borrower files or is eligible to file consolidated, combined or unitary tax returns.
“Title IV Plan” means a pension plan subject to Title IV of ERISA, other than a Multiemployer Plan, to which any ERISA Affiliate incurs or otherwise has any obligation or liability, contingent or otherwise.
“Trade Secrets” means all right, title and interest (and all related IP Ancillary Rights) arising under any Requirement of Law in or relating to trade secrets.
“Trademark” means all rights, title and interests (and all related IP Ancillary Rights) arising under any Requirement of Law in or relating to trademarks, trade names, corporate names, company names, business names, fictitious business names, trade styles, service marks, logos and other source or business identifiers and, in each case, all goodwill associated therewith, all registrations and recordations thereof and all applications in connection therewith.
“Treaty on European Union” means the Treaty of Rome of March 25, 1957, as amended by the Single European Act 1986 and the Maastricht Treaty (which was signed in Maastricht on February 7, 1992 and came into force on November 1, 1993).
“UCC” means the Uniform Commercial Code of any applicable jurisdiction and, if the applicable jurisdiction shall not have any Uniform Commercial Code, the Uniform Commercial Code as in effect from time to time in the State of New York.
“United States” and “U.S.” each means the United States of America.
 
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“U.S. Lender Party” means each of the Agent, each Lender, each L/C Issuer, each SPV and each participant, in each case that is a United States person under and as defined in Section 7701(a)(30) of the Code.
“Wholly-Owned Subsidiary” means any Subsidiary in which (other than directors’ qualifying shares required by law) one hundred percent (100%) of the Stock and Stock Equivalents, at the time as of which any determination is being made, is owned, beneficially and of record, by any Credit Party, or by one or more of the other Wholly-Owned Subsidiaries, or both.
“Withdrawal Liabilities” means, at any time, any liability incurred (whether or not assessed) by any ERISA Affiliate and not yet satisfied or paid in full at such time with respect to any Multiemployer Plan pursuant to Section 4201 of ERISA.
11.2 Other Interpretive Provisions.
(a) Defined Terms. Unless otherwise specified herein or therein, all terms defined in this Agreement or in any other Loan Document shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto. The meanings of defined terms shall be equally applicable to the singular and plural forms of the defined terms. Terms (including uncapitalized terms) not otherwise defined herein and that are defined in the UCC shall have the meanings therein described.
(b) The Agreement. The words “hereof”, “herein”, “hereunder” and words of similar import when used in this Agreement or any other Loan Document shall refer to this Agreement or such other Loan Document as a whole and not to any particular provision of this Agreement or such other Loan Document; and subsection, section, schedule and exhibit references are to this Agreement or such other Loan Documents unless otherwise specified.
(c) Certain Common Terms. The term “documents” includes any and all instruments, documents, agreements, certificates, indentures, notices and other writings, however evidenced. The term “including” is not limiting and means “including without limitation.” Whenever any provision refers to the “knowledge” (or an analogous phrase) of any Credit Party, such words are intended to signify that a Responsible Officer or other member of management of such Credit Party has actual knowledge or awareness of a particular fact or circumstance or that a Responsible Officer or other member of management of such Credit Party, if such Person had exercised reasonable diligence, would have known or been aware of such fact or circumstance.
(d) Performance; Time. Whenever any performance obligation hereunder or under any other Loan Document (other than a payment obligation) shall be stated to be due or required to be satisfied on a day other than a Business Day, such performance shall be made or satisfied on the next succeeding Business Day. For the avoidance of doubt, the initial payments of interest and fees relating to the Obligations (other than amounts due on the Effective Date) shall be due and paid on the first day of the first month or quarter, as applicable, following the entry of the Obligations onto the
 
115

operations systems of Agent, but in no event later than the first day of the second month or quarter, as applicable, following the Effective Date. In the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including”; the words “to” and “until” each mean “to but excluding”, and the word “through” means “to and including.” If any provision of this Agreement or any other Loan Document refers to any action taken or to be taken by any Person, or which such Person is prohibited from taking, such provision shall be interpreted to encompass any and all means, direct or indirect, of taking, or not taking, such action.
(e) Contracts. Unless otherwise expressly provided herein or in any other Loan Document, references to agreements and other contractual instruments, including this Agreement and the other Loan Documents, shall be deemed to include all subsequent amendments thereto, restatements and substitutions thereof and other modifications and supplements thereto which are in effect from time to time, but only to the extent such amendments and other modifications are not prohibited by the terms of any Loan Document.
(f) Laws. References to any statute or regulation may be made by using either the common or public name thereof or a specific cite reference and, except as otherwise provided with respect to FATCA, are to be construed as including all statutory and regulatory provisions related thereto or consolidating, amending, replacing, supplementing or interpreting the statute or regulation.
11.3 Accounting Terms and Principles. All accounting determinations required to be made pursuant hereto shall, unless expressly otherwise provided herein, be made in accordance with GAAP. No change in the accounting principles used in the preparation of any financial statement hereafter adopted by CryoLife shall be given effect for purposes of measuring compliance with any provision of Article V or VI unless the Borrowers, the Agent and the Required Lenders agree to modify such provisions to reflect such changes in GAAP and, unless such provisions are modified, all financial statements, Compliance Certificates and similar documents provided hereunder shall be provided together with a reconciliation between the calculations and amounts set forth therein before and after giving effect to such change in GAAP. Notwithstanding any other provision contained herein, all terms of an accounting or financial nature used herein shall be construed, and all computations of amounts and ratios referred to in Article V and Article VI shall be made, without giving effect to any election under Accounting Standards Codification 825-10 (or any other Financial Accounting Standard having a similar result or effect) to value any Indebtedness or other liabilities of any Credit Party or any Subsidiary of any Credit Party at “fair value.” A breach of a financial covenant contained in Article VI shall be deemed to have occurred as of any date of determination by Agent or as of the last day of any specified measurement period, regardless of when the financial statements reflecting such breach are delivered to Agent.
11.4 Payments. The Agent may set up standards and procedures to determine or redetermine the equivalent in Dollars of any amount expressed in any currency other than Dollars and otherwise may, but shall not be obligated to, rely on any determination made by any Credit Party or any L/C Issuer. Any such determination or redetermination
 
116

by the Agent shall be conclusive and binding for all purposes, absent manifest error. No determination or redetermination by any Secured Party or any Credit Party and no other currency conversion shall change or release any obligation of any Credit Party or of any Secured Party (other than the Agent and its Related Persons) under any Loan Document, each of which agrees to pay separately for any shortfall remaining after any conversion and payment of the amount as converted. The Agent may round up or down, and may set up appropriate mechanisms to round up or down, any amount hereunder to nearest higher or lower amounts and may determine reasonable de minimis payment thresholds.
[Balance of page intentionally left blank; signature page follows.]
 
117

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their duly authorized officers as of the day and year first above written.

BORROWERS:	
 	
CRYOLIFE, INC.	
 	 	
By:	 	/s/ D. A. Lee	
 	 	
Title:	 	Executive Vice President, Chief Operating Officer, Chief Financial Officer and Treasurer	
FEIN:	 	59-2417093	
 	
CARDIOGENESIS CORPORATION	
 	 	
By:	 	/s/ D. A. Lee	
Title:	 	Executive Vice President, Chief Operating Officer, Chief Financial Officer and Treasurer	
FEIN:	 	58-2291265	
 	
AURAZYME PHARMACEUTICALS, INC.	
 	 	
By:	 	/s/ D. A. Lee	
Title:	 	Executive Vice President, Chief Operating Officer, Chief Financial Officer and Treasurer	
FEIN:	 	58-2627289	
 	
CRYOLIFE INTERNATIONAL, INC.	
 	 	
By:	 	/s/ D. A. Lee	
Title:	 	Vice President, Chief Financial Officer and Treasurer	
FEIN:	 	58-2053258	
 	
HEMOSPHERE, INC.	
 	 	
By:	 	/s/ D. A. Lee	
Title:	 	Executive Vice President, Chief Operating Officer, Chief Financial Officer and Treasurer	
FEIN:	 	91-1935286	
[SIGNATURE PAGE – SECOND AMENDED AND RESTATED CREDIT AGREEMENT (CRYOLIFE)]

 	 	 	
BORROWER REPRESENTATIVE:	
 	
CRYOLIFE, INC.	
 	 	
By:	 	/s/ D. A. Lee	
Title:	 	Executive Vice President, Chief Operating Officer, Chief Financial Officer and Treasurer	
FEIN:	 	59-2417093	

Address for notices:	
 	
1655 Roberts Blvd., NW	
Kennesaw, GA 30144	
Attn: D. Ashley Lee	
Facsimile:	 	 	
[SIGNATURE PAGE – SECOND AMENDED AND RESTATED CREDIT AGREEMENT (CRYOLIFE)]

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their duly authorized officers as of the day and year first above written.

GENERAL ELECTRIC CAPITAL CORPORATION, as the Agent, L/C Issuer, Swingline Lender and as a Lender	
 	 	
By:	 	/s/ Andrew Moore	
Title:	 	Its Duly Authorized Signatory	
 	
Address for Notices:	
 	
General Electric Capital Corporation	
2 Bethesda Metro Center	
Bethesda, Maryland 20814	
Attn: CryoLife Account Officer	
Facsimile: (866) 673-0624	
 	
With a copy to:	
 	
General Electric Capital Corporation	
2 Bethesda Metro Center	
Bethesda, Maryland 20814	
Attn: General Counsel-Healthcare Financial Services	
Facsimile: (866) 261-9396	
 	
Address for payments:	
 	
ABA No. 021-001-033	
Account Number 50271079	
Deutsche Bank Trust Company Americas	
New York, New York	
Account Name: HH CASH FLOW COLLECTIONS	
Reference: CFN HFS2713 /CryoLife	
[SIGNATURE PAGE – SECOND AMENDED AND RESTATED CREDIT AGREEMENT (CRYOLIFE)]

Schedule 1.1
Revolving Loan Commitments

General Electric Capital Corporation	  	$	20,000,000	  	
 	 	
Total:	  	$	20,000,000	  	

Amended and Restated Credit Agreement
Schedule 3.2
Stock and Stock Equivalents

 	  	Preferred Stock
Authorized	 	  	Common Stock
Authorized	 	  	Outstanding	 	
CryoLife, Inc.	  	 	5,000,000	  	  	 	75,000,000	  	  	 	 	 	
CryoLife Europa, Ltd.	  	 	N/A	  	  	 	100,000	  	  	 	50,000	  	
AuraZyme Pharmaceuticals, Inc.	  	 	N/A	  	  	 	75,000,000	  	  	 	5,000,000	  	
Cardiogenesis Corporation	  	 	N/A	  	  	 	1,000	  	  	 	100	  	
CryoLife International, Inc.	  	 	5,000,000	  	  	 	20,000,000	  	  	 	1,000	  	
Hemosphere, Inc.	  	 	N/A	  	  	 	100	  	  	 	100	  	
CryoLife Asia Pacific Pte, Ltd.	  	 	N/A	  	  	 	1,000	  	  	 	1,000	  	
 
*	Eclipse Surgical Technologies BV (uncertificated interests only)	
Number of shares subject to Employee Stock Options as of September 19, 2014: 2,185,515
CryoLife Europa, Ltd., AuraZyme Pharmaceuticals, Inc., CryoLife International Inc., Cardiogenesis Corporation, Hemosphere, Inc., and CryoLife Asia Pacific Pte, Ltd. are all 100% owned by CryoLife, Inc.
CryoLife, Inc. granted to its employees certain rights to purchase shares pursuant to that certain 1996 Discounted Employee Stock Purchase Plan, as amended.
CryoLife, Inc., pursuant to its Articles of Incorporation and a Rights Agreement, as amended, has granted shareholders certain rights to receive shares of CryoLife, Inc. when certain conditions are met.
CryoLife Employees have received Restricted Stock Units, Restricted Stock Awards, Performance Share Units, and Performance Share Awards in accordance with outstanding equity plans, which if the vesting schedule is met, will be converted into common stock of CryoLife, Inc.

Amended and Restated Credit Agreement
Schedule 3.5
Litigation
Tax Audits
The Cobb County Board of Tax Assessors has given CryoLife, Inc. notice that a business personal property tax audit for returns filed for the years 2007-2010 began in January of 2011. The audit is complete, but CryoLife has not yet been notified of any assessments. The Statute of Limitations was not extended for this audit.
The California Board of Equalization audited the sales and use tax returns for the period October 1, 2010 through September 30, 2013. The Statute of Limitations was extended until October 31, 2014. CryoLife, Inc. intends to pay the final assessment in the amount of approximately $112,000 before the end of October 2014.
Tax Notices
The Wisconsin Department of Revenue has notified CryoLife, Inc. of an outstanding withholding tax liability in the amount of $5,000 relating to an unpaid debt of our subsidiary, Cardiogenesis Corporation, from the period prior to our acquisition. CryoLife, Inc. is currently researching the matter and will work with the Department of Revenue to resolve the liability.
CryoLife, Inc. has received a Letter of Inquiry from the State of Michigan regarding Michigan taxes for our subsidiary, Hemosphere, Inc. relating to pre-acquisition periods. Based on preliminary research, we believe Hemosphere may have had a filing obligation for Michigan Business Tax (MBT) and sales and use taxes in the period prior to our acquisition but has not yet quantified amounts that may be due. CryoLife will continue to work with the State of Michigan to resolve any outstanding obligations.

Amended and Restated Credit Agreement
Schedule 3.7
ERISA
 
(a)	all Title IV Plans – none	
 
(b)	all Multiemployer Plans – none	
 
(c)	all material Benefit Plans –	
 
 	1.	CryoLife, Inc. Profit Sharing 401(k) Plan	
 
 	2.	CryoLife, Inc. Employee Health Benefit Plan	

Amended and Restated Credit Agreement
Schedule 3.10
Tax Audits
Tax Audits
The Cobb County Board of Tax Assessors has given CryoLife, Inc. notice that a business personal property tax audit for returns filed for the years 2007-2010 began in January of 2011. The audit is complete, but CryoLife has not yet been notified of any assessments. The Statute of Limitations was not extended for this audit.
The California Board of Equalization notified CryoLife, Inc. in December of 2013 that it would be auditing the sales and use tax returns for the period October 1, 2010 through September 30, 2013. The Statute of Limitations was extended until October 31, 2014. CryoLife, Inc. recently received the final assessment from the Board of Equalization in the amount of approximately $112,000 and intends to pay it before the end of October 2014.
Tax Notices
The Wisconsin Department of Revenue has notified CryoLife, Inc. of an outstanding withholding tax liability in the amount of $5,000 relating to an unpaid debt of our subsidiary, Cardiogenesis Corporation, from the period prior to our acquisition. CryoLife, Inc. is currently researching the matter and will work with the Department of Revenue to resolve the liability.
CryoLife, Inc. has received a Letter of Inquiry from the State of Michigan regarding Michigan taxes for our subsidiary, Hemosphere, Inc. relating to pre-acquisition periods. Based on preliminary research, we believe Hemosphere may have had a filing obligation for Michigan Business Tax (MBT) and sales and use taxes in the period prior to our acquisition but has not yet quantified amounts that may be due. CryoLife will continue to work with the State of Michigan to resolve any outstanding obligations.

Amended and Restated Credit Agreement
Schedule 3.12
Environmental Matters
None

Amended and Restated Credit Agreement
Schedule 3.15
Labor Relations
None

Amended and Restated Credit Agreement
Schedule 3.18
Brokers’ and Transaction Fees
None

Amended and Restated Credit Agreement
Schedule 3.22
FDA Regulatory Compliance
(a) The FDA has issued public notice of its request for guidance from an advisory panel of external experts on October 9, 2014 to consider a possible reclassification of “more than minimally manipulated” heart valves (which would include CryoLife’s SynerGraft ®  pulmonary valve tissues) from “unclassified” to “class III.” CryoLife, Inc. has been engaged in active dialogue with FDA regarding the agency’s request for guidance, will be presenting at the advisory panel meeting, and will be recommending “class II” classification. At this time, it remains unclear whether FDA’s request for guidance will have an impact on the classification of CryoLife tissues.
(c) CryoLife, Inc. received an FDA warning letter dated January 29, 2013 referencing certain aspects of the company’s quality system and is working with FDA to address the agency’s concerns.
(d) FDA recalls

Recall Number	  	Recall
Class	  	Recall
Date	  	Recall Reason	  	Product/Tissue
Recalled	
Z-1219-2011	  	II	  	1/7/2011	  	A pre-processing culture performed on a companion allograft (Aortic Valve & Conduct SG) tested positive for Staphylococcus aureus.	  	Pulmonary Valve SG	
 	 	 	 	 	
Z-1561-2011 & Z-1560-2011	  	II	  	2/17/2011	  	Staphylococcus aureus (not methicillin resistant) identified in companion tissue. All final (post-processing) cultures for the recalled allografts were negative.	  	Pulmonary Hemi Artery SG and Pulmonary Valve and Conduit SG	
 	 	 	 	 	
B-0768-13	  	II	  	12/12/2012	  	Human Tissues, recovered from a donor whose donor eligibility determination did not identify if the donor was free from risk factors for and clinical evidence of, infection due to relevant communicable disease agents, were distributed.	  	Femoral -Popliteal Artery x 2, Femoral Vein, Saphenous Vein	
 	 	 	 	 	
B-1983-03	  	III	  	5/17/2013	  	Human tissue allografts, recovered from a donor whose donor eligibility determination failed to ensure that the donor was free from risk factors for, and clinical evidence of infection due to relevant communicable disease agents and diseases, were distributed.	  	Pulmonary Valve SG	
 	 	 	 	 	
Z-0809-2014	  	II	  	11/22/2013	  	Serological testing for the donor was performed with a blood sample that may have been hemodiluted due to the administration of normal saline to the donor prior to death.	  	Pulmonary Hemi-Artery SG	

 	 	 	 	 	 	 	 	 	
B-1365-13	  	III	  	3/18/2013	  	Human Tissues, recovered from a donor whose donor eligibility determination did not identify if the donor was free from risk factors for and clinical evidence of, infection due to relevant communicable disease agents, were distributed.	  	Pulmonary Valve and Conduit	
 	 	 	 	 	
B-1983-03	  	 	  	5/17/2013	  	Cardiac grafts, human allografts, Vascular grafts, recovered from a donor whose donor eligibility determination failed to ensure that the donor was free from risk factors for, and clinical evidence of infection due to relevant communicable disease agents and diseases, were distributed.	  	Saphenous Vein, Femoral Veins, Pulmonary Valve and Conduit, Aortic Valve and Conduit, Pulmonary Trunk Patch, Pulmonary Hemi-artery, Pulmonary Branch Patch, Descending Thoracic Aorta, Aortoiliac	
 	 	 	 	 	
Z-1993-2013	  	 	  	6/28/2013	  	Following acquisition of Cardiogenesis, we began receiving complaints of sparks, burns or smoke incidents related to the handpieces	  	SoloGrip III	
 	 	 	 	 	
Z-1993-2013	  	 	  	6/28/2013	  	Following acquisition of Cardiogenesis, we began receiving complaints of sparks, burns or smoke incidents related to the handpieces	  	Pearl 5.0	
 	 	 	 	 	
1063481-01-17-14-001	  	 	  	1/17/2014	  	A small number of 5mL product was packaged in 2mL shelf boxes. The packaging error only pertains to the shelf box. CryoLife is initiating a voluntary field action to remove any product from the field that is packaged incorrectly in the 2mL shelf box.	  	BioFoam	
 	 	 	 	 	
Z-1674-2014	  	II	  	3/13/2014	  	Serum albumin component monomer failed to meet internally established end of shelf-life specification.	  	BioGlue	

Amended and Restated Credit Agreement
Schedule 5.1
Liens

Debtor	  	Secured Party	  	Collateral	
 	 	 	
CryoLife, Inc.	  	DeLage Landen Financial Services	  	24 HP printers	
 	 	 	
CryoLife, Inc.	  	DeLage Landen Financial Services	  	7 Lexmark printers	
 	 	 	
CryoLife, Inc.	  	DeLage Landen Financial Services	  	2 Ricoh copiers	
 	 	 	
CryoLife, Inc.	  	EverBank	  	18 Sharp Copiers	
 	 	 	
CryoLife, Inc.	  	Pitney Bowes	  	DM400C Mail Machine	
 	 	 	
CryoLife Europa, Ltd.	  	COMCO Autoleasing, Germany	  	€ 200,000 Money Market fund on deposit with HSBC	
 	 	 	
CryoLife Europa, Ltd.	  	Paul Ehrlich Institute, Germany	  	€ 14,700 Money Market fund on deposit with HSBC	
 	 	 	
CryoLife Europa, Ltd.	  	HM Revenue and Customs, United Kingdom	  	£ 400,000 Money Market fund on deposit with HSBC	
CryoLife, Inc. may also be a party to various equipment leases as described in the UCC search report provided to the Agent. These are true lease transactions and the concomitant UCC Financing Statements were filed for notification purposes only.

Amended and Restated Credit Agreement
Schedule 5.4
Investments
CryoLife, Inc. owns 2,381,390 shares of ValveXchange, Inc. Series A Preferred Stock

Amended and Restated Credit Agreement
Schedule 5.5
Indebtedness
None

Amended and Restated Credit Agreement
Schedule 5.9
Contingent Obligations
Starch Medical, Inc.
 
 	•	 	Upon US Regulatory Approval - $500,000	
 
 	•	 	First Commercial Sale - $500,000	
 
 	•	 	US Patent Issuance - $500,000	
Hemosphere, Inc.
 
 	•	 	First contingent threshold - $2,500,000	
 
 	•	 	Second contingent threshold - $2,000,000	

EXHIBIT 1.1(b)
TO
CREDIT AGREEMENT
FORM OF LETTER OF CREDIT REQUEST
[NAME OF L/C ISSUER], as L/C Issuer
under the Credit Agreement referred to below
Attention:
             , 20    
 
 	Re:	CryoLife, Inc. and certain of its Subsidiaries (the “Borrowers”)	
Reference is made to the Second Amended and Restated Credit Agreement, dated as of September 26, 2014 (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “ Credit Agreement ”), among the Borrowers, CryoLife, Inc., as the Borrower Representative, the other Credit Parties party thereto, the Lenders and L/C Issuers party thereto and General Electric Capital Corporation, as administrative agent for the Lenders and L/C Issuers. Capitalized terms used herein without definition are used as defined in the Credit Agreement.
The Borrower Representative, on behalf of the Borrowers, hereby gives you notice, irrevocably, pursuant to Section 1.1(b) of the Credit Agreement, of its request for your Issuance of a Letter of Credit, in the form attached hereto, for the benefit of [Name of Beneficiary], in the amount of $        , to be issued on              ,          (the “ Issue Date ”) with an expiration date of              ,         .
The undersigned hereby certifies that, except as set forth on Schedule A attached hereto, the following statements are true on the date hereof and will be true on the Issue Date, both before and after giving effect to the Issuance of the Letter of Credit requested above and any Loan to be made or any other Letter of Credit to be Issued on or before the Issue Date:
(a) the representations and warranties set forth in Article III of the Credit Agreement and elsewhere in the Loan Documents are true and correct in all material respects (without duplication of any materiality qualifier contained therein), except to the extent such representations and warranties expressly relate to an earlier date, in which case such representations and warranties were true and correct as of such date;
(b) no Default or Event of Default has occurred and is continuing; and
(c) the aggregate outstanding amount of Revolving Loans does not exceed the Maximum Revolving Loan Balance.

 	 	 	
CRYOLIFE, INC., as the Borrower Representative	
 	 	
By:	 	 	
 	 	Name:	
 	 	Title:	
[SIGNATURE PAGE TO LETTER OF CREDIT REQUEST DATED              ,         ]

EXHIBIT 1.1(c)
TO
CREDIT AGREEMENT
FORM OF SWINGLINE REQUEST
GENERAL ELECTRIC CAPITAL CORPORATION,
as Agent under the Credit Agreement referred to below
500 West Monroe Street
Chicago, Illinois 60661
Attn: Portfolio Manager –             
             , 20    
 
 	Re:	CryoLife, Inc. and certain of its Subsidiaries (the “Borrowers”)	
Reference is made to the Second Amended and Restated Credit Agreement, dated as of September 26, 2014 (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “ Credit Agreement ”), among the Borrowers, CryoLife, Inc., as the Borrower Representative, the other Credit Parties party thereto, the Lenders and L/C Issuers party thereto and General Electric Capital Corporation, as administrative agent for the Lenders and L/C Issuers. Capitalized terms used herein without definition are used as defined in the Credit Agreement.
The Borrower Representative, on behalf of Borrowers, hereby gives you irrevocable notice pursuant to Section 1.1(c) of the Credit Agreement that it requests Swing Loans under the Credit Agreement (the “ Proposed Advance ”) and, in connection therewith, sets for the following information:
A. The date of the Proposed Advance is              ,          (the “Funding Date”).
B. The aggregate principal amount of Proposed Advance is $        .
The undersigned hereby certifies that, except as set forth on Schedule A attached hereto, the following statements are true on the date hereof both before and after giving effect to the Proposed Advance and any other Loan to be made or Letter of Credit to be issued on or before the Funding Date:
(a) the representations and warranties set forth in Article III of the Credit Agreement and elsewhere in the Loan Documents are true and correct in all material respects (without duplication of any materiality qualifier contained therein), except to the extent such representations and warranties expressly relate to an earlier date, in which case such representations and warranties were true and correct as of such date;
(b) no Default or Event of Default has occurred and is continuing; and
(c) the aggregate outstanding amount of Revolving Loans does not exceed the Maximum Revolving Loan Balance.
 
1

 	 	 	
Sincerely,	
 	
CRYOLIFE, INC., as the Borrower Representative	
 	 	
By:	 	 	
Name:	 	 	
Title:	 	 	

EXHIBIT 1.6
TO
CREDIT AGREEMENT
FORM OF NOTICE OF CONVERSION OR CONTINUATION
GENERAL ELECTRIC CAPITAL CORPORATION
as Agent under the Credit Agreement referred to below
             ,         
Attention:
 
 	Re:	CryoLife, Inc. and its Subsidiaries (the “Borrowers”)	
Reference is made to the Second Amended and Restated Credit Agreement, dated as of September 26, 2014 (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “ Credit Agreement ”), among the Borrowers, CryoLife, Inc., as Borrower Representative, the other Credit Parties party thereto, the Lenders and L/C Issuers party thereto and General Electric Capital Corporation, as administrative agent for the Lenders and L/C Issuers. Capitalized terms used herein and not otherwise defined herein are used herein as defined in the Credit Agreement.
The Borrower Representative, on behalf of Borrowers, hereby gives you irrevocable notice, pursuant to Section 1.6 of the Credit Agreement of its request for the following:
(a) a continuation, on              ,         , as LIBOR Rate Loans having an Interest Period of      months of Revolving Loans in an aggregate outstanding principal amount of $         having an Interest Period ending on the proposed date for such continuation;
(b) a conversion, on              ,         , to LIBOR Rate Loans having an Interest Period of      months of Revolving Loans in an aggregate outstanding principal amount of $        ; and
(c) a conversion, on              ,         , to Base Rate Loans, of Revolving Loans in an aggregate outstanding principal amount of $        .

In connection herewith, the undersigned hereby certifies that, except as set forth on Schedule A attached hereto, no Default or Event of Default has occurred and is continuing on the date hereof, both before and after giving effect to any Loan to be made or Letter of Credit to be Issued on or before any date for any proposed conversion or continuation set forth above.

CRYOLIFE, INC., as the Borrower Representative	
 	 	
By:	 	 	
 	 	Name:	
 	 	Title:	

EXHIBIT 2.1
TO
CREDIT AGREEMENT
CLOSING CHECKLIST
(a) Documents. The Agent shall have received on or prior to the Effective Date each of the following, each dated the Effective Date unless otherwise agreed by the Agent, in form and substance satisfactory to the Agent and each Lender:
(i) this Agreement duly executed by the Borrowers and a Note for each Lender conforming to the requirements set forth in  Section 1.2 ;
(ii) an amendment to the Guaranty and Security Agreement, and the Omnibus Reaffirmation Agreement, each duly executed by each Credit Party, together with (A) copies of UCC, Patent, Trademark, Copyright and other appropriate search reports and of all effective prior filings listed therein, together with evidence of the termination of such prior filings and other documents with respect to the priority of the security interest of the Agent in the Collateral, in each case as may be reasonably requested by the Agent, (B) all documents representing all securities being pledged pursuant to the Guaranty and Security Agreement and related undated powers or endorsements duly executed in blank, (C) a perfection certificate from Borrowers, (D) Control Agreements that, in the reasonable judgment of the Agent, are required for the Credit Parties to comply with the Loan Documents as of the Effective Date, each duly executed by, in addition to the applicable Credit Party, the applicable financial institution and (E) a duly executed landlord waiver for any location at which a landlord waiver would be required pursuant to  Section 4.12 , in each case with respect to clauses (B), (D) and (E) to the extent not already delivered to Agent prior to the Effective Date;
(iii) the Fee Letter, duly executed by the Borrowers;
(iv) duly executed favorable opinions of counsel to the Credit Parties, addressed to the Agent, the L/C Issuer and the Lenders and addressing such matters as the Agent may reasonably request;
(v) a copy of each Organization Document of each Credit Party that is on file with any Governmental Authority in any jurisdiction, certified as of a recent date by such Governmental Authority, together with, if applicable, certificates attesting to the good standing of such Credit Party in such jurisdiction and each other jurisdiction where such Credit Party is qualified to do business as a foreign entity or where such qualification is necessary (and, if appropriate in any such jurisdiction, related tax certificates);
(vi) a certificate of the secretary or other officer of each Credit Party in charge of maintaining books and records of such Credit Party certifying as to (A) the names and signatures of each officer of such Credit Party authorized to execute and deliver any Loan Document, (B) the Organization Documents of such Credit Party attached to such certificate are complete and correct copies of such Organization

Documents as in effect on the date of such certification (or, for any such Organization Document delivered pursuant to clause (v)  above, that there have been no changes from such Organization Document so delivered) and (C) the resolutions of such Credit Party’s board of directors or other appropriate governing body approving and authorizing the execution, delivery and performance of each Loan Document to which such Credit Party is a party;
(vii) a certificate or certificates of a Responsible Officer of the Borrower to the effect that (A) each condition set forth in clauses  (b)  through  (e)  of  Section 2.1  and each condition set forth in  Section 2.2  has been satisfied;
(viii) evidence that the insurance policies required by Section 4.6 are in full force and effect and all endorsements required by such  Section 4.6  have been delivered to Agent;
(ix) duly executed originals of Trademark Security Agreements, Copyright Security Agreements and Patent Security Agreements, each signed by each Credit Party which owns Trademarks, Copyrights and/or Patents, as applicable, all in form and substance reasonably satisfactory to Agent to the extent not already delivered to Agent prior to the Effective Date;
(x) duly executed originals of a letter of direction from Borrower addressed to Agent, on behalf of itself and Lenders, with respect to the disbursement on the Effective Date of the proceeds of the Loans;
(xi) duly executed Notice of Borrowing;
(xi) all documentation and other information requested by Agent with respect to “know your customer” and anti-money laundering rules and regulations, including the Patriot Act; and
(xii) such other documents and information as any Lender may reasonably request.
(b) Fee and Expenses. There shall have been paid to the Agent, for the account of the Agent, its Related Persons, the L/C Issuer or any Lender, as the case may be, all fees and all reimbursements of costs or expenses, in each case due and payable under any Loan Document on or before the Effective Date.
(c) Consents. Each Credit Party shall have received all consents and authorizations required pursuant to any material Contractual Obligation with any other Person and shall have obtained all Permits of, and effected all notices to and filings with, any Governmental Authority, in each case, as may be necessary in connection with the transactions contemplated in any Loan Document.

EXHIBIT 4.2(b)
COMPLIANCE CERTIFICATE
CryoLife, Inc.
Date:              , 20    
This Compliance Certificate (this “Certificate”) is given by CryoLife, Inc., a Florida corporation (the “ Borrower Representative ”), pursuant to subsection 4.2(b) of that certain Second Amended and Restated Credit Agreement dated as of September 26, 2014 among Borrower Representative, CryoLife International, Inc. (“ International ”), Cardiogenesis Corporation (“ Cardiogenesis ”), Hemosphere, Inc., a Delaware corporation (“ Hemosphere ”), AuraZyme Pharmaceuticals, Inc. (“ AuraZyme ” and together with Borrower Representative, International, Cardiogenesis and Hemosphere, the “ Borrowers ”), the other Credit Parties party thereto, General Electric Capital Corporation, as administrative agent (in such capacity, “ Agent ”), as L/C Issuer, Swingline Lender and as a Lender, and the additional Lenders party thereto (as such agreement may be amended, restated, supplemented or otherwise modified from time to time, the “ Credit Agreement ”). Capitalized terms used herein without definition shall have the meanings set forth in the Credit Agreement.
The officer executing this Certificate is a Responsible Officer of the Borrower Representative and as such is duly authorized to execute and deliver this Certificate on behalf of Borrowers. By executing this Certificate, such officer hereby certifies to Agent, Lenders and L/C Issuer, on behalf of Borrowers, that:
(a) the financial statements delivered with this Certificate in accordance with subsection 4.1(a) and/or 4.1(b) of the Credit Agreement are correct and complete and fairly present, in all material respects, in accordance with GAAP the financial position and the results of operations of Borrowers and their Subsidiaries as of the dates of and for the periods covered by such financial statements (subject, in the case of interim financial statements, to normal year-end adjustments and the absence of footnote disclosure);
(b) to the best of such officer’s knowledge, each Credit Party and each of their Subsidiaries, during the period covered by such financial statements, has observed and performed all of their respective covenants and other agreements in the Credit Agreement and the other Loan Documents to be observed, performed or satisfied by them, and such officer had not obtained knowledge of any Default or Event of Default  [except as specified on the written attachment hereto];
(c) Exhibit A hereto is a correct calculation of each of the financial covenants contained in Article VI of the Credit Agreement; and
(d) since the Effective Date and except as disclosed in prior Compliance Certificates delivered to Agent, no Credit Party and no Subsidiary of any Credit Party has:
(i) changed its legal name, identity, jurisdiction of incorporation, organization or formation or organizational structure or formed or acquired any Subsidiary except as follows:                                         ;

(ii) acquired the assets of, or merged or consolidated with or into, any Person, except as follows:                                         ; or
(iii) changed its address or otherwise relocated or acquired fee simple title to any real property or entered into any real property leases, except as follows:                                                              .
IN WITNESS WHEREOF, Borrower Representative has caused this Certificate to be executed by one of its Responsible Officers this      day of              , 20    .

 	
 	 	
By:	 	 	
Its:	 	 	
Note: Unless otherwise specified, all financial covenants are calculated for Borrowers and their Subsidiaries on a consolidated basis in accordance with GAAP and all calculations are without duplication.

EXHIBIT A TO EXHIBIT 4.2(b)
COMPLIANCE CERTIFICATE
Covenant 6.1 Leverage Ratio

Leverage Ratio is defined as follows:	  	 	 	 	
 	 	
Average of the sum of the aggregate balance of outstanding Revolving Loans and Swing Loans as of the last day of each month in the twelve month period ended on the date of measurement	  	 	 	 	
 	 	 	
Plus:	 	Letter of Credit Obligations as of date of measurement	  	 	 	 	
 	 	 	
 	 	Principal portion of Capital Lease Obligations and Indebtedness secured by purchase money Liens as of date of measurement	  	 	 	 	
 	 	 	
 	 	Without duplication, all other Indebtedness of Credit Parties as of date of measurement (other than Indebtedness of the type described in clauses (e), (g), (h), (i) and (j) (other than with respect to clause (j), Guarantees of Indebtedness of others of the type not described in clauses (e), (g), (h) and (i) of the definition of Indebtedness) of the definition of Indebtedness)	  	 	 	 	
 	 	
Indebtedness	  	$	            	  	
 	 	
Adjusted EBITDA for the twelve month period ending on the date of measurement (per Covenant 6.2)	  	$	            	  	
 	 	
Leverage Ratio (Indebtedness (from above) divided by Adjusted EBITDA)	  	 	 	 	
 	 	
Maximum Leverage Ratio	  	 	2.50:1.00	  	
 	 	
In Compliance	  	 	Yes/No	  	

Covenant 6.2 Minimum EBITDA

EBITDA is defined as follows:	  	 	 	 	
 	 	
Net income (or loss) for the applicable period of measurement of Borrowers and their Subsidiaries on a consolidated basis determined in accordance with GAAP, but excluding: (a) the income (or loss) of any Person which is not a Subsidiary of a Borrower, except to the extent of the amount of dividends or other distributions actually paid to a Borrower or any of its Subsidiaries in cash by such Person during such period and the payment of dividends or similar distributions by that Person is not at the time prohibited by operation of the terms of its charter or of any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Person; (b) the income (or loss) of any Person accrued prior to the date it becomes a Subsidiary of a Borrower or is merged into or consolidated with a Borrower or any of its Subsidiaries or that Person’s assets are acquired by a Borrower or any of its Subsidiaries; (c) the proceeds of any life insurance policy to the extent included in net income (or loss); (d) gains or losses from the sale, exchange, transfer or other disposition of Property or assets not in the Ordinary Course of Business of the Borrowers and their Subsidiaries, and related tax effects in accordance with GAAP; (e) any other extraordinary or non-recurring gains or losses of a Borrower or its Subsidiaries, and related tax effects in accordance with GAAP; and (f) interest income	  	$	            	  	
 	 	
Plus, without duplication:	  	 	 	 	
 	 	 	
 	 	All amounts deducted in calculating net income (or loss) for depreciation or amortization for such period	  	 	 	 	
 	 	 	
 	 	Interest expense deducted in calculating net income (or loss) for such period	  	 	 	 	
 	 	 	
 	 	All accrued taxes on or measured by income to the extent deducted in calculating net income (or loss) for such period	  	 	 	 	
 	 	 	
 	 	All non-cash losses or expenses (or minus non-cash income or gain) included or deducted in calculating net income (or loss) for such period, excluding any non-cash loss or expense (a) that is an accrual of a reserve for a cash expenditure or payment to be made, or anticipated to be made, in a future period or (b) relating to a write-down, write off or reserve with respect to Accounts and Inventory; provided, however, that an impairment or write off of the note receivable of ValveXchange, Inc. to CryoLife, Inc. pursuant to the Loan and Security Agreement between ValveXchange, Inc. and CryoLife, Inc., dated July 6, 2011, as amended, shall be considered a non-cash loss or expense.	  	 	 	 	

 	 	 	 	 	 	 	
 	 	 	
 	 	Non-recurring fees, costs and expenses in connection with the Bard Litigation actually incurred by Borrower and its Subsidiaries during such period in an aggregate amount not to exceed $4,000,000 during the term of the Credit Agreement.	  	 	 	 	
 	 	 	
 	 	Fees and expenses paid to Agent and/or Lenders in connection with the Loan Documents, to the extent deducted in calculating net income (or loss) for such period	  	 	 	 	
 	 	 	
 	 	EBITDA	  	$	            	  	

 	 	 	 	 	 	 	
Calculation of Adjusted EBITDA	  	 	 	 	
 	 	
EBITDA for the applicable period of measurement:	  	$	            	  	
 	 	 	
Plus:	 	with respect to Targets owned by the Borrowers for which the Agent has received financial statements pursuant to  subsection 4.1(b)  for less than four (4) quarters, Pro Forma EBITDA allocated to each quarter prior to the acquisition thereof included in the trailing four (4) quarter period for which Adjusted EBITDA is being calculated;  [If more than one Target has been acquired, Borrower Representative should attach calculation of Pro Forma EBITDA for each Target]	  	$	            	  	
 	 	 	
Plus:	 	transaction costs and expenses (including integration costs) associated with potential and completed acquisitions and other Investments (in each case, whether or not successful), in an aggregate amount not to exceed $1,500,000 for any four (4) quarters period	  	$	            	  	
 	 	 	
Minus:	 	with respect to any Disposition consummated within the period in question, EBITDA attributable to the Subsidiary, profit centers, or other asset which is the subject of such Disposition from the beginning of such period until the date of consummation of such Disposition	  	$	            	  	
 	 	
Adjusted EBITDA	  	$	            	  	
 	 	
Required Minimum Adjusted EBITDA	  	$	            	  	
 	 	
In Compliance	  	 	Yes/No	  	
 	 	
“Pro Forma EBITDA” means, with respect to any Target, EBITDA for such Target for the most recent twelve (12) month period preceding the acquisition thereof, adjusted by verifiable expense reductions, including excess owner compensation, if any, which are expected to be realized, in each case calculated on a month by month basis by the Borrowers and consented to by the Agent and Required Lenders	  	 	 	 	

EXHIBIT 11.1(a)
TO
CREDIT AGREEMENT
FORM OF ASSIGNMENT
This ASSIGNMENT, dated as of the Effective Date, is entered into between              (“the Assignor”) and              (“ the Assignee ”).
The parties hereto hereby agree as follows:

Borrowers:	  	CryoLife, Inc., a Florida corporation and certain of its Subsidiaries (together, the “ Borrowers ”)	
 	 	
Agent:	  	General Electric Capital Corporation, as administrative agent for the Lenders and L/C Issuers (in such capacity and together with its successors and permitted assigns, the “ Agent ”)	
 	 	
Credit Agreement:	  	Second Amended and Restated Credit Agreement, dated as of September 26, 2014, among the Borrowers, CryoLife, Inc., as Borrower Representative, the other Credit Parties party thereto, the Lenders and L/C Issuers party thereto and the Agent (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “ Credit Agreement ”; capitalized terms used herein without definition are used as defined in the Credit Agreement)	
 	 	
[Trade Date:	  	             ,         ]1	
 	 	
Effective Date:	  	             ,         2	
 
1 	Insert for informational purposes only if needed to determine other arrangements between the assignor and the assignee.	
2 	To be filled out by Agent upon entry in the Register.	

 	 	 	 	 	 	 	 	 	 	 	 	 	
Loan/Commitment Assigned	 	Aggregate amount
of Commitments
or principal
amount of Loans
for all Lenders 5	 	 	Aggregate amount
of Commitments 3  or
principal amount of
Loans Assigned 4	 	 	Percentage
Assigned 5	 	
Revolver	 	$	            	  	 	$	            	  	 	 	    .    	% 	
[THE REMAINDER OF THIS PAGE WAS INTENTIONALLY LEFT BLANK]
 
3 	Including Revolving Loans and interests, participations and obligations to participate in Letter of Credit Obligations.	
4 	Amount to be adjusted by the counterparties to take into account any payments or prepayments made between the Trade Date and the Effective Date. The aggregate amounts are inserted for informational purposes only to help in calculating the percentages assigned which, themselves, are for informational purposes only.	
5 	Set forth, to at least 9 decimals, the Assigned Interest as a percentage of the aggregate Commitment. This percentage is set forth for informational purposes only and is not intended to be binding. The assignments are based on the amounts assigned not on the percentages listed in this column.	

Section 1. Assignment. Assignor hereby sells and assigns to Assignee, and Assignee hereby purchases and assumes from Assignor, Assignor’s rights and obligations in its capacity as Lender under the Credit Agreement (including Liabilities owing to or by Assignor thereunder) and the other Loan Documents, in each case to the extent related to the amounts identified above (the “ Assigned Interest ”).
Section 2. Representations, Warranties and Covenants of Assignors. Assignor (a) represents and warrants to Assignee and the Agent that (i) it has full power and authority, and has taken all actions necessary for it, to execute and deliver this Assignment and to consummate the transactions contemplated hereby and (ii) it is the legal and beneficial owner of its Assigned Interest and that such Assigned Interest is free and clear of any Lien and other adverse claims and (iii) by executing, signing and delivering this assignment via ClearPar® or any other electronic settlement system designated by the Agent, the Person signing, executing and delivering this Assignment on behalf of the Assignor is a duly authorized signatory for the Assignor and is authorized to execute, sign and deliver this Agreement, (b) makes no other representation or warranty and assumes no responsibility, including with respect to the aggregate amount of the Loans and Commitments, the percentage of the Loans and Commitments represented by the amounts assigned, any statements, representations and warranties made in or in connection with any Loan Document or any other document or information furnished pursuant thereto, the execution, legality, validity, enforceability or genuineness of any Loan Document or any document or information provided in connection therewith and the existence, nature or value of any Collateral, (c) assumes no responsibility (and makes no representation or warranty) with respect to the financial condition of any Credit Party or the performance or nonperformance by any Credit Party of any obligation under any Loan Document or any document provided in connection therewith and (d) attaches any Notes held by it evidencing at least in part the Assigned Interest of such Assignor (or, if applicable, an affidavit of loss or similar affidavit therefor) and requests that the Agent exchange such Notes for new Notes in accordance with  Section 1.2  of the Credit Agreement.
Section 3. Representations, Warranties and Covenants of Assignees. Assignee (a) represents and warrants to Assignor and the Agent that (i) it has full power and authority, and has taken all actions necessary for Assignee, to execute and deliver this Assignment and to consummate the transactions contemplated hereby, (ii) it is [ not]  an Affiliate or an Approved Fund of a Lender and (iii) it is sophisticated with respect to decisions to acquire assets of the type represented by the Assigned Interest assigned to it hereunder and either Assignee or the Person exercising discretion in making the decision for such assignment is experienced in acquiring assets of such type, (iv) by executing, signing and delivering this Assignment via ClearPar® or any other electronic settlement system designated by the Agent, the Person signing, executing and delivering this Assignment on behalf of the Assignor is a duly authorized signatory for the Assignor and is authorized to execute, sign and deliver this Agreement (b) appoints and authorizes the Agent to take such action as administrative agent on its behalf and to exercise such powers under the Loan Documents as are delegated to the Agent by the terms thereof, together with such powers as are reasonably incidental thereto, (c) shall perform in accordance with their terms all obligations that, by the terms of the Loan Documents, are required to be performed by it as a Lender, (d) confirms it has received such documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and shall continue to make its own credit decisions in taking or not taking any action under any Loan

Document independently and without reliance upon Agent, any L/C Issuer, any Lender or any other Indemnitee and based on such documents and information as it shall deem appropriate at the time, (e) acknowledges and agrees that, as a Lender, it may receive material non-public information and confidential information concerning the Credit Parties and their Affiliates and their Stock and agrees to use such information in accordance with  Section 9.10  of the Credit Agreement, (f) specifies as its applicable lending offices (and addresses for notices) the offices at the addresses set forth beneath its name on the signature pages hereof, (g) shall pay to the Agent an assignment fee in the amount of $3,500 to the extent such fee is required to be paid under Section 9.9  of the Credit Agreement and (h) to the extent required pursuant to  Section 10.1(f)  of the Credit Agreement, attaches two completed originals of Forms W-8ECI, W-8BEN, W-8IMY or W-9 and, if applicable, a portfolio interest exemption certificate.
Section 4. Determination of Effective Date; Register. Following the due execution and delivery of this Assignment by Assignor, Assignee and, to the extent required by  Section 9.9  of the Credit Agreement, the Borrowers, this Assignment (including its attachments) will be delivered to the Agent for its acceptance and recording in the Register. The effective date of this Assignment (the “ Effective Date ”) shall be the later of (i) the acceptance of this Assignment by the Agent and (ii) the recording of this Assignment in the Register. The Agent shall insert the Effective Date when known in the space provided therefor at the beginning of this Assignment.
Section 5. Effect. As of the Effective Date, (a) Assignee shall be a party to the Credit Agreement and, to the extent provided in this Assignment, have the rights and obligations of a Lender under the Credit Agreement and (b) Assignor shall, to the extent provided in this Assignment, relinquish its rights (except those surviving the termination of the Commitments and payment in full of the Obligations) and be released from its obligations under the Loan Documents other than those obligations relating to events and circumstances occurring prior to the Effective Date.
Section 6. Distribution of Payments. On and after the Effective Date, the Agent shall make all payments under the Loan Documents in respect of each Assigned Interest (a) in the case of amounts accrued to but excluding the Effective Date, to Assignor and (b) otherwise, to Assignee.
Section 7. Miscellaneous. (a) The parties hereto, to the extent permitted by law, waive all right to trial by jury in any action, suit, or proceeding arising out of, in connection with or relating to, this Assignment and any other transaction contemplated hereby. This waiver applies to any action, suit or proceeding whether sounding in tort, contract or otherwise.
(b) On and after the Effective Date, this Assignment shall be binding upon, and inure to the benefit of, the Assignor, Assignee, the Agent and their Related Persons and their successors and assigns.
(c) This Assignment shall be governed by, and be construed and interpreted in accordance with, the law of the State of New York.

(d) This Assignment may be executed in any number of counterparts and by different parties in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.
(e) Signature pages may be detached from multiple separate counterparts and attached to a single counterpart. Delivery of an executed signature page of this Assignment by facsimile transmission or Electronic Transmission shall be as effective as delivery of a manually executed counterpart of this Assignment.

IN WITNESS WHEREOF, the parties hereto have caused this Assignment to be executed by their respective officers thereunto duly authorized, as of the date first above written.

[NAME OF ASSIGNOR]	
as Assignor	
 	 	
By:	 	 	
 	 	Name:	
 	 	Title:	
 	
[NAME OF ASSIGNEE]	
as Assignee	
 	 	
By:	 	 	
 	 	Name:	
 	 	Title:	
 	
Lending Office for LIBOR Rate Loans:	
 	
[Insert Address (including contact name, fax number and e-mail address)]	
 	
Lending Office (and address for notices) for any other purpose :	
 	
[Insert Address (including contact name, fax number and e-mail address)]	
[SIGNATURE PAGE FOR ASSIGNMENT FOR CRYOLIFE, INC.’S AMENDED & RESTATED CREDIT AGREEMENT]

 	 	 	
ACCEPTED and AGREED	
this      day of              :	
 	
GENERAL ELECTRIC CAPITAL CORPORATION as Agent	
 	 	
By:	 	 	
 	 	Name:	
 	 	Title:	
 	
CRYOLIFE, INC.7	
 	 	
By:	 	 	
 	 	Name:	
 	 	Title:	

7 	Include only if required pursuant to Section 9.9 of the Credit Agreement.	
 
[SIGNATURE PAGE FOR ASSIGNMENT FOR CRYOLIFE, INC.’S AMENDED & RESTATED CREDIT AGREEMENT]

EXHIBIT 11.1(b)
TO
CREDIT AGREEMENT
FORM OF REVOLVING LOAN NOTE

Lender: [NAME OF LENDER]	 	New York, New York	
Principal Amount: $        	 	            , 20    	
FOR VALUE RECEIVED, the undersigned, CRYOLIFE, INC., a Florida corporation, CARDIOGENESIS CORPORATION, a Florida corporation, AURAZYME PHARMACEUTICALS, INC., a Florida corporation, HEMOSPHERE, INC., a Delaware corporation, and CRYOLIFE INTERNATIONAL, INC., a Florida corporation (together, the “ Borrowers ”), hereby jointly and severally promise to pay to the order of the Lender set forth above (the “ Lender ”) the Principal Amount set forth above, or, if less, the aggregate unpaid principal amount of all Revolving Loans (as defined in the Credit Agreement referred to below) of the Lender to the Borrowers, payable at such times and in such amounts as are specified in the Credit Agreement.
The Borrowers jointly and severally promise to pay interest on the unpaid principal amount of the Revolving Loans from the date made until such principal amount is paid in full, payable at such times and at such interest rates as are specified in the Credit Agreement. Demand, diligence, presentment, protest and notice of non-payment and protest are hereby waived by the Borrower.
Both principal and interest are payable in Dollars to General Electric Capital Corporation, as Agent, at the address set forth in the Credit Agreement, in immediately available funds.
This Note is one of the Notes referred to in, and is entitled to the benefits of, the Second Amended and Restated Credit Agreement, dated as of September 26, 2014 (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “ Credit Agreement ”), among the Borrowers, CryoLife, Inc., as Borrower Representative, the other Credit Parties party thereto, the Lenders and the L/C Issuers party thereto and General Electric Capital Corporation, as administrative agent for the Lenders and L/C Issuers. Capitalized terms used herein without definition are used as defined in the Credit Agreement.
The Credit Agreement, among other things, (a) provides for the making of Revolving Loans by the Lender to the Borrowers in an aggregate amount not to exceed at any time outstanding the Principal Amount set forth above, the indebtedness of the Borrowers resulting from such Revolving Loans being evidenced by this Note and (b) contains provisions for acceleration of the maturity of the unpaid principal amount of this Note upon the happening of certain stated events and also for prepayments on account of the principal hereof prior to the maturity hereof upon the terms and conditions specified therein.
This Note is a Loan Document, is entitled to the benefits of the Loan Documents and is subject to certain provisions of the Credit Agreement, including  Sections 9.18(b ) ( Submission to Jurisdiction ),  9.19  ( Waiver of Jury Trial ),  9.23  ( Joint and Several ) and  11.2  ( Other Interpretive Provisions ) thereof.
 
1

This Note is a registered obligation, transferable only upon notation in the Register, and no assignment hereof shall be effective until recorded therein.
This Note shall be governed by, and construed and interpreted in accordance with, the law of the State of New York.
[SIGNATURE PAGES FOLLOW]
[$        ] REVOLVING LOAN NOTE OF CRYOLIFE, INC., ET AL. FOR THE BENEFIT OF [NAME OF LENDER]
 
2

IN WITNESS WHEREOF, each Borrower has caused this Note to be executed and delivered by its duly authorized officer as of the day and year and at the place set forth above.

CRYOLIFE, INC.	
 	 	
By:	 	 	
Name:	 	 	
Title:	 	 	
 	
CARDIOGENESIS CORPORATION	
 	 	
By:	 	 	
Name:	
Title:	
 	
CRYOLIFE INTERNATIONAL, INC.	
 	 	
By:	 	 	
Name:	 	 	
Title:	 	 	
 	
AURAZYME PHARMACEUTICALS, INC.	
 	 	
By:	 	 	
Name:	 	 	
Title:	 	 	
 	
HEMOSPHERE, INC.	
 	 	
By:	 	 	
Name:	 	 	
Title:	 	 	
 	
[ADD OTHER BORROWERS, IF ANY]	

EXHIBIT 11.1(c)
TO
CREDIT AGREEMENT
FORM OF SWINGLINE NOTE

 	  	New York, New York	
Swingline Lender: [NAME OF SWINGLINE LENDER]	  	 	
Principal Amount: $        	  	             , 20    	
FOR VALUE RECEIVED, the undersigned, CRYOLIFE, INC., a Florida corporation, CARDIOGENESIS CORPORATION, a Florida corporation, AURAZYME PHARMACEUTICALS, INC., a Florida corporation, HEMOSPHERE, INC., a Delaware corporation, and CRYOLIFE INTERNATIONAL, INC., a Florida corporation (together, the “ Borrowers ”), hereby jointly and severally promise to pay to the order of the Swingline Lender set forth above (the “ Swingline Lender ”) the Principal Amount set forth above, or, if less, the aggregate unpaid principal amount of all Swingline Loans (as defined in the Credit Agreement referred to below) of the Swingline Lender to the Borrowers, payable at such times and in such amounts as are specified in the Credit Agreement.
The Borrowers jointly and severally promise to pay interest on the unpaid principal amount of the Swingline Loans from the date made until such principal amount is paid in full, payable at such times and at such interest rates as are specified in the Credit Agreement. Demand, diligence, presentment, protest and notice of non-payment and protest are hereby waived by the Borrower.
Both principal and interest are payable in Dollars to General Electric Capital Corporation, as Agent, at the address set forth in the Credit Agreement, in immediately available funds.
This Note is one of the Notes referred to in, and is entitled to the benefits of, the Second Amended and Restated Credit Agreement, dated as of September 26, 2014 (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “ Credit Agreement ”), among the Borrowers, CryoLife, Inc., as Borrower Representative, the other Credit Parties party thereto, the Lenders and the L/C Issuers party thereto and General Electric Capital Corporation, as administrative agent for the Lenders and L/C Issuers. Capitalized terms used herein without definition are used as defined in the Credit Agreement.
The Credit Agreement, among other things, (a) provides for the making of Swing Line Loans by the Swingline Lender to the Borrowers in an aggregate amount not to exceed at any time outstanding the Principal Amount set forth above, the indebtedness of the Borrowers resulting from such Swingline Loans being evidenced by this Note and (b) contains provisions for acceleration of the maturity of the unpaid principal amount of this Note upon the happening of certain stated events and also for prepayments on account of the principal hereof prior to the maturity hereof upon the terms and conditions specified therein.
This Note is a Loan Document, is entitled to the benefits of the Loan Documents and is subject to certain provisions of the Credit Agreement, including  Sections 9.18(b ) ( Submission to Jurisdiction ),  9.19  ( Waiver of Jury Trial ),  9.23  (Joint and Several) and  11.2  ( Other Interpretive Provisions ) thereof.
 
2

This Note is a registered obligation, transferable only upon notation in the Register, and no assignment hereof shall be effective until recorded therein.
This Note shall be governed by, and construed and interpreted in accordance with, the law of the State of New York.
[SIGNATURE PAGES FOLLOW]
 
3

IN WITNESS WHEREOF, each Borrower has caused this Note to be executed and delivered by its duly authorized officer as of the day and year and at the place set forth above.

CRYOLIFE, INC.	
 	 	
By:	 	 	
Name:	 	 	
Title:	 	 	
 	
CARDIOGENESIS CORPORATION	
 	 	
By:	 	 	
Name:	 	 	
Title:	 	 	
 	
CRYOLIFE INTERNATIONAL, INC.	
 	 	
By:	 	 	
Name:	 	 	
Title:	 	 	
 	
AURAZYME PHARMACEUTICALS, INC.	
 	 	
By:	 	 	
Name:	 	 	
Title:	 	 	
 	
HEMOSPHERE, INC.	
 	 	
By:	 	 	
Name:	 	 	
Title:	 	 	
 	
[ADD OTHER BORROWERS, IF ANY]	

EXHIBIT 11.1(d)
TO
CREDIT AGREEMENT
FORM OF NOTICE OF BORROWING
GENERAL ELECTRIC CAPITAL CORPORATION
as Agent under the Credit Agreement referred to below
            ,          
Attention:
 
 	Re:	CryoLife, Inc. and certain of its Subsidiaries (the “Borrowers”)	
Reference is made to the Second Amended and Restated Credit Agreement, dated as of September 26, 2014 (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “ Credit Agreement ”), among the Borrowers, CryoLife, Inc., as Borrower Representative, the other Credit Parties, the Lenders and L/C Issuers party thereto and General Electric Capital Corporation, as administrative agent for such Lenders and L/C Issuers. Capitalized terms used herein without definition are used as defined in the Credit Agreement.
The Borrower Representative, on behalf of Borrowers, hereby gives you irrevocable notice, pursuant to Section 1.5 of the Credit Agreement of its request of a Borrowing (the “ Proposed Borrowing ”) under the Credit Agreement and, in that connection, sets forth the following information:
(a) The date of the Proposed Borrowing is             ,          (the “Funding Date”).
(b) The aggregate principal amount of requested Revolving Loans is $        , of which $         consists of Base Rate Loans and $         consists of LIBOR Rate Loans having an initial Interest Period of      months.
The undersigned hereby certifies that, except as set forth on Schedule A attached hereto, the following statements are true on the date hereof and will be true on the Funding Date, both before and after giving effect to the Proposed Borrowing and any other Loan to be made or Letter of Credit to be Issued on or before the Funding Date:
(a) the representations and warranties set forth in Article III of the Credit Agreement and elsewhere in the Loan Documents are true and correct in all material respects (without duplication of any materiality qualifier contained therein), except to the extent such representations and warranties expressly relate to an earlier date, in which case such representations and warranties were true and correct as of such date;

(b) no Default or Event of Default has occurred and is continuing; and
(c) the aggregate outstanding amount of Revolving Loans does not exceed the Maximum Revolving Loan Balance.

CRYOLIFE, INC., as the Borrower Representative	
 	 	
By:	 	 	
 	 	Name:	
 	 	Title:	

Exhibit 10.7
FIRST AMENDMENT TO DISTRIBUTION AGREEMENT
This FIRST AMENDMENT TO DISTRIBUTION AGREEMENT (this “First Amendment”) is entered into as of May 18, 2011, by and between (i) STARCH MEDICAL, INC., a Delaware corporation having a principal place of business at 2150 Ringwood Avenue, San Jose, California 95131 (“ SMI ”), (ii) CRYOLIFE, INC., a Florida corporation, having a principal place of business at 1655 Roberts Blvd. NW, Kennesaw, Georgia 30144 (“ CryoLife ”) and (iii) CLOTPLUS LIMITED, a limited company of Ireland having a principal place of business at Regus House, Block 4, Harcourt Road, Dublin2, Ireland (“ CPL ”). This First Amendment amends that certain Distribution Agreement dated September 28, 2010 between SMI and CryoLife (the “ Agreement ”) and adds CPL as a party for the limited purposes set forth in this First Amendment. When used herein, the term  Amended Agreement  refers to the Agreement as amended by this First Amendment. To the extent any provision of this First Amendment conflicts with a term of the Agreement, the provisions of this First Amendment shall prevail. Defined terms used herein but not defined herein shall have the meaning set forth in the Agreement.
Background
WHEREAS, SMI manufactures Products defined in the Agreement;
WHEREAS, the Agreement appoints CryoLife as exclusive distributor of Products for Permitted Clinical Applications within the Territory;
WHEREAS, CPL has a Certificate of Free Sale from the Irish Medicines Board to manufacture Products for commercial sale (a “ Free Sale Certificate ”) in countries in which a Free Sale Certificate is required for the sale of Products into these countries (“FSC Countries”);
WHEREAS, SMI does not currently have a Free Sale Certificate for Products it manufactures:
WHEREAS, SMI and CryoLife desire to authorize SMI to engage CPL to manufacture Product that CryoLife can sell commercially in FSC Countries.
NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, SMI, CryoLife and CPL hereby agree as follows:
1.Order and Manufacture
1.1 Authority and Manufacture. SMI and CryoLife agree that SMI may use CPL to manufacture Products for sale to CryoLife under the Agreement. In connection there with, SMI and CryoLife agree that SMI may grant to CPL a limited license that permits CPL to manufacture Products for Permitted Clinical Applications within the Territory for sale only to CryoLife pursuant to the terms of this Agreement.
1.2 General Responsibilities. CPL shall be responsible to CryoLife for all Product manufactured by CPL. SMI shall use all reasonable efforts to cause CPL to fulfill all responsibilities of CPL as manufacturer of record of Products it produces for CryoLife. CPL agrees to comply with all applicable regulatory, quality and specification requirements set forth in the Amended Agreement with respect to Products manufactured by CPL.
 
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1.3 Product Order, Delivery and Payment. Orders for Products manufactured by CPL (“CPL Products”) shall be placed by CryoLife with SMI and be fulfilled in the manner provided in the Amended Agreement. CryoLife shall place orders as set forth on the attached  Schedule 1.3 . CryoLife may designate CPL as manufacturer of record on all orders of Products it desires to distribute in FSC Countries and all such Product shall be manufactured by CPL (“ FSC Product Orders ”). For Products CryoLife designates for manufacture by CPL or for resale into FSC Countries, SMI shall cause such Products to be manufactured by CPL.
1.4 Direct Orders with CPL. CryoLife shall place FSC Product Orders directly with CPL or make payment for such orders directly to CPL. Orders placed and payments made to CPL shall, except for the payee, otherwise comply with all requirements of Section 3 (Payment and Product Purchases) of the Amended Agreement and be counted for all purposes of the Amended Agreement as if they were purchased directly from SMI. Any payments made to CPL shall be credited to CryoLife for purposes of the Amended Agreement as if they were made directly to SMI. Inability of CPL to fulfill CryoLife’s purchase orders for CPL Products, solely due to manufacturing or production reasons, will be treated as SMI’s inability to fulfill purchase orders for Products under Section 3.8.3 of the Amended Agreement. The parties agree that notwithstanding the price and Products available under the Agreement, that the CPL Products shall only be for the configurations and prices set forth on Schedule 1.4 , attached hereto. CryoLife agrees that notwithstanding anything contrary contained in the Amended Agreement except for  Schedule 1.3  it will only order once every calendar year from CPL unless CPL otherwise consents in writing. If requested by CPL it shall reasonably attempt to place its orders for CPL Product in larger quantities to assist CPL in achieving manufacturing scale.
1.5 Specifications and Regulatory Compliance. All CPL Products and all procedures employed by CPL in the manufacture of CPL Products shall meet the requirements set forth in the following Agreement sections: Section 4 (Product Specifications and Changes) and Section 5 (Approvals and Compliance). All CPL Products shall be manufactured by CPL in a fully CE Marking certified and functioning manufacturing facility.
2.Distribution and Inventory
2.1 Limitations on CPL Activities. During the term of this Agreement CPL agrees (i) to sell the CPL Products for use in Permitted Clinical Applications within the Territory exclusively to CryoLife, (ii) to refrain from selling or licensing any CPL Products to any Distributor or Third Party for sale or distribution in Permitted Clinical Applications within the Territory, (iii) to refrain from directly or indirectly marketing, promoting, or encouraging any Third Party to market, promote or distribute the CPL Products for any of the Permitted Clinical Applications within the Territory, (iv) to refrain from licensing or transferring any AMP™ technology to any Third Party within the Territory for the purpose of manufacturing any CPL Products upon terms or conditions that would enable or allow such Third Party to sell any CPL Products for Permitted Clinical Applications within the Territory. In addition, CPL agrees until January 1, 2015 it shall refrain from (A) directly, or indirectly selling, permitting to sell, market, promote or encouraging third parties to sell, permit to sell, market or promote any Competitive Product for any Permitted Clinical Application within the Territory or (B) licensing or transferring to any Third Party technology that would enable or allow any Third Party to manufacture any Competitive Product within the Territory. The foregoing limitations do not apply to sales by SMI or CPL of the Products described on  Schedule 2.1  of the Agreement.
 
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2.2 Current CPL Distributors. CPL represents and warrants that no Persons have any rights or agreements from or with CPL that entitle them to Distribute any Products for Permitted Clinical Applications within the Territory.
2.3 Supply Interruption. CPL will notify CryoLife and SMI immediately in writing upon becoming aware of any supply shortage, or other interruption or potential interruption in the supply of any material, component, or sub-assembly, in each case as it relates to CPL Products, which notice shall include the quantity of such material or component ordered by CPL, name of the distributor and any additional information CPL may have concerning the reasons for the supply interruption and the steps being taken to cure such interruption. In addition, if reasonably requested in writing by CryoLife, CPL agrees to confirm within twenty (20) days that CPL is not aware of any supply shortage, or other interruption or potential interruption in the supply of any material, component, or sub-assembly that impacts CPL. If at any time CPL does not have enough component material to fulfill, or other supply or manufacturing problems prevent CPL from fulfilling on a timely basis, its supply obligations to CryoLife for purchase of CPL Products, CPL shall promptly notify CryoLife of the nature and extent of the impairment to CPL’s ability to supply and shall allocate 100% of its full resources to rectifying the impairment to the extent commercially reasonable until such impairment is overcome.
2.4 Forecasts, Returns, and Payment. CryoLife agrees to include the name of the anticipated manufacturer of record for all Products in the forecasts it provides pursuant to Section 3.11 (Forecasts) of the Amended Agreement. CPL agrees to accept returns of CPL Product in the same manner and upon the same terms as applies to Products manufactured by SMI under Section 3.13 (Returns) of the Agreement. Payments for orders placed directly with CPL by CryoLife shall be governed by the provisions of Section 3.14 (Payments) of the Amended Agreement as if the term CPL replaced the term SMI each time it appears therein.
2.5 Samples. CPL shall provide, at no cost to CryoLife, reasonable quantities of sterile and non-sterile CPL Products that CryoLife may use at its sole discretion for samples and demonstrations. From time to time as CryoLife and CPL may mutually agree is reasonable for the purpose of supporting CryoLife’s promotional and sales efforts, CPL shall provide additional sample units to CryoLife at no cost to CryoLife. CryoLife shall certify that all orders for additional sample units are for sample units that were actually used for demonstrations and not sold or otherwise provided as part of the sale of CPL Products. The parties acknowledge that Section 3.15 of the Agreement shall be deemed an appropriate guide to the samples to be provided herein.
3. Approvals and Compliance
3.1 Regulatory Approvals. CPL represents and warrants to CryoLife that it has applied for and received a Free Sale Certificate from the Irish Medicines Board for CPL Products in the Permitted Clinical Applications within. SMI and CPL jointly and severally represent and warrant that the Free Sale Certificate from the Irish Medicines Board for CPL Products as obtained is in good standing and has never been revoked or suspended for any reason. SMI has no reason to believe that the Free Sale Certificate will be revoked or suspended for any reason. Each of SMI and CPL hereby grant to CryoLife the fully paid-up right to use the Free Sale Certificate as it relates to the CPL Products within the Territory that are owned by or licensed to CPL throughout the Term. All costs and expenses related to obtaining and maintaining the Free Sale Certificate shall be CPL’s. CPL shall have the primary responsibility for all communications, submissions and interactions with the Regulatory Authorities for the purpose of obtaining and maintaining the Free Sale Certificate. SMI and CPL each jointly and severally represent that CPL has a fully CE Marking certified and functioning manufacturing source for the CPL Products capable of producing sufficient CPL Product quantities to meet CryoLife’s needs for Products to sell to FSC Countries under the Amended Agreement.
 
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3.2 CPL Reporting. CPL agrees to provide CryoLife with the same reports respecting all Regulatory Approvals obtained and maintained by CPL that SMI provides to CryoLife, as SMI provides to CryoLife respecting all Products provided to CryoLife under the Amended Agreement.
3.3 Regulatory and CPL Products Communications. CPL shall be responsible to Regulatory Authorities throughout the Territory as the manufacturer of the CPL Products. SMI shall ensure that CPL fulfills all of its obligations as manufacturer of the CPL Products.
3.3.1 Each of SMI, CPL and CryoLife shall promptly notify the other and provide to the other a copy or transcription, if available, of any communication from any Regulatory Authority relating to the CPL Products, the marketing thereof, or any related matter (including copies of all product approvals) and shall keep the other parties reasonably apprised of regulatory interactions and similar activities with governmental authorities and international bodies in connection with the CPL Products anywhere in the Territory.
3.3.2 Each of SMI, CPL and CryoLife shall notify the other immediately by fax or email, with confirming notice via overnight delivery, as soon as it becomes aware of any issue with the CPL Products or their testing, manufacture, labelling, or packaging, including any issue relating to regulatory compliance, safety or efficacy of the CPL Products or breach by such party of the terms of this Agreement. Without limiting the generality of the foregoing, each of SMI, CPL and CryoLife will notify the other immediately if it becomes aware of any death or bodily injury caused by a CPL Product unit (or suspected to be caused by a CPL Product unit) or any malfunction of any of the CPL Products.
3.3.3 If any of SMI, CPL and CryoLife receives notice of an actual or threatened inspection, investigation, inquiry, recall, import or export ban, product seizure, enforcement proceeding or similar action by a Regulatory Authority with respect to the CPL Product or a party’s activities in connection with the CPL Product, it will notify the other parties within forty-eight (48) hours after its receipt of notice of the action and will promptly deliver to the other parties copies of all relevant documents received from the Regulatory Authority. Any notice respecting a recall or action that in any way restricts the ability of CryoLife to Distribute CPL Products shall be delivered to the other parties promptly upon receipt.
3.3.4 Each of SMI, CPL and CryoLife shall cooperate in response to the action, including providing information and documentation as requested by the Regulatory Authority relating to any CPL Product. If the action primarily concerns CryoLife’s activities then CryoLife shall have primary responsibility to respond to the Regulatory Authority; otherwise, CPL shall have primary responsibility to respond related to CPL Product. In either case, upon request of the responding party, the other parties shall provide consulting advice and assistance with the response. In addition, each of SMI, CPL and CryoLife shall promptly notify the others and provide to the others a copy or transcription, if available, of any communication from any Regulatory Authority relating to the CPL Products, the marketing thereof, or any related matter and shall keep the other parties reasonably apprised of regulatory interactions and similar activities with Regulatory Authorities in connection with the CPL Products.
3.3.5 If SMI, CPL or CryoLife in good faith determines that a removal, correction, recall or other Field Action involving the CPL Product or its labelling is warranted (whether or not required by a Regulatory Authority), such party shall immediately notify the other parties and shall advise
 
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such other parties of the reasons underlying its determination that a removal, correction, recall or other Field Action is warranted. The parties shall consult with each other as to any action to be taken in regard to such removal, correction, recall or other Field Action. If, after consultations, any party in good faith believes that such a removal, correction, recall or Field Action should be undertaken with respect to the CPL Products or its labelling, the parties shall cooperate in carrying out the same. CPL shall be responsible for all of CryoLife’s reasonable out-of-pocket costs and expenses, including the cost of the CPL Products and the replacement cost of the CPL Products, quality control testing and notification in the event of removals, correction, recall or other Field Action involving the CPL Product or its labelling, provided it copies CryoLife on such notification. In the event of a Field Action of any CPL Products, CPL shall promptly correct noted deficiencies relating to its manufacturing, packaging, labelling, testing and storage or handling of CPL Product, if applicable, or cause the vendor of any material, component, or sub-assembly incorporated into such CPL Product to do likewise with respect to such material, component, or sub-assembly and CryoLife shall correct noted deficiencies related to matters for which it is responsible. If CryoLife is not timely reimbursed as required herein in Section 3.3.5, CryoLife may notify SMI and offset any such unreimbursed costs and expenses against amounts otherwise due or coming due to SMI under the Amended Agreement.
3.3.6 In the event of any action by a Regulatory Authority or Field Action that impedes CryoLife’s ability to sell CPL Product, the Minimum Annual Purchase Requirements shall be adjusted equitably downward to reflect such impediment.
3.4 Compliance with Laws. Each of SMI, CPL and CryoLife will comply with all Applicable Laws in the Territory that pertain to the testing, manufacture, labelling, marketing, distribution, sale, or packaging of the CPL Product and in any other manner pertaining to the performance of its obligations under this Agreement, including the maintenance of ongoing quality assurance and testing procedures to comply with applicable regulatory requirements. Each of SMI, CPL and CryoLife will also comply with Applicable Laws in the Territory pertaining to the import, export, distribution, sales, and marketing of the CPL Product. Without limiting the generality of the foregoing, each of SMI, CPL and CryoLife will, as required by law, (i) report to every applicable Regulatory Authority within any relevant time periods all events that are required to be reported (including any death or serious bodily injury caused by a CPL Product); and (ii) deliver, within the permitted time periods, all annual or other periodic reports required to be delivered to every applicable Regulatory Authority.
3.5 Regulatory Audits and QA Assessments. CryoLife shall have the same regulatory audit and QA assessment rights with respect to CPL and CPL Products as it has with respect to SMI and Products under Section 5.8 (Regulatory Audits and QA Assessments) of the Agreement.
3.6 Traceability. CPL and CryoLife shall maintain manufacturing and traceability records with respect to the CPL Products, including records by lot number. For seven years after delivery to CryoLife of each CPL Product unit, or such longer period as may be required by applicable Regulatory Laws, SMI shall or shall cause CPL to: (i) maintain traceability for each CPL Product unit including the manufacturing date and lot number of each CPL Product unit and each component and material comprising each CPL Product and (ii) provide CryoLife a copy of such records upon CryoLife’s written request.
3.7 Product Complaints and Reports. CPL and CryoLife shall each collect and record Product Complaints (and any other events required to be recorded under Applicable Laws) respecting CPL Products in accordance with Applicable Laws and their standard procedures and policies in effect from time to time. CPL and CryoLife shall each provide to the other reports of such complaints or events
 
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within seventy-two (72) hours after receipt. CPL shall be responsible for investigating all Product Complaints regarding CPL Products, shall promptly respond to such complaints and shall copy CryoLife on any response made by CPL or SMI. CPL shall be responsible for submitting, or causing to be submitted, to the Regulatory Authorities all required reports and other materials, including annual reports, distribution reports and safety reports.
4.Liability
4.1 Indemnification by SMI. SMI agrees that for purposes of SMI’s indemnification obligations under Section 6 (Indemnification and Liability) of the Agreement (i) all CPL Products shall be included as and considered to be Products and (ii) all representations and warranties, covenants, or obligations of CPL under this First Amendment shall be deemed to be representations and warranties, covenants, or obligations of SMI under the Amended Agreement.
4.2 Insurance. CPL will procure insurance in accordance with Section 6.6 of the agreement for CPL Products with CPL’s obligation being satisfied by including CPL Product under its insurance policies provided such inclusion provides CryoLife with full coverage for all CPL Product. It is understood that such insurance shall not be construed to create a limit of each party’s liability with respect to its indemnification obligations under Section 6 (Indemnification and Liability) of the Amended Agreement or Section 4.1 of this First Amendment. Each party shall provide the other party with written evidence of such insurance (or financial information that describes the amounts available under any self-insurance facility) upon request. CPL shall provide CryoLife with written notice at least fifteen (15) days prior to the cancellation, non-renewal, or material change in such insurance. SMI may undertake CPL’s obligation under this Section 4.1 through its own insurance policy, by adding CryoLife as an additional insured.
5.Confidentiality
5.1 Confidentiality. CryoLife and CPL each agree to be bound by the confidentiality agreement of Section 7 (Confidentiality) of the Agreement with respect to Confidential Information of the other party.
6.Intellectual Property Rights
6.1 Intellectual Property Representations. SMI hereby reconfirms its representations, warranties, and covenants contained in Section 10 (Intellectual Property Rights) of the Amended Agreement subject to the following qualification: SMI has granted to CPL, consistent with the authority recognized in Section 1 of this First Amendment, a limited license to manufacture Products for use in Permitted Clinical Applications for sale only to CryoLife for resale in Territory.
6.2 Limited License for PerClot Mark. CryoLife hereby grants CPL a non-exclusive, non-transferable license solely to use the PerClot mark in its manufacture of the CPL Products for CryoLife under this First Amendment.
7. Term and Termination
7.1 Term and Termination. The term of the Agreement shall not be amended by this First Amendment. References to Parties in the Section 11.2 (Termination) of the Agreement, however, shall be interpreted to refer therein only to CryoLife and SMI.
 
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7.2 Effect of Termination. SMI’s obligation to fill purchase orders shall include the obligation to cause CPL to fill purchase orders under Section 11.3 (Effect of Termination) of the Amended Agreement.
7.3 Length of CPL Commitment. CPL’s obligation to manufacture Product hereunder shall terminate two years after CryoLife has received U.S. Regulatory Approval (as such term is defined in that certain License Agreement, dated September 28, 2010, by and between CryoLife and SMI) but not beyond 2016 unless with further approval of the parties.
8.Representations and Warranties
8.1 Representations and Warranties
8.1.1 SMI and CPL each hereby jointly and severally represent and warrant that:
(i) SMI is duly and validly organized and existing corporation in good standing under the laws of the state of Delaware, and that it or its affiliates that may be performing its obligations under this First Amendment are legally qualified to do business in each jurisdiction in which this First Amendment may be performed and where its activities hereunder require such qualification,
(ii) CPL is a duly and validly organized and existing limited company under the laws of Ireland, and that it or its affiliates that may be performing its obligations under this First Amendment are legally qualified to do business in each jurisdiction in which this First Amendment may be performed and where its activities hereunder require such qualification,
(iii) the performance of this First Amendment and the consummation of the transactions contemplated herein will not result in any breach, conflict, or violation of any terms or provisions of, or constitute a default under, the Certificate of Incorporation or By-Laws (if any), or other organizational documents, or any material agreement or instrument to which SMI or CPL is a party, by which it or CPL is bound, or to which any property of SMI or CPL is subject,
(iv) all requisite corporate action has been taken for the due authorization, execution, delivery, and performance of this First Amendment by SMI and CPL, and this Agreement constitutes a legally binding obligation, enforceable against SMI and CPL, in accordance with its terms, except insofar as enforceability may be limited by bankruptcy, insolvency, reorganization, or similar laws affecting the rights of creditors generally,
(v) neither SMI nor CPL is a party to any litigation relating to, or that could reasonably be expected to affect, its ability to perform its obligations under this First Amendment.
8.1.2 CryoLife hereby represents and warrants that:
(i) it is a duly and validly organized and existing corporation in good standing under the laws of the state of Florida, and that it or its affiliates that may be performing its obligations under this First Amendment are legally qualified to do business in each jurisdiction in which this First Amendment may be performed and where its activities hereunder require such qualification,
 
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(ii) the performance of this First Amendment and the consummation of the transactions contemplated herein will not result in any breach or violation of any terms or provisions of, or constitute a default under, its Certificate of Incorporation or By-Laws, or other organizational documents, and
(iii) all requisite corporate action has been taken for the due authorization, execution, delivery, and performance of this First Amendment by it, and this Agreement constitutes a legally binding obligation, enforceable against such party, in accordance with its terms, except insofar as enforceability may be limited by bankruptcy, insolvency, reorganization, or similar laws affecting the rights of creditors generally.
9.General
9.1 Notice. Any notice or other communication required or permitted by this First Amendment or the Amended Agreement must be given in writing and must be delivered by personal delivery (including personal delivery by overnight courier such as Federal Express, DHL, or similar overnight courier), first class mail (registered or certified), telecopy (with a copy sent by personal delivery or first class mail), or email (with a copy sent by personal delivery or first class mail) at the address of the party as set forth herein or such other changed address of the party as to which notice has been given, and will be deemed as having been given when received or delivered. N OTWITHSTANDING ANYTHING TO THE CONTRARY PROVIDED IN THIS  F IRST  A MENDMENT OR THE  A MENDED  A GREEMENT ,  IT SHALL BE SUFFICIENT FOR  C RYO L IFE ,  WHEN PROVIDING NOTICE TO THE OTHER PARTIES ,  TO PROVIDE SUCH NOTICE ONLY TO  SMI. T HE PARTIES ACKNOWLEDGE AND AGREE THAT NOTICE GIVEN BY  C RYO L IFE TO  SMI  SHALL BE SUFFICIENT TO ALSO NOTIFY  CPL.
9.2 Binding; Assignment. This First Amendment and the Amended Agreement shall be binding on CryoLife, SMI, CPL and their respective successors and assigns. No party may assign its obligations under the Amended Agreement or in any way transfer its rights or obligations under the Amended Agreement, directly or indirectly, without the prior written consent of the other party, which consent shall not be unreasonably withheld, except that either party may, without such consent, assign the Amended Agreement in connection with any sale of substantially all of its assets or stock or pursuant to any merger, reclassification, or reorganization.
9.3 Entire Agreement; Modification; Waiver. This First Amendment together with the Agreement contains the entire agreement between the parties with respect to the subject matter of this First Amendment or the Agreement and shall supersede and terminate all prior agreements, commitments, or understandings, whether oral or written, related to the Products, except for the Confidentiality Agreement as modified by Section 7.2. No waiver or modification of any of the provisions of this First Amendment or the Amended Agreement shall be binding unless it is in writing and signed by CryoLife and SMI. CPL EXPRESSLY AGREES THAT THE  A MENDED  A GREEMENT MAY BE AMENDED BY AGREEMENT OF  SMI  AND C RYO L IFE AND THAT  SMI  MAY WAIVE RIGHTS OF  CPL  UNDER THIS  F IRST  A MENDMENT AND THE A MENDED  A GREEMENT ,  NOTWITHSTANDING ANY ADVERSE IMPACT SUCH AMENDMENT OR WAIVER MAY HAVE ON  CPL,  AND ANY AND ALL SUCH AMENDMENTS AND WAIVERS SHALL BE BINDING ON BOTH  SMI AND  CPL. Any waiver of any condition on any one occasion shall not constitute a waiver on any subsequent occasion. A failure to exercise or a delay in exercising a right or remedy provided by this First Amendment or the Amended Agreement or by law shall not constitute a waiver of that right or remedy.
9.4 Arbitration; Governing Law; Jurisdiction. The parties agree that any dispute concerning, relating to, or arising out of this First Amendment or the Amended Agreement shall be resolved by final
 
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and binding arbitration in accordance with the procedures set forth in the Agreement as modified herein with CPL being a participant as necessary. Provided, however that, notwithstanding any other provision herein, either SMI or CryoLife, in its sole and exclusive discretion, may apply to any court with jurisdiction over the parties for a temporary restraining order, preliminary or permanent injunction, without submission of such claim for equitable relief to arbitration.
9.5 Controlling Language. This First Amendment and the Agreement have been written, and all discussions leading up to this First Amendment and the Agreement have been conducted, in the English language which the parties thoroughly understand. Each party represents that it has read and fully understands this First Amendment and the Agreement.
9.6 Independent Contractor. CryoLife shall operate as an independent contractor and nothing contained in the Amended Agreement shall be deemed or construed to recreate an employer/employee, principal/agent, joint venture, partnership, or fiduciary relationship between the parties.
9.7 Severability. If any provision of the Amended Agreement is held by a court of competent jurisdiction to be invalid or unenforceable, such provision will be severed from the Amended Agreement without affecting the validity or enforceability of any of the remaining provisions.
9.8 Heading and Captions. Headings and captions used herein are for convenience only and are not to be deemed part of this First Amendment or the Amended Agreement.
9.9 Inapplicability of UCC. The parties agree that neither the Uniform Commercial Code of Georgia nor any other State of the United States shall apply to this First Amendment or the Amended Agreement or the activities contemplated by this First Amendment or the Amended Agreement. The parties intend that the provisions of this First Amendment or the Amended Agreement, including those relating to purchase of Products and CPL Products and termination, govern their activities exclusively under this First Amendment or the Amended Agreement where provisions of the Uniform Commercial Code might otherwise provide.
9.10 Counterparts/Defined Terms. This First Amendment may be executed in multiple counterparts, each of which shall be an original, and all of which together shall constitute one and the same instrument. Terms defined in the Agreement but not separately defined in this First Amendment shall be given the meanings assigned to them in the Agreement. The use of the term Products includes all CPL Products.
9.11 Further Assurances; Force Majeure. Each party covenants and agrees that, subsequent to the execution and delivery of this First Amendment or the Amended Agreement and without any additional consideration, it will execute and deliver any further legal instruments and perform any acts that are or may become reasonably necessary to effectuate the purposes of this First Amendment or the Amended Agreement. Neither SMI nor CryoLife will have any liability for any failure or delay in performing any obligation under this First Amendment or the Amended Agreement (except the obligation to make payments promptly when and as due) if the failure or delay results from force majeure, understood as a cause which is beyond the control of either party and one which could not have been avoided even with the exercise of due care. The party claiming force majeure will give the other parties written notice of the cause within fifteen (15) days after occurrence thereof, and will exercise reasonable diligence to remove the cause and resume performance.
 
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9.12 Specific Performance. Each party acknowledges that it will be impossible to measure in money the damage to the other party if a party fails to comply with the confidentiality obligations imposed by the Amended Agreement, and that, in the event of any such failure, the other party will not have an adequate remedy at law or in damages. Accordingly, each party agrees that injunctive relief or other equitable remedy, in addition to remedies at law or damages, is an appropriate remedy for any such failure and will not oppose the granting of such relief on the basis that the other party has an adequate remedy at law. Each party agrees that it will not seek, and agrees to waive any requirement for, the securing or posting of a bond in connection with any other party’s seeking or obtaining such equitable relief.
9.13 CPL Joinder. THEPARTIESACKNOWLEDGEANDAGREETOTHEADDITIONANDJOINDEROF CPL  TO THIS  F IRST  A MENDMENT AND  A MENDED  A GREEMENT FOR THE PURPOSES SET FORTH HEREIN . B Y SIGNING BELOW , CPL  AGREES TO BE BOUND BY THE PROVISIONS OF THIS  F IRST  A MENDMENT AND A MENDED  A GREEMENT .
IN WITNESS WHEREOF, the parties have caused this First Amendment to be executed by their respective duly authorized officers, and have duly delivered and executed this Agreement as of the date first hereinabove set forth.

CRYOLIFE, INC.	 	 	 	STARCH MEDICAL, INC.	
 	 	 	 	 	
By:	 	/s/ D. A. Lee	 	 	 	By:	 	/s/ Xin Ji	
Name:	 	D. Ashley Lee	 	 	 	Name:	 	Xin Ji	
Title:	 	Executive VP, COO & CFO	 	 	 	Title:	 	CEO	
 	 	 	 	
CLOTPLUS LIMITED	 	 	 	 	 	 	
 	 	 	 	 	
By:	 	/s/ Jason Ji	 	 	 	 	 	 	
Name:	 	Jason Ji	 	 	 	 	 	 	
Title:	 	Director	 	 	 	 	 	 	
 
10

Schedule 1.3
CryoLife places the following order for delivery in October of 2011:

1 Gram Standard	 	CPS0001	 	274 Boxes of 5 Units	
3 Gram Standard	 	CPS0003	 	494 Boxes of 5 Units	
3 Gram Laparoscopic	 	CPL8303	 	312 Units	
In addition, CryoLife anticipates the following orders for 2012 and will notify CPL 6 months prior to the delivery date if it no longer desires these Products in these configurations:
June of 2012:

1 Gram Standard	 	CPS0001	 	323 Boxes of 5 Units	
3 Gram Standard	 	CPS0003	 	583 Boxes of 5 Units	
3 Gram Laparoscopic	 	CPL3803	 	371 Units	
December of 2012:

1 Gram Standard	 	CPS 0001	 	519 Boxes of 5 Units	
3 Gram Standard	 	CPS0003	 	899 Boxes of 5 Units	
3 Gram Laparoscopic	 	CPL3803	 	585 Units	
After 2012, CryoLife may order Products with a four month lead time, or if the date set forth on the purchase order is for a delivery date more than four months from receipt, such date to fulfill such purchase order set forth therein, with the minimum amount of such order no less in units than the order of October 2011.
 
11

Schedule 1.4
Transfer Prices
FOB Shanghai or Beijing

Type	  	Price	  	Equivalent to SMI Product	
Standard 1 gram	  	US$30 each; US$150 box of 5	  	STA 0001	
Standard 3 gram	  	US$50 each; US$250 box of 5	  	STA 0003	
Laparoscopic 3 gram	  	US$55 each; sold only individually	  	LAP 3803	
 
12

Exhibit 31.1
CERTIFICATIONS
I, James P. Mackin, certify that:
1. I have reviewed this quarterly report on Form 10-Q of CryoLife, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: October 28, 2014

/s/ JAMES P. MACKIN	
President and Chief Executive Officer	

Exhibit 31.2
I, David Ashley Lee, certify that:
1. I have reviewed this quarterly report on Form 10-Q of CryoLife, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: October 28, 2014

/s/ D. ASHLEY LEE	
Executive Vice President, Chief Operating Officer, and Chief Financial Officer	

Exhibit 32
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of CryoLife, Inc. (the “Company”) on Form 10-Q for the quarter ending September 30, 2014, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of James P. Mackin, the President and Chief Executive Officer of the Company, and David Ashley Lee, the Executive Vice President, Chief Operating Officer, and Chief Financial Officer of the Company, hereby certifies, pursuant to and for purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ JAMES P. MACKIN	 	 	 	/s/ D. ASHLEY LEE	
JAMES P. MACKIN	 	 	 	D. ASHLEY LEE	
President and Chief Executive Officer
October 28, 2014	 	 	 	Executive Vice President, Chief Operating Officer,
and Chief Financial Officer
October 28, 2014