EXECUTION COPY



                             DISTRIBUTION AGREEMENT



                                    Between


                                 COBE BCT, INC.


                                      and


                           AASTROM BIOSCIENCES, INC.



                          Dated as of October 22, 1993
<PAGE>
 
                               TABLE OF CONTENTS
                               -----------------


Section                                                                  Page
-----------------------------------------------------------------------------
                                                                   
                                ARTICLE I
                               DEFINITIONS
1.01   Definitions.......................................................   1


                                   ARTICLE II
                           APPOINTMENT AS DISTRIBUTOR

2.01   Appointment and Acceptance; Products;
       Exclusivity; Affiliate Sales......................................  11
2.02   Relationship; Subdistributors.....................................  14
2.03   Purpose; Development Programs.....................................  15
2.04   Review of Programs and ACL........................................  19
2.05   Annual Customer Review; Change of Use.............................  21


                                  ARTICLE III
                            SUPPLIER'S UNDERTAKINGS

3.01   Product Development Program; Diligence............................  23
3.02   Product Specifications............................................  23
3.03   Training by the Supplier..........................................  23
3.04   Sole Distributor..................................................  24
3.05   Enforcement of Intellectual Property Rights.......................  24
3.06   Manufacturing and Labeling; Product Name; Parts...................  25
3.07   Regulatory Approvals..............................................  26
3.08   Intellectual Property Indemnification.............................  26
3.09   Insurance; Indemnification for Product Liability..................  26
3.10   Forecasting Unit Demand...........................................  28


                                   ARTICLE IV
                           DISTRIBUTOR'S UNDERTAKINGS

4.01   Market Development Program; Diligence.............................  28
4.02   Training by the Distributor.......................................  29
4.03   Advertising.......................................................  29
4.04   Warranties; Service...............................................  29
4.05   Notice of Infringement............................................  30



<PAGE>
 


Section                                                                   Page
------------------------------------------------------------------------------
                                                                    
4.06   License...........................................................   30
4.07   Regulatory Approvals..............................................   30
4.08   Competitive Products..............................................   31
4.09   Insurance.........................................................   31
4.10   Solutions and Growth Medium.......................................   32
4.11   Information Concerning Pricing....................................   33
4.12   Indemnification for Product Liability.............................   34


                                   ARTICLE V
                     DISTRIBUTOR PURCHASES OF THE PRODUCTS

5.01   Orders............................................................   34
5.02   Purchase Price; Periodic Adjustments..............................   34
5.03   Monthly Report; Monthly Payment; Distributor Fee..................   37
5.04   Deliveries........................................................   38


                                ARTICLE VI
                        TRADEMARKS AND TRADE NAMES

6.01   License...........................................................   38
6.02   Licenses to Third Parties.........................................   38
6.03   Effect of Use.....................................................   38
6.04   Cessation of Use..................................................   39


                               ARTICLE VII
                            TERM; TERMINATION

7.01   Term..............................................................   39
7.02   Notice of Breach..................................................   39
7.03   Cure Period.......................................................   39
7.04   Objection; Negotiation............................................   40
7.05   Remedy; Partial Termination; Termination Upon Bankruptcy..........   40
7.06   Other Remedies....................................................   42
7.07   Effect of Termination by Distributor..............................   42
7.08   Attorney's Fees and Costs.........................................   43
7.09   Interest..........................................................   43
7.10   Transition Upon Termination.......................................   43

<PAGE>
 


Section                                                                   Page
------------------------------------------------------------------------------
                                                                    
                                  ARTICLE VIII
                                CONFIDENTIALITY

8.01    Confidentiality.................................................   44
8.02    Survival of Covenants to Keep Secret............................   44
8.03    No License......................................................   44


                                   ARTICLE IX
                                 FORCE MAJEURE

9.01    Force Majeure...................................................   45


                                   ARTICLE X
                            MISCELLANEOUS PROVISIONS

10.01   Amendment; Alteration...........................................   45
10.02   Notice..........................................................   46
10.03   Arbitration.....................................................   46
10.04   Governing Law...................................................   47
10.05   Waiver..........................................................   47
10.06   Entire Agreement; Assignment....................................   47
10.07   Parties in Interest.............................................   47
10.08   Severability....................................................   48
10.09   Headings........................................................   48
10.10   Counterparts....................................................   48
10.11   Approvals.......................................................   48


                                   SCHEDULES

Schedule A --  Product Development Program
Schedule B --  Market Development Program
Schedule C --  Annual Commitment List

<PAGE>
 
                                                                  EXECUTION COPY

                             DISTRIBUTION AGREEMENT
                             ----------------------


          DISTRIBUTION AGREEMENT dated as of October 22, 1993 between AASTROM
BIOSCIENCES, INC., a Michigan corporation (the "Supplier"), and COBE BCT, INC.,
                                                --------                       
a Colorado corporation (the "Distributor").
                             -----------   

                              W I T N E S S E T H:
                              - - - - - - - - - - 

          WHEREAS, the Supplier wishes to create, develop and manufacture and
supply Products (as defined below) and to have the Products marketed worldwide;

          WHEREAS, the Distributor wishes to sell, market and distribute the
Products worldwide; and

          WHEREAS, the Supplier wishes that the Distributor distribute the
Products worldwide;

          NOW, THEREFORE, in consideration of the premises and mutual covenants
and agreements hereinafter set forth, the Supplier and the Distributor agree as
follows:


                                   ARTICLE I

                                  DEFINITIONS
                                  -----------

          SECTION 1.01.  Definitions.  As used in this Agreement, the following
                         -----------                                           
terms shall have the following meanings:

          "ACL" has the meaning specified in Section 2.04(b).
           ---                                               

          "Actual International Direct Sales" means for any Direct Sales Country
           ---------------------------------                                    
the unit Sales of any of the Products other than Spare Parts by the Distributor
to Stem Cell Therapy Customers in such Direct Sales Country in which the
purchase price is due and payable in cash from the purchaser of such Products
substantially contemporaneously with (i.e., within 60 days of) such Sales in
                                      ----                                  
such Country expressed in the official currency unit of such Country.

          "Actual International Direct Sales Amount" for any Product in any
           ----------------------------------------                        
Direct Sales Country for any calendar month means the Actual International
Direct Sales of such Product during such month in such Country multiplied by the
greater of (a) the Average International Direct Selling Price for such Product
for such Country and (b) the Minimum International Direct Selling Price for such
Product for such Country expressed in the official currency unit of such
Country.

<PAGE>
 
                                                                          Page 2

          "Actual Subdistributor Sales" means the unit Sales of the Products
           ---------------------------                                      
other than Spare Parts by the Distributor to Subdistributors outside the United
States (other than Direct Sales Countries) in which the purchase price is due
and payable in cash from the purchaser of such Products substantially
contemporaneously with (i.e., within 60 days of) such Sales.
                        ----                                

          "Actual Subdistributor Sales Amount" for any Product for any calendar
           ----------------------------------                                  
month means the Actual Subdistributor Sales of such Product during such month
multiplied by the greater of (a) the Average Subdistributor Selling Price for
such Product and (b) the Minimum Subdistributor Selling Price for such Product.

          "Average Subdistributor Selling Price" means, for any Product for any
           ------------------------------------                                
calendar month, the aggregate selling price, net of any applicable discounts,
less any payments made to Subdistributors, of Actual Subdistributor Sales
divided by the quantity of such Product sold during such calendar month.

          "Affiliate" means (a) with respect to the Distributor, any Person
           ---------                                                       
other than the Distributor (i) that is controlled, either directly or
indirectly, by Investment AB Cardo, (ii) for which a Person controlled, either
directly or indirectly, by Investment AB Cardo is the principal manager, or
(iii) in which Investment AB Cardo has an equity ownership interest of ten
percent or more; and (b) with respect to the Supplier, any Person other than the
Supplier (i) that is controlled, either directly or indirectly, by the Supplier,
(ii) for which the Supplier is the principal manager or (iii) in which the
Supplier has an equity ownership interest of ten percent or more.

          "Affiliate Sales" has the meaning specified in Section 2.01(d).
           ---------------                                               

          "Agreement" or "this Agreement" means this Distribution Agreement
           ---------      --------------                                   
dated as of October 22, 1993 between the Supplier and the Distributor (including
the schedules hereto) and all amendments, modifications and supplements made in
accordance with Section 10.01 hereof.

          "Average International Direct Selling Price" means, for any Product in
           ------------------------------------------                           
any Direct Sales Country for any calendar month, the aggregate selling price,
net of all applicable discounts, less any payments made to Subdistributors (all
expressed in the offficial currency of such Country), of all Actual
International Direct Sales of such Product in such Country during such calendar
month, divided by the quantity of such Product sold during such calendar month
in such Country expressed in the official currency unit of such Country.

          "Base Term" has the meaning specified in Section 7.01.
           ---------                                            

          "BIU" has the meaning specified in Section 2.01(a)(i).
           ---                                                  

          "Change of Use" has the meaning specified in Section 2.04(a).
           -------------                                               

<PAGE>
 
                                                                          Page 3
          
          "Co-Marketing Arrangement" has the meaning specified in Section
           ------------------------                                      
7.05(b).

          "Competitive Product" means any product (other than the Distributor's
           -------------------                                                 
Products) that competes with the Products for use by the same Customer such that
the Customer might use such product instead of any of the Products.

          "Complete System Sale" means the Sale by the Distributor to one or
           --------------------                                             
more Stem Cell Therapy Customers of all of the Products specified in (i), (iii),
(vii), (x) and (xi) of Section 2.01(a) at such time as all of the Products
specified in (ii), (v), (vi), (viii) and (ix) of Section 2.01(a) are generally
available for purchase by Customers and have been delivered to the Distributor
or in the Distributor's reasonable judgment, are available for delivery, to the
Distributor.

          "Confidential Information" means all confidential or secret data,
           ------------------------                                        
reports, interpretations, forecasts, records, marketing, sales and other
commercial data or reports, trade secret information, know-how methods,
procedures, designs, technology, inventions, ideas, specifications, plans,
patent applications and related correspondence, or other information that the
parties hereto provide to each other in connection with this Agreement, together
with analyses, compilations, studies or other documents, whether prepared by
their respective agents or attorneys, which contain or otherwise reflect such
information; provided, however, that the following shall not constitute
             --------  -------                                         
Confidential Information for purposes of this Agreement:

          (a) information which was in one of such parties' possession prior to
     its receipt from the other of such parties;

          (b) information which is obtained by one of such parties from a third
     person who, insofar as is known to such party, is not prohibited from
     transmitting the information to such party by a contractual, legal or
     fiduciary obligation to the other of such parties; and

          (c) information which is or becomes publicly available through no
     fault of either of such parties.

          "Control" (including the terms "controlled by" and "under common
           -------                        -------------       ------------
control with"), with respect to the relationship between or among two or more
------------                                                                 
Persons, means the possession, directly or indirectly or as trustee or executor,
of the power to direct or cause the direction of the affairs or management of a
Person, whether through the ownership of voting securities, as trustee or
executor, by contract or otherwise, including, without limitation, the
ownership, directly or indirectly, of securities having the power to elect a
majority of the board of directors or similar body governing the affairs of such
Person.

<PAGE>
 
                                                                          Page 4
          
          "Customer" means any party to whom Products are sold or reasonably are
           --------                                                             
expected to be sold.  Different units within a single Person (e.g., a blood
                                                              ----         
bank, an apheresis center, a transplant center) will be considered separate
Customers for purposes of this Agreement if each such unit has the primary
decision-making authority for the purchase of the Products, notwithstanding the
fact that payment for the Products may be issued by the same Person.

          "Customer License" has the meaning specified in Section 2.01(a).
           ----------------                                               

          "Customer Service Information" has the meaning specified in Section
           ----------------------------                                      
2.04(b).

          "Deductible" has the meaning specified in Section 3.09(b).
           ----------                                               

          "Deemed International Direct Sales" means, for any Product (other than
           ---------------------------------                                    
Spare Parts) in any Direct Sales Country for any calendar month, the aggregate
unit sales of such Product by the Distributor to Stem Cell Therapy Customers,
other than Actual International Direct Sales.

          "Deemed International Direct Sales Amount" for any Direct Sales
           ----------------------------------------                      
Country calendar month means the Deemed International Direct Sales of each
Product in any Direct Sales Country during such calendar month multiplied by the
greater of (a) the Average International Direct Selling Price for such Product
in such Direct Sales Country and (b) the Minimum International Direct Selling
Price for such Product for any Direct Sales Country expressed in the official
currency unit of such Country.

          "Deemed Subdistributor Sales" means, for any Product (other than Spare
           ---------------------------                                          
Parts) for any calendar month, the aggregate unit Sales of such Product by the
Distributor, other than Actual Subdistributor Sales.

          "Deemed Subdistributor Sales Amount" for any calendar month means the
           ----------------------------------                                  
Deemed Subdistributor Sales of each Product during such calendar month
multiplied by the greater of (a) the Average Subdistributor Selling Price for
such Product and (b) the Minimum Subdistributor Selling Price for such Product.

          "Direct Sales Countries" has the meaning specified in Section 2.02(c).
           ----------------------                                               

          "Disposables" has the meaning specified in Section 2.01(a).
           -----------                                               

          "Distributor" has the meaning set forth in the preamble to this
           -----------                                                   
Agreement.

          "Distributor Customer Service Information" has the meaning specified
           ----------------------------------------                           
in Section 2.04(b).

<PAGE>
 
                                                                          Page 5
          
          "Distributor Indemnified Person" has the meaning specified in Section
           ------------------------------                                      
4.12.

          "Distributor's Notice of Breach" has the meaning specified in Section
           ------------------------------                                      
7.02.

          "Distributor's Products" means (i) the Spectra Apheresis System, (ii)
           ----------------------                                              
the 2991 Blood Cell Processor, (iii) stem cell freezing solutions and protocols,
(iv) immunological tumor purging systems that do not provide for positive
selection of stem cells, (v) all improvements or enhancements to any of the
foregoing and (vi) any

successor product to any of the foregoing that is not a Competitive Product.

          "Equipment" has the meaning specified in Section 2.01(a).
           ---------                                               

          "Excess Payments" has the meaning specified in Section 4.09.
           ---------------                                            

          "Exchange Rate" means, with respect to any Direct Sales Country for
           -------------                                                     
any calendar month the average monthly market rate at which the official
currency unit of such Country is exchangeable into one U.S. dollar.

          "FDA" means the United States Food & Drug Administration.
           ---                                                     

          "Fiscal Year" means any fiscal year ended June 30.
           -----------                                      

          "Growth Medium" has the meaning specified in Section 2.01(a).
           -------------                                               

          "Infringement" has the meaning specified in Section 3.05.
           ------------                                            

          "Intellectual Property Rights" means any rights to any patents, patent
           ----------------------------                                         
rights, copyrights, trademarks, service
marks, trade names, trademark rights, trade name rights or trade secrets.

          "International Direct Monthly Purchase Price" has the meaning
           -------------------------------------------                 
specified in Section 5.02(c).

          "International Direct Products" means the Products other than Spare
           -----------------------------                                     
Parts sold by the Distributor to Stem Cell Therapy Customers in Direct Sales
Countries.

          "IP Enforcement Actions" has the meaning specified in Section 3.05.
           ----------------------                                            

          "IP Enforcement Costs" has the meaning specified in Section 3.05.
           --------------------                                            

          "Joint Registration" has the meaning specified in Section 4.07.
           ------------------                                            

          "License" has the meaning specified in Section 7.07(a).
           -------                                               

<PAGE>
 
                                                                          Page 6

          "Market Development Program" means the program attached hereto as
           --------------------------                                      
Schedule B, to promote and market the Products, as such program may be modified
and amended from time to time in accordance with Section 2.04 hereof.

          "Milestone Fees" has the meaning specified in Section 5.03(c).
           --------------                                               

          "Minimum Direct International Selling Price" means, for each Product
           ------------------------------------------                         
in each Direct Sales Country, the minimum direct international selling price for
such Product in such Country expressed in the official currency unit of such
Country.

          "Minimum Subdistributor Selling Price" means, for each Product, the
           ------------------------------------                              
minimum selling price to Subdistributors for such Product.

          "Monetary Breach" has the meaning specified in Section 7.03.
           ---------------                                            

          "Monthly Parts Purchase Price" has the meaning specified in Section
            ---------------------------                                      
5.02(e).

          "Monthly Purchase Price" means the sum of the U.S. Monthly Purchase
           ----------------------                                            
Price, the International Direct Monthly Purchase Price for each Direct Sales
Country, the Monthly Parts Purchase Price and the Subdistributor Purchase Price.

          "Monthly Report" has the meaning specified in Section 5.03.
           --------------                                            

          "Notice of Breach" has the meaning specified in Section 7.02.
           ----------------                                            

          "Objection" has the meaning specified in Section 7.04.
           ---------                                            

          "Party" means a party to this Agreement.
           -----                                  

          "Permitted Clinical Research Applications" means any clinical or
           ----------------------------------------                       
therapeutic use of the Products for any clinical research or trial that is
expected to result in a new application of, or a new FDA-approved indication
for, the Products.

          "Person" means any individual, partnership, firm, corporation,
           ------                                                       
association, trust, unincorporated organization or other entity, as well as any
syndicate or group that would be deemed to be a person under Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended.

          "Plan" has the meaning specified in Sections 2.03(e) and (f).
           ----                                                        

          "Policy" has the meaning specified in Section 3.09(a).
           ------                                               

          "Premiums" has the meaning specified in Section 3.09(a).
           --------                                               

          "Pricing Information" has the meaning specified in Section 4.11.
           -------------------                                            

<PAGE>
 
                                                                          Page 7

          "Principal Components of the Market Development Program" has the
           ------------------------------------------------------         
meaning specified in Section 2.03(f).

          "Principal Components of the Product Development Program" has the
           -------------------------------------------------------         
meaning specified in Section 2.03(e).

          "Principal Objection" has the meaning specified in Section 2.04(b).
           -------------------                                               

          "Product Development Program" means the program attached hereto as
           ---------------------------                                      
Schedule A, for the design, creation, validation, manufacture and release of the
Products, as such program may be modified and amended from time to time in
accordance with Section 2.04 hereof.

          "Products Liability Cap" has the meaning specified in Section 4.09.
           ----------------------                                            

          "Product Liability Claims" has the meaning specified in Section
           ------------------------                                      
3.09(a).

          "Products" has the meaning specified in Section 2.01(a).
           --------                                               

          "Programs" means, collectively, the Market Development Program and the
           --------                                                             
Product Development Program.

          "Purchased Spare Parts" has the meaning specified in Section 5.02(e).
           ---------------------                                               

          "Retaliatory IP Claims" has the meaning specified in Section 3.05(a).
           ---------------------                                               

          "Sale" and any grammatical variant thereof means any sale, conditional
           ----                                                                 
sale, installment sale, rental, lease or other arrangement whereby the Products
are placed at the disposal of a Customer in exchange for value received or to be
received.

          "Sales Threshold" means (x) $60 million in any Fiscal Year up to and
           ---------------                                                    
including 1998, (y) $125 million in the Fiscal Year 1999 and (z) $200 million in
the Fiscal Year 2000 and thereafter.

          "SCTIP Rights" has the meaning specified in Section 3.05.
           ------------                                            

          "Sixth Insurance Year" has the meaning specified in Section 4.09.
           --------------------                                            

          "Solutions" has the meaning specified in Section 2.01(a).
           ---------                                               

          "Spare Parts" has the meaning specified in Section 2.01(a)(ix).
           -----------                                                   

          "Stem Cell Therapy Applications" means applications of the Products
           ------------------------------                                    
pursuant to which human bone marrow or peripheral blood derived stem and
hematopoietic cells are used primarily for one or more of the following:  (a)
restoration of hematopoietic function; (b) augmentation of the recovery of a
previously damaged hematopoietic system; and (c) augmentation of the recovery of

<PAGE>
 
                                                                          Page 8

previously damaged bone marrow; provided, however, that such cells have not been
                                --------  -------                               
altered through the introduction of a new genetic component.  Notwithstanding
anything in this Agreement to the contrary, Stem Cell Therapy Applications shall
not include any of the following applications of the Products:  (i) all
diagnostic or other non-therapeutic clinical applications; (ii) all gene therapy
or gene transfer applications; (iii) all non-human applications; (iv) all
Permitted Clinical Research applications; and (v) all applications in which the
Products are labelled not for human use.

          "Stem Cell Therapy Customers" means Customers who perform, or are
           ---------------------------                                     
reasonably expected to perform, Stem Cell Therapy Applications.

          "Subdistributor Monthly Purchase Price" has the meaning specified in
           -------------------------------------                              
Section 5.02(b).

          "Subdistributor Products" means Products other than Spare Parts sold
           -----------------------                                            
by the Supplier to the Distributor for resale and distribution to
Subdistributors in countries outside of the United States (other than Direct
Sales Countries).

          "Subdistributors" has the meaning specified in Section 2.02(a).
           ---------------                                               

          "Supplier" has the meaning set forth in the preamble to this
           --------                                                   
Agreement.

          "Supplier Customer Service Information" has the meaning specified in
           -------------------------------------                              
Section 2.04(b).

          "Supplier Deficiency" has the meaning specified in Section 4.09.
           -------------------                                            

          "Supplier Indemnified Person" has the meaning specified in Section
           ---------------------------                                      
3.08.

          "Supplier Products Liablity Payments" has the meaning specified in
           -----------------------------------                              
Section 4.09.

          "Supplier's New Products" has the meaning specified in Section
           -----------------------                                      
2.01(f).

          "Supplier's Notice of Breach" has the meaning specified in Section
           ---------------------------                                      
7.02.

          "Supplier's Other Products" means the Supplier"s products (other than
           -------------------------                                           
the Products) that utilize some or all of the Products as components and that
are not Competitive Products.

          "Supplier Products Liability Payments" has the meaning specified in
           ------------------------------------                              
Section 4.09.

          "Supplier's Share" has the meaning specified in Section 4.10.
           ----------------                                            

          "Target Prices" has the meaning specified in Section 2.03(f).
           -------------                                               
<PAGE>
 
                                                                          Page 9

          "Upcharges" means amounts included in the Distributor"s selling price
           ---------                                                           
for Actual U.S. Sales, Actual International Direct Sales, or the Actual
Subdistributor Sales of Disposables to a Stem Cell Therapy Customer (in the case
of Actual U.S. Sales and Actual International Direct Sales) or to a
Subdistributor (in the case of Actual Subdistributor Sales) in any calendar
month that reflect the Distributor's depreciation of, and interest on, Equipment
or rental, lease or other deferred payments for Equipment, where the value of
such Equipment previously has been included in one of the formulae set forth in
Section 5.02(a), (b), or (c) in Deemed U.S. Sales, Deemed International Direct
Sales or Deemed Subdistributor Sales, respectively.

          "Unreimbursed Losses" has the meaning specified in Section 3.09(b).
           -------------------                                               

          "U.S. Monthly Purchase Price" has the meaning specified in Section
           ---------------------------                                      
5.02(a).

          "U.S. Products" means the Products other than Spare Parts sold by the
           -------------                                                       
Distributor to Stem Cell Therapy Customers in the United States.

          "Worldwide Sales" means the sum of the (i) Deemed International Sales
           ---------------                                                     
Amount, (ii) Deemed U.S. Sales Amount, (iii) Deemed Subdistributor Sales Amount,
(iv) Actual International Direct Sales, (v) Actual U.S. Sales and (vi) Actual
Subdistributor Sales.


                                   ARTICLE II

                           APPOINTMENT AS DISTRIBUTOR
                           --------------------------

          SECTION 2.01.  Appointment and Acceptance; Products; Exclusivity;
                         --------------------------------------------------
Affiliate Sales.  (a)  The Supplier hereby appoints the Distributor, and the
---------------                                                             
Distributor hereby accepts appointment, in each case on the terms and subject to
the conditions of this Agreement, as the Supplier's worldwide distributor for
Stem Cell Therapy Applications of the following products, or such alterations
to, or replacements for, such products as may be developed in accordance with
the Product Development Program (collectively, the "Products"):
                                                    --------   

        (i)  a biochamber incubation unit (a "BIU") that controls the biological
                                              ---                               
     and physical environment during the expansion process;

       (ii)  a BIU monitor module that provides a central display, an operator
     input device and a printer;

      (iii)  an inoculation and harvest unit that facilitates the initial
     filling and inoculation of cells, as well as the final harvest of cells at
     the completion of the expansion process;

<PAGE>
 
                                                                         Page 10

       (iv)  a system rack to integrate conveniently the multiple biochamber and
     incubation units with the companion monitor modules (together with the
     products described in (i), (ii) and (iii) above and the improvements and
     enhancements hereto and thereto, the "Equipment");
                                           ---------   

        (v)  an incubation and growth medium required by the cell culture, which
     shall include to the extent required, growth factors, glutamine,
     antibiotics, serums and other substances ("Growth Medium");
                                                -------------   

       (vi)  harvest reagents which facilitate the removal of the expanded cells
     from the biochamber (together with the Growth Medium and all improvements
     and enhancements hereto and thereto, the "Solutions");
                                               ---------   

      (vii)  a disposable biochamber cartridge where the growth and expansion
     of cells takes place (together with all improvements and enhancements
     hereto and the Solutions, the "Disposables");
                                    -----------   

     (viii)  all improvements and enhancements to the products described in
     (i) through (vii) above;

       (ix)  spare parts for the Equipment ("Spare Parts");
                                             -----------   

        (x)  a license for the use of such products solely for Stem Cell Therapy
     Applications (the "Customer License"); and
                        ----------------       

          (xi)  instructions for the use of each of such products, other than
     the Customer License.

           (b)  Except as provided in Section 2.01(d), the Distributor and each
Subdistributor shall sell the Products only in conjunction with Customer
Licenses.

           (c)  Except as otherwise specifically provided in this Section 2.01
and in Sections 4.01(b) and 7.05(b), the Supplier shall not (i) authorize any
Person other than the Distributor to act as a distributor of any of the Products
(or any product that includes any Product as a component) to, or for resale to,
Customers whose predominant use of the Products is, or reasonably is expected to
be, for Stem Cell Therapy Applications or (ii) market, promote, Sell or
distribute any of the Products (or any product that includes any Product as a
component), directly or indirectly, to, or for resale to, any Stem Cell Therapy
Customer.

           (d)  Notwithstanding any provision of this Agreement to the contrary,
the Supplier may Sell the Products to its Affiliates for Stem Cell Therapy
Applications by such Affiliates, but not for resale to Persons which are not
Affiliates of the Supplier, and may make such Sales with a license for use of
the Products for Stem Cell Therapy Applications, and the Distributor may Sell
the Products to its Affiliates for applications other than Stem Cell Therapy
Applications by such Affiliates, but not for resale to Persons which are not
Affiliates of the Distributor, and

                                       10
<PAGE>
 
                                                                         Page 11

may make such Sales with a license for use of the Products for applications
other than Stem Cell Therapy Applications (such Sales by either the Distributor
or the Supplier being "Affiliate Sales").  If the aggregate purchase price
                       ---------------                                    
received by the Supplier for all its Affiliate Sales during any fiscal year
exceeds five percent of the Worldwide Sales during such Fiscal Year, the
Supplier shall pay to the Distributor, within 90 days after the end of such
Fiscal Year, cash in an amount equal to thirty percent of the excess of such
aggregate purchase price over the amount equal to five percent of Worldwide
Sales during such fiscal year.  If the aggregate purchase price received by the
Distributor for all its Affiliate Sales during any calendar year exceeds five
percent of the aggregate purchase price received by the Supplier for Sales of
the Products during such Fiscal Year to Customers that are not Stem Cell Therapy
Customers, the Distributor shall pay to the Supplier, within 90 days after the
end of such Fiscal Year, cash in an amount equal to ninety percent of the excess
of such aggregate purchase price over the amount equal to five percent of such
Sales by the Supplier. All calculations pursuant to this Section 2.03(d) of the
aggregate purchase price received by the Supplier or the Distributor shall be
made in accordance with the calculation of Worldwide Sales. The Supplier and the
Distributor shall, promptly following the end of each fiscal year, make
available to each other such information as is reasonably necessary to audit the
Affiliate Sales of the other party.

          (e)  The Supplier expressly reserves the right to market, sell and
distribute (either directly or through its designees) (i) the Products to its
Affiliates for Stem Cell Therapy Applications as provided in Section 2.03(d),
(ii) the Products to any Customer for applications other than Stem Cell Therapy
Applications, and (iii) the Supplier's Other Products to any Customer for any
application.  Except as provided in Section 2.03(d), the Supplier shall sell the
Products to Customers that are not Stem Cell Therapy Customers only in
conjunction with a license to use the Products solely for applications other
than Stem Cell Therapy Applications.  The Distributor is not authorized by the
Supplier to distribute the Products to any Person other than a Stem Cell Therapy
Customer.

          (f)  The Supplier agrees to appoint the Distributor, and the
Distributor agrees to accept appointment, as the Supplier's sole worldwide
distributor of any of the Supplier's products that are successors to, or
replacements of, the Products and are also Competitive Products (the "Supplier's
                                                                      ----------
New Products").  Sales of the Supplier's New Products by the Supplier to the
------------                                                                
Distributor pursuant to such distribution arrangement shall be at fixed prices
and on other terms to be negotiated by the Supplier and the Distributor in good
faith, taking into account the terms of this Agreement, as it is in effect at
such time, the respective costs of the Supplier and the Distributor in
developing, producing and marketing the Supplier's New Products and market
conditions at such time.

          SECTION 2.02.  Relationship; Subdistributors.  (a)  The Distributor
                         -----------------------------                       
shall conduct its business in the purchase and resale of the Products as a
principal for its own account.  This Agreement does not in any way create the
relationship of principal and agent, partners, joint venturers, master and
servant, or any similar relationship, between the Supplier and the Distributor.

<PAGE>
 
                                                                         Page 12

          (b)  The Distributor shall have the right to appoint and to use any
independent selling representative, agent, associate distributor or
subdistributor who agrees to be bound by all applicable terms of this Agreement
(collectively, the "Subdistributors") and who is designated in accordance with
                    ---------------                                           
Market Development Program.  The Distributor shall use all reasonable efforts to
cause the Subdistributors to comply with their obligations under this Agreement.

          (c) The Distributor shall either Sell the Products directly to Stem
Cell Therapy Customers (i.e., through the Distributor's own employed sales
force) in each of the countries listed below:

              Australia               Holland
              Austria                 Italy
              Belgium                 Japan
              Canada                  Spain
              France                  Switzerland
              Germany                 United Kingdom

(collectively, the "Direct Sales Countries"; each being a "Direct Sales
                    ----------------------                 ------------
Country"), or make payments to the Supplier in accordance with Section 2.02(e).

          (d) The Distributor may Sell the Products to Stem Cell Therapy
Customers through Subdistributors, each of whom shall be identified to the
Supplier, in countries other than the Direct Sales Countries and the United
States.

          (e) If the Distributor uses Subdistributors to sell the Products to
Stem Cell Therapy Customers in the Direct Sales Countries and the United States,
the Distributor shall bear all costs and discounts attributable to the
Subdistributor, unless otherwise expressly approved by the Supplier.

          SECTION 2.03.  Purpose; Development Programs.  (a)  The Supplier and
                         -----------------------------                        
the Distributor each acknowledges that it has entered into this Agreement in
order to develop a respected image of the Products among Stem Cell Therapy
Customers, to develop the Products so that they can be Sold to Stem Cell Therapy
Customers as promptly as practicable and to develop a market for the Products
among Stem Cell Therapy Customers, in each case in a manner that maximizes the
financial returns to both the Supplier and the Distributor.

         (b)  As the Supplier's worldwide distributor of the Products for Stem
Cell Therapy Applications, the Distributor shall use reasonable best efforts to
develop and implement a worldwide plan for marketing and Sales of the Products
for Stem Cell Therapy Applications so that the Products will be Sold for Stem
Cell Therapy Applications worldwide promptly after such Sales become feasible,
the market share of the Products for Stem Cell Therapy Applications will be high
and the prices of the Products for Stem Cell Therapy Applications, will be
commensurate with the market value of the Products, in each case in a

<PAGE>
 
                                                                         Page 13

manner that maximizes the financial returns of both the Distributor and the
Supplier.

         (c)  The Supplier shall use reasonable best efforts promptly to develop
and produce Products that are high quality, cost competitive, cost effective for
Stem Cell Therapy Customers and capable of achieving widespread acceptance among
Stem Cell Therapy Customers, in each case in a manner that maximizes the
financial returns of both the Supplier and the Distributor.

         (d)  To achieve the goals set forth in Sections 2.03(a), (b) and (c),
the Supplier and the Distributor have developed the Product Development Program
and the Market Development Program, each of which will be designed to comply
with the applicable standards of the ISO 9000 Series of the International
Standards Organization and will be amended from time to time in accordance with
the terms of this Agreement.

         (e)  The Product Development Program will at all times include the
following components (the "Principal Components of the Product Development
                           -----------------------------------------------
Program"), together with such other components as the Supplier may deem
-------                                                                
appropriate:

       (i)  a plan, which shall include, without limitation, a strategy, a
    rationale, budgets, tactics, contingency plans and staffing and a projected
    timetable (collectively, a "Plan") to develop the Products for sale to Stem
                                ----                                           
    Cell Therapy Customers;

      (ii)  a Plan for obtaining (A) the approval of (x) the FDA and any other
    United States governmental authority necessary for the Sale of the Products
    to Stem Cell Therapy Customers in the United States and (y) the
    Underwriter's Laboratory and (B) support for the claims set forth in the
    Market Development Program;

     (iii)  the specifications of each Product, including, without limitation,
    specifications for performance and reliability of each Product and each
    component thereof;

      (iv)  a Plan for validating the performance and reliability specifications
    for the Products set forth in the Product Development Program and the
    Product claims (including, without limitation, cost effectiveness claims)
    and service goals set forth in the Market Development Program;

       (v)  a quality assurance Plan;

      (vi)  a Plan for manufacturing, or causing the Products to be
    manufactured, so that the Products can be delivered for sale to Stem Cell
    Therapy Customers in a manner consistent with the Market Development
    Program, including, without limitation, (A) specifications of, and a
    timetable

<PAGE>
 
                                                                         Page 14

    for, the production capacity to be available for the supply of each of the
    Products; (B) Plans and leadtimes for the production of prototype, pilot and
    production models; (C) a Plan for identifying, qualifying, contracting with
    and auditing third parties for the manufacture of the Products; and (D)
    Plans for addressing situations in which the Distributor's orders for the
    Products exceeds the Supplier's capacity to deliver the Products; and

     (vii)  a Plan for developing enhancements to the Products in response to
    evolving market needs.

         (f)  The Market Development Program will at all times include the
following components (the "Principal Components of the Market Development
                           ----------------------------------------------
Program"), together with such other components as the Distributor may deem
-------                                                                   
appropriate:

         (i)  a plan, which shall include, without limitation, a strategy, a
    rationale, budgets, tactics, contingency plans and staffing and a projected
    timetable (collectively, a "Plan") to obtain all non-U.S. approvals market,
                                ----                                           
    sell and distribute the Products to Stem Cell Therapy Customers;

        (ii)  the targets for average prices of the Products for Sales in the
    United States, in each Direct Sales Country (expressed in the official
    currency unit of such Country) and elsewhere outside the United States,
    including targets for prices to Subdistributors, all subject to approval by
    Supplier ("Target Prices");
               -------------   

       (iii)  the Minimum U.S. Selling Price and Minimum Subdistributor Selling
    Price and the Minimum International Direct Selling Price in each of the
    Direct Sales Countries (expressed in the official currency unit of such
    Country) of each of the Products, as approved by the Supplier;

        (iv)  a mechanism for monitoring the development and growth of the
    market for the Products;

         (v)  criteria for targeting Customers and targets for sales volume and
    market share in each of the countries where the Products are to be sold, all
    as agreed upon by the Supplier and the Distributor;

        (vi)  criteria for targeting Customers and targets for sales volume and
    market share in each of the countries where the Products are to be sold, all
    as agreed upon by the Supplier and the Distributor;

       (vii)  a warranty program for the Products, as agreed upon by the
    Supplier and the Distributor, as well as a program for providing customer
    service and customer support to Stem Cell Therapy Customers beyond the scope
    of such warranties;

<PAGE>
 
                                                                         Page 15

      (viii)  a Plan for developing customer relations, Customer contacts, Sales
    lead follow up and monitoring customer satisfaction with, the Products and,
    the Distributor's and each Subdistributor's performance;

        (ix)  a program for the Distributor's training of Stem Cell Therapy
    Customers and for the Supplier's training of the Distributor's personnel who
    will provide training to the Distributors' and the Subdistributors'
    personnel who will provide such training to Stem Cell Therapy Customers and
    to the Distributor's and the Subdistributors' personnel who will provide
    customer engineering and customer support to Stem Cell Therapy Customers;

         (x)  guidelines and procedures for coordinating contacts of Stem Cell
    Therapy Customers by the Supplier with contacts by the Distributor; and

        (xi)  a Plan for forecasting demand for the Products by Stem Cell
    Therapy Customers.

         SECTION 2.04.  Review of Program and ACL.  (a)  The Supplier and the
                        -------------------------                            
Distributor contemplate that the Programs will be amended to address issues that
cannot yet be addressed and also will be amended in response to unforeseen
events, changes in circumstances and evolving market needs.  Accordingly, the
Supplier and the Distributor shall meet no more than four times per year to
discuss amendments to each of the Programs.

         (b)  Before the beginning of each Fiscal Year during the term of this
Agreement, the Supplier and the Distributor shall mutually establish an annual
commitment list (the "ACL"), which shall set forth:  (i) the principal
                      ---                                             
commitments and specific objectives that either the Supplier or the Distributor
reasonably believes is important to achieve during the next Fiscal Year to
accomplish the objectives set forth in Sections 2.03(a), (b) and (c) of this
Agreement and to discharge the obligations of the Supplier and the Distributor
under the Programs; (ii) those objectives or commitments of either the Supplier
or the Distributor that require mutual agreement or coordination between the
Distributor and the Supplier; and (iii) any change from the ACL of the preceding
year, the Product Development Program or the Market Development Program, in
either case that will materially affect either the timing of, or the mechanism
for, the development of the Products for, or the delivery and/or marketing of
the Products to, Stem Cell Therapy Customers.  No provision of the ACL shall be
changed, amended, or modified without the prior approval of the Supplier and the
Distributor.  Each of the Supplier and the Distributor shall use reasonable best
efforts diligently to achieve each of the goals and objectives set forth on the
ACL.  If the Supplier and the Distributor are unable to reach mutual agreement
on the inclusion of any commitment or objective on the ACL, then the Supplier
and the Distributor will negotiate in good faith for 30 days in an attempt to
resolve such disagreement.  If the parties are unable to resolve such
disagreement during such 30-day period, then either the Supplier or the
Distributor may submit such disagreement to arbitration in accordance with
Section 10.03. The Parties shall use their reasonable

<PAGE>
 
                                                                         Page 16

best efforts to cause such arbitration to result in a decision within 40 days
after submission thereto.

         (c)  In connection with the preparation of the ACL and as otherwise
reasonably required, the Market Development Program and the Product Development
Program shall, at all times, include each of the Principal Components thereof
set forth in Section 2.03 of this Agreement and such other items as are
reasonably required to achieve the goals and objectives set forth in Sections
2.03(a), (b) and (c) of this Agreement.  The Supplier and the Distributor shall
give each other such information as is reasonably necessary to evaluate, and
shall give due consideration to the views and recommendations of the other with
respect to, all components of each of the Programs.  The Product Development
Program and the Market Development Program shall include sufficient details to
enable the Distributor and the Supplier, respectively, to have a reasonable
basis to assess the probability of achieving the goals and objectives set forth
in the ACL and in Sections 2.03(a), (b) and (c) of this Agreement.  Subject to
the right of objection (and resolution of such objection) set forth below, the
Supplier shall be free to amend the Product Development Program without the
consent of the Distributor, and the Distributor shall be free to amend the
Market Development Program without the consent of the Supplier.  The Supplier
may object to any amendment of, or failure to amend, any Principal Component of
the Market Development Program, and the Distributor may object to any amendment
of, or failure to amend, any Principal Component of the Product Development
Program on the basis (i) that such amendment, or failure to amend, is not
reasonably consistent with the goals and objectives set forth in the ACL or
Sections 2.03(a), (b) and (c) of this Agreement, or (ii) that, as a result of
such amendment, or failure to amend, the parties are not reasonably likely to
achieve the goals and objectives embodied in such Principal Component.  If the
Supplier and the Distributor are unable to agree on a Principal Component of
either Program the Supplier and the Distributor, each shall endeavor to resolve
the disagreement within such 30-day period.  If the Supplier and the Distributor
are unable to resolve such disagreement within such 30-day period, either party
shall be free to implement the Principal Component in question until such
disagreement is resolved, unless the other party reasonably believes that the
failure to resolve such disagreement will have an immediate adverse effect on
the ability of the parties to implement the goals and objectives set forth in
the ACL.  In that case, either Party may cause the disagreement to be submitted
immediately to arbitration in accordance with Section 10.03, and the Parties
shall use their reasonable best efforts to cause such arbitration to be decided
within 40 days after submission. If neither Party believes that there will be
any such immediate adverse effect, then the Parties will continue to endeavor to
resolve the disagreement for an additional period of six months.  If the Parties
are unable to resolve such disagreement within such six-month period, then the
disagreement may be submitted to arbitration in accordance with Section 10.03.
The Parties shall use their reasonable best efforts to cause such arbitration to
result in a decision within a 40 day period.

<PAGE>
 
                                                                         Page 17

         (d)  A copy of the ACL for the Fiscal Year ending June 30, 1994 is
attached hereto as Schedule C.

         SECTION 2.05.  Annual Customer Review; Change of Use.  (a)  The parties
                        -------------------------------------                   
acknowledge that following the sale of any Product to any Customer, such
Customer may subsequently (i) use such Product for applications other than those
disclosed to the Supplier or the Distributor prior to such sale or (ii) change
its use from Stem Cell Therapy Applications to other applications, or vice versa
(a "Change of Use").  Notwithstanding anything in this Agreement to the
    -------------                                                      
contrary, the Distributor, or any Subdistributor, shall not be in breach of this
Agreement if the Distributor (or such Subdistributor, as the case may be) acts
in good faith and uses reasonable best efforts to ensure that it sells Products
only to Stem Cell Therapy Customers, even though a Customer's predominant use of
a Product may be for applications other than Stem Cell Therapy Applications.
Similarly, notwithstanding anything in this Agreement to the contrary, the
Supplier or any of its other distributors shall not be in breach of this
Agreement if the Supplier (or such other distributor, as the case may be) acts
in good faith and uses reasonable best efforts to ensure that it sells Products
only to Persons other than Stem Cell Therapy Customers, even though a Person's
predominant use of a Product may be for Stem Cell Therapy Applications.

         (b)  The Supplier and the Distributor shall meet within three months
after the end of each Fiscal Year during the term of this Agreement during which
sales of the Products are made by either the Distributor, any Subdistributor or
the Supplier or any of its other distributors to determine the extent to which
the Distributor has sold Products to Customers other than Stem Cell Therapy
Customers, the extent to which the Supplier has sold Products to Stem Cell
Therapy Customers and the extent to which Customers of the Distributor or the
Supplier have effected a Change of Use.  At such meeting or meetings, the
Distributor shall make available to the Supplier a survey of the Distributor's
Customers whose purchases represent at least 80% of the Sales by the Distributor
during such Fiscal Year (the "Distributor Customer Service Information").  The
                              ----------------------------------------        
Distributor Customer Service Information shall also provide a reasonable
estimate of the expected predominant use of the Products by such Customers in
the following Fiscal Year.  The Supplier shall furnish the Distributor with
comparable information regarding the Supplier's Sales of Products to Customers
other than Stem Cell Therapy Customers (the "Supplier Customer Service
                                             -------------------------
Information"; and, together with the Distributor Customer Service Information,
-----------
the "Customer Service Information").
     ----------------------------   

         (c)  If it is determined:

       (i)  that at the time of the Supplier's Sale of any Equipment to a
    Customer (other than an Affiliate of the Supplier), the Supplier knew or
    reasonably should have known that such Customer's intended predominant use
    of such Equipment was for Stem Cell Therapy Applications, the

<PAGE>
 
                                                                         Page 18

    Supplier shall pay to the Distributor an amount equal to 40% of all amounts
    received by the Supplier in payment for such Equipment;

      (ii)  that a Customer of the Supplier (other than an Affiliate of the
    Supplier) uses any Disposable purchased from the Supplier for Stem Cell
    Therapy Applications, the Supplier shall pay to the Distributor an amount
    equal to 30% of all amounts received by the Supplier as payment for such
    Disposable;

     (iii)  that at the time of the Distributor's (or any Subdistributor's)
    Sale of any Equipment to any Customer (other than an Affiliate), the
    Distributor (or such Subdistributor) knew or reasonably should have known
    that such Customer's intended predominant use of such Equipment was not for
    Stem Cell Therapy Applications, the Distributor (or such Subdistributor)
    shall pay to the Supplier all amounts received by the Distributor (or such
    Subdistributor) in payment for such Equipment; and

      (iv)  that a Customer of the Distributor other than an Affiliate of the
    Distributor (or any subdistributor) has used any Disposable purchased from
    the Distributor (or such Subdistributor) for any application other than a
    Stem Cell Therapy Application, the Distributor (or such Subdistributor)
    shall pay to the Supplier an amount equal to 90% of all amounts received by
    the Distributor (or such Subdistributor) in payment for such Disposable.

         (d)  The Supplier and the Distributor shall make available to each
other such information as is reasonably necessary to audit the Sales of the
other party described in 2.05(c) above.

         (e)  If it is determined by the Supplier and the Distributor, based on
the Customer Service Information or otherwise, (i) that a Customer of the
Supplier has effected a Change of Use, such Customer may be redesignated, at the
Supplier's option, as being a Stem Cell Therapy Customer and, accordingly, a
Customer that the Distributor will have the responsibility to serve, or (ii)
that a Customer of the Distributor has effected a Change of Use, such Customer
may be redesignated, at the Distributor's option, as not being a Stem Cell
Therapy Customer and, accordingly, a Customer that the Supplier will have the
responsibility to serve.  Upon any such redesignation, the Supplier and the
Distributor shall develop a program that is reasonably acceptable to each party
and such Customer for the orderly transition of responsibility for such Customer
over a reasonable period of time not to exceed one year.

<PAGE>
 
                                                                         Page 19

                                  ARTICLE III

                            SUPPLIER'S UNDERTAKINGS
                            -----------------------

         SECTION 3.01.  Product Development Program; Diligence.  The Supplier
                        --------------------------------------               
shall use reasonable best efforts to implement its obligations under the Product
Development Program and the Market Development Program diligently.

         SECTION 3.02.  Product Specifications.  The Supplier shall supply the
                        ----------------------                                
Products in accordance with the product specifications set forth in, and the
other applicable provisions of, the Product Development Program and the Market
Development Program.

         SECTION 3.03.  Training by the Supplier.  (a)  The Supplier shall, in
                        ------------------------                              
accordance with the provisions of Section 6.2 of Market Development Plan (which
provisions may not be changed without the Supplier's approval), provide
technical and commercial training with respect to the Products to the
Distributor's personnel.  To facilitate the Distributor's ability to be self-
reliant in providing such training, the Supplier shall provide a license to the
Distributor to use such technical information and know-how as the Supplier
reasonably believes is necessary for such training.  The Supplier shall not
charge the Distributor for such training, but all costs incurred by personnel of
the Distributor in the course of such training shall be the responsibility of
the Distributor.

         (b) As reasonably requested in writing by the Distributor, at any time
and from time to time, the Supplier shall, at reasonable compensation rates
chargeable to the Customer, provide training in applications other than Stem
Cell Therapy Applications to the Distributor's Customers who wish to use the
Products for applications other than Stem Cell Therapy Applications.

         SECTION 3.04.  Sole Distributor.  Unless this Agreement has been
                        ---------------                                  
terminated by the Supplier in part in accordance with Section 7.05(b), the
Supplier hereby grants (a) the Distributor the right during the term of this
Agreement to indicate in appropriate ways (e.g., on its letterhead and billing
                                           ----                               
forms and through signs) that it is the only authorized distributor for the
Products to Stem Cell Therapy Customers and (b) any Subdistributor that has been
approved by the Supplier the right during the term of this Agreement to indicate
in appropriate ways (e.g., on its letterhead and billing forms and through
                     ----                                                 
signs) that it is an authorized Subdistributor of the Products to Stem Cell
Therapy Customers or that it is the only authorized Subdistributor of the
Products to Stem Cell Therapy Customers within a geographic segment.

         SECTION 3.05.  Enforcement of Intellectual Property Rights.  Promptly
                        -------------------------------------------           
upon receipt of notice of any infringement or threatened infringement
("Infringement") by third parties of the Supplier's Intellectual Property Rights
--------------                                                                  
relating to the Sale of the Products to Stem Cell Therapy Customers ("SCTIP
                                                                      -----
Rights"), the Supplier shall, unless such notice was received pursuant to
------                                                                   
Section
<PAGE>
 
                                                                         Page 20

4.05 hereof, promptly notify the Distributor of any such Infringement, and, as
promptly as practicable thereafter, the Supplier and the Distributor shall
jointly determine whether to take action to prevent such Infringement and
otherwise to enforce the SCTIP Rights (all such actions being "IP Enforcement
                                                               --------------
Actions").  In making such determination, the Supplier and the Distributor shall
-------                                                                         
consider the impact that such Infringement is expected to have on Sales of the
Products to Stem Cell Therapy Customers, the likelihood that such IP Enforcement
Action will be successful, the expected cost of such IP Enforcement Action, the
likelihood that such IP Enforcement Action will result in intellectual property
claims against the Supplier or the Distributor ("Retaliatory IP Claims") and the
                                                 ---------------------          
potential impact of any Retaliatory IP Claims on the Supplier and the
Distributor.  No IP Enforcement Action to enforce the SCTIP Rights will be
undertaken without the consent of both the Supplier and the Distributor.  If any
such IP Enforcement Action is undertaken, the Supplier and the Distributor shall
jointly retain a single counsel reasonably satisfactory to each of the Supplier
and the Distributor, and all decisions relating to such IP Enforcement Action
and the defense of any Retaliatory IP Claims shall be reasonably satisfactory to
each of the Supplier and the Distributor.  Sixty percent of all costs of
prosecuting IP Enforcement Actions relating to SCTIP Rights and defending any
Retaliatory IP Claims, including, without limitation, reasonable fees and
disbursement of counsel, any reasonable out-of-pocket expenses incurred by the
Supplier and the Distributor and any damages awarded against (or amount paid in
settlement by) either the Supplier or the Distributor in any Retaliatory IP
Claim (all such costs being "IP Enforcement Costs") shall be borne by the
                             --------------------                        
Supplier and forty percent of such IP Enforcement Costs shall be borne by the
Distributor, unless, and to the extent that, such IP Enforcement Action also
benefits the Supplier's Sales of Products to Persons other than Stem Cell
Therapy Customers, in which case the Distributor's share of such IP Enforcement
Costs shall be reduced proportionally to reflect the benefit derived by each
Party.  All amounts received by the Supplier and the Distributor, whether as a
result of damages awarded, settlement payments or otherwise, as a result of any
IP Enforcement Action relating to SCTIP Rights, shall be shared by the Supplier
and the Distributor in proportion to their respective share of the IP
Enforcement Costs for such IP Enforcement Action.

         SECTION 3.06.  Manufacturing and Labeling; Product Name; Parts.  (a)
                        -----------------------------------------------       
The Supplier shall manufacture the Products, or cause the Products to be
manufactured, in accordance with the Product Development Program.  The
Supplier's obligation under this Section 3.06 to manufacture the Products shall
include the affixing on the Products of labels agreed upon by the Supplier and
the Distributor; provided, however, that any costs associated with the labeling
of Products with the Distributor's name that would not be incurred but for such
labeling will be at the Distributor's expense.  The Products shall be labeled as
a Product of both the Supplier and the Distributor, with the Distributor's name
at least as prominent as the Supplier's name, unless otherwise required by law,
in which case the Distributor's name shall be as prominent relative to the
Supplier's name as shall be permitted by law.

<PAGE>
 
                                                                         Page 21

         (b)  The Supplier shall have the right to name the Products and shall,
in exercising such right, give due consideration to the views and
recommendations of the Distributor.

         (c)  The Supplier shall maintain a stock of Spare Parts for the
Products in accordance with the Market Development Program.  Spare Parts shall
be priced in accordance with Section 5.02(e) of this Agreement.

         SECTION 3.07.  Regulatory Approvals.  (a)  At its own expense, the
                        --------------------                               
Supplier shall, in accordance with the Product Development Program, use
reasonable best efforts diligently to obtain, in the name of the Supplier, all
authorizations, consents, orders and approvals of all governmental authorities
in the United States that may be or become necessary for the Distributor to sell
the Products to Stem Cell Therapy Customers in the United States.

         (b)  The Supplier shall provide to the Distributor such assistance,
including, without limitation, providing at no charge all Products necessary for
clinical trials and making any modifications to Products, as the Distributor may
reasonably request to obtain the regulatory approvals necessary to sell the
Products to Stem Cell Therapy Customers in countries other than the United
States specified in the Market Development Program.

         SECTION 3.08.  Intellectual Property Indemnification.  The Supplier
                        -------------------------------------               
agrees to indemnify and hold harmless the Distributor and its Affiliates and all
Subdistributors and their affiliates and their respective officers, directors,
employees and agents (each such person being a "Supplier Indemnified Person")
                                                ---------------------------  
from and against any losses, claims, damages or liabilities and to reimburse
each Indemnified Person for all expenses (including reasonable fees and expenses
of counsel) as they are incurred, related to, arising out of or in connection
with defending any action, claim, suit, investigation or proceeding (other than
a Retaliatory IP Claim) in which a Person other than the Distributor claims or
alleges that the sale of the Products by the Distributor to any Stem Cell
Therapy Customer conflicts with or infringes on the Intellectual Property Rights
of, or other intellectual property owned or licensed by, such Person.

         SECTION 3.09.  Insurance; Indemnification for Product Liability.  (a)
                        ------------------------------ -----------------       
The Supplier agrees to obtain an insurance policy or policies (the "Policy") on
                                                                    ------     
terms and conditions and in amounts reasonably acceptable to the Distributor
covering losses, claims, damages, liabilities or expenses (including reasonable
fees and expenses of counsel) incurred by the Supplier related to, or arising
out of, any action, claim, suit, investigation or proceeding, in which a Person
claims or alleges that any Product distributed by the Distributor pursuant to
this Agreement has caused such Person to sustain any personal injury, property
damage, wrongful death or any other tortious harm as a result of any
manufacturing defect in (including, without limitation, any latent defect in),
or any defective design of, or an inadequacy of warnings on, the Products (such

<PAGE>
 
                                                                         Page 22

claims or allegations being a "Products Liability Claims").  The Supplier agrees
                               -------------------------                        
to use reasonable best efforts to have all Supplier Indemnified Persons named as
additional insureds on the Policy, which shall provide that it may not be
cancelled without 30 days" notice to the Distributor and that the Distributor
shall have the right, but no obligation, to pay any premiums due under the
Policy (the "Premiums").  The Policy shall be primary insurance with respect to
             --------                                                          
Product Liability Claims, and any insurance obtained by the Distributor shall be
excess insurance.  The Parties recognize that the nature of product liability
claims and insurance available to cover product liability claims will change
over the coming years and will vary from country to country.  It is the
agreement and goal of the Parties to obtain from time to time such liability
insurance which protects both the Supplier and the Distributor to the maximum
extent reasonably feasible, at prices which are commercially reasonable.  To the
extent reasonably feasible, both Parties shall endeavor to use the same counsel
to defend both the Supplier and the Distributor in any Products Liability Claim.
Both the Supplier and the Distributor shall, to the extent it does not increase
its own risk of liability, cooperate with each other in the defense of any
Product Liability Claim so as to minimize the risk of any liability to the other
party.

         (b)  The Supplier shall pay all Premiums and any losses, claims,
damages or liabilities for Products Liability Claims to the extent not payable
under the Policy (such losses, claims, damages, liabilities being "Unreimbursed
                                                                   ------------
Losses"), including, without limitation (including reasonable fees and expenses
------                                                                         
of counsel) any portion of any Unreimbursed Loss the Insurance Carrier is not
obligated to pay because of any deductible, self-insured retention or similar
provision of the Policy (a "Deductible").  The Supplier shall receive a
                            ----------                                 
contribution from the Distributor toward the Premiums and shall share in the
satisfaction of any Unreimbursed Losses in accordance with Sections 4.09(b) and
(c) hereof.

         (c) The Supplier (i) shall not amend, change or cancel the Policy
without the consent of the Distributor (which consent shall not unreasonably be
withheld) and (ii) shall inform the Distributor in writing in the event that any
products other than the Products distributed by the Distributor are covered by
the Policy.

         (d) The Supplier shall, subject to the limitation set forth in Section
4.09(c), indemnify and hold harmless each Supplier Indemnified Person from and
against any Unreimbursed Losses (except Deductibles).

         SECTION 3.10.  Forecasting Unit Demand.  The Supplier and the
                        -----------------------                       
Distributor shall agree upon a process of unit demand forecasting that meets the
needs of the Supplier, the Distributor, and any sub-Suppliers to be used by the
Supplier.  A mechanism that the Supplier and the Distributor believe is workable
is described in the Market Development Program, but both the Supplier and the
Distributor recognize that this mechanism must be modified periodically as
product and component lead times and delivery mechanisms are better understood
by the Supplier and the Distributor.

<PAGE>
 
                                                                         Page 23

                                   ARTICLE IV

                           DISTRIBUTOR'S UNDERTAKINGS
                           --------------------------

         SECTION 4.01.  Market Development Program; Diligence.  (a)  The
                        -------------------------------------           
Distributor shall use reasonable best efforts to implement its obligations under
the Market Development Program and the Product Development Program diligently.
In performing its obligations under the Market Development Program, the
Distributor shall provide to Stem Cell Therapy Customers financing options
suitable for the market environment.

         (b)  Notwithstanding anything in this Agreement to the contrary, if the
Distributor identifies to the Supplier potential Stem Cell Therapy Customers in
the United States to whom the Distributor reasonably believes it cannot
effectively sell the Products, the Supplier may sell the Products to such Stem
Cell Therapy Customers, directly, or through a distributor or sales agent
(identified to the Distributor) who expressly agrees in writing to be bound by
all of the restrictions on sales of the Products which are applicable to the
Supplier under this Agreement.  Upon the identification of such Stem Cell
Therapy Customers by the Distributor to the Supplier, the Distributor shall have
no further obligation under this Agreement to attempt to sell Products to such
Customers.

         SECTION 4.02.  Training by the Distributor.  (a)  The Distributor
                         --------------------------                       
shall, in accordance with the Market Development Program, provide commercial and
technical training with respect to the Products to its, and the Subdistributors'
personnel who will provide training, customer service and support to Stem Cell
Therapy Customers.

         (b) As reasonably requested in writing by the Supplier, at any time and
from time to time, the Distributor shall, at reasonable compensation rates
chargeable to the customer, provide training in Stem Cell Therapy Applications
to the Supplier's Customers who wish to use the Products for such applications.

         SECTION 4.03.  Advertising.  The Distributor and each Subdistributor
                        -----------                                          
shall submit to the Supplier, prior to its use by the Distributor or such
Subdistributor, all advertising copy concerning the Products and shall not use
such copy without the consent of the Supplier (which shall not be unreasonably
withheld); provided, however, that in no event shall the Supplier have any
obligation to share in advertising or other promotional costs incurred by the
Distributor or Subdistributor.

         SECTION 4.04.  Warranties; Service.  (a)  The Distributor and each
                        -------------------                                
Subdistributor shall extend warranties, which in accordance with the Market
Development Program, shall be mutually approved by the Supplier and the
Distributor, and perform warranty service on the Products sold to Stem Cell

<PAGE>
 
                                                                         Page 24

Therapy Customers by the Distributor or any such Subdistributor, as the case may
be.

         (b)  The Monthly Purchase Price shall be reduced in accordance with
Section 5.02 by an amount equal to the costs reasonably incurred by the
Distributor in providing warranty service to Stem Cell Therapy Customers in
accordance with the Market Development Program.  Any costs incurred by the
Distributor or any Subdistributor in providing extended warranty or maintenance
service beyond the standard warranty period provided in the Market Development
Program shall be borne solely by the Distributor or such Subdistributor.

         (c)  The Distributor and each Subdistributor shall, in accordance with
the Market Development Program, provide service and customer support for the
Products to Stem Cell Therapy Customers which have purchased Products from the
Distributor or such Subdistributor, as the case may be.  The provision of such
service and support shall be priced so as not to be a disincentive to Stem Cell
Therapy Customers to purchase the Products.

         (d)  The Supplier shall assist the Distributor in providing warranty
service and other services to Stem Cell Therapy Customers, as reasonably
requested by the Distributor, at prices or rates to be negotiated in good faith
by the Supplier and the Distributor.

         SECTION 4.05.  Notice of Infringement.  The Distributor and each
                        ----------------------                           
Subdistributor shall promptly notify the Supplier in writing if it becomes aware
of any infringement or threatened infringement of any SCTIP Rights.

         SECTION 4.06.  License.  The Distributor hereby grants to the Supplier
                        -------                                                
a license to the Distributor's trademarks and trade names specified in the
Market Development Program for the sole purpose of the Supplier's affixing of
such trademarks and trade names to the Products sold to the Distributor pursuant
to this Distribution Agreement and the packaging for the Products as
contemplated in Section 3.06(a) hereof.

         SECTION 4.07.  Regulatory Approvals.  (a) At its own expense, the
                        --------------------                              
Distributor shall use reasonable best efforts diligently to obtain, in the
Supplier's name and the Distributor's name (a "Joint Registration"), all
                                               ------------------       
authorizations, consents, orders and approvals of all non-U.S. governmental
authorities, and to complete clinical trials, that may be or become necessary to
sell the Products to Stem Cell Therapy Customers in the countries other than the
United States specified in the Market Development Program; provided, however,
that if the law of one of such countries prohibits or otherwise restricts such
Joint Registration, the Distributor shall use reasonable best efforts to obtain
such Joint Registration to the extent permitted by such law and otherwise shall
use reasonable best efforts to obtain such registrations in the Distributor's
name.  The Distributor shall be responsible for the cost of all clinical trials
(other than the cost of the

<PAGE>
 
                                                                         Page 25

Products required for such trial, which shall be provided by the Supplier at no
charge) necessary to obtain such non-U.S. approvals.

         (b)  If this Agreement is terminated in its entirety or with respect to
any country other than the United States, the Distributor shall use reasonable
best efforts to provide information on clinical trials and such other
information (other than confidential business information) as is reasonably
necessary to enable the Supplier to obtain registration in its name in such
country.

         SECTION 4.08.  Competitive Products.  (a)  In order to fulfill its
                        --------------------                               
obligations with respect to promoting the Sale of the Products, except as
provided in Section 4.10 of this Agreement, the Distributor and its Affiliates
shall not, and shall not attempt to, Sell, directly or indirectly, to any Stem
Cell Therapy Customer any Competitive Product for Stem Cell Therapy
Applications, other than the Distributor's Products and other products that are
sold by the Distributor as an adjunct or complement to the Products; provided,
however, this prohibition shall not apply to the Sale of Competitive Products in
any geographical area with respect to which this Agreement has been terminated
or in which a Co-Marketing Arrangement has been established.

         (b)  Unless otherwise agreed by the Supplier, each Subdistributor shall
agree to be bound by this Section 4.08 prior to the Sale of the Products to such
Subdistributor.

         SECTION 4.09.  Insurance.  (a)  To assist the Supplier in satisfying
                        ---------                                            
its obligation set forth in Section 3.09(a) hereof to obtain the Policy, the
Distributor shall recommend the Supplier to the Distributor's insurance carrier,
it being understood that such obligations do not depend on the responsiveness of
such carrier.

         (b) Within 30 days after the Distributor's receipt of reasonably
satisfactory evidence of the payment of the Premium, the Distributor shall pay
to the Supplier 40% of the Premium, 40% of amounts which the Supplier is
obligated to bear as a Deductible, and 40% of the Unreimbursed Losses; provided,
however, that the Distributor's obligation to pay the Premium and the Deductible
and the Unreimbursed Losses for the fifth Fiscal Year following the first Fiscal
Year in which the Supplier first purchases products liability insurance (such
year being the "Sixth Insurance Year") and each year thereafter shall not exceed
                --------------------                                            
0.4% of Worldwide Sales during such Fiscal Year (such amount being the "Products
                                                                        --------
Liability Cap"); and, provided further, that if the Policy at any time covers
-------------                                                                
products other than the Products distributed by the Distributor pursuant to this
Agreement, the Premiums, the Deductibles and the Unreimbursed Losses payable to
the Supplier by the Distributor shall be reduced to a percentage equal to 40%
multiplied by the percentage of the Supplier's total revenues that is
represented by revenues received by the Supplier for Sales of the products by
the Distributor pursuant to this Agreement.

<PAGE>
 
                                                                         Page 26

         (c) If the aggregate unreimbursed amounts paid by the Supplier during
any Fiscal Year with respect to Product Liability Claims, including amounts of
Premiums, Deductibles and Unreimbursed Losses that are not reimbursed by the
Distributor under this Section 4.09 (the "Supplier Products Liability Payments")
                                          ------------------------------------  
exceeds 60% (subject to upward adjustment in accordance with the second proviso
of Section 4.09(b)) of the aggregate amounts paid with respect to such
liabilities, and the Products Liability Cap for such Fiscal Year exceeds the sum
of the aggregate amounts paid by the Distributor to the Supplier under Section
4.09(b) for such Fiscal Year that are paid by the Distributor and not reimbursed
by the Supplier, then the Distributor shall pay to the Supplier the amount of
such excess (the "Excess Payments").  The Distributor shall make Excess Payments
                  ---------------                                               
in each Fiscal Year until the sum of the Excess Payments in such Fiscal Year and
all preceding Fiscal Years beginning with the Sixth Insurance Year is equal to
the Supplier Deficiency in that Fiscal Year and all preceding Fiscal Years
beginning with the Sixth Insurance Year.  The "Supplier Deficiency" for any
                                               -------------------         
Fiscal Year shall be equal to the excess of the actual amount of the Products
Liability Payments for such Fiscal Year over the amount that such Products
Liability Payments would have been but for the Products Liability Cap.

         SECTION 4.10.  Solutions and Growth Medium.  Notwithstanding any other
                        ---------------------------                            
provision in this Agreement to the contrary, if it is in the Customers' best
interests or if sale of the Growth Medium or Solutions is prohibited by local
law or regulation or otherwise is commercially impracticable, the Distributor
may obtain Solutions and Growth Medium from a source other than the Supplier and
sell such other Solutions and Growth Medium to any Stem Cell Therapy Customer.
If the Distributor makes any such Sales to Stem Cell Therapy Customers, the
Distributor shall pay to the Supplier, in those cases in which the use of such
other Solutions or Growth Medium is prohibited by law or otherwise is
commercially impracticable, an amount equal to the lesser of:  (a) a royalty
equal to 10% of the Distributor's net selling price of such sales and (b) an
amount equal to 60% of the Distributor's gross margin realized on such sales of
the Solutions and/or Growth Medium (said 60% amount being defined as the
"Supplier's Share"), and, in those cases in which the use of such other
-----------------                                                      
Solutions or Growth Medium is legally or practically required, the Supplier's
Share. Such payments shall be made by the Distributor to the Supplier within 30
days following the month in which the sale occurred.

         SECTION 4.11.  Information Concerning Pricing.  (a)  The Distributor
                        ------------------------------                       
shall provide to the Supplier the following information regarding the prices at
which Products are Sold by the Distributor to Stem Cell Therapy Customers
pursuant to this Agreement (the "Pricing Information"):  the average, highest
                                 -------------------                         
and lowest selling prices of each of the Products (specified by catalogue
number) in each country and to each Subdistributor.  The Supplier and the
Distributor shall review the Pricing Information at least once a year.  In light
of such Pricing Information, the Supplier and the Distributor annually shall (i)
agree to Target Prices, the Minimum U.S. Selling Price, the Minimum
Subdistributor Selling Price and the Minimum Direct International Selling Price
in each of the Direct Sales

<PAGE>
 
                                                                         Page 27

Countries for each of the Products and (ii) develop goals and objectives to be
included in the ACL for such year to maximize the financial returns of both the
Supplier and the Distributor.

         (b)  The Supplier and the Distributor each shall endeavor in good faith
to establish, within three years after the payment of the latter of the
Milestone Fees, fixed prices (which shall be revised and adjusted annually) at
which the Supplier shall Sell Products to the Distributor pursuant to this
Agreement, it being recognized, however that neither party shall be obligated to
agree to fixed pricing unless the party determines it to be in its own best
interests.  Once such prices are established, they shall replace the pricing
formulae set forth below in Section 5.02 and shall be consistent with the
following goals and objectives:  (i) to price the Products to maximize their
value; (ii) to share mutually in the revenues and benefits from Sales of the
Products; and (iii) to exchange openly information regarding Sales prices and
production costs.

         (c)  Notwithstanding anything in this Agreement to the contrary, the
Distributor's obligations under Sections 2.03(a) and (b) and Section 4.01 shall
not require the Distributor to make any Sales of Products, which, in the
judgment of the Distributor, are reasonably likely to cause the Average U.S.
Selling Price, the Average International Direct Selling Price in any Direct
Sales Country and the Average Subdistributor Selling Price to be less than the
Minimum U.S. Selling Price, or the Minimum International Direct Selling Price in
such Direct Sales Country and the Minimum Subdistributor Selling Price,
respectively, during the month in which such Sales otherwise would be made.

         SECTION 4.12.  Indemnification for Product Liability.  The Distributor
                        -------------------------------------                  
agrees to indemnify and hold harmless the Supplier and its Affiliates and their
respective officers, directors, employees and agents (each such person being a
"Distributor Indemnified Person") from and against any losses, claims, damages
-------------------------------                                               
or liabilities not subject to the Policy and to reimburse each Distributor
Indemnified Person for all expenses (including reasonable fees and expenses of
counsel) not subject to the Policy as they are incurred, related to, arising out
of or in connection with defending any action, claim, suit, investigation or
proceeding in which a Person claims or alleges that the claims made beyond those
in the Market Development Program, or the training, service or repair
undertaken, by the Distributor, or such Subdistributor, with respect to the
Products has caused such Person to sustain any personal injury, property damage,
wrongful death or any other tortious harm.

<PAGE>
 
                                                                         Page 28

                                   ARTICLE V

                     DISTRIBUTOR PURCHASES OF THE PRODUCTS
                     -------------------------------------

         SECTION 5.01.  Orders.  Orders for Products placed by the Distributor
                        ------                                                
shall conform to, and shall be filled in accordance with, the Programs.

         SECTION 5.02.  Purchase Price; Periodic Adjustments.  (a)  The
                        ------------------------------------           
aggregate purchase price to be paid to the Supplier by the Distributor for U.S.
Products Sold during any calendar month (the "U.S. Monthly Purchase Price")
                                              ---------------------------  
shall be calculated according to the following formula:

         *

    where "P" is the U.S. Monthly Purchase Price, "SP" is the aggregate of the
    Actual U.S. Sales Amount for each of the Products during such calendar
    month, "DS" is the Deemed U.S. Sales Amount during such calendar month, "U"
    is the aggregate dollar amount of Upcharges included in the selling price of
    the Actual U.S. Sales Amount during such calendar month, "F" is the
    applicable aggregate unreimbursed freight and handling charges for the
    Actual U.S. Sales, the Deemed U.S. Sales and the Purchased Spare Parts used
    for warranty service provided in accordance with the Programs during such
    calendar month borne by the Distributor, "R" is the aggregate amount
    credited by the Distributor during such calendar month for returns of U.S.
    Products as reflected in the applicable credit invoices, "W" is the
    Distributor"s cost of providing warranty service during such calendar month
    (i.e., travel and other out-of-pocket expenses and cost of warranty service
     ---                                                                       
    at applicable hourly rates, but excluding the cost of Purchased Spare Parts)
    to Stem Cell Therapy Customers in the United States pursuant to, and in
    accordance with, Section 4.04(a), all as reflected in the relevant Monthly
    Report, and "X" is * (or, if 5.02(d) is applicable, *

         (b) The aggregate purchase price to be paid to the Supplier by the
Distributor for Subdistributor Products Sold during any calendar month (the
"Subdistributor Monthly Purchase Price") shall be calculated according to the
--------------------------------------                                       
following formula:

              *

    where "P" is the Subdistributor Monthly Purchase Price, "SP" is the
    aggregate of the Actual Subdistributor Sales Amounts for each of the
    Products during such calendar month, "DS" is the Deemed Subdistributor Sales
    Amount during such calendar month, "U" is the aggregate dollar amount of
    Upcharges included in the selling price of the Actual

                    *CONFIDENTIAL PORTION REDACTED AND FILED
                         SEPARATELY WITH THE COMMISSION

<PAGE>
 
                                                                         Page 29

     Subdistributor Sales Amount during such calendar month, "F" is the
     applicable aggregate unreimbursed freight and handling charges for the
     Actual Subdistributor Sales and the Deemed Subdistributor Sales and the
     Purchased Spare Parts used for warranty service for Subdistributor Products
     provided in accordance with the Programs during such calendar month borne
     by the Distributor, "R" is the aggregate amount credited by the Distributor
     during such calendar month for returns of Subdistributor Products as
     reflected in the applicable credit invoices, "W" is the Distributor"s cost
     of providing warranty service on Subdistributor Products during such
     calendar month (i.e., travel and other out-of-pocket expenses and cost of
                     ---
     warranty service at applicable hourly rates, but excluding the cost of
     Purchased Spare Parts) to Stem Cell Therapy Customers outside of the United
     States pursuant to, and in accordance with, Section 4.04(a), and "X" is *

         (c)  The aggregate purchase price to be paid to the Supplier by the
Distributor for International Direct Products Sold in each Direct Sales Country
during any calendar month (the "International Direct Monthly Purchase Price")
                                -------------------------------------------  
shall be calculated according to the following formula:

              *

    where "P" is the International Direct Monthly Purchase Price, "SP" is the
    aggregate of the Actual International Direct Sales Amount for each of the
    Products in such Country during such calendar month, "DS" is the Deemed
    International Direct Sales Amount in such Country during such calendar
    month, "U" is the aggregate dollar amount of Upcharges included in the
    selling price of the Actual International Direct Sales Amount during such
    calendar month, "F" is the applicable aggregate unreimbursed freight and
    handling charges for the Actual International Direct Sales in such Country,
    the Deemed International Direct Sales and the Purchased Spare Parts used for
    warranty service provided in such Country in accordance with the Programs
    during such calendar month borne by the Distributor, "R" is the aggregate
    amount credited by the Distributor during such calendar month for returns of
    International Direct Products in such Country as reflected in the applicable
    credit invoices, "W" is the Distributor's cost of providing warranty service
    on International Direct Products in such Country during such calendar month
    (i.e., travel and other out-of-pocket expenses and cost of warranty service
     ---                                                                       
    at applicable hourly rates, but excluding the cost of Purchased Spare Parts)
    to Stem Cell Therapy Customers in such Direct Sales Country pursuant to, and
    in accordance with, Section 4.04(a), all as reflected in the relevant
    Monthly Report, and "X" is *  The International Direct Monthly Purchase
    Price for each Direct Sales Country shall be converted


                    *CONFIDENTIAL PORTION REDACTED AND FILED
                         SEPARATELY WITH THE COMMISSION

<PAGE>
 
                                                                         Page 30

    from the official currency unit of such Country into U.S. dollars at the
    Exchange Rate for the month in which the Sales represented by such
    International Direct Monthly Purchase Price were made.

         (d)  If Worldwide Sales exceed the Sales Threshold in any Fiscal Year,
then the U.S. Monthly Purchase Price for all Sales in excess of such threshold
shall be calculated based upon the formula in subsection 5.02(a) above, except
that "X" shall equal *

         (e)  The aggregate purchase price (the "Monthly Parts Purchase Price")
                                                 ----------------------------  
to be paid to the Supplier by the Distributor for Spare Parts purchased by the
Distributor, whether purchased for a warranty service in accordance with Section
4.04(a) or otherwise (the "Purchased Spare Parts"), in any calendar month, shall
                           ---------------------                                
be calculated according to the following formula:

              *

    where "P" is the Monthly Parts Purchase Price, "C" is the Supplier's cost of
    producing such Purchased Spare Parts, "R" is the aggregate price paid by the
    Distributor to the Supplier for the Spare Parts returned by Stem Cell
    Therapy Customers during such calendar month and the freight paid the
    Distributor with respect to such returns, "WC" is the purchase price paid to
    the Supplier by the Distributor for Spare Parts used for warranty service
    provided in such month by the Distributor to Stem Cell Therapy Customers
    pursuant to, and in accordance with, Section 4.04(a).

         SECTION 5.03.  Monthly Report; Monthly Payment; Distributor Fee.  (a)
                         -----------------------------------------------       
Within thirty days after the end of each calendar month, the Distributor shall
prepare and deliver to the Supplier a report (the "Monthly Report") stating,
                                                   --------------           
among other things, the aggregate amount of Worldwide Sales, specifying sales by
the Distributor of U.S. Products and International Products during such month.
At the time of delivery of the monthly report, the Distributor shall pay the
Monthly Purchase Price.  The Distributor shall assume responsibility for all
amounts that become uncollectible from its Customers and any collection costs
incurred in pursuit of such amounts.

         (b)  Within five business days after the Distributor's first issuance
of an invoice (or invoices) evidencing that the Complete System Sale has
occurred, the Distributor shall pay to the Supplier a fee of *

         (c)  Within thirty business days after final written approval by the
FDA of the Products for Sales in the United States for any clinical indications
for Stem Cell Therapy Applications, the Distributor shall pay to the Supplier a
fee of   *    (together with the fees specified in Section 5.03(b), the
"Milestone Fees").
---------------   

                    *CONFIDENTIAL PORTION REDACTED AND FILED
                         SEPARATELY WITH THE COMMISSION

<PAGE>
 
                                                                         Page 31

         SECTION 5.04.  Deliveries.  The Supplier shall deliver the Products in
                        ----------                                             
accordance with each firm order by the Distributor.  Unless otherwise agreed by
the Supplier and the Distributor, delivery shall be F.O.B. at the Supplier's
place of manufacture ("ex works").  Title to the Products Sold to the
Distributor by the Supplier pursuant to this Agreement shall pass from the
Supplier to the Distributor upon the Distributor's acceptance of the Products at
the Supplier's place of manufacture.  All of the costs of transportation
(including insurance) shall be borne by the Distributor and included in "F" in
the formulae set forth in Section 5.02 above.


                                   ARTICLE VI

                           TRADEMARKS AND TRADE NAMES
                           --------------------------

         SECTION 6.01.  License.  To the extent permitted by law, the Supplier
                        -------                                               
hereby grants to the Distributor and each Subdistributor a license and right to
use during the existence of this Agreement any trademark and trade name of the
Supplier associated with the Products for the sole purpose of Selling, and
promoting the Sale of, the Products in accordance with this Agreement.  The
Distributor shall take no steps to register the Supplier's trademarks or trade
names.

         SECTION 6.02.  Licenses to Third Parties.  The Supplier shall not grant
                        -------------------------                               
to any person other than the Distributor a right or license to use during the
term of this Agreement any trademark or trade name of the Supplier for the
purpose of Selling, or promoting the Sale of, the Products to Stem Cell Therapy
Customers unless the Supplier has established a Co-Marketing Arrangement in
accordance with Section 7.05(b).

         SECTION 6.03.  Effect of Use.  Any trademarks and trade names licensed
                        -------------                                          
to the Distributor hereunder are, and shall remain the exclusive property of,
the Supplier, and nothing contained herein shall grant or be construed as
granting to the Distributor any right, title or interest in the Supplier's
trademark or trade name not specifically set forth in Section 6.01.  Any trade
names or trademarks developed for the Products during the term of this Agreement
shall be owned solely by the Supplier, but shall be licensed to the Distributor
in accordance with Section 6.01.

         SECTION 6.04.  Cessation of Use.  Upon the later of expiration or
                        ----------------                                  
termination of this Agreement or the license rights granted to the Distributor
pursuant to Section 7.07 hereof, the Distributor shall forthwith cease any and
all use of, and shall not use or have any right to use, any trademark or trade
name of the Supplier licensed to the Distributor hereunder.

<PAGE>
 
                                                                         Page 32
                                  
                                  ARTICLE VII

                               TERM; TERMINATION
                               -----------------

         SECTION 7.01.  Term.  Unless earlier terminated pursuant to Section
                        ----                                                
7.02 hereof, the term of this Agreement shall commence on the date first above
written and end on October 22, 2003 (the "Base Term").  At the end of the Base
                                          ---------                           
Term, the Distributor shall have the option to renew this Agreement for one
additional ten-year period, which, except as otherwise specifically provided in
this Section 7.01, shall be upon the terms and conditions in effect at the
expiration of the Base Term.  The Distributor may exercise this option by
providing written notice to the Supplier not less than 365 days prior to the
expiration of the Base Term.  At the end of such additional ten-year term, the
parties may extend this Agreement for a subsequent ten-year period only by
mutual agreement.

         SECTION 7.02.  Notice of Breach.  If the Supplier has materially
                        ----------------                                 
breached its obligations under this Agreement, the Distributor shall deliver to
the Supplier written notice of such breach (the "Distributor's Notice of
                                                 -----------------------
Breach").  If the Distributor has materially breached its obligations under this
Agreement, the Supplier shall deliver to the Distributor written notice of such
breach (the "Supplier's Notice of Breach"; and, together with the Distributor's
             ---------------------------                                       
Notice of Breach, a "Notice of Breach").  Any Notice of Breach shall describe
                     ----------------                                        
such breach in reasonable detail.

         SECTION 7.03.  Cure Period.  If the alleged breach by the Supplier or
                        -----------                                           
the Distributor can be cured by the payment of money (a "Monetary Breach"), the
                                                         ---------------       
breaching Party may cure such Monetary Breach at any time within ten days after
the existence of the Monetary Breach and the amount owed has been established.
If the breach is not a Monetary Breach and reasonably can be cured within thirty
days, then the breaching Party may cure the breach within thirty days after
delivery of the Notice of Breach.  If the breach is not a Monetary Breach and
reasonably cannot be cured within thirty days, then the breaching Party may
submit to the nonbreaching Party within thirty days after delivery of the Notice
of Breach a written plan to effect a cure as soon as reasonably practicable, but
in any event within one year following the receipt of the Notice of Breach from
the nonbreaching party, and the breaching Party shall diligently, promptly and
continuously pursue such plan until the breach has been cured.

         SECTION 7.04.  Objection; Negotiation.  (a)  If either Party disputes
                         ---------------------                                
an assertion by the other Party that it has materially breached this Agreement,
as specified in any Notice of Breach, then the allegedly breaching Party may, in
lieu of proceeding with a remedy of such alleged breach, deliver to the other
Party a written objection (the "Objection") within fifteen days after receipt of
                                ---------                                       
the Notice of Breach.  Any Objection shall set forth in reasonable detail the
basis for the objection to the breach alleged in the Notice of Breach.

<PAGE>
 
                                                                         Page 33

         (b)  For a period of up to thirty days after the delivery of the
Objection, the Parties shall pursue good faith negotiations to attempt to
resolve mutually the Parties' differences concerning the Notice of Breach and
the Objection.  If the Parties have not reached a mutually satisfactory
resolution within said thirty days, then either Party may submit the matter for
resolution by binding arbitration pursuant to Section 10.03.

         SECTION 7.05.  Remedy; Partial Termination; Termination Upon
                        ---------------------------------------------
Bankruptcy.  (a)  If the Supplier fails to cure any material breach within the
time periods specified in Section 7.03 above, the Distributor may terminate this
Agreement.

         (b)  If the Distributor fails to cure any material breach within the
time periods specified in Section 7.03 above, the Supplier may terminate this
Agreement, and the Distributor's right to act as the Distributor, on a worldwide
basis, or with respect to specific geographic areas, or the Supplier may permit
the Distributor to continue to act as a distributor of the Products but may
appoint other distributors of the Products or the Supplier may distribute the
Products itself, in each case either on a worldwide basis or with respect to one
or more geographic areas (such arrangement being a "Co-Marketing Arrangement").
                                                    ------------------------    
If the Supplier exercises its right under this Section 7.05(b) to establish a
Co-Marketing Arrangement, the prices to be paid to the Supplier by the
Distributor for the Products distributed by the Distributor in each geographic
area in which a Co-Marketing Arrangement is established shall be fair and
reasonable fixed prices for each of the Products determined in good faith
negotiations by the Supplier and the Distributor, based upon the amounts paid to
the Supplier by the Distributor for each of the Products during the period
preceding such termination, which prices shall then be renegotiated annually
based upon then current market conditions.  Effective one year after delivering
written notice to the other Party, either Party may terminate the Distributor's
right to Sell in countries where a Co-Marketing Arrangement has been
established.

         (c)  This Agreement shall terminate immediately upon written notice by
either party to the other (i) in the event that a bankruptcy petition is filed
with respect to the party notified pursuant to this subparagraph or (ii) in the
event that the party notified pursuant to this subparagraph (A) becomes
insolvent; (B) is adjudicated as a bankrupt pursuant to an involuntary petition
in bankruptcy; (C) suffers appointment of a temporary or permanent receiver,
trustee or custodian for its business or for all or part of its assets, where
such appointment is not discharged within thirty days; (D) makes an assignment
for the benefit of creditors; (E) is admitted to the benefits of any procedure
for the settlement or postponement of debts; (F) becomes a party to dissolution
proceedings; or (G) takes any corporate action with respect to any of the
foregoing.

<PAGE>
 
                                                                         Page 34

         (d)  The Distributor may terminate this Agreement upon twelve months'
advance written notice to the Supplier in the event that any Person other than
the Distributor during the term of this Agreement beneficially owns more than 50
percent (measured either by value or voting rights) of the outstanding Common
Stock or voting securities of the Supplier.

         (e)  The Distributor may terminate this Agreement at any time after
December 31, 1997 if it reasonably determines that the Supplier is unlikely to
be able to produce Products that can be sold to Stem Cell Therapy Customers on a
competitive basis on or prior to December 31, 1998.  The Supplier may terminate
this Agreement at any time after the second anniversary of the payment of the
later of the Milestone Fees if the Supplier reasonably determines, taking into
account the fact that there is no established market for the Products, that the
Distributor is unlikely to be able to develop a market for the Products among,
or to market the Products effectively to, Stem Cell Therapy Customers.

         SECTION 7.06.  Other Remedies.  In the event of a breach of this
                        --------------                                   
Agreement, the nonbreaching Party shall be entitled to pursue, in addition to
the remedies specified in this Article VII, any and all equitable or legal
remedies available to it as a result of the breach, through the arbitration
proceeding or the limited court actions as permitted by Section 10.03.  If
either Party elects to terminate this Agreement in accordance with this Article
VII, such termination shall not preclude the nonbreaching Party from pursuing
such additional remedies and collecting any damages to which the nonbreaching
Party may be entitled.

         SECTION 7.07.  Effect of Termination by Distributor.  (a)  In the event
                        ------------------------------------                    
that the Distributor terminates this Agreement in accordance with Section
7.05(a) hereof, and the Distributor has paid all of the Milestone Fees, then the
Supplier shall (i) grant to the Distributor, effective upon notice by the
Distributor to the Supplier following such termination, a non-exclusive
perpetual license with no rights to grant a sublicense (other than a sublicense
to manufacture) (the "License") of all patents and other intellectual property
                      -------                                                 
necessary or useful to manufacture, use, market and sell the Products to Stem
Cell Therapy Customers solely for the use, manufacture, marketing and sale of
the Products for Stem Cell Therapy Applications and (ii) provide to the
Distributor all technical or other information relating to the processes covered
by the License.  In addition, the Distributor shall, if requested by the
Supplier, manufacture products for the Supplier's use and sale that are similar
to the Products sold in the Stem Cell Therapy Market.  The prices to be paid to
the Distributor by the Supplier for the Products manufactured by the Distributor
shall be fixed prices for each of the Products, based upon the amounts paid to
the Supplier by the Distributor for each of the Products during the period
preceding such termination, as negotiated in good faith by the Distributor and
the Supplier.  Such negotiated prices shall be applicable for one year, and
shall be renegotiated and redetermined annually based upon the then current
market conditions.

<PAGE>
 
                                                                         Page 35

         (b)  Under the License, the Distributor shall pay to the Supplier on a
monthly basis a royalty fee equal to 15% of the sales price to Customers (net of
freight, delivery and returns) for Products sold during each month using such
License, subject to reduction for any amounts payable by the Distributor to any
third party pursuant to any agreement between the Supplier and such third party
with respect to any Intellectual Property Rights granted to the Distributor
under the License.

         (c)  The License shall not affect any other right or remedy of the
Distributor arising from the Supplier's nonperformance of this Agreement.

         SECTION 7.08.  Attorneys' Fees and Costs.  In the event of any
                        -------------------------                      
arbitration or court proceedings with respect to a breach, an alleged breach, a
dispute as to the interpretation of this Agreement, or any other dispute
concerning this Agreement, the Party who most prevails in such proceedings shall
be entitled to recover from the other Party the reasonable attorneys' fees and
other reasonable costs incurred by the prevailing Party in connection with such
proceedings, in such amounts as the arbitrator or the court deems appropriate
and fair.  The arbitrator in such arbitration proceedings shall determine the
prevailing Party, and the amount of attorneys' fees and other costs to be paid
by the other Party to the prevailing Party.

         SECTION 7.09.  Interest.  If a Party fails to pay any amount when due,
                        --------                                               
such amount shall thereafter bear interest until such amount, together with such
interest, is paid in full at a rate equal to the rate announced from time to
time by Citibank as its base rate of interest plus two percent.

         SECTION 7.10.  Transition Upon Termination.  (a)  Upon any termination
                        ---------------------------                            
of this Agreement, in whole or in part, the Distributor and the Supplier each
shall use reasonable and good faith efforts to accomplish an orderly transition
of marketing responsibilities, from the Distributor to the Supplier (or the
Supplier's designee).

         (b)  If this Agreement is terminated the Distributor shall make
available to the Supplier (i) a list of each Customer and Subdistributor which
purchased Equipment from the Distributor, identifying the Equipment purchased by
each such Customer and Subdistributor, (ii) a list of each Customer and
Subdistributor which purchased Disposables during the 24 calendar months
immediately preceding such termination, identifying the types and quantities of
Disposables purchased by each such Customer and Subdistributor during the last
24 months, and (iii) a copy of each customer record of service performed within
the last 24 calendar months for the Customers listed in subparagraphs (i) and
(ii) above.  Notwithstanding the foregoing, however, if the Supplier establishes
a Co-Marketing Arrangement pursuant to Section 7.05(b) pursuant to which the
Distributor is allowed to continue to distribute Products in one or more
specific geographical areas, then the Distributor shall not

<PAGE>
 
                                                                         Page 36

be required to furnish to the Supplier the foregoing lists and records for such
geographical areas.


                                  ARTICLE VIII

                                CONFIDENTIALITY
                                ---------------

         SECTION 8.01.  Confidentiality.  (a)  The Distributor and the Supplier
                        ---------------                                        
agree to keep secret and not to disclose to any third party any Confidential
Information of the other that may from time to time be received from the other
party in connection with the transactions contemplated by this Agreement;
provided, however, that the Distributor may disclose such information to its
Affiliates.  The Confidential Information exchanged by the parties in connection
with this Agreement shall not be used by the receiving party for any purpose
other than for purposes of carrying out this Agreement during its term.  The
Supplier may disclose the Distributor's Confidential Information to the
Supplier's employees and agents to the extent necessary to enable such employees
and agents to perform the Supplier's responsibilities under this Agreement, and
the Distributor may disclose the Supplier's Confidential Information to the
Distributor's employees and agents and the Distributor's Subdistributors and
their employees and agents to enable (i) such employees and agents to perform
the Supplier's responsibilities under the Agreement and (ii) such
Subdistributors to the extent necessary to assist the Distributor in the
performance of its obligations under this Agreement.

         (b)  The foregoing confidentiality obligations are subject to an
exception for any disclosure that becomes legally required by subpoena or other
legal process; provided, however, that the Party who so becomes legally
obligated shall give written notice to the other Party of such required
disclosure as promptly as practicable after the Party becomes aware of such
disclosure requirements.

         SECTION 8.02.  Survival of Covenants to Keep Secret.  The parties'
                        ------------------------------------               
obligations under this Article VIII shall survive expiration or termination of
this Agreement.

         SECTION 8.03.  No License.  Except as otherwise provided in this
                        ----------                                       
Agreement, nothing in this Agreement shall be construed to constitute a grant of
any licensing rights from the Supplier to the Distributor to make the Products
or to use the Products (other than a demonstration use for marketing to
potential customers).
<PAGE>
 
                                                                         Page 37

                                   ARTICLE IX

                                 FORCE MAJEURE
                                 -------------

         SECTION 9.01.  Force Majeure.  (a)  If either party is rendered unable,
                        -------------                                           
in whole or in part, to carry out its obligations under this Agreement by reason
of force majeure, and if such party gives prompt written notice to the other
party describing the details giving rise to such party's claim of force majeure,
then the party claiming force majeure shall be excused from performing its
obligations hereunder, but only for so long as that party remains unable by
reason of force majeure so to perform.  Such cause of the party's inability to
perform shall be remedied to the extent possible with all reasonable speed.  As
used herein, force majeure means Acts of God, labor disputes, acts of public
enemies, wars, blockades, insurrections, riots, epidemics, quarantine
restrictions, landslide, lightning, earthquakes, fires, storms, floods,
washouts, arrests, restraints of rulers and people, civil disturbances, acts of
any governmental or local authority, inability to obtain transport or supplies
for any reason, and other acts that are not within the control of the party
claiming excuse from performance and that could not have been avoided or
overcome by such party using due diligence.  The lack of financial resources
shall not constitute force majeure.

         (b) If any event of force majeure materially impairs the Distributor's
ability to sell the Products or the Supplier's ability to manufacture the
Product, then during the pendency of that force majeure event, the Supplier may
sell the Products or the Distributor may manufacture the Products (as the case
may be) that would otherwise have been sold by the Distributor or manufactured
by the Supplier, but for the force majeure event.


                                   ARTICLE X

                            MISCELLANEOUS PROVISIONS
                            ------------------------

         SECTION 10.01.  Amendment; Alteration.  No amendment, change,
                         ---------------------                        
alteration, modification of, or addition to, this Agreement shall be effective
unless in writing and properly executed by each of the parties hereto.

         SECTION 10.02.  Notice.  All notices, requests, claims, demands,
                         ------                                          
waivers and other communications hereunder shall be in writing (including
telecopier or facsimile or similar writing) and shall be given or made (and
shall be deemed to have been duly given or made upon receipt) if delivered in
person,

<PAGE>
 
                                                                         Page 38

by courier service, by cable, telegram, telex, telecopier or facsimile or by
registered or certified mail (postage prepaid, return receipt requested) as
follows:

         (a)  if to the Distributor:

              Cobe BCT, Inc.
              1185 Oak Street
              Lakewood, CO  80215
              Telecopy:  303-231-4160
              Attention:  Edward Wood

         (b)  if to the Supplier:

              Aastrom Biosciences, Inc.
              (Mail:  P.O. Box 376)
              Ann Arbor, MI  48105
              (Direct Delivery:
              Dominos Farms, Lobby L)
              Telecopy:   313-665-0485
              Attention:  R. Douglas Armstrong, PhD
                          President and
                          Chief Executive Officer

or to such other address as either party may have furnished to the other in
writing in accordance herewith.  All notices, requests, claims, demands, waivers
and other communications hereunder shall be deemed to have been received on the
date of personal delivery, cable, telegram, telex, telecopier (with copy by
mail) or facsimile transmission (with copy by mail), or on the fifth business
day (or, in the case of international post, on the fifteenth business day) after
the mailing thereof, except that notices of changes of address shall be
effective only upon receipt.

         SECTION 10.03.  Arbitration.  All claims and disputes relating to this
                         -----------                                           
Agreement shall be subject to binding arbitration, at the option of the Supplier
or the Distributor, in Chicago, Illinois in accordance with the Arbitration
Rules of the American Arbitration Association.  Written notice of demand for
arbitration shall be filed with the other party to this Agreement and with the
American Arbitration Association within a reasonable time after the dispute has
arisen.  Any award or decision rendered in such arbitration process may be
entered as a judgement against a Party in any court of competent jurisdiction
over the Party.  Nothing in this Section shall limit either the Supplier's or
the Distributor's right to obtain a preliminary injunction or temporary
restraining order pertaining or relating to an arbitrable dispute or controversy
against the other party, pending resolution of said dispute or controversy by
the arbitration process.  The Distributor and the Supplier hereby irrevocably
submit to the jurisdiction of any state or federal court in Michigan or Colorado
in any action or proceeding arising out of or relating to this Agreement or any
other agreement or transaction

<PAGE>
 
                                                                         Page 39

contemplated hereby, or any arbitration award or decision arising from this
Agreement.  The Distributor and the Supplier hereby irrevocably waive, to the
fullest extent they may effectively do so, the defense of an inconvenient forum
to the maintenance of such action or proceeding.

         SECTION 10.04.  Governing Law.  This Agreement shall be governed by,
                         -------------                                       
and construed in accordance with, the laws of the State of New York applicable
to contracts executed in and to be performed entirely within that state.

         SECTION 10.05.  Waiver.  Either party hereto may waive compliance with
                         ------                                                
any of, or extend the time for performance of, the agreements contained herein.
Any such waiver or extension shall be valid if set forth in an instrument in
writing signed by the party to be bound thereby.  The failure of either party to
assert any of its rights hereunder shall not constitute a waiver of any such
rights.

         SECTION 10.06.  Entire Agreement; Assignment.  This Agreement
                         ----------------------------                 
constitutes the entire agreement between the parties with respect to the subject
matter hereof and supersedes all prior agreements and undertakings, both written
and oral, between the parties with respect to the subject matter hereof.  This
Agreement shall not be assigned by operation of law or otherwise, other than by
the Distributor to its Affiliates, without the express written consent of the
Distributor and the Supplier (which consent may be granted or withheld in the
sole discretion of the Supplier or the Distributor); provided that any
                                                     --------         
assignment by the Distributor to its Affiliates does not relieve the Distributor
of its obligations hereunder.

         SECTION 10.07.  Parties in Interest.  This Agreement shall be binding
                         -------------------                                  
upon and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
Person any rights, benefits or remedies of any nature whatsoever under or by
reason of this Agreement.

         SECTION 10.08.  Severability.  If any term or other provision of this
                         ------------                                         
Agreement is invalid, illegal or incapable of being enforced by any law, rule,
regulation or public policy, all other terms and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner materially adverse to any party.  Upon such determination that any term
or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in an
acceptable manner in order that the transactions contemplated hereby are
consummated as originally contemplated to the greatest extent possible.

         SECTION 10.09.  Headings.  The descriptive headings contained in this
                         --------                                             
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.

<PAGE>
 
                                                                         Page 40

         SECTION 10.10.  Counterparts.  This Agreement may be executed in one or
                         ------------                                           
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.

         SECTION 10.11.  Approvals.  Whenever a matter is subject to the
                         ---------                                      
approval of the other Party, a Party shall not unreasonably withhold its
approval.

         IN WITNESS WHEREOF, the Distributor and the Supplier each have caused
this Agreement to be executed by its duly authorized officer as of the date
first above written.


                             COBE BCT, INC.


                             By:  /s/ EDWARD WOOD
                                  ----------------------------
                                  Edward Wood
                                  President


                             AASTROM BIOSCIENCES, INC.


                             By:  /s/ R. DOUGLAS ARMSTRONG
                                  -------------------------------
                                  R. Douglas Armstrong, Ph.D.
                                  President and Chief
                                  Executive Officer

<PAGE>
 
                                   SCHEDULE A

                          PRODUCT DEVELOPMENT PROGRAM

                                       *










                    *CONFIDENTIAL PORTION REDACTED AND FILED
                         SEPARATELY WITH THE COMMISSION

<PAGE>
 
                                   SCHEDULE B

                                       *











                    *CONFIDENTIAL PORTION REDACTED AND FILED
                         SEPARATELY WITH THE COMMISSION

<PAGE>
 
          Revision of Schedule C of the 11/1/93 Distribution Agreement
                        1994-1995 Annual Commitment List
                        --------------------------------


                                       *










                    *CONFIDENTIAL PORTION REDACTED AND FILED
                         SEPARATELY WITH THE COMMISSION

<PAGE>
 
                            SUPPLEMENTAL AGREEMENT

     This Agreement is entered into as of March 29, 1995, by and between Aastrom
Biosciences, Inc., a Michigan corporation ("Aastrom"), Cobe Laboratories, Inc.,
a Colorado corporation ("Cobe Lab"), and Cobe BCT, Inc., a Colorado corporation
("Cobe BCT"), with respect to the following facts:

     A. Pursuant to Section 5.05 of that certain Stock Purchase Agreement
between Aastrom and Cobe Lab, dated October 22, 1993 (the "Stock Purchase
Agreement"), Aastrom has a "put option" to require Cobe Lab to purchase stock
issued by Aastrom in a "Qualifying Private Placement" (as defined in the Stock
Purchase Agreement), under certain circumstances.

     B. Pursuant to Section 5.03 of the Distribution Agreement between Aastrom 
and Cobe BCT, dated as of October 22, 1993 (the "Distribution Agreement"), Cobe 
BCT is obligated to pay to Aastrom a $5 million fee upon the occurrence of 
specified events (the "Milestone Fees").

     C. Aastrom is in the process of offering for sale a new series of preferred
stock, designated as Series D Preferred Stock.

     WHEREFORE, the parties hereto mutually agree as follows:

          1.  Cobe Lab agrees that if Aastrom sells shares of its Series D 
Preferred Stock in a private placement on or before April 22, 1995 in which (i) 
the cash proceeds to Aastrom from such sales to investors other than Cobe Lab 
equal at least $5 million, and (ii) persons other than holders of Series A 
Preferred Stock and Series B Preferred Stock and their affiliates purchase 
shares of Series D Preferred Stock having an aggregate purchase price of at 
least $1 million (the "Private Placement"), then upon request by Aastrom by May 
31, 1995, Cobe Lab will purchase shares of Series D Preferred Stock having an 
aggregate purchase price of $5 million for the same price per share and on the 
same terms and conditions as such other investors; provided, that such terms and
conditions must be reasonably satisfactory to Cobe Lab (the "Cobe Share 
Purchase").

          2.  Aastrom, Cobe Lab and Cobe BCT agree that if the Cobe Share 
Purchase is consummated:

               (i)   The Private Placement will not be deemed to be a Qualifying
Private Placement for purposes of Section 5.05 of the Stock Purchase Agreement, 
and Aastrom will retain its "put option" for the next Qualifying Private 
Placement or a Qualifying IPO;

               (ii)  Upon the consummation of the Cobe Share Purchase, Section 
1.01 of the Distribution Agreement shall be amended by deleting the 

                                       1

<PAGE>
 
definition of "Milestone Fees" and replacing such definition with the following
words:

               "Milestone Events" means each of (i) the
          Distributor's first issuance of an invoice (or invoices)
          evidencing that the Complete System Sale has occurred
          and (ii) the final written approval by the FDA of the 
          Products for Sales in the United States for any clinical
          indications for Stem Cell Therapy Applications."

               (iii) Upon the consummation of the Cobe Share Purchase, Section 
4.11(b) of the Distribution Agreement shall be amended by deleting the words 
"within three years after the payment of the latter Milestone Fee" and replacing
such words with the words "within three years after the later to occur of the 
Milestone Events");

               (iv)  Upon the consummation of the Cobe Share Purchase, Section 
5.03 of the Distribution Agreement shall be amended by deleting paragraphs 
5.03(b) and 5.03(c) in their entirety and by redesignating paragraph 5.03(a) as
Section 5.03;

               (v)   Upon the consummation of the Cobe Share Purchase, Section 
7.05(e) of the Distribution Agreement shall be amended by deleting the words 
"the second anniversary of the payment of the later of the Milestone Fees" and 
replacing such words with the words "the second anniversary of the later to 
occur of the Milestone Events"; and

               (vi)  Upon the consummation of the Cobe Share Purchase, Section 
7.07(a) of the Distribution Agreement shall be amended by deleting the words
"and the Distributor has paid all of the Milestone Fees," and replacing such
words with the words "and both Milestone Events have occurred".

     IN WITNESS WHEREOF, the parties have executed and delivered this Agreement 
as of the date set forth above.

AASTROM BIOSCIENCES, INC.                        COBE LABORATORIES, INC.


By:/s/ R. Douglas Armstrong                         By:/s/
   -------------------------                        ------------------------

                                                 COBE BCT, INC.


                                                 By:/s/ Edward C. Wood, Jr.
                                                    -----------------------

                                      2
 
<PAGE>
 
                                   AMENDMENT
                                      to
                        RESTATED DISTRIBUTION AGREEMENT
                                    between
                              COBE BCT, INC. and
                           AASTROM BIOSCIENCES, INC.

     This Amendment is made as of September 11, 1995, to that certain Restated 
Distribution Agreement dated as of October 22, 1993, between AASTROM
Biosciences, Inc., a Michigan corporation (the "Supplier"), and Cobe BCT, Inc.,
a Colorado corporation (the "Distributor") (the "Restated Distribution
Agreement").

     1.  The terms which are defined in the Restated Distribution Agreement 
shall have the same meaning in this Amendment as defined in the Restated 
Distribution Agreement.

     2.  The definition of "Stem Cell Therapy Applications" in the Restated 
Distribution Agreement is hereby amended to add the words "or umbilical cord 
blood" on the second line, so that the first two and one-half lines read as 
follows:

               "Stem Cell Therapy Applications" means
          applications of the Products pursuant to which human
          bone marrow or peripheral blood or umbilical cord blood
          derived stem and hematopoietic cells are used primarily
          for one or more of the following:...

     3.  There shall be added to Section 1.01 of the Restated Distribution 
Agreement: new defined terms, as follows:

               "Lymphoid Cell" means lymphoid stem cell (e.g., 
          any cell capable of generating cells solely of lymphoid
          lineage) and any cell derived therefrom, including but not
          limited to, the subcortical thymocyte, cortical thymocyte,
          medullary thymocyte, lymphocyte, B-cell, plasma cell,
          immunoblast, lymphoplasmacytoid cell and the NK-cell.

               "Lymphoid Cell Applications" means any
          expansion, selection or genetic manipulation,
          including genetic transformation, of Lymphoid Cells, 
          provided that either the starting cell population is a
          lymphoid selected cell mixture, or that the mature 
          lymphoid cell production is not derived ex vivo from a
          pre-lymphoid cell-type (e.g., multipotent stem cell).

                                       1
<PAGE>
 
     4.  The first sentence in Section 2.01(d) of the Restated Distribution 
Agreement is hereby amended to add the words "(excluding, however, for Lymphoid 
Cell Applications)" in two locations, so that the first sentence as amended 
reads as follows:

               (d) Notwithstanding any provision of this Agreement to the
     contrary, the Supplier may Sell the Products to its Affiliates for Stem
     Cell Therapy Applications by such Affiliates, but not for resale to Persons
     which are not Affiliates of the Supplier, and may make such Sales with a
     license for use of the Products for Stem Cell Therapy Applications, and the
     Distributor may Sell the Products to its Affiliates for applications other
     than Stem Cell Therapy Applications (excluding, however, Lymphoid Cell
     Applications) by such Affiliates, but not for resale to Persons which are
     not Affiliates of the Distributor, and may make such Sales with a license
     for use of the Products for applications other than Stem Cell Therapy
     Applications (excluding, however, for Lymphoid Cell Applications) (such
     permitted Sales by either the Distributor or the Supplier being "Affiliate
     Sales").

     5.  Excepting only as otherwise set forth above, all other terms and 
provisions of the Restated Distribution Agreement shall remain in full force and
effect.

     IN WITNESS WHEREOF, the Distributor and the Supplier each have caused this 
Amendment to be executed by its duly authorized officer as of the date first 
written above.

                                   COBE BCT, INC.

                                   By: /s/ EDWARD WOOD
                                       -----------------------------------------
                                           Edward Wood, President


                                   AASTROM BIOSCIENCES, INC.

                                   By: /s/ R. DOUGLAS ARMSTRONG
                                       -----------------------------------------
                                           R. Douglas Armstrong, Ph.D.,
                                           President and Chief Executive Officer


                                       2
<PAGE>
 
                                  AMENDMENT TO
                        RESTATED DISTRIBUTION AGREEMENT


     This Amendment is made as of October 29, 1996 to that certain Restated
Distribution Agreement dated as of October 22, 1993, between Aastrom
Biosciences, Inc., a Michigan corporation (the "Supplier") and Cobe BCT, a
Colorado corporation (the "Distributor") (the "Restated Distribution
Agreement").

          1.  With respect to the Purchase Price payable by the Distributor to 
the Supplier for the Product as specified in Article V of the Restated
Distribution Agreement, the parties hereby agree that the Distributor shall be
entitled to a 5% discount on the Purchase Price for all of the Product purchased
until the aggregate of said discount equals a total of $350,000, increased by
25% per annum, compounded annually, from December 15, 1996, until the date the
first $200,000 in aggregate discounts are actually realized and credited. Said
aggregate discount, including the compounded increase, shall hereinafter be
called the "Aggregate Discount". If the Aggregate Discount has not been realized
by the second anniversary of the first commercial sale of the Product by the
Distributor, then the discount on subsequent sales of the Product from the
Supplier to the Distributor shall be at 10% (rather than 5%), until the
Aggregate Discount is realized by the Distributor.

          2.  An example of the calculations for the Aggregate Discount 
specified in Section 1 above is as follows:

               a.  First Product sold to Distributor (12/15/97)

               b.  First $200,000 discount credit at 5% actually 
     realized by Distributor (12/15/98)

               c.  Aggregate Discount ($350,000 x 1.25/2/) as of 
     12/15/98:                                                          546,875
 
               d.  Less $200,000 discount credit at 5% actually
     realized as of 12/15/98:                                          (200,000)
                                                                       ---------
 
               e.  Net balance of Aggregate Discount as of
     12/15/98:                                                          346,875

               f.  Further $300,000 discount credit at 5% actually
     realized from 12/16/98 to 12/15/99:                               (300,000)
                                                                       ---------

               g.  Net balance of Aggregate Discount as of
     12/15/99:                                                           46,875

               h.  Further $46,875 discount credit at 10% actually
     realized after 12/15/99:                                           (46,875)
                                                                       ---------

               i.  Aggregate Discount is fully realized.

          3.  The Supplier has agreed to the foregoing discount in consideration
and recognition of the assistance which the Distributor has given to the 
Supplier in the development of the Product.

          4.  Terms defined in the Restated Distribution Agreement shall have 
the same meaning in this Amendment.

          5.  Excepting only as otherwise expressly set forth above, all other 
terms and provisions of the Restated Distribution Agreement shall remain in full
force and effect.

     IN WITNESS WHEREOF, the Distributor and the Supplier each have caused this
Amendment to be executed by its duly authorized officer as of the date first
written above.

                                               COBE BCT, INC.
 
 
                                               By:  /s/ Edward C. Wood
                                                  --------------------

                                               AASTROM BIOSCIENCES, INC.
 
 
                                               By:  /s/ R. Douglas Armstrong
                                                  --------------------------

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Source: OneCLE Business Contracts.