Document:

Exhibit 10.2

 

NIC
INC. 2006 AMENDED AND RESTATED

STOCK OPTION AND INCENTIVE PLAN

 

Performance-Based
Restricted Stock Agreement

 

The Company
seeks to provide a means by which the Company, through the grant of the Shares
to Grantee, may retain Grantee’s services and motivate Grantee to exert his or
her best efforts on behalf of the Company and any Affiliate;

 

NOW,
THEREFORE, in consideration of the foregoing and for other good and valuable
consideration, the receipt and adequacy of which is hereby acknowledged, the
parties agree as follows:

 

1.             Grant of Performance-Based
Restricted Stock.  NIC Inc., a Colorado corporation (the “Company”),
hereby promises to grant to
                                                    
(“Grantee”), as of
                          ,
20     (the “Grant Date”)
                          
shares of the Company’s no par value Common Stock (the “Shares”), subject to
the restrictions, terms, conditions and other provisions of this Performance-Based
Restricted Stock Agreement (the “Agreement”) and of the NIC Inc. 2006 Amended
and Restated Stock Option and Incentive Plan (the “Plan”), which restrictions,
terms, conditions and other provisions are incorporated herein by this
reference.  Unless otherwise defined
herein, the terms defined in the Plan shall have the same defined meanings in
this Agreement.

 

The actual
number of Shares, if any, (subject to any adjustment to the number of Shares as
provided in Section 3 hereof, and as will be reflected by delivery of
Share certificates or registered as book entry shares with the Company’s
transfer agent) that will be delivered pursuant to this Agreement is dependent
upon the level of achievement of the performance goals set forth in Exhibit A
(the “Performance Goals”) during the period from January 1, 2008 through December 31,
2010 (the “Performance Period”) and the compliance with all terms and
conditions set forth in this Agreement and the Plan.

 

2.             Restrictions and Forfeiture

 

If Grantee’s Continuous Status as an Employee, Director or Consultant
terminates for any reason other than death or disability (as disability is
defined in Internal Revenue Code Section 22(e)(3)) or following a Control Change
as provided for in Section 4(b), Grantee shall forfeit all rights to
receive any undelivered Shares under this Agreement.  Grantee’s right to receive an undelivered Shares
will also be forfeited if the Committee determines that Grantee engaged in
misconduct in connection with his or her employment with NIC.

 

From the date
of this Agreement and until a Share is delivered to Grantee, Grantee shall have
no rights to sell, assign, exchange, transfer, pledge, hypothecate or otherwise
encumber any right he or she may have to receive such Share under this
Agreement.

 

3.             Acceleration of Payment of Shares on
Death or Disability.

 

If Grantee’s
Continuous Status as an Employee, Director or Consultant terminates due to his
or her death or disability, Grantee shall receive a pro rata portion of the
Shares eligible to be 

 

 

received under
this Agreement.  The pro rata portion
will be determined by calculating the product of (a) the total number of
Shares Grantee would have received if his or her employment had not terminated
and based on the ultimate level of achievement toward the Performance Goals at
the end of the Performance Period multiplied by (b) a fraction, the
numerator of which is the number of full and partial months of employment
Grantee completed after the Grant Date and the denominator is thirty-six
(36).  For the avoidance of doubt, unless
otherwise determined by the Committee in its sole discretion, in no event will
any Shares be paid on account of Grantee’s death or disability if the
Performance Goals are achieved at a level less than Threshold.

 

4.             Terms and Conditions.

 

(a)           Adjustments in Event of Change in
Common Stock. 
If any change is made in the Shares, without the receipt of
consideration by the Company (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange
of shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the number of Shares eligible to be
paid pursuant to the terms and conditions of this Agreement (including any
Dividend Shares credited to Grantee’s account in accordance with Section 4(c))
will be appropriately adjusted in the class(es) and number of shares and price
per share of stock of those subject Shares in such manner as the Board may deem
equitable to prevent substantial dilution or enlargement of the rights granted
to Grantee; provided, however, that no such adjustment shall cause the Company
to issue a fractional share.  Such adjustments
shall be final, binding and conclusive. 
(The conversion of any convertible securities of the Company shall not
be treated as a transaction not involving the receipt of consideration by the
Company.)

 

(b)           Sale of the Company.  In the event of a dissolution, liquidation or
sale of all or substantially all of the assets of the Company, or a transaction
following which the Company is not the surviving corporation in any merger,
consolidation, or reorganization (a “Control Change”), then all or a portion of
the number of the Shares eligible to be delivered pursuant to this Agreement
shall be delivered in accordance with the following:

 

(i)            If
the Control Change occurs on or prior to the first anniversary of the Grant
Date and this Agreement is not assumed, converted, or replaced by the continuing
entity, Grantee shall be paid immediately before the Control Change a number of
Shares equal to that number of Shares Grantee would have been paid if each of
the Performance Goals was achieved at the “Target” level.

 

(ii)           If
the Control Change occurs after the first anniversary of the Grant Date and
this Agreement is not assumed, converted, or replaced by the continuing entity,
Grantee shall be paid immediately before the Control Change a number of Shares
based on the actual performance of the Company as if the Performance Period
ended on December 31 immediately preceding the date, on which the Control
Change occurs, with appropriate adjustments, if necessary to reflect such
shortened Performance Period.

 

2

 

(iii)          If
the Control Change occurs on or before the first anniversary of the Grant Date
and this Agreement is assumed by the continuing entity, Grantee shall be paid
at the end of the Performance Period the same number of Shares Grantee would
have been paid if each of the Performance Goals was achieved at the “Target”
level, subject to Grantee’s Continuous Status as an Employee, Director or
Consultant through the end of the Performance Period.

 

(iv)          If
the Control Change occurs after the first anniversary of the Grant Date and
this Agreement is assumed by the continuing entity, Grantee shall be paid at
the end of the Performance Period the same number of Shares based on the actual
performance of the Company as if the Performance Period ended on December 31
immediately preceding the date on which the Control Change occurs, subject to
Grantee’s Continuous Status as an Employee, Director or Consultant through the
end of the Performance Period with appropriate adjustments, if necessary, to
reflect such shortened Performance Period.

 

Notwithstanding the provisions of clause (iii) and
(iv) to the contrary, if, during the remaining portion of the applicable
Performance Period for the applicable award and following the Control Change, (A) Grantee’s
Continuous Status as an Employee, Director or Consultant is terminated by the
Company other than for cause or, (B) if Grantee is a participant in an
arrangement or covered by an employment agreement that provides for certain
rights upon Grantee’s resignation with “good reason” and Grantee resigns for
such a “good reason”, then, to the extent not then-vested, Grantee shall be
paid upon his or her termination of employment the number of Shares that would
have been paid under (iii) or (iv) as applicable.

 

                If this Agreement is assumed in connection with a Control Change
transaction, then the Board shall equitably and proportionately adjust the
number of Shares and the kind of Shares or securities covered by this Agreement
immediately after such transaction solely as necessary to preserve (but not
increase) the level of incentives intended by this Agreement.

 

                This Agreement shall not in any way affect the right of the Company to
adjust, reclassify, reorganize or otherwise change its capital or business
structure or to merge, consolidate, dissolve, liquidate, sell or transfer all
or any part of its business or assets.

 

(c)           Dividend Shares.  Provided this Agreement has not otherwise
been terminated or any of Grantee’s rights to receive Shares have not been
forfeited, Grantee shall be entitled to receive dividend equivalent accruals on
the Shares for any cash dividends declared before any Shares are paid under
this Agreement.  At the end of the
Performance Period or at any other time Grantee becomes entitled to receive the
payment of Shares hereunder, Grantee shall receive an additional number of
Shares (“Dividend Shares”) determined as follows: (1) as of each date (the
“Dividend Payment Date”) that the Company would otherwise pay a declared cash
dividend on the total number of Shares set forth in Section 1 if such
Shares were outstanding, the Company will credit a number of Dividend Shares to
a notional account established for the benefit of Grantee.  The number of Dividend Shares so credited
will be calculated by dividing the amount of 

 

3

 

such hypothetical cash dividend
payment by the Fair Market Value of the Company’s common stock on the Dividend
Payment Date (rounded down to the nearest whole Dividend Share); and (2) on
the date some or all of the Shares are paid under this Agreement, the total
number of Dividend Shares credited to Grantee’s notional account will be
converted into an equivalent number of Shares and paid to Grantee.

 

(d)           No Rights as a Shareholder.  Each Share potentially eligible to be
delivered pursuant to this Agreement is not considered issued or outstanding
until an actual delivery of the Share has been made.  Accordingly, until such Share has been
delivered to Grantee pursuant to the terms of this Agreement, Grantee shall
have no rights and privileges as a shareholder of the Company with respect to
such Share, including no right to vote or receive dividends paid on any
Shares.  Notwithstanding the foregoing
sentence, Grantee is entitled to receive Dividend Shares as provided above in Section 4(c).

 

(e)           No Rights to Continued Relationship.  Grantee’s right to receive any Shares under
this Agreement shall not confer upon Grantee any right with respect to
continuance of employment by the Company or by an Affiliate, nor shall it
interfere in any way with the right of his or her employer to terminate his or
her employment at any time.

 

Grantee’s
right to receive any Shares hereunder shall not confer upon Grantee any right
with respect to continuance of a directorship of the Company or of an
Affiliate, nor shall it interfere in any way with the right of the shareholders
to remove him or her as a director at any time.

 

Grantee’s
right to receive any Shares hereunder shall not confer upon Grantee any right
with respect to continuance of any consulting arrangement with the Company or
any Affiliate, nor shall it interfere in any way with the right of the Company
or an Affiliate, as the case may be, to terminate any such arrangement.

 

(f)            Compliance with Other Laws and
Regulations. 
This Agreement and the obligation of the Company to sell and deliver
Shares hereunder, shall be subject to all applicable federal and state laws,
rules, and regulations, and to such approvals by any government or regulatory
agency as may be required.  The Company
shall not be required to issue or deliver any certificates for Shares prior to
the completion of any registration or qualification of such Shares under any
federal or state law, or any rule or regulation of any governmental body
which the Company shall, in its sole discretion, determine to be necessary or
advisable; provided, however, the Company shall use reasonable efforts to cause
such issuance or delivery to comply with all such laws and rules as
promptly as practicable.

 

To the extent applicable, it is intended that this Agreement and the
Plan comply with the provisions of Section 409A of the Code.  This Agreement and the Plan shall be
administered in a manner consistent with this intent, and any provision that
would cause this Agreement or the Plan to fail to satisfy Section 409A of
the Code shall have no force or effect until amended to comply with Section 409A
of the Code (which amendment 

 

4

 

may be retroactive to the extent permitted by
Section 409A of the Code and may be made by the Company without the
consent of Grantee).

 

(g)           Withholding Taxes.
Grantee agrees to make appropriate arrangements with the Company or Affiliate,
as the case may be, for the satisfaction of all federal, state and local income
and employment tax withholding requirements applicable to the delivery of any
Shares.  No certificates representing
Shares will be delivered until Grantee has made acceptable arrangements for
these withholding requirements.  Grantee
may elect to pay all minimum required amounts of tax withholding, or any part
thereof, by electing to transfer to the Company, or have withheld from any
Shares otherwise eligible to be delivered under this Agreement, Shares having a
value equal to the minimum amount required to be withheld under federal, state
or local law or such lesser amount as may be elected by Grantee. The value of
Shares to be transferred to the Company shall be the fair market value of the
Shares on the date that the amount of tax to be withheld is to be determined
(the “Tax Date”), as determined by the Company. Any such elections by Grantee
to have Shares withheld for this purpose will be subject to the following
restrictions:

 

(i)            All
elections must be made prior to the Tax Date;

 

(ii)           All
elections shall be irrevocable; and

 

(iii)          If
Grantee is an officer or director of the Company within the meaning of Section 16
of the Securities Exchange Act of 1934 (“Section 16”), Grantee must
satisfy the requirements of such Section 16 and any applicable rules thereunder
with respect to the use of Common Stock to satisfy such tax withholding
obligation.

 

5.             Investment
Representation.  The Company may require that Grantee furnish
to the Company, as a condition of acquiring stock hereunder, (a) written assurances
satisfactory to the Company, or counsel for the Company, as to Grantee's
knowledge and experience in financial and business matters and/or to employ a
purchaser representative reasonably satisfactory to the Company, or counsel for
the Company, who is knowledgeable and experienced in financial and business
matters, and that he or she is capable of evaluating, alone or together with
the purchaser representative, the merits and risks of acquiring the Shares; and
(b) written assurances satisfactory to the Company, or counsel for the Company,
stating that Grantee is acquiring the stock for Grantee's own account and not
with any present intention of selling or otherwise distributing the stock.  The Company may (a) restrict the
transferability of the stock and require a legend to be endorsed on the
certificates representing such stock, as appropriate to reflect resale
restrictions, if any, imposed by the Board or as appropriate to comply with any
applicable state or federal securities laws, rules or regulations; and (b)
condition the issuance and delivery of stock upon the listing, registration or
qualification of such stock upon a securities exchange or quotation system or
under applicable securities laws.  The
Company will use reasonable efforts to cause such issuance and delivery to be
in compliance with all applicable listing, registration or qualification
requirements or applicable exception therefrom as promptly as practicable
following Grantee's entitlement to the shares. 
The foregoing requirements, and any assurances given pursuant to such
requirements, shall be

 

5

 

inoperative if (a) the issuance of stock has
been registered under a then currently effective registration statement under
the Securities Act, or (b) as to any particular requirement, a determination is
made by counsel for the Company that such requirement need not be met in the
circumstances under the then applicable securities laws.  

 

6.             Grantee Bound by the Plan. 
Grantee agrees to be bound by all the terms and provisions of the
Plan.  To the extent that the terms of
this Agreement are inconsistent with the terms of the Plan, the terms of the
Plan shall govern.  The captions used in
this Agreement, and the Plan are inserted for convenience and shall not be
deemed a part of the Agreement for construction or interpretation.

 

7.             Governing Law.  This
Agreement and the Plan shall be construed in accordance with the laws of the
State of Colorado, without regard to the conflict of laws principles.

 

8.             Notices.  Any
notice to the Company or the Board that is required to be made under the terms
of the Agreement or under the terms of the Plan shall be addressed to the
Company in care of its Compensation Committee Chairman at 25501 West Valley
Parkway, Suite 300, Olathe, Kansas 66061 with a copy to its General Counsel at
the same address.  Any notice that is
required to be made to Grantee under the terms of the Agreement or under the
terms of the Plan shall be addressed to him or her at the address indicated
below:

 

 

 

unless Grantee notifies the Company of his or
her address change in writing as provided in this Section 8 in which case the
notice shall be addressed to Grantee at his or her new address.  A notice under this Section 8 shall be deemed
to have been given or delivered upon personal delivery or upon deposit in the
United States mail, by registered or certified mail, postage prepaid and
properly addressed as provided in this Section 8.

 

This Agreement has been
executed and delivered by the parties hereto effective date above written.

 

	
   

  	
  NIC, INC. 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
   

  
	
   

  	
  Name: 

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  GRANTEE

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
					

 

6

 

Exhibit A

 

Performance Goals

 

The total number of Shares granted under this Award that will
ultimately be delivered to Grantee based on the achievement of the established
performance goals will depend on the Company’s consolidated financial
performance with respect to each of the following three measures for the
Performance Period:

 

·                  Operating
income growth (three-year compound annual growth rate) – 25% weighting

 

·                  Total
revenue growth (three-year compound annual growth rate) – 25% weighting

 

·                  Cash
flow return on invested capital (three-year average) – 50% weighting

 

Each of these metrics is
defined as follows:

 

The definition of Operating Income is consistent with that term defined
in generally accepted accounting principles and will be derived from the face
of the consolidated statements of income included in the Company’s Annual Reports
on Form 10-K for the respective fiscal years.

 

The definition of Total Revenue is consistent with that term defined in
generally accepted accounting principles and will be derived directly from the
face of the consolidated statements of income included in the Company’s Annual
Reports on Form 10-K for the respective fiscal years.

 

Cash Flow Return on Invested Capital is defined as consolidated cash
flow from operating activities minus capital expenditures, the difference of
which is divided by the difference between total assets and non-interest
bearing current liabilities. 
Consolidated cash flow from operating activities and capital
expenditures will be derived from the face of the consolidated statements of cash
flows included in the Company’s Annual Report on Form 10-K for the
respective fiscal years.  Total assets
and non-interest bearing liabilities will be derived from the face of the
consolidated balance sheets included in the Company’s Annual Reports on Form 10-K
for the respective fiscal years.

 

Calculation
of Deliverable Shares

 

At the end of the Performance Period, the Company will deliver a number
of Shares based on a pre-defined schedule of Threshold, Target and Superior
Company performance.  The Threshold,
Target and Superior Performance Goals for each of the three measures above have
been established by the Committee and are set forth in the table immediately
below.

 

A-1

 

	
   

  	
   

  	
  Performance Goals

  	
   

  
	
   

  	
   

  	
  Threshold

  	
   

  	
  Target

  	
   

  	
  Superior

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Operating income growth

  	
   

  	
  15

  	
  %

  	
  20

  	
  %

  	
  25

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total revenue growth

  	
   

  	
  15

  	
  %

  	
  20

  	
  %

  	
  25

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Cash flow return on invested capital

  	
   

  	
  15

  	
  %

  	
  20

  	
  %

  	
  25

  	
  %

  

 

The total number of Shares granted in Section 1 of this Agreement
was determined based on the quotient of [75%] [115%] of the Grantee’s base
salary (on the Grant Date) divided by the market value of one Share on the
Grant Date.  Accordingly, only if all
Performance Goals are achieved at the Superior level will the total number of
Shares be delivered.

 

If less than Superior performance is obtained for all three Performance
Goals, then the number of Shares to be delivered at the end of the Performance
Period will be the quotient obtained by dividing (a) the product of (1) the
Grantee’s base salary as of the Grant Date times (2) the weighted
percentages of 25%, 50% or 75% for Company performance at Threshold, Target or
Superior levels, respectively by (b) the fair market value of one Share on
the Grant Date.  For each performance
measure, the weighted percentage will be 0% if Threshold performance is not
achieved for that Performance Goal, and no additional shares will be awarded
for performance in excess of the Superior level.  For amounts between the Threshold and Target
levels or between the Target and Superior levels, straight line interpolation,
rounded up to the next whole share, will be used to determine the number of
Shares that is to be delivered.

 

A-2Exhibit
10.01

 

EXECUTION COPY

 

ASSET
PURCHASE AGREEMENT

 

by
and between

 

OSIRIS
THERAPEUTICS, INC.

 

and

 

NUVASIVE,
INC.

 

Dated as of May 8,
2008

 

 

TABLE OF
CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE I. PURCHASE
  AND SALE OF ASSETS

  	
  1

  
	
  Section 1.1

  	
  Transferred
  Assets; Excluded Assets; Time of Transfer

  	
  1

  
	
  Section 1.2

  	
  Assumed
  Liabilities; Retained Liabilities

  	
  3

  
	
  Section 1.3

  	
  Technology
  Closing; Manufacturing Closing

  	
  4

  
	
  Section 1.4

  	
  Initial
  Purchase Price

  	
  5

  
	
  Section 1.5

  	
  Additional Purchase Price

  	
  5

  
	
  Section 1.6

  	
  Withholding

  	
  8

  
	
  Section 1.7

  	
  Allocation
  of Purchase Price

  	
  8

  
	
   

  	
   

  	
   

  
	
  ARTICLE II. REPRESENTATIONS AND WARRANTIES OF SELLER

  	
  9

  
	
  Section 2.1

  	
  Organization, Good
  Standing and Authority

  	
  9

  
	
  Section 2.2

  	
  Organizational and
  Governing Documents; Approval

  	
  9

  
	
  Section 2.3

  	
  Due Execution and Delivery

  	
  9

  
	
  Section 2.4

  	
  Title
  and Sufficiency of Transferred Assets

  	
  10

  
	
  Section 2.5

  	
  Consents;
  No Conflict

  	
  10

  
	
  Section 2.6

  	
  Taxes

  	
  10

  
	
  Section 2.7

  	
  Financial Information

  	
  11

  
	
  Section 2.8

  	
  [Intentionally omitted.]

  	
  11

  
	
  Section 2.9

  	
  Contracts

  	
  11

  
	
  Section 2.10

  	
  Litigation and Claims

  	
  12

  
	
  Section 2.11

  	
  Compliance With Laws

  	
  12

  
	
  Section 2.12

  	
  Employees and Independent
  Contractors

  	
  12

  
	
  Section 2.13

  	
  Employee Benefits

  	
  14

  
	
  Section 2.14

  	
  Labor Matters

  	
  15

  
	
  Section 2.15

  	
  Intellectual Property

  	
  15

  
	
  Section 2.16

  	
  Insurance

  	
  17

  
	
  Section 2.17

  	
  Fair Consideration; No
  Fraudulent Conveyance

  	
  18

  
	
  Section 2.18

  	
  Authorizations; Regulatory
  Compliance

  	
  18

  
	
  Section 2.19

  	
  Products;
  Product Liability

  	
  20

  
	
  Section 2.20

  	
  Environmental

  	
  20

  
	
  Section 2.21

  	
  Real Property; Leases

  	
  21

  
	
  Section 2.22

  	
  Brokers

  	
  21

  
	
  Section 2.23

  	
  Capital Expenditures

  	
  21

  
	
  Section 2.24

  	
  No Changes

  	
  21

  
	
  Section 2.25

  	
  Obsolete Items

  	
  23

  
	
  Section 2.26

  	
  Customers and Suppliers

  	
  23

  
	
  Section 2.27

  	
  Disclosure

  	
  23

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  III. REPRESENTATIONS AND WARRANTIES OF PURCHASER

  	
  23

  
	
  Section 3.1

  	
  Organization and Authority

  	
  23

  
	
  Section 3.2

  	
  Organizational and
  Governing Documents; Approval

  	
  24

  
				

 

 

	
  Section 3.3

  	
  Due Execution and Delivery

  	
  24

  
	
  Section 3.4

  	
  Consents; No Conflicts

  	
  24

  
	
  Section 3.5

  	
  Brokers

  	
  24

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  IV. CERTAIN COVENANTS AND AGREEMENTS

  	
  24

  
	
  Section 4.1

  	
  Further Assurances

  	
  24

  
	
  Section 4.2

  	
  Conduct of Activities
  Associated with the Transferred Assets

  	
  25

  
	
  Section 4.3

  	
  Financial Statements

  	
  26

  
	
  Section 4.4

  	
  Post-Technology Closing
  Receipts

  	
  27

  
	
  Section 4.5

  	
  Confidentiality

  	
  27

  
	
  Section 4.6

  	
  No Other Bids

  	
  28

  
	
  Section 4.7

  	
  Post-Technology Closing
  Cooperation Relating to Transferred Assets

  	
  29

  
	
  Section 4.8

  	
  No Post-Technology Closing
  Retention of Copies

  	
  30

  
	
  Section 4.9

  	
  Noncompetition and
  Nonsolicitation

  	
  30

  
	
  Section 4.10

  	
  Notice of Breaches

  	
  31

  
	
  Section 4.11

  	
  Certain Employee Matters

  	
  32

  
	
  Section 4.12

  	
  Right of First
  Negotiation; Purchase Option

  	
  32

  
	
  Section 4.13

  	
  Brand and Trademarks

  	
  33

  
	
  Section 4.14

  	
  Consents

  	
  33

  
	
  Section 4.15

  	
  Hart-Scott-Rodino
  Notification

  	
  34

  
	
  Section 4.16

  	
  Public Announcement

  	
  34

  
	
  Section 4.17

  	
  Bulk Sales Laws

  	
  35

  
	
  Section 4.18

  	
  Transfer Taxes

  	
  35

  
	
  Section 4.19

  	
  Termination of Certain
  Contracts

  	
  35

  
	
  Section 4.20

  	
  Preparation of Proxy
  Statement; Stockholder Meeting

  	
  35

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  V. CONDITIONS TO CLOSING

  	
  36

  
	
  Section 5.1

  	
  Conditions to Obligations
  of Each Party

  	
  36

  
	
  Section 5.2

  	
  Conditions to the
  Obligations of the Purchaser

  	
  36

  
	
  Section 5.3

  	
  Conditions to the
  Obligations of Seller

  	
  38

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  VI. CONDITIONS TO THIRD MILESTONE PAYMENT

  	
  39

  
	
  Section 6.1

  	
  Conditions to Third
  Milestone Payment

  	
  39

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  VII. TERMINATION

  	
  40

  
	
  Section 7.1

  	
  Termination of Agreement

  	
  40

  
	
  Section 7.2

  	
  Procedures and Effect of
  Termination

  	
  41

  
	
  Section 7.3

  	
  Reimbursement of Expenses

  	
  41

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  VIII. INDEMNIFICATION

  	
  42

  
	
  Section 8.1

  	
  Indemnification by Seller

  	
  42

  
	
  Section 8.2

  	
  Indemnification by
  Purchaser

  	
  42

  
	
  Section 8.3

  	
  Survival

  	
  43

  
	
  Section 8.4

  	
  Limitations

  	
  43

  
	
  Section 8.5

  	
  Resolution of Notice of
  Claim

  	
  44

  
				

 

ii

 

	
  Section 8.6

  	
  Third Party Actions

  	
  45

  
	
  Section 8.7

  	
  Exclusive Remedy

  	
  46

  
	
  Section 8.8

  	
  Reliance

  	
  46

  
	
  Section 8.9

  	
  Tax Treatment of Indemnity
  Payments

  	
  46

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  IX. MISCELLANEOUS

  	
  46

  
	
  Section 9.1

  	
  Disputes

  	
  46

  
	
  Section 9.2

  	
  Merger Clause

  	
  47

  
	
  Section 9.3

  	
  Amendments

  	
  47

  
	
  Section 9.4

  	
  Notices

  	
  47

  
	
  Section 9.5

  	
  Captions

  	
  48

  
	
  Section 9.6

  	
  Governing Law

  	
  48

  
	
  Section 9.7

  	
  Schedules and Exhibits

  	
  48

  
	
  Section 9.8

  	
  Severability

  	
  48

  
	
  Section 9.9

  	
  Counterparts

  	
  49

  
	
  Section 9.10

  	
  Fees and Expenses

  	
  49

  
	
  Section 9.11

  	
  Benefits and Binding
  Effect

  	
  49

  
	
  Section 9.12

  	
  No Third Party Beneficiary

  	
  49

  
	
  Section 9.13

  	
  Definitions;
  Interpretation

  	
  49

  
				

 

iii

 

ASSET
PURCHASE AGREEMENT

 

This ASSET PURCHASE AGREEMENT (this “Agreement”) dated as
of the 8th day of May, 2008, is by and between  OSIRIS
THERAPEUTICS, INC., a Delaware corporation (“Seller”), and NUVASIVE, INC.,
a Delaware corporation (“Purchaser”).

 

RECITALS:

 

A.            Seller is
engaged in the business of processing, manufacturing, marketing and selling an
osteobiologic allograft material containing cancellous bone (which contains
intrinsic viable mesenchymal stem cells) used
in spinal fusion and other surgical procedures and commonly known as Osteocel®
and Osteocel®  XO including current
formulation and all development projects related to Osteocel® and
Osteocel®  XO   (collectively,
the “Product”) (the development,
manufacturing, marketing and sale of the Product shall be referred to herein as
the “Business”).

 

B.            Pursuant
to this Agreement, Seller and Purchaser intend that (i) Seller sell and
transfer to Purchaser all of Seller’s right, title and interest in and to all
of Seller’s property and assets set forth in Section 1.1(a) hereof,
and (ii) Purchaser assume certain specified obligations of Seller,
contractual and otherwise, set forth in Section 1.2(a), all on the terms
and conditions contained in, and as more fully set forth in, this Agreement.

 

C.            Simultaneously
with the execution and delivery of this Agreement and as a condition and
material inducement to the willingness of Purchaser to enter into this
Agreement, Purchaser and certain stockholders of Seller are entering into
voting agreements pursuant to which, among other things, such stockholders have
agreed to vote in favor of approval of the transactions contemplated by this
Agreement and the other Transaction Documents and to take certain other actions
in furtherance of the transactions contemplated hereby, in each case upon the
terms and subject to the conditions set forth herein.

 

Accordingly,
in consideration of the premises and the mutual covenants and agreements
contained herein, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties agree as follows:

 

ARTICLE
I.

PURCHASE AND SALE OF ASSETS

 

Section 1.1            Transferred Assets; Excluded
Assets; Time of Transfer.

 

(a)           Transferred
Assets. On the terms and subject to the conditions set forth in this
Agreement and in reliance upon the representations and warranties contained
herein, at the times set forth in Section 1.1(c) below, Seller shall
sell, transfer, assign, set over, convey and deliver to Purchaser, and
Purchaser shall purchase, acquire, accept, assume and receive from Seller, free
and clear of any Liens (other than Permitted Liens), all right, title and
interest of Seller in, to and under the following assets and property, real,
personal or mixed, tangible or intangible, of Seller with respect to the
Business (other than the Excluded Assets) (the “Transferred Assets”):

 

 

(i)            All Patent Rights, Trademark
Rights and Copyright Rights set forth on Schedule 1.1(a)(i) hereto
(the “Transferred Technology”);

 

(ii)           All inventory (other than Finished
Inventory) and work in process existing as of the Manufacturing Closing Date,
which includes any and all goods, raw materials and work in process used or
consumed in the Business, together with all rights of Seller relating to such
inventory against suppliers thereof (the “Work in Process”);

 

(iii)          [Intentionally
omitted.];

 

(iv)          The rights of Seller related to the
development of the Product, including all clinical trials, and related clinical
trial data, which rights are identified on Schedule 1.1(a)(iv) (the
“Product Development”);

 

(v)           All data and records related to the
operation of the Business, which data and records include (without limitation)
client and customer lists, research and development reports, financial and
billing records (including routing and billing information), creative
materials, advertising materials, marketing materials, promotional materials,
studies, reports, correspondence and other similar documents (the “Records”),
which Records are identified on Schedule 1.1(a)(v); provided that all
such data and records provided pursuant to this Section 1.1(a)(v) may
in Seller’s sole discretion, have redacted therefrom all data unrelated to the
Business;

 

(vi)          The tangible personal property of
Seller used in or necessary for the operation of the Business identified on Schedule
1.1(a)(vi);

 

(vii)         The permits, licenses, franchises,
consents, authorizations, registrations and other approvals and operating
rights relating to the Business that are identified on Schedule 1.1(a)(vii);

 

(viii)        All claims of Seller against third
parties relating to the Technology Assets as of the Technology Closing Date and
the Manufacturing Assets as of the Manufacturing Closing Date, in each case
whether choate or inchoate, known or unknown, contingent or noncontingent;

 

(ix)           All rights of Seller relating to
deposits and prepaid expenses, claims for refunds and rights to offset in
respect thereof relating to the Business and/or the Transferred Assets;

 

(x)            All rights in and to the Contracts
used in, related to or necessary for the operation of the Business as presently
conducted or as contemplated to be conducted, that are identified on Schedule 1.1(a)(x) (the “Assumed Contracts”);

 

(xi)           All of Seller’s goodwill relating to
the foregoing assets; and

 

(xii)          All Business Intellectual Property not otherwise set forth
on Schedules 1.1(a)(i), 1.1(a)(iv), 1.1(a)(v) and 1.1(a)(vi).

 

2

 

Schedule 1.1 — Manufacturing Assets identifies all of the Transferred Assets that are being transferred to
Purchaser at the Manufacturing Closing (the “Manufacturing Assets”).

 

(b)           Excluded
Assets.  Except for the Transferred
Assets, Purchaser shall not acquire by virtue of this Agreement, any other
Transaction Document, or the transactions contemplated hereby or thereby, and
shall have no right, title or interest in any of the assets of Seller with
respect to the Business or otherwise, and such assets shall remain the property
of the Seller (collectively, the “Excluded Assets”).

 

(c)           Time
for Transfer of the Transferred Assets. 
The consummation of the transactions contemplated by this Section 1.1
shall take place (i) with respect to the Technology Assets, on the
Technology Closing Date (the “Technology Asset Transfer”) and (ii) with
respect to the Manufacturing Assets, on the Manufacturing Closing Date (the “Manufacturing
Asset Transfer”).

 

Section 1.2            Assumed Liabilities; Retained
Liabilities.

 

(a)           On
the terms of and subject to the conditions of this Agreement and in reliance
upon the representations and warranties contained herein, in addition to
purchasing and acquiring the Transferred Assets, Purchaser shall assume and
agrees, from and after the date of such assumption, to pay, perform and
discharge when due, and to indemnify Seller against and hold it harmless
from only the following liabilities and
obligations of Seller (but excluding the Retained Liabilities) in respect of
the Business (the “Assumed Liabilities”):

 

(i)            (A) The obligations to perform arising in the
ordinary course of the Business after the Technology Closing Date under the
Assumed Contracts which constitute a portion of the Technology Assets and (B) the
obligations to perform arising in the ordinary course of the Business after the
Manufacturing Closing Date under the Assumed Contracts which constitute a
portion of the Manufacturing Assets;

 

(ii)           The expenses and liabilities
relating to the Business which are incurred or accrued in the ordinary course
of the Business consistent with past practice after the Technology Closing Date.

 

(b)           Other
than the Assumed Liabilities, Purchaser shall not assume by virtue of this
Agreement or the transactions contemplated hereby, and shall have no liability
for, any other liability of Seller.  All
liabilities other than Assumed Liabilities are referred to herein as “Retained
Liabilities.”  The Retained
Liabilities will include, without limitation, the following:

 

(i)            all trade accounts payable of the Business;

 

(ii)           any liabilities or
obligations of Seller in respect of indebtedness (whether absolute, accrued,
contingent, fixed or otherwise, whether due or to become due) of Seller, of any
kind, character or description whatsoever, including, but not limited to,
indebtedness owed by Seller to any of its stockholders;

 

(iii)          any liabilities or obligations
of Seller related to the employment, termination or compensation of any
employee, consultant or service provider of the 

 

3

 

Seller, including but
not limited to compensation claims, Taxes or employer withholdings, workers’
compensation or benefits (however described) owing to any such person arising
out of the operation of the Business by Seller including, for avoidance of
doubt, any and all liabilities or obligations to Transferred Employees incurred
prior to the time that any such Transferred Employee becomes an employee of
Purchaser;

 

(iv)          any liabilities or
obligations of Seller which arise from or out of or in connection with any
product warranty or product liability claims owing, accrued or the underlying
facts with respect to which arising out of the operation of the Business by
Seller (including, for avoidance of doubt, the operation of the Business by
Seller through and including the Manufacturing Closing Date but excluding
liabilities or obligations resulting from either modifications to the Product
made by Purchaser or additional warranties extended by Purchaser following the
Technology Closing Date);

 

(v)           any liabilities or
obligations (whether assessed or unassessed) of Seller for any Taxes, any
Transfer Taxes imposed on Seller, any Taxes of the Business for any period (or
portion thereof) ending on or prior to the Technology Closing Date and any
Taxes of the Business related to the Manufacturing Assets for any period (or
portion thereof) ending on or prior to the Manufacturing Closing Date;

 

(vi)          any liabilities or
obligations relating to or arising out of a breach or failure of Seller to
perform under an Assumed Contract prior to the date on which any such Assumed
Contract is transferred by Seller to Purchaser in accordance with the terms of
this Agreement;

 

(vii)         any liabilities or obligations
relating to or arising under any environmental law or regulation to the extent
arising out of the operation of the Business prior to the Technology Closing
Date with respect to the Technology Asset and the Manufacturing Closing Date
with respect to the Manufacturing Assets; and

 

(viii)        any liabilities or obligations of Seller
incurred, arising from or out of or in connection with this Agreement, the Manufacturing
Agreement, the License Agreement, the Bill of Sale — Technology Assets, the
Bill of Sale — Manufacturing Assets, the IP Assignment Agreement — Patents and
the IP Assignment Agreement — Trademarks (together, the “Transaction
Documents”) or the events or negotiations leading up to the execution and
consummation of the transactions contemplated by the Transaction Documents.

 

Section 1.3            Technology Closing;
Manufacturing Closing.  The consummation of the
Technology Asset Transfer (the “Technology Closing”) shall be held as
soon as reasonably practicable upon satisfaction of the conditions set forth in
Article V of this Agreement or such other date and time as Purchaser and
Seller shall agree (the “Technology Closing Date”).  The consummation of the Manufacturing Asset
Transfer (the “Manufacturing Closing”) shall be held as soon as
reasonably practicable following the earlier to occur of (i) the
termination of the Manufacturing Agreement by Purchaser pursuant to Section 7.1
of the Manufacturing Agreement and (ii) the expiration of the “Term” (as
that term is defined in the Manufacturing Agreement) of the Manufacturing
Agreement (the “Manufacturing Closing Date”).  The Technology Closing 

 

4

 

and the Manufacturing Closing shall be held at the offices of DLA Piper
US LLP, 4365 Executive Drive, San Diego, California (or via exchange of
documents via PDF and overnight mail courier).

 

Section 1.4            Initial Purchase Price.  At the Technology Closing,
Purchaser shall (i) assume the Assumed Liabilities related to the
Technology Assets, and (ii) pay to Seller an aggregate of Thirty Five
Million Dollars ($35,000,000) (the “Initial Purchase Price”).  Purchaser shall pay the Initial Purchase
Price to Seller by bank or cashiers check or, provided that Seller has
delivered wire transfer instructions to Purchaser not less than two (2) business
days prior to the Technology Closing Date, by wire transfer in United States
dollars of immediately available funds to an account designated in writing by
Seller.

 

Section 1.5            Additional Purchase Price.

 

(a)           Milestones; Milestone Payments.  From and after the Technology Closing Date,
in addition to the consideration set forth in Section 1.4 above,
Purchaser shall, subject to, and contingent upon achievement of the
post-Technology Closing performance milestones of the Business set forth below
(each, a “Milestone”) not later than the applicable date for
satisfaction of each Milestone set forth below (each a “Milestone Expiration
Date”), pay to Seller an amount of cash (in United States dollars of
immediately available funds) or common stock, par value $0.001 per share, of
Purchaser (“Purchaser Common Stock”) (the form of payment of which is to
be determined in the sole discretion of Purchaser), equal to the First
Milestone Payment, Second Milestone Payment, Third Milestone Payment, Fourth
Milestone Payment, Fifth Milestone Payment and/or Sixth Milestone Payment, as
applicable (the “Applicable Milestone Payment”) and each Milestone shall
be independent of each other Milestone and may be satisfied and payment become
due therefore regardless of non-satisfaction of any other Milestone; provided,
however, that (i) Purchaser shall not issue shares of Purchaser
Common Stock in respect of any Applicable Milestone Payment unless such shares
of Purchaser Common Stock may be re-sold by Seller pursuant to Rule 144 of
the rules and regulations promulgated under the Securities Act of 1933, as
amended (the “Securities Act”) on the date of such issuance, (ii) if
Purchaser elects to issue shares of Purchaser Common Stock in respect of any
Applicable Milestone Payment, then prior to such issuance and upon request by
the Purchaser, Seller shall deliver to Purchaser such representations and
warranties as Purchaser shall reasonably request for purposes of exempting the
issuance of such shares from the registration requirements of the Securities
Act and (iii) if Purchaser elects to issue shares of Purchaser Common
Stock in respect of any Applicable Milestone Payment, the number of shares of
Purchaser Common Stock to be issued shall be equal to the Applicable Milestone
Payment divided by the Purchaser Common Stock Value.  The obligations of Purchaser under this Section 1.5(a) are
subject to the provisions of Section 1.5(c) below (regarding
Purchaser’s Rights of Set-Off).  For
avoidance of doubt, in no event shall the sum of all Applicable Milestone
Payments made by Purchaser to Seller under this Section 1.5 exceed Fifty
Million Dollars ($50,000,000) plus or minus the WIP Value (the “Maximum Milestone Amount”).

 

(i)            If at any time following the Technology Closing Date but
at or prior to April 15, 2009, Seller shall have delivered to Purchaser an
aggregate of 125,000 cubic centimeters of Product (the “First Delivery Threshold”)
in accordance with the terms and provisions of, and subject to the
specifications set forth in, the Manufacturing Agreement, 

 

5

 

Purchaser shall pay to Seller Five Million
Dollars ($5,000,000) (the “First Milestone Payment”).

 

(ii)           If at any time following the Technology Closing Date but
prior to the Manufacturing Closing, Seller shall have delivered to Purchaser an
aggregate of 250,000 cubic centimeters of Product (including, for avoidance of
doubt, any Product delivered in satisfaction of the First Delivery Threshold)
(the “Second Delivery Threshold”) in accordance with the terms and
provisions of, and subject to the specifications set forth in, the
Manufacturing Agreement, Purchaser shall pay to Seller Five Million Dollars
($5,000,000) (the “Second Milestone Payment”).

 

(iii)          Subject to the prior satisfaction of the conditions set
forth in Article VI of this Agreement, at the Manufacturing Closing,
Purchaser shall pay to Seller the sum of (i) Twelve Million, Five Hundred
Thousand Dollars ($12,500,000) plus
or minus (ii) the WIP Value
(the “Third Milestone Payment”).

 

(iv)          If prior to the Manufacturing Closing, Seller shall have
delivered to Purchaser an aggregate of 275,000 cubic centimeters of Product
(including, for avoidance of doubt, the Product delivered pursuant to the
Second Delivery Threshold) in accordance with the terms and provisions of, and
subject to the specifications set forth in, the Manufacturing Agreement, at the
Manufacturing Closing, Purchaser shall pay to Seller Five Million Dollars
($5,000,000) (the “Fourth Milestone Payment”).

 

(v)           At the Manufacturing Closing, Purchaser shall pay to
Seller the Additional Product Delivery Payment, if any (the “Fifth Milestone
Payment”).

 

(vi)          If at any time following the Technology Closing Date the
Business shall generate Thirty-Five Million Dollars ($35,000,000) in cumulative
Net Sales (the “Net Sales Threshold”), Purchaser shall pay to Seller
Fifteen Million Dollars ($15,000,000) (the “Sixth Milestone Payment”).

 

If any payment under this Section 1.5(a) is
made in the form of Purchaser Common Stock, then on the date of such payment
Purchaser shall provide to Seller (I) a certificate from a duly authorized
officer of Purchaser certifying that as of the date of such issuance (x) the
Purchaser Common Stock so issued has been duly authorized and is validly
issued, fully-paid and non-assessable and, (y) the provisions of Rule 144(c) of
the Securities Act, are satisfied and (II) a legal opinion from Purchaser’s
legal counsel that such Purchaser Common Stock has been duly authorized and
validly issued, is fully paid and non-assessable and that the holding period
set forth in Rule 144(b) of the Securities Act has been
satisfied.  If Purchaser is unable to satisfy
the requirement set forth in the immediately preceding sentence, Seller shall
be under no obligation to accept Purchaser Common Stock as payment for the
Applicable Milestone Payment and Purchaser shall make such Applicable Milestone
Payment in the form of cash, in United States dollars of immediately available
funds.

 

(b)           Time for Determination; Dispute
Mechanism.

 

(i)            As soon as reasonably practicable following each
date on which a Milestone is achieved and in any event within five (5) business
days of the achievement 

 

6

 

of any such Milestone, Purchaser shall pay to Seller the
Applicable Milestone Payment for such Milestone; provided, however,
that in no event shall Purchaser be liable for the payment of, and Seller shall
not be entitled to, any Applicable Milestone Payment for any Milestone that is
not achieved on or before the applicable Milestone Expiration Date.  At all times following the Manufacturing
Closing Date and prior to payment by Purchaser to Seller of the Sixth Milestone
Payment pursuant to Section 1.5(a)(vi) hereof, Purchaser shall, as
soon as reasonably practicable following each December 31 during such
period, deliver to Seller Purchaser’s calculation of the cumulative Net Sales
for the period commencing on the day immediately following the Manufacturing
Closing Date and up to and including each such December 31.

 

(ii)           If Seller believes that it is entitled to payment of
all or any portion of an Applicable Milestone Payment hereunder which Seller
has not received within five (5) business days following the achievement
of the Milestone for which payment is due, Seller may, not later than twelve
(12) months following the achievement of such Milestone, deliver to Purchaser a
notice setting forth Seller’s determination that all or a portion of such
Applicable Milestone Payment is due under this Agreement (the “Milestone
Assessment Notice”).  If Seller does
not deliver to Purchaser a Milestone Assessment Notice within such twelve (12)
month period, then Seller shall have been deemed to agree that the Milestone
has not been met and no payment with respect to such Milestone is due to Seller
hereunder and Seller shall have no further rights to such Applicable Milestone
Payment or any portion thereof; provided, however, that Seller’s
failure to deliver a Milestone Assessment Notice within such twelve (12) month
period with respect to the Sixth Milestone Payment shall not relieve Purchaser
of its obligations to pay the Sixth Milestone Payment (if and when earned)
unless Purchaser is materially prejudiced by such delay.

 

(iii)          If Purchaser shall object to Seller’s determination
that a Milestone has been achieved as set forth in the Milestone Assessment
Notice, then Purchaser shall deliver a dispute notice (a “Milestone Dispute
Notice”) to Seller within five (5) business days following Seller’s
delivery of the Milestone Assessment Notice. 
If Purchaser delivers a Milestone Dispute Notice to Seller in connection
with the Sixth Milestone Payment under Section 1.5(a)(vi), upon Seller’s
reasonable request, Purchaser shall provide Seller with such books of account
and records and written evidence as Seller shall reasonably request showing
Purchaser’s calculation of the Net Sales of the Business and, upon Seller’s
reasonable request and upon two (2) business days prior written notice to
Purchaser, Seller or its representative may inspect the gross receipts,
credits, sales Tax, Tax reports, costs and any other reports, records or
documents reasonably requested by Seller and associated with the Business or
the Product for the sole purpose of reviewing, and only to the extent necessary
to review, Purchaser’s calculation of Net Sales.  A representative of Purchaser, on the one
hand, and a representative of Seller, on the other, shall attempt in good faith
to resolve any such objections within ten (10) business days of the
receipt by Seller of the Milestone Dispute Notice.

 

(iv)          If Purchaser and Seller shall be unable to resolve
any such dispute within the ten (10) business day period, either Purchaser
or Seller by written notice to the other may demand arbitration in accordance
with the procedures set forth in Section 9.1 hereof.

 

7

 

(v)           If no Milestone Dispute Notice is delivered within
the timeframe set forth above, then Seller’s determination that the Milestone
has been achieved, and that some or all of the Applicable Milestone Payment is
due hereunder, shall be deemed to be accepted and Purchaser shall pay to Seller
those amounts set forth in the Milestone Assessment Notice.

 

(c)           Rights of Set-Off.  Purchaser shall have the right to withhold
and set-off against any amount otherwise due to be paid (but not yet paid)
pursuant to this Section 1.5 the amount of any Losses to which any
Purchaser Indemnified Party may be entitled under Article VIII hereof or
any other agreement entered into pursuant to this Agreement (the “Rights of
Set-Off”); provided, however, that the foregoing shall not
apply (i) to the same Loss more than once or (ii) to the extent any
such Loss is adjusted as provided for in Section 8.4(b) hereof.

 

(d)           Acknowledgement of Seller and
Purchaser.  Seller and Purchaser
acknowledge  that (i) (A) upon
the Technology Closing and subject to Purchaser’s express obligations under the
Manufacturing Agreement, Purchaser has the right to operate the Business and
Purchaser’s other businesses in any way that Purchaser deems appropriate in
Purchaser’s sole discretion, and (B) subject to Purchaser’s express
obligations under the Manufacturing Agreement, Purchaser has no obligation to
operate the Business in order to achieve any Milestone or to achieve or
maximize any Applicable Milestone Payment, (ii) there is no assurance that
the Seller will achieve all or any Milestones or that Purchaser will achieve
the Net Sales Threshold, (iii) the parties solely intend the express
provisions of this Agreement and the other Transaction Documents to govern
their contractual relationship, (iv) the right of the Seller to payment of
any Applicable Milestone Payment, if any, shall not bear any interest unless
not timely paid, and (v) the right of the Seller to a portion of any
Applicable Milestone Payment, if any, shall not be represented by a certificate
or other instrument, shall not represent an ownership interest of Seller in
Purchaser or the Business and shall not entitle Seller to any rights common to
any holder of any debt or equity security of Purchaser.  The Seller hereby waives, on its behalf and
on behalf of any of its successors and assigns, any fiduciary duty (but, for
avoidance of doubt, not any implied covenant of good faith and fair dealing) of
Purchaser to Seller, with respect to the matters contemplated by this Section 1.5.

 

Section 1.6            Withholding.  Purchaser shall be entitled to deduct and
withhold from the consideration otherwise payable pursuant to this Agreement to
Seller  such amounts as Purchaser is
required to deduct and withhold under the Code, or any provisions of state or
local Tax law, with respect to the making of such payment.  Purchaser shall notify Seller of the basis
for such withholding no less than 10 business days prior to the proposed
withholding and shall consider in good faith any views of Seller that such
withholding is not required under the Code, or any provisions of state or local
Tax law, with respect to the making of such payment.

 

Section 1.7            Allocation of Purchase Price.  The Initial Purchase Price shall
be allocated for Tax purposes among the Transferred Assets in accordance with Section 1060
of the Code.  Purchaser shall prepare and
deliver to Seller for Seller’s approval, a proposed allocation of the Initial
Purchase Price prepared in accordance with the foregoing within 45 days of the
Technology Closing; provided, that if Seller withholds its approval to
such allocation, Purchaser and Seller shall negotiate in good faith to agree
upon the allocation of the Purchase Price within 30 days of Seller’s receipt of
Purchaser’s proposed allocation.  Each of
Purchaser and Seller shall 

 

8

 

file IRS Form 8594 with its Federal income
Tax Return consistent with such allocation as determined in accordance with the
immediately preceding sentence for the Tax year in which this Agreement is
consummated.  Seller and Purchaser shall
report all Tax consequences of the transactions contemplated by this Agreement
in a manner consistent with such allocation, and not take any position
inconsistent therewith upon examination of any Tax Return, in any refund claim,
in any litigation or investigation or otherwise.

 

ARTICLE
II.

REPRESENTATIONS AND WARRANTIES OF
SELLER

 

Seller
represents and warrants to Purchaser as of the date hereof as follows:

 

Section 2.1            Organization,
Good Standing and Authority.  Seller is duly formed, validly existing and
in good standing under the laws of the State of Delaware, and is duly qualified
as a foreign corporation to transact business and is in good standing in each
jurisdiction in which such qualification is required, except where failure to
be qualified or to be in good standing would not materially and adversely
affect the Business.  Seller has full
corporate power and authority to own the assets owned by it, to lease the
properties and assets held by it under lease, to own and carry on the operation
of the Business as it is now being conducted by it, and to operate the Business
as heretofore operated by it.

 

Section 2.2            Organizational and Governing
Documents; Approval.

 

(a)           Prior to the date hereof, Seller has
furnished to Purchaser complete and correct copies of the certificate of
incorporation and bylaws of Seller (the “Seller Organizational Documents”).  The Seller Organizational Documents are in
full force and effect and Seller is not in violation of any provision of the
Seller Organizational Documents.

 

(b)           This Agreement and the other
Transaction Documents to which it is a party have been approved by all
necessary corporate action of Seller and no other corporate proceedings on the
part of Seller and, except for the Stockholder Approval, no corporate
proceedings on the part of Seller’s stockholders are necessary to authorize the
execution and delivery of this Agreement or any other Transaction Document, or
the consummation of the transactions contemplated hereby or thereby, under the
Delaware General Corporation Law, the Seller Organizational Documents or
otherwise.

 

Section 2.3            Due
Execution and Delivery.  Seller has all necessary power and authority
to execute and deliver this Agreement and the other Transaction Documents to
which it is a party and each instrument required hereby and thereby to be
executed and delivered by it, and, prior to the Technology Closing, will have
all necessary power and authority to carry out its obligations hereunder and
thereunder.  Seller has duly executed and
delivered this Agreement and assuming the due authorization, execution and
deliver of this Agreement by Purchaser, this Agreement constitutes (and, when
executed and delivered, the Transaction Documents to which it is a party will
constitute) the legal, valid and binding obligations of Seller enforceable
against it in accordance with its terms, except that such enforcement (a) may
be limited by bankruptcy, insolvency, moratorium or similar laws affecting
creditors’ rights generally, and (b) is subject to 

 

9

 

the availability of equitable remedies, as determined in the discretion
of the court before which such a proceeding may be brought.

 

Section 2.4            Title and Sufficiency of
Transferred Assets.  Seller is the sole owner and
has good and marketable title (or leasehold title, as the case may be)  to the Transferred Assets free and clear of all liens,
claims, charges, security interests, leases, covenants, options, pledges,
rights of others, easements, rights of refusal, reservations, restrictions,
encumbrances and other defects in title (collectively, “Liens”) except
for (i) Liens incurred in the ordinary course of the Business, consistent
with past practice, of the type identified on Schedule 2.4(i), (ii) Liens
for Taxes not yet due and payable and (iii) Liens created by the express
provisions of the Assumed Contracts (together, the “Permitted Liens”)
whether imposed by agreement, understanding, law, equity, or otherwise.  The Manufacturing Assets are all assets of Seller
used in or related to the processing and manufacturing of
the Products.  The
Transferred Assets are suitable for the uses to which they are being put or
have been put in the ordinary course of the Business and are in good working
order.  The Transferred Assets and the
Business Intellectual Property of Seller licensed to Purchaser under the
License Agreement constitute all of the assets, property, real personal or
mixed, tangible or intangible, of Seller used in, held for use in, or necessary
for the operation of the Business as presently conducted.

 

Section 2.5            Consents;
No Conflict.  Except as set forth on Schedule 2.5, no consent,
authorization, permit, waiver or approval of or from, or notice to, any person
or any governmental authority is required as a condition to the execution and
delivery of this Agreement or the other Transaction Documents by Seller or the
consummation of the transactions contemplated by this Agreement and the
Transaction Documents by Seller.  Except
as set forth on Schedule 2.5, the execution and delivery of this
Agreement and the Transaction Documents and each instrument required hereby to
be executed and delivered by Seller and the consummation of the transactions
contemplated hereby and thereby by Seller will not give rise to a right of
termination of, contravene or constitute a default under, or be an event which
with the giving of notice or passage of time or both will become a default
under, or give to others any rights of termination or cancellation of, or give
rise to a right of acceleration of the performance required by or maturity of,
or result in the creation of any Lien, claim, cost, Tax, losses or loss of any
rights with respect to the Business or the Transferred Assets pursuant to any
of the terms, conditions or provisions of or under any applicable law, the
Seller Organizational Documents or under any Assumed Contract.

 

Section 2.6            Taxes.

 

(a)           All
Tax Returns required to be filed (after giving effect to applicable extensions)
by Seller by any law, rule or regulation have been filed with the
appropriate governmental authority and all Taxes required to be paid by Seller
prior to the Technology Closing Date have been paid in full.  No claim has ever been made in writing
or, to Seller’s Knowledge otherwise, by a Tax authority in a jurisdiction where
the Seller does not pay Tax or file Tax Returns that it is subject to Taxation
by that jurisdiction or required to file returns in that jurisdiction.

 

(b)           All Taxes owed by Seller or for which
Seller may be held liable (whether or not shown on any Tax Return) which were
or will be due on or prior to the Technology Closing have been or will be paid
in full.  The unpaid Taxes of Seller for
periods not included in Tax Returns

 

10

 

filed or to be filed prior
to the Technology Closing does not include any material liability for Taxes
attributable to events that are outside of the ordinary course of Seller’s
business.

 

(c)           There are no Liens for Taxes (other
than for current Taxes not yet due and payable) on any of the Transferred
Assets.

 

Section 2.7            Financial
Information.   Attached hereto as Schedule 2.7
are (i) the unaudited balance sheet, operating income and free cash flows
of the Business as of the end of and for the fiscal year ended December 31,
2007 and (ii) the unaudited balance sheet of the Business (the “Balance
Sheet”) as of March 31, 2008 (the “Balance Sheet Date”) and the
unaudited operating income and free cash flows of the Business as of March 31,
2008 (together, the “Financial Information”).  The Financial Information has been, and if
required to be reported by Purchaser under Item 9.01 of Form 8-K and
Regulation S-X of the federal securities laws for a business acquisition
required to be described in answer to Item 2.01 of Form 8-K the unaudited
balance sheet, operating income and free cash flows of the Business as of the
end of and for the fiscal year ended December 31, 2006 prior to the
Technology Closing Date will be, prepared in accordance with GAAP applied on a
consistent basis throughout periods covered thereby, fairly represent in all
material respects the financial condition, results of operations and cash flows
of the Business as of the respective dates thereof and for the periods referred
to therein and are consistent with the books and records of the Business,
subject to the absence of footnotes and normal, recurring year-end
adjustments.  Seller does not have any
indebtedness or other liability or obligation (whether known, unknown, mature,
unmatured, absolute or contingent) of the Business, except for (a) liabilities
and obligations shown on the Balance Sheet and (b) liabilities and
obligations which have arisen since the date of the Balance Sheet in the
ordinary course of business and which are not material to the Business,
individually or in the aggregate.  All
reserves that are set forth in or reflected in the Balance Sheet have been
established in accordance with GAAP consistently applied and are reasonably
adequate.

 

Section 2.8            [Intentionally
omitted.].

 

Section 2.9            Contracts.

 

(a)           Description of Contracts.  Schedule 1.1(a)(x) contains
a true and complete list of all Contracts to which the Seller is a party and
which are used in or are necessary for the operation of the Business or by
which any Transferred Assets are bound, true and complete copies of which,
together with all amendments, waivers and supplements thereto, have been
delivered to Purchaser prior to the date hereof.

 

(b)           Status of Contracts.  Each Assumed Contract is in full force and
effect in accordance with its terms and is a valid and binding obligation of
Seller and, to Seller’s Knowledge, each other party thereto, enforceable in
accordance with its terms, except that such enforcement (i) may be limited
by bankruptcy, insolvency, moratorium or similar laws affecting creditors’
rights generally, and (ii) is subject to the availability of equitable
remedies, as determined in the discretion of the court before which such a
proceeding may be brought.  Neither
Seller, nor to Seller’s Knowledge
any other party to any of the Assumed Contracts, is in default under any Assumed Contract and no event has
occurred which, after notice or lapse of time or both, would constitute a
default under any such Assumed Contract, and the 

 

11

 

consummation of the
transactions contemplated by this Agreement and the other Transaction Documents
will not give rise to any such default or breach.  Each Assumed Contract is in written form.

 

(c)           Disposition of Certain Contracts.  Seller is legally entitled to terminate those
Contracts identified on Schedule 2.9(c) in accordance with their
terms and without penalty or additional payment, effective no later than the
date set forth beside the names thereof on Schedule 2.9(c).

 

Section 2.10         Litigation
and Claims.  There is (a) no
Action
pending, or to the Seller’s Knowledge, threatened against or
affecting the Business (including any of the Transferred Assets) or the
transactions contemplated hereby, or (b) to Seller’s Knowledge, no
governmental inquiry or investigation pending or threatened against or
affecting the Business (including any of the Transferred Assets).  The Seller has not received any written legal
opinion or written memorandum or legal advice from legal counsel to the effect
that Seller (with respect to the Business or the Transferred Assets) is
exposed, from a legal standpoint, to any material liability or material
disadvantage with respect to the Business or the prospects, financial
condition, operations, property or affairs of the Business.  The Seller is not in default with respect to
any order, writ, injunction or decree of any governmental entity known to or
served upon the Seller and relating to the Business or the Transferred
Assets.  There is no action or suit by
the Seller and relating to the Business or the Transferred Assets that is
pending, threatened or contemplated against any other person.

 

Section 2.11         Compliance With Laws.   Seller is not in material violation of or in
material default under any law, statute, regulation, rule, ordinance,
administrative order or court order applicable to Seller with respect to the
Business or the Transferred Assets, including, without limitation, the Public
Health Services Act (“PHSA”) and relevant sections of the FDCA, and the
United States National Organ Transplant Act, Title 21 of the Code of Federal
Regulations Part 1271, Human Cells, Tissues, and Cellular and Tissue Based
Products.  To Seller’s Knowledge, the
Seller is not under investigation with respect to, has not been threatened to
be charged with, nor has been given notice of, any violation of or material
default under any law, statute, regulation, rule, ordinance, standard,
guideline, administrative order or court order applicable to Seller with
respect to the Business or the Transferred Assets.  All permits (A) pursuant to which Seller
currently operates or holds any interest in the property of the Business, or (B) which
is required for the operation of the Business as currently conducted or the
holding of any such interest has been issued or granted to Seller and are set
forth on Schedule 2.11. All such permits are in full force and effect
and constitute all permits required to permit the Seller to operate or conduct
the Business or hold any interest in the Transferred Assets.

 

Section 2.12         Employees and
Independent Contractors.

 

(a)           Schedule 2.12(a)(i) contains
a true and complete list, as of April 28, 2008, of all employees of Seller
employed in the Business (the “Seller Employees”), including, to the
extent applicable, each Seller Employee’s (i) name, (ii) title, wage,
salary, target bonus and accrued vacation or paid time off as of April 30,
2008, (iii) principal location of employment, and (iv) date of hire
by Seller.  Schedule 2.12(a)(ii) contains
a list of all Seller Employees who to Seller’s Knowledge are not citizens of
the United States. Schedule 2.12(a)(iii) also contains a true and 

 

12

 

complete list of all Seller
Employees who are as of such date on a short- or long-term disability leave or
other leave of absence (but not including vacation).  Each Seller option plan provides that the
vesting of all options to purchase Seller common stock, par value $0.001 per
share (“Seller Options”) granted thereunder to any Seller Employee may
be accelerated, in whole or in part, at the discretion of the board of
directors of Seller or the plan administrator of the Seller, in either case
pursuant to the option plan and related documents governing the Seller Options.

 

(b)           Schedule 2.12(b) contains
a true and complete list, as of the date hereof, of all consultants and other
independent contractors who are providing material services to the Business
(the “Independent Contractors”), including (i) each Independent
Contractor’s name, (ii) the type of services being provided by each
Independent Contractor, (iii) the principal location where services are
provided by each Independent Contractor and (iv) the date when each
Independent Contractor was retained by Seller. 
Copies of all contracts relating to Independent Contractors used in the
Business have been furnished to Purchaser.

 

(c)           Seller is in compliance in all
material respects with all applicable laws, rules and regulations with
respect to employment, employment practices, and terms, conditions and
classification of employment (including the proper classification of workers as
independent contractors and consultants), wage and hour requirements,
immigration status, discrimination in employment, employee health and safety, and
the Workers’ Adjustment and Retraining Notification Act.  Seller has withheld or will timely withhold
all amounts required by law or by agreement to be withheld from the wages,
salaries, and other payments to Seller Employees; and Seller is not liable for
any arrears of wages, compensation, Taxes, penalties or other sums for failure
to comply with any of the foregoing. 
Seller has paid in full or will timely pay in full to all Seller
Employees all wages, salaries, commissions, bonuses, benefits and other
compensation due to or on behalf of such Seller Employees.  There are no controversies pending or, to
Seller’s Knowledge, threatened, between the Seller and any of its Seller
Employees, which controversies have or would reasonably be expected to result
in an action, suit, proceeding, claim, arbitration or investigation before any
governmental entity.

 

(d)           To Seller’s Knowledge, no Seller
Employee is in violation of any term of any employment or service agreement,
patent disclosure agreement, non-competition agreement, or any restrictive
covenant to a former employer relating to the right of any such Seller Employee
to be employed by the Seller because of the nature of the business conducted or
presently proposed to be conducted by the Seller or to the use of trade secrets
or proprietary information of others.  To
Seller’s Knowledge, there are no material controversies, grievances or claims
pending or threatened, by any of the Seller Employees with respect to their
employment. To Seller’s Knowledge, no Seller Employee has given notice to
Seller that any such Seller Employee intends to terminate his or her employment
with the Seller (other than for the purposes of accepting employment with
Purchaser following the Technology Closing). 
The employment of each Seller Employee has been at all times in the past
and is “at-will”, and the Seller has not had any obligation to provide any
particular form or period of notice prior to terminating the employment of any
Seller Employee.  Seller has not (i) entered
into any Contract that obligates or purports to obligate Purchaser to make an
offer of employment to any Seller Employee and/or (ii) promised or
otherwise provided any assurances (contingent or otherwise) to any Seller
Employee of any terms or conditions of employment with Purchaser following the
Technology Closing.

 

13

 

Section 2.13         Employee Benefits.

 

(a)           Schedule 2.13(a) sets
forth a true and complete list of each “employee benefit plan,” as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended (“ERISA”),
and each and every written, unwritten, formal or informal plan, agreement,
program, policy or other arrangement involving direct or indirect compensation
(other than workers’ compensation, unemployment compensation and other
government programs), employment, severance, consulting, disability benefits,
supplemental unemployment benefits, vacation benefits, retirement benefits,
deferred compensation, profit-sharing, bonuses, stock options, stock
appreciation rights, other forms of incentive compensation, post-retirement
insurance benefits, or other benefits, entered into, maintained or contributed
to by Seller or any of its subsidiaries or with respect to which Seller or any
of its subsidiaries has or may in the future have any liability (contingent or
otherwise), and in each case under which any Seller Employee has any present or
future right to benefits.  Each plan,
agreement, program, policy or arrangement required to be set forth on such
schedule pursuant to the foregoing is referred to herein as a “Seller
Benefit Plan.”

 

(b)           Each Seller Benefit Plan has been
maintained and administered in all respects in compliance with its terms and
with the requirements prescribed by any and all statutes, orders, rules and
regulations (foreign and domestic), including (without limitation) ERISA and
the Code, which are applicable to such Seller Benefit Plan.  No action, suit or claim (excluding claims
for benefits incurred in the ordinary course) has been brought or is pending
or, to Seller’s Knowledge, threatened against or with respect to any Seller
Benefit Plan or the assets or any fiduciary thereof (in that Person’s capacity
as a fiduciary of such Seller Benefit Plan). 
There are no audits, inquiries or proceedings pending or, to the
Knowledge of Seller, threatened by the IRS, DOL, or other governmental entity
with respect to any Seller Benefit Plan. 
No event has occurred and, to Seller’s Knowledge, there exists no
condition or set of conditions in connection with which Purchaser or any Seller
Employee could reasonably be expected to become subject to any liability under
or with respect to any Seller Benefit Plan.

 

(c)           No Seller Benefit Plan is maintained
outside the jurisdiction of the United States, or covers any Seller Employee
residing or working outside the United States.

 

(d)           Schedule 2.13(d) discloses
each: (i) agreement with any Seller Employee (A) the benefits of
which are contingent, or the terms of which are altered, upon the occurrence of
a transaction involving Seller of the nature of any of the transactions
contemplated by this Agreement, (B) providing any term of employment or
compensation guarantee or (C) providing severance benefits or other
benefits after the termination of employment of such Seller Employee; (ii) agreement,
plan or arrangement under which any Seller Employee may receive payments from
Seller that may be subject to the Tax imposed by Section 4999 of the Code
or included in the determination of such Seller Employee’s “parachute payment”
under Section 280G of the Code; and (iii) agreement or plan binding
Seller, including any stock option plan, stock appreciation right plan,
restricted stock plan, stock purchase plan, severance benefit plan or Seller
Benefit Plan, any of the benefits of which will be increased, or the vesting of
the benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the benefits
of which will be calculated on the basis of any of the transactions
contemplated by this Agreement.

 

14

 

Section 2.14         Labor Matters.  (i) Seller is not a party to any
collective bargaining agreement or other labor contract applicable to any
Seller Employee, (ii) to Seller’s Knowledge, no union has bargaining
rights with respect to any Seller Employee and there are no threatened or
apparent union organizing activities involving any Seller Employee, (iii) there
are no strikes, slowdowns or work stoppages pending or, to Seller’s
Knowledge, threatened between Seller and an Seller Employee, and (iv) to
Seller’s Knowledge, there are no unfair labor practice complaints involving an
Seller Employee pending against Seller. Seller shall be responsible for providing
continuation coverage to the extent required by Section 4980B of the Code
or similar state law (“COBRA”) to Seller Employees, and other qualified
beneficiaries under COBRA with respect to such employees, who have a COBRA
qualifying event (due to termination of employment with the Seller or
otherwise) prior to or in connection with the transactions contemplated by this
Agreement.  Except as required by law,
neither Purchaser nor any of its affiliates shall be responsible for the
failure of Seller to comply with any of the requirements of COBRA, including
applicable notice requirements.

 

Section 2.15         Intellectual Property.

 

(a)           The Transferred Technology set forth
on Schedule 1.1(a)(i) and the other Business Intellectual Property
set forth on Schedule 1.1(a)(iv) together set forth a true,
complete and correct list of all Business Intellectual Property.

 

(b)           The Seller is the sole and exclusive
beneficial and record owner of all Transferred Technology.

 

(c)           The Transferred Technology and the
Business Intellectual Property of Seller licensed to Purchaser under the
License Agreement (the “Licensed Technology”) is valid, existing, in
full force and effect, or,  with respect
to applications, is still pending, and has not expired or been cancelled or
abandoned.  All necessary application,
registration, maintenance, renewal and other fees, and all necessary documents
and certificates, in connection with such Transferred Technology and the
Licensed Technology have been paid and filed, respectively, with the relevant
patent, copyright, trademark or other authorities in the United States or
foreign jurisdictions, as the case may be, for the purposes of perfecting,
prosecuting and maintaining such Transferred Technology and the Licensed
Technology.

 

(d)           There is no pending or, to the Seller’s
Knowledge, threatened (and at no time within the two years prior to the date of
this Agreement has there been pending any) action, suit, claim or proceeding
before any court, government agency or arbitral tribunal in any jurisdiction
challenging the use, ownership, validity, enforceability or registerability of
any Transferred Technology or the Licensed Technology.  The Seller is not a party to any settlements,
covenants not to sue, consents, decrees, stipulations, judgments or orders
resulting from action, suit, claim or proceeding which permit third parties to
use any Transferred Technology.

 

(e)           Schedule 2.15(e) lists all
licenses, sublicenses and other agreement as to which Seller is a party and
pursuant to which Seller has granted to any third party any right to use any of
the Transferred Technology, including the identity of all parties thereto, a
description of the nature and subject matter thereof and the applicable royalty
and term thereof.

 

15

 

(f)            Schedule 2.15(f) lists all
licenses, sublicenses and other agreements as to which Seller is a party and
pursuant to which Seller is authorized to use any intellectual property
belonging to any third party in connection with the Business, including the
identity of all parties thereto, a description of the nature and subject matter
thereof, the applicable royalty and term thereof.

 

(g)           The Seller owns, or has valid rights
to use all of the Transferred Technology.

 

(h)           The conduct of the Business and
manufacture, practice, use and sale of the Product as previously conducted,
manufactured, practiced, used and sold, and as currently conducted,
manufactured, used and sold did not and does not infringe, misappropriate, or
otherwise violate any intellectual property or other proprietary right owned by
any third party, or constitute unfair competition or trade practices under the
laws of any jurisdiction.

 

(i)            There is no pending or, to the
Knowledge of Seller, threatened (and at no time within the two years prior to
the date of this Agreement has there been pending or, to the Knowledge of
Seller, threatened any) action, suit, claim or proceeding, and Seller has not
received any written complaint, claim, demand or notice from any third party, alleging
that the conduct of the Business infringes, misappropriates, or otherwise
violates or constitutes the unauthorized use of, or will infringe,
misappropriate, or otherwise violate or constitute the unauthorized use of, the
intellectual property or other proprietary right of any third party (nor does
the Seller have Knowledge of any basis therefor).  The Seller is not a party to any settlement,
covenant not to sue, consent, decree, stipulation, judgment, or order resulting
from any Action which (i) restricts the Seller’s rights to use any
Transferred Technology, (ii) restricts the Business in order to
accommodate a third party’s intellectual property or (iii) requires any
future payment by the Seller.  The Seller
has not received any written or, to the Seller’s Knowledge, oral communication
from any third party offering to license to the Seller any intellectual
property purported to be used in the Business or claiming that the Seller must
license or refrain from using any intellectual property or other proprietary
rights of any third party in order to conduct the Business.

 

(j)            To the Knowledge of Seller, no third
party is infringing, misappropriating, or otherwise violating or engaged in the
unauthorized use of any Transferred Technology, and no actions, suits, claims
or proceedings have been brought against any third party by the Seller alleging
that a third party is infringing, misappropriating, or otherwise violating or
engaged in the unauthorized use of any Transferred Technology.

 

(k)           The Seller has taken commercially
reasonable steps to obtain, maintain and protect the Transferred Technology,
including requiring each employee, consultant and independent contractor who or
that has contributed in any way to the Transferred Technology or has made any
contributions to the development of any Product to execute a written agreement
that assigns to Seller all rights, title and interest in and to the Transferred
Technology and any inventions, improvements, discoveries, information and other
know-how relating to the Business and the Product.  Other than under an appropriate
confidentiality or nondisclosure agreement or contractual provision relating to
confidentiality and nondisclosure, there has been no disclosure to any third
party of confidential information or trade secrets of the Seller related to any
Product, the Business or the Transferred Technology and the Seller has taken
all reasonable precautions to 

 

16

 

protect the secrecy,
confidentiality and value of the Transferred Technology (including by the
enforcement of a policy requiring each employee, consultant and independent
contractor to execute proprietary information and confidentiality agreements
substantially in the Seller’s standard form which has been provided by Seller
to Purchaser).  Assignments to the Seller
of the Patent Rights, copyrights and copyright applications listed in Schedule
1.1(a)(i) have been duly executed and filed with the United States
Patent and Trademark Office or Copyright Office, as applicable.  Assignments of trademark registrations and
pending trademark applications listed in Schedule 1.1(a)(i) and
acquired from any third party have been duly executed and filed with the United
States Patent and Trademark Office or foreign trademark authority, as
applicable.

 

(l)            Neither the execution of this
Agreement nor the consummation by the Seller of the transactions contemplated
by this Agreement will result in any violation, loss or impairment of, or
payment of any additional amounts with respect to, any Transferred Technology,
nor require the consent of any governmental entity or third party with respect
to any Transferred Technology.  The
Seller is not a party to any Contract under which a third party would have or
would be entitled to receive a license or any other right to any Transferred
Technology any other property or assets of Purchaser or any of Purchaser’s
affiliates as a result of the execution of this Agreement or the consummation
of the transactions contemplated by this Agreement, nor would the consummation
of such transactions result in the amendment or alteration of any license or
other right which exists on the date of this Agreement.

 

(m)          Except as set forth on Schedule
2.15(m), the Seller has not assigned or granted any exclusive rights in any
Transferred Technology to any third party.

 

(n)           No government funding, facilities of
a university, college, other educational institution or research center or
funding from third parties was used in the development of any Transferred Technology.  To the Knowledge of Seller, no current or
former employee, consultant or Independent Contractor of the Seller, who was
involved in, or who contributed to, the creation or development of any
Transferred Technology, has performed services for the government, university,
college, or other educational institution or research center during a period of
time during which such employee, consultant or independent contractor was also
performing services for the Seller.

 

(o)           Seller and Purchaser are parties to
that certain Joint Privilege Agreement dated as of March 5, 2008, pursuant
to which Seller provided Purchaser with (i) an attorney-client privileged
opinion of Seller’s retained counsel, dated February 29, 2008, and (ii) an
attorney-client privileged opinion of Seller’s retained counsel, dated March 4,
2008 (collectively, the “JPA Opinions”).  The
representations and warranties as to certain factual matters made by Seller to
its counsel as set forth in the product package insert contained in the written
certificate delivered by Seller to such counsel (a copy of which is attached as
Schedule 2.15(o) hereto), in connection with counsel’s rendering
the JPA Opinions were true and correct in all respects on the date made.

 

Section 2.16         Insurance.  Schedule 2.16 contains a
complete and correct list as of the date hereof of all insurance policies
maintained by or on behalf of the Seller with respect to the Business and/or
the Transferred Assets, including all legally required workers’ compensation
insurance and errors and omissions, casualty, fire, product liability and
general liability 

 

17

 

insurance.  True and complete
copies of each listed policy have been furnished to Purchaser.  Such policies are in full force and effect,
all premiums due thereon have been paid and the Seller has complied in all
material respects with the provisions of such policies.  The Seller has not received any notice from
any issuer of such insurance policies canceling or amending any policies listed
on Schedule 2.16.  There is no
claim by the Seller pending under any of such policies as to which coverage has
been denied or disputed by the underwriters or in respect of which the
underwriters have reserved their rights. 
Neither the Seller nor any affiliate thereof has ever maintained,
established, sponsored, participated in or contributed to any self-insurance
plan with respect to the Business and/or Transferred Assets.

 

Section 2.17         Fair
Consideration; No Fraudulent Conveyance.  Seller is not now and Seller will not be
rendered insolvent by the sale, transfer and assignment of the Transferred
Assets pursuant to the terms of this Agreement or the transactions contemplated
hereby.  Seller has no intention to file
for bankruptcy, and, to Seller’s Knowledge, no insolvency proceedings of any
character including without limitation, bankruptcy, receivership,
reorganization, composition or arrangement with creditors, voluntary or
involuntary, affecting Seller or any of the Transferred Assets or Assumed
Liabilities are pending or threatened. 
Seller is not entering into this Agreement and the transactions
contemplated hereby with the intent to defraud, delay or hinder Seller’s
creditors and the consummation of the transactions contemplated by this Agreement
and the transactions contemplated hereby will not have any such effect.  The transactions contemplated hereby do not
constitute a fraudulent conveyance, or otherwise give rise to any right of any
creditor of Seller whatsoever to any of the Transferred Assets after the
Technology Closing.

 

Section 2.18         Authorizations; Regulatory
Compliance.

 

Schedule 2.18
sets forth a complete list of all approvals, clearances, authorizations,
licenses or registrations required by any governmental entity
having regulatory authority or jurisdiction over the Business and the Products,
including the United States Food and Drug Administration
(“FDA”) and any regulatory authority in the jurisdiction or country in
which the Products are manufactured, to permit the design, development,
pre-clinical and clinical testing, manufacture, labeling, marketing, promotion,
import, export, use and sale of the Products, whether required of Seller or, to
Seller’s Knowledge, required of any of its suppliers or manufacturers.  Except as set forth on Schedule 2.18:

 

(a)           The Business and the Products are in
compliance in all material respects with all current applicable laws, statutes,
rules, regulations, ordinances, standards, guidelines or orders administered,
issued or enforced by the FDA or any other governmental entity having
regulatory authority or jurisdiction over the Business and the Products,
including, without limitation, the PHSA and relevant
sections of the FDCA, and the United States National Organ Transplant
Act, Title 21 of the Code of Federal Regulations Part 1271, Human Cells,
Tissues, and Cellular and Tissue Based Products..

 

(b)           Seller and, to
the Knowledge of Seller, its suppliers and manufacturers are in compliance in
all material respects with all applicable laws, statutes, rules, regulations,
ordinances, standards, guidelines or orders administered , issued or enforced
by the FDA or any other governmental entity, including the American Association
of Tissue Banks, relating to the 

 

18

 

methods and materials used
in, and the facilities and controls used for, the design, manufacture,
processing, packaging, labeling, storage and distribution of the Products and
all Products have been processed, manufactured, packaged, labeled, stored,
handled and distributed by Seller in compliance with the quality control
procedures and specifications furnished by Seller to Purchaser and all
applicable laws, statutes, rules, regulations, ordinances, standards,
guidelines or orders administered, issued or enforced by the FDA or any other
governmental entity, including the American Association of Tissue Banks,
including, without limitation, current Good Tissue Practice regulations
promulgated by the FDA and the United States National Organ Transplant Act,
Title 21 of the Code of Federal Regulations Part 1271, Human Cells,
Tissues, and Cellular and Tissue Based Products.  Further, no governmental action has been
taken or, to Seller’s Knowledge, is in the process of being taken that will
slow, halt or enjoin the manufacturing of the Products or the operation of the
Business or subject the manufacturing of the Products or the Business to
regulatory enforcement action.

 

(c)           Seller has not
received and, to Seller’s Knowledge, its manufacturers or suppliers have not
received from the FDA or any other governmental entity, and to Seller’s
Knowledge, there are no facts which would furnish any reasonable basis for, any
notice of adverse findings, FDA warning letters, regulatory letters, notices of
violations, warning letters, Section 305 criminal proceeding notices under
the FDCA or other similar communication from the FDA or other governmental
entity, and there have been no seizures conducted or, to Seller’s Knowledge,
threatened by the FDA or other governmental entity, and no recalls, market
withdrawals, field notifications, notifications of misbranding or adulteration,
or safety alerts conducted, requested or threatened by the FDA or other
governmental entity relating to the Business or to the Products.

 

(d)           For each of the
Products, no pre-market notification (“510(k)”) submission is required
and no 510(k) submission has been filed with the FDA or any other
governmental entity.

 

(e)           To Seller’s
Knowledge, there are no currently existing facts which will (i) cause the
withdrawal or recall, or require suspension or additional approvals or
clearances, of any Products currently sold by Seller, (ii) require a
change in the manufacturing, marketing classification, labeling or intended use
of any such Products, or (iii) require the termination or suspension of
marketing of any such Products.

 

(f)            Except as set
forth on Schedule 2.18(f), (i) none of the Products manufactured,
marketed or sold by Seller has been recalled or subject to a field safety
notification (whether voluntarily or otherwise); (ii) to Seller’s
Knowledge none of the Products manufactured, marketed or sold by Seller’s
manufacturers and suppliers has been recalled or subject to a field safety
notification (whether voluntary or otherwise); and (iii) Seller has not
received written notice (whether completed or pending) of any proceeding
seeking recall, suspension or seizure of any products sold or proposed to be
sold by Seller.

 

(g)           Seller has
submitted to the FDA all Biological Product Deviation Reports relating to
performance issues that could lead to serious injury or death that Seller has
been required to submit under applicable federal statutes, rules, regulations,
standards, guides or orders administered or promulgated by the FDA related to
the Products.  To Seller’s Knowledge,
except 

 

19

 

as set forth on Schedule
2.18(g), no circumstances have arisen that would require Seller to submit a
Biological Product Deviation Report to the FDA.

 

Section 2.19         Products;
Product Liability.

 

(a)           Each of the Products (including all
Finished Inventory): (i) is, and at all times up to and including the sale
thereof has been processed, manufactured, packaged, labeled, stored, handled,
distributed, shipped, marketed and promoted, and in all other respects has
been, in compliance with all applicable laws, statutes, rules, regulations,
ordinances or orders administered, issued or enforced by the FDA or any other
governmental entity, including, without limitation, current Good Tissue
Practice regulations promulgated by the FDA, the PHSA and relevant
sections of the FDCA, and  the
United States National Organ Transplant Act, Title 21 of the Code of Federal
Regulations Part 1271, Human Cells, Tissues, and Cellular and Tissue Based
Products and (b) is, and at all relevant times
has conformed in all material respects to all specifications and any promises,
warranties or affirmations of fact made in all regulatory filings or set forth
in any regulatory approvals, authorizations or clearances pertaining thereto or
made on the container or label for such Product or in connection with its
sale.  There is no design or
manufacturing defect with respect to the Products.

 

(b)           Schedule 2.19(b) sets forth the
forms of Seller’s service or product warranties that are currently applicable
to services or merchandise related to the Business (including, without
limitation, the Products).  Except as set
forth on Schedule 2.19(b), there are no existing or, to Seller’s
Knowledge, threatened, claims against Seller for services or merchandise
related to the Business which are defective or fail to meet any service or
product warranties other than in the ordinary course of business consistent
with past experience.  Seller has not
incurred liability arising out of any injury to individuals as a result of the
ownership, possession, or use of any Product and, to Seller’s Knowledge, there
has been no inquiry or investigation made in respect thereof by any
governmental entity.

 

Section 2.20         Environmental.

 

(a)           Except as would not be reasonably
likely to result in a material liability of Seller with respect to the
Business, (i) Seller is now and always has been in compliance with
applicable legal requirements with respect to environmental laws, rules,
regulations and ordinances, and (ii) to the Seller’s Knowledge, no
underground storage tanks and no amount of any substance that has been
designated by any governmental entity or by any legal requirements to be
radioactive, toxic, hazardous or otherwise a danger to health or the
environment, including PCBs, asbestos, petroleum, toxic mold, urea-formaldehyde
and all substances listed as hazardous substances pursuant to the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended, or
defined as a hazardous waste pursuant to the United States Resource
Conservation and Recovery Act of 1976, as amended, and the regulations
promulgated pursuant to said laws, but excluding office and janitorial supplies
(a “Hazardous Material”), are present in, on or under any property
of Seller used in the Business, including the land and the improvements, ground
water and surface water thereof.

 

20

 

(b)           Except as would
not be reasonably likely to result in a material liability to Seller with
respect to the Business, Seller has not transported, stored, used,
manufactured, disposed of, released, removed or exposed its employees or others
to Hazardous Materials in violation of any legal requirement or manufactured
any product containing a Hazardous Material in violation of any legal
requirement, nor has Seller received notification from any party that it has or
is alleged to have any remediation obligation relating to any Hazardous
Material.

 

Section 2.21         Real
Property; Leases.  Except as set forth on Schedule 2.21,
Seller does not own, lease or sublease any real property used in or necessary
for the operation of the Business.

 

Section 2.22         Brokers.  Except as set forth on Schedule
2.22, no broker or other representative has acted on behalf of Seller in
connection with the transaction contemplated hereby in such manner as to give
rise to any  claim by any person against
Purchaser or Seller for a finder’s fee, brokerage commission or similar
payment.

 

Section 2.23         Capital
Expenditures.   Set forth on Schedule 2.23 is a list
of Seller’s approved capital expenditure projects related to the Business and
involving in excess of $25,000 including: 
(i) projects which have been commenced but are not yet completed; (ii) projects
which have not been commenced; and (iii) projects which have been
completed in respect of which payment has been made, within the last twelve
(12) months.

 

Section 2.24         No Changes. Except as set
forth on Schedule 2.24, since December 31, 2007 there has not been,
occurred or arisen any of the following:

 

(a)           any amendment to the Seller
Organizational Documents;

 

(b)           any incurrence or assumption by the
Business of any indebtedness in excess of $5,000 individually or $25,000 in the
aggregate;

 

(c)           the imposition of any Lien (other
than Permitted Liens) upon any of the Transferred Assets;

 

(d)           any material damage, destruction or
loss with respect to the Transferred Assets or any other real or tangible
personal property used in the Business, whether or not covered by insurance;

 

(e)           any payment, loan or advance of any
amount to, or sale, transfer or lease of any of the Transferred Assets to, or
any agreement or arrangement relating to the Business or constituting a
Transferred Asset with, any member or equity holder of Seller or any of their
respective affiliates;

 

(f)            any change in the Tax or accounting
principles, methods, practices or procedures followed by Seller or any change
in the depreciation or amortization policies or rates theretofore adopted by
Seller, except as required by GAAP or disclosed to Purchaser in writing;

 

21

 

(g)           any change or revocation by Seller of
any Tax election with respect to the Business or any agreement or settlement
with any governmental entity with respect to such Taxes;

 

(h)           any acquisition by Seller by merging
or consolidating with, or by purchasing a substantial portion of the assets of,
or by any other manner, any business or corporation, partnership, association
or other business organization or division thereof comprising all or a portion
of the Business or the Transferred Assets;

 

(i)            any sale, lease or other transfer or
disposition by Seller of its assets related to the Business, tangible or
intangible, other than the sale of Product in the ordinary course of the
Business;

 

(j)            any Contract (or series of related
Contracts) related to the Business and entered into by Seller either involving
more than $25,000 individually (or $50,000 in the aggregate) or outside the
ordinary course of business;

 

(k)           any acceleration, termination,
modification or cancellation of any Assumed Contract involving more than
$25,000 individually (or $50,000 in the aggregate);

 

(l)            any capital expenditure (or series
of related capital expenditures) related to the Business by Seller either
involving more than $25,000 individually (or $50,000 in the aggregate) or
outside the ordinary course of business;

 

(m)          any capital investment in, any loan to
or any acquisition of the securities or assets of, any other person by Seller
with respect to or in connection with the Business;

 

(n)           any delay or postponement of payment
of accounts payable or other liabilities of Seller with respect to or in
connection with the Business outside the ordinary course of Business consistent
with past practice;

 

(o)           any cancellation, compromise, waiver
or release of any right or claim of Seller with respect to or in connection
with the Business outside the ordinary course of Business consistent with past
practice;

 

(p)           the commencement or written notice to
Seller or, to Seller’s Knowledge, oral notice or threat of commencement of any
lawsuit or proceeding against the Transferred Assets or against Seller with
respect to the Transferred Assets, the Product or the Business;

 

(q)           any license or sublicense of any
rights of Seller under or with respect to the Transferred Technology;

 

(r)            any written notice or claim to
Seller or, to Seller’s Knowledge, oral notice or claim of ownership by any
Person of Business Intellectual Property or of infringement by the Business of
any Person’s intellectual property rights;

 

(s)           any material change in pricing
charged by Seller for Products; or

 

22

 

(t)            any negotiation or agreement by
Seller or any officer or employee thereof to do any of the things described in
the preceding clauses (a) through (s) (other than negotiations with
Purchaser and its representatives regarding the transactions contemplated by
this Agreement).

 

Since December 31, 2007, no Business
Material Adverse Effect has occurred, and no event, circumstance, condition or
effect has occurred that could reasonably be expected to result in a Business
Material Adverse Effect.

 

Section 2.25         Obsolete
Items.  Schedule 2.25 sets forth, as of the
date hereof, a complete and accurate list of any category of products, supplies
or parts used in the Business that has an aggregate inventory value in excess
of $10,000 that has been identified through reasonable business practices to be
obsolete, damaged or defective.

 

Section 2.26         Customers
and Suppliers.  Schedule 2.26 identifies the Business’
ten (10) largest customers and suppliers (measured by dollar volume in
each case) during the calendar year 2007 and during the first three months of
2008, showing with respect to each, the name and address, dollar volume and
nature of the relationship (including the principal categories of Product
bought or sold).  Seller is not required
to provide any bonding or other financial security arrangements in connection
with any of the transactions with its customers or supplies.  Seller has not received any direct
communication (whether written or oral) of any intention of any customer or
supplier identified on Schedule 2.26 to discontinue its relationship as a
customer or supplier of, or materially reduce its purchases from or sales to
Seller (or, post-Technology Closing, from Purchaser).

 

Section 2.27         Disclosure. No statement (including without limitations, the representations and
warranties and covenants contained in this Agreement) by Seller contained in
this Agreement and none of the information contained in the schedules hereto,
in any other Transaction Document and any document, written statement or
certificate furnished to Purchaser and its representatives to Seller contains
or will contain any untrue statement of a material fact or omits or will omit
to state a material fact necessary to make the statements herein or therein, in
light of the circumstances in which they were made, not misleading.  To the Seller’s Knowledge, there exists no
fact that adversely affects the value of the Transferred Assets or the
Business, prospects, financial condition or operations of the Business which
has not been set forth in this Agreement or the schedules hereto.  Seller has afforded to the officers,
employees and authorized representatives of Purchaser (including, without
limitation, independent public accountants and attorneys) access to all
financial and other books and records (including computer files, retrieval
programs and similar documentation) of Seller with respect to the Business.

 

ARTICLE
III.

REPRESENTATIONS AND WARRANTIES OF PURCHASER

 

Purchaser hereby represents
and warrants to Seller as of the date hereof as follows:

 

Section 3.1            Organization and Authority.  Purchaser is duly formed, validity existing
and in good standing under the laws of the State of Delaware and is duly
qualified as a foreign corporation to transact business and is in good standing
in each jurisdiction in which such qualification is required, except when
failure to be so qualified would not materially and 

 

23

 

adversely affect Purchaser’s business. 
Purchaser has full corporate power and authority to execute and deliver
this Agreement and the Transaction Documents to which it is party, to perform
its obligations hereunder and under the Transaction Documents, to consummate
the transactions contemplated hereby and thereby and to own and carry on the operation
of its business as currently operated by it.

 

Section 3.2            Organizational
and Governing Documents; Approval.

 

                (a)           Prior to the date hereof, Purchaser
has furnished to Seller complete and correct copies of the certificate of
incorporation and bylaws of Purchaser (the “Purchaser Organizational
Documents”).  The Purchaser
Organizational Documents are in full force and effect and Purchaser is not in
violation of any provision of the Purchaser Organizational Documents.

 

(b)           This Agreement and the Transaction
Documents to which Purchaser is a party have been approved by all necessary
corporate action of Purchaser.

 

Section 3.3            Due Execution and Delivery.  Purchaser has all necessary corporate power
and authority to execute and deliver this Agreement and the other Transaction
Documents to which it is a party and each instrument required hereby and
thereby to be executed and delivered by it, and to carry out its obligations
hereunder and thereunder.  Purchaser has
duly executed and delivered this Agreement and, assuming the due authorization,
execution and deliver of this Agreement by Seller, this Agreement constitutes
(and, when executed and delivered, the Transaction Documents to which it is a
party will constitute) the legal, valid and binding obligations of Purchaser
enforceable against it in accordance with its terms, except that such
enforcement (a) may be limited by bankruptcy, insolvency, moratorium or
similar laws affecting creditors’ rights generally, and (b) is subject to
the availability of equitable remedies, as determined in the discretion of the
court before which such a proceeding may be brought.

 

Section 3.4            Consents; No Conflicts.  No consent, authorization, permit, waiver or
approval of or from or notice to any person or any governmental authority is
required as a condition to the execution and delivery of this Agreement by
Purchaser or any of the Transaction Documents to which it is a party and the
consummation of the transactions contemplated by this Agreement and such
Transaction Documents by Purchaser.  The
execution and delivery of this Agreement and the other Transaction Documents
and each instrument required hereby to be executed and delivered by Purchaser
and the consummation of the transactions contemplated hereby and thereby by
Purchaser will not contravene any applicable law or the Purchaser
Organizational Documents.

 

Section 3.5            Brokers.  No broker or other representative has acted
on behalf of Purchaser in connection with the transaction contemplated hereby
in such manner as to give rise to any valid claim by any person against Seller
for a finder’s fee, brokerage commission or similar payment.

 

ARTICLE
IV.

CERTAIN COVENANTS AND AGREEMENTS

 

Section 4.1            Further Assurances.  Each of Seller and Purchaser covenants and
agrees with the other that at any time and from time to time hereafter, and
without further consideration, 

 

24

 

each will promptly execute and deliver to the other such further
assurances, instruments and documents and take such further action as the other
may reasonably request in order to carry out the full intent and purpose of
this Agreement and to consummate the transactions contemplated hereby.  Without limiting the foregoing, Seller
covenants and agrees with Purchaser that at any time and from time to time
following the Technology Closing Date, if Seller shall be in breach of its
representations and warranties set forth in Section 2.4 (Title and
Sufficiency of Transferred Assets), Seller will, without further consideration,
promptly execute and deliver to Purchaser such further assurances, instruments
and documents and take such further action as Purchaser may reasonably request
in order to remedy the breach of such representations and warranties.

 

Section 4.2            Conduct of Activities Associated with the Transferred Assets.  During the period from the date of this Agreement to (i) the
Technology Closing with respect to the Technology Assets and (ii) the
Manufacturing Closing with respect to the Manufacturing Assets, Seller will
conduct its activities associated with the Transferred Assets in their ordinary
and usual course, consistent with past practice, and will use commercially
reasonable efforts to (i) preserve intact all rights, privileges,
franchises and other authority related to the activities associated with the
Transferred Assets and (ii) maintain in their current or currently planned
condition (as such currently planned condition has been expressly communicated
to Purchaser including but not limited to those matters set forth in the
schedules hereto) its current relationships with licensors, licensees,
suppliers, contractors, distributors, customers, and others having
relationships related to the activities associated with the Business and the
Transferred Assets.  Without limiting the
generality of the foregoing, and except as (i) expressly contemplated by
this Agreement, (ii) set forth on Schedule 4.2 or (iii) approved
in writing by Purchaser in advance, prior to the Technology Closing with
respect to all Transferred Assets and the Manufacturing Closing with respect to
the Manufacturing Assets, Seller will not:

 

(a)           create, incur or assume any
obligation which would materially and adversely affect the Transferred Assets
or Purchaser’s ability to conduct Business in substantially the same manner and
condition as conducted by Seller on the date of this Agreement;

 

(b)           enter into any contract that, if
entered into prior to the date hereof would be required to be set forth on Schedule
1.1(a)(x) or violate, terminate, amend or otherwise modify or waive
any of the terms of any Assumed Contract;

 

(c)           sell, lease, license, transfer or
dispose of any of the Transferred Assets (except for sales of Product in the
ordinary course of business consistent with its past practices);

 

(d)           change any of its accounting methods
with respect to the Business or the Transferred Assets;

 

(e)           terminate, waive or release any
material right or material claim with respect to the Business or any of the
Transferred Assets;

 

(f)            license any of the Transferred
Technology (except for licenses under its standard customer agreement made in
the ordinary course of business consistent with its past practices);

 

25

 

(g)           (i) initiate any litigation,
action, suit, proceeding, claim or arbitration or (ii) settle or agree to
settle any litigation, action, suit, proceeding, claim or arbitration, in each
case with respect to the Business or the Transferred Assets;

 

(h)           change the manner in which it extends
warranties, discounts or credits to customers with respect to the Products;

 

(i)            modify, allow to lapse or otherwise
fail to maintain insurance coverage with respect to the Transferred Assets at
levels consistent with the amounts of such coverage in effect as of the date hereof;

 

(j)            sell, dispose of or encumber any of
the Transferred Assets or license any Transferred Assets to any person;

 

(k)           enter into any agreements or
commitments relating to the activities associated with the Transferred Assets;

 

(l)            fail to comply in all material
respects with all laws and regulations applicable to the activities associated
with the Transferred Assets;

 

(m)          change or announce any change to the
Business or the Transferred Assets; or

 

(n)           (i) agree to do any of the
things described in the preceding clauses (a)-(m) or (ii) take or
agree to take any action which would reasonably be expected to prevent Seller
from performing or cause Seller not to perform one or more covenants required
hereunder or under any other Transaction Document to be performed by Seller.

 

Section 4.3            Financial Statements.

 

(a)           Prior to the Technology Closing,
Seller shall deliver to Purchaser historical financial statements for the
Business for the fiscal year 2007 and, for each completed month period of 2008
and for the period between the last completed month and the Technology Closing
Date, in each case in a form that complies with what is required by Item 9.01
of Form 8-K and Regulation S-X of the federal securities laws for a
business acquisition required to be described in answer to Item 2.01 of Form 8-K,
including information required in order for Purchaser to prepare the pro forma
financial information required by Item 9.01 of Form 8-K.  The historical financial statements for the
Business for the fiscal year 2007 shall be accompanied by an unqualified report
from Seller’s independent registered accounting firm (with notes thereto)
stating to the effect that such financial statements present fairly, in all
material respects, the financial position of the Business, as well as the
results of operations and cash flows of the Business, for each of the periods
covered by such financial statements, in conformity with GAAP.

 

(b)           Not later than thirty (30) days after
the completion of each fiscal quarter of Seller that occurs during the period
from the date of this Agreement through and up to the Technology Closing Date,
Seller shall deliver to Purchaser quarterly financial statements for the
Business (together with any required notes) in a form that Seller prepares for
internal financial reporting; provided, however, that Seller shall provide
Purchaser with such additional information as 

 

26

 

Purchaser may reasonably
request in order to comply with the requirements for financial statements
included in Quarterly Reports on Form 10-Q filed under the Securities
Exchange Act of 1934, as amended.

 

(c)           On or prior to the Technology Closing
Date, Seller shall deliver to Purchaser the audited balance sheets and
statements of income, changes in stockholders’ equity and cash flows of the
Business as of the end of and for each of the fiscal years ended December 31,
2006 and December 31, 2007 or such other periods as shall be required to
be reported by Purchaser by Item 9.01 of Form 8-K and Regulation S-X of
the federal securities laws for a business acquisition required to be described
in answer to Item 2.01 of Form 8-K (the “Audited Financial Statements”).  The Audited Financial Statements shall be
accompanied by an unqualified report from Seller’s independent registered
accounting firm stating to the effect that the Audited Financial Statements
present fairly, in all material respects, the financial position of the
Business, as well as the results of operations and cash flows of the Business,
for each of the periods covered by the Audited Financial Statements, in
conformity with GAAP.

 

(d)           After the Technology Closing, at the
reasonable request of Purchaser, Seller shall, and shall cause its affiliates
to, cooperate fully in the preparation of all financial statements reasonably
determined by Purchaser to be necessary to meet its financial reporting and Tax
obligations in connection with the consummation of the transactions
contemplated hereby.  Seller shall
provide Purchaser with any records and other information in Seller’s possession
or control as shall be reasonably requested by Purchaser in connection
therewith and shall use commercially reasonable efforts to cause to be provided
to Purchaser any records and other information that is not in the possession or
control of Seller as shall be reasonably requested by Purchaser in connection
therewith and shall use commercially reasonable efforts to provide Purchaser
with access to Seller’s accountants.

 

Section 4.4            Post-Technology Closing Receipts.  Seller shall hold in trust for, and promptly
remit to Purchaser without deduction, any amounts collected or received by
Seller that relate to the Business or Purchaser following the Technology
Closing.  Purchaser shall hold in trust
for, and promptly remit to Seller without deduction, any amounts collected or
received by Purchaser that either constitute accounts receivable related to
Product sold by Seller prior to the Technology Closing Date or that do not
relate to the Transferred Assets.

 

Section 4.5            Confidentiality.  Seller will
maintain confidential all information related to the Business, the Product and
the Transferred Assets including, without limitation, business plans and
proposals, marketing strategies, standard operating procedures, personnel data,
pricing, intellectual property and all other information that would be
considered confidential and proprietary (“Confidential Information”).

 

(b)           For a period of five (5) years
from the Technology Closing Date, Seller will treat all Confidential Information
with the same degree of care that it employs with respect to its own
confidential information which it does not desire to have published or
disseminated.  In no event will that
degree of care be less than that employed by a reasonable person.  Notwithstanding the foregoing, Seller shall
have no such obligation with respect to that portion of the Confidential
Information that Seller can demonstrate is (i) in the public domain or
enters the public domain without the wrongful act or breach of this Agreement
by Seller, (ii) approved in advance in 

 

27

 

writing by Purchaser for
release by Seller or (iii) disclosed by order of a court of competent
jurisdiction, provided that such disclosure is subject to all applicable
governmental or judicial protection for like material and reasonable advance
notice is give by Seller to Purchaser.

 

The fact that Confidential
Information may be in or becomes part of the public domain, in and of itself,
does not exclude any specific information from obligations of this Agreement.

 

Section 4.6            No Other Bids.

 

(a)           Until the earlier to occur of (a) the
Manufacturing Closing or (b) the earlier termination of this Agreement
pursuant to its terms, neither Seller nor any of Seller’s officers, managers,
employees, agents or other representatives shall, directly or indirectly, (i) initiate,
solicit, entertain or encourage (including by way of furnishing information
regarding the Transferred Assets) any Asset Acquisition Proposal, or make any
statements to third parties which may reasonably be expected to lead to any
Asset Acquisition Proposal or (ii) negotiate, engage in any substantive
discussions, or enter into any agreement, with any Person concerning any Asset
Acquisition Proposal.  Notwithstanding
the foregoing, if at any time prior to obtaining the Stockholder Approval (i) Seller
receives an unsolicited bona fide written Asset Acquisition Proposal that did
not result from any breach of this Section 4.6, (ii) the Board of
Directors of Seller shall have first determined in good faith that such Asset
Acquisition Proposal constitutes a Superior Proposal, (iii) the Board of
Directors of Seller shall have first determined in good faith, after
consultation with outside counsel, that failure to take such action would
result in a breach of its fiduciary duties under the Delaware General
Corporation Law (“DGCL”), and (iv) Seller shall have notified
Purchaser of such determination (a “Notice of Superior Proposal”) and
offered to discuss in good faith with Purchaser (and, if Purchaser accepts,
thereafter negotiated in good faith), for a period of no less than five (5) business
days, any adjustments in the terms and conditions of this Agreement proposed by
Purchaser.  If, following such notice and
discussions, the Board of Directors of Seller (after consultation with its
outside counsel and regionally-recognized independent financial advisor) shall
have resolved, after taking into account the results of such discussions and
proposals by Purchaser, if any, that the Asset Acquisition Proposal remains a
Superior Proposal, then Seller may (A) furnish non-public information with
respect to Seller to the person or group making such Asset Acquisition Proposal
and their representatives pursuant to a customary confidentiality agreement,
and (B) participate in discussions or negotiations with such person or
group and their respective representatives regarding such Asset Acquisition
Proposal, provided, however, that Seller shall provide or make
available to Purchaser any material non-public information concerning Seller,
the Business or the Transferred Assets that is provided to the person making
such Asset Acquisition Proposal or its representatives which was not previously
provided or made available to Purchaser. 
Each Notice of Superior Proposal delivered pursuant to this Section 4.6(a) shall
include the forms of agreements pursuant to which the Superior Proposal would
be implemented or, if no such agreements have been proposed, a written summary
of the material terms and conditions of such Superior Proposal (it being
understood that Seller must deliver a new Notice of Superior Proposal and
thereafter negotiate as provided herein in the event of any modification to an
Asset Acquisition Proposal if such modification results in the determination
that such Asset Acquisition Proposal is a Superior Proposal).

 

28

 

(b)           Nothing contained in this Section 4.6
or in Section 4.21 shall prohibit Seller from taking and disclosing to its
stockholders a position with respect to a tender offer contemplated by Rule 14d-9
or Rule 14e-2 promulgated under the Exchange Act or from making any
disclosure to Seller’s stockholders if, in the good faith judgment of the Board
of Directors of Seller, after consultation with outside counsel, failure to so
disclose would result in a breach of its fiduciary duties under the DGCL;
provided that disclosure to stockholders pursuant to Rule 14e-2 relating
to an Asset Acquisition Proposal shall be deemed to be a Change in the Seller
Board Recommendation under Section 4.21(c) unless the Board of
Directors of Seller expressly, and without qualification, concurrently with
such disclosure reaffirms the Seller Board Recommendation.

 

(c)           Seller will promptly inform Purchaser
in writing of any Asset Acquisition Proposal (whether or not such Asset
Acquisition Proposal shall be determined by the Board of Directors of Seller to
constitute a Superior Proposal) received by them and shall provide to Purchaser
the name of such third party and the terms of any such Asset Acquisition
Proposal.  The covenants in this Section 4.6
will apply to any and all discussions in which Seller is currently involved
with third parties with respect to an Asset Acquisition Proposal, and Seller
shall immediately terminate all such discussions.

 

Section 4.7            Post-Technology Closing Cooperation Relating to Transferred Assets.

 

(a)           Seller agrees that, during the term
of the Manufacturing Agreement, if reasonably requested by Purchaser, it will
cooperate with Purchaser in enforcing the terms of any Assumed Contract as well
as the protection of any and all intellectual property rights related to the
Transferred Technology (“Intellectual Property Rights”).  In the event that Purchaser is unable to
enforce its Intellectual Property Rights against a third party as a result of a
rule or law barring enforcement of such rights by a transferee of such
rights, Seller agrees to, during the period commencing on the Technology
Closing Date and ending on the date that is eighteen (18) months following the
Manufacturing Closing Date, reasonably cooperate with Purchaser by assigning to
Purchaser such rights as may be reasonably required by Purchaser to enforce its
Intellectual Property Rights in its own name.

 

(b)           Seller agrees further that, following
the Technology Closing Date, if any consent or waiver set forth in Schedule
5.2(f) has not been delivered to Purchaser by Seller at or prior to
the Technology Closing Date, Seller shall use commercially reasonable efforts
to obtain such approval or permit at the sole expense of Seller following the
Technology Closing Date.

 

(c)           Seller agrees further that, following
the Technology Closing Date, Seller shall, upon the request of Purchaser and at
the sole cost and expense of Purchaser, reasonably cooperate with Purchaser to
enforce Seller’s and/or Purchaser’s rights with respect to confidentiality and
non-disclosure covenants executed by any person in favor of Seller with respect
to the Business and/or the Transferred Assets prior to the Technology Closing
Date.

 

(d)           Seller agrees further that, if
reasonably requested by Purchaser, Seller shall reasonably cooperate with
Purchaser to provide reasonable access to records and personnel of Seller to
the extent Purchaser finds such access necessary in order to transition the
Transferred Assets into service of Purchaser.

 

29

 

(e)           At or prior to the Technology Closing
Date, Seller shall cause Purchaser to be designated as an additional loss payee
with respect to any loss related to the Manufacturing Assets on all insurance
policies identified on Schedule 2.16. 
From the Technology Closing through the date immediately following the
Manufacturing Closing, Seller shall maintain each such insurance policy in full
force and effect (or replace with coverage of similar level) and pay all
premiums thereon when due and payable and comply in all material respects with
the provisions of such policies.

 

(f)            Seller hereby constitutes and
appoints Purchaser (and its successors and assigns), from and after the
Technology Closing Date, the true and lawful attorney or attorneys of Seller,
with full power of substitution, for Seller and in its name and stead, or
otherwise, but on behalf and for the benefit of Purchaser (and its successors
and assigns), to (i) from and after the Technology Closing Date, demand
and receive from time to time the Technology Assets sold, transferred,
assigned, set over, conveyed and delivered hereunder and under the Bill of Sale
— Technology Assets and (ii) from and after the Manufacturing Closing
Date, demand and receive from time to time the Manufacturing Assets sold,
transferred, assigned, set over, conveyed and delivered hereunder and under the
Bill of Sale — Manufacturing Assets, and to give receipts and releases for and
in respect of the same and any part thereof, and from time to time to institute
and prosecute in the name of Seller or otherwise, but for the benefit of
Purchaser (and its successors and assigns), any and all proceedings at law, in
equity or otherwise, which Purchaser (and its successors or assigns) may deem
proper in order to collect, assert or enforce any claim, right or title of any
kind in and to the Technology Assets and Manufacturing Assets sold, transferred,
assigned, set over, conveyed and delivered hereunder and under the Bill of Sale
— Technology Assets and Bill of Sale — Manufacturing Assets, and to defend or
compromise any or all actions, suits or proceedings in respect of the
Technology Assets and/or the Manufacturing Assets and do all such acts and
things in relation thereto as Purchaser (and its successors and assigns) shall
reasonably deem advisable, Seller hereby declaring that the appointment made
and the powers hereby granted are coupled with an interest and are and shall be
irrevocable by Seller in any manner and for any reason.

 

Section 4.8            No
Post-Technology Closing Retention of Copies.  Immediately after (i) the Technology
Closing with respect to the Technology Assets and (ii) the Manufacturing
Closing with respect to the Manufacturing Assets, Seller shall deliver to
Purchaser or destroy copies of any Transferred Assets in Seller’s possession
that are in addition to those delivered to Purchaser, whether such copies are
in paper form, on computer media or stored in another form; provided, however,
that Seller may retain and use copies of books and records (financial or
otherwise) relating to the activities associated with the Transferred Assets to
the extent necessary to comply with applicable law.

 

Section 4.9            Noncompetition
and Nonsolicitation.

 

(a)           From the Technology Closing Date to
the date that is eighteen (18) months following the Manufacturing Closing (such
period, the “Restricted Period”), Seller agrees that Seller will not,
whether on Seller’s own behalf or on behalf of or in conjunction with any
person, directly or indirectly; (i) engage in any business or activities
that compete with the Business (a “Competitive Business”); (ii) enter
the employ of, or render services to, any person (or any affiliate of any
person) who or which is engaged in a Competitive Business with respect to such

 

30

 

Competitive Business
(whether directly or indirectly); or (iii) acquire a financial interest
in, or otherwise become actively involved with, any Competitive Business,
directly or indirectly, as a partner, shareholder, officer, director,
principal, agent, trustee or consultant. 
Notwithstanding the foregoing, nothing in this Section 4.9 shall
prevent, prohibit, restrict or otherwise limit Seller’s right or ability to,
subject to Purchaser’s rights pursuant to Section 4.13 hereof (i) engage
in or operate the business of any second generation mesenchymal stem cells
product for bone repair utilizing culturally-expanded mesenchymal stem cells to
create a synthetic version of the Product, including, without limitation,
Osteocel® XC
or (ii) consummate a transaction with a third party, through stock or
asset acquisition, merger, consolidation or otherwise, where any such third
party acquires all or a portion of the outstanding common stock or assets of
Seller, provided that any such third party who acquires all of the outstanding
commons stock or substantially all of the assets of Seller shall expressly
agree, in writing, to be bound by the terms of this Section 4.9, provided
further, however. that any such third party acquiror will not be prevented from
engaging in a Competitive Business if, and to the extent to which, such
acquiror engaged in the Competitive Business prior to such transaction.

 

(b)           During the Restricted Period, Seller
will not, whether on Seller’s own behalf or on behalf of or in conjunction with
any person, directly or indirectly: (i) solicit, encourage or attempt to
solicit or encourage any person who is at the time of such solicitation,
encouragement, or attempted solicitation or encouragement an employee of
Purchaser or any of its affiliates and who was immediately prior to the
Technology Closing or Manufacturing Closing (as applicable), a Seller Employee
to leave the employment of Purchaser or its affiliates; (ii) hire any
Seller Employee who left the employment of Seller or its affiliates coincident
with or in connection with the Technology Closing or the Manufacturing Closing;
or (iii) hire any Seller Employee who terminates employment with Purchaser
or its affiliates in the one year period following the Manufacturing Closing.

 

(c)           During the Restricted Period, Seller agrees that Seller
will not, whether on Seller’s own behalf or on behalf of or in conjunction with
any person, directly or indirectly solicit, encourage or attempt to solicit or
encourage to cease to work with Purchaser or its affiliates any employee of, or
consultant then under contract with, Purchaser or its affiliates who is or has
been engaged in the Business.

 

(d)           During the Restricted Period, Seller agrees that Seller
will not, directly or indirectly (i) solicit, induce or attempt to induce
any customer to cease doing business in whole or in part with Purchaser or its
affiliates with respect to the Business; (ii) attempt to limit or
interfere with any business agreement existing between the Purchaser and/or its
affiliates and any third party; or (iii) disparage the business reputation
or employees of Purchaser, or any of its affiliates, or take any actions,
knowingly, willfully or, recklessly, that are harmful to the Purchaser’s or its
affiliates’ goodwill with their customers, clients, publishers, advertisers,
marketers, vendors, employees, service providers, media or the public.

 

Section 4.10         Notice
of Breaches.  From the
date of this Agreement until (i) the Technology Closing date with respect
to all Transferred Assets and (ii) the Manufacturing Closing with respect
to the Manufacturing Assets, the Seller shall promptly deliver to the Purchaser
a written notice containing supplemental information concerning events or
circumstances first occurring subsequent to the date hereof which would render
any 

 

31

 

representation, warranty or statement in this Agreement inaccurate or
incomplete, or any covenant breached, as of any date after the date of this
Agreement, specifying the applicable section of this Agreement to which such
supplemental information applies (including any changes pursuant to subsection (b) of
this Section, the “Notice of Breach”). 
Following the delivery of any such Notice of Breach, Seller shall
promptly deliver to Purchaser all additional information reasonably requested
by Purchaser with respect to the content of such Notice of Breach.  No delivery of any Notice of Breach pursuant
to this Section 4.10 or knowledge of any such breach (however obtained)
shall be deemed to amend or supplement any schedule to this Agreement or affect
the rights and remedies of Purchaser under Article VIII of this Agreement.

 

Section 4.11         Certain Employee Matters.

 

(a)           As soon as reasonably practicable
following the date hereof, Seller shall provide Purchaser reasonable access
during normal working hours to active employees of Seller performing services
with respect to the Business (“Seller Employees”) to enable Purchaser to
discuss compensation terms and present offers or employment or service to such
employees.

 

(b)           Purchaser may, in its sole
discretion, offer employment to Seller Employees commencing as of the
Manufacturing Closing (each Seller Employee who executes and delivers to the
Purchaser such an offer of employment, a “Transferred Employee”).  With respect to any Seller Employee who
receives an offer of employment from Purchaser prior to the Manufacturing
Closing Date, Seller shall assist Purchaser with its efforts to enter into an
offer letter with such employee as soon as reasonably practicable after the
date hereof and in any event prior to the Manufacturing Closing Date.  Notwithstanding any of the foregoing,
Purchaser shall not have any obligation to make an offer of employment to any Seller
Employee.  Purchaser agrees that Purchaser
will not, directly or indirectly, solicit, encourage or attempt to solicit or
encourage to cease to work with Seller any Seller Employee for employment with
Purchaser commencing prior to the Manufacturing Closing Date without the
consent of Seller, which consent shall not be unreasonably withheld.

 

(c)           From and after the Technology Closing
Date or the Manufacturing Closing Date, as applicable, Purchaser shall
recognize each Transferred Employee’s original hire date with Seller and prior
service with Seller (as recognized by Seller immediately prior to the
Technology Closing Date or the Manufacturing Closing Date, as applicable) as
service with Purchaser for purposes of eligibility to participate in, and
determining vesting and any accrued benefits based on length of service
under,  Purchaser’s employee benefit
plans, policies, arrangements and payroll policies, including vacation
benefits.

 

(d)           Seller shall make employment files of
the Seller Employees available for inspection by Purchaser, to the extent
permitted by and in accordance with applicable law.

 

(e)           Seller shall, at Purchasers request,
accelerate the vesting of any Seller Options held by one or more Transferred
Employees at or following the Technology Closing on the terms and subject to the
conditions as Purchaser shall reasonably request and in a manner consistent
with the applicable plan option agreements and related documents.

 

32

 

Section 4.12         Right of First Negotiation; Purchase
Option.

 

(a)           Purchase Option.  For a period commencing on the Technology
Closing Date and ending at 11:59 p.m. pacific time on December 31,
2009, Purchaser shall have the right to acquire, and Seller shall be obligated
to provide, the exclusive rights to any second generation mesenchymal stem cell
product for bone repair utilizing culture expanded mesenchymal stemcells to
create a synthetic version of the Product (“Osteocel XC®”) on the terms and
conditions set forth on Schedule 4.12.

 

(b)           Right of First Negotiation.  From the Technology Closing Date until December 31,
2009, and subject to Purchaser’s rights under Section 4.12(a) hereof,
if Seller desires to enter into a transaction or accept a third-party proposal
for the sale (whether directly or by merger, acquisition or any other asset
sale or change of control transaction), license, joint-venture arrangement,
transfer or partial transfer (or similar arrangement) of Osteocel XC® (an “Osteocel XC Transaction”), it
shall first provide Purchaser with a notice of such desired Osteocel XC
Transaction (a “Negotiation Notice”). 
The Negotiation Notice shall include in reasonable detail all material
economic, legal and business terms of the Osteocel XC Transaction proposed by
Seller.  If, within five (5) business
days of receipt of a Negotiation Notice, Purchaser gives Seller written notice
of its interest to negotiate such Osteocel XC Transaction on the terms
contained in the Negotiation Notice (an “Affirmative Response Notice”),
then Seller and Purchaser agree, promptly and in good faith, to exclusively
negotiate a legally-binding agreement to carry out such Osteocel XC
Transaction.  If Purchaser fails to
respond to the Negotiation Notice within said five (5) business day
period, or if Seller and Purchaser fail, after good faith efforts, to enter
into a written agreement for such Osteocel XC Transaction within thirty (30)
days after delivery of Seller’s Negotiation Notice, then neither Purchaser nor
Seller shall have a right or be under any obligation to enter into such Osteocel
XC Transaction, and Seller (subject to the right of Purchaser to exercise its
right pursuant to Section 4.12(a)) may consummate with a third-party a
transaction on terms not materially less favorable to Seller, taken as a whole,
than the terms contained in the Negotiation Notice.  If Purchaser delivers an Affirmative Response
Notice to Seller pursuant to this Section 4.12(b), Purchaser shall provide
to Seller a draft definitive agreement for the Osteocel XC Transaction.

 

Section 4.13         Brand and
Trademarks. Except as expressly
provided in this Agreement or in the Manufacturing Agreement, Purchaser shall
have no rights to any of Seller’s intellectual property other than the
Transferred Technology, and Seller shall have no rights to any of Purchaser’s
intellectual property.

 

Section 4.14         Consents.  Prior to the Technology Closing
Date, Seller shall use its commercially reasonable efforts to obtain in writing
and at its own expense all consents and waivers referred to on Schedule 2.5
hereto.  To the extent that an attempted
assignment or transfer of any Assumed Contract would constitute a breach
thereof, this Agreement shall not constitute an assignment or attempted
assignment thereof.  In such a case,
Seller shall establish with Purchaser any back-to-back arrangement reasonably
requested by Purchaser in order to provide for Purchaser the benefits intended
to be assigned under any such Assumed Contract (subject to the right of any
third party thereunder to terminate such Assumed Contract), including, without
limitation, the enforcement by Seller for the benefit of Purchaser, at
Purchaser’s sole cost and expense, of any and all rights of Seller against a
third party to such Assumed Contract arising out of the breach by such third
party or otherwise.

 

33

 

Section 4.15         Hart-Scott-Rodino Notification.

 

(a)           Seller and Purchaser shall each
promptly prepare, execute and file a notification with the United States
Justice Department and the Federal Trade Commission as required by the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (“HSR”).  Seller and Purchaser shall cooperate with
each other in connection with the preparation of such notification, including
sharing information concerning sales and ownership and such other information
as may be needed to complete such notification, and providing a copy of such
notification to the other prior to filing. 
Each of Seller and Purchaser shall keep all information about the other
obtained in connection with the preparation of such notification
confidential.  Purchaser and Seller shall
each pay one-half of the filing fee required under by the regulations
promulgated pursuant to HSR.  Purchaser
and Seller shall promptly inform the other of any material communication between
such party and any governmental entity regarding any of the transactions
contemplated hereby.  If either party
received any formal or informal request for supplemental information or
documentary material from any governmental entity with respect to the
transactions contemplated hereby, then the recipient of such request shall
make, or case to be made, as soon as reasonably practicable, a response in
compliance with such request and, in making any such response, the responding
party shall consider in good faith the views of the other party hereto.  Seller and Purchaser covenant and agree that
the Technology Closing shall be subject and conditioned upon the receipt of
requisite approvals or the expiration of the applicable waiting period under
HSR.

 

(b)           Notwithstanding anything in this
Agreement to the contrary, if any administrative or judicial action or
proceeding is instituted (or threatened to be instituted) challenging any
transaction contemplated by this Agreement as violative of any federal, state
or foreign statutes, rules, regulations, orders or decrees that are designed to
prohibit, restrict or regulate actions having the purpose or effect of
monopolization or restraining o trade (collectively, “Antitrust Laws”),
it is expressly understood and agreed that: (i) Purchaser and Seller shall
provide information required by law or governmental regulation and shall use
commercially reasonably efforts to substantially comply as promptly as
practicable with any “second request” for information pursuant to the Antitrust
Laws; (ii) Purchaser and Seller shall use their commercially reasonably
efforts to resolve such objections, if any, as may be asserted by any
governmental entity with respect to the transactions contemplated by this
Agreement under Antitrust Laws; provided, however, that (A) neither
Purchaser nor Seller shall have any obligation to litigate or contest any
administrative or judicial action or proceeding or any decree, judgment,
injunction or other order, whether temporary, preliminary or permanent; and (B) Purchaser
shall be under no obligation to make proposals, execute or carry out agreements
or submit to orders providing for (1) the sale, license or other
disposition or holding separate (through the establishment of a trust or
otherwise) of any assets or categories of assets of Purchaser or any of its
affiliates or the Transferred Assets, or (2) the imposition of any
limitation or regulation on the ability of Purchaser or any of its affiliates
to freely conduct their business or own such assets.

 

Section 4.16         Public Announcement.  Except as required by law,
neither party (nor any director, officer, employee or affiliate of either
party) shall make any public announcement, whether written or oral, concerning
this Agreement or the subject matter hereof without the prior written consent
of the other.

 

34

 

Section 4.17         Bulk Sales Laws.  Seller shall comply,
in connection with transactions contemplated by this Agreement, with any
applicable bulk sales laws and any other applicable bulk sales laws with
respect to or requiring notice to Seller’s creditors, in effect as of the
Technology Closing Date with respect to the Technology Assets and the
Manufacturing Closing Date with respect to the Manufacturing Assets.

 

Section 4.18         Transfer Taxes.  All sales or
use, transfer, real property gains, excise, stamp, business and occupation, or
other similar Taxes, resulting or arising out of or in connection with the
consummation of the transactions contemplated hereby (“Transfer Taxes”)
and imposed on Seller shall be paid by Seller and Seller shall promptly
discharge such Transfer Taxes when due. 
All Transfer Taxes imposed on Purchaser other than Transfer Taxes
resulting from Seller’s breach of this Section 4.19 shall be paid by
Purchaser.

 

Section 4.19         Termination of Certain Contracts.  At or prior to the Technology
Closing Date, Seller shall deliver to each party to those Contracts identified
on Schedule 2.9(c) a notice of termination, which termination shall
be effective as of the date set forth opposite each such Contract on Schedule
2.9(c).  Notwithstanding the foregoing,
Seller shall give any such notice of termination following the Technology
Closing Date within two (2) business days of receipt of a written request
of Purchaser to earlier deliver such notice of termination.  Seller acknowledges that Seller’s failure to
comply with the provisions of this Section 4.20 shall be a material breach
of this Agreement for purposes of Section 5.2(b) hereof.

 

Section 4.20         Preparation of Proxy Statement;
Stockholder Meeting.

 

(a)           As promptly as reasonably practicable
following the date of this Agreement, Seller shall prepare and file with the
Securities and Exchange Commission (the “SEC”) a proxy statement
relating to the approval of the transactions contemplated by this Agreement by
Seller’s stockholders (as amended or supplemented from time to time, the “Proxy
Statement”) and Seller shall use its reasonable best efforts to respond as
promptly as practicable to any comments of the SEC with respect thereto and to
cause the Proxy Statement to be mailed to Seller’s stockholders as promptly as
reasonably practicable following the date of this Agreement.  Seller shall promptly notify Purchaser upon
the receipt of any comments from the SEC or its staff or any request from the
SEC or its staff for amendments or supplements to the Proxy Statement and shall
provide Purchaser with copies of all correspondence between Seller and its
representatives, on the one hand, and the SEC and its staff, on the other
hand.  Notwithstanding anything to the
contrary stated above, prior to filing or mailing the Proxy Statement (or any
amendment or supplement thereto) or responding to any comments of the SEC with
respect thereto, Seller shall (i) provide Purchaser the reasonable
opportunity to review and comment on such document or response prior to any
filing of such document or response to any comments of the SEC and consider in
good faith Purchaser’s comments, (ii) include in such document or response
all comments reasonably proposed by Purchaser with respect to any statement or
information specifically relating to the Purchaser.

 

(b)           Seller shall, as promptly as
reasonably practicable following the date of this Agreement (taking into
consideration regulatory review processes and timing therefore), establish a
record date for, duly call, give notice of, convene and hold a meeting of its
stockholders (the “Stockholders Meeting”) for the purpose of obtaining
the affirmative vote of 

 

35

 

the holders of a majority of
the outstanding shares of Seller’s common stock, par value $0.001 per share, in
favor of approval of the transactions contemplated by this Agreement (the “Stockholder
Approval”).  Seller shall cause the
Stockholders Meeting to be held as promptly as reasonably practicable after the
date of this Agreement.  Except as set
forth in Section 4.6(b), Seller shall, through its board of directors,
recommend to its stockholders that they approve this Agreement and the
transactions contemplated hereby, and shall include such recommendation in the
Proxy Statement (“Seller Board Recommendation”).

 

(c)           Except as set forth in this Section 4.20(c),
the Board of Directors of Seller shall not (i) withdraw or modify in a
manner adverse to Purchaser, or publicly propose to withdraw or modify in a
manner adverse to Purchaser, the Seller Board Recommendation; (ii) approve
or recommend any letter of intent, agreement in principle, acquisition
agreement, option agreement or similar agreement constituting or relating to,
or that is intended to be or would reasonably be likely to result in, any Asset
Acquisition Proposal; or (iii) approve or recommend, or publicly propose
to approve, endorse or recommend, any Asset Acquisition Proposal.  Notwithstanding the foregoing, if, prior to
receipt of the Stockholder Approval, the Board of Directors of Seller
determines in good faith that an unsolicited bona fide written Alternative
Proposal received by Seller constitutes a Superior Proposal (after compliance
with the notification and negotiation provisions set forth herein), the Board
of Directors of Seller may withdraw, modify or qualify its Seller Board
Recommendation (a “Change in Seller Board Recommendation”) and may
recommend such Superior Proposal.

 

ARTICLE
V.

CONDITIONS TO CLOSING

 

Section 5.1            Conditions to Obligations of Each Party.  The respective obligations of
each of Purchaser and Seller to consummate the transactions contemplated in
this Agreement are subject to the satisfaction of the following conditions:

 

(a)           All applicable waiting periods (and
any extensions thereof) under HSR shall have expired or otherwise been
terminated;

 

(b)           No law or regulation shall have been
adopted or promulgated, and no temporary restraining order, preliminary or
permanent injunction or other judgment or order issued by any governmental
entity shall be in effect, in each case which has the effect of making the
transactions contemplated by this Agreement illegal, or otherwise enjoining or
prohibiting the consummation of the transactions contemplated by this
Agreement; and

 

(c)           The Stockholder Approval shall have
been obtained.

 

Section 5.2            Conditions to the Obligations of the Purchaser.  The obligation of Purchaser to
consummate the transactions contemplated in this Agreement are subject to the
satisfaction (or waiver by Purchaser) of the following additional conditions:

 

(a)           (i) The representations and
warranties of Seller set forth in Sections 2.1, 2.2, 2.3 and 2.4 shall be true
and correct in all respects at and as of the Technology Closing Date as if
first made on the Technology Closing Date, and (ii) the other
representations and warranties of Seller set forth in Article II shall be
true and correct in all material respects (except for any such 

 

36

 

representations and
warranties that are qualified by materiality, which shall be true and correct
in all respects) on and as of the date hereof and on and as of the Technology
Closing Date, as though first made on and as of the Technology Closing Date
(other than representations and warranties made as of a specified date, which
need be true and correct only as of the specified date);

 

(b)           Seller shall have (i) performed
and complied with its agreements and covenants under Section 4.3
(Financial Statements), including, for avoidance of doubt, delivery of the
Audited Financial Statements pursuant to Section 4.3(c) hereof and (ii) performed
and complied in all material respects with all of its other agreements and
covenants required to be performed or complied with under this Agreement as of
the Technology Closing;

 

(c)           There shall not have occurred, from
the date of this Agreement through the Technology Closing Date, any Business
Material Adverse Effect or any event or development which, individually or in
the aggregate, would have a Business Material Adverse Effect;

 

(d)           No action suit, proceeding claim,
arbitration or investigation before any governmental entity or before any
arbitrator shall be pending that would reasonably be expected to result in an
unfavorable judgment, order, decree, stipulation or injunction that would: (i) prevent
consummation of the transactions contemplated by this Agreement or (ii) cause
the transactions contemplated by this Agreement to be rescinded following
consummation;

 

(e)           Seller shall have delivered to
Purchaser a certificate executed by an authorized officer of the Seller to the
effect that each of the conditions specified in clauses (a), (b), (c) and (d) of
this Section 5.2 has been satisfied as of immediately prior to the
Technology Closing in all respects;

 

(f)            Seller shall have given such notices
and obtained in writing and at its own expense all consents and waivers
referred to on Schedule 5.2(f) hereto, and Seller shall have
delivered to Purchaser copies of each such fully executed notice, consent
and/or waiver;

 

(g)           Seller shall have delivered to
Purchaser a bill of sale and assignment and assumption agreement in the form
attached hereto as Exhibit A (the “Bill of Sale — Technology
Assets”) dated as of the Technology Closing Date and duly executed by an
authorized officer of Seller;

 

(h)           Seller shall have delivered to
Purchaser (i) an assignment of intellectual property in the form attached
hereto as Exhibit B (the “IP Assignment Agreement — Patents”)
and (ii) an assignment of intellectual property in the form attached
hereto as Exhibit C (the “IP Assignment Agreement —
Trademarks”), in each case dated as of the Technology Closing Date and duly
executed by an authorized officer of Seller;

 

(i)            Seller shall have delivered to
Purchaser a manufacturing and supply agreement in the form attached hereto as Exhibit D
(the “Manufacturing Agreement”) dated as of the Technology Closing Date
and duly executed by an authorized officer of Seller;

 

37

 

(j)            Seller shall have delivered to
Purchaser a license agreement in the form attached hereto as Exhibit E
(the “License Agreement”) dated as of the Technology Closing Date and
duly executed by an authorized officer of Seller;

 

(k)           McKenna Long & Aldridge LLP,
counsel to Seller, shall have delivered to Purchaser an opinion in the form
attached hereto as Exhibit F, dated as of the Technology Closing
Date;

 

(l)            All Liens other than
Permitted Liens to which any of the Technology Assets are subject or by which
any of the Technology Assets are bound shall have been removed and Seller shall
have delivered to Purchaser evidence of the removal of such Liens that is
reasonably acceptable to Purchaser;

 

(m)          Seller shall have delivered to
Purchaser a secretary’s certificate in the form attached hereto as Exhibit G,
dated as of the Technology Closing Date and duly executed by the Secretary or
Assistant Secretary of Seller; and

 

(n)           Seller shall have obtained from the
Secretary of State of the State of Delaware, and delivered to Purchaser, a
certificate of good standing of Seller.

 

Section 5.3            Conditions
to the Obligations of Seller.  The obligation of Seller to consummate the
transactions contemplated in this Agreement are subject to the satisfaction (or
waiver by Seller) of the following additional conditions:

 

(a)           (i) The representations and
warranties of Purchaser set forth in Sections 3.1, 3.2 and 3.3 shall be true
and correct in all respects at and as of the Technology Closing Date as if
first made on the Technology Closing Date, and (ii) the other
representations and warranties of Purchaser set forth in Article III shall
be true and correct in all material respects (except for any such
representations and warranties that are qualified by materiality, which shall
be true and correct in all respects) on and as of the date hereof and on and as
of the Technology Closing Date, as if first made at and as of the Technology
Closing Date (other than representations and warranties made as of a specified
date, which need be true and correct only as of the specified date);

 

(b)           Purchaser shall have performed and
complied in all material respects with all of its agreement and covenants
required to be performed or complied with under this Agreement as of the
Technology Closing;

 

(c)           No action, suit, proceeding claim,
arbitration or investigation before any governmental entity or before any
arbitrator shall be pending that would reasonably be expected to result in an
unfavorable judgment, order, decree, stipulation or injunction that would: (i) prevent
consummation of the transactions contemplated by this Agreement or (ii) cause
the transactions contemplated by this Agreement to be rescinded following
consummation;

 

(d)           Purchaser shall have delivered to
Seller a certificate executed by an authorized officer of the Seller to the
effect that each of the conditions specified in clauses (a), (b) and (c) of
this Section 5.3 has been satisfied as of immediately prior to the Technology
Closing in all respects;

 

38

 

(e)           Purchaser shall have delivered to
Seller the Bill of Sale — Technology Assets dated as of the Technology Closing
Date and duly executed by an authorized officer of Purchaser;

 

(f)            Purchaser shall have delivered to
Seller the Manufacturing Agreement dated as of the Technology Closing Date and
duly executed by an authorized officer of Purchaser;

 

(g)           Purchaser shall have delivered to
Seller the License Agreement dated as of the Technology Closing Date and duly
executed by an authorized officer of Purchaser;

 

(h)           DLA Piper US LLP, counsel to
Purchaser, shall have delivered to Purchaser an opinion in the form attached
hereto as Exhibit H, dated as of the Technology Closing Date;

 

(i)            Purchaser shall have delivered to
Seller a secretary’s certificate in the form attached hereto as Exhibit I,
dated as of the Technology Closing Date and duly executed by the Secretary or
Assistant Secretary of Purchaser; and

 

(j)            Purchaser shall have obtained from
the Secretary of State of the State of Delaware, and delivered to Seller, a
certificate of good standing of Purchaser.

 

ARTICLE
VI.

CONDITIONS TO THIRD MILESTONE PAYMENT

 

Section 6.1            Conditions to Third
Milestone Payment. 
Purchaser’s obligation to make the Third Milestone Payment on the
Manufacturing Closing Date shall be subject to the satisfaction (or waiver by
Purchaser) of the following conditions:

 

(a)           (i) The representations and
warranties of Seller set forth in Sections 2.1, 2.2, 2.3 and 2.4 shall be true
and correct in all respects with respect to Seller and the Manufacturing
Assets, as applicable, at and as of the Manufacturing Closing Date as if first
made on the Manufacturing Closing Date, and (ii) the other representations
and warranties of Seller set forth in Article II shall be true and correct
in all material respects with respect to Seller and the Manufacturing Assets,
as applicable, at and as of the Manufacturing Closing Date, as if first made at
and as of such time;

 

(b)           Seller shall have performed and
complied in all material respects with all of its agreements and covenants
required to be performed or complied with under this Agreement with respect to
the Manufacturing Assets as of the Manufacturing Closing Date;

 

(c)           There shall not have occurred, from
the date of this Agreement through the Manufacturing Closing Date, any event,
circumstance, development with respect to, change in or effect on the
Manufacturing Assets that is, or could reasonably be expected to be, materially
adverse to such Manufacturing Assets, taken as a whole;

 

(d)           No action, suit, proceeding, claim,
arbitration or investigation before any governmental entity or before any
arbitrator shall be pending that would reasonably be expected to result in an
unfavorable judgment, order, decree, stipulation or injunction that would: (i) prevent
the transfer of the Manufacturing Assets as contemplated hereby or (ii) cause
the transfer 

 

39

 

of the Manufacturing Assets as
contemplated hereunder to be rescinded following consummation;

 

(e)           None of the Work in Process shall be
held under a consignment or similar arrangement or be in transit.  The Work in Process shall have been
manufactured in accordance with then current Good Tissue Practices, as set
forth by the FDA, and all applicable laws, rules, regulations, ordinances,
standards and guidelines, including, without limitation, the United States
Federal Food, Drug and Cosmetic Act, 21 U.S.C. §301 et seq., and the United States National Organ Transplant
Act, Title 21 of the Code of Federal Regulations Part 1271, Human Cells,
Tissues, and Cellular and Tissue Based Products.

 

(f)            Seller shall have delivered to
Purchaser a certificate executed by an authorized officer of the Seller to the
effect that each of the conditions specified in clauses (a), (b), (c), (d) and
(e) of this Section 6.1 has been satisfied as of the Manufacturing
Closing Date in all respects;

 

(g)           Seller shall have delivered to
Purchaser a bill of sale and assignment and assumption agreement in the form
attached hereto as Exhibit J (the “Bill of Sale — Manufacturing
Assets”) dated as of the Manufacturing Closing Date and duly executed by an
authorized officer of Seller;

 

(h)           All Liens other than
Permitted Liens to which any of the Manufacturing Assets are subject or by
which any of the Manufacturing Assets are bound shall have been removed and
Seller shall have delivered to Purchaser evidence of the removal of such Liens
that is reasonably acceptable to Purchaser; and

 

(i)            Seller shall have obtained from the
Secretary of State of the State of Delaware, and delivered to Purchaser, a
certificate of good standing of Seller.

 

ARTICLE
VII.

TERMINATION

 

Section 7.1            Termination of Agreement.  This Agreement may be terminated at any time
prior to the Technology Closing:

 

(a)           By mutual written consent of
Purchaser and Seller;

 

(b)           By Purchaser or Seller if, without
the fault of the terminating party, the Technology Closing shall not have
occurred on of before September 8, 2008 (the “End Date”); provided
that, if by the End Date the condition set forth in Section 5.1(a) shall
not have been satisfied but all other conditions shall be or are capable of
being satisfied, the End Date may be extended by either Purchaser or Seller, in
its discretion, by three (3) months from its scheduled expiry (in which
case any references to the End Date herein shall mean the End Date as
extended);

 

(c)           By Purchaser, if Seller shall be in
material breach of any of its representations, warranties, covenants or
agreements set forth in this Agreement, which breach is not cured by Seller
within ten (10) calendar days following receipt of written notice of such
breach or failure to perform from Purchaser, provided that Purchaser is
not in material breach of any of its

 

40

 

representations, warranties,
covenants or agreements set forth in this Agreement at the time such notice is
delivered;

 

(d)           By Seller, if Purchaser shall be in
material breach of any of its representations, warranties, covenants or
agreements set forth in this Agreement, which breach is not cured by Purchaser
within ten (10) calendar days following receipt of written notice of such
breach or failure to perform from Seller, provided that Seller is not in
material breach of any of its representations, warranties, covenants or
agreements set forth in this Agreement at the time such notice is delivered;

 

(e)           By Purchaser or Seller if any
governmental entity shall have entered a final, non-appealable order or
injunction restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement, provided that such right of termination shall
not be available to any party if such party shall have failed to take
reasonable efforts to prevent or contest the imposition of such order or
injunction;

 

(f)            By Purchaser or Seller if the
Stockholder Approval shall not have been obtained at the Stockholders Meeting
duly convened or at any adjournment or postponement thereof; provided, however,
that the right to terminate this Agreement under this Section 7.1(f) shall
not be available to Seller where the failure to obtain the Stockholder Approval
shall have been caused by the action or failure to act of Seller and such
action or failure to act constitutes a breach by Seller of this Agreement; or

 

(g)           By Purchaser if there shall have been
a Change in Seller Board Recommendation.

 

Section 7.2            Procedures
and Effect of Termination. 
In the event of termination of this Agreement by Purchaser or Seller
pursuant to Section 7.1, all obligations of the parties hereunder shall
terminate without any liability of any party to the other party, except for any
liability of a party for breaches of this Agreement prior to such
termination.  This Section 7.2, Section 4.5
(Confidentiality), Section 7.3 and Article IX shall survive any
termination of this Agreement.

 

Section 7.3            Reimbursement of Expenses.  Seller agrees that, if Purchaser or Seller
terminates this Agreement (i) pursuant to Section 7.1(b) hereto
and, at the time of such termination, the Stockholder Approval shall not have
been obtained or (ii) pursuant to Section 7.1(f), then Seller shall
pay to Purchaser promptly (but in any even no later than two business days
after such termination) an amount of Three Hundred Fifty Thousand Dollars
($350,000.00) as reimbursement for Purchaser’s costs and expenses associated
with the negotiation, implementation and performance of this Agreement prior to
such termination.  Seller further agrees
that, (i) if Purchaser or Seller terminates this Agreement pursuant to Section 7.1(f) hereto
and at the time of such termination the Stockholder Meeting shall have been
held, the Stockholder Approval shall not have been obtained and, prior to the
Stockholder Meeting, there shall have been a Change in Seller Board
Recommendation or (ii) Purchaser terminates this Agreement pursuant to Section 7.1(g),
then Seller shall pay to Purchaser promptly (but in any event no later than two
business days after such termination) an amount of Two Million Dollars
($2,000,000).  All amounts payable by
Seller to Purchaser pursuant to this Section 7.3 shall be 

 

41

 

paid in a wire transfer of United States dollars in immediately
available funds to an account designated by Purchaser to Seller in writing.

 

ARTICLE
VIII.

INDEMNIFICATION

 

Section 8.1            Indemnification by Seller.  Seller hereby agrees to indemnify, defend and
save harmless Purchaser and its directors, officers, employees, affiliates,
agents, advisors, representatives, stockholders and assigns (collectively, the “Purchaser Indemnified Parties”) from, against
and in respect of any and all Losses incurred or suffered by any Purchaser
Indemnified Party arising out of, or related to, the following (each, a “Purchaser
Claim”):

 

(a)           any misrepresentation or breach of
warranty made by the Seller in any Transaction Document or in any document,
certificate or other instrument required to be delivered by the Seller under
any Transaction Document;

 

(b)           any breach or non fulfillment by the
Seller when required to be performed of any covenant or agreement made or to be
performed by the Seller in any Transaction Document or in any agreement or
instrument entered in connection with any Transaction Document;

 

(c)           any fraud or intentional
misrepresentation with respect to, or intentional breach of, any Transaction
Document by the Seller; and

 

(d)           the Retained Liabilities.

 

Except as set forth in Section 8.6
with respect to third party Actions, in the event of any Purchaser Claim,
Purchaser shall notify Seller and such notice shall be in writing and shall
describe with reasonable specificity the nature and amount of such Purchaser
Claim (a “Purchaser Notice of Claim”). 
A delay on the part of a Purchaser Indemnified Party in giving Seller a
Purchaser Notice of Claim shall relieve Seller from its obligations under this Section 8.1
only to the extent that Seller is materially prejudiced thereby.  A Purchaser Notice of Claim may be delivered
at any time during the applicable survival period for such claim as set forth
in Section 8.3 of this Agreement.

 

Section 8.2            Indemnification by
Purchaser.  Purchaser
hereby agrees to indemnify, defend and save harmless Seller and its directors,
officers, employees, affiliates, agents, advisors, representatives,
stockholders and assigns (collectively, the “Seller
Indemnified Parties”) from, against and in respect of any and all
Losses incurred or suffered by any Seller Indemnified Party arising out of, or
related to, the following (each, a “Seller Claim”):

 

(a)           any misrepresentation or breach of
warranty made by the Purchaser in any Transaction Document or in any document,
certificate or other instrument required to be delivered by the Purchaser under
any Transaction Document;

 

(b)           any breach or non fulfillment of any
covenant or agreement made or to be performed by the Purchaser in any
Transaction Document or in any agreement or instrument entered in connection
with any Transaction Document;

 

42

 

(c)           any fraud or intentional
misrepresentation with respect to, or intentional breach of, any Transaction
Document by Purchaser; and

 

(d)           the Assumed Liabilities.

 

Except as set forth in Section 8.6
with respect to third party Actions, in the event of any Seller Claim, Seller
shall notify Purchaser and such notice shall be in writing and shall describe
with reasonable specificity the nature and amount of such Seller Claim (a “Seller
Notice of Claim”).  A delay on the
part of a Seller Indemnified Party in giving Purchaser a Seller Notice of Claim
shall relieve Purchaser from its obligations under this Section 8.2 only
to the extent that Purchaser is materially prejudiced thereby.  A Seller Notice of Claim may be delivered at
any time during the applicable survival period for such claim as set forth in Section 8.3
of this Agreement.

 

Section 8.3            Survival.  If the Technology Closing occurs, all
representations and warranties of Purchaser and Seller contained herein or in
any other Transaction Document or document, certificate or other instrument
required to be delivered hereunder or thereunder in connection with the
transactions contemplated hereby shall survive the Technology Closing and shall
continue until eighteen months (18) months after the Manufacturing Closing, provided
that the representations and warranties set forth in Section 2.6 (Taxes), Section 2.9(c) (Disposition
of Certain Contracts), Section 2.15 (Intellectual Property), Section 2.18
(Authorizations; Regulatory Compliance), Section 2.20 (Environmental), Section 2.22
(Brokers), shall survive until sixty (60) days after the expiration of the
applicable statutes of limitations (including any extensions or waivers
thereof) (the “Specified Representations”); provided, further,
that the representations and warranties on which any Claims for indemnification
are based shall continue in effect until final resolution of such claims and
such expiration thereof shall not effect the right of any Indemnified Party to
seek indemnification for Losses pursuant to Article 8 hereof.

 

Section 8.4            Limitations. 
Notwithstanding anything contained in this Agreement to the contrary:

 

(a)           Neither party shall be liable or be
obligated to make any payment in respect of Losses suffered by an Indemnified
Party under Section 8.1(a) (other than the representations and
warranties set forth in Section 2.4 hereof), 8.1(b), 8.2(a) or
8.2(b) hereof (as the case may be) until the aggregate of all
Losses suffered by such Indemnified Party under this Article VIII exceeds
Two Hundred Fifty Thousand Dollars ($250,000) (the “Basket Amount”);
after which such other party shall be entitled to recover all such Losses
(subject to the General Cap Amount); provided that in no event shall the
aggregate indemnity amount payable by any indemnifying party pursuant to Section 8.1(a),
8.1(b) or 8.2(a) hereof (other than with respect to any
Specified Representations) exceed Fifteen Million Dollars ($15,000,000) (the “General
Cap Amount”).

 

(b)           Neither party shall be liable or be
obligated to make any payment in respect of Losses suffered by an Indemnified
Party under (i) Section 8.1(a) with respect to any
Specified Representation (other than the representations set forth in Section 2.9(c) hereof),
or (ii) Section 8.2(b) (the “Special Cap Liabilities”)
until the aggregate of all Losses suffered by such Indemnified Party under this
Article VIII exceeds the Basket Amount, after which such other party shall
be entitled to recover all such Losses (subject to the Special Cap Amount), provided

 

43

 

that in no event shall the
aggregate indemnity amount payable by any indemnifying party with respect to
the Special Cap Liabilities and liability under Section 8.1(a) with
respect to the representations set forth in Section 2.9(c) hereof,
when taken together with all Losses paid or payable to an Indemnified Party
pursuant to Section 8.4(a) above, exceed Twenty Million Dollars
($20,000,000) plus any Applicable Milestone
Payments that become payable (prior to Purchaser’s Rights of Set-Off) pursuant
to Section 1.5 hereof; provided, however, that in no event
shall the aggregate indemnity amount for Losses payable by any Indemnifying
Party under this Section 8.4(b), when taken together with all Losses paid
or payable by an Indemnifying Party pursuant to Section 8.4(a), exceed
Thirty Five Million Dollars ($35,000,000) (the “Special Cap Amount”).

 

(c)           Each party’s liability and obligation
to make any payment in respect of Losses suffered by an Indemnified Party under
(i) Sections 8.1(c) and 8.1(d) or (ii) Sections
8.2(c) and 8.2(d) shall be unlimited.

 

(d)           The amount of any Losses
indemnifiable by either party pursuant to this Article VIII shall be
adjusted to reflect the value of any insurance proceeds actually received (net
of any deductibles, retention or self-insurance) by the Indemnified Party or
its successors or assigns in respect of such Losses provided, however,
that no Indemnified Party shall have any obligation to pursue such insurance
proceeds or recovery from third persons. 
If any such proceeds or recoveries are received by an Indemnified Party
(or any of its affiliates) with respect to any Claims after a party hereto has
made a payment to the Indemnified Party with respect to such Claim, the
Indemnified Party (or such affiliate) shall pay to such party the amount of
such proceeds or recoveries (up to the amount of such party’s payment with
respect to such Claim).

 

(e)           No Indemnified Party shall be
entitled to recover under this Article VIII an amount in respect of
Losses, or otherwise obtain reimbursement or restitution from any party to this
Agreement, more than once in respect of the same Loss.

 

Section 8.5            Resolution of Notice of
Claim.  Each Purchaser
Notice of Claim and Seller Notice of Claim (each, a “Notice of Claim”)
delivered hereunder shall be resolved as follows:

 

(a)           If, within thirty (30) days after a
Notice of Claim is received by the indemnifying party, the indemnifying party
does not contest such Notice of Claim in writing to the Indemnified Party, the
indemnifying party shall be conclusively deemed to have consented to the
recovery by the Indemnified Party of the full amount of Losses (subject to the
limits contained in this Article VIII) specified in the Notice of Claim in
accordance with this Article VIII, and the indemnifying party shall be
obligated to pay to the Indemnified Party the total amount of Losses set forth
in the Notice of Claim within fifteen (15) days following such thirty (30) day
period.

 

(b)           Following the delivery of a Notice of
Claim to an indemnifying party, the indemnifying party shall be given such
access as they may reasonably require during the Indemnified Party’s normal
business hours (or such other times as the parties may agree) to those books
and records of the Indemnified Party relating to the Claim in the possession
of, and/or under the control of, the Indemnified Party, and access to such
personnel or representatives of 

 

44

 

the Indemnified Party as
they may reasonably require for the purposes of determining whether to contest
all or any portion of a Notice of Claim.

 

(c)           If the indemnifying party gives the
Indemnified Party written notice contesting all or any portion of a Notice of
Claim (a “Contested Claim”) within the thirty (30) day period specified
in Section 8.5(a) above, then such Contested Claim shall be resolved
by either (i) a written settlement agreement or memorandum executed by the
Indemnified Party and the indemnifying party or (ii) in the absence of
such a written settlement agreement within fifteen (15) days following receipt
by the Indemnified Party of the written notice from the indemnifying party, by
binding arbitration between the Indemnified Party and indemnifying party in
accordance with the terms and provisions of Section 9.1 below.  The decision of the arbitrators as to the
validity and amount of any claim in any disputed Notice of Claim shall be
binding and conclusive upon the parties to this Agreement, and the Indemnified
Party shall be entitled to act in accordance with and in reliance on such
decision, and the indemnifying party shall be obligated to pay to the
Indemnified Party the total amount of Losses as determined by the arbitrator
within fifteen (15) days following such decision.

 

(d)           Judgment upon any award rendered by
the arbitrators may be entered in any court having jurisdiction.  Seller and Purchaser shall instruct the
arbitrators to determine and set forth in judgment of the arbitrators the
non-prevailing party to an arbitration and such non-prevailing party shall pay
its own expenses, the fees of each arbitrator, the administrative fee of the
American Arbitration Association, and the expenses, including, without
limitation, the reasonable attorneys’ fees and costs, incurred by the
prevailing party to the arbitration.  The
arbitration panel shall be authorized to determine which party to the
arbitration is the prevailing party and which party is the non-prevailing
party.

 

(e)           Any amounts owed to any Purchaser
Indemnified Party following the resolution of a Purchaser Claim, as determined
by this Section 8.5, shall be satisfied, at the sole discretion of
Purchaser, by payment of Seller to Purchaser, from any earned but unpaid
portion of the Maximum Milestone Amount.

 

Section 8.6            Third Party Actions.  In the event any Action is instituted against
an Indemnified Party, which involves a Claim for which indemnification may be
sought, the Indemnified Party will, promptly after receipt of notice of any
such Action, notify the indemnifying party of the commencement thereof.  The failure to so notify the indemnifying party
of the commencement of any such Action will relieve the indemnifying party from
liability in connection therewith only to the extent that such failure
materially and adversely affects the ability of the indemnifying party to
defend the interests of the indemnifying party in such Action.  Except as set forth on Schedule 8.6
hereto, the Indemnified Party shall have the right to control the defense or
settlement of such Action; provided that the indemnifying party and its counsel
(at such party’s sole expense) may participate in (but not control the conduct
of) the defense of such Action, but only to the extent that such participation
does no affect any privilege relating to the Indemnified Party.  Any settlement by the Indemnified Party of
any such Action with third party claimants, or any judgment by any governmental
entity with respect to such Action with third party claimants, shall be
determinative of the amount of Losses relating to such matter for purposes of
this Article VIII.

 

45

 

Section 8.7            Exclusive Remedy.  If the Technology Closing
occurs, except for the rights of Purchaser set forth in Section 9.1(b) hereto,
following the Technology Closing the right of the parties hereto to demand and
receive indemnification pursuant to this Article VIII shall be the sole
and exclusive remedy exercisable by a party with respect to this Agreement or
the transactions contemplated hereby except for the right to seek specific
performance of any of the agreements contained herein, and except in the case
of fraud or intentional misrepresentation.

 

Section 8.8            Reliance.  No Indemnified Party shall be required to
show reliance on any representation, warranty, certificate or other agreement
in order for such Indemnified Party to be entitled to indemnification
hereunder.

 

Section 8.9            Tax Treatment of Indemnity Payments.  Any payment pursuant to this
Article VIII shall be considered an adjustment to the initial Purchase
Price for Tax purposes, to the maximum extent permitted by law.

 

ARTICLE
IX.

MISCELLANEOUS

 

Section 9.1            Disputes.

 

(a)           Any dispute, controversy, difference or claim arising out
of, relating to or in connection with this Agreement, any other Transaction
Document, any transaction hereunder or thereunder or breach hereof or thereof
shall be finally settled by arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association (the “Rules”)
then in effect by one (1) arbiter appointed with the consent of both
Seller and Purchaser (and in the event such consent cannot be obtained within
thirty (30) days following the request by Seller or Purchaser for the consent
of the other, in accordance with the Rules). 
The arbiter’s award shall be final and binding, and, in all instances,
be subject to the limitations set forth in Article VIII hereof.  Judgment upon the award rendered by the
arbiter may be entered in any court having jurisdiction thereof.  The arbitration shall take place in the Cook
County in the State of Illinois, or such other place as the parties may
agree.  The arbiter’s award shall be in
writing and shall include (i) a provision that the prevailing party in the
arbitration shall recover its costs of the arbitration and reasonable attorneys’
fees from the other party, and (ii) the amount of such costs and fees.

 

(b)           Notwithstanding subsection (a), (i) either
party may, if it believes that it requires or is entitled to injunctive relief,
file a civil action in any court having jurisdiction seeking injunctive relief,
(ii) Purchaser shall be entitled to specific performance to remedy any
breach by Seller of its representations and warranties contained in Section 2.4
(Title and Sufficiency of Transferred Assets) and the covenants contained in Section 4.1
(Further Assurances) and shall be entitled to file a civil action in any court
having jurisdiction seeking such relief and (iii) Purchaser shall be
entitled to specific performance and shall be entitled to file a civil action
in any court having jurisdiction seeking such relief if Seller is in breach of
its obligations under Section 4.6 (No Other Bids) hereof or if following
the termination of the Manufacturing Agreement, Purchaser has requested that
the Manufacturing Closing take place and the 

 

46

 

Manufacturing Assets be
transferred to Purchaser in accordance with the terms of this Agreement and
Seller has not, within ten (10) business days following such request,
delivered and transferred the Manufacturing Assets to Purchaser.  Any claim to or demand for monetary damages
shall, however, be governed exclusively by the provisions for arbitration set
forth in subsection (a).

 

Section 9.2            Merger Clause.  This Agreement, the other Transaction
Documents and the agreements, documents and instruments to be executed and
delivered in connection herewith and therewith contain the final, complete and
exclusive statement of the agreement between the parties with respect to the
transactions contemplated herein and all other prior or contemporaneous oral
communications (including, for avoidance of doubt, communications in connection
with the preparation of this Agreement and the other Transaction Documents) and
agreements, and all prior written communications (including, for avoidance of
doubt, written drafts of this Agreement and the other Transaction Documents)
and agreements, with respect to the subject matter hereof are merged herein and
superseded.  For the avoidance of doubt,
it is the parties’ intent that no term contained in or omitted from any prior
written draft of this Agreement or the other Transaction Documents be used as
extrinsic evidence under any state law or judicial interpretation to determine
the intent of the parties hereto.

 

Section 9.3            Amendments.  No
amendment to, or any waiver with respect to any provision of, this Agreement
shall be effective unless in writing and executed, in the case of an amendment
by each party to this Agreement or, in the case of a waiver by each party
against whom the waiver is to be effective. 
No course of dealing and no failure or delay on the part of any party
hereto in exercising any right, power or remedy conferred by this Agreement
shall operate as a waiver thereof or otherwise prejudice such party’s rights,
powers and remedies.  The failure of either
party to this Agreement to require the performance of a term or obligation
under this Agreement or the waiver by the other party to this Agreement of any
breach hereunder shall not prevent subsequent enforcement of such term or
obligation or be deemed a waiver of any subsequent breach hereunder.  No single or partial exercise of any right,
power or remedy conferred by this Agreement shall preclude any other or further
exercise thereof or the exercise of any other right, power or remedy.

 

Section 9.4            Notices.  All notices, requests and demands and other
communications hereunder must be in writing and shall be deemed to have been
duly given (i) if given by telecopy, when such telecopy is transmitted to
the telecopy number specified in this Agreement, if written confirmation of
receipt thereof is obtained, (ii) on the date of delivery shown on the
return receipt (or, if none shown, three (3) days after deposit in
the mail) if placed in the United States mails and forwarded by registered or
certified mail, return receipt requested, postage prepaid, or (iii) one (1) business
day after deposit in the mail, if delivered, prepaid, to an overnight
courier.  All such communications shall
be addressed as follows:

 

(a)           if to Seller:

 

Osiris
Therapeutics, Inc.

7015
Albert Einstein Avenue

Columbia,
Maryland 21046

Attention:  Chief Executive Officer

 

47

 

Facsimile:
(443) 283-4259

 

with a required copy to:

 

McKenna
Long & Aldridge LLP

303
Peachtree St., NE, Suite 5300

Atlanta,
Georgia 30308

Attention:  Michael Cochran, Esq.

Facsimile:
(404) 527-4198

 

(b)           if to Purchaser:

 

NuVasive, Inc.

7473
Lusk Boulevard

San
Diego, California 92121

Attention:  General Counsel

Facsimile:
(858) 909-2479

 

with a required copy (which shall not constitute
notice) to:

 

DLA
Piper US LLP

4365
Executive Drive, Suite 1100

San
Diego, California 92122

Attention:  Michael Kagnoff

Facsimile:
(858) 456-3075

 

Any party may change the
address(es) to which notices to it are to be sent by giving notice of such change
to the other parties in accordance with this Section.

 

Section 9.5            Captions.  The captions are for convenience of reference
only and shall not be construed as a part of this Agreement.

 

Section 9.6            Governing Law.  This Agreement, including the validity hereof
and the rights and obligations of the parties hereunder, shall be construed,
interpreted, enforced and governed by and under the laws of the State of
Delaware applicable to contracts made and to be performed entirely in such
state, without regard to its rules regarding conflicts of law provisions.

 

Section 9.7            Schedules and Exhibits.  All the schedules and exhibits referenced in
and attached to this Agreement are incorporated herein by reference and shall
be deemed to be a part of this Agreement for all purposes.  If any provision of this Agreement is so
broad as to be unenforceable, such provision shall be interpreted to be only so
broad as if enforceable.

 

Section 9.8            Severability.  The invalidity, unenforceability or
illegality of any one or more phrases, sentences, clauses or provisions of this
Agreement shall not affect the validity, enforceability or legality of the
remaining portions of this Agreement or any part thereof (so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to any party), it being intended that
each party’s rights and privileges shall be enforceable to the fullest extent
permitted by applicable law, and any such invalidity, 

 

48

 

unenforceability or illegality in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction (so long as
the economic or legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to any party).

 

Section 9.9            Counterparts.  This Agreement may be executed in any number
of counterparts, each of which shall constitute an original but all of which
shall constitute one and the same instrument. 
The parties need not sign the same counterpart.

 

Section 9.10         Fees and
Expenses.  Except as expressly set forth herein, Seller
on the one hand, and Purchaser, on the other hand, shall each bear their own
expenses in connection with the negotiation and preparation of this Agreement,
all agreements, documents, and instruments contemplated hereby, and the
consummation of the transactions contemplated hereby, including, without
limitation, the fees and expenses of their respective counsel, accountants, and
consultants.

 

Section 9.11         Benefits
and Binding Effect.  No party may assign or transfer any of their
respective rights, benefits or obligations under this Agreement without the
consent in writing of the other party hereto; provided, however, that any party
may assign its rights, benefits and obligations hereunder in whole or in part
to any successor or successors to (i) in the case of Purchaser, all or
part of the Transferred Assets or its business in the event of a
reorganization, merger or consolidation, sale or other transfer of a
substantial portion of its assets or (ii) in the case of Seller, all of
its business in the event of a reorganization, merger or consolidation (each of
the events in (i) and (ii), a “Corporate Event”); provided that any
acquiror or successor of Purchaser or Seller, as applicable, in connection with
a Corporate Event shall, in the consenting parties reasonable discretion, be at
least as creditworthy as the assigning party; provided further, however, that
Seller may not assign or transfer any of its rights, benefits or obligations
under this Agreement in connection with a Corporate Event prior to the
Manufacturing Closing Date to any person identified on Schedule 9.11.
Notwithstanding the foregoing, no assignment shall relieve the assigning party
of responsibility for the performance of its obligations hereunder.

 

Section 9.12         No Third
Party Beneficiary.  The parties hereto do not intend to create
any third party beneficiary rights or remedies with respect to any person,
including without limitation any employees or former employees of Seller or
other person or entity who is providing, or has provided services to Seller as
a result of the provisions in this Agreement, and specifically hereby negate
any such intention or construction.

 

Section 9.13         Definitions;
Interpretation.  For purposes of this
Agreement, (a) the terms defined in this Agreement and in this Section 9.13
shall have the meanings assigned to them in this Agreement and this Section 9.13
and include the plural as well as the singular, (b) all accounting terms
not otherwise defined herein have the meanings assigned under GAAP, (c) all
references in this Agreement to designated “Section” or other subdivisions are
to be designated Sections and other subdivisions of the body of this Agreement,
(d) pronouns of either gender or neutral shall include, as appropriate,
the other pronoun forms, and (e) the words “herein,” “hereof” and “hereunder”
and other words of similar import refer to this Agreement as a whole and not to
any particular Section or other subdivision.   Each of the parties has participated in the
drafting and negotiation of this Agreement. 
If an ambiguity or question of intent or interpretation arises, this
Agreement must be construed as if it is drafted by both parties, and no 

 

49

 

presumption or burden of proof shall arise favoring or disfavoring any
party by virtue of authorship of any of the provisions of this Agreement.

 

                As
used in this Agreement and the exhibits and schedules delivered pursuant to
this Agreement, the following definitions will apply:

 

“Action” means any
action, suit, claim, charge, cause of action or suit (whether in contract or
tort or otherwise), litigation (whether at law or in equity, whether civil or
criminal), controversy, assessment, arbitration, investigation, hearing,
complaint, demand or other proceeding to, from, by or before any arbitrator,
court, tribunal or other governmental entity.

 

“Additional Product
Delivery Payment” means the product of (i) (A) the
Excess Delivery Amount divided by (B) 58,300,
rounded down to the nearest whole number multiplied by (ii) Two
Million, Five Hundred Thousand Dollars ($2,500,000); provided, however,
that in no event shall the Additional Product Delivery Payment exceed Seven Million,
Five Hundred Thousand Dollars ($7,500,000).

 

“Allowable Work in
Process” means the maximum total amount of Work in Process and Finished
Inventory existing on the Manufacturing Closing Date which is reasonably
necessary to support the sales forecasts provided by Purchaser to Seller.

 

“Asset
Acquisition Proposal” means any proposal, inquiry or offer from any person
(other than Purchaser) concerning the acquisition or license of all or any
portion of the Transferred Assets.

 

“Business
Intellectual Property” means any and all intellectual property and other intangible rights and
property used in, held for use in, intended for use in, related to or necessary
for the operation of the Business as presently conducted, including any or all
of the following, and all rights in, arising out of, or associated therewith,
including, but not limited to, all such rights used in the operation of the
Business: (i) any and all Patent Rights; (ii) all inventions (whether
patentable or not), invention disclosures, discoveries, improvements, trade
secrets, proprietary information, technology, technical information, data
(including data from scientific and clinical and pre-clinical studies and other
research), customer, physician and supplier lists, procedures, processes,
specifications, methods, techniques, ideas, results, marketing studies, plans
and proposals, market research and all other information and know-how, whether
or not patentable or protected as a trade secret, and all documentation relating
to any of the foregoing; (iii) all trademarks, service marks, trade names,
domain names, and registrations and applications relating to any of the
foregoing, all logos, designs, brand names, trade dress and slogans, and all
other rights corresponding thereto throughout the world (“Trademark Rights”);
(iv) all copyrights, copyrights registrations and applications therefor,
works of authorship and derivative works (including advertising, marketing and
promotional materials, artwork, labels and other works of authorship) mask
works, moral rights, and all other rights corresponding thereto throughout the
world; (“Copyright Rights”) (v) all industrial designs and any
registrations and applications therefor throughout the world; (vi) all
software, including but not limited to source code, object, executable or
binary code, templates, manuals and other items and documentation related
thereto or associated therewith; (vii) all databases and data collections
and all rights therein throughout the world; (viii) all Actions and rights
to sue at law or in equity for any, 

 

50

 

present or future infringement or other impairment
thereto, including the right to receive all proceeds and damages therefrom, and
all rights to obtain renewals, continuations, divisions or other extensions of
legal protections pertaining thereto; and (ix) any similar or equivalent
rights to any of the foregoing anywhere in the world, together with the
goodwill and the business appurtenant thereto and any rights, claims or choses
in action relating to or deriving from any of the foregoing.

 

“Business Material
Adverse Effect” means any event, circumstance, development with respect to,
change in or effect on the Business or the Transferred Assets that is, or would
reasonably be expected to have, a material adverse effect on the business,
assets, liabilities, financial condition or results of operations of the
Business, taken as whole; provided, however, that any event,
circumstance, development, change or effect arising out of or relating to the
following shall not be taken into account in determining whether a Business
Material Adverse Effect shall have occurred: (i) changes in general
economic conditions which do not have a disproportionate impact on the Business,
(ii) changes affecting generally the industry in which the Seller conducts
the Business which do not have a disproportionate impact on the Business, (iii) the
public announcement by Purchaser and Seller of the execution of this Agreement,
(iv) any action taken or omitted to be taken by Seller pursuant to the
express terms of this Agreement, (v) any change resulting solely from an
action taken by Purchaser or its affiliates without the prior written consent
of Seller, and (vi) any action taken at, and in accordance with, the
written request of Purchaser.

 

“Claims” means, as
the context dictates, any Purchaser Claim or Seller Claim.

 

“Contract” means
any written or oral legally binding contract, agreement, instrument, commitment
or undertaking of any nature (including leases, licenses, mortgages, notes,
guarantees, sublicenses, subcontracts, letters of intent and purchase orders).

 

“Code” means the
Internal Revenue Code of 1986, as amended, or as hereafter amended.

 

“Excess Delivery
Amount” means the positive number, if any, by which the total number of
cubic centimeters of Product that Seller shall have delivered to Purchaser prior to the
Manufacturing Closing in accordance with the terms and provisions of, and
subject to the specifications set forth in, the Manufacturing Agreement,
exceeds the Second Delivery Threshold.

 

“Finished
Inventory” means all finished goods inventory of Product.

 

“GAAP”
means United States
generally accepted accounting principals and practices in effect from time to
time applied consistently throughout the periods involved.

 

“Indemnified Party”
means, as the context dictates, any Purchaser Indemnified Party or Seller
Indemnified Party.

 

“Knowledge”
means, with respect to Seller, the actual knowledge of the individuals listed
on Schedule 9.14 hereto or the knowledge that any such individual could
obtain by reasonable inquiry.

 

51

 

“Losses”
shall mean the amount of any loss, claim, Tax, demand, loss, deficiency,
damage, liability, judgment, fine, penalty, fee, cost or expense (including,
without limitation, reasonable attorneys’, consultants’ and experts’ fees and
expenses) incurred, paid, accrued or sustained by the Purchaser Indemnified
Parties, including, without limitation, any costs of defending any Actions or
enforcing the Purchaser Indemnified Party’s rights under this Agreement.  In determining the amount of any Loss (but,
for avoidance of doubt, not in determining whether a breach of representation,
warranty or covenant exists), any qualifications in the representations,
warranties and covenants with respect to a Business Material Adverse Effect,
materiality, material or similar terms shall be disregarded and will not have
any effect with respect to the calculation of the amount of any Losses
attributable to a breach of any representation, warranty or covenant of the
Seller set forth in the Transaction Documents, and the exhibits, schedules or
certificates delivered in connection therewith.

 

“Net
Sales” means (i) the gross amount invoiced by Purchaser and its affiliates for Product
sold in bona fide arms-length transactions to any non-affiliated third party
customer or distributor and (ii) the gross royalties and license fees
payable to Purchaser by licensees, sublicensees and distributors for Product
sold in bona fide, arms-length transactions, in each case, less the following
offsets and deductions: (a) quantity and/or cash discounts from the gross
invoice price which are actually allowed and taken; (b) freight, postage
and insurance included in the invoice price; (c) amounts repaid or
credited by reasons of rejections or return of goods or because of retroactive
price reductions specifically identifiable to such Product; (d) amounts
payable resulting from government (or agency thereof) mandated rebate programs;
(e) third party rebates or charge-backs to the extent actually allowed;
and (f) invoiced customs duties and sales Taxes (excluding income,
value-added and similar Taxes), if any, all as determined in accordance with
GAAP.  Where there is an initial disposal
by Purchaser or any of its affiliates to Purchaser or any of its affiliates, as
applicable, and a subsequent sale to a person or entity other than the
Purchaser or its affiliates, the “Net Sales” shall be calculated by reference
to the invoiced ex-work pertaining to the first sale or other disposal to a
person or entity other than Purchaser or its affiliates.

 

“Patent Rights”
means any and all (A) patents, (B) patent applications, including,
without limitation, all provisional applications, substitutions, continuations,
continuations-in-part, divisions, renewals, and all patents granted thereon, (C) all
patents-of-addition, reissues, reexaminations and extensions or restorations by
existing or future extension or restoration mechanisms, including, without
limitation, supplementary protection certificates or the equivalent thereof,
and (D) any other form of government-issued right substantially equivalent
to any of the foregoing used in, necessary for or related to the Business.

 

“Purchaser
Common Stock Value” means the average closing sales price of one share of
Purchaser Common Stock on the principal exchange on which the Purchaser Common
Stock is traded over the ten-day trading period ending on the second trading
day preceding the date of issuance of such Purchaser Common Stock to the Seller.

 

“Superior Proposal”
shall mean an unsolicited bona fide Asset Acquisition Proposal by a third party
to enter into a sale, lease, exchange transfer, license, acquisition or
disposition of all of the Business and the Transferred Assets in a single
transaction or a series of related transactions that (a) was not obtained
or made as a direct or indirect result of a failure to comply 

 

52

 

with or breach of (or in violation of) the Agreement;
and (b) is on terms and conditions that the Board of Directors of Seller
determines, in its reasonable, good faith judgment, after obtaining and taking
into account such matters that it deems relevant (taking into account all
financial, regulatory, legal and other aspects thereof) following consultation
with its outside legal counsel and regionally-recognized financial advisor: (x) is
more favorable, from a financial point of view, to Seller’s stockholders than
the terms of this Agreement (taking into account any offer by the Purchaser to
amend the terms of this Agreement,); and (y) is reasonably capable of
being consummated on the terms proposed and on a timely basis (taking into
account all financial, regulatory, legal and other aspects thereof); provided, however, that any such Asset Acquisition Proposal
shall not be deemed to be a “Superior Proposal” if any financing required to
consummate the transaction contemplated by such Asset Acquisition Proposal is
not firmly committed and reasonably capable of being obtained by such third
party, or if the consummation of such transaction is contingent on any such
financing being obtained.

 

“Taxes” means (A) any
and all foreign, and U.S. federal, state, local or other Taxes of any kind
(together with any and all interest, penalties, additions to Tax and additional
amounts imposed with respect thereto) imposed by any governmental entity,
including Taxes on or with respect to income, franchises, windfall or other
profits, gross receipts, property, sales, use, capital stock, payroll,
employment, unemployment, social security, workers’ compensation or net worth,
and Taxes in the nature of excise, withholding, ad valorem or value added; (B) any
liability for the payment of any amounts of the type described in clause (A) as
a result of being or ceasing to be a member of an affiliated, consolidated,
combined or unitary group for any period; and (C) any liability for the
payment of any amounts of the type described in clause (A) or (B) as
a result of any express or implied obligation to indemnify any other Person or
as a result of any obligations under any agreements or arrangements with any
other Person with respect to such amounts and including any liability for Taxes
of a predecessor or a transferor or otherwise by operation of law.

 

“Tax Return” means
any return, report or similar filing (including the attached schedules)
required to be filed with respect to Taxes, including any information return,
claim for refund, amended return or declaration of estimated Taxes.

 

“Technology
Assets” means all Transferred Assets other than the Manufacturing Assets.

 

“WIP
Value” shall mean the positive or negative number equal to (i) with
respect to Allowable Work in Process held by Seller as of the Manufacturing
Closing Date that but for receipt of the documentation necessary for the
Allowable Work in Process to constitute Finished Product, the product of (x) the
aggregate cubic centimeters of such Allowable Work in Process, times (y) the
then current Product Fee under the Manufacturing Agreement times (z) 0.7 minus (ii) the product of 17,500 times then current
Product Fee under the Manufacturing Agreement.

 

53

 

Index
of Other Defined Terms:

 

	
  Defined Terms

  	
   

  	
  Section Reference

  
	
  510(k)

  	
   

  	
  Section 2.18(d)

  
	
  Affirmative
  Response Notice

  	
   

  	
  Section 4.12(b)

  
	
  Agreement

  	
   

  	
  Preamble

  
	
  Antitrust
  Laws

  	
   

  	
  Section 4.15(b)

  
	
  Applicable
  Milestone Payment

  	
   

  	
  Section 1.5(a)

  
	
  Assumed
  Contracts

  	
   

  	
  Section 1.1(a)(x)

  
	
  Assumed
  Liabilities

  	
   

  	
  Section 1.2(a)

  
	
  Audited
  Financial Statements

  	
   

  	
  Section 4.3(c)

  
	
  Balance
  Sheet

  	
   

  	
  Section 2.7

  
	
  Balance
  Sheet Date

  	
   

  	
  Section 2.7

  
	
  Basket
  Amount

  	
   

  	
  Section 8.4(a)

  
	
  Bill
  of Sale — Manufacturing Assets

  	
   

  	
  Section 6.1(g)

  
	
  Bill
  of Sale — Technology Assets

  	
   

  	
  Section 5.2(g)

  
	
  Business

  	
   

  	
  Recital
  A

  
	
  Change
  in Seller Board Recommendation

  	
   

  	
  Section 4.20(c)

  
	
  COBRA

  	
   

  	
  Section 2.14

  
	
  Competitive
  Business

  	
   

  	
  Section 4.9(a)

  
	
  Confidential
  Information

  	
   

  	
  Section 4.5

  
	
  Contested
  Claim

  	
   

  	
  Section 8.5(c)

  
	
  Corporate
  Event

  	
   

  	
  Section 9.11

  
	
  DGCL

  	
   

  	
  Section 4.6(a)

  
	
  End
  Date

  	
   

  	
  Section 7.1(b)

  
	
  ERISA

  	
   

  	
  Section 2.13(a)

  
	
  Excluded
  Assets

  	
   

  	
  Section 1.1(b)

  
	
  FDA

  	
   

  	
  Section 2.18

  

 

54

 

	
  Fifth
  Milestone Payment

  	
   

  	
  Section 1.5(a)(v)

  
	
  Financial
  Information

  	
   

  	
  Section 2.7

  
	
  First
  Delivery Threshold

  	
   

  	
  Section 1.5(a)(i)

  
	
  First
  Milestone Payment

  	
   

  	
  Section 1.5(a)(i)

  
	
  Fourth
  Milestone Payment

  	
   

  	
  Section 1.5(a)(iv)

  
	
  General
  Cap Amount

  	
   

  	
  Section 8.4(a)

  
	
  Hazardous
  Material

  	
   

  	
  Section 2.20(a)

  
	
  HSR

  	
   

  	
  Section 4.15(a)

  
	
  Independent
  Contractors

  	
   

  	
  Section 2.12(b)

  
	
  Initial
  Purchaser Price

  	
   

  	
  Section 1.4

  
	
  Intellectual
  Property Rights

  	
   

  	
  Section 4.7(a)

  
	
  IP
  Assignment Agreement — Patents

  	
   

  	
  Section 5.2(h)

  
	
  IP
  Assignment Agreement — Trademark

  	
   

  	
  Section 5.2(h)

  
	
  JPA
  Opinions

  	
   

  	
  Section 2.15(o)

  
	
  License
  Agreement

  	
   

  	
  Section 5.2(j)

  
	
  Licensed
  Technology

  	
   

  	
  Section 2.15(c)

  
	
  Liens

  	
   

  	
  Section 2.4

  
	
  Manufacturing
  Agreement

  	
   

  	
  Section 5.2(i)

  
	
  Manufacturing
  Assets

  	
   

  	
  Section 1.1(a)

  
	
  Manufacturing
  Asset Transfer

  	
   

  	
  Section 1.1(c)

  
	
  Manufacturing
  Closing

  	
   

  	
  Section 1.3

  
	
  Manufacturing
  Closing Date

  	
   

  	
  Section 1.3

  
	
  Maximum
  Milestone Amount

  	
   

  	
  Section 1.5(a)

  
	
  Milestone

  	
   

  	
  Section 1.5(a)

  
	
  Milestone
  Assessment Notice

  	
   

  	
  Section 1.5(b)(ii)

  

 

55

 

	
  Milestone
  Dispute Notice

  	
   

  	
  Section 1.5(b)(iii)

  
	
  Milestone
  Expiration Date

  	
   

  	
  Section 1.5(a)

  
	
  Negotiation
  Notice

  	
   

  	
  Section 4.12(b)

  
	
  Net
  Sales Threshold

  	
   

  	
  Section 1.5(b)(vi)

  
	
  Notice
  of Breach

  	
   

  	
  Section 4.10

  
	
  Notice
  of Claim

  	
   

  	
  Section 8.5

  
	
  Notice
  of Superior Proposal

  	
   

  	
  Section 4.6(a)

  
	
  Osteocel
  XC

  	
   

  	
  Section 4.12(a)

  
	
  Osteocel
  XC Transaction

  	
   

  	
  Section 4.12(b)

  
	
  Permitted
  Liens

  	
   

  	
  Section 2.4

  
	
  PHSA

  	
   

  	
  Section 2.11

  
	
  Product

  	
   

  	
  Recital
  A

  
	
  Product
  Development

  	
   

  	
  Section 1.1(a)(iv)

  
	
  Proxy
  Statement

  	
   

  	
  Section 4.20(a)

  
	
  Purchaser

  	
   

  	
  Preamble

  
	
  Purchaser
  Claim

  	
   

  	
  Section 8.1

  
	
  Purchaser
  Common Stock

  	
   

  	
  Section 1.5(a)

  
	
  Purchaser
  Indemnified Parties

  	
   

  	
  Section 8.1

  
	
  Purchaser
  Notice of Claim

  	
   

  	
  Section 8.1

  
	
  Purchaser
  Organizational Documents

  	
   

  	
  Section 3.2(a)

  
	
  Records

  	
   

  	
  Section 1.1(a)(v)

  
	
  Restricted
  Period

  	
   

  	
  Section 4.9(a)

  
	
  Retained
  Liabilities

  	
   

  	
  Section 1.2(b)

  
	
  Rights
  of Set-Off

  	
   

  	
  Section 1.5(c)

  
	
  Rules

  	
   

  	
  Section 9.1(a)

  

 

56

 

	
  SEC

  	
   

  	
  Section 4.20(a)

  
	
  Second
  Delivery Threshold

  	
   

  	
  Section 1.5(a)(ii)

  
	
  Second
  Milestone Payment

  	
   

  	
  Section 1.5(a)(ii)

  
	
  Securities
  Act

  	
   

  	
  Section 1.5(a)

  
	
  Seller

  	
   

  	
  Preamble

  
	
  Seller
  Benefit Plan

  	
   

  	
  Section 2.13(a)

  
	
  Seller
  Board Recommendation

  	
   

  	
  Section 4.20(b)

  
	
  Seller
  Claim

  	
   

  	
  Section 8.2

  
	
  Seller
  Employees

  	
   

  	
  Section 2.12(a)

  
	
  Seller
  Indemnified Parties

  	
   

  	
  Section 8.2

  
	
  Seller
  Notice of Claim

  	
   

  	
  Section 8.2

  
	
  Seller
  Options

  	
   

  	
  Section 2.12(a)

  
	
  Seller
  Organizational Documents

  	
   

  	
  Section 2.2(a)

  
	
  Sixth
  Milestone Payment

  	
   

  	
  Section 1.5(a)(vi)

  
	
  Special
  Cap Amount

  	
   

  	
  Section 8.4(b)

  
	
  Special
  Cap Liabilities

  	
   

  	
  Section 8.4(b)

  
	
  Specified
  Representations

  	
   

  	
  Section 8.3

  
	
  Stockholder
  Approval

  	
   

  	
  Section 4.20(b)

  
	
  Stockholders
  Meeting

  	
   

  	
  Section 4.20(b)

  
	
  Technology
  Asset Transfer

  	
   

  	
  Section 1.1(c)

  
	
  Technology
  Closing

  	
   

  	
  Section 1.3

  
	
  Technology
  Closing Date

  	
   

  	
  Section 1.3

  
	
  Third
  Milestone Payment

  	
   

  	
  Section 1.5(a)(iii)

  
	
  Transaction
  Documents

  	
   

  	
  Section 1.2(b)(viii)

  
	
  Transfer
  Taxes

  	
   

  	
  Section 4.18

  

 

57

 

	
  Transferred
  Assets

  	
   

  	
  Section 1.1

  
	
  Transferred
  Employee

  	
   

  	
  Section 4.11(b)

  
	
  Transferred
  Technology

  	
   

  	
  Section 1.1(a)(i)

  
	
  Work
  in Process

  	
   

  	
  Section 1.1(a)(ii)

  

 

[Signature Page to Follow]

 

58

 

IN WITNESS WHEREOF, Seller and
Purchaser have each caused this Agreement to be executed by their respective duly
authorized officers, all as of the date first above written.

 

SELLER:

 

	
   

  	
  OSIRIS
  THERAPEUTICS, INC.

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  C. RANDAL MILLS

  
	
   

  	
  Name: 

  	
  C. Randal Mills

  
	
   

  	
  Title: 

  	
  President & CEO

  

 

 

PURCHASER:

 

	
   

  	
  NUVASIVE,
  INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  ALEXIS V. LUKIANOV

  
	
   

  	
  Name:

  	
  Alexis V. Lukianov

  
	
   

  	
  Title:

  	
  CEO and Chairman of the Board

  

 

59

MANUFACTURING AGREEMENT

 

THIS MANUFACTURING AGREEMENT (the “Agreement”) is made
and entered into as of
                                ,
2008 (the “Effective Date”), by and between Osiris Therapeutics, Inc. (“Osiris”),
a Delaware corporation, and NuVasive, Inc. (“NuVasive”), a Delaware
corporation.

 

RECITALS

 

WHEREAS, Osiris and NuVasive are parties to that certain
Asset Purchase Agreement, dated
                      ,
2008 (the “Asset Purchase Agreement”), pursuant to which Osiris sold, and
NuVasive purchased, technology related to manufacturing the Osteocel product
line (as more specifically set forth therein); and

 

WHEREAS, NuVasive and Osiris desire to herein set forth an
arrangement whereby Osiris shall manufacture and deliver to NuVasive, and
NuVasive shall purchase, the Product (as defined below).

 

NOW, THEREFORE, in consideration of the mutual covenants
and agreements contained herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Parties
hereto agree as follows:

 

ARTICLE 1

DEFINED
TERMS

 

As used herein, certain capitalized terms shall have
the meanings ascribed to them as provided below:

 

1.1.          “AATB” means the American Association
of Tissue Banks.

 

1.2.          “Action” shall have the meaning as
such term is defined in Section 6.3 of this Agreement.

 

1.3.          “Affiliate” means, with respect to a
party, any person or entity which, directly or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with,
such party.

 

1.4.          “Certificate of Analysis”
means, for each Lot produced, a document prepared by
Osiris setting forth the measured and observable characteristics of Product
from the Lot, confirming that such Lot meets the Specifications, certifying
that such Lot was manufactured and released in accordance with applicable Laws
and cGTP.

 

1.5.          “cGTP” means current Good Tissue
Practice as defined in FDA rules and regulations, including the United
States regulations set forth at 21 CFR Parts 1270 and 1271, subparts C and D,
as in effect and as may be amended or replaced by the FDA from time to time.

 

1.6.          “Confidential Information” means
information which is disclosed by a party (the “Disclosing Party”) to the other
party (the “Receiving Party”) in whatever media, and is marked, identified or
otherwise acknowledged to be confidential at the time of disclosure; provided
that information shall not be deemed “Confidential Information” which is (a) publicly
known, through no fault of the Receiving Party, (b) received by the
Receiving Party from a source having the right to 

 

60

 

disclose such information, (c) known
by the Receiving Party prior to disclosure of such information, or (d) independently
developed by the Receiving Party without use of the Disclosing Party’s
information.  Notwithstanding the
foregoing and for the avoidance of doubt, the Confidential Information of
NuVasive includes all Licensed Technology, whether or not marked, identified or
otherwise acknowledged to be confidential and whether or not known or developed
by Osiris, and the use and disclosure of Licensed Technology by Osiris (as the
Receiving Party hereunder) shall be subject to Section 8.3.

 

1.7.          “CPI” shall mean the “Price Index for
all Urban Consumers, U.S. city average, all items, for the then immediately
preceding 12-month period” as published by the US Government.

 

1.8.          “Damages” shall have the meaning as
such term is defined in Section 6.1 of this Agreement.

 

1.9.          “Deliver” or “Delivery” with respect to Product
means, and shall take place upon, the transfer of possession of Product to a
carrier, FCA the Facility (Incoterms 2000).

 

1.10.        “Donor” means a human tissue donor.

 

1.11.        “Donor Tissue” means human
musculoskeletal tissue, including bone and connective tissue.

 

1.12.        “Excess Quantities” shall have the
meaning as such term is defined in Section 3.3 of this Agreement.

 

1.13.        “Executives” shall have the meaning as
such term is defined in Section 9.8 of this Agreement.

 

1.14.        “Facility” means the facility at which
Osiris or its subcontractors set forth on Schedule 3.11, or otherwise approved
by NuVasive in accordance with Section 3.11, will Process Product under
this Agreement.

 

1.15.        “FDA” means the U.S. Food and Drug
Administration, and any successor or replacement agency thereto.

 

1.16.        “Inventions” shall have the meaning as
such term is defined in Section 8.2 of this Agreement.

 

1.17.        “Latent
Defect” means any defect in any Lot or other shipment of Product that could
not reasonably be found by the exercise of ordinary care in an initial physical
inspection by NuVasive, such as, but not limited to, the presence of a
contaminant or Osiris’ failure to Process Product in accordance with cGTP.

 

1.18.        “Laws” means all laws, rules, regulations,
ordinances, standards and guidelines that apply to the Processing of Product or
the performance of either party’s obligations under this Agreement, as the
context requires under this Agreement, including, without
limitation, the Public Health Service Act, 42 U.S.C. §201 et seq., the United
States National Organ Transplant Act, Title 21 of the Code of Federal
Regulations Parts 1270 and 1271, Human Cells, Tissues, and Cellular and Tissue
Based Products, other rules, regulations or standards promulgated by the FDA or
any other applicable governmental agency, and of the AATB, as each may be
amended from time to time.

 

61

 

1.19.        “Licensed Technology” means the
intellectual property (including patents and patents pending of NuVasive),
methods, technology, and know-how owned or licensed by NuVasive and used in,
held for use in, intended for use in, related to or necessary for Processing
the Product.  Licensed Technology shall include
all Transferred Technology as defined in and purchased by NuVasive under the
Asset Purchase Agreement.

 

1.20.        “Lot” means the Product, Processed in
accordance with the Specifications, resulting from a single production run,
traceable to a single source Donor.

 

1.21.        “Lot
Records” means manufacturing, packaging and test records, donor suitability
determination documentation, cleaning, labeling and “sterilization” processes
documentation and documentation relating to Processing and release of each Lot,
including exception documentation, deviations/discrepancies, raw data or data
worksheets and additional documentation generated and/or processed as part of
the production record of the related Lot.

 

1.22.        “Minimum Performance Level” shall have
the meaning as such term is defined in Section 3.3 of this Agreement.

 

1.23.        “NuVasive Indemnitee” shall have the
meaning as such term is defined in Section 6.1 of this Agreement.

 

1.24.        “NuVasive Responsible Party” shall have
the meaning as such term is defined in Section 6.2 of this Agreement.

 

1.25.        “Order” shall have the meaning as such
term is defined in Section 3.2 of this Agreement.

 

1.26.        “Osiris Indemnitee” shall have the
meaning as such term is defined in Section 6.2 of this Agreement.

 

1.27.        “Osiris Product Warranty” shall have the
meaning as such term is defined in Section 3.7 of this Agreement.

 

1.28.        “Osiris Responsible Party” shall have
the meaning as such term is defined in Section 6.1 of this Agreement.

 

1.29.        “Parties” shall mean Osiris and
NuVasive; “Party” shall mean Osiris or NuVasive,

 

1.30.        “Process” or “Processing” shall mean any or all of the acts of manufacturing
(including procuring materials, Donor Tissue and Donors suitability for
determination, for manufacturing), handling, storing, analyzing, testing,
packaging, labeling and preparing for shipment Product by Osiris pursuant to
this Agreement.

 

1.31.        “Product” means osteobiologic allograft
material containing cancellous bone (which contains viable mesenchymal stem
cells) Processed by Osiris using the Licensed Technology and meeting the
Specifications attached hereto as Exhibit A, and which has passed all
required inspections and testing and has been released for distribution for
human implantation.

 

1.32.        “Product Fees” shall have the meaning as
such term is defined in Section 4.1.

 

62

 

1.33.        “Product-Related Inspection” shall have
the meaning as such term is defined in Section 5.1 of this Agreement.

 

1.34.        “Product Withdrawal” shall have the
meaning as such term is defined in Section 5.7 of this Agreement.

 

1.35.        “Publication” shall have the meaning as
such term is defined in Section 8.4 of this Agreement.

 

1.36.        “Specifications” means the Product
specifications set forth in Exhibit A attached hereto, as the same may be
amended in accordance with this Agreement.

 

1.37.        “Term” shall have the meaning as such
term is defined in Section 7.1 of this Agreement.

 

ARTICLE 2

PROCUREMENT
AND SUPPLY OF DONORS

 

               Donor Procurement Obligations.  Osiris shall use its commercially reasonable
best efforts to procure Donor Tissue as necessary to meet the Minimum
Performance Levels and to Process Product in accordance with the terms of this
Agreement.

 

ARTICLE 3

MANUFACTURING
OF PRODUCT; TECHNOLOGY LICENSE

 

3.1.          Manufacturing Obligations.  Osiris shall Process for and supply to
NuVasive Product in accordance with the terms of this Agreement.  Osiris shall Process and
supply the Product to NuVasive hereunder in conformity with the Specifications
and in compliance with cGTP and all applicable Laws.  If either party seeks a change to the
Specifications or there is a change in applicable Laws that would
necessitate a change in the Specifications, the parties will meet and confer in
good faith to determine whether and what changes (if any) should be made thereto.
Any and all amendments or modifications in the Specifications must be agreed
upon in writing by both parties.

 

3.2.          Forecasting and Orders.  On or before sixty (60) days prior to each
calendar quarter, NuVasive shall provide to Osiris a binding order (“Order”)
for the quantity and size of Product to be delivered by Osiris to NuVasive in
the following calendar quarter.  Each
Order shall be in writing, and shall specify the quantity of units of Product
by size, the brand name of each unit of Product ordered, the requested
Delivery date(s), the destination shipping address(es), and the Product
Fees therefor. Osiris shall be required to supply to NuVasive all such
quantities of Product as NuVasive orders pursuant to such Orders in accordance
with the Product unit sizes and brand names specified in such Orders and shall
use its commercially reasonable best efforts to conform to the requested
Delivery date(s) set forth in such Orders, provided in each case such
Orders do not exceed the Minimum Performance Levels during the applicable
periods set forth in Section 3.3 below.  Osiris shall deliver the Product to
NuVasive pursuant to the Orders, subject to available Product being released
for transplantation; provided, that the Parties understand and agree the final
Delivery dates for Orders may vary from the requested dates based upon Donor
Tissue procurement.

 

63

 

3.3.          Performance Levels.

 

3.3.1.       Minimum
Performance Levels. Osiris shall use its commercially reasonable best
efforts to Deliver Product to NuVasive at least in the quantities set forth
below during the applicable periods (“Minimum Performance Levels”) and shall
Deliver any such Product according to Product unit size and brand name
specifications established by NuVasive and set forth in each Order.  NuVasive shall provide Orders to purchase
from Osiris Product in quantities of at least the Minimum Performance Level for
the applicable period.

 

	
  Applicable Period

  	
   

  	
  Minimum Performance

  Level Delivered (cc)

  
	
  Effective Date to April 15, 2009

  	
   

  	
  125,000

  
	
  April 16, 2009 to eighteen (18) months
  following the Technology Closing Date (as defined in the Asset Purchase
  Agreement)

  	
   

  	
  125,000

  

 

3.3.2.       Additional
Product. Osiris shall have the right, in its discretion, to Process and
Deliver Product hereunder in quantities that exceed NuVasive’s Orders (the “Excess
Quantities”), provided that Osiris gives advance written notice to NuVasive of
its intent to Process and Deliver the Excess Quantities.  Following receipt of such written notice, the
Parties shall discuss and attempt in good faith to reach agreement on the unit
sizes of the Excess Quantities.  If the
parties are unable to reach agreement on the unit sizes of any Excess
Quantities within ten (10) days from the notice, Osiris shall Process and
Deliver to NuVasive unit sizes of such Excess Quantities in the same proportion
as the unit sizes of Product set forth in NuVasive’s most recent Order.  Subject to the notice and sizing provisions
immediately above, in addition to NuVasive’s requirement to purchase from
Osiris Product in quantities of at least the Minimum Performance Level
(provided that Osiris and/or its subcontractors Processes at least such
quantities) for the applicable period, NuVasive shall purchase from Osiris the Excess
Quantities that Osiris Processes in accordance with this Agreement during the
Term; provided, however, that NuVasive shall have no obligation hereunder to
purchase Product in quantities greater than                 
cubic centimeters, and the Delivery and purchase of such greater quantities of
Product, if any, shall be by mutual written agreement of both parties. For all
Product Processed hereunder, Osiris shall provide NuVasive with a monthly
forecast of projected Product manufacturing quantities for such month.

 

3.4.          Shipment and Delivery.  All Product shall be shipped to NuVasive or
NuVasive’s customers as directed by NuVasive using a shipping company designated by
NuVasive.  Osiris shall tender Product
for Delivery, FCA the Facility, in accordance with the Specifications and
addressed to the shipping address specified by NuVasive in the Orders or to
such other address as NuVasive may provide to Osiris in writing in advance of
any Delivery.  NuVasive shall provide
Osiris with standard shipping instructions prior to the first requested
shipping date hereunder; thereafter, such shipping instructions may be changed
upon written notice given to Osiris by NuVasive.  Osiris shall not Deliver any Product prior to
completion of quality control and release testing by Osiris. NuVasive shall
be responsible for all shipping and insurance charges and risk of loss
associated with the shipment of Product hereunder (from and after Delivery),
provided that Osiris has complied with the shipping instructions of NuVasive
and that the Product is tendered for Delivery in accordance 

 

64

 

with the Specifications.  Title to Product shall pass to NuVasive upon Delivery of Product to the
carrier selected by NuVasive.

 

3.5.          Quality Control; Release
Testing; Documentation. Osiris shall be responsible for quality
control tests to ensure that each Lot conforms to the Specifications and is
produced in accordance with applicable Laws and cGTP, and Osiris shall be
responsible for all release testing.  All
quality control test results and release testing and other documents related to
quality control and quality assurance and copies thereof shall be made
available to NuVasive at Osiris’s offices upon written request of
NuVasive.  Such information is considered
NuVasive’s Confidential Information in accordance with this Agreement and shall
be transferred to NuVasive upon the termination of this Agreement.  Any testing performed by or on behalf of
Osiris (including tests to confirm that each Lot meets the Specifications)
shall be performed at Osiris’s sole cost and expense and may be used by
NuVasive for final release of each Lot without additional testing by NuVasive;
provided, however, that NuVasive may conduct its own release testing of each Lot
in its discretion. NuVasive (in its sole discretion) shall determine the form
and substance of any release testing information that is submitted to any
regulatory authority.  At the time of
Delivery of each Lot, Osiris shall send to NuVasive a signed Certificate of
Analysis with respect to such Lot. Within thirty (30) days following the
Delivery of each Lot, Osiris shall provide NuVasive with properly completed
copies of Lot Records for such Lot prepared in accordance with the
Specifications and applicable Laws.

 

3.6.          Rejection and Cure.  Upon receipt of each shipment of Product,
NuVasive or its customers shall perform an initial physical inspection of such
Product and review any related documentation. 
If any Product (including without limitation any documentation
related thereto) fails, in whole or in part, to conform to the applicable
Specifications and the terms hereof, or if any Product is not Processed in
accordance with cGTP or applicable Laws, then NuVasive shall have the right to
reject such nonconforming Product. 
NuVasive shall give written notice to Osiris of its rejection hereunder
as soon as possible, but no more than thirty (30) days after NuVasive’s or its
customer’s receipt of such shipment, specifying the grounds for such
rejection.  If at any time thereafter
NuVasive discovers a Latent Defect, NuVasive shall give written notice to
Osiris of its rejection hereunder as soon as possible, but no more than ninety
(90) days after NuVasive’s receipt of the Product, specifying the grounds for
such rejection.  The nonconforming
Product shall be held for Osiris’s disposition, or shall be returned to Osiris,
in each case at Osiris’s expense, as directed by Osiris.  Osiris shall use commercially reasonable best
efforts to correct the root cause of the nonconformance in order to comply with
the requirements of the applicable Specification.  In addition, Osiris shall, at its
expense, promptly replace each nonconforming Product with conforming Product.

 

3.7.          Warranty.  With respect to Product supplied hereunder,
Osiris warrants (“Osiris Product Warranty”) that the (a) Product shall
conform with the applicable Specifications therefor, shall be free from defects
in materials or workmanship, and shall not be adulterated,
misbranded, contaminated, tampered with or otherwise altered or mishandled
while in the custody and control of Osiris; and (b) Product shall
be Processed in accordance with the applicable Specifications, and in
compliance with cGTP and all applicable Laws.  Osiris hereby represents, warrants and
covenants that it will not, and has not, employed or otherwise used in any
capacity the services of any person debarred under Section 21 U.S.C. 335a
in performing any portion of the Processing of Product.  EXCEPT AS PROVIDED HEREIN, OSIRIS MAKES NO
OTHER WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE PRODUCT, INCLUDING,
WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR WARRANTY OF FITNESS FOR
A PARTICULAR PURPOSE.

 

65

 

3.8.          Packaging; Labeling; Marketing.  Osiris shall package and label the Product
according to the Specifications and in compliance with cGTP and all applicable
Laws, rules, regulations, and/or standards. Product supplied to NuVasive shall
be labeled as determined by NuVasive, provided that NuVasive shall provide
Osiris with at least thirty (30) days prior written notice of any labeling
changes (including, but not limited to, brand names), and Osiris shall be
entitled to recover, and NuVasive shall be responsible to pay to Osiris, all reasonable
out of pocket costs that Osiris incurs associated with such labeling change.
Each unit of Product shall have a unique identification number.

 

3.9.          Regulatory Approvals.  Product is currently regulated under 21 CFR
parts 1270 and 1271 as a human cellular and tissue based tissue product.
NuVasive shall obtain at its expense all regulatory approval by the FDA or
other regulatory authority necessary or required for the distribution, sale and
marketing of Product under current Laws as of the Effective Date.  At NuVasive’s request during the Term, Osiris
will assist NuVasive in preparing the portions of NuVasive’s regulatory filings
that pertain to Processing and will make appropriate Osiris personnel
reasonably available for meetings with regulatory authorities relating to
Processing, provided that all such regulatory filings shall be the sole and
exclusive property of NuVasive and NuVasive shall have sole authority and
responsibility with respect to contacts and communications with regulatory
authorities relating to the Product. In the event of changes in applicable
Laws, or significant regulatory differences in foreign countries where NuVasive
distributes Product, the Parties shall cooperate to determine what actions, if
any, are required to meet any new or foreign regulations and shall negotiate in
good faith changes to this Agreement including but not limited to, changes to
Orders, Product Fees and Minimum Performance Levels to reflect any change in
Product manufacturing costs. No change in Product-specific manufacturing
processes, test methods, or other procedures or documentation relating to
Processing shall be implemented by Osiris unless and until the parties have
agreed in writing to such change.

 

3.10.        Technology License. NuVasive
hereby grants to Osiris during the Term, for the sole purpose of performing its
duties and fulfilling its obligations under this Article 3, a
non-exclusive and non-transferable license, without a right to sublicense, to
use the Licensed Technology solely to the extent necessary to Process the
Product under the terms and conditions of this Agreement. Notwithstanding the
foregoing, NuVasive hereby consents to the sublicense by Osiris of the Licensed
Technology to the Persons listed on Schedule 3.11 solely to the extent
necessary for such subcontractor to provide processing services to Osiris,
provided that the terms of any such sublicense arrangement shall either be
pursuant to (i) the terms of those Contracts between Seller and such
Persons which are identified on Schedule 3.11 hereto as such Contracts
are in effect on the date hereof or (ii) require the prior written consent
of NuVasive, which consent shall not be unreasonably withheld.

 

3.11.        Subcontracting.  Except as provided on Schedule 3.11,
Osiris shall not assign, subcontract, or delegate any of its responsibilities
under this Agreement without the prior written consent of NuVasive, which consent may be granted or withheld in NuVasive’s sole
discretion.  Such subcontractors
shall be subject to confidentiality obligations at least as stringent, when
taken as a whole, as provided in this Agreement.  No subcontractor may further subcontract any
responsibilities under this Agreement without the prior written consent of
NuVasive, which consent may be granted or withheld in NuVasive’s
sole discretion.  Any approved
subcontractor shall be subject to all of the terms and conditions applicable to
Osiris under this Agreement.  Osiris
shall be responsible, and shall remain liable, for the performance of all of
its obligations under this Agreement and for any breach by any subcontractor
thereof.  NuVasive shall have the right
to audit 

 

66

 

and inspect all
subcontractors with whom Osiris may enter into agreements in the performance of
its responsibilities under this Agreement. 
Such audit and inspection rights shall be substantially similar to the
rights of NuVasive to audit and inspect Osiris under this Agreement.

 

ARTICLE 4

FEES

 

4.1.          Product Fees.  NuVasive shall pay to Osiris $      
per cubic centimeter of Product (“Product Fees”) Delivered to NuVasive and that
is not timely rejected by NuVasive pursuant to Section 3.6 above.  All payments due hereunder shall be made in
U.S. dollars, without set-off or counterclaim. For the avoidance of doubt,
NuVasive shall be responsible for paying to Osiris the Product Fee for all
conforming Product that is Delivered to NuVasive as a replacement of Product
rejected in accordance with Section 3.6 to the extent that payment for
such Product was not previously made.

 

4.2.          Adjustments to Product Fees.  The Product Fees shall be escalated on January 1,
2009 by the then current increase in CPI. Adjustments to Product Fees shall be
effective January 1st and shall apply to all shipments of Product
made on or after January 1st.

 

4.3.          Billing.  NuVasive shall pay to Osiris the Product Fees
within thirty (30) days of Delivery of the conforming Product.  In the event NuVasive fails to pay in
accordance with this Section 4.3, Osiris may, in addition to any other
remedies available to it, assess interest at a rate of one and one-half percent
(1.5%) per month on all unpaid amounts.

 

4.4.          Taxes.  All payments required under this Agreement
are exclusive of any applicable federal, state and local taxes.  Each of the Parties shall be responsible for
the payment of taxes and other assessments for which it is liable under Laws.

 

ARTICLE 5  

ADDITIONAL
OBLIGATIONS

 

5.1.          Inspections. Upon reasonable
prior written notice, NuVasive may, at its expense, audit Osiris during normal
business hours for quality control and assurance,
compliance with Laws, cGTP, and other applicable regulations or standards, and
the terms hereof, and otherwise inspect facilities and records, each as related
to the Processing of Product hereunder; provided, however, that such audits and
inspections may be conducted no more than twice during the Term hereof, other
than “for cause” audits, which NuVasive shall be entitled to conduct as
necessary to address specific quality problems relating to Product, as well as
in preparation for regulatory filings and in response to regulatory authority
requirements. Any corrective action mutually agreed upon by the
parties in response to NuVasive’s audit or inspection shall be implemented by
Osiris, at Osiris’ expense, prior to filling new or outstanding Orders.  Osiris hereby agrees to advise NuVasive
promptly (and, in any event, within thirty-six (36) hours) of any proposed or
unannounced visit or inspection by any agent of a regulatory authority to the
Facility where such visit or inspection is specifically related to the Product or
its Processing (a “Product-Related Inspection”).  Osiris agrees to permit, to the extent
reasonably practical, one or more qualified representative(s) of NuVasive
to be present during a Product-Related Inspection if requested by
NuVasive.  If NuVasive is not present
during a Product-Related Inspection, Osiris shall promptly provide a summary
report of the results of the Product-Related inspection to NuVasive.  Osiris shall promptly notify
NuVasive of the results of any inspection, comments, responses or notices
received from the FDA, AATB, or other applicable regulatory authorities, which
relate to the Processing of Product hereunder. 
With respect to the

 

67

 

forgoing, each Party shall
provide the other Party at such other Party’s request with copies of any
notices or correspondence from or to such regulatory authorities that directly
relate to Product.  Such notices and
correspondence are considered Confidential Information in accordance with this
Agreement. The Parties will cooperate in the development and review of responses
that are required to be submitted to any regulatory authority relating to the
Processing of Product prior to submission to the regulatory authority.

 

5.2.          Records; Safety.  Osiris shall maintain accurate and complete
records of its procurement, Processing and supply of Product hereunder for the
longer of five (5) years after shipment of any such Product, or the
period of time required by applicable Laws, regulations and/or standards,
whichever is greater.  No records
required by this Agreement shall be discarded by Osiris without specific prior
written notification of Osiris’ intent to discard to NuVasive.  Those records (or copies of those records)
that Osiris is unwilling to retain will be transferred to NuVasive for
storage.  Osiris shall promptly (and,
in any event, within twenty four (24) hours) notify NuVasive of any information
of which it becomes aware concerning Product supplied to NuVasive.  Any such notification will include all
related information in reasonable detail. 
Upon such notification, the parties shall consult with each other in an
effort to arrive at a mutually acceptable procedure for taking appropriate
action; provided, however, that nothing contained herein shall be construed as
restricting the right of either party to make a timely report of such matter to
any regulatory authority or take other action that it deems to be appropriate
or required by applicable Laws.

 

5.3.          Regulatory Compliance.  With respect to each Party’s
performance under this Agreement, Osiris and NuVasive shall each comply with
all applicable Laws, regulations, and standards.

 

5.4.          AATB Accreditation.  The Parties agree that Osiris is actively
pursuing AATB accreditation, and that NuVasive shall continue to perform its
obligations under this Agreement despite the pendency of such AATB
accreditation for so long as Osiris is using reasonable commercial efforts to
obtain such accreditation.  Once obtained,
Osiris agrees to maintain its accreditation with the AATB and should Osiris’
accreditation lapse at any time or for any reason, it shall promptly
communicate to the NuVasive the reasons for such lapse and the actions taken to
cure the loss of AATB accreditation. In the event that Osiris fails to cure
such loss within six months, notwithstanding any provision to the contrary
contained in this Agreement, NuVasive shall be immediately and forever relieved
of any obligation to order Product or to pay any fees with respect thereto and
shall have the right to cancel or amend, without liability, any Orders then
pending; provided, however, NuVasive shall pay the Product Fees for all Orders
shipped as long as such Orders are filled with Product Processed while Osiris
was accredited.

 

5.5.          Complaints.  Osiris hereby agrees to
advise NuVasive promptly (and, in any event, within thirty-six (36) hours) of any
complaint information (including adverse event information) Osiris receives
relating to Product. Osiris will assist NuVasive in investigating and
resolving all complaints and adverse events related to the Processing of
Product.  NuVasive will be responsible for evaluating
and investigating complaints and the Parties will cooperate
in preparing  communications to any
regulatory authorities regarding Product complaints or adverse events.  Osiris will take any corrective actions
agreed to by the parties to avoid future occurrences of Product complaints or
adverse events related to the Processing of the Product.

 

68

 

5.6.          Product Tracking.  NuVasive shall be responsible for maintaining
trackability for all Products provided by Osiris. Tracking records shall be
maintained by NuVasive in accordance with all applicable Laws.

 

5.7.          Product Withdrawal.  In the event Osiris or NuVasive believes it
may be necessary to conduct a recall, field correction, market withdrawal,
stock recovery, or other similar action with respect to Product (a “Product
Withdrawal”), NuVasive shall make all decisions as to such Product Withdrawal
and Osiris shall cooperate with NuVasive in any Product Withdrawal. NuVasive
shall bear all costs in connection with any such Product Withdrawal and
NuVasive shall reimburse Osiris for all reasonable out-of-pocket expenses
incurred by Osiris in connection with any such Product Withdrawal; provided,
however, that if such Product Withdrawal is attributable to any breach,
misrepresentation or non-fulfillment of any covenant, agreement, representation
or warranty made or to be performed by Osiris under the Asset Purchase
Agreement or this Agreement (including, without limitation, the failure of any
Product supplied hereunder to meet the Osiris Product Warranty) or to the
negligent act or omission or willful misconduct of Osiris, Osiris shall
reimburse NuVasive for all costs reasonably incurred by NuVasive in connection
with any such Product Withdrawal.

 

ARTICLE 6

INDEMNIFICATION
AND INSURANCE

 

6.1.          Osiris’s Indemnity Obligations.  Osiris shall defend, indemnify and hold
harmless NuVasive, its Affiliates and their respective successors and permitted
assigns (the “NuVasive Indemnitees”) from and against any and all losses,
liabilities, claims, actions, proceedings, damages and expenses (including
without limitation reasonable attorneys’ fees and expenses) (herein “Damages”)
relating to or resulting from a claim that arises out of (a) any breach by
Osiris or its Affiliates, sublicensees, contractors or subcontractors,
or any of their respective officers, directors, employees, or agents (the “Osiris
Responsible Parties”) of this Agreement, including without limitation,
the failure of any Product supplied hereunder to meet or comply with the
Specifications or Osiris Product Warranty, (b) the negligence or willful
misconduct of any of the Osiris Responsible Parties, (c) any violation of
Law by any of the Osiris Responsible Parties; or (d) the unauthorized use
of Licensed Technology by any of the Osiris Responsible Parties; provided,
however, this Section 6.1 shall not impose any obligation on Osiris to
indemnify the NuVasive Indemnitees to the extent of any
Damages for which NuVasive is obligated to indemnify the Osiris Indemnitees
pursuant to Section 6.2.

 

6.2.          NuVasive’ Indemnity Obligations.  NuVasive shall defend, indemnify and hold
harmless Osiris and its Affiliates, and their respective successors and
permitted assigns (the “Osiris Indemnitees”) from and against any and all
Damages relating to or resulting from a claim that arises out of (a) any
breach by NuVasive or its Affiliates, sublicensees, contractors or
subcontractors, or any of their respective officers, directors, employees, or
agents (the “NuVasive Responsible Parties”) of this Agreement, (b) the
negligence or willful misconduct of any of the NuVasive Responsible Parties, (c) any
changes to the Specifications requested by NuVasive in writing, or (d) any
violation of Law by any of the NuVasive Responsible Parties; provided, however,
this Section 6.2 shall not impose any obligation on NuVasive to indemnify
the Osiris Indemnitees to the extent of any Damages for which Osiris is
obligated to indemnify the NuVasive Indemnitees pursuant to Section 6.1.

 

6.3.          Notice of Claim.  The indemnification obligations of the
parties pursuant to this Agreement shall be proportional to the relative
responsibility or fault of each party for the Damages 

 

69

 

incurred
as a result of the actions or inactions of such party.  Promptly after receipt by a NuVasive
Indemnitee or Osiris Indemnitee of the commencement of any such claim, demand,
action, suit or proceeding (collectively, “Action”) which is the subject of the
other party’s indemnification obligations hereunder, such Indemnitee shall
notify the other party of the commencement of the Action.  Any failure to provide such notice shall only
relieve the other party of its indemnification obligations hereunder to the
extent the indemnifying party has been materially prejudiced by such failure.  The indemnifying party shall have sole right
to select and retain attorneys (reasonably acceptable to the Indemnitee) to
assert or negotiate, and sole right to control, the defense and any settlement
of the Action, to the extent of the indemnifying party’s corresponding
indemnification and defense obligations, except that under no circumstances
shall the indemnifying party enter into any settlement that involves an
admission of liability, negligence or other culpability by the Indemnitee, or
requires the Indemnitee to contribute to the settlement, without the Indemnitee’s
prior written consent.  Without limiting
the indemnifying party’s foregoing right to select and retain attorneys and to
sole control of the defense and settlement of such Action, the Indemnitee may,
at its own expense, participate in the defense of, or otherwise consult with
counsel of its own choice in connection with, an Action that is the subject of
the other party’s indemnification obligations.

 

6.4.          Limitation of Liability.  IN NO EVENT SHALL EITHER PARTY
BE LIABLE, WHETHER AS A RESULT OF CONTRACTUAL BREACH, TORT OR OTHERWISE, TO THE
OTHER PARTY FOR ANY CONSEQUENTIAL, SPECIAL, OR INCIDENTAL DAMAGES INCURRED BY
SUCH OTHER PARTY, INCLUDING BUT NOT LIMITED TO INJURY TO GOODWILL, OR DIRECT,
INDIRECT OR SPECULATIVE LOST PROFITS.  The foregoing
Limitation of Liability shall not apply to a party’s liability for breach of
its confidentiality obligations hereunder or to the extent such damages are
paid to a third party in connection with a third party claim that is
indemnified hereunder.

 

6.5.          Insurance.  Each party agrees to procure and maintain in
full force and effect during the term of this Agreement, at its sole cost and
expense, general liability and product liability insurance in amounts of not
less than $2,000,000 per incident and $7,000,000 annual aggregate, which
insurance shall be written on an “occurrence” basis policy form, or, in the
alternative, shall continue for a period of ten (10) years following the
termination or expiration of this Agreement, with a reputable insurance carrier
and name the other party as an additional insured.  Each party shall, on request, provide to the
other party a copy of a certificate of coverage or other written evidence
reasonably satisfactory to such requesting party of such insurance coverage.

 

ARTICLE 7

TERM
AND TERMINATION

 

7.1.          Term.  Unless terminated earlier pursuant to the
terms of this Agreement, this Agreement shall commence on the Effective Date
and remain in effect for eighteen (18) months therefrom (the “Term”).

 

7.2.          Termination.

 

7.2.1.       This Agreement
may be terminated, prior to the expiration of its Term, by either party
immediately upon written notice to the other party after the material breach of
any provision of this Agreement by the other party if the other party has not
cured such breach within thirty (30) days after receipt of written notice
thereof from the non-breaching party.

 

70

 

7.2.2.       This Agreement
may be terminated, prior to the expiration of its Term, immediately upon
written notice by either party if the other party shall have become insolvent
or bankrupt, or shall have made a general assignment for the benefit of its
creditors, or any case or proceeding shall have been commenced by or against
the other party in bankruptcy or seeking reorganization, liquidation,
dissolution, or any other relief under any bankruptcy, insolvency,
reorganization or other similar act or law, and any such event shall have
continued for sixty (60) days undismissed or undischarged.

 

7.2.3.       This
Agreement may be terminated, prior to the expiration of its Term, by NuVasive
at any time and for any reason, immediately upon written notice to Osiris,
after Osiris has Delivered to NuVasive an aggregate of           
cubic centimeters of Product hereunder.

 

7.3.          Effect of Termination or Expiration.  After either party provides notice of
termination under Section 7.2.1 or 7.2.2 and pending termination of this
Agreement under such Sections, the Parties shall continue to perform their
respective obligations hereunder. 
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 3.7,
5.2, 6.1, 6.2, 6.3, 6.4, 6.5, 8.1, 8.2, and 8.3 and the applicable provisions
of Article 9 shall survive any expiration or termination of this
Agreement.  Each party agrees to return
upon the expiration or termination of this Agreement all Confidential
Information acquired from the other party, except as to such information it may
be required to retain under applicable Laws, and except for one copy of such
information may be retained by such party’s legal department; provided,
that if Osiris elects not to retain a copy of any such Confidential Information
provided to NuVasive pursuant to Section 3.5 hereof, then NuVasive shall,
upon reasonable notice to NuVasive and during NuVasive’s normal business hours,
provide Osiris with access to such Confidential Information as is reasonably
necessary for purposes of Osris’ compliance with applicable Laws or in
connection with Osiris’ defense of any third party claims related thereto.

 

ARTICLE 8

INTELLECTUAL
PROPERTY AND CONFIDENTIALITY

 

8.1.          Intellectual Property.  Subject to the license expressly granted by
this Agreement, NuVasive is the sole and exclusive owner of all right, title
and interest in and to the methods of Processing Product and all of NuVasive’s
patents, trademarks, inventions, copyrights, know-how, and trade secrets.

 

8.2.          Other Inventions. The parties
do not contemplate that any inventions, discoveries, improvements,
modifications, derivations, information, know-how and the like that arise out
of the performance of this Agreement (collectively, the “Inventions”),
including those related to processes, compositions of matter and methods of
use, whether protectable by patent or as a trade secret, shall by Osiris.  Accordingly, any and all Inventions made by
either party individually or jointly hereunder, including any Inventions
hereunder pertaining to Processing of Product, shall be owned solely by
NuVasive, and Osiris hereby assigns to NuVasive all right, title and interest
in and to all Inventions.  Osiris shall,
upon NuVasive’s request, execute such documents, including any and all
applications, assignments or other instruments, give any testimony and take
such other actions as NuVasive deems necessary for NuVasive to obtain such
ownership and to apply for, secure, and maintain patent or other proprietary
protection in the United States or any other country with respect to Product or
Inventions, provided that NuVasive shall compensate Osiris for its reasonable
out of pocket costs and expenses associated with such actions.  All Inventions and any information with
respect thereto shall be the Confidential Information of NuVasive.

 

71

 

8.3.          Confidentiality.  The Receiving Party shall ensure the
confidentiality of the Disclosing Party’s Confidential Information it receives
by taking substantially the same precautions as the Receiving Party does with
its own Confidential Information, but not less than a reasonable standard of
care.  The Receiving Party shall not use
the Disclosing Party’s Confidential Information for any purpose other than to
carry out the Receiving Party’s obligations hereunder.  The obligations of confidentiality shall not
apply to information that the Receiving Party is required by applicable Laws to
disclose; provided, however, that the Receiving Party shall so notify the
Disclosing Party of the Receiving Party’s intent to disclose and shall
cooperate with the Disclosing Party at the Disclosing Party’s expense on
reasonable measures to protect the confidentiality of the Disclosing Party’s
Confidential Information. The Receiving Party may not disclose the Disclosing Party’s
Confidential Information received pursuant to this Agreement except to the
Receiving Party’s directors, officers, employees, consultants, attorneys and
accountants who reasonably require disclosure of such Confidential Information for
the Receiving Party to exercise its rights or perform its obligations under
this Agreement, provided that such persons and entities are obligated to
hold the Confidential Information in confidence in accordance with restrictions
and procedures no less stringent than provided for herein and such persons
enter into a written confidentiality agreement whereunder they agree not to
disclose such information. The fact that general information may be in or
become part of the public domain, in and of itself, does not exclude any specific
Confidential Information from the obligations of this Agreement.  The Parties
hereto understand and agree that this Section 8.3 is reasonable and
necessary to protect NuVasive’s and Osiris’ respective business interests.  The Parties further agree that the other may
suffer irreparable harm from a breach of this Section 8.3.  Thus, in addition to any other rights or
remedies, all of which shall be deemed cumulative, a party shall be entitled to
pursue injunctive relief to enforce the terms of this Section 8.3.

 

8.4.          Publications.  No announcement, news release, public
statement, publication, or presentation relating to this Agreement or either
party’s performance hereunder (collectively, a “Publication”) shall be made
without the other party’s prior written approval, except as required by
Law.  Each party agrees to submit each
Publication it proposes to make to the other party for purposes of such other
party’s review, comment and approval. 
Each party further agrees to respond as promptly as reasonably possible.

 

ARTICLE 9

MISCELLANEOUS

 

9.1.          No Assignment.  Except as otherwise set forth herein, neither
Party shall transfer, assign or cede any rights or delegate any obligations
hereunder, in whole or in part, whether voluntarily or by operation of law,
without the prior written consent of the other Party, which consent may be
withheld at the other Party’s reasonable business discretion, provided, that (a) Osiris
may transfer this Agreement without prior written consent of NuVasive to an
Affiliate or in connection with a merger or sale of all or substantially all of
the stock or assets of Osiris to any party that NuVasive does not reasonably
deem to be a competitor, and (b)  NuVasive may transfer this Agreement
without prior written consent of Osiris to an Affiliate of NuVasive or in
connection with a merger or sale of all or substantially all of the assets of
NuVasive.

 

9.2.          Notices.  All notices or other communications given
pursuant hereto shall be in writing and deemed given (a) when delivered by
messenger, (b) when sent by facsimile, (with receipt confirmed), (c) when
received by the addressee, if sent by Federal Express or other express delivery
service (receipt requested), or (d) five days after being mailed in the
U.S., first-class 

 

72

 

postage
prepaid, registered or certified, in each case to the appropriate addresses and
facsimile numbers set forth below (or to such other addresses and facsimile
numbers as a party may designate as to itself by notice to the other party):

 

	
  If to Osiris:

  	
   

  	
  If to NuVasive

  
	
   

  	
   

  	
   

  
	
  Osiris Therapeutics, Inc.

  7015 Albert Einstein Drive

  Columbia, MD 21046

  Attention: Chief Executive Officer

  Fax No.: 443-545-1701

   

  With
  a copy to:

   

  McKenna Long & Aldridge LLP

  303 Peachtree St., NE, Suite 5300

  Atlanta, GA 30308

  Attention: Michael Cochran, Esq.

  Fax No.: 404-527-4198

  	
   

  	
  NuVasive, Inc.

  7473 Lusk Boulevard

  San Diego, CA 92121

  Attention: General Counsel

  Fax No.: [*]

   

  With
  a copy (which shall not constitute notice) to:

   

  DLA Piper US LLP

  4365 Executive Drive

  Suite 1100

  San Diego, CA 92122

  Attention: Michael Kagnoff

  Fax No.: 858-638-5022

  

 

9.3.          Force Majeure.  Nonperformance by either party hereto shall
be excused to the extent that performance is rendered impossible by strike,
fire, explosion, flood, acts of God, terrorism, war or civil commotion,
governmental acts or orders or restrictions, failure of suppliers, public
utilities or common carriers, or any other reason where failure to perform is
beyond the reasonable control of and is not caused by the negligence of the
non-performing party.  Such
non-performing party shall exercise best efforts to eliminate the force majeure
event and to resume performance of its affected obligations as soon as
practicable.  In the event that, as a
result of such force majeure event, a party does not perform all of its
obligations hereunder for any period of ninety (90) consecutive days, in
addition to any other rights hereunder, the other party may terminate this
Agreement on thirty (30) days’ prior written notice to the non-performing
party.

 

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

 

9.5.          Partial Invalidity.  If any provision of this Agreement is held to
be invalid, the remaining provisions shall nevertheless remain in full force
and effect.  In addition, the Parties
shall renegotiate in good faith any term held to be invalid, and be bound by
the mutually agreed upon substitute provision.

 

9.6.          Entire Agreement; Inconsistent
Terms; Waiver.  This Agreement
constitutes the entire agreement between the Parties hereto with respect to the
subject matter hereof and may not be amended, modified, waived or cancelled
except by a writing signed by each of the Parties or, in case of a waiver, by
the party effecting such waiver.  If any
terms or conditions of any standard form 

 

73

 

(e.g.,
purchase order, order acknowledgment, etc.) of Osiris or NuVasive conflict or
are inconsistent with any terms or conditions of this Agreement, the terms and
conditions of this Agreement shall govern. 
Failure to require performance of any provision hereof shall in no
manner affect the right of such party at a later time to enforce the same, and
no waiver in any one instance shall be deemed to be a further or continuing
waiver of the same or any other provision.

 

9.7.          Governing Law; Consent to
Jurisdiction.  This Agreement shall
be governed by the laws of the State of Delaware, without regard to conflicts
of laws principles.

 

9.8.          Dispute Resolution.  In the event of a dispute arising under this
Agreement, each party agrees to notify the other party of the specific
complaints or points of disagreement, and to use its good faith efforts to
resolve such dispute, without legal action, by referring such dispute to the
[Title] of Osiris and [Title]of NuVasive (collectively, “Executives”) for resolution. 
The Executives shall meet promptly after such referral to attempt to
resolve such dispute through good faith discussions.  In the event the Executives cannot resolve
such dispute within fifteen (15) days of such initial meeting, either party may
request that such dispute be resolved by
binding arbitration before one (1) neutral arbitrator in accordance
with the then-current Commercial Arbitration Rules of the American
Arbitration Association, applying the substantive law specified in Section 9.7.  The parties shall jointly select the
arbitrator.  Within three (3) months
of the conclusion of an arbitration proceeding, the arbitration decision shall
be rendered in writing and shall specify the basis on which the decision was
made.  Any award rendered by the
arbitrator shall be final and binding upon the parties, and judgment upon any
such award may be entered in any court having jurisdiction thereof.  Arbitration shall be conducted in Chicago,
Illinois.  The parties agree that, any provision
of applicable law notwithstanding, they will not request, and the arbitrator
shall have no authority to award, punitive or exemplary damages against either
party.  The costs of the arbitration,
including administration fees, shall be shared by the parties in proportion to
their fault, as determined by the arbitrator. 
Notwithstanding the foregoing, the parties agree that if any breach or
threatened breach of this Agreement would necessarily result in immediate,
irreparable injury to a party, that party, in addition to any other remedies
available under this Agreement, shall have the right to seek injunctive relief
in any court of competent jurisdiction. 
Notwithstanding anything to the contrary in this Agreement, this Section 9.8 shall not
apply to any disputes arising under Section 8.3 (Confidentiality) or to
any disputes relating to a party’s intellectual property (including,
without limitation, disputes relating to ownership or inventorship of
inventions, validity or infringement of patents, or scope of patent claims).

 

9.9.          Independent Contractor.  The relationship between NuVasive and Osiris
established by this Agreement is that of independent contractors.  Neither party shall have authority to
conclude contracts or otherwise to act for or bind the other party in any
manner, whatsoever, as agent or otherwise.

 

9.10.        Further
Actions.  Each party agrees to
execute, acknowledge and deliver such further instruments, and to do all such
other acts, as may be reasonably necessary or appropriate in order to carry out
the purpose and intent of this Agreement.

 

9.11.        Representations and Warranties.  Each of the Parties represents and warrants
that (i) it is fully authorized to enter into this Agreement; (ii) its
entering into and performance under this Agreement does not violate or breach
it Certificate of Incorporation or corporate bylaws or any agreement or
contract to which it is a party; (iii) there is no claim, demand, action,
suit or proceeding or investigation pending or currently threatened against it
or any of its Affiliates involving or relating to the subject matter hereof, or
which, if adversely determined, would restrict it from 

 

74

 

entering
into this Agreement and carrying out its obligations under this Agreement; and (iv) it
has no legal obligations which would prevent this Agreement from being fully
implemented in accordance with its terms.

 

IN WITNESS WHEREOF, the undersigned caused this
Agreement to be executed as of the Effective Date.

 

	
  OSIRIS THERAPEUTICS, INC.

  	
   

  	
  NUVASIVE, INC.

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
  Name:

  	
   

  	
  Name:

  
	
  Its:

  	
   

  	
  Its:

  
					

 

75

 

Exhibit A
Product Specifications

 

Osiris Materials Specifications numbers 90055, 90067, 90080, 90081,
90103, 9012, 90129, 90149, and 90188, as may be amended by mutual written
agreement of the parties.

 

 

 

76

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