10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2008

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from          to

Commission file number 000-50744

NUVASIVE, INC.

(Exact name of registrant as specified in its charter)

Delaware	33-0768598
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

7475 Lusk Boulevard
San Diego, CA 92121
(Address of principal executive offices, including zip code)

(858) 909-1800
(Registrant’s telephone number, including area code)

4545 Towne Centre Court
San Diego, CA 92121
(Former name, former address and former fiscal year, if changed since last report)

      Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ     No o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

     Large accelerated filer þ  Accelerated filer o  Non-accelerated filer   o
(Do not check if a smaller reporting company) Smaller Reporting Company o 

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o      No. þ

As of July 31, 2008, there were 35,878,674 shares of the registrant’s common stock outstanding.

NUVASIVE, INC.

QUARTERLY REPORT ON FORM 10-Q

June 30, 2008

TABLE OF CONTENTS

PART I—FINANCIAL INFORMATION
Item 1. Financial Statements	3
Condensed Consolidated Balance Sheets as of June 30, 2008 (Unaudited) and December 31, 2007	3
Unaudited Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2008 and 2007	4
Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2008 and 2007	5
Notes to Condensed Consolidated Financial Statements	6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
Item 3. Quantitative and Qualitative Disclosures About Market Risk	19
Item 4. Controls and Procedures	20
PART II—OTHER INFORMATION
Item 1. Legal Proceedings	20
Item 1A. Risk Factors	20
Item 4. Submission of Matters to a Vote of Security Holders	22
Item 5. Other Information	23
Item 6. Exhibits	24
SIGNATURES	25
EXHIBIT 2.1
EXHIBIT 10.1
EXHIBIT 10.2
EXHIBIT 10.3
EXHIBIT 10.4
EXHIBIT 10.5
EXHIBIT 10.6
EXHIBIT 10.7
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

NUVASIVE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

	June 30, 2008			December 31, 2007
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	136,224		$	61,915
Short-term marketable securities		72,746			19,247
Accounts receivable, net		32,528			27,496
Inventory, net		52,185			36,280
Prepaid expenses and other current assets		2,947			1,240
Total current assets		296,630			146,178
Property and equipment, net of accumulated depreciation		64,876			43,538
Intangible assets, net of accumulated amortization		25,955			24,496
Long-term marketable securities		56,745			8,536
Other assets		9,254			2,939
Total assets	$	453,460		$	225,687
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued liabilities	$	20,012		$	13,839
Accrued payroll and related expenses		10,793			12,075
Royalties payable		2,092			2,076
Total current liabilities		32,897			27,990
Senior convertible notes		230,000			—
Long-term liabilities		590			1,119
Commitments and contingencies
Stockholders’ equity:
Common stock, 70,000 shares authorized; and 35,794 and 35,330 issued and outstanding at June 30, 2008 and December 31, 2007, respectively		36			35
Additional paid-in capital		366,150			364,469
Accumulated other comprehensive income (loss)		(84	)		54
Accumulated deficit		(176,129	)		(167,980	)
Total stockholders’ equity		189,973			196,578
Total liabilities and stockholders’ equity	$	453,460		$	225,687

See accompanying notes to unaudited condensed consolidated financial statements.

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NUVASIVE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited and in thousands, except per share data)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2008			2007			2008			2007
Revenues	$	57,417		$	35,618		$	108,601		$	68,838
Cost of goods sold		9,571			6,710			18,666			12,417
Gross Profit		47,846			28,908			89,935			56,421
Operating expenses:
Sales, marketing and administrative		42,099			28,534			81,416			56,982
Research and development		6,426			5,418			13,402			10,762
In-process research and development		—			—			4,176			—
Total operating expenses		48,525			33,952			98,994			67,744
Interest and other income, net		184			1,628			910			3,487
Net loss	$	(495	)	$	(3,416	)	$	(8,149	)	$	(7,836	)
Net loss per share:
Basic and diluted	$	(0.01	)	$	(0.10	)	$	(0.23	)	$	(0.23	)
Weighted average shares — basic and diluted		35,663			34,654			35,543			34,485

See accompanying notes to unaudited condensed consolidated financial statements.

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NUVASIVE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited and in thousands)

	Six Months Ended
	June 30,
	2008			2007
Operating activities:
Net loss	$	(8,149	)	$	(7,836	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		8,449			5,933
Stock-based compensation		10,298			6,613
In-process research and development		4,176			—
Other non-cash adjustments		312			1,179
Changes in operating assets and liabilities:
Accounts receivable		(5,044	)		(4,621	)
Inventory		(16,496	)		(8,868	)
Prepaid expenses and other current assets		(1,707	)		(39	)
Accounts payable and accrued liabilities		3,361			1,926
Accrued payroll and related expenses		(1,282	)		(421	)
Net cash used in operating activities		(6,082	)		(6,134	)
Investing activities:
Cash paid for pedicle screw technology		(6,256	)		—
Cash paid for acquisition of Radius Medical, LLC		—			(6,970	)
Purchases of property and equipment		(25,686	)		(8,527	)
Sales of short-term marketable securities		19,300			79,050
Purchases of short-term marketable securities		(72,799	)		(49,580	)
Sales of long-term marketable securities		3,500			6,000
Purchases of long-term marketable securities		(51,709	)		(13,991	)
Other assets		543			5
Net cash (used in) provided by investing activities		(133,107	)		5,987
Financing activities:
Payment of long-term liabilities		(300	)		(300	)
Issuance of senior convertible notes, net of issuance costs		222,414			—
Purchase of convertible note hedges		(45,758	)		—
Sale of warrants		31,786			—
Issuance of common stock		5,356			3,189
Net cash provided by financing activities		213,498			2,889
Increase in cash and cash equivalents		74,309			2,742
Cash and cash equivalents at beginning of period		61,915			41,476
Cash and cash equivalents at end of period	$	136,224		$	44,218
Supplemental disclosure of non-cash transaction:
Issuance of common stock in connection with acquisition of Radius Medical LLC	$	—		$	10,501
Purchases of leasehold improvements paid by lessor	$	2,848		$	—

See accompanying notes to unaudited condensed consolidated financial statements.

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NuVasive, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

1. Description of Business

     NuVasive, Inc. (the Company or NuVasive) was incorporated in Delaware on July 21, 1997. The Company is a medical device company focused on the design, development and marketing of products for the surgical treatment of spine disorders and operates in one business segment. The Company began commercializing its products in 2001. NuVasive’s principal product offering includes a minimally disruptive surgical platform called Maximum Access Surgery, or MAS^®, as well as a growing offering of cervical and motion preservation products. The Company’s currently-marketed products are used predominantly in spine fusion surgeries, both to enable access to the spine and to perform restorative and fusion procedures. The Company also focuses significant research and development efforts on both MAS and motion preservation products in the areas of (i) fusion procedures in the lumbar and thoracic spine, (ii) cervical fixation products, and (iii) motion preservation products such as total disc replacement and nucleus-like cervical disc replacement. The Company dedicates significant resources to sales and marketing efforts, including training spine surgeons on its unique technology and products. The Company’s MAS platform combines NeuroVision^®, a nerve avoidance system, MaXcess^®, a minimally disruptive surgical system, and specialized implants, including fixation products for fusion and CoRoent^® suite of implants.

     The fusion fixation products include the Company’s SpheRx^® pedicle screw systems, XLP™ lateral fixation plate, Halo™ anterior fixation plate, Helix™ cervical plate and Gradient Plus^tm cervical plate. The Company also offers their Triad^® and Extensure™lines of bone allograft, in patented saline packaging, and a synthetic bone void filler, FormaGraft^®, designed to aid in bone growth with fusion procedures.

     The Company loans its NeuroVision systems to surgeons and hospitals who purchase disposables and implants for use in individual procedures. In addition, NeuroVision, MaXcess and surgical instrument sets are placed with hospitals for an extended period at no up-front cost to them provided they commit to minimum monthly purchases of disposables and implants. The Company sells a small quantity of surgical instrument sets and NeuroVision systems to hospitals. The Company offers a range of bone allograft in patented saline packaging and spine implants such as rods, plates and screws. Implants and disposables are shipped from the Company’s facilities or from limited disposable inventories stored at sales agents’ sites.

     NuVasive focuses significant research and development efforts on both MAS and motion preservation products in the areas of (i) fusion procedures in the lumbar and thoracic spine, (ii) cervical fixation products, and (iii) motion preservation products such as total disc replacement and nucleus-like cervical disc replacement. The Company dedicates significant resources to its sales and marketing efforts, including training spine surgeons on its unique technology and products.

2. Basis of Presentation

     The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Pursuant to these rules and regulations, the Company has condensed or omitted certain information and footnote disclosures it normally includes in its annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States (GAAP). In the opinion of our management, the financial statements include all adjustments necessary, which are of a normal and recurring nature, for the fair presentation of the Company’s financial position and of the results of operations and cash flows for the periods presented. All intercompany transactions and balances have been eliminated in consolidation.

     These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2007 included in NuVasive’s Annual Report on Form 10-K filed with the Securities and Exchange Commission. Operating results for the three and six months ended June 30, 2008 and 2007 are not necessarily indicative of the results that may be expected for any other interim period or for the full year. The balance sheet at December 31, 2007 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by GAAP for complete financial statements. Certain previously reported amounts have been reclassified to conform to the current period’s presentation.

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3. Agreement to Acquire Osteocel Biologics Business

     On May 8, 2008, NuVasive signed a definitive agreement to acquire the Osteocel^® biologics business from Osiris Therapeutics, Inc. (Osiris). The acquired Osteocel biologics business includes a proprietary adult stem cell bone graft product with the beneficial properties of autograft. The Company completed the acquisition of the Osteocel biologics business on July 24, 2008 and made the $35 million cash acquisition closing payment to Osiris. Under the terms of the agreement, NuVasive will make additional milestone-based contingent payments, which are based on meeting specific product delivery specifications, not to exceed $37.5 million in either cash or a combination of cash and stock, at the Company’s election. In connection with the closing of the acquisition, the Company entered into a Manufacturing Agreement (the Manufacturing Agreement), pursuant to which Osiris will supply, and the Company will purchase, quantities of product of at least the specified production and performance levels for the specified periods as outlined in the Manufacturing Agreement. In addition, at the conclusion of the 18 month Manufacturing Agreement, the Company will obtain a processing facility with significant supply stream capacity from Osiris for $12.5 million in cash or a combination of cash and stock, at the Company’s election.

4. Convertible Senior Notes

     In March 2008, the Company issued $230.0 million principal amount of 2.25% Convertible Senior Notes (the Notes), which includes the subsequent exercise of the initial purchasers’ option to purchase an additional $30.0 million aggregate principal amount of the Notes. The net proceeds from the offering, after deducting the initial purchasers’ discount and costs directly related to the offering, were approximately $208.4 million. The Company will pay 2.25% interest per annum on the principal amount of the Notes, payable semi-annually in arrears in cash on March 15 and September 15 of each year. The Notes mature on March 15, 2013 (the Maturity Date).

     The Notes will be convertible into shares of the Company’s common stock, $0.001 par value per share, based on an initial conversion rate, subject to adjustment, of 22.3515 shares per $1,000 principal amount of the Notes (which represents an initial conversion price of approximately $44.74 per share). Holders may convert their notes at their option on any day up to and including the second scheduled trading day immediately preceding the Maturity Date. If a fundamental change to the Company’s business occurs, as defined in the Notes, holders of the Notes have the right to require that the Company repurchase the Notes, or a portion thereof, at the principal amount thereof plus accrued and unpaid interest.

     In connection with the offering of the Notes, the Company entered into convertible note hedge transactions (the Hedge) with the initial purchasers and/or their affiliates (the Counterparties) entitling the Company to purchase up to 5.1 million shares of the Company’s common stock, subject to adjustment, at an initial stock price of $44.74 per share, subject to adjustment. In addition, the Company sold to the Counterparties warrants to acquire up to 5.1 million shares of the Company’s common stock (the Warrants), subject to adjustment, at an initial strike price of $49.13 per share, subject to adjustment. The cost of the Hedge that was not covered by the proceeds from the sale of the Warrants was approximately $14.0 million and is reflected as a reduction of additional paid-in capital as of June 30, 2008. The impact of the Hedge is to raise the effective conversion price of the Notes to approximately $49.13 per share (or approximately 20.3542 shares per $1,000 principal amount of the Notes). The Hedge is expected to reduce the potential equity dilution upon conversion of the Notes if the daily volume-weighted average price per share of the Company’s common stock exceeds the strike price of the Hedge. The Warrants could have a dilutive effect on the Company’s earnings per share to the extent that the price of the Company’s common stock during a given measurement period exceeds the strike price of the Warrants. Through June 30, 2008, the price of the Company’s common stock has not exceeded the strike price of the Warrants.

5. Acquisition of Pedicle Screw Technology

     In March 2008, the Company completed a buy-out of royalty obligations on SpheRx^® pedicle screw and related technology products and acquired new pedicle screw intellectual property totaling $6.3 million. Of the total purchase price, $2.1 million, representing the present value of the expected future cash flows associated with the terminated royalty obligations, was allocated to intangible assets to be amortized on a straight-line basis over a seven-year period. The remaining $4.2 million was allocated to in-process research and development as the associated projects had not yet reached technological feasibility and had no alternative future uses.

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6. Balance Sheet Reserves

     The balances of the reserves for accounts receivable and inventory are as follows:

(in thousands)	June 30, 2008		December 31, 2007
Reserves for accounts receivable	$	763	$	926
Reserves for inventory	$	4,104	$	3,614

7. Net Loss Per Share

     NuVasive computes net loss per share using the weighted-average number of common shares outstanding during the period. The effect of stock options, conversion of the senior convertible notes, and warrants is anti-dilutive and therefore excluded from the calculation. Although these securities are currently not included in the net loss per share calculation, they could be dilutive when, and if, the Company reports future earnings.

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(in thousands, except per share amounts)	2008			2007			2008			2007
Numerator:
Net loss	$	(495	)	$	(3,416	)	$	(8,149	)	$	(7,836	)
Denominator for basic and diluted net loss per share:
Weighted average common shares outstanding		35,663			34,654			35,543			34,485
Basic and diluted net loss per share	$	(0.01	)	$	(0.10	)	$	(0.23	)	$	(0.23	)

8. Comprehensive Income

     Comprehensive income, which includes the unrealized gain (loss) on short-term marketable securities and foreign currency translation adjustments for the three- and six-month periods ended June 30, 2008 and 2007 did not differ significantly from the reported net loss.

9. Marketable Securities

     Effective January 1, 2008, the Company adopted FASB Statement No. 157 (SFAS 157), Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles, and expands disclosures about fair value measurements. On February 6, 2008, the FASB deferred the effective date of SFAS 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis. These nonfinancial items include assets and liabilities such as reporting units measured at fair value in a goodwill impairment test and nonfinancial assets acquired and liabilities assumed in a business combination. The Company measures certain assets at fair value and thus there was no impact on the Company’s consolidated financial statement at the adoption of SFAS 157. SFAS 157 requires disclosure that establishes a framework for measuring fair value and expands disclosure about fair value measurements. The statement requires fair value measurement be classified and disclosed in one of the following three categories:

Level 1:	Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities.
Level 2:	Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.
Level 3:	Unobservable inputs are used when little or no market data is available.

     We measure available-for-sale securities at fair value on a recurring basis. All of the Company’s assets measured at fair value on a recurring basis subject to the disclosure requirements of SFAS 157 as of June 30, 2008 are categorized as Level 1. The Company recorded an immaterial unrealized loss in each of the six-month periods ended June 30, 2008 and 2007. The unrealized loss is included as a component of other comprehensive loss within stockholders’ equity.

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10. Stock-Based Compensation

     For purposes of calculating the stock-based compensation under SFAS 123(R), the Company estimates the fair value of stock options granted to employees and shares issued under the Employee Stock Purchase Plan, or ESPP, using a Black-Scholes option-pricing model. The assumptions used to estimate the fair value of stock awards granted in the three- and six-month periods ended June 30, 2008 and 2007 are as follows:

	Three and Six Months	Three and Six Months
	Ended June 30, 2008	Ended June 30, 2007
Stock Options
Volatility	42%	50%
Expected term (years)	2.5 to 4.5	2.5 to 4.5
Risk free interest rate	2.46% to 3.41%	4.51% to 4.92%
Expected dividend yield	0.0%	0.0%
ESPP
Volatility	42% to 50%	50%
Expected term (years)	0.5	0.5
Risk free interest rate	3.03% to 4.01%	4.45% to 4.86%
Expected dividend yield	0.0%	0.0%

     The compensation cost that has been included in the statement of operations for all stock-based compensation arrangements was as follows:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(in thousands, except per share amounts)	2008			2007			2008			2007
Sales, marketing and administrative expense	$	4,538		$	2,894		$	9,042		$	5,522
Research and development expense		610			575			1,256			1,091
Stock-based compensation expense	$	5,148		$	3,469		$	10,298		$	6,613
Effect on basic and diluted net loss per share	$	(0.14	)	$	(0.10	)	$	(0.29	)	$	(0.19	)

     Stock-based compensation for stock options is recognized and amortized on an accelerated basis in accordance with Financial Accounting Standards Board Interpretation No. 28, Accounting for Stock Appreciation Rights and Other Variable Stock Option Award Plans (FIN 28). As of June 30, 2008, there was $23.8 million of unrecognized stock-based compensation expense. This cost is expected to be recognized over a weighted-average period of approximately 1.4 years.

11. New Building Lease

     On November 6, 2007, the Company entered into a 15-year lease agreement for the purpose of relocating our corporate headquarters to an approximately 140,000 square feet two-building campus style complex. Rental payments consist of base rent of $2.43 per square foot per month, escalating at an annual rate of three percent over the 15-year period of the lease, plus related operating expenses. In addition, through options to acquire additional space in the project and to require the construction of an additional building on the campus, the agreement provides for facility expansion rights to an aggregate of more than 300,000 leased square feet. In connection with the lease, the Company issued a $3.1 million irrevocable transferrable letter of credit. Relocation to the new facility began in March 2008 and is expected to continue through the third quarter of 2008.

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     The table below provides the minimum cash payments required under the new building lease for rent and related operating expenses.

Year
(in thousands)
2008	$	1,080
2009		5,151
2010		5,801
2011		6,003
2012		6,214
2013 and thereafter		82,339
	$	106,588

12. Business Combination

     Radius Acquisition. On January 23, 2007, NuVasive completed the acquisition of substantially all of Radius Medical, LLC’s (Radius) right, title and interest in and to the assets used by Radius in connection with the design, development, marketing and distribution of collagen-based medical biomaterials, together with the intellectual property rights, contractual rights, inventories, and certain liabilities related thereto in exchange for cash consideration of $5.0 million, NuVasive common stock of $10.5 million, cash deposited in escrow of $2.0 million and direct transaction costs of $0.3 million. The transaction provides NuVasive with a biologic product, FormaGraft^®, a synthetic bone void filler designed to aid in bone growth with fusion procedures, and a platform for future development. FormaGraft received 510(k) clearance from the Food and Drug Administration (FDA) in May 2005. The Company accounted for this acquisition under the purchase method of accounting and, accordingly, the purchased assets were initially recorded at their estimated fair values at the date of the acquisition. Among other assets, the Company acquired $16.5 million of amortizable intangible assets, including a supply agreement with Maxigen Biotech, Inc. (MBI) and licensed technology and recorded $1.1 million of goodwill. The results of Radius’s operations are included in the consolidated financial statements beginning on the date of the acquisition.

     In connection with the acquisition of Radius, NuVasive made a separate $2.0 million equity investment in MBI. On May 1, 2007, the equity investment in MBI was completed resulting in NuVasive ownership of approximately 9% of MBI. The Company accounts for this investment at cost and includes it in other assets on the consolidated balance sheets.

13. Impact of Recently Issued Accounting Standards

     In December 2007, the Financial Accounting Standards Board (FASB) issued Statement No. 141(Revised 2007), Business Combinations (SFAS No. 141(R)), which establishes principles and requirements for the reporting entity in a business combination, including recognition and measurement in the financial statements of the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree. This statement also establishes disclosure requirements to enable financial statement users to evaluate the nature and financial effects of the business combination. SFAS No. 141(R) applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008, and interim periods within those fiscal years. SFAS No. 141(R) will become effective for our fiscal year beginning in 2009. We are currently evaluating the effect, if any, the adoption of SFAS No. 141(R) could have on our consolidated financial statements.

     In May 2008, the FASB issued FASB Staff Position (FSP) No. APB 14-1, Accounting for Convertible Debt Instruments that May be Settled in Cash upon Conversion (Including Partial Cash Settlement) (FSP APB 14-1 or the FSP) that significantly impacts the accounting for convertible debt. The FSP requires convertible debt that has the ability to be settled in cash to be bifurcated into debt and equity components and accounted for separately at issuance. The value assigned to the debt component would be the estimated fair value, as of the issuance date, of a similar bond without the conversion feature. The difference between the bond cash proceeds and this estimated fair value would be recorded as a debt discount and amortized to interest expense over the life of the bond, resulting in the recognition of interest expense on these securities at an effective rate more comparable to what the Company would have incurred had the Company issued nonconvertible debt with otherwise similar terms. The equity component of the convertible debt securities would be included in the paid-in-capital section of stockholders’ equity on the Company’s consolidated balance sheets, and the initial carrying values of these debt securities would be

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correspondingly reduced. The Company is currently evaluating the impact, if any, this FSP could have on its results of operations upon adoption. In addition, if the Company’s convertible debt is redeemed or converted prior to maturity, any unamortized debt discount at the time of such redemption or conversion would result in a loss on extinguishment. FSP APB 14-1 will become effective for fiscal years beginning after December 15, 2008, and require retrospective application.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements May Prove Inaccurate

     You should read the following discussion of our financial condition and results of operations in conjunction with the unaudited consolidated financial statements and the notes to those statements included in this report. This discussion may contain forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, such as those set forth under heading “Risk Factors,” and elsewhere in this report, and in our Annual Report on Form 10-K for the year ending December 31, 2007. We do not intend to update these forward looking statements to reflect future events or circumstances.

Overview

     We are a medical device company focused on the design, development and marketing of products for the surgical treatment of spine disorders. Our currently-marketed product portfolio is focused on applications for spine fusion surgery, a market estimated to exceed $4.2 billion in the United States in 2008. Our principal product offering includes a minimally disruptive surgical platform called Maximum Access Surgery, or MAS^®, as well as a growing offering of cervical and motion preservation products. Our currently-marketed products are used predominantly in spine fusion surgeries, both to enable access to the spine and to perform restorative and fusion procedures. We also focus significant research and development efforts on both MAS and motion preservation products in the areas of (i) fusion procedures in the lumbar and thoracic spine, (ii) cervical fixation products, and (iii) motion preservation products such as total disc replacement and nucleus-like cervical disc replacement. We dedicate significant resources to our sales and marketing efforts, including training spine surgeons on our unique technology and products.

     Our MAS platform combines three categories of our product offerings:

• NeuroVision^® — a proprietary software-driven nerve avoidance system;

• MaXcess^® — a unique split-blade design retraction system providing enhanced surgical access to the spine; and

• Specialized implants, including our fixation products for fusion and CoRoent^® suite of implants.

     Our fusion fixation products include our SpheRx^® pedicle screw systems, XLP™ lateral fixation plate, Halo™ anterior fixation plate, Helix™ cervical plate and Gradient Plus^tm cervical plate. We also offer our Triad^® and Extensure™lines of bone allograft, in our patented saline packaging, and a synthetic bone void filler, FormaGraft^®, designed to aid in bone growth with fusion procedures.

     We have an active product development pipeline focused on expanding our current fusion product platform as well as products designed to preserve spinal motion. In particular, we have an ongoing pivotal clinical study, which began in the third quarter of 2006, with respect to our investigational cervical disc replacement device. We expect to have completed enrollment in the trial by August 2008.

     Since inception, we have been unprofitable. As of June 30, 2008, we had an accumulated deficit of $176.1 million.

     Revenues. The majority of our revenues are derived from the sale of implants and disposables and we expect this trend to continue in the near term. We loan our surgical instrument sets at no cost to surgeons and hospitals that purchase disposables and implants for use in individual procedures; there are no minimum purchase requirements of disposables and implants related to these loaned surgical instruments. In addition, we place NeuroVision, MaXcess and other MAS or cervical surgical instrument sets with hospitals for an extended period at no up-front cost to them provided they commit to minimum monthly purchases of disposables and implants. These extended loan transactions represent less than 20% of our total stock of loaner surgical assets. Our implants and disposables are currently sold and shipped from our San Diego and Memphis facilities or from limited disposable inventories stored at our sales agents’ sites. We recognize revenue for disposables or implants used upon receiving a purchase order

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from the hospital indicating product use or implantation. In addition, we sell a small number of MAS instrument sets, MaXcess devices, and NeuroVision systems. To date, we have derived less than 5% of our total revenues from these sales.

     Sales and Marketing. Through June 30, 2008, substantially all of our operations are located in the United States and substantially all of our sales to date have been generated in the United States. We distribute our products through a sales force comprised of independent exclusive sales agents and our own directly employed sales professionals. Our sales force provides a delivery and consultative service to our surgeon and hospital customers and is compensated based on sales and product placements in their territories. Sales force commissions are reflected in our statement of operations in the sales, marketing and administrative expense line. We expect to continue to expand our distribution channel. In the second quarter of 2006, we completed our efforts to transition our sales force to one that is exclusive to us with respect to the sale of spine products. Late in 2007, we began an expansion in international markets focusing initially on European markets. We expect our international sales force to be made up of a combination of distributors and direct sales personnel.

Critical Accounting Policies

     Our discussion and analysis of our financial condition and results of operations is based upon our unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (GAAP). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. On an ongoing basis, we evaluate our estimates including those related to bad debts, inventories, long-term assets, income taxes, and stock-based compensation. We base our estimates on historical experience and on various other assumptions we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities not readily apparent from other sources. Actual results may differ from these estimates.

     We believe the following accounting policies to be critical to the judgments and estimates used in the preparation of our consolidated financial statements.

     Revenue Recognition. We follow the provisions of the Securities and Exchange Commission Staff Accounting Bulletin (SAB) No. 104, Revenue Recognition, which sets forth guidelines for the timing of revenue recognition based upon factors such as passage of title, installation, payment and customer acceptance. We recognize revenue when all four of the following criteria are met: (i) persuasive evidence that an arrangement exists; (ii) delivery of the products and/or services has occurred; (iii) the selling price is fixed or determinable; and (iv) collectability is reasonably assured. Specifically, revenue from the sale of implants and disposables is recognized upon receipt of a purchase order from the hospital indicating product use or implantation or upon shipment to third party customers who immediately accept title. Revenue from the sale of our instrument sets is recognized upon receipt of a purchase order and the subsequent shipment to customers who immediately accept title.

     Allowance for Doubtful Accounts. We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. The allowance for doubtful accounts is reviewed quarterly and is estimated based on the aging of account balances, collection history and known trends with current customers. As a result of this review, the allowance is adjusted on a specific identification basis. Increases to the allowance for doubtful accounts result in a corresponding sales, marketing and administrative expense. We maintain a relatively large customer base that mitigates the risk of concentration with one customer. However, if the overall condition of the healthcare industry were to deteriorate, or if the historical data used to calculate the allowance provided for doubtful accounts does not reflect our customer’s future ability to pay outstanding receivables, significant additional allowances could be required.

     Excess and Obsolete Inventory and Instruments. We calculate an inventory reserve for estimated obsolescence and excess inventory based upon historical turnover and assumptions about future demand for our products and market conditions. Our allograft implants have a four-year shelf life and are subject to demand fluctuations based on the availability and demand for alternative implant products. Our MAS inventory, which consists primarily of disposables and specialized implants, is at risk of obsolescence following the introduction and development of new or enhanced products. Our estimates and assumptions for excess and obsolete inventory are reviewed and updated on a quarterly basis. The estimates we use for demand are also used for near-term capacity planning and inventory purchasing and are consistent with our revenue forecasts. Increases in the reserve for excess and obsolete inventory result in a corresponding expense to cost of goods sold.

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     A stated goal of our business is to focus on continual product innovation and to obsolete our own products. While we believe this provides a competitive edge, it also results in the risk that our products and related capital instruments will become obsolete prior to the end of their anticipated useful lives. If we introduce new products or next-generation products prior to the end of the useful life of a prior generation, we may be required to dispose of existing inventory and related capital instruments and/or write off the value or accelerate the depreciation of these assets.

     Long-Term Assets. Property and equipment is carried at cost less accumulated depreciation. Depreciation is computed using the straight-line method based on the estimated useful lives of three to seven years for machinery and equipment and three years for loaner instruments. We own land and a building in Memphis, Tennessee that we use as a warehouse and distribution facility. The building is depreciated over a period of 20 years. Maintenance and repairs are expensed as incurred. Intangible assets, consisting of purchased and licensed technology and a supply agreement, are amortized on a straight-line basis over their estimated useful lives ranging from 14 to 20 years.

     We evaluate our long-term assets for indications of impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. If this evaluation indicates that the value of the long-term asset may be impaired, we make an assessment of the recoverability of the net carrying value of the asset over its remaining useful life. If this assessment indicates that the long-term asset is not recoverable, we reduce the net carrying value of the related asset to fair value and may adjust the remaining depreciation or amortization period. We have not recognized any material impairment losses on long-term intangible assets through June 30, 2008.

     Accounting for Income Taxes. Significant management judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities and any valuation allowance recorded against our net deferred tax assets. We have recorded a full valuation allowance on our net deferred tax assets as of June 30, 2008 due to uncertainties related to our ability to utilize our deferred tax assets in the foreseeable future.

     Valuation of Stock-Based Compensation. On January 1, 2006, we adopted the fair value recognition provisions of Statement of Financial Accounting Standards (SFAS) 123 (revised 2004), Share-Based Payment (SFAS 123(R)), which establishes accounting for share-based awards exchanged for shareowner (employee) and non-employee director services and requires us to expense the estimated fair value of these awards over the requisite service period. Option awards issued to non-employees are recorded at their fair value as determined in accordance with Emerging Issues Task Force (EITF) 96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling Goods or Services, and are periodically revalued as the options vest and are recognized as expense over the related service period.

     For purposes of calculating the stock-based compensation expense, we estimate the fair value of all share-based awards to shareowners (employees) and directors at the date of grant using the Black-Scholes option-pricing model and the portion that is ultimately expected to vest is recognized as compensation expense over the requisite service period on an accelerated basis.

     The determination of fair value using the Black-Scholes option-pricing model is affected by our stock price, as well as assumptions regarding a number of complex and subjective variables, including expected stock price volatility, risk-free interest rate, expected dividend and expected term. Stock-based compensation expense is recognized only for those awards that are ultimately expected to vest, and we have applied an estimated forfeiture rate to unvested awards for the purpose of calculating compensation cost. Stock-based compensation related to stock options is recognized and amortized on an accelerated basis in accordance with Financial Accounting Standards Board Interpretation No. 28, Accounting for Stock Appreciation Rights and Other Variable Stock Option Award Plans (FIN 28). If there is a difference between the assumptions used in determining stock-based compensation cost and the actual factors which become known over time, specifically with respect to anticipated forfeitures, we may change the input factors used in determining stock-based compensation costs. These changes, if any, may materially impact our results of operations in the period such changes are made.

     In-Process Research and Development. In 2008, we recorded an in-process research and development (IPRD) charge of $4.2 million related to the acquisition of pedicle screw technology in the first quarter of 2008. At the date of the acquisition, the projects associated with the IPRD efforts had not yet reached technological feasibility and the research and development in-process had no alternative future uses. Accordingly, the amounts were charged to expense on the acquisition date.

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     The above listing is not intended to be a comprehensive list of all of our accounting policies. In many cases, the accounting treatment of a particular transaction is specifically dictated by accounting principles generally accepted in the United States (GAAP). See our unaudited condensed consolidated financial statements and notes thereto included in this report, and our audited consolidated financial statements and notes thereto for the year ended December 31, 2007 included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission, which contain accounting policies and other disclosures required by GAAP.

Results of Operations

Revenue

	June 30,
(dollars in thousands)	2008		2007		$ Change		% Change
Three months ended	$	57,417	$	35,618	$	21,799		61.2	%
Six months ended	$	108,601	$	68,838	$	39,763		57.8	%

     Revenues have increased over time due primarily to continued market acceptance of our products within our MAS platform, including NeuroVision, MaXcess disposables, and our specialized implants such as our XLP™ lateral plate, SpheRx^® pedicle screw systems, and CoRoent^® suite of products. The continued adoption of minimally invasive procedures for spine have led to the continued expansion of our innovative lateral procedure known as eXtreme Lateral Interbody Fusion, or XLIF^®, in which surgeons access the spine for a fusion procedure from the side of the patient’s body, rather than from the front or back. The execution of our strategy of expanding our product offering for the lumbar region and addressing broader indications further up the spine in the thoracic and cervical regions through product introductions in 2008 and 2007 have contributed to revenue growth in both years. Additionally, the completion of our transition to an exclusive sales force in mid-2006 has increased the effort focused on selling our products, as well as the overall market penetration, resulting in higher sales. We expect revenue to continue to increase, which can be mainly attributed to the continued adoption of our XLIF^® procedure and deeper penetration into existing accounts as our sales force executes on the strategy of selling the full mix of our products. In addition, the expansion of our biologics offering through the acquisition of the Osteocel biologics business, and our new product introductions and sales force initiatives are expected to lead to continued revenue growth.

Cost of Goods Sold

	June 30,
(dollars in thousands)	2008			2007			$ Change		% Change
Three months ended	$	9,571		$	6,710		$	2,861		42.6	%
% of revenue		16.7	%		18.8	%
Six months ended	$	18,666		$	12,417		$	6,249		50.3	%
% of revenue		17.2	%		18.0	%

     Cost of goods sold consists of purchased goods and overhead costs, including depreciation expense for instruments.

     The increase in cost of goods sold in total dollars in the three- and six-month periods ended June 30, 2008 compared to the same periods in 2007 resulted primarily from (i) increased material costs of $1.3 million and $5.6 million, respectively, primarily to support revenue growth; (ii) increased depreciation expense of $0.6 million and $1.1 million, respectively, incurred on the increased amount of surgical instrument sets we hold for use in surgeries; and (iii) for the three-months ended June 30, 2008, increased overhead expense of $0.8 million due to expanded facility costs. We expect cost of goods sold, as a percentage of revenue, to increase slightly through the remainder of 2008. We expect our gross margin to range between 80% to 81%.

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Operating Expenses

     Sales, Marketing and Administrative.

	June 30,
(dollars in thousands)	2008			2007			$ Change		% Change
Three months ended	$	42,099		$	28,534		$	13,565		47.5	%
% of revenue		73.3	%		80.1	%
Six months ended	$	81,416		$	56,982		$	24,434		42.9	%
% of revenue		75.0	%		82.8	%

     Sales, marketing and administrative expenses consist primarily of compensation, commission and training costs for personnel engaged in sales, marketing and customer support functions, distributor commissions, surgeon training costs, shareowner (employee) related expenses for our administrative functions, third party professional service fees, amortization of acquired intangible assets, and facilities and insurance expenses.

     The increases in sales, marketing and administrative expenses principally result from growth in our revenue and the overall growth in the Company, including expenses that fluctuate with sales and expenses associated with investments in our infrastructure and headcount growth. Increases in costs based on revenue, such as sales force compensation and shipping costs, were $ 5.4 million, and $7.7 million, for the three- and six- month periods ended June 30, 2008, respectively, compared to the same periods in 2007. Increases in costs based on overall company growth and administrative support, such as compensation and other shareowner (employee) related costs, were $3.1 million and $7.7 million, respectively, for the three- and six-month periods ended June 30, 2008, compared to the same periods in 2007. We also incurred an increase in equipment and facility costs of $1.5 million and $2.2 million, respectively, for the three- and six-month period ended June 30, 2008, compared to the same period in 2007, also a result of company growth and the relocation to our new facility.

     Total costs related to our sales force, as a percent of revenue, decreased to 32.2% from 33.5% for the three months ended June 30, 2008 compared to the same period in 2007. The decrease in costs as a percentage of revenue were primarily attributable to the increased revenues and to certain costs associated with our transition to sales force exclusivity that were incurred in the 2007 period but not incurred in the 2008 period.

     In the second quarter of 2006, we completed our efforts to transition our sales force to one that is exclusive to us in the field of spine products. Our exclusive sales force consists of independent sales agents and directly-employed sales personnel. On a long-term basis, as a percentage of revenue, we expect sales, marketing and administrative costs to continue to decrease over time as we continue to see the synergies of investments we have made (such as our sales force exclusivity transition). However, we have other significant expenses planned that are designed to increase the scalability of our business. For example, we purchased and began the implementation of a new enterprise resource planning, or ERP, software system, in 2007. We will capitalize the majority of the aggregate $8.6 million anticipated cost of the ERP project and amortize it over a 7-year period. In addition, we entered into a lease of a two-building campus-style headquarters complex in November 2007 to accommodate our Company’s growth. Relocation to the new facility began in March 2008 and is expected to be completed in the third quarter of 2008, and, as a result, we will incur increased facility costs beginning on the relocation dates. Specifically, we expect to incur approximately $1.9 million in incremental facility costs in 2008 plus an amount related to our former headquarters, as discussed below. See Note 11 to the unaudited condensed consolidated financial statements included in this filing for additional information regarding this lease and the expected additional costs related thereto.

     Subsequent to completion of our relocation to the new facility, we expect to sublease the current 62,000 square foot facility through August 2012, the date on which the related lease agreement expires. Upon moving the final phase of shareowners (employees) and operations from our current facility to our new headquarters during the third quarter of 2008, we expect to record a loss equal to the estimated excess of the remaining lease expense less the expected sublease income. As a result, we expect to record a one-time loss in the third quarter of 2008 in the range of $2.0 million to $3.0 million. As of the date of this filing, we have not yet entered into a sublease agreement and cannot be assured that a sublease, if any, will provide the anticipated sublease income used to calculate the above range.

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     Research and Development.

	June 30,
(dollars in thousands)	2008			2007			$ Change		% Change
Three months ended	$	6,426		$	5,418		$	1,008		18.6	%
% of revenue		11.2	%		15.2	%
Six months ended	$	13,402		$	10,762		$	2,640		24.5	%
% of revenue		12.3	%		15.6	%

     Research and development expense consists primarily of product research and development, clinical trial costs, regulatory and clinical functions, and employee (shareowner)-related expenses.

     The increase in research and development costs in the periods presented are primarily due to increases in compensation and other shareowner related expenses of $0.8 million and $1.6 million for the three- and six-month periods ended June 30, 2008, respectively, compared to the same periods in 2007, primarily due to increased headcount to support our product development and enhancement efforts. We expect research and development costs to continue to increase in absolute dollars for the foreseeable future in support of our ongoing development activities and planned clinical trial activities; however, as a percentage of revenue these costs are expected to decrease in the near term and then stabilize over time.

     In-Process Research and Development.

     The Company completed a buy-out of royalty obligations on SpheRx^® pedicle screw and related technology products and acquired new pedicle screw intellectual property for an aggregate purchase price of $6.3 million in March 2008. The total purchase price was allocated as $2.1 million to intangible assets to be amortized on a straight-line basis over a seven-year period and $4.2 million to in-process research and development as the associated projects had not yet reached technological feasibility. No acquisitions resulting in similar charges occurred during the three- and six- months ended June 30, 2007.

Interest and Other Income, Net

	June 30,
(dollars in thousands)	2008			2007			$ Change			% Change
Three months ended	$	184		$	1,628		$	(1,444	)		(88.7	%)
% of revenue		0.3	%		4.6	%
Six months ended	$	910		$	3,487		$	(2,577	)		(73.9	%)
% of revenue		0.8	%		5.1	%

     Interest and other income, net, consists primarily of interest income earned on marketable securities offset by interest expense incurred related to the Company’s convertible debt offering signed in March 2008. For the six months ended June 30, 2007, this category also includes, other income of $0.4 million related to our relinquishment of a right of first refusal to certain technology associated with the 2005 acquisition of RSB Spine LLC and other income of $0.3 million for an insurance claim settlement. Excluding these items, interest and other income, net, decreased in the periods presented due to (i) $1.7 million and $2.1 million in interest expense for the three- and six-month periods ended June 30, 2008, respectively, related to the convertible debt offering, and (ii) higher balances in marketable securities offset by lower interest rates resulting in an increase of $0.4 million and $0.1 million for the three- and six-month periods ended June 30, 2008, respectively.

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Stock-Based Compensation

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(in thousands)	2008		2007		2008		2007
Sales, marketing and administrative expense	$	4,538	$	2,894	$	9,042	$	5,522
Research and development expense		610		575		1,256		1,091
Total stock-based compensation expense	$	5,148	$	3,469	$	10,298	$	6,613

     We granted approximately 1.6 million and 1.2 million options in the first six months of 2008 and 2007, respectively, with a per option grant date weighted average fair value of $14.22 and $10.26, respectively. We recognize stock-based compensation expense on a accelerated basis in accordance with FIN 28, which effectively results in the recognition of approximately 60% of the total compensation expense for a particular option within 12 months of its grant date. The increases in stock-based compensation expense in the three- and six-month periods ended June 30, 2008 compared to the same periods in 2007 are due primarily to additional options granted in the 2008 periods and the increased weighted average fair value per option in 2008, in addition to increased participation in our Employee Stock Purchase Plan.

Osteocel^® Acquisition

     On July 24, 2008, we completed the acquisition of the Osteocel^® biologics business from Osiris Therapeutics, Inc. (Osiris) for a closing payment of $35 million. In accordance with the asset purchase agreement that was entered into during March 2008, we will pay Osiris upon the completion of production based milestones, based on specified amounts of product delivered to NuVasive, up to $37.5 million. In addition, in accordance with the asset purchase agreement and a manufacturing agreement entered into upon the close of the acquisition, we will acquire a manufacturing facility for $12.5 million, payable in cash or a combination of cash and stock, at our election, in January 2010. At no time will the purchase price of the Osteocel biologics business exceed $85 million. We are currently in the process of completing our purchase price allocation related to this acquisition. The total purchase price will be allocated to intangible assets, tangible assets acquired, and in-process research and development (IPRD), with the excess purchase price allocated to goodwill. We estimate that we will record a charge to IPRD of approximately $15 to $20 million, as the associated purchased projects have not yet reached technological feasibility.

Liquidity and Capital Resources

     Since our inception in 1997, we have incurred significant losses and as of June 30, 2008, we had an accumulated deficit of approximately $176.1 million. We have not yet achieved profitability, and do not expect to be profitable in 2008 after considering the in-process research and development charge. We expect our sales, marketing and administrative expense and research and development expense will continue to grow and, as a result, we will need to generate significant net sales to achieve profitability. To date, our operations have been funded primarily with proceeds from the sale of our equity securities.

     In March 2008, we issued $230.0 million principal amount of 2.25% Convertible Senior Notes due 2013 (the Notes). The net proceeds from the offering, after deducting the initial purchasers’ discount and costs directly related to the offering, were approximately $208.4 million. We will pay 2.25% interest per annum on the principal amount of the Notes, payable semi-annually in arrears in cash on March 15 and September 15 of each year. The Notes mature on March 15, 2013.

     Cash, cash equivalents and short-term and long-term marketable securities, was $265.7 million at June 30, 2008 and $89.7 million at December 31, 2007. The increase was due primarily to the net proceeds from our convertible debt financing transaction in March of 2008.

     Net cash used in operating activities was $6.1 million in the first half of 2008 and 2007. We spent an incremental $5.9 million for inventory and headcount to support our increased operations and growing business during the first half of 2008 as compared to the same period in 2007, offset by improved operating results for the quarter.

     Net cash used by investing activities was $133.1 million in the first half of 2008 compared to $6.0 million provided by investing activities in the same period in 2007. The increase in net cash used by investing activities of

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$139.1 million is primarily due to the net change of $123.2 million in the cash used by the activity in our investment portfolio and to a $17.2 million increase in capital asset purchases. Included in the $17.2 million increase of capital expenditures over the prior year, is approximately $3.5 million and $6.6 million of expenditures related to the new facility and for the implementation of our new ERP system, respectively.

     Net cash provided by financing activities was $213.5 million in the first half of 2008 compared to $2.9 million in the same period in 2007. The change in net cash provided by financing activities of $210.6 million is primarily due to the receipt of net proceeds of $208.4 million from the issuance of convertible debt in March 2008.

     We expect that cash provided by operating activities may fluctuate in future periods as a result of a number of factors, including fluctuations in our working capital requirements and of our capital expenditures for additional loaner assets, our operating results, and cash used in any future acquisitions. In addition, we expect to incur additional capital expenditures for leasehold improvements for the new headquarters facility. We have sufficient cash and investments on hand to finance our operations for the foreseeable future.

Commitments

     On November 6, 2007, the Company entered into a 15-year lease agreement for the purpose of relocating our corporate headquarters to an approximately 140,000 square foot two-building campus style complex. Rental payments consist of base rent of $2.43 per square foot, escalating at an annual rate of three percent over the 15-year period of the lease, plus related operating expenses. Relocation to the new facility began in the first quarter of 2008 and is expected to continue through the third quarter of 2008. In addition, through options to acquire additional space in the project and to require the construction of an additional building on the campus, the agreement provides for facility expansion rights to an aggregate of more than 300,000 leased square feet. Under the terms of this lease, NuVasive is required to make minimum lease payments, including operating expenses as follows:

Year	(in thousands)
2008	$	1,080
2009		5,151
2010		5,801
2011		6,003
2012		6,214
2013 and thereafter		82,339
	$	106,588

     In connection with the lease, the Company issued a $3.1 million irrevocable transferrable letter of credit. Subsequent to the relocation dates, the Company expects to sublease the current facility through August 2012, the date on which the related lease agreement expires.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

     Our exposure to interest rate risk at June 30, 2008 is related to our investment portfolio which consists largely of debt instruments of high quality corporate issuers and the U.S. government and its agencies. Due to the short-term nature of these investments, we have assessed that there is no material exposure to interest rate risk arising from our investments. Fixed rate investments and borrowings may have their fair market value adversely impacted from changes in interest rates. At June 30, 2008, we did not hold any material asset-backed investment securities and in 2007 and 2008, we did not realize any losses related to asset-backed investment securities.

     Foreign Currency Exchange Risk. We have operated mainly in the United States of America, and the majority of our sales since inception have been made in U.S. dollars. Further, the majority of our sales to international markets have been to independent distributors in transactions conducted in U.S. dollars. Accordingly, we have not had any material exposure to foreign currency rate fluctuations.

     Interest Rate Risk. Our exposure to market risk for changes in interest rates relates primarily to our investment portfolio. The fair market value of fixed rate securities may be adversely impacted by fluctuations in interest rates while income earned on floating rate securities may decline as a result of decreases in interest rates. Under our current policies, we do not use interest rate derivative instruments to manage exposure to interest rate changes. We

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attempt to ensure the safety and preservation of our invested principal funds by limiting default risk, market risk and reinvestment risk. We mitigate default risk by investing in investment grade securities. We have historically maintained a relatively short average maturity for our investment portfolio, and we believe a hypothetical 100 basis point adverse move in interest rates along the entire interest rate yield curve would not materially affect the fair value of our interest sensitive financial instruments.

Item 4. Controls and Procedures.

     Disclosure Controls and Procedures. We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended (Exchange Act), is recorded, processed, summarized and reported within the timelines specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objectives, and in reaching a reasonable level of assurance, management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

     Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we carried out an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Exchange Act Rules 13a — 15(e) and 15d — 15(e)) as of June 30, 2008. Based on such evaluation, our management has concluded as of June 30, 2008, the Company’s disclosure controls and procedures are effective.

     Changes in Internal Control over Financial Reporting.

     We are involved in ongoing evaluations of internal controls. In anticipation of the filing of this Form 10-Q, our Chief Executive Officer and Chief Financial Officer, with the assistance of other members of our management, reviewed our internal controls and have determined, based on such review, that there have been no changes in internal control over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

     As previously reported, we have been involved in a series of related lawsuits involving families of decedents who donated their bodies through UCLA’s willed body program. We had been dismissed from these lawsuits by the trial court but the decision was appealed. In July 2008, the appellate court reversed the trial court’s decision to dismiss us from these lawsuits. We are currently deciding whether to appeal the decision of the appellate court. The complaint alleges that the head of UCLA’s willed body program, Henry G. Reid, and a third party, Ernest V. Nelson, improperly sold some of the donated cadavers to the defendants (including NuVasive). Plaintiffs only cause of action against NuVasive is for negligence.

     Although the outcome of this lawsuit cannot be determined with certainty, we believe that we acted within the relevant law in procuring the cadavers for our clinical research and intend to vigorously defend ourselves against the claims contained in the complaint.

Item 1A. Risk Factors

     An investment in our common stock involves a high degree of risk. You should consider carefully the risks and uncertainties described under Item 1A of Part I of our Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2007, together with all other information contained or incorporated by reference in this report before you decide to invest in our common stock. If any of the risks described in this report or in our annual report actually occurs, our business, financial condition, results of

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operations and our future growth prospects could be materially and adversely affected. Under these circumstances, the trading price of our common stock could decline, and you may lose all or part of your investment.

If our acquisitions are unsuccessful, our business may be harmed.

     As part of our business strategy, we have acquired companies, technologies and product lines to maintain our objectives of developing or acquiring innovative technologies. Acquisitions involve numerous risks, including the following:

• The possibility that we will pay more than the value we derive from the acquisition, which could result in future non-cash impairment charges;

• Difficulties in integration of the operations, technologies, and products of the acquired companies, which may require significant attention of our management that otherwise would be available for the ongoing development of our business;

• The assumption of certain known and unknown liabilities of the acquired companies; and

• Difficulties in retaining key relationships with employees, customers, partners and suppliers of the acquired company.

     Any of these factors could have a negative impact on our business, results of operations or financing position. Specifically, our recent Osteocel acquisition is the largest acquisition we have ever completed, with a potential total acquisition price of $85 million. If we failed to properly value that business, or fail to generate expected revenues or profits from operation of that business, our results of operations will suffer.

     Further, past and potential acquisitions entail risks, uncertainties and potential disruptions to our business, especially where we have little experience as a company developing or marketing a particular product or technology (as is the case with the Osteocel biologic product). For example, we may not be able to successfully integrate an acquired company’s operations, technologies, products and services, information systems and personnel into our business, which will be required if we assume ownership of the Osteocel processing facility. Acquisitions may also further strain our existing financial and managerial controls, and divert management’s attention away from our other business concerns.

Our recent acquisition of the Osteocel business from Osiris Therapeutics may prove difficult to successfully integrate and could negatively impact our business.

     We recently acquired the Osteocel biologics business from Osiris Therapeutics, Inc. As part of this acquisition, we inherited the right and obligation to continue supplying the Osteocel product to the existing primary distributor of Osteocel, Orthofix N.V. Orthofix has an obligation to purchase a pre-determined amount of Osteocel from us, and our revenue projections for 2008 are largely dependent on these purchases. We do not have a history of dealing with Orthofix, and any failure of Orthofix to meet their contractual obligations will negatively impact our results of operations.

     In addition, as part of the acquisition, Osiris will continue to act as our exclusive supplier of Osteocel for a period of 18 months. In that capacity, we will be highly dependent on Osiris for supply of Osteocel and any failure on their part to process and supply such product will negatively impact our ability to meet our obligations to existing distributors and to build inventory for future launch of our own sales.

     The Osteocel product is processed from allograft, which is donated human tissue. Allograft is a supply-constrained material and there is ongoing risk that there will be insufficient supply to produce the necessary quantity of Osteocel. Allograft also carries with it the possibility of disease transmission, which could result in negative patient outcomes and negative publicity for our company.

     Lastly, Orthofix unsuccessfully attempted to stop our acquisition of Osteocel by seeking a temporary restraining order to delay the acquisition. Although this attempt failed, it is possible that Orthofix will take further legal action to disrupt the acquisition or integration of the product, and may specifically assert that it has rights to Osteocel beyond 2008. If Orthofix attempts to assert any of these claims, such claims could result in fees related to litigation, settlement or judgment, which fees could negatively impact our results of operations.

21

Item 4. Submission of Matters to a Vote of Security Holders

          Our Annual Meeting of Stockholders was held on May 22, 2008. Our stockholders acted upon the following two proposals at the meeting:

1. To elect two Class I directors to hold office until the 2011 Annual Meeting of Stockholders and until their successors are elected and qualified.

2. To ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2008.

          With respect to the first proposal, our stockholders voted and approved the election of two Class I directors to hold office until the 2011 Annual Meeting of Stockholders or until their earlier resignation or removal. The directors elected and the votes cast were as follows:

Names of Directors Elected	Number of Shares:	For		Withheld
Robert J. Hunt:			31,726,310		1,200,147
Hansen A Yuan:			31,724,376		1,202,081

     The following are the other members of our board of directors whose terms continued after the meeting: Alexis Lukianov; Jack R. Blair; Peter C. Farrell; Lesley H. Howe; and Eileen M. More.

     At the Annual Meeting, our stockholders also voted upon and ratified the Audit Committee’s selection of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2008, by the following vote:

Number of Shares Voted

For	Against	Abstain	Broker Non-Votes
32,889,963	25,714	10,780	0

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Item 5. Other Information.

Compensatory Arrangements with Certain Officers

     On August 5, 2008, the Company entered into compensatory letter agreements (Compensatory Letter Agreements) with its named executive officers (as defined in Item 402(a)(3) of Regulation S-K). Each agreement with the applicable named executive officer supersedes all prior agreements with such named executive officer relating to compensation.

     The base salaries and the target bonuses for the named executive officers, as set forth in the Compensatory Letter Agreements, are consistent with the base salaries and target bonuses disclosed in the Company’s 8-K dated January 4, 2008 and the Company’s 8-K dated February 26, 2008, respectively.

     The Compensatory Letter Agreements also set forth the severance benefits for each of the named executive officers when involuntarily terminated by the Company. The terms of the severance benefits are summarized as follows:

	Involuntary Termination Prior to Change
	of Control or 12 Months or More After	Involuntary Termination within
Position	Change of Control	12 Months of a Change of Control
Alexis V. Lukianov	200% of Compensation	200% of Compensation
CEO
Keith C. Valentine	100% of Compensation	150% of Compensation
President & Chief Operating Officer
Kevin C. O’Boyle	100% of Compensation	150% of Compensation
Executive Vice President & CFO
Patrick Miles	100% of Compensation	150% of Compensation
Executive Vice President, Marketing & Product Development
Jeffrey P. Rydin	100% of Compensation	100% of Compensation
Senior Vice President, U.S. Sales

     The terms “Change of Control”, “Compensation”, and “Involuntary Termination” are defined in the respective Compensatory Letter Agreements. Additionally, upon a Change of Control, the outstanding options for each named executive officer will have accelerated vesting schedules as set forth in the respective Compensatory Letter Agreement. Copies of the Compensatory Letter Agreements are furnished as Exhibits 10.1, 10,2, 10.3, 10.4 and 10.5 and are hereby incorporated herein by reference.

23

Item 6. Exhibits

EXHIBIT INDEX

Exhibit No	Description
2.1	Asset Purchase Agreement, dated May 8, 2008, by and between the Company and Osiris Therapeutics, Inc.
3.1 (1)	Restated Certificate of Incorporation
3.2 (1)	Restated Bylaws
10.1#	Compensation Letter Agreement, dated August 5, 2008, by and between the Company and Alexis V. Lukianov
10.2#	Compensation Letter Agreement, dated August 5, 2008, by and between the Company and Keith C. Valentine
10.3#	Compensation Letter Agreement, dated August 5, 2008, by and between the Company and Kevin C. O’Boyle
10.4#	Compensation Letter Agreement, dated August 5, 2008, by and between the Company and Patrick Miles
10.5#	Compensation Letter Agreement, dated August 5, 2008, by and between the Company and Jeffrey P. Rydin
10.6	Form of Voting Agreement, dated May 8, 2008, by and among each of Peter Friedli, Venturetec, Inc., U.S. Venture 05, Inc., Joyce, Ltd. and C Randal Mills, Ph.D, and the Company
10.7+	Manufacturing Agreement, dated July 24, 2008 by and between the Company and Osiris Therapeutics, Inc.
31.1	Certification of Chief Executive Officer pursuant to Rules 13a-14 and 15d-14 promulgated under the Securities Exchange Act of 1934
31.2	Certification of Chief Financial Officer pursuant to Rules 13a-14 and 15d-14 promulgated under the Securities Exchange Act of 1934
32 *	Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(1)	Incorporated by reference to our Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 13, 2004.
#	Indicates management contract or compensatory plan.
+	Confidential portions omitted and filed separately with the U.S. Securities and Exchange Commission pursuant to Rule 24b-2 promulgated under the Securities Exchange Act of 1934, as amended.
*	These certifications are being furnished solely to accompany this quarterly report pursuant to 18 U.S.C. Section 1350, and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934 and are not to be incorporated by reference into any filing of NuVasive, Inc., whether made before or after the date hereof, regardless of any general incorporation language in such filing.

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SIGNATURES

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

NuVasive, Inc.
Date: August 8, 2008
	By: /s/ Alexis V. Lukianov
	Alexis V. Lukianov Chairman and Chief Executive Officer
Date: August 8, 2008
	By: /s/ Kevin C. O’Boyle
	Kevin C. O’Boyle Executive Vice President and Chief Financial Officer

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EXHIBIT INDEX

Exhibit No	Description
2.1	Asset Purchase Agreement, dated May 8, 2008, by and between the Company and Osiris Therapeutics, Inc.
3.1 (1)	Restated Certificate of Incorporation
3.2 (1)	Restated Bylaws
10.1#	Compensation Letter Agreement, dated August 5, 2008, by and between the Company and Alexis V. Lukianov
10.2#	Compensation Letter Agreement, dated August 5, 2008, by and between the Company and Keith C. Valentine
10.3#	Compensation Letter Agreement, dated August 5, 2008, by and between the Company and Kevin C. O’Boyle
10.4#	Compensation Letter Agreement, dated August 5, 2008, by and between the Company and Patrick Miles
10.5#	Compensation Letter Agreement, dated August 5, 2008, by and between the Company and Jeffrey P. Rydin
10.6	Form of Voting Agreement dated as of May 8, 2008 by and among each of Peter Friedli, Venturetec, Inc., U.S. Venture 05, Inc., Joyce, Ltd. and C Randal Mills, Ph.D, and the Company
10.7+	Manufacturing Agreement, dated July 24, 2008 by and between the Company and Osiris Therapeutics, Inc.
31.1	Certification of Chief Executive Officer pursuant to Rules 13a-14 and 15d-14 promulgated under the Securities Exchange Act of 1934
31.2	Certification of Chief Financial Officer pursuant to Rules 13a-14 and 15d-14 promulgated under the Securities Exchange Act of 1934
32 *	Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(1)	Incorporated by reference to our Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 13, 2004.
#	Indicates management contract or compensatory plan.
+	Confidential portions omitted and filed separately with the U.S. Securities and Exchange Commission pursuant to Rule 24b-2 promulgated under the Securities Exchange Act of 1934, as amended.
*	These certifications are being furnished solely to accompany this quarterly report pursuant to 18 U.S.C. Section 1350, and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934 and are not to be incorporated by reference into any filing of NuVasive, Inc., whether made before or after the date hereof, regardless of any general incorporation language in such filing.

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EX-2.1

Exhibit 2.1

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

		Page
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

		Page
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,

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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

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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.

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     (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

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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

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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

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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

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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

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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.

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     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.

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     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.

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     (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

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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

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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

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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

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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.

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     (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;

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     (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

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     (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

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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,

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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);

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     (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

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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. (a) 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

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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).

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     (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.

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     (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

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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

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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.

     Section 4.12 Right of First Negotiation; Purchase Option.

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     (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.

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     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.

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     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

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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

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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;

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     (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;

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     (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

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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

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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

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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;

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     (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

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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

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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.

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     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

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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.

     Index of Other Defined Terms:

53

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

Defined Terms	Section Reference
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

Defined Terms	Section Reference
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

Defined Terms	Section Reference
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

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Defined Terms	Section Reference
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]

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     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:	/s/ Charles Randal Mills
	Name:	Charles Randal Mills
	Title:	President & CEO

PURCHASER:

NuVasive, Inc.
By:	/s/ Alexis Lukianov
	Name:	Alexis Lukianov
	Title:	Chief Executive Officer

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EX-10.1

Exhibit 10.1

August 5, 2008

Dear Mr. Lukianov,

     This letter agreement confirms the material compensation terms of your continued employment with NuVasive. This letter agreement supersedes all prior agreements relating to your compensation arrangements and is in addition to any and all benefits that are made generally available to NuVasive employees. It is also in addition to benefits available to you as an executive of NuVasive. Defined terms used herein have the meanings set forth in the attached Appendix of Defined Terms.

     This letter agreement has no impact on other types of agreements or arrangements between you and NuVasive, including agreements related to confidentiality, intellectual property ownership, non-solicitation or non-competition obligations, etc. You agree to continue abiding by all such arrangements, as well as all NuVasive policies and procedures.

     Your current annual base salary is $600,000, payable in installments in accordance with NuVasive’s regular payroll practices. Your base salary is subject to change and is reviewed at least annually. You are eligible to receive a performance bonus on an annual basis. The performance bonus is determined at the discretion of the Board of Directors and is based on a combination of company performance and your individual performance. Your current target annual cash bonus is 75% — 100% of your base salary (with ability to over-perform), with the actual amount being determined at the discretion of the Board of Directors. Additionally, the Board of Directors has established an unvested stock option target for you of 1,000,000 shares (combined with vested and owned shares, representing approximately 4% of the Company’s equity), and to reach that target has established an intention to grant you an additional 400,000 stock options in early 2009, subject to individual and company performance and at the Board’s discretion.

     You also have certain severance benefits related to a termination of your employment or a Change of Control of NuVasive. In the event of any termination of your employment, you shall be entitled to the Severance Benefit. In the event of a Change of Control of NuVasive, you shall be entitled to the Change of Control Benefit. In addition, the Section 409A Terms shall be applicable to the Severance Benefit.

     We look forward to your continued success with NuVasive.

Truly Yours,

NUVASIVE, INC.

/s/ Eileen M. More

Eileen M. More

Page 2 – Compensation Letter

I have read and accept the terms of this letter.

/s/ Alexis V. Lukianov 

     Alexis V. Lukianov

Defined Terms:

“Change of Control Benefit” is defined as follows: Company Acceleration Plan applies with respect to 50% of unvested stock options vesting immediately upon a Change of Control, and the remaining unvested stock options vest in 12 equal monthly installments following the Change of Control; provided that all unvested stock options shall immediately vest upon an Involuntary Termination following the Change of Control.

“Severance Benefit” upon any termination of your employment (whether voluntary or involuntary) at any time, severance is equal to 200% of Compensation. Such amount shall be due and payable immediately upon any such termination and upon the condition that you execute NuVasive’s standard form of release of claims.

“Change of Control” is defined as either a Change in Control or Fundamental Transaction as defined in the 2004 Equity Incentive Plan.

“Company Acceleration Plan” is defined as the Company’s policy pursuant to which 50% of all unvested options under any of the Company’s equity compensation plans (including the 1998 Stock Option/Stock Issuance Plan and 2004 Equity Incentive Plan) immediately accelerate upon a Change of Control of the Company, and all remaining stock options immediately accelerate upon an involuntary termination (except for death, disability or cause) of service within 18 months following such an event.

“Compensation” is defined as annual salary and bonus most recently paid (even if not in prior year).

“Section 409A Terms” – the following terms shall be applicable to the Severance Benefit: Notwithstanding anything in this Agreement to the contrary, no Severance Benefit payable pursuant to this Agreement which constitutes a “deferral of compensation” within the meaning of the Treasury Regulations issued pursuant to Section 409A of the Code (the “Section 409A Regulations”) shall be paid until Executive has incurred a “separation from service” within the meaning of the Section 409A Regulations. Furthermore, to the extent that Executive is a “specified employee” within the meaning of the Section 409A Regulations no Severance Benefit that constitutes a deferral of compensation shall paid to Executive before the date (the “Delayed Payment Date”) which is first day of the seventh month after the date of Executive’s separation from service or, if earlier, the date of Executive’s death following such separation from service. All such amounts that would, but for these defined terms, become payable prior to the Delayed Payment Date will be accumulated and paid on the Delayed Payment Date. The Company intends that the Severance Benefit will not be subject to taxation under Section 409A of the Code. The provisions of this Letter Agreement shall be interpreted and construed in favor of satisfying any applicable requirements of Section 409A of the Code. However, the Company does not guarantee any particular tax effect for income provided to Executive pursuant to this Agreement. In any event, except for the Company’s responsibility to withhold applicable income and employment taxes from compensation paid or provided to Executive, the Company shall not be responsible for the payment of any applicable taxes on compensation paid or provided to Executive pursuant to this Agreement.

EX-10.2

Exhibit 10.2

August 5, 2008

Dear Mr. Valentine,

     This letter agreement confirms the material compensation terms of your continued employment with NuVasive. This letter agreement supersedes all prior agreements relating to your compensation arrangements and is in addition to any and all benefits that are made generally available to NuVasive employees. It is also in addition to benefits available to you as an executive of NuVasive. Defined terms used herein have the meanings set forth in the attached Appendix of Defined Terms.

     This letter agreement has no impact on other types of agreements or arrangements between you and NuVasive, including agreements related to confidentiality, intellectual property ownership, non-solicitation or non-competition obligations, etc. You agree to continue abiding by all such arrangements, as well as all NuVasive policies and procedures.

     Your current annual base salary is $400,000, payable in installments in accordance with NuVasive’s regular payroll practices. Your base salary is subject to change and is reviewed at least annually. You are eligible to receive a performance bonus on an annual basis. The performance bonus is determined at the discretion of the Board of Directors and is based on a combination of company performance and your individual performance. Your current target annual cash bonus is 75% — 100% of your base salary (with ability to over-perform), with the actual amount being determined at the discretion of the Board of Directors. Additionally, the Board of Directors has established an unvested stock option target for you of 500,000 shares, and to reach that target has established an intention to grant you an additional 400,000 stock options in early 2009, subject to individual and company performance and at the Board’s discretion.

     You also have certain severance benefits related to an Involuntary Termination of your employment or a Change of Control of NuVasive. In the event of an Involuntary Termination of your employment, you shall be entitled to the Severance Benefit. In the event of a Change of Control of NuVasive, you shall be entitled to the Change of Control Benefit. In addition, the Section 409A Terms shall be applicable to the Severance Benefit.

     We look forward to your continued success with NuVasive.

Truly Yours,
NUVASIVE, INC.
/s/ Alexis V. Lukianov	/s/ Eileen M. More
Alexis V. Lukianov	Eileen M. More

Page 2 – Compensation Letter

I have read and accept the terms of this letter.

/s/ Keith C. Valentine 

     Keith C. Valentine

Defined Terms:

“Change of Control Benefit” is defined as follows: Company Acceleration Plan applies with respect to 50% of unvested stock options vesting immediately upon a Change of Control, and the remaining unvested stock options vest in 12 equal monthly installments following the Change of Control; provided that all unvested stock options shall immediately vest upon an Involuntary Termination following the Change of Control.

“Severance Benefit” is equal to the following: (1) upon an Involuntary Termination prior to a Change of Control, Severance Benefit is equal to 100% of Compensation; (2) upon an Involuntary Termination within 12 months following a Change of Control, Severance Benefit is equal to 150% of Compensation; or (3) upon an Involuntary Termination more than 12 months following a Change of Control, Severance Benefit is equal to 100% of Compensation. Such amount shall be due and payable immediately upon any such Involuntary Termination and upon the condition that you execute NuVasive’s standard form of release of claims.

“Change of Control” is defined as either a Change in Control or Fundamental Transaction as defined in the 2004 Equity Incentive Plan.

“Company Acceleration Plan” is defined as the Company’s policy pursuant to which 50% of all unvested options under any of the Company’s equity compensation plans (including the 1998 Stock Option/Stock Issuance Plan and 2004 Equity Incentive Plan) immediately accelerate upon a Change of Control of the Company, and all remaining stock options immediately accelerate upon an involuntary termination (except for death, disability or Cause) of service within 18 months following such an event.

“Compensation” is defined as annual salary and bonus most recently paid (even if not in prior year).

“Involuntary Termination” is defined as an involuntary Termination (as defined in the 2004 Equity Incentive Plan) for reasons other than death, disability or Cause. “Cause” is defined as any of the following: (i) the Executive’s repeated failure to satisfactorily perform the Executive’s job duties; (ii) the Executive’s refusal or failure to follow lawful directions of the Board; (iii) the Executive’s conviction of a crime involving moral turpitude; (iv) the Executive engaging or in any manner participating in any activity which is directly competitive with or injurious to the Company. The term Involuntary Termination shall include a voluntary resignation by the Executive following any of the following (each a “Voluntary Resignation”): a significant reduction of the Executive’s job responsibilities or title, a requirement (refused by the Executive) that the Executive move for his/her principal place of employment more than 50 miles from the then-current principal place of employment, or a reduction of greater than 15% in the Executive’s base pay or bonus opportunity (where not all Executives are similarly affected).

“Section 409A Terms” – the following terms shall be applicable to the Severance Benefit: Notwithstanding anything in this Agreement to the contrary, no Severance Benefit payable pursuant to

this Agreement which constitutes a “deferral of compensation” within the meaning of the Treasury Regulations issued pursuant to Section 409A of the Code (the “Section 409A Regulations”) shall be paid until Executive has incurred a “separation from service” within the meaning of the Section 409A Regulations. Furthermore, to the extent that Executive is a “specified employee” within the meaning of the Section 409A Regulations no Severance Benefit that constitutes a deferral of compensation shall paid to Executive before the date (the “Delayed Payment Date”) which is first day of the seventh month after the date of Executive’s separation from service or, if earlier, the date of Executive’s death following such separation from service. All such amounts that would, but for these defined terms, become payable prior to the Delayed Payment Date will be accumulated and paid on the Delayed Payment Date. The Company intends that the Severance Benefit will not be subject to taxation under Section 409A of the Code. The provisions of this Letter Agreement shall be interpreted and construed in favor of satisfying any applicable requirements of Section 409A of the Code. However, the Company does not guarantee any particular tax effect for income provided to Executive pursuant to this Agreement. In any event, except for the Company’s responsibility to withhold applicable income and employment taxes from compensation paid or provided to Executive, the Company shall not be responsible for the payment of any applicable taxes on compensation paid or provided to Executive pursuant to this Agreement.

EX-10.3

Exhibit 10.3

August 5, 2008

Dear Mr. O’Boyle,

     This letter agreement confirms the material compensation terms of your continued employment with NuVasive. This letter agreement supersedes all prior agreements relating to your compensation arrangements and is in addition to any and all benefits that are made generally available to NuVasive employees. It is also in addition to benefits available to you as an executive of NuVasive. Defined terms used herein have the meanings set forth in the attached Appendix of Defined Terms.

     This letter agreement has no impact on other types of agreements or arrangements between you and NuVasive, including agreements related to confidentiality, intellectual property ownership, non-solicitation or non-competition obligations, etc. You agree to continue abiding by all such arrangements, as well as all NuVasive policies and procedures.

     Your current annual base salary is $315,000, payable in installments in accordance with NuVasive’s regular payroll practices. Your base salary is subject to change and is reviewed at least annually. You are eligible to receive a performance bonus on an annual basis. The performance bonus is determined at the discretion of the Board of Directors and is based on a combination of company performance and your individual performance. Your current target annual bonus is 50% — 75% of your base salary (with ability to over-perform), with the actual amount being determined at the discretion of the Board of Directors. Additionally, the Board of Directors has established an unvested stock option target for you of 275,000 shares, and to reach that target has established an intention to grant you an additional 90,000 stock options in early 2009, subject to individual and company performance and at the Board’s discretion.

     You also have certain severance benefits related to an Involuntary Termination of your employment or a Change of Control of NuVasive. In the event of an Involuntary Termination of your employment, you shall be entitled to the Severance Benefit. In the event of a Change of Control of NuVasive, you shall be entitled to the Change of Control Benefit. In addition, the Section 409A Terms shall be applicable to the Severance Benefit.

     We look forward to your continued success with NuVasive.

Truly Yours,
NUVASIVE, INC.
/s/ Alexis V. Lukianov	/s/ Eileen M. More
Alexis V. Lukianov	Eileen M. More

Page 2 – Compensation Letter

I have read and accept the terms of this letter.

/s/ Kevin O’Boyle 

     Kevin O’Boyle

Defined Terms:

“Change of Control Benefit” is defined as follows: Company Acceleration Plan applies with respect to 50% of unvested stock options vesting immediately upon a Change of Control, and the remaining unvested stock options vest in 12 equal monthly installments following the Change of Control; provided that all unvested stock options shall immediately vest upon an Involuntary Termination following the Change of Control.

“Severance Benefit” is equal to the following: (1) upon an Involuntary Termination prior to a Change of Control, Severance Benefit is equal to 100% of Compensation; (2) upon an Involuntary Termination within 12 months following a Change of Control, Severance Benefit is equal to 150% of Compensation; or (3) upon an Involuntary Termination more than 12 months following a Change of Control, Severance Benefit is equal to 100% of Compensation. Such amount shall be due and payable immediately upon any such termination and upon the condition that you execute NuVasive’s standard form of release of claims.

“Change of Control” is defined as either a Change in Control or Fundamental Transaction as defined in the 2004 Equity Incentive Plan.

“Company Acceleration Plan” is defined as the Company’s policy pursuant to which 50% of all unvested options under any of the Company’s equity compensation plans (including the 1998 Stock Option/Stock Issuance Plan and 2004 Equity Incentive Plan) immediately accelerate upon a Change of Control of the Company, and all remaining stock options immediately accelerate upon an involuntary termination (except for death, disability or Cause) of service within 18 months following such an event.

“Compensation” is defined as annual salary and bonus most recently paid (even if not in prior year).

“Involuntary Termination” is defined as an involuntary Termination (as defined in the 2004 Equity Incentive Plan) for reasons other than death, disability or Cause. “Cause” is defined as any of the following: (i) the Executive’s repeated failure to satisfactorily perform the Executive’s job duties; (ii) the Executive’s refusal or failure to follow lawful directions of the Board; (iii) the Executive’s conviction of a crime involving moral turpitude; (iv) the Executive engaging or in any manner participating in any activity which is directly competitive with or injurious to the Company. The term Involuntary Termination shall include a voluntary resignation by the Executive following any of the following (each a “Voluntary Resignation”): a significant reduction of the Executive’s job responsibilities or title, a requirement (refused by the Executive) that the Executive move for his/her principal place of employment more than 50 miles from the then-current principal place of employment, or a reduction of greater than 15% in the Executive’s base pay or bonus opportunity (where not all Executives are similarly affected).

“Section 409A Terms” – the following terms shall be applicable to the Severance Benefit: Notwithstanding anything in this Agreement to the contrary, no Severance Benefit payable pursuant to

this Agreement which constitutes a “deferral of compensation” within the meaning of the Treasury Regulations issued pursuant to Section 409A of the Code (the “Section 409A Regulations”) shall be paid until Executive has incurred a “separation from service” within the meaning of the Section 409A Regulations. Furthermore, to the extent that Executive is a “specified employee” within the meaning of the Section 409A Regulations no Severance Benefit that constitutes a deferral of compensation shall paid to Executive before the date (the “Delayed Payment Date”) which is first day of the seventh month after the date of Executive’s separation from service or, if earlier, the date of Executive’s death following such separation from service. All such amounts that would, but for these defined terms, become payable prior to the Delayed Payment Date will be accumulated and paid on the Delayed Payment Date. The Company intends that the Severance Benefit will not be subject to taxation under Section 409A of the Code. The provisions of this Letter Agreement shall be interpreted and construed in favor of satisfying any applicable requirements of Section 409A of the Code. However, the Company does not guarantee any particular tax effect for income provided to Executive pursuant to this Agreement. In any event, except for the Company’s responsibility to withhold applicable income and employment taxes from compensation paid or provided to Executive, the Company shall not be responsible for the payment of any applicable taxes on compensation paid or provided to Executive pursuant to this Agreement.

EX-10.4

Exhibit 10.4

August 5, 2008

Dear Mr. Miles,

     This letter agreement confirms the material compensation terms of your continued employment with NuVasive. This letter agreement supersedes all prior agreements relating to your compensation arrangements and is in addition to any and all benefits that are made generally available to NuVasive employees. It is also in addition to benefits available to you as an executive of NuVasive. Defined terms used herein have the meanings set forth in the attached Appendix of Defined Terms.

     This letter agreement has no impact on other types of agreements or arrangements between you and NuVasive, including agreements related to confidentiality, intellectual property ownership, non-solicitation or non-competition obligations, etc. You agree to continue abiding by all such arrangements, as well as all NuVasive policies and procedures.

     Your current annual base salary is $325,000, payable in installments in accordance with NuVasive’s regular payroll practices. Your base salary is subject to change and is reviewed at least annually. You are eligible to receive a performance bonus on an annual basis. The performance bonus is determined at the discretion of the Board of Directors and is based on a combination of company performance and your individual performance. Your current target annual bonus is 75% — 100% of your base salary (with ability to over-perform), with the actual amount being determined at the discretion of the Board of Directors. Additionally, the Board of Directors has established an unvested stock option target for you of 350,000 shares, and to reach that target has established an intention to grant you an additional 150,000 stock options in early 2009, subject to individual and company performance and at the Board’s discretion.

     You also have certain severance benefits related to an Involuntary Termination of your employment or a Change of Control of NuVasive. In the event of an Involuntary Termination of your employment, you shall be entitled to the Severance Benefit. In the event of a Change of Control of NuVasive, you shall be entitled to the Change of Control Benefit. In addition, the Section 409A Terms shall be applicable to the Severance Benefit.

     We look forward to your continued success with NuVasive.

Truly Yours,
NUVASIVE, INC.
/s/ Alexis V. Lukianov	/s/ Eileen M. More
Alexis V. Lukianov	Eileen M. More

Page 2 – Compensation Letter

I have read and accept the terms of this letter.

/s/ Patrick Miles 

     Patrick Miles

Defined Terms:

“Change of Control Benefit” is defined as follows: Company Acceleration Plan applies with respect to 50% of unvested stock options vesting immediately upon a Change of Control, and the remaining unvested stock options vest in 12 equal monthly installments following the Change of Control; provided that all unvested stock options shall immediately vest upon in Involuntary Termination following the Change of Control.

“Severance Benefit” is equal to the following: (1) upon an Involuntary Termination prior to a Change of Control, Severance Benefit is equal to 100% of Compensation; (2) upon an Involuntary Termination within 12 months following a Change of Control, Severance Benefit is equal to 150% of Compensation; or (3) upon an Involuntary Termination more than 12 months following a Change of Control, Severance Benefit is equal to 100% of Compensation. Such amount shall be due and payable immediately upon any such termination and upon the condition that you execute NuVasive’s standard form of release of claims.

“Change of Control” is defined as either a Change in Control or Fundamental Transaction as defined in the 2004 Equity Incentive Plan.

“Company Acceleration Plan” is defined as the Company’s policy pursuant to which 50% of all unvested options under any of the Company’s equity compensation plans (including the 1998 Stock Option/Stock Issuance Plan and 2004 Equity Incentive Plan) immediately accelerate upon a Change of Control of the Company, and all remaining stock options immediately accelerate upon an involuntary termination (except for death, disability or Cause) of service within 18 months following such an event.

“Compensation” is defined as annual salary and bonus most recently paid (even if not in prior year).

“Involuntary Termination” is defined as an involuntary Termination (as defined in the 2004 Equity Incentive Plan) for reasons other than death, disability or Cause. “Cause” is defined as any of the following: (i) the Executive’s repeated failure to satisfactorily perform the Executive’s job duties; (ii) the Executive’s refusal or failure to follow lawful directions of the Board; (iii) the Executive’s conviction of a crime involving moral turpitude; (iv) the Executive engaging or in any manner participating in any activity which is directly competitive with or injurious to the Company. The term Involuntary Termination shall include a voluntary resignation by the Executive following any of the following (each a “Voluntary Resignation”): a significant reduction of the Executive’s job responsibilities or title, a requirement (refused by the Executive) that the Executive move for his/her principal place of employment more than 50 miles from the then-current principal place of employment, or a reduction of greater than 15% in the Executive’s base pay or bonus opportunity (where not all Executives are similarly affected).

“Section 409A Terms” – the following terms shall be applicable to the Severance Benefit: Notwithstanding anything in this Agreement to the contrary, no Severance Benefit payable pursuant to

this Agreement which constitutes a “deferral of compensation” within the meaning of the Treasury Regulations issued pursuant to Section 409A of the Code (the “Section 409A Regulations”) shall be paid until Executive has incurred a “separation from service” within the meaning of the Section 409A Regulations. Furthermore, to the extent that Executive is a “specified employee” within the meaning of the Section 409A Regulations no Severance Benefit that constitutes a deferral of compensation shall paid to Executive before the date (the “Delayed Payment Date”) which is first day of the seventh month after the date of Executive’s separation from service or, if earlier, the date of Executive’s death following such separation from service. All such amounts that would, but for these defined terms, become payable prior to the Delayed Payment Date will be accumulated and paid on the Delayed Payment Date. The Company intends that the Severance Benefit will not be subject to taxation under Section 409A of the Code. The provisions of this Letter Agreement shall be interpreted and construed in favor of satisfying any applicable requirements of Section 409A of the Code. However, the Company does not guarantee any particular tax effect for income provided to Executive pursuant to this Agreement. In any event, except for the Company’s responsibility to withhold applicable income and employment taxes from compensation paid or provided to Executive, the Company shall not be responsible for the payment of any applicable taxes on compensation paid or provided to Executive pursuant to this Agreement.

EX-10.5

Exhibit 10.5

August 5, 2008

Dear Mr. Rydin,

     This letter agreement confirms the material compensation terms of your continued employment with NuVasive. This letter agreement supersedes all prior agreements relating to your compensation arrangements and is in addition to any and all benefits that are made generally available to NuVasive employees. It is also in addition to benefits available to you as an executive of NuVasive. Defined terms used herein have the meanings set forth in the attached Appendix of Defined Terms.

     This letter agreement has no impact on other types of agreements or arrangements between you and NuVasive, including agreements related to confidentiality, intellectual property ownership, non-solicitation or non-competition obligations, etc. You agree to continue abiding by all such arrangements, as well as all NuVasive policies and procedures.

     Your current annual base salary is $300,000, payable in installments in accordance with NuVasive’s regular payroll practices. Your base salary is subject to change and is reviewed at least annually. You are eligible to receive a performance bonus on an annual basis. The performance bonus is determined at the discretion of the Board of Directors and is based on a combination of company performance and your individual performance. Your current target annual bonus is 75% — 100% of your base salary (with ability to over-perform), with the actual amount being determined at the discretion of the Board of Directors. Additionally, the Board of Directors has established an unvested stock option target for you of 250,000 shares, and to reach that target has established an intention to grant you an additional 75,000 stock options in early 2009, subject to individual and company performance and at the Board’s discretion.

     You also have certain severance benefits related to an Involuntary Termination of your employment or a Change of Control of NuVasive. In the event of an Involuntary Termination of your employment, you shall be entitled to the Severance Benefit. In the event of a Change of Control of NuVasive, you shall be entitled to the Change of Control Benefit. In addition, the Section 409A Terms shall be applicable to the Severance Benefit.

     We look forward to your continued success with NuVasive.

Truly Yours,
NUVASIVE, INC.
/s/ Alexis V. Lukianov	/s/ Eileen M. More
Alexis V. Lukianov	Eileen M. More

Page 2 – Compensation Letter

I have read and accept the terms of this letter.

/s/ Jeffrey Rydin 

     Jeffrey Rydin

Defined Terms:

“Change of Control Benefit” is defined as follows: Company Acceleration Plan applies except that, for these purposes, an involuntary termination shall include a Voluntary Resignation.

“Severance Benefit” upon an Involuntary Termination at any time, severance is equal to 100% of Compensation. Such amount shall be due and payable immediately upon any such termination and upon the condition that you execute NuVasive’s standard form of release of claims.

“Change of Control” is defined as either a Change in Control or Fundamental Transaction as defined in the 2004 Equity Incentive Plan.

“Company Acceleration Plan” is defined as the Company’s policy pursuant to which 50% of all unvested options under any of the Company’s equity compensation plans (including the 1998 Stock Option/Stock Issuance Plan and 2004 Equity Incentive Plan) immediately accelerate upon a Change of Control of the Company, and all remaining stock options immediately accelerate upon an involuntary termination (except for death, disability or Cause) of service within 18 months following such an event.

“Compensation” is defined as annual salary and bonus most recently paid (even if not in prior year).

“Involuntary Termination” is defined as an involuntary Termination (as defined in the 2004 Equity Incentive Plan) for reasons other than death, disability or Cause. “Cause” is defined as any of the following: (i) the Executive’s repeated failure to satisfactorily perform the Executive’s job duties; (ii) the Executive’s refusal or failure to follow lawful directions of the Board; (iii) the Executive’s conviction of a crime involving moral turpitude; (iv) the Executive engaging or in any manner participating in any activity which is directly competitive with or injurious to the Company. The term Involuntary Termination shall include a voluntary resignation by the Executive following any of the following (each a “Voluntary Resignation”): a significant reduction of the Executive’s job responsibilities or title, a requirement (refused by the Executive) that the Executive move for his/her principal place of employment more than 50 miles from the then-current principal place of employment, or a reduction of greater than 15% in the Executive’s base pay or bonus opportunity (where not all Executives are similarly affected).

“Section 409A Terms” – the following terms shall be applicable to the Severance Benefit: Notwithstanding anything in this Agreement to the contrary, no Severance Benefit payable pursuant to this Agreement which constitutes a “deferral of compensation” within the meaning of the Treasury Regulations issued pursuant to Section 409A of the Code (the “Section 409A Regulations”) shall be paid until Executive has incurred a “separation from service” within the meaning of the Section 409A Regulations. Furthermore, to the extent that Executive is a “specified employee” within the meaning of the Section 409A Regulations no Severance Benefit that constitutes a deferral of compensation shall paid to Executive before the date (the “Delayed Payment Date”) which is first day of the seventh month after the date of Executive’s separation from service or, if earlier, the date of Executive’s death following

such separation from service. All such amounts that would, but for these defined terms, become payable prior to the Delayed Payment Date will be accumulated and paid on the Delayed Payment Date. The Company intends that the Severance Benefit will not be subject to taxation under Section 409A of the Code. The provisions of this Letter Agreement shall be interpreted and construed in favor of satisfying any applicable requirements of Section 409A of the Code. However, the Company does not guarantee any particular tax effect for income provided to Executive pursuant to this Agreement. In any event, except for the Company’s responsibility to withhold applicable income and employment taxes from compensation paid or provided to Executive, the Company shall not be responsible for the payment of any applicable taxes on compensation paid or provided to Executive pursuant to this Agreement.

EX-10.6

Exhibit 10.6

Company Voting and Support Agreement

          COMPANY VOTING AND SUPPORT AGREEMENT, dated as of May 8, 2008, (this “Agreement”), by and between Nuvasive, Inc. (“Nuvasive”), a Delaware corporation, and [•] (the “Stockholder”). Capitalized terms used but not defined herein shall have the meanings given to such terms in the Asset Purchase Agreement, dated as of the date hereof (the “Purchase Agreement”), by and between Nuvasive and Osiris Therapeutics, Inc. (the “Company”).

WITNESSETH:

          WHEREAS, Nuvasive and the Company are entering into the Purchase Agreement concurrently with the execution and delivery of this Agreement, which Purchase Agreement sets forth the terms and conditions on which Nuvasive will acquire certain assets of the Company (the “Acquisition”).

          WHEREAS, as of the date hereof, the Stockholder is the beneficial and record owner of [•] shares of Company Common Stock (the “Existing Shares”).

          WHEREAS, Nuvasive has required, as a material inducement to Nuvasive’s willingness to enter into the Purchase Agreement, that the Stockholder enter into this Agreement.

          NOW, THEREFORE, in consideration of the foregoing and the mutual representations, warranties, covenants and agreements contained herein, and intending to be legally bound hereby, the parties hereto hereby agree as follows:

ARTICLE I

VOTING

          1.1 Agreement to Vote. The Stockholder agrees that, from and after the date hereof and until this Agreement is terminated pursuant to Section 4.1, at the Stockholder Meeting and any other meeting of the stockholders of the Company, however called relating to any proposed action by the stockholders of the Company with respect to the matters set forth in Section 1.1(b) below (each, a “Voting Event”), the Stockholder shall:

          (a) appear at each such Voting Event or otherwise cause the Existing Shares and any voting securities of the Company acquired by the Stockholder after the date hereof and prior to the record date of such Voting Event (together with the Existing Shares, the “Voting Shares”) owned beneficially or of record by the Stockholder to be counted as present thereat for purposes of calculating a quorum; and

          (b) vote (or cause to be voted), in person or by proxy, all the Voting Shares (i) in favor of adoption of the Purchase Agreement and any other transactions and other matters specifically contemplated by the Purchase Agreement and (ii) against any action or agreement submitted for adoption of the stockholders of the Company that, to the Stockholder’s knowledge, would result in a breach of any covenant, representation or warranty or any other obligation or agreement of the Company contained in the Purchase Agreement or of the Stockholder contained in this Agreement.

          1.2 Fiduciary Duties. Each party hereto acknowledges and agrees that the Stockholder is not making any agreement or understanding herein in any capacity other than in its capacity as a stockholder of the Company. If the Stockholder or any affiliates, employees or agents of the Stockholder is an officer or member of the Board of Directors of the Company, nothing herein shall in any way limit or affect actions taken by them in such capacity, and no action taken in their capacity as such an officer or director in furtherance of their fiduciary duties as an officer or director of the Company shall be deemed to be a breach of the provisions of this Agreement.

ARTICLE II

REPRESENTATIONS AND WARRANTIES

          2.1 Representations and Warranties of the Stockholder. The Stockholder hereby represents and warrants to Nuvasive as follows:

          (a) Authorization; Validity of Agreement; Necessary Action. This Agreement has been duly and validly executed and delivered by the Stockholder and, assuming this Agreement constitutes the valid and binding agreement of Nuvasive, constitutes the valid and binding agreement of the Stockholder, enforceable against the Stockholder in accordance with its terms, subject to (i) laws of general application relating to bankruptcy, insolvency and the relief of debtors, and (ii) rules of law governing specific performance, injunctive relief and other equitable remedies.

          (b) Ownership. As of the date hereof, the number of shares of Company Common Stock beneficially owned by the Stockholder is noted in the Recitals to this Agreement. The Existing Shares are, and the Voting Shares will be, owned beneficially by the Stockholder. As of the date hereof, the Existing Shares are the only shares of Company Common Stock held of record or beneficially owned by the Stockholder. Subject to Section 3.1, the Stockholder has and will have at all times through the time of any Voting Event sole voting power, sole power of disposition, sole power to issue instructions with respect to the matters set forth in Article I or Section 3.1 hereof, and sole power to agree to all of the matters set forth in this Agreement, in each case with respect to all of the Existing Shares and with respect to all of the Voting Shares at the time of any Voting Event, with no limitations, qualifications or restrictions on such rights, subject to applicable federal securities laws and the terms of this Agreement. The Stockholder has good title to the Existing Shares, free and clear of any Liens and the Stockholder will have good title to such Voting Shares as of the time of any Voting Event, free and clear of any Liens. The Stockholder further represents that any proxies heretofore given in respect of the shares of Company Common Stock owned beneficially and of record by such Stockholder, if any, are revocable, and have been revoked.

          (c) No Violation. The execution and delivery of this Agreement by the Stockholder does not, and the performance by the Stockholder of its obligations under this Agreement will not, (i) contravene or conflict with the organizational or governing documents of the Stockholder, (ii) contravene or conflict with or constitute a violation by Stockholder of any provision of any Law binding upon or applicable to the Stockholder or any of its properties or assets, or (iii) result in any violation of, or default (with or without notice or lapse of time, or

-2-

both) under, or give rise to a right of termination, cancellation or acceleration of any material obligation or to the loss of a material benefit under any loan, guarantee of indebtedness or credit agreement, note, bond, mortgage, indenture, lease or agreement binding upon the Company or any of its subsidiaries or result in the creation of any Lien (other than Permitted Liens) upon any of the properties or assets of the Stockholder, except for any of the matters set forth in the foregoing clause (iii) as would not reasonably be expected to materially impair the ability of the Stockholder to perform its obligations hereunder or to consummate the transactions contemplated hereby on a timely basis.

          2.2 Representations and Warranties of Nuvasive. Nuvasive hereby represents and warrants to the Stockholder as follows:

          (a) Authorization; Validity of Agreement; Necessary Action. This Agreement has been duly and validly executed and delivered by Nuvasive and, assuming this Agreement constitutes the valid and binding agreement of the Stockholder, constitutes the valid and binding agreement of Nuvasive, enforceable against Nuvasive in accordance with its terms, subject to (i) laws of general application relating to bankruptcy, insolvency and the relief of debtors, and (ii) rules of law governing specific performance, injunctive relief and other equitable remedies.

          (b) No Violation. The execution and delivery of this Agreement by Nuvasive does not, and the performance by Nuvasive of its obligations under this Agreement will not, (i) contravene or conflict with the organizational or governing documents of Nuvasive, (ii) contravene or conflict with or constitute a violation by Nuvasive of any provision of any Law binding upon or applicable to Nuvasive or any of its properties or assets or (iii) result in any violation of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any material obligation or to the loss of a material benefit under any loan, guarantee of indebtedness or credit agreement, note, bond, mortgage, indenture, lease or agreement binding upon Nuvasive or result in the creation of any Lien (other than Permitted Liens) upon any of the properties or assets of Nuvasive, except for any of the matters set forth in the foregoing clause (iii) as would not reasonably be expected to materially impair the ability of Nuvasive to perform his obligations hereunder or to consummate the transactions contemplated hereby on a timely basis.

ARTICLE III

OTHER COVENANTS

          3.1 Further Agreements of the Stockholder. (a) The Stockholder hereby agrees, while this Agreement is in effect, and except as expressly contemplated hereby, not to sell, transfer, pledge, encumber, assign, distribute, gift or otherwise dispose of (collectively, a “Transfer”) or enter into any contract, option, put, call or other arrangement or understanding with respect to any Transfer (whether by actual disposition or effective economic disposition due to hedging, cash settlement or otherwise) of, any of the Voting Shares, or any interest therein, provided, that notwithstanding the foregoing, the Stockholder may Transfer any Voting Shares to any transferee or transferees (including, for avoidance of doubt, any member of Stockholder’s immediate family, a trust for the benefit of the Stockholder or any member of the Stockholder’s immediate family or upon the death of the Stockholder) if either (i) Stockholder retains direct or

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indirect sole voting control over such Transferred Voting Shares through the term of this Agreement; or (ii) as a condition to such Transfer, such transferee or transferees shall execute an agreement that contains the same substantive covenants regarding voting and transfer as are contained in this Agreement.

          (a) In case of a stock dividend or distribution of voting securities of the Company, or any change in the Company Common Stock by reason of any stock dividend or distribution, split-up, recapitalization, combination, exchange of shares or the like, the term “Voting Shares” shall be deemed to refer to and include the Voting Shares as well as all such stock dividends and distributions of voting securities of the Company and any voting securities into which or for which any or all of the Voting Shares may be changed or exchanged.

          (b) The Stockholder agrees, while this Agreement is in effect, not to, nor to permit any investment banker, financial adviser, attorney, accountant or other representative or agent of the Stockholder to, directly or indirectly, engage in any activity which would be prohibited pursuant to Section 4.7 of the Purchase Agreement if engaged in by the Company.

          (c) The Stockholder agrees, while this Agreement is in effect, not to take or agree or commit to take any action that would make any representation and warranty of the Stockholder contained in Section 2.1 of this Agreement inaccurate in any material respect. The Stockholder further agrees that it shall use its commercially reasonable efforts to cooperate with the Company to effect the transactions contemplated hereby including the Acquisition.

ARTICLE IV

MISCELLANEOUS

          4.1 Termination. This Agreement shall terminate upon the earlier to occur of (a) the receipt of the Stockholder Approval (as defined in the Purchase Agreement) and (b) the termination of the Purchase Agreement pursuant to its terms. In the event of such termination of this Agreement, this Agreement shall forthwith become void and have no effect, without any liability or obligation on the part of any party; provided, however that nothing herein shall relieve any party from liability for any fraud, intentional misrepresentation or willful breach of any of its representations, warranties, covenants or agreements set forth in this Agreement prior to such termination.

          4.2 Further Assurances. From time to time, at the other party’s request and without further consideration, each party shall execute and deliver such additional documents and take all such further action as may be reasonably necessary or desirable to consummate the transactions contemplated by this Agreement.

          4.3 No Ownership Interest. Nothing contained in this Agreement shall be deemed to vest in Nuvasive any direct or indirect ownership or incidence of ownership of or with respect to any Voting Shares. All rights, ownership and economic benefits of and relating to the Voting Shares shall remain vested in and belong to the Stockholder, and Nuvasive shall have no authority to manage, direct, superintend, restrict, regulate, govern or administer any of the

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policies or operations of the Company or exercise any power or authority to direct the Stockholder in the voting of any of the Voting Shares, except as otherwise provided herein.

          4.4 Notices. Except for notices that are specifically required by the terms of this Agreement to be delivered orally, all notices, requests, claims, demands and other communications hereunder shall be in writing and shall be deemed given if delivered personally, faxed (with confirmation) or sent by overnight courier (providing proof of delivery) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice)

     (a) (a) if to Nuvasive:

NuVasive, Inc.
7473 Lusk Boulevard
San Diego, California 92121
Attention: General Counsel
Facsimile: (858) 909-2479

          with a 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

          and (b) if to the Stockholder:

[•]

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

[•]

          4.5 Interpretation. When a reference is made in this Agreement to an Article or Section, such reference shall be to an Article or Section of this Agreement unless otherwise indicated. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.” The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant thereto unless otherwise defined therein. Whenever the context of this Agreement requires, the gender of all words herein shall include the masculine, feminine and neuter, and the number of all words herein shall include the singular and plural. Any agreement, instrument or statute defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement, instrument or statute as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes) by succession of comparable successor statutes

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and references to all attachments thereto and instruments incorporated therein. 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 all the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of authorship of any of the provisions of this Agreement.

          4.6 Counterparts. This Agreement may be executed in two or more consecutive counterparts (including by facsimile), each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument, and shall become effective when one or more counterparts have been signed by each of the parties and delivered (by telecopy or otherwise) to the other parties.

          4.7 Entire Agreement; Third-Party Beneficiaries. This Agreement (including the exhibits and schedules hereto) constitutes the entire agreement, and supersedes all other prior agreements and understandings, both written and oral, between the parties, or any of them, with respect to the subject matter hereof and thereof and is not intended to and shall not confer upon any person other than the parties hereto any rights or remedies hereunder; provided, however, that the Company shall be deemed to be a third-party beneficiary of the Stockholder’s obligations under Sections 1.1 and 3.1 and shall be entitled to enforce the terms of this Agreement in respect thereto as if it were a party hereto.

          4.8 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to any choice or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware.

          4.9 Jurisdiction; Enforcement. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement. Each of the parties hereto irrevocably agrees that any legal action or proceeding with respect to this Agreement and the rights and obligations arising hereunder, or for recognition and enforcement of any judgment in respect of this Agreement and the rights and obligations arising hereunder brought by the other party hereto or its successors or assigns, shall be brought and determined exclusively in the Delaware Court of Chancery and any state appellate court therefrom within the State of Delaware (or, only if the Delaware Court of Chancery declines to accept jurisdiction over a particular matter, any state or federal court within the State of Delaware). Each of the parties hereto hereby irrevocably submits with regard to any such action or proceeding for itself and in respect of its property, generally and unconditionally, to the personal jurisdiction of the aforesaid courts and agrees that it will not bring any action relating to this Agreement or any of the transactions contemplated by this Agreement in any court other than the aforesaid courts. Each of the parties hereto hereby irrevocably waives, and agrees not to assert as a defense, counterclaim or otherwise, in any action or proceeding with respect to this Agreement, (a) any claim that it is not personally subject to the jurisdiction of the above named courts for any reason other than the failure to serve in accordance with this Section 4.9, (b) any claim that it or its property is exempt or immune from jurisdiction of any such court or from any legal process

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commenced in such courts (whether through service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise) and (c) to the fullest extent permitted by the applicable Law, any claim that (i) the suit, action or proceeding in such court is brought in an inconvenient forum, (ii) the venue of such suit, action or proceeding is improper or (iii) this Agreement, or the subject mater hereof, may not be enforced in or by such courts.

          4.10 Amendment. Any provision of this Agreement may be amended or waived if, and only if, such amendment or waiver is in writing and signed, in the case of an amendment, by each of the parties hereto, or in the case of a waiver, by the party against whom the waiver is to be effective. Notwithstanding the foregoing, no failure or delay by any party hereto in exercising any right hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise of any other right hereunder.

          4.11 Severability. Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the sole extent of such invalidity or unenforceability without rendering invalid or unenforceable the remainder of such term or provision or the remaining terms and provisions of this Agreement in any jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, such provision shall be interpreted to be only so broad as is enforceable.

          4.12 Assignment. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties, and any assignment without such consent shall be null and void. Subject to the preceding sentence, this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns.

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          IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the date first above written.

NUVASIVE, INC.
By:
	Name:
	Title:
[•]
By:
	Name:
	Title:

Received and acknowledged as of the date first above written: OSIRIS THERAPEUTICS, INC.
By:
	Name:
	Title:

Signature Page to Voting and Support Agreement

Schedule of Voting and Support Agreements

	Number of Company
Name of Stockholder	Shares Beneficially Owned
Peter Friedli		9,870,371
Joyce Ltd.		10,000
US Venture 05, Inc.		1,000,000
Venturetec, Inc.		3,963,629
C. Randal Mills		123,000

EX-10.7

Exhibit 10.7

MANUFACTURING AGREEMENT

     THIS MANUFACTURING AGREEMENT (the “Agreement”) is made and entered into as of July 24, 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 May 8, 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

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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.

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     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.

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     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.

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     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.

	Minimum Performance
Applicable Period	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

^*** Portions of this page have been omitted pursuant to a request for Confidential Treatment filed separately with the Commission.

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the shipping instructions of NuVasive and that the Product is tendered for Delivery in accordance 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

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WARRANTY OF MERCHANTABILITY OR WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE.

     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

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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 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 1^st and shall apply to all shipments of Product made on or after January 1^st.

     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

^*** Portions of this page have been omitted pursuant to a request for Confidential Treatment filed separately with the Commission.

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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 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.

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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.

     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.

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     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 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

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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.

          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

^*** Portions of this page have been omitted pursuant to a request for Confidential Treatment filed separately with the Commission.

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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.

     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

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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 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.		NuVasive, Inc.
	7015 Albert Einstein Drive		7473 Lusk Boulevard
	Columbia, MD 21046		San Diego, CA 92121
	Attention: Chief Executive Officer		Attention: General Counsel
	Fax No.: 443-545-1701		Fax No.: 858-909-2000
With a copy to:		With a copy (which shall not constitute notice) to:
	McKenna Long & Aldridge LLP		DLA Piper US LLP
	303 Peachtree St., NE, Suite 5300		4365 Executive Drive
	Atlanta, GA 30308		Suite 1100
	Attention: Michael Cochran, Esq.		San Diego, CA 92122
	Fax No.: 404-527-4198		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

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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 (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 Randy Mills, the Chief Executive Officer of Osiris, and the General Counsel 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.

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     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

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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.

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK]

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

OSIRIS THERAPEUTICS, INC.			NUVASIVE, INC.
By:	/s/ C. Randal Mills		By:	/s/ Alexis Lukianov
	Name:	C. Randal Mills		Name:	Alexis Lukianov
	Its:	President & CEO		Its:	Chief Executive Officer

SIGNATURE PAGE TO
MANUFACTURING AGREEMENT

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Exhibit A Product Specifications

Osiris Materials Specifications numbers 90055, 90067, 90080, 90081, 90103, 90128, 90129, 90149, and 90188, as may be amended by mutual written agreement of the parties.

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EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO
SECTION 302 OF SARBANES-OXLEY ACT OF 2002

I, Alexis V. Lukianov, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of NuVasive, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 8, 2008

/s/ Alexis V. Lukianov
Alexis V. Lukianov
Chairman and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO
SECTION 302 OF SARBANES-OXLEY ACT OF 2002

I, Kevin C. O’Boyle, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of NuVasive, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 8, 2008

/s/ Kevin C. O’Boyle
Kevin C. O’Boyle
Executive Vice President and Chief Financial Officer

EX-32

Exhibit 32

CERTIFICATIONS OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of NuVasive, Inc. (the Company) on Form 10-Q for the period ended June 30, 2008, as filed with the Securities and Exchange Commission on the date hereof (the Quarterly Report), I, Alexis V. Lukianov, Chairman and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

          1. The Quarterly Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

          2. That information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 8, 2008

/s/ Alexis V. Lukianov
Alexis V. Lukianov
Chairman and Chief Executive Officer

In connection with the Quarterly Report of NuVasive, Inc. (the Company) on Form 10-Q for the period ended June 30, 2008, as filed with the Securities and Exchange Commission on the date hereof (the Quarterly Report), I, Kevin C. O’Boyle, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

          1. The Quarterly Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

          2. That information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 8, 2008

/s/ Kevin C. O’Boyle

Kevin C. O’Boyle
Executive Vice President and Chief Financial Officer