Exclusive Manufacturing Agreement

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



EXCLUSIVE MANUFACTURING AGREEMENT



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



RECITALS



WHEREAS, pursuant to a separate asset purchase agreement (the " Asset Purchase Agreement ") entered into by and between the parties concurrently with this Agreement, NuVasive has purchased from Pearsalls the assets for a business that involves the ownership, design, development and commercial exploitation of non-vascular applications of embroidery technology for surgical implants, including, without limitation, products referred to by Seller by the name "NeoDisc99" and related spine motion preserving technologies, test methods and know-how (collectively, the " Medical Device Global Operations ");



WHEREAS, pursuant to the Asset Purchase Agreement, Pearsalls transferred to NuVasive certain patent rights, copyrights and rights to technical information for the design, development, and manufacture of certain products, including the NeoDisc99 artificial cervical disc product more fully described in Exhibit A-I (the " Cervical Spine Product ") and the Nottingham Rotator Cuff product more fully described in Exhibit A-II (the "Nottingham Rotator Cuff Product"), and its rights to the NeoDisc trademark;



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



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



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












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



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



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





1. DEFINITIONS



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



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



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



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



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



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



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



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



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



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Practices as promulgated by the United States Federal Food, Drug, and Cosmetic Act, 21 U.S.C. a7 301 et seq, as amended, cGMP for medical devices (21 C.F.R. Part 820), and other Applicable Law.



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



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



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



1.11 " Change of Control " means a party92s (i) sale, lease, or other disposition of all or substantially all of its assets, rights or businesses, or (ii) the acquisition of a party by, or merger, consolidation, reorganization, business combination of a party into or with, another entity in which the stockholders of a party immediately prior to such acquisition, merger, consolidation, reorganization or business combination do not own a majority of the outstanding voting shares of the surviving, purchasing, or newly resulting business entity.



1.12 " FDA " means the United States Food and Drug Administration.



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



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



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



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



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



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



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





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



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



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



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



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



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



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



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1.27 " Product Category " means one or a group of distinguishing characteristics of a particular Product that require differentiation on the package label for the Product and includes the intended country of distribution for such Product Category and the Product92s size and intended use (i.e., whether for use clinically or for demonstration or testing purposes), as well as any other categories agreed upon by the parties from time to time.



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



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



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



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



1.32 " Term " has the meaning set forth in Section 12.1.



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



1.34 " Territory " shall mean the world.





2. SPECIFICATIONS; REGULATORY ASSISTANCE



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



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to the extent such specifications would require material changes in Pearsalls92 facilities, manufacturing methods or personnel, shall be subject to Pearsalls92 consent, which shall not be unreasonably withheld. Both Pearsalls and NuVasive acknowledge and understand that Product and Packaging Specifications for a Product may need to be modified from time to time in light of regulatory requirements or other reasons. Any such modifications that are required due to generally applicable regulatory requirements will be implemented by Pearsalls as quickly as commercially reasonable and at Pearsalls92 expense; provided that, changes specific to a particular Product that may be required by a Regulatory Authority for the manufacture, assembly, distribution or use of such Product shall be implemented pursuant to the Change Control process set forth in Section 3.1. Any such modifications that are required or desired for reasons other than generally applicable regulatory requirements may result in changes to the Terms of Sale for such Product, and subject to the parties92 agreement to such changes, shall be implemented by Pearsalls as quickly as commercially reasonable. Subject to the foregoing, all modifications to Product and Packaging Specifications shall be implemented pursuant to the Change Control process set forth in Section 3.1. In the event that a change in regulatory requirements for a particular jurisdiction would make unlawful the sale or use in such jurisdiction of a Product not manufactured in compliance therewith, Pearsalls shall cease manufacture of such Product for such jurisdiction until in compliance with such changed regulatory requirements.



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



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



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



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





3. CHANGE CONTROL



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



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upon written notice to Pearsalls, and Pearsalls shall implement such changes promptly after receipt of such notice from NuVasive. Notwithstanding any provision herein to the contrary, to be effective, notice of a change requested by NuVasive must contain a complete description of such change that is sufficiently detailed to enable Pearsalls to assess the nature and scope of the modifications required to implement such change. If the notice of a requested change does not contain sufficient information to enable Pearsalls to assess the potential impact of such change, Pearsalls shall notify NuVasive and the parties shall work together in good faith to develop or acquire the necessary information. Promptly after receipt of notice of a requested change and the information necessary to assess its potential impact, Pearsalls shall notify NuVasive whether or not the requested change would be a Material Change. With respect to a Material Change, the parties will work together in good faith to agree upon (a) a cost-effective method to implement the requested change, and (b) appropriate changes to the Terms of Sale for the Product, including changes to the pricing consistent with the Pricing Formula. Finally, the parties will develop a " Change Order " that includes a detailed and complete description of the change to be implemented and specifies all changes to the Terms of Sale for the Product. Material Changes will be implemented after execution of a Change Order, in accordance with the terms of such Change Order. In the event Pearsalls desires to suggest a change to the Product and Packaging Specifications, if it is not a Material Change, Pearsalls shall notify NuVasive accordingly and implement such change once it has received NuVasive92s written consent for the change. If it is a Material Change, Pearsalls shall notify NuVasive and provide a Change Order for such change and the change will be implemented only after both parties have executed the Change Order.



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



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



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





4. MANUFACTURE AND SUPPLY



4.1 Requirements; Manufacture of Products . During the Term and subject to the terms and conditions set forth herein, (a) Pearsalls shall manufacture and supply all of NuVasive92s requirements of Cervical Spine Products in the Territory, including Cervical Spine Products for clinical studies, demonstration/sample purposes and commercial sale, and (b) except as otherwise provided herein, NuVasive shall purchase all of its requirement for Cervical Spine Products in the Territory exclusively from Pearsalls, including Cervical Spine Products for clinical studies, demonstration/sample purposes and commercial sale. Further, Pearsalls shall manufacture and supply the Nottingham Rotator Cuff Product for NuVasive for the price specified in Exhibit C , in accordance with appropriate other Terms of Sale agreed by the parties and subject to the terms hereof, and shall manufacture and supply Other Products for NuVasive upon mutual written agreement of the parties and subject to the terms hereof; provided , however , that such supply shall be on a non-exclusive basis. For the avoidance of doubt, NuVasive shall have the right in its sole discretion and at all times to manufacture, and to use third parties to manufacture and supply all or part of NuVasive92s requirements for the Nottingham Rotator Cuff Product and Other Products.



4.2 Forecasts . Upon commencement of clinical studies for the Cervical Spine Product or within a commercially reasonable period prior to the first order for Products, at least thirty (30) days prior to the commencement of each calendar quarter NuVasive shall furnish Pearsalls with a good faith estimate of the quantities of each Product Category that NuVasive intends to purchase from Pearsalls during each month of the upcoming four (4) calendar quarters (the " Forecast "). Notwithstanding the foregoing, NuVasive shall notify Pearsalls of any revision to a Forecast already furnished to Pearsalls as soon as commercially practicable after NuVasive becomes aware that its likely or actual requirements for one or more Product Categories have changed by ***percent (***%) or more. It is understood that the quantities specified in the Forecasts are intended to be estimates only and shall not be binding on NuVasive; provided however , that Pearsalls shall not have any obligation to be prepared to supply NuVasive with more than *** percent (***%) of NuVasive92s forecasted requirement for any particular Product Category for any particular month, as specified in the most recent Forecast for such month.



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








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



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



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



4.3.2 Pearsalls shall use commercially reasonable efforts to fill NuVasive92s purchase orders for Products in any given month in excess of the quantities for that month specified in the applicable Forecast; provided, however , that Pearsalls shall not be obligated to provide NuVasive in any particular month with more than *** percent (***%) in excess of the quantities of Products forecasted for that month; and provided further that the mere failure, in and of itself, of Pearsalls to meet any order in excess of the forcasted amounts and sizes shall not bring into effect the provisions of Section 5.1 nor be a default for the purposes of Sec ...