EXHIBIT 10.1


 


*** Certain confidential
portions of this Exhibit were omitted by means of blackout of the text (the “Mark”).  This Exhibit has been filed separately with
the Secretary of the Commission without the Mark pursuant to the Company's
Application Requesting Confidential Treatment under Rule 24b-2 under the 1934
Act.


 


EXCLUSIVE MANUFACTURING AGREEMENT


 


This
EXCLUSIVE MANUFACTURING AGREEMENT (this “Agreement”), dated as of August
4, 2005 (the “Effective Date”), is entered into between NuVasive, Inc.,
a Delaware corporation, with its principal place of business at 4545 Towne
Centre Court, San Diego, 92121 (“NuVasive”), and Pearsalls Limited, a company incorporated in England & Wales
under registration number 03851227 whose registered office is at Tancred
Street, Taunton, Somerset, TA1 1RY (“Pearsalls”).


 


RECITALS


 


WHEREAS,
pursuant to a separate asset purchase agreement (the “Asset Purchase
Agreement”) entered into by and between the parties concurrently with this
Agreement, NuVasive has purchased from Pearsalls the assets for a business that
involves the ownership, design, development and commercial exploitation of
non-vascular applications of embroidery technology for surgical implants,
including, without limitation, products referred to by Seller by the name “NeoDiscTM” and
related spine motion preserving technologies, test methods and know-how
(collectively, the “Medical Device Global Operations”);


 


WHEREAS,
pursuant to the Asset Purchase Agreement, Pearsalls transferred to NuVasive
certain patent rights, copyrights and rights to technical information for the
design, development, and manufacture of certain products, including the
NeoDiscTM artificial cervical disc product more fully described in Exhibit
A-I (the “Cervical Spine Product”) and the Nottingham Rotator Cuff product
more fully described in Exhibit A-II (the “Nottingham Rotator Cuff
Product”), and its rights to the NeoDisc trademark;


 


WHEREAS,
pursuant to the Asset Purchase Agreement, Pearsalls also assigned to NuVasive
certain rights under a Patent and Know-How License (the assigned rights being
referred to herein as the “Ellis License”) from Ellis Developments
Limited (“EDL”) wherein EDL licensed to Pearsalls certain patent rights,
copyrights, and rights to technical information for the manufacture of human surgical
implants using embroidery technology;


 


WHEREAS,
NuVasive desires Pearsalls to manufacture, assemble and supply the Cervical
Spine Product for purchase by NuVasive and Pearsalls desires to manufacture,
assemble and supply the Cervical Spine Product for sale to NuVasive, all on an
exclusive basis as further set forth herein; and


 


WHEREAS,
during the term hereof, NuVasive desires Pearsalls to manufacture, assemble and
supply Nottingham Rotator Cuff Products on a non-exclusive basis and may desire
Pearsalls to manufacture, assemble and supply on a non-exclusive basis certain
other human surgical implants (other than the Cervical Spine Product and the
Nottingham Rotator Cuff Product) that are created in whole or in part using
embroidery technology, (the “Other Products” and collectively with the
Cervical Spine Product and the Nottingham Rotator Cuff Product, the


 





















 


“Products”) for purchase by NuVasive and,
subject to the mutual agreement of the parties on the Terms of Sale (as defined
herein) for such Other Products, Pearsalls desires to manufacture, assemble and
supply such Other Products for sale to NuVasive on the terms set forth herein;


 


WHEREAS,
Pearsalls requires a license to certain NuVasive intellectual property rights
and a sublicense under the Ellis License in order to manufacture Products for
NuVasive and perform related services under this Agreement and NuVasive desires
to grant Pearsalls such a license together with a sublicense under the Ellis
Licence for such limited purposes.


 


NOW,
THEREFORE, in consideration of the foregoing premises and the mutual covenants
herein contained, the parties hereby agree as follows:


 


1.             DEFINITIONS


 


All definitions below or elsewhere in this Agreement
apply to both their singular and plural forms, as the context may require.  The terms “herein,” “hereunder,” “hereof” and
similar expressions refer to this Agreement. 
“Section” refers to a Section herein. 
“Exhibit” refers to an exhibit attached hereto.  The word “including” means “including without
limitation,” unless otherwise stated. 
All references to “days” are to calendar days, unless otherwise
specified.


 


For
purposes of this Agreement, the terms defined in this Section 1 shall have the
respective meanings set forth below:


 


1.1           “Affiliate”
means, as to any Person, any other Person which is controlling, controlled by
or under common control with such Person.


 


1.2           “Alternative
Manufacturing License” has the meaning set forth in Section 5.2.


 


1.3           “Applicable
Law” means all laws, ordinances, rules and regulations applicable to the
manufacture of a Product or any other activities of a party under this
Agreement, including the applicable regulations and guidelines of any
Regulatory Authority including the FDA and foreign counterparts and all
applicable cGMPs, in effect from time to time during the Term.


 


1.4           “Background
License” has the meaning set forth in Section 7.2.


 


1.5           “Base
Cost” means for each of the Cervical Spine Product and the Nottingham
Rotator Cuff Product the Base Cost specified for such Product in Exhibit C
and for each Other Product means an amount consistent with the Base Cost
Formula or as otherwise agreed by the parties, in each case as such Base Cost
may be adjusted by the parties from time to time as provided hereunder.


 


1.6           “Base
Cost Formula” means the Base Cost formula set forth in Section 3 of Exhibit
C.


 


1.7           “cGMP”
or “current Good Manufacturing Practices” means current good manufacturing practices applicable from time to time to
the manufacturing, packaging, labeling, holding and quality control testing of
a Product, including Good
Manufacturing


 


2





















 


Practices
as promulgated by the United States Federal Food, Drug, and Cosmetic
Act, 21 U.S.C. § 301 et seq, as amended, cGMP for medical devices (21 C.F.R.
Part 820), and other Applicable Law.


 


1.8           “Cervical
Spine Product Packaging Specifications” means the Packaging Specifications
set forth in Exhibit B-III attached hereto, as such specifications may
be revised by NuVasive pursuant to the Change Control process set forth in
Section 3.1.


 


1.9           “Cervical
Spine Product” means the product described in Exhibit A-I attached
hereto.


 


1.10         “Cervical
Spine Product Specifications” means the Product Specifications set forth in
Exhibit B-I attached hereto, as such Product Specifications may be
revised by NuVasive pursuant to the Change Control process set forth in Section
3.1.


 


1.11         “Change
of Control” means a party’s (i) sale, lease, or other disposition of all or
substantially all of its assets, rights or businesses, or (ii) the acquisition
of a party by, or merger, consolidation, reorganization, business combination
of a party into or with, another entity in which the stockholders of a party
immediately prior to such acquisition, merger, consolidation, reorganization or
business combination do not own a majority of the outstanding voting shares of
the surviving, purchasing, or newly resulting business entity.


 


1.12         “FDA”
means the United States Food and Drug Administration.


 


1.13         “Inventions”
means all inventions, discoveries, improvements or other technology conceived
or reduced to practice during the Term solely by Pearsalls or jointly by its
employees or others acting on behalf of Pearsalls and NuVasive or their
Affiliates to the extent relating to the Product, the Manufacturing Know-How,
the Medical Device Intellectual Property, or any improvements thereto, and all
Intellectual Property Rights in the foregoing.


 


1.14         “Intellectual
Property” or “Intellectual Property Rights” means all intellectual
and industrial property rights, including any and all patents (including
reissues, divisions, continuations and extensions thereof), patent
registrations, database rights, utility models, business processes, trademarks,
trade secrets, know how, trade names, copyrights, moral rights, any other form
of proprietary protection, and any applications for any of the foregoing, which
arises or is enforceable under the laws of the United States, any other
jurisdiction, or any bi-lateral or multi-lateral treaty regime.


 


1.15         “Manufacturing
Know-How” means all information, techniques, practices, methods, knowledge,
skill and data, which are not generally known including, but not limited to, a
proprietary “trade secret” or other Intellectual Property Rights, whether or
not patentable or copyrightable, relating to or useful for the production,
assembly, manufacture, storage and/or transport of the Product, including any
of the foregoing that is part of the Medical Device Intellectual Property.


 


3





















 


1.16         “Material
Change” means a change requested or required by NuVasive, or requested by
Pearsalls and accepted in writing by NuVasive, that does or is likely to
materially increase the work, time or cost of manufacturing, packaging, storing
or shipping the Product, or to result in any other type of additional burden on
Pearsalls.


 


1.17         “Medical
Device Intellectual Property” means all of the Intellectual Property
included in the Purchased Assets, as such term is defined in the Asset Purchase
Agreement, purchased by NuVasive from Pearsalls under the terms of the Asset
Purchase Agreement.


 


1.18         “Nottingham
Rotator Cuff Product Packaging Specifications” means the Packaging
Specifications set forth in Exhibit B-III attached hereto, as such
specifications may be revised by NuVasive pursuant to the Change Control
process set forth in Section 3.1.


 


1.19         “Nottingham
Rotator Cuff Product” means the product described in Exhibit A-II
attached hereto.


 


1.20         “Nottingham
Rotator Cuff Product Specifications” means the Product Specifications set
forth in Exhibit B-II attached hereto, as such Product Specifications
may be revised by NuVasive pursuant to the Change Control process set forth in
Section 3.1.


 


1.21         “NuVasive
Technology” means (i) the Medical Device Intellectual Property, and (ii)
all other technologies, inventions, materials, and documents, and all
Intellectual Property rights in the foregoing, owned by NuVasive or its
Affiliates (with the right to grant sublicenses thereto) at any time during the
Term (but only during the period of such ownership) that relate to the
manufacture or assembly of the Products.


 


1.22         “Packaging
Specifications” means the requirements, standards, quality control testing
and other attributes pertaining to the packaging, labeling and shipping of a
Product, as such specifications may be amended by NuVasive pursuant to the
Change Control process set forth in Section 3.1.


 


1.23         “Pearsalls
Technology” means all technologies, inventions, materials, and documents,
and all Intellectual Property rights in the foregoing, owned by Pearsalls or
its Affiliates during the Term (but only during the period of such ownership)
that relate to the manufacture or assembly of the Product.


 


1.24         “Person”
means any individual, corporation, partnership, trust, limited liability
company, association, joint stock company, joint venture, unincorporated
organization, governmental authority or any other form of entity not
specifically listed herein.


 


1.25         “Pricing
Formula” means the pricing formula set forth in Section 3 of Exhibit C.


 


1.26         “Product”
means the Cervical Spine Product, the Nottingham Rotator Cuff Product and any
Other Product that the parties agree will be manufactured by Pearsalls for sale
to NuVasive under the terms of this Agreement.


 


4





















 


1.27         “Product
Category” means one or a group of distinguishing characteristics of a
particular Product that require differentiation on the package label for the
Product and includes the intended country of distribution for such Product
Category and the Product’s  size and
intended use (i.e., whether for use clinically or for demonstration or testing
purposes), as well as any other categories agreed upon by the parties from time
to time.


 


1.28         “Product
Specifications” means the requirements, standards, quality control testing
and other attributes pertaining to a Product, as such specifications may be
amended by NuVasive pursuant to the Change Control process set forth in Section
3.1.


 


1.29         “Quality
Agreement” means the quality agreement for volume manufacture of the
Cervical Spine Product that will be developed by the parties mutually in good
faith and agreed upon by both parties in writing prior to the commercial sale
of the Cervical Spine Product in the United States and attached hereto as Exhibit
E.


 


1.30         “Quality
Standards” means initial and continuing compliance with: ISO 9001 or ISO
13485, as applicable; all local laws and regulations affecting manufacturing;
and internal identified manufacturing policies, standard operating procedures
and specifications; as any of the foregoing are in effect from time to time;
and no failure to comply with directions or regulations of Regulatory
Authorities for jurisdictions in which any Product is
distributed for human use, and, with respect to any Product intended for
human use in the United States, Quality Standards shall include cGMP and
applicable FDA rules and regulations and International Conference on
Harmonization guidelines and requirements.


 


1.31         “Regulatory
Authority” means any governmental regulatory authority within the Territory
involved in regulating any aspect of the manufacture, market approval, sale,
distribution, packaging or use of any Product for each jurisdiction in which
such Product is distributed.


 


1.32         “Term”
has the meaning set forth in Section 12.1.


 


1.33         “Terms
of Sale” means for each Product the pricing and all other Product-specific
terms of sale for the sale of such Product by Pearsalls to NuVasive, as agreed
to by the parties.


 


1.34         “Territory”
shall mean the world.


 


2.             SPECIFICATIONS; REGULATORY ASSISTANCE


 


2.1           Specifications.  The initial Cervical Spine Product
Specifications are attached hereto as Exhibit B-I and the initial
Cervical Spine Product Packaging Specifications are attached hereto as Exhibit
B-III.  The initial Nottingham
Rotator Cuff Product Specifications are attached hereto as Exhibit B-II
and the initial Nottingham Rotator Cuff Product Packaging Specifications are
attached hereto as Exhibit B-III. 
The initial Product and Packaging Specifications for each Other Product
shall be specified by NuVasive in consultation with Pearsalls a reasonable
period of time prior to the initial order for such Product, but in any event at
least thirty (30) days prior to such order, and,


 


5





















 


to the extent such
specifications would require material changes in Pearsalls’ facilities,
manufacturing methods or personnel, shall be subject to Pearsalls’ consent,
which shall not be unreasonably withheld. 
Both Pearsalls and NuVasive acknowledge and understand that Product and
Packaging Specifications for a Product may need to be modified from time to
time in light of regulatory requirements or other reasons.  Any such modifications that are required due
to generally applicable regulatory requirements will be implemented by
Pearsalls as quickly as commercially reasonable and at Pearsalls’ expense;
provided that, changes specific to a particular Product that may be required by
a Regulatory Authority for the manufacture, assembly, distribution or use of
such Product shall be implemented pursuant to the Change Control process set
forth in Section 3.1.  Any such
modifications that are required or desired for reasons other than generally
applicable regulatory requirements may result in changes to the Terms of Sale
for such Product, and subject to the parties’ agreement to such changes, shall
be implemented by Pearsalls as quickly as commercially reasonable.  Subject to the foregoing, all modifications
to Product and Packaging Specifications shall be implemented pursuant to the
Change Control process set forth in Section 3.1.  In the event that a change in regulatory
requirements for a particular jurisdiction would make unlawful the sale or use
in such jurisdiction of a Product not manufactured in compliance therewith,
Pearsalls shall cease manufacture of such Product for such jurisdiction until
in compliance with such changed regulatory requirements.


 


2.2           Document
Transfer.  Pearsalls shall supply to
NuVasive and advise NuVasive in writing within ten (10) days of all material
final changes (i.e., not in draft form) to the items specified in Sections
2.2.1 and 2.2.2:


 


2.2.1        all
plans, drawings and all other documents associated with the manufacture of
Products under this Agreement, as such documents are created by or on behalf of
Pearsalls and become available; and


 


2.2.2        a
list of all suppliers and other contributors, with full contact information,
that supply raw materials, compositions thereof, fabricated products, technical
designs or information (including know-how) and all other inputs used in the
manufacture of Products.


 


2.3           Regulatory
Assistance.  Pearsalls shall
cooperate, as reasonably requested by NuVasive, to assist NuVasive in obtaining
all necessary regulatory approvals for the manufacture and sale of the
Products.  Pearsalls shall bear the cost
of such cooperation to the extent related to the provision of manufacturing
information, and NuVasive shall bear the reasonable out of pocket cost of all
other such cooperation by Pearsalls; provided that, Pearsalls shall not be
required to spend more than 200 man-hours per year on any of such efforts
without reasonable compensation by NuVasive for all time spent in assisting
NuVasive in excess of such yearly limit.


 


3.             CHANGE
CONTROL


 


3.1           Changes
to Product and Packaging Specifications. 
NuVasive may make changes to the Product and Packaging Specifications
that are not Material Changes at any time


 


6





















 


upon written notice to
Pearsalls, and Pearsalls shall implement such changes promptly after receipt of
such notice from NuVasive. 
Notwithstanding any provision herein to the contrary, to be effective,
notice of a change requested by NuVasive must contain a complete description of
such change that is sufficiently detailed to enable Pearsalls to assess the
nature and scope of the modifications required to implement such change.  If the notice of a requested change does not
contain sufficient information to enable Pearsalls to assess the potential
impact of such change, Pearsalls shall notify NuVasive and the parties shall
work together in good faith to develop or acquire the necessary
information.  Promptly after receipt of
notice of a requested change and the information necessary to assess its
potential impact, Pearsalls shall notify NuVasive whether or not the requested
change would be a Material Change.  With
respect to a Material Change, the parties will work together in good faith to
agree upon (a) a cost-effective method to implement the requested change,
and (b) appropriate changes to the Terms of Sale for the Product,
including changes to the pricing consistent with the Pricing Formula.  Finally, the parties will develop a “Change
Order” that includes a detailed and complete description of the change to
be implemented and specifies all changes to the Terms of Sale for the
Product.  Material Changes will be
implemented after execution of a Change Order, in accordance with the terms of
such Change Order.  In the event
Pearsalls desires to suggest a change to the Product and Packaging
Specifications, if it is not a Material Change, Pearsalls shall notify NuVasive
accordingly and implement such change once it has received NuVasive’s written
consent for the change.  If it is a
Material Change, Pearsalls shall notify NuVasive and provide a Change Order for
such change and the change will be implemented only after both parties have
executed the Change Order.


 


3.2           Change
to Non-Pricing Terms of Sale based on Material Change Experienced by Pearsalls.  In the event of any Material Change
experienced by Pearsalls or reasonably anticipated by Pearsalls that, in the
reasonable opinion of Pearsalls, would affect the commercial reasonableness of
any of the Terms of Sale, other than price, for one or more Products, Pearsalls
shall notify NuVasive of the Material Change and the required changes to the
Terms of Sale for each affected Product. 
The description of the Material Change submitted by Pearsalls to NuVasive
shall be sufficiently detailed to enable NuVasive to assess the changes
necessary to ensure the commercial reasonableness of the Terms of Sale for each
Product impacted by such change.  
The parties will work together in good faith to agree upon modifications
to the non-pricing Terms of Sale for the Product and/or the Product or
Packaging Specifications and other factors that impact the supply of the
Product.  The parties will develop a
Change Order that includes a detailed and complete description of the changes
to be implemented and specifies all changes to the Terms of Sale for each
affected Product.  For the avoidance of
doubt, the parties agree that changes to pricing shall be made only in
accordance with Section 8.1.2, or otherwise as mutually agreed by the parties.


 


3.3           Implementation
of Change Orders.  Once a Change
Order has been executed by both parties, Pearsalls shall perform the work
specified in the Change Order in accordance with its terms and any revisions to
the Terms of Sale shall be effective immediately or as otherwise specified in
the Change Order. Each Change Order executed by Pearsalls and NuVasive will be
incorporated into and constitute an amendment to this Agreement.  Unless otherwise specified in the applicable
Change Order, the terms of any


 


7





















 


Change Order will take
precedence over any inconsistent provisions set forth in this Agreement, but
only with respect to the Products that are the subject of the Change Order.


 


4.             MANUFACTURE
AND SUPPLY


 


4.1           Requirements;
Manufacture of Products.  During the
Term and subject to the terms and conditions set forth herein, (a) Pearsalls
shall manufacture and supply all of NuVasive’s requirements of Cervical Spine
Products in the Territory, including Cervical Spine Products for clinical studies,
demonstration/sample purposes and commercial sale, and (b) except as otherwise
provided herein, NuVasive shall purchase all of its requirement for Cervical
Spine Products in the Territory exclusively from Pearsalls, including Cervical
Spine Products for clinical studies, demonstration/sample purposes and
commercial sale.  Further, Pearsalls
shall manufacture and supply the Nottingham Rotator Cuff Product for NuVasive
for the price specified in Exhibit C, in accordance with appropriate
other Terms of Sale agreed by the parties and subject to the terms hereof, and
shall manufacture and supply Other Products for NuVasive upon mutual written
agreement of the parties and subject to the terms hereof; provided, however,
that such supply shall be on a non-exclusive basis.   For the avoidance of doubt, NuVasive shall
have the right in its sole discretion and at all times to manufacture, and to
use third parties to manufacture and supply all or part of NuVasive’s
requirements for the Nottingham Rotator Cuff Product and Other Products.


 


4.2           Forecasts.  Upon commencement of clinical studies for the
Cervical Spine Product or within a commercially reasonable period prior to the
first order for Products, at least thirty (30) days prior to the commencement
of each calendar quarter NuVasive shall furnish Pearsalls with a good faith
estimate of the quantities of each Product Category that NuVasive intends to
purchase from Pearsalls during each month of the upcoming four (4) calendar
quarters (the “Forecast”). 
Notwithstanding the foregoing, NuVasive shall notify Pearsalls of any
revision to a Forecast already furnished to Pearsalls as soon as commercially
practicable after NuVasive becomes aware that its likely or actual requirements
for one or more Product Categories have changed by ***percent (***%) or
more.  It is understood that the
quantities specified in the Forecasts are intended to be estimates only and
shall not be binding on NuVasive; provided however, that Pearsalls shall
not have any obligation to be prepared to supply NuVasive with more than *** percent
(***%) of NuVasive’s forecasted requirement for any particular Product Category
for any particular month, as specified in the most recent Forecast for such
month.


 


4.3           Orders.  NuVasive shall make all purchases by
submitting monthly purchase orders to Pearsalls which shall be firm and binding
and NuVasive shall use commercially reasonable efforts to ensure that all of
its requirements for Products in the month to which each such purchase order
relates are specified in such purchase order. 
Notwithstanding the foregoing, NuVasive may also submit additional firm
and binding purchase orders in any month. 
Each purchase order shall specify the quantity of each Product Category


 










*** Material has been omitted
pursuant to a request for confidential treatment.


 


8





















 


ordered, including,
without limitation whether and how many are ordered for demonstration/sample or
clinical study purposes.


 


4.3.1        To
the extent the quantity of Products ordered is consistent with the applicable
Forecast, Pearsalls shall deliver the ordered Products within thirty (30) days
after the receipt of the corresponding purchase order.  Pearsalls shall notify NuVasive within five
(5) days after receipt of a purchase order for a quantity that exceeds the
quantity in the applicable Forecast if Pearsalls is unable to timely produce
such excess quantity, and the parties will work together in good faith to
enable Pearsalls to meet the terms of the order as closely as possible.


 


4.3.2        Pearsalls
shall use commercially reasonable efforts to fill NuVasive’s purchase orders
for Products in any given month in excess of the quantities for that month
specified in the applicable Forecast; provided, however, that Pearsalls
shall not be obligated to provide NuVasive in any particular month with more
than *** percent (***%) in excess of the quantities of Products forecasted for
that month; and provided further that the mere failure, in and of itself, of
Pearsalls to meet any order in excess of the forcasted amounts and sizes shall
not bring into effect the provisions of Section 5.1 nor be a default for the
purposes of Section 12.2.3.


 


4.4           Supply.  Pearsalls shall supply the Products in
accordance with the Product Specifications then in effect.  Pearsalls shall manufacture the Products in
compliance with cGMP and applicable Quality Standards.


 


4.5           Subcontractors.  Pearsalls shall have the right to obtain
components for the manufacture and assembly of the Products from the suppliers
listed in Exhibit F and from such other third parties as may be approved
by NuVasive, such approval not to be unreasonably withheld or delayed.  Furthermore, NuVasive may require Pearsalls
to switch suppliers; provided that if NuVasive requires such change for
reasons unrelated to the past underperformance of the terminated supplier,
including such supplier’s failure to meet applicable quality standards, and the
change would be a Material Change, it must be implemented through a Change
Order in accordance with Article 3. 
Pearsalls shall not be responsible for any delays in delivery, any
non-conformity of Products to their Product Specifications or any other breach
of its obligations hereunder to the extent such delay, non-conformity or other
breach is the fault of a supplier selected solely by NuVasive.


 


4.6           Exclusivity.  Pearsalls shall be the exclusive supplier of
Cervical Spine Products to NuVasive during the Term, except as provided in
Article 5.


 


4.7           Delivery.


 


4.7.1        All
Products delivered to NuVasive shall be FCA (INCOTERMS 2000) NuVasive’s
identified delivery point, which shall be specified at the time that the
Products are ordered by NuVasive. 
Pearsalls shall use commercially reasonable


 










*** Material has
been omitted pursuant to a request for confidential treatment.


 


9





















 


efforts to deliver
ordered Products within the time frame agreed to by the parties and shall
arrange all insurance (in amounts that NuVasive shall reasonably determine) and
transportation as specified in writing from time to time by NuVasive.  NuVasive shall reimburse Pearsalls for the
cost of insurance and transportation.  To
the extent reasonably possible, all customs, duties, costs, taxes, insurance
premiums, and other expenses relating to such transportation and delivery shall
be prepaid by Pearsalls and added to the invoice.


 


4.7.2        Pearsalls
shall package the Products in accordance with their Packaging
Specifications.  Pearsalls will (i)
retain all original quality and testing records, which shall be in a form
reasonably acceptable for submission to all applicable Regulatory Authorities
and shall be available for inspection by NuVasive from time to time upon
reasonable notice to Pearsalls, and (ii) include with each shipment copies of
all applicable quality and testing records and a Certificate of Conformity
signed by a Pearsalls administrator with authority to bind Pearsalls that
manufacture was in accordance with applicable Quality Standards and that the
Products conform to the Product Specifications and have been packaged in
conformance with the Packaging Specifications.


 


4.8           Rejection
of Product in Case of Nonconformity.


 


4.8.1        Within
thirty (30) days of receipt of any shipment of Products, NuVasive may reject
any portion of such shipment which is (a) not conforming to the Product
Specifications or Packaging Specifications, (b) damaged during shipment as a
result of Pearsalls having not packaged the Products in conformance with the
Packaging Specifications or (c) adulterated or misbranded within the meaning of
the Federal Food, Drug and Cosmetic Act (the “Act”) or any similar
provisions of any other Applicable Law. 
If no notice of intent to reject is timely received by Pearsalls,
NuVasive shall be deemed to have accepted such delivery of Products; provided,
however, in the case of Products having latent defects which upon visual
examination, without opening the sterile packaging, by NuVasive upon receipt
could not reasonably have been discovered, NuVasive must give notice of NuVasive’s
intent to reject within thirty (30) days after discovery of such defects;
provided that such notice may in no event be given later than thirty (30) days
after the earlier of (a)  *** years from
the delivery date, and (b) the expiration date on the label of such Product.


 


4.8.2        In
order to reject a shipment, NuVasive must (a) give notice to Pearsalls of
NuVasive’s intent to reject the shipment within thirty (30) days of receipt
together with a written indication of the reasons for such rejection, and (b)
as promptly as commercially reasonable thereafter, provide Pearsalls with
notice of final rejection and the full basis therefor.


 


4.8.3        Pearsalls
shall replace as soon as reasonably practicable and at its cost, including
shipping and insurance, all Products that have been properly rejected by


 










***
Material has been omitted pursuant to a request for confidential treatment.


 


10





















 


NuVasive.  If such Products are not replaced within a
reasonable period of time, which shall not exceed twenty (20) business days,
NuVasive may replace such Products through a third party at Pearsalls’ cost.


 


4.9           Product
Warranty.


 


4.9.1        Pearsalls
represents and warrants to NuVasive that at the time of delivery to NuVasive
the Products will: (i) be new and conform in all respects to the Product
Specifications in effect at the time of shipment; (ii) have been manufactured
in accordance with the Quality Agreement and in accordance with the Quality
Standards and all other Applicable Law; (iii) be packaged in accordance with
the Packaging Specifications in effect at the time of shipment, (iv) not be
adulterated or misbranded within the meaning of the Act, and (v) be free and
clear of any and all liens and encumbrances of whatsoever nature and kind.  Pearsalls further represents and warrants
that (vi) all suture raw material used in the Products will be in compliance
with FDA approval requirements at the time of manufacture of such Products, and
(viii) the Products will be free from all defects in workmanship and materials
at the time of delivery to NuVasive and for the period from the date of
delivery until the earlier of (a) the expiration date on the labels of the
Products, and (b) *** years from the date of delivery of the Products, provided
that the Products are stored under the conditions stated on their labels.


 


4.9.2        EXCEPT
FOR THE FOREGOING WARRANTIES, PEARSALLS DOES NOT MAKE ANY OTHER WARRANTY,
EXPRESS OR IMPLIED, WITH RESPECT TO THE PRODUCTS, INCLUDING THE WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.  The foregoing limitation of warranties,
however, shall not in any way limit NuVasive’s rights to indemnification under
this Agreement.


 


4.10         Inventory.  Pearsalls shall manufacture and maintain at
all times during the Term a one (1) month inventory of Products and a two (2)
month inventory of components for Products, which inventory shall be adjusted
to meet the then-current one (1) month Forecast within a commercially
reasonable period of time after receipt of a new Forecast that is significantly
higher than the previous Forecast for such period; provided that, there will be
no inventory requirements for the Nottingham Rotator Cuff Product.  Notwithstanding the foregoing, the parties
agree that if a Forecast for a particular Product Category is more than ***%
higher than the previous Forecast for such Product Category or if NuVasive
makes a change in the Packaging Specifications, that Pearsalls shall have a
commercially reasonable time to adjust its inventory of Products and components
appropriately. In the event that a change in inventory required under this
Agreement will not be completed more than thirty (30) days after Pearsalls’
receipt of a new Forecast, Pearsalls shall notify NuVasive and the parties will
work together in good faith to minimize the commercial impact on NuVasive of
the time required to implement the change.


 










***
Material has been omitted pursuant to a request for confidential treatment.


 


11





















 


4.11         Location
of Manufacture.  Pearsalls shall
manufacture the Products only at its facility located in Taunton, United
Kingdom, unless the manufacture of Products at any different facility is
authorized in writing by NuVasive, which authorization shall not be unreasonably
withheld or delayed.


 


4.12         Supply
of Components by NuVasive.  NuVasive
shall have the right, in its sole discretion, to supply materials or components
of the Product to Pearsalls.  Pearsalls
shall not warrant under Section 4.9.1 of this Agreement those supply materials
or components supplied by NuVasive and shall not be responsible for any breach
of its obligations hereunder that may arise from NuVasive’s supply of materials
or components.


 


5.             ALTERNATIVE SUPPLY


 


5.1           Alternative
Supply.  Notwithstanding anything to
the contrary herein, NuVasive shall have the right, in its sole discretion, to
have all or part of its requirements for the Cervical Spine Product
manufactured by itself or third parties, subject to the terms of this
Agreement, upon thirty (30) days notice to Pearsalls under any of the circumstances
set forth in Sections 5.1.1, 5.1.2, 5.1.3, 5.1.4, 5.1.6 or 5.1.7:


 


5.1.1        In
any single month, Pearsalls is unable to deliver, for any reason, at least  *** percent (***%) of the lower of (a) the
quantity of Cervical Spine Products ordered by NuVasive for delivery during
such period, or (b) the aggregate quantity of the monthly requirement for
Cervical Spine Products forecasted for such month at least three (3) months
prior to the month in question, in each case without regard to Product
Category;


 


5.1.2        In
any three (3) consecutive months, or any four (4) months in any consecutive
twelve (12) month period, Pearsalls is unable to deliver, for any reason other
than Force Majeure, at least *** percent (***%) of the lower of (a) the
quantity of the Cervical Spine Products ordered by NuVasive for delivery during
such period, or, (b) the aggregate quantity of the monthly requirement for
Cervical Spine Products forecasted for such month at least three (3) months
prior to each month in question, in each case without regard to Product
Category;


 


5.1.3        In
any three (3) consecutive months, or any four (4) months in any consecutive
twelve (12) month period, Pearsalls is unable to deliver, for any reason constituting
Force Majeure, at least *** percent (***%) of the lower of (a) the quantity of
the Cervical Spine Products ordered by NuVasive for delivery during such
period, or, (b) the aggregate quantity of the monthly requirement for Cervical
Spine Products forecasted for such month at least three (3) months prior to
each month in question, in each case without regard to Product Category;


 










***
Material has been omitted pursuant to a request for confidential treatment.


 


12





















 


5.1.4        In
any two (2) consecutive months, or any three (3) months in any consecutive
twelve (12) month period, more than *** percent (***%) of the Cervical Spine
Products delivered to NuVasive either fail to conform to the Product
Specifications or are not packaged in accordance with the Packaging
Specifications; provided that, NuVasive must give prompt notice to Pearsalls
with respect to the first month in which such a failure occurs and such first
month shall not be counted for purposes of this Section 5.1.4 if Pearsalls
replaces the defective Products within thirty (30) days after receipt of such
notice.


 


5.1.5        If
at any time Pearsalls is not in material compliance with all of the Quality
Standards and fails to correct such non-compliance within thirty (30) days
after notice; provided that, Pearsalls shall have the right to cure a breach of
this Section 5.1.5 only once in any consecutive twelve (12) month period;


 


5.1.6        In
the event of a Change of Control of Pearsalls in which the successor in
interest is an entity that NuVasive deems (in its reasonable discretion) to be
a business competitor of NuVasive; provided that, this provision shall not
apply to any Change of Control in which the successor in interest is an entity
with respect to which NuVasive affirmed in writing to Pearsalls in advance of
the Change of Control not to be a business competitor of NuVasive;


 


5.1.7        Where
none of Sections 5.1.1, 5.1.2, 5.1.3, 5.1.4, 5.1.5 nor 5.1.6 apply, and
NuVasive elects to establish for its convenience alternative sources of supply,
whether in addition to or in lieu of Pearsalls, all Products manufactured by an
alternative source of supply shall be subject to the payments described in
Section 5.2.


 


5.1.8        Pearsalls
shall notify NuVasive immediately if any of the circumstances set forth in
Sections 5.1.1, 5.1.2, 5.1.3, 5.1.4, 5.1.5 or 5.1.6 appear likely to occur.


 


5.2           Alternative
Manufacturing License.  Pearsalls
hereby grants to NuVasive, effective upon the earlier of (i) the expiration or
termination of this Agreement, (ii) the exercise by NuVasive of its rights to
transfer all or part of the Cervical Spine Product manufacturing to a third
party consistent with Section 5.1 during the Term, or (iii) any event which
causes Pearsalls to undergo or be subject to any of the circumstances set forth
in Sections 12.2.1 or 12.2.2, a non-exclusive license under the Pearsalls
Technology to make, have made, offer for sale, sell, distribute, have
distributed, export, have exported, import and have imported, and otherwise
exploit the Products for all purposes in the Territory, including the right to
sublicense (the “Alternative Manufacturing License”).  Upon the occurrence of any condition set
forth in Sections 5.1.1, 5.1.2, 5.1.3, 5.1.4, 5.1.5, 5.1.6 or 5.1.7, the Alternative
Manufacturing License shall take effect upon thirty (30) days notice from
NuVasive, with no further consent or action required on either party’s
part.  The Alternative Manufacturing
License shall be royalty-free and no additional consideration shall be due to
Pearsalls thereunder except if NuVasive elects to establish an additional
source or sources of supply pursuant to Section 5.1.7, in which


 










***
Material has been omitted pursuant to a request for confidential treatment.


 


13





















 


 


case the fees set forth
in Exhibit D attached hereto shall be payable by NuVasive to Pearsalls.


 


5.3           Cooperation
and Assistance.  Upon NuVasive’s
exercise of its alternative manufacturing rights under Sections 5.1 and 5.2, Pearsalls
shall provide, subject only to NuVasive’s reimbursement of Pearsalls’ reasonable
out-of-pocket expenses, all information, cooperation and assistance reasonably
requested by NuVasive or its designees for the purpose of establishing the
permitted alternative manufacturing arrangements.  Such information, cooperation and assistance
shall include the communication and transfer of all know-how (including the
Manufacturing Know-How) under the control of Pearsalls or its Affiliates or
subcontractors relating to the design, manufacture, packaging and supply of the
Products.


 


6.             OWNERSHIP


 


6.1           Intellectual
Property.  As between the parties,
NuVasive exclusively shall have all right, title and interest in any Inventions
made or conceived or reduced to practice solely by or on behalf of NuVasive or
the parties jointly in the course of performing this Agreement.  For those Inventions solely conceived by or
on behalf of NuVasive or jointly conceived by the parties, NuVasive hereby
grants Pearsalls a non-exclusive, royalty-free license to make, use, have made,
export and supply such Inventions during the Term anywhere in the world either
for or at the direction of NuVasive.  For
Inventions solely conceived by Pearsalls, Pearsalls hereby grants NuVasive an
irrevocable, perpetual,  royalty-free
sole license with right of sublicense to make, use, have made, export, offer
for sale, and sell such Inventions anywhere in the world; provided that, such
license shall terminate automatically in the event that Pearsalls exercises any
Right of Reversion that arises under the Asset Purchase Agreement.  For purposes of the foregoing license grant, “sole”
shall mean exclusive except as to Pearsalls’ use of such Inventions on its own
behalf or within its manufacturing operations. 
Pearsalls agrees that it shall not grant any third-party licenses under
the Inventions, or otherwise allow any third parties to use, the Inventions,
unless the license to NuVasive has terminated as provided above.


 


6.2           Patent
Filings.


 


6.2.1        NuVasive,
has the right, but not the obligation to file all patent applications relating
to the Inventions conceived solely by or on behalf of NuVasive or jointly by or
on behalf of the parties.


 


6.2.2        Pearsalls
has the right, but not the obligation to file all patent applications relating
to the Inventions conceived solely by or on behalf of Pearsalls.  If Pearsalls for any reason determines not to
file or continue prosecution of a given patent application, it shall promptly
notify NuVasive, and NuVasive shall thereafter at its sole expense succeed to
the rights in respect of such patents issuing thereon.


 


6.3           Assignment.  Pearsalls hereby agrees to make any
assignments necessary to accomplish the ownership provision set forth for the
jointly conceived Inventions in


 


14





















 


Section 6.1 and shall
promptly sign all documents and provide, at NuVasive’s expense, information
reasonably requested by NuVasive in connection with the patent applications as
described in Section 6.2.  In interpreting
Section 6.1, anything made or conceived or reduced to practice by an employee
or contractor of Pearsalls in the course of performance under this Agreement
will be deemed so made or conceived or reduced to practice by Pearsalls; and
Pearsalls, as of the Effective Date and throughout the Term, has and will have
appropriate agreements with all such employees and contractors necessary to
fully effect the provisions of this Section. 
NuVasive will have the exclusive right to, and, at NuVasive’s expense,
Pearsalls agrees to assist NuVasive in every proper way (including becoming a
nominal party) to, evidence, record and perfect the assignment and to apply for
and obtain recordation of and from time to time enforce, maintain and defend
such proprietary rights.  In the event
that NuVasive is unable for any reason whatsoever to secure Pearsalls’
signature to any document it is entitled to under this Section, Pearsalls
hereby irrevocably designates and appoints NuVasive and its duly authorized
officers and agents, as its agents and attorneys-in-fact to act for and in its
behalf and instead of Pearsalls, to execute and file any such document and to
do all other lawfully permitted acts to further the purposes of the foregoing
with the same legal force and effect as if executed by Pearsalls.


 


6.4           Enforcement
of Patent Rights.  NuVasive in the
case of all NuVasive Technology and all Inventions solely conceived by NuVasive
and jointly conceived by the parties, and Pearsalls in the case of all
Pearsalls Technology and all Inventions solely conceived by Pearsalls, shall
have the right, at its expense, to determine the appropriate course of action
to enforce such rights or otherwise abate the infringement thereof, to take (or
refrain from taking) appropriate action to enforce such rights, to control any
litigation or other enforcement action and to enter into, or permit, the
settlement of any such litigation or other enforcement action with respect to
such rights, and in good faith shall consider the interests of the other party,
if any, in so doing.  In the case of
actions by Pearsalls to enforce the Pearsalls Technology, NuVasive shall have
the right to participate fully with Pearsalls in the conduct of the action,
including any settlement discussions or decisions, at NuVasive’s expense and
with counsel of its choice; provided that, only Pearsalls shall make decisions
with respect to settlements that result in any payment by Pearsalls or the
imposition of any other obligation or restriction on Pearsalls, including an injunction.  Notwithstanding the foregoing, NuVasive and
Pearsalls shall fully cooperate with each other in any action to enforce any
such rights.


 


7.             LICENSES


 


7.1           NuVasive
License to Pearsalls.  Subject to the
terms and conditions of this Agreement and for the Term, NuVasive hereby grants
to Pearsalls and its Affiliates a revocable, royalty-free, worldwide,
nonexclusive, nontransferable, nonassignable license, with no right to
sublicense without NuVasive’s prior written consent, to use the NuVasive
Technology, including the Ellis Licence and the Inventions, solely to
manufacture, assemble and deliver to NuVasive or to its designated agents the
Products pursuant to Section 4 hereof.


 


15





















 


7.2           Background
License.  With respect to any
Pearsalls Invention relating to a Product that is developed or assigned
hereunder and is based on, or incorporates, or is an improvement or derivative
of, or cannot be reasonably made, used, modified, maintained, supported,
reproduced or distributed without using or violating, any rights of Pearsalls
to the Pearsalls Technology or any other rights of Pearsalls, Pearsalls hereby
grants NuVasive a perpetual, worldwide, royalty-free, nonexclusive,
sublicensable right and license (the “Background License”) to exploit
and exercise all such rights in support of NuVasive’s or its sublicensees’
exercise or exploitation of such Invention only for purposes of making, using,
maintaining, supporting, reproducing, offering to sell, selling, distributing
or otherwise exploiting the related Product.


 


8.             REPORTS
AND PAYMENTS


 


8.1           Payments
for Manufacture of Products.


 


8.1.1        In
connection with the manufacture and supply of Products hereunder, NuVasive
shall pay Pearsalls an amount as set forth on Exhibit C.


 


8.1.2        In
the event that the total cost of manufacturing any of the Products increases
from the applicable Base Cost for such Product by more than twenty-five percent
(25%) as a result of factors outside the reasonable control of Pearsalls (e.g.,
inflationary increases over time or a Force Majeure event as defined in Section
14), as reasonably documented in writing by Pearsalls, the parties shall
negotiate in good faith a reasonable increase in the price payable by NuVasive
for the Product, as well as an appropriate change in the Product’s Base
Cost.  If the parties are unable to reach
an agreement within thirty (30) days after written notice by Pearsalls to
NuVasive, then either party may refer the issue to an expert reasonably agreed
upon by the parties; provided that, if the parties cannot agree on an expert
within thirty (30) days after the notice was received, the parties shall engage
in the dispute resolution process described in Section 16.3.


 


8.2           Payment
Terms.  All payments to Pearsalls
under this Agreement are to be made in US dollars and shall be paid within
thirty (30) days of invoice, which Pearsalls shall issue, as applicable,
monthly or when or after it ships the Products to NuVasive or its
designee.  Interest at a monthly rate of
one percent (1%) shall accrue on all payments that are not the subject of a
dispute in good faith and are not made within the aforementioned thirty (30)
day period.  Further, in the event that
NuVasive fails to pay any material portion of an invoice that is not the subject
of a dispute in good faith for more than sixty (60) days after the date of such
invoice, Pearsalls may suspend its obligation to manufacture and deliver
Products to NuVasive until such time as NuVasive is no longer in arrears.


 


9.             COMPLIANCE WITH LAW; REGULATORY AFFAIRS;
RECALLS


 


9.1           Compliance
with Law.  Each party shall maintain
in full force and affect all necessary licenses, permits and other
authorizations required by law to carry out its duties and obligations under
this Agreement.  Each party shall comply
with all Applicable Laws


 


16





















 


in performing its
obligations and exercising its rights under this Agreement.  Pearsalls and NuVasive each shall keep all
records and reports required to be kept by Applicable Law.  The parties will reasonably cooperate with
one another with the goal of ensuring full compliance with Applicable Law.  Each party will cooperate with the other to
provide such letters, documentation and other information on a timely basis as
the other party may reasonably require to fulfill its reporting and other
obligations under Applicable Laws to applicable Regulatory Authorities.  Except for such amounts as are expressly
required to be paid by a party to the other under this Agreement, each party
shall be solely responsible for any costs incurred by it to comply with its
obligations under Applicable Laws.


 


9.2           Reasonable
Cooperation.  Pearsalls shall use its
reasonable and diligent efforts to (a) during clinical trials, support all
modifications to Products to the extent and in such manner as NuVasive may
request in an effort to obtain regulatory approval of such Products, and
(b) supply such drawings and specifications of the Products as NuVasive
may reasonably require to evaluate and obtain regulatory approval of the
Products; provided, however, that Pearsalls shall not be required to (i)
pay money (other than as expressly required pursuant to this Agreement), or
(ii) assume any other material obligation not otherwise required to be assumed
by this Agreement.


 


9.3           Maintenance
and Inspection of Facilities and Records. 
Pearsalls shall maintain at its sole cost all government approvals of
its facilities, including all Regulatory Authority approvals, shall maintain
adequate premises, equipment, and experienced and competent personnel, and
shall maintain accurate and complete records of all methods, tests, procedures
and results of its work, that are required to manufacture and assemble the
Products in compliance with cGMP and applicable Quality Standards.  NuVasive shall have the right, upon
reasonable notice and during regular business hours, to conduct quality
assurance audits of the facilities used by Pearsall for the manufacture of
Products and records of Pearsalls and of all third parties whose facilities are
used for the manufacture of any portion of the Product for compliance with
Regulatory Authority standards, including cGMP. 
Pearsalls will also (a) inform NuVasive in writing in advance of any
proposed inspection by any governmental agency of the Pearsalls facilities
where the Product is manufactured or assembled and of the results of any such
inspection and (b) permit NuVasive to participate in any such inspection of the
Pearsalls facilities.


 


9.4           Adverse
Events Reporting and Product Information Requests.


 


9.4.1        Adverse
Reaction Reporting.  During the Term,
each party shall immediately, but in any case within twenty-four (24) hours,
notify the other party, by facsimile or telephone, of any adverse patient
experience involving the Product of which it becomes aware. 


 


9.4.2        Product
Information Requests. Information concerning any complaints, inquiries
and/or information requests from consumers, physicians, or other third parties
regarding the Product shall be forwarded to NuVasive within three (3) business
days of Pearsalls’ receipt of the information and/or inquiry. NuVasive


 


17





















 


shall respond to such
complaints and inquiries, if necessary, in accordance with its usual and
customary procedures. NuVasive shall supply Pearsalls, for Pearsalls’
information purposes only, with copies of its standard response information for
the Products as well as any updates thereto.


 


9.4.3        Governmental
Reports. NuVasive shall be responsible for filing with the appropriate
Regulatory Authorities any required adverse reaction reports that it receives
directly from third parties and any adverse reaction reports that it receives
through Pearsalls.


 


9.5           Recalls.


 


9.5.1        Recalls.
In the event (i) any government authority issues a request, directive or order
that a Product be recalled, or (ii) a court of competent jurisdiction orders
such a recall, or (iii) NuVasive reasonably determines that a Product should be
recalled, the parties shall take all appropriate corrective actions. In the
event that such recall results from the manufacture, packaging, storage,
testing and handling of the Product by Pearsalls and such recall or event is
due solely to Pearsalls’ negligence or willful misconduct, or Pearsalls’
failure to manufacture Products according to the Product Specifications or
package Products according to the Packaging Specifications, Pearsalls shall be
responsible for all reasonable expenses of the recall. In all other cases,
NuVasive shall be responsible for the expenses of the recall. For the purposes
of this Agreement, the expenses of recall shall include, without limitation,
the expenses of notification and destruction or return of the recalled Product,
and the amounts paid by NuVasive for the Products recalled.


 


9.5.2        Recall
Coordination. All coordination of any recall or field correction activities
involving Products shall be handled by NuVasive.


 


9.5.3        Recall
Records. Each of the parties shall maintain complete and accurate recall
records of all the Products sold by it for such periods as may be required by
Applicable Law, but in no event less than three (3) years after the date of the
recall.


 


10.           REPRESENTATIONS
AND WARRANTIES


 


10.1         Corporate
Existence.  Pearsalls hereby
represents and warrants to NuVasive that Pearsalls is a private company limited by shares duly formed, validly existing
and in good standing under the laws of England
and Wales.  NuVasive hereby
represents and warrants to Pearsalls that NuVasive is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware.


 


10.2         Corporate
Power.  Each party hereby represents
and warrants to the other party that such party (a) has the corporate
power and authority and the legal right to own and operate its property and
assets, to lease the property and assets it operates under lease, and to carry
on its business as it is now being conducted and (b) is in compliance with all
requirements of Applicable Law, except to the extent that any noncompliance
would not


 


18





















 


have a material adverse
effect on the properties, business, financial or other condition of such party
and would not materially adversely affect such party’s ability to perform its
obligations under this Agreement.


 


10.3         Authorization
and Enforcement of Obligations.  Each
party hereby represents and warrants to the other party that such party (a) has
the corporate power and authority and the legal right to enter into this
Agreement and to perform its obligations hereunder and (b) has taken all
necessary corporate action on its part to authorize the execution and delivery
of this Agreement and the performance of its obligations hereunder.  This Agreement has been duly executed and
delivered on behalf of such party, and constitutes a legal, valid, binding
obligation, enforceable against such party in accordance with its terms.


 


10.4         No
Conflict.  Each party hereby
represents and warrants to the other party that the execution and delivery of
this Agreement and the performance of such party’s obligations hereunder (a) do
not conflict with or violate any requirement of Applicable Law or any
contractual obligation of such party and (b) do not conflict with, or
constitute a default or require any consent under, any contractual obligation
of such party.


 


11.           CONFIDENTIALITY


 


11.1         Nondisclosure
Obligations.  Except as otherwise
provided in this Section 11, both parties shall maintain in confidence, and use
only for purposes of this Agreement, (a) all information and data resulting
from or related specifically to the manufacture of Products and (b) all
information and data not described in clause (a) above but supplied by the
other party (i) under this Agreement and marked “Confidential” or (ii) prior to
the Effective Date under the terms of any nondisclosure agreements between the
parties.  For purposes of this Section
11, information and data described in clause (a) or (b) above shall be referred
to as “Confidential Information.” 
Notwithstanding the foregoing, the parties acknowledge and agree that
information and data of Pearsalls that is not identified as specific to any
Product or group of Products and results from or is related in general to the
manufacturing operations of Pearsalls shall not be Confidential Information.  Data and information transferred by Pearsalls
to NuVasive pursuant to this Agreement and pertaining only to a specific
Product including, but not limited to, its composition, manufacture, testing,
handling or otherwise, shall be the Confidential Information of NuVasive.


 


11.2         Permitted
Disclosures.  To the extent it is
reasonably necessary or appropriate to fulfill its obligations or exercise its
rights under this Agreement, (a) a party may disclose Confidential Information
it is otherwise obligated under this Section 11 not to disclose to its
Affiliates, sublicensees, consultants, outside contractors and clinical
investigators, on a need-to-know basis, provided that such persons have entered
into a written agreement obligating them to keep the Confidential Information
confidential and not use the Confidential Information for the same time periods
and to the same extent as such party is required under this Agreement; and (b)
a party may disclose such Confidential Information to government or other
Regulatory Authorities to the extent that such disclosure is required by
Applicable Law or court order, or is reasonably necessary to


 


19





















 


obtain patents or
authorizations to conduct clinical trials with, and to commercially market the
Product, provided that the disclosing party shall provide written notice to the
other party and sufficient opportunity to object to such disclosure or to
request confidential treatment thereof.


 


11.3         Information
that is Not Confidential.  The
obligation not to disclose or use Confidential Information shall not apply to
any part of such Confidential Information that (a) is or becomes patented,
published or otherwise part of the public domain other than by acts of the
party obligated not to disclose such Confidential Information or its Affiliates
or sublicensees in contravention of this Agreement; (b) is disclosed to the
party desiring to make such use or disclosure or to its Affiliates or
sublicensees by a third party, provided such Confidential Information was not
obtained by such third party directly or indirectly from the other party under
this Agreement on a confidential basis; (c) prior to disclosure under this
Agreement, was already in the possession of the party desiring to make such use
or disclosure or to its Affiliates or sublicensees, provided such Confidential
Information was not obtained directly or indirectly from the other party under
this Agreement; or (d) is disclosed in a press release agreed to by both
parties hereto, which agreement shall not be unreasonably withheld by either
party.  Notwithstanding the foregoing,
all Confidential Information designated as owned by or assigned to a party in
connection with this Agreement shall be deemed Confidential Information of such
party whether or not it was disclosed by such party to the other and exception
(c) above will not be applicable thereto.


 


11.4         Terms
of this Agreement.  Neither party
shall disclose any terms or conditions of this Agreement to any third party
without the prior consent of the other party, except as required by Applicable
Law or court order, provided that the party required to make such disclosure
shall provide written notice to the other party as soon as practicable in order
to afford such party an opportunity to avoid the disclosure or seek a
protective order.


 


12.           TERM
AND TERMINATION


 


12.1         Term
This Agreement shall take effect on the Effective Date and, unless terminated
earlier pursuant to this Section 12, shall remain in effect until *** (the “Term”)
and thereafter be automatically renewed for successive one (1) month terms,
unless either party gives thirty (30) days’ notice of termination prior to the
end of the then-current term. 
Immediately after the end of the initial Term, the then-current prices
for the Cervical Spine Product shall be negotiated by the parties.


 


12.2         Termination
for Cause.  Either party may
terminate this Agreement, at its option, upon the occurrence of any of the
following:


 


12.2.1      The
other party (a) seeks the liquidation, reorganization, dissolution or winding
up of itself (other than dissolution or winding up for the purposes of solvent
reorganization or amalgamation) or the composition or readjustment of all or
substantially all of its debts, (b) applies for or consents to the appointment
of,


 










***
Material has been omitted pursuant to a request for confidential treatment.


 


20





















 


or the taking of
possession by, a receiver, custodian, trustee or liquidator (or the equivalent
under the laws of any foreign jurisdiction) of itself or of all or
substantially all of its assets, (c) makes a general assignment for the benefit
of its creditors, (d) commences a voluntary case under the United States
Bankruptcy Code or any similar insolvency law of any foreign jurisdiction, (e)
files a petition seeking to take advantage of any other law relating to
bankruptcy, insolvency, reorganization, winding-up or composition or
readjustment of debts, or (f) adopts any resolution of its Board of Directors
or stockholders for the purpose of effecting any of the foregoing; or


 


12.2.2      A
proceeding or case is commenced without the application or consent of the other
party and such proceeding or case continues undismissed, or an order, judgment
or decree approving or ordering any of the following is entered and continues
unstayed in effect, for a period of ninety (90) days from and after the date
service of process is effected upon the other party, seeking (a) its
liquidation, reorganization, dissolution or winding up, or the composition or
readjustment of all or substantially all of its debts, (b) the appointment of a
trustee, receiver, custodian, liquidator or the like of itself or of all or
substantially all of its assets, or (c) similar relief under any law relating to
bankruptcy, insolvency, reorganization, winding up or composition or
readjustment of debts; or


 


12.2.3      Upon
or after the breach of any material agreement, condition or covenant of this
Agreement, if the breaching party has not cured such breach within ninety (90)
days after written notice thereof from the other party.


 


12.3         Effect
of Expiration or Termination.


 


12.3.1      Expiration
or termination of this Agreement shall not relieve the parties of any
obligation accruing prior to such expiration or termination.  The provisions of Sections 1, 4.9.1(viii), 5,
6, 7.2, 8.2, 9.3, 9.4, 9.5, 11, 12, 13 and 16 shall survive the expiration or
termination of this Agreement.


 


12.3.2      Each
party will promptly return all Confidential Information and all materials or
documents embodying the Intellectual Property of the other (and all copies and
abstracts thereof) that it is not entitled to use under the surviving terms of
this Agreement.


 


12.3.3      Upon
the expiration or termination of this Agreement for any reason, except by Pearsalls
pursuant to Section 12.2;


 


(a)           NuVasive
shall have the right to exercise the Alternative Manufacturing License with no
obligation to pay any fees, royalties or other consideration to Pearsalls (or
its successor) under this Agreement, but NuVasive shall remain under obligation
to pay any remaining payments and royalties due under the Asset Purchase
Agreement;


 


(b)           Pearsalls
shall (i) transfer to NuVasive (or its designee) all documentation, relevant
Manufacturing Know-How and materials not already in


 


21





















 


NuVasive’s possession
that are reasonably necessary to enable NuVasive or such designee to
manufacture commercial quantities of the Products and (ii) comply with
applicable regulatory requirements in connection with such transfer.  The Parties shall use commercially reasonable
efforts to implement any technology transfers pursuant to this
Section 12.3.3 sufficiently in advance of any such termination event or
expiration; and


 


(c)           NuVasive
shall have the right to purchase: (i) Pearsalls’ inventory of finished
Products, if any, at the price set forth in the applicable Terms of Sale; and
(ii) Pearsalls’ stock of materials used in the manufacture of the Products at
the price paid by Pearsalls for such materials.


 


13.           INDEMNIFICATION


 


13.1         Pearsalls
Indemnification.  Pearsalls shall
indemnify NuVasive against any and all liability, damages, cost and expenses,
including reasonable attorneys’ fees, made against or sustained by NuVasive
arising from any third-party claim that arises from (i) Pearsalls’ gross
negligence or willful misconduct in the performance of its obligations
hereunder, (ii) Pearsalls’ failure to deliver Products in accordance with
Pearsalls’ warranties as provided in Section 4.9 of this Agreement, (iii) the
infringement by the Pearsalls Technology or any Invention that is made,
conceived or reduced to practice solely by Pearsalls of any Intellectual Property Rights of any third party; or
(iv) Pearsalls’ violation of applicable law.


 


13.2         NuVasive
Indemnification.  NuVasive shall
indemnify Pearsalls against any and all liability, damages, cost and expenses,
including reasonable attorneys’ fees, made against or sustained by Pearsalls
arising from any third-party claim that arises from the infringement by the
NuVasive Technology, excluding the Medical Device Intellectual Property, of any Intellectual Property Rights of any
third party.


 


13.3         Indemnity
Exclusions and Requirements. 
(a)  In order for an indemnified
party to be entitled to any indemnification provided for under this Agreement
in respect of, arising out of or involving a claim made by any third party
against the indemnified party (a “Third Party Claim”), the indemnified
party must notify the indemnifying party in writing of the Third Party Claim (a
“Third Party Claim Notice”) promptly following receipt by such
indemnified party of written notice of the Third Party Claim, which
notification, to be a valid Third Party Claim Notice (a “Valid Third Party
Claim Notice”), must be accompanied by a copy of the written notice, if
any, of the third party claimant to the indemnified party asserting the Third
Party Claim; provided, that the failure to provide such notice promptly shall
not affect the obligations of the indemnifying party hereunder except to the
extent the indemnifying party is prejudiced thereby.  The indemnified party shall deliver to the
indemnifying party copies of all other notices and documents (including court
papers), if any, received by the indemnified party relating to the Third Party
Claim.


 


(b)           The
indemnifying party shall have the right to defend against any such Third Party
Claim (including to conduct any proceedings or settlement negotiations) with


 


22





















 


counsel of its own
choosing.  The indemnified party shall
have the right to participate in the defense of any Third Party Claim
(including the right to participate in any settlement negotiations) and to
employ its own counsel (it being understood that the indemnifying party shall
control such defense and settlement negotiations), at its own expense, provided,
however, that if the indemnified party reasonably concludes, based on
reasonable advice from counsel, that the indemnifying party and the indemnified
party have adversely conflicting interests with respect to such Third Party
Claim, the reasonable fees and expenses of counsel to the indemnified party
solely in connection therewith shall be paid by the indemnifying party; provided,
however, that in no event shall the indemnifying party be responsible for
the fees and expenses of more than one counsel for all indemnified
parties.  Whether or not the indemnified
party participates in the defense of any Third Party Claim, the indemnified party
shall be entitled to reasonable notice of all court appearances and settlement
negotiations and, to the extent requested by the indemnified party, copies of
all proceedings filed with any governmental authority in connection with such
Third Party Claim.  Prior to the time the
indemnified party is notified by the indemnifying party as to whether the
indemnifying party will assume the defense of a Third Party Claim, the
indemnified party shall take all actions reasonably necessary to timely
preserve the collective rights of the parties with respect to such Third Party
Claim, including responding timely to legal process.  If the indemnifying party shall decline to
assume the defense of a Third Party Claim (or shall fail to notify the
indemnified party of its election to defend such Third Party Claim) within
thirty (30) days after the giving by the indemnified party to the indemnifying
party of a Valid Third Party Claim Notice with respect to the Third Party
Claim, the indemnified party shall defend against the Third Party Claim and the
indemnifying party shall be liable to the indemnified party for all reasonable
fees and expenses incurred by the indemnified party in the defense of the Third
Party Claim, including the reasonable fees and expenses of counsel employed by
the indemnified party, if and to the extent that the indemnifying party is
responsible to indemnify for such Third Party Claim.  Regardless of which party assumes the defense
of a Third Party Claim, the parties agree to cooperate with one another in
connection therewith.  Such cooperation
shall include providing records and information that are relevant to such Third
Party Claim, and making employees and officers available on a mutually
convenient basis to provide additional information and explanation of any
material provided hereunder and to act as a witness or respond to legal
process; provided, that the indemnifying party shall reimburse the indemnified
party for its reasonable out-of-pocket expenses incurred in connection with the
fulfillment of the indemnified party’s obligations under this sentence.  Whether or not the indemnifying party assumes
the defense of a Third Party Claim, the indemnified party shall not admit any
liability, consent to the entry of judgment with respect to, or settle,
compromise or discharge, such Third Party Claim without the indemnifying party’s
prior written consent (which consent shall not be unreasonably withheld,
delayed or conditioned), provided, however, that the indemnified party
may admit liability, consent to the entry of judgment with respect to, or
otherwise settle, compromise or discharge such Third Party Claim without the
consent of the indemnifying party if it releases the indemnifying party from
any liability with respect to the Third Party Claim, or if the indemnifying
party would have no liability with respect thereto.  If the indemnifying party assumes the defense
of any Third Party Claim, the indemnifying


 


23





















 


party shall have
the right to consent to the entry of judgment with respect to, or otherwise
settle, compromise or discharge, such Third Party Claim; provided, however,
that the indemnifying party shall not, without the prior written consent of the
indemnified party (which consent shall not be unreasonably withheld, delayed or
conditioned), consent to the entry of judgment with respect to, or otherwise
settle, compromise or discharge, any Third Party Claim if such judgment,
settlement, compromise or discharge involves equitable or other non-monetary
damages or otherwise requires the indemnified party or any of its Affiliates to
pay any amount to any Person, including the indemnifying party, or to take any
action or refrain from taking any action (other than the execution of a
customary release or covenant not to sue). 
Any final and non-appealable judgment entered or settlement agreed upon
with respect to a Third Party Claim shall be binding upon the indemnifying
party, and shall be paid within ten (10) days of the date of the relevant final
judgment or settlement agreement.


 


(c)           Incidental
and Consequential Damages.  EXCEPT
(a) FOR A PARTY’S LIABILITY FOR DEATH OR BODILY INJURY OF A PERSON, (b)
FRAUDULENT MISREPRESENTATION, (c) ANY LIABILITY THAT CANNOT BE EXCLUDED OR
LIMITED UNDER APPLICABLE LAW, (d) ANY INDEMNITY OBLIGATION HEREUNDER, OR (e) A
BREACH OF SECTION 11, NEITHER PARTY WILL BE LIABLE UNDER ANY CONTRACT,
NEGLIGENCE, STRICT LIABILITY OR OTHER THEORY FOR ANY INCIDENTAL, INDIRECT,
SPECIAL OR CONSEQUENTIAL DAMAGES SUCH AS LOSSES OF REVENUES, BUSINESS, GOODWILL
OR PROFITS WITH RESPECT TO ANY SUBJECT MATTER OF THIS AGREEMENT.


 


13.4         Insurance.  NuVasive and Pearsalls each shall obtain
liability insurance with respect to its activities contemplated by this
Agreement in such amounts as are customary for companies engaged in similar
activities.  NuVasive and Pearsalls shall
each provide evidence of such insurance to the other party upon reasonable
request and shall each maintain such insurance for so long as each continues to
conduct such activities, and thereafter for so long as each customarily
maintains insurance for itself covering similar activities.


 


14.           FORCE
MAJEURE


 


Neither
party shall be held liable or responsible to the other party nor be deemed to
have defaulted under or breached this Agreement for failure or delay in
fulfilling or performing any Term (except for a failure to pay money) when such
failure or delay is caused by or results from causes beyond the reasonable
control of the affected party including but not limited to unusually large
fluctuations or instability in the market for raw materials or components,
fire, floods, embargoes, war, acts of war (whether war be declared or not),
acts of terrorism, insurrections, riots, civil commotions, strikes, lockouts or
other labor disturbances, acts of God or acts, omissions or delays in acting by
any governmental authority or the other party (“Force Majeure”).


 


24





















 


15.           ASSIGNMENT


 


This
Agreement may not be assigned or otherwise transferred, nor, except as
expressly provided hereunder, may any right or obligations hereunder be
assigned or transferred by either party without the prior written consent of
the other party (which consent shall not be unreasonably withheld or delayed); provided,
however, that either party may, without such consent, assign this Agreement
and its rights and obligations hereunder in connection with the transfer or
sale of all or substantially all of its business relating to this Agreement, or
in the event of its merger or consolidation or Change of Control or similar
transaction if (a) the assignee has the financial wherewithal to perform its
obligations hereunder, as reasonably demonstrated by such assignee, or (b) the
assignment does not relieve the assignor of any of its obligations under this
Agreement.  In any case, the assignee
shall execute a counterpart of this Agreement agreeing to be bound by the
provisions hereof; in the case of (b), the counterpart shall acknowledge that
it shall be jointly and severally liable with the assignor and any other
assignee of such assignor for all the obligations of the assignor
hereunder.  Notwithstanding any provision
herein to the contrary, NuVasive shall have the right to establish an
alternative source of supply, as provided in Section 5.1.6, and to have the
Alternative Manufacturing License take effect, as specified in Section 5.2, in
the event of any Change of Control of Pearsalls in which (a) the successor in
interest is an entity that NuVasive deems (in its reasonable discretion) to be
a business competitor of NuVasive, and (b) NuVasive did not affirm in writing
to Pearsalls in advance of the Change of Control that the successor in interest
is not a business competitor of NuVasive.


 


16.           MISCELLANEOUS


 


16.1         Notices.  All notices, requests, consents, instructions
or other communications or other documents required or permitted hereunder
shall be in writing and shall be deemed given or delivered when delivered
personally via telecopier or five (5) days after being sent, when sent by
registered or certified mail, or one (1) day after being sent, when sent by
overnight courier, addressed as follows:


 


If to NuVasive, to:


 


NuVasive, Inc.


4545 Towne Centre Court


San Diego, California 92121


United States


Attention:              Jason
Hannon, Vice President, Legal


Facsimile:               (858)
909-2000


 


with a copy to:


 


Heller Ehrman LLP


4350 La Jolla Village Drive, 7th Floor


San Diego, CA  92122


United States


Attention:              Michael
S. Kagnoff, Esq.


Facsimile:               (858)
450-8499


 


25





















 


If to Pearsalls, to:


 


Pearsalls Limited


Tancred Street, Taunton


Somerset, TA1 1RY


United Kingdom


Attention:              D.
Lawson Lyon, Managing Director


Facsimile:               011-1823-336-824


 


with a copy to:


 


Gardner Carton & Douglas LLP


191 N. Wacker Drive, Suite 3700


Chicago, Illinois  60606-1698


United States


Attention:              Cathy
Kiselyak Austin


Facsimile:               (312)
569-3455


 


or to such other address as such party may indicate by a notice delivered
to the other parties hereto.


 


16.2         Severability.  In the event that any provision of this
Agreement shall be determined to be illegal or unenforceable, that provision
will be limited or eliminated to the minimum extent necessary so that this
Agreement shall otherwise remain in full force and effect and enforceable.


 


16.3         Applicable
Law; Jurisdiction and Venue.  Any
dispute or claim arising out of or in connection with this Agreement will be
finally settled by binding arbitration in New York, New York, in accordance
with the then-current Commercial Arbitration Rules of the American Arbitration
Association by one (1) arbitrator appointed in accordance with said rules.  The arbitrator shall apply Delaware law, without
reference to rules of conflicts of law or rules of statutory arbitration, to
the resolution of any dispute and shall document his or her decision in
writing.  Judgment on the award rendered
by the arbitrator may be entered in any court having jurisdiction thereof.  Notwithstanding the foregoing, the parties
may apply to any court of competent jurisdiction for preliminary or interim
equitable relief, or to compel arbitration in accordance with this paragraph,
without breach of this arbitration provision.


 


16.4         Injunctive
Relief.  Notwithstanding Section
16.3, either party shall be entitled to seek injunctive relief in any court of
competent jurisdiction for a breach or threatened breach of Section 11 or any
infringement of such party’s Intellectual Property Rights.


 


16.5         Entire
Agreement.  This Agreement contains
the entire understanding of the parties with respect to the subject matter
hereof.  All express or implied
agreements and understandings, either oral or written, heretofore made are
expressly superseded by this Agreement. 
This Agreement may be amended, or any term hereof modified, only by a
written instrument duly executed by both parties hereto.


 


26





















 


16.6         Headings.  The captions to the Sections hereof are not a
part of this Agreement, but are merely guides or labels to assist in locating
and reading the Sections hereof.


 


16.7         Independent
Contractors.  Pearsalls and NuVasive
each acknowledge that they are independent contractors and that the
relationship between them shall not constitute a partnership, joint venture, or
agency or employer/employee relationship. 
Neither Pearsalls nor NuVasive shall have the authority to make any
statements, representations or commitments of any kind, or to take any action,
which shall be binding on the other party, without the prior consent of the
other party to do so.


 


16.8         Waiver.  The waiver by either party hereto of any
right hereunder or of the failure to perform or of a breach by the other party
shall not be deemed a waiver of any other right hereunder or of any other
breach or failure by the other party whether of a similar nature or otherwise.


 


16.9         Construction
of Agreement.  This Agreement has
been negotiated by the parties hereto and their attorneys.  Therefore, each party hereby waives the
application of any law, regulation, holding or rule of construction providing
that ambiguities in an agreement or other document will be construed against
the party drafting such agreement or document.


 


16.10       Counterparts.  This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.  Facsimile signatures shall be deemed to have
the same effect as their originals.


 


16.11       Press
Releases.  Except to the extent
necessary under Applicable Law, each party agrees that it will not make any
press release or other public statement relating to the existence or substance
of this Agreement or the matters addressed herein without the prior written
consent of the other party.


 


16.12       Non-Compete.  Pearsalls agrees that during the Term it will
not develop, manufacture (for itself or any third party), have manufactured,
market or sell any product or component thereof that is or could be competitive
with the Product.


 


[REMAINDER OF THIS PAGE INTENTIONALLY LEFT
BLANK]


 


27





















 


IN
WITNESS WHEREOF, the parties have executed this Agreement to be effective as of
the Effective Date.


 


	
   

  	
   

  	
  NUVASIVE, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Alexis V. Lukianov

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Chairman and CEO

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Date:

  	
  8/4/05

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  PEARSALLS LIMITED

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Richard C. Adloff

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Sr. V.P., Finance

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Date:

  	
  August 4, 2005

  	
   

  
								



 


 


SIGNATURE PAGE TO EXCLUSIVE MANUFACTURING AGREEMENT


 


28





















 


EXHIBIT A


 


PRODUCT


 


I.              CERVICAL
SPINE PRODUCT


 


The Cervical Spine Product has an embroidered
polyester jacket that encapsulates a pre-moulded silicone core.   The device is a replacement not just for the
nucleus but for the entire disc.  It is
made in a number of sizes.  Extensions of
the encapsulating jacket are used to create fixation flanges to enable the
secure initial mechanical fixation of the device.  The jacket is manufactured from polyester
suture material using a computer controlled embroidery machine.


 





 


Cervical Spine Product Fixated by Four Screws


 


II.            NOTTINGHAM
ROTATOR CUFF PRODUCT


 


The Nottingham Rotator Cuff Product is a CE marked
device for the augmentation of a direct repair of a torn rotator cuff.  The device is manufactured from polyester
suture material using a computer controlled embroidery machine.


 


B-1





















 





 


The Two Sizes of Augmentation Device


 


At the top is the 20mm device and below is the 30mm device,
these dimensions referring to the width of the base of the mesh section at the
left of the photograph.  Also shown are
the three fixation holes and the introducing leader.


 





 


Mounted Nuttingham Rotator Cuff Product


 


2





















 


EXHIBIT B


 


SPECIFICATIONS


 


I.              CERVICAL
SPINE PRODUCT SPECIFICATIONS


 


COMPONENT SPECIFICATION


 


***



***


 


***


 










*** Material has been omitted
pursuant to a request for confidential treatment.


 


3





















 


***



***


 


***


 










*** Material has been omitted
pursuant to a request for confidential treatment.


 


4





















 


PCD 18178 Cervical
Spine Product Size         ***


PCD 18177 Cervical
Spine Product Size         ***


PCD 18166 Cervical
Spine Product Size         ***


PCD 17168 Cervical
Spine Product Size         ***


PCD 17167 Cervical
Spine Product Size         ***


PCD 17166 Cervical
Spine Product Size         ***


PCD 17155 Cervical
Spine Product Size         ***


PCD 16156 Cervical
Spine Product Size         ***


PCD 16155 Cervical
Spine Product Size         ***


PCD 17145 Cervical
Spine Product Size         ***


PCD 16145 Cervical
Spine Product Size         ***


PCD 15155 Cervical
Spine Product Size         ***


PCD 15145 Cervical
Spine Product Size         ***


 





 


Pearsalls
Cervical Disc Size Range - Smallest (5S) and Largest (8XL) Discs


 


Device
Manufacture


 


***

***

***


 










*** Material has been omitted
pursuant to a request for confidential treatment.


 


5





















 


Device
Specification Forms


 


	
  Process

  	
   

  	
  Reference

  
	
  Requirement Specification

  	
   

  	
  ***

  
	
  Risk Analysis

  	
   

  	
  ***

  
	
  Essential Requirement Checklist

  	
   

  	
  ***

  
	
  Order Receipt/Processing Record

  	
   

  	
  ***

  
	
  Component Specification Form

  	
   

  	
  ***

  
	
  Device Specification Sheet

  	
   

  	
  ***

  
	
  Embroidery Specification Sheets

  	
   

  	
  ***

  



 


Manufacturing
Process Records


 


	
  Process

  	
   

  	
  Reference

  
	
  General
  Embroidery

  	
   

  	
  ***

  
	
  PCD Device
  Finishing

  	
   

  	
  ***

  
	
  PCD QC
  Inspection

  	
   

  	
  ***

  
	
  PCD Core QC
  Inspection

  	
   

  	
  ***

  
	
  PCD Assembly

  	
   

  	
  ***

  
	
  Implant
  Washing  

  	
   

  	
  ***

  
	
  Implant
  Packing  

  	
   

  	
  ***

  



 


Sterilization Specifications


 


	
  Process

  	
   

  	
  Reference

  
	
  ***

  	
   

  	
  ***

  
	
  ***

  	
   

  	
  ***

  



 










*** Material has been omitted
pursuant to a request for confidential treatment.


 


6





















 


Labeling and IFU Specifications (with sample
labels)


 


	
  Process

  	
   

  	
  Reference

  
	
  Labels

  	
   

  	
  See below for example.

  
	
  IFU

  	
   

  	
  PIM/IFU/PCD/01

  



 





 





 


7





















 


II.            NOTTINGHAM ROTATOR
CUFF PRODUCT SPECIFICATIONS


 


DEVICE COMPONENT SPECIFICATION


 


***

***

***


 










*** Material has been omitted
pursuant to a request for confidential treatment.


 


8





















 


***

***

***


 





 


Device Manufacture


 


***

***


 










*** Material has been omitted
pursuant to a request for confidential treatment.


 


9





















 


Device
Specification Forms


 


	
  Process

  	
   

  	
  Reference

  
	
  Requirement Specification

  	
   

  	
  ***

  
	
  Risk Analysis

  	
   

  	
  ***

  
	
  Essential Requirement Checklist

  	
   

  	
  ***

  
	
  Order Receipt/Processing Record

  	
   

  	
  ***

  
	
  Component Specification Form

  	
   

  	
  ***

  
	
  Embroidery Specification Forms

  	
   

  	
  ***

  



 


Manufacturing
Process Records


 


	
  Process

  	
   

  	
  Reference

  
	
  General Embroidery

  	
   

  	
  ***

  
	
  Soxhlet

  	
   

  	
  ***

  
	
  Shoulder Device Finishing

  	
   

  	
  ***

  
	
  Shoulder Device QC Inspection

  	
   

  	
  ***

  
	
  Implant Washing

  	
   

  	
  ***

  
	
  Implant Packing

  	
   

  	
  ***

  
	
  Sterile Despatch

  	
   

  	
  ***

  



 


Packing, Labeling and IFU Specifications


 


	
  Process

  	
   

  	
  Reference

  
	
  Packing

  	
   

  	
  Double Tyvek pouches and white shelf box

  
	
  Labels

  	
   

  	
  See below for example

  
	
  IFU

  	
   

  	
  P003-PL-04a

  



 










*** Material has been omitted
pursuant to a request for confidential treatment.


 


10





















 


Sterilization Specifications


 


	
  Process

  	
   

  	
  Reference

  
	
  ***

  	
   

  	
  ***

  
	
  ***

  	
   

  	
  ***

  



 


III.                                 CERVICAL SPINE PRODUCT
AND NOTTINGHAM ROTATOR CUFF PRODUCT - PACKAGING SPECIFICATIONS


 


A.                                    General
Information


 


1.                                       All product
labels for boxes and pouches will be printed in accordance with PLD WI 3 with
reference to sample labels in the Sample Label File located in the Clean Room
Office.


 


B.                                    Procedure


 


1.                                       Printing


 


a.                                       The Information
on the label must include:


 


i)                                         The
Lot number


ii)                                      The
description


iii)                                   The
size


iv)                                  The
REF code


v)                                     The
Expiry Date


vi)                                  The
presence of the symbols for expiry date and single use only


 


2.                                       Sealing


 


a.                                       Inner and outer
peel pouches sealed in a clean room with a heat sealing machine set at ***C.


 


	
  

  	
   

  	
  Clean
  unbroken

  seal line

  



 










*** Material has been omitted
pursuant to a request for confidential treatment.


 


11





















 


b.                                      If required, mini
label on film side of the inner pouch is placed such that the product itself is
not obscured.


 


c.                                       Sealed inner
pouch is placed into an outer pouch such that the film sides are uppermost and
the peel chevrons are at the same end.


 


	
  

  	
   

  	
  Chevrons

  



 


d.                                      Product label in
the centre of the clear front of the outer pouch such that the product itself
is not obscured.


 


3.                                       Packing


 


a.                                       Unless otherwise
specified on the Order Receipt/Processing Record, a single double pouched and,
and if applicable the instructions for use is packed, into each white shelf box


 


b.                                      Product label is
located on lid of the box


 


c.                                       Irradiation
indicator dot is placed on the product labels on the outer pouch and on the box
lid.


 


d.                                      The specified
number of For Patients Notes product labels on a single length of backing strip
are placed inside the box, which can then be closed. Note:  The For Patients Notes product labels do not
require irradiation dots.


 


12





















 


e.                                        Each
shelf box is individually shrink-wrapped using the Minipack Synthesis 760
machine.


 





 


13





















 


EXHIBIT C


 


PRODUCT PRICING


 


I.                                         CERVICAL SPINE
PRODUCT – PRICE AND BASE COST


 


As of the Effective Date, the price for the
Cervical Spine Product shall be:


 


•                  US$***/unit for
clinical use


•                  US$***/unit plus
the cost of sterilization for use in testing


•                  US$***/unit for
demonstration use


 


As of the Effective Date, the Base Cost for
the Cervical Spine Product shall be US$ ***.


 


Notwithstanding the foregoing, in the event that the Cervical Spine
Product patent (i.e., U.S. patent 6,093,205 or any patent that is of the same patent family) is invalidated in any jurisdiction
without any further possibility of appeal, the parties shall renegotiate in
good faith the pricing for Cervical Spine Products manufactured for
distribution in such jurisdiction.


 


II.                                     NOTTINGHAM ROTATOR
CUFF PRODUCT – PRICE AND BASE COST


 


As of the Effective Date, the price for the
Nottingham Rotator Cuff Product shall be:


 


•                  US$***/unit for
clinical use


•                  US$***/unit plus
the cost of sterilization for use in testing


•                  US$***/unit for
demonstration use


 


As of the Effective Date, the Base Cost for
the Nottingham Rotator Cuff Product shall be US$***.


 


III.                                 PRICING FORMULA AND
BASE COST FORMULA


 


Unless otherwise agreed by the parties, the Base Cost and the price for
any Other Product, other than the Cervical Spine Product and the Nottingham
Rotator Cuff Product, shall be set initially in accordance with the following
Base Cost Formula and Price Formula:


 


L = Labor cost to Pearsalls for the Product


O = Overhead = *** * L


M = Materials cost to Pearsalls for the Product


 










*** Material has been omitted
pursuant to a request for confidential treatment.


 


1





















 


Base Cost =   ***


=   ***


P = Price to be paid to Pearsalls by NuVasive for the Product


 


P = Base Cost plus margin of ***% of final price


P =          ***

                ***


***


 


For example, if L= *** and M= *** then


Base Cost = ***


***


 










*** Material has been omitted
pursuant to a request for confidential treatment.


 


2





















 


EXHIBIT D


 


ELECTIVE ALTERNATIVE MANUFACTURING FEE


 


For each Cervical Spine Product that is manufactured by an alternative
supplier and for which Pearsalls is to receive a fee under the terms of Section
5.2, Pearsalls shall be paid US$ *** by NuVasive.  Such fees shall be paid on a quarterly basis
and accompanied by a reasonably detailed report specifying the number of
Cervical Spine Products supplied to NuVasive during such period by an
alternative supplier.


 










*** Material has been omitted
pursuant to a request for confidential treatment.


 


1





















 


EXHIBIT E


 


QUALITY AGREEMENT


 


[To be agreed upon by the parties after the Effective Date, as provided
in Section 1.27.]


 


E-1





















 


EXHIBIT F


 


APPROVED SUPPLIERS


 


NuVasive hereby approves the following suppliers of components for
Products:


 


•                  Biosil Limited,
Global House, Isle of Man Business Park, Douglas, Isle of Man, British Isles


 


•                  AorTech International plc


 


E-1